WEBVTT - Trump Tariffs Impact on Market Psychology 

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. So

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<v Speaker 2>the story on US tariffs has, as we know, dominated

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<v Speaker 2>much of the conversation in markets. Statements from the Trump

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<v Speaker 2>administration recently have been at times contradictory, especially in the

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<v Speaker 2>run up to the new trade deal deadline of August. First,

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<v Speaker 2>in a moment, we'll go to Hong Kong and get

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<v Speaker 2>the perspective of Nadia Grant from BNP Pariba Asset Management.

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<v Speaker 2>On Thursday, we heard from Jamie Diamond, the CEO of

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<v Speaker 2>JP Morgan Chase. He was speaking in Dublin where he

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<v Speaker 2>warned of complacency on tariffs. He also said it's important

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<v Speaker 2>that an agreement is reached between the European Union and

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<v Speaker 2>the US for a closer look now at how tariffs

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<v Speaker 2>are impacting market psychology. I'm joined by Keith Buchanan. He

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<v Speaker 2>is senior portfolio manager at Global Investments. Keith joining today

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<v Speaker 2>from Chicago, Illinois. Keith, thank you so much for making

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<v Speaker 2>time to chat with me on this tariff story. What

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<v Speaker 2>is your sense of where we stand right now?

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<v Speaker 3>Well, thanks Degan, it's a good thing to chat with you.

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<v Speaker 4>Again, we've looked at the tariff story as having the

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<v Speaker 4>potential to inject new, almost reinvigorated inflation to the economy.

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<v Speaker 4>Now it depends on the whole picks of the toll.

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<v Speaker 1>Is.

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<v Speaker 3>We look at tariffs as like a.

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<v Speaker 4>Traffic toll and someone has to pay it or pass along,

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<v Speaker 4>whether it's the importer, the US corporation, or the end consumer,

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<v Speaker 4>whether it's corporation or individual. So we've looked at this

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<v Speaker 4>as you know, still a developing story, not one that's

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<v Speaker 4>in the review myriad as corporations have as you mentioned

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<v Speaker 4>in the in the break before that, there have been

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<v Speaker 4>some corporations that made adjustments in order to make sure

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<v Speaker 4>that they didn't have a full implementation of tariffs. Had

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<v Speaker 4>to run through price increases that perhaps their consumers couldn't take,

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<v Speaker 4>so they built up inventories and there are things that

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<v Speaker 4>might affect the cash flow but didn't affect earnings so directly.

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<v Speaker 4>So we're investigating how that really plays out, and it's

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<v Speaker 4>really critical this earning season.

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<v Speaker 2>I'm wondering how it's going to affect the Fed's thinking

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<v Speaker 2>as well. Right now, if you look at futures pricing,

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<v Speaker 2>the markets expecting two rate cuts before the end of

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<v Speaker 2>the year. Do you think that's maybe a little too optimistic,

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<v Speaker 2>But the.

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<v Speaker 4>Minutes last week kind of painted a story of anticipation

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<v Speaker 4>that kind of aligns with what we're thinking internally with

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<v Speaker 4>the corporations really making sure that you know, the way

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<v Speaker 4>that the tariffs have been implemented won't really throw them

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<v Speaker 4>off from an annual earning.

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<v Speaker 3>Standpoint, And I think that's what.

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<v Speaker 4>Those of the Fed have also taken notice of, is

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<v Speaker 4>it will take some time to really see the real

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<v Speaker 4>effects that can either outweigh or justify temporary even call it,

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<v Speaker 4>if you will, transitory change. The corporations are made in

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<v Speaker 4>order to elude the most negative impacts of tariff.

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<v Speaker 3>So I think there's a wait and.

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<v Speaker 4>See approach that we are waiting for corporations to see

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<v Speaker 4>what they have done how that impacts earnings, but also

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<v Speaker 4>the Federal Reserve and those decision makers on monetary policy

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<v Speaker 4>are also waiting to see who has those effects that

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<v Speaker 4>we can't get around and when does that really hit

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<v Speaker 4>the road as far as the data perspective, And we

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<v Speaker 4>just haven't seen it just yet, but that doesn't mean

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<v Speaker 4>we won't see it over the next couple of months.

