1 00:00:02,440 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:09,640 --> 00:00:12,840 Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. 3 00:00:12,920 --> 00:00:15,400 Speaker 2: You can join Brian Curtis and myself for the stories, 4 00:00:15,440 --> 00:00:18,520 Speaker 2: making news and moving markets in the Apec region. You 5 00:00:18,600 --> 00:00:21,439 Speaker 2: can subscribe to the show anywhere you get your podcast 6 00:00:21,520 --> 00:00:24,919 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 7 00:00:24,920 --> 00:00:26,080 Speaker 2: Bloomberg Business app. 8 00:00:27,440 --> 00:00:32,159 Speaker 3: Max Bonduri, Founder and CEO of SGMC Capital, for a 9 00:00:32,200 --> 00:00:35,360 Speaker 3: closer look at the markets, we seem to have entered 10 00:00:35,400 --> 00:00:37,479 Speaker 3: a risk off period here, Max, what do you think 11 00:00:37,560 --> 00:00:38,320 Speaker 3: is the cause of that? 12 00:00:40,320 --> 00:00:42,839 Speaker 4: Well, the main one, of course is the geopolitical tensions 13 00:00:42,840 --> 00:00:45,720 Speaker 4: that we have seen in the Middle East unfortunately, and 14 00:00:45,880 --> 00:00:47,839 Speaker 4: if you couple that with the fact that we have 15 00:00:47,960 --> 00:00:52,159 Speaker 4: seen inflation numbers remaining higher than what most people anticipated, 16 00:00:52,479 --> 00:00:55,080 Speaker 4: and the fact that again these tensions could create the 17 00:00:55,280 --> 00:00:59,320 Speaker 4: create an appward spiral with respect to further pressures upside 18 00:00:59,320 --> 00:01:03,040 Speaker 4: pressures to the inflation level, then of course this is 19 00:01:03,080 --> 00:01:05,520 Speaker 4: why you're seeing quite a bit of risk of that 20 00:01:05,560 --> 00:01:07,800 Speaker 4: we have experience over the last in days. And you 21 00:01:07,880 --> 00:01:10,120 Speaker 4: couple that with the fact that we've had a strong 22 00:01:10,160 --> 00:01:12,400 Speaker 4: start of the year, actually coming off a pretty strong 23 00:01:12,800 --> 00:01:15,480 Speaker 4: year all of last year. Then it makes sense for 24 00:01:15,680 --> 00:01:19,160 Speaker 4: global investors to start taking profit reducing risks and taking 25 00:01:19,200 --> 00:01:20,640 Speaker 4: a look on what is going to happen next. 26 00:01:21,040 --> 00:01:24,360 Speaker 2: Does it confound you a bit that inflation is proving 27 00:01:24,880 --> 00:01:26,640 Speaker 2: to be as sticky as it is? I mean, and 28 00:01:26,720 --> 00:01:30,280 Speaker 2: here we had one of the FED presidents last week 29 00:01:30,560 --> 00:01:34,479 Speaker 2: was Austin Goolsby of Chicago saying that basically the story 30 00:01:34,520 --> 00:01:38,600 Speaker 2: on inflation is stagnated. I mean, he's basically saying it's stalled. 31 00:01:40,440 --> 00:01:44,280 Speaker 4: Well, we're not surprised. Every time we spoke last November, 32 00:01:44,319 --> 00:01:46,400 Speaker 4: last December, we always said that the FED was going 33 00:01:46,480 --> 00:01:49,440 Speaker 4: to cut two maximum three times, so we were never 34 00:01:49,480 --> 00:01:52,600 Speaker 4: in the seven to eighth camp. That's because again, going 35 00:01:52,600 --> 00:01:54,960 Speaker 4: from an eight nine percent inflation to a four or 36 00:01:54,960 --> 00:01:57,760 Speaker 4: five percent inflation is pretty easy. Going from four to 37 00:01:57,760 --> 00:02:00,000 Speaker 4: five down to two, which is what the FED wants, 38 00:02:00,440 --> 00:02:03,840 Speaker 4: that's a lot lot harder. So we're not surprised obviously. 39 00:02:04,000 --> 00:02:06,520 Speaker 4: Now the main question is are we going to be 40 00:02:06,640 --> 00:02:10,760 Speaker 4: floating around the current levels gradually declining or are we 41 00:02:10,800 --> 00:02:13,720 Speaker 4: going to see a further spike because of everything that 42 00:02:13,800 --> 00:02:16,160 Speaker 4: we have been seeing in terms of tension and just 43 00:02:16,280 --> 00:02:20,639 Speaker 4: overall demand and supply scenarios, because in the latter case 44 00:02:20,800 --> 00:02:24,920 Speaker 4: then that could be quite worrisome for markets because you know, 45 00:02:25,000 --> 00:02:27,640 Speaker 4: some banks out there actually starting to talk about hikes. 46 00:02:27,680 --> 00:02:30,920 Speaker 4: Now we're not in that camp. We still see about 47 00:02:30,960 --> 00:02:34,360 Speaker 4: two cuts, like we've said last year, but clearly it's 48 00:02:34,400 --> 00:02:37,440 Speaker 4: a whole difference scenario would respect to what most investors 49 00:02:37,440 --> 00:02:38,560 Speaker 4: were expecting in Genuary. 50 00:02:38,600 --> 00:02:41,880 Speaker 3: So it's a dual mandate. The labor market is a 51 00:02:41,960 --> 00:02:45,080 Speaker 3: lagging indicator, and it seems like the Fed is waiting 52 00:02:45,280 --> 00:02:48,440 Speaker 3: to see you know, what happens with labor. If the 53 00:02:48,480 --> 00:02:51,799 Speaker 3: Fed waits until it actually weakens, might that be too late? 54 00:02:51,919 --> 00:02:53,799 Speaker 3: Is there a real risk that it waited too long? 55 00:02:56,240 --> 00:02:59,840 Speaker 4: That could be the risk. And to be honest, up 56 00:03:00,120 --> 00:03:04,600 Speaker 4: until now, the market has managed to cope with the 57 00:03:04,680 --> 00:03:07,520 Speaker 4: changes in expectations quite swiftly, because if you see again, 58 00:03:07,639 --> 00:03:10,440 Speaker 4: we went from seven to eight cuts expectations to less 59 