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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.

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Speaker 2: On today's episode, we'll bring you part of an exclusive

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Speaker 2: conversation with Taiwan's Vice premier, plus a look at tech

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Speaker 2: and tariffs as we wrap up the trading week in

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Speaker 2: the Asia Pacific, and a bit later we'll catch up

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Speaker 2: with Adam Koons for a look at markets. Adam is

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Speaker 2: the chief investment officer at Winthrop Capital Management. But we

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Speaker 2: begin in Taipei. We heard earlier from Taiwan Vice Premier

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Speaker 2: Cheng Li Chwin. She told Bloomberg her government is focused

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Speaker 2: on building up its relationship with the US. Chang also

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Speaker 2: said she sees cooperation and investments on tech R and

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Speaker 2: D as a critical area that will benefit both sides

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Speaker 2: in securing a leading role in high tech sectors. Cheng

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Speaker 2: spoke exclusively with Bloomberg's Annabelle Droolers in Taipei.

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Speaker 3: Who mentioned the US and the importance that it plays

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Speaker 3: in the democratic supply chain for drones. President Trump is

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Speaker 3: still early days in the White House and the outlook

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Speaker 3: for the US Taiwan relationship is a little bit unclear.

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Speaker 3: It could seem what's your perspective on the shape it's

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Speaker 3: going to be taking over the next four years Main.

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Speaker 4: Bank Guard YAH.

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Speaker 1: The US has always been Taiwan's most important partner in

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Speaker 1: terms of regional security and in trade. We are attentive

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Speaker 1: to the policies of the new US administration and different

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Speaker 1: local agencies have been studying new areas for cooperation between US.

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Speaker 1: The more important thing is identifying a strategic direction to

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Speaker 1: the US and Taiwan and maintaining a mutually beneficial working

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Speaker 1: relationship so we can build a democratic supply chain that

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Speaker 1: strengthens the US's leadership in the global high tech industry

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Speaker 1: while also helping Taiwan maintain its competitiveness in making contributions

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Speaker 1: to high tech development.

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Speaker 3: And what is your assessment of the way that President

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Speaker 3: Trump has changed his position very radically from the Biden

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Speaker 3: administration on Ukraine.

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Speaker 4: GANDRU.

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Speaker 1: Taiwan has been monitoring the development of the war in

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Speaker 1: Ukraine and related updates from Europe. We want to do

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Speaker 1: our part for the Indo Pacific region. Enhancing military capabilities

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Speaker 1: is the basis for peace. We want the Taiwanese people

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Speaker 1: to recognize this. Therefore, we are not only committed to

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Speaker 1: building up our defense capabilities. We are also strengthening our

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Speaker 1: economic resilience. This way, we can continue to take on

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Speaker 1: important roles and increase our contributions to the world. President

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Speaker 1: lay had set the four Pillars for Peace. They represent

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Speaker 1: objectives like enhancing Taiwan's defense capability, enhancing economic safety and resilience,

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Speaker 1: continuing cooperation with light minded countries, and lastly supporting orderly

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Speaker 1: exchanges between Taiwan and China.

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Speaker 3: How does Taiwan prepare for other eventualities? Because there's the

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Speaker 3: tariff risk that is still very present, not yet fully

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Speaker 3: CLAAR five, but there's the chance that we see twenty

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Speaker 3: five percent tariffs on Taiwan's semiconductors. How is the island

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Speaker 3: preparing for that?

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Speaker 4: Oh? Women that will meet too, that they're going through Maine,

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Speaker 4: Washington for Shangander.

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Speaker 1: We are tracking new policies from the Trump administration closely.

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Speaker 1: We want to show that the future of the Taiwan

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Speaker 1: US Corporation is focused on cutting edge technology. This is

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Speaker 1: mutually beneficial and it should be a shared goal, and

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Speaker 1: we're willing to expand our investments in the US with

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Speaker 1: the aim to amplify our innovations in technology, including AI,

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Speaker 1: chips and drones and even R and D in future technologies.

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Speaker 1: We want to stay leaders in the high tech industry

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Speaker 1: amongst democratic countries. This strategy is critical for both of us.

