WEBVTT - China Chips Fund, Asia Markets 0:00:02.480 --> 0:00:07.720 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.640 --> 0:00:12.840 This is the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. 0:00:12.920 --> 0:00:15.400 You can join Brian Curtis and myself for the stories, 0:00:15.440 --> 0:00:18.560 making news and moving markets in the APAC region. You 0:00:18.600 --> 0:00:21.439 can subscribe to the show anywhere you get your podcast 0:00:21.520 --> 0:00:24.919 and always on Bloomberg Radio, the Bloomberg Terminal, and the 0:00:24.920 --> 0:00:26.080 Bloomberg Business App. 0:00:29.640 --> 0:00:32.879 Joining us now is Peter Elstrom, Bloomberg Executive Editor for 0:00:32.960 --> 0:00:36.519 Asia Technology. To take a look at the chip story 0:00:36.640 --> 0:00:39.080 right across the globe here, Peter, thanks very much. We've 0:00:39.080 --> 0:00:41.720 talked quite a bit this morning about the US possibly 0:00:41.760 --> 0:00:46.919 putting CXMT on the entity list, and we'll also we've 0:00:46.920 --> 0:00:50.160 talked a little bit about the chip fund that China 0:00:50.240 --> 0:00:53.159 has put together twenty seven billion dollars, not so much 0:00:53.159 --> 0:00:55.880 about TSMC, so we can talk about all three. But 0:00:56.120 --> 0:00:59.560 TSMC set to win something like around five billion dollars 0:00:59.600 --> 0:01:03.279 in grant for the US chip plant. This is part 0:01:03.320 --> 0:01:07.920 of a big reshoring story by the Biden administration. If 0:01:07.920 --> 0:01:10.480 we just take a step back, how is that overall 0:01:10.560 --> 0:01:12.280 reshoring going in your view? 0:01:13.600 --> 0:01:17.360 Yeah, so you're exactly right. There is a huge chip 0:01:17.360 --> 0:01:21.360 war going on. Specifically between the United States and China, 0:01:21.840 --> 0:01:24.520 but more broadly than that, there are other countries involved 0:01:24.560 --> 0:01:27.399 in trying to build their own domestic chip industries too, 0:01:27.920 --> 0:01:30.839 and this dates back to really a couple of different things. 0:01:30.920 --> 0:01:33.679 During the COVID pandemic, there were disruptions to the supply 0:01:33.840 --> 0:01:36.760 chain that created all sorts of problems for the automotive industry, 0:01:36.760 --> 0:01:40.280 in particular where they couldn't get enough chips. And beyond that, 0:01:40.360 --> 0:01:43.200 there's some security concerns because right now most of the 0:01:43.240 --> 0:01:46.640 advanced chips in the world are made in Taiwan, followed 0:01:46.680 --> 0:01:50.800 by South Korea. So the United States, Japan, Europe, and 0:01:50.880 --> 0:01:54.840 China all are trying to build up their domestic chip industries. 0:01:55.080 --> 0:01:57.240 At this point, the US has been off to a 0:01:57.280 --> 0:02:00.720 pretty slow start in terms of making that happen. They, 0:02:00.760 --> 0:02:04.600 of course, the Biden administration unveiled the Chips Act. That's 0:02:04.600 --> 0:02:07.520 an effort to subsidize some of these efforts with billions 0:02:07.560 --> 0:02:10.280 and billions of dollars. What we're hearing about now is 0:02:10.320 --> 0:02:13.400 that the Biden administration is making some progress. They're getting 0:02:13.400 --> 0:02:15.840 close to being able to award some of the really 0:02:15.880 --> 0:02:18.760 big numbers to the leading chip companies in the world. 0:02:18.919 --> 0:02:22.679 So TSMC is the producer of the most advanced chips 0:02:22.720 --> 0:02:25.000 in the world to make them for Apple and for Nvidia. 0:02:25.280 --> 0:02:28.639 They've been talking about building this fab in the US 0:02:28.919 --> 0:02:31.480 and now what we're hearing from our sources is that 0:02:31.520 --> 0:02:34.920 they could get more than five billion dollars to subsidize that. 0:02:34.919 --> 0:02:38.000 That's a lot of money, obviously, but it comes as 0:02:38.040 --> 0:02:41.440 they plan on investing about forty billion dollars into two 0:02:41.600 --> 0:02:45.200 chip fabs in Arizona to help them build more advanced 0:02:45.240 --> 0:02:47.639 chips within the United States, which, as you're saying, that's 0:02:47.639 --> 0:02:50.919 part of this on shoring effort by the United States 0:02:50.960 --> 0:02:52.880 to make sure that it does have a steady supply 0:02:52.919 --> 0:02:55.720 of these semiconductors that are so important for the economy. 