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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Dan Schwartzman.

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Speaker 2: Doug Chrisner is off this week, coming up the latest

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Speaker 2: developments from the Shanghai Cooperation Summit in Tianjin, China. But

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Speaker 2: we begin with the markets. On Tuesday, we'll get the

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Speaker 2: first US trading session of September, which is usually the

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Speaker 2: weakest month for stocks. From more, we hear from Michael Hartnett,

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Speaker 2: chief investment strategist at b of A Global Research. He

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Speaker 2: spoke at Bloomberg Television hosts Sherry On in April, Honk

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Speaker 2: on the Asia trade.

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Speaker 1: Really good to have you with us. Should we get

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Speaker 1: started with what to expect out of the US, because,

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Speaker 1: I mean, we are headed towards the reopen after the holidays,

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Speaker 1: but valuations have been pretty high. I mean, is this

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Speaker 1: a concern.

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Speaker 3: Yes, it is a concern. It's one of the few concerns. However,

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Speaker 3: I think people are very happy that we've seen a

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Speaker 3: turn in tariff's lower, We're seeing a turn in rates lower,

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Speaker 3: we're seeing taxation lower, and of course you've got an

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Speaker 3: incentive now for both the administration to be joined by

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Speaker 3: the Fed in creating good economic conditions in front of

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Speaker 3: the midterms next year.

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Speaker 4: So I think there's.

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Speaker 3: Still a fair bit of amentum behind the US market.

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Speaker 3: I think the difference in twenty twenty five is that

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Speaker 3: there are other stories around the world. Japan's one of them,

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Speaker 3: China is another one of them. So it's not just

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Speaker 3: a US exclusive bull story. But I think the story

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Speaker 3: in the US is still fairly intact. But you're very right.

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Speaker 3: The valuations are the one thing the longer term investors

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Speaker 3: are looking at in the US and seeing can I

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Speaker 3: really get the upside from the US that I could

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Speaker 3: get perhaps out of China or Japan going forward in

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Speaker 3: the next twelve months.

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Speaker 1: Does that also apply to the currency space as well.

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Speaker 1: We have seen the dollar now lose ground for the

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Speaker 1: last five sessions.

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Speaker 3: Yeah, Look, the dollars in a bear market and the

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Speaker 3: dollars down ten percent year to date. There are good

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Speaker 3: reasons for that. The bear market will continue. Interest rates

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Speaker 3: are going to come down in the US. You've still

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Speaker 3: got a lot of debt, a lot of deficits, You've

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Speaker 3: got a finance You've got a very radical president pursuing

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Speaker 3: quite radical, unconventional you know, policies. Some are good, some

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Speaker 3: are bad, but foreign investors have a little worry about that,

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Speaker 3: and I think that that bear market will continue. That's

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Speaker 3: why golds at an all time high. That's why silver's

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Speaker 3: at an all time high. A normal US dollar bull

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Speaker 3: bear market, you know, is down thirty forty percent. Thus far,

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Speaker 3: we're down ten percent and you've still got further to

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Speaker 3: go with a dollar going down. And of course that's

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Speaker 3: one of the reasons why in twenty twenty five international

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Speaker 3: markets have outperformed the US.

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Speaker 5: You're positive on Japan as well. What in terms of

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Speaker 5: stocks do you like there? What are you perhaps steering

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Speaker 5: clear off?

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Speaker 4: Well, I think there's interest in Japan.

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Speaker 3: I mean, I'm here at the Bank of America, you know,

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Speaker 3: Tokyo Conference, the Japan Conference. I think we've got six

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Speaker 3: hundred plus global investors here. I think eighty percent of

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Speaker 3: them are from overseas.

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Speaker 4: I think the.

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Speaker 3: Numbers up twenty twenty five percent, you know from last year.

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Speaker 3: Why are they coming to Japan, Well, a, they're looking

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Speaker 3: for an alternative from the USB. You know, the currency

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Speaker 3: is cheap. But I think there are Japanese narratives. One

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Speaker 3: is you know, the content, you know, companies, and other

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Speaker 3: is the defense industry, which is starting to grow because

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Speaker 3: of you know, US isolationism. And of course you've got

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Speaker 3: a banking industry in Japan, which you.

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Speaker 4: Know suddenly is doing well.

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Speaker 6: You know.

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Speaker 3: And even though the Japanese banks are up two hundred,

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Speaker 3: three hundred, four hundred percent from their lows three four

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Speaker 3: years ago, they're still, believe it or not, seventy percent

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Speaker 3: below where they were in the late eighties. And so

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Speaker 3: long as the Bank of Japan is behind the curve,

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Speaker 3: which it is, and so long as the Bank of

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Speaker 3: Japan is going to be forced to raise interest rates,

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Speaker 3: which it will, those bank stocks will do well. So

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Speaker 3: I think bank's content, defense are probably the three big

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Speaker 3: narratives in the Japanese market right now.

