Speaker 1: Bloomberg Audio Studios, podcasts, radio News. Welcome to the Daybreak
Speaker 1: Asia podcast. I'm deg Prisner. In the States, federal prosecutors
Speaker 1: have opened a criminal investigation into FED shared J. Powell.
Speaker 2: Now.
Speaker 1: This is over the fed's renovation of its Washington, DC headquarters.
Speaker 1: The New York Times reported a key issue is whether
Speaker 1: Powell lied to Congress about the scope of this project. Well,
Speaker 1: the report prompted Powell to issue a video statement. He
Speaker 1: said the FED had been served grand jury subpoenas from
Speaker 1: the Department of Justice, while at the same time, Powell
Speaker 1: hit back at the probe. Here's Powell.
Speaker 3: The threat of criminal charges is a consequence of the
Speaker 3: Federal Reserve setting interest rates based on our best assessment
Speaker 3: of what will serve the public, rather than following the
Speaker 3: preferences of the president.
Speaker 1: That was fedshare J. Powell. Right now, we're seeing dollar weakness,
Speaker 1: with the Bloomberg dollar spot in decks down about two
Speaker 1: tenths of one percent. At the same time, we've got
Speaker 1: a rally underway in precious metals. Spot gold is up
Speaker 1: one and a half percent and silver is up four
Speaker 1: point four percent. At the moment, Japan is closed for
Speaker 1: a public holiday and that means the first time we're
Speaker 1: going to get any reaction to the Powell story reflected
Speaker 1: in US treasuries will be in the London session. For
Speaker 1: a closer look, Now at markets across the Asia Pacific
Speaker 1: as we begin a new trading week, I'm joined by
Speaker 1: Bloomberg's Leonting III. She is Managing editor for Asian Equities.
Speaker 1: Leonting joining from our studios in Singapore. Thanks for making time.
Speaker 1: Can we talk about the reaction that you're seeing to
Speaker 1: the Powell story being reflected in markets across the Asia Pacific.
Speaker 2: Yeah, people are debating, you know, the outlook for the
Speaker 2: fat independence. That's basically the biggest sort of focal point
Speaker 2: for investors right now. As you said, the dollar is
Speaker 2: slight as slightly weaker, and the US features also dipped.
Speaker 2: In fact, the futures reaction is actually a little bit
Speaker 2: bigger than in the dollar, and the pressure's metals are
Speaker 2: up for safe haven bid. So overall the question is,
Speaker 2: you know, this is definitely not a good look for
Speaker 2: the FED, for the US government, or for the US
Speaker 2: market as a whole. Although the reaction, the immediate reaction
Speaker 2: is not drastic, people are really questioning the kind of
Speaker 2: longer term structure issue, because this really challenges fed's independence.
Speaker 2: So the takeaway here is, you know, first of all,
Speaker 2: look at the noise level right if in the end
Speaker 2: we're looking at court appearances, stuff like that, and that
Speaker 2: will really have more of a repercussion for investors, causing
Speaker 2: a little bit more generis among global investors. And the
Speaker 2: longer term trend is really the d dollarization, and that
Speaker 2: has been happening even without the subpoena news. But you know, again,
Speaker 2: with the noise level heightening, I think there's going to
Speaker 2: be a bit of a speed up for US or
Speaker 2: global investors to shift some of their US assets and
Speaker 2: relocate outside of the US.
Speaker 1: Leon ting, let's talk a little bit about what's happening
Speaker 1: right now in terms of equity market action in the
Speaker 1: Asia Pacific. Right now, it's kind of a mixed picture,
Speaker 1: and I can understand that given the volatility that you
Speaker 1: just highlighted, but let's not lose sight of the fact
Speaker 1: that there has been a lot of positivity lately inequities
Speaker 1: in the Asia Pacific, especially where tech stalks are concerned. Now,
Speaker 1: South Korea, as you and I both know, has been
Speaker 1: upright spot, particularly for the chip makers. This is all
Speaker 1: about the buildout of artificial intelligence, right.
Speaker 2: Yeah. Indeed, if you look at a tech gauge for
Speaker 2: Asia Tech versus Nastaq one hundred, we're looking at a
Speaker 2: huge outperformance. Last I checked it was year to date
Speaker 2: the Asia gauge was up more than six percent, and
Speaker 2: that is compared to Nastak's gain of about two percent.
