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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Daybreak Asia podcast. I'm Doug Prisner. You can join Brian

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Speaker 1: Curtis and myself for the stories, making news and moving

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Speaker 1: markets in the APEC region. You can subscribe to the

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Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app. Joining us

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Speaker 1: now is Jeffrey Launt, head of Asia Investment specialist at

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Speaker 1: HSBC Asset Management, joining us from our studios in Hong Kong.

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Speaker 1: Nice of you to drop by. I think we've got

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Speaker 1: to start with the situation in China that the pm

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Speaker 1: n I data that we had over the weekend was

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Speaker 1: fairly concerning. I think we're in contraction at the manufacturing

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Speaker 1: level for a fourth straight month. Are you concerned about

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Speaker 1: the government falling short of that five percent growth target?

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Speaker 2: I'm not sure that we ever really were very confident

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Speaker 2: of an immediate bounce back of the Chinese economy, So

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Speaker 2: I don't think that this adds extra extra significant information

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Speaker 2: to our view, which was always that we would need

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Speaker 2: another couple of quarters for the economy really to find

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Speaker 2: its feet again.

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Speaker 1: Does it do more in terms of applying pressure on

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Speaker 1: Beijing to add stimulus to the equation.

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Speaker 2: I think it probably does. Yes, at the margin, I

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Speaker 2: think that was what we were expecting. It was quite

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Speaker 2: possibly what the authorities were expecting in China as well,

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Speaker 2: and therefore we do expect further stimulus, and we would

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Speaker 2: expect there to be further measures taken to cushion those

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Speaker 2: parts of the economy which need the most help.

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Speaker 1: It wasn't just a PMI data that was a little disappointing.

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Speaker 1: The latest housing sales figures also indicating that that slump

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Speaker 1: in residential real estate is deepening a bit. Is that

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Speaker 1: the key if you're going to solve the problem with

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Speaker 1: weak sentiment in China is the pretty market continuing to

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Speaker 1: be the eye of the storm here.

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Speaker 2: Yes, I think that's that's absolutely right, Doug. That is

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Speaker 2: the source of the of the issues that we've seen.

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Speaker 2: I think it's symptomatic of an economy that's reaching a

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Speaker 2: level of maturity, which means that some of these areas

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Speaker 2: of overinvestment of need some recalibration, and therefore it is

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Speaker 2: part of the solution as well to really put that

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Speaker 2: part of the economy back on an even footing, and

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Speaker 2: we encouragingly we are seeing signs of of of significant

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Speaker 2: stimulus in that part of the economy, and we expect

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Speaker 2: that to continue.

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Speaker 1: We had a story at the top here about talking

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Speaker 1: about increased American tariff sun Chinese made goods for the

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Speaker 1: American market. Obviously, the fact that maybe we can see

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Speaker 1: those new tariffs in effect sooner rather than later. The

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Speaker 1: issue of tariffs here and the way in which it

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Speaker 1: enters the conversation around geopolitical risk. Where does that land

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Speaker 1: in terms of a hierarchy in the way you think

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Speaker 1: about putting money to work in China?

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Speaker 2: Well, I think that the first thing to say is

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Speaker 2: that many of the companies in China that are exposed

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Speaker 2: to that type of issue have taken significant mitigating action

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Speaker 2: in order to you know that this is not this

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Speaker 2: is not a new thing for Chinese companies in respect

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Speaker 2: to particularly exports to the United States. So a lot

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Speaker 2: of them are very self contained in terms of their

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Speaker 2: their revenues within China. In many ways, they don't need

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Speaker 2: to export too much to the United States, remain highly

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Speaker 2: profitable and also highly credit worthy as well. The other

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Speaker 2: thing I mean, I was following your conversation beforehand, I

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Speaker 2: was just speaking to my colleague about the fact that

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Speaker 2: I was in Hong Kong at the weekend trying to

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Speaker 2: buy a car, and by far the most impressive in

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Speaker 2: our view was that this is a personal view, is

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Speaker 2: where the Chinese makes of electric vehicle, they really are

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Speaker 2: stand out in terms of quality and price, and from

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Speaker 2: that point of view, maybe it's not surprising that other

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Speaker 2: parts of the world want to make those more expensive

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Speaker 2: in their domestic market. So I think that this is

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Speaker 2: something that the Chinese exporters, particularly in the EV area,

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Speaker 2: can compete with.

