WEBVTT - APAC Markets, Disney Vote 0:00:00.160 --> 0:00:10.440 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:10.520 --> 0:00:13.720 Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian 0:00:13.800 --> 0:00:16.640 Curtis and myself for the stories, making news and moving 0:00:16.680 --> 0:00:19.560 markets in the APAC region. You can subscribe to the 0:00:19.600 --> 0:00:23.080 show anywhere you get your podcast and always on Bloomberg Radio, 0:00:23.320 --> 0:00:26.080 the Bloomberg Terminal, and the Bloomberg Business App. 0:00:27.240 --> 0:00:30.440 Well, Disney shareholders have handed CEO Bob Iger a big 0:00:30.520 --> 0:00:33.640 vote of confidence. They elected all of Disney's choices for 0:00:33.720 --> 0:00:37.320 the company's board at a proxy vote, and shareholders rejected 0:00:37.440 --> 0:00:41.640 dissident investor Nelson Peltz's bid for board seats. Beltz's ally, 0:00:41.720 --> 0:00:45.879 former Disney finance chief Jay Russulu, was also rejected. The 0:00:45.960 --> 0:00:48.319 result is a clear cut victory for Iger, who has 0:00:48.360 --> 0:00:51.159 fought to keep Peltz off the board since returning to 0:00:51.240 --> 0:00:55.160 CEO in twenty twenty two. Jamie Lumley, senior analyst at 0:00:55.200 --> 0:00:59.920 Third Bridge, outlines what's next for Iiger after winning the vote. 0:01:00.080 --> 0:01:02.520 Thing that I think investors will really be looking at 0:01:02.680 --> 0:01:07.399 is streaming profitability. The company's planning on finally driving profits 0:01:07.480 --> 0:01:10.360 in fiscal year twenty twenty four. This is coming after 0:01:10.800 --> 0:01:13.800 so many quarters and years of billions and losses in 0:01:13.840 --> 0:01:16.240 this segment, and we've heard Bob Bayer talk about how 0:01:16.240 --> 0:01:19.399 important this streaming transition is for the business. Really making 0:01:19.400 --> 0:01:21.640 sure that they're hitting their mark and achieving their goals. 0:01:21.760 --> 0:01:24.160 That's definitely priority number one as they move beyond this 0:01:24.240 --> 0:01:24.840 proxy fight. 0:01:25.720 --> 0:01:29.560 Jamie Lumley at Third Bridge. Disney has reinstated its dividend 0:01:29.640 --> 0:01:32.720 and has announced plans to invest sixty billion dollars in 0:01:32.760 --> 0:01:35.720 its parks and resorts over the next ten years. It 0:01:35.760 --> 0:01:38.880 also deepened its involvement in the video game business via 0:01:38.959 --> 0:01:42.640 a one point five billion dollar investment in Epic Games. 0:01:43.280 --> 0:01:46.160 Joining US now to discuss this is Bloomberg Intelligence US 0:01:46.280 --> 0:01:49.880 media analyst Gita Rong and Athan Geeta. Can we say 0:01:49.920 --> 0:01:52.880 that this is a victory for both Bob Byer and 0:01:53.160 --> 0:01:56.800 Nelson Pelts. I mean, the former is obvious, the latter, 0:01:56.920 --> 0:02:01.120 Pelts is a billion dollars richer now, and he's also 0:02:01.200 --> 0:02:04.920 made a point. I guess you could say, hater's gonna hate, Well, 0:02:04.960 --> 0:02:07.080 this is billionaire's gonna billion. 0:02:10.240 --> 0:02:11.840 That's a perfect way to put it. And I think 0:02:11.919 --> 0:02:14.800 Nlson Pels is definitely kind of spinning this as a 0:02:14.880 --> 0:02:18.600 win for himself, for his fun triad, and of course 0:02:18.639 --> 0:02:21.160 for Disney shareholders at large. I mean, the stock is 0:02:21.160 --> 0:02:24.640 definitely up fifty percent, and I think in many ways 0:02:24.680 --> 0:02:27.160 he's right. I mean, he is claiming that he has 0:02:27.480 --> 0:02:33.239 been the instrumental catalyst for kind of accelerating this transformation 0:02:33.320 --> 0:02:37.160 at Disney, and I think to largest tent, that's definitely true. 0:02:37.840 --> 0:02:40.440 Gay to take us inside the drama of this story, 0:02:40.480 --> 0:02:42.400 I mean, this is the second time in two years 0:02:42.720 --> 0:02:45.920 that Pelts was trying to get board seats. And the 0:02:45.960 --> 0:02:49.400 other character that's part of the story is Ike pearl Mutter, 0:02:49.560 --> 0:02:53.360 the former chairman of Marvel Entertainment. Disney purchased Marvel for 0:02:53.400 --> 0:02:55.840 a round four billion, and pearl Mutter was able to 0:02:55.919 --> 0:02:59.760 join the leadership team. He was tossed out last year. 0:03:00.040 --> 0:03:02.200 And I'm wondering whether a part of the story had 0:03:02.200 --> 0:03:04.799 to do with a bit of revenge that failed ultimately. 