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Speaker 1: We will also make efforts to balance trade in our

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Speaker 1: increased investments in the US.

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Speaker 3: Do you think that the US is still a reliable

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Speaker 3: security partner to Taiwan?

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Speaker 4: Women Way pay me to to em.

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Speaker 1: We are important partners on regional security, trade and economic collaboration.

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Speaker 1: We hope to deepen ties with the US, and we

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Speaker 1: believe it will be done on the basis of the

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Speaker 1: Taiwan Relations Act and six Assurances. Since Trump became president,

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Speaker 1: he's emphasized the importance of keeping the prostrate peaceful and

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Speaker 1: doesn't want to see a unilateral change of status quite

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Speaker 1: by force, and most democratic countries share this same view.

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Speaker 2: That was Taiwan Vice Premier Chen Lechwin speaking exclusively with

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Speaker 2: Bloomberg's Annabel Droolers, and I am pleased to say that

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Speaker 2: Annabel is joining us now from Taipei. Always a pleasure.

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Speaker 2: Thank you for making time to chat with us. I'm

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Speaker 2: sure it's been a busy day for you. I want

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Speaker 2: to begin with this area of defense because I know

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Speaker 2: that Washington supplies Taiwan with billions of dollars in weaponry,

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Speaker 2: and I was curious to discover that Taiwan is now

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Speaker 2: using drone technology as a big part of its defense strategy.

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Speaker 2: Is this technology that is coming from the United States

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Speaker 2: or is Taiwan in the process of developing its own

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Speaker 2: drone technology.

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Speaker 3: No, it's something that's being developed on the island. I mean,

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Speaker 3: it's not to say that the more advanced drones, where

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Speaker 3: the US still maintains a competitive edge globally, that they

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Speaker 3: wouldn't look to have those drones as part of their inventory.

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Speaker 3: But generally what we've seen during the war in Ukraine

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Speaker 3: is that it's these tactical drones, these low end, low

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Speaker 3: cost drones that are needed if you're going to ever

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Speaker 3: carry out asymmetric warfare. And asymmetric warfare is essentially what

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Speaker 3: allows a smaller power like time On, for instance, to

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Speaker 3: have any hope of combating a much larger force, and

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Speaker 3: that is China. So that is really the goal of

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Speaker 3: the island now is to be able to build up

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Speaker 3: its drone infantry, and it's trying to do that within

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Speaker 3: the island, and so it's putting a lot of policy

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Speaker 3: focus and resources into doing just that, and that's really

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Speaker 3: been the purpose of our trip this week is to

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Speaker 3: meet with different policy makers, different different government even local

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Speaker 3: government officials, and also some of the major players in

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Speaker 3: the space to discuss this effort and the challenges that

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Speaker 3: they're facing and doing that.

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Speaker 2: So a lot of the conversation that you had with

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Speaker 2: the Vice Premier focused on technology. We know the story

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Speaker 2: on semiconductors. Is their real concern here that if the

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Speaker 2: US were to impose tariffs on chips coming from Taiwan

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Speaker 2: into the US that a company like TSMC could be

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Speaker 2: adversely impacted. Is that a real risk?

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Speaker 3: I think that the more likely scenario is that those

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Speaker 3: tariffs will get passed on to customers or companies back

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Speaker 3: in the US. There has been a concerted effort and

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Speaker 3: pressure on Taiwanese companies like TSMC to establish more advanced

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Speaker 3: technology outside or off the island, and so the US

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Speaker 3: obviously wants to be a base for that. We've seen

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Speaker 3: TSMC establishing a plant already in Germany, for instance, but

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Speaker 3: that's for more of their lower end technologies, not their

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Speaker 3: most advanced ones. Taiwan, for its part, it sees the

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Speaker 3: science park model. This is sort of the ecosystem where

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Speaker 3: all of the players around semiconductors come into one key place.

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Speaker 3: It sees that as really pivotal to the success of

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Speaker 3: its industries like semiconductors. It's the same police they're trying

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Speaker 3: to replicate with drones now, and so that's one of

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Speaker 3: the reasons they don't want to move it off Taiwan.

