Speaker 1: This is Bloomberg day Break Weekend, our global look at
Speaker 1: the top stories in the coming week from our Daybreak
Speaker 1: anchors all around the world, and straight.
Speaker 2: Ahead on the program.
Speaker 1: Apple set to launch the iPhone fifteen this week. I'm
Speaker 1: Tom Busby in New York.
Speaker 3: I'm Carolyn hege Hair in London, where we're looking ahead
Speaker 3: to the crucial ECB interest rate decision.
Speaker 4: I'm Brian Curtis in Hong Kong. We look at upcoming
Speaker 4: data in China and what might serve as a catalyst
Speaker 4: for a market recovery.
Speaker 5: I'm Keilly Lines in Washington, where the House is returning
Speaker 5: from its August recess and racing to avoid a government shutdown.
Speaker 6: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 1: I'm Tom Busby, and we begin today's program with Apple
Speaker 1: and it's new product unveiling next week, which risks being
Speaker 1: overshadowed by a growing government iPhone ban in China, Apple's
Speaker 1: largest market outside the US. Now for all things Apple,
Speaker 1: we're joined by Bloomberg Technology co host ed Ludlow in
Speaker 1: San Francisco.
Speaker 7: Ed.
Speaker 2: Thanks for joining us, Thank you for having me. Wow
Speaker 2: what a week. Oh yeah.
Speaker 1: Now, before we talk about the upcoming iPhone fifteen and
Speaker 1: Apple Watch upgrades, let's start with last week and what
Speaker 1: happened with the iPhone in China what that did to
Speaker 1: Apple shares this past week on Wall Street.
Speaker 8: I mean, the reality is that the news was so
Speaker 8: significant that on Wednesday and Thursday, across two sessions, Apple
Speaker 8: lost almost two hundred billion dollars in market cap, which
Speaker 8: for Apple, that just doesn't happen, you know, It's it's
Speaker 8: kind of this steady ship technology giant. But the news
Speaker 8: is kind of a see saw of things that The
Speaker 8: headline is that, according to Bloomberg sources, China's government is
Speaker 8: telling other government agents and state backed corporations that their
Speaker 8: staff cannot use iPhone and they cannot use handsets from
Speaker 8: other non Chinese handset makers. And what that looks like,
Speaker 8: you know, is similar to what we saw a year ago,
Speaker 8: actually in May of twenty twenty two, when the Chinese
Speaker 8: government said a similar thing about personal computers or PCs.
Speaker 8: They basically said, you have two years to transition from
Speaker 8: a foreign brand to a Chinese brand, and you have
Speaker 8: to use a you have to use a Chinese PC.
Speaker 8: And they're now replicating that playbook with smartphones.
Speaker 1: So is this like an opening salvo by Beijing in
Speaker 1: a crackdown on all US technology? Also it comes at
Speaker 1: the same time a new Huawei phone comes out.
Speaker 8: Yes, So I would note that there are several cell
Speaker 8: side analysts that point out, despite the headline and all
Speaker 8: of the news reports, it's likely that the Chinese government,
Speaker 8: as a matter of policy, you know, has been telling
Speaker 8: govvernment workers, agencies, and state back corporations for some time, like, hey,
Speaker 8: come on, let's be using Chinese brands, not our own brands,
Speaker 8: domestic brands, not a foreign or international brand.
Speaker 2: So it's hard to gauge like what.
Speaker 8: Kind of impact that would have. Next week, and I
Speaker 8: know we'll get into it is the launch of the
Speaker 8: iPhone fifteen, and this is kind of the most substantive
Speaker 8: and significant technology upgrade to the iPhone handset for some time.
Speaker 8: But go back to the Chinese consumer. China Greater China
Speaker 8: is about twenty percent of Apple's revenues, and in the
Speaker 8: quarter just gone, the June quarter, Apple actually grew in
Speaker 8: China eight percent, whereas overall sales declined. So if you're
Speaker 8: a consumer in China and your government is telling you like, hey,
Speaker 8: if you work for the government or a government agency
Speaker 8: or a state back corporation, we don't want using iPhone,
Speaker 8: and then Apple brings out a new iPhone, what are
Speaker 8: you going to do? And that is the part that
Speaker 8: the market and the analysts and that all of us
Speaker 8: tech journalists are finally hard to quantify, like what the
Speaker 8: impact will be? And you absolutely right. The surprise of
Speaker 8: last week was Huawei, that's been out of the handset
Speaker 8: game for a little while, bringing to market a mysterious
Speaker 8: new smartphone which we literally lifted the lid on.
Speaker 1: Now there's Mate sixty Pro five G capable updated. It
Speaker 1: sounds like they are really pushing this to take the
Speaker 1: place of all those Apple products.
