Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.
Speaker 2: On today's episode, we'll bring you part of an exclusive
Speaker 2: conversation with Taiwan's Vice premier, plus a look at tech
Speaker 2: and tariffs as we wrap up the trading week in
Speaker 2: the Asia Pacific, and a bit later we'll catch up
Speaker 2: with Adam Koons for a look at markets. Adam is
Speaker 2: the chief investment officer at Winthrop Capital Management. But we
Speaker 2: begin in Taipei. We heard earlier from Taiwan Vice Premier
Speaker 2: Cheng Li Chwin. She told Bloomberg her government is focused
Speaker 2: on building up its relationship with the US. Chang also
Speaker 2: said she sees cooperation and investments on tech R and
Speaker 2: D as a critical area that will benefit both sides
Speaker 2: in securing a leading role in high tech sectors. Cheng
Speaker 2: spoke exclusively with Bloomberg's Annabelle Droolers in Taipei.
Speaker 3: Who mentioned the US and the importance that it plays
Speaker 3: in the democratic supply chain for drones. President Trump is
Speaker 3: still early days in the White House and the outlook
Speaker 3: for the US Taiwan relationship is a little bit unclear.
Speaker 3: It could seem what's your perspective on the shape it's
Speaker 3: going to be taking over the next four years Main.
Speaker 4: Bank Guard YAH.
Speaker 1: The US has always been Taiwan's most important partner in
Speaker 1: terms of regional security and in trade. We are attentive
Speaker 1: to the policies of the new US administration and different
Speaker 1: local agencies have been studying new areas for cooperation between US.
Speaker 1: The more important thing is identifying a strategic direction to
Speaker 1: the US and Taiwan and maintaining a mutually beneficial working
Speaker 1: relationship so we can build a democratic supply chain that
Speaker 1: strengthens the US's leadership in the global high tech industry
Speaker 1: while also helping Taiwan maintain its competitiveness in making contributions
Speaker 1: to high tech development.
Speaker 3: And what is your assessment of the way that President
Speaker 3: Trump has changed his position very radically from the Biden
Speaker 3: administration on Ukraine.
Speaker 4: GANDRU.
Speaker 1: Taiwan has been monitoring the development of the war in
Speaker 1: Ukraine and related updates from Europe. We want to do
Speaker 1: our part for the Indo Pacific region. Enhancing military capabilities
Speaker 1: is the basis for peace. We want the Taiwanese people
Speaker 1: to recognize this. Therefore, we are not only committed to
Speaker 1: building up our defense capabilities. We are also strengthening our
Speaker 1: economic resilience. This way, we can continue to take on
Speaker 1: important roles and increase our contributions to the world. President
Speaker 1: lay had set the four Pillars for Peace. They represent
Speaker 1: objectives like enhancing Taiwan's defense capability, enhancing economic safety and resilience,
Speaker 1: continuing cooperation with light minded countries, and lastly supporting orderly
Speaker 1: exchanges between Taiwan and China.
Speaker 3: How does Taiwan prepare for other eventualities? Because there's the
Speaker 3: tariff risk that is still very present, not yet fully
Speaker 3: CLAAR five, but there's the chance that we see twenty
Speaker 3: five percent tariffs on Taiwan's semiconductors. How is the island
Speaker 3: preparing for that?
Speaker 4: Oh? Women that will meet too, that they're going through Maine,
Speaker 4: Washington for Shangander.
Speaker 1: We are tracking new policies from the Trump administration closely.
Speaker 1: We want to show that the future of the Taiwan
Speaker 1: US Corporation is focused on cutting edge technology. This is
Speaker 1: mutually beneficial and it should be a shared goal, and
Speaker 1: we're willing to expand our investments in the US with
Speaker 1: the aim to amplify our innovations in technology, including AI,
Speaker 1: chips and drones and even R and D in future technologies.
Speaker 1: We want to stay leaders in the high tech industry
Speaker 1: amongst democratic countries. This strategy is critical for both of us.