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Speaker 3: And of course at the same time it becomes the

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Speaker 3: so called silicon shield, which we know about as well,

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Speaker 3: and that also helps it to work with partners to

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Speaker 3: help them also want to provide that level of assurance

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Speaker 3: of military assistance if it's ever needed in the future.

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Speaker 2: So we've talked about drone technology being developed on Taiwan.

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Speaker 2: We've also talked about semiconductors, what o their high tech

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Speaker 2: industries are being developed on the island, they would.

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Speaker 3: Be the main ones, and obviously looking at how AI

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Speaker 3: is integrated into both of those efforts, and so that's

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Speaker 3: what again coming back to what we're seeing in drones now.

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Speaker 3: That is sort of the future of where drones go

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Speaker 3: from here as well, because we talk about the integration

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Speaker 3: of AI so that these drones are able to fly

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Speaker 3: in large numbers together drone swarms for instance, and that's

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Speaker 3: when the units are able to communicate with each without

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Speaker 3: having any sort of human intervention. And so AI I

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Speaker 3: think really cuts across both semiconductors. And obviously you see

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Speaker 3: that those chips that are needed to create things like

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Speaker 3: like service Cloud Service for instance, AI services and on

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Speaker 3: Hi for instance, is another big name in that market.

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Speaker 3: You see it really going across both sectors.

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Speaker 2: Annabel will leave it. There are always a pleasure. Thanks

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Speaker 2: for taking time to catch up with us from Taipei,

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Speaker 2: Bloomberg's Annabel Droolers. Joining us here on the Daybreak Asia podcast.

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Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm Doug Krisner.

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Speaker 2: So the angst over tariffs, along with some mixed economic

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Speaker 2: news seemed to hang over markets today, but I think

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Speaker 2: more fundamentally it was the weakness in chip stocks that

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Speaker 2: led the equity market lower. Nvidia is good but not

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Speaker 2: great numbers sank those shares eight and a half percent,

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Speaker 2: and at the end of the day, the S and

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Speaker 2: P was down about one one point six percent, with

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Speaker 2: the benchmark breaking below that one hundred day moving average.

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Speaker 2: Joining us now for a closer look at the price

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Speaker 2: action is Adam Kuhns. He is chief investment officer at

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Speaker 2: Winthrop Capital Management. Good of you to make time to visit.

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Speaker 2: What did you make of today's trading activity?

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Speaker 5: Yeah, well, first, thanks for having me. I think this

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Speaker 5: is kind of the setup for the year, which is

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Speaker 5: high expectations, and if those expectations aren't met, you're going

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Speaker 5: to see pain. And I think when you look at

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Speaker 5: something like Navidia, where obviously you kind of hit on

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Speaker 5: it right at the beginning, is a good quarter isn't

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Speaker 5: good enough anymore? And when you've got valuations that are

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Speaker 5: somewhat stretched across a particular tech in the S and

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Speaker 5: P five hundred, that doesn't necessarily mean people are going

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Speaker 5: to just sell because the pe ratio is a little

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Speaker 5: off tilt. What it does mean is that if you

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Speaker 5: don't exceed expectations, if your outlook isn't stronger than expected,

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Speaker 5: it's going to be difficult for your stock to perform

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Speaker 5: in this environment. That's coupled with obviously the fact that

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Speaker 5: we've got this overhanging from as you mentioned that the

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Speaker 5: tariffs and just kind of some of the things coming

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Speaker 5: out of DC, so that those are the real big

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Speaker 5: moving objects in the market right now.

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Speaker 2: Have no doubt about that. We'll talk more about tariffs

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Speaker 2: in a moment. Let's talk about this mixed economic news.

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Speaker 2: So we had a revision on fourth quarter GDP unrevised

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Speaker 2: though at two point three percent. I think it's kind

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Speaker 2: of interesting that consumers spending held up as well as

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Speaker 2: it did, rising at a four point two percent pace.