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<v Speaker 2>How difficult is it to try to assess which companies

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<v Speaker 2>are best insulated from this tariff threat right now? Or

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<v Speaker 2>is that simply impossible because in some way all companies

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<v Speaker 2>are exposed.

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<v Speaker 4>We feel like all companies are exposed to a degree,

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<v Speaker 4>and then that degree varies by the industry and by

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<v Speaker 4>the approach to the latest from the administration. It's definitely

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<v Speaker 4>too early to tell from an aggregate standpoint. We don't

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<v Speaker 4>feel like there's a determination to be made just yet,

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<v Speaker 4>and we'd like to wait and see them make sure

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<v Speaker 4>that we're not premature and making a call, whether it's

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<v Speaker 4>positible or negative on just what the lasting impact is

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<v Speaker 4>of the most recent trade policy changes.

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<v Speaker 3>We just don't think we're there yet.

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<v Speaker 4>And frankly, this earning season could be, you know, the

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<v Speaker 4>very first they have a full what corporations can really

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<v Speaker 4>speak freely about it, but still could possibly be you know,

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<v Speaker 4>several quarters a come before we really have a good

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<v Speaker 4>grasp of what the impact is from the trade policy changes.

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<v Speaker 2>The unofficial start to the season begins next week. We'll

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<v Speaker 2>hear from the big banks today a pretty upbeat forecast

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<v Speaker 2>from Delta Airlines that stock popped about twelve percent so

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<v Speaker 2>if we can go back to kind of expectations for

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<v Speaker 2>not only earnings, but what we may hear in terms

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<v Speaker 2>of forecast from some of these companies, do you have

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<v Speaker 2>a sense of.

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<v Speaker 4>That, And look, Delta Airlines is a microcosm of exactly

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<v Speaker 4>what we've been studying internally. Delta pulled their pull their

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<v Speaker 4>earnings guidance earlier in the year from an annual standpoint,

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<v Speaker 4>and they re implemented this quarter today when they had

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<v Speaker 4>better color around the puts and takes as to what

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<v Speaker 4>at this point, as much as they can graft the

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<v Speaker 4>impact could be. So they were much less certain a

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<v Speaker 4>quarter ago. Now they're more.

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<v Speaker 3>Certain that we can have more clarity is what their earnings.

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<v Speaker 4>And cash flow for cast could be, and we can,

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<v Speaker 4>and we as onlookers and investors can have more confidence

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<v Speaker 4>and some of the estimates that we've put.

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<v Speaker 3>Around some corporations.

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<v Speaker 4>So we feel like Delta really set the tone for

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<v Speaker 4>us to really have more confidence in this earning season

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<v Speaker 4>going in a way that it's not just a old

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<v Speaker 4>pulling guidance.

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<v Speaker 3>We're not adjusting guidance. We don't know what the next.

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<v Speaker 4>Step could be, and a little more clarity to help

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<v Speaker 4>us understand what this earnings growth this quarter could be,

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<v Speaker 4>and also we understand and appreciate just how impactful that

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<v Speaker 4>could be for evaluation of the SB five hundred going forward.

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<v Speaker 4>So we feel like that this quarter is very critical

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<v Speaker 4>in understanding the next steps market.

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<v Speaker 2>As I'm speaking to you, I'm watching Bitcoin set a

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<v Speaker 2>record high. We're trading around one hundred and sixteen thousand

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<v Speaker 2>at the moment. Given everything that's going on in other

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<v Speaker 2>markets right now, do you have to have a little

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<v Speaker 2>exposure to the crypto space, and maybe it's through bitcoins.

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<v Speaker 3>We don't.

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<v Speaker 4>We don't have any in our in our in our

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<v Speaker 4>strategies right now. We don't necessarily look at it as

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<v Speaker 4>the ass as a as a real detractor. We feel

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<v Speaker 4>like it's definitely a beta plus type of measure. We'd

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<v Speaker 4>rather get that exposure through equities, frankly, and changing our

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<v Speaker 4>exposed equities and even gaining more leverage if possible. But

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<v Speaker 4>right now we just don't have that exposure. But we don't.

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<v Speaker 4>We don't feel like that. It's it's something that we is,

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<v Speaker 4>something that we actually discussed on a very active basis,

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<v Speaker 4>is not yet.

