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

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Speaker 2: This is the.

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Speaker 1: Bloomberg Daybreak Aisia podcast. I'm Doug Prisner. You can join

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Speaker 1: Brian Curtis and myself for the stories, making news and

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Speaker 1: moving markets in the APAC region. You can subscribe to

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Speaker 1: the show anywhere you get your podcast and always on

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Speaker 1: Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app well.

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Speaker 3: Joining us now to take a look at market action

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Speaker 3: and what to expect going forward to Stephanie Lung cioed

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Speaker 3: stash away with us in our studios here in Hong Kong. Stephanie,

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Speaker 3: thanks very much for being in. So a lot of

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Speaker 3: investors are saying it's all about Nvidia this week, but

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Speaker 3: we should note that the rally in risk assets has

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Speaker 3: seen a broadening to not only industrials, but financials, other

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Speaker 3: value and cyclical stocks, also emerging markets. Foreign currencies have

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Speaker 3: rallied as well. So to what extent do you see

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Speaker 3: this as bigger than meg seven, bigger than AI and

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Speaker 3: bigger than in Nvidia or is it really all about

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Speaker 3: in Vidia?

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Speaker 4: Yeah?

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Speaker 2: Actually, I mean a lot of action obviously in Nvidia

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Speaker 2: and the AI related themes. I mean, most recently we've

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Speaker 2: seen actually the AI theme broadening itself as well to

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Speaker 2: power companies or kind of infrastructure plays. If you think

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Speaker 2: about kind of AI usage and compare that with kind

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Speaker 2: of traditional search, every AI query actually uses ten times

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Speaker 2: more energy than a Google search. So that explains why

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Speaker 2: investors are getting actually quite excited about energy in general

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Speaker 2: and power plays and data center uses. I think also

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Speaker 2: if you think about kind of the broader economy, I

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Speaker 2: think about two months ago, we pointed out that we're

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Speaker 2: seeing some green sheets in terms of the global manufacturing sector,

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Speaker 2: and when you look at global manufacturing PMIS or USPMIS,

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Speaker 2: they have been actually slumping for the last twelve to

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Speaker 2: eighteen months, which has actually made a turn in the

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Speaker 2: last two months. So I think that in combination with

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Speaker 2: more supportive policies out of China, that prompts actually a

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Speaker 2: larger recovery in risky assets. And when there's more things

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Speaker 2: to choose from, it's not just Max seven anymore. You

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Speaker 2: can actually invest in the broader market, including industrials, including

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Speaker 2: even utilities. That actually broadens up the market.

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Speaker 1: We heard today from the head of the Cleveland Fed

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Speaker 1: that Lorettamesters saying that maybe we don't get the three

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Speaker 1: rate cuts projected in the month of June when the

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Speaker 1: FED conducted the last dot plot survey. I'm wondering what

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Speaker 1: that does to your thesis on the market. Let's say

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Speaker 1: we don't get any rate cuts this year from the FED.

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Speaker 1: I know that may be away from the consensus viewpoint,

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Speaker 1: but there's a lot to be said for the robust

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Speaker 1: nature of the American economy inflation. Yes, it appears to

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Speaker 1: be a little stubborn. Maybe the FED doesn't cut rates

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Speaker 1: between now and the end of the year. How does

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Speaker 1: that change the way you're viewing opportunities.

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Speaker 2: Yeah, I think at the beginning of the year, when

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Speaker 2: the market was actually pricing to six cuts, I mean,

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Speaker 2: we were saying that that was way too aggressive, and

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Speaker 2: we don't see inflation coming down as quickly as it

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Speaker 2: did in the last kind of sixty eight nine months

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Speaker 2: and in the first quarter. Indeed, what we've seen is

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Speaker 2: still this inflation, but the pace of that this inflation

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Speaker 2: has disappoints at market. Now, the market is sort of

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Speaker 2: pricing in one to two cuts by the end of

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Speaker 2: the year, and I think we've seen some walk backs

