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

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

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Speaker 2: So we got minutes of the last FED meeting during

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Speaker 2: the last session, and they seem to underscore worry over inflation.

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Speaker 2: Most members of the Fed's Rate Committee saw upside risk

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Speaker 2: to inflation as being greater than concern over a weaker

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Speaker 2: labor market. In the meantime, in Asia, the CEO of

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Speaker 2: Hong Kong Exchanges and Clearing is striking an upbeat tone

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Speaker 2: when it comes to the return of international investors. And

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Speaker 2: in the moment we'll bring you our conversation with Bonnie

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Speaker 2: Chan of HK Exchanges. But we begin here in the States.

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Speaker 2: Joining me now is Tim Pagliara. He is the chief

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Speaker 2: investment officer at cap Wealth. Tim is on the line

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Speaker 2: from Nashville, Tennessee. Thank you, sir for making time to

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Speaker 2: chat with me. Can we talk a little bit about

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Speaker 2: the FED minutes and this concern over persistent inflation. Does

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Speaker 2: that concern you at all?

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Speaker 3: Well, we have seen inflation in the three percent range

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Speaker 3: this year last year. It's no surprise, I mean. And

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Speaker 3: the balancing act that the FED has is they have

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Speaker 3: to take a look at, as you suggested, and you know,

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Speaker 3: a recount of the minutes. They've got to look at

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Speaker 3: an employment and then they have to balance that against inflation.

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Speaker 3: So is inflation ahead of the two percent target? Yes,

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Speaker 3: it's a three percent And is it going to be

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Speaker 3: a persistent problem, Well, we don't know. One of the

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Speaker 3: candidates for the Federal Reserve talk this morning about the

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Speaker 3: ratio of the size of the Fed's balance sheet at

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Speaker 3: twenty percent of GDP and where we were the last

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Speaker 3: time we looked at that, and you know, he would

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Speaker 3: suggest that it's we had two percent interest rates, so

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Speaker 3: the Fed can lower rates based upon their prior positioning

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Speaker 3: relative to the Fed's balance sheet, and where unemployment is,

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Speaker 3: you know, suggesting that the full rate of unemployment's closer

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Speaker 3: to three and a half percent.

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Speaker 2: One of the things that struck me in the minutes

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Speaker 2: of the last meeting, A couple of members of the

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Speaker 2: committee noted concern about elevated asset valuations. Is that something

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Speaker 2: that you share that concern? I know we are enjoying

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Speaker 2: a pretty expensive equity market. I think we can agree

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Speaker 2: on that much.

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Speaker 3: We sure can, And I think most of the concern

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Speaker 3: is channeled into all of the spending on artificial intelligence

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Speaker 3: and data centers. And you know, some estimates now are

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Speaker 3: that the amount of debt going into those centers and

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Speaker 3: the whole space is somewhere around three trillion dollars.

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Speaker 4: It's an enormous amount of money.

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Speaker 3: This morning, a couple of the commentators, we're talking about

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Speaker 3: the parallel between where we are right now in the

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Speaker 3: railroads and the eighteen hundreds, and you know, without really

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Speaker 3: acknowledging it, that was a bubble too, you know, so

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Speaker 3: we are in somewhat of a bubble, just like we

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Speaker 3: were in eighteen sixty. You know, House of Morgan JP.

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Speaker 3: Morgan went to the Rothchilds to borrow money and they

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Speaker 3: told them, you can't borrow a dollar, not a single dollar.

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Speaker 4: Go back and clean up your mess.

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Speaker 3: And then we got through that through consolidation, and then

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Speaker 3: we went through this unparalleled period of economic expansion. So

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Speaker 3: there are going to be some ebb and flows in

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Speaker 3: this invaluation. Most of the valuation has centered in things

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Speaker 3: all related to AI, except some of the picks and shovels,

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Speaker 3: things that we really like that we think will benefit

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Speaker 3: from this tremendous amount of spending.

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Speaker 2: So for months now we've seen Megacaptech lead the market higher,

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Speaker 2: and as you pointed out, it's really about artificial intelligence

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Speaker 2: and maybe by extension, cloud computing services. I think it's

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Speaker 2: interesting that some strategists are now saying, because these companies

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Speaker 2: are extra heavily weighted, if we continue to see a

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Speaker 2: rotation out of some of those names and into maybe

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Speaker 2: undervalue elements of the market, that that may contribute to

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Speaker 2: a broader route in the equity trade. Does that concern

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Speaker 2: you at all?

