Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg day Break Weekend, our global look at
Speaker 2: the top stories in the coming week from our Daybreak
Speaker 2: anchors all around the world. Straight ahead on the program,
Speaker 2: and look at how tariffs on lumber and timber could
Speaker 2: impact the US housing market. I'm Tom Busby in New York.
Speaker 3: I'm Caroline Hebge in London. What's in a prize, specifically
Speaker 3: the Nobel Prize Decisions.
Speaker 4: I'm Dog Prisner looking at Chinese consumers during Golden Week
Speaker 4: plus trouble with some Hong Kong real estate.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 2: Good day to you. I'm Tom Busby. We begin today's
Speaker 2: program with a new batch of tariffs announced by President
Speaker 2: Trump on imports of soft wood, timber, and lumber, as
Speaker 2: well as levees on kitchen cabinets, vanities, and upholstered wood
Speaker 2: products brought into the US. How will this impact the
Speaker 2: housing market moving forward? And what about housing prices?
Speaker 5: For more?
Speaker 2: We're joined by Drew Redding, Bloomberg Intelligence US home building Analyst. Well, Drew,
Speaker 2: thank you so much for being here, appreciated home builders.
Speaker 2: Home buyers now, they've already been paying sky high prices,
Speaker 2: elevated mortgage rates, they've been paying tariffs on imported kitchen appliances,
Speaker 2: washers and dryers, and now October fourteenth, they'll be paying
Speaker 2: ten percent levees on softwood, lumber and timber, twenty five
Speaker 2: percent on kitchen cabinets, vanities, other pre assembled I mean,
Speaker 2: this is looking This is not good, is it?
Speaker 6: Yeah? Well, certainly, you know, the consumer doesn't need higher
Speaker 6: costs when it comes to housing, given the affordability constraints
Speaker 6: that they've been under for the last several years. Just
Speaker 6: to take a step back on the tariffs, to put
Speaker 6: it in perspective, the US imports about thirteen million dollars
Speaker 6: or seven percent roughly of the goods used in new
Speaker 6: residential construction. So at the headline level, it's not necessarily
Speaker 6: a massive piece. But you know, there are particular areas
Speaker 6: where tariffs will be felt perhaps more than others. If
Speaker 6: you look at the top of three countries that we
Speaker 6: import from, it's China. That's about twenty seven percent of imports.
Speaker 6: From there, we're talking about things like appliance, is lighting,
Speaker 6: electrical components, hand tools. The second is Mexico and from
Speaker 6: there we're primarily talking about gypsum products. So I think
Speaker 6: drywall Mexico is about seventy two percent of imports there.
Speaker 6: And then third, you know, which has really come into
Speaker 6: focus now is Canada, which accounts for eighty five percent
Speaker 6: of lumber imports. So when you put all this together,
Speaker 6: the previously announced tariffs, you know, country specific fat and
Speaker 6: on reciprocal tariffs, along with these newly announced tariffs, we
Speaker 6: think that the costs, the total cost to a builder
Speaker 6: will be about ten thousand dollars per home, which which
Speaker 6: is a pretty staggering number. Now, we don't think the
Speaker 6: builders will ultimately absorb all of these costs. I think,
Speaker 6: you know, they'll probably be spread throughout the supply chain.
Speaker 6: And when you think about the large public builders, they're
Speaker 6: really better positioned in this environment given you know, their
Speaker 6: scale now in terms of their ability to pass on
Speaker 6: to consumers. You know, I think that could be tough.
Speaker 6: And you know, you've got prices already coming down for
Speaker 6: a lot of builders due to affordability, and then they're
Speaker 6: still having to use an elevated degree of incentives, which
Speaker 6: is accounted for as a reduction in salespace. So there's
Speaker 6: a lot of moving pieces. But at the end of
Speaker 6: the day, the point is that it becomes increasingly expensive
Speaker 6: to build a home, and I.
Speaker 2: Mean this could really deter a lot of builders. Like
Speaker 2: you said, we're not worried about the KB homes and
Speaker 2: the Pulties of the world, but a lot of smaller
Speaker 2: ones from constructing new homes, at least initially.
Speaker 5: Right.
Speaker 6: No, it's a good point. And you know why we
Speaker 6: haven't seen a huge packed impact on you know, tariffs
Speaker 6: to this point. One of the things we have heard,
Speaker 6: and to your point, really from the smaller private builders,
Speaker 6: is that there hasn't been a lot of certainty, so
Speaker 6: they don't know what their costs are going to be.
Speaker 6: When you don't know what your costs are going to be,
Speaker 6: it's hard for you to plan out into the future
Speaker 6: and put new production into the ground. So I do
Speaker 6: think it is definitely more challenging for the smaller names
Speaker 6: in the group. One thing that I think that's worth
Speaker 6: pointing out on the lumber side of this is that
Speaker 6: prior to this announcement of a ten percent tariff on
Speaker 6: software imports, we already had duties on lumber coming in
Speaker 6: from Canada. If you're talking about forty five percent on
Speaker 6: Canadian lumber imports, which again is eighty five percent of
Speaker 6: all the lumber imported into the US.
