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

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

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Speaker 2: Earlier today, US Treasury Secretary Scott Besson seemed to cast

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Speaker 2: doubt on a timely resolution to the US China trade war.

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Speaker 2: He said the White House had not offered to cut

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Speaker 2: tariffs on China on a unilateral basis now. Those remarks

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Speaker 2: came in response to a report indicating the US was

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Speaker 2: considering slashing levies on Chinese goods. The Wall Street Journal

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Speaker 2: reported in some cases, tariffs could be cut by more

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Speaker 2: than half. Prior to the report, China signaled it was

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Speaker 2: open to trade talks with the US. Here is Treasury

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Speaker 2: Secretary Besson speaking at an event hosted by the Institute

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Speaker 2: for International Finance in Washington.

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Speaker 3: If China is serious on less dependence on export led

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Speaker 3: manufacturing growth and a rebalancing toward a domestic economy, I

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Speaker 3: think they use the term dual circulation. Well it's right now,

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Speaker 3: it's really singular circulation. And if they want to rebalance,

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Speaker 3: let's do it together.

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Speaker 2: That is Treasury Secretary Bess. And he went on to

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Speaker 2: say a full rebalancing of trade might take two to

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Speaker 2: three years. Then later in the day after the closing bell,

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Speaker 2: President Trump said China may receive a new tariff right

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Speaker 2: in the next two to three weeks. Here's Trump.

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Speaker 4: We're dealing with a lot of countries right now, and

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Speaker 4: it could be with China. But maybe we'll make a

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Speaker 4: special a deal and we'll see what it will be.

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Speaker 4: Right now, it's one hundred and forty five percent. That's

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Speaker 4: very high. It got there because of the fentanyl. They're

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Speaker 4: sending massive amounts of fentanyl into a country.

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Speaker 2: At the same time, President Trump dismissed a report in

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Speaker 2: The Financial Times that he's planning to spare carmakers from

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Speaker 2: some of his most onerous tariffs. He told reporters he's

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Speaker 2: not considering change to tariffs on autos or on auto parts. Earlier,

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Speaker 2: The FT had reported a move is being considered to

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Speaker 2: exempt car parts from the tariffs on US imports from China,

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Speaker 2: but in place to counter fentanyl production. Now car makers

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Speaker 2: reportedly would also get a break from tariffs on steel

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Speaker 2: and aluminum. For more, we heard from Bloomberg m Live

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Speaker 2: market strategist Mark Cranfield. He spoke with Bloomberg's Paul Allen

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Speaker 2: and Marcson.

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Speaker 5: More soothing rhetoric coming out of the Oval Office today,

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Speaker 5: and we did see the US dollar strengthen stocks rally

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Speaker 5: as well. But considering how dependent markets seem to be

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Speaker 5: on newsflow at the moment, how sustainable does this rally look?

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Speaker 6: Not very? I would suggest chaotic conditions are not what

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Speaker 6: investors need, particularly if you're a medium term, long term

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Speaker 6: portfolio manager. You need things to be a little bit clearer.

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Speaker 6: Colleague in New York, Cameron Christ was writing overnight that

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Speaker 6: the realized volatility on the S and P five hundred

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Speaker 6: is getting close to sixty percent. We've never seen those

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Speaker 6: kind of levels except during the global financial crisis and

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Speaker 6: the Wall Street crash in the nineteen thirties, So that

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Speaker 6: shows you how extreme these kind of day to day

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Speaker 6: swings are that we're seeing in the most important financial

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Speaker 6: index in the world.

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Speaker 3: Now.

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Speaker 6: The only way for this to resolve itself is either

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Speaker 6: we go through a quiet period a few weeks of

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Speaker 6: limited trading where volatility gradually dies because the ranges are smaller,

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Speaker 6: or the market needs have declined substantially to take out

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Speaker 6: that extreme level of volatility. One or the other needs

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Speaker 6: to happen. And when you see that, the trade talks

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Speaker 6: so far have been pretty inconclusive. There seems to be

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Speaker 6: a lot of changing of mind about what they mean

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Speaker 6: where they're going to be imposed. Investors are not going

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Speaker 6: to take this well. They're going to take a defensive approach,

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Speaker 6: and that likely means that US equities need to decline further.

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Speaker 6: That will be the outcome that resolves this extreme period

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Speaker 6: price action, which cannot is unsustainable. It cannot go on

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Speaker 6: like this without big things breaking, and the way for

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Speaker 6: that to happen is for money to gradually ease out

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Speaker 6: of the markets and for US markets to lose their

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Speaker 6: premium over the rest of the world. We already begin

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Speaker 6: to see flows into Europe, into China, parts of Asia.