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Speaker 2: from Fed officials as well to the three cuts forecasts

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Speaker 2: now when we take a step back, we still think

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Speaker 2: that there will be this inflation kind of going on

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Speaker 2: in the next six month or so. However, I mean

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Speaker 2: that pace is actually going to be more gradual. And

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Speaker 2: when you think about kind of how the Fed thinks

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Speaker 2: about the setting of the interest rates, right now, the

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Speaker 2: real rates is actually above two percent, which is actually

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Speaker 2: quite tight, and they have actually said that they think

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Speaker 2: real rates are actually quite tight. That gives them some

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Speaker 2: room to cut. I mean, whether it's one times, two times,

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Speaker 2: or even three times. I think it's just a matter

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Speaker 2: of kind of I guess twenty five basis of one's difference.

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Speaker 2: But the direction is that the direction is that they

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Speaker 2: will stop to cut at some point in the second

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Speaker 2: half of this year.

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Speaker 3: So inflation was a concern that was very much front

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Speaker 3: and center. It seems like it has slipped a little

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Speaker 3: bit to the backseat, not as far back as as

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Speaker 3: things like geopolitics, debt and deficits, and these are the

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Speaker 3: things that Jamie Diamond, you know, commented on and he's

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Speaker 3: very nervous and he's prone to look at these big

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Speaker 3: picture themes. But what happens in markets is they don't

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Speaker 3: always focus on those big picture areas on a day

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Speaker 3: to day basis, and so I'm curious whether or not,

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Speaker 3: you know, inflation is kind of sliding into that position where, yeah,

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Speaker 3: it's out there, it's something to be concerned about, but

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Speaker 3: it may not affect markets in the very short term.

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Speaker 5: Yeah, I think.

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Speaker 2: I mean the concern for US for inflation really is

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Speaker 2: that where does long term inflation land. Does it actually

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Speaker 2: go back to the FETs two percent target. Now we

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Speaker 2: talked about AI for example, I mean AI actually is

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Speaker 2: very very power kind of consumptive or very very power hungry,

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Speaker 2: and when you look at, for example, the latest kind

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Speaker 2: of iteration of chips from Nvidia, it actually uses even

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Speaker 2: more power than the previous kind of generations. So I

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Speaker 2: mean that actually puts some pressure up what pressure on

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Speaker 2: commodity prices, where we're seeing breakouts in copper, we're seeing

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Speaker 2: breakouts in gold. I mean that also reflects I think

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Speaker 2: the market is concerned about the US dollar, and when

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Speaker 2: we think about commodities, I mean these are priced in

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Speaker 2: US dollars. So I think in combination, we're actually more

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Speaker 2: concerned about the long term inflation outlook of settling somewhere

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Speaker 2: between two to three percent rather than the fits two

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Speaker 2: percent targets, so that actually has a lot of implication

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Speaker 2: for long duration bonds. I think that is actually the

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Speaker 2: bigger longer term concern.

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Speaker 1: I'm glad you mentioned US dollar strength because the flip

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Speaker 1: side is obviously a weak currency for many of the

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Speaker 1: exporting nations in the APAC region. I was looking at

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Speaker 1: data today from the Port of Los Angeles. We had

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Speaker 1: trade volumes total volumes up for a ninth straight month

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Speaker 1: during the month of April, and then if you look

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Speaker 1: at import volumes, these are containers that are fully stacked

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Speaker 1: up twenty one percent in the month of April versus

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Speaker 1: last year. So I guess there may be a case

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Speaker 1: that weaker currencies in some of the exporting nations in

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Speaker 1: Asia is really helping to drive trade right now.

