WEBVTT - Equities Rebound on US Jobs Data Spark 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.640 --> 0:00:12.880 This is the Bloomberg Daybreak Aisia podcast. I'm Doug Prisner. 0:00:12.920 --> 0:00:15.400 You can join Brian Curtis and myself for the stories, 0:00:15.440 --> 0:00:18.520 making news and moving markets in the APAC region. You 0:00:18.600 --> 0:00:21.439 can subscribe to the show anywhere you get your podcast 0:00:21.520 --> 0:00:24.919 and always on Bloomberg Radio, the Bloomberg Terminal, and the 0:00:24.920 --> 0:00:29.440 Bloomberg Business app. This is Daybreak Asia. I'm Doug Prisoner 0:00:29.480 --> 0:00:33.240 in New York, joined by my colleague Avril Hong in Singapore, 0:00:33.360 --> 0:00:36.640 and our guest is Cheryl Smith. She's economist and portfolio 0:00:36.760 --> 0:00:41.840 manager at Trillium Asset Management. Cheryl joins us from Boston, Massachusetts. 0:00:42.159 --> 0:00:44.120 Thanks for making time to chat with us. I'm sure 0:00:44.159 --> 0:00:46.720 you've had a very very interesting week with a lot 0:00:46.720 --> 0:00:49.440 of the volatility that we have been seeing in markets. 0:00:49.680 --> 0:00:51.800 Late in the day yesterday was struck by the fact 0:00:51.840 --> 0:00:56.000 that JP Morgan put out a note indicating that, according 0:00:56.080 --> 0:01:00.720 to its calculations, the unwinding of this yen carry trade, 0:01:00.760 --> 0:01:03.960 which really created an enormous amount of this week's volatility, 0:01:04.240 --> 0:01:09.200 has been essentially removed, has been unwound seventy five percent. 0:01:09.560 --> 0:01:11.760 Does that make you feel a little bit more comfortable 0:01:11.760 --> 0:01:12.600 at this point, Cheryl. 0:01:15.520 --> 0:01:18.600 It feels more comfortable than knowing that there's a huge 0:01:18.640 --> 0:01:23.000 amount still to be unwound. But it is the sense 0:01:23.080 --> 0:01:26.480 that when you have a market instability, you begin to 0:01:26.600 --> 0:01:30.360 discover the trades that you didn't exactly know were there. 0:01:30.720 --> 0:01:35.040 So we I think it was something people knew that 0:01:35.080 --> 0:01:37.920 there was a carry trade going on. People knew that 0:01:38.319 --> 0:01:42.960 it made sense because the stability between of the difference 0:01:43.040 --> 0:01:47.280 between US interest rates and Japanese interest rates had been 0:01:47.400 --> 0:01:50.520 established for quite a long time, and the exchange rates 0:01:50.520 --> 0:01:55.360 were relatively stable. What we did not know until we 0:01:55.440 --> 0:01:59.320 saw the unwind coming was really how large that trade was, 0:01:59.320 --> 0:02:01.800 how many trades in place, and however they were so, 0:02:01.960 --> 0:02:07.800 how susceptible the traders were to any unexpected change in 0:02:07.960 --> 0:02:13.079 either the interest rate spread or in the differential four 0:02:13.840 --> 0:02:17.640 or excuse me, the direction of the exchange rate. So 0:02:18.200 --> 0:02:22.400 the speed at which that happened was quite alarming. If 0:02:22.440 --> 0:02:24.720 we say, you should say so, I think you know, 0:02:24.800 --> 0:02:27.560 twenty five percent left to go is certainly better than 0:02:28.120 --> 0:02:31.040 looking and saying, oh my gosh, there's three times more to. 0:02:31.040 --> 0:02:33.240 Go, Cheryl. 0:02:33.320 --> 0:02:35.639 When we look at where the yen is seated now, 0:02:35.680 --> 0:02:38.760 it's around the one four seven level. It's nowhere near 0:02:38.840 --> 0:02:41.280 the one four one we saw intraday earlier in the week, 0:02:41.320 --> 0:02:44.680 which also tells us that the FED is a driver 0:02:44.919 --> 0:02:46.600 in a way of what we see on the pay 0:02:46.840 --> 0:02:50.040 Given what we got out of the US initial jobless 0:02:50.040 --> 0:02:52.720 claims declining by the most in nearly a year, what 0:02:53.000 --> 0:02:54.799 are you expecting out of September? 