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Speaker 4: No, not really.

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Speaker 3: I mean I think these things are all healthy. You know,

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Speaker 3: a correction during a period of overvaluation like we've seen

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Speaker 3: in the last four or five days. Look at Palanteer.

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Speaker 3: I think it's down seventeen percent in four days, but

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Speaker 3: it had gotten very, very frothy. So I don't think

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Speaker 3: it's a bad thing to see these companies, you know,

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Speaker 3: retrace more sustainable levels of valuation. But overall, I'm very

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Speaker 3: like I said, I'm very optimistic, especially about broadening out

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Speaker 3: the number of companies that participate in this market. And

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Speaker 3: I think that will that'll sustain us because I think

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Speaker 3: there's still a good, good appetite for equity.

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Speaker 2: So if you see a pullback in a name like

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Speaker 2: Palenteer down sixteen percent, as you said, over the last

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Speaker 2: four sessions, do you become a dip buyer?

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Speaker 3: Then I wouldn't be because our cost in Palenteer is

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Speaker 3: somewhere around fourteen dollars. We sold twenty percent of our

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Speaker 3: Palteer position in the mid seventies in January. For tax purposes,

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Speaker 3: we deferred that out and we'll take a look at

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Speaker 3: another sale, you know, sometime in January. And we also,

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Speaker 3: you know, look at we've got free reign and qualified accounts,

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Speaker 3: so we manage around the tax impact of that. But

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Speaker 3: I don't think that's a particularly great buy right now,

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Speaker 3: you know, in that space. It's a great, great company,

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Speaker 3: and they're doing all the right things, but again, valuation

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Speaker 3: is ahead of what I think they can deliver long term.

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Speaker 2: So tomorrow morning, we're going to hear from Walmart, and

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Speaker 2: I'm curious to get your take on what we may hear,

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Speaker 2: not only about the tariff and the impact that may

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Speaker 2: be having on margins, but overall how the American consumer

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Speaker 2: is performing.

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Speaker 3: Yeah, and I think you know, we had mixed messages

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Speaker 3: out of Target, you know, especially with their CEO change.

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Speaker 3: I think Walmart will stand out. They typically do well.

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Speaker 3: If we are going into a period of you know,

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Speaker 3: tighter you know, budgets for the American consumer, they should

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Speaker 3: perform very well. We had good numbers out of Home

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Speaker 3: Depot this week, so you know, I'm not expecting anything,

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Speaker 3: but you know, a good middle of the road report

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Speaker 3: out of out of Walmart.

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Speaker 2: I'm tempted to ask about whether or not you're seeing

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Speaker 2: opportunities offshore. I mean, we can talk a little bit

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Speaker 2: about the dollar if you'd like, as a factor to

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Speaker 2: consider when looking offshore in foreign markets. Is that something

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Speaker 2: you're dabbling in at all?

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Speaker 3: You know, we're looking at some ets we missed, except

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Speaker 3: for a small number of clients. We missed a big

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Speaker 3: opportunity in Vietnam, you know, and height of all this

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Speaker 3: tariff talk, in the midst of all the uncertainty, Vietnam

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Speaker 3: was one of the first countries that cut a deal

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Speaker 3: and came to the table. And the large cap Vietnam

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Speaker 3: ETF's up fifty five percent since April twentieth me, So,

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Speaker 3: I know, it's so, you know, I think that the

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Speaker 3: story on the tariffs is actually turning in to be

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Speaker 3: a good one.

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Speaker 4: You know, we had an upgrade for the.

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Speaker 3: Credit United States based upon the amount of revenue that

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Speaker 3: is coming in from tariffs. I think that Vietnam, India,

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Speaker 3: the countries that embrace free trade with US, they'll build

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Speaker 3: a much stronger sustainable economy than say China will at

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Speaker 3: this point because they'll be forced to turn within and

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Speaker 3: you know, focus on their own consumers. So I'm you know,

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Speaker 3: I'm excited about that, especially the revenue. You know, no business,

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Speaker 3: no government can sustain itself long term unless it's appropriately financed.

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Speaker 3: And the Trump administration took the position that a source

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Speaker 3: of revenue through tariffs was better than taxing directly the

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Speaker 3: American people and the production of you know, of their labor.