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Speaker 2: Yeah, for sure, if you look at how the Japanese

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Speaker 2: end has been fueling the japan economy recovery, I think

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Speaker 2: a lot of nations are thinking about their own currencies,

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Speaker 2: and China in particular is suffering from a cyclical downturn

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Speaker 2: and exports have been very, very weak, right and I

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Speaker 2: think that is one of the easy levels that they

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Speaker 2: can pull to trigger recovery in the Chinese economy. Of course,

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Speaker 2: they're pulling out all the stops. In latest Politburo meeting

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Speaker 2: they actually announced that they will try to support the

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Speaker 2: property sector. They've just issued a one trillion special bond

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Speaker 2: for the government and there's a lot of speculation on

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Speaker 2: how they would use that to prop up the property

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Speaker 2: sector as well.

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Speaker 3: But a rally of thirty percent off the lows, that's

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Speaker 3: a very big rally. I mean, how much is already in.

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Speaker 2: Yeah, So if you look at kind of China equity

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Speaker 2: market from my fundamentals and valuation point of view, let's

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Speaker 2: take valuations right. Historically it's average PE has been around

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Speaker 2: eleven point five percent point five times. Right now it's

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Speaker 2: sort of ten point five, So roughly ten to fifteen

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Speaker 2: percent upside from there. Yeah, from a valuation perspective.

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Speaker 3: All right, Stephanie, Stephanie lung Cio at stash Away, we've

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Speaker 3: seen a broad advance in risk assets really globally over

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Speaker 3: the past month or so after weakness in April. But

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Speaker 3: can that rally continue. We're joined now by Juinbilu, who

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Speaker 3: is portfolio manager at Tribeca Investment Partners. June, thanks very

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Speaker 3: much for being with us. A very simple question to

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Speaker 3: you can the broader markets rally. If Nvidia disappoints.

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Speaker 5: Thank you for having me. Look, we do believe so

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Speaker 5: in Vidia.

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Speaker 4: If Divindia did disappoints, it will probably put more pressure

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Speaker 4: on the more expensive part of the market, which is

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Speaker 4: the tech and the growth companies. But we do think

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Speaker 4: heading into the year end, there will be many other

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Speaker 4: companies sectors, such as the cyclical part of the market

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Speaker 4: should start to do a little bit better given the

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Speaker 4: amount of underperformers they have done. So, you know, our

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Speaker 4: view is that market is going to continue to trend higher.

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Speaker 1: How are you feeling about the Chinese markets? Is that

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Speaker 1: an area that will continue to trend higher as well?

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Speaker 5: I do think so.

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Speaker 4: I think that, you know, when we come to the

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Speaker 4: cyclical part or the valuation differential between different sectors. The

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Speaker 4: evaluation differential between different markets has been incredible, particularly the

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Speaker 4: Chinese market. You know, the valuation that's presenting many of

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Speaker 4: its growth companies or even other cyclical businesses, it's just

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Speaker 4: incredible when comparing to the developed markets. I do think

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Speaker 4: that market will continue to outperform, and particularly at the

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Speaker 4: expense of some of the more defensive market within that

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Speaker 4: whole Asian Pacific region.

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Speaker 3: Sometimes geopolitics really rises to the fore, particularly when the

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Speaker 3: US and China are going at it over, for instance, trade.

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Speaker 3: Now we have a possible inflection point with latching the

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Speaker 3: being inaugurated as president and making a speech where he

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Speaker 3: didn't really say anything all that new in terms of

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Speaker 3: the basic framework, the way that they look at things

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Speaker 3: in Taiwan, which is we already have de facto independence.

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Speaker 3: We don't need to declare it, treat us as an equal.

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Speaker 3: But China didn't like that hearing it this time around.

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Speaker 4: Why look, I do think at this point with geopolitics,

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Speaker 4: China is wanting to make a stance, although I think

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Speaker 4: realistically China do prefer the status quo, as you said,

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Speaker 4: whatever they've been promising before as the way it is.

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Speaker 4: I think at this point it's perhaps just making a

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Speaker 4: making a stance, but I would very much think it's

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Speaker 4: about status quo being maintained.

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Speaker 1: June Bay, what are your clients most concerned about these days?