0:02:56.600 --> 0:02:59.600 I think that we'll I still expect to see the 0:02:59.639 --> 0:03:03.359 labor market deteriorate and somewhat because while the initial claims 0:03:03.760 --> 0:03:07.360 fell by the most in quite some time, continuing claims 0:03:07.400 --> 0:03:10.720 were steady and are forty percent above where they were 0:03:10.760 --> 0:03:15.320 at their low, So we really have a substantial backlog. 0:03:15.400 --> 0:03:18.480 That continuing claims I think is a little bit more 0:03:18.720 --> 0:03:22.679 of an indicator because it includes people that have been 0:03:23.000 --> 0:03:25.880 out of work for a longer period of time. And 0:03:25.880 --> 0:03:28.080 what we're seeing is that people are finding it harder 0:03:28.120 --> 0:03:31.600 to get jobs. Maybe not so much coming in losing 0:03:31.680 --> 0:03:36.120 jobs immediately, but that longer duration of unemployment still counts 0:03:36.120 --> 0:03:38.840 and still burns up a rising unemployment rate. 0:03:39.880 --> 0:03:42.280 What is your sense of whether you know they're going 0:03:42.320 --> 0:03:45.120 to try and completely put the genie back in the bottle? 0:03:45.160 --> 0:03:50.680 Are we still talking about two percent on the inflation target. 0:03:51.920 --> 0:03:54.880 They certainly have been very very steadfast that that is 0:03:54.960 --> 0:03:58.920 where they are trying to go. And a large part 0:03:59.520 --> 0:04:05.400 of inflation is expectational. People try to put that in 0:04:05.440 --> 0:04:08.480 their labor contracts, people put it in their expectations of 0:04:08.480 --> 0:04:12.920 how are they doing? And we had an established two 0:04:12.960 --> 0:04:17.440 percent or lower inflation rate for a good ten years, 0:04:17.680 --> 0:04:20.680 and they're really the FED, I think, is trying very 0:04:20.800 --> 0:04:23.520 very hard to get that back into people's heads, to 0:04:23.520 --> 0:04:28.160 get that back into people's minds and therefore into people's behavior. 0:04:28.480 --> 0:04:32.240 So they need to keep in their mind they need 0:04:32.279 --> 0:04:36.440 to keep aiming for that two percent target, and I 0:04:36.480 --> 0:04:38.480 think that they will continue to do it. I don't 0:04:38.520 --> 0:04:42.440 think that they think that this amount of increase in 0:04:42.720 --> 0:04:46.440 unemployment that we've seen so far is out of line. 0:04:46.520 --> 0:04:48.440 I don't think that the FED thinks that it is 0:04:48.520 --> 0:04:49.160 behind ball. 0:04:50.440 --> 0:04:53.760 It seems like you disagree somewhat. And if that's the case, 0:04:53.800 --> 0:04:55.320 are you expecting a recession? 0:04:57.000 --> 0:05:01.360 We are expecting a recession. We are not expecting a 0:05:01.400 --> 0:05:04.920 super deep reception recession, but we are expecting a recession. 0:05:05.160 --> 0:05:07.800 They tend to be cumulative. So when you see this 0:05:08.120 --> 0:05:13.680 increase in continuing claims those people run out of resources 0:05:13.760 --> 0:05:17.320 or their resources are strained, they spend less. That spending 0:05:17.440 --> 0:05:21.000 less really doesn't do it on its own. But as 0:05:21.120 --> 0:05:26.000 consumers spend less, businesses start cutting their discretionary spending, they 0:05:26.000 --> 0:05:30.120 cut the investment and that is what really can cause 0:05:30.360 --> 0:05:35.200 a recession to gather hold and start really rolling. So 0:05:36.400 --> 0:05:40.119 we've seen in this earning season, we saw a lot 0:05:40.200 --> 