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Speaker 1: This is Bloomberg Daybreak Asia for this Wednesday, March twenty

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Speaker 1: second in Hong Kong, Tuesday March twenty first in New York,

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Speaker 1: and coming up today. US equities rise with a rally

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Speaker 1: in bank stocks, and the FETE now faces a close

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Speaker 1: call on whether to hike or hold great steady. The

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Speaker 1: Biden administration appears to be making it even more difficult

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Speaker 1: for chip companies operating in China, and Nike sales beat

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Speaker 1: expectations despite weak results in China. The USS President she

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Speaker 1: is parroting Russia's demands for peace. The US changes course

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Speaker 1: on sending Abram's tanks to Ukraine. Japan Prime Minister keishatas

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Speaker 1: at Ukraine. I'm at Baxter with Global News. That's all

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Speaker 1: straight ahead on Bloomberg Daybreak Asia, the business news you

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Speaker 1: need to start your day in just one fifteen minute

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Speaker 1: podcast available on Apples, Spotify, the Bloomberg Business app, and

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Speaker 1: everywhere you get your podcasts. Good morning, I'm de Prisoner

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Speaker 1: and I'm Brian Curtiz. Here are the stories we're following today.

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Speaker 1: The FED facing a close call here on whether to

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Speaker 1: hike or hold interest rates. Bloomberg's Michael McKee has a preview.

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Speaker 1: This is the first meeting in a very long time

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Speaker 1: where nobody on Wall Street really knows what the Fed

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Speaker 1: will do. Two weeks ago, it was a question of

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Speaker 1: whether they raised rates half or a quarter percentage point,

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Speaker 1: But disruptions to the banking system now have many investors

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Speaker 1: betting the central Bank won't raise rates at all. Financial

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Speaker 1: shares have calmed a bit in the last two days

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Speaker 1: and markets have almost gotten back to pricing one quarter

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Speaker 1: point move. Do FED officials still need to do crisis

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Speaker 1: management or can they go back to their focus on inflation,

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Speaker 1: which remains far above target. Almost as important, what do

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Speaker 1: they say about future rate moves and how their tightening

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Speaker 1: cycle and the banks have affected the outlook for inflation,

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Speaker 1: growth and unemployment. Michael McKee, Bloomberg Daybreak Asia. So now

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Speaker 1: let's get to the FTIC. We are hearing that US

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Speaker 1: officials are studying ways that they could possibly, at least

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Speaker 1: on a temporary basis, expand a level of insurance coverage

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Speaker 1: for deposits, all deposits at US banks. The Treasury Department

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Speaker 1: staff has been reviewing whether federal regulators have enough emergency

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Speaker 1: authority to at least temporarily ensure these deposits have insurance

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Speaker 1: above the current cap. That's a quarter of a million dollars.

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Speaker 1: We are told authorities don't yet have such a view

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Speaker 1: as to whether or not this move is even necessary. Still,

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Speaker 1: they are developing a strategy out of due diligence in

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Speaker 1: the case the situation becomes a lot worse, Treasury Secretary

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Speaker 1: Janet Yellen said the US is prepared to repeat the

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Speaker 1: actions it took recently to protect bank depositors. If smaller

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Speaker 1: lenders are threatened. We will need to re examine our

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Speaker 1: current regulatory and supervisory regimes and consider whether they are

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Speaker 1: appropriate for the risk the banks face today. Treasury Secretary Yellen.

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Speaker 1: There she did not direct fully addressed the possibility of

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Speaker 1: a temporary expansion to FDI deposit insurance. She also said

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Speaker 1: she would not speculate on the kind of regulatory changes

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Speaker 1: that may be needed in the wake of this month's

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Speaker 1: stress within the banking system. Bran Well, we're hearing that

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Speaker 1: UBS wants to cherry pick top dealmakers from Credit Suiz

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Speaker 1: following the takeover of the investment bank. We get more

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Speaker 1: here from Bloomberg's Eric Lamb. UBS is set to be

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Speaker 1: particularly interested in advisory bankers in the United States and

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Speaker 1: those covering prominent industries such as technology. We hear that

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Speaker 1: UBS executives wants bolster their own investment bank while dumping

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Speaker 1: riskier operations. That could include dropping a Credit Suiez plan

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Speaker 1: to carve out CS First Boston as a new competitor.

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Speaker 1: The Financial Times had reported that UBS would talk with

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Speaker 1: cs former board member Michael Klein to unwind that deal.