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Speaker 6: That is likely to continue, and the result also will

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Speaker 6: lead to a weaker US dollar as well. Even though

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Speaker 6: mister Besson might not have a clear target for the

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Speaker 6: yen himself, financial markets seems to have decided. Investors seem

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Speaker 6: to prefer the idea that the US dollar is still

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Speaker 6: overvalued and it needs to adjust, with the yend, the

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Speaker 6: euro and the Swiss frank the main beneficiaries of that.

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Speaker 6: That is likely to continue for a while. So this

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Speaker 6: theme of sell American assets looks as though it still

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Speaker 6: has quite a way to play out unless we have

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Speaker 6: a very quick resolution to all the trade talks, which

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Speaker 6: doesn't seem to be on the cards for now.

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Speaker 5: Certainly, UBS is out with a note today as well,

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Speaker 5: with the dollar weakness continuing to be a theme there.

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Speaker 5: Although we have seen yields on some of these longer

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Speaker 5: dated US notes starting to fall a little. Pimco saying

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Speaker 5: they're looking attractive. What messages the bond market sending.

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Speaker 6: Here instead a very mixed signal. I mean to be honest,

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Speaker 6: Investors listening to this wouldn't expect anything else from Pimco.

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Speaker 6: Pimco is a fixed income fan manager. What else are

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Speaker 6: they going to do with their money apart from buy bond,

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Speaker 6: so you would expect them to be supporting the market.

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Speaker 6: Steepening of the curve is the bigger theme Here's flattened

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Speaker 6: slightly this week, but every US Treasury auction continues to

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Speaker 6: be a landmine. We have a big one coming up

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Speaker 6: next week, which is a ten year auction. To get through,

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Speaker 6: every auction this week has been pretty dice. They've had

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Speaker 6: to cheapen up the yields, even the five year last night,

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Speaker 6: which is usually a very easy one to sell. They

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Speaker 6: had to squeeze some extra yield out of the market

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Speaker 6: to make it go through. There's a seven year tonight,

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Speaker 6: which is going to be pretty tricky as well. Foreign

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Speaker 6: investors are the key to this, and that's where people

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Speaker 6: will get the idea whether they really support the US

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Speaker 6: yield curve or not. Most likely they will stand back

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Speaker 6: until yields are very attractive and the curve is much

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Speaker 6: deeper to compensate them. For the fact that if the

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Speaker 6: US continues on this policy path, investors will be expecting

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Speaker 6: the major rating agencies to downgrade the United States. It

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Speaker 6: seems inevitable that there will have to be. The fiscal

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Speaker 6: situation of the States is unsustainable, the trade situation is unsustainable.

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Speaker 6: They need to stop the growth. The growth projections in

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Speaker 6: the United States are getting lower and lower. That means

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Speaker 6: that it will affect the credit rating. People are starting

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Speaker 6: to price that in and the simple way to do

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Speaker 6: that is to steepen the US Treasury curve, which ultimately

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Speaker 6: means that long en yields will need to go higher.

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Speaker 5: We also heard some remarks from President Trump about j

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Speaker 5: Powder Day. Of course, it was twenty four hours ago

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Speaker 5: that he said that he had no intention to fire Jaypowell,

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Speaker 5: and now Trump's saying, look, he might pick up the

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Speaker 5: phone and call him regarding rates. I mean, it's a

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Speaker 5: bit of a tightrope act here for the Fed chare.

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Speaker 5: That does suggest though, that the two haven't spoken yet.

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Speaker 5: What's the path ahead for Japowell here? How does he react?

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Speaker 6: It's an extremely difficult situation for everybody at the Federal Reserve.

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Speaker 6: When you have the President speaking so often, it's a

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Speaker 6: very unusual situation. People in the Central Bank in the

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Speaker 6: United States are not used to almost daily messaging coming

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Speaker 6: from the White House. They're usually left alone to do

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Speaker 6: their job, set monetary policy, and once in a while

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Speaker 6: they report to Congress, usually twice a year, to give

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Speaker 6: them an update. That's usually as far as it goes.