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Speaker 2: And at the same time today we got news that

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Speaker 2: Durbal goods orders in January were able to rebound by

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Speaker 2: about three point one percent. So that's the positive. Now

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Speaker 2: the negative weekly jobless claims rising to a level of

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Speaker 2: two hundred and forty two thousand, Now that seems to

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Speaker 2: coincide with a lot of the staff reductions that we

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Speaker 2: have seen in Washington. But on top of that, sales

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Speaker 2: of existing homes dropping to a record low in January,

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Speaker 2: and yet we hear from the FED that they're just

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Speaker 2: going to hold firm right now. Is that the right

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Speaker 2: policy approach? Do you think for this moment in time?

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Speaker 5: Well, I mean if I would say no, but I

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Speaker 5: understand the Fed's position here is that the data isn't

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Speaker 5: really pointing to them needing to decrease rates moving towards

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Speaker 5: you know, a looser monetary policy because hit the first

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Speaker 5: thing you said there was the consumer. That has been

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Speaker 5: the story for the last two years. The consumer has

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Speaker 5: remained so resilient. It has proven every economist wrong that's

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Speaker 5: called for a recession, you know, and that's been an

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Speaker 5: ongoing theme.

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Speaker 4: Right.

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Speaker 5: Oh, there are recessions coming, there's an inverted curve. There

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Speaker 5: has to be a recession coming. But the thing that's

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Speaker 5: held that up, that's dis proven that this this go around,

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Speaker 5: at least up to this point, is that the consumer

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Speaker 5: has been able to kind of extend this cycle much

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Speaker 5: further than what was expected. Now, I think what you're

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Speaker 5: going to see and the next point is that we

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Speaker 5: are starting to see the employment market give way a

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Speaker 5: little bit. And I think some of the things you know,

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Speaker 5: coming from DOGE to make some cuts you know, from

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Speaker 5: the public sector, that will have an effect, at least

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Speaker 5: in the near term, to increase unemployment, which obviously leads

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Speaker 5: to some sort of contraction. Now I understand it's you know,

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Speaker 5: marginal from what they amount of cuts so far and

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Speaker 5: how that will bleed through the economy, but it will

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Speaker 5: still have a negative effect on the economy.

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Speaker 2: I'm wondering whether we can change gears and talk a

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Speaker 2: little bit about US trade because the question right now

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Speaker 2: for markets is whether we're on the verge of a

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Speaker 2: trade war in North America. We've got these tariffs that

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Speaker 2: are being threatened for next Tuesday from the Trump administration

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Speaker 2: twenty five percent on Canada and Mexico, and the leaders

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Speaker 2: of those countries are basically saying that they are ready

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Speaker 2: to retaliate. Where are you in all of this in

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Speaker 2: understanding how it will ultimately impact markets?

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Speaker 5: Well, this is somewhat more unpredictable than the stock market.

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Speaker 2: But you know, I right now.

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Speaker 5: I think what we've seen is that there's this narrative

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Speaker 5: push around tariffs and kind of the you know, strongest

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Speaker 5: guy in the prison yard mentality. And I think what

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Speaker 5: we're going to continue to see is that now we

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Speaker 5: may see tariffs enacted, but it'll probably be this negotiation

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Speaker 5: tool and that you're hearing people talk more more about that.

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Speaker 5: It seems to be Trump's primary tool in negotiations to

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Speaker 5: come with that you know, heavy hand right up front,

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Speaker 5: that gives him leeway to negotiate down the road. Right now,

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Speaker 5: I'm going to continue to believe that that is what

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Speaker 5: we're going to see happening through this kind of talk

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Speaker 5: of tariffs and trade. But you know, you never know

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Speaker 5: of these things is someone can just kind of take

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Speaker 5: a hard stance and that can unravel the whole thing,

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Speaker 5: and that would lead to a trade war. So I

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Speaker 5: hope that doesn't happen because that's not positive in my opinion,

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Speaker 5: for any of these economies that we're talking about. So

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Speaker 5: right now, I still believe that this is rhetoric until

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Speaker 5: proven otherwise.