0:02:55.800 --> 0:02:58.480 It's a fascinating story when you think back fifty years 0:02:58.480 --> 0:03:01.680 ago that American chip makers were actually offshoring a lot 0:03:01.720 --> 0:03:05.520 of production. I think Hong Kong initially was a big beneficiary. 0:03:05.560 --> 0:03:08.680 Then it migrated to Japan, I think before Taiwan. But 0:03:08.760 --> 0:03:12.280 if you look at the runway that's necessary, the period 0:03:12.280 --> 0:03:15.280 of time that has to take place in order for 0:03:15.600 --> 0:03:19.760 the initial investment to happen construction, you need to get 0:03:19.760 --> 0:03:23.280 a very experienced labor force at work here. I mean, 0:03:23.639 --> 0:03:25.639 what is it going to take two years before these 0:03:25.680 --> 0:03:27.079 plants are fully operational. 0:03:28.200 --> 0:03:31.400 Yeah, it's interesting to see some of the contrasts here. 0:03:31.400 --> 0:03:34.920 In Japan. The Japanese government has also been trying to 0:03:34.920 --> 0:03:38.720 build up its domestic chip industry, and the speed with 0:03:38.800 --> 0:03:42.200 which they've moved is sort of startling compared to the 0:03:42.320 --> 0:03:45.720 United States in particular. So TSMC, again, the leading chip 0:03:45.760 --> 0:03:48.160 producer in the world, has built most of its fabs 0:03:48.240 --> 0:03:51.040 in Taiwan. In the past, it has agreed to build 0:03:52.320 --> 0:03:55.080 in Japan and in the United States. In Japan, it 0:03:55.200 --> 0:03:57.960 had an opening ceremony for its first fab. Here, they're 0:03:58.120 --> 0:04:00.200 very far along. They were able to team up with 0:04:00.200 --> 0:04:04.560 a domestic construction company called Kajema that moved very very quickly. 0:04:04.600 --> 0:04:07.280 They hired seven thousand workers very quickly. In the United 0:04:07.280 --> 0:04:10.520 States is almost the opposite. TSMC has already announced two 0:04:10.600 --> 0:04:13.720 delays in their plans in Arizona. They've had problems with 0:04:13.920 --> 0:04:16.720 unions there. The US government hasn't been quick to write 0:04:16.720 --> 0:04:19.080 those checks to make sure that the money is getting out, 0:04:19.279 --> 0:04:22.040 so that's really slowed down the process in the US. 0:04:22.360 --> 0:04:25.680 TSMC has talked about this about some of the problems, 0:04:25.720 --> 0:04:27.720 but it's happening very very slowly there. 0:04:28.520 --> 0:04:30.520 And one of the other stories that I mentioned briefly 0:04:30.680 --> 0:04:33.960 was China ready and another twenty seven billion dollars for 0:04:34.000 --> 0:04:36.800 a chip fund that they'll call the Big Fund, And 0:04:37.200 --> 0:04:40.360 we're curious about exactly where this money goes and also 0:04:41.040 --> 0:04:44.159 how far behind is China in trying to get to 0:04:44.200 --> 0:04:46.880 the advanced production levels that we see in Taiwan that 0:04:46.920 --> 0:04:50.320 you've talked about and that Intel has aspired to for 0:04:50.360 --> 0:04:51.000 all these years. 0:04:52.279 --> 0:04:56.600 Yeah, well, China is really being driven by necessity at 0:04:56.600 --> 0:05:02.680 this point. The US government has levied a number of 0:05:02.720 --> 0:05:07.240 different restrictions on their technology companies and their ability to 0:05:07.360 --> 0:05:12.080 get chips. In particular, a couple of years ago, the 0:05:12.120 --> 0:05:15.200 Biden administration imposed a whole series of curbs on their 0:05:15.200 --> 0:05:19.040 ability to buy AI artificial intelligence chips, as well as 0:05:19.080 --> 0:05:21.680 chip making equipment to make the most advanced chips. So 0:05:21.720 --> 0:05:24.400 what you're seeing in China right now is an all 0:05:24.480 --> 0:05:27.000 out effort to try to build the foundation of an 0:05:27.040 --> 0:05:30.240 industry that they can develop over the next few years. 