Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Krisner.
Speaker 2: Certainly was a risk off day in the US, and
Speaker 2: that included bitcoin. In a moment, we'll take a look
Speaker 2: at the crypto space with Peter Chung, head of research
Speaker 2: at Presto Research. But we begin in Hong Kong with
Speaker 2: Helen Ju, Managing director and CIO of NF Trinity. Happy
Speaker 2: New Year, Helen, Thank you for joining us. It's always
Speaker 2: a pleasure. There's a lot to cover. We can talk
Speaker 2: about the FED and some of the policies that we're
Speaker 2: expecting from the incoming Trump administration in a moment, But
Speaker 2: I'd like to begin with technology because we saw a
Speaker 2: pretty good pullback today in Nvidia. I think in New
Speaker 2: York trading we were down around six percent. That seemed
Speaker 2: to be correlated to disappointment over what the market heard
Speaker 2: yesterday when CEO Jensen Huang gave the keynote address at
Speaker 2: CEES he fail to mention he failed to mention the
Speaker 2: company's next generation of chips Rubin, and that may have
Speaker 2: been driving a lot of the disappointment. How are you
Speaker 2: viewing AI right now?
Speaker 3: Broadly speaking, look, I think that AI has obviously been
Speaker 3: really the key momentum driver behind the broader market since
Speaker 3: pretty much March of twenty twenty three, when the.
Speaker 4: Chat GPT started to take off.
Speaker 3: I think a lot of the upward revision in terms
Speaker 3: of expectations has already happened, and it really depends on
Speaker 3: which segment of the ecosystem you're operating in to figure
Speaker 3: out whether there is still further upside. So what we
Speaker 3: have seen initially is that most of the focus has
Speaker 3: been on Nvidia and on the GPU, and then gradually
Speaker 3: it actually spread out to other parts as well. Like
Speaker 3: you know, any company that has some application that has
Speaker 3: to do with AI, or even like one or two
Speaker 3: percent of revenues coming from AI starts to become AI
Speaker 3: plays and see meaningful valuation expansion. Now we're kind of
Speaker 3: getting to the stage where the expectation is high enough
Speaker 3: that it's quite easy to miss the high expectations, and therefore,
Speaker 3: just like before you had twenty five percent share price
Speaker 3: move on the back of a slight beat and two
Speaker 3: percent of revenue AI product, now the opposite can also happen,
Speaker 3: and so it's becoming much more selective and much more
Speaker 3: volatile versus Before let's talk.
Speaker 2: A little bit about the macro. Some of the economic
Speaker 2: news that we had here in the US seemed to
Speaker 2: trigger concern about stubborn inflation, and with that the bet
Speaker 2: that the FED is not going to be aggressive in
Speaker 2: cutting rates again, maybe not until July. So how are
Speaker 2: you viewing the US inflation story right now?
Speaker 3: I think a lot of it is still very much
Speaker 3: dependent on services, and in terms of the goods front,
Speaker 3: we've already seen meaningful disinflation, and actually the broader trend
Speaker 3: is not so concerning.
Speaker 4: If you look at the small amount.
Speaker 3: Of inflation beat versus expectation, it is really kind of
Speaker 3: like a very very minor amount.
Speaker 4: But I think we do see that.
Speaker 3: Last night, for example, the macro data across the board
Speaker 3: was quite strong. Think that, you know, things are really
Speaker 3: not slowing down. And I think the other main source
Speaker 3: of the concern about the inflation is not only what
Speaker 3: we're seeing today from the strong economy, but also what
Speaker 3: we might see going forward from both the trade tariffs
Speaker 3: as well as the loss of labor from the immigration
Speaker 3: policies that Trump is likely to implement. So that's why
Speaker 3: people are getting increasingly concerned, not necessarily because of today's data,
Speaker 3: but because of what might happen policy wise over the
Speaker 3: next three to six months, where there's a significant amount
Speaker 3: of uncertainty.
Speaker 2: Uncertainty, but you're kind of indicating maybe concern about rising
Speaker 2: inflation longer term, right, I.