0:05:44.760 of discussion, particularly about AI. You know, how much investment 0:05:44.800 --> 0:05:46.720 we're firms going to make an AI and were they 0:05:46.760 --> 0:05:49.080 ever going to see a payoff? Those are the kinds 0:05:49.080 --> 0:05:52.520 of questions. When shareholders start asking those questions, business people 0:05:52.560 --> 0:05:55.880 start looking at their investment plans and you know, can 0:05:55.960 --> 0:05:57.520 I take a little out here, can I take a 0:05:57.560 --> 0:06:01.160 little out there. They may still commit to large scale 0:06:02.440 --> 0:06:05.760 commitments like investing in AI, but where else are they 0:06:05.800 --> 0:06:11.800 going to cut? So as we see those questions about 0:06:11.880 --> 0:06:16.719 returns on investment coming up, businesses get happy to sort 0:06:16.720 --> 0:06:20.160 of pull the trigger and cut investment plans, and that's 0:06:20.160 --> 0:06:24.760 what starts to snowball. So that's really my concern, Cheryl. 0:06:24.800 --> 0:06:27.760 I take your point about, you know, things slowing down, 0:06:28.080 --> 0:06:32.080 especially when it comes to earnings and you know, AI spending. 0:06:32.120 --> 0:06:34.680 It really needs to show that it's a revenue generator. 0:06:35.160 --> 0:06:39.119 But in terms of the recession risks, given how big 0:06:39.200 --> 0:06:44.239 the reaction the concern in the market was earlier this week, 0:06:44.440 --> 0:06:47.480 it seems more like an overreaction to me, at least, 0:06:47.560 --> 0:06:49.400 what is your sense of weather, It was just a 0:06:49.680 --> 0:06:52.800 case of, you know, perhaps bad timing, given how it 0:06:52.839 --> 0:06:55.480 coincided with tech earnings and the rotation, and then we 0:06:55.600 --> 0:06:58.679 also had concerns about tensions in the Middle East. 0:07:00.720 --> 0:07:04.440 I think this initial rapid drop and certainly what we 0:07:04.520 --> 0:07:09.760 saw in Japan was I won't call it an overreaction, 0:07:09.880 --> 0:07:12.520 but I'll call it an immediate marketing to market, if 0:07:12.560 --> 0:07:15.720 you will, an immediate change in expectations. And I would 0:07:15.720 --> 0:07:19.680 add into the factors that you mentioned that we really 0:07:19.760 --> 0:07:23.640 did see the market certainly perceived a regime change by 0:07:23.720 --> 0:07:26.480 the Bank of Japan. Bank of Japan apparently is saying 0:07:26.840 --> 0:07:30.400 we still thought that that was an accommodating policy. We 0:07:30.440 --> 0:07:33.360 didn't think raising the rates to twenty five basis points 0:07:34.120 --> 0:07:36.880 was that big a deal. The market certainly perceived it, 0:07:37.160 --> 0:07:39.320 and as I mentioned, you know, sort of the unwind 0:07:39.320 --> 0:07:44.320 of that carry trade being a precipitating factor. So I 0:07:44.320 --> 0:07:48.320 don't think we'll see the quite kind of that immediate volatility. 0:07:48.360 --> 0:07:51.000 Markets going down twelve percent in a day is scary 0:07:51.160 --> 0:07:54.680 to anybody. But what I think we will see is 0:07:54.840 --> 0:07:58.760 a continuation in the slowing of economic growth that we 0:07:58.840 --> 0:08:02.720 had been seeing. The second quarter us GDP was much 0:08:02.800 --> 0:08:05.800 higher than expectations, but if we look at, you know, 0:08:05.880 --> 0:08:08.440 the year before, it's half of what the year before was. 0:08:08.600 --> 0:08:12.000 So we are seeing that slowing. It's going to sort 0:08:12.000 --> 0:08:14.160 of continue to slow. 0:08:15.240 --> 0:08:17.400 Cheryl, always a pleasure. Thank you for making time to 0:08:17.480 --> 0:08:20.320 chat with us here on Daybreak Asia. She is Cheryl Smith, 0:08:20.360 --> 0:08:32.240 economist and portfolio manager at Trillium Asset Management. Mary Niicola 0:08:32.320 --> 0:08:35.400 she is m Live macro Strategist. She's in Singapore, and 0:08:35.440 --> 0:08:37.000 so Mary and I are going to chat a little 0:08:37.040 --> 0:08:39.839 bit now about what's happening in markets. Can we start 0:08:39.880 --> 0:08:42.959 with this inflation data for China? Does it shock you 0:08:43.360 --> 0:08:45.560 that we I don't even know how many months it's 0:08:45.600 --> 0:08:49.920 been since kind of factory gate prices have been in deflation. 