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

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. So

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Speaker 2: we're seeing a positive tone to risk assets in the

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Speaker 2: Asia Pacific. This is on where the China will be

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Speaker 2: taking steps to revive consumption by boosting people's incomes. The

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Speaker 2: official Shinwan Use Agency sites a statement from the State Council,

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Speaker 2: and at the same time, authorities are reportedly set to

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Speaker 2: unveil plans later today to stabilize both the Chinese stock

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Speaker 2: and real estate markets. Let's take a closer look and

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Speaker 2: for that I am joined now by Paul Dobson. He

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Speaker 2: is Bloomberg's executive editor for Asia Markets. He joins us

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Speaker 2: from our studios in Singapore. Paul, it's always a pleasure.

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Speaker 2: So the official announcement is going to be made at

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Speaker 2: three pm local time. What is the chance for a

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Speaker 2: little disappointment?

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Speaker 3: Hi there, Doug. I think yes, the chance for disappointment

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Speaker 3: is reasonably high actually, and the reason that I say

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Speaker 3: that is because the market has already built in quite

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Speaker 3: lofty expectations given the price action that we saw on Friday,

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Speaker 3: where we had a big jump in the onshore markets,

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Speaker 3: and that followed through into the US market, with the

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Speaker 3: Golden Dragon Index jumping more than two and a half

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Speaker 3: percent as well. Saw some speculative trades going in in

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Speaker 3: the ETFs with our call options out of the money

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Speaker 3: looking for further gains there as well. And I think

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Speaker 3: that maybe the market got a little bit too excited

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Speaker 3: about the idea that it was going to be the

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Speaker 3: PBOC leading these announcements and that we were going to

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Speaker 3: see some real exciting fireworks like the press conference that

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Speaker 3: we saw in September where they pre announced right cuts

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Speaker 3: and got into a lot more stimulative detail. This one

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Speaker 3: seems much more that it's micro focused, you know, kind

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Speaker 3: of here are all the ways that we're going to

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Speaker 3: flesh out the promises that we already made at the

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Speaker 3: NPC meeting earlier in the month. And that's why I think,

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Speaker 3: you know that although that these are you know, put

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Speaker 3: them together, there's quite a lot of useful stuff in there.

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Speaker 3: Maybe there's a little bit of a ground that there

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Speaker 3: will be some disappointment. The people that are leading the

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Speaker 3: press conference this afternoon are not the heads of departments,

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Speaker 3: so that tells you that maybe it's a little bit

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Speaker 3: lower key, and some of the details that we saw

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Speaker 3: in that Shinhua report that you referred to. There are

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Speaker 3: bits and bobs that are new. There's you know, the

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Speaker 3: efforts to push up maybe the minimum wage, pension payments,

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Speaker 3: ensure that unemployment benefits are paid out could all be supportive.

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Speaker 3: But I don't know whether there's that big round billion

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Speaker 3: u N number or exciting new announcements that's really going

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Speaker 3: to sustain this market rally.

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Speaker 2: So do you have a sense as to why the

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Speaker 2: policy response is so restrained even in the face of

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Speaker 2: the severity of the deflationary trap that China seems to

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Speaker 2: be in.

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Speaker 3: Yeah, I think that the authorities want to avoid blowing

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Speaker 3: any bubbles and they want to carry on and finish

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Speaker 3: the job getting rid of the speculation in corners of

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Speaker 3: the market, particularly property, and so from that respect, they

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Speaker 3: don't want to do anything that is overly stimulative. You know,

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Speaker 3: the GDP growth goal again for this year is five percent,

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Speaker 3: the CPI goal is two percent, and so they want

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Speaker 3: to hit those targets, but it doesn't feel like they

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Speaker 3: want to go a long way to meet them. And

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Speaker 3: what we've seen for the past couple of years is

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Speaker 3: they've been happy to let the economy run a relative

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Speaker 3: smooth amount and then come back in in the second

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Speaker 3: of half of the year to give a little bit

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Speaker 3: of an extra push to get to those kinds of levels,

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Speaker 3: but not creating any sort of speculative bubbles along the way.

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Speaker 3: I think the other thing is they just don't know

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Speaker 3: yet what the full impact or how far the US

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Speaker 3: administration is going to go with the tariffs, so they

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Speaker 3: want to leave some powder dry just in case things

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Speaker 3: worse than a lot more as exports get hit with

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Speaker 3: those levees following through.