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<v Speaker 2>You know, right after the election, a lot of the

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<v Speaker 2>conversation focused on merger and acquisition activity and deregulation. We

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<v Speaker 2>haven't seen much in the way of deal flow and

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<v Speaker 2>M and A activity. How are you feeling about that

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<v Speaker 2>possibility moving forward, perhaps after the tariff story fades into

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<v Speaker 2>the background.

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<v Speaker 4>From a deregulatory standpoint, the initial thought was after deregulation

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<v Speaker 4>and some anti trust concerns were abated, then you'd see

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<v Speaker 4>this influx and flurry of eminet. We feel like the

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<v Speaker 4>main driver and the data supports this is more brilliant

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<v Speaker 4>economic exportations and we just haven't had that because the

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<v Speaker 4>traff conversation has been in a way so as that

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<v Speaker 4>starts to not necessarily that the terrorfs go away, but

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<v Speaker 4>is there more certainty and clarity around the direction and

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<v Speaker 4>the drivers of the psychology of our trade positive changes,

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<v Speaker 4>specifically when it comes to TERRAFK. We feel like some

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<v Speaker 4>of that imminate can unlocked because the anti trust levers

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<v Speaker 4>are have been loosen some and so we appreciate that

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<v Speaker 4>part of it, but we just still have to have

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<v Speaker 4>some economic clarity in order for those conversations to really

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<v Speaker 4>gain momentum and we get paying the pad on though,

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<v Speaker 4>so we feel like economic inspectation to wait more. Even

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<v Speaker 4>we're selling this environment than some of the anti trust

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<v Speaker 4>concerns being alleviated. You have to have optimism about economic

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<v Speaker 4>developments over the next five, ten, fifteen years, and that

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<v Speaker 4>picture's just been very, very unclear. And as that clarity

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<v Speaker 4>comes to the marketplace, we feel like em and they

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<v Speaker 4>could pick up in a substantial way.

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<v Speaker 2>So away from the US keith, I'm wondering whether you're

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<v Speaker 2>forced to find opportunity offshore right now. Maybe it's in Europe.

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<v Speaker 2>How are you thinking about foreign markets?

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<v Speaker 4>We've we've we've had a underway when it comes in

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<v Speaker 4>the national compared to domestic here for some time.

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<v Speaker 3>Now.

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<v Speaker 4>That's that's a that's a marketplace that we've paid more

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<v Speaker 4>attention to it. It's a little more exciting and more

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<v Speaker 4>you know, our ears are perking up a little more,

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<v Speaker 4>but not necessarily where we feel like we change that

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<v Speaker 4>position that we're in as far as going from underweight

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<v Speaker 4>to overweight, we feel like you have. Politically, there's still

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<v Speaker 4>a lot of concerns in the world. You know, we

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<v Speaker 4>can go down the list and it's you know, very

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<v Speaker 4>well known issues that kind of take some of the

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<v Speaker 4>headlines here in the past several months, we don't really

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<v Speaker 4>feel like that changes, and the prospects here in the

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<v Speaker 4>US we feel like, even with our monetary fiscal concerns,

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<v Speaker 4>still a little more exciting than what we see in nationally.

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<v Speaker 4>So we're comf fable in the position we've been in. And

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<v Speaker 4>that's that goes from Margie and the Bella markets as well.

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<v Speaker 2>Keith will leave it there, Thank you so very much.

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<v Speaker 2>He is Keith Buchanan, Senior portfolio manager at Globalt Investments,

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<v Speaker 2>joining from Chicago here on the Daybreak Asia podcast. Welcome

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<v Speaker 2>back to the Daybreak Asia Podcast. I'm Doug Chrisner. I

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<v Speaker 2>think we can agree the major challenge for markets right

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<v Speaker 2>now is determining the effect of those US tariffs. For

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<v Speaker 2>a closer look now, I am joined by Nadia Grant.

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<v Speaker 2>She is head of Global Equity at Bnpperabat Asset Management,

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<v Speaker 2>and Nadia is joining from our studios in Hong Kong.

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<v Speaker 2>Thank you so much for making time to chat with me.

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<v Speaker 3>I know the.

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<v Speaker 2>Tariff story is a still evolving one right now, although

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<v Speaker 2>I think we may be able to say there are

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<v Speaker 2>several highly probable scenarios. Let me begin with the growth outlook.

