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Speaker 1: Good morning, and welcome to the Bloomberg Daybreak Asia podcast.

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Speaker 1: I'm Doug Prisner. Here are the stories we're following today.

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Speaker 2: I'm Charlie Palatin for Doug Crisner. This week Asian stock

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Speaker 2: set to follow Wall Street, hire as traders prepare for

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Speaker 2: the US election, and key economic data ahead of the

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Speaker 2: next FED decision. We heard from Daniel Lamb, head of

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Speaker 2: equity trading at Standard Chartered Wealth Solutions. He spoke earlier

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Speaker 2: with Bloomberg's Heidi Stroud Watson Sherryon in Hong Kong.

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Speaker 3: So, Daniel, do you see yields going much higher from there?

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Speaker 4: Because it feels that there is.

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Speaker 3: Still you know, as I said, that sort of investor

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Speaker 3: anxiety given the level of uncertainty at the moment.

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Speaker 5: Well, we do believe that around the current level it

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Speaker 5: is quite attractive for the medium to long term investors

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Speaker 5: because the tenure year has gone up by roughly sixty

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Speaker 5: bases pot over the last five weeks or so, and

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Speaker 5: we believe that is pricing in a Donald Trump or

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Speaker 5: Republican clean sweep right. And other traits that include such

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Speaker 5: phenomena includes perhaps the small caps and also the US financials. Okay,

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Speaker 5: so all these are pricing in that scenario almost to perfection.

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Speaker 5: So basically for the long term investors because of the

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Speaker 5: fat rate cut path is still very much intact in

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Speaker 5: our view that we believe the news would gradually come

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Speaker 5: down after the elections.

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Speaker 3: What is interesting is almost regardless of who is emerges

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Speaker 3: victorious from the election, now the candidate is really prioritizing

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Speaker 3: definite reduction, right, So does that play into this sort

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Speaker 3: of uncertainty and the anxiety that we're feeling across bond investors.

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Speaker 5: Yes, yes, yes, that certainly does. But we do believe

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Speaker 5: that they would need to be stimulating the economy first

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Speaker 5: right before they The deficit has been increasing for for

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Speaker 5: a long time, right, so it is a case of

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Speaker 5: in a way, trying to stabilize the current economic scenario

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Speaker 5: before getting concerned about the medium to longer term issues.

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Speaker 5: So that is likely to be the policy that they'll

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Speaker 5: be taking. So that means at the same time, Gold

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Speaker 5: is you know, our only overweight in terms of our

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Speaker 5: level one as a class allocation, and that really plays

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Speaker 5: into that scenario. We believe that under all the different scenarios,

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Speaker 5: gold would be performing pretty well right regardless of who wins,

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Speaker 5: because of what you said, the the but delicity of

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Speaker 5: political tension, et cetera.

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Speaker 6: Yeah, Daniel, what about the Japanese yen? I mean with

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Speaker 6: the USO's rising, we continue to see pressure.

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Speaker 5: Oh the yen is because of the current political uncertainties

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Speaker 5: that we're seeing. So that is probably going to be

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Speaker 5: warbly for a while, especially when you're going into the

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Speaker 5: US elections. Right because going into the elections, you expect

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Speaker 5: that the dollar will remain quite strong. Okay, So two

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Speaker 5: sides of the equation dollar staying strong and political uncertaties

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Speaker 5: in Japan. So dollar yen probably going to be going

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Speaker 5: higher to around the one fifty five level roughly right

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Speaker 5: before it can go back. Bioj's on a different path

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Speaker 5: from the fat. It's on the rate hiking path. And

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Speaker 5: the fact that you know the election results is as

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Speaker 5: is means that the people you know are concerned about

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Speaker 5: about the inflationary scenario, the layman in terms of the economy,

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Speaker 5: they are concerned. So the bioj's are to be hiking

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Speaker 5: and that would help to narrow the interest rate differential

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Speaker 5: between dollar and the yen. Dollar n to gradually come

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Speaker 5: back down.

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Speaker 6: So what do you make then of what happens to

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Speaker 6: US tech because I know that you've been watching that

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Speaker 6: inverse correlation with a yen.

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Speaker 7: Yes.

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Speaker 5: So basically we have cited the dollar yen unwind of

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Speaker 5: the yen carry trade as the major risk for US

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Speaker 5: growth stocks or tax doocks, because if you look at

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Speaker 5: the movement of the two since to to, they have

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Speaker 5: been basically very much you know, correlated, right, perfect correlation.