Speaker 8: Yes, so I talked about that tit for tat and
Speaker 8: the geopolitics. The Commerce Secretary, Gina Romondo was in China
Speaker 8: week before this, right last week and time to that
Speaker 8: this mysterious phone hits the market, and it's mysterious because
Speaker 8: it's not registered. The specs are not registered with the
Speaker 8: China regulator, which is highly unusual. It on paper is
Speaker 8: competitive with the leading smartphones. What Bloomberg did is we
Speaker 8: actually got hold of one because it sold out within hours,
Speaker 8: and we took it to a specialist tech insights and
Speaker 8: they tore the thing apart and what they discovered is, yes, okay,
Speaker 8: it's more technologically advanced than we thought. China was cap
Speaker 8: of love. It has a seven animeter processor, but that
Speaker 8: is still two generations behind the cutting edge of chip making.
Speaker 8: But it raised all these alarm bells about whether China
Speaker 8: is breaching sanctions that the US currently has in place.
Speaker 8: But the point, as it relates to Apple is will
Speaker 8: hold on. This has come out of nowhere? Could Huawei
Speaker 8: take some market share from Apple at the same time
Speaker 8: that the government is cracking down on products like the iPhone?
Speaker 8: And so that was part of the nervousness in the
Speaker 8: market and one reason that Apple share has fell.
Speaker 2: Oh boy did they fall. Now.
Speaker 1: Some analysts, though, I mean JP Morgan Chase says this
Speaker 1: is bad not you know, the high valuation for the
Speaker 1: company and the risks with this band. But some like
Speaker 1: Dan Ives had Wedbush Security saying this band is really
Speaker 1: nothing to worry about. Let's hear what he said to
Speaker 1: Bloomberg this just on Friday.
Speaker 9: In my opinion, Barcelot worse than bite. I mean, there's
Speaker 9: essentially been a pseudo ban of government employse for Apple
Speaker 9: in terms of iPhones the last two years. Now, maybe
Speaker 9: there was a little more restrictions here, but we're still
Speaker 9: talking about what we with five hundred thousand iPhones max.
Speaker 9: Relative to a week, We've going to be forty five
Speaker 9: million sold in China in the next year.
Speaker 1: And let's face it, ed Apple still valued at around
Speaker 1: two point eight trillion dollars, the most valuably valuable publicly
Speaker 1: traded company in the US.
Speaker 8: So there's two things here. Whether the bark is worse
Speaker 8: than its bite in the context of China's government, and
Speaker 8: it's its attitude towards Apple, we don't know. You know,
Speaker 8: Dan talked about this sort of unit volume that could
Speaker 8: be impacted. Think about it a slightly different way, think
Speaker 8: about how it might impact the broad suite of Apple products.
Speaker 8: The iPhone is still everything for Apple, but if you're
Speaker 8: a consumer, and again, you know that your government is saying, hey,
Speaker 8: we don't want you using iPhone. In the context of
Speaker 8: a government agency or a state backed corporation, do you
Speaker 8: then hold off on buying an Apple Watch or a
Speaker 8: MacBook or using other Apple products. So that's the unquantifiable
Speaker 8: side of it. I'll tell you what we know, and
Speaker 8: the data is really important. That the June quarter was
Speaker 8: a record for Apple in Greater China, and what Tim
Speaker 8: Cook said was responsible for that was what he called switches.
Speaker 8: Switches are consumers that are buying an iPhone for the
Speaker 8: first time, or they're switching from another handset maker to iPhone.
Speaker 8: Maybe they've had one in the past, but they're switches.
Speaker 8: And so what we concluded from that was China was
Speaker 8: growing because people were moving to iPhone and this story
Speaker 8: in literally the last week or so has changed that narrative.
Speaker 8: And as Dan kind of pointed out, we don't know
Speaker 8: the number of handsets. You can try to calculate, but
Speaker 8: it's going to be interesting to see how the Chinese
Speaker 8: consumer reacts.
Speaker 1: Let's face it, we have a few months here before
Speaker 1: the holidays, we have these new products coming out. It
Speaker 1: could really change things. Let's talk about what is happening
Speaker 1: at Apple headquarters that's coming Tuesday. What are you expecting
Speaker 1: to see in these new products.
Speaker 8: Yeah, we're excited to be down in Cupertino at Apple HQ.
Speaker 8: The event is called wonder Lust. We actually don't have
Speaker 8: a really clear handle on why, but this is the
Speaker 8: biggest event of the year, and it's all about the
Speaker 8: iPhone fifteen. And like Apple was done with prior generations,
Speaker 8: there will be four individual submodels of the fifteen generation.