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<v Speaker 2>How are you feeling about growth going forward.

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<v Speaker 1>Yeah, it's a pleasure to be with you. The growth

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<v Speaker 1>outlook is definitely uncertain and most definitely as well, most

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<v Speaker 1>likely on a downward trajectory. And so when we think

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<v Speaker 1>about the tariff and how the market is looking at them,

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<v Speaker 1>it seems that the market is now completely pricing an

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<v Speaker 1>outcome whereby their view as a negotiating tool, and that

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<v Speaker 1>they will be evolving. And when we listen to what

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<v Speaker 1>has been said more recently by the administration, and I'm

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<v Speaker 1>thinking about a Treasury Secretary as cop essant when he

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<v Speaker 1>was actually talking about using tariff as a source of

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<v Speaker 1>revenues and to finance that the tax cuts and the

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<v Speaker 1>provisions from the big beautiful Bill. And so there may

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<v Speaker 1>be a bit of complacency in the part of the

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<v Speaker 1>market when it comes to tariff because of that ever

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<v Speaker 1>changing nature of it.

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<v Speaker 2>When it comes to the impact of tariff's I'm curious

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<v Speaker 2>as to how you see the economic risk distributed across Asia.

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<v Speaker 2>So many of those countries we know are exporters, and

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<v Speaker 2>obviously they have exposure, but I'm wondering about jurisdictions that

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<v Speaker 2>may have a slight advantage.

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<v Speaker 1>So I'm a Stockpiaker. So I look at companies and

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<v Speaker 1>sectors and so and obviously at countries as well, and

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<v Speaker 1>so I would say, you know that we initially when

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<v Speaker 1>we heard about the potential of tariff, those that had

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<v Speaker 1>big exposure to US exports were obviously the most at risk.

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<v Speaker 1>And so I'm thinking the like Vietnam, for example, But

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<v Speaker 1>Vietnam has been really quick to get to negotiate, and

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<v Speaker 1>actually what the end did up negotiating is a pretty

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<v Speaker 1>positive outcome versus what was feared. And so the knee

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<v Speaker 1>jerk reaction of the market was really to sell this

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<v Speaker 1>market first. And now we're seeing really that we've passed

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<v Speaker 1>that big overhang and you can start investing and looking

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<v Speaker 1>at companies again. So you have a big of a

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<v Speaker 1>big relief rally there, and then you have obviously others

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<v Speaker 1>where you still have a very uncertain outcome because we

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<v Speaker 1>just don't know where the tariff will land. Definitely, we

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<v Speaker 1>know that the auto sector has been very penalized for Japan,

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<v Speaker 1>it's been quite impactful. So although we like some of

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<v Speaker 1>our exposure in Japan, we prefer exposure in Japan to

0:12:39.800 --> 0:12:43.400
<v Speaker 1>the financials, to the banks that are exposed to more

0:12:43.440 --> 0:12:46.720
<v Speaker 1>of the CPI strands and the wage growth and the

0:12:46.760 --> 0:12:50.680
<v Speaker 1>fact that the rates are well underpend and so benefit

0:12:51.160 --> 0:12:53.840
<v Speaker 1>from that outlook as opposed to the exporters on the

0:12:53.880 --> 0:12:56.800
<v Speaker 1>auto side that are really feeling the blunt of the

0:12:56.840 --> 0:12:58.319
<v Speaker 1>pressure on the tariff.

0:12:58.440 --> 0:13:00.959
<v Speaker 2>So you're normally based in London, I understand you or

0:13:01.000 --> 0:13:04.319
<v Speaker 2>in China recently, and I'm very curious about your observations

0:13:04.360 --> 0:13:08.480
<v Speaker 2>there and whether or not you're finding opportunity in China

0:13:08.559 --> 0:13:09.000
<v Speaker 2>right now.

0:13:09.480 --> 0:13:13.160
<v Speaker 1>We are absolutely so. We were really excited by China

0:13:13.280 --> 0:13:15.480
<v Speaker 1>Tech after Deep Sick. We thought that there was a

0:13:15.520 --> 0:13:19.080
<v Speaker 1>big realization that actually really China was closing in on

0:13:19.120 --> 0:13:22.720
<v Speaker 1>the AI race and find opportunities there earlier on the year.

