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Speaker 1: Good morning. I'm Doug Prisner and I'm Brian Curtiz.

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Speaker 2: Here are the stories we're following today. US manufacturing activity

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Speaker 2: declined further in the month of June. The ISM Manufacturing

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Speaker 2: PMI at forty six, the lowest level that we've seen

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Speaker 2: since May of twenty twenty. A surgeon auto production during

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Speaker 2: April helped to prevent negative year on year growth. However,

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Speaker 2: the softening survey data suggests that a contraction in annual

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Speaker 2: production is still on the horizon. Here's ISM Manufacturing Business

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Speaker 2: Committee Chair Tim Fiori.

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Speaker 3: Now, I think the problem here is that there's still

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Speaker 3: no demand and we burned off the overordering. The backlog

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Speaker 3: is still contracking at a very strong rate. You know,

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Speaker 3: there's five things that I watch that's going to indicate

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Speaker 3: when we see a turnaround. Only one of them is positive,

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Speaker 3: and that's on the lee time side.

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Speaker 2: One highlight of the report shows a drop in the

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Speaker 2: prices sub index. It indicates that prices that producers pay

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Speaker 2: to their parts suppliers are falling more quickly.

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Speaker 1: We go to China next, where the government has imposed

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Speaker 1: new restrictions on the exportation of two metals crucial to

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Speaker 1: both the production of semiconductors and certain materials used in

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Speaker 1: the ev industry. Story from Bloomberg's Bonni Out in Hong

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Speaker 1: Kong call it.

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Speaker 4: The tit for tat on escalation of the US China

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Speaker 4: trade war. The move will add to US China tensions,

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Speaker 4: just as US Treasury Secretary Janet Yellen visits Beijing to

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Speaker 4: cool things down. China says the metals gallium and Germanium

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Speaker 4: will be subject to controls starting August first. Exporters will

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Speaker 4: need to apply for a license from the Ministry of

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Speaker 4: Commerce and they'll need to report details of the overseas buyers.

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Speaker 4: China is the dominant producer of the two metals, and

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Speaker 4: although the materials are not particularly rare, China keeps the

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Speaker 4: prices low, and with these new controls that's likely to change.

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Speaker 4: In Hong Kong and Bonnie Ol Bloomberg Day Break.

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Speaker 2: Asia, Apple's Vision Pro virtual reality heads that is off

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Speaker 2: to a slow start. Bloomberg's Larry Kowski reports.

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Speaker 5: Apple is slashing production targets for the thirty five hundred

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Speaker 5: dollars headset as manufacturers struggled with the gadget's complex design.

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Speaker 5: According to the Financial Times, Apple is now preparing to

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Speaker 5: make fewer than four hundred thousand units of the headset

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Speaker 5: next year. Plans for a cheaper version of the Vision

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Speaker 5: Pro are said to have been pushed back. Apple unveiled

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Speaker 5: the Vision Pro last month in a move to sustain

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Speaker 5: sales momentum and to try to propel a mixed reality

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Speaker 5: industry that has struggled for years to make it into

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Speaker 5: the mainstream. Larry Kofski Bloomberg day Break Asia.

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Speaker 1: Saudi Arabia will extend its production cut of a million

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Speaker 1: barrels a day by one month. This move is aimed

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Speaker 1: at what Offici'll see as stubbornly weak oil prices. Now,

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Speaker 1: the Kingdom's effort will get a little bit of help

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Speaker 1: from Russia, which is set to reduce its exports by

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Speaker 1: five hundred thousand barrels a day beginning in August. Here's

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Speaker 1: Bloomberg's Will Kennedy Russia.

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Speaker 6: Move perhaps was a little bit more surprising. Clearly, there's

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Speaker 6: been a lot of focus on Russia's compliance with their

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Speaker 6: existing commitments, and for them to make an extra commitment

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Speaker 6: at this stage is very interesting. I think what the

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Speaker 6: market will really take from that is that the alliance

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Speaker 6: between Riad and Moscow remains strong, that they're determined to

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Speaker 6: work together to keep the oil market where they wanted,

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Speaker 6: and this today's move and the Russian side of that

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Speaker 6: was perhaps a little surprising.