00:03:10,440 --> 00:03:13,000 Speaker 4: than two by the end of the year and markets 60 00:03:13,120 --> 00:03:16,360 Speaker 4: have fared quite decently up until again last week before 61 00:03:16,360 --> 00:03:19,920 Speaker 4: the geopolitical tensions. In terms of macroeconomic risks, then yes, 62 00:03:20,000 --> 00:03:22,519 Speaker 4: of course, if the FED waits too long, that could 63 00:03:22,560 --> 00:03:24,760 Speaker 4: be a little too much. That is again why we 64 00:03:24,880 --> 00:03:28,600 Speaker 4: do expect the FED to start doing something and at 65 00:03:28,680 --> 00:03:31,920 Speaker 4: least again those one or two cuts this year, But 66 00:03:32,040 --> 00:03:34,360 Speaker 4: a lot is going to be dependent on data. We're 67 00:03:34,560 --> 00:03:38,720 Speaker 4: seeing growth remaining strong and robust, and that is why 68 00:03:38,760 --> 00:03:41,800 Speaker 4: you know the FED is not in any particular rush, 69 00:03:41,880 --> 00:03:45,080 Speaker 4: but they will eventually have to do something in order 70 00:03:45,160 --> 00:03:47,320 Speaker 4: not to try and break something within the system. 71 00:03:47,560 --> 00:03:50,480 Speaker 2: So do you use this opportunity maybe to reduce your 72 00:03:50,520 --> 00:03:53,200 Speaker 2: exposure to the US just a little bit. Maybe you 73 00:03:53,280 --> 00:03:56,080 Speaker 2: look at Europe right now, we're talking about a potential 74 00:03:56,160 --> 00:03:59,960 Speaker 2: rate cut from the ECB. Germany's shows a little sun 75 00:04:00,000 --> 00:04:03,880 Speaker 2: line of maybe improvement. Do you maybe try to get 76 00:04:03,920 --> 00:04:07,960 Speaker 2: exposure to underloved markets right now and sell the US. 77 00:04:09,760 --> 00:04:11,480 Speaker 4: Yes, a bit of a rotation makes a lot of 78 00:04:11,520 --> 00:04:16,800 Speaker 4: sense from a monetary perspective. Like you've correctly mentioned, the 79 00:04:16,839 --> 00:04:19,279 Speaker 4: ECB is going to be acting sooner. They're going to 80 00:04:19,320 --> 00:04:21,719 Speaker 4: be more accumulative than the facts, so that could provide 81 00:04:21,720 --> 00:04:24,560 Speaker 4: a little bit of support of the markets going forward. 82 00:04:24,720 --> 00:04:26,440 Speaker 4: So a bit of rotation out of the US and 83 00:04:26,480 --> 00:04:28,880 Speaker 4: into Europe does make a lot of sense, especially because 84 00:04:29,040 --> 00:04:31,640 Speaker 4: getting out of the US would normally mean taking quite 85 00:04:31,640 --> 00:04:33,880 Speaker 4: a bit of profits, So that is always something that 86 00:04:34,640 --> 00:04:37,839 Speaker 4: makes a lot of sense. That being said, the growth 87 00:04:37,960 --> 00:04:39,800 Speaker 4: remains a lot stronger in the Yes, if you're looking 88 00:04:39,800 --> 00:04:44,240 Speaker 4: at longer term perspective, the US remains the more attractive 89 00:04:44,800 --> 00:04:48,400 Speaker 4: market before we do stick with the core exposures within 90 00:04:48,480 --> 00:04:50,479 Speaker 4: the US, But of course we have been trimming a 91 00:04:50,520 --> 00:04:52,479 Speaker 4: bit of quite a bit over the last few weeks. 92 00:04:53,120 --> 00:04:56,520 Speaker 3: Jeffries pointed out late last week something interesting that net 93 00:04:56,560 --> 00:05:00,919 Speaker 3: interest payments for the US corporate sector have actually declined 94 00:05:01,160 --> 00:05:04,760 Speaker 3: over this tightening cycle. And that's because the large cash 95 00:05:04,800 --> 00:05:09,120 Speaker 3: balances of the big tech companies, combined with listed corporates 96 00:05:09,160 --> 00:05:13,520 Speaker 3: refinancing or turning out their debt, and also households did 97 00:05:13,560 --> 00:05:16,479 Speaker 3: sort of the same thing. Do you see that as 98 00:05:16,560 --> 00:05:19,560 Speaker 3: a positive That maybe doesn't get as much discussion as 99 00:05:19,560 --> 00:05:19,919 Speaker 3: it could. 100 00:05:22,040 --> 00:05:22,320 Speaker 2: Well. 101 00:05:22,520 --> 00:05:25,760 Speaker 4: Corporates in general have been a lot more prepared this 102 00:05:25,920 --> 00:05:29,440 Speaker 4: time round for the current let's say slow down, even 103 00:05:29,480 --> 00:05:31,640 Speaker 4: though slow down in growth is not exactly that, but 104 00:05:31,680 --> 00:05:35,560 Speaker 4: in terms of environment with respect to interest rates, they 105 00:05:35,600 --> 00:05:38,839 Speaker 4: have been cutting their expenses a lot earlier and a 106 00:05:38,880 --> 00:05:42,040 Speaker 4: lot more proactively than it was in the past cycles. 107 00:05:42,080 --> 00:05:44,640 Speaker 4: They've probably learned from the past, and even as you 108 00:05:44,680 --> 00:05:48,760 Speaker 4: correctly pointed out, from an interest rate payment they have 109 00:05:48,920 --> 00:05:51,479 Speaker 4: been doing what they had to. Of course, the large 110 00:05:51,720 --> 00:05:54,240 Speaker 4: tech companies are going to be skewing the results a 111 00:05:54,279 --> 00:05:56,919 Speaker 4: little bit on one side, but in general, corporates have 112 00:05:57,000 --> 00:05:59,880 Speaker 4: been acting quite well and that is probably why you 113 00:06:00,240 --> 00:06:04,960 Speaker 4: seeing growth and in general earnings come out pretty decently 114 00:06:05,000 --> 00:06:07,240 Speaker 4: and pretty robustly, and that is what is keeping the 115 00:06:07,279 --> 00:06:10,880 Speaker 4: economy afloat even though rates are remaining high. 116 00:06:11,360 --> 00:06:13,240 