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Speaker 5: What about ships in techs in Japan?

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Speaker 3: The tech companies in Japan Again, I think that the

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Speaker 3: tech companies globally will continue to do fairly well. I

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Speaker 3: think the big focus right now, however, is China. You know,

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Speaker 3: I think in China, you know, this is the market,

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Speaker 3: the ballmarket that nobody speaks of, and it's very you know,

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Speaker 3: you arguably what we've learnt, you know, this year in

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Speaker 3: twenty twenty five or global investors have learned this year

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Speaker 3: in twenty twenty five, driven by that deep seek moment

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Speaker 3: that we had earlier on in this year, is that

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Speaker 3: you cannot be exclusively in US tech. You need to

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Speaker 3: barbel that, particularly with Chinese tech companies. But in addition,

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Speaker 3: I think there are Japanese tech companies that can also

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Speaker 3: benefit from that globalization if you like, of the tech

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Speaker 3: exposure that investors feel that they need right now.

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Speaker 1: And Michael, China is also a geopolitical story, right, I mean,

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Speaker 1: with a realignment of alliances and partnerships. You know, of

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Speaker 1: course you have a war going on in Ukraine, how

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Speaker 1: big will the defense sector be? I mean, overnight we

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Speaker 1: saw European defense chairs rallying on ideas that potentially we

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Speaker 1: could see really a detailed plan on rearmament right now,

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Speaker 1: just a headline on the Bloomberg right now that South

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Speaker 1: Korea is also going to gradually raise defense costs. It

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Speaker 1: seems to be a very global story at the moment.

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Speaker 4: Absolutely, yeah.

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Speaker 3: I mean, look, I think that for twenty thirty years,

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Speaker 3: I mean, America has really policed the world in exchange,

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Speaker 3: if you like, for savings around the world coming back

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Speaker 3: to America and buying treasuries and financing the deficit. And

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Speaker 3: I think, you know, the Trump administration you know, has

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Speaker 3: really been you know, fairly honest. I think in saying

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Speaker 3: to the rest of the world, we're no longer going

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Speaker 3: to you know, finance your security, We're no longer going

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Speaker 3: to make you you know, you know, be your defense industry.

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Speaker 3: You have to stand up on your own two feet.

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Speaker 3: And I think we saw that first in Europe, but

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Speaker 3: I think now Asia is the next leg of that

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Speaker 3: defense trade. And as I said earlier, the defense docks

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Speaker 3: in Japan are doing well. You yourself said that career. China

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Speaker 3: are sort of joining that theme, but it is now

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Speaker 3: a multi year theme. You know, America has debt problems,

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Speaker 3: it has deficit problems. It's said, we can no longer

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Speaker 3: use American tax payer money to defend your countries. You

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Speaker 3: have to defend them yourselves. And that is going to

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Speaker 3: mean that there's going to be greater spending on defense

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Speaker 3: across a greater range of companies, you know, to the

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Speaker 3: benefit of those companies within the local stock markets.

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Speaker 5: Michael, you alluded to some of this earlier. How when

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Speaker 5: it comes to us exceptionalism, we've seen a bit of

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Speaker 5: it creepedback and starts AI a key play. Maybe you

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Speaker 5: talk about the valuation with there. Bonds have also creped

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Speaker 5: back in, but dollar, I think that's still the missing

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Speaker 5: piece of the puzzle.

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Speaker 2: And you know, you're.

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Speaker 5: Still burish in the view even into the end of

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Speaker 5: the year. What are you expecting into next year as well?

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Speaker 1: Well?

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Speaker 4: Again, I think the dollars in a bear market.

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Speaker 3: And again, if the dollar was as exceptional as you know,

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Speaker 3: everyone thought it was a year ago, the dollar wouldn't

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Speaker 3: be going down. You know, the dollar is going down

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Speaker 3: because the US is less exceptional. It's it's got less

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Speaker 3: exceptional outperformance and it's got a less exceptional narrative.

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Speaker 4: And then again that's partly.

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Speaker 3: Because the rest of the world has reasons to invest

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Speaker 3: there Europe defense, europe fiscal stimulus, China rebalancing a week

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Speaker 3: in a week dollar, which is great for emerging market.

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Speaker 4: So twenty five is.

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Speaker 3: Very different in that suddenly an equity investor has other

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Speaker 3: places to invest in. It's not just exclusively the NASDAG.

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Speaker 4: And so that's why I think.