Speaker 8: Two base models iPhone fifteen and iPhone fifteen plus a
Speaker 8: plus sized version six point seven inch screen, and then
Speaker 8: the Pro models. And the Pro model is everything. It's
Speaker 8: so important. Higher average selling price consumers tend to favor
Speaker 8: those kind of very tech heavy, substantive upgrades. And you
Speaker 8: know with the Pro you will get an iPhone fifteen
Speaker 8: Pro and an iPhone fifteen Pro Max. All according to
Speaker 8: Bloomberg's reporting, and in particular, I shout out my good
Speaker 8: friend and colleague Mark German because he always scoops this
Speaker 8: stuff ahead of time. And there are two key things
Speaker 8: about the iPhone on the Pro side, the Pro and
Speaker 8: Pro Max, higher spec materials. We're going to have titanium
Speaker 8: around the edges instead of aluminum or stainless steel, so
Speaker 8: a higher quality but lighter weight product, a slightly wider screen.
Speaker 8: They're called bezels, the sort of edge of the phone
Speaker 8: the screen will stretch further. But then I'm a geek, right,
Speaker 8: I love the compute, I love the processors to look
Speaker 8: out for what they talk about, the proprietary silicon and
Speaker 8: again what drives upgrades in the smartphone market. It's real
Speaker 8: cutting edge tech. In this generation of iPhone fifteen Pro,
Speaker 8: we expect Apple's own a seventeen processor, the latest processor
Speaker 8: they do, built on three nanometer technology that will give
Speaker 8: it faster processing. It will give a greater memory bandwidth
Speaker 8: in conjunction with the memory chips. But also we're looking
Speaker 8: at the next generation of RF or radio frequency chip
Speaker 8: as well, the U two across all of them Pro
Speaker 8: and the base model fifteen's that will give it just
Speaker 8: better connectivity and in short medium range, which if you
Speaker 8: care about those things, right, and beyond that, some OS
Speaker 8: and functionality update as well.
Speaker 2: Also a refreshed Apple Watch AirPods. There may be news there.
Speaker 8: Yeah, so the air pods are kind of getting a
Speaker 8: slight refresh. I think the big thing we missed on
Speaker 8: iPhone and I apologize I should have got to it sooner.
Speaker 8: But is that we're going to go back to us
Speaker 8: or we're going too USBC charging, So everyone out there
Speaker 8: that's sort of insanely furious, like HI about how many
Speaker 8: different charges you have to use every day? Apple is
Speaker 8: moving the iPhone to USBC, which is substantive, right, It's
Speaker 8: going from thirty pen to lightning to now USBC, and
Speaker 8: the air pods will also get that USBC upseight and
Speaker 8: that's pretty much it beyond the software at the AirPods
Speaker 8: and then very modest changes to Apple Watch two updated
Speaker 8: lines series nine forty one millimeter forty five millimeter and
Speaker 8: then a second generation Ultra forty nine millimeter in size.
Speaker 8: So it's slight tweaks, but the real updates are in
Speaker 8: the iPhone.
Speaker 1: Well, there is a lot to look forward to, ED,
Speaker 1: and be sure to tune into Bloomberg Technology weekdays at
Speaker 1: noon on Bloomberg Television, and ED is going to be
Speaker 1: in Cooper Tino at Apple Headquarters this Tuesday, following all
Speaker 1: the action on Bloomberg TV. Coming up on Bloomberg Day
Speaker 1: Break weekend, we head to Europe and preview the upcoming
Speaker 1: ECB decision.
Speaker 2: I'm Tom Busby. This is Bloomberg.
Speaker 1: This is Bloomberg Daybreak, weekend, our global look ahead at
Speaker 1: the top stories for investors in the coming week. I'm
Speaker 1: Tom Busby in New York. And up later in our
Speaker 1: program a look at the market recovery in China. But first,
Speaker 1: the European Central Bank meets in the coming days, where
Speaker 1: policymakers will decide whether or not to prolong the most
Speaker 1: aggressive bout of monetary tightening in its history. Investors are
Speaker 1: split on whether or not the ECB will pause, as
Speaker 1: the latest data show the pace of price increases are
Speaker 1: slowing along with the downturn in the services sector.
Speaker 2: For more, let's go.
Speaker 1: To London and bring in Bloomberg Daybreak europe Banker Caroline
Speaker 1: Hepger Tom.
