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Speaker 1: This is Bloomberg Daybreak Asia for this Wednesday, February eighth

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Speaker 1: in Hong Kong, Tuesday February seven in New York, and

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Speaker 1: coming up today, US equities rally after fetchare J. Powell's.

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Speaker 1: The remarks were less aggressive than feared by traders. Pallas's

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Speaker 1: interest rates need to keep rising if a strong labor

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Speaker 1: market persists, and Zoom will cut fifteen percent of its

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Speaker 1: workers as the service adapts to slower growth. The US

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Speaker 1: has China, refuses a call to discuss the balloon bounding

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Speaker 1: Biden to address China and the US economy and state

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Speaker 1: of the Union. Turkeeper claims emergency powers and the wake

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Speaker 1: of the twin quakes. I'm at Baxter with Global News.

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Speaker 1: The liv Golf series reveals some stunning financial news. Dan

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Speaker 1: Schwartz been I'll have that story more coming up in

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Speaker 1: Bloomberg Sports. That's all Straight Ahead on Bloomberg Daybreak Asia

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Speaker 1: on Bloomberg eleven and three on New York, Bloomberg Washington,

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Speaker 1: d C, Bloomberg one O six one, Boston, Bloomberg nine sixties,

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Speaker 1: sent frances Go Syrius Exam one nineteen and around the

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Speaker 1: world on Bloomberg Radio dot Com and via the Bloomberg

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Speaker 1: Business app. Good morning, I'm Doug Prisoner and I'm Brian Curtiz.

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Speaker 1: Here are the stories we're following today. The market seemingly

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Speaker 1: a little bit out of step with exactly what j

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Speaker 1: Pali said. He said that additional rate hikes will be

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Speaker 1: needed to bring down inflation, and he said the Fed's

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Speaker 1: key rate, the terminal rate, may need to peak above

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Speaker 1: a level previously expected. Here's Pal speaking with David Rubinstein

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Speaker 1: at the Economic Club of Washington. The labor market report

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Speaker 1: for January, it kind of shows you why we think

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Speaker 1: that this will be a process that takes a significant

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Speaker 1: period of time. The labor markets extraordinarily strong. If we

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Speaker 1: continue to get, for example, strong labor market reports or

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Speaker 1: higher higher inflation reports, it may well be the case

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Speaker 1: that we have to do more in race Hight likes

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Speaker 1: more than this price. Then. Pal also said that we

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Speaker 1: are seeing the early stages of disinflation. However, he acknowledged

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Speaker 1: he's probably going to be a bumpy ride ahead. Pal

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Speaker 1: said he will likely take until next year for the

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Speaker 1: FED to reach its two percent inflation target. And before

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Speaker 1: the Powell interview, the head of the Minneapolis Fed, Neil Cash,

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Speaker 1: Cary was saying policymakers need to keep hiking rates. Here's

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Speaker 1: cash Cary speaking on CNBC two. Were surprised by the

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Speaker 1: big jobs number. It tells me that so far we're

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Speaker 1: not seeing much of an imprint of our tightening to

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Speaker 1: date on the labor market. There's some evidence that it's

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Speaker 1: having some effect, but it's pretty muted so far. So

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Speaker 1: I haven't seen anything yet to lower my rate path.

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Speaker 1: Right now, I'm still at around five point four percent.

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Speaker 1: If I had to pick a number today, I'll do

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Speaker 1: where I was in December, alright, five point four and

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Speaker 1: cash Cary went on to say no one should overreact

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Speaker 1: to any singular report. He also said the underlying strength

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Speaker 1: of the services sector he is still very robust. We

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Speaker 1: were talking about the I s M Services Index coming

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Speaker 1: in way above estimates US Friday. Cash Cary thinks that's

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Speaker 1: where many FED officials are now focusing their attention. Brian

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Speaker 1: to Corporate News, a company that benefited from pandemic air

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Speaker 1: lockdowns is now slashing jobs. That story from Bloombridge Tom Busby.

