Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Dan Schwartzman.
Speaker 2: Doug Chrisner is off this week, coming up the latest
Speaker 2: developments from the Shanghai Cooperation Summit in Tianjin, China. But
Speaker 2: we begin with the markets. On Tuesday, we'll get the
Speaker 2: first US trading session of September, which is usually the
Speaker 2: weakest month for stocks. From more, we hear from Michael Hartnett,
Speaker 2: chief investment strategist at b of A Global Research. He
Speaker 2: spoke at Bloomberg Television hosts Sherry On in April, Honk
Speaker 2: on the Asia trade.
Speaker 1: Really good to have you with us. Should we get
Speaker 1: started with what to expect out of the US, because,
Speaker 1: I mean, we are headed towards the reopen after the holidays,
Speaker 1: but valuations have been pretty high. I mean, is this
Speaker 1: a concern.
Speaker 3: Yes, it is a concern. It's one of the few concerns. However,
Speaker 3: I think people are very happy that we've seen a
Speaker 3: turn in tariff's lower, We're seeing a turn in rates lower,
Speaker 3: we're seeing taxation lower, and of course you've got an
Speaker 3: incentive now for both the administration to be joined by
Speaker 3: the Fed in creating good economic conditions in front of
Speaker 3: the midterms next year.
Speaker 4: So I think there's.
Speaker 3: Still a fair bit of amentum behind the US market.
Speaker 3: I think the difference in twenty twenty five is that
Speaker 3: there are other stories around the world. Japan's one of them,
Speaker 3: China is another one of them. So it's not just
Speaker 3: a US exclusive bull story. But I think the story
Speaker 3: in the US is still fairly intact. But you're very right.
Speaker 3: The valuations are the one thing the longer term investors
Speaker 3: are looking at in the US and seeing can I
Speaker 3: really get the upside from the US that I could
Speaker 3: get perhaps out of China or Japan going forward in
Speaker 3: the next twelve months.
Speaker 1: Does that also apply to the currency space as well.
Speaker 1: We have seen the dollar now lose ground for the
Speaker 1: last five sessions.
Speaker 3: Yeah, Look, the dollars in a bear market and the
Speaker 3: dollars down ten percent year to date. There are good
Speaker 3: reasons for that. The bear market will continue. Interest rates
Speaker 3: are going to come down in the US. You've still
Speaker 3: got a lot of debt, a lot of deficits, You've
Speaker 3: got a finance You've got a very radical president pursuing
Speaker 3: quite radical, unconventional you know, policies. Some are good, some
Speaker 3: are bad, but foreign investors have a little worry about that,
Speaker 3: and I think that that bear market will continue. That's
Speaker 3: why golds at an all time high. That's why silver's
Speaker 3: at an all time high. A normal US dollar bull
Speaker 3: bear market, you know, is down thirty forty percent. Thus far,
Speaker 3: we're down ten percent and you've still got further to
Speaker 3: go with a dollar going down. And of course that's
Speaker 3: one of the reasons why in twenty twenty five international
Speaker 3: markets have outperformed the US.
Speaker 5: You're positive on Japan as well. What in terms of
Speaker 5: stocks do you like there? What are you perhaps steering
Speaker 5: clear off?
Speaker 4: Well, I think there's interest in Japan.
Speaker 3: I mean, I'm here at the Bank of America, you know,
Speaker 3: Tokyo Conference, the Japan Conference. I think we've got six
Speaker 3: hundred plus global investors here. I think eighty percent of
Speaker 3: them are from overseas.
Speaker 4: I think the.
Speaker 3: Numbers up twenty twenty five percent, you know from last year.
Speaker 3: Why are they coming to Japan, Well, a, they're looking
Speaker 3: for an alternative from the USB. You know, the currency
Speaker 3: is cheap. But I think there are Japanese narratives. One
Speaker 3: is you know, the content, you know, companies, and other
Speaker 3: is the defense industry, which is starting to grow because
Speaker 3: of you know, US isolationism. And of course you've got
Speaker 3: a banking industry in Japan, which you.
Speaker 4: Know suddenly is doing well.
Speaker 6: You know.
Speaker 3: And even though the Japanese banks are up two hundred,
Speaker 3: three hundred, four hundred percent from their lows three four
Speaker 3: years ago, they're still, believe it or not, seventy percent
Speaker 3: below where they were in the late eighties. And so
Speaker 3: long as the Bank of Japan is behind the curve,
Speaker 3: which it is, and so long as the Bank of
Speaker 3: Japan is going to be forced to raise interest rates,
Speaker 3: which it will, those bank stocks will do well. So
Speaker 3: I think bank's content, defense are probably the three big
Speaker 3: narratives in the Japanese market right now.
