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

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Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Krisner.

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Speaker 2: Certainly was a risk off day in the US, and

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Speaker 2: that included bitcoin. In a moment, we'll take a look

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Speaker 2: at the crypto space with Peter Chung, head of research

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Speaker 2: at Presto Research. But we begin in Hong Kong with

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Speaker 2: Helen Ju, Managing director and CIO of NF Trinity. Happy

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Speaker 2: New Year, Helen, Thank you for joining us. It's always

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Speaker 2: a pleasure. There's a lot to cover. We can talk

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Speaker 2: about the FED and some of the policies that we're

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Speaker 2: expecting from the incoming Trump administration in a moment, But

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Speaker 2: I'd like to begin with technology because we saw a

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Speaker 2: pretty good pullback today in Nvidia. I think in New

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Speaker 2: York trading we were down around six percent. That seemed

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Speaker 2: to be correlated to disappointment over what the market heard

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Speaker 2: yesterday when CEO Jensen Huang gave the keynote address at

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Speaker 2: CEES he fail to mention he failed to mention the

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Speaker 2: company's next generation of chips Rubin, and that may have

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Speaker 2: been driving a lot of the disappointment. How are you

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Speaker 2: viewing AI right now?

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Speaker 3: Broadly speaking, look, I think that AI has obviously been

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Speaker 3: really the key momentum driver behind the broader market since

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Speaker 3: pretty much March of twenty twenty three, when the.

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Speaker 4: Chat GPT started to take off.

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Speaker 3: I think a lot of the upward revision in terms

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Speaker 3: of expectations has already happened, and it really depends on

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Speaker 3: which segment of the ecosystem you're operating in to figure

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Speaker 3: out whether there is still further upside. So what we

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Speaker 3: have seen initially is that most of the focus has

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Speaker 3: been on Nvidia and on the GPU, and then gradually

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Speaker 3: it actually spread out to other parts as well. Like

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Speaker 3: you know, any company that has some application that has

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Speaker 3: to do with AI, or even like one or two

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Speaker 3: percent of revenues coming from AI starts to become AI

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Speaker 3: plays and see meaningful valuation expansion. Now we're kind of

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Speaker 3: getting to the stage where the expectation is high enough

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Speaker 3: that it's quite easy to miss the high expectations, and therefore,

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Speaker 3: just like before you had twenty five percent share price

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Speaker 3: move on the back of a slight beat and two

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Speaker 3: percent of revenue AI product, now the opposite can also happen,

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Speaker 3: and so it's becoming much more selective and much more

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Speaker 3: volatile versus Before let's talk.

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Speaker 2: A little bit about the macro. Some of the economic

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Speaker 2: news that we had here in the US seemed to

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Speaker 2: trigger concern about stubborn inflation, and with that the bet

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Speaker 2: that the FED is not going to be aggressive in

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Speaker 2: cutting rates again, maybe not until July. So how are

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Speaker 2: you viewing the US inflation story right now?

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Speaker 3: I think a lot of it is still very much

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Speaker 3: dependent on services, and in terms of the goods front,

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Speaker 3: we've already seen meaningful disinflation, and actually the broader trend

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Speaker 3: is not so concerning.

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Speaker 4: If you look at the small amount.

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Speaker 3: Of inflation beat versus expectation, it is really kind of

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Speaker 3: like a very very minor amount.

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Speaker 4: But I think we do see that.

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Speaker 3: Last night, for example, the macro data across the board

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Speaker 3: was quite strong. Think that, you know, things are really

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Speaker 3: not slowing down. And I think the other main source

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Speaker 3: of the concern about the inflation is not only what

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Speaker 3: we're seeing today from the strong economy, but also what

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Speaker 3: we might see going forward from both the trade tariffs

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Speaker 3: as well as the loss of labor from the immigration

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Speaker 3: policies that Trump is likely to implement. So that's why

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Speaker 3: people are getting increasingly concerned, not necessarily because of today's data,

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Speaker 3: but because of what might happen policy wise over the

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Speaker 3: next three to six months, where there's a significant amount

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Speaker 3: of uncertainty.

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Speaker 2: Uncertainty, but you're kind of indicating maybe concern about rising

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Speaker 2: inflation longer term, right, I.

