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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak

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Speaker 1: Asia podcast. I'm Doug Chrisner. Equity markets across the Asia

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Speaker 1: Pacific are trading somewhat cautiously on the first session of

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Speaker 1: twenty twenty six. Volumes today will likely be thin. We

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Speaker 1: have a number of regional markets shut for holiday, including

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Speaker 1: Japan and China, and South Korea had a delayed opening.

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Speaker 1: Joining me now for a look at what we see

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Speaker 1: on the horizon is Bloomberg's Paul Dobson, Executive Editor for

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Speaker 1: Asia Markets. Paul joins us from our studios in Singapore.

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Speaker 1: Thank you for being here. Happy New Year to you.

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Speaker 1: Last year, global equities posted their strongest years since about

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Speaker 1: twenty nineteen, and I'm curious to get your take on

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Speaker 1: what you're hearing in terms of the outlook for equity

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Speaker 1: markets in Asia this year.

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Speaker 2: Yeah. So, I think the globally, the sentiment remains relatively

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Speaker 2: positive for equities going into the new year. I think

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Speaker 2: the Asia's markets fed pretty well, partly with the dollar

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Speaker 2: weakening as on, sort of like people spread their bets

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Speaker 2: a little bit wider than just the US That helped

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Speaker 2: lift Asia's markets and Chinese equities in general seem to

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Speaker 2: get some positive momentum from the AI story in particular

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Speaker 2: and advanced technological developments more broadly as well, so there

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Speaker 2: was a little bit more positive sentiment there too. That

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Speaker 2: being said, you know, the fact that we've had decent

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Speaker 2: gains does the valuations looking a little bit more stretched.

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Speaker 2: We saw some doubts, for example, in South Korea, some

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Speaker 2: wobbles after its extremely strong gains this year, so there

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Speaker 2: is a little bit more of a hurdle to overcome

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Speaker 2: in terms of that valuation and in terms of the outlook.

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Speaker 2: So more positive news is likely to be needed in

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Speaker 2: order to continue to keep things on an upward trajectory.

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Speaker 1: So you mentioned South Korea there. Talk to me a

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Speaker 1: little bit about what we learned the other day with

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Speaker 1: the export data. I think this semiconductor arena was particular

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Speaker 1: gularly strong.

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Speaker 2: Yeah, still looking strong for South Korea, and that's a

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Speaker 2: good kind of guideline for the rest of the region.

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Speaker 2: If South Korea is doing well, then it tends to

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Speaker 2: sort of mimic the other tech heavy centers Japan, Taiwan

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Speaker 2: and China in a sort of more roundabout way as well.

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Speaker 2: So I think that that's interesting in the context of

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Speaker 2: the Trump tariffs that we've seen this year. Of course,

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Speaker 2: in the middle half of last year there was concern

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Speaker 2: about how damaging that was going to be for the economy,

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Speaker 2: particularly across Asia, but so far most places seem to

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Speaker 2: have ridden that out pretty well. So for example, in

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Speaker 2: Singapore today, you know, we had a final GDP numbers

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Speaker 2: for the year looking strong as well, despite it being

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Speaker 2: a kind of global trade center and very much dependent

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Speaker 2: on those flows. Part of it seems to be China's

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Speaker 2: ability to reroot its own exports more towards Europe that

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Speaker 2: seems to have helped, and also the kind of using

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Speaker 2: more Asian nations as transit hub as well. But nonetheless,

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Speaker 2: it will partly depend on how strong that US consumer

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Speaker 2: remains and how much that appetite for imports despite the

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Speaker 2: extra cost from the tariffs, will be through the year ahead.

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Speaker 2: Career of course, you know, as you said, though tech heavy,

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Speaker 2: and so that also ties in with that AI story

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Speaker 2: much more strongly too.

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Speaker 1: So we recently got the official PMI data for China.

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Speaker 1: The bright spot seemed to be on the manufacturing side,

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Speaker 1: with factory activity expanding for the first time in nine months.