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Speaker 1: Is it geopolitics? Is it the fact that inflation still

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Speaker 1: remains stubbornly high in many markets. Is the fact that

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Speaker 1: maybe we don't know that the FED is going to

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Speaker 1: lower interest rates? This year at all. What are they

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Speaker 1: concerned about?

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Speaker 5: Look, I think it's a really good question.

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Speaker 4: I think they concerned a bit about every or everything

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Speaker 4: at the moment seems to be having a lot of uncertainty. Look,

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Speaker 4: I think inflation, the interest rate is a big one.

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Speaker 4: Clearly in the last couple of years has really deterred

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Speaker 4: a lot of returns for across many class asset classes.

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Speaker 4: Inflation is falling, but not fast enough. Our view is

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Speaker 4: that interest rate will fall, but it's perhaps not going

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Speaker 4: to be this year, and that is a little bit

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Speaker 4: disap pointing to many of the clients hence that they

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Speaker 4: are you know, we are seeing a little bit of

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Speaker 4: volatility in this at this point, but you know, our

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Speaker 4: advice to clients is really taking a step back. Interest

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Speaker 4: rate is going to head lower, maybe not this year,

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Speaker 4: but it will be next year. And with that kind

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Speaker 4: of stable outlook and corporate's kind of holding up okay

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Speaker 4: in terms of earnings, and you know, and the economy

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Speaker 4: is holding up all right.

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Speaker 5: I do think that that that that pays.

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Speaker 4: Put a pretty good good path for a pretty good

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Speaker 4: return for the equity market at this point.

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Speaker 3: It's funny how you look at these things, because interest

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Speaker 3: rates are very low in Japan and China and they

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Speaker 3: don't have all that much growth. And interest rates are

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Speaker 3: very high in the United States and they have a

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Speaker 3: lot of growth at the moment. How do you sort

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Speaker 3: of put that all into the mix.

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Speaker 4: That's right, It isn't look I absolutely as a global investor,

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Speaker 4: it is a little bit harder at the moment. That's

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Speaker 4: why I think the Chinese markets it does look very

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Speaker 4: interesting because we're looking at the project growth. So hopefully

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Speaker 4: the projected growth will come from come back from its

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Speaker 4: very very low level that's been rebased significantly lower. We

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Speaker 4: think heading forward next twelve month, the growth will be

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Speaker 4: there and they will be higher than what is expected

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Speaker 4: out of the US. Now, the AI thematic is very different.

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Speaker 4: I think, you know, US has a really fantastic hairstyle

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Speaker 4: in many of the sectors, well many of its you know,

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Speaker 4: chip makers and things, and I do think that at

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Speaker 4: some point the Asian markets will catch up. But you know,

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Speaker 4: but just as a market itself, I do think the

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Speaker 4: evaluation will support you know, the markets that sort of

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Speaker 4: performed the last two a month.

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Speaker 1: Let's do a little bit of walk about economics, so

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Speaker 1: to speak. How are things in Australia these days, particularly

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Speaker 1: on the East Coast.

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Speaker 4: Look at the economy is actually holding up well, but

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Speaker 4: we are certainly seeing that consumer slowing down very quickly,

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Speaker 4: particularly in the last couple of months that we have

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Speaker 4: heard from major retailers across every industry talking about slow

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Speaker 4: down and trading down by the consumer, you know, Australia.

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Speaker 4: In fact, if you take out the population growth, our

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Speaker 4: consumer has been consumer recession for quite some time. That

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Speaker 4: is really just a result of a variable interest rate,

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Speaker 4: variable home low interest rate that is really be impacted

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Speaker 4: you know, the consumer. And yeah, so we're hoping the

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Speaker 4: budget that which has been very stimulus stimular tree and

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Speaker 4: then we have the rate cut, the tax cut that's

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Speaker 4: coming through by July this year. So we do think

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Speaker 4: that these measures will help consumer to offset its weakness

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Speaker 4: and its tough environment.