0:08:50.120 --> 0:08:51.800 This is problematic, isn't it. 0:08:52.679 --> 0:08:56.040 Absolutely. I think we've seen that there's just a broad 0:08:56.120 --> 0:08:59.120 weakness in the domestic economy, whether you're seeing it from 0:08:59.160 --> 0:09:03.080 consumer price andes or from the producer price index. Both 0:09:03.120 --> 0:09:06.840 are suggesting that domestic demand is very, very lackluster, and 0:09:06.960 --> 0:09:10.360 of course adding to that is the weak export data 0:09:10.400 --> 0:09:13.360 that we saw, and exports were one of the big 0:09:13.480 --> 0:09:17.679 drivers of growth for China for some time, and now 0:09:17.720 --> 0:09:20.840 that that's losing steam as well, it's hard to see 0:09:21.800 --> 0:09:25.360 the China really making that five percent growth target. 0:09:25.800 --> 0:09:28.480 You know, I know it's a very sensitive topic around 0:09:28.520 --> 0:09:31.920 the notion of overcapacity, but isn't that part of the 0:09:31.960 --> 0:09:34.760 problem where there is so much capacity that some of 0:09:34.800 --> 0:09:38.280 these producers have no choice to move inventory but to 0:09:38.320 --> 0:09:40.640 lower prices. Isn't that part of the problem. 0:09:41.120 --> 0:09:45.400 Well, it's also a problem of domestic demand, So it's 0:09:45.480 --> 0:09:50.199 the fact that people aren't responding to these lower prices. 0:09:50.440 --> 0:09:53.240 It's a matter of there is a weakness in domestic demand, 0:09:53.640 --> 0:09:57.040 so they're forced to export as well, which is why 0:09:57.120 --> 0:10:00.480 we've seen a massive uptick in exports and things like 0:10:00.600 --> 0:10:05.520 electric vehicles and other stuff. So it's a combination. It's 0:10:05.679 --> 0:10:08.320 really if you pin it back and draw it back 0:10:08.360 --> 0:10:11.680 to what is the underlying problem, it still comes back 0:10:11.720 --> 0:10:14.720 to the weakness and domestic demand, and that's largely because 0:10:14.760 --> 0:10:16.360 of what we're seeing in the property sector. 0:10:16.559 --> 0:10:19.880 So where does that leave the government, particularly the central bank? 0:10:19.960 --> 0:10:22.559 Is there anything that can happen on the policy side. 0:10:22.600 --> 0:10:25.360 I know that we've seen rate cuts and rate cuts. 0:10:25.640 --> 0:10:28.679 Nothing seems to work. I know a while ago we 0:10:28.679 --> 0:10:32.920 were talking about some form of quantitative easing, but PBOC 0:10:32.960 --> 0:10:35.840 seems a little resistant. What can policy makers do? 0:10:36.840 --> 0:10:37.080 Yeah? 0:10:37.320 --> 0:10:39.720 I think it still comes down to what will they 0:10:39.840 --> 0:10:43.080 do on the property sector. We have to remember that 0:10:43.160 --> 0:10:46.800 so many people have their money in property in China, 0:10:47.240 --> 0:10:50.640 and now that the property sector has been in a 0:10:50.679 --> 0:10:53.440 malaise for such a long time, there is still that 0:10:53.679 --> 0:10:57.000 there is concern about where to put your money and 0:10:57.840 --> 0:11:01.040 will this market ever come back? So it's still and 0:11:01.080 --> 0:11:04.240 we have to remember how much the market