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Speaker 1: The spinoff had been a centerpiece of Credit Sweezes restructuring. Still,

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Speaker 1: some Credit sweet staff are holding out hope that an

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Speaker 1: alternative plan can be lined up. In Hong Kong, I'm

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Speaker 1: Eric Lamb Bloomberg Day Break Asia in Washington. The Biden

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Speaker 1: administration is making it even more difficult for those semiconductor

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Speaker 1: companies operating in China. We have that from Bloomberg's Denise Pellegrini.

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Speaker 1: The administration is moving to titan restrictions on new operations

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Speaker 1: in China by chip manufacturers if they get federal funds

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Speaker 1: to build. In the US, the fifty billion dollars Chip

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Speaker 1: in Science AC pass last year could block firms that

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Speaker 1: win grants from expanding output by more than five percent

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Speaker 1: for new technology and ten percent for older tech. This

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Speaker 1: also includes one hundred thousand dollars spending cap on investments

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Speaker 1: in advanced capacity in China. It's all part of Washington's

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Speaker 1: efforts to curb China's ambitions while securing supply of components

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Speaker 1: for AI supercomputers and everyday electronics in the US. Intel, Samsung,

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Speaker 1: and Taiwan Semi are among those currently operating in China.

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Speaker 1: The rules will be finalized by the Commerce Department later

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Speaker 1: this year after a sixty day public comment period. Denise

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Speaker 1: Pellegrini Bloomberg Day Break Asia. Nike reported robust quarterly sales

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Speaker 1: that rose fourteen percent to twelve point four billion. Analysts

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Speaker 1: were eleven point five billion. However, the company did miss

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Speaker 1: on profitability and its gross margins were a little weaker

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Speaker 1: than expected. The sports where brand made progress in dealing

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Speaker 1: with a supply glut that forced the company to discount merchandise.

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Speaker 1: Inventories were up sixteen percent from the prior year. The

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Speaker 1: company had reported a forty three percent jump though the

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Speaker 1: previous quarter. Despite the positive results, weakness in China did persist.

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Speaker 1: Revenue there fell almost eight percent. We heard earlier from

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Speaker 1: Bloomberg'spoon and Goil China didn't do as well as everyone

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Speaker 1: had expected, but it was still up one percent on

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Speaker 1: a constant currency basis. And I think the key witha

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Speaker 1: China is not the quarter that they reported, but the

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Speaker 1: quarters that they will report in the coming year, because

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Speaker 1: that's when we really think China will show a meaningful

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Speaker 1: bounce back. Even that's when COVID restrictions were actually eased.

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Speaker 1: So we're still very optimistic on China. Shares it down

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Speaker 1: about two and a quarter percent in late trading as

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Speaker 1: investors are focused on possibly that RGIN miss doug And

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Speaker 1: also something to consider here is that with revenue up

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Speaker 1: twelve percent, even though your revenue with down eight percent

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Speaker 1: in China, some may focus on that as a positive

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Speaker 1: given that China at some point is expected to come

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Speaker 1: back well. And if you look at the fact that

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Speaker 1: they've really been dealing with bloated inventory for a while, right,

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Speaker 1: and the only way to kind of liquidate or at

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Speaker 1: least bring down those inventory levels maybe is through discounting.

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Speaker 1: So it's not surprising that you're going to see a

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Speaker 1: little bit of pressure on gross margin, right if you're

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Speaker 1: kind of lowering prices, and it it was quite modest too.

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Speaker 1: The gross margin was forty three point three percent. That

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Speaker 1: was just under the forty three point seven percent estimates,

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Speaker 1: so not even a full percentage point. We did have

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Speaker 1: equity prices moving higher, which, as we mentioned, was a

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Speaker 1: little surprising given the climate. We also had big rallies

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Speaker 1: in Europe, and it looks like Asia will open higher

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Speaker 1: as well. A couple of themes that seem to be

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Speaker 1: holding sway, interested in your thoughts on that. Obviously, One

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Speaker 1: is that these coordinated efforts to limit the damage from

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Speaker 1: the banking turmoil seemed to be taking hold with investors,

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Speaker 1: and then investors seem to be comfortable with a twenty

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Speaker 1: five basis point hiked by the FED. The swamps market

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Speaker 1: at the moment just under an eighty two probability that

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Speaker 1: we'll get that quarter percentage point hike tomorrow. Yeah. That said, though,

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Speaker 1: the volatility that we have seen in US treasuries, particularly

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Speaker 1: over the last several sessions, has been stunning, and our

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Speaker 1: colleagues on Bloomberg Surveillance, we're speaking with Matthew Michigan over

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Speaker 1: at John Hancock earlier. He was saying that he is

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Speaker 1: certain that the FED has run out of runway for

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Speaker 1: a soft landing, So you tighten here, maybe another twenty

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Speaker 1: five basis points. Probability is much greater where recession is concerned.