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Speaker 1: Lumbrigs Will Kennedy there by the way, so fares here.

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Speaker 1: Moscow has dragged its heels on the cutback seen by

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Speaker 1: Opek plus as Russia faces more pressure to keep funds

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Speaker 1: flowing to its war against Ukraine.

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Speaker 2: Right in the meantime, India state oil refiners are considering

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Speaker 2: paying for Russian crude oil in the Chinese currency that

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Speaker 2: you want. The oil refiners include bar Up Petroleum and

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Speaker 2: Hindustan Petroleum. Officials from the two refiners say that there's

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Speaker 2: a risk that the use of these currencies for trade

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Speaker 2: with Russia will be stopped. Is thus looking for different

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Speaker 2: types of alternatives. However, an industry official said that the

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Speaker 2: refiners are unlikely to use the yuon for multiple cargoes

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Speaker 2: from Russia, as higher demand for the currency will make

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Speaker 2: the exchange rate unfavorable. The official also said that selling

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Speaker 2: dollars to buy you on would result in India effectively

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Speaker 2: helping China further its currency agenda, potentially a politically unpalatable step.

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Speaker 2: In the meantime, Reuters has reported that some of these

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Speaker 2: types of transactions in Yon for Russian crude were already

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Speaker 2: made last month. All right, eight minutes passed the hour.

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Speaker 2: I'm Brian Curtis along with Doug Krisner. So we've got

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Speaker 2: US China tensions increasing seemingly a not share. Although, as

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Speaker 2: we mentioned in our story Doug, some of these medals

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Speaker 2: are widely available, but it won't be as cheap. I

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Speaker 2: suppose if other countries like Japan, South Korea, Russia, Belgium,

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Speaker 2: if they are eventually the end suppliers, then the prime

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Speaker 2: could be higher. So it's something that will definitely make

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Speaker 2: Jenney Yellen's trip to China this week quite interesting.

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Speaker 1: I think that's fair to say. We were talking on

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Speaker 1: the call before the program about this move on the

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Speaker 1: part of China to explore to explore the possibility of

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Speaker 1: sourcing some of the core materials that are used for

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Speaker 1: lithian production and refining those in South America before those

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Speaker 1: materials are exported back to China. This just shows how

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Speaker 1: shrewd China has been in really dominating a lot of

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Speaker 1: the raw material markets used for things like EV batteries

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Speaker 1: and even semiconductors.

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Speaker 2: Yeah, both sides are quite active now on this front,

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Speaker 2: trying to outcompete with the other, speaking the two sides,

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Speaker 2: US and China, and that will be, as we mentioned,

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Speaker 2: quite under the spotlight this week with Jennet Yellen going there.

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Speaker 2: Now her new counterpart is Vice Premier Holy Fung and

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Speaker 2: he has succeeded Leohua. And you'll remember, Doug that when

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Speaker 2: Yellen and Leu met back in January in Zurich, their

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Speaker 2: rapport was so good that they at one point dismissed

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Speaker 2: their aid so that they could talk privately. And so

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Speaker 2: it'll be really interesting to see how this new dynamic

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Speaker 2: is between Jennet Yellen and Hollyphone. Holophone, like Leoha has

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Speaker 2: said to be a very long confidant of President Shijen Pain.

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Speaker 1: Well, it's going to be very interesting, particularly since the

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Speaker 1: moment that you kind of referenced. Since that time, I mean,

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Speaker 1: the administration has seemingly leaned more severely into a lot

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Speaker 1: of the restrictions on certain types of technology, particularly where

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Speaker 1: advanced semiconductors are concerned.