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Speaker 6: The big question for investors is the independence of the

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Speaker 6: Central Bank in the United States. So far, President Trump

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Speaker 6: has not addressed that at all. He speaks about mister

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Speaker 6: Powell on a personal level, he does not speak about

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Speaker 6: wanting to sustain Federal Reserve independence. That is what investors

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Speaker 6: want to see. That's what they have been relying on

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Speaker 6: for years and years. If they don't get that clarification again,

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Speaker 6: it will mean there has to be a discount for

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Speaker 6: US assets, particularly for treasuries and the US dollar, because

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Speaker 6: that is where foreign money assesses every country based on

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Speaker 6: partly whether the central Bank can make decisions for monetary

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Speaker 6: policy based on the data it sees, not by looking

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Speaker 6: over its shoulder to see whether President thinks it's good

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Speaker 6: or bad. Foreign investors need that clarity and reassurance that

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Speaker 6: the Federal Reserve can make its decisions based on the

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Speaker 6: data it sees and do its job for the time being.

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Speaker 6: That is not a clear outcome.

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Speaker 2: That's Bloomberg Market Live strategist Mark Cranfield there in conversation

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Speaker 2: with Bloomberg's Paul Allen here on the Daybreak Asia podcast.

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

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Speaker 2: Earnings this morning from the South Korean chip maker s

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Speaker 2: k Heinez, the company's operating profits soared by one hundred

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Speaker 2: and fifty eight percent. Now, this reflects a global race

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Speaker 2: in AI as well as a stockpiling ahead of US

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Speaker 2: tariffs of both advanced chips and memory chips used in

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Speaker 2: both PCs and smartphones. We heard earlier from sk Kim,

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Speaker 2: the executive director at Diewah Securities. Here's mister Kemon conversation

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Speaker 2: with Bloomberg's Paul Allen in Sydney, s K.

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Speaker 5: A blow out set of numbers here. I just want

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Speaker 5: to stop by getting your initial response to what we've

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Speaker 5: seen this morning.

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Speaker 2: Yeah, yeah, s K.

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Speaker 1: Heinez announce some the upbit the market expectations. So I

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Speaker 1: think that the upside is coming from dram so especially

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Speaker 1: the pischiment. Growth of the extra reserve is higher than

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Speaker 1: previous to company's guide them so, which means that we

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Speaker 1: did the more stage of the high valued product such

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Speaker 1: as the HPM and d DR five. But on the

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Speaker 1: other hand, land flash business remain weak.

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Speaker 3: Uh.

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Speaker 7: You think in line with the our our market estimate,

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Speaker 7: how much of what we have seen today can you

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Speaker 7: put down the front loading and around fear about the

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Speaker 7: tariff uncertainty.

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Speaker 5: Least sorts of numbers are going to be sustainable in

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Speaker 5: future quarters as the clouds around the trade will gathered.

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Speaker 2: Yeah.

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Speaker 1: Clearly there's some food in demand from the terraf terrafy issue,

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Speaker 1: but also at the same time there is some additional

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Speaker 1: demand from the deep sick uh in the demand from

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Speaker 1: China and also the China government. Uh, the similar measure.

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Speaker 7: Uh, that is some Uh.

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Speaker 1: Yeah, we see some the higher demand for commodity memory

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Speaker 1: uh and uh yeah, I'll call you to the company

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Speaker 1: is the data point they already guided for the higher

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Speaker 1: shipment growth for the second quarter. It's almost double digit

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Speaker 1: growth for both dam and land flesh, so, which means

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Speaker 1: the power with the strong resarch will continue in the

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Speaker 1: second quarter as well.

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Speaker 5: Certainly, under normal circumstances that increased demand from China would

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Speaker 5: seem encouraging. But considering that the changes that we're seeing

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Speaker 5: on trade and tariffs and the news flow that comes

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Speaker 5: out of the White House is quite unpredictable at the moment,

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Speaker 5: how challenging is it to make accurate forecasts about future

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Speaker 5: quarters for Eskeheinix and other chip makers as well.

