Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. We're
Speaker 2: seeing a cautious tone in markets across the APAC this
Speaker 2: morning after equity market weakness in the States. Joining US
Speaker 2: now for a closer look is Olivier Dossier, head of
Speaker 2: Investment decision Research for the APAC at Simcorp Olivier It's
Speaker 2: always a pleasure. Would you say that the lack of
Speaker 2: conviction is correlated directly with the uncertainty that we're seeing
Speaker 2: around these tariffs.
Speaker 3: Yeah, certainly, we haven't got many kind of details yet
Speaker 3: as to the status of these talents. For especially with
Speaker 3: regards to the US and China relationship. The largest and
Speaker 3: second largest economies in the world are about to have
Speaker 3: another trade war, and that really makes everybody else nervous
Speaker 3: because you can't plan anything until you know what direction
Speaker 3: this is taken, and if a deal is possible, and
Speaker 3: what shape would that deal take. Nothing is known at
Speaker 3: this point and that makes it very difficult.
Speaker 2: For no doubt about that. Today the White House did
Speaker 2: warn of big tariffs. I think the spokesperson was referring
Speaker 2: to the reciprocal tariffs that we're expecting next week. Today,
Speaker 2: I was struck by the fact that double line capitalist
Speaker 2: Jeff Gunlock was saying these tariffs could very well be inflationary.
Speaker 1: Now.
Speaker 2: FED Chair j Powell seemed to concede that point yesterday,
Speaker 2: although the term that he applied to tariffs being inflationary
Speaker 2: was transitory. Now we know where we've been when the
Speaker 2: FED has used that term in the past. How do
Speaker 2: you expect the tariff's story to contribute to inflation if
Speaker 2: at all?
Speaker 3: Terriffs will be inflationary if they're maintained, if they're kept
Speaker 3: long enough, if they're just a tool to get a
Speaker 3: trade deal, and they are on the here a few
Speaker 3: months and then gone, then they don't usually show up
Speaker 3: in the data because most of the resellers will absorb
Speaker 3: that that that monthly bump in their in their margins,
Speaker 3: So they really have to be there for a long
Speaker 3: period to be inflationary. What they can do in the
Speaker 3: short term, though, is raise inflation expectations among consumers, which
Speaker 3: will some of them will try to jump the gun
Speaker 3: on some purchases, and that could lead to, you know,
Speaker 3: a lit a bump in or short term bump in
Speaker 3: inflation because people rush to buy things before they take effect,
Speaker 3: but that is transitionary in impact.
Speaker 2: So Olivier imagine that the tariffs last a couple of months.
Speaker 2: Perhaps does that necessarily force central banks in Asia to
Speaker 2: consider adjusting their policy when it comes to currencies.
Speaker 3: But a lot of them are, you know, peg to
Speaker 3: the dollars, so obviously they need to follow what the
Speaker 3: Fed does in that sense. But if the you know,
Speaker 3: if the Fed things terrists are inflationary, they will maintain
Speaker 3: the interest rates where they are, which is which is
Speaker 3: quite a restricted level at this time. And that's the
Speaker 3: problem for a lot of the deptors in Asia who
Speaker 3: have US dollar bonds out that are expiring this year
Speaker 3: or next year, and they need to start rolling that
Speaker 3: debt over at a much higher interest rate than when
Speaker 3: they first took it out.
Speaker 2: So oliviate. Today we had the CPI data for Japan
Speaker 2: coming in a little above forecast in the same week
Speaker 2: that we had the BOJ meeting, and Governor uwaita sounding
Speaker 2: a little relaxed in terms of the move that we
Speaker 2: have seen the upward push and yields on jgb's He
Speaker 2: didn't seem to be too alarmed by the fact that
Speaker 2: that appreciation has been happening pretty quickly. Are you in
Speaker 2: the camp that we're going to get a BOJ rate
Speaker 2: hike in May?
Speaker 3: I think yes, this is something they should have done already.
Speaker 3: In my book, inflation has been above the two percent
Speaker 3: target for what eight nineteen straight months now, and they're
Speaker 3: still reacting very slowly. And I think the danger is
Speaker 3: for them to have this kind of lack of communications
Speaker 3: with market where they say we're not alarmed, we're not alarmed.
Speaker 3: Then they raise rates and everybody gets get spooked, and
Speaker 3: that's what happened last August. So they need to communicate
Speaker 3: more clearly about what their plans is so that markets
Speaker 3: have time to adjust in a disciplined fashion.