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Speaker 1: With so many more workers back at the office, there's

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Speaker 1: not as much demand for video conferencing calls and now

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Speaker 1: Zoom Video Communication says it's cutting thirteen hundred jobs that's

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Speaker 1: about fift of its workforce because of slowing growth, and

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Speaker 1: CEO Eric Yuan, who said in a blog post that

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Speaker 1: he's accountable for the company's recent struggles, says they'll take

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Speaker 1: a pay cut and forego his annual bonus. Shares of

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Speaker 1: Zoom rose nearly ten percent in trading on Tuesday. Tom

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Speaker 1: Busby Bloomberg Daybreak Asia. We are told at Meta Platforms

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Speaker 1: is asking many of its managers and directors to transition

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Speaker 1: to jobs as individual contributors or leave the company. We

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Speaker 1: have more from Bloomberg's Charlie Pellett. Those sources say the

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Speaker 1: process is known internally as a flattening. Higher level managers

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Speaker 1: are sharing the directive with their subordinates incoming weeks, separate

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Speaker 1: from the company's regular performance reviews that are currently underway. Meata,

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Speaker 1: which owns Facebook and Instagram, fired thirtent of its workforce

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Speaker 1: in November during its first major layoff, and sources say

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Speaker 1: in the months since, staff of faced intense anxiety about

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Speaker 1: the potential for future cuts. In New York, Charlie Pellett

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Speaker 1: Bloomberg Daybreak Asia, Soft Bank posted a net loss of

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Speaker 1: seven eighty three point four billion yen or five point

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Speaker 1: nine billion dollars for the December quarter. Analysts had been

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Speaker 1: projecting profit of more than two hundred five billion yen

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Speaker 1: more from Bloomberg's David and Glaze. The key factor was

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Speaker 1: the Vision Fund. It has reported losses for four straight quarters.

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Speaker 1: The fund lost six hundred sixty billion yen on declining

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Speaker 1: valuations for companies in its investment portfolio. Now, to make

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Speaker 1: matters worse, the founder Masayoshi saw On skipped the earnings

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Speaker 1: call for the first time one record first off bank.

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Speaker 1: One of the keys to reigniting investment activity lies in

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Speaker 1: a successful I p O for ARM, that's the chip

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Speaker 1: design firm Sawn acquired back in. Saan says he wants

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Speaker 1: to focus on that task and that's why he'd skipped

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Speaker 1: the call. Analysts are skeptical. Saan says he still thinks

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Speaker 1: ARM can become the largest I p O by a

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Speaker 1: chip company ever. In Hong Kong. I'm David and Glass

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Speaker 1: bloom brig Day Brick Asia coming up in a few moments.

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Speaker 1: We will be chatting with Kin Pung, who is investment

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Speaker 1: strategies that city Private Bank Asia Pacific with us right

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Speaker 1: here in our studios in Hong Kong, Doug. I like

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Speaker 1: that data point you brought out about the earnings that

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Speaker 1: would seem to be a little bit positive for the bulls.

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Speaker 1: Here's another interesting read that if you look at inflation

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Speaker 1: year on year, it really doesn't tell you all that

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Speaker 1: much because you know who cares really what was happening

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Speaker 1: last year. The rolling three month core CPI is ump

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Speaker 1: about three at an annualized rate, and that's almost a two.

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Speaker 1: And remember what cash Cary had to say the lag

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Speaker 1: effect here on the FED rate hikes that are already

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Speaker 1: in the pipeline. A lot of this has not really

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Speaker 1: impacted the labor market yet. Information tech, I know we've

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Speaker 1: talked about it. It's been very hard hit. I think

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Speaker 1: that the total number of job cuts in the information

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Speaker 1: tech space since the beginning of the year right now

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Speaker 1: is probably just under around seventy thousand. There will be

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Speaker 1: more job losses, guarantee it. And we just cannot know,

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Speaker 1: um what the future holds in terms of the data.