0:03:05.040 --> 0:03:05.560 Is that fair? 0:03:06.600 --> 0:03:08.960 I think that's definitely fair. I mean, we've seen kind 0:03:09.000 --> 0:03:12.880 of Bob Eiger even chronicle this in his autobiography The 0:03:13.200 --> 0:03:14.960 Right of a Lifetime, you know, kind of dealing with 0:03:15.000 --> 0:03:19.200 a very difficult personality like Ike Perlmutter. They always had 0:03:19.320 --> 0:03:23.160 kind of their creative differences. Bob was was forced to 0:03:23.240 --> 0:03:25.920 keep him on after the Marvel acquisition. That turned out 0:03:25.960 --> 0:03:28.400 to be a huge, huge win for of course, for 0:03:28.480 --> 0:03:31.520 Iiger and for Disney. You know, the Marvel movies bringing 0:03:31.520 --> 0:03:33.919 in billions and billions of dollars at the box office, 0:03:34.400 --> 0:03:38.000 but he had to constantly kind of contend with you know, 0:03:38.120 --> 0:03:41.600 Pearl Mutter's temper tantrums. Remember, Perlmutter wanted to get rid 0:03:41.640 --> 0:03:44.040 of Kevin Feige, and Kevin Feigi has kind of been 0:03:44.040 --> 0:03:47.920 the whole creative genius behind Marvel and so many of 0:03:47.960 --> 0:03:50.880 the Disney movies. So it's been a very rough and 0:03:51.000 --> 0:03:54.640 rocky road, you know, between the Disney management team as 0:03:54.680 --> 0:03:56.840 well as Ike pul Mutter. Of course, he was forced out, 0:03:57.760 --> 0:04:01.400 and you know, the way that Eiger and kind of 0:04:01.400 --> 0:04:03.720 the Disney team have fun at is this has been 0:04:03.800 --> 0:04:08.160 kind of this vendetta against Disney by Eike Pelmas. I 0:04:08.160 --> 0:04:09.480 think there's definitely a ring. 0:04:09.360 --> 0:04:10.040 Of truth to that. 0:04:11.360 --> 0:04:14.000 No matter how we got here, the company has been 0:04:14.040 --> 0:04:17.560 benefiting from some of what was suggested by Tryan, and 0:04:18.120 --> 0:04:20.719 you know, we've seen the stock price advance. You mentioned 0:04:20.720 --> 0:04:23.400 that I'm not sure about the succession planning that's still 0:04:23.720 --> 0:04:26.520 out there, and at least just with the streaming strategy 0:04:26.600 --> 0:04:29.279 is something that we probably should discuss. How might the 0:04:29.400 --> 0:04:33.239 streaming strategy change from here and how might it improve? 0:04:34.720 --> 0:04:38.440 Yes, I don't necessarily think that Tryan or pelse offered 0:04:38.480 --> 0:04:42.039 any constructive advice when it came to any strategic visions 0:04:42.040 --> 0:04:44.960 around Disney. Yes, they're absolutely right that the succession plan 0:04:45.000 --> 0:04:48.520 has been botched and botched multiple times, and that is 0:04:48.560 --> 0:04:50.760 something that I think, you know, they're obviously going to 0:04:50.839 --> 0:04:52.880 try and fix and do a good job. They have 0:04:52.920 --> 0:04:55.840 a whole committee just looking into succession right now. James 0:04:55.880 --> 0:04:58.480 Gorman from Morgan Stanley is kind of leading those efforts. 0:04:59.240 --> 0:05:02.800 So I think they definitely do their best there from 0:05:02.839 --> 0:05:06.080 a same perspective. You know, profitability, of course, is the 0:05:06.120 --> 0:05:10.080 big metric. Now it's no longer subscribers. They have multiple levers. 