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Speaker 3: That the US has lost a little bit of its

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Speaker 3: luster in terms of the exceptionalism story. Of course, it's

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Speaker 3: still got Ai, it's still got, you know, a business sector,

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Speaker 3: the ones to make money, blah blah blah. But I

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Speaker 3: think the dollar is something that will be sacrificed, if

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Speaker 3: you like, by the Trump administration. If you want to

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Speaker 3: make America great again, and you want to rebalance the

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Speaker 3: US economy and you want to get manufacturing going in

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Speaker 3: the crucially electorally important states of Pennsylvania, Michigan and Wisconsin,

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Speaker 3: you really don't want a strong dollar. So I think

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Speaker 3: the dollar is in a bear market.

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Speaker 4: It's just beginning. It will continue.

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Speaker 3: But as I said, if you look at gold, you

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Speaker 3: look at silver, they're telling you that they're very much

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Speaker 3: in the early stages of that dollar bear market.

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Speaker 5: Yeah, and all this as part of as you highlighted,

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Speaker 5: their investors looking for alternatives other than the US, such

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Speaker 5: and perhaps in Japan. Michael, really good to get your

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Speaker 5: insights on all this. Michael Hartnet is chief investment strategist

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Speaker 5: at b of A.

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Speaker 2: Welcome back to the Daybreak Asia podcast. I'm Dan Schwartzman

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Speaker 2: in for Doug Krisner. This morning, Chinese President Shijin Bing

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Speaker 2: is pledging over one and a half billion dollars in

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Speaker 2: grants and loans to member states of the Shanghai Cooperation Organization.

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Speaker 2: Attendees at this year's summit include Russian President Vladimir Putin

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Speaker 2: and Indian President Narendra Modi. Speaking in Tianjin, she called

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Speaker 2: for the creation of a development bank, more joint green

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Speaker 2: energy projects, and expanded education programs. We got reaction from

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Speaker 2: Henry Wang, founder and president of the Center for China

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Speaker 2: and Globalization. He spoke at Bloomberg's sherry On and April

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Speaker 2: hung on the Asia Trade.

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Speaker 5: Very good to see you, sir. Let's start off with

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Speaker 5: your key takeaways from the SEO. I think one of

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Speaker 5: the meaningful developments includes grants, investments, loans that China is pledging.

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Speaker 5: How significant is that to you?

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Speaker 6: Yes, thank you having absolutely you know you see this

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Speaker 6: SEO summit held in Tenjin is really very big significance

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Speaker 6: because it is the largest SEO gathering in more than

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Speaker 6: twenty years. It's probably the one of the highest level

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Speaker 6: that we have twenty over some leaders there and Indian

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Speaker 6: Primise Moody was there. And also this SEO has been

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Speaker 6: well planned and organized and they used to many statement

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Speaker 6: For example, they have a ten year long term strategy

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Speaker 6: has been stipulated. As you said, they're also going to

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Speaker 6: establish a new SEO bank. But further than that, they're

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Speaker 6: also built up quite a few platform plans. For example,

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Speaker 6: platform on the green industry, on the energy on also

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Speaker 6: digital and also there's a science and technology platform, education

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Speaker 6: platform or vocational platform. On top of that. China also

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Speaker 6: pledged actual dollars and the moneys to this development, so

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Speaker 6: that you have something to start with, you have something

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Speaker 6: to catalyze with all those members, So this is really

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Speaker 6: you have an anchor to really drive that. Plus you

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Speaker 6: have all those heads of state gather here to really

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Speaker 6: push forward a kind of the more in the multipolar world.

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Speaker 6: There's one strong polo here right here gathering as well.

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Speaker 6: So they actually propose many new thinking as well, that

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Speaker 6: you're going to maintain maltiltalism, stick to you and principle,

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Speaker 6: maintain wto There's.

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Speaker 7: A lot on there. So I think this is really

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Speaker 7: a very important gap.

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Speaker 5: Henry, talk to us about this show of unity between

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Speaker 5: the Indian, Chinese Russian presidents. What do you see beyond

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Speaker 5: the symbolism as a way to counter US dominance.

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Speaker 7: Well, I think they certainly there's a very.

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Speaker 6: Strong uh you know this, this pleasure demonstrated on what

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Speaker 6: US has been pushing for. For example, you know, UNI

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Speaker 6: Lato is unpacking on back off of the who you know,

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Speaker 6: Climbate agreement and the UNISICO and threatening W two and

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Speaker 6: all those you know.

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Speaker 7: Unilatter approach.

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Speaker 6: Certainly, the China being the second largest economy and India

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Speaker 6: soon to be the third largest economy, they really want

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Speaker 6: to show to the world.

