Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Dan Schwartzman
Speaker 2: in for Doug Prisner. We begin in China, where President
Speaker 2: Xi Jinping hosted a number of the country's most prominent
Speaker 2: tech entrepreneurs. She voiced support for the country's private sector,
Speaker 2: seen as integral to reviving China's economy. For more on
Speaker 2: the China story, we hear from How Hang, chief economists
Speaker 2: that Grow Investment Group. He spoke to Bloomberg Sherry On
Speaker 2: and Heidi Stroud Watts.
Speaker 1: It's been a few years and so much volatility and
Speaker 1: ups and downs for the Chinese market since then. Do
Speaker 1: you think this is a sustainable romie.
Speaker 3: It's a good rebound, so I think, you know, before
Speaker 3: it really wove into multi years of a rising trend,
Speaker 3: a lot needs to be done, and for now, I
Speaker 3: think many of us are still seeing fundamental problem with
Speaker 3: the Chinese economy. So as such, you know, the earning
Speaker 3: schools hasn't been sustainable for some time. For the past
Speaker 3: ten years, earnings per year in the Chinese markets more
Speaker 3: less the same r So basically the change in the
Speaker 3: stock price level has been the result of changing in
Speaker 3: valuation multiples. So if you really want a sustainable bull
Speaker 3: market for the long term, you really want a sustainable
Speaker 3: growth model going forward.
Speaker 1: There's a lot of optimism about these cheaper AI models
Speaker 1: and perhaps a China could lead the way when it
Speaker 1: comes to the new tech revolution. Could that sustain in
Speaker 1: those expectations.
Speaker 3: I think for now people are really insotistic and by
Speaker 3: the prospects of it. I think Deepstick did a really
Speaker 3: good job to break the technology Germany and the embargo
Speaker 3: from the US. Now, you know, having said that, though,
Speaker 3: I think it's still very difficult to see how to
Speaker 3: monetize from this app. And also you know, Chinese are
Speaker 3: renowned for not willing to pay for software. So I
Speaker 3: think if you look at back in the nineties, right,
Speaker 3: so when we was first introduced to China, so basically
Speaker 3: nine percent of the copies used in the market, says
Speaker 3: actually pirated copies all the way it until like ten
Speaker 3: fifteen years later, So you know, it's a difficult market
Speaker 3: to monetize. I think it's still very early stage. It's
Speaker 3: a huge breakthrough, but then at the same time, you know,
Speaker 3: for now, I don't see a good way to monetize it.
Speaker 4: Does the season thing meeting the idea of Beijing's endorsement
Speaker 4: for the sect and now does that still have the
Speaker 4: same power that it would have used to as some
Speaker 4: sort of government put.
Speaker 3: I think back in twenty eighteen, November twenty eighteen, there
Speaker 3: was a similar meeting with the private entrepreneurs in Beijing,
Speaker 3: and back then it was at the depth of the
Speaker 3: trade war back then, and the Chinese market didn't bottom
Speaker 3: until like two three months later in January twenty nineteen.
Speaker 3: So that is telling you a lot about you know,
Speaker 3: the signals from these meetings can be fleeting. And also yesterday,
Speaker 3: if you look at the market reaction, you know, firstly
Speaker 3: the market was rising strongly in Hong Kong, but then
Speaker 3: regurgitate a lot of the gains towards the end. And
Speaker 3: also yesterday's you know, the best performing sector is actually
Speaker 3: the SOE sectors. The private sectors for some reason, is
Speaker 3: legging substantially yesterday.
Speaker 4: And I'm guessing you think that none of this exuberance
Speaker 4: or that we've seen so far is enough to counterbalance
Speaker 4: against the broader economic malays the property overhanging. You know,
Speaker 4: what more can the government do from a policy perspective
Speaker 4: to really change the mindset there.
Speaker 3: Yeah, I think so far this technical rebound has been
Speaker 3: the result of the sentiment changed, right, So, because the
Speaker 3: deep Sik moment really woke up the Chinese investment communities. Wow,
Speaker 3: you know what is possible right going forward? And also
Speaker 3: the Chinese tech sector variation has been depressed for a
Speaker 3: long time, and some of the foreign investors have been buying,
Speaker 3: you know, for a sort of a trading opportunity, and
Speaker 3: I think that's sort of a set of the rally
Speaker 3: in the past months or so. I think right now,
Speaker 3: you know, we're running into a very strong resistance level, right,
Speaker 3: So these are key technical levels, and many of our
Speaker 3: technical indicators are actually running into very strong resistance. So
Speaker 3: for the market to go substantially high from here, a
Speaker 3: lot needs to be done, a lot of policies needs
Speaker 3: to be set, you know, in March in the coming twin.