reacted to 0:11:04.960 --> 0:11:10.080 the possibility of cleaning up that excess supply, but of 0:11:10.160 --> 0:11:13.880 course it wasn't enough, and it wasn't It didn't do 0:11:14.040 --> 0:11:18.920 much to pick up sentiment because it wasn't a a 0:11:18.960 --> 0:11:23.000 big surprise or a big comprehensive plan. 0:11:23.280 --> 0:11:25.840 What do you see when you look at the Chinese 0:11:25.840 --> 0:11:28.640 bond market right now is one example. Is there anything 0:11:28.720 --> 0:11:32.599 that is informative about kind of investors sentiment when you 0:11:32.640 --> 0:11:33.720 look at Chinese bonds? 0:11:34.520 --> 0:11:37.520 Yeah, It's interesting because a while ago I had written 0:11:37.559 --> 0:11:42.200 something specifically talking about China bonds and the Japanification of 0:11:42.440 --> 0:11:45.080 China bonds in the sense of that yields are going 0:11:45.120 --> 0:11:48.080 to continue to go lower largely on the basis of 0:11:48.559 --> 0:11:55.480 longer term prospects of demographics, debt, deflation, and depressed confidence, 0:11:55.880 --> 0:11:59.120 and a lot of these factors haven't really changed, would 0:11:59.200 --> 0:12:02.559 suggests that yields should be still heading lower as a result. 0:12:03.200 --> 0:12:05.520 In terms of the currency, do you have a sense, 0:12:05.520 --> 0:12:08.360 I mean, we've been holding around these levels for it 0:12:08.400 --> 0:12:11.840 seems quite some time, and we talked about the export 0:12:11.880 --> 0:12:16.560 component being very important for contained or rather continued growth 0:12:16.559 --> 0:12:18.719 in China. Do you have a sense of whether or 0:12:18.800 --> 0:12:21.960 not authorities are worried about weakness in the currency. 0:12:22.880 --> 0:12:26.000 I think, well, we've seen a strength about a strengthen 0:12:26.000 --> 0:12:29.040 the currency with the unwind of carry trades over the 0:12:29.120 --> 0:12:31.960 last week, so China was one of the big funders 0:12:31.960 --> 0:12:35.560 that investors were using. So we've seen that unwind come 0:12:35.640 --> 0:12:38.280 through for C and Y. But at the same time 0:12:38.360 --> 0:12:43.440 and that actually the yield differential differential narrowing with the 0:12:43.559 --> 0:12:47.360 US does provide some opportunity for the PBOC to actually 0:12:47.400 --> 0:12:50.480 move ahead on interest rate cuts because if you recall, 0:12:50.640 --> 0:12:53.520 they had been focused on the weakness and the currency 0:12:53.559 --> 0:12:57.920 and we're afraid, we're reluctant to cut rates because of 0:12:57.960 --> 0:13:01.760 the fear of capital outflows because of an overshoot in 0:13:01.800 --> 0:13:03.400 the in currency weakness. 0:13:03.840 --> 0:13:05.760 Yeah, we can talk a little bit about the yen 0:13:05.840 --> 0:13:08.800 trade very briefly. That was pretty stunning. Do you have 0:13:08.840 --> 0:13:11.360 a sense, I mean, your sources, the people that you're 0:13:11.400 --> 0:13:14.480 talking to in the newsroom and their sources. Do we 0:13:14.520 --> 0:13:17.320 have a sense that most of this unwind has happened already? 0:13:18.040 --> 0:13:18.199 Yeah? 0:13:18.280 --> 0:13:20.679 The big the big story was from JP Morgan where 0:13:20.720 --> 0:13:23.559 their estimates show that seventy percent of the carry chain 0:13:23.679 --> 0:13:28.600 unwind has already happened. But potentially, you know, we're looking 0:13:28.600 --> 0:13:31.800 for yen at trading into a new range. Right, so 0:13:31.920 --> 0:13:34.840 the possibility of dollar yen going back to one sixty 0:13:35.000 --> 0:13:40.080 is very unlikely, especially with a relatively hawkish BOJ. So 0:13:40.400 --> 0:13:43.240 we could see yen stabilize around these levels, but with 0:13:43.480 --> 0:13:47.120 heightened volatility, you could still see a further unwind in 0:13:47.200 --> 0:13:52.839 the carry trade. 