0:05:10.120 --> 0:05:13.520 I think in place to drive streaming profits, they're going 0:05:13.560 --> 0:05:16.560 to increase prices. They're going to make sure that they 0:05:16.600 --> 0:05:19.240 have the best content. They're not going to spend money 0:05:19.279 --> 0:05:21.479 like how they were spending. You know, everybody was spending 0:05:21.480 --> 0:05:25.960 money like drunken sailors. Everybody's now rationalizing output. They're rationalizing costs, 0:05:26.200 --> 0:05:28.480 and they're having many other different initiatives. You know, they 0:05:28.480 --> 0:05:31.839 have a new ad tier, they're integrating Hulu and Disney 0:05:31.839 --> 0:05:33.640 Plus and that's going to save them a whole bunch 0:05:33.640 --> 0:05:36.080 of costs. And then remember they are going to crack 0:05:36.160 --> 0:05:39.440 down on passwords sharing Alla Netflix. So all of this 0:05:39.720 --> 0:05:41.800 is going to you know, add to that bottom. 0:05:41.440 --> 0:05:43.640 Line gata in a moment. I want to get your 0:05:43.680 --> 0:05:47.719 take on this Paramount Global deal with Sherry Redstone and 0:05:47.760 --> 0:05:50.640 sky Dance. We can talk about that in a moment. Obviously, 0:05:50.680 --> 0:05:54.039 Paramount is a company with legacy assets like CBS and 0:05:54.160 --> 0:05:57.560 MTV and to get back to Disney, Disney is still 0:05:57.600 --> 0:06:00.080 holding on to ABC. Do you have a sense of 0:06:00.120 --> 0:06:01.920 what Disney is going to do with the network? 0:06:03.120 --> 0:06:05.159 I think Disney, you know, so there's been a lot 0:06:05.160 --> 0:06:07.920 of on again off against speculation about what they want 0:06:07.960 --> 0:06:09.279 to do with their TV networks. 0:06:09.320 --> 0:06:09.520 You know. 0:06:09.720 --> 0:06:13.120 The Eiger famously last year said that, you know, everything 0:06:13.160 --> 0:06:15.040 is on the table. You know, maybe we don't really 0:06:15.080 --> 0:06:16.720 want to hold on to our TV ass and then 0:06:16.760 --> 0:06:18.760 he kind of walked it back and I think he 0:06:18.839 --> 0:06:21.240 realized that, you know, yes, the TV ascids are in 0:06:21.279 --> 0:06:23.800 secular decline, but at the same token. I mean, they 0:06:23.800 --> 0:06:25.880 do bring in a fair amount of cash and they 0:06:25.880 --> 0:06:28.240 all respond and you know they're going to be instrumental 0:06:28.279 --> 0:06:31.440 for him kind of crafting a digital strategy as well, 0:06:31.480 --> 0:06:34.480 which is exactly what he's doing with ESPN. Remember, he's 0:06:34.520 --> 0:06:36.920 again putting a lot of the linear TV networks into 0:06:36.920 --> 0:06:40.720 this new sports app that they're creating, and ABC is 0:06:40.720 --> 0:06:42.920 going to be part of that as well, comes out 0:06:42.920 --> 0:06:46.840 a little bit later this year along with Warner Brothers, Discovery, 0:06:46.839 --> 0:06:49.719 and Foxy. So they have that in the works. You know, 0:06:49.720 --> 0:06:52.560 they have the new ESPN digital strategy in the works. 0:06:52.800 --> 0:06:55.920 So I think they're really kind of trying to orchestrate 0:06:56.000 --> 0:06:59.560 this transition from linear to digital in as painless and 0:06:59.560 --> 0:07:01.000 as smooth way as possible. 0:07:02.240 --> 0:07:05.000 And just that one other area that we had raised 0:07:05.040 --> 0:07:08.200 a few moments ago, succession. What's the latest there. 0:07:09.360 --> 0:07:11.800 So they do have their four internal candidates who are 0:07:11.800 --> 0:07:15.400 all seen as possible successors. Again, remember each of these candidates, 0:07:15.400 --> 0:07:18.320 whether you know it's from Parks or from the film division, 0:07:18.440 --> 0:07:21.120 or the TV division or even ESPN, they all have 0:07:21.200 --> 0:07:25.000 specialized expertise. The problem for you know, the Disney succession 0:07:25.120 --> 0:07:27.000 plan is that you need somebody who has not just 0:07:27.040 --> 0:07:30.840 specialized expertise, but also broad expertise. And that's really going 0:07:30.920 --> 0:07:32.880 to be the challenge here. So I think they're going 0:07:32.960 --> 0:07:36.160 to have to have multiple successors kind of groom them 0:07:36.160 --> 0:07:39.680 and see who really kind of is up for the challenge. 0:07:39.800 --> 0:07:41.920 So let's get to Paramount Global, because we had some 0:07:42.000 --> 0:07:45.720 breaking news later in New York today Sherry Redstone apparently 0:07:46.040 --> 0:07:49.080 with a tentative deal to sell her stake in Paramount Global. 