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Speaker 1: And it was interesting to hear Pal talking about how

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Speaker 1: he's basically responding to the data and we all should

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Speaker 1: be doing that and not not placed too much hope

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Speaker 1: in what we expect the future holds all right, it

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Speaker 1: is time now for global news. The Pentagon says China

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Speaker 1: has cut off communication regarding the balloon downing by US

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Speaker 1: forces at Baxter has global news in the nine sixty

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Speaker 1: News from San Francisco, and yeah, that's exactly right, Brian.

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Speaker 1: The Pentagon saying that try has rebuffed all efforts by

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Speaker 1: Defense Secretary Lloyd Austin, especially when he tried to set

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Speaker 1: up a call with Defence Minister Wave Fun. The Pentagon

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Speaker 1: says the call was made right after the shootdown, but

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Speaker 1: in a statement now, it says the PCR has declined

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Speaker 1: any requests. The US says it wants to maintain open

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Speaker 1: lines of communication in his State of the Union addressed,

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Speaker 1: and I President Joe Biden will of course have to

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Speaker 1: address foreign relations, the war in Ukraine, which coincidentally broke

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Speaker 1: out right before last year's speech, and then the international

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Speaker 1: balloon incident with China. Republican Congressman Steve Sleey says that

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Speaker 1: Republicans are watching with a very critical eye, saying the

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Speaker 1: Bid administration acted much too late on the balloon. It

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Speaker 1: was still flying on its path, so it was getting

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Speaker 1: some kind of data from somewhere to nowhere to go?

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Speaker 1: Are you telling me it wasn't also sending information back

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Speaker 1: during that path? Should have never been allowed to complete

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Speaker 1: its mission. It's never been allowed to start its mission.

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Speaker 1: The Biden administration's past responses that it couldn't be shot

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Speaker 1: down over land. We'll watched for tonight. He's also expected

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Speaker 1: to to call for a minimum tax on billionaires and

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Speaker 1: to quadruple the levy on stock buybacks. He's intending to

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Speaker 1: walk the line addressing public concerns in the US and

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Speaker 1: trying to install a feeling of optimism about the future.

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Speaker 1: Congresswoman Deborah Ross, Democrat from North Carolina, on Bloomberg's Balance

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Speaker 1: of Power Today, says the address will show the president

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Speaker 1: is a dynamic fighter. We were in the middle of

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Speaker 1: a global pandemic. We had an insurrection at the Capitol.

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Speaker 1: I mean, when has that happened? Both of those things

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Speaker 1: at the same time. But despite that, the Biden administration

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Speaker 1: really fought back to get people back to work, back

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Speaker 1: to school. She says, accomplishments and plans for the future.

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Speaker 1: A Bloomberg coverage begins at eight thirty Wall Street Time

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Speaker 1: on all Bloomberg platforms. We will have it for you,

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Speaker 1: of course. On Daybreak Asia sounds of frantic searchers looking

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Speaker 1: for possible survivors in the quake in Turkey. The latest

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Speaker 1: death toll count now is over six thousand, with more

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Speaker 1: than eleven thousand buildings damaged, with people still trapped in

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Speaker 1: freezing temperatures. Thirteen point four million people live in the

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Speaker 1: areas affected by the quakes, and Turkey has declared a

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Speaker 1: three month state of emergency rules and although not disclosing

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Speaker 1: any specific threat for the super Bowl, Homeland Security Secretary

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Speaker 1: Alejandro Majorca says they prepare for and an imaginable scenario.