0:05:31.120 --> 0:05:34.240 As you mentioned, they're now looking to raise about twenty 0:05:34.320 --> 0:05:37.200 seven billion dollars for a chip fund that will invest 0:05:37.240 --> 0:05:40.040 in chip startups and chip companies. The formal name is 0:05:40.160 --> 0:05:44.440 National Integrated Circuit Industry Investment Fund. People in China just 0:05:44.480 --> 0:05:47.840 call the big fund they've had. This is their third fund. 0:05:47.880 --> 0:05:50.279 They've invested in a bunch of startups there, but they've 0:05:50.279 --> 0:05:52.440 had a number of problems. I mean, one, they're trying 0:05:52.480 --> 0:05:56.960 to imitate technology that already the Western companies have spent 0:05:57.040 --> 0:06:00.440 a lot of time developing, have very very advanced equipment, 0:06:00.640 --> 0:06:02.800 and there have been some corruption problems within the big 0:06:02.839 --> 0:06:05.719 for the previous big funds also, which have slowed down 0:06:05.760 --> 0:06:08.240 their efforts to build up the domestic chip industry. 0:06:09.960 --> 0:06:12.320 Peter, it's always a pleasure. Yeah, good stuff. Thank you 0:06:12.360 --> 0:06:15.240 so much for being with us. Peter Elstrom from Bloomberg News. 0:06:30.040 --> 0:06:33.840 Well, let's get to our guest, Stephanie lyng CIO. It's 0:06:34.000 --> 0:06:37.400 stashaway for a closer look at markets. So we've had 0:06:37.560 --> 0:06:40.240 a week of NPC meetings and we're kind of trying 0:06:40.240 --> 0:06:43.560 to weigh that up and see whether or not it's 0:06:43.680 --> 0:06:48.640 positive for markets or not. Your thoughts at this stage, Stephanie. 0:06:48.880 --> 0:06:49.640 Yes, good morning. 0:06:49.720 --> 0:06:53.640 Indeed, we had the NPC was just quite anticipated, and 0:06:54.320 --> 0:06:56.000 I mean we were all looking for kind of big 0:06:56.080 --> 0:06:59.200 numbers coming out from me event. I think mostly if 0:06:59.200 --> 0:07:03.080 I look kind of GDP targets, inflation targets, everything seems 0:07:03.080 --> 0:07:06.400 to be quite in line with market expectations or our expectations. 0:07:07.279 --> 0:07:09.920 For example, on a GDP growth of five percent, inflation 0:07:10.000 --> 0:07:13.480 of three percent, that's kind of more or less kind 0:07:13.480 --> 0:07:16.480 of in line with historical presidents and also what we're 0:07:16.480 --> 0:07:20.080 looking for. However, I think the key question really for 0:07:20.200 --> 0:07:23.640 markets and for investors now is that how are they 0:07:23.680 --> 0:07:25.920 going to achieve these targets, and whether or not they 0:07:25.920 --> 0:07:28.720 can actually achieve these targets by the end of the 0:07:28.800 --> 0:07:32.480 year when the next NPC actually comes. I think mostly 0:07:32.600 --> 0:07:37.400 the concern is on the inflation site, and if you 0:07:37.440 --> 0:07:39.960 remember last year they also had a three percent inflation target, 0:07:41.440 --> 0:07:44.520 they the economy of the government actually was not able 0:07:44.560 --> 0:07:45.160 to achieve that. 0:07:45.360 --> 0:07:48.080 And for the past year, I think. 0:07:48.080 --> 0:07:51.720 While the world or most developed markets are kind of 0:07:51.840 --> 0:07:56.440 concerned about inflation, China is actually on a deflation concern 0:07:56.560 --> 0:07:59.520 and I think if you look at PPI and CPI, 0:08:00.080 --> 0:08:02.600 these have been negative quite some time. Of course, we 0:08:03.040 --> 0:08:05.360 just get the latest CPI which is positive, which is 0:08:05.360 --> 0:08:09.680 a great kind of development, but PPI still seems to 0:08:09.720 --> 0:08:10.679 be quite negative. 