Speaker 2: Yeah, I mean it sounds like some of these Canadian
Speaker 2: lumber makers, these these manufacturers could really be struggling now
Speaker 2: if you know, sales get hurt.
Speaker 6: Yeah, it's a great point. And you know, the announcement
Speaker 6: really came because the administration wanted to open an investigation
Speaker 6: as to, you know, whether or not the lumber trade
Speaker 6: was of risk to national security, which they determined that
Speaker 6: it was. So the question becomes, well, can the US
Speaker 6: produce enough lumber domestically to meet all the demand. And
Speaker 6: I think the answer for now is no. And you know,
Speaker 6: as I mentioned, we produced about seventy percent of the
Speaker 6: lumber utilized in the US and to get that to
Speaker 6: one hundred percent would really require a lot of time.
Speaker 6: The National Association of home builders estimates you know, somewhere
Speaker 6: around ten years to be able to achieve this. So
Speaker 6: certainly no small feat.
Speaker 2: And not only the industrial or resilience, but also Trump's
Speaker 2: had the high quality jobs that this would create. Would
Speaker 2: they really be high quality jobs?
Speaker 6: I mean that remains to be seen. And like I said,
Speaker 6: it's will take a lot of time to add new
Speaker 6: capacity to the industry. But you know, there are a
Speaker 6: lot of jobs along the supply train and in terms
Speaker 6: of you know, just the not only jobs you're creating
Speaker 6: at the mills, but logistics and you know, getting wood
Speaker 6: to factories to job sites and things like that. So
Speaker 6: it would certainly help.
Speaker 2: Now let's talk about the other tariffs, and these are big.
Speaker 2: They're twenty five percent on on kitchen bathroom, Vanity's kitchen cabinets,
Speaker 2: that type of thing. We know that Ethan Allen, Lazy
Speaker 2: Boys source and manufacture a lot of their products in
Speaker 2: the US, But there are big retailers that import a
Speaker 2: ton of goods Wayfair William soonoma our Age formerly a
Speaker 2: restoration hardware. I mean, they may really be impacted by
Speaker 2: these tariffs, right, you.
Speaker 6: Know, I think from from their perspective, you know, the
Speaker 6: impact isn't going to be as great as you might expect.
Speaker 6: But if you think about the individual consumer who is
Speaker 6: going out and making a single purchase, you know, on
Speaker 6: a kitchen cabinet or vanity, and was looking for a
Speaker 6: low cost option, all of a sudden to them that
Speaker 6: becomes significantly more expensive. So there's I think there's a
Speaker 6: big difference between how you know a home improvement retailer
Speaker 6: can manage the situation versus individual consumer.
Speaker 2: A lot of challenges well our thanks to Drew Redding,
Speaker 2: Bloomberg Intelligence US home Building analyst. We move next to
Speaker 2: a turning point for big pharma. This past week, five
Speaker 2: US negotiated a three year reprieve on drug import tariffs
Speaker 2: in exchange for a promise to reduce what it charges
Speaker 2: Medicaid for some prescription meds, also to price future drugs
Speaker 2: on part with what it charges other wealthy nations, and
Speaker 2: to sell certain drugs at discounted prices to the public. Now,
Speaker 2: how might this impact the pharmaceutical space, what other drug
Speaker 2: makers are working on their own deals, and what does
Speaker 2: it mean for consumers. For all that, we're joined by
Speaker 2: Madison Muller, Bloomberg Health reporter. Madison, thanks for being here.
Speaker 7: Thanks for having me. I appreciate it.
Speaker 2: Can you kind of detail the finer points of this
Speaker 2: agreement with the White House? And I'm most curious about
Speaker 2: trump RX. It sounds a little like his answer to Obamacare.
Speaker 7: But yeah, it's an interesting concept, and I think we
Speaker 7: knew that they were working on something like this. I mean,
Speaker 7: for the last few months, the administration has been talking
Speaker 7: about direct to consumer websites and platforms. Some drug makers
Speaker 7: had already started doing that. Eli Lilly, for example, has
Speaker 7: Lily direct. Nova Nordisk has been doing this for some
Speaker 7: of the real high demand drugs like GLP one weight
Speaker 7: loss drugs, And so we knew the administration was thinking
Speaker 7: about doing something like this, and its answer to one
Speaker 7: of the biggest priorities in terms of healthcare is lowering
Speaker 7: drug prices, and this is sort of one of the
Speaker 7: one of multiple things that the administration thinks could help
Speaker 7: address that by making a website where drug makers can
Speaker 7: put their drugs on there and at a steep discount
Speaker 7: to the list price and have consumers sort of directly
Speaker 7: buy them from the manufacturers as a way to cut
Speaker 7: drug prices. But it's an interesting concept, and cash pay
Speaker 7: might not necessarily be super popular for other medications like
Speaker 7: it has been for the GLP one weight loss drugs.