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Speaker 1: We have our personnel from our countering weapons of mass

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Speaker 1: destruction office, chemical and biological threats have depleted. The individuals

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Speaker 1: have deployed uh their equipment to make sure that the

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Speaker 1: air is save in secure. He says, no specific credible

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Speaker 1: threat against the super Bowl, but they need to be

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Speaker 1: prepared in every way. Global News powered by more than

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Speaker 1: journalists and analysts and over one d twenty countries in

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Speaker 1: San Francisco, I'm d Baxter and this is Bloomberg. This

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Speaker 1: is Bloomberg Break Asia and Brian Curtis along with Rashad

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Speaker 1: Salama and our guest is Kinpung, investment strategist at City

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Speaker 1: Private Bank Asia Pacific. So can for the markets, the

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Speaker 1: FED was your adversary last year. This year, it's not

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Speaker 1: except that premise or rejected. I think that's acceptable. Um.

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Speaker 1: We've seen Chairman Powell UM do some flip flops over

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Speaker 1: the years. Right. Remember you know quantitative tightening was on autopilot.

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Speaker 1: Remember inflation was transitory, and so so this is UM

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Speaker 1: an opportunity for him to do so again. And I

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Speaker 1: think by March the level of CPI will be below

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Speaker 1: that of the fit funds, right, and that I think

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Speaker 1: opens up a little window. UM. As we go through

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Speaker 1: the second quarter, the level of his CPI will become

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Speaker 1: significantly below that of the fit funds rate. So I

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Speaker 1: think now that doesn't necessarily encourage him to cut rates,

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Speaker 1: but I think it definitely opens up the room to

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Speaker 1: pause again. Absolutely, And you know, you look at that

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Speaker 1: job's reports to really throw the spanner in the works

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Speaker 1: and just showing the ser strength of the US econing,

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Speaker 1: which he acknowledged in that interview that he conducted that Tuesday.

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Speaker 1: And the point being if we do get let's say

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Speaker 1: we went fifty basis points next in March. We're not

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Speaker 1: gonna feel that for a year because the transmission mechanisms

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Speaker 1: and have got such a lag between the tight monetary

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Speaker 1: policy and what we're seeing. That's right, Well, if he

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Speaker 1: will fifty, I think we'll feel feel pretty immediately. Um

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Speaker 1: But but I think I think, yeah, you're right that

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Speaker 1: the type the amount of tiding that was done last year,

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Speaker 1: it's not fully reflected in um in markets, in the

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Speaker 1: econ economic data just yet. And also with regards to

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Speaker 1: that payrolls reports, I think what the pandemic has done

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Speaker 1: is to make a lot of these seasonal adjustments obsolete, right.

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Speaker 1: Um So, so in the last month in January there

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Speaker 1: was actually one have million job losses, but seasonal just

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Speaker 1: been added three million, and so you know we're probably

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Speaker 1: going to see some payback of that in February when

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Speaker 1: season adjustment will subtract a million, and this is probably

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Speaker 1: gonna be fewer unadjusted job gains. So in any case,

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Speaker 1: I feel the five seventeen thousand was was was kind

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Speaker 1: of absurdly strong and we shouldn't be taking that at

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Speaker 1: its um you know, phase value. So you're actually pretty bullish,

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Speaker 1: you like the China recovery. You like a bear market

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Speaker 1: in the dollar to continue or to push forward, and

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Speaker 1: you like investment grade bonds. Um, let me put a

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Speaker 1: data point out there that Doug mentioned, which is kind

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Speaker 1: of interesting that more than half of the companies in

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Speaker 1: the SMP five reported and earnings have dropped. They've dropped

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Speaker 1: two point eight percent though from a year earlier, and

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Speaker 1: that's less than the three point three percent that was

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Speaker 1: expected before the earning season began. It's by no means

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Speaker 1: great because earnings are coming down, but uh and they're

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Speaker 1: coming down at a time when rates are still going up.

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Speaker 1: But it's not the big story that we thought it

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Speaker 1: would be. Right. Um, So rewind to last October, the

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Speaker 1: consensus for fourth quarter earnings was plus four something like that.