Speaker 1: We will also make efforts to balance trade in our
Speaker 1: increased investments in the US.
Speaker 3: Do you think that the US is still a reliable
Speaker 3: security partner to Taiwan?
Speaker 4: Women Way pay me to to em.
Speaker 1: We are important partners on regional security, trade and economic collaboration.
Speaker 1: We hope to deepen ties with the US, and we
Speaker 1: believe it will be done on the basis of the
Speaker 1: Taiwan Relations Act and six Assurances. Since Trump became president,
Speaker 1: he's emphasized the importance of keeping the prostrate peaceful and
Speaker 1: doesn't want to see a unilateral change of status quite
Speaker 1: by force, and most democratic countries share this same view.
Speaker 2: That was Taiwan Vice Premier Chen Lechwin speaking exclusively with
Speaker 2: Bloomberg's Annabel Droolers, and I am pleased to say that
Speaker 2: Annabel is joining us now from Taipei. Always a pleasure.
Speaker 2: Thank you for making time to chat with us. I'm
Speaker 2: sure it's been a busy day for you. I want
Speaker 2: to begin with this area of defense because I know
Speaker 2: that Washington supplies Taiwan with billions of dollars in weaponry,
Speaker 2: and I was curious to discover that Taiwan is now
Speaker 2: using drone technology as a big part of its defense strategy.
Speaker 2: Is this technology that is coming from the United States
Speaker 2: or is Taiwan in the process of developing its own
Speaker 2: drone technology.
Speaker 3: No, it's something that's being developed on the island. I mean,
Speaker 3: it's not to say that the more advanced drones, where
Speaker 3: the US still maintains a competitive edge globally, that they
Speaker 3: wouldn't look to have those drones as part of their inventory.
Speaker 3: But generally what we've seen during the war in Ukraine
Speaker 3: is that it's these tactical drones, these low end, low
Speaker 3: cost drones that are needed if you're going to ever
Speaker 3: carry out asymmetric warfare. And asymmetric warfare is essentially what
Speaker 3: allows a smaller power like time On, for instance, to
Speaker 3: have any hope of combating a much larger force, and
Speaker 3: that is China. So that is really the goal of
Speaker 3: the island now is to be able to build up
Speaker 3: its drone infantry, and it's trying to do that within
Speaker 3: the island, and so it's putting a lot of policy
Speaker 3: focus and resources into doing just that, and that's really
Speaker 3: been the purpose of our trip this week is to
Speaker 3: meet with different policy makers, different different government even local
Speaker 3: government officials, and also some of the major players in
Speaker 3: the space to discuss this effort and the challenges that
Speaker 3: they're facing and doing that.
Speaker 2: So a lot of the conversation that you had with
Speaker 2: the Vice Premier focused on technology. We know the story
Speaker 2: on semiconductors. Is their real concern here that if the
Speaker 2: US were to impose tariffs on chips coming from Taiwan
Speaker 2: into the US that a company like TSMC could be
Speaker 2: adversely impacted. Is that a real risk?
Speaker 3: I think that the more likely scenario is that those
Speaker 3: tariffs will get passed on to customers or companies back
Speaker 3: in the US. There has been a concerted effort and
Speaker 3: pressure on Taiwanese companies like TSMC to establish more advanced
Speaker 3: technology outside or off the island, and so the US
Speaker 3: obviously wants to be a base for that. We've seen
Speaker 3: TSMC establishing a plant already in Germany, for instance, but
Speaker 3: that's for more of their lower end technologies, not their
Speaker 3: most advanced ones. Taiwan, for its part, it sees the
Speaker 3: science park model. This is sort of the ecosystem where
Speaker 3: all of the players around semiconductors come into one key place.
Speaker 3: It sees that as really pivotal to the success of
Speaker 3: its industries like semiconductors. It's the same police they're trying
Speaker 3: to replicate with drones now, and so that's one of
Speaker 3: the reasons they don't want to move it off Taiwan.