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Speaker 3: Let me ask you really briefly flip side of the

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Speaker 3: first question. If Nvidia does produce really big numbers, can

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Speaker 3: we rally a lot from here?

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Speaker 6: Oh?

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Speaker 4: Absolutely, I do think share markers heading higher and if

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Speaker 4: it's good result, it's heading even higher.

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Speaker 6: Yeah, Okay.

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Speaker 3: Quim Bailu joining US portfolio manager Tribeca Investment.

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Speaker 1: Partners, Dark guest is Ariel Kohane Ariel a senior fellow

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Speaker 1: at the Atlantic Council. On the death of the Iranian President.

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Speaker 1: It's a pleasure to have you on the program and

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Speaker 1: we always benefit from your analysis.

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Speaker 2: Here.

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Speaker 1: Is this going to change anything inside Iran? Do you think?

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Speaker 6: Not much? I mean it may precipitate the transition. I'm

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Speaker 6: watching like a hawk. What's happening with much about kamen Nai,

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Speaker 6: the son of the Supreme Leader. The Supreme leaders positioning

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Speaker 6: his boy to succeed him. Surprise, surprise. So it's going

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Speaker 6: to be Eshiah North Korea. His son is not a

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Speaker 6: distincuish scholar. And of course Iran is what is called

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Speaker 6: the republic of a scholar or the Layatanaki. They call

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Speaker 6: it the state of scholarly leadership. The first Tiatola, in

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Speaker 6: the second the current Tiatola were not the most distinguished scholars,

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Speaker 6: but they were very capable politicians. Clearly, the current title

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Speaker 6: is eighty five years old, and the death of President

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Speaker 6: rac comes at an opportune moment in this succession. Now,

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Speaker 6: at the same time, the Islamic Revolutionary Guard IRGC are

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Speaker 6: thinking about the future of Iran without these clerics. Basically

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Speaker 6: as a security services dictatorship. So lack of popularity of

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Speaker 6: these leaders may play into the hands of the IRGC

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Speaker 6: generals who are my sources are telling me thinking about

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Speaker 6: taking over.

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Speaker 3: It's interesting because we often hear that there is a

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Speaker 3: large civil society inside Iran, with elites, with well educated

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Speaker 3: people who may not be in complete agreement with the

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Speaker 3: path that the that you've seen from the Islamic leaders.

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Speaker 3: I'm just curious your thoughts on that. I mean, it's

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Speaker 3: not like they're out there every day in the streets

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Speaker 3: or anything, but how strong is civil society there and

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Speaker 3: could you see a change brought forward by them.

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Speaker 6: First of all, the civil society was very strong. In

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Speaker 6: two thousand and nine, there was a Green Revolution. They

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Speaker 6: voted a couple of times not in accordance to what

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Speaker 6: the Ayatola wanted. This is how President Khatami and President

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Speaker 6: Rukhani were elected. They are of that regime, but they

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Speaker 6: were of the more reformist wing of that regime. I

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Speaker 6: spent some time speaking with as Rokani after he retired,

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Speaker 6: and he was a very impressive man. Now, currently the

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Speaker 6: crackdown is very strong. There were riots in twenty twenty two. Unfortunately,

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Speaker 6: both in two thousand and nine and twenty twenty two,

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Speaker 6: the Obama administration and the Biden administration, respectively did not

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Speaker 6: go out of their way to support this popular uprisings,

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Speaker 6: and they were quashed by the regime. In the future,

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Speaker 6: if the regime is in crisis and different factions of fighting,

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Speaker 6: civil society may play a major role. But they're not armed,

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Speaker 6: and they're not very well organized, and unfortunately they do

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Speaker 6: not have a lot of support, as demonstrated now by

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Speaker 6: expression of regret with the demise of the president who

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Speaker 6: was known as the Hangman of Iran. He personally was

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Speaker 6: responsible for hanging a five thousand ariel.

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Speaker 1: Presumably we'll have elections in Iran within fifty days. Would

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Speaker 1: you trust the results?