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Speaker 1: So so basically the consensus number came down by seven

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Speaker 1: percentage points before this earning season started. And so you know, basically,

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Speaker 1: you know, before each earning season there's a few months

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Speaker 1: of downward adjustments to earning the expectations so that the

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Speaker 1: companies can actually beat by a little bit. The margin

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Speaker 1: of beats is the smallest for since the pandemics in

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Speaker 1: the initial pandemic, and uh far smaller than the average

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Speaker 1: one average beats that we've seen over the past ten

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Speaker 1: years or so. So so basically you know that there's

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Speaker 1: it's it's losing some someone, but the bears have hung

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Speaker 1: their hat on. You know, this is gonna be one

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Speaker 1: of the biggest drops in earning. You listen to Mike

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Speaker 1: Wilson and Morgan sound the biggest drop in earnings we've

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Speaker 1: ever seen and that sort of thing. That's not actually

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Speaker 1: what's happening. No, I wouldn't think it's gonna be the biggest. Uh.

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Speaker 1: We're looking like sometime percent drop um, probably not carried

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Speaker 1: over the full year um. But you know that's not

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Speaker 1: being factored into consensus expectations yet, right. Consensus expectations basically

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Speaker 1: looking for the media recovery in the first quarter, and

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Speaker 1: I think that's two optimistic still. It's about forward guidance,

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Speaker 1: and that has been really patchy in terms of positivity. Okay, okay,

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Speaker 1: let's talk a little bit about some some of the

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Speaker 1: moves out here in Asia. Interestingly, last week we had

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Speaker 1: to sell off in in some Chinese stocks. We had

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Speaker 1: the NaSTA Golden Dragon Index and also the Tech index

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Speaker 1: here in Hong Kong and basically MSCI China moving down

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Speaker 1: a little bit, so they were taking profits I suppose,

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Speaker 1: or were they expressing some fear about the reopening Ken No,

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Speaker 1: I think it's it's profit taking. I mean, you know,

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Speaker 1: prior to that little correction, we're almost six up, you

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Speaker 1: know when you're looking at MSCI China from the end

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Speaker 1: of October and so so that's that's quite quite a

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Speaker 1: lot to uh to take in. Um. I think the

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Speaker 1: recovery has just begun, right, we're seeing you know, for example,

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Speaker 1: after the Chinese New Year, the mobility indicators like road

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Speaker 1: traffic and subway ridership are back to basically pre pandemic

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Speaker 1: levels um and so so, so that momentum is still going.

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Speaker 1: And another thing that is very important is that last

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Speaker 1: year Chinese households accumulated some fifteen trillion woman buh. That's

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Speaker 1: like that's two and a half trillion US dollars worth

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Speaker 1: of new deposits. Right. Some of that money was supposed

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Speaker 1: to go to property, but then people are afraid of

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Speaker 1: incomplete projects. Some of that money came out of stocks

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Speaker 1: and bonds, and a lot of that money was meant

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Speaker 1: to be spent, but I couldn't, so all three of

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Speaker 1: those things what happened this year? Right though there will

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Speaker 1: be more spending, you've already seen some of that, um,

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Speaker 1: and I think more influence to equity markets, and so

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Speaker 1: we have not seen that yet. Again, Okay, they do

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Speaker 1: have all that money. The thing is Chinese uh consumes

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Speaker 1: our savers as well. Let's them forget that, the big

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Speaker 1: time savers. Sure, but you know the thing is you

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Speaker 1: mentioned households that you know, we've got a house. Perhaps

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Speaker 1: there's been a fundamental shift in household confidence in residential

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Speaker 1: real estate. I mean there's a declining population and then

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Speaker 1: we've got a real estate infantry with a hundred twenty

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Speaker 1: two million square meters available in the ten largest cities.