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Speaker 3: Mean, yeah, I mean the new normal or the kind

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Speaker 3: of longer term normal is certainly going to be higher

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Speaker 3: versus before because of a lot of the structural things

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Speaker 3: that have changed, So for example, the deglobalization, right, so

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Speaker 3: those are or maybe you know, even though the technology

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Speaker 3: has been helping, maybe the impact of the technology disinflationary

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Speaker 3: trend was seen earlier, like maybe one or you know,

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Speaker 3: one and a.

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Speaker 4: Half decades ago.

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Speaker 3: So obviously, if AI really has a very significant impact

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Speaker 3: in terms of lifting productivity, that's going to be the

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Speaker 3: huge offsetting factor. But at the moment we're still at

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Speaker 3: the very beginning of that. It's very difficult to quantify

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Speaker 3: or to figure out how much impact it can have.

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Speaker 2: So if you can accept the idea that maybe we

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Speaker 2: only get one rate cut this year, the dollar really

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Speaker 2: is going to reflect that and remain very robust against

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Speaker 2: the majors. And I'm sure that for someone in the

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Speaker 2: Asia pack that has to put money to work. That's

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Speaker 2: going to be increasingly challenging, is it not.

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Speaker 3: Yeah, it's already been challenging, right, So obviously, beginning of

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Speaker 3: last year, people were expecting like six rate cuts last

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Speaker 3: year and maybe four more this year, and then now,

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Speaker 3: you know, looking back, the economy has been surprisingly strong

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Speaker 3: in the US, and you know, now I think the

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Speaker 3: expectation is a little bit extreme on the other side

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Speaker 3: because of a few things.

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Speaker 4: One is that, actually, if you think about it.

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Speaker 3: A lot of the job's data over the last few

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Speaker 3: one or two quarters has actually been quite volatile. So

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Speaker 3: it's sure this month we had very very strong data,

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Speaker 3: but we can't be assured that the employment data is

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Speaker 3: going to be consistent throughout. And if you do have

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Speaker 3: one or two months of air pocket again, then I

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Speaker 3: think the yields will sell off and people start to

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Speaker 3: get more concerned again. The second thing is that a

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Speaker 3: lot of this tariff and immigration policy, and tariff in

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Speaker 3: particular is not only inflationary, but also potentially going to

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Speaker 3: hurt growth in the US, hurt US corporates, and hurt

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Speaker 3: overall activity globally, which will then have indirect impact on

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Speaker 3: the US economy as well, So if that actually happens

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Speaker 3: and US data gets affected, that could also actually increase

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Speaker 3: the expectations regarding more ray cuts versus before. So at

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Speaker 3: the moment, it feels very firm, but usually those are

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Speaker 3: the moments when you can't really see anything going wrong.

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Speaker 3: Those are the moments when you're.

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Speaker 4: Just like on the cusp of something going wrong.

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Speaker 3: And I think expectations about the US economy and it's

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Speaker 3: robustness and the yield outlook are quite quite uppy at

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Speaker 3: the moment.

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Speaker 2: How are you viewing China right now? And opportunities there.

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Speaker 3: Opportunity is definitely there, But I don't think it's about

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Speaker 3: domestic stimulus necessarily. Domestic simulus is only enough to get

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Speaker 3: people to feel like things aren't getting incrementally much worse.

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Speaker 3: But all the sentiment and expectation and hopes and confidence

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Speaker 3: rests on really the geopolitical aspect, right So if you

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Speaker 3: do have very egregious trade policies, it's going to massively

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Speaker 3: hit sentiment and the markets are not going to perform

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Speaker 3: no matter how much domestic policy stimulus you have, And

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Speaker 3: so I think that's the key thing to watch.

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Speaker 4: I think I hope that China and the US as

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Speaker 4: well as.

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Speaker 3: The US and other major markets that it's dealing with,

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Speaker 3: will have a rapid negotiation at the beginning of this

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Speaker 3: year and try to sort out some of the differences

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Speaker 3: rather than having it you know, drag out through the

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Speaker 3: rest of the year, which would be actually very negative

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Speaker 3: for global economy and sentiment.

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Speaker 2: So we've covered a lot of themes, Helen, can you

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Speaker 2: help me understand what the investment strategy would be going forward?

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Speaker 1: Here?

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Speaker 2: How does everything translate?