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Speaker 1: But the other thing that he said that I was

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Speaker 1: struck by. When you see volatility in the two year

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Speaker 1: treasuries yield start to act like a meme stock, you

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Speaker 1: know you've got problems. Yeah, absolutely, I mean that is

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Speaker 1: a very astute comment. Now it's I'm for Global News.

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Speaker 1: And by the way, we have Layla Pence coming up

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Speaker 1: in a few moments, President of Pennce Wealth Management, taking

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Speaker 1: a look at these wild markets. Well, the US is

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Speaker 1: responding today to the comments coming out of the she

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Speaker 1: Putin summit by saying that China is not taking the

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Speaker 1: right tact in bringing peace to Ukraine. It backs it

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Speaker 1: with that story in the Global News from the nine

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Speaker 1: sixty news room in San Francisco, ed right on target

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Speaker 1: Brian fiery comments coming from National Security Council spokesman John Kirby.

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Speaker 1: He and his regime keeps parting the Russian propaganda that

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Speaker 1: this is somehow a war of the West on Russia,

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Speaker 1: that it's some sort of existential threats to mister Putin.

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Speaker 1: That's just a bunch of molarchy. Ukraine posed no threat

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Speaker 1: to anybody, let alone Russian and directed at President The

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Speaker 1: two sides just said, quote, the purposes and principles of

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Speaker 1: the UN Charter must be observed, an international law must

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Speaker 1: be respected. Well, we agree, following the UN Charter would

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Speaker 1: mean that Russia withdrawal from all the territory inside Ukraine,

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Speaker 1: the territory of another member state of the UN. And

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Speaker 1: Kirby's she to meet for one only. He's blowing through inventory,

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Speaker 1: He's blowing through manpower. His military is getting embarrassed constantly.

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Speaker 1: They've lost greater than fifty percent of the territory that

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Speaker 1: they took in the first few months of this war.

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Speaker 1: He needs help from President She and that's what this

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Speaker 1: visit was all about. Now, whether it results in anything,

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Speaker 1: we'll see, Yeah, Kirby says, so far, the US has

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Speaker 1: seen no evidence that She has promised more lethal aid.

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Speaker 1: As for She, he's offered to make closer ties with China. Now.

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Speaker 1: Spokesman Huang Wang band through a translator. Presidency is stressed

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Speaker 1: that's voices for peace and irrationality of building. Most of

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Speaker 1: the countries are supposed to easing patience, stand for peace talks,

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Speaker 1: and are against adding fuel to the fire. His three

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Speaker 1: shows that's conflicts in the end have to be settled

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Speaker 1: us through dialogue and a negotiation and putin reacting that

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Speaker 1: Moscow is looking through China's peace posle and hailing the

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Speaker 1: peace plans, saying that it is in line with things

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Speaker 1: he feels could work. Japan's Prime Minister Fumio Keisha has

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Speaker 1: travel to Ukraine for talks with President Voladimir Zelenski. He

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Speaker 1: becomes the final Group of Seven leader to visit since

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Speaker 1: the invasion. It is the most visible show of support

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Speaker 1: coming from Japan. Kishiata plans to visit Poland as well

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Speaker 1: on his trip. Meanwhile, the US says it is readying

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Speaker 1: more military hardware to send a Ukraine. In a change

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Speaker 1: of direction, General pat Ryder says Abrams tanks will be

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Speaker 1: on their way. Beauty, in close coordination with Ukraine, has

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Speaker 1: made the decision to provide the M one A one

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Speaker 1: variant of the Abrams tank, which will enable US to

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Speaker 1: significantly expedite delivery timelines and deliver this important capability to

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Speaker 1: Ukraine by the fall of this year. It will also

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Speaker 1: outfit them with advanced machine and gun weaponry. China's new

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Speaker 1: ambassador to Japan has arrived in the country to take

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Speaker 1: his post. The statement says he's to maintain and develop

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Speaker 1: health and stable relations. His arrival puts him right in

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Speaker 1: the middle of the semiconductor challenge as well, and Taiwan's presidents.