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Speaker 1: So even though you give those vehicles an A plus rating,

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Speaker 1: I mean, can we still talk about the fact that

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Speaker 1: there is it seems to be an overcapacity problem, particularly

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Speaker 1: in EV production.

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Speaker 2: Well, I think, I mean, obviously we've seen some news

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Speaker 2: this morning in that respect that I think that's in

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Speaker 2: inevitable in terms of the EBB and flow of a

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Speaker 2: new type of market. There will be periods of over

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Speaker 2: exuberance over investment, but it isn't as if the world

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Speaker 2: doesn't need more evs, and so from that point of view,

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Speaker 2: I think that the industry is very well set up

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Speaker 2: for the future.

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Speaker 1: The other story that we were talking about earlier the

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Speaker 1: fact that China is threatening severe economic retaliation against Japan

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Speaker 1: if the Japanese government further restricts sales and servicing of

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Speaker 1: some of that advanced chip making equipment, obviously this would

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Speaker 1: complicate what the US is trying to achieve in cutting

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Speaker 1: off China from that advanced technology. To what extent is

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Speaker 1: China being held back right now on the technological front

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Speaker 1: with these export controls that the US has initiated.

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Speaker 2: I think that again, this is not something that has

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Speaker 2: come as a great surprise to that to Chinese business

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Speaker 2: and industry, and therefore that there are significant ways in

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Speaker 2: which they the economy can can cope with cope with

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Speaker 2: these sorts of retaliatory measures or new tariffs which are

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Speaker 2: coming in from other parts of the world. So I

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Speaker 2: don't think that this is something which is a It's

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Speaker 2: obviously an enduring issue. It's one that's not going to

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Speaker 2: go away. But it is part now of the landscape,

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Speaker 2: I think for analysts of Chinese stocks and markets, and

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Speaker 2: it's something which is as I say, it doesn't come

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Speaker 2: as a great surprise to us.

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Speaker 1: So with that level of transparency, you seem pretty sanguine

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Speaker 1: and when it comes to China. Are you putting new

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Speaker 1: money to work there?

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Speaker 2: Well, the that's a that's a very interesting question, because

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Speaker 2: I wouldn't want to underestimate the challenges that the Chinese

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Speaker 2: economy faces. I think that the most important challenges, though,

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Speaker 2: are those which we started with, which are really concerned

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Speaker 2: with the domestic situation and the need for a bottom

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Speaker 2: to be put into the real estate market. From that perspective,

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Speaker 2: we are, as I mentioned, we don't think there's going

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Speaker 2: to be an immediate turnaround, and so it's a stockpickers market.

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Speaker 2: I mean, you have to remember that the Chinese economy

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Speaker 2: is the second largest in the world. It's probably also

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Speaker 2: one of the most innovative, one of the one of

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Speaker 2: the least correlated of other of any in the world.

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Speaker 2: And you can see by the alpha that portfolio managers

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Speaker 2: make in Chinese portfolios that there clearly are opportunities there.

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Speaker 2: But as I say, it's a stockpickers market at the moment,

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Speaker 2: I wouldn't expect any particular outperformance on a benchmark level.

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Speaker 1: Can we call it cautious optimism. We'll leave it there. Jeffrey,

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Speaker 1: thank you so much. Jeffrey Lant, Head of Asia investment

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Speaker 1: specialist at HSBC Asset Management, joining us from our studios

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Speaker 1: in Hong Kong. Apple will hold its annual Fall event

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Speaker 1: on September ninth, and the iPhone sixteen lineup will be

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Speaker 1: center stage. For sure, this launch may mean some gains

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Speaker 1: in market share for some of Apple suppliers in Asia.

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Speaker 1: Let's take a closer look now with Stephen Teng. He's

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Speaker 1: a senior tech analyst for Bloomberg Intelligence, joining us from

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Speaker 1: our studios in Hong Kong. Stephen, thank you so much

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Speaker 1: for being with us. You point out in your latest

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Speaker 1: report that iPhone demand essentially has been stagnant for three

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Speaker 1: years now. Unit sales have been nearly flat. Do you

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Speaker 1: think this is going to be a game changer here,

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Speaker 1: this new iPhone?

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Speaker 3: Well, first of all, thanks for having me. I think

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Speaker 3: for this iPhone sixteen we are looking at some moderi

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Speaker 3: upgrade in terms of Howard's back. People are really looking

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Speaker 3: at this new feature about AI obviously Apple Intelligence, which

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Speaker 3: it could be a game changer, but it's probably a

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Speaker 3: bit too early to say even that. People still need

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Speaker 3: to see what's the actual user experienced this new feature

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Speaker 3: may deliver, but certainly there's something to look forward to.