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Speaker 5: So the money that people use to short yen, the

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Speaker 5: money that they get is one of that's used to

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Speaker 5: buy these high flying US growth stocks. So if there

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Speaker 5: were to be sharp and wine like what we saw

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Speaker 5: back in August, that can hurt the tax stocks, cause

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Speaker 5: a temporary dislocation, so to speak. So given the long

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Speaker 5: term prospects for those docks, if there were to be

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Speaker 5: such a scenario, that would be a great buying opportunity

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Speaker 5: for those.

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Speaker 6: Text your as reporting this week, what are your expectations

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Speaker 6: for this earning season?

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Speaker 5: All these earning seasons. We believe it's likely to be

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Speaker 5: pretty good. I mean, so far the companies have been

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Speaker 5: have been doing quite well, so we're expecting that the

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Speaker 5: guidance to be quite good as well for those But

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Speaker 5: of course, you know, in terms of the AI, the

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Speaker 5: tax stocks, UH semiconductor stocks, those that are you know,

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Speaker 5: more advanced in terms of you know, for the advanced technology,

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Speaker 5: those are likely to be doing better than those that

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Speaker 5: are using less advanced technology in terms of semiconductors. So

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Speaker 5: there is likely to be differentiated differentiation there. But we

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Speaker 5: do believe that you know, such causes like you know,

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Speaker 5: Dolly and coming off leading to the tax stocks to

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Speaker 5: be under pressured. Potentially, those are factors that you know,

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Speaker 5: people should be taking advantage of for the long term investors.

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Speaker 3: And you're after the exuberance over the China stimulus package,

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Speaker 3: we're now seeing some of those each seeing some significant

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Speaker 3: money being yanked out now. In fact, when it comes

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Speaker 3: to large caps one ATF see the biggest outflows from

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Speaker 3: China since twenty twenty. You talk a little bit about

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Speaker 3: the sort of temporary reallocation from Indian funding, Right, Does

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Speaker 3: that mean when you look at China versus India you're

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Speaker 3: still preferring the latter while you kind of wait for

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Speaker 3: more details on what happens with China stimulus.

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Speaker 5: Yes, because the letter is more of a more of

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Speaker 5: a growth, longer term, consistent growth story in China, We're

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Speaker 5: not so sure, right, because it depends on what's going

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Speaker 5: to come out, you know, further details of the stimulus package.

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Speaker 5: People waiting for that. That's why people are pulling money

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Speaker 5: out and money money rotains very fast. They go to

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Speaker 5: the US for the for the Donald Trump trade for example.

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Speaker 5: So yes, we're preferring India for the longer term. But

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Speaker 5: if these stimulus in China were to come out to

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Speaker 5: surprising the upside, then we can see another exuberance in China.

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Speaker 3: Daniel, really great to have you with Aastaniel Lamb who's

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Speaker 3: ahead of equity strategy at Standard Chartered World Solutions.

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Speaker 2: I'm Charlie Pellot. Doug Krusner is off this week. Let's

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Speaker 2: get to a conversation with Larry Kulp, Sharman and CEO

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Speaker 2: of GE Aerospace. In an exclusive interview with Bloomberg, he

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Speaker 2: passed through the issues lingering over the aviation industry. Here's

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Speaker 2: Culp speaking with our own Hustbland.

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Speaker 4: I mean in Singapore, Larry, when he comes to the

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Speaker 4: aerospace industry, he's been settled with supply chain disruption, supply

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Speaker 4: chain issues and challenges. When will we see the end

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Speaker 4: of those challenges?

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Speaker 8: Well, in many respects it's all about demand, and we

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Speaker 8: look out both in terms of demand for new engines

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Speaker 8: underwing on new airplanes and the support that we provide

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Speaker 8: the airlines for their existing fleets. Continuing to be strong.

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Speaker 8: Really for the rest of this decade. It's a good

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Speaker 8: problem to have, and we'll need to increase our output.

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Speaker 8: We'll need to work with our suppliers to increase their

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Speaker 8: outputs to us. I think every year, probably between now

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Speaker 8: and twenty nine or thirty at a minimum, so it'll

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Speaker 8: be with.

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Speaker 7: Us for a while. But I think we're making a

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Speaker 7: lot of progress.

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Speaker 4: The thing is some had anticipated and ended the problem

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Speaker 4: by twenty twenty seven, but by the sound of it,

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Speaker 4: it's going to be longer than that. Perhaps we could

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Speaker 4: see a lost decade for the aerospace industry. Would that

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Speaker 4: be a fair assumption.

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Speaker 8: I don't think we're going to lose a decade by

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Speaker 8: any stretch. Again, I think given how strong demand is

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Speaker 8: and the progress we and others are suppliers, our airframewer

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Speaker 8: customers are making will continue to drive output.