0:13:23.240 --> 0:13:25.679
<v Speaker 1>But we also really like the fact that on the

0:13:25.720 --> 0:13:30.280
<v Speaker 1>consumer side on there's not The service sector and particularly

0:13:30.360 --> 0:13:34.600
<v Speaker 1>the financial service sector has got so much greenfield that's

0:13:34.600 --> 0:13:37.520
<v Speaker 1>got so much room to grow, and so we have

0:13:37.640 --> 0:13:41.840
<v Speaker 1>exposure to a life insurance company there. And what has

0:13:41.880 --> 0:13:46.079
<v Speaker 1>really captured our attention this week in particular has been

0:13:46.120 --> 0:13:50.240
<v Speaker 1>the talks on supply side reform, the talks of anti involution,

0:13:50.800 --> 0:13:53.360
<v Speaker 1>because that's been one of the area where we were

0:13:53.400 --> 0:13:55.880
<v Speaker 1>did in terms of sectors where we've been sort of

0:13:55.960 --> 0:13:58.720
<v Speaker 1>more shy and haven't really wanted to get exposure. Have

0:13:58.840 --> 0:14:04.040
<v Speaker 1>been those where we've seen obviously oversupply, fierce competition, because

0:14:04.160 --> 0:14:07.960
<v Speaker 1>that is very negative for margins for returns, and so

0:14:08.040 --> 0:14:10.960
<v Speaker 1>if the government is really a key to tackle the

0:14:11.120 --> 0:14:14.640
<v Speaker 1>issue and to instill more supply discipline, we think that

0:14:14.640 --> 0:14:18.240
<v Speaker 1>would be a really strong catalyst for Chinese equity, in

0:14:18.280 --> 0:14:23.200
<v Speaker 1>particular in the sector of ev so on the auto surrey,

0:14:23.720 --> 0:14:26.240
<v Speaker 1>on the battery, on the solar side, where you've seen

0:14:26.720 --> 0:14:28.400
<v Speaker 1>that fierce competition.

0:14:28.040 --> 0:14:31.560
<v Speaker 2>But you're not concerned about the overcapacity issue, or you're

0:14:31.600 --> 0:14:34.880
<v Speaker 2>not concerned at all when you look at the wholesale

0:14:34.960 --> 0:14:38.520
<v Speaker 2>level of deflation in China, these are not concerns that

0:14:38.600 --> 0:14:39.000
<v Speaker 2>you have.

0:14:39.640 --> 0:14:42.479
<v Speaker 1>Oh absolutely. That's why at the moment we're on the sideline.

0:14:42.760 --> 0:14:45.760
<v Speaker 1>We want to see whether these measures will come to fruition.

0:14:46.200 --> 0:14:49.720
<v Speaker 1>But historically, when you've seen more supply discipline, when you've

0:14:49.720 --> 0:14:53.440
<v Speaker 1>seen closure of capacity that has been that's very market positive.

0:14:53.480 --> 0:14:56.280
<v Speaker 1>So we're really keen to see whether these measures are

0:14:56.320 --> 0:14:58.360
<v Speaker 1>going to come through, whether you will see supply side

0:14:58.400 --> 0:14:59.920
<v Speaker 1>reform to tackle these issues.

0:15:00.240 --> 0:15:04.160
<v Speaker 2>Do you feel confident in Beijing's ability to strike some

0:15:04.240 --> 0:15:08.680
<v Speaker 2>sort of deal with Washington so that the pressure that

0:15:08.720 --> 0:15:11.280
<v Speaker 2>this trade war represents will be alleviated.

0:15:11.760 --> 0:15:14.360
<v Speaker 1>I think we've already seen a big degree of de

0:15:14.720 --> 0:15:18.600
<v Speaker 1>escalation because if you recall earlier on a year we

0:15:18.720 --> 0:15:24.160
<v Speaker 1>had really outlandish tariff levels that were completely punitive and prohibitive.

0:15:24.440 --> 0:15:27.760
<v Speaker 1>We were in one hundred percent range if memory serves

0:15:27.760 --> 0:15:31.120
<v Speaker 1>me well, So you've already had a great degree of

0:15:31.520 --> 0:15:35.120
<v Speaker 1>de escalation. I think in the case of China, I

0:15:35.120 --> 0:15:38.720
<v Speaker 1>think that they can really tackle the tariff in many ways.