Speaker 3: Mean, yeah, I mean the new normal or the kind
Speaker 3: of longer term normal is certainly going to be higher
Speaker 3: versus before because of a lot of the structural things
Speaker 3: that have changed, So for example, the deglobalization, right, so
Speaker 3: those are or maybe you know, even though the technology
Speaker 3: has been helping, maybe the impact of the technology disinflationary
Speaker 3: trend was seen earlier, like maybe one or you know,
Speaker 3: one and a.
Speaker 4: Half decades ago.
Speaker 3: So obviously, if AI really has a very significant impact
Speaker 3: in terms of lifting productivity, that's going to be the
Speaker 3: huge offsetting factor. But at the moment we're still at
Speaker 3: the very beginning of that. It's very difficult to quantify
Speaker 3: or to figure out how much impact it can have.
Speaker 2: So if you can accept the idea that maybe we
Speaker 2: only get one rate cut this year, the dollar really
Speaker 2: is going to reflect that and remain very robust against
Speaker 2: the majors. And I'm sure that for someone in the
Speaker 2: Asia pack that has to put money to work. That's
Speaker 2: going to be increasingly challenging, is it not.
Speaker 3: Yeah, it's already been challenging, right, So obviously, beginning of
Speaker 3: last year, people were expecting like six rate cuts last
Speaker 3: year and maybe four more this year, and then now,
Speaker 3: you know, looking back, the economy has been surprisingly strong
Speaker 3: in the US, and you know, now I think the
Speaker 3: expectation is a little bit extreme on the other side
Speaker 3: because of a few things.
Speaker 4: One is that, actually, if you think about it.
Speaker 3: A lot of the job's data over the last few
Speaker 3: one or two quarters has actually been quite volatile. So
Speaker 3: it's sure this month we had very very strong data,
Speaker 3: but we can't be assured that the employment data is
Speaker 3: going to be consistent throughout. And if you do have
Speaker 3: one or two months of air pocket again, then I
Speaker 3: think the yields will sell off and people start to
Speaker 3: get more concerned again. The second thing is that a
Speaker 3: lot of this tariff and immigration policy, and tariff in
Speaker 3: particular is not only inflationary, but also potentially going to
Speaker 3: hurt growth in the US, hurt US corporates, and hurt
Speaker 3: overall activity globally, which will then have indirect impact on
Speaker 3: the US economy as well, So if that actually happens
Speaker 3: and US data gets affected, that could also actually increase
Speaker 3: the expectations regarding more ray cuts versus before. So at
Speaker 3: the moment, it feels very firm, but usually those are
Speaker 3: the moments when you can't really see anything going wrong.
Speaker 3: Those are the moments when you're.
Speaker 4: Just like on the cusp of something going wrong.
Speaker 3: And I think expectations about the US economy and it's
Speaker 3: robustness and the yield outlook are quite quite uppy at
Speaker 3: the moment.
Speaker 2: How are you viewing China right now? And opportunities there.
Speaker 3: Opportunity is definitely there, But I don't think it's about
Speaker 3: domestic stimulus necessarily. Domestic simulus is only enough to get
Speaker 3: people to feel like things aren't getting incrementally much worse.
Speaker 3: But all the sentiment and expectation and hopes and confidence
Speaker 3: rests on really the geopolitical aspect, right So if you
Speaker 3: do have very egregious trade policies, it's going to massively
Speaker 3: hit sentiment and the markets are not going to perform
Speaker 3: no matter how much domestic policy stimulus you have, And
Speaker 3: so I think that's the key thing to watch.
Speaker 4: I think I hope that China and the US as
Speaker 4: well as.
Speaker 3: The US and other major markets that it's dealing with,
Speaker 3: will have a rapid negotiation at the beginning of this
Speaker 3: year and try to sort out some of the differences
Speaker 3: rather than having it you know, drag out through the
Speaker 3: rest of the year, which would be actually very negative
Speaker 3: for global economy and sentiment.
Speaker 2: So we've covered a lot of themes, Helen, can you
Speaker 2: help me understand what the investment strategy would be going forward?
Speaker 1: Here?
Speaker 2: How does everything translate?