0:08:10.760 --> 0:08:13.800 Yeah, I think the longest streak of deflation that we've 0:08:13.840 --> 0:08:16.920 seen at the wholesale level since about twenty sixteen. Do 0:08:17.000 --> 0:08:19.280 you think that the economy generally speaking, I hear what 0:08:19.320 --> 0:08:22.200 you're saying about the growth target right around five percent, 0:08:22.480 --> 0:08:25.880 maybe or you're doubtful that the government will achieve that. 0:08:26.200 --> 0:08:28.600 But can you dispute the fact that there seems to 0:08:28.640 --> 0:08:32.320 be this economic malaise threatening the overall economy. 0:08:34.320 --> 0:08:40.080 Yeah, I think it's of course, it's partly structural with 0:08:40.400 --> 0:08:43.520 kind of the clamp down or the property sector, which 0:08:43.520 --> 0:08:45.719 has been a great driver of the economy in the 0:08:45.840 --> 0:08:49.640 last two decades or so, but partially the kind of 0:08:49.720 --> 0:08:52.520 economic downturn is cyclical as well. Right, if we look 0:08:52.600 --> 0:08:57.880 at the global manufacturing indexes or the global manufacturing sector, 0:08:58.200 --> 0:09:00.160 I mean those actually have been in a downturn for 0:09:00.240 --> 0:09:03.440 the last kind of talk to eighteen months. We're starting 0:09:03.480 --> 0:09:06.480 to see some signs of turning points. If you look 0:09:06.520 --> 0:09:11.199 at the latest kind of PMI, manufacturing in vaccines coming 0:09:11.280 --> 0:09:13.720 out from the US or even on a global basis, 0:09:13.920 --> 0:09:16.640 I mean these have been turning around and are positive now. 0:09:16.720 --> 0:09:20.920 So I mean that actually is a positive development for China. 0:09:20.960 --> 0:09:24.640 Economy because a significant part of China is still supported 0:09:24.679 --> 0:09:25.720 by exports. 0:09:26.360 --> 0:09:30.280 Stephanie, are we maybe overplaying the slow down and downturn 0:09:30.360 --> 0:09:34.079 in China anecdotally? Just talking to people coming back from 0:09:34.120 --> 0:09:36.560 shen Zen Go for you know a lot of Hong 0:09:36.640 --> 0:09:38.959 Kong people go for day trips and they talk about, 0:09:39.200 --> 0:09:41.800 you know, the malls are booming that you know, the 0:09:42.480 --> 0:09:45.040 buzz is there, people are out, the restaurants are packed. 0:09:45.040 --> 0:09:47.959 You can't get into this restaurant because it's too full. 0:09:48.360 --> 0:09:51.000 You know. It's a slightly different story that we see 0:09:51.040 --> 0:09:53.680 from the big macro numbers, and I wonder how you 0:09:53.720 --> 0:09:54.360 make sense of that. 0:09:55.559 --> 0:09:58.640 Yes, indeed, I think it's a bit of a two 0:09:58.679 --> 0:10:01.600 speed economy. Right if you look at the consumer data, 0:10:02.559 --> 0:10:05.720 they have actually been been quite good. Right. It's if 0:10:05.760 --> 0:10:08.440 if you look at, for example, the service PMI, it 0:10:08.480 --> 0:10:12.040 has been an expansion while the manufacturing side has been 0:10:12.040 --> 0:10:15.800 in a slump. So similar things are going on globally 0:10:15.880 --> 0:10:17.560 as well. Right if you look at the US, I mean, 0:10:17.679 --> 0:10:19.880 sut side of things are actually very very strong, while 0:10:19.960 --> 0:10:23.240 manufacturing is also in a slump. So I think it's 0:10:23.240 --> 0:10:26.000 not just just a China problem. But of course for 0:10:26.160 --> 0:10:31.080 China because it's still heavily reliant on the manufacturing side, 0:10:31.120 --> 0:10:35.760 heavily reliant on export, heavily reliant on investment rather than consumption, 0:10:36.400 --> 0:10:37.640 which is the case in the US. 0:10:37.720 --> 0:10:39.240 Therefore, I think if you look at kind of. 0:10:39.160 --> 0:10:43.480 The overall economy, just the weight of things makes China 0:10:43.800 --> 0:10:48.960 kind of I think, makes China's economy more formal vulnerable 0:10:49.040 --> 0:10:50.960 to a global manufacturing slump. 0:10:51.320 --> 0:10:54.080 So would you be putting money to work in markets 0:10:54.080 --> 0:10:55.040 in China right now? 0:10:56.320 --> 0:10:59.600 I think, I mean, it's definitely looking more interesting compared 0:10:59.720 --> 0:11:00.719 with last year. 0:11:00.760 --> 0:11:01.280 For example. 