Speaker 5: What about ships in techs in Japan?
Speaker 3: The tech companies in Japan Again, I think that the
Speaker 3: tech companies globally will continue to do fairly well. I
Speaker 3: think the big focus right now, however, is China. You know,
Speaker 3: I think in China, you know, this is the market,
Speaker 3: the ballmarket that nobody speaks of, and it's very you know,
Speaker 3: you arguably what we've learnt, you know, this year in
Speaker 3: twenty twenty five or global investors have learned this year
Speaker 3: in twenty twenty five, driven by that deep seek moment
Speaker 3: that we had earlier on in this year, is that
Speaker 3: you cannot be exclusively in US tech. You need to
Speaker 3: barbel that, particularly with Chinese tech companies. But in addition,
Speaker 3: I think there are Japanese tech companies that can also
Speaker 3: benefit from that globalization if you like, of the tech
Speaker 3: exposure that investors feel that they need right now.
Speaker 1: And Michael, China is also a geopolitical story, right, I mean,
Speaker 1: with a realignment of alliances and partnerships. You know, of
Speaker 1: course you have a war going on in Ukraine, how
Speaker 1: big will the defense sector be? I mean, overnight we
Speaker 1: saw European defense chairs rallying on ideas that potentially we
Speaker 1: could see really a detailed plan on rearmament right now,
Speaker 1: just a headline on the Bloomberg right now that South
Speaker 1: Korea is also going to gradually raise defense costs. It
Speaker 1: seems to be a very global story at the moment.
Speaker 4: Absolutely, yeah.
Speaker 3: I mean, look, I think that for twenty thirty years,
Speaker 3: I mean, America has really policed the world in exchange,
Speaker 3: if you like, for savings around the world coming back
Speaker 3: to America and buying treasuries and financing the deficit. And
Speaker 3: I think, you know, the Trump administration you know, has
Speaker 3: really been you know, fairly honest. I think in saying
Speaker 3: to the rest of the world, we're no longer going
Speaker 3: to you know, finance your security, We're no longer going
Speaker 3: to make you you know, you know, be your defense industry.
Speaker 3: You have to stand up on your own two feet.
Speaker 3: And I think we saw that first in Europe, but
Speaker 3: I think now Asia is the next leg of that
Speaker 3: defense trade. And as I said earlier, the defense docks
Speaker 3: in Japan are doing well. You yourself said that career. China
Speaker 3: are sort of joining that theme, but it is now
Speaker 3: a multi year theme. You know, America has debt problems,
Speaker 3: it has deficit problems. It's said, we can no longer
Speaker 3: use American tax payer money to defend your countries. You
Speaker 3: have to defend them yourselves. And that is going to
Speaker 3: mean that there's going to be greater spending on defense
Speaker 3: across a greater range of companies, you know, to the
Speaker 3: benefit of those companies within the local stock markets.
Speaker 5: Michael, you alluded to some of this earlier. How when
Speaker 5: it comes to us exceptionalism, we've seen a bit of
Speaker 5: it creepedback and starts AI a key play. Maybe you
Speaker 5: talk about the valuation with there. Bonds have also creped
Speaker 5: back in, but dollar, I think that's still the missing
Speaker 5: piece of the puzzle.
Speaker 2: And you know, you're.
Speaker 5: Still burish in the view even into the end of
Speaker 5: the year. What are you expecting into next year as well?
Speaker 1: Well?
Speaker 4: Again, I think the dollars in a bear market.
Speaker 3: And again, if the dollar was as exceptional as you know,
Speaker 3: everyone thought it was a year ago, the dollar wouldn't
Speaker 3: be going down. You know, the dollar is going down
Speaker 3: because the US is less exceptional. It's it's got less
Speaker 3: exceptional outperformance and it's got a less exceptional narrative.
Speaker 4: And then again that's partly.
Speaker 3: Because the rest of the world has reasons to invest
Speaker 3: there Europe defense, europe fiscal stimulus, China rebalancing a week
Speaker 3: in a week dollar, which is great for emerging market.
Speaker 4: So twenty five is.
Speaker 3: Very different in that suddenly an equity investor has other
Speaker 3: places to invest in. It's not just exclusively the NASDAG.
Speaker 4: And so that's why I think.