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Speaker 3: So I think there's two possible outcomes. One is the

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Speaker 3: Goldilock scenario, which is that the US economy is intact

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Speaker 3: and the jail politics are not as bad as expected.

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Speaker 3: In that case, everything else catches up to the US

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Speaker 3: and a synchronized global recovery, and you actually have the

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Speaker 3: dollar weekend a little bit and everywhere else that's been

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Speaker 3: totally hammered catch up.

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Speaker 4: That's the best case scenario.

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Speaker 3: In the worst case scenario, you know, the administration gets

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Speaker 3: a little bit too hawk as drags it out tariffs, immigration,

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Speaker 3: they end up being negative for the US and.

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Speaker 4: Elsewhere as well.

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Speaker 3: The US starts to catch down with the rest of

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Speaker 3: the world, and everything actually on the risk assets front

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Speaker 3: actually starts to go down.

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Speaker 4: In the first scenario, what we.

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Speaker 3: Would look at would be like cyclicals and non US

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Speaker 3: markets for that catch up play, because they are basically

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Speaker 3: the ones that are lagging and the ones that would

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Speaker 3: benefit the most from that scenario. And the second scenario,

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Speaker 3: I think is really about holding cash and maybe treasuries

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Speaker 3: and defensives, you know, all the places where nobody has

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Speaker 3: any exposure. In the equity market, I wouldn't even be

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Speaker 3: going that much into like credit just because the credit

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Speaker 3: spread is so so so narrow at the moment. It

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Speaker 3: has to widen if there is any kind of recession

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Speaker 3: or soft landing fears, So that would be the way

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Speaker 3: that we would look at it. And you know hedging

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Speaker 3: as well, because vis is still low.

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Speaker 2: So what about things to avoid it all caused when

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Speaker 2: I was listening to you kind of sketch out the

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Speaker 2: China story, I'm thinking, well, avoid anything that has to

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Speaker 2: do with the Chinese consumer.

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Speaker 3: The Chinese consumer has definitely been weak. But that Chinese

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Speaker 3: consumer derating or sell off is actually behind us. Is

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Speaker 3: actually about six to nine months ago, so that was

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Speaker 3: the worst of it. Previously, expectation was always for twenty

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Speaker 3: percent plus growth, and the stocks were trading at like

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Speaker 3: twenty to thirty times PE and the positioning was very heavy.

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Speaker 3: I think all of that has already unwound in the

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Speaker 3: last six to twelve months. Obviously, whether it rebounds to

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Speaker 3: a significant extent remains to be seen.

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Speaker 4: The low end.

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Speaker 3: Consumer is probably the one that the government cares the

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Speaker 3: most about, and so certain consumer staples and other stuff

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Speaker 3: I think is the area that we would look at.

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Speaker 4: I think on the luxury and so on and so

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Speaker 4: forth front.

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Speaker 3: You know, most of the global luxury stocks have sold off,

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Speaker 3: but they're not like super.

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Speaker 4: Distressed per se.

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Speaker 3: And I don't think the Chinese consumer is necessarily going

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Speaker 3: to rebound aggressively on the luxury front, even if the

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Speaker 3: trade TARFF concerns go away.

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Speaker 2: We'll leave it there. Helen, thank you so much for

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Speaker 2: joining us. Helen ju is managing director also the CIO

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Speaker 2: at NF Trinity. Joining us from our studios in Hong Kong.

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Speaker 2: Here on the Daybreak Asia podcast. Welcome back to the

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Speaker 2: Bloomberg Daybreak Asia Podcast. I'm Doug Krisner. So bitcoins march

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Speaker 2: back above one hundred thousand didn't last very long today

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Speaker 2: During New York trading Bitcoin slid about five percent along

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Speaker 2: with a broader retreat in US risk assets. Let's take

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Speaker 2: a closer look now at the crypto space. We are

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Speaker 2: joined by Peter Chung. He is head of research at

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Speaker 2: Presto Research. Peter joining us from Hong Kong. It's always

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Speaker 2: a pleasure. Happy New Year. Can you help me understand

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Speaker 2: what was going on with the price action in bitcoin today?

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Speaker 1: By Happy New Year to you as well. I think

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Speaker 1: what happened last twenty four hours is just the typical

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Speaker 1: risk assic behavior of bitcoin reacting to some very strong

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Speaker 1: macro data that came out in the early hours of

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Speaker 1: the US equity market trading. So I think along with

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Speaker 1: the broader risk asset selloff, I think the bitcoin also

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Speaker 1: went through some correction. And yeah, I think that's what happened.