0:13:54.480 --> 0:13:57.880 Eva Lee she is Head of Greater China Equities at 0:13:58.120 --> 0:14:01.240 UBS Global Wealth Management, where she is in the Chief 0:14:01.280 --> 0:14:05.080 Investment Office pleasure to have you on the show today, Eva, 0:14:05.120 --> 0:14:08.319 thanks so much. So much has been happening in global markets. 0:14:08.360 --> 0:14:11.120 I want to get into the China story momentarily, but 0:14:11.160 --> 0:14:14.440 I'm curious as to what you're hearing from clients as 0:14:14.480 --> 0:14:17.600 a result of this enormous volatility that was running through 0:14:17.920 --> 0:14:20.520 global markets in the past week. What were they saying 0:14:20.560 --> 0:14:20.760 to you? 0:14:22.880 --> 0:14:27.120 Well, well, luckily, you know, most of my clients actually 0:14:27.240 --> 0:14:30.200 have been setting their money in the money market funds, 0:14:30.240 --> 0:14:34.360 you know, in deposits, so they're actually looking into whether 0:14:34.560 --> 0:14:39.000 when's the best timing to deploy this cash. Some of 0:14:39.040 --> 0:14:43.560 them actually have their holdings already in bonds and they're happy, 0:14:44.040 --> 0:14:46.280 you know, with the movements. If you look at the 0:14:46.320 --> 0:14:49.520 past two weeks, the investment great bonds has been doing well. 0:14:50.000 --> 0:14:54.000 So the biggest questions that I've been asked is whether 0:14:54.240 --> 0:14:57.880 the you know, the yen unwinding it's done. I think 0:14:57.920 --> 0:15:02.920 that's the key questions. And based on our data analysis, 0:15:03.080 --> 0:15:05.960 we find that you know that if you break it 0:15:06.040 --> 0:15:09.520 down in terms of the end positioning into three buckets 0:15:10.240 --> 0:15:13.560 and the more need term buckets than winding already done. 0:15:14.120 --> 0:15:18.240 And I think this is an important signal because I'm 0:15:18.240 --> 0:15:20.640 not saying that there is not lack there won't be 0:15:20.680 --> 0:15:21.600 any volatility. 0:15:21.640 --> 0:15:22.160 There will be. 0:15:22.280 --> 0:15:24.800 I mean, we look at how the US markets overnight 0:15:25.160 --> 0:15:27.040 and going forward, we still have a lot of data 0:15:27.840 --> 0:15:31.040 to sort of signal where the US economy is hading. 0:15:31.120 --> 0:15:34.880 But having said that, you know, some of the markets 0:15:35.000 --> 0:15:38.760 after the corrections, like the Big Tag, the Quality Company, 0:15:38.880 --> 0:15:41.880 some of the Japanese ones, they look really attractive in 0:15:41.920 --> 0:15:47.120 terms of valuations after the correction. Yeah, I think that's 0:15:48.240 --> 0:15:50.760 that makes some you know, sort of the equity market 0:15:51.120 --> 0:15:52.840 very interesting, at least in the near term. 0:15:54.120 --> 0:15:57.080 So even we've seen over the past week that there 0:15:57.160 --> 0:16:01.040 has been this view that China has in a safe haven. 0:16:01.560 --> 0:16:04.880 What do you think that is and also why? What 0:16:04.920 --> 0:16:07.360 do you think will be the real catalyst that brings 0:16:07.400 --> 0:16:10.800 foreign investors back, especially since we've seen a number of 0:16:10.840 --> 0:16:15.480 different policy responses but nothing has really compelled foreign investors 0:16:15.520 --> 0:16:17.160 back in. So what do you think it'll take. 0:16:18.640 --> 0:16:22.240 I think the market really, I mean totally with you. 0:16:22.360 --> 0:16:25.080 I mean, some of the training program on home appliance 0:16:25.200 --> 0:16:27.440 is like I'm like, hey, come on, I mean, the 0:16:27.480 --> 0:16:30.880 central government is pulling out real money to support the economy. 