0:11:01.600 --> 0:11:04.280 Of course, everybody knows that China is very, very cheap 0:11:04.360 --> 0:11:06.640 right in terms of valuation. The problem is the lack 0:11:06.720 --> 0:11:11.160 of a catalyst for economic upturn. I think Number one, 0:11:11.200 --> 0:11:16.040 the government has been trying to stimulate the economy from 0:11:16.080 --> 0:11:20.200 a kind of monetary fiscal perspective. Now, of course, there's 0:11:20.240 --> 0:11:24.000 a question of how much is enough. And I think 0:11:24.640 --> 0:11:29.520 if you look at kind of historical examples the Chinese government, 0:11:29.559 --> 0:11:32.760 once they start kind of injecting liquidity you want to 0:11:32.800 --> 0:11:36.840 start stimulating, They're not going to stop until the economy 0:11:36.840 --> 0:11:39.200 actually turns around. So I think also if you look 0:11:39.240 --> 0:11:42.000 at kind of the ability for the Chinese government to stimulate. 0:11:42.040 --> 0:11:46.600 There is still potential. So I think the key is 0:11:46.640 --> 0:11:49.920 still coming back to the global economy, whether or not 0:11:50.000 --> 0:11:53.400 we see in recovery. And I think there are early 0:11:53.440 --> 0:11:55.120 signs that we are seeing part of that. 0:11:55.440 --> 0:11:58.520 Okay, Okay, Now, if we see some money come out 0:11:58.600 --> 0:12:01.880 of the Japanese and in US markets, you know, which 0:12:01.920 --> 0:12:05.720 some people think is inevitable given the highs that we've seen, 0:12:06.360 --> 0:12:09.320 some of that money might go into China. But the 0:12:09.400 --> 0:12:12.160 thing is that you hear kind of a downbeat picture 0:12:12.280 --> 0:12:15.560 from investors about policy in China. They don't believe that 0:12:15.600 --> 0:12:18.800 the policy is there to drive the private sector higher 0:12:18.800 --> 0:12:22.079 over the coming years. Is the jury still out on that? 0:12:23.760 --> 0:12:24.000 Yes? 0:12:24.880 --> 0:12:29.520 I think the problem is that I guess once you 0:12:30.160 --> 0:12:34.240 I guess once the confidence is diminished, is very very 0:12:34.240 --> 0:12:36.400 hard to bring that back, right, And a lot of 0:12:36.440 --> 0:12:40.160 these corporates are making decisions not on a kind of 0:12:40.200 --> 0:12:42.480 one or two year basis, right, They're making decisions on 0:12:42.520 --> 0:12:45.840 a ten year or even kind of much longer term basis. 0:12:46.480 --> 0:12:50.240 And those investments are indeed, I very hard to bring back. 0:12:50.720 --> 0:12:53.240 But if we look at kind of the market itself, 0:12:54.400 --> 0:12:58.520 I mean investments money you are fast money globally are 0:12:58.600 --> 0:12:59.440 much shorter term. 0:12:59.480 --> 0:13:01.120 They're much kind of faster to react. 0:13:01.800 --> 0:13:04.360 And I mentioned about kind of the cyclical problems and 0:13:04.400 --> 0:13:07.400 the structural problems of China. I think if you have 0:13:07.520 --> 0:13:11.679 the cyclical problems easing, there's still kind of a lot 0:13:11.720 --> 0:13:14.560 of room for the market to improve, right given that 0:13:14.679 --> 0:13:18.720 valuations are very cheap. So I do think that there 0:13:18.760 --> 0:13:20.520 could be a kind of cyclic op turn. 0:13:20.559 --> 0:13:20.679 Now. 0:13:20.720 --> 0:13:23.800 Of course, we're in the structural issues to resolve, and 0:13:23.880 --> 0:13:27.840 for a structural kind of tenure bull market to start 0:13:28.280 --> 0:13:30.080 that the hurdle is actually a lot higher. 