Speaker 3: And of course at the same time it becomes the
Speaker 3: so called silicon shield, which we know about as well,
Speaker 3: and that also helps it to work with partners to
Speaker 3: help them also want to provide that level of assurance
Speaker 3: of military assistance if it's ever needed in the future.
Speaker 2: So we've talked about drone technology being developed on Taiwan.
Speaker 2: We've also talked about semiconductors, what o their high tech
Speaker 2: industries are being developed on the island, they would.
Speaker 3: Be the main ones, and obviously looking at how AI
Speaker 3: is integrated into both of those efforts, and so that's
Speaker 3: what again coming back to what we're seeing in drones now.
Speaker 3: That is sort of the future of where drones go
Speaker 3: from here as well, because we talk about the integration
Speaker 3: of AI so that these drones are able to fly
Speaker 3: in large numbers together drone swarms for instance, and that's
Speaker 3: when the units are able to communicate with each without
Speaker 3: having any sort of human intervention. And so AI I
Speaker 3: think really cuts across both semiconductors. And obviously you see
Speaker 3: that those chips that are needed to create things like
Speaker 3: like service Cloud Service for instance, AI services and on
Speaker 3: Hi for instance, is another big name in that market.
Speaker 3: You see it really going across both sectors.
Speaker 2: Annabel will leave it. There are always a pleasure. Thanks
Speaker 2: for taking time to catch up with us from Taipei,
Speaker 2: Bloomberg's Annabel Droolers. Joining us here on the Daybreak Asia podcast.
Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm Doug Krisner.
Speaker 2: So the angst over tariffs, along with some mixed economic
Speaker 2: news seemed to hang over markets today, but I think
Speaker 2: more fundamentally it was the weakness in chip stocks that
Speaker 2: led the equity market lower. Nvidia is good but not
Speaker 2: great numbers sank those shares eight and a half percent,
Speaker 2: and at the end of the day, the S and
Speaker 2: P was down about one one point six percent, with
Speaker 2: the benchmark breaking below that one hundred day moving average.
Speaker 2: Joining us now for a closer look at the price
Speaker 2: action is Adam Kuhns. He is chief investment officer at
Speaker 2: Winthrop Capital Management. Good of you to make time to visit.
Speaker 2: What did you make of today's trading activity?
Speaker 5: Yeah, well, first, thanks for having me. I think this
Speaker 5: is kind of the setup for the year, which is
Speaker 5: high expectations, and if those expectations aren't met, you're going
Speaker 5: to see pain. And I think when you look at
Speaker 5: something like Navidia, where obviously you kind of hit on
Speaker 5: it right at the beginning, is a good quarter isn't
Speaker 5: good enough anymore? And when you've got valuations that are
Speaker 5: somewhat stretched across a particular tech in the S and
Speaker 5: P five hundred, that doesn't necessarily mean people are going
Speaker 5: to just sell because the pe ratio is a little
Speaker 5: off tilt. What it does mean is that if you
Speaker 5: don't exceed expectations, if your outlook isn't stronger than expected,
Speaker 5: it's going to be difficult for your stock to perform
Speaker 5: in this environment. That's coupled with obviously the fact that
Speaker 5: we've got this overhanging from as you mentioned that the
Speaker 5: tariffs and just kind of some of the things coming
Speaker 5: out of DC, so that those are the real big
Speaker 5: moving objects in the market right now.
Speaker 2: Have no doubt about that. We'll talk more about tariffs
Speaker 2: in a moment. Let's talk about this mixed economic news.
Speaker 2: So we had a revision on fourth quarter GDP unrevised
Speaker 2: though at two point three percent. I think it's kind
Speaker 2: of interesting that consumers spending held up as well as
Speaker 2: it did, rising at a four point two percent pace.