0:07:49.760 --> 0:07:53.560 She is the controlling interest in National Amusements. In National 0:07:53.640 --> 0:07:56.960 has about seventy seven percent of voting shares for Paramount. 0:07:57.360 --> 0:08:00.680 Skydance Media looks to be the buyer take on this. 0:08:02.000 --> 0:08:04.800 I mean again, this has been going on now for 0:08:04.840 --> 0:08:08.680 almost four or five months. Uh so they've been engaged 0:08:08.760 --> 0:08:11.920 in some kind of discussions with really all different types 0:08:11.960 --> 0:08:13.920 of buyers. Of course, sky Dance has been the one 0:08:14.000 --> 0:08:17.400 that's been there from the very beginning. Remember Skydance Media 0:08:17.720 --> 0:08:21.080 is this film studio that is controlled by David Ellison, 0:08:21.120 --> 0:08:25.160 who is the son of Larry Ellison, and sky Dancer 0:08:25.200 --> 0:08:28.600 has had a lot of you know, collaboration with par 0:08:28.640 --> 0:08:31.040 around in the past. They almost have this ten year relationship. 0:08:31.560 --> 0:08:35.120 They worked on movies together like you know, top Gun Maverick. 0:08:36.280 --> 0:08:38.240 So so there has been you know, a lot of 0:08:38.320 --> 0:08:41.800 exchange from on both sides, and so they feel like, 0:08:41.840 --> 0:08:43.199 you know, it would be it would be kind of 0:08:43.240 --> 0:08:45.760 the perfect fit. And I think in many ways Sharry 0:08:45.800 --> 0:08:48.480 Redstone wants to deal with sky Dance because again this is, 0:08:49.040 --> 0:08:51.120 you know, a known devil better than an unknown angel 0:08:51.200 --> 0:08:51.640 kind of thing. 0:08:53.120 --> 0:08:56.920 So does this does this sort of signal uh, the 0:08:57.000 --> 0:08:59.000 exit of Sherry Redstone. 0:08:59.200 --> 0:09:03.720 Ultimately, it's still going to be very, very complex and 0:09:03.840 --> 0:09:06.720 very messy. She does have, as you pointed out, a 0:09:06.840 --> 0:09:10.720 close to eighty percent voting interest, about a ten percent 0:09:10.840 --> 0:09:15.760 economic interest. We're not yet clear exactly what Skydance has 0:09:15.840 --> 0:09:21.160 offered her for both her economic stake as well as 0:09:21.200 --> 0:09:24.440 her controlling voting stake in the company. So all of 0:09:24.480 --> 0:09:26.760 that has to be worked out. And then at the 0:09:26.840 --> 0:09:30.120 end of all of this, the ultimate goal is that 0:09:30.200 --> 0:09:34.000 sky Dance has not just to control National Amusements, but 0:09:34.040 --> 0:09:36.840 then has to somehow get complete control of paramounts. It's 0:09:36.880 --> 0:09:39.800 kind of this very very messy, complex two step process. 0:09:39.920 --> 0:09:43.120 Gita, thanks so much for joining us as Bloomberg Intelligence 0:09:43.240 --> 0:09:44.800 is Gita, Rang and hast. 0:09:51.440 --> 0:09:53.400 Let's take a closer look at what's going on in 0:09:53.440 --> 0:09:56.320 markets at the moment with our own Mark Cranfield is 0:09:56.320 --> 0:09:59.600 Bloomberg's m Live strategist. He joins us from our studios 0:09:59.600 --> 0:10:02.440 and singer hard to believe. At the end of last year, 0:10:02.480 --> 0:10:04.880 the market was looking at one hundred and fifty basis 0:10:04.880 --> 0:10:08.360 points in cuts from the Fed in calendar twenty four. 0:10:08.559 --> 0:10:11.280 I mean that was super aggressive, well beyond double in 0:10:11.360 --> 0:10:14.079 fact what the Fed was predicting. And here we are 0:10:14.160 --> 0:10:17.280 now wondering whether we're going to get one rate cut. 0:10:17.720 --> 0:10:19.000 What the heck is going on here? 0:10:19.040 --> 0:10:23.320 Mark, Well, what you can really see here is a 0:10:23.360 --> 0:10:28.520 disconnect between Jerme Power and the rest of the Federal 0:10:28.559 --> 0:10:34.560 Reserve to some extent. So back in late November early December, 0:10:34.640 --> 0:10:41.080 Drone Power appeared to be really optimistic that the FED 0:10:41.200 --> 0:10:43.040 was on the path, that the inflation was going to 0:10:43.080 --> 