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Speaker 2: So right now we're twenty percent. Is there the reasonable chance,

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Speaker 2: in the view of the market watchers that you're in

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Speaker 2: touch with, that we could see that terror freight rise

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Speaker 2: above twenty percent?

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Speaker 3: There's definitely concern. Right on the campaign trial, Trump was

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Speaker 3: talking about sixty percent. So relative to that, we're actually

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Speaker 3: in a pretty decent spot with what we've had so far.

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Speaker 3: And you've seen that China's retaliation efforts have been relatively targeted,

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Speaker 3: you know, focusing on the areas where they feel that

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Speaker 3: they can cause some pain to Trump's biggest sort of

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Speaker 3: electoral base, so with the farmers and that kind of thing.

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Speaker 3: But yes, depending on what China can do and look,

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Speaker 3: it's sort of said, you know, we're doing plenty on

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Speaker 3: the fentanyl trade. Now we're really trying here. You know

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Speaker 3: that you don't believe that these tariffs are justified. It's

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Speaker 3: probably not going to be enough for the Trump administration.

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Speaker 3: So there's definitely the possibility that things can ratchet up,

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Speaker 3: and we'll see, we get April the second the reciprocal terrifts,

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Speaker 3: will see whether there's anything extra layered on for China

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Speaker 3: there and what comes after that.

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Speaker 2: Paul, I think it's important to point out that overall

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Speaker 2: high tech stocks in China still seem to be basking

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Speaker 2: in the glory of that deep seek moment. And I

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Speaker 2: noticed over the weekend that the Chinese search engine by

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Speaker 2: Do released two AI models. How much enthusiasm is there

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Speaker 2: still for tech stocks in China right now?

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Speaker 3: Lots of enthusiasm and excitement. Yes, yes, yes, I think

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Speaker 3: that that's the other thing perhaps I should have mentioned

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Speaker 3: is sooner. The other thing that's giving the authorities a

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Speaker 3: little bit, you know, of reason to kind of push this,

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Speaker 3: but not give the broader economy too much of a push,

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Speaker 3: because it feels that this can take take growth and

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Speaker 3: enthusiasm and the markets for that matter, a decent way. Further,

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Speaker 3: the Chinese tech really seems to be thriving despite some

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Speaker 3: of the limitations that were put on imports of technology

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Speaker 3: during the Biden administration, and it's coinciding with a little

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Speaker 3: bit of a curb in enthusiasm for the US market

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Speaker 3: as well. So I think that there are some flows

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Speaker 3: that are coming into Chinese tech and out of US

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Speaker 3: tech at the moment, a bit of a rebalancing there.

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Speaker 3: So that's certainly working. And each time, you know, there's

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Speaker 3: been just this continuing flurry of an and I think

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Speaker 3: that's one of China's strengths is that competition, which is

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Speaker 3: really driving the innovation. So although it's caused a lot

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Speaker 3: of kind of price wars in various parts of the economy,

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Speaker 3: is also pushing people to be lean, a slicker, faster,

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Speaker 3: and so the companies that do survive are going to

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Speaker 3: be looking in very good nick and decent investment opportunities.

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Speaker 3: It seems to be what the market is saying.

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Speaker 2: Away from technology, what other areas of the Chinese equity

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Speaker 2: market are getting investor attention.

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Speaker 3: So right now with this stimulus, people are looking at

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Speaker 3: the consumers a sector and seeing you know whether there

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Speaker 3: is going to be a broadening out to companies that

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Speaker 3: are more focused on the domestic economy. I think that

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Speaker 3: healthcare as well has been something of a bright spot

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Speaker 3: of late. And you know, the banks are the ones

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Speaker 3: that are most closely tied to the economy. If the

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Speaker 3: PBOZ and the authorities can do enough to help those

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Speaker 3: banks kind of push out again their net interest margins,

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Speaker 3: then that can be supportive for those as well. I think,

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Speaker 3: you know, in general, the other thing that we want

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Speaker 3: to pay a bit more attention to is that a

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Speaker 3: lot of the gains so far have been in the

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Speaker 3: Hong Kong markets rather than the mainland markets. There's been

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Speaker 3: huge flows from the mainland into Hong Kong. Maybe it's

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Speaker 3: time to see a little bit of a rebalancing there.