Speaker 2: Is that because so many of those other medications are so.
Speaker 7: Expensive exactly, and the insurance landscape for weight loss drugs
Speaker 7: is quite patchy still, it's very difficult to get insurance coverage.
Speaker 7: The drugs are expensive, so a lot of people are
Speaker 7: willing to pay out of pocket for those medications. But
Speaker 7: in terms of this Feiser deal, some of the medications
Speaker 7: that we know that Pfizer will be discounting, like It's
Speaker 7: blood thinner Eloquist, those are usually covered by insurance anyway,
Speaker 7: so people with insurance will have coverage for that. There
Speaker 7: wouldn't really be a reason for them to buy it
Speaker 7: directly from the manufacturer on a website like trump Orex,
Speaker 7: and those who don't have insurance, it's probably still going
Speaker 7: to be pretty expensive for now.
Speaker 2: Some of the drugs that are made by Pfizer, by Lilly,
Speaker 2: by Johnson and Johnson all made or mostly made in
Speaker 2: the US. Let's talk about what Trump threatened to impose
Speaker 2: on branded drugs from outside the US. A one hundred
Speaker 2: percent tariff. Now, that's not going to help a whole
Speaker 2: lot of consumers is.
Speaker 7: It right exactly. I mean, that's one thing that's been
Speaker 7: sort of in conflict with the administration's efforts to lower
Speaker 7: drug prices is if there are tariffs on pharmaceutical products,
Speaker 7: that could end up raising drug prices because it will
Speaker 7: make it a lot more expensive for manufacturers to make
Speaker 7: these medications. And like you said, all of the big
Speaker 7: US and you know, international drug makers have plants, have
Speaker 7: manufacturing plants in the US. They're building more in the US,
Speaker 7: but the pharmaceutical supply chain is really complex, and they
Speaker 7: do have some elements of their manufacturing or supply outside
Speaker 7: of the US. ELI Lilly, for example, makes the critical
Speaker 7: first step in their weight loss and diabetes drugs Manjarro
Speaker 7: and zepbound in Ireland and then they ship it here
Speaker 7: and the rest of the manufacturing process happens here. So
Speaker 7: tariffs really had, you know, huge potential implications for this industry.
Speaker 7: And what Peiser has been able to do is negotiate
Speaker 7: a three year reprieve and it's the assumption that other
Speaker 7: drug makers are going to try to follow suit with this.
Speaker 2: Well, part Offiser's deal is they made a seventy billion
Speaker 2: dollar pledge to expand manufacturing and research and development here.
Speaker 2: So what is in Peiser's plans and what are some
Speaker 2: of the other US manufacturers doing.
Speaker 7: Yeah, so, like we said, there are other US manufacturers
Speaker 7: and international manufacturers that have pledged billions of dollars of investments.
Speaker 7: Over the last couple of months we've seen I mean,
Speaker 7: I think Lily was the first one back in February,
Speaker 7: and since then there's been a lot of other pledges
Speaker 7: to invest. And so right now, what we're hearing is
Speaker 7: that these negotiations are sort of on hold for the
Speaker 7: time being in terms of this one hundred percent tariffs
Speaker 7: that Trump had threatened. And there was also this ongoing
Speaker 7: two thirty two investigation, which is a national security investigation
Speaker 7: into the pharmaceutical supply chain sort of as to lay
Speaker 7: the groundwork for eventual tariffs. So we're hearing right now,
Speaker 7: as these sort of deals are going on, that all
Speaker 7: of that is on pause for the time being. And
Speaker 7: I guess it was a couple of months ago the
Speaker 7: Trump administration sent letters to seventeen drug makers laying out
Speaker 7: a couple of specific demands, you know, to lower drug prices,
Speaker 7: look into direct to consumer, you know, offer discounts through medicaid,
Speaker 7: and so what we're seeing is Pfizer follow through on
Speaker 7: some of those demands and make promises that they will
Speaker 7: discount a lot of their drugs on this trump are
Speaker 7: X website, that they'll just count drugs through medicaid, which
Speaker 7: that it's sort of Actually for the industry was a
Speaker 7: bit of a relief because they thought it was going
Speaker 7: to be worse than this, and it could be worse
Speaker 7: than this if there were sweeping most favored nation policies
Speaker 7: or tariffs implemented, and so for Pfizer, actually it was
Speaker 7: a good thing and there was some fault, you know,
Speaker 7: I guess follow through for the rest of the industry
Speaker 7: that this would be a good thing too well.