0:10:45.560 hear his targets, everything was going to go right, and 0:10:45.600 --> 0:10:49.280 there'll be early rate cuts. And then the data came 0:10:49.320 --> 0:10:53.040 in and set everybody back. And you've heard a whole 0:10:53.120 --> 0:10:57.520 variety of Federal Reserve speakers who pushed back against the 0:10:57.559 --> 0:11:01.120 idea that not only three intra rate cuts is too many, 0:11:01.160 --> 0:11:03.840 but maybe we only need one this year, As you 0:11:03.840 --> 0:11:06.640 were saying, mister Bostic is the clear front runner in 0:11:06.679 --> 0:11:07.880 the In the one case. 0:11:08.840 --> 0:11:10.880 I don't really worry too much about this kind of 0:11:10.920 --> 0:11:15.560 stuff because to me, the economy is leading. Really the FED, 0:11:15.679 --> 0:11:20.520 you know, it was talking about possibly doing more rate cuts, 0:11:20.520 --> 0:11:24.240 but it's stipulated three in the coming year. And no 0:11:24.280 --> 0:11:27.520 matter what they're saying, they're they're they're saying that they 0:11:27.559 --> 0:11:31.120 will follow the economy. They will be waiting on the data. 0:11:31.640 --> 0:11:34.520 And if you think about it, normally we think of 0:11:34.559 --> 0:11:37.679 the FED leading, but the Fed is really following, and 0:11:37.720 --> 0:11:40.559 the market's not really leading either. The market is also 0:11:40.640 --> 0:11:43.679 following the economy. The economy is surprising all of us. 0:11:44.280 --> 0:11:49.200 Well, they've said before that their data dependent finally looks 0:11:49.200 --> 0:11:52.800 as though investors are believing it, having having lost money 0:11:52.840 --> 0:11:55.600 by being too aggressive on the rate cuts in the 0:11:55.600 --> 0:11:58.440 first place, that they finally can conclude you that, okay, 0:11:58.679 --> 0:12:02.160 maybe we really should watch the data and react accordingly 0:12:03.240 --> 0:12:06.959 to that. But obviously different asset classes are viewing this 0:12:07.480 --> 0:12:10.679 in different ways. So the bond market is getting used 0:12:10.720 --> 0:12:12.120 to the idea that it's in a bit of a 0:12:12.160 --> 0:12:15.880 trading range, not really going anywhere for the time being. 0:12:16.240 --> 0:12:18.319 And yet the equity market is in a much stronger 0:12:18.360 --> 0:12:22.959 position where it knows that interest rate cuts are coming eventually, 0:12:23.520 --> 0:12:26.160 it's very confident that interest rates won't go up again, 0:12:26.559 --> 0:12:29.600 so that's much more important. And earnings are in a 0:12:29.600 --> 0:12:33.520 good situation. The underlying economy is doing very well, so 0:12:33.679 --> 0:12:37.000 all of that is favorable for the US cor and 0:12:37.080 --> 0:12:40.600 the US dollars fairly firm as well, which again helps 0:12:40.600 --> 0:12:44.800 as well. So different asset classes will respond in different ways, 0:12:44.840 --> 0:12:48.040 But the bond market for now is going to have 0:12:48.080 --> 0:12:51.080 to get used to probably sideways trading for quite a while. 0:12:51.160 --> 0:12:53.480 Yet you were talking about the dollar there. Year we 0:12:53.520 --> 0:12:55.320 pulled back a little bit in New York trading, we 0:12:55.320 --> 0:12:58.280 weakened against the majors. But I think that to the 0:12:58.360 --> 0:13:00.640 tune that we were singing at the end of last 0:13:00.720 --> 0:13:04.319 year with much lower interest rates, I think guys in 0:13:04.360 --> 0:13:07.040 the foreign exchange really had to reverse their bets that 0:13:07.080 --> 0:13:09.240 we're going to see a great deal of dollar weakness. 0:13:09.679 --> 0:13:12.040 That hasn't happened so far this year. But when you 0:13:12.040 --> 0:13:14.320 look at some of the important crosses, and I'm thinking 0:13:14.360 --> 0:13:18.600 particularly dollar yen. Brian was referencing a commentary from a 0:13:18.600 --> 0:13:21.800 former member of the boj board talking about the fact 0:13:21.800 --> 0:13:23.840 that now the heavy lifting has been done at the 0:13:23.840 --> 0:13:27.559 March meeting, where we've moved away from the massive stimulus 0:13:27.679 --> 0:13:30.000 program on the part of what the Bank of Japan 0:13:30.040 --> 0:13:33.240 had been doing, maybe there's no longer an urgent need 0:13:33.640 --> 0:13:36.360 to adjust further. Would you say that's a fair statement, 0:13:36.400 --> 0:13:38.880 and you know we're going to see maybe stasis from 0:13:38.920 --> 0:13:39.680 the Bank of Japan. 