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Speaker 3: That's what we saw on Friday with the mainland gauge

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Speaker 3: starting to catch up a little bit on Hong Kong's markets.

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Speaker 3: So see whether that continues to push through.

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Speaker 2: Is this primarily retail money or institutions becoming a little

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Speaker 2: bit more aggressive as well.

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Speaker 3: Hard to see, but probably both. I mean, I think

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Speaker 3: that the retail consumer would like to have investments outside

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Speaker 3: of the un in case the currency depreciates significantly during

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Speaker 3: the ratcheting up of terrace with the US, but at

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Speaker 3: the same time, return investors have been burned continually, so

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Speaker 3: they'll be the most flighty if things do to start

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Speaker 3: to turn south as well. So it needs to be

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Speaker 3: a little bit of caution there. And you know, there's

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Speaker 3: still being all of that money that's flowed into bonds

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Speaker 3: and bond like products that has pushed yields exceptionally low.

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Speaker 3: And that tells you that there is still the question

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Speaker 3: of winning hearts and minds, winning that confidence if you

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Speaker 3: want to continue to see this rally building on where

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Speaker 3: we are at the moment.

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Speaker 2: Paul, before I let you go, the currency seems to

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Speaker 2: be holding up reasonably well in the face of a

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Speaker 2: lot of the trade war rhetoric that has been kind

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Speaker 2: of going back and forth between the US and China,

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Speaker 2: principally from Washington, going to other places around the world.

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Speaker 2: How do you explain what the PBOC is doing and

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Speaker 2: managing the currency.

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Speaker 3: It is keeping it very much in check and has

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Speaker 3: needed to do at the start of the Trump administration.

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Speaker 3: But what we're seeing now is a weakening of the dollar,

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Speaker 3: and while or sort of more broadly. And while that's

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Speaker 3: going on, actually the PBOC is still leaving the UN

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Speaker 3: in the same place more or less versus the greenback,

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Speaker 3: and so as a result, on a broader basis, the

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Speaker 3: UN is just starting to weaken a little bit against

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Speaker 3: against this peers. And I think really it's all eyes

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Speaker 3: on the exchange rate with the dollar, because that's all

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Speaker 3: important as we get into this tariff situation, and people

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Speaker 3: will be watching to see whether we get strength again

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Speaker 3: in the dollar and whether that starts to put the

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Speaker 3: UN on depression, whether the authority starts to ease their

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Speaker 3: grip and allow it to weaken a little bit to

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Speaker 3: cushion some of the blow from those tarifs overtime.

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

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Speaker 2: Dobson is executive editor for Asia Markets, joining us from

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Speaker 2: our studios in Singapore here on the Daybreak Asia podcast.

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Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm Dek Chrisner.

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Speaker 2: So we're gearing up for a new trading week in

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Speaker 2: the States after about of turbulence over the last five

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Speaker 2: trading days. At one point, the S and P five

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Speaker 2: hundred entered a correction relative to its February record high,

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Speaker 2: and for all of last week the S and P

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Speaker 2: was down two point three percent, and then over the weekend,

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Speaker 2: Treasury s Secretary Scott Besson said he's not worried about

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Speaker 2: a market downturn, and he said corrections are healthy, they're normal.

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Speaker 2: Let's talk about the outlook now with our guest, Joy

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Speaker 2: Young is with us. She has head of index product

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Speaker 2: management and marketing at Market Vectors Indexes. Joining from just

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Speaker 2: outside here in New York City, Joy, thank you for

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Speaker 2: being with us. Is this volatility all about US tariff policy?

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Speaker 4: Well, the volatility is coming from every source, and I

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Speaker 4: think it's all about the headlines right now. But I

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Speaker 4: think one thing investors must ultimately keep top of mind

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Speaker 4: is to get some perspective among all this noise that's circulating. So,

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Speaker 4: you know, one key point that we always highlight is that,

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Speaker 4: you know, mark is a volatile We've just come off

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Speaker 4: of two back to back years of twenty percent annualized

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Speaker 4: return and historically market's only return on average thirteen percent.