Speaker 2: A lot to look forward to in a lot of deals,
Speaker 2: likely in the pipeline. Our thanks to Madison Muller, Bloomberg
Speaker 2: Health Reporter, and coming up on Bloomberg Gay Break Weekend,
Speaker 2: we'll look at the global political implications of the Nobel
Speaker 2: Prize decisions. I'm Tom Busby and this is Bloomberg. This
Speaker 2: is Bloomberg Gay Break Weekend, our global look ahead at
Speaker 2: the top stories for investors in the coming week. I'm
Speaker 2: Tom in New York. Up later in our program, a
Speaker 2: look at the Golden Week holiday in China and what
Speaker 2: it'll mean for consumer spending. But first, a new batch
Speaker 2: of recipients for the Nobel Prize, one of the world's
Speaker 2: most prestigious accolades, established in the will of Swedish chemist
Speaker 2: and inventor Alfred Nobel to honor individuals who made outstanding
Speaker 2: contributions to humankind. The awards have become an emblem of achievement,
Speaker 2: even capturing the interest of US President Donald Trump. For more,
Speaker 2: Let's go to London and bring in Bloomberg Daybreak Europe
Speaker 2: anchor Caroline hepger Tom.
Speaker 3: It's no secret that President Trump has been courting the
Speaker 3: idea of winning a Nobel Peace Prize for some time.
Speaker 3: According to Bloomberg opinion columnist Andres Klouth, it's one of
Speaker 3: the reasons he's been pushing so hard for a cease
Speaker 3: far between Russia and Ukraine. Other political leaders, including the
Speaker 3: Congolese president, have weighed into the debate, saying Trump will
Speaker 3: have earned the award if he can end more than
Speaker 3: three decades of conflict between Rwanda and the Democratic Republic
Speaker 3: of Congo. And of course, previous US presidents have managed
Speaker 3: to impress the Nobel Committee in the past. Prior winners
Speaker 3: include Theodore Roosevelt, Jimmy Carter, and most recently Barack Obama
Speaker 3: in two thousand and nine. The current president mentioned the
Speaker 3: prize during his recent address to the United Nations General Assembly,
Speaker 3: although he did remain philosophical about his chances of winning.
Speaker 8: I didn't think of it at the time because I
Speaker 8: was too busy working to save millions of lives, that is,
Speaker 8: the saving and stopping of these wars. But later I
Speaker 8: realized that the United Nations wasn't there for us.
Speaker 9: They weren't there.
Speaker 8: I thought of it really after the fact, not during
Speaker 8: these negotiations, which were not easy. That being the case,
Speaker 8: what is the purpose of the United Nations? The UN
Speaker 8: has such tremendous potential. I've always said it, such tremendous,
Speaker 8: tremendous potential. But it's not even coming close to living
Speaker 8: up to that potential for the most part, at least
Speaker 8: for now. All they seem to do is write a
Speaker 8: really strongly worded letter and then never follow that letter up.
Speaker 8: It's empty words, and empty words don't solve war. The
Speaker 8: only thing that solves war and wars is action. Now,
Speaker 8: after ending all of these wars and also earlier negotiating
Speaker 8: the Abraham Accords, which is a very big thing for
Speaker 8: which our country received no credit, never receives credit. Everyone
Speaker 8: says that I should get the Nobel Peace Prize for
Speaker 8: each one of these achievements. But for me, the real
Speaker 8: prize will be the sons and daughters who live to
Speaker 8: grow up with the mothers and fathers, because millions of
Speaker 8: people are no longer being killed in endless and unglorious wars.
Speaker 3: That Donald Trump speaking there at the UN General Assembly
Speaker 3: in New York, so just how likely is it that
Speaker 3: he'll walk away with Nobel recognition and how important is
Speaker 3: the upcoming prize giving. It's something I've been discussing with
Speaker 3: our Nordic managing editor Katy Poyan Palo and Stockholm bureau
Speaker 3: chief Charles Daily. Charles, can I start with you Firstie?
Speaker 3: So the Nobels are obviously hugely prestigious. They are known
Speaker 3: around the world, just in terms of the history and
Speaker 3: where we are for this year. To tell us a
Speaker 3: bit about the history of the Nobels and how they've
Speaker 3: come about.
Speaker 5: Yep, sure, I mean to do that. We have to
Speaker 5: go back to eighteen ninety five and the Last Will
Speaker 5: and Testament, of a Swedish engineer and chemist by the
Speaker 5: name of Alfred Nobel, who is known really as well
Speaker 5: as the Nobel Prizes, he's also known for inventing dynamite
Speaker 5: as his claim to fame. In that will, he listed
Speaker 5: five prizes for those who have conferred the greatest benefit
Speaker 5: to mankind in the preceding year. And there were five
Speaker 5: categories of prizes in the will physics, chemistry, physiology or medicine,
Speaker 5: literature and peace, and they were first awarded in nineteen
Speaker 5: oh one. Some years later, in nineteen sixty eight, however,
Speaker 5: a prize was added in memory of Alfred Nobel, and
Speaker 5: that was established by the central bank here in Sweden,
Speaker 5: which is called the Risbank, and not surprisingly that is
Speaker 5: called now the Economics Prize.