Speaker 3: So I think there's two possible outcomes. One is the
Speaker 3: Goldilock scenario, which is that the US economy is intact
Speaker 3: and the jail politics are not as bad as expected.
Speaker 3: In that case, everything else catches up to the US
Speaker 3: and a synchronized global recovery, and you actually have the
Speaker 3: dollar weekend a little bit and everywhere else that's been
Speaker 3: totally hammered catch up.
Speaker 4: That's the best case scenario.
Speaker 3: In the worst case scenario, you know, the administration gets
Speaker 3: a little bit too hawk as drags it out tariffs, immigration,
Speaker 3: they end up being negative for the US and.
Speaker 4: Elsewhere as well.
Speaker 3: The US starts to catch down with the rest of
Speaker 3: the world, and everything actually on the risk assets front
Speaker 3: actually starts to go down.
Speaker 4: In the first scenario, what we.
Speaker 3: Would look at would be like cyclicals and non US
Speaker 3: markets for that catch up play, because they are basically
Speaker 3: the ones that are lagging and the ones that would
Speaker 3: benefit the most from that scenario. And the second scenario,
Speaker 3: I think is really about holding cash and maybe treasuries
Speaker 3: and defensives, you know, all the places where nobody has
Speaker 3: any exposure. In the equity market, I wouldn't even be
Speaker 3: going that much into like credit just because the credit
Speaker 3: spread is so so so narrow at the moment. It
Speaker 3: has to widen if there is any kind of recession
Speaker 3: or soft landing fears, So that would be the way
Speaker 3: that we would look at it. And you know hedging
Speaker 3: as well, because vis is still low.
Speaker 2: So what about things to avoid it all caused when
Speaker 2: I was listening to you kind of sketch out the
Speaker 2: China story, I'm thinking, well, avoid anything that has to
Speaker 2: do with the Chinese consumer.
Speaker 3: The Chinese consumer has definitely been weak. But that Chinese
Speaker 3: consumer derating or sell off is actually behind us. Is
Speaker 3: actually about six to nine months ago, so that was
Speaker 3: the worst of it. Previously, expectation was always for twenty
Speaker 3: percent plus growth, and the stocks were trading at like
Speaker 3: twenty to thirty times PE and the positioning was very heavy.
Speaker 3: I think all of that has already unwound in the
Speaker 3: last six to twelve months. Obviously, whether it rebounds to
Speaker 3: a significant extent remains to be seen.
Speaker 4: The low end.
Speaker 3: Consumer is probably the one that the government cares the
Speaker 3: most about, and so certain consumer staples and other stuff
Speaker 3: I think is the area that we would look at.
Speaker 4: I think on the luxury and so on and so
Speaker 4: forth front.
Speaker 3: You know, most of the global luxury stocks have sold off,
Speaker 3: but they're not like super.
Speaker 4: Distressed per se.
Speaker 3: And I don't think the Chinese consumer is necessarily going
Speaker 3: to rebound aggressively on the luxury front, even if the
Speaker 3: trade TARFF concerns go away.
Speaker 2: We'll leave it there. Helen, thank you so much for
Speaker 2: joining us. Helen ju is managing director also the CIO
Speaker 2: at NF Trinity. Joining us from our studios in Hong Kong.
Speaker 2: Here on the Daybreak Asia podcast. Welcome back to the
Speaker 2: Bloomberg Daybreak Asia Podcast. I'm Doug Krisner. So bitcoins march
Speaker 2: back above one hundred thousand didn't last very long today
Speaker 2: During New York trading Bitcoin slid about five percent along
Speaker 2: with a broader retreat in US risk assets. Let's take
Speaker 2: a closer look now at the crypto space. We are
Speaker 2: joined by Peter Chung. He is head of research at
Speaker 2: Presto Research. Peter joining us from Hong Kong. It's always
Speaker 2: a pleasure. Happy New Year. Can you help me understand
Speaker 2: what was going on with the price action in bitcoin today?
Speaker 1: By Happy New Year to you as well. I think
Speaker 1: what happened last twenty four hours is just the typical
Speaker 1: risk assic behavior of bitcoin reacting to some very strong
Speaker 1: macro data that came out in the early hours of
Speaker 1: the US equity market trading. So I think along with
Speaker 1: the broader risk asset selloff, I think the bitcoin also
Speaker 1: went through some correction. And yeah, I think that's what happened.
