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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 Dan Schwartzman

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Speaker 2: in for Doug Prisner. We begin in China, where President

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Speaker 2: Xi Jinping hosted a number of the country's most prominent

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Speaker 2: tech entrepreneurs. She voiced support for the country's private sector,

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Speaker 2: seen as integral to reviving China's economy. For more on

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Speaker 2: the China story, we hear from How Hang, chief economists

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Speaker 2: that Grow Investment Group. He spoke to Bloomberg Sherry On

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Speaker 2: and Heidi Stroud Watts.

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Speaker 1: It's been a few years and so much volatility and

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Speaker 1: ups and downs for the Chinese market since then. Do

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Speaker 1: you think this is a sustainable romie.

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Speaker 3: It's a good rebound, so I think, you know, before

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Speaker 3: it really wove into multi years of a rising trend,

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Speaker 3: a lot needs to be done, and for now, I

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Speaker 3: think many of us are still seeing fundamental problem with

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Speaker 3: the Chinese economy. So as such, you know, the earning

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Speaker 3: schools hasn't been sustainable for some time. For the past

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Speaker 3: ten years, earnings per year in the Chinese markets more

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Speaker 3: less the same r So basically the change in the

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Speaker 3: stock price level has been the result of changing in

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Speaker 3: valuation multiples. So if you really want a sustainable bull

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Speaker 3: market for the long term, you really want a sustainable

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Speaker 3: growth model going forward.

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Speaker 1: There's a lot of optimism about these cheaper AI models

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Speaker 1: and perhaps a China could lead the way when it

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Speaker 1: comes to the new tech revolution. Could that sustain in

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Speaker 1: those expectations.

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Speaker 3: I think for now people are really insotistic and by

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Speaker 3: the prospects of it. I think Deepstick did a really

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Speaker 3: good job to break the technology Germany and the embargo

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Speaker 3: from the US. Now, you know, having said that, though,

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Speaker 3: I think it's still very difficult to see how to

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Speaker 3: monetize from this app. And also you know, Chinese are

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Speaker 3: renowned for not willing to pay for software. So I

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Speaker 3: think if you look at back in the nineties, right,

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Speaker 3: so when we was first introduced to China, so basically

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Speaker 3: nine percent of the copies used in the market, says

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Speaker 3: actually pirated copies all the way it until like ten

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Speaker 3: fifteen years later, So you know, it's a difficult market

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Speaker 3: to monetize. I think it's still very early stage. It's

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Speaker 3: a huge breakthrough, but then at the same time, you know,

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Speaker 3: for now, I don't see a good way to monetize it.

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Speaker 4: Does the season thing meeting the idea of Beijing's endorsement

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Speaker 4: for the sect and now does that still have the

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Speaker 4: same power that it would have used to as some

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Speaker 4: sort of government put.

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Speaker 3: I think back in twenty eighteen, November twenty eighteen, there

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Speaker 3: was a similar meeting with the private entrepreneurs in Beijing,

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Speaker 3: and back then it was at the depth of the

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Speaker 3: trade war back then, and the Chinese market didn't bottom

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Speaker 3: until like two three months later in January twenty nineteen.

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Speaker 3: So that is telling you a lot about you know,

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Speaker 3: the signals from these meetings can be fleeting. And also yesterday,

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Speaker 3: if you look at the market reaction, you know, firstly

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Speaker 3: the market was rising strongly in Hong Kong, but then

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Speaker 3: regurgitate a lot of the gains towards the end. And

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Speaker 3: also yesterday's you know, the best performing sector is actually

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Speaker 3: the SOE sectors. The private sectors for some reason, is

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Speaker 3: legging substantially yesterday.

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Speaker 4: And I'm guessing you think that none of this exuberance

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Speaker 4: or that we've seen so far is enough to counterbalance

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Speaker 4: against the broader economic malays the property overhanging. You know,

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Speaker 4: what more can the government do from a policy perspective

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Speaker 4: to really change the mindset there.

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Speaker 3: Yeah, I think so far this technical rebound has been

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Speaker 3: the result of the sentiment changed, right, So, because the

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Speaker 3: deep Sik moment really woke up the Chinese investment communities. Wow,

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Speaker 3: you know what is possible right going forward? And also

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Speaker 3: the Chinese tech sector variation has been depressed for a

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Speaker 3: long time, and some of the foreign investors have been buying,

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Speaker 3: you know, for a sort of a trading opportunity, and

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Speaker 3: I think that's sort of a set of the rally

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Speaker 3: in the past months or so. I think right now,

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Speaker 3: you know, we're running into a very strong resistance level, right,

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Speaker 3: So these are key technical levels, and many of our

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Speaker 3: technical indicators are actually running into very strong resistance. So

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Speaker 3: for the market to go substantially high from here, a

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Speaker 3: lot needs to be done, a lot of policies needs

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Speaker 3: to be set, you know, in March in the coming twin.