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Speaker 2: Yeah, it's a pretty interesting part of the relationship anything

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Speaker 2: high tech and that besides semiconductors, these particular metals that

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Speaker 2: we talked about today, are used in solar panels, in

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Speaker 2: the making of solar panels, in electric vehicles, and even telecommunications,

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Speaker 2: so it's pretty broad. So what else we have on today.

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Speaker 2: We've got the Reserve Bank of Australia decision, so that'll

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Speaker 2: be interesting. And we just did a couple of stories

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Speaker 2: about oil. I wonder what Saudi and Russia extending this

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Speaker 2: supply cut says about in demand. Are they not seeing

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Speaker 2: strong end demand and what does that mean for the

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Speaker 2: global economy.

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Speaker 1: Well, if you look at what's going on here Stateside,

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Speaker 1: I think the clue may be the government forecast now

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Speaker 1: for an increase in US oil production to an average

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Speaker 1: twelve point six million barrels a day this year. That

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Speaker 1: would be up from around eleven point nine million. So

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Speaker 1: anything that the US is adding to the market, I

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Speaker 1: think OPEC plus is trying to take away as a

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Speaker 1: way of ensuring that oil prices try to remain higher.

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Speaker 1: But against that, you've got concern about global growth weakening,

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Speaker 1: and maybe it's that that's going to continue to apply

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Speaker 1: downward pressure on the price of oil.

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Speaker 2: Yeah, that's why I say, I wonder what it means

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Speaker 2: about demand. All right, it's time now for Global News. Well,

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Speaker 2: the top Chinese military official is calling for closer ties

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Speaker 2: with Russia and Harvard admissions policy under the gun once again.

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Speaker 2: For more on the news, Let's get to Denise Pellegrini

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Speaker 2: in the Bloomberg newsroom.

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Speaker 1: Denise, thanks, thank you.

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Speaker 7: Brian and minority groups are now calling on the US

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Speaker 7: government to investigate Harvard and its admissions policies. Bloomberg's Eric

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Speaker 7: Larsen calls it all. He says, they're accusing the university

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Speaker 7: of giving preferential treatment to children of Harvard alums and

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Speaker 7: to wealthy donors.

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Speaker 8: They say about seventy percent of the students who get

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Speaker 8: in through these legacy programs are white, and that because

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Speaker 8: university Harvard University receives federal funds, that this allegedly violates

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Speaker 8: Title six of the Civil Rights Acts of nineteen sixty

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Speaker 8: four by making it easier for white students to get

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Speaker 8: in through this process.

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Speaker 3: Yeah.

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Speaker 7: And Larson also calls this new complaint against Harvard fallout

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Speaker 7: from last week's Supreme Court ruling ending affirmative action. China

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Speaker 7: says wants more cooperation with Russia's military. China's Defense Minister

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Speaker 7: Lee Hung Fu, commenting in a meeting with the commander

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Speaker 7: in chief of Russia's navy, and this indicates Russia still

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Speaker 7: has Beijing's back, and Beijing still has Russia's back even

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Speaker 7: after the aborted Wagner mutiny. The US has been asking

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Speaker 7: Beijing meantime not to support Russia in the war against Ukraine,

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Speaker 7: and CIA director Bill Burns well, he's been warning continuously.

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Speaker 7: He's doing it again through the holiday weekend, warning about

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Speaker 7: the danger that China presents.

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Speaker 9: Russia's aggression poses a formidable test. But China is the

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Speaker 9: only country with both the intent to reshape the international

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Speaker 9: order and increasingly the economic, diplomatic, military, and technological power

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Speaker 9: to do so.

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Speaker 7: And Burns speaking there at a lecture in Oxfordshire, England.

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Speaker 7: Hong Kong police are putting one hundred thousand dollars bounties

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Speaker 7: on wanted democracy activists. They're offering rewards for information leading

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Speaker 7: to the arrest of eight people wanted under the Beijing

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Speaker 7: drafted National Security Law, including former lawmakers Nathan Law and

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Speaker 7: Dennis Quock and others. They're all currently living in self

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Speaker 7: imposed exile in the US, the UK, Canada, and Australia.