0:15:38.800 --> 0:15:42.320
<v Speaker 1>So there's the negotiation route, absolutely, but there's also been

0:15:42.360 --> 0:15:44.680
<v Speaker 1>a high degree of trying to offset some of the

0:15:44.680 --> 0:15:48.480
<v Speaker 1>impact of the tariff by stimulating the economy so to

0:15:48.560 --> 0:15:52.080
<v Speaker 1>really try to compensate. And then there's also the opportunity.

0:15:52.160 --> 0:15:55.000
<v Speaker 1>What we've observed the first time we had tariff back

0:15:55.040 --> 0:15:58.280
<v Speaker 1>in twenty eighteen is a degree as well of re

0:15:58.440 --> 0:16:02.160
<v Speaker 1>routing and recycling, and so really seeing some of the

0:16:02.680 --> 0:16:06.360
<v Speaker 1>exports that were meant for the US market perhaps being

0:16:06.400 --> 0:16:09.080
<v Speaker 1>rerouted such that it would not go directly to the

0:16:09.200 --> 0:16:13.600
<v Speaker 1>US but find its way there eventually, and recycling meaning

0:16:13.680 --> 0:16:16.200
<v Speaker 1>that some of the exports that were initially meant for

0:16:16.240 --> 0:16:19.520
<v Speaker 1>the US actually finding their way elsewhere, and I'm thinking

0:16:19.520 --> 0:16:23.000
<v Speaker 1>in Europe or elsewhere in the world, and so there's

0:16:23.160 --> 0:16:27.440
<v Speaker 1>many ways in which we've seen companies being agile and

0:16:27.560 --> 0:16:30.320
<v Speaker 1>adapting to the circumstances. But to go back to your

0:16:30.360 --> 0:16:33.800
<v Speaker 1>first question of growth, obviously this is a gross reduction.

0:16:34.120 --> 0:16:36.960
<v Speaker 1>This is a handicap that we're putting on global trade

0:16:37.000 --> 0:16:37.960
<v Speaker 1>and on global growth.

0:16:38.160 --> 0:16:40.240
<v Speaker 2>So, Nadia, when you are on the mainland and you

0:16:40.320 --> 0:16:46.280
<v Speaker 2>were engaged in conversation around technology, particularly the focus on AI,

0:16:46.400 --> 0:16:48.680
<v Speaker 2>I'm curious as to whether or not people really feel

0:16:48.720 --> 0:16:51.840
<v Speaker 2>that the US has a potential, through these export controls

0:16:52.160 --> 0:16:54.600
<v Speaker 2>and the limits that have already been put into effect

0:16:54.840 --> 0:16:58.160
<v Speaker 2>when it comes to certain aspects of the technology, whether

0:16:58.240 --> 0:17:03.080
<v Speaker 2>that still has the ability to hold back further growth

0:17:03.160 --> 0:17:05.639
<v Speaker 2>in the tech sector in China, or is there a

0:17:05.640 --> 0:17:09.160
<v Speaker 2>growing sense of confidence that China, through its own means,

0:17:09.560 --> 0:17:12.400
<v Speaker 2>has the ability to kind of compensate and maybe work

0:17:12.440 --> 0:17:13.440
<v Speaker 2>this out on its own.

0:17:14.400 --> 0:17:14.680
<v Speaker 3>Yeah.

0:17:14.800 --> 0:17:18.320
<v Speaker 1>I think it's very interesting because I've been really amazed

0:17:19.640 --> 0:17:23.280
<v Speaker 1>by the agility really of China tech in terms of

0:17:23.320 --> 0:17:27.879
<v Speaker 1>that ability to adapt and find efficiencies in the face

0:17:27.920 --> 0:17:31.000
<v Speaker 1>of challenge, in the face of restriction. And so when

0:17:31.040 --> 0:17:33.679
<v Speaker 1>you listen to some of the big tech CEO in

0:17:33.720 --> 0:17:36.680
<v Speaker 1>the US, they would tell you that they actually think

0:17:36.720 --> 0:17:38.920
<v Speaker 1>that China is really catching up and he is really

0:17:38.960 --> 0:17:42.720
<v Speaker 1>able to manage with those constraints. So yeah, I would

0:17:42.800 --> 0:17:46.600
<v Speaker 1>think so. And in the case of on the US side,

0:17:46.640 --> 0:17:50.000
<v Speaker 1>I mean, you know, the CEO of the largest chip

0:17:50.040 --> 0:17:53.360
<v Speaker 1>company or the largest company has really been quite vocal

0:17:53.440 --> 0:17:56.520
<v Speaker 1>about the fact that it would be a lot more

0:17:56.680 --> 0:18:01.200
<v Speaker 1>productive to not have this restrictions because in the end

0:18:02.080 --> 0:18:06.240
<v Speaker 1>they don't achieve the objective that they set out to achieve.