Speaker 2: How would you evaluate risk assets right now? In Japan?
Speaker 3: So there's been a lot of you know, Japan had
Speaker 3: with the second best market last year with the US,
Speaker 3: there's been a lot of people that are looking at
Speaker 3: moving money around. We don't know yet what the situation
Speaker 3: is between US and Japan. That hasn't even been discussed yet.
Speaker 3: So well, there be terrorists on Japan, we don't know.
Speaker 3: We know that Donald Trump would like a weaker dollar
Speaker 3: therefore stronger in so that might be negative for the
Speaker 3: Japanese market, so would hire bog interest rates. So I
Speaker 3: think Japan is probably peaked in a sense in my
Speaker 3: mind last year, both economically and in terms of the market,
Speaker 3: and I think people are looking at relative that you
Speaker 3: to move out of this expensive market into cheaper ones.
Speaker 2: I'm curious as to how you're feeling about Japanese tech
Speaker 2: talks in particular. We've talked a lot on this program
Speaker 2: about the deep Seek moment in China and the ripple
Speaker 2: effect that it created around the world. So when it
Speaker 2: comes to Japanese tech shares, how are you feeling.
Speaker 3: So Japan benefited from the decoupling that the US is
Speaker 3: trying to do with its especially tech supply chain away
Speaker 3: from China towards more you know, US friendly countries and
Speaker 3: in age of pack Japan is the only signatory to
Speaker 3: some of their defense treaties. So Japan was a big
Speaker 3: benefactor of that, of that relocation, relocation of supply chains.
Speaker 3: But it also led to a market that performed really well,
Speaker 3: but was very, very concentrated, maybe just two sectors, industrials
Speaker 3: and technology was the bulk of the move for the
Speaker 3: NIK and I think those are getting a little bit
Speaker 3: expensive now, and if the FED needs, if the BOG
Speaker 3: needs to start raising rates and the YET starts to strengthen,
Speaker 3: then those gains there are a bit at risk right now.
Speaker 2: So what is your outlook for China in the meantime.
Speaker 3: So, China, you know, has obviously very big structural problems
Speaker 3: on its economic model, and I'm not sure that the
Speaker 3: authorities yet know how to address them. They are those
Speaker 3: supporting their market, they are creating this floor, they are
Speaker 3: trying to reinflate their banking sector, They're trying to reinflate
Speaker 3: some other parts of the consumption food. But ultimately they'll
Speaker 3: wait until they hear from Donald Trump and where that
Speaker 3: trade war is going to decide what kind of measures
Speaker 3: need to be taken to to turn their economy around.
Speaker 3: But it's going to be a very very tough fight.
Speaker 3: I think that China is three years into potentially it's
Speaker 3: last decade because it's still doing the old you know,
Speaker 3: let's borrow more and increase the debt and ask the
Speaker 3: banks to roll over the debt that a cheaper margin,
Speaker 3: and that game is not scalable, and I think it's
Speaker 3: reaching its end right now. So I would say China
Speaker 3: has support of the government. Lots of money there that
Speaker 3: they can throw at the stock market and create a
Speaker 3: floor and create a better feeling. But ultimately, if the
Speaker 3: US and China has a trade war, if the the
Speaker 3: coupling of these two economies goes on, it'll be very
Speaker 3: tough for China to turn that ship around.
Speaker 2: What about the story on domestic demand? We have seen
Speaker 2: the government take a number of steps to try to
Speaker 2: improve that. Is it going to be enough to change
Speaker 2: the narrative?
Speaker 3: No, Because you know the top ten percent of earners
Speaker 3: in chrying to make sixty percent of the retail sales,
Speaker 3: you can double the other sixty percent, That doesn't really
Speaker 3: move the needle in terms of the economic things. And
Speaker 3: those ten percent are not rushing to the store right
Speaker 3: now to exchange their old toaster for a new one.
Speaker 3: They want to buy big ticket items. They want to
Speaker 3: buy long term, durable things, and for that they need confidence.
Speaker 3: They need reassurance that the economy is going to turn around,
Speaker 3: that there is a plan to do better, that there
Speaker 3: won't be a trade war with the US, there won't
Speaker 3: be a war with Taiwan, that sort of thing, And
Speaker 3: I think that's uncertainty is holding that segment of the
Speaker 3: consumption back and that's the bulk of it.
Speaker 2: So, Olivia, your challenge now is to formulate an investment strategy.