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Speaker 3: And it's working, you know, and we're generating a lot

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Speaker 3: of revenue. The credit agencies are noticing it, and I

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Speaker 3: think it's going to show up in our budget projections

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Speaker 3: by this time next year.

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Speaker 2: We'll see where we go from here. Tim, It's always

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Speaker 2: a pleasure. Thank you so very much. Tim Paglear there.

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Speaker 2: He is the chief investment officer at cap Wealth. On

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Speaker 2: the line from Nashville, Tennessee here on the Daybreak Asia podcast.

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

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Speaker 2: Hong Kong Exchanges and Clearing posted record quarterly profit, a

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Speaker 2: gain of forty one percent, surged with average daily turnover

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Speaker 2: nearly doubling, and at the same time listings rebounded, with

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Speaker 2: IPO applications topping two hundred. The Exchange of CEO Bonnie

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Speaker 2: Chan told Bloomberg Television she's optimistic international investors are returning

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Speaker 2: to Chinese assets and that will keep momentum strong. Here

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Speaker 2: is part of chance conversation with Bloomberg Yvonne Man.

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Speaker 1: Another quarter of record profit. They have training that's been booming,

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Speaker 1: and now more than two hundred active applications on the pipeline.

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Speaker 1: What'st it out to you for this quarter?

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Speaker 5: You know, what really stands out for me for this

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Speaker 5: quarter is the fact that it's writing on a pretty

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Speaker 5: sustained momentum. If you look at our results, this is

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Speaker 5: actually another set of record half yearly results. We deliver

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Speaker 5: a pretty strong a pretty strong set already for the

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Speaker 5: second half of twenty twenty four. And so for me,

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Speaker 5: my biggest takeaway is that actually, since I think September

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Speaker 5: twenty twenty four, gradually we're seeing a return of interest

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Speaker 5: from international investors and they want to again look for

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Speaker 5: opportunities to deploy more capital to this part of the world.

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Speaker 5: You see it, I think manifested in many ways in

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Speaker 5: our daily turnover, but also I think, you know, in

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Speaker 5: the way that all these investors around the world are

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Speaker 5: participating in our IPOs.

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Speaker 1: The key question is it's sustainable. You mentioned about average

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Speaker 1: daily turnover, which you're nearly double from a year ago.

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Speaker 1: Obviously with liquidity it has been quite ample. With these

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Speaker 1: sell bound flows. What could extend the streak?

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Speaker 4: Right?

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Speaker 5: International investors are really again focusing on China assets, and

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Speaker 5: I think as they try to come back to Treasure Hunt,

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Speaker 5: it is a very good thing that we have equally

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Speaker 5: a robust pipeline to match their appetite. I think that

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Speaker 5: is very very important. So you mentioned our pipeline. We're

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Speaker 5: currently over two hundred companies already having filed their applications,

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Speaker 5: and in fact, you know, on a daily basis, I'm

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Speaker 5: speaking to a lot more so, I think, you know,

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Speaker 5: with the backdrop of you know, really the interest returning

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Speaker 5: in earnest as well as you know, all these very

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Speaker 5: exciting investment opportunities coming online. I do hope that the

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Speaker 5: momentum can carry on.

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Speaker 1: How confident are you the Hong Kong can reclaim the

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Speaker 1: number one i peal venue this year?

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Speaker 5: Yeah, people always ask me that question. I think it's

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Speaker 5: certainly good to be sort of all the way at

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Speaker 5: the top of the league table. I mean, at the moment,

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Speaker 5: we're in a very good position, and we do have

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Speaker 5: the pipeline to help us deliver and help us stay

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Speaker 5: stay up there. But you know, to me, the more

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Speaker 5: important thing really is to make sure that we are

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Speaker 5: able to support the fundraising needs of these companies. And

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Speaker 5: this year I keep talking about the IPO pipeline, I

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Speaker 5: think we also need to look at the follow on fundraising,

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Speaker 5: which in fact has raised more money than the IPO proceeds.

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Speaker 5: So yea, today we have raised about sixteen billion US

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Speaker 5: dollars close to seventeen for you by way of IPOs,

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Speaker 5: but we have actually more than forty billion US dollars

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Speaker 5: raised by companies already listed on our exchange. So to me,

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Speaker 5: so long as we continue to support the fundraising needs

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Speaker 5: of these companies, we continue to improve our listing framework.