0:18:06.840 --> 0:18:09.280
<v Speaker 2>Give me your sense of the pharmaceutical industry. I know

0:18:09.400 --> 0:18:12.800
<v Speaker 2>that China and the US are somewhat entwined at that level.

0:18:12.920 --> 0:18:15.840
<v Speaker 2>Are you optimistic that we can avoid much more in

0:18:15.840 --> 0:18:18.160
<v Speaker 2>the way of tension on that front? And I'm curious

0:18:18.160 --> 0:18:20.520
<v Speaker 2>to get your take on the farmer business on the mainland.

0:18:21.240 --> 0:18:25.199
<v Speaker 1>Oh, farmer business on the mainland. So we don't have

0:18:25.320 --> 0:18:29.679
<v Speaker 1>much exposure to the farmer business there. I must admit.

0:18:30.240 --> 0:18:34.520
<v Speaker 1>We have exposure to European pharmaceutical company, but the way

0:18:34.560 --> 0:18:36.879
<v Speaker 1>they are set up, so the one in particular, we

0:18:36.960 --> 0:18:40.240
<v Speaker 1>have exposure to one leader on oncology because we really

0:18:40.280 --> 0:18:44.400
<v Speaker 1>think that from a demographic standpoint, oncology is not only

0:18:44.440 --> 0:18:47.639
<v Speaker 1>the largest therapeutics, but it's the one that's growing the

0:18:47.640 --> 0:18:52.320
<v Speaker 1>most because of aging population. But that specific company has

0:18:52.680 --> 0:18:56.159
<v Speaker 1>having its manufacturing footprint, is answering US demand with the

0:18:56.280 --> 0:19:01.000
<v Speaker 1>US manufacturing and supply chain and so pretty much insulated

0:19:01.160 --> 0:19:04.000
<v Speaker 1>from from the impact on the tariff. It's so, it

0:19:04.080 --> 0:19:06.680
<v Speaker 1>seems so we really want to make sure that when

0:19:06.720 --> 0:19:10.520
<v Speaker 1>we think about tariff and specific companies that we understand

0:19:11.119 --> 0:19:14.800
<v Speaker 1>the makeup of their supply chain, of their manufacturing footprint,

0:19:14.880 --> 0:19:16.680
<v Speaker 1>because if the if the if a company in the

0:19:16.720 --> 0:19:21.320
<v Speaker 1>same sector would export its drugs to the US, then

0:19:21.359 --> 0:19:25.080
<v Speaker 1>obviously would feel the full blunt of the tariff. So

0:19:25.119 --> 0:19:28.320
<v Speaker 1>it's really important to understand case by case how the

0:19:28.359 --> 0:19:32.800
<v Speaker 1>companies are organized. And we've seen actually a florry of

0:19:32.520 --> 0:19:40.040
<v Speaker 1>announcement for on shoring of farmer companies from Europe in particular,

0:19:40.359 --> 0:19:43.680
<v Speaker 1>but not only back to the US, and the tariff

0:19:43.720 --> 0:19:47.000
<v Speaker 1>that have just been announced on the farmer sector by

0:19:47.000 --> 0:19:51.000
<v Speaker 1>the administration this week, they really allow for a year

0:19:51.119 --> 0:19:54.800
<v Speaker 1>or two before coming into effect, because they acknowledged that

0:19:54.840 --> 0:19:59.480
<v Speaker 1>if you want to bring bring manufacturing back to the

0:19:59.600 --> 0:20:02.159
<v Speaker 1>U S you really need to allow some time for

0:20:02.200 --> 0:20:03.399
<v Speaker 1>this to occur.