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Speaker 7: Hong Kong police are calling them all fugitives. Security is

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Speaker 7: Titan Manhattan as Cruz Gramble to set up for tomorrow

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Speaker 7: nights fireworks. New York City's acting Police Commissioner Edward Cobban,

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Speaker 7: less than a week into his new role, he'll be

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Speaker 7: leading his officers through the one of the busiest times

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Speaker 7: for the city. He says, there are a lot of

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Speaker 7: undercover officers trying to keep everyone safe.

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Speaker 1: They'll be much the public. We'll see how much the

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Speaker 1: public will not see.

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Speaker 7: And one thing you will see in addition to a

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Speaker 7: lot of police officers is a lot of street shutdowns

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Speaker 7: if you're driving around, So be prepared. And the rich

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Speaker 7: keep getting richer, and you can thank this year's stock

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Speaker 7: boom for that. Bloomberg Snathan Hager is more the.

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Speaker 10: Five hundred richest people on the Bloomberg Billionaire's Index added

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Speaker 10: eight hundred and fifty two billion dollars to their fortunes

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Speaker 10: in the first half. That's an average of fourteen million

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Speaker 10: dollars a day over the last six months, as the

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Speaker 10: S and P five hundred rows sixteen percent. It's the

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Speaker 10: best just half year for billionaires since the back half

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Speaker 10: of twenty twenty, that's when the economy bounced back from

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Speaker 10: the COVID induced slump.

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Speaker 7: Bloomberg Snathan Hager reporting there, and Global News twenty four

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Speaker 7: hours a day, powered by more than twenty seven hundred

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Speaker 7: journalists and analysts and more than one hundred and twenty

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Speaker 7: countries in New York. I'm Today's PELGRINNY, and this is Bloomberg, and.

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Speaker 2: I'm Brian Curtisy in Hong Kong, along with Rashad Salamat,

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Speaker 2: and our guest is Peter Halesworth, Founder and portfolio manager

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Speaker 2: of Hengren Partners. Peter, great to have you back on

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Speaker 2: the program. So a lot of the rally in the

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Speaker 2: US this year has been a kind of mean reversion trade,

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Speaker 2: a lot of money rushing into tech, which was hit

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Speaker 2: so hard last year. I'm wondering if you could see

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Speaker 2: China be the beneficiary of mean reversion in that sentiment

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Speaker 2: has not been good year to date, and whether or

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Speaker 2: not in the second half, it could be a time

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Speaker 2: for interest to increase in China.

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Speaker 11: Your thoughts, Yeah, thanks, Brian. I would say that there's

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Speaker 11: a likelihood, but it's going to take time for that

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Speaker 11: to occur. I think right now there's a crisis of

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Speaker 11: confidence towards investing in Chinese stocks due to unpredictable policy

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Speaker 11: and mixed messages coming from the government, and there really

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Speaker 11: needs to be a concerted and consistent initiative to restore

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Speaker 11: credibility with consistency before I think you can have a

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Speaker 11: serious case of FOMO take take effect in China.

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Speaker 12: Peter, could you argue now that, given what you said

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Speaker 12: about the fears that people have of investing in China,

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Speaker 12: that we have now a discount built into the stock

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Speaker 12: market there, and if so, how much is it and

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Speaker 12: does that represent then you know, perhaps a buying opportunity

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Speaker 12: at certain points where people will other people will get

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Speaker 12: fomo as a consequence.

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Speaker 11: Oh, absolutely, Rich, I agree. We'd bowls on Chinese equities

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Speaker 11: for the long term, and we've written out many many

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Speaker 11: wobbles in confidence in the past and we've come out

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Speaker 11: and done well for our investors. I would say the

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Speaker 11: issue is that these discounts can remain in place and

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Speaker 11: deeply embedded for a long time.