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Speaker 1: What about what about the suppliers in Asia may how

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Speaker 1: may they benefit from from this new phone.

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Speaker 3: Given that the overall iPhone Shuman as you mentioned earlier,

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Speaker 3: has been relative stagneque for years. For this year, even

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Speaker 3: though I think people are looking at the intransply chain order,

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Speaker 3: we're looking at roughly ten percent increase in second half

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Speaker 3: versus last year. But the key driver for the supplier

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Speaker 3: still more about the order share win mostly and also

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Speaker 3: the potential spe upgrade. So from that perspective, I think

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Speaker 3: in terms of descembers, I think the Luxurre uh IT

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Speaker 3: probably is the major beneficiary given that this supply has

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Speaker 3: been gaining share over the past few years, which is

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Speaker 3: because of Apple's effort to diversify the supply chain. So

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Speaker 3: the supplier like Hong Hi which is still largest UH,

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Speaker 3: but then it may suffer a little bit in terms

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Speaker 3: of location. Also, the other one in Taiwan is a

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Speaker 3: Pagatron uh It used to be number two supplier. It

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Speaker 3: may become number three this year given that the share

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Speaker 3: again of Lucture, And then in terms of the and

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Speaker 3: also on the panel side, the UH the the old

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Speaker 3: let display orders share gain by LG display which may

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Speaker 3: be made in the win in terms of the shar

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Speaker 3: again at this place.

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Speaker 1: When I those are yeah, I'm sorry. When I think

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Speaker 1: of the iPhone, I think of the camera and how

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Speaker 1: advanced this device has become. Just in terms of what

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Speaker 1: the camera is able to capture, either still photographs or

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Speaker 1: in video. What do we know so far about what

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Speaker 1: we're likely to see with an upgrade to the camera,

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Speaker 1: and the suppliers in Asia, whether they're a lens manufacturer

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Speaker 1: or another component in that camera processing that could benefit

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Speaker 1: from this new iPhone.

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Speaker 3: Okay, in terms of the upgrade in camera, I think

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Speaker 3: the focus this year is really about the medium model.

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Speaker 3: I mean the Pro series, the used to be trail

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Speaker 3: Makeupixel now upgrade to forty eight. So that's the main

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Speaker 3: story there. As for the top ends remained the same.

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Speaker 3: So in terms of because this obviously means the better

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Speaker 3: ASP for the supplier, so the major supply, the largain

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Speaker 3: like Sunny Optical, they can both benefit from this. And

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Speaker 3: then obviously going forward we'll see if there's any further upgrade,

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Speaker 3: but that would be the nestier story.

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Speaker 1: You made an interesting point. We were talking about the

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Speaker 1: assemblers and how it's incumbent upon Apple to kind of

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Speaker 1: diversify away from Hanhai. You mentioned luck share as one

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Speaker 1: of the big beneficiaries. Do you think we're going to

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Speaker 1: see more of this as time goes on? Apple looking

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Speaker 1: to kind of create greater diversity among its suppliers.

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Speaker 3: I think that's the general direction but Apple. But having

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Speaker 3: say that Apple does have the tendency to keep only

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Speaker 3: a handful of supplier in certain components, or sometimes even

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Speaker 3: just keep the soul supplier, I think it's better for

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Speaker 3: it to control the quality and the delivery. So I

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Speaker 3: mean in a near term we may not see any

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Speaker 3: major increase in terms of a stambler, But then in

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Speaker 3: certain market for example like India, they start working with

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Speaker 3: Tata for the iPhone assembly, So if they are doing

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Speaker 3: a good job, I mean Tata, If they're doing a

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Speaker 3: good job, then hard to tell. But so far I

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Speaker 3: think we're still looking at three major supplier in the side.

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Speaker 1: When it comes to the parts manufacturers, are they at

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Speaker 1: a state right now in terms of their production capacity

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Speaker 1: where they can meet what you think is going to

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Speaker 1: be a little bit of a pickup in demand. Do

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Speaker 1: you think that that's probable or we maybe going to

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Speaker 1: have a little too much demand and supply is going

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Speaker 1: to take a while to catch up.

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Speaker 3: I think in terms of capacity, I don't really see

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Speaker 3: any major issue given that we're not the overall smartpha

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Speaker 3: obviously become a much more mature market as a whole.