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Speaker 1: Yeah yeah, yeah, that's correct, Yeah, but very reasonally. We

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Speaker 1: see some concerns on the therapy was e g H

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Speaker 1: and also some you know, AI demand seems to remain

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Speaker 1: so originally AI demand, Uh, it's a little bit uh

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Speaker 1: you know, uh uh safe from the there's a therapy

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Speaker 1: issue because of even the there's the AI demanders now

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Speaker 1: it is from everywhere. Uh and yeah, so the concern

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Speaker 1: is more about some you know, the second half. Uh,

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Speaker 1: it's for the commodity side, because of which is an

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Speaker 1: unexpected uh you know demand uh concentrated in the commodity

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Speaker 1: to even but HPM UH is a you know, the

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Speaker 1: Heenechs have leading they're reading in h pm, so they're

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Speaker 1: relatively uh their lavine portion of HPM is way higher

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Speaker 1: than other supplier. Uh so in their perspective. So the

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Speaker 1: s K highexes I think they're owning and performance we're

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Speaker 1: a rather depending on the AI, which means uh some

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Speaker 1: loadmap of the NBDIA GV three hundred which are used

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Speaker 1: uh you know, twelve high HPM three product. And also

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Speaker 1: i'd rather see some potential riskers from some experts control

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Speaker 1: from the US government. Uh And yeah, and relatively we

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Speaker 1: can over our we can say that the AI demand

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Speaker 1: is a US as a lot of comport over and

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Speaker 1: more uh you know, bits over compared with the commodity

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Speaker 1: design in previously.

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Speaker 5: Definitely, the story around the AI driven demand seems very robust.

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Speaker 5: But you mentioned that d RAM a little bit earlier.

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Speaker 5: How about d RAM demands it's connected to some of

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Speaker 5: those more traditional markets like uh PCs and smartphones. How

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Speaker 5: do you see demand on that sector.

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Speaker 3: Yeah.

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Speaker 1: So over the PC smartphone demand demand remain uh. It's

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Speaker 1: a week uh as we can say it's a stable,

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Speaker 1: it's not as strong. But this year clearly the replacement

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Speaker 1: cycle for p se uh from because of the window

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Speaker 1: microsoftware stop supplying support for the window ten. So we

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Speaker 1: already see some signal of the replacement cycle demand from

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Speaker 1: the PC UH and the smart phone. The smart phone

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Speaker 1: is a little bit the Questo map, but I think

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Speaker 1: that the iPhone UH this year Apple, while there's uncertainty

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Speaker 1: in you know U s, but the you know Apple

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Speaker 1: is working with the Chinese local uh you know AI

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Speaker 1: companies such as Ali Baba and the preparing AI uh

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Speaker 1: the models the China markets. So that with resulting the

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Speaker 1: higher shipment and also h some some you know the

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Speaker 1: positive numbers from Chinese smartphone maker early this year. Uh

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Speaker 1: So yeah, some some AI only device AI demand UH

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Speaker 1: caustiously anticipate late this year, but we see the more

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Speaker 1: viability in the piece side.

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Speaker 5: Now, SK before we let you go, I just want

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Speaker 5: to get your thoughts on the share price artwork for

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Speaker 5: sk Heinex. Person. If we take a look at this

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Speaker 5: performance over the past year, it's been a wild ride,

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Speaker 5: but it's essentially flat on. Yeah, we've got short selling

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Speaker 5: of s k Heinex at a record. What's your price

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Speaker 5: target for the stock?

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Speaker 1: Yeah, our target price is two hundred and sixty seven

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Speaker 1: thousand and one, so we still see some upside closed,

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Speaker 1: it's way higher than like more more than forty percent.

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Speaker 1: The reason that the weaknesses come from the the short

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Speaker 1: selling band in Korea, some short selling from the end

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Speaker 1: of March, and also the one of the reasons is

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Speaker 1: that the shurt price of Micron is a kick competitors

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Speaker 1: in the ASTA. Micron share price is down so much

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Speaker 1: so now the valuation gap between Skinich and Micron it's

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Speaker 1: quite narrow narrowing, so that is kind of pressure on

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Speaker 1: the subprice. Uh until now, but uh kiss, they show

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Speaker 1: that it's a strong awning uh performance, it's based on

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Speaker 1: the it's a leadership and then yeah, according to the

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Speaker 1: some research from the sk Heinich they achieved number one

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Speaker 1: market share position in dram you know reason today. So yeah,

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Speaker 1: if if we see if there is some say uncertainty

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Speaker 1: is there and maybe Korean government in the US government,

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Speaker 1: they would uh yeah, discuss on the traffic maybe tomorrow.

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Speaker 1: So we will see, but hopefully uh some the better

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Speaker 1: uh situation for the semiconductor industry. And then I think

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Speaker 1: there's offside in the show, right, there's a buying opportunity

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Speaker 1: of investors, all.

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Speaker 5: Right, ts k I will have to leave it there.

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Speaker 5: Thanks so much for joining us. That is Skkim, executive

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Speaker 5: director and analysts at Die with Securities.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Prisoner and this is Bloomberg