Speaker 2: Given everything that we've described, give me something that you
Speaker 2: think will succeed in the next six to nine months.
Speaker 3: So what we've seen is a lot of rebalancing has
Speaker 3: already happened since about mid December, when investors went into
Speaker 3: twenty twenty five thinking betting on growth, betting on momentum.
Speaker 3: They had a pro business president in the US, they
Speaker 3: had a peaceful transfer of power, they had a Republican Congress.
Speaker 3: They thought that growth was back on. And these are
Speaker 3: kinds of assumptions are being threatened right now. Even inflation,
Speaker 3: the assumption that inflation would keep going down is being
Speaker 3: threatened right now. So we've seen a big rebalancing move
Speaker 3: in the last two plus months towards more or defensive
Speaker 3: assets and away from growth assets. So we now have
Speaker 3: a situation where you have two times more risk averse
Speaker 3: investors than risk tolerant ones in the market. So any
Speaker 3: kind of shock, any kind of risk event, might create
Speaker 3: a very big overreaction right now in the market, and
Speaker 3: that's what worries us. But I would wait for that
Speaker 3: to happen, because I think something is going to shock
Speaker 3: the system. There's not enough confidence for people to hold
Speaker 3: on very long right now that don't know if any
Speaker 3: of their assumptions for twenty twenty five are going to
Speaker 3: come through, and that's creating an environment where big drawdowns
Speaker 3: or sharp drawdowns are likely. So I would wait for that.
Speaker 3: I would say, for me, markets, equity markets right now
Speaker 3: are buy on the dip thing, not chase the trend.
Speaker 2: All right, So let's assume you're right for the moment
Speaker 2: and there is some type of shock event. Does that
Speaker 2: necessarily create a buying opportunity?
Speaker 3: I think it does in the short term because as
Speaker 3: we saw from from Nike's earnings and other earnings, earnings
Speaker 3: and some of the economic data is coming in better
Speaker 3: than feared, in some cases better than expected. So there
Speaker 3: is still quite a strong economy underneath, and consumers would
Speaker 3: like to keep spending. They just need to be given
Speaker 3: a little bit more certainty about where all of this
Speaker 3: is going. There's just so many things happening right now.
Speaker 3: Geopolitics is a live show right now. It used to
Speaker 3: happen once every decade. Now it was happening every ten minutes.
Speaker 3: I think that's pooking people. But ultimately, the will to
Speaker 3: spend and the will to invest is there. It just
Speaker 3: needs a little bit more comfort.
Speaker 2: All right, Olivier, We'll leave it there. Thank you so much.
Speaker 2: Enjoy the weekend. Olivia Dossier is head of investment decision
Speaker 2: Research for the APEC at Simcorp. Joining us here on
Speaker 2: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
Speaker 2: I'm Doug Chrisner. On Thursday, in the US, President Trump
Speaker 2: reiterated his support for stable coin legislation and he called
Speaker 2: on Congress to create simple, common sense rules. Let's take
Speaker 2: a closer look now at the crypto space with Peter Chung.
Speaker 2: He is head of research at Presto Research. Peter is
Speaker 2: normally based in Hong Kong. Today is on the line
Speaker 2: from Soul, South Korea. Peter, I'm glad you could make
Speaker 2: time to chat with us now. President Trump seems to
Speaker 2: be having a lot of influence over the market for
Speaker 2: digital assets these days, and he's been promoting a few projects.
Speaker 2: One is World Liberty Financial. We can talk more about
Speaker 2: that in a moment. It was earlier in the month
Speaker 2: that he signed an executive order calling for the creation
Speaker 2: of a strategic bitcoin reserve. Give me your assessment of
Speaker 2: this plan.
Speaker 1: Yeah, so, what he has announced so far is that
Speaker 1: there's going to be two things, Bitcoin strategic reserve and
Speaker 1: a digital asses stockpile. Both of these two funds is
Speaker 1: going to be funded through the common phiscated assets, which
Speaker 1: is currently mostly held under the DOJ. Most of it
Speaker 1: is actually bitcoin, but there's some small portion of a
Speaker 1: non bitcoin digital assets as well. So what Trump has
Speaker 1: ordered is to create two different set of funds, one
Speaker 1: purely funded by bitcoin only and the other one with
Speaker 1: non bitcoin digital assets. And the big coin Strategic Reserve
Speaker 1: is going to be you know, he has ordered the
Speaker 1: Commerce Secretary and the Treasury Secretary to figure out a
Speaker 1: way to accumulate more through a bud neutral way. And
Speaker 1: for digital asset stockpile, they've indicated that they're not going
Speaker 1: to try to add anything more.