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Speaker 1: Ian One has affirmed updates for her trip to the US.

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Speaker 1: She will travel from March twenty ninth to April seventh,

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Speaker 1: stopping first in New York before heading to Guatemala and Belize,

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Speaker 1: and then traveling through Los Angeles. On her return leg,

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Speaker 1: she'll meet with House Speaker Kevin McCarthy. Global News powered

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Speaker 1: by more than twenty seven hundred journalists and analysts and

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Speaker 1: over one hundred and twenty countries in San Francisco. I'm

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Speaker 1: at Baxter and this is Bloomberg. This is Bloomberg Daybreak Asia.

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Speaker 1: I'm Brian Curtis here in Hong Kong along with Vannie Quinn.

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Speaker 1: Let's get to our guest, Layla Pennce, President Pennce Wealth Management.

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Speaker 1: So we're always trying to read the wisdom in the markets,

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Speaker 1: or at least the message of the markets. Laila, the

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Speaker 1: problem is which market. So if you look at the

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Speaker 1: stock market, we're right at the midpoint of a range

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Speaker 1: we've been in for ten months. It may have felt

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Speaker 1: volatilesom to some, but you know, we're between thirty eight

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Speaker 1: and forty two hundred here, almost right on four thousand. However,

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Speaker 1: in the bond market, tons of volatility. So I'm curious

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Speaker 1: why we see that big difference and whether or not

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Speaker 1: it's because of of repricing due to the FED. It

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Speaker 1: is definitely due to repricing to the FT. I mean,

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Speaker 1: before a SVB, the three or rate with over five percent,

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Speaker 1: and it looked like, you know, they're gonna they were

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Speaker 1: going to do fifty basis points and uh and even

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Speaker 1: more increases. And then of course as VB happens and

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Speaker 1: the world changed, I believe we have a much different

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Speaker 1: bond market because we have we're gonna have a different FED.

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Speaker 1: As you've been mentioning, you know, we expect at twenty

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Speaker 1: five basis point tomorrow and possibly pausing after that, really

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Speaker 1: following somewhat what the ISHB did. SHB had already said

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Speaker 1: fifty basiness point, and then the indication is there going

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Speaker 1: to be data dependent and I think the FED would

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Speaker 1: do the same, and that could signal certainly a pause

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Speaker 1: in the future, and that of course takes out that

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Speaker 1: five and six percent numbers that the market was expecting

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Speaker 1: before what happened to Circom Valley Bank Leila. Are we

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Speaker 1: about to have a banking crisis. It seems like we

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Speaker 1: might be through the worst of it, But these headlines

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Speaker 1: coming out post market now on First republic Bank and

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Speaker 1: the fact that it may have to rely on us

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Speaker 1: backing to facilitate a deal don't vote very well. I

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Speaker 1: think that our government and Federal Reserve and certainly its secretary, uh,

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Speaker 1: you know that they are definitely going to start They're

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Speaker 1: going to back up these banks. There's no way we

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Speaker 1: think they're going to let another SVP happens with First Republicans.

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Speaker 1: But it certainly is scary. I can tell you that

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Speaker 1: we're getting a lot of clients calling, and whether it's

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Speaker 1: big banks or regional banks, and they want their money

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Speaker 1: out because you know, they haven't been getting that much interest,

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Speaker 1: and now they're realizing that money market funds government money

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Speaker 1: market funds are yielding substansion over four percent, and so

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Speaker 1: now that money is being withdrawn and there's nothing that

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Speaker 1: could stop if you have a run in the bank.

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Speaker 1: Another problem, however, if they were to come out tomorrow

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Speaker 1: and ensure ad I s for a much larger deposits

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Speaker 1: amount of what that could calm the markets. But you know,

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Speaker 1: I know yelling today said that they are ready to

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Speaker 1: do something like that, but really didn't come out and

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Speaker 1: say it's it's tempting to think that there's deep trouble

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Speaker 1: in the banking industry, But then when you see the

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Speaker 1: market performance over the past couple of days. I'm a

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Speaker 1: big believer in the market. It's why we do what

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Speaker 1: we do. A five percent jumped today in the KBW

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Speaker 1: Banking Index. It would appear that investor, now, maybe that's

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Speaker 1: just because you know, we fell so precipitously last week

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Speaker 1: and this is a little bit of relief. But do

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Speaker 1: you think it has legs. I believe it has next

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Speaker 1: in the bigger banks. I'm so worried about the regional banks.