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Speaker 2: I remember in the days leading up to January twentieth,

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Speaker 2: when President Trump was sworn in for a second time,

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Speaker 2: the markets had really been anticipating a lot more in

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Speaker 2: the way of deregulation and merger and acquisition activity. We

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Speaker 2: really haven't seen that yet. Do you think that will

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Speaker 2: ultimately happen?

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Speaker 5: I do. I think, you know, look, we're still in

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Speaker 5: the first hundred days, but you're right, we haven't really

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Speaker 5: heard anything about that. So I think the focus really

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Speaker 5: is on kind of the two dynamics. It stows the

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Speaker 5: cutting of jobs in the public sector, and then on

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Speaker 5: the other side of that of the tariffs. I think

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Speaker 5: once that starts to cool it off a little bit,

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Speaker 5: then we'll see the push towards deregulation, and in some

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Speaker 5: ways deregulation comes hand in hand with the cuts in

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Speaker 5: the public sector. Right So, if they're going to be

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Speaker 5: cutting a large amount of staff from the sec irs

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Speaker 5: and the like, then that probably leads to a natural

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Speaker 5: deregulation simply because they're just not the staff to regulate

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Speaker 5: the way they were before.

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Speaker 2: So, given everything that we're talking about in the big picture,

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Speaker 2: I'm wondering how you're trendslating that into an investment strategy.

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Speaker 2: What are you doing these days?

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Speaker 3: Yeah?

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Speaker 5: So, I mean I still think there's you've got these

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Speaker 5: kind of polar opposites pulling and pushing the market. So

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Speaker 5: I still think you want to be fully invested. I

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Speaker 5: don't think you want to be moving to cash or

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Speaker 5: anything like that. I do think if you're, you know,

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Speaker 5: in your equity allocation, do you want to take two

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Speaker 5: years in a row of plus twenty percent and maybe

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Speaker 5: pull back the risk profile a little bit? That probably

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Speaker 5: makes some sense right now. By no means are we,

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Speaker 5: you know, completely in a bubble or stretched in equity markets.

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Speaker 5: But there is a growing number of events that create uncertainty,

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Speaker 5: and there's nothing that equity markets like less than uncertainty,

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Speaker 5: so that that leads us to kind of moving more defensively.

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Speaker 5: And when I am speaking about kind of you know,

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Speaker 5: defensive names in the equity market, I'm looking at lower beta,

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Speaker 5: the higher quality factor type stocks, those that maybe pay

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Speaker 5: a higher dividend or have you know, a higher free

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Speaker 5: cash flow and giving up a little bit of the

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Speaker 5: growth factor. And then the other side of that coin

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Speaker 5: is we are overweight fixed income in particular, we are

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Speaker 5: extending our duration within the fixed income allocation. I think

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Speaker 5: you know, we have most likely seen the peak in

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Speaker 5: interest rates to the cycle, and even if the FED

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Speaker 5: does not cut rates, we're okay with just sitting here

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Speaker 5: and collecting the income and the safety that we get

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Speaker 5: out that we get out of fixed income right now.

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Speaker 5: And if rates do come down for any particular reason,

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Speaker 5: then that obviously we get some appreciation there. And that

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Speaker 5: is that's another way to play defenses by being a

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Speaker 5: little overweight fixed income. If we did see an economic

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Speaker 5: slow down, if we did see some of these initiatives

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Speaker 5: out of DC create some contraction, that would lead to

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Speaker 5: a flight to quality. And I think a trade war

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Speaker 5: would be another scenario where you would see a flight

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Speaker 5: to quality that would decrease interest rates on the long

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Speaker 5: end of the curve.

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Speaker 2: Adam, We'll leave it there. Always a pleasure. Thank you

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Speaker 2: so much for joining us. Adam Koons is chief investment

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Speaker 2: Officer at Winthrop Capital Management, joining us here on the

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Speaker 2: Daybreak Asia Podcast. Thanks for listening to today's episode of

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Speaker 2: the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look

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Speaker 2: at the story shaping markets, finance, and geopolitics in the

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Speaker 2: Hong Kong to Singapore and Australia. I'm Doug Prisoner and

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Speaker 1: Mm hm