Speaker 3: So how important do you think it is then to
Speaker 3: Swedish people.
Speaker 5: I think the fact that a Nobel Prize is seen
Speaker 5: as you know, the most prestigious award in the world
Speaker 5: in its field is really a source of national pride
Speaker 5: for a country that, you know, let's be honest, is
Speaker 5: only ten point five million people on the northern edges
Speaker 5: of Europe. I think it's worth also noting that Sweden
Speaker 5: is a nation that looks outward beyond its borders in
Speaker 5: many respects. So the international attention that these prizes gone
Speaker 5: is of huge importance to the country. Nobel Day on
Speaker 5: December tenth, which is the anniversary of Nobel's death, is
Speaker 5: when the prizes are awarded by the King and there
Speaker 5: is a lavish banquet in Stockholm City Hall. And it's
Speaker 5: probably fair to say that that is the biggest academic
Speaker 5: and cultural highlight of the year in Sweden.
Speaker 3: So deliberations normally do take place in secret. So what
Speaker 3: do we know about the process for this year.
Speaker 5: Yeah, the process for this year is as with other years.
Speaker 5: So Nobel in his will listed the institutions responsible for
Speaker 5: awarding the prize, for example the Royal Swedish Academy of
Speaker 5: Sciences and for the Peace Prize it is a committee
Speaker 5: of five elected by Norway's Parliament. Then there is an
Speaker 5: approved list of nominators, for example former winners, members of
Speaker 5: the Swedish Academy, or professors or chair people affiliated with universities,
Speaker 5: and they can then put forward a name and a
Speaker 5: voting committee then decides on the winner or winners. There
Speaker 5: can only be three winners per prize. Is the maximum
Speaker 5: number of winners per prize, and disclosure about nominations is
Speaker 5: restricted for fifty years, so very a process shrouded in secrecy.
Speaker 3: So Katy, let me turn to you the history of
Speaker 3: awarding the Peace Prize by Norway to foreign leaders. It
Speaker 3: has at times been controversial.
Speaker 9: Well, absolutely, it's been controversial. So one thing to know
Speaker 9: about this prize is you cannot ever give it to
Speaker 9: a person that has deceased, And so living people tend
Speaker 9: to after being awarded, continue their careers and lives, and
Speaker 9: sometimes they do things that don't really kind of fit
Speaker 9: in with the spirit of why they were awarded a
Speaker 9: peace prize. One super well known example is two thousand
Speaker 9: and nine when Barack Obama was awarded the Nobel Peace
Speaker 9: Prize just nine months after becoming US president, and he
Speaker 9: of course went on to take a lot of US
Speaker 9: troops into Afghanistan.
Speaker 3: Yes, and of course we know that President Trump has
Speaker 3: been talking about wanting to win the prize for some time,
Speaker 3: and so again this perhaps put some pressure, adds some
Speaker 3: pressure to these awards. When did we first find out
Speaker 3: about his ambitions?
Speaker 9: Trump has been talking about this for almost a decade.
Speaker 9: He keeps bringing up the fact that Obama was given
Speaker 9: the prize and says, you know, if he were named Obama,
Speaker 9: he would have been given this prize. In ten seconds.
Speaker 9: Trump talks about having brokeered peace or helped end seven wars,
Speaker 9: but many of these are actually a little bit questionable.
Speaker 3: Indeed, in terms of the political implications. Then the pressure,
Speaker 3: I wonder whether that is being felt. And maybe also
Speaker 3: we don't know were the US president to win, what
Speaker 3: might be the implications in the fallout.
Speaker 9: I think the big question is what if he doesn't win.
Speaker 9: This is where the main implication is or Norway. Really
Speaker 9: very recently, Trump declared that not winning would represent a
Speaker 9: big insult to our country. He there sort of applied
Speaker 9: some pressure on the Norwegians. Norwegians are really worried about this.
Speaker 9: They're bracing for what's happening if Trump doesn't win. Now,
Speaker 9: if Trump were to win, I think a lot of
Speaker 9: people would put to question the sort of foundation of
Speaker 9: the Nobel Peace Prize and what it's done for. But
Speaker 9: the same question has been raised with the previous winner.
Speaker 9: As you know, Obama himself questioned his own.
Speaker 3: Victory indeed, But then, of course, the Peace Prize is
Speaker 3: separate from the Norwegian government. So whilst there might be trepidation,
Speaker 3: how does that factor into the kind of decision making.
Speaker 9: The committee is independent, we know that, and some of
Speaker 9: the controversial decisions it's taken in the past were precisely
Speaker 9: because it is independent. The Norwegian government wanted no conflict
Speaker 9: with China in twenty ten, and yet the committee you know,
Speaker 9: went and awarded the Chinese dissident that year.