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Speaker 3: So the capacity issue to some extent is probably more

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Speaker 3: about relocation as the supply chain is trying to cope

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Speaker 3: with the jupidical tention. So some components supply might be

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Speaker 3: forced to relocay. But so far, for the like a camera,

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Speaker 3: we don't really see a lot of relocation happening. People

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Speaker 3: are I think components supplier are still generally cautious because

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Speaker 3: of the yeah.

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Speaker 1: We'll leave it there're Stephen, Thank you so much for

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Speaker 1: making time to chat with us. Stephen Cheng, who is

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Speaker 1: senior tech analyst for Bloomberg Intelligence. Peter maguire joins us.

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Speaker 1: He is the CEO of EXAM Australia, joining us from Sydney.

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Speaker 1: I believe Peter, thanks for making time. Before we get

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Speaker 1: into your perspective on the market, give me a sense

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Speaker 1: of what XAM Australia does, what kind of business you're in.

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Speaker 4: Well, good morning, Doug. We're in the retile market. As

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Speaker 4: far as currency tried and co modities and of course stocks.

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Speaker 4: We're rebranding in Australia under Trading dot Com and we've

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Speaker 4: just sought approval by the SEC and the States and

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Speaker 4: we've got over twelve million clients globally, so it's a

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Speaker 4: fairly large operation. And you know, twenty four hours a day,

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Speaker 4: seven well five days a week, the market's trade and

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Speaker 4: we try and offer that to our clients.

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Speaker 1: All right, So let's focus a little bit on the

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Speaker 1: currency side. Give me your perspective on what's happening with

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Speaker 1: the Japanese and we briefly touched one forty seven earlier

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Speaker 1: weakening against the greenback. There are folks saying that maybe

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Speaker 1: we will not get another rate cut or rate hike,

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Speaker 1: I should say, from the bog between now and the

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Speaker 1: end of the year. Are you in that camp?

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Speaker 4: Well, I think it's probably a fifty to fifty throw

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Speaker 4: the coin, and I'm probably still airing that you might

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Speaker 4: get one, but probably about a fifty five percent probability

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Speaker 4: my mind, because we've still got four months to roll,

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Speaker 4: and I feel as though that what we've seen in

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Speaker 4: the last month was absolutely epic. When you've seen what

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Speaker 4: happened as far as yen and of course the nick

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Speaker 4: and the I suppose the differential between the rates and

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Speaker 4: what we're seeing. As far as the overall picture in Japan,

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Speaker 4: it's been a dynamic market to trade, and if you're

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Speaker 4: looking at trading any market, over the last probably six

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Speaker 4: to eight weeks, that yen was just spectacular from one

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Speaker 4: forty four to one sixty two back to one forty five.

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Speaker 4: So it really hasn't it's been the market to trade

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Speaker 4: really and it's just been quite extraordinary.

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Speaker 1: That was very much about the carry trade in the

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Speaker 1: unwind of that position. You think most of that has

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Speaker 1: been flushed out at this point.

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Speaker 4: I think so, I don't necessarily, I just want to

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Speaker 4: see where that US dollar trends over the next couple

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Speaker 4: of well, naturally that this week and leading.

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Speaker 5: Up to the eighteenth, but there could be a little

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Speaker 5: bit more movement.

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Speaker 4: I maybe that one forty three one forty two handle, Doug,

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Speaker 4: we might see it's currently sitting, you know that best

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Speaker 4: part of a little bit.

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Speaker 5: You know, one forty seven, it's airing back up.

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Speaker 4: But I still think that there's probably a little bit

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Speaker 4: more movement in the yen in the shore.

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Speaker 1: So you're referring to the eighteenth that's the FED meeting.

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Speaker 1: Before we get there, we have the employment report at

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Speaker 1: the end of the week. You care to wager a

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Speaker 1: guess on what we might see in terms of non

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Speaker 1: farm payrolls.

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Speaker 4: Well, you know, forecasts are looking around about that one

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Speaker 4: sixty five sort of handle eyed problem.

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Speaker 5: You know, it's going to be hard. You've got you've

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Speaker 5: got handalists, Dug.

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Speaker 4: I'm laughing to myself because you've got you know, everyone's

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Speaker 4: got an opinion. They're like noses and we're you know,

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Speaker 4: some people are at one hundred thousand and some are

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Speaker 4: as high as two eight.

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Speaker 5: So it's going to be anywhere between that.