Speaker 2: So I'm curious to get your take on what you're 117 00:06:13,240 --> 00:06:15,760 Speaker 2: seeing in China these days. I mean, we were talking 118 00:06:15,839 --> 00:06:19,600 Speaker 2: last hour about how disappointing some of the monthly activity 119 00:06:19,680 --> 00:06:22,000 Speaker 2: data was for the month of March. I'm thinking industrial 120 00:06:22,040 --> 00:06:25,440 Speaker 2: output and retail sales. Yeah, there's a big question mark 121 00:06:25,480 --> 00:06:28,839 Speaker 2: over the Chinese consumer. Yes, we know the property market 122 00:06:28,880 --> 00:06:32,080 Speaker 2: is still in the process of de leveraging. Is there 123 00:06:32,440 --> 00:06:35,440 Speaker 2: enough that would interest you in putting new money to 124 00:06:35,480 --> 00:06:36,640 Speaker 2: work in China right now? 125 00:06:38,600 --> 00:06:41,680 Speaker 4: At the moment, it's difficult to increase exposure to China 126 00:06:41,760 --> 00:06:44,479 Speaker 4: because once again we know that it's weak and probably 127 00:06:44,480 --> 00:06:47,039 Speaker 4: a lot of the negatives are out there. But from 128 00:06:47,080 --> 00:06:50,560 Speaker 4: an economic perspective, we're not particularly worried. Yes, we are 129 00:06:50,600 --> 00:06:53,560 Speaker 4: obviously in a weak environment and it's likely to remain 130 00:06:53,640 --> 00:06:56,280 Speaker 4: that way. But what we need again before putting more 131 00:06:56,360 --> 00:06:59,240 Speaker 4: money to work is having more visibility with respect to 132 00:06:59,279 --> 00:07:02,760 Speaker 4: the business environment, with respect to the rules and regislations 133 00:07:02,760 --> 00:07:04,960 Speaker 4: which are going to be taking place in China, and 134 00:07:05,040 --> 00:07:09,039 Speaker 4: with respect to the overall support for the market that 135 00:07:09,800 --> 00:07:12,600 Speaker 4: the government and the local authorities are going to be provided, 136 00:07:12,920 --> 00:07:16,480 Speaker 4: because again this is the real risk when you have 137 00:07:16,800 --> 00:07:19,360 Speaker 4: very little visibility with respect to what is going to 138 00:07:19,360 --> 00:07:21,680 Speaker 4: be happening on that front, and that is when you're 139 00:07:21,720 --> 00:07:24,840 Speaker 4: going to be then finding yourself holding an industry or 140 00:07:24,840 --> 00:07:27,120 Speaker 4: sub names which on paper look very good and in 141 00:07:27,240 --> 00:07:29,520 Speaker 4: terms of prospects look very good, but then because of 142 00:07:29,680 --> 00:07:33,640 Speaker 4: changes again in the rules or legislations or requirements, then 143 00:07:33,680 --> 00:07:35,760 Speaker 4: all of a sudden that play doesn't look so great. 144 00:07:35,800 --> 00:07:38,720 Speaker 3: Yeah, okay, Max, you talked a little bit about rotating 145 00:07:38,760 --> 00:07:41,680 Speaker 3: into Europe. What would be your top conviction call at 146 00:07:41,680 --> 00:07:42,080 Speaker 3: the moment? 147 00:07:44,080 --> 00:07:48,040 Speaker 4: Well, currently, obviously in the fixed income space, locking in 148 00:07:48,080 --> 00:07:51,400 Speaker 4: some of the yields makes a lot of sense. Don't 149 00:07:51,400 --> 00:07:53,720 Speaker 4: go too high on the duration risk, and don't go 150 00:07:53,800 --> 00:07:56,280 Speaker 4: high actually on credit risk because the credit risk spread 151 00:07:56,520 --> 00:07:59,600 Speaker 4: is not particularly interesting. But do look to add the 152 00:07:59,680 --> 00:08:02,480 Speaker 4: fixed income exposure in the four to six years kind 153 00:08:02,520 --> 00:08:05,160 Speaker 4: of maturity. That for us makes a lot of sense 154 00:08:06,000 --> 00:08:09,800 Speaker 4: in terms of the equity we do after the current 155 00:08:09,880 --> 00:08:14,000 Speaker 4: correction remain constructive because as mentioned again, growth and numbers 156 00:08:14,040 --> 00:08:18,240 Speaker 4: remain decent and robust. But take exposure in a risk 157 00:08:18,280 --> 00:08:21,720 Speaker 4: adjusted way before We do prefer long calls rather than 158 00:08:21,880 --> 00:08:25,720 Speaker 4: outright purchases. That's because again you are exposed to the upside. 159 00:08:25,880 --> 00:08:29,280 Speaker 4: We only have a limited downside should things decline, and 160 00:08:29,800 --> 00:08:32,839 Speaker 4: do have a hedging mechanism in mind, whether that's called, 161 00:08:32,840 --> 00:08:37,360 Speaker 4: whether that's oil, depending on how your portfoliosposition should and 162 00:08:37,440 --> 00:08:40,560 Speaker 4: hopefully not, but should geopolitical tensions rise and. 163 00:08:41,120 --> 00:08:44,719 Speaker 2: Very quickly, Max thirty seconds walk about economics. How are 164 00:08:44,720 --> 00:08:47,319 Speaker 2: things in the Lion City right now? How are they doing. 165 00:08:48,840 --> 00:08:49,000 Speaker 5: Well? 166 00:08:49,000 --> 00:08:52,280 Speaker 4: They're doing well, And in terms of perspectives given the 167 00:08:52,360 --> 00:08:55,280 Speaker 4: change in leaderships, there's a lot of optimism going around 168 00:08:55,520 --> 00:08:59,320 Speaker 4: against Singapore with always a safe harbor in times of 169 00:08:59,480 --> 00:09:03,280 Speaker 4: uncertain and that is likely to prove true again going 170 00:09:03,320 --> 00:09:04,920 Speaker 4: forward given the environment that we're living. 