Speaker 3: Charles, just coming back to you in our specific sphere,
Speaker 3: there's always lots of interest in the prize in economics,
Speaker 3: as well as the other sciences that are awarded, in
Speaker 3: literature and so on. Again, we don't know very much
Speaker 3: about those awards, But what do you think might be
Speaker 3: in the mix here for all of those of the
Speaker 3: hugely important nobels.
Speaker 5: That's a very difficult question because it really is hard
Speaker 5: to name names. I mean, the betting odds at the
Speaker 5: moment are really only available for the Peace and Literature prizes.
Speaker 5: The favorites for the literature this year include the Australian
Speaker 5: fiction writer Gerald Mernaine and also the Mexican author Christina
Speaker 5: Rivera Gaza. So yeah, in conclusion, it's really hard to
Speaker 5: sort of say were we think the winners might be.
Speaker 5: It might be worth noting though, however, in terms of
Speaker 5: the science related awards, prizes are typically shared by multiple
Speaker 5: scholars and they often have an affiliation to universities on
Speaker 5: the respective research departments. The North America and Europe tend
Speaker 5: to dominate the science related prizes as well. And I
Speaker 5: think you know, one area that's caught a lot of
Speaker 5: media attention rightly in recent years has been the lack
Speaker 5: of women representation on the awards. And you know, I
Speaker 5: don't think that necessarily reflects badly on the Nobel committee
Speaker 5: per se, but probably is more a reflection of the
Speaker 5: barriers that women face in working and progressing through the
Speaker 5: scientific community.
Speaker 3: So my thanks there to Bloomberg's Charles Daily and Katty
Speaker 3: poyan Palo. We'll have full coverage of the Nobel Prize
Speaker 3: ceremonies across at Bloomberg platforms. I'm Caroline Hepgar here in
Speaker 3: London and you can catch us every weekday morning for
Speaker 3: Blueberg Daybreak you at beginning at six am in London,
Speaker 3: that's one am on Wall Street.
Speaker 2: Tom, Thank you Caroline, and coming up on Bloomberg Daybreak weekend,
Speaker 2: I'll look at China's Golden Week holiday and what it
Speaker 2: could reveal about the strength of the Chinese consumer. I'm
Speaker 2: Tom Busby and this is Bloomberg. This is Bloomberg day
Speaker 2: Break Weekend, our global look ahead of the top stories
Speaker 2: for investors in the coming week. I'm Tom Busby in
Speaker 2: New York. In China, the Golden Week holiday is now underway.
Speaker 2: It began last Wednesday with National Day and runs through
Speaker 2: the mid Autumn festival, and the government is hoping Chinese
Speaker 2: consumers will celebrate for more. Let's get to the host
Speaker 2: of the Daybreak Asia podcast, Doug Krisner.
Speaker 4: Tom, Golden Week is regarded as the most important travel
Speaker 4: period in China. Authorities are expecting two point four billion
Speaker 4: people to travel during this eight day break, and needless
Speaker 4: to say, the holiday represents a major opportunity for more
Speaker 4: domestic consumption. Joining me now is Bloomberg's Catherine Lim, retail
Speaker 4: analyst for Bloomberg Intelligence. She's on the line from Singapore.
Speaker 4: Thank you so much for making time to chat with me.
Speaker 4: Can you give me a sense on the extent to
Speaker 4: which there is optimism over the outlook for consumer spending
Speaker 4: this year?
Speaker 8: Right?
Speaker 10: You know, happy to be here and gen as you've
Speaker 10: highlighted we are into the world holiday period. Over eight days,
Speaker 10: you're gonna see celebrations not just for National Day, but
Speaker 10: also the mid Autumn festival, which is a traditional, you
Speaker 10: know event that family and friends together. So it was
Speaker 10: very timely seeing how some of the cities are issuing
Speaker 10: consumption vouchers out to their consumers so that you could
Speaker 10: stimulate a little bit more of that spending, which admittedly
Speaker 10: had put on a dreg in August because there was
Speaker 10: a calender shift in that very important mid autumn festival
Speaker 10: that I've just talked about, where by family and friends gether.
Speaker 4: I'm wondering about sentiment right now, and maybe we can
Speaker 4: tie to the equity markets in China which have been
Speaker 4: performing very well. Is that expected to provide some positivity
Speaker 4: to sentiment?
Speaker 2: Do you think?
Speaker 10: Well, definitely, I guess you know, when you look at
Speaker 10: asset and asset value creation, it's either property if not.
Speaker 10: Do you know the equity market, and I think in
Speaker 10: the last two to three years, both of these market
Speaker 10: hasn't been you know, in the best of shape. In
Speaker 10: year to date, equity market the rarely definitely brings relieved
Speaker 10: and you know, does help stimulate that centiment if you
Speaker 10: ask me.