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Speaker 7: Again because the demand is so strong.

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Speaker 8: We'll talk about the supply chain, but I don't think

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Speaker 8: this will be a lost decade. I think this will

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Speaker 8: be a very important decade as the industry recovers from

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Speaker 8: the pandemic, modernizes fleets, expands fleets with more fuel efficient aircraft.

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Speaker 4: But realistically, what can be done.

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Speaker 8: Well it really for us is all about making sure

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Speaker 8: we're the best possible partner, the best hossible collaborator with

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Speaker 8: our suppliers. The vast majority of the input challenges that

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Speaker 8: we have, the shortages that cause us to be late

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Speaker 8: on deliveries, really come from about fifteen different suppliers across

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Speaker 8: our supply chain. We have five hundred and fifty engineers

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Speaker 8: going in to work with those suppliers, identify bottlenecks, identify constraints,

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Speaker 8: and really solving those problems so that we can drive

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Speaker 8: better output from their operations, inputs into hours and in

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Speaker 8: turn to the airlines and the airframers.

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Speaker 4: Let's talk specifically about the latest supply chain disruptions and

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Speaker 4: shortage and that has to do with the costings of

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Speaker 4: high pressure turbine blades. What's the story there? When can

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Speaker 4: that issue be resolved?

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Speaker 7: Well, I think there are a host of issues.

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Speaker 8: Again, when you look across the supply chain that we're managing,

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Speaker 8: We've got about fifteen different suppliers across a number of

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Speaker 8: different commodities, which are really where we're being paced. So

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Speaker 8: I think in every instance, I really like the progress

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Speaker 8: that I'm saying. Teams collaborating on the shop floor, identifying

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Speaker 8: the issues that are really the problem. It may be

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Speaker 8: a process yield in some instances, it may be something

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Speaker 8: as simple as staffing, perhaps a.

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Speaker 7: Second shift, and others.

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Speaker 8: But by working those problems together, we're driving better output.

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Speaker 8: We had a small handful of suppliers just here in

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Speaker 8: the most recent quarter where we increased our output sequentially

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Speaker 8: by eighteen percent, not year over year, but from the

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Speaker 8: second quarter to the third quarter. It's that type of work,

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Speaker 8: the cumulative effect of that type of work which will

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Speaker 8: help us.

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Speaker 4: So when it comes to the costings, that issue could

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Speaker 4: be resolved in the next give me a timeframe.

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Speaker 8: I don't want to talk about specific commodities with specific

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Speaker 8: timeframes again, because the demand curve steps up every year

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Speaker 8: for the rest of this decade.

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Speaker 7: So even if we were in a.

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Speaker 8: Position where we had solved a particular shortage, there's going

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Speaker 8: to be more demand, thus more output required next year

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Speaker 8: to continue to drive those capacity expansions, those process improvements

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Speaker 8: for quite some time. But I think we're fortunate to

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Speaker 8: have that sort of outlook in our business.

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Speaker 4: The aerospace industry is also seeing of the challenges. We're

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Speaker 4: seeing fulty pots in planes still in some of is

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Speaker 4: how concerning is that for you?

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Speaker 8: Well, it's a high priority for us because some of

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Speaker 8: that activity has actually involved engines, and just a couple

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Speaker 8: of weeks ago, our Supply Chain Integrity Coalition issued a

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Speaker 8: report had a series of recommendations that we think will

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Speaker 8: improve the safety and the security of the supply chain.

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Speaker 8: Not many people appreciate that what we do, it's not

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Speaker 8: only manufacture engines, but we support those engines for twenty

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Speaker 8: sometimes thirty years over their entire life cycle. So the services,

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Speaker 8: the parts, the repairs that we provide in the aftermarket

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Speaker 8: are a critical part of what we do for the airlines,

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Speaker 8: and we all need to make sure that there are

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Speaker 8: no counterfeit parts in that supply chain. And that's a

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Speaker 8: good of what the coalition. The Coalition's work was aimed

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Speaker 8: to do.

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Speaker 4: Is there some sperhops that it is a sign that

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Speaker 4: we've reached the limit of innovation on conventional aircraft, for instance.

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Speaker 7: No, not at all.

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Speaker 8: I think that if you look at what we're doing,

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Speaker 8: just say, in the narrow body segment with our leap engine,

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Speaker 8: we're providing a generational step function improvement in fuel efficiency.

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Speaker 8: It's part of the reason that demand is so strong,

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Speaker 8: because airlines not only want to expand they want to

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Speaker 8: modernize because of that fuel efficiency, which also translates into

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Speaker 8: real sustainability gains.