Speaker 3: To pause or not to pause is the question that
Speaker 3: ECB policymakers will be mulling in the run up two
Speaker 3: thursdays rate decision. A chorus of Governing Council members have
Speaker 3: in recent days been reiterating their desire to hike interest
Speaker 3: rate in another point, to bring down inflation in Europe,
Speaker 3: but there are others who are worried that the effects
Speaker 3: of the last nine hikes are starting to take their
Speaker 3: toll on the economy well. Economic growth remains resilient in
Speaker 3: the second quarter. In the twenty member euro Area, the
Speaker 3: latest PMI surveys have shown the services sector following manufacturing
Speaker 3: into a downturn. I've been discussing this with Bloomberg's ECB
Speaker 3: reporter Jana Randau and our senior Euro Area economist David Powell.
Speaker 3: I started by talking to Yanna about her expectations, having
Speaker 3: spoken to the Dutch Central Bank governor class Not, who
Speaker 3: told Bloomberg that investors betting against the rate hike maybe
Speaker 3: underestimating the likelihood of it happening.
Speaker 7: Well, I think he actually describes the controversy or the
Speaker 7: challenges rather well. He didn't say raids will rise, nor
Speaker 7: did he say raids will be on hold. Reading between
Speaker 7: the lines, I sensed a slight preference for another hike,
Speaker 7: but he was very clear in saying it is complicated. Right,
Speaker 7: the inflation outlook proves to be disappointing. It's sticky, it's
Speaker 7: not coming down as quickly as they want. At the
Speaker 7: same time, economic surveys point to a very quick deterioration
Speaker 7: in the economic outlook. Hard data is so far, he
Speaker 7: said on quite showing that yet the second quarter GDP
Speaker 7: figures were actually rather promising. The labor market is holding up,
Speaker 7: the housing market seems to have bottomed out. So so
Speaker 7: a very very tricky situation. And we've heard, of course,
Speaker 7: from from policymakers from from across the spectrum. We've had
Speaker 7: the very hawkish people, the Slovak Central Bank governor speaking
Speaker 7: about the need for one more hike and preferably preferably
Speaker 7: in September. We heard from Mario sent In or the
Speaker 7: Portuguese saying downside rescus some materializing. So the spectrum is
Speaker 7: rather wide and it's very difficult, but I think not
Speaker 7: view of ever so slightly preferring a move in September,
Speaker 7: that is where I would put my.
Speaker 3: Money, Okay, really between the lines and of the ECB officials, David,
Speaker 3: Inflation has been slowing in the Euro Area, but the
Speaker 3: economy is slowing down to how difficult a balancing act
Speaker 3: is the ECB facing.
Speaker 10: Well, the ECB's primary focus, in fact only focus really
Speaker 10: is inflation, unlike the Federal Reserve. So it's going to
Speaker 10: be it's going to look at that most and as
Speaker 10: Jhanna said, inflation remains very high. In fact, it is
Speaker 10: higher than they forecast when they last released their forecast
Speaker 10: in June. And also inflation expectation are very high despite
Speaker 10: the slow down in the economy. So we think they're
Speaker 10: going to hike again in September. And as Jana also highlighted,
Speaker 10: the some of the hawkish members have been speaking about
Speaker 10: that preference for a hike in September, and they probably
Speaker 10: know the window of opportunity will soon close to get
Speaker 10: a last hike in It's clear that the economy is
Speaker 10: facing a period of significant weakness and that's probably going
Speaker 10: to get worse in the second half of this year.
Speaker 10: There's not only the surveys, there's more forward looking indicators
Speaker 10: like the ECB's bank lending survey and data and credit
Speaker 10: that show the picture is getting worse. So they'll probably
Speaker 10: try to push this through now because it may be
Speaker 10: the last opportunity to do so.
Speaker 3: Yeah, Okay, Yana, how divided you think that the Council
Speaker 3: will be though on this decision?
Speaker 7: I would say the times when everybody agrees easily and
Speaker 7: is very happy with the outcome, those times are over.
Speaker 7: Do I expect big, big fight? Probably not, but but
Speaker 7: you do see different opinions emerging, and and very much
Speaker 7: along the Hawkish and Dorvish lines. You would you would
Speaker 7: expect with those in the dobbage camp really looking at
Speaker 7: the economy, at the risks, at at how demand is slowing,
Speaker 7: how the slowdown in China is affecting manufacturing, which if
Speaker 7: you believe the the p M I S is really
Speaker 7: really doing poorly. And and of course now that weakness
Speaker 7: is building into services to some extent. So the the
Speaker 7: eyes of the doves are really on those indicators, whereas
Speaker 7: the hawks do pay attention to to inflation expectations a
Speaker 7: little more uh to to the risk that that there
Speaker 7: is there is still upset risk to the inflation outlook.