0:13:40.920 --> 0:13:44.120 I suspect they have more interest rate hikes to come 0:13:44.160 --> 0:13:46.120 this year from the Bank of Japan. But in terms 0:13:46.160 --> 0:13:49.200 of the US dollar, next week is probably going to 0:13:49.240 --> 0:13:53.160 be a pretty big moment for the dollar. If we 0:13:53.200 --> 0:13:55.880 get past non farm payrolls at the end of this 0:13:55.960 --> 0:13:59.600 week and DOLLI yen still hasn't risen above one hundred 0:13:59.600 --> 0:14:02.400 and fifty two, it may well be that they will 0:14:02.520 --> 0:14:04.640 just start the beginning of a down trend for the 0:14:04.679 --> 0:14:08.120 dollar because people will lose patients. There are very very 0:14:08.120 --> 0:14:12.319 big short positions against the yen, which have also prompted 0:14:12.559 --> 0:14:18.160 strong dollar positions elsewhere. If people don't see satisfaction quickly 0:14:18.760 --> 0:14:21.760 in achieving what they want in a strong dollar, will 0:14:21.880 --> 0:14:23.640 they will go the other way. They will start cutting 0:14:23.680 --> 0:14:27.760 those positions and they'll look for the next trend. It's 0:14:27.760 --> 0:14:29.560 a very big time coming up for the dollar. 0:14:30.000 --> 0:14:32.120 Yeah, I think a lot of investors would look forward 0:14:32.160 --> 0:14:35.600 to that dollar weekening a little. Another currency besides the 0:14:35.760 --> 0:14:38.000 en that's been weak against the greenback is the Chinese 0:14:38.040 --> 0:14:42.160 you want, So let's switch the discussion to China briefly. 0:14:42.280 --> 0:14:44.240 Doug sent me a story which is quite interesting. Ray 0:14:44.320 --> 0:14:48.320 Dalio says he's sticking with China. What do you think, Mark, 0:14:48.760 --> 0:14:51.640 Is that a political call or is that a smart 0:14:51.880 --> 0:14:53.480 business and finance call. 0:14:54.120 --> 0:14:56.600 I think if you're a good equity picker and you're 0:14:56.640 --> 0:14:59.840 looking at China, I'm sure your bounds will be able 0:14:59.880 --> 0:15:03.080 to find ways to invest and to make decent returns 0:15:03.440 --> 0:15:06.640 because the Chinese government is all the measures it's doing 0:15:06.800 --> 0:15:11.440 art to support Chinese based companies to improve the Chinese economy. 0:15:11.520 --> 0:15:15.120 So most likely there will be decent returns to be 0:15:15.200 --> 0:15:19.160 found among good companies in China itself. The tricky part 0:15:19.400 --> 0:15:21.920 for a lot of investors is the Hong Kong side 0:15:21.920 --> 0:15:23.640 of it, because a lot of people like to use 0:15:23.680 --> 0:15:26.400 Hong Kong as a way to play China. That might 0:15:26.440 --> 0:15:29.840 be much more complicated because of the way in which 0:15:30.280 --> 0:15:34.360 the hate shares are very cheap compared to the on 0:15:34.440 --> 0:15:36.640 shore and they may stay that way for a long time. 0:15:37.080 --> 0:15:40.200 Yeah, the big numbers in the week ahead for China 0:15:40.240 --> 0:15:42.440 will be the inflation numbers. And one of the things 0:15:42.480 --> 0:15:44.480 I think for the market right now is whether or 0:15:44.480 --> 0:15:47.320 not we're going to see a prolonged period of deflation 0:15:47.640 --> 0:15:51.000 in the mainland economy. Market. It's always a pleasure. Thanks 0:15:51.000 --> 0:15:53.360 for making time to chat with us from the Lion City. 0:15:53.360 --> 0:15:56.160 It's Mark Cranfield, Bloomberg m Live Strategistic. 