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Speaker 7: We have been very public.

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Speaker 8: Over the last three years about our next generation narrowbody engine,

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Speaker 8: a program which we call RISE, which is really stands

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Speaker 8: for Revolutionary Innovation and Sustainable Engines. So there will be

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Speaker 8: new planes that come to market probably sometime in the

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Speaker 8: middle or the latter part of the next decade. We

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Speaker 8: want to make sure we're investing today in the technologies,

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Speaker 8: the innovations that are going to provide the next step

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Speaker 8: function improvement in fuel efficiency and thus sustainability.

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Speaker 4: Letter We know that ge powers the Triple seven X.

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Speaker 4: Its delivery has yet again been delayed, extending the delay

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Speaker 4: to about five years.

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Speaker 3: Now.

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Speaker 4: How confident are you that perhaps those planes will be

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Speaker 4: delivered in twenty twenty six. What's the complication there?

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Speaker 7: Well, I think there's a lot happening there.

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Speaker 8: We'll let Kelly Ortberg and the team at Boeing talk

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Speaker 8: about the schedule for the Triple seven X. I think

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Speaker 8: their last comments talked about an entry into service in

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Speaker 8: twenty twenty six.

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Speaker 7: We're thrilled to be the.

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Speaker 8: Only engine underwing with our new nine X engine. When

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Speaker 8: I talk to customers, they tell me two things. They

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Speaker 8: love that airplane and they wish they had it yesterday.

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Speaker 8: I think the fact that customers are very key to

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Speaker 8: see Boeing work through the development and the certification task

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Speaker 8: that lie ahead of them is really good news for

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Speaker 8: Boeing's good news for us because that's going to be

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Speaker 8: a heck of an airplane once it enters into service.

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Speaker 4: All lines like Kathy have expressed a disappointment. I mean,

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Speaker 4: is there a sense? I mean, how are you confident

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Speaker 4: twenty twenty six is actually viable?

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Speaker 8: That's the plan that we're working on with Boeing. We

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Speaker 8: know that's the plan that they're working on with every

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Speaker 8: ounce of energy and dedication that they can provide.

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Speaker 4: You talked about your nine X engine. It's been problematic

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Speaker 4: as well. There are a few challenges there that have

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Speaker 4: been cracks. Can you talk us through what is happening,

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Speaker 4: what the root cause is, and how are you trying

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Speaker 4: to fix it.

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Speaker 8: I think you may be referring to a piece of

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Speaker 8: equipment that is attached to the nine X engine, which

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Speaker 8: is a Boeing supply part, not a GE aerospace supply part.

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Speaker 8: So the engine has performed very well over the last

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Speaker 8: several years. It was certified back in twenty twenty. There's

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Speaker 8: plenty of work that we still need to do to

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Speaker 8: be able to ramp side by side with Boeing, but

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Speaker 8: in terms of the core integrity of the engine, weren't

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Speaker 8: very good.

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Speaker 4: So you're saying that it is not on GE to

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Speaker 4: fix the problem, it is on Boeing to fix that problem.

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Speaker 7: I think.

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Speaker 8: I think the crack that you're referring to is a

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Speaker 8: function of a Boeing supplied component, not a GE engine.

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Speaker 4: When you see when do you see testing resuming for

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Speaker 4: the Triple seven X, is there is there a sense

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Speaker 4: that you're getting in your conversations with Boeing.

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Speaker 8: That's really for Boeing to speak too publicly in terms

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Speaker 8: of the schedule for that the resumption of that testing.

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Speaker 4: Larry, although you talked about how are you optimistic about

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Speaker 4: the outlook for the aviation sector, talk to us about

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Speaker 4: the kind of demand you anticipating and which region is

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Speaker 4: driving that optimism.

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Speaker 8: Well, I think it's really a global phenomena. As people

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Speaker 8: have traveled more and they've been keen to travel all

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Speaker 8: the more post of the pandemic. We're seeing the airlines

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Speaker 8: work their assets, fly those planes like like never before.

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Speaker 8: And at the same time, we're seeing airlines around the world,

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Speaker 8: but particularly here in the Asia Pacific region and in

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Speaker 8: the Middle East, looking to expand their fleets of both

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Speaker 8: narrow bodies and wide bodies.

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Speaker 7: That's all good for.

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Speaker 8: The industry and why I say that this will really

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Speaker 8: be a demand driven challenge, a challenge we happily accept

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Speaker 8: for the rest of this decade.

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Speaker 4: Can you put a number to it? Are you as

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Speaker 4: optimistic now as you were at the start of the

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Speaker 4: year for instance?