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Speaker 1: I think the regional banks people are withdrawing their funds

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Speaker 1: and they're moving into the bigger banks where they feel

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Speaker 1: safer because the government said they're too big to fail.

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Speaker 1: So as long as there's money being withdrawn, I think

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Speaker 1: we need some additional action from the government who backstop

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Speaker 1: and protect the depositors more. That's the only way we

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Speaker 1: think they could help the regional banks right now, they're

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Speaker 1: getting a lot of withdrawals. I know, I'm seeing it

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Speaker 1: with my clients. What are you telling your clients, Leila,

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Speaker 1: you have to have a strong backbone to stay in

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Speaker 1: this market anywhere. Yeah, you know, it's very interesting. A

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Speaker 1: lot of clients are back to wanting to be more

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Speaker 1: in tech because you know. So that's an interesting twist

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Speaker 1: because you know, for the very first time we actually

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Speaker 1: see a light at the end of the tunnel comes

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Speaker 1: to interest rate increases, and we've been waiting for that.

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Speaker 1: You know, we think they may have a pause after tomorrow,

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Speaker 1: and as you know, the stock market is already expecting

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Speaker 1: an actually decrease an interest rate at the end of

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Speaker 1: the year. We're not expecting that. But if we can

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Speaker 1: just pause, then we know the limits, we know the

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Speaker 1: terminal rate, and that will board work for the stock market.

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Speaker 1: And certainly still there's still some very high interest rates

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Speaker 1: on the short term that are available. So if we

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Speaker 1: get if we get a slowdown, and I know that

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Speaker 1: you're a little bit concerned about what's happening with regional banks,

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Speaker 1: If we get a slowdown, recession, light recession, something like that,

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Speaker 1: shallow does profitable big technology stand out as as as positive,

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Speaker 1: does defense, and does healthcare. Those are some of the

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Speaker 1: areas that you seem interested in. Yes, that's exactly why

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Speaker 1: we're expecting a slowdown. Certainly is going to be a

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Speaker 1: lot less especially in the cycle call, and we want

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Speaker 1: to be in the strongest area that do well regardless.

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Speaker 1: I mean, if you think about the Biden administrations just

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Speaker 1: requested eight hundred and eighty six billion dollars but depends

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Speaker 1: spending in the fiscal year twenty twenty four, that's a

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Speaker 1: lot of money going to these to these companies less

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Speaker 1: beside the spending from a foreign governments as well. So

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Speaker 1: we feel very good about that. We think tech will

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Speaker 1: continue to do well, especially if interest rates basically go

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Speaker 1: down or just say the same. They still have growth

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Speaker 1: and certainly healthcare people still get sick regardless, So we

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Speaker 1: think those areas will tend to stand on their own

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Speaker 1: regardless from market conditions. And you can see that the

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Speaker 1: market it's certainly starting to favor those. When you say tech, Leila,

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Speaker 1: do you mean the mega cap tech names or are

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Speaker 1: you looking at other specific things, because they haven't seen

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Speaker 1: too much of a rally at other points in the

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Speaker 1: last couple of months, be it you know, the semiconductors

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Speaker 1: or China or anywhere else. Yeah, we tend to stay

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Speaker 1: with big tech. That's really an uncertainty, is like we

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Speaker 1: have right now and certainly is slow downcoming. Big tech

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Speaker 1: tends to outperform because they still have growth regardless, and

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Speaker 1: so we tend to stick with a bigger tech a

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Speaker 1: bit more predictability. You really don't want to be out

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Speaker 1: there on the risks. Okay, yale right now, So we

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Speaker 1: only have about a minute or so. But what would

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Speaker 1: be your sort of most interesting contrarian call then? Well,

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Speaker 1: contraining on callee, Well, I think that really the banks

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Speaker 1: are contrarian. I think the flosh banks right now are

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Speaker 1: a contrarian call because I do think that they are

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Speaker 1: going to survive. People still have to keep their money

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Speaker 1: in the bank. They're just gonna there's going to be

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Speaker 1: an outflow from regional bank to big banks. And big

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Speaker 1: banks got hurt just along with regional banks. So you know,

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Speaker 1: the asset managers are really good. As an asset manager,

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Speaker 1: we're getting a lot more dollars in because they're leaving

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Speaker 1: the regional banks the reef and they're coming to the

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Speaker 1: asset managers and the big banks. This is Bloomberg Daybreak Asia,

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