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Speaker 7: And including Russia, that they want to maintain.

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Speaker 6: UH the eighty years older global system, want to improve

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Speaker 6: in largely hands of this system.

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Speaker 7: They don't want this to be disrupted. So I think

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Speaker 7: there's a lot of matches sent on that.

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Speaker 6: You know, they want to actually keep the go go

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Speaker 6: trade and go go business as as as strong as

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Speaker 6: they can, and also SL become a mediating public platform.

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Speaker 6: You see both Prime Mister Moody and Pakistan Mini Prime

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Speaker 6: Minister they're at the same table Armenia as a jam

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Speaker 6: had to say, China and India.

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Speaker 7: Actually get together.

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Speaker 6: So I think this shows that of course they want

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Speaker 6: to promote in peace. So SL could be an extra

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Speaker 6: guarante to UH. Maybe bricks countries like China India can

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Speaker 6: help settle the Ukraine Russian War.

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Speaker 1: How would that differ from all of the other multilateral

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Speaker 1: organizations that we already have in place, like the China

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Speaker 1: late ai i B for example.

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Speaker 7: Yeah, well ai B is an international organization.

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Speaker 6: You have a lot of you know, largely developed country

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Speaker 6: like all the European country are there and many Australia, Canada,

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Speaker 6: in New Zealand there, so so there's a lot of

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Speaker 6: a great mix of uh uh bricks countries and the

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Speaker 6: developed countries like India was there as as a vice president.

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Speaker 6: India actually received the largest loan from ai B. But

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Speaker 6: that's purely financial. But like there's also a new development

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Speaker 6: bank that established in Shaghai that focused on the bricks

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Speaker 6: country development. So this time they have se O Bank developments.

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Speaker 6: So you can see, actually there's more financially economically interchanges

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Speaker 6: with this or the which is which is you know

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Speaker 6: reflect reality.

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Speaker 7: I mean bricks countries, SEO countries.

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Speaker 6: Are already growing economic strong bricks country GDP is very

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Speaker 6: larger than G seven now, so I think there is

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Speaker 6: reflect that business.

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Speaker 1: Geopolitically speaking, though, how sustainable are such partnerships given of

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Speaker 1: course the China has issues with other countries, territorial issues

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Speaker 1: with Southeast Asian countries, to mention. Of course the China

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Speaker 1: India relationship also mare intense a little bit because of

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Speaker 1: the Pakistan relationship as well well.

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Speaker 6: I think this is going to improve you know, economic

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Speaker 6: comes first and then I see the key takeaway is

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Speaker 6: that also they build up kind of some some kind

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Speaker 6: of cordial and friendly atmosphere at the summit, particularly with India,

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Speaker 6: that both Moody and persons should announced that we're not rivraries,

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Speaker 6: you know, not that US and Europe take China as

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Speaker 6: a rivalry. You know, they are saying, you know, we're

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Speaker 6: not riving. So you know, all those countries are seeking

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Speaker 6: friendly corporation. So further that then you can see, you know,

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Speaker 6: they could improve relations. And there's quite a few Asian

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Speaker 6: countries and allows is added to the member or part

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Speaker 6: of the member of SEO as well. And this is

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Speaker 6: really a good way to gather cooperative spirit. Particularly this

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Speaker 6: time you see SCO is building it gradually built into

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Speaker 6: a big block of we can corporation. So it's it's

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Speaker 6: really interesting you have a I B, you have our CP,

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Speaker 6: you have UH you know SCO breaks. So those are

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Speaker 6: really great shift to more UH in addition to security,

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Speaker 6: more economy and business uh. You know, for example, the

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Speaker 6: trade amount of the s steel countries amounts to two

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Speaker 6: pound street billion dollars a year.

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Speaker 7: That's enormous.

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Speaker 6: So so I think that that's really interesting to see

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Speaker 6: this kind of a.

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Speaker 7: Proliferation or you know, striving of the uh uh.

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Speaker 6: You know economic boom or economic model that be emerging

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Speaker 6: against this. You know that the globally is not functioned

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Speaker 6: so well, so there's a lot of origional uh practice.

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Speaker 1: Now, Henry juya One, really good to have you with us,

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Speaker 1: founder and president at the Center for China and Globalization.

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Speaker 6: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 6: Asia Edition podcast. Each weekday, we look at story shaping markets, finance,

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Speaker 6: and geopolitics in the Asia Pacific. You can find us

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Speaker 6: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 6: else you listen. Join us again tomorrow for insight on

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Speaker 6: the market moves from Hong Kong to Singapore and Australia.

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Speaker 4: I'm Doug Prisoner and this is Bloomberg