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Speaker 8: Certainly more optimistic again because we see the flying public

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Speaker 8: continuing to fly. Just the comments from the airline CEOs

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Speaker 8: the last couple of weeks in conjunction with their earnings

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Speaker 8: calls has reiterated that bolishness. And every customer that I

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Speaker 8: talked to that has planes on order, be they Airbus

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Speaker 8: or Boeing airplanes are very keen to see those planes

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Speaker 8: delivered and those planes added to their fleets.

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Speaker 4: So what Asia versus Middle East versus Europe I mean.

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Speaker 8: In terms of growth, Well, certainly Asia, pac and the

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Speaker 8: Middle East I would say is outgrowing what we're seeing

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Speaker 8: in North America and in Europe in terms of new

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Speaker 8: airplane deliveries, and probably also at this point in terms

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Speaker 8: of traffic increases.

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Speaker 4: Are you concerned about growth because the IMF has just

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Speaker 4: cut its growth projection for the year. We're seeing countries

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Speaker 4: like China, for instance, undergoing a sluggish economy having great

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Speaker 4: difficulty turning around its economy. Is that impacting kind of

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Speaker 4: demand that you're anticipating.

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Speaker 8: I think at this point we don't really see those

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Speaker 8: economic concerns directly material impacting demand and our industry. Again,

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Speaker 8: because the life cycles of these machines are so long,

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Speaker 8: the order books really reach out into the next decade. Now,

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Speaker 8: that could change, and we're not either oblivious or completely

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Speaker 8: immune from some of the economic pressures that people are

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Speaker 8: concerned about. But at this point, we really think that

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Speaker 8: we have a strong undercurrent of demand on both the

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Speaker 8: new make and on the aftermarket side, which should continue

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Speaker 8: for the foreseeable future.

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Speaker 4: When you speak to leaders in the business world, a

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Speaker 4: lot of them say that one of the risks is

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Speaker 4: actually the US election. How are you assessing that risk

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Speaker 4: to your business.

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Speaker 8: Well, we'll have an election here what a week from Tuesday,

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Speaker 8: and we'll get on the other side of that. Ge

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Speaker 8: has worked with both Democratic and Republican administrations for over

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Speaker 8: a century. So whatever the outcome, I know, having been

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Speaker 8: born in Washington, DC, that we will will move forward

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Speaker 8: as a company and we will work with whatever administrations

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Speaker 8: in place, as we have over the last several decades.

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Speaker 4: It doesn't matter who the president is. It doesn't matter

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Speaker 4: if it's Trump and his perhaps is his plans to

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Speaker 4: impose TARIS and China. That does not impact how you

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Speaker 4: view your business, does not impact your strategy.

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Speaker 8: Well, I think that we'll see how the winning candidate

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Speaker 8: moves forward from a policy perspective. I'm highly optimistic that

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Speaker 8: we'll work constructively with whoever wins the election.

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Speaker 4: I'd like to touch in China. It has big ambitions

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Speaker 4: COMAC C nine one nine. So if we've seen orders

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Speaker 4: of about three hundred coming from the big Chinese carriers,

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Speaker 4: what do you make of that number?

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Speaker 8: Well, it would suggest that the Chinese carriers like that airplane.

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Speaker 8: We'd like to think one reason they like that airplane

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Speaker 8: is because we have our leap one sea engine underwing

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Speaker 8: sole source in that regard, and I think Comac and

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Speaker 8: the Chinese are quite serious about their intentions with that airplane,

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Speaker 8: and that demand that you just cited really is the

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Speaker 8: beginning of the market acceptance of that aircraft.

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Speaker 4: Do you think it can be a game changer? Do

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Speaker 4: you think it will reshape the landscape in the aerospace business?

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Speaker 8: Well, I think that we will see over time how

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Speaker 8: successful Comac and the market acceptance of that airplane is.

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Speaker 8: But it would be very foolish, I think, to bet

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Speaker 8: against Comac and their customers.

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Speaker 4: What are its biggest challenges?

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Speaker 8: Well, I think anytime that you bring a new aircraft

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Speaker 8: to market in a marketplace as complex as ours. Again,

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Speaker 8: as we were talking earlier, there is not only the

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Speaker 8: ramping of the supply chain to produce more of those

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Speaker 8: airplanes every year, but the regional and ultimately the global

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Speaker 8: support network that those airplanes will require. That's going to

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Speaker 8: be that's a serious undertaking. I think Comac understands that clearly,

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Speaker 8: and we'll do everything they can to master that challenge.

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Speaker 4: Larry Colp, we thank you so much for your insights. Today.

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