Speaker 7: So I think by the end of it we will
Speaker 7: come out with an agreement with with the consensus, but
Speaker 7: it will be very difficult called to communicate and accommodate
Speaker 7: all those views and all those concerns. So I would say,
Speaker 7: you know, a little bit more politics if you want,
Speaker 7: is what it takes from from the president, from Christine
Speaker 7: Lagard and brokering that consensus. It won't be as easy
Speaker 7: because the path forward is not as obvious as it
Speaker 7: used to be.
Speaker 3: David, do you think that the diversions you say, this
Speaker 3: might may be you know, the last sort of chance
Speaker 3: of the central bank in Europe to raise rays the divergence?
Speaker 3: Is that going to be an issue for the euro?
Speaker 3: What happens if the ECB pauses, Well, the.
Speaker 10: Federal Reserve is probably done hiking, and that will also
Speaker 10: give the EAC be another reason to think about whether
Speaker 10: they want to continue hiking. So they don't. They don't
Speaker 10: have to worry about a huge surge in the euro
Speaker 10: if they were to if they were to kind of
Speaker 10: continue hiking, although there probably would be a reaction in
Speaker 10: the market because right now the market is not expecting
Speaker 10: a hike in September. It's only about a twenty percent
Speaker 10: probability of that priced in. So the immediate market reaction
Speaker 10: will probably be a higher euro, but it wouldn't be
Speaker 10: the start of some kind of very long trend of divergence.
Speaker 3: And just in terms of the outlook economically for Europe,
Speaker 3: you know, as we go into the end of this year,
Speaker 3: more importantly, our view on the economic performance next year.
Speaker 10: Next year will be will be a difficult year. We
Speaker 10: have all of these problems at the euro areas facing
Speaker 10: and not only the area, but the rest of the
Speaker 10: Western world, the United States, the United Kingdom in terms
Speaker 10: of tighter monetary policy and the full impact of that
Speaker 10: finally being felt. There is a long lag that comes
Speaker 10: with raising interest rates, so the pain will be more
Speaker 10: obvious towards the end of this year and into next year.
Speaker 3: David Okay, very interesting, Yanna. In terms of the ECB's
Speaker 3: inflation expectations survey, it showed that consumers see inflation at
Speaker 3: three point four percent of the next twelve months. How
Speaker 3: much of a problem is it, you know that this
Speaker 3: is how embedded are inflation expectations becoming for consumers and businesses.
Speaker 7: Yeah, I mean the rate or the expectations for the
Speaker 7: next year. You would expect that to still be high,
Speaker 7: just because inflation is still high and even official forecasts
Speaker 7: don't see it coming back to two percent over the
Speaker 7: next twelve months. So the ECB will look at the
Speaker 7: trajectory and see how that measure has actually come down,
Speaker 7: and it has come down quite a bit. What's slightly
Speaker 7: more interesting is the three year horizon, and there we've
Speaker 7: seen that number up and down over the past months,
Speaker 7: but the last move was up slightly, so our consumers
Speaker 7: slightly raised their expectations for inflation in three years, and
Speaker 7: that rate also still is quite significantly above two percent.
Speaker 3: That was Brian Beg's DCB reporter Jana Vanda and our
Speaker 3: senior year area economist David Powell from Bloomberg Economics. I'm
Speaker 3: Caroline hepget here in London. You can catch us every
Speaker 3: weekday morning for Bloomberg Daybreak you at beginning at six
Speaker 3: am in London. That's one am on Wall Street.
Speaker 1: Tom coming up on Bloomberg day Break weekend. China's economy
Speaker 1: is it slumping toward I rebound? I'm Tom Busby and
Speaker 1: this is.
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Speaker 1: I'm Tom Busby in New York with your global look
Speaker 1: ahead at the top stories for investors in the coming week.
Speaker 1: Ahead of a slew of Chinese economic data coming out
Speaker 1: next week, we take a look at that country's lackluster
Speaker 1: economic recovery, will affading economic momentum, and danger China's growth
Speaker 1: target this year. For more, Let's get to Bloomberg Daybreak
Speaker 1: Asia host Ryan Curtis.
Speaker 4: To China's growth is slowing, the REMMBE is weakening, imports
Speaker 4: and exports are slower, prices are falling, and youth unemployment
Speaker 4: is running above twenty percent. And in the coming week
Speaker 4: we're expecting more data on retail sales, factory output, and
Speaker 4: fixed asset investment, and few are expecting any kind of
Speaker 4: dramatic turnaround in that set. Looming above all of this
Speaker 4: as well is the property crisis. We caught up with
Speaker 4: Bloomberg columnist John Authers, who said, as bad as things
Speaker 4: are now, they could be a lot worse.