0:16:03.640 --> 0:16:06.040 Well, let's take a look at markets now with Belita own, 0:16:06.200 --> 0:16:09.840 chairman at Dalton Investments. Blita, thanks very much for joining you. 0:16:09.880 --> 0:16:11.880 I want to start with Jay Powell and I want 0:16:11.920 --> 0:16:14.680 to play a clip from his speech a little bit 0:16:14.680 --> 0:16:18.040 earlier and then get your response to it. Powell did 0:16:18.160 --> 0:16:22.440 note the pickup in jobs and inflation, but he reaffirmed 0:16:22.440 --> 0:16:25.880 that the Fed wants to stay patient and watch the data, and, 0:16:25.920 --> 0:16:29.760 while perhaps not intending to pal laid out the bulls 0:16:29.800 --> 0:16:30.440 base case. 0:16:31.120 --> 0:16:34.400 But these recent data do not, however, materially change the 0:16:34.480 --> 0:16:37.920 overall picture, which continues to be one of solid growth, 0:16:38.120 --> 0:16:41.480 a strong but rebalancing labor market, and inflation moving down 0:16:41.520 --> 0:16:44.880 toward two percent on a sometimes bumpy path. 0:16:45.720 --> 0:16:48.200 So the point is that he makes the point sort 0:16:48.240 --> 0:16:51.440 of the bulls point, which is, look, don't overthink this. 0:16:51.600 --> 0:16:55.080 Things are pretty good. The economy is doing well, profits 0:16:55.240 --> 0:17:00.360 have been increasing, and inflation is coming down, while agnolaging 0:17:00.440 --> 0:17:02.440 that it did pop up a little bit in January 0:17:02.480 --> 0:17:04.840 and Febry. Do you support that view or do you 0:17:04.840 --> 0:17:05.800 think he's all wet? 0:17:07.560 --> 0:17:08.960 I think pal is right on track. 0:17:09.160 --> 0:17:12.800 It's very much the case that the US economy is 0:17:12.800 --> 0:17:17.840 strong and that we have seen substantial improvement in the 0:17:17.880 --> 0:17:22.120 inflation numbers. My only caution is that I believe it's 0:17:22.200 --> 0:17:25.200 much harder to get it much further down than where 0:17:25.200 --> 0:17:28.200 it is currently, because we live in a world where 0:17:28.320 --> 0:17:33.240 there are hot wars going on and unforeseen events of 0:17:33.320 --> 0:17:36.280 the unforeseen events that could disrupt supply chains. 0:17:36.520 --> 0:17:38.440 So you've got that to worry. 0:17:38.160 --> 0:17:40.400 About, and that's you know, in recent memory, and even 0:17:40.440 --> 0:17:42.440 further back from that, in recent memory, we've already seen 0:17:42.480 --> 0:17:45.320 the disruption of the Red Sea, and then we've also seen, 0:17:46.800 --> 0:17:49.080 you know, the impact going further back two years or 0:17:49.119 --> 0:17:53.480 so of Russia's invasion on the grain market. So with 0:17:53.720 --> 0:17:57.639 these tensions running so high, it's difficult to be truly 0:17:57.680 --> 0:18:01.600 confident that the US and the numbers are insulated from 0:18:02.000 --> 0:18:05.560 you know, adverse surprises. But the points that he makes, 0:18:05.560 --> 0:18:07.840 I think is that the economy is strong, and so 0:18:08.000 --> 0:18:10.840 there seems to be, know, Harry, whatsoever to ease at 0:18:10.840 --> 0:18:14.280 this point. Why stoke an economy that's already strong and 0:18:15.119 --> 0:18:17.200 increase the odds that inflation will research? 0:18:17.760 --> 0:18:19.560 You know, I'm listening to you, and I'm wondering whether 0:18:19.680 --> 0:18:21.480 or not there are people around the globe that feel 0:18:21.520 --> 0:18:24.200 the same way. And that's one reason to favor the US. 0:18:24.800 --> 0:18:26.800 Brian has been talking a lot about how well the 0:18:26.800 --> 0:18:29.760 market's been holding up as being kind of a response 0:18:29.920 --> 0:18:33.159 to the performance of the overall American economy. I get that. 0:18:33.200 --> 0:18:36.480 I don't disagree, but I'm wondering, given everything that you 0:18:36.600 --> 0:18:41.240 just laid out in terms of uncertainty and risk, whether 0:18:41.280 --> 0:18:44.879 you want to kind of be defensive and put you know, 0:18:45.320 --> 0:18:48.080 risk assets to work only in the United States. Maybe 0:18:48.200 --> 0:18:51.240 the expense of other markets. Is that a fair statement? 0:18:51.680 --> 0:18:53.919 Maybe Japan? You would include Japan in that. 0:18:55.240 --> 0:18:56.440 I would definitely include Japan. 