Speaker 1: Sessions, always with the voice of caution there. But I
Speaker 1: really find it interesting the timing that you have PRESIDENCYGMP
Speaker 1: putting all of these tech leaders in the forefront of
Speaker 1: what he's trying to achieve. How much is this to
Speaker 1: do with the Trump trade tensions, with potentially the rivalry
Speaker 1: that's just going to heat up in the next few years,
Speaker 1: and how Beijing needs to position for that. And given
Speaker 1: that sort of external threat, could you see it being
Speaker 1: more proactive in terms of helping the private sector.
Speaker 3: I think to a certain extent, Chininese the private sector
Speaker 3: to be strong more than ever now. I think, you know,
Speaker 3: the government is indeed, you know, trying to help the
Speaker 3: private sector to a certain extent. But you know, having
Speaker 3: said that in the past few years, you know what
Speaker 3: gets really strong is the so E sectors, right, So
Speaker 3: the resources is really going into the S sectors, and
Speaker 3: because of the incentive system, the commercial banks are lending
Speaker 3: sort of towards the SE sectors rather than to the
Speaker 3: private sectors. You know, because if your longo sour, you
Speaker 3: have to be responsible, right, even if you left the job.
Speaker 1: Right.
Speaker 3: So that's the reason why you know, the private sector
Speaker 3: is not getting enough credit and if they really want
Speaker 3: to grow, you know, they have to find a way
Speaker 3: to get credits from the banking system. Now with Diepsicek,
Speaker 3: you know, for some reason, you know, use deepsiy as
Speaker 3: an example, right, So the founder is actually a dh
Speaker 3: fund tycoon, right, He's loaded, right, so he he has
Speaker 3: money he's willing to burn. And also you know for
Speaker 3: his own business. You know, he's he's been using AI algorithm,
Speaker 3: you know, to trade to make money from trainese market
Speaker 3: and has been very successful. And so I think, you know,
Speaker 3: Deep is you know, one of those sort of accidental
Speaker 3: sort of fortune that the founder used his own money
Speaker 3: to burn and there's very limited government intervention and therefore,
Speaker 3: you know, Deepsey was able to flourish, you know, under
Speaker 3: such system. I think to replicate the success of Deep
Speaker 3: Sick really needs a really hands off approach from the government.
Speaker 4: I wanted to get your views on Ali Barber because
Speaker 4: I do wonder with this sort of return to the
Speaker 4: fould with jackmar how much could we see a re
Speaker 4: reversal of Barber's fortunes. Right, Because you can take a
Speaker 4: look on that chart twenty twenty November when the ANTIPO
Speaker 4: was called off, we've not even seen with the recent
Speaker 4: recovery that stock price even halfway back to the previous levels.
Speaker 4: Do you think that this is the start of a
Speaker 4: meaningful improvement.
Speaker 3: Yeah, I think Baba has done a lot of work
Speaker 3: in the past few years, right, so I think it
Speaker 3: is actually leading the AI makements in China, Right, so
Speaker 3: a lot of people didn't see the efforts endeavors that
Speaker 3: is being sort of undertaken by Baba. Having said that,
Speaker 3: though you know, the stocks has rarely for like more
Speaker 3: than fifty percent now, all right, So you know, even
Speaker 3: though it's down substantially from the peak in twenty twenty one,
Speaker 3: you know, people still need to see earnings growths from
Speaker 3: this company and also sort of a better sort of
Speaker 3: a reception from the government for BAB and also for
Speaker 3: the entire private enterprise, you know, for people to pick
Speaker 3: up confidence again in these sectors.
Speaker 4: How Home always great to argue with US partner and
Speaker 4: chief economists at Grow Investment Group.
Speaker 2: Welcome back to the Daybreak Asia podcast. Dan Schwort's been
Speaker 2: inaing for Doug Chrisner for a look at the broader
Speaker 2: market landscape in the Asia Pacific. We heard from me
Speaker 2: Katerina bigos Cio for Asia Extra Paan Core Investments at
Speaker 2: ACT Investment Managers. She spoke earlier with Bloomberg's David and
Speaker 2: Glass and Rebecca Chue Wilkins in Hong Kong.