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Speaker 1: I mean, these things are good to be played out

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Speaker 1: in people's minds. They are aware of this and it

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Speaker 1: has a wealth effect. Yes, certainly so, um, those who

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Speaker 1: all have have had that a little bit hidden on

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Speaker 1: the on the price. It wasn't dramatic because there were

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Speaker 1: simply that that many transactions last year. UM. But now

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Speaker 1: these how to digest these inventories are basically convincing buyers

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Speaker 1: that they will be completed. I think that would be

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Speaker 1: a first good step. UM. Now, that's uh, developer financing

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Speaker 1: is back. I don't think that the incomplete projects is

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Speaker 1: going to be as big a problem this year. And

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Speaker 1: to be honest, you know, we thought that the real

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Speaker 1: estate sector was perhaps over capacity, you know, before the

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Speaker 1: pandemic hit um and and now that capacity has shrunk

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Speaker 1: by perhaps right. So so there there's a little bit

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Speaker 1: recovered to be done just to get back to something

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Speaker 1: that that that would have been considered normal. We talk

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Speaker 1: a lot about geopolitical tensions between the US and China.

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Speaker 1: I was looking over the trade numbers for last year

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Speaker 1: two record. Okay, it was pretty pretty astonishing, up close

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Speaker 1: to seven billion dollars in total trade between the two countries.

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Speaker 1: That's not adjusted for inflation, but but that's still a

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Speaker 1: pretty big number at a time when relations are not

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Speaker 1: all that good. Is that a good sign or does

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Speaker 1: it mean that we moved down from here? It just

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Speaker 1: means that divorces are very always difficult. Sorry, and then

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Speaker 1: it's just it's it's kind of hard to figure out

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Speaker 1: exactly which ties to keep, which ones do to sever,

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Speaker 1: um and so so I think this is a testament

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Speaker 1: that's um, well, you saw a little bit of increasing

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Speaker 1: in US exports of China and quite a bit of

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Speaker 1: increasing Chinese Chinese exports to the US. So basically that

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Speaker 1: the the exports that China would have absorbed are not

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Speaker 1: allowed to happen. And so so I think this is um,

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Speaker 1: it's not really inconsistent with about geo political situation. UM,

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Speaker 1: but I do think that um, it's a good thing.

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Speaker 1: That's this divorce, this decoupling is uh is more difficult

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Speaker 1: to achieve. Ken, what's your biggest concern that you get

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Speaker 1: from clients and tell me how do you then responded

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Speaker 1: and what is the strategy? Very very briefly, sure, So

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Speaker 1: the concern with regards to the U S is that is,

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Speaker 1: are we really getting into a recession? What if rates

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Speaker 1: have to go much higher? Um? Well, I think I

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Speaker 1: think that's that's a big, an important question. But I

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Speaker 1: think we aside from payrolls, just about every other indicator

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Speaker 1: is pointing that's the U S economy is weakening and

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Speaker 1: the later um, this recession hits, uh, it'll probably be deeper. Right.

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Speaker 1: So so so I think I think the um, uh,

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Speaker 1: you know, I think that's that's the that's that's the

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Speaker 1: first message we have is basically the FED needs to

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Speaker 1: pause and UM, and that will be positive for the

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Speaker 1: for the boom market. Final question in thirty seconds or so,

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Speaker 1: we didn't get to investment grade bonds. You like them

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Speaker 1: where and in what industry? Sure? I think this is

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Speaker 1: basically we we like the in the investment grade space

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Speaker 1: UM above above the triple beast right because in a

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Speaker 1: in a potential recession, we're likely to see more downgrades

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Speaker 1: UM and the potential for UM for short term right

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Speaker 1: three year and under yields to fall is significant, and

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Speaker 1: so we like that segment of the curve. This is

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Speaker 1: Bloomberg Daybreak Asia, your morning brief on this story is

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Speaker 1: making news from Hong Kong to Singapore and Wall Street.

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Speaker 1: listen live each day on Bloomberg eleven three oh in

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