171 00:09:05,720 --> 00:09:08,520 Speaker 3: Max, thank you very much for joining us. Max Bonduri, 172 00:09:08,640 --> 00:09:20,479 Speaker 3: founder and CEO of SGMC Capital, chi Asian Equities portfolio 173 00:09:20,559 --> 00:09:25,640 Speaker 3: manager at Rebecco. So Vicky one interesting idea here global 174 00:09:25,640 --> 00:09:28,880 Speaker 3: supply chains are always in flux, and at the moment, 175 00:09:29,000 --> 00:09:32,280 Speaker 3: moving out of China into other parts of the Asia Pacific, 176 00:09:32,760 --> 00:09:35,600 Speaker 3: is that an area perhaps that can be exploited. 177 00:09:35,679 --> 00:09:40,040 Speaker 1: If so, Rare, good morning, Brian Senas to be here 178 00:09:40,040 --> 00:09:43,520 Speaker 1: in the studio. Yeah, so this is really what we observe, 179 00:09:43,559 --> 00:09:45,560 Speaker 1: and I think a lot of stocks have done really 180 00:09:45,600 --> 00:09:49,719 Speaker 1: well in Asia outside China in the manufacturing space. What 181 00:09:49,760 --> 00:09:54,080 Speaker 1: we are noticing is that as manufacturing move out of China, 182 00:09:54,720 --> 00:09:59,679 Speaker 1: the supply chain further relocates. We noticed that there is 183 00:09:59,720 --> 00:10:05,160 Speaker 1: actually capacity shortage for manufacturing outside China. So in China 184 00:10:05,240 --> 00:10:09,040 Speaker 1: there is oversupply, but outside China there is not enough supply. 185 00:10:09,440 --> 00:10:13,000 Speaker 1: So this benefits a lot of companies in the manufacturing 186 00:10:13,000 --> 00:10:18,199 Speaker 1: whether there's light manufacturing or heavy manufacturing space within Asia Pacific. 187 00:10:18,280 --> 00:10:21,840 Speaker 1: And we're actually seeing very good share price performance. But 188 00:10:21,960 --> 00:10:26,040 Speaker 1: this is obviously not a one thematic that people have 189 00:10:26,920 --> 00:10:30,920 Speaker 1: grouped together. So compared to the attention that people have 190 00:10:30,960 --> 00:10:34,640 Speaker 1: been paying on AI and on semiconductor supply chain relocating, 191 00:10:34,920 --> 00:10:37,880 Speaker 1: I think this would be a very important opportunity for 192 00:10:37,920 --> 00:10:40,959 Speaker 1: people to not to miss that there is so much 193 00:10:41,559 --> 00:10:46,640 Speaker 1: a growing manufacturing power within Asia Pacific that is not 194 00:10:46,720 --> 00:10:50,160 Speaker 1: to be overlooked and obviously very good out of opportunities 195 00:10:50,160 --> 00:10:50,880 Speaker 1: for investers. 196 00:10:50,920 --> 00:10:55,640 Speaker 2: So is that South Asia aussion and I'm thinking Vietnam, 197 00:10:55,720 --> 00:10:58,760 Speaker 2: but I'm also thinking Indonesia. Are there opportunities for more 198 00:10:58,800 --> 00:11:02,160 Speaker 2: manufacturing and Indonesia absolutely so. 199 00:11:02,240 --> 00:11:05,079 Speaker 1: There has been this very interesting data that came out 200 00:11:05,160 --> 00:11:10,559 Speaker 1: last week that talks about FDI growth in Indonesia for electrical, 201 00:11:13,160 --> 00:11:17,400 Speaker 1: industrial and machinery segments. So that number stood at thirty 202 00:11:17,400 --> 00:11:20,199 Speaker 1: five percent year on air, and I think these kind 203 00:11:20,280 --> 00:11:24,040 Speaker 1: of numbers typically don't get the headlines, but Indonesia as 204 00:11:24,080 --> 00:11:29,760 Speaker 1: a manufacturing upgrade destination is definitely firmly in play. Also, 205 00:11:29,960 --> 00:11:35,200 Speaker 1: I think not to forget that actually not large in 206 00:11:35,280 --> 00:11:39,240 Speaker 1: terms of marketcap, but in terms of significance for Korea 207 00:11:39,240 --> 00:11:43,000 Speaker 1: and Taiwan, there are still very interesting manufacturing opportunities and 208 00:11:43,080 --> 00:11:45,560 Speaker 1: actually quite a lot of stocks have done really well 209 00:11:45,600 --> 00:11:48,760 Speaker 1: in this space and people just probably paid less attention 210 00:11:48,840 --> 00:11:51,920 Speaker 1: to them. And I think going forward, as it is 211 00:11:51,960 --> 00:11:56,400 Speaker 1: becoming more of a consensus for more industries to start 212 00:11:56,480 --> 00:11:59,960 Speaker 1: relocating outside the China supply chain, there would be opportunity. 213 00:12:00,240 --> 00:12:03,120 Speaker 3: We've always had a Korea discount for various reasons. Some 214 00:12:03,280 --> 00:12:06,559 Speaker 3: geopolitical apparently you think that's changing. Now do you think 215 00:12:06,600 --> 00:12:10,000 Speaker 3: why why is Korea undervalued at the moment. 216 00:12:11,600 --> 00:12:15,840 Speaker 1: That's a great question, Brian, so I think if we 217 00:12:15,960 --> 00:12:21,080 Speaker 1: do nothing, just keep going the way it did, the 218 00:12:21,160 --> 00:12:25,600 Speaker 1: career discount is highly unlikely to narrow. So what market 219 00:12:25,640 --> 00:12:28,800 Speaker 1: has noticed is obviously this value of program in Korea, 220 00:12:29,360 --> 00:12:33,640 Speaker 1: and the career market has responded with great enthusiasm into 221 00:12:33,720 --> 00:12:37,280 Speaker 1: the announcement of the news because people recognize that in 222 00:12:37,360 --> 00:12:40,600 Speaker 1: Japan we have seen this before. But knowing that in 223 00:12:40,679 --> 00:12:48,120 Speaker 1: Japan this it took about eight years before improving corporate 224 00:12:48,200 --> 00:12:51,920 Speaker 1: governance and shareholder returns become a sort of consensus in 225 00:12:51,960 --> 00:12:54,680 Speaker 1: the Japanese corporate world, it's going to take a long 226 00:12:54,760 --> 00:12:59,439 Speaker 1: time in Korem before this actually becomes a real consensus. 