0:16:31.240 --> 0:16:33.760 It hasn't happened often The last time they did so 0:16:33.960 --> 0:16:37.080 was two thousand and nine, I think. But having said that, 0:16:37.200 --> 0:16:41.840 I think the market really needs real data or you know, 0:16:41.920 --> 0:16:44.880 sort of real earnings improvements to sort of pull the 0:16:45.040 --> 0:16:48.360 market in, pull the money back in. I think some 0:16:48.560 --> 0:16:51.520 I think that was select companies earnings with self surprise 0:16:51.600 --> 0:16:55.120 on up side, despite the very challenging micro they're still 0:16:55.160 --> 0:16:58.360 able to grow their earnings by teens and the share 0:16:58.400 --> 0:17:00.800 price up ten percent in one day. I think so 0:17:01.120 --> 0:17:05.160 market did respond, but they need real data. They do 0:17:05.280 --> 0:17:10.040 not no longer will listen to this dat's policy support. Yeah, 0:17:10.080 --> 0:17:12.600 I think that that's the main difference. And obviously people 0:17:12.720 --> 0:17:15.840 have been hiding. I won't describe China as a safe haven, 0:17:15.920 --> 0:17:20.360 but I will say there are pockets of sectors actually 0:17:20.480 --> 0:17:24.840 that give you yields, and they still treating a very 0:17:24.880 --> 0:17:28.280 attractive evaluation. I think that might be paid where people hiding. 0:17:28.880 --> 0:17:31.840 The export economy seems to be holding up remarkably well, 0:17:31.880 --> 0:17:36.240 even though taishin the last reading on the manufacturing PMI 0:17:36.400 --> 0:17:38.240 was a little soft. I understand that, but if you 0:17:38.240 --> 0:17:41.280 look at the overall economy, domestic demand is very sluggish, 0:17:41.359 --> 0:17:44.919 we get that exports are holding well. Here he is 0:17:44.960 --> 0:17:47.760 the kind of the sort of damocles that's just dangling 0:17:47.800 --> 0:17:49.879 over the market. And that's the tariff story. When you 0:17:49.920 --> 0:17:53.960 consider geopolitics and the US, I mean, are you braced 0:17:53.960 --> 0:17:57.720 for something in a new administration where we could be 0:17:57.840 --> 0:18:02.640 potentially looking at much hard sure tariffs on on Chinese exports. 0:18:03.480 --> 0:18:05.959 I think we all understand. I mean, the you know 0:18:06.040 --> 0:18:09.440 sort of the Republicans, you know Trump, it's more likely 0:18:09.480 --> 0:18:12.399 to be harsh on China particular and tariff side. We 0:18:12.440 --> 0:18:14.840 don't know too much about Harris at the moment, but 0:18:15.240 --> 0:18:18.240 looks like the Democratic Party would be more of a 0:18:18.280 --> 0:18:22.679 continuity of policy. They will continue on these restrictions are ivy, 0:18:23.960 --> 0:18:29.000 but they're not going to impose new additionals ones onto China. 0:18:29.520 --> 0:18:32.159 But I think you bring a very you brought a 0:18:32.240 --> 0:18:35.880 very good point. Yes, export growth was very strong, but 0:18:36.440 --> 0:18:39.760 we cannot deny that part of it with people are 0:18:39.800 --> 0:18:43.680 making orders ahead of this potential change in tariff. So 0:18:43.920 --> 0:18:46.560 further down the road, particularly moving in twenty twenty five, 0:18:46.720 --> 0:18:50.320 these sort of teens growth in export, it's unlikely to continue. 0:18:50.680 --> 0:18:54.120 Then it will fall back down to local consumptions, and 0:18:54.160 --> 0:18:57.879 as consumption was so weak at this stage, if in 0:18:57.920 --> 0:19:00.600 fact It tells you why the government really pull out 0:19:00.640 --> 0:19:04.480 their own money into support the economy domestic consumption, because 0:19:04.520 --> 0:19:07.439 they knew that if they do not drive this further 0:19:08.240 --> 0:19:10.919 or let it, you know, sort of life in kicking. 