Speaker 2: And at the same time today we got news that
Speaker 2: Durbal goods orders in January were able to rebound by
Speaker 2: about three point one percent. So that's the positive. Now
Speaker 2: the negative weekly jobless claims rising to a level of
Speaker 2: two hundred and forty two thousand, Now that seems to
Speaker 2: coincide with a lot of the staff reductions that we
Speaker 2: have seen in Washington. But on top of that, sales
Speaker 2: of existing homes dropping to a record low in January,
Speaker 2: and yet we hear from the FED that they're just
Speaker 2: going to hold firm right now. Is that the right
Speaker 2: policy approach? Do you think for this moment in time?
Speaker 5: Well, I mean if I would say no, but I
Speaker 5: understand the Fed's position here is that the data isn't
Speaker 5: really pointing to them needing to decrease rates moving towards
Speaker 5: you know, a looser monetary policy because hit the first
Speaker 5: thing you said there was the consumer. That has been
Speaker 5: the story for the last two years. The consumer has
Speaker 5: remained so resilient. It has proven every economist wrong that's
Speaker 5: called for a recession, you know, and that's been an
Speaker 5: ongoing theme.
Speaker 4: Right.
Speaker 5: Oh, there are recessions coming, there's an inverted curve. There
Speaker 5: has to be a recession coming. But the thing that's
Speaker 5: held that up, that's dis proven that this this go around,
Speaker 5: at least up to this point, is that the consumer
Speaker 5: has been able to kind of extend this cycle much
Speaker 5: further than what was expected. Now, I think what you're
Speaker 5: going to see and the next point is that we
Speaker 5: are starting to see the employment market give way a
Speaker 5: little bit. And I think some of the things you know,
Speaker 5: coming from DOGE to make some cuts you know, from
Speaker 5: the public sector, that will have an effect, at least
Speaker 5: in the near term, to increase unemployment, which obviously leads
Speaker 5: to some sort of contraction. Now I understand it's you know,
Speaker 5: marginal from what they amount of cuts so far and
Speaker 5: how that will bleed through the economy, but it will
Speaker 5: still have a negative effect on the economy.
Speaker 2: I'm wondering whether we can change gears and talk a
Speaker 2: little bit about US trade because the question right now
Speaker 2: for markets is whether we're on the verge of a
Speaker 2: trade war in North America. We've got these tariffs that
Speaker 2: are being threatened for next Tuesday from the Trump administration
Speaker 2: twenty five percent on Canada and Mexico, and the leaders
Speaker 2: of those countries are basically saying that they are ready
Speaker 2: to retaliate. Where are you in all of this in
Speaker 2: understanding how it will ultimately impact markets?
Speaker 5: Well, this is somewhat more unpredictable than the stock market.
Speaker 2: But you know, I right now.
Speaker 5: I think what we've seen is that there's this narrative
Speaker 5: push around tariffs and kind of the you know, strongest
Speaker 5: guy in the prison yard mentality. And I think what
Speaker 5: we're going to continue to see is that now we
Speaker 5: may see tariffs enacted, but it'll probably be this negotiation
Speaker 5: tool and that you're hearing people talk more more about that.
Speaker 5: It seems to be Trump's primary tool in negotiations to
Speaker 5: come with that you know, heavy hand right up front,
Speaker 5: that gives him leeway to negotiate down the road. Right now,
Speaker 5: I'm going to continue to believe that that is what
Speaker 5: we're going to see happening through this kind of talk
Speaker 5: of tariffs and trade. But you know, you never know
Speaker 5: of these things is someone can just kind of take
Speaker 5: a hard stance and that can unravel the whole thing,
Speaker 5: and that would lead to a trade war. So I
Speaker 5: hope that doesn't happen because that's not positive in my opinion,
Speaker 5: for any of these economies that we're talking about. So
Speaker 5: right now, I still believe that this is rhetoric until
Speaker 5: proven otherwise.
Speaker 2: I remember in the days leading up to January twentieth,
Speaker 2: when President Trump was sworn in for a second time,
Speaker 2: the markets had really been anticipating a lot more in
Speaker 2: the way of deregulation and merger and acquisition activity. We
Speaker 2: really haven't seen that yet. Do you think that will
Speaker 2: ultimately happen?