227 00:12:59,800 --> 00:13:03,760 Speaker 1: This has been a top down drive in Korea, and 228 00:13:03,840 --> 00:13:07,280 Speaker 1: what we're seeing is when we speak to companies, there 229 00:13:07,400 --> 00:13:11,440 Speaker 1: is a very large difference between the management that are 230 00:13:11,480 --> 00:13:16,800 Speaker 1: open and actively thinking about improving shareholder returns by taking 231 00:13:16,840 --> 00:13:22,200 Speaker 1: concrete actions to increase payout or improve let's say, the 232 00:13:22,280 --> 00:13:26,760 Speaker 1: corporate return profiles, whereas there are companies that basically don't 233 00:13:26,800 --> 00:13:29,640 Speaker 1: really care about returns, and if you ask them, they 234 00:13:29,640 --> 00:13:32,679 Speaker 1: would say, oh, we have our CAPEX programs, we're going 235 00:13:32,720 --> 00:13:35,640 Speaker 1: to invest in one, two, three, and there's no change 236 00:13:35,679 --> 00:13:38,760 Speaker 1: to us. So it's going to make a huge difference 237 00:13:38,760 --> 00:13:42,160 Speaker 1: for investors whether you're buying those companies that are open 238 00:13:42,200 --> 00:13:45,280 Speaker 1: to change and well show concrete actions versus those that 239 00:13:45,360 --> 00:13:51,000 Speaker 1: are highly well stable and not changing their attitude. And 240 00:13:51,080 --> 00:13:53,920 Speaker 1: we have seen that divergence in the Japanese stock market 241 00:13:54,360 --> 00:13:58,120 Speaker 1: very very obviously, so I would expect the same to 242 00:13:58,200 --> 00:14:02,640 Speaker 1: happen in Korea. And with the hype kind of going 243 00:14:02,679 --> 00:14:05,320 Speaker 1: off a little bit from the from the stock market, 244 00:14:05,880 --> 00:14:07,800 Speaker 1: I think there is great opportunity to. 245 00:14:07,679 --> 00:14:11,240 Speaker 2: Make you mentioned Japan, Vicky. I'm wondering if Japan in 246 00:14:11,280 --> 00:14:14,559 Speaker 2: any way benefits from the move to diversify out of China, 247 00:14:14,679 --> 00:14:16,400 Speaker 2: and if so, how does that manifest. 248 00:14:17,679 --> 00:14:23,520 Speaker 1: It is definitely happening. So Japan has tremendous technology reserves 249 00:14:23,560 --> 00:14:27,960 Speaker 1: in many of the manufacturing industries. Uh, it's all pretty 250 00:14:27,960 --> 00:14:31,680 Speaker 1: well known. So there's there's machinery, there's obviously semiconductor supply chain. 251 00:14:31,920 --> 00:14:35,640 Speaker 1: So I was in Japan in February this year, and 252 00:14:35,720 --> 00:14:41,760 Speaker 1: there's obviously tremendous in susiasm for TSMC's new fab in Koshue, 253 00:14:42,080 --> 00:14:46,200 Speaker 1: and a lot of related suppliers in Japan have responded 254 00:14:46,360 --> 00:14:50,760 Speaker 1: very positively to be able to supply TSMC and this 255 00:14:50,960 --> 00:14:55,520 Speaker 1: new fab from within Japan. So the whole supply chain 256 00:14:55,640 --> 00:15:00,120 Speaker 1: is very enthusiastic about this development. And there's definitely a 257 00:15:00,120 --> 00:15:03,640 Speaker 1: lot of investments going in and there is marketing share 258 00:15:03,680 --> 00:15:07,640 Speaker 1: to be taken, so Japan is definitely one of these destinations. 259 00:15:07,880 --> 00:15:10,800 Speaker 3: All right, Vicky, thanks very much. We note for our 260 00:15:10,880 --> 00:15:14,160 Speaker 3: audience that you're a little cautious on AI and we'll 261 00:15:14,200 --> 00:15:16,800 Speaker 3: save that for our next discussion, which hopefully won't be 262 00:15:16,800 --> 00:15:20,440 Speaker 3: too long. Vicki Chi with us age Equities portfolio manager 263 00:15:20,560 --> 00:15:32,200 Speaker 3: at Rubeco Dana Doria Cocio invest Net to take a 264 00:15:32,200 --> 00:15:33,800 Speaker 3: closer look at the market. It's always good on a 265 00:15:33,840 --> 00:15:36,640 Speaker 3: Monday morning to have kind of a lofty discussion data. 266 00:15:36,800 --> 00:15:39,040 Speaker 3: We can also get to the news flow as well, 267 00:15:39,480 --> 00:15:42,760 Speaker 3: but I'll start off with how the Fed looks at 268 00:15:42,840 --> 00:15:45,240 Speaker 3: its mandate, because there's been a lot of discussion of 269 00:15:45,280 --> 00:15:48,080 Speaker 3: this of late. Of course, many say that the Fed 270 00:15:48,120 --> 00:15:51,520 Speaker 3: waited too long to start raising interest rates, So one 271 00:15:51,520 --> 00:15:54,320 Speaker 3: of the interesting questions now is will it also wait 272 00:15:54,400 --> 00:15:58,440 Speaker 3: too long to start cutting to avoid a downturn or 273 00:15:58,480 --> 00:16:02,040 Speaker 3: will it act early with the feeling of Christians. I'm 274 00:16:02,080 --> 00:16:03,240 Speaker 3: curious about your tike. 275 00:16:05,000 --> 00:16:08,200 Speaker 6: Well, I think there's more danger of them waiting too 276 00:16:08,280 --> 00:16:11,080 Speaker 6: long than the other way around. I think the FED 277 00:16:11,160 --> 00:16:14,360 Speaker 6: is going to be more concerned about letting inflation tick up. 278 00:16:14,520 --> 00:16:17,280 Speaker 6: Obviously they can't control what's going on in the global 279 00:16:17,320 --> 00:16:21,120 Speaker 6: arena and causing oil prices energy to spike, you know, 280 00:16:21,200 --> 00:16:24,760 Speaker 6: which is giving them some consternation around inflation. You do 281 00:16:24,840 --> 00:16:28,680 Speaker 6: see wages kind of holding setting and you know growth 282 00:16:28,680 --> 00:16:31,040 Speaker 6: there going down, so I think you know they're not 283 00:16:31,520 --> 00:16:33,480 Speaker 6: You do hear people asking, hey, are they actually going 284 00:16:33,560 --> 00:16:34,280 Speaker 6: to hike rates. 