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Speaker 4: So you know, it's not unusual to see drops of

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Speaker 4: ten percent in any short periods, as we've seen last week,

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Speaker 4: but it is unusual to see two back to back

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Speaker 4: years of twenty percent, So I think we should expect

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Speaker 4: that correction, you know, was happening and was coming. And

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Speaker 4: the question is is this a correction or are we

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Speaker 4: entering a bear market?

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Speaker 1: And that's kind of unclear.

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Speaker 4: But you know, having perspective on everything can help be

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Speaker 4: a healthy way to you know, start this week and

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Speaker 4: to really think clearly about how to position your portfolio.

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Speaker 2: So I mentioned that Besin was speaking over the weekend.

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Speaker 2: One of the things that he refused to rule out

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Speaker 2: was recession. We have heard similar statement from President Trump.

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Speaker 2: Is a recession kind of worst case in your.

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Speaker 4: Mind a recession, it's deflation. But also the worst case

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Speaker 4: is lose seeing investors losing confidence in the market because

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Speaker 4: a lot of clearly, you know, in order to be investor,

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Speaker 4: to stay invested, you really have to have confidence in

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Speaker 4: your long term strategy. So I think that's ultimately the

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Speaker 4: worst case because once you lose confidence, you're going to overreact,

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Speaker 4: You're going to maybe get out of the market, and

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Speaker 4: we know historically staying invested in focusing on long term

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Speaker 4: is really the best strategy.

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Speaker 2: We had data last Friday from the University of Michigan

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Speaker 2: showing consumer sentiment now at the lowest level in more

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Speaker 2: than two years, and inflation expectations during the next five

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Speaker 2: to ten year time horizon rose to a level of

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Speaker 2: three point nine percent. That's the highest since February nineteen

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Speaker 2: ninety three. This has got to be a problematic situation

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Speaker 2: for the FED, no doubt about it.

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Speaker 4: Yeah, so it's a tough road for the FED because

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Speaker 4: you know, they have to balance you know, what the

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Speaker 4: administration wants and the economy as well as their inflation target.

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Speaker 4: But we also know that, you know, there has been

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Speaker 4: this strong focus on American exceptionalism, and I think people

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Speaker 4: are starting to reevaluate what that really means. And we've

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Speaker 4: seen from deep Seek that it was a reminder that

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Speaker 4: AI is an evolving story and that competition in the

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Speaker 4: AI industry is certainly robust and dynamic, and innovation can

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Speaker 4: emerge from everywhere and you know, globally anywhere. And again

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Speaker 4: the trade terrorists also reminded us that you know, a

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Speaker 4: protectionist policy and ban can drive competition and innovation abroad.

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Speaker 4: And we also have to think about the second and

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Speaker 4: third order impacts of trade terror So, you know, just

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Speaker 4: to try to forecast.

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Speaker 1: What we think will happen with terrorrists.

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Speaker 4: You need to forecast what we think will happen to

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Speaker 4: the you know, response to terrorsts and also the you know,

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Speaker 4: complicated supply chains that terrorists will have in the long term.

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Speaker 2: So we have the FED meeting this week. It's widely

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Speaker 2: expected that policymakers are going to hold right steady. If

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Speaker 2: we hear anything from Powell as it relates to the

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Speaker 2: risk in the economy right now, what do you think

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Speaker 2: he will tease out.

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Speaker 4: I think he's going to hold off and wait for

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Speaker 4: the data. I think he's you know, it would be

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Speaker 4: really you know, I think it would be more cautious

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Speaker 4: for him to really look and have the data as

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Speaker 4: evidence and support, rather than try to project what, you know,

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Speaker 4: you know, what might happen, you know, without any of

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Speaker 4: the support and data, because you know, we just I

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Speaker 4: don't think anybody knows what's going to happen with the

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Speaker 4: teriff implementation at this point.

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Speaker 1: And you know what happened next week tomorrow.

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Speaker 2: You mentioned stagflation a moment ago, and I'm looking at

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Speaker 2: what happened Friday in the bond market. We had yields

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Speaker 2: rising just a bit. Is the bond market something that

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Speaker 2: you're playing in right now, or are you feeling as

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Speaker 2: though maybe there's too much volatility, particularly at the long

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Speaker 2: end of the curve.