Speaker 2: I know you've been in markets for quite some time,
Speaker 2: I think more than twenty years professionally, so I want
Speaker 2: you to give me your analysis as to whether or
Speaker 2: not promoting a strategic bitcoin reserve, or even developing one
Speaker 2: in any way would undermine the confidence in the US
Speaker 2: dollar is the world's reserve currency. Isn't that a risk?
Speaker 1: I know that there are some people who argue makes
Speaker 1: that point, and I tend to disagree. There's no real
Speaker 1: hard evidence that the existence of a bitcoin reserve is
Speaker 1: going to lead to lack of declining confidence in US dollars.
Speaker 1: I mean, we already have a gold strategy reserve. I
Speaker 1: know it's the kind of the legacy of the past
Speaker 1: financial system. But nonetheless, I think, you know, you cannot
Speaker 1: just directly jump onto the conclusion that just because you
Speaker 1: have another hard asset supporting or backing the US dollars
Speaker 1: market is going to suddenly freak out and say that
Speaker 1: this means that the you know, the US dollar is
Speaker 1: not to be trusted. There are other factors that supports
Speaker 1: the US dollar confidence.
Speaker 2: Would there need to be some sort of regulatory regime.
Speaker 2: I can only imagine this making the Fed's job, as
Speaker 2: one instance, a lot more difficult.
Speaker 1: First of all, it's gonna be under the Department of Treasury,
Speaker 1: not under the FED, So I don't think FED is
Speaker 1: going to be directly involved in managing this. So it
Speaker 1: does not necessarily make the FED job more difficult in
Speaker 1: my view. Remember, there is a legislative efforts to codify
Speaker 1: bigcoin strategic reserve as well. So Trump is not going
Speaker 1: to be in the White House forever. There's a you know,
Speaker 1: in order to make this a more permanent thing, you
Speaker 1: need legislations to support this, and that work is already underway.
Speaker 2: What would be the effective other countries were to adopt
Speaker 2: a similar strategy and set up their own strategic bitcoin
Speaker 2: reserve or some other reserve tied to another cryptocurrency.
Speaker 1: Well, I think the effect would be very positive for
Speaker 1: the market, I think, and I think the likelihood of
Speaker 1: that happening has gone up with the most powerful country
Speaker 1: in the world giving visiitimacy to bitcoin as a strategy asset.
Speaker 1: So I think, you know, when you think about this,
Speaker 1: this is a huge development. It's something that the six
Speaker 1: month ago, I don't think anybody would have kind of
Speaker 1: imagined happening. So I think there's going to be a
Speaker 1: similar conversation taking place in many other governments around the world,
Speaker 1: and it's going to be a lot easier for them
Speaker 1: to make an argument to own bitcoin as a strategy asset.
Speaker 1: Then let's say six months ago, when you know, no
Speaker 1: major government was actually doing it.
Speaker 2: When cryptocurrencies were first introduced. There was a lot in
Speaker 2: the conversation at the time around using these cryptocurrencies as
Speaker 2: a means for conducting or transacting business. Right now, the
Speaker 2: emphasis seems to be on holding them as anyone would
Speaker 2: hold gold as kind of a reserve asset. Does that
Speaker 2: surprise you, The fact that we haven't moved into a
Speaker 2: world where we're used in cryptocurrencies to transact business more frequently.
Speaker 1: That doesn't surprise me at all. Bigcoin is going through
Speaker 1: three stages of becoming a money, and whether it end
Speaker 1: up actually becoming a money or not, I don't know.
Speaker 1: But these three stages are you know, they don't happen simultaneously.
Speaker 1: It first needs to be adopted as a store of value,
Speaker 1: and secondly, only after that you get a medium of
Speaker 1: exchange stage, and the last one is the unit of
Speaker 1: account stage. And so bitcoin is going through the first
Speaker 1: stage of being adopted as a stove value and this
Speaker 1: can take a long time. It's a multi decade process.
Speaker 1: A similar thing happened with the gold as well. So
Speaker 1: and right now I don't think it's it's wise to
Speaker 1: spend your bigcoin as a medium of exchange because it's
Speaker 1: going to be a very expensive spending ten years from
Speaker 1: now if the bigcoin value goes a lot higher from
Speaker 1: where it is. So right thing to do right now
Speaker 1: is just hold on to your bit coin, don't spend it,
Speaker 1: And after the adoption is more widely spread out and
Speaker 1: the upside potential of a big cooin kind of peeks out,
Speaker 1: and that's when you start thinking about maybe spending it
Speaker 1: as a medium of exchange.