285 00:16:34,600 --> 00:16:37,120 Speaker 5: I don't see that. I can't imagine that they really 286 00:16:37,160 --> 00:16:37,560 Speaker 5: want to do that. 287 00:16:37,600 --> 00:16:40,080 Speaker 6: I think that would demonstrate, you know, kind of a 288 00:16:40,120 --> 00:16:41,320 Speaker 6: failure in the policy. 289 00:16:41,960 --> 00:16:43,320 Speaker 5: But I do think they'll hold. 290 00:16:43,160 --> 00:16:45,760 Speaker 6: For longer, and you know that may well mean that 291 00:16:46,120 --> 00:16:49,000 Speaker 6: we court recession more than you know, higher inflation. 292 00:16:49,560 --> 00:16:51,880 Speaker 2: Yeah, the notion of a hike, that's something that John 293 00:16:51,920 --> 00:16:54,720 Speaker 2: Williams brought up last week, which I thought was interesting 294 00:16:54,760 --> 00:16:58,040 Speaker 2: as well. And then you heard from Gules be Austin Goolsby, 295 00:16:58,120 --> 00:17:00,360 Speaker 2: the head of the Chicago Fed last Friday, who was 296 00:17:00,400 --> 00:17:04,760 Speaker 2: saying essentially that progress on inflation has stalled. That may 297 00:17:04,760 --> 00:17:06,760 Speaker 2: have been a bit worries. So I guess we'll get 298 00:17:06,760 --> 00:17:10,119 Speaker 2: some clarity this week with the PCE data for the 299 00:17:10,440 --> 00:17:12,280 Speaker 2: for the month of March. Where do you see this 300 00:17:12,359 --> 00:17:15,239 Speaker 2: fight in inflation right now? Do you personally think there 301 00:17:15,280 --> 00:17:16,080 Speaker 2: is upside risk? 302 00:17:17,800 --> 00:17:19,040 Speaker 5: Well, yes, I do. 303 00:17:19,119 --> 00:17:21,600 Speaker 6: I mean, just just always being a student of kind 304 00:17:21,640 --> 00:17:23,679 Speaker 6: of what's happened historically, right and trying to put the 305 00:17:23,680 --> 00:17:24,600 Speaker 6: context around it. 306 00:17:24,680 --> 00:17:27,440 Speaker 5: I mean, you know, it did obviously. 307 00:17:27,119 --> 00:17:30,800 Speaker 6: We had inflation increased very fast and abruptly and then 308 00:17:31,000 --> 00:17:33,040 Speaker 6: you know, kind of calmed down in the same way. 309 00:17:33,280 --> 00:17:36,119 Speaker 6: But we know historically that inflation doesn't tend to get 310 00:17:36,200 --> 00:17:38,800 Speaker 6: tamped down. It can kind of rear back up once 311 00:17:38,840 --> 00:17:42,080 Speaker 6: it's once it's spiked. So I do think there's a 312 00:17:42,160 --> 00:17:44,240 Speaker 6: danger that, you know, and especially too, as I say, 313 00:17:44,280 --> 00:17:49,200 Speaker 6: we look at energy prices, right, so obviously commodities. 314 00:17:48,880 --> 00:17:52,200 Speaker 5: You know, experiencing a spike. It's exogenous due to what's 315 00:17:52,240 --> 00:17:55,680 Speaker 5: going on, you know, in war zones, and the. 316 00:17:55,640 --> 00:17:58,159 Speaker 6: Federally has no control over that obviously, right, they have 317 00:17:58,200 --> 00:17:59,120 Speaker 6: control over the rate. 318 00:17:59,520 --> 00:18:01,480 Speaker 5: So I do think there's you know, the. 319 00:18:01,440 --> 00:18:04,199 Speaker 6: Possibility that inflation remains stickier than we want it to 320 00:18:04,600 --> 00:18:06,320 Speaker 6: and two percent, I think was always kind of a 321 00:18:06,359 --> 00:18:09,360 Speaker 6: difficult target. Everybody sort of put that in the back 322 00:18:09,359 --> 00:18:11,719 Speaker 6: of their heads. I think, you know, January, we're at 323 00:18:11,720 --> 00:18:15,200 Speaker 6: a point where we're expecting six rate decreases this year, 324 00:18:15,240 --> 00:18:19,600 Speaker 6: which I always thought was just kind of the market 325 00:18:19,680 --> 00:18:23,640 Speaker 6: didn't seem to have a good rationalization for that though, 326 00:18:23,680 --> 00:18:26,679 Speaker 6: because you were expecting a swoft landing and you are 327 00:18:26,720 --> 00:18:28,880 Speaker 6: also expecting you know, rate costs. 328 00:18:29,800 --> 00:18:32,600 Speaker 3: Yeah, that's why I think you've had this development of 329 00:18:32,640 --> 00:18:37,439 Speaker 3: these alternative scenarios that Ben Bernanki has recommended to the 330 00:18:37,440 --> 00:18:40,440 Speaker 3: Bank of England, and it's because the FED has found 331 00:18:40,480 --> 00:18:43,119 Speaker 3: itself on the back foot because it's putting out a 332 00:18:43,200 --> 00:18:47,600 Speaker 3: sort of view that is based on one idea. And 333 00:18:48,160 --> 00:18:50,359 Speaker 3: what Bernanki is saying is that since no one really 334 00:18:50,400 --> 00:18:54,040 Speaker 3: knows what the economy will do, why not give investors 335 00:18:54,200 --> 00:18:58,040 Speaker 3: scenarios and what you might do in those cases. Now 336 00:18:58,080 --> 00:19:01,000 Speaker 3: I understand that, but I wonder if it's really all 337 00:19:01,000 --> 00:19:03,040 Speaker 3: that different from saying you're data dependent. 