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Speaker 1: I think the official PMI reading was just above fifty

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Speaker 1: to fifty point one. Was that a big surprise.

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Speaker 2: It was an upward surprise, suddenly credative to where analysts

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Speaker 2: were looking for it. I think there was a little

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Speaker 2: bit of cynicism about the number as well, given you know,

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Speaker 2: kind of the positive scene that it puts on things

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Speaker 2: going into year ends. Nonetheless, you know, Chinese exports again

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Speaker 2: have held up reasonably well, that's not really the concern.

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Speaker 2: The concern is still that domestic demand side of things

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Speaker 2: and whether there is the potential to kind of rebalance

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Speaker 2: the economy a little bit more in favor of the

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Speaker 2: consumer this year. And what we've seen in terms of

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Speaker 2: the support for that is a continuation of their trade

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Speaker 2: in program a little bit like the US is cash

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Speaker 2: for Clunkers program, So some more money being pledged for

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Speaker 2: that into the start of this year, and you know,

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Speaker 2: the government will continue to talk about that, but it

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Speaker 2: still seems to be emphasizing more advanced technologies and industry

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Speaker 2: as being the real engine for growth and for competitive

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Speaker 2: sort of global standing as well into the year ahead.

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Speaker 1: So, Paul, when it comes to technology in China, a

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Speaker 1: lot of the focus in the IPO market has been

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Speaker 1: on the chip makers. I think we have another IPO

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Speaker 1: today in Hong Kong. This is the chip designer be Run.

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Speaker 1: It's trading for the first time today. Right.

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Speaker 2: It was trading higher in gray markets before official trading begins,

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Speaker 2: and it was several times over subscribed, more than several times.

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Speaker 2: It was very heavily over subscribed. So we have that

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Speaker 2: one going off. Most of the recent sort of mid

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Speaker 2: size IPOs I guess you would call this one have

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Speaker 2: gone off pretty well and seen decent first day gains

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Speaker 2: on the Hong Kong Stock Exchange, and so you know,

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Speaker 2: the expectation is that this will be a continuing trend.

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Speaker 2: And there's more Chinese main lane companies pipelined to list

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Speaker 2: in Hong Kong in the coming year. Today we heard

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Speaker 2: the Baydu's AI unit is looking to do similar and

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Speaker 2: there's also more technology companies in mainland China are looking

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Speaker 2: to do first time IPOs as well. So strong enthusiasm

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Speaker 2: for that to get that cash in to continue to

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Speaker 2: fuel that development and growth in the sector.

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Speaker 1: So we also had the sales target released from the

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Speaker 1: Chinese ev maker BYD. The company met. What do we

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Speaker 1: know about where BYD is now relative to Tesla.

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Speaker 2: Let's say I was looking at those numbers. Actually I

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Speaker 2: was surprised, even though I know, we know that the

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Speaker 2: trend is established and the BYD is on and up

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Speaker 2: and up, and Tesla's sort of seeing a little bit

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Speaker 2: of a diminishing output at the moment to people looking

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Speaker 2: for Tesla numbers which should be released today and expecting

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Speaker 2: quite a big drop. And so the gap between total

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Speaker 2: vehicle production and sales by BYD and Tesla continues to

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Speaker 2: push higher, which sort of talks to one the cost

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Speaker 2: advantages that Chinese companies have and to the popularity of

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Speaker 2: those byds, some of them cheaper than Tesla's as a

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Speaker 2: sort of alternative choice for consumers.

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Speaker 1: And we recently had the industrial profits data for China

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Speaker 1: for the month of November a drop of thirteen point

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Speaker 1: one percent year on year. That's got to be worrisome, Yeah, worrisome.