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Speaker 2: When you look at bitcoin, Peter, the risk asset that

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Speaker 2: is strongly or most strongly correlated with the cryptocurrency, would

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Speaker 2: it be equities, would it be what's going on in

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Speaker 2: the US dollar? How do you understand the signal that

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Speaker 2: the bitcoin market is getting from other risk markets.

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Speaker 1: Yeah, I think the segment of the traditional finance market

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Speaker 1: that has the highest correlation with the crypto and bitcoin

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Speaker 1: is the big text, especially the Magnificent sevens. I mean,

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Speaker 1: I think because bitcoin actually because it's an emerging asset

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Speaker 1: class that has an element of network effect. So one

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Speaker 1: looking at a bitcoin is viewed as sort of like

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Speaker 1: a Internet startup that has a lot to gain from

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Speaker 1: the adoption of the network by the public. And that's

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Speaker 1: exactly what bigcoin Networker has been going through in the

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Speaker 1: first fifteen years of its life.

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Speaker 2: It's interesting that you mentioned the Magnificent seven. I think

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Speaker 2: the Bloomberg gauge of the mag seven was down about

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Speaker 2: two and a half percent today, so clearly a lot

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Speaker 2: of selling pressure. Let's talk a little bit about your

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Speaker 2: expectations on bitcoin policy or crypto policy more broadly, with

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Speaker 2: the new Trump administration. What are your expectations in terms

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Speaker 2: of the regulatory environment.

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Speaker 1: Yeah, so I think, I mean, there are a few

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Speaker 1: things that will happen. But first and almost I think

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Speaker 1: with the Trump in the White House, there are things

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Speaker 1: that can happen relatively quickly through the presidential power. These

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Speaker 1: include things like repealing set on one, which is the

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Speaker 1: SEC guidelines that effectively prevents traditional Costilian banks from entering

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Speaker 1: into the digital asset custody space. Another thing that could happen,

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Speaker 1: I think is the end of the so called the

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Speaker 1: Operation chockpoint two point zero, which is a name given

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Speaker 1: to the anti cryptop policies undertaken by the Biden of

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Speaker 1: the administration. I think that you know that that can

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Speaker 1: be easily fixed by replacing some of the key UH

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Speaker 1: members of the federal regulatory agencies. And then the other

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Speaker 1: thing that could happen is on the legislation side in

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Speaker 1: the Congress, now that we have, you know, the Republican

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Speaker 1: majority Congress, and the many of the policy is that

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Speaker 1: I think the Trump advocated in terms of nurturing the

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Speaker 1: crypto industry requires a legislative process, and these things can

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Speaker 1: These can be undertaken as well, but this will be

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Speaker 1: a little bit more lengthier process given that it needs

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Speaker 1: to get buy ins from many lawmakers.

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Speaker 2: So, Peter, when I hear you describe a lot of

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Speaker 2: the changes that you're expecting here in the US, I'm

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Speaker 2: curious about how that may impact markets like Hong Kong

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Speaker 2: or Singapore where crypto is concerned. Do you have a

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Speaker 2: sense of that.

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Speaker 1: Yes, So, I think many jurisdictions in Asia look to

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Speaker 1: what's happening in the US in terms of crypto policies

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Speaker 1: and regulations, and I like to use that as a

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Speaker 1: benchmark given that there are you know, the many of

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Speaker 1: the opinion leaders on the on the crypto industry is

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Speaker 1: actually they reside in the US. So I think, you know,

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Speaker 1: policymakers in Hong Kong and Singapore, they both view the

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Speaker 1: blockchain as a technology that can enhance their competitive positioning

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Speaker 1: as financial hubs, and I think they are paying a

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Speaker 1: very close attention to what's going to happen, especially with

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Speaker 1: things like a stable coin, for instance, which is the

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Speaker 1: initiative that Hong Kong government in particular is quite interested in.

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Speaker 2: So I mentioned a moment ago that during New York trading,

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Speaker 2: Bitcoin broke back below one hundred thousand. Do you have

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Speaker 2: a price target this year for where bitcoin may end up?