338 00:19:04,920 --> 00:19:08,680 Speaker 6: Yeah, I think there's always attempts to shed light and 339 00:19:08,880 --> 00:19:11,199 Speaker 6: you know, be as transparent as possible, will at the 340 00:19:11,200 --> 00:19:13,920 Speaker 6: same time not actually trying to predict the future, right, 341 00:19:14,160 --> 00:19:16,240 Speaker 6: So I mean, how many different ways can we give 342 00:19:16,280 --> 00:19:18,720 Speaker 6: a different complexion on this question for the market to 343 00:19:18,840 --> 00:19:21,800 Speaker 6: digest well at the same time saying exactly what you 344 00:19:21,840 --> 00:19:23,600 Speaker 6: just said, We're going to be data dependent, We're going 345 00:19:23,640 --> 00:19:27,320 Speaker 6: to be watching. You know, the employment picture really empowers 346 00:19:27,359 --> 00:19:30,159 Speaker 6: the FED, I think, to hold I don't. I just 347 00:19:30,200 --> 00:19:33,040 Speaker 6: don't see a good reason that they need to decrease. Obviously, 348 00:19:34,119 --> 00:19:35,240 Speaker 6: it's not that there are no reasons. 349 00:19:35,320 --> 00:19:35,439 Speaker 4: Right. 350 00:19:35,480 --> 00:19:37,800 Speaker 6: We have a deficit and a debt problem that you know, 351 00:19:37,880 --> 00:19:40,439 Speaker 6: certainly the government would love to see us, you know, 352 00:19:40,720 --> 00:19:44,800 Speaker 6: maybe reduce that burden by lowering rates. You know, we 353 00:19:44,960 --> 00:19:48,119 Speaker 6: have obviously politics an election year, not just in the 354 00:19:48,200 --> 00:19:51,760 Speaker 6: US but globally, but certainly here. You know, the FED 355 00:19:51,800 --> 00:19:54,399 Speaker 6: can't win when it comes to that, right, regardless of 356 00:19:54,520 --> 00:19:56,880 Speaker 6: what direction they go, they'll be attacked from one side. 357 00:19:56,720 --> 00:19:57,080 Speaker 5: Or the other. 358 00:19:57,359 --> 00:20:00,560 Speaker 6: So so really they do have these other pressure But 359 00:20:00,560 --> 00:20:02,200 Speaker 6: at the end of the day, you started this conversation 360 00:20:02,240 --> 00:20:02,919 Speaker 6: in the right place. 361 00:20:02,960 --> 00:20:05,680 Speaker 5: What is their mandate? Their mandate isn't employment and inflation. 362 00:20:06,000 --> 00:20:09,320 Speaker 6: Well, employment looks strong and inflation is not getting back 363 00:20:09,359 --> 00:20:12,960 Speaker 6: down to this two percent target. It really didn't ever 364 00:20:13,040 --> 00:20:16,160 Speaker 6: look great to get down to two percent, and now 365 00:20:16,160 --> 00:20:18,439 Speaker 6: it's looking like it could be stickier. So you know 366 00:20:18,920 --> 00:20:21,680 Speaker 6: they're going to be data dependent, but I think it's asymmetric. 367 00:20:21,720 --> 00:20:23,879 Speaker 5: They'll lean towards staying higher for longer. 368 00:20:24,000 --> 00:20:25,800 Speaker 2: Hey, data, Before we let you go, I think we 369 00:20:25,880 --> 00:20:27,679 Speaker 2: have to talk a little bit about earnings. I mean, 370 00:20:27,720 --> 00:20:29,600 Speaker 2: it's going to be a thick week this week, one 371 00:20:29,680 --> 00:20:32,240 Speaker 2: hundred and seventy eight companies within the S and P report, 372 00:20:32,320 --> 00:20:34,760 Speaker 2: Big tech is going to dominate. Do you think we're 373 00:20:34,760 --> 00:20:36,080 Speaker 2: going to be disappointed here? 374 00:20:37,520 --> 00:20:38,359 Speaker 5: I think it's hard. 375 00:20:38,880 --> 00:20:41,440 Speaker 6: It's really hard not to be disappointed when you're priced 376 00:20:41,440 --> 00:20:41,960 Speaker 6: to perfection. 377 00:20:42,040 --> 00:20:44,000 Speaker 5: And I'm sure I know you hear that. You know 378 00:20:44,040 --> 00:20:45,160 Speaker 5: it's not revelatory. 379 00:20:45,840 --> 00:20:47,840 Speaker 6: But I also think the other thing, of course, hovering 380 00:20:47,880 --> 00:20:49,800 Speaker 6: over all this has been the AI boom. 381 00:20:50,240 --> 00:20:52,320 Speaker 5: And you know, my opinion on. 382 00:20:52,280 --> 00:20:54,679 Speaker 6: This, and I've shared a lot, is that these makers 383 00:20:54,880 --> 00:20:58,719 Speaker 6: of AI have been doing really well. But what's starting 384 00:20:58,760 --> 00:21:01,199 Speaker 6: to surface is that the users of AI are going 385 00:21:01,200 --> 00:21:03,439 Speaker 6: to need a little bit more time. You know that 386 00:21:03,560 --> 00:21:06,080 Speaker 6: time is going to be measured in years, not quarters 387 00:21:06,080 --> 00:21:10,320 Speaker 6: for actual productivity increases. So while the makers, you know, 388 00:21:11,320 --> 00:21:14,760 Speaker 6: at some point their prospects start to have to be 389 00:21:14,840 --> 00:21:17,320 Speaker 6: spread out a little bit too, right, because just look 390 00:21:17,359 --> 00:21:20,679 Speaker 6: around you to talk to corporate players, everybody's sort of 391 00:21:20,680 --> 00:21:23,520 Speaker 6: looking at each other saying, yeah, you know, we're looking 392 00:21:23,560 --> 00:21:25,720 Speaker 6: at it, we're exploring it, we're trying to see how 393 00:21:25,760 --> 00:21:27,960 Speaker 6: AI can help us. You're not hearing a lot of 394 00:21:27,960 --> 00:21:31,159 Speaker 6: great stories about the users of AI suddenly becoming more 395 00:21:31,200 --> 00:21:33,399 Speaker 6: productive or figuring out how to best use it. 396 00:21:34,160 --> 00:21:37,600 Speaker 3: So we've had this pretty strong pullback, and earnings really 397 00:21:38,080 --> 00:21:40,320 Speaker 3: has been a part of it, because, as you say, 398 00:21:40,359 --> 00:21:42,720 Speaker 3: the bar has been set pretty high, but now you've 399 00:21:42,720 --> 00:21:45,080 Speaker 3: got really you've got a six percent pullback. So we 400 00:21:45,080 --> 00:21:47,159 Speaker 3: are up ten percent in the first quarter, So that 401 00:21:47,240 --> 00:21:50,160 Speaker 3: puts us up four percent over about the first four 402 00:21:50,200 --> 00:21:52,720 Speaker 3: months of the year for the S and P five hundred. 