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Speaker 2: I don't know, you know, you have to tally that

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Speaker 2: off against the positive PMI data. I think that the

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Speaker 2: fourth quarter was a little bit more of a tough

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Speaker 2: one for China, but nonetheless, you know, the as so

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Speaker 2: long as those exports are holding up and they're still

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Speaker 2: continuing and demand in that space. Then overall, you know,

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Speaker 2: Chi jimping didn't seem particularly worried about GDP. It hit

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Speaker 2: its five percent target. Seems to be the case more

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Speaker 2: or less for twenty twenty five. Were expecting probably a

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Speaker 2: target of you know, sort of just below five percent

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Speaker 2: again for this year most likely. And I think that

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Speaker 2: that talks to the idea that China doesn't feel that

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Speaker 2: it needs to push particularly hard to drive stronger growth

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Speaker 2: at the moment, and so you know the policy support

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Speaker 2: that we're seeing. Yes, people are expecting some easing this year,

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Speaker 2: but they're not expecting a whole lot in that space.

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Speaker 1: So when it comes to technology, we talked a little

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Speaker 1: bit about the AI story. I'm also wondering about some

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Speaker 1: of the big intranet firms in China. Are there any

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Speaker 1: reasons to be cautious on Chinese tech in the new year?

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Speaker 2: Great, great question. Well, it's competitive, for one thing, so

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Speaker 2: particularly in among those platform companies in the food delivery

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Speaker 2: space and that kind of thing. You know, they've been

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Speaker 2: trying to compete on market share by driving prices ever low,

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Speaker 2: and the authorities have expressed some dissatisfaction with that, seeing

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Speaker 2: as a sort of competition for the sake of competition

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Speaker 2: rather than driving growth and innovation. So that's one thing

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Speaker 2: that's definitely been holding them all back as a whole

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Speaker 2: and creating some sort of mixed performance that we've seen

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Speaker 2: over that year. I think, you know, the strength of

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Speaker 2: the consumer is going to be a really big question

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Speaker 2: that continues to hang over China and that sort of

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Speaker 2: well what we've been calling involution, you know, that very

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Speaker 2: strong price competition that's been hurting retailers more broadly, Whether

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Speaker 2: the authority steps to curb that in various spaces, you know,

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Speaker 2: not just the sort of online retail environment, but right

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Speaker 2: across industry in general, whether that can be successful. This

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Speaker 2: time last year, I think, Doug, if you remember, we

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Speaker 2: were talking very much about this idea of the Japanification

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Speaker 2: of China, that sort of concern seems to have dissipated somewhat.

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Speaker 2: It's still there as a sort of long term worry,

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Speaker 2: but it does seem like some of the measures that

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Speaker 2: were taken in twenty twenty five to address that were

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Speaker 2: successful to a reasonable extent.

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Speaker 1: Paul, great stuff. We'll leave it there, Thank you so much.

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Speaker 1: Paul Dobson, Executive Editor for Asia Markets at Bloomberg joining

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Speaker 1: from our studios in Singapore. Here on the Daybreak Asia podcast.

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Speaker 1: Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.

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Speaker 1: In his New Year's Eve message, Chinese President Chi Chen

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Speaker 1: Pang highlighted the achievements of China's large language models, as

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Speaker 1: well as the research and development in semiconductors. She said

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Speaker 1: that China has become one of the economies with the

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Speaker 1: fastest growing innovation capabilities. Let's take a closer look at

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Speaker 1: the tech story in China. I'm joined by Stephanie Leung

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Speaker 1: Cio at Stashaway. Stephanie joins from our studios in Hong Kong.

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Speaker 1: Thank you for being here. Can you describe for me

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Speaker 1: the difference in the ways in which the Americans are

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Speaker 1: approaching artificial intelligence versus the Chinese.

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Speaker 3: I think there's a perhaps of a philosophical difference in

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Speaker 3: terms of the end goal where the US is pursuing

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Speaker 3: versus where the Chinese are pursuing and the I guess

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Speaker 3: if you look at the US companies, all of them

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Speaker 3: are talking about when are we going to reach a GI.

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Speaker 3: There's a debate on the timeline, but the end goal

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Speaker 3: is the same, right. Everybody is sort of looking at

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Speaker 3: that and seeing it as the grand price, whereas in

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Speaker 3: China there's actually no talk of AGI. In China, there's

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Speaker 3: a lot of talks about, oh, how do we use

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Speaker 3: AI in uh the in manufacturing and automating our factories,

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Speaker 3: in producing robots and enhancing manufacturing processes, in finding new drugs.