0:18:56.480 --> 0:19:00.199 Japan is cheap, and Japan is at a point in 0:19:00.240 --> 0:19:02.520 time where many things are going right and it looks 0:19:02.520 --> 0:19:04.800 like it's about to take off. So Japan spent the 0:19:04.880 --> 0:19:08.480 last nine years working on corporate governance reform. We're finally 0:19:08.520 --> 0:19:14.120 seeing the results of that through companies giving back returns 0:19:14.160 --> 0:19:18.800 to shareholders, either through dividends or share buybacks. Also, we're 0:19:18.840 --> 0:19:23.199 seeing an increase in unsolicited bids for companies, which is 0:19:23.400 --> 0:19:25.639 very unusual in Japan, and I can't remember when the 0:19:25.640 --> 0:19:27.119 first one was, but it was just no more than 0:19:27.160 --> 0:19:30.320 to say, two three years ago. And the pressure from 0:19:30.320 --> 0:19:34.880 the TSE is quite heavy on managements to respond response 0:19:35.040 --> 0:19:38.040 responsibly to these take up of bids. In the past, 0:19:38.040 --> 0:19:42.080 it wasn't uncommon to just simply ignore them. But now 0:19:42.320 --> 0:19:45.520 there is a list, if you like, of companies that 0:19:45.560 --> 0:19:49.040 are doing the right thing according to TSSE reforms, and 0:19:49.280 --> 0:19:54.240 that includes being responsible in terms of taking seriously bids 0:19:54.280 --> 0:19:58.040 from you know, investors or other companies to buy a 0:19:58.080 --> 0:20:02.440 company at a much higher price. These events and the 0:20:02.520 --> 0:20:07.399 encouragement of the TSE is really propelling valuations upwards. So 0:20:07.480 --> 0:20:10.720 even though we've just seen finally a new high in 0:20:10.800 --> 0:20:13.520 Japan after the nineteen eighty nine you know peak and 0:20:13.560 --> 0:20:17.600 then collapse TACON thirty what is it, thirty four years? 0:20:17.680 --> 0:20:20.480 Is it to get back there, and we've just passed 0:20:20.520 --> 0:20:23.800 forty thousand on the nick A, and I think even 0:20:23.800 --> 0:20:24.880 betadtes are ahead. 0:20:26.359 --> 0:20:30.520 Yeah, it's great to be diversified, and Japan's offering US investors, 0:20:30.520 --> 0:20:33.960 for instance, great opportunities. Europe has done pretty well too. 0:20:34.320 --> 0:20:38.320 The AI companies involved in that have rallied a lot, 0:20:38.400 --> 0:20:40.880 and just here in the last say three or four months, 0:20:40.920 --> 0:20:44.600 we've seen a lot of ketchup being done by cyclical 0:20:44.760 --> 0:20:49.280 oriented companies, and so industrials and materials and financials have 0:20:49.440 --> 0:20:51.879 rallied pretty well. And the other thing that's kind of 0:20:51.880 --> 0:20:54.919 great about the environment is that you can make some 0:20:55.040 --> 0:20:59.080 bets on equities, which are obviously more risky assets, all 0:20:59.119 --> 0:21:01.600 the while collecting five percent coupon and the bonds that 0:21:01.680 --> 0:21:04.200 you hold. No, that wasn't always the case. You were 0:21:04.200 --> 0:21:06.879 forced into the equity market because you're getting nothing on 0:21:06.920 --> 0:21:09.560 bond deals one percent or so. And that remains the 0:21:09.600 --> 0:21:12.919 case in Japan. So you know, yeah, I'm curious how 0:21:13.000 --> 0:21:19.480 you are sort of diversified big picture, So we are, frankly. 0:21:19.200 --> 0:21:22.200 We're not particularly bullish about the US simply because the 0:21:22.280 --> 0:21:25.479 valuations are so high. Being value investors, we invest one 0:21:25.560 --> 0:21:29.040 company at a time and you know, for US, it's 0:21:29.119 --> 0:21:31.720 easier to focus on companies in Asia because they are 0:21:31.760 --> 0:21:34.080 a lot cheaper, so they provide you a margin of safety. 0:21:34.320 --> 0:21:36.159 So in addition to Japan, there are other parts of 0:21:36.200 --> 0:21:37.840 Asia that we think are quite attractive. 0:21:37.920 --> 0:21:39.720 One of them, you know, clearly. 0:21:39.400 --> 0:21:43.199 Being India, and Indian valuations are not cheap even by 0:21:43.359 --> 0:21:47.800