403 00:21:52,800 --> 00:21:57,000 Speaker 3: Does that still feel like lofty valuations and that we've 404 00:21:57,040 --> 00:21:59,920 Speaker 3: gone too far too fast? Annualize that would be around 405 00:22:00,119 --> 00:22:03,520 Speaker 3: twelve percent gain for the year, right, And that's not 406 00:22:03,600 --> 00:22:05,600 Speaker 3: all that far from normal, is it? 407 00:22:06,840 --> 00:22:09,679 Speaker 5: No? It isn't. And I think your your points are valid. 408 00:22:09,720 --> 00:22:12,840 Speaker 6: And if we think that multiples increased dramatically on the 409 00:22:12,880 --> 00:22:15,399 Speaker 6: back of the AI story, and then we have some 410 00:22:15,840 --> 00:22:18,159 Speaker 6: you know, recognition that that story is going to take 411 00:22:18,240 --> 00:22:20,280 Speaker 6: much longer to play out, which is with sort of 412 00:22:20,280 --> 00:22:23,120 Speaker 6: where I stand on it. You know, I do think 413 00:22:23,160 --> 00:22:26,120 Speaker 6: it's reasonable to think that the market progresses at maybe 414 00:22:26,160 --> 00:22:28,520 Speaker 6: a little bit steadier of a pace and not you know, 415 00:22:28,640 --> 00:22:32,399 Speaker 6: this jump up. All that being said, it's you know, 416 00:22:32,640 --> 00:22:37,280 Speaker 6: one fantastic uh return, a series of returns from one 417 00:22:37,280 --> 00:22:40,240 Speaker 6: of these AI makers. I think I think this market, 418 00:22:40,480 --> 00:22:42,840 Speaker 6: you know, would eat it up and you'll see an 419 00:22:42,880 --> 00:22:46,399 Speaker 6: immediate term kind of positive impact because there is the promise, right, 420 00:22:46,440 --> 00:22:48,320 Speaker 6: it's just when does that promise kind of come through? 421 00:22:48,760 --> 00:22:51,000 Speaker 6: But you know, with with the volatility that we'll be 422 00:22:51,040 --> 00:22:54,040 Speaker 6: coming this year, likely because of the election. And you 423 00:22:54,080 --> 00:22:57,679 Speaker 6: know that's not to say whoever wins, right, the returns 424 00:22:57,760 --> 00:23:02,000 Speaker 6: generally speaking don't correlate that well. But volatility, you know, 425 00:23:02,119 --> 00:23:06,439 Speaker 6: volatility does beget volatility. So with what we have ahead 426 00:23:06,760 --> 00:23:09,840 Speaker 6: and annualizing that for and saying, hey, twelve, that wouldn't 427 00:23:09,840 --> 00:23:11,480 Speaker 6: be a bad year from my perspective. 428 00:23:11,600 --> 00:23:14,560 Speaker 2: Well, speaking of AI darlings, in Vidia was hard hit 429 00:23:14,640 --> 00:23:16,800 Speaker 2: last week. I think the stock was down about thirteen 430 00:23:16,800 --> 00:23:19,080 Speaker 2: and a half percent for the week. We don't get 431 00:23:19,119 --> 00:23:21,879 Speaker 2: earnings from in Nvidia for another month. I think the 432 00:23:22,080 --> 00:23:25,800 Speaker 2: trading desk over at Goldmann, Sachs was describing in Vidia 433 00:23:25,880 --> 00:23:30,480 Speaker 2: as the most important stock on planet Earth. Are you 434 00:23:31,080 --> 00:23:33,760 Speaker 2: thinking maybe that this has been a significant break here 435 00:23:33,800 --> 00:23:36,840 Speaker 2: in the stock or maybe it's a buying opportunity in 436 00:23:36,840 --> 00:23:40,080 Speaker 2: the view of many that are still disciples of the 437 00:23:40,240 --> 00:23:41,240 Speaker 2: AI trade. 438 00:23:42,720 --> 00:23:46,560 Speaker 6: I think AI is hard for folks to model, and 439 00:23:46,600 --> 00:23:49,800 Speaker 6: so these prices you're seeing in these companies that produce 440 00:23:50,040 --> 00:23:53,960 Speaker 6: AI components are you know, a lot of it is 441 00:23:54,000 --> 00:23:58,879 Speaker 6: based on very forward looking terminal value. These are the 442 00:23:58,920 --> 00:24:03,399 Speaker 6: growthiest growth and so that means that the models, you know, 443 00:24:03,640 --> 00:24:06,920 Speaker 6: when there's any kind of volatility in the expectation that 444 00:24:07,359 --> 00:24:09,479 Speaker 6: it almost gets I won't say they're a lotto ticket. 445 00:24:10,080 --> 00:24:12,360 Speaker 6: I think you have to go a little bit into 446 00:24:12,480 --> 00:24:14,800 Speaker 6: smaller cap range or what have you. But there's a 447 00:24:14,840 --> 00:24:18,120 Speaker 6: flavor of that because the models are not who's modeling 448 00:24:18,240 --> 00:24:18,920 Speaker 6: AI used. 449 00:24:19,359 --> 00:24:22,200 Speaker 3: Yeah, that's a good question. Dana, Thanks so much, Dana Doria, 450 00:24:22,320 --> 00:24:23,920 Speaker 3: co c Iowa Vestnet. 451 00:24:26,680 --> 00:24:29,639 Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you 452 00:24:29,680 --> 00:24:32,800 Speaker 2: the stories making news and moving markets in the Asia Pacific. 453 00:24:33,320 --> 00:24:36,440 Speaker 2: Visit the Bloomberg Podcast channel on YouTube to get more 454 00:24:36,480 --> 00:24:40,080 Speaker 2: episodes of this and other shows from Bloomberg. Subscribe to 455 00:24:40,119 --> 00:24:43,879 Speaker 2: the podcast on Apple, Spotify or anywhere else you listen, 456 00:24:44,000 --> 00:24:47,119 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 457 00:24:47,119 --> 00:24:48,200 Speaker 2: Bloomberg Business app.