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Speaker 3: So I think in China, the application of AI is

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Speaker 3: the end goal, is the pursuit that the Chinese is

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Speaker 3: going after, not necessarily having the best and the most

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Speaker 3: intelligent model.

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Speaker 1: We've recently seen some pretty amazing I pos for AI

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Speaker 1: chip companies on the Chinese mainland, and I'm trying to

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Speaker 1: understand how much of this is tied to enthusiasm or

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Speaker 1: excitement for the actual technology, or whether this is more

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Speaker 1: of an illustration of this casino type mindset that may

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Speaker 1: be existing in the Chinese equity market. Yeah.

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Speaker 3: I think anytime you put things into the Chinese equity market,

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Speaker 3: there's a bit of both, Right, there's a bit of

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Speaker 3: the real story, the real investments, but also there's a

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Speaker 3: lot of speculative sort of element, given that there isn't

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Speaker 3: a lot of I guess outlets for capital to go

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Speaker 3: to kind of get exposure in the Chinese market. But

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Speaker 3: I mean I think the government is actually very very

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Speaker 3: much deteriment to invest in the air industry, particularly the

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Speaker 3: chips industry, because if you think about I guess, the

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Speaker 3: building blocks of modern industrialization of kind of technology and

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Speaker 3: enable manufacturing these AI chips is actually like the new oil, right,

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Speaker 3: you need these AI chips to be able to automate

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Speaker 3: the factories that build the robots. So I think the

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Speaker 3: investments into these AI companies or this industry is real. However,

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Speaker 3: I think we need to invest us. What we need

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Speaker 3: to see is actually earnings growth and margins, right, And

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Speaker 3: I think that's a big question mark in the Chinese

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Speaker 3: industry because if you look at kind of I guess

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Speaker 3: how the government is pursuing industrial growth or kind of

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Speaker 3: I guess economic growth and social welfare, they are encouraging

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Speaker 3: price competition in a lot of industries.

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Speaker 1: At the same time, companies in China on the robotics

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Speaker 1: side seem to be very very aggressive. Is that a

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Speaker 1: trend that you expect to continue?

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Speaker 3: Yes, definitely. And if you look at I guess in

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Speaker 3: the US, I mean Tesla is saying that they will

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Speaker 3: have commercial productions of robots and autonomous driving is also

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Speaker 3: a big part of this, right, So I think China

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Speaker 3: definitely wants to be a leading player and wants to

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Speaker 3: be a dominant player in this field. And if you

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Speaker 3: think about the Chinese policy of economic growth is still

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Speaker 3: export driven, and this is a big part where China

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Speaker 3: can produce a lot of advanced robotics, a lot of

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Speaker 3: advanced drones, and I guess autonomous evs using is very

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Speaker 3: very cheap source of power, and it's like sort of

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Speaker 3: source of cheap chips and source of chip labor. So

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Speaker 3: this is going to be a very important strategic development

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Speaker 3: for China going forward.

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Speaker 1: What about future industries and I'm thinking about commercial space exploration,

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Speaker 1: quantum computing. You mentioned kind of nuclear reactors. I'm wondering

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Speaker 1: about nuclear fusion. Are these areas that are really top

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Speaker 1: of mind, I think for the government to try to

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Speaker 1: invigorate and to help power the economy.

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Speaker 3: I mean nuclear is already well into implementation phase. I

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Speaker 3: think there's isn't any question about just building up all

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Speaker 3: these nuclear power plants to support the new economy of China.

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Speaker 3: As as I think quantum goes, there's a bit of

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Speaker 3: u there's a I think a lower kind of emphasis

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Speaker 3: on that, because, as I mentioned in the beginning, right,

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Speaker 3: the philosophy of the Chinese is the is the the

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Speaker 3: higher end application the manufacturing industrialization, and it's I mean quantum.