Speaker 4: So, when I think of destinations in China, one of
Speaker 4: the things that comes to mind is Macau and the casinos.
Speaker 4: Are people feeling reasonably optimistic about casino business this year
Speaker 4: and traffic at the big places, well.
Speaker 10: We've also seen traffic, and I would say, you know,
Speaker 10: the table roles, etc. Picking up in terms of our crowd,
Speaker 10: so that is a good sign. On the other hand,
Speaker 10: what I'll say is that you know, a lot of
Speaker 10: these spenders, whether your gamblers or your shoppers per se,
Speaker 10: there is more discerning spending that we have observed, So
Speaker 10: I'm not sure whether we should be putting that much
Speaker 10: bet on Macau. Similarly, you know, even Hong Kong per se,
Speaker 10: I would say that, you know, after the recent typhoon
Speaker 10: hits and we are anticipating another typhoon hitting you know,
Speaker 10: the South over the next ten days, et cetera, it
Speaker 10: may not actually be you know, the biggest thing for
Speaker 10: these two autonomous regions within the country itself. I'm a
Speaker 10: little more optimistic about domestic tourism within the country, as
Speaker 10: you know, more of the shoppers or consumers take a
Speaker 10: break out into you know, the suburban regions and there
Speaker 10: are more camping sites as well as you know, areas
Speaker 10: that consumers can take a break from the city.
Speaker 4: So you mentioned a moment ago that domestic governments in
Speaker 4: China are handing out vouchers and coupons and things to
Speaker 4: kind of stimulate domestic consumption. Give me a sense of
Speaker 4: how they are applied and whether we should be looking
Speaker 4: for kind of high frequency data among retailers, whether it's
Speaker 4: more a story about restaurants, whether it's a story about
Speaker 4: air travel.
Speaker 10: Right, you know, for restaurants, definitely, because you know, we
Speaker 10: are still seeing lots of promotions ongoing for platforms like
Speaker 10: Ali Baba, may twe and JD dot Com when it
Speaker 10: comes to food delivery and quick commerce. You know, you
Speaker 10: would have heard of the competition that was ongoing among
Speaker 10: these three companies since the beginning, since the middle of
Speaker 10: this year itself, and it continues to actually intensify as
Speaker 10: we go into the holiday season again, you know, all
Speaker 10: the gatherings that's going on now that will likely come
Speaker 10: through and on a more intensified level into October and November. Doug,
Speaker 10: Let's not forget that we are now very close to
Speaker 10: the start of the Singles Day shopping festival, which is
Speaker 10: essentially a near two month long shopping festival, and it
Speaker 10: will kick start sometimes on the seventh of October, which
Speaker 10: is essentially next week itself. Once the consumers returns from
Speaker 10: the holidays, they may actually be shopping more online. So
Speaker 10: I would say that, going back to your earlier point
Speaker 10: about consumption vouchers, it's definitely good to actually have an
Speaker 10: extra vouchure on hand to spend. But we'll let's look
Speaker 10: at the discretionary side of things itself. Those spending may
Speaker 10: actually come through in October and November, particularly during the
Speaker 10: Singles Day promotions.
Speaker 4: Catherine will leave it there. Thank you so very much,
Speaker 4: Bloomberg's Catherine Lim, retail analyst for Bloomberg Intelligence. Catherine joining
Speaker 4: us from Singapore, So we go from the Chinese consumer
Speaker 4: to the challenges facing some of the most wealthy families
Speaker 4: in Hong Kong. Joining me now is Bloomberg Shirley Joo.
Speaker 4: Shirley and her team have been reporting on how trouble
Speaker 4: in several high profile real estate projects is creating financial
Speaker 4: risk for some very wealthy families in China. Shirley, thank
Speaker 4: you for making time to chat with me before we
Speaker 4: get to specific examples. Can you help me understand the
Speaker 4: state of the Hong Kong real estate market right now?
Speaker 11: So, Hong Kong's property market has been in a crisis
Speaker 11: since COVID. It's mainly to do with the rising interest
Speaker 11: rate globally and the slowing economy in China. A lot
Speaker 11: of developers borrowed a lot of money before COVID and
Speaker 11: before you know, Hong Kong sort of plunged into years
Speaker 11: of political turmoil and the COVID isolation around the time
Speaker 11: of twenty seventeen and twenty eighteen. That was when you know,
Speaker 11: a lot of developers and a lot of smaller businesses
Speaker 11: borrowed a lot of money and invested heavily into the
Speaker 11: real estate sector. But then, you know, during COVID, people
Speaker 11: stopped traveling and the retail businesses really did very badly.
Speaker 11: And after COVID, China's economy started to slow down, and
Speaker 11: that really put a lot of pressure on developers and
Speaker 11: the businesses that sort of went on in the real
Speaker 11: estate sector. Today, real estate prices, we have data showing
Speaker 11: that it's about thirty percent down from the pre COVID level.