Speaker 3: That the US has lost a little bit of its
Speaker 3: luster in terms of the exceptionalism story. Of course, it's
Speaker 3: still got Ai, it's still got, you know, a business sector,
Speaker 3: the ones to make money, blah blah blah. But I
Speaker 3: think the dollar is something that will be sacrificed, if
Speaker 3: you like, by the Trump administration. If you want to
Speaker 3: make America great again, and you want to rebalance the
Speaker 3: US economy and you want to get manufacturing going in
Speaker 3: the crucially electorally important states of Pennsylvania, Michigan and Wisconsin,
Speaker 3: you really don't want a strong dollar. So I think
Speaker 3: the dollar is in a bear market.
Speaker 4: It's just beginning. It will continue.
Speaker 3: But as I said, if you look at gold, you
Speaker 3: look at silver, they're telling you that they're very much
Speaker 3: in the early stages of that dollar bear market.
Speaker 5: Yeah, and all this as part of as you highlighted,
Speaker 5: their investors looking for alternatives other than the US, such
Speaker 5: and perhaps in Japan. Michael, really good to get your
Speaker 5: insights on all this. Michael Hartnet is chief investment strategist
Speaker 5: at b of A.
Speaker 2: Welcome back to the Daybreak Asia podcast. I'm Dan Schwartzman
Speaker 2: in for Doug Krisner. This morning, Chinese President Shijin Bing
Speaker 2: is pledging over one and a half billion dollars in
Speaker 2: grants and loans to member states of the Shanghai Cooperation Organization.
Speaker 2: Attendees at this year's summit include Russian President Vladimir Putin
Speaker 2: and Indian President Narendra Modi. Speaking in Tianjin, she called
Speaker 2: for the creation of a development bank, more joint green
Speaker 2: energy projects, and expanded education programs. We got reaction from
Speaker 2: Henry Wang, founder and president of the Center for China
Speaker 2: and Globalization. He spoke at Bloomberg's sherry On and April
Speaker 2: hung on the Asia Trade.
Speaker 5: Very good to see you, sir. Let's start off with
Speaker 5: your key takeaways from the SEO. I think one of
Speaker 5: the meaningful developments includes grants, investments, loans that China is pledging.
Speaker 5: How significant is that to you?
Speaker 6: Yes, thank you having absolutely you know you see this
Speaker 6: SEO summit held in Tenjin is really very big significance
Speaker 6: because it is the largest SEO gathering in more than
Speaker 6: twenty years. It's probably the one of the highest level
Speaker 6: that we have twenty over some leaders there and Indian
Speaker 6: Primise Moody was there. And also this SEO has been
Speaker 6: well planned and organized and they used to many statement
Speaker 6: For example, they have a ten year long term strategy
Speaker 6: has been stipulated. As you said, they're also going to
Speaker 6: establish a new SEO bank. But further than that, they're
Speaker 6: also built up quite a few platform plans. For example,
Speaker 6: platform on the green industry, on the energy on also
Speaker 6: digital and also there's a science and technology platform, education
Speaker 6: platform or vocational platform. On top of that. China also
Speaker 6: pledged actual dollars and the moneys to this development, so
Speaker 6: that you have something to start with, you have something
Speaker 6: to catalyze with all those members, So this is really
Speaker 6: you have an anchor to really drive that. Plus you
Speaker 6: have all those heads of state gather here to really
Speaker 6: push forward a kind of the more in the multipolar world.
Speaker 6: There's one strong polo here right here gathering as well.
Speaker 6: So they actually propose many new thinking as well, that
Speaker 6: you're going to maintain maltiltalism, stick to you and principle,
Speaker 6: maintain wto There's.
Speaker 7: A lot on there. So I think this is really
Speaker 7: a very important gap.
Speaker 5: Henry, talk to us about this show of unity between
Speaker 5: the Indian, Chinese Russian presidents. What do you see beyond
Speaker 5: the symbolism as a way to counter US dominance.
Speaker 7: Well, I think they certainly there's a very.
Speaker 6: Strong uh you know this, this pleasure demonstrated on what
Speaker 6: US has been pushing for. For example, you know, UNI
Speaker 6: Lato is unpacking on back off of the who you know,
Speaker 6: Climbate agreement and the UNISICO and threatening W two and
Speaker 6: all those you know.
Speaker 7: Unilatter approach.
Speaker 6: Certainly, the China being the second largest economy and India
Speaker 6: soon to be the third largest economy, they really want
Speaker 6: to show to the world.
Speaker 7: And including Russia, that they want to maintain.