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Speaker 2: Yeah, go ahead to finish it off.

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Speaker 11: Ye, just as much as a bubble, you know, can

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Speaker 11: continue on beyond beyond rationality. I would say the inverse

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Speaker 11: that discounts can be deep, discounts can be embedded for

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Speaker 11: a long time. If investors all at once have the

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Speaker 11: same reason to lose confidence, turn their back and consider

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Speaker 11: a country or a market like China as a permanent underperformer.

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Speaker 11: Remember what happened in Japan for more than two decades.

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Speaker 11: It was an under forming components and a large component

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Speaker 11: of the EFA indexes and EFA managers could easily outperform

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Speaker 11: just by being underweight or zero in Japan. The same

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Speaker 11: could happen for China if they don't start to become

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Speaker 11: more consistent in their policy and really give up on

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Speaker 11: these mixed messages that they send to investors, not only

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Speaker 11: foreign but also domestic.

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Speaker 2: I wanted to drill down a little bit more on

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Speaker 2: why the loss of investor confidence, So we know that

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Speaker 2: part of it's because of regulatory decisions, and part of

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Speaker 2: it may be in terms of stimulus. As you look

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Speaker 2: at that pie, you know, where do you see the

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Speaker 2: biggest issues of hitting investor confidence?

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Speaker 11: Well, I think you have the overhang of the property

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Speaker 11: bubble burst. I think that is that's a problem that's

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Speaker 11: just not going to go away easily and simply without

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Speaker 11: some strong and concerted and overwhelming action from the government.

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Speaker 11: We have not seen that and Secondly, I can't recall

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Speaker 11: when this administration has done any meaningful or significant stimulus, right.

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Speaker 12: But I mean the thing is what type of stimulus

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Speaker 12: are be talking about here? And you know what's likely

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Speaker 12: to work? Because I mean the old playbook certainly is

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Speaker 12: not going to be fit for purpose, is it now?

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Speaker 8: No?

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Speaker 11: But I think there has to be a version of

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Speaker 11: putting money directly into consumers pockets. So I think we

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Speaker 11: need to, you know, see whether it be you know,

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Speaker 11: temporary tax cuts, whether it be you know, holidays on

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Speaker 11: property tax, whatever it takes to really stuff the pockets

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Speaker 11: of consumers with money and get them spent again, because

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Speaker 11: that really isn't happening at the pace everyone thought would happen.

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Speaker 11: And now we're in a position where, you know, we're

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Speaker 11: waiting for a stimulus and kind of come to the

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Speaker 11: rescue and the helicopters with the money aren't arriving.

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Speaker 2: And how much to the lack of confidence do you

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Speaker 2: attribute to weakness in US China relations?

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Speaker 11: A good amount because I think the Taiwan issue really

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Speaker 11: resurrects the fears that investors, especially global and emerging market

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Speaker 11: investors have about what happened with Russia post Ukraine. I

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Speaker 11: mean that is a sore that just hasn't healed. There

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Speaker 11: was permanent capital loss if you had exposure to Russia,

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Speaker 11: and if there is any kind of military conflict regarding Taiwan,

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Speaker 11: I think I think global and emerging market investors Brian

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Speaker 11: fear that they could also suffer a permanent capital loss

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Speaker 11: as a result of.

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Speaker 2: That final question, how much does the success of the

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Speaker 2: US equity market, how much of a role does that

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Speaker 2: play in sucking money out of some Chinese investments?

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Speaker 11: Yourself included, well, we don't invest in the US. We

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Speaker 11: invest only in Chinese stocks, and we've done well by

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Speaker 11: being very situational and selective. But I would say I

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Speaker 11: would point more towards India and Japan as the beneficiaries

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Speaker 11: of money that used to be destined for China have

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Speaker 11: now gone to those markets, and you can see it

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Speaker 11: in their indexes.

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