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Speaker 1: We do. Actually, we published the twenty twenty five Crypto

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Speaker 1: Market Outlook Report in December where we talk about a

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Speaker 1: few things, but one of them is the price predictions

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Speaker 1: for major cryptocurrencies and bitcoin. We have a price target

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Speaker 1: of a two hundred and ten thousand. I know a

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Speaker 1: lot of people kind of get surprise to hear a

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Speaker 1: big number like that, but remember that the bitcoin has

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Speaker 1: done crazier things in the past two hundred ten thousand

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Speaker 1: dollar The target is about one hundred percent upside from

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Speaker 1: current point on, which is the modest increase compared to

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Speaker 1: the bull cycles of the last fifteen years. And we

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Speaker 1: actually have a quantitative kind of approach to this number.

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Speaker 1: So what we did was, you know, we just didn't

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Speaker 1: We didn't just pull the number out of the thing there.

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Speaker 1: We estimated what we call the realized value for next

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Speaker 1: year for bitcoin network, which is a metric that we

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Speaker 1: think captures the uh the adoption of bigcoin as an

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Speaker 1: asset class by the by the traditional finance and that

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Speaker 1: number has been steadily increasing about five percent every month

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Speaker 1: since the January of last year, which is when spot

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Speaker 1: big quin t TF was first introduced. So we think

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Speaker 1: the adoption of that asset class through vehicles like the

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Speaker 1: ETF will continue into next year. And as long as

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Speaker 1: that happens, I think the hour real the realized value

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Speaker 1: target is quite fairly realistic. And we apply three and

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Speaker 1: a half times multiple to our realized value estimate to

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Speaker 1: arrive at our fear value estimate for the bitcoin market cap.

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Speaker 2: So right now, as I'm speaking to you, I'm looking

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Speaker 2: at a price of just under ninety seven thousand, and

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Speaker 2: you are forecasting two hundred and ten thousand by the

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Speaker 2: end of twenty twenty five. Now, how does that map

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Speaker 2: with the overall market cap for bitcoin? I mean, what

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Speaker 2: do you believe the overall market will be at the

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Speaker 2: end of the year.

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Speaker 1: Yeah, so that's the number will be about four point

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Speaker 1: two trillion dollars for bitcoin. So our twenty ten thousand

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Speaker 1: dollars higher price is simply by dividing that number with

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Speaker 1: outsending bitcoin units.

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Speaker 2: So we've talked about a price target of two hundred

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Speaker 2: and ten thousand in the year ahead for bitcoin. I'm

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Speaker 2: curious Peter, as to whether or not you're making other

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Speaker 2: bold predictions for the year ahead.

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Speaker 1: Yeah. So another prediction that we make in that report

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Speaker 1: is that that we think at least one nation state

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Speaker 1: or one sent five and the company will embrace bitcoins

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Speaker 1: as a treasury asset. And on the nation state side,

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Speaker 1: it's actually a trend that's been happening for the last

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Speaker 1: at least four years. You know, we saw the first

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Speaker 1: of that from Elsa Vador when they announced the adoption

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Speaker 1: of a bitcoin as the legal tender. The announcement from

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Speaker 1: Elsavada was in twenty twenty one, and every year since

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Speaker 1: then at least one country has been announcing it. You

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Speaker 1: can find the list of those countries in the report. Obviously,

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Speaker 1: last year was you know, US announced the plan to

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Speaker 1: do so, although it still requires approval from you know,

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Speaker 1: from the Congress. You know. I think the mere fact

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Speaker 1: that the US is considering this option, I think it's

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Speaker 1: going to trigger a lot of discussions in other countries

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Speaker 1: based on the game theory dynamics.

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Speaker 2: Peter will leave it there. It's always a pleasure. Thanks

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Speaker 2: so much for joining us, Peter Chung, they're head of

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Speaker 2: research at Presto Research. Joining us here on the Daybreak

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Speaker 2: Asia Podcast. Thanks for listening to today's episode of the

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Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at

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Speaker 2: the story shaping markets, finance, and geopolitics in the Asia Pacific.

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Speaker 2: You can find us on Apple, Spotify, the Bloomberg Podcast

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Speaker 2: YouTube channel, or anywhere else you listen. Join us again

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Speaker 2: tomorrow for insight on the market moves from Hong Kong

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Speaker 2: to Singapore and Australia. I'm Doug Chrisner and this is

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Speaker 2: Bloomberg