0:19:11.720 --> 0:19:14.720 You know that the expert growth, it's not going to 0:19:14.720 --> 0:19:17.920 be there forever, and then the economic situation will be 0:19:18.040 --> 0:19:20.360 very challenging. Moving into twenty twenty five. 0:19:21.400 --> 0:19:24.280 If you spoke about earnings, what are your expectations for 0:19:24.320 --> 0:19:28.359 this earning season and how do you see the tech 0:19:28.359 --> 0:19:29.800 companies playing out? 0:19:31.280 --> 0:19:34.560 Overall? Will be mixed back, Like we all know that 0:19:34.640 --> 0:19:37.880 the top line, particularly the consumption side, is very weak. 0:19:38.000 --> 0:19:40.840 I mean when we break it down into details. For 0:19:40.880 --> 0:19:44.560 those that announced results, they are saying asp down. So 0:19:44.560 --> 0:19:47.119 the only way is they able to manage volumes and 0:19:47.119 --> 0:19:49.720 cost control, then they are able to do some magic 0:19:49.760 --> 0:19:53.520 on the bottom line. So some not all the companies 0:19:53.520 --> 0:19:56.280 that manage to do that, right, So that that's one point. 0:19:56.359 --> 0:20:01.440 Second point on the internet side, leading in the nets 0:20:01.480 --> 0:20:05.600 companies likely to do continue to surprise you on the 0:20:05.640 --> 0:20:08.199 bottom line on the cost control. They did that in 0:20:08.280 --> 0:20:11.359 first quarter and I think that will continue in the 0:20:11.400 --> 0:20:15.040 second quarter and they will confirm you more of the 0:20:15.160 --> 0:20:17.800 buy back plan, which they have done in first quarter, 0:20:18.240 --> 0:20:22.119 so we actually see that this could be uh, you know, 0:20:22.160 --> 0:20:24.720 at least make some of these stocks look more interesting 0:20:26.119 --> 0:20:27.840 after around the results season. 0:20:28.080 --> 0:20:31.240 I'm imagining that you don't believe that we're going to 0:20:32.160 --> 0:20:34.680 get they hit the growth target this year. I think 0:20:34.680 --> 0:20:36.800 you're you're probably of the opinion that we're going to 0:20:36.840 --> 0:20:38.200 fail on that front, am I right? 0:20:39.040 --> 0:20:42.600 Okay? They said five percent? Okay, now the broad saying 0:20:42.600 --> 0:20:45.159 it's as long as you know close to five we 0:20:45.240 --> 0:20:48.040 are good. So I don't know how you define it. 0:20:48.160 --> 0:20:50.959 Do you have a guess target or not take a shot? 0:20:51.280 --> 0:20:53.800 I think four point six four four point seven, four 0:20:53.800 --> 0:20:57.520 point eight. I think that will be the rough rough target. 0:20:57.600 --> 0:20:58.600 They were rich, all. 0:20:58.640 --> 0:21:00.760 Right either It's always a place sure. Thanks for making 0:21:00.800 --> 0:21:01.560 time to chat with us. 0:21:01.600 --> 0:21:01.960 Eva Lee. 0:21:02.200 --> 0:21:05.639 She is head of Greater China Equities at UBS Global 0:21:05.640 --> 0:21:08.760 Wealth Management. She's a part of the Chief Investment Office 0:21:08.760 --> 0:21:14.200 in Hong Kong. This has been the Bloomberg Daybreak Asia podcast, 0:21:14.359 --> 0:21:17.040 bringing you the stories making news and moving markets in 0:21:17.080 --> 0:21:20.960 the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube 0:21:21.000 --> 0:21:24.399 to get more episodes of this and other shows from Bloomberg. 0:21:24.600 --> 0:21:28.560 Subscribe to the podcast on Apple, Spotify or anywhere else 0:21:28.600 --> 0:21:31.760 you listen, and always on Bloomberg Radio, the Bloomberg Terminal, 0:21:32.000 --> 0:21:33.359 and the Bloomberg Business app.