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Speaker 1: Are you still doing a lot of marketing or do

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Speaker 1: you think companies are starting to come to you.

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Speaker 5: Now, I think both. I mean companies. Certainly, I think

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Speaker 5: saw how well we've done in the IPO space, and

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Speaker 5: so I think on the average I probably need two

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Speaker 5: to three companies per day or to wanting to understand

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Speaker 5: more what we have to offer, and I want to

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Speaker 5: expand the universe a little bit. I think it's very

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Speaker 5: encouraging that in the past few months we have seen

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Speaker 5: an increased appetite of companies beyond just the mainland China

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Speaker 5: wanting to use Hong Kong, as they all pick Hong

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Speaker 5: Kong as their listing venue.

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Speaker 3: So yea.

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Speaker 5: To date we've listed companies from Thailand, from Singapore, and

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Speaker 5: there are more in the pipeline, so I certainly will

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Speaker 5: do more in terms of this marketing activity.

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Speaker 1: There are those out there that do call this recovery

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Speaker 1: you're seeing as something that's made in China, that what

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Speaker 1: you're seeing in terms of the pipeline has been really

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Speaker 1: driven by government policy geopolitics. What do you say to

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Speaker 1: those who say that.

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Speaker 5: Well, first of all, I don't think I'm surprised. I mean,

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Speaker 5: just considering that China is the second largest economy of

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Speaker 5: the world, and we're it's capable of producing so many

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Speaker 5: exciting companies which investors around the world want to invest in.

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Speaker 5: Right so to me, whether I mean it's it's natural

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Speaker 5: and totally understandable, you know, this made in China phenomena.

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Speaker 5: But that said, I mean, given that Hong Kong is

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Speaker 5: an international financial center and we stand in the middle

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Speaker 5: as a superconnector between mainland China and the rest of

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Speaker 5: the world, what I would like to see is to

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Speaker 5: really continue bringing more participants into the universe, whether they

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Speaker 5: are international companies, international investors, mainline companies, mainland investors. I

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Speaker 5: really want them to you know, see Hong Kong as

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Speaker 5: the main market they want to transact that.

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Speaker 1: This is it. We've seen a bit of a quiet

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Speaker 1: resurgence in the Asian market and the IPO market. Theres

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Speaker 1: seem as to be coming back to life again as well.

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Speaker 1: What does the rebound in Shanghai and Shanxen mean for

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Speaker 1: the pipeline here?

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Speaker 5: I think that will be very, very encouraging because the

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Speaker 5: way I see it, we always say the capital markets

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Speaker 5: is there to serve the real economy. So the fact

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Speaker 5: that capital markets are doing well, you know, should suggest

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Speaker 5: that actually, you know, there's a lot of positive momentum

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Speaker 5: in the real economy as well. China is a big country.

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Speaker 5: It is producing a lot of very exciting investment opportunities.

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Speaker 5: I mean, you see our pipeline, right, it's really filled

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Speaker 5: with a lot of excitement, and there's certainly enough for

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Speaker 5: more than just Hong Kong to support. And I think

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Speaker 5: increasingly I'm seeing the you know, the few exchanges in China, right,

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Speaker 5: so Shanghai, Shinjin, Beijing and the Hong Kong market really

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Speaker 5: playing a very complementary role. Now for Hong Kong, I

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Speaker 5: think one advantage we have is certainly the connection to

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Speaker 5: the rest of the world. And therefore, for a lot

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Speaker 5: of companies when they decide to pick which venue to list,

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Speaker 5: one thing which will gravitate them towards Hong Kong is

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Speaker 5: if they have overseas expansion plans. And we actually saw

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Speaker 5: that in a lot of companies which have been listed

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Speaker 5: in the past few months. They want to raise proceeds,

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Speaker 5: they want to therefore use the proceeds to expand overseas,

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Speaker 5: and I think that is one thing which Hong Kong

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Speaker 5: can actually serve the best.

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Speaker 2: That is Bonnie Chan, CEO of Hong Kong Exchanges and Clearing,

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Speaker 2: speaking with Bloomberg's Yvonne Man here on the Daybreak Asia podcast.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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

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

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: or and Australia. I'm Doug Prisoner and this is Bloomberg.

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Speaker 4: Mm hmm