Speaker 11: The concerns for China or the worries about Chinese growth
Speaker 11: aren't having as big an effect on the rest of
Speaker 11: the world as they used to. This looks like a
Speaker 11: much more serious situation for China than twenty fifteen, when
Speaker 11: they're badly handled Chinese evaluation really did lead to a
Speaker 11: minor crisis that got very scary.
Speaker 4: So to take a look at how investors are responding
Speaker 4: to this weakness in the Chinese economy. Joining me is
Speaker 4: Tu Laning, Bloomberg's managing editor for Asia Stocks Leanink. Some
Speaker 4: might argue that it is worse now that China seems
Speaker 4: to be in a kind of secular and cyclical decline.
Speaker 4: What are you hearing from investors.
Speaker 12: A bit of a mixed views. I think the predominant
Speaker 12: view is that people are a parish and that is
Speaker 12: backed by data. The latest data that we saw from
Speaker 12: northbound flows into China as well as the prime brokers
Speaker 12: from Goldman, Sachs and Morgan Stanley. They've all shown that
Speaker 12: loan only investors and also hedge funds globally have been
Speaker 12: pulling money out of China and their positioning actually has
Speaker 12: lowered to the level just before the pandemic. So that's
Speaker 12: a pretty dismal sort of picture right now. But on
Speaker 12: the other side, we are also seeing an emergence of
Speaker 12: investors who are actually ready to have a bit of
Speaker 12: a tactical move into the Chinese equities because we did
Speaker 12: see it's not quite Bazuka, but some heavy measures from
Speaker 12: the Chinese government to support the housing sector, and there
Speaker 12: is some concrete evidence that people are actually lining up
Speaker 12: at least in mega cities like Beijing and Shanghai to
Speaker 12: buy homes. And that's sort of like the first concrete
Speaker 12: thing or evidence that we are seeing from all these
Speaker 12: stumulus measures for the housing sector that people are actually
Speaker 12: reacting to it. And some of them would just be speculation,
Speaker 12: as we saw in the you know, some of the
Speaker 12: property names on Wednesday, the likes of Evergrand and Sunak
Speaker 12: and Chumau and these.
Speaker 4: Yeah, we saw those big gains, you know, something like
Speaker 4: to sixty five to eighty three percent and everything. So
Speaker 4: you mentioned those measures about property, What specifically are investors
Speaker 4: looking for in terms of a catalyst that might spark
Speaker 4: a broader market recovery.
Speaker 12: Yeah, I think it all comes down to reviving demand
Speaker 12: from home buyers, right, And so far, basically people were
Speaker 12: disappointed because whatever the government was trying to do, demand
Speaker 12: is not coming back. We saw a few months of
Speaker 12: housing a sales slump from official data. But now we
Speaker 12: are actually seeing some kind of demand coming and it
Speaker 12: may not be quite animal spirit as of yet, but
Speaker 12: that's probably the initial science of some kind of warm
Speaker 12: up or revival of the market, and that if that
Speaker 12: can continue and that will show up in the September data,
Speaker 12: and that would really be the catalyst that people are
Speaker 12: looking for. And again it should not just show show
Speaker 12: up in one month's data. It would have to kind
Speaker 12: of last as well for people to actually engauge how
Speaker 12: much demand pantep demand there actually is among home buyers
Speaker 12: in China.
Speaker 4: In that furious rally that we saw after some of
Speaker 4: those measures, particularly that story in the Securities Times about
Speaker 4: more coming, we basically saw a lot of the developers
Speaker 4: that had been hit the hardest rebound sharply, but not
Speaker 4: so much for some of the steadier hands like China
Speaker 4: Overseas and China Resources Land. Is it the case that
Speaker 4: for those brave souls, they're just looking to make a
Speaker 4: quick buck on a quick recovery.
Speaker 12: Yeah, so far. That is a sense that we are
Speaker 12: getting by talking to the market participants. Yeah, these distressed
Speaker 12: and names such as Eragrant and Sunnak and Shima, their
Speaker 12: stock valuations are really really low. They've all become penny stocks.
Speaker 12: And even with yesterday's rally, bear in mind most of
Speaker 12: them still saw their stock prices drop more than seventy
Speaker 12: percent in the last couple of years. And I think
Speaker 12: for hedge funds, it's difficult to get into the distressed
Speaker 12: debt space because of the lack of liquidity, and of
Speaker 12: course in the stock market, there's still plenty of liquidity
Speaker 12: for them to take a punt at something that they
Speaker 12: think may actually generate you know, double or triple digit
Speaker 12: return in a short period of time.
Speaker 4: Outside of hedge funds who are quite opportunistic and looking
Speaker 4: for some quick gains. For asset managers and bigger investors
Speaker 4: to take a look at China, will they need to
Speaker 4: see domestic investors get bullish first, or will they dare
Speaker 4: to get.