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Speaker 6: Absolutely not. These are carefully choreographed elections. They are managed,

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Speaker 6: stage managed by the Supreme Leader. Even people as pious

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Speaker 6: and as much of the regime as the former presidents

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Speaker 6: Ruhani and Ahmadinijad. You remember Ahmadinijad was not as sweetheart,

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Speaker 6: but they are barred from running in these elections. These

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Speaker 6: elections are anything but democratic.

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Speaker 3: What about in Saudi Arabia because the king King Salmon

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Speaker 3: is being treated for lung inflammation, I don't know the

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Speaker 3: exact status, but he's elderly, he's eighty eight years old.

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Speaker 3: Will that succession can there be rather smooth or could

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Speaker 3: it be turbulent.

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Speaker 6: Again? In these autocracies, from Moscow to Tehran to villad,

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Speaker 6: everything is very opaque. We do not know what is

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Speaker 6: the extent of opposition and resistance to the crown Prince

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Speaker 6: Mohammad bin Filman who is actually running the affairs in

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Speaker 6: Saudi Arabia now. For years, King Solomon is ailing for

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Speaker 6: many years, not always in full control of his capacities,

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Speaker 6: of his abilities, and his demise will enthrone literally his

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Speaker 6: son who is in charge now, MBS Mohammed bin Soilmant. However,

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Speaker 6: that may be a point where those princes who were

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Speaker 6: sidelined by him, or those prominent Saudis who were detained

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Speaker 6: in a five star hotel, if you remember, until they

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Speaker 6: pay up the taxes or share in their wealth with

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Speaker 6: the treasury, they may muster in opposition. There were some

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Speaker 6: reports of an attempted assassination. I don't know how reliable

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Speaker 6: these reports were, but in a country with a tradition

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Speaker 6: of assassinations, like King Fod back in the day, and

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Speaker 6: yet then another king before pod. There is a tradition,

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Speaker 6: unfortunately in Saudi Arabia to assassinate on desirable kings. If

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Speaker 6: I were NBS, I would be investing very very hard

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Speaker 6: and watching my security very carefully. And I'm sure he

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Speaker 6: has the money for the best security consultants in the world.

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Speaker 1: He was scheduled to be in Japan this week, but

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Speaker 1: he canceled that visit because of the situation with the

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Speaker 1: King Ariel. Very quickly here at about thirty seconds or so,

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Speaker 1: if the Trump administration comes back into power, let me

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Speaker 1: just say it in another way, if Donald Trump is

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Speaker 1: re elected, how do the situations in Iran and Saudi Arabia?

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Speaker 1: How are they affected?

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Speaker 6: If we are to judge Trump by his performance in

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Speaker 6: his first term, he will get closer to Saudi Arabia.

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Speaker 6: He will probably back Israel up more than the current administration,

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Speaker 6: and he will be more prickly visa the Iran. Iran

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Speaker 6: is very close to getting a nuclear weapon, or at

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Speaker 6: least to enrich uranium to ninety percent, which is sufficient

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Speaker 6: for a bomb, and that is an existential threat not

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Speaker 6: just for Israel, not just for Saudi Arabia, but for

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Speaker 6: all American allies. In the region and also because of

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Speaker 6: the range of the Iranian missiles to our European NATO

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Speaker 6: allies as well.

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Speaker 1: Ariel will leave it there. It's always a pleasure. Thanks

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Speaker 1: for making time to chat with us, Ariel Cone, Senior

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Speaker 1: Fellow at the Atlantic Council, helping us understand the latest

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Speaker 1: developments in the Mid East in both Iran and Saudi Arabia.

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Speaker 3: This is the Bloomberg Daybreak Asia podcast, bringing you the

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Speaker 3: stories making news and moving markets in the Asia Pacific.

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Speaker 3: Visit the Bloomberg Podcast channel on YouTube to get more

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Speaker 3: episodes of this and other shows from Bloomberg. Subscribe to

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