Speaker 2: When you look at bitcoin, Peter, the risk asset that
Speaker 2: is strongly or most strongly correlated with the cryptocurrency, would
Speaker 2: it be equities, would it be what's going on in
Speaker 2: the US dollar? How do you understand the signal that
Speaker 2: the bitcoin market is getting from other risk markets.
Speaker 1: Yeah, I think the segment of the traditional finance market
Speaker 1: that has the highest correlation with the crypto and bitcoin
Speaker 1: is the big text, especially the Magnificent sevens. I mean,
Speaker 1: I think because bitcoin actually because it's an emerging asset
Speaker 1: class that has an element of network effect. So one
Speaker 1: looking at a bitcoin is viewed as sort of like
Speaker 1: a Internet startup that has a lot to gain from
Speaker 1: the adoption of the network by the public. And that's
Speaker 1: exactly what bigcoin Networker has been going through in the
Speaker 1: first fifteen years of its life.
Speaker 2: It's interesting that you mentioned the Magnificent seven. I think
Speaker 2: the Bloomberg gauge of the mag seven was down about
Speaker 2: two and a half percent today, so clearly a lot
Speaker 2: of selling pressure. Let's talk a little bit about your
Speaker 2: expectations on bitcoin policy or crypto policy more broadly, with
Speaker 2: the new Trump administration. What are your expectations in terms
Speaker 2: of the regulatory environment.
Speaker 1: Yeah, so I think, I mean, there are a few
Speaker 1: things that will happen. But first and almost I think
Speaker 1: with the Trump in the White House, there are things
Speaker 1: that can happen relatively quickly through the presidential power. These
Speaker 1: include things like repealing set on one, which is the
Speaker 1: SEC guidelines that effectively prevents traditional Costilian banks from entering
Speaker 1: into the digital asset custody space. Another thing that could happen,
Speaker 1: I think is the end of the so called the
Speaker 1: Operation chockpoint two point zero, which is a name given
Speaker 1: to the anti cryptop policies undertaken by the Biden of
Speaker 1: the administration. I think that you know that that can
Speaker 1: be easily fixed by replacing some of the key UH
Speaker 1: members of the federal regulatory agencies. And then the other
Speaker 1: thing that could happen is on the legislation side in
Speaker 1: the Congress, now that we have, you know, the Republican
Speaker 1: majority Congress, and the many of the policy is that
Speaker 1: I think the Trump advocated in terms of nurturing the
Speaker 1: crypto industry requires a legislative process, and these things can
Speaker 1: These can be undertaken as well, but this will be
Speaker 1: a little bit more lengthier process given that it needs
Speaker 1: to get buy ins from many lawmakers.
Speaker 2: So, Peter, when I hear you describe a lot of
Speaker 2: the changes that you're expecting here in the US, I'm
Speaker 2: curious about how that may impact markets like Hong Kong
Speaker 2: or Singapore where crypto is concerned. Do you have a
Speaker 2: sense of that.
Speaker 1: Yes, So, I think many jurisdictions in Asia look to
Speaker 1: what's happening in the US in terms of crypto policies
Speaker 1: and regulations, and I like to use that as a
Speaker 1: benchmark given that there are you know, the many of
Speaker 1: the opinion leaders on the on the crypto industry is
Speaker 1: actually they reside in the US. So I think, you know,
Speaker 1: policymakers in Hong Kong and Singapore, they both view the
Speaker 1: blockchain as a technology that can enhance their competitive positioning
Speaker 1: as financial hubs, and I think they are paying a
Speaker 1: very close attention to what's going to happen, especially with
Speaker 1: things like a stable coin, for instance, which is the
Speaker 1: initiative that Hong Kong government in particular is quite interested in.
Speaker 2: So I mentioned a moment ago that during New York trading,
Speaker 2: Bitcoin broke back below one hundred thousand. Do you have
Speaker 2: a price target this year for where bitcoin may end up?