0:13:30.400 --> 0:13:32.400 So we have two stories that are kind of interesting 0:13:32.440 --> 0:13:35.720 today and they clash in a way. One is the 0:13:35.720 --> 0:13:39.760 Biden administration wing some new sanctions on a few Chinese 0:13:39.800 --> 0:13:43.480 tech companies, particularly within the realm of semiconductors. That's not new. 0:13:43.520 --> 0:13:47.360 We know the administration has been focused on restraining China's 0:13:47.360 --> 0:13:50.280 development on that front. At the same time, though, China 0:13:50.440 --> 0:13:52.160 seems to be raising a lot more in the way 0:13:52.200 --> 0:13:56.439 of capital to fund a chip fund that would essentially 0:13:56.880 --> 0:13:59.960 be used for R and D purposes. Is it possible 0:14:00.120 --> 0:14:03.960 for China to compensate for what is being withheld from 0:14:04.400 --> 0:14:06.080 Western technology companies. 0:14:07.480 --> 0:14:11.360 Yeah, I think that's kind of a tug of war 0:14:12.000 --> 0:14:16.839 between US and China that's kind of started or accelerated 0:14:17.040 --> 0:14:19.640 a few years ago. And I think this is one 0:14:19.680 --> 0:14:23.280 of the structural problems that it's it's very, very hot 0:14:23.320 --> 0:14:27.840 to see things reverting back to where it was, particularly 0:14:27.920 --> 0:14:31.880 with the kind of the development chips and technology. Every 0:14:31.960 --> 0:14:35.440 country or every kind of major power will try to 0:14:35.480 --> 0:14:38.080 secure their own technology stack, and I mean China and 0:14:38.080 --> 0:14:41.760 the US is no different. So I think, of course, 0:14:41.960 --> 0:14:46.040 the US has the election this year, and the China 0:14:46.600 --> 0:14:50.560 issue is top of concern or kind of like top 0:14:50.600 --> 0:14:54.280 of a lot of kind of I. 0:14:54.200 --> 0:14:56.520 Guess everybody wants to China. 0:14:56.680 --> 0:14:58.960 Yeah, exactly, everybody wants to play that card. 0:15:00.080 --> 0:15:04.080 And I think if let's say, if Trump gets kind 0:15:04.120 --> 0:15:07.240 of into the office, there could be even more acceleration 0:15:07.480 --> 0:15:10.600 in terms of the rhetoric or action against China. 0:15:10.680 --> 0:15:12.120 So that is one big risk. 0:15:12.680 --> 0:15:15.880 I think in terms of China's own development, it's they 0:15:15.920 --> 0:15:18.320 will try to invest a lot, but I mean from 0:15:18.320 --> 0:15:21.280 a technology point of view, there's still kind of several 0:15:21.360 --> 0:15:24.080 years behind, and I think China will actually invest a 0:15:24.160 --> 0:15:28.320 lot more into not probably not the top end, but 0:15:28.880 --> 0:15:30.920 still if you look at kind of ship like where 0:15:30.960 --> 0:15:32.560 chips are used, right, A lot of the chips are 0:15:32.600 --> 0:15:34.840 used in auto, A lot of chips are used actually 0:15:34.880 --> 0:15:38.560 in electronic vehicles. I mean those are areas actually where 0:15:38.640 --> 0:15:40.720 China can excel. So I think that's where a lot 0:15:40.760 --> 0:15:41.720 of investment will. 0:15:41.560 --> 0:15:44.960 Grow, all right, Stephanie, Unfortunately out of time, I did 0:15:44.960 --> 0:15:47.240 want to get your view on Japan whether or not 0:15:47.320 --> 0:15:50.960 you're using a pogo stick to jump higher from forty 0:15:51.000 --> 0:15:54.720 thousand or a bungee cord to pro blower levels, but 0:15:54.760 --> 0:15:56.720 we'll save that for the next discussion. We love to 0:15:56.760 --> 0:15:59.280 have you on the program, Thanks very much, Stephanie. Lung 0:15:59.280 --> 0:16:18.120 there Cio, it's stash Away. Joining us on the line 0:16:18.200 --> 0:16:22.440 for this next segment is Joy Young, head of product 0:16:22.480 --> 0:16:26.720 management Market Vector Indexes. So, Joy, how do you feel 0:16:26.760 --> 0:16:29.320 with markets at these levels? Here? We had a little 0:16:29.320 --> 0:16:32.120 bit of a spooky day on Friday on Wall Street. 0:16:32.160 --> 0:16:36.920 Your thoughts, Yeah, thank you. We had a very exciting 0:16:37.200 --> 0:16:41.160 week last week with you know, several assets heading there 0:16:41.240 --> 0:16:43.480 all time high, and I don't know if people still 0:16:43.520 --> 0:16:46.880 remember we started Monday with Nvidia, you know, just with 0:16:47.000 --> 0:16:52.120 great earnings announcement joining the two trillion dollar club, and 0:16:52.160 --> 0:16:56.560 then we saw it pushing the SMP up and it's 0:16:56.560 --> 0:16:59.240 not just the mag seven because we're seeing the equal 0:16:59.240 --> 0:17:01.920 weighted as and P five hundred also hitting their all 0:17:01.960 --> 0:17:04.440 time high. So yeah, they were going up, and then 0:17:04.560 --> 0:17:07.560 it's not unexpected to see when we have these price 0:17:07.680 --> 0:17:10.840 momentum that we're going to see some pullback in correction. 