Speaker 11: Out in front.
Speaker 12: Yeah, they're not coming back. I think that's just the fact.
Speaker 12: From everyone that we're talking to, all those major long
Speaker 12: only mutual fun especially global ones, very very few have
Speaker 12: said that they have the appetite to add China weight.
Speaker 12: The only exception I would say is GQG. They did
Speaker 12: say to us a few weeks ago that they're actually
Speaker 12: quite bullish on China tech stocks, and their timing I
Speaker 12: think was quite optune because since they said it, the
Speaker 12: tech stocks actually added about eight percent in value.
Speaker 4: We are still getting state media stories about tighter regulations
Speaker 4: in various industries. Will this spook investors once again?
Speaker 12: I think there is a difference between this wave of
Speaker 12: sort of tightening in regulation versus what we saw in
Speaker 12: the tech crackdown a year ago or two years ago.
Speaker 12: Right now, it's really targeted at sort of maintaining the
Speaker 12: fact that children will actually have you know, they won't
Speaker 12: be addicted, and parents can set them, can be comfortable
Speaker 12: with their kids using techy. So that is really catering
Speaker 12: to the needs of the citizens and their well being.
Speaker 12: So I would say that's slightly different from the kind
Speaker 12: of unpredictable crackdowns on all kinds of sectors a few
Speaker 12: years ago, and also from markets perspective, the latest tightening
Speaker 12: in the gaming addiction actually didn't have any impact at all.
Speaker 12: So all that I think overall has been priced in,
Speaker 12: and the broader view among investors about the tech regulation
Speaker 12: or the broader regulation is that China actually wants to
Speaker 12: support the domestic tech giants right now, and the main
Speaker 12: reason for that is to create jobs because, as you know,
Speaker 12: the youth unemployment is at the au tum high right now, yeah,
Speaker 12: and it.
Speaker 4: Was the tech giants that were most appealing to a
Speaker 4: lot of Western investors in the past. Let's go back
Speaker 4: to John Authurs, because one of the things he was
Speaker 4: concerned about was whether or not the turmoil that we've
Speaker 4: seen in the China markets was spreading outward. Let's hear
Speaker 4: again from our columnist John.
Speaker 11: Authors, the fact a lot of Western investors have already
Speaker 11: abandoned their direct exposure to China. The emphasize direct because
Speaker 11: everybody has a lot of indirect exposures as well. That
Speaker 11: fact has something to do with why it hasn't really
Speaker 11: impeded other global markets.
Speaker 4: Is that another shoe to drop though? To Lienting that
Speaker 4: perhaps this would spread outward from China, this kind of market.
Speaker 12: Turmoil, I would say most of the people that we spoke
Speaker 12: to have said that they see limited impact from China
Speaker 12: slowdown to major Western economies like the US and Europe.
Speaker 12: Especially in the US. I think overall, US and China
Speaker 12: has been decoupling, and as you saw in the latest
Speaker 12: US export data, I think import data, I should say,
Speaker 12: China accounted for I think a much smaller portion than
Speaker 12: it accounted for in twenty eighteen. And also there is
Speaker 12: a bit of a decoupling between the two nations banking
Speaker 12: system as well, so from both the you know, export
Speaker 12: link and the banking link, there is actually not a
Speaker 12: huge amount of China influence or you know, us exposure
Speaker 12: to China that investors are really worried about right now.
Speaker 4: Venting, thanks so much for joining us. Tulian Ting, Bloomberg's
Speaker 4: Managing editor for Asia stocks him Brian Curtis, along with
Speaker 4: Doug Chrisner. You can catch us every weekday here for
Speaker 4: Bloomberg Daybreak Asia, beginning at six am in Hong Kong
Speaker 4: and six pm on Wall Street.
Speaker 1: Tom, Thanks Brian, and coming up here on Bloomberg day
Speaker 1: Break Weekend, we head to the nation's capital for a
Speaker 1: look at the biggest political stories in the upcoming week.
Speaker 1: I'm Tom Busby, and this is Bloomberg. This is Bloomberg
Speaker 1: day Break Weekend, our global look ahead at the top
Speaker 1: stories for investors in the coming week. I'm Tom Busby
Speaker 1: in New York. The House reconvenes this week, and top
Speaker 1: of the agenda is an impending government show down. For more,
Speaker 1: let's add to our Bloomberg ninety nine one newsroom in
Speaker 1: Washington and Bloomberg sound On co host Kaylee Lines.
Speaker 5: That's right, Tom, They're coming back the House of Representatives.
Speaker 5: That is, after a long August recess which still wasn't
Speaker 5: short of drama. Congressmen and women will be returning to
Speaker 5: Capitol Hill next week, but they'll come back into session
Speaker 5: this coming Tuesday with a big deadline looming on the horizon.