Speaker 2: So maybe we can talk a little bit about President
Speaker 2: Trump's World Liberty Financial. This is something I think that
Speaker 2: his family is involved with and has endorsed, and from
Speaker 2: what I understand, World Liberty Financial has just completed its
Speaker 2: second set of token sales, raising about a quarter of
Speaker 2: a billion total amount of coins now sold just over
Speaker 2: around five hundred and fifty million dollars worth. Are you
Speaker 2: concerned when you have something like this where the president,
Speaker 2: who is obviously invested in the success of this project,
Speaker 2: may have a little bit of a conflict of interest.
Speaker 2: Does that concern you at all?
Speaker 1: Yeah? I mean that's I mean, I generally in support
Speaker 1: of everything that Trump is doing crypto space, but this
Speaker 1: is one part where I wish that he didn't really
Speaker 1: proactively engaged in because it does create room for some
Speaker 1: potential problems down the road, So I think that White
Speaker 1: House is trying their best to make everything transparent to
Speaker 1: avoid any future problems. So we'll see how it goes.
Speaker 1: But yeah, it's one part that I wish that the
Speaker 1: Trump kind of was stayed away from.
Speaker 2: So you're in soul at the moment, and I know
Speaker 2: you travel frequently across Asia. Give me a sense of
Speaker 2: how what is happening here in the States with crypto
Speaker 2: policy is impacting the mindset of the people who play
Speaker 2: in this space across Asia.
Speaker 1: As I mentioned earlier, I think this definitely has prompted
Speaker 1: a lot of conversations through many jurisdictions in Asia in
Speaker 1: terms of how these governments in Asia will have to
Speaker 1: approach the big cooin as potential strategy assets. And I
Speaker 1: think every country is different, depending on their priorities, their
Speaker 1: eventual approach will look quite different. And I think some
Speaker 1: countries will be more proactive than others. And I think
Speaker 1: the countries that will be more proctive are the ones
Speaker 1: where they kind of see the value that the blockchain
Speaker 1: technology delivers to their own economy and generally the open
Speaker 1: economy that value is open financial system. I think it's
Speaker 1: going to be a lot more proactive in adopting or
Speaker 1: incorporating a blockchain into their system. But Hong Kong or Singapore,
Speaker 1: which is the financial hubs and also our keenly trying
Speaker 1: to compete against other financial hubs like the New York
Speaker 1: or London, is going to be more proactive in trying
Speaker 1: to adopt the blockchain as part of their financial system.
Speaker 2: So would it surprise you if a country like China, Russia,
Speaker 2: maybe even Japan, if those nations were to go about
Speaker 2: accumulating bitcoin in the run up to any strategic bitcoin
Speaker 2: reserve that may get created in the United States.
Speaker 1: Yeah, I mean, I think out of the surprise that
Speaker 1: these countries also embrace bitcoin, you know, as part of
Speaker 1: their strategy assets. I mean, it can come in many
Speaker 1: shape and forms. It may not necessarily be in the
Speaker 1: form of a strategy reserve, but maybe their public pension
Speaker 1: system may allocate some small portion to bitcoin, or maybe
Speaker 1: they air sofverey wealth funds may allocate small portion to bitcoin.
Speaker 1: Some people speculate that that has already taken place with
Speaker 1: some of the Asian governments. They are under no obligation
Speaker 1: to disclose their holdings, so maybe we may we simply
Speaker 1: may not know about it, So I wouldn't be surprised
Speaker 1: at all if that that that happens.
Speaker 3: Uh.
Speaker 1: And you know, I think that's all going to be
Speaker 1: very positive for the digital uset prices.
Speaker 2: Peter will leave it there, always a pleasure. Thank you
Speaker 2: so much, Peter Chung. They're head of research at Presto Research.
Speaker 2: Joining us here on the Daybreak Asia Podcast. Thanks for
Speaker 2: listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Speaker 2: Each weekday, we look at the story shaping markets, finance,
Speaker 2: and geopolitics in the Asia Pacific. You can find us
Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
Speaker 2: else you listen. Join us again tomorrow for insight on
Speaker 2: the market moves from Hong Kong to Singapore and Australia.
Speaker 2: I'm Doug Chrisner, and this is Bloomberg