0:17:11.000 --> 0:17:13.159 So that's what we see on you know, what we 0:17:13.200 --> 0:17:16.439 saw on Friday. But you know, we're also seeing that 0:17:16.520 --> 0:17:19.119 this all time high is spreading globally. You know, we 0:17:19.600 --> 0:17:21.480 mentioned at the beginning of the program that you know, 0:17:21.600 --> 0:17:25.080 Japanese markets are hitting their all time high, so you know, 0:17:25.160 --> 0:17:28.320 we're seeing that, you know, there's now a signaling to 0:17:28.440 --> 0:17:31.120 the potential end of the Bank of Japan and their 0:17:31.480 --> 0:17:35.680 negative interest rate policy. In this in turn, we're seeing 0:17:35.720 --> 0:17:39.239 the unraveling of the very popular carry trade, which is 0:17:39.280 --> 0:17:43.760 now impacting the dollar. So with dollar a week, we're 0:17:43.760 --> 0:17:47.159 seeing gold prices also breaking out of their range and 0:17:47.280 --> 0:17:48.480 hitting their all time highs. 0:17:48.520 --> 0:17:50.879 So with the record highs that we've been talking about 0:17:50.960 --> 0:17:53.280 or you just highlighted in terms of equity trading, I'm 0:17:53.320 --> 0:17:56.040 going to add to that list a bitcoin, which I 0:17:56.040 --> 0:17:58.760 think broke above seventy grand for the first time last week. 0:17:59.240 --> 0:18:02.080 And to kind of dovetail with the point you just 0:18:02.200 --> 0:18:06.640 made there about the BOJ perhaps doing away with negative 0:18:06.720 --> 0:18:10.080 rates here sometime soon, I doubt. I don't know, maybe 0:18:10.080 --> 0:18:12.360 it's March, maybe it's April. But the question is one 0:18:12.400 --> 0:18:15.680 of excess liquidity. Do we still have a certain level 0:18:15.720 --> 0:18:18.040 of excess liquidity and global markets. 0:18:18.960 --> 0:18:22.800 I think there is that people are careful on where 0:18:22.800 --> 0:18:26.480 they're investing it. So I think, you know, we're seeing 0:18:26.480 --> 0:18:29.000 this all time high and it's actually quite unusual to 0:18:29.040 --> 0:18:31.919 see both risk on and risk off assets moving in 0:18:31.920 --> 0:18:34.919 the same direction with so much uncertainty and quite a 0:18:34.920 --> 0:18:35.600 lot of risk. 0:18:35.520 --> 0:18:36.240 Still out there. 0:18:36.640 --> 0:18:40.160 And you know, we know traditionally gold is a defensive 0:18:40.200 --> 0:18:43.760 asset and it goes up when things are looking down. 0:18:44.640 --> 0:18:47.800 But the equity markets are saying that the economy is 0:18:47.840 --> 0:18:51.480 still looking pretty strong. So we also have like bitcoin 0:18:51.520 --> 0:18:55.280 going up, as you know, a very volatile asset class, 0:18:55.280 --> 0:18:58.600 and we're seeing that based on the trigger of there's 0:18:58.640 --> 0:19:01.960 a lot of investors trying to, you know, allocate the 0:19:02.080 --> 0:19:07.040 money into something that isn't correlated with other asset classes 0:19:07.119 --> 0:19:10.120 because they just don't know where things may end up 0:19:10.160 --> 0:19:11.560 in the next few months. 0:19:12.359 --> 0:19:14.920 You mentioned Japan and I had a question for you. 0:19:15.720 --> 0:19:18.119 I put a question earlier to a guest saying, you know, 0:19:18.160 --> 0:19:21.440 if you do get a change in Boja policy, you're 0:19:21.440 --> 0:19:23.640 going to probably see as stronger yin and that might 0:19:23.680 --> 0:19:25.720 not be good for the stock market. But the flip 0:19:25.760 --> 0:19:28.800 side of that, which I also I also think is 0:19:28.880 --> 0:19:31.600 kind of interesting, is that you're going to get repatriation 0:19:31.760 --> 0:19:36.879 of Japanese assets abroad, and as that comes back in, 0:19:37.480 --> 0:19:39.960 you know, it's going to have to go somewhere. Does 0:19:39.960 --> 0:19:42.359 it go into the bond market there or does it 0:19:42.359 --> 0:19:43.439 go into the stock market. 