Speaker 5: I do. I think, you know, look, we're still in
Speaker 5: the first hundred days, but you're right, we haven't really
Speaker 5: heard anything about that. So I think the focus really
Speaker 5: is on kind of the two dynamics. It stows the
Speaker 5: cutting of jobs in the public sector, and then on
Speaker 5: the other side of that of the tariffs. I think
Speaker 5: once that starts to cool it off a little bit,
Speaker 5: then we'll see the push towards deregulation, and in some
Speaker 5: ways deregulation comes hand in hand with the cuts in
Speaker 5: the public sector. Right So, if they're going to be
Speaker 5: cutting a large amount of staff from the sec irs
Speaker 5: and the like, then that probably leads to a natural
Speaker 5: deregulation simply because they're just not the staff to regulate
Speaker 5: the way they were before.
Speaker 2: So, given everything that we're talking about in the big picture,
Speaker 2: I'm wondering how you're trendslating that into an investment strategy.
Speaker 2: What are you doing these days?
Speaker 3: Yeah?
Speaker 5: So, I mean I still think there's you've got these
Speaker 5: kind of polar opposites pulling and pushing the market. So
Speaker 5: I still think you want to be fully invested. I
Speaker 5: don't think you want to be moving to cash or
Speaker 5: anything like that. I do think if you're, you know,
Speaker 5: in your equity allocation, do you want to take two
Speaker 5: years in a row of plus twenty percent and maybe
Speaker 5: pull back the risk profile a little bit? That probably
Speaker 5: makes some sense right now. By no means are we,
Speaker 5: you know, completely in a bubble or stretched in equity markets.
Speaker 5: But there is a growing number of events that create uncertainty,
Speaker 5: and there's nothing that equity markets like less than uncertainty,
Speaker 5: so that that leads us to kind of moving more defensively.
Speaker 5: And when I am speaking about kind of you know,
Speaker 5: defensive names in the equity market, I'm looking at lower beta,
Speaker 5: the higher quality factor type stocks, those that maybe pay
Speaker 5: a higher dividend or have you know, a higher free
Speaker 5: cash flow and giving up a little bit of the
Speaker 5: growth factor. And then the other side of that coin
Speaker 5: is we are overweight fixed income in particular, we are
Speaker 5: extending our duration within the fixed income allocation. I think
Speaker 5: you know, we have most likely seen the peak in
Speaker 5: interest rates to the cycle, and even if the FED
Speaker 5: does not cut rates, we're okay with just sitting here
Speaker 5: and collecting the income and the safety that we get
Speaker 5: out that we get out of fixed income right now.
Speaker 5: And if rates do come down for any particular reason,
Speaker 5: then that obviously we get some appreciation there. And that
Speaker 5: is that's another way to play defenses by being a
Speaker 5: little overweight fixed income. If we did see an economic
Speaker 5: slow down, if we did see some of these initiatives
Speaker 5: out of DC create some contraction, that would lead to
Speaker 5: a flight to quality. And I think a trade war
Speaker 5: would be another scenario where you would see a flight
Speaker 5: to quality that would decrease interest rates on the long
Speaker 5: end of the curve.
Speaker 2: Adam, We'll leave it there. Always a pleasure. Thank you
Speaker 2: so much for joining us. Adam Koons is chief investment
Speaker 2: Officer at Winthrop Capital Management, joining us here on the
Speaker 2: Daybreak Asia Podcast. Thanks for listening to today's episode of
Speaker 2: the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look
Speaker 2: at the story shaping markets, finance, and geopolitics in the
Speaker 2: Asia Pacific. You can find us on Apple, Spotify, the
Speaker 2: Bloomberg Podcast YouTube channel, or anywhere else you listen. Join
Speaker 2: us again tomorrow for insight on the market moves from
Speaker 2: Hong Kong to Singapore and Australia. I'm Doug Prisoner and
Speaker 2: this is Bloomberg.
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