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Speaker 4: I'm going to stick ma you a hand up and

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Speaker 4: say between one fifty and one sixty five. And we've

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Speaker 4: just got to see how those numbers drop. But there's

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Speaker 4: some You've got other numbers coming out during the week

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Speaker 4: that are I think going to weigh on that.

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Speaker 5: Well naturally way on it.

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Speaker 4: But the the the expectations, it's either going to be

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Speaker 4: enjoyed by the FED or if it's softer than expected,

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Speaker 4: then that's really going to call I think some further

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Speaker 4: concerned effect share POW and his decision making process.

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Speaker 1: So could that necessarily mean fifty basis point cut this month.

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Speaker 4: I think, say you've got a thirty five percent probability

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Speaker 4: of that happening, and if it's a week of number

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Speaker 4: than expected Doug, then you're probably that's going to be

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Speaker 4: up the best chance of a fifty to fifty chance

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Speaker 4: as well. So yeah, we've got two weeks to roll tomorrow.

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Speaker 4: It's all the decision, and you know, there's a lot

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Speaker 4: of water to pass under the bridge between now and then.

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Speaker 4: You've got today, they've got the PMIS both non manufacturing

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Speaker 4: and manufacturing today and Thursday, respectively.

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Speaker 5: Those numbers will drop.

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Speaker 4: So we've just got to see how that is all

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Speaker 4: interpreted by the market.

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Speaker 1: Also, So thirty percent probability that it's a weak employment reading,

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Speaker 1: and then we do get a fifty basis point cut

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Speaker 1: at the September meeting. What does that do to the dollar? Then?

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Speaker 1: Under that scenario, Wow.

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Speaker 5: You know, I mean US dollar index.

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Speaker 4: If I'm looking at the you know, one one seventy

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Speaker 4: five sort of handle at the mart, and I think

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Speaker 4: it'll probably be in the hundreds, and you might even

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Speaker 4: see a ninety nine, a high ninety nine. I think

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Speaker 4: probably twenty five's baked in but fifty certainly isn't baked in,

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Speaker 4: So I think that that would really push that dollar

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Speaker 4: to you know, quite a bit softer.

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Speaker 5: Than where it is at the moment.

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Speaker 4: And yeah, you might see a will naturally a move

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Speaker 4: across the commodity complex and against all the currencies.

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Speaker 1: What are your favorite funding currencies these days? If it's

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Speaker 1: not the Japanese yen, are there other currencies that you

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Speaker 1: favor if you're going to carry well.

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Speaker 4: Some people like a Swiss frank of course, but yeah,

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Speaker 4: I think that well, it's just been the yen has

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Speaker 4: been the favorite all the way through, and it's just

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Speaker 4: been so dynamic. So I still don't believe that missus

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Speaker 4: Wotton Arby's jumped off the throne. Yet they're still very

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Speaker 4: action based because of all the cross rates. The yen

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Speaker 4: has been just an extraordinary market to trade. You know,

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Speaker 4: I'm still erring on that one, remembering when you're offering

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Speaker 4: so many different cross rates like we offer, there's opportunities

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Speaker 4: on every every every day because you know, you're looking

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Speaker 4: at that yen pound, yen euro, you know, yen asie.

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Speaker 5: It's just been quite extraordinary what we've seen.

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Speaker 1: Yeah, volatility, as your friend in that kind of situation,

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Speaker 1: no doubt about that. Talk to me a little bit

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Speaker 1: about expectations very quickly, Peter, for a move on the

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Speaker 1: part of the Bank of Korea to cut rates as

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Speaker 1: soon as next month.

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Speaker 4: Oh look, Gold wouldn't be surprised for that to happen.

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Speaker 4: And I think that you've also got the other side

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Speaker 4: where you look at it. You know what's happening as

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Speaker 4: far as Eurozone. Where does the Bank of Canada play,

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Speaker 4: where you know the banks are starting to cut and

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Speaker 4: I feel as a career will roll through with that.

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Speaker 4: So yeah, it's probably a fairly you know, bigger chance

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Speaker 4: than not happening. So that's where we're sitting at the moment,

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Speaker 4: as well as far as keeping an eye across that

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Speaker 4: Asia Pacific basin and you know the mood of central

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Speaker 4: banks in that whole region.

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Speaker 1: Peter will leave it there. A pleasure to have you

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Speaker 1: on the program. Peter Maguire, Chief Executive Office, Sir at

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Speaker 1: XM Australia. This has been the Bloomberg Daybreak Asia podcast,

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Speaker 1: bringing you the stories making news and moving markets in

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Speaker 1: the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube

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