Speaker 1: We do. Actually, we published the twenty twenty five Crypto
Speaker 1: Market Outlook Report in December where we talk about a
Speaker 1: few things, but one of them is the price predictions
Speaker 1: for major cryptocurrencies and bitcoin. We have a price target
Speaker 1: of a two hundred and ten thousand. I know a
Speaker 1: lot of people kind of get surprise to hear a
Speaker 1: big number like that, but remember that the bitcoin has
Speaker 1: done crazier things in the past two hundred ten thousand
Speaker 1: dollar The target is about one hundred percent upside from
Speaker 1: current point on, which is the modest increase compared to
Speaker 1: the bull cycles of the last fifteen years. And we
Speaker 1: actually have a quantitative kind of approach to this number.
Speaker 1: So what we did was, you know, we just didn't
Speaker 1: We didn't just pull the number out of the thing there.
Speaker 1: We estimated what we call the realized value for next
Speaker 1: year for bitcoin network, which is a metric that we
Speaker 1: think captures the uh the adoption of bigcoin as an
Speaker 1: asset class by the by the traditional finance and that
Speaker 1: number has been steadily increasing about five percent every month
Speaker 1: since the January of last year, which is when spot
Speaker 1: big quin t TF was first introduced. So we think
Speaker 1: the adoption of that asset class through vehicles like the
Speaker 1: ETF will continue into next year. And as long as
Speaker 1: that happens, I think the hour real the realized value
Speaker 1: target is quite fairly realistic. And we apply three and
Speaker 1: a half times multiple to our realized value estimate to
Speaker 1: arrive at our fear value estimate for the bitcoin market cap.
Speaker 2: So right now, as I'm speaking to you, I'm looking
Speaker 2: at a price of just under ninety seven thousand, and
Speaker 2: you are forecasting two hundred and ten thousand by the
Speaker 2: end of twenty twenty five. Now, how does that map
Speaker 2: with the overall market cap for bitcoin? I mean, what
Speaker 2: do you believe the overall market will be at the
Speaker 2: end of the year.
Speaker 1: Yeah, so that's the number will be about four point
Speaker 1: two trillion dollars for bitcoin. So our twenty ten thousand
Speaker 1: dollars higher price is simply by dividing that number with
Speaker 1: outsending bitcoin units.
Speaker 2: So we've talked about a price target of two hundred
Speaker 2: and ten thousand in the year ahead for bitcoin. I'm
Speaker 2: curious Peter, as to whether or not you're making other
Speaker 2: bold predictions for the year ahead.
Speaker 1: Yeah. So another prediction that we make in that report
Speaker 1: is that that we think at least one nation state
Speaker 1: or one sent five and the company will embrace bitcoins
Speaker 1: as a treasury asset. And on the nation state side,
Speaker 1: it's actually a trend that's been happening for the last
Speaker 1: at least four years. You know, we saw the first
Speaker 1: of that from Elsa Vador when they announced the adoption
Speaker 1: of a bitcoin as the legal tender. The announcement from
Speaker 1: Elsavada was in twenty twenty one, and every year since
Speaker 1: then at least one country has been announcing it. You
Speaker 1: can find the list of those countries in the report. Obviously,
Speaker 1: last year was you know, US announced the plan to
Speaker 1: do so, although it still requires approval from you know,
Speaker 1: from the Congress. You know. I think the mere fact
Speaker 1: that the US is considering this option, I think it's
Speaker 1: going to trigger a lot of discussions in other countries
Speaker 1: based on the game theory dynamics.
Speaker 2: Peter will leave it there. It's always a pleasure. Thanks
Speaker 2: so much for joining us, Peter Chung, they're head of
Speaker 2: research at Presto Research. Joining us here on the Daybreak
Speaker 2: Asia Podcast. Thanks for listening to today's episode of the
Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at
Speaker 2: the story shaping markets, finance, and geopolitics in the Asia Pacific.
Speaker 2: You can find us on Apple, Spotify, the Bloomberg Podcast
Speaker 2: YouTube channel, or anywhere else you listen. Join us again
Speaker 2: tomorrow for insight on the market moves from Hong Kong
Speaker 2: to Singapore and Australia. I'm Doug Chrisner and this is
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