Speaker 2: We really haven't seen that kind of outperformance at the
Speaker 2: start of the year for a very long time. As
Speaker 2: you said, Korea is an outstanding winner. That's because evaluation
Speaker 2: is indeed cheap. Right even after a seventy percent gain
Speaker 2: last year, the valuation pe forward pevaluation is still at
Speaker 2: about ten times of ten times for the Cosby. That
Speaker 2: compares with twenty five times for the Nasdaq one hundred.
Speaker 2: And if you look at earnings potential, Korea cosby estimated
Speaker 2: earnings growth for the next twelve months is at more
Speaker 2: than seventy percent and that compares to about eighteen percent
Speaker 2: for the Max seven. So you can see the fundamental
Speaker 2: driver of earnings plus evaluation are really providing a tailwind
Speaker 2: for Korean stock.
Speaker 1: So the IPO markets have been very busy as well,
Speaker 1: not only on the Chinese mainland, but in Hong Kong,
Speaker 1: and a number of these IPOs are tied to tech,
Speaker 1: particularly again this area of semiconductors. What are we seeing
Speaker 1: at the moment.
Speaker 2: Yeah, so today we're seeing Omnivision, that's a chip design
Speaker 2: raising about six hundred and sixty million dollars. It's up
Speaker 2: not by a lot, but last a checked was up
Speaker 2: more than three percent. That's a continuation. We saw last
Speaker 2: week two AI large language model developers debuting, and both
Speaker 2: debut performed very well, I should say, and that was
Speaker 2: Minimax and Jipu, and that they actually came to the
Speaker 2: public market before Open Ai, which was also planning for
Speaker 2: an IPO. Overall, I think there is always a balance
Speaker 2: between you know, whether these IPOs would digress or divert
Speaker 2: money away from the existing shares. But in this case,
Speaker 2: I think there is still fresh money going into these deals,
Speaker 2: and these deals performing well is underpinning a further rally
Speaker 2: in the AI sector in China.
Speaker 1: So later in the week, as you know, we'll be
Speaker 1: hearing from TSMC. The company will report full quarterly earnings
Speaker 1: and also provide a forecast on capital spending for two
Speaker 1: twenty six. Last week we had the monthly revenue figures
Speaker 1: for TSMC, they came in above estimate, So I'm thinking
Speaker 1: that the market feels pretty good about where TSMC is
Speaker 1: with respect to earnings.
Speaker 2: Yeah, for TSMC, we saw a slew of Wall Street
Speaker 2: analyst upgrades leading up to the earnings that will come
Speaker 2: out on Thursday this week. I believe we saw Morgan Stanley,
Speaker 2: we saw Goldman Sachs, and I think overall they're talking
Speaker 2: about how this tech trip maker, I should say, is
Speaker 2: really very well positioned in the global semiconductor semiconductor supply chain,
Speaker 2: just because the valuation for the company is actually not
Speaker 2: expensive and in any kind of environment. It also it
Speaker 2: still has to provide chips for all sorts of sort
Speaker 2: of demand, and the positioning is unbeatable according to those analysts.
Speaker 1: Are there any pieces of economic news in the coming
Speaker 1: week that have the potential to move markets, either in China,
Speaker 1: Japan or even Australia.
Speaker 2: I think overall it would be the kind of rate decisions,
Speaker 2: right Australia, Japan and China. I think there's a bit
Speaker 2: of a divergence in global central bank rate decisions. We're
Speaker 2: looking at Japan potentially, you know, hiking again and Australia
Speaker 2: potentially cutting again. Of course, the US FED may cut,
Speaker 2: but the schedule has been moved back a little bit
Speaker 2: because of the job stata that came out on Friday,
Speaker 2: which were a bit solid. So I think the kind
Speaker 2: of implication from the divergent central bank rate decisions will
Speaker 2: really play out in investors' mind. And for China there
Speaker 2: is also the NPC that's coming up in March, and
Speaker 2: the kind of reinforcement on the self reliance agenda, the
Speaker 2: development of the chip sector. You know, the competition again
Speaker 2: is the US AI and I think that that can
Speaker 2: continue to provide a tailwind for the AI and chip
Speaker 2: sector in China.
Speaker 1: Leonting will leave it there, Thank you so very much.
Speaker 1: Bloomberg's Leon Ting II. She is Managing editor for Asia