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Speaker 1: Sessions, always with the voice of caution there. But I

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Speaker 1: really find it interesting the timing that you have PRESIDENCYGMP

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Speaker 1: putting all of these tech leaders in the forefront of

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Speaker 1: what he's trying to achieve. How much is this to

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Speaker 1: do with the Trump trade tensions, with potentially the rivalry

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Speaker 1: that's just going to heat up in the next few years,

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Speaker 1: and how Beijing needs to position for that. And given

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Speaker 1: that sort of external threat, could you see it being

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Speaker 1: more proactive in terms of helping the private sector.

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Speaker 3: I think to a certain extent, Chininese the private sector

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Speaker 3: to be strong more than ever now. I think, you know,

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Speaker 3: the government is indeed, you know, trying to help the

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Speaker 3: private sector to a certain extent. But you know, having

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Speaker 3: said that in the past few years, you know what

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Speaker 3: gets really strong is the so E sectors, right, So

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Speaker 3: the resources is really going into the S sectors, and

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Speaker 3: because of the incentive system, the commercial banks are lending

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Speaker 3: sort of towards the SE sectors rather than to the

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Speaker 3: private sectors. You know, because if your longo sour, you

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Speaker 3: have to be responsible, right, even if you left the job.

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Speaker 1: Right.

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Speaker 3: So that's the reason why you know, the private sector

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Speaker 3: is not getting enough credit and if they really want

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Speaker 3: to grow, you know, they have to find a way

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Speaker 3: to get credits from the banking system. Now with Diepsicek,

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Speaker 3: you know, for some reason, you know, use deepsiy as

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Speaker 3: an example, right, So the founder is actually a dh

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Speaker 3: fund tycoon, right, He's loaded, right, so he he has

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Speaker 3: money he's willing to burn. And also you know for

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Speaker 3: his own business. You know, he's he's been using AI algorithm,

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Speaker 3: you know, to trade to make money from trainese market

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Speaker 3: and has been very successful. And so I think, you know,

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Speaker 3: Deep is you know, one of those sort of accidental

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Speaker 3: sort of fortune that the founder used his own money

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Speaker 3: to burn and there's very limited government intervention and therefore,

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Speaker 3: you know, Deepsey was able to flourish, you know, under

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Speaker 3: such system. I think to replicate the success of Deep

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Speaker 3: Sick really needs a really hands off approach from the government.

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Speaker 4: I wanted to get your views on Ali Barber because

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Speaker 4: I do wonder with this sort of return to the

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Speaker 4: fould with jackmar how much could we see a re

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Speaker 4: reversal of Barber's fortunes. Right, Because you can take a

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Speaker 4: look on that chart twenty twenty November when the ANTIPO

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Speaker 4: was called off, we've not even seen with the recent

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Speaker 4: recovery that stock price even halfway back to the previous levels.

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Speaker 4: Do you think that this is the start of a

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Speaker 4: meaningful improvement.

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Speaker 3: Yeah, I think Baba has done a lot of work

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Speaker 3: in the past few years, right, so I think it

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Speaker 3: is actually leading the AI makements in China, Right, so

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Speaker 3: a lot of people didn't see the efforts endeavors that

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Speaker 3: is being sort of undertaken by Baba. Having said that,

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Speaker 3: though you know, the stocks has rarely for like more

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Speaker 3: than fifty percent now, all right, So you know, even

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Speaker 3: though it's down substantially from the peak in twenty twenty one,

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Speaker 3: you know, people still need to see earnings growths from

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Speaker 3: this company and also sort of a better sort of

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Speaker 3: a reception from the government for BAB and also for

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Speaker 3: the entire private enterprise, you know, for people to pick

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Speaker 3: up confidence again in these sectors.

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Speaker 4: How Home always great to argue with US partner and

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Speaker 4: chief economists at Grow Investment Group.