0:19:45.119 --> 0:19:47.520 I would think probably the stock market is looking pretty 0:19:47.520 --> 0:19:51.640 good right now for Japan as well as emerging markets 0:19:51.640 --> 0:19:55.119 in Asia, because they seem to have been undervalued given 0:19:55.720 --> 0:19:58.560 the rest of global markets. So there are a lot 0:19:58.600 --> 0:20:02.880 of opportunities, and maybe they will be thinking about how 0:20:02.880 --> 0:20:05.399 to hedge the dollar and you know where they can 0:20:05.400 --> 0:20:07.440 put it without being exposed to dollar. 0:20:07.960 --> 0:20:10.600 So here's a question for you. We've been pondering this 0:20:11.320 --> 0:20:14.440 on the program today. Are there similarities between what we 0:20:14.560 --> 0:20:17.080 had in the equity market in the late nineteen nineties, 0:20:17.080 --> 0:20:19.719 what many have called the dot com bubble, and what 0:20:19.760 --> 0:20:23.639 we're seeing right now, particularly in tech that's related to 0:20:23.680 --> 0:20:24.680 the AI trade. 0:20:26.840 --> 0:20:30.480 Well, you know, looking at the data, you can always 0:20:30.560 --> 0:20:34.439 draw similarities, but we don't know what's going to happen next. 0:20:34.560 --> 0:20:37.320 I think, I think, yeah, A lot of people have 0:20:37.840 --> 0:20:45.000 kind of called the similar similarity between Nvidia and you know, Cisco, right, 0:20:45.040 --> 0:20:49.200 because these are like basically when you see some disruptive 0:20:49.600 --> 0:20:52.720 tech take off, what you're seeing is first the money 0:20:52.760 --> 0:20:56.520 piles in and the growth starts happening in the underlying infrastructure. 0:20:57.160 --> 0:21:00.760 But you know, then you'll see, like some domin net players, 0:21:00.880 --> 0:21:04.680 they will be competed away. Other players will come in 0:21:04.880 --> 0:21:07.560 and try to eat away at that profit. And you know, 0:21:07.720 --> 0:21:12.480 Nvidia has a strong mote, but we're seeing like competitors. 0:21:13.560 --> 0:21:18.040 In fact, some of their clients, like Microsoft, Amazon, they're 0:21:18.080 --> 0:21:22.960 also building their own design hardware into AI so that 0:21:23.000 --> 0:21:27.800 they're not relying on just Nvidia. So as that, you know, 0:21:29.720 --> 0:21:33.000 as we see the shift from kind of these infrastructure players, 0:21:33.080 --> 0:21:35.919 you know, to adopters, you know, these are the players 0:21:35.920 --> 0:21:38.960 that are going to be using the AI and that's 0:21:39.000 --> 0:21:42.720 where the growth will also start to happen. So you 0:21:42.840 --> 0:21:45.200 have to think about the life cycle of the thing 0:21:45.320 --> 0:21:50.040 as well as you know, diversifying your bets on which 0:21:50.119 --> 0:21:51.280 player is going to take off. 0:21:51.800 --> 0:21:54.119 So Joy, could I at least get you to say that, 0:21:54.240 --> 0:21:58.040 you know, we've got overblock conditions there, maybe not exactly 0:21:58.080 --> 0:22:01.560 a bubble, but but over block conditions, and that some 0:22:01.600 --> 0:22:03.160 sort of correction is nigh. 0:22:04.520 --> 0:22:09.840 Well. I mean, I truly think AI is, you know, 0:22:09.960 --> 0:22:16.560 really has the potential to deliver something really innovative and productive. 0:22:16.640 --> 0:22:20.280 But not every company is going to participate in it. 0:22:20.400 --> 0:22:24.080 So some people will overvalue some of these players, and 0:22:24.200 --> 0:22:26.200 you know, that may be a bubble, but I think 0:22:26.400 --> 0:22:29.800 over the long term we will see a trend to 0:22:29.840 --> 0:22:34.760 capture some of the growth opportunities. What's really interesting for 0:22:34.880 --> 0:22:37.719