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Speaker 3: Of course, there's been a lot of exciting developments, but

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Speaker 3: still it's still quite far away from being able to

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Speaker 3: be applied to the industry. So I think that is

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Speaker 3: not perhaps what the Chinese government wants to pursue in

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Speaker 3: the short term. But of course, if quantum computing makes

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Speaker 3: a big leave and it gets into applications sooner than

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Speaker 3: I think, I mean, the Chinese will be very very

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Speaker 3: quick to catch up.

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Speaker 1: What about space exploration or space travel of some sort.

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Speaker 3: Yeah, I think, I mean we're starting to see some

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Speaker 3: applications of I guess space usage in manufacturing and new

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Speaker 3: empower kind of production. So, for example, in the US,

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Speaker 3: I think there's been some ideas being floated as to

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Speaker 3: brain data centers into space. I mean that solves a

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Speaker 3: lot of problems, solves the cooling problem, solves the power problem,

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Speaker 3: because I mean you can actually get power from the

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Speaker 3: Sun like twenty four seven, and space being I guess

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Speaker 3: vacuum place, it's the best for cooling stuff. So I

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Speaker 3: think there's been some ideas being floated as far as

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Speaker 3: China goes. Again, if we go back to the root

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Speaker 3: of the China industrial production, it's always been about having

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Speaker 3: abundant resources to be able to produce at the lowest

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Speaker 3: costs as scale. So if we apply that lens to space,

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Speaker 3: I mean that's still not I think that's still a

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Speaker 3: bit far away from being able to produce at mass

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Speaker 3: at lower costs. So I think China again, it's something

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Speaker 3: that's definitely on the Chinese radar, But as far as

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Speaker 3: I kind of making real investments, I think we're still

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Speaker 3: some time away.

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Speaker 1: So we've talked about some of the reasons to be

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Speaker 1: optimistic about the Chinese economy in the new year, let's

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Speaker 1: talk a little bit about the reasons to be pessimistic.

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Speaker 1: And I'm thinking about the property market in particular. Is

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Speaker 1: that still going to be, in your view, a major

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Speaker 1: overhang for the foreseeable future.

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Speaker 3: Yeah, I think if we look at the data, I

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Speaker 3: mean probably prices are still kind of falling and there's

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Speaker 3: no sign of sustainable recovery. More importantly, if you look

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Speaker 3: at the inflation data in China mostly, I guess, for example,

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Speaker 3: we've looked at the PPI, it's still in negative territory,

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Speaker 3: and given this kind of trend of price cutting and

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Speaker 3: price competition going on in China, I mean it seems

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Speaker 3: like the government is actually okay with it. They're not

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Speaker 3: looking to end the deflation cycle anytime soon. And as

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Speaker 3: equity investors, when we look at kind of company earnings

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Speaker 3: and revenues and prices, of course, I mean that's inenominal value.

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Speaker 3: So if an economy is still in deflation, I think

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Speaker 3: it's hard for us to see like a broad recovery

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Speaker 3: in in the in the overall economy. And of course

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Speaker 3: property is still in overhang, not just from a kind

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Speaker 3: of a data perspective, but also from a sentiment perspective,

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Speaker 3: given it a lot of wealth is actually held there. Also,

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Speaker 3: corporates have still fairly low confidence in the economy and

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Speaker 3: in the sustainable kind of recovery, and that takes some

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Speaker 3: time to recover.

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Speaker 1: Okay, Stephanie, always a pleasure. I hope you have a

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Speaker 1: great twenty twenty six. Stephanie Leung is at Stashaway, joining

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Speaker 1: us from Hong Kong here on the Daybreak Asia podcast.

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Speaker 1: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 1: Asia Edition podcast. Each weekday, we look at the story

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Speaker 1: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 1: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 1: or anywhere else you listen. Join us again tomorrow for

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Speaker 1: insight on the market moves from Hong Kong to Singapore

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Speaker 1: and Australia. I'm Doug Prisoner and this is Bloomberg