Speaker 5: A clock is ticking quite loudly trying to avert a
Speaker 5: government shutdown before funding runs out on September thirtieth. Joining
Speaker 5: us now with more of the preview is Mike Dorning,
Speaker 5: Bloomberg News Deputy Congressional Editor. So Mike, first of all,
Speaker 5: let's just talk about the clock. There's what eleven legislative
Speaker 5: days between when they come back and when that deadline is.
Speaker 13: That's about right. They have until September thirtieth, and then
Speaker 13: the government funding runs out, so the government will shut
Speaker 13: down October first if they can't agree to something.
Speaker 5: So that's if they can't pass all twelve appropriations bills
Speaker 5: that they need to, or if they are unable to
Speaker 5: pass a continuing resolution basically just punt kick it down
Speaker 5: the road. It being the can if it's a continuing
Speaker 5: resolution that they want to pursue. What questions are there
Speaker 5: around that.
Speaker 13: Well, one of the key questions is whether they can
Speaker 13: get enough of the House Conservatives to agree to a
Speaker 13: continuing resolution that Speaker McCarthy's willing to put it on
Speaker 13: the floor. They can easily get something like that passed
Speaker 13: through the Senate. The Republican leader in the Senate has
Speaker 13: already said he's for it. It's in the House where
Speaker 13: although there's plenty of votes for it, it's a question
Speaker 13: of how much Speaker McCarthy's willing to anger the Conservatives.
Speaker 13: And then it's a question of what will be in
Speaker 13: the continuing resolution and what won't That could be a
Speaker 13: key issue.
Speaker 5: Well, in one of those issues is in regard to
Speaker 5: Ukraine funding. And this is where there seems to be
Speaker 5: a lot of daylight even between Republicans, as you say,
Speaker 5: in the House and then in the Senate. Can you
Speaker 5: walk us through that issue in particular, and where especially
Speaker 5: those on the far right end of Republicans in the
Speaker 5: House are on this.
Speaker 13: Absolutely. Traditionally Republicans had been very strong on defense, and
Speaker 13: that's what where the Senate Republicans are coming from, that
Speaker 13: old Reagan Esque project American military power in the House
Speaker 13: on the far right, there's a lot of unease with
Speaker 13: the American support for Ukraine, and there there's opposition to
Speaker 13: sending more money to Ukraine, and House Speaker McCarthy has
Speaker 13: puoted the idea of stripping that out and separately having
Speaker 13: a bill that would require Biden to meet demands on
Speaker 13: border enforcement and changes in asylum policy and other immigration
Speaker 13: issues if they're going to give more money to Ukraine.
Speaker 5: So all of this to say, it's going to be
Speaker 5: really complicated threading this needle trying to get enough support
Speaker 5: even for a cr let alone an actual spending package
Speaker 5: at the end of the day. So at the moment,
Speaker 5: how likely does a government shutdown seem.
Speaker 13: Certainly looking like a bigger risk because there are these problems,
Speaker 13: there's these fights, This idea that McCarthy has raised to
Speaker 13: tie Ukraine aid to border and force some policy all
Speaker 13: make a shutdown more likely. That said, in Congress, a
Speaker 13: lot of times all this gets resolved at the last minute,
Speaker 13: So we really won't know for sure until a day
Speaker 13: or two before the shutdown how likely it is.
Speaker 5: So waiting until the clock is at like eleven fifty
Speaker 5: eight before it strikes or.
Speaker 13: At least you know, maybe the same day, as often
Speaker 13: the case, before you know what's going on now here.
Speaker 13: One likely scenario is they just punt the issue down
Speaker 13: the road for six, eight, ten weeks. So if that happened,
Speaker 13: the whole drama begins again.
Speaker 5: I'm sensing a theme here. Mike Dawning bloo whty can
Speaker 5: christ over exactly, Thank you very much, and Tom get
Speaker 5: ready for the shutdown showdown.
Speaker 1: Thank you, Kaylee. That was Bloomberg's sound on co host
Speaker 1: Kaylee Lines, reporting from our Bloomberg ninety nine one newsroom
Speaker 1: in Washington, and you can hear sound on weekdays one
Speaker 1: to three pm on Bloomberg Radio. And that does it
Speaker 1: for this edition of Bloomberg day Break Weekend. Join us
Speaker 1: again Monday morning at five am Wall Street Time for
Speaker 1: the latest on the market's overseas and the news you
Speaker 1: need to start your day.
Speaker 2: I'm Tom Buzzby. Stay with us.
Speaker 1: Top stories and global business headlines are coming up right now.