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Speaker 2: Welcome back to the Daybreak Asia podcast. Dan Schwort's been

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Speaker 2: inaing for Doug Chrisner for a look at the broader

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Speaker 2: market landscape in the Asia Pacific. We heard from me

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Speaker 2: Katerina bigos Cio for Asia Extra Paan Core Investments at

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Speaker 2: ACT Investment Managers. She spoke earlier with Bloomberg's David and

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Speaker 2: Glass and Rebecca Chue Wilkins in Hong Kong.

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Speaker 5: Let's start with China. Now that this market's been liberated

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Speaker 5: somewhat of the premium, what Now, how do you look

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Speaker 5: at the market right now thirty percent into the rally, Yeah, of.

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Speaker 6: Course, I mean I think we have to break it

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Speaker 6: down a little bit to look at where the rally

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Speaker 6: is coming from. And again it's very concentrated. As we know.

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Speaker 6: The positive since the beginning of the year has been

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Speaker 6: the Deep Sick innovation. I think it's excited a lot

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Speaker 6: of market participants and corporations in China about the potential

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Speaker 6: implications of that on a corporate sector again a longer term,

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Speaker 6: that kind of implication of productivity, again, new business, new

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Speaker 6: revenue streams, and of course we've had the meeting of

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Speaker 6: she with various tech leaders at the broader tech industry,

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Speaker 6: and I think that's a positive. I think it shows

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Speaker 6: that the goals are aligned. But again the market has

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Speaker 6: in not taking it with additional let's say support in

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Speaker 6: a raally sense, again, because we've had a meeting in

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Speaker 6: twenty eighteen, and again the consequences of the evolution of

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Speaker 6: that has been somewhat different to what was again stated

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Speaker 6: in twenty eighteen. I think it's a positive, but I

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Speaker 6: think we have to be cognizant that the aim for China.

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Speaker 6: I think the goals are aligned and the aim for

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Speaker 6: China is still common prosperity's technological advancement and the realization

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Speaker 6: of the government that tech has a big contribution to that,

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Speaker 6: and I think this.

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Speaker 3: Is a positive.

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Speaker 7: I want to ask about and sort of shift gears.

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Speaker 7: So think about that a little bit more in the

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Speaker 7: context of tariffs and Trump coming in. You know, in

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Speaker 7: December we saw the PBOC shifting its monetary policy. Starts

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Speaker 7: the most aggressive in fourteen years, promising triple our cut.

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Speaker 7: The PBAC has sort of taught the talk, it hasn't

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Speaker 7: worked the walk, and to some extent there's been this

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Speaker 7: relentless focus on instead prioritizing the stability of the end.

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Speaker 7: How do you think reactors have Investors are reacting to this?

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Speaker 7: I mean, are they surprised, confused, disappointed.

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Speaker 6: I think there's a limited room I would say for

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Speaker 6: BOC at the moment to move aggressively purely because again

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Speaker 6: the FED is on extended pause, if you might say,

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Speaker 6: the monetary policy. We had indications that again the economy

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Speaker 6: in US stay is stronger, the inflation is still resisting

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Speaker 6: another three point level in the core side. So again

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Speaker 6: with FED being on pause again puts a little bit

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Speaker 6: more restrained to China and the ability of China to

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Speaker 6: continue easing without pressure on its currency. And I think

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Speaker 6: the second part is what are going to be the

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Speaker 6: next steps for the tariffs. I think the market is

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Speaker 6: certainly not believing that this is the ten percent was

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Speaker 6: the end of the tariffs between US and China, and

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Speaker 6: I think this is somewhat preserving some omnistion to understand

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Speaker 6: what are the implications of the next stage of this

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Speaker 6: TYRFS to to continue to ease with the monetary policy.

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Speaker 6: I think ultimately, and we've said it before, fiscal needs

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Speaker 6: to do a lot more and fiscal needs to do

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Speaker 6: a lot more in kind of demand side, are you

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Speaker 6: doing more for the consumer? And I would say if

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Speaker 6: you had to kind of expand a little bit the

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Speaker 6: tech positive leaning towards tech, it's again it's somewhat in

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Speaker 6: indication that they're willing to do a lot more demand

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Speaker 6: time of support support a confidence, support invested confidence, but

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Speaker 6: also support private sector and consumers.

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Speaker 3: That's a good.

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Speaker 7: Point that you make on trying to essentially trying to

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Speaker 7: preserve ammunition when it comes to tariffs. Do you think

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Speaker 7: that there's potential for tariffs or tariffs that we're expecting

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Speaker 7: to see. Are they forcing the PBOC to break its

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Speaker 7: promises and are we seeing a new playbook from the

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Speaker 7: PBOC when it comes to dealing with the trade war.