Speaker 5: Let's start with China. Now that this market's been liberated
Speaker 5: somewhat of the premium, what Now, how do you look
Speaker 5: at the market right now thirty percent into the rally, Yeah, of.
Speaker 6: Course, I mean I think we have to break it
Speaker 6: down a little bit to look at where the rally
Speaker 6: is coming from. And again it's very concentrated. As we know.
Speaker 6: The positive since the beginning of the year has been
Speaker 6: the Deep Sick innovation. I think it's excited a lot
Speaker 6: of market participants and corporations in China about the potential
Speaker 6: implications of that on a corporate sector again a longer term,
Speaker 6: that kind of implication of productivity, again, new business, new
Speaker 6: revenue streams, and of course we've had the meeting of
Speaker 6: she with various tech leaders at the broader tech industry,
Speaker 6: and I think that's a positive. I think it shows
Speaker 6: that the goals are aligned. But again the market has
Speaker 6: in not taking it with additional let's say support in
Speaker 6: a raally sense, again, because we've had a meeting in
Speaker 6: twenty eighteen, and again the consequences of the evolution of
Speaker 6: that has been somewhat different to what was again stated
Speaker 6: in twenty eighteen. I think it's a positive, but I
Speaker 6: think we have to be cognizant that the aim for China.
Speaker 6: I think the goals are aligned and the aim for
Speaker 6: China is still common prosperity's technological advancement and the realization
Speaker 6: of the government that tech has a big contribution to that,
Speaker 6: and I think this.
Speaker 3: Is a positive.
Speaker 7: I want to ask about and sort of shift gears.
Speaker 7: So think about that a little bit more in the
Speaker 7: context of tariffs and Trump coming in. You know, in
Speaker 7: December we saw the PBOC shifting its monetary policy. Starts
Speaker 7: the most aggressive in fourteen years, promising triple our cut.
Speaker 7: The PBAC has sort of taught the talk, it hasn't
Speaker 7: worked the walk, and to some extent there's been this
Speaker 7: relentless focus on instead prioritizing the stability of the end.
Speaker 7: How do you think reactors have Investors are reacting to this?
Speaker 7: I mean, are they surprised, confused, disappointed.
Speaker 6: I think there's a limited room I would say for
Speaker 6: BOC at the moment to move aggressively purely because again
Speaker 6: the FED is on extended pause, if you might say,
Speaker 6: the monetary policy. We had indications that again the economy
Speaker 6: in US stay is stronger, the inflation is still resisting
Speaker 6: another three point level in the core side. So again
Speaker 6: with FED being on pause again puts a little bit
Speaker 6: more restrained to China and the ability of China to
Speaker 6: continue easing without pressure on its currency. And I think
Speaker 6: the second part is what are going to be the
Speaker 6: next steps for the tariffs. I think the market is
Speaker 6: certainly not believing that this is the ten percent was
Speaker 6: the end of the tariffs between US and China, and
Speaker 6: I think this is somewhat preserving some omnistion to understand
Speaker 6: what are the implications of the next stage of this
Speaker 6: TYRFS to to continue to ease with the monetary policy.
Speaker 6: I think ultimately, and we've said it before, fiscal needs
Speaker 6: to do a lot more and fiscal needs to do
Speaker 6: a lot more in kind of demand side, are you
Speaker 6: doing more for the consumer? And I would say if
Speaker 6: you had to kind of expand a little bit the
Speaker 6: tech positive leaning towards tech, it's again it's somewhat in
Speaker 6: indication that they're willing to do a lot more demand
Speaker 6: time of support support a confidence, support invested confidence, but
Speaker 6: also support private sector and consumers.
Speaker 3: That's a good.
Speaker 7: Point that you make on trying to essentially trying to
Speaker 7: preserve ammunition when it comes to tariffs. Do you think
Speaker 7: that there's potential for tariffs or tariffs that we're expecting
Speaker 7: to see. Are they forcing the PBOC to break its
Speaker 7: promises and are we seeing a new playbook from the
Speaker 7: PBOC when it comes to dealing with the trade war.