0:20:03.920 --> 0:20:06.800
<v Speaker 2>So you mentioned European pharma how are you feeling about

0:20:06.840 --> 0:20:09.000
<v Speaker 2>European markets more broadly.

0:20:09.160 --> 0:20:12.400
<v Speaker 1>Well, for the first time in a long time, I'm

0:20:12.640 --> 0:20:17.880
<v Speaker 1>actually pretty sanguine in that I really think we've had

0:20:18.200 --> 0:20:20.680
<v Speaker 1>we've had a wake up call in Europe that you've

0:20:20.720 --> 0:20:26.440
<v Speaker 1>had that bazooka in the German Infrastructure Plan. Germany was

0:20:26.480 --> 0:20:30.320
<v Speaker 1>the only country that had fiscal room to ease, and

0:20:30.359 --> 0:20:33.919
<v Speaker 1>it's doing so in a very material way. And so

0:20:33.960 --> 0:20:36.320
<v Speaker 1>we think that the plan that has been announced, I mean,

0:20:36.359 --> 0:20:39.600
<v Speaker 1>Germany is the largest European economy, he's going to add

0:20:39.720 --> 0:20:42.879
<v Speaker 1>point three two point six percent growth to European GDP,

0:20:43.080 --> 0:20:47.040
<v Speaker 1>which is very material when Europe was so desperately in

0:20:47.119 --> 0:20:50.879
<v Speaker 1>need of growth and so and so we really added

0:20:50.960 --> 0:20:54.880
<v Speaker 1>exposure to what we thought was some of the main

0:20:54.960 --> 0:20:58.640
<v Speaker 1>beneficiaries of that plan, so namely in the construction sector,

0:20:59.119 --> 0:21:02.800
<v Speaker 1>MidCap names that would set to benefit from a lot

0:21:02.800 --> 0:21:09.880
<v Speaker 1>of the stimulus happening there. And you know, monetary policy

0:21:09.920 --> 0:21:12.639
<v Speaker 1>is also loose in Europe, so we think the combination

0:21:13.440 --> 0:21:18.680
<v Speaker 1>of those two ise is quite supportive. Obviously, the European

0:21:18.720 --> 0:21:21.960
<v Speaker 1>market started the year really strongly, and then I sort

0:21:21.960 --> 0:21:25.040
<v Speaker 1>of gave some back because of the fear of tariff

0:21:25.080 --> 0:21:27.880
<v Speaker 1>and we'll have to We'll have to see what happens there.

0:21:27.920 --> 0:21:30.680
<v Speaker 1>But in so far as our exposure, we can really

0:21:31.040 --> 0:21:34.080
<v Speaker 1>sort of get exposure mainly through MidCap that are more

0:21:34.160 --> 0:21:37.280
<v Speaker 1>insulated and more focused on the German infrastructure plan.

0:21:37.440 --> 0:21:39.320
<v Speaker 2>Nadia will leave it there. Thank you so very much

0:21:39.359 --> 0:21:41.480
<v Speaker 2>for making time to chat with me. She is Nadi

0:21:41.480 --> 0:21:45.280
<v Speaker 2>a Grant, Head of Global Equity at BNP. Payabout asset management.

0:21:45.400 --> 0:21:49.600
<v Speaker 2>Joining us here on the Daybreak Asia Podcast. Thanks for

0:21:49.680 --> 0:21:54.280
<v Speaker 2>listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.

0:21:54.600 --> 0:21:57.720
<v Speaker 2>Each weekday, we look at the story shaping markets, finance,

0:21:58.080 --> 0:21:59.680
<v Speaker 2>and geopolitics in the Asia.

0:21:59.680 --> 0:22:00.280
<v Speaker 3>Pason it.

0:22:00.480 --> 0:22:03.760
<v Speaker 2>You can find us on Apple, Spotify, the Bloomberg Podcast

0:22:03.840 --> 0:22:07.200
<v Speaker 2>YouTube channel, or anywhere else you listen. Join us again

0:22:07.200 --> 0:22:10.520
<v Speaker 2>tomorrow for insight on the market moves from Hong Kong

0:22:10.640 --> 0:22:15.040
<v Speaker 2>to Singapore and Australia. I'm Doug Chrisner, and this is

0:22:15.080 --> 0:22:15.639
<v Speaker 2>Bloomberg