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Speaker 4: To me, it seems like the bond participants have been

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Speaker 4: a lot more cautious than the equity markets. But then again,

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Speaker 4: I think we were seeing such an expensive US equity

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Speaker 4: that it was easy to take some off the top

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Speaker 4: and really park it somewhere else. And you know, really

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Speaker 4: where we're seeing investors flow back into is gold, and

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Speaker 4: gold has last week hit, you know, another all time high,

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Speaker 4: so that's an indication that people are taking a flight

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Speaker 4: to safety approach.

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Speaker 2: So in terms of the dollar, one of the things

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Speaker 2: that has happened race with a lot of the rhetoric

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Speaker 2: around tough talk on tariffs, has been a dollar positive,

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Speaker 2: although the dollar gave back a little bit of ground

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Speaker 2: in the Friday session, even though yields were up just

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Speaker 2: a bit. How do you go about thinking about currencies

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Speaker 2: right now when you're looking at overall kind of market strategy,

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Speaker 2: particularly where the dollar is concerned.

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Speaker 4: I think definitely part of the dollar weakness has to

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Speaker 4: do with the uncertainty around the tear so you're seeing

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Speaker 4: a lot of currency volatility, and again that's you know,

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Speaker 4: pivoting people to to really look at gold, you know,

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Speaker 4: as a dollar alternative, and we've seen that with central banks.

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Speaker 4: We're now starting to see retail flow back into gold ETF.

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Speaker 4: So I think people are just kind of more cautious

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Speaker 4: about many of the safe assets that traditionally have been

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Speaker 4: US treasury US dollars, but now are kind of waiting

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Speaker 4: to see what's going to play out with you know,

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Speaker 4: the Trump administration.

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Speaker 2: What is the most reliable signal that you can think

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Speaker 2: of these days?

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Speaker 4: It's a hard call, but I think gold has been

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Speaker 4: pretty reliable because now you're seeing a mix of investors,

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Speaker 4: you know, central banks, retail investors, investments, Juler. You're seeing

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Speaker 4: a very strong mix of a diverse base. We also

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Speaker 4: very much watch our Bitcoin reference rate because it you know, bitcoin,

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Speaker 4: crypto assets, they trade real time, so it gives us

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Speaker 4: an indication of investor sentiment, you know, during the weekend

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Speaker 4: as well as during market, you know market, when markets

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Speaker 4: are when traditional markets are closed, We're seeing how investors

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Speaker 4: are reacting in real time.

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Speaker 2: When you look at fun flows these days, is there

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Speaker 2: something that you're using as a guide right now in

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Speaker 2: terms of tracking the flow of capital.

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Speaker 4: Yeah, So many of our indexes are linked to funds

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Speaker 4: and ETF, so we're watching those fun flows as well

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Speaker 4: as just ETF fun flows. And then you know, we

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Speaker 4: you know, watch a lot of the reports that come

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Speaker 4: out from you know, different ETF kind of source news sources.

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Speaker 2: Is there a risk of further downside do you think?

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Speaker 2: I mean, we stabilized last week. I think for all

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Speaker 2: of last week the S and P was up about

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Speaker 2: two point three percent when some buying kind of entered

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Speaker 2: into the picture after that pullback, Is there still the

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Speaker 2: risk of more downside? Do you think for the equity market?

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Speaker 4: Of course, there's always that risk is always you know

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Speaker 4: out there markets are volatile, and we've seen pullbacks back

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Speaker 4: in twenty twenty two of almost fifty percent, so that

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Speaker 4: you know, we could potentially see that again this year.

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Speaker 4: But I would say, you know, don't throw everything out

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Speaker 4: at once. You know there is you know, different ciated

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Speaker 4: performance within the US markets. Also, you know, people who

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Speaker 4: overreact this this is a good opportunity to buy something

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Speaker 4: cheap in the market.

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Speaker 2: Joy will leave it there. Thank you so much for

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Speaker 2: taking the time to chat with us. Joey Yang, head

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Speaker 2: of Index Product Management and marketing at Market Vector Indexes.

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Speaker 2: Joining us here on the Daybreak Asia Podcast. Thanks for

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Speaker 2: listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.

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Speaker 2: Each weekday, we look at the story shaping markets, finance,

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Speaker 2: and geopolitics in the Asia Pacific. You can find us

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Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 2: else you listen. Join us again tomorrow for insight on

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Speaker 2: the market moves from Hong Kong to Singapore and Australia.

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Speaker 2: I'm Doug Chrisner, and this is Bloomberg