Speaker 6: Absolutely, I mean, look at there's a new playbook there,
Speaker 6: because there's no other playbook. You know, in the previous
Speaker 6: trade conflict there was the China was in a different state.
Speaker 6: It was in an economic state, but also the monetary
Speaker 6: policy in a different stage. So at the moment is
Speaker 6: certainly it's a wait and see. They need to see
Speaker 6: how the tariffs, what tifts, what the implication, what the
Speaker 6: size of those, the timing of that is to kind
Speaker 6: of of craft their own monetary and fiscal policy accordingly.
Speaker 5: What are the things are happening right now? I mean,
Speaker 5: this exuberance in Chinese markets might be sort of overshadowing
Speaker 5: other market teams right now.
Speaker 4: What else is on your mind?
Speaker 6: Well, I think the tech broader tech it's staying as
Speaker 6: a theme that is drive is going to drive global investment.
Speaker 6: I think for the next couple of years of not
Speaker 6: a decade, because I think technology and innovation and advancement
Speaker 6: it's at the forefront of many economies, and I think
Speaker 6: what Diepsick has provided to investors is that there'll be
Speaker 6: more players to it, and clearly, particularly in eye development,
Speaker 6: when we'll look to build the models, US will build
Speaker 6: their own models in English. Probably there will be Chinese.
Speaker 6: They will build some models in English and in Chinese
Speaker 6: because again they need to cater to their own demand, right,
Speaker 6: So there will be certainly a lot more broader spectrum
Speaker 6: of players into this field that investment needs to capitalize on.
Speaker 6: And again the ramification of it at the moment is
Speaker 6: that it's still in a stage of development. Is still
Speaker 6: an page of training those models, and those still have
Speaker 6: implication on building system building thefrastructure, and I still has
Speaker 6: a positive impact on a broader Asian economies a place
Speaker 6: like Japan, places like Korea, a potential of Taiwan that
Speaker 6: are part of that supply chain of building dafrastructure and
Speaker 6: the ecosystem pro tech development.
Speaker 7: We've already seen deep seak being banned from government officials
Speaker 7: phones in various countries, and of course this concern and
Speaker 7: this SI theme of sovereign AI. I just want to
Speaker 7: ask to what extent do you think these national security
Speaker 7: concerns are going to hamper the development of the diversity
Speaker 7: of what we see and also the ability for investors
Speaker 7: to be moving into new markets.
Speaker 6: No, absolutely, and this is a key concern. And again
Speaker 6: the excitement is there. I think the potential for AI
Speaker 6: is certainly there certain terms of the ability of AI
Speaker 6: to enhance productivity, to provide new business lines and new revenues.
Speaker 6: But we need to look at again, data security will
Speaker 6: be a big concern. We have to look at dipstick
Speaker 6: as an open ended again, anybody can build on that platform,
Speaker 6: and that's a consideration and security and as we go
Speaker 6: further down the line, a national security, data security, data privacy.
Speaker 6: These are concerned that are still present, again beyond the
Speaker 6: fact that the excitement and the potential value of AI
Speaker 6: is still present. And then we have with the models themselves.
Speaker 6: You know, the data in which those models are getting trained,
Speaker 6: the hallucinations that they have, or the data output that
Speaker 6: they potentially have that could be misleading. So there's a
Speaker 6: lot of still things that needs to be hashed out
Speaker 6: till we get to the endpoint where AI is really
Speaker 6: manifesting in the industries. I think at the moment is
Speaker 6: still very much about tech infrastructure, building training and getting
Speaker 6: to that AI models that are right for particular industries
Speaker 6: or particular countries in a.
Speaker 7: Katerina, thank you so much for joining us today. That's
Speaker 7: Ekaterina V. Got Cio for Asia Extra Pan Core Investments
Speaker 7: at Access Investment Managers.
Speaker 5: Thanks for listening to today's episode of the Bloomberg Daybreak
Speaker 5: Asia Edition podcast. Each weekday, we look at the story
Speaker 5: shaping markets, finance, and geopolitics in the Asia Pacific.
Speaker 6: You can find us on Apple, Spotify, the Bloomberg Podcast
Speaker 6: YouTube channel, or anywhere else you listen.
Speaker 5: Join us again tomorrow for insight on the market moves
Speaker 5: from Hong Kong to Singapore and Australia.
Speaker 4: I'm Doug Prisoner and this is Bloomberg