Speaker 4: So can you give me an example of how a
Speaker 4: wealthy family in Hong Kong made a big bet on
Speaker 4: a major real estate project, only to see that project
Speaker 4: underperform in a major way mis expectations wildly.
Speaker 11: New World is one of the most high profile examples
Speaker 11: of this. They borrowed a lot of money to invest
Speaker 11: in developing several major projects, including a huge shopping mall
Speaker 11: and hotel complex near Hong Kong's famous Victoria Harbor and
Speaker 11: mega shopping mall near Hong Kong's International Airport, as well
Speaker 11: as a sports park near Hong Kong's old Airport. And
Speaker 11: they did that in twenty seventeen and twenty eighteen, and
Speaker 11: they spent a lot of money, fueled by debt, and
Speaker 11: then in twenty nineteen, Hong Kong started to enter this
Speaker 11: prolonged period of political turmoil and COVID isolation, and after COVID,
Speaker 11: Hong Kong's economy didn't rebound, it slowed down, so a
Speaker 11: lot of these projects didn't really have time to materialize.
Speaker 11: They didn't have the chance to generate cash for New
Speaker 11: World to pay off their debt, and that's why New
Speaker 11: World's step problem really emerged over the past two years
Speaker 11: and it was pushed to the brink of default. And
Speaker 11: it had to line up Hong Kong's biggest ever refinancing
Speaker 11: with dozens of banks, and it put it off. But
Speaker 11: then banks started to feel that they had too much
Speaker 11: exposure on your world.
Speaker 4: One of the things that I think is very interesting
Speaker 4: here in terms of context is the notion of family
Speaker 4: empires being involved here. It's not just a company. It's
Speaker 4: almost like a dynasty, isn't it. And you mentioned in
Speaker 4: your piece this issue which I found very interesting the
Speaker 4: notion of self correcting. So when a family makes a mistake,
Speaker 4: it's the dynamics of the family sometimes that can make
Speaker 4: the correcting process even more challenging, right.
Speaker 11: Right, Yeah, So the issue with a lot of family
Speaker 11: owned businesses is that a lot of the decision making
Speaker 11: is sometimes down to the personal whim of family members.
Speaker 11: Even though they hired professional managers to run their companies,
Speaker 11: the final decision making will be swighed by the will
Speaker 11: of family members, and that's making management more difficult and
Speaker 11: less professional. And in New World's case, because they expanded
Speaker 11: so aggressively in twenty seventeen and twenty eighteen and the
Speaker 11: timing was really bad. So now there that problem really showed,
Speaker 11: and that's really raising an alarm bell for a lot
Speaker 11: of other family owned businesses in Hong Kong and around
Speaker 11: the world as well.
Speaker 4: So we know on the mainland, the government's been very
Speaker 4: concerned about problems with the property market. How is the
Speaker 4: local government in Hong Kong viewing this situation right now?
Speaker 4: Are people very concerned?
Speaker 11: People are concerned, and that was why you would see
Speaker 11: reports about Hong Kong's mondatary Authority actually following up on
Speaker 11: New wor World refinancing effort. You know, there were reports
Speaker 11: about Hong Kong Monetary Authority calling banks up to check
Speaker 11: on the status on their refinancing arrangement with New World,
Speaker 11: and banks felt that they didn't want to be the
Speaker 11: one that make New World default and trigger the rippling
Speaker 11: effect on Hong Kong's economy. So there is this saying
Speaker 11: that New World is too big to fail, and that
Speaker 11: really showed during its refinancing effort with the banks and
Speaker 11: with the involvement of Hong Kong's monetary authorities.
Speaker 4: When I think about the residential market in Hong Kong,
Speaker 4: I know that for years there have been challenges trying
Speaker 4: to add to new supplies. So many restrictions on developing
Speaker 4: land and yet here we have a situation where commercial
Speaker 4: developers don't seem to have any problems. Can you imagine
Speaker 4: a world where things get turned and so that perhaps
Speaker 4: in a way, these companies begin to focus their energy,
Speaker 4: maybe more on residential property than on commercial property.
Speaker 11: That's exactly what New World is doing right now. So
Speaker 11: now they are refocusing on selling and building more residential
Speaker 11: projects and from selling apartments that will generate money for
Speaker 11: them to pay down debt. So that's their main strategy
Speaker 11: right now.
Speaker 4: Shirley, we'll leave it there. Thank you so very much,
Speaker 4: Bloomberg Shirley Joe in Hong Kong, and I'm Doug Chrisner.
Speaker 4: Catch us weekdays for the Daybreak Asia podcast. It's available
Speaker 4: wherever you get your podcast. Tom.
Speaker 2: Thanks Doug, and that does it for this edition of
Speaker 2: Bloomberg day Break Weekend. Join us again Monday morning at
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