Speaker 6: UH the eighty years older global system, want to improve
Speaker 6: in largely hands of this system.
Speaker 7: They don't want this to be disrupted. So I think
Speaker 7: there's a lot of matches sent on that.
Speaker 6: You know, they want to actually keep the go go
Speaker 6: trade and go go business as as as strong as
Speaker 6: they can, and also SL become a mediating public platform.
Speaker 6: You see both Prime Mister Moody and Pakistan Mini Prime
Speaker 6: Minister they're at the same table Armenia as a jam
Speaker 6: had to say, China and India.
Speaker 7: Actually get together.
Speaker 6: So I think this shows that of course they want
Speaker 6: to promote in peace. So SL could be an extra
Speaker 6: guarante to UH. Maybe bricks countries like China India can
Speaker 6: help settle the Ukraine Russian War.
Speaker 1: How would that differ from all of the other multilateral
Speaker 1: organizations that we already have in place, like the China
Speaker 1: late ai i B for example.
Speaker 7: Yeah, well ai B is an international organization.
Speaker 6: You have a lot of you know, largely developed country
Speaker 6: like all the European country are there and many Australia, Canada,
Speaker 6: in New Zealand there, so so there's a lot of
Speaker 6: a great mix of uh uh bricks countries and the
Speaker 6: developed countries like India was there as as a vice president.
Speaker 6: India actually received the largest loan from ai B. But
Speaker 6: that's purely financial. But like there's also a new development
Speaker 6: bank that established in Shaghai that focused on the bricks
Speaker 6: country development. So this time they have se O Bank developments.
Speaker 6: So you can see, actually there's more financially economically interchanges
Speaker 6: with this or the which is which is you know
Speaker 6: reflect reality.
Speaker 7: I mean bricks countries, SEO countries.
Speaker 6: Are already growing economic strong bricks country GDP is very
Speaker 6: larger than G seven now, so I think there is
Speaker 6: reflect that business.
Speaker 1: Geopolitically speaking, though, how sustainable are such partnerships given of
Speaker 1: course the China has issues with other countries, territorial issues
Speaker 1: with Southeast Asian countries, to mention. Of course the China
Speaker 1: India relationship also mare intense a little bit because of
Speaker 1: the Pakistan relationship as well well.
Speaker 6: I think this is going to improve you know, economic
Speaker 6: comes first and then I see the key takeaway is
Speaker 6: that also they build up kind of some some kind
Speaker 6: of cordial and friendly atmosphere at the summit, particularly with India,
Speaker 6: that both Moody and persons should announced that we're not rivraries,
Speaker 6: you know, not that US and Europe take China as
Speaker 6: a rivalry. You know, they are saying, you know, we're
Speaker 6: not riving. So you know, all those countries are seeking
Speaker 6: friendly corporation. So further that then you can see, you know,
Speaker 6: they could improve relations. And there's quite a few Asian
Speaker 6: countries and allows is added to the member or part
Speaker 6: of the member of SEO as well. And this is
Speaker 6: really a good way to gather cooperative spirit. Particularly this
Speaker 6: time you see SCO is building it gradually built into
Speaker 6: a big block of we can corporation. So it's it's
Speaker 6: really interesting you have a I B, you have our CP,
Speaker 6: you have UH you know SCO breaks. So those are
Speaker 6: really great shift to more UH in addition to security,
Speaker 6: more economy and business uh. You know, for example, the
Speaker 6: trade amount of the s steel countries amounts to two
Speaker 6: pound street billion dollars a year.
Speaker 7: That's enormous.
Speaker 6: So so I think that that's really interesting to see
Speaker 6: this kind of a.
Speaker 7: Proliferation or you know, striving of the uh uh.
Speaker 6: You know economic boom or economic model that be emerging
Speaker 6: against this. You know that the globally is not functioned
Speaker 6: so well, so there's a lot of origional uh practice.
Speaker 1: Now, Henry juya One, really good to have you with us,
Speaker 1: founder and president at the Center for China and Globalization.
Speaker 6: Thanks for listening to today's episode of the Bloomberg Daybreak
Speaker 6: Asia Edition podcast. Each weekday, we look at story shaping markets, finance,
Speaker 6: and geopolitics in the Asia Pacific. You can find us
Speaker 6: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
Speaker 6: else you listen. Join us again tomorrow for insight on
Speaker 6: the market moves from Hong Kong to Singapore and Australia.
Speaker 4: I'm Doug Prisoner and this is Bloomberg