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Speaker 6: Absolutely, I mean, look at there's a new playbook there,

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Speaker 6: because there's no other playbook. You know, in the previous

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Speaker 6: trade conflict there was the China was in a different state.

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Speaker 6: It was in an economic state, but also the monetary

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Speaker 6: policy in a different stage. So at the moment is

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Speaker 6: certainly it's a wait and see. They need to see

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Speaker 6: how the tariffs, what tifts, what the implication, what the

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Speaker 6: size of those, the timing of that is to kind

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Speaker 6: of of craft their own monetary and fiscal policy accordingly.

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Speaker 5: What are the things are happening right now? I mean,

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Speaker 5: this exuberance in Chinese markets might be sort of overshadowing

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Speaker 5: other market teams right now.

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Speaker 4: What else is on your mind?

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Speaker 6: Well, I think the tech broader tech it's staying as

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Speaker 6: a theme that is drive is going to drive global investment.

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Speaker 6: I think for the next couple of years of not

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Speaker 6: a decade, because I think technology and innovation and advancement

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Speaker 6: it's at the forefront of many economies, and I think

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Speaker 6: what Diepsick has provided to investors is that there'll be

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Speaker 6: more players to it, and clearly, particularly in eye development,

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Speaker 6: when we'll look to build the models, US will build

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Speaker 6: their own models in English. Probably there will be Chinese.

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Speaker 6: They will build some models in English and in Chinese

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Speaker 6: because again they need to cater to their own demand, right,

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Speaker 6: So there will be certainly a lot more broader spectrum

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Speaker 6: of players into this field that investment needs to capitalize on.

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Speaker 6: And again the ramification of it at the moment is

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Speaker 6: that it's still in a stage of development. Is still

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Speaker 6: an page of training those models, and those still have

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Speaker 6: implication on building system building thefrastructure, and I still has

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Speaker 6: a positive impact on a broader Asian economies a place

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Speaker 6: like Japan, places like Korea, a potential of Taiwan that

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Speaker 6: are part of that supply chain of building dafrastructure and

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Speaker 6: the ecosystem pro tech development.

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Speaker 7: We've already seen deep seak being banned from government officials

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Speaker 7: phones in various countries, and of course this concern and

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Speaker 7: this SI theme of sovereign AI. I just want to

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Speaker 7: ask to what extent do you think these national security

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Speaker 7: concerns are going to hamper the development of the diversity

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Speaker 7: of what we see and also the ability for investors

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Speaker 7: to be moving into new markets.

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Speaker 6: No, absolutely, and this is a key concern. And again

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Speaker 6: the excitement is there. I think the potential for AI

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Speaker 6: is certainly there certain terms of the ability of AI

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Speaker 6: to enhance productivity, to provide new business lines and new revenues.

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Speaker 6: But we need to look at again, data security will

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Speaker 6: be a big concern. We have to look at dipstick

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Speaker 6: as an open ended again, anybody can build on that platform,

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Speaker 6: and that's a consideration and security and as we go

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Speaker 6: further down the line, a national security, data security, data privacy.

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Speaker 6: These are concerned that are still present, again beyond the

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Speaker 6: fact that the excitement and the potential value of AI

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Speaker 6: is still present. And then we have with the models themselves.

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Speaker 6: You know, the data in which those models are getting trained,

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Speaker 6: the hallucinations that they have, or the data output that

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Speaker 6: they potentially have that could be misleading. So there's a

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Speaker 6: lot of still things that needs to be hashed out

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Speaker 6: till we get to the endpoint where AI is really

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Speaker 6: manifesting in the industries. I think at the moment is

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Speaker 6: still very much about tech infrastructure, building training and getting

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Speaker 6: to that AI models that are right for particular industries

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Speaker 6: or particular countries in a.

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Speaker 7: Katerina, thank you so much for joining us today. That's

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Speaker 7: Ekaterina V. Got Cio for Asia Extra Pan Core Investments

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Speaker 7: at Access Investment Managers.

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Speaker 5: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 5: Asia Edition podcast. Each weekday, we look at the story

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Speaker 5: shaping markets, finance, and geopolitics in the Asia Pacific.

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Speaker 6: You can find us on Apple, Spotify, the Bloomberg Podcast

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Speaker 6: YouTube channel, or anywhere else you listen.

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Speaker 5: Join us again tomorrow for insight on the market moves

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Speaker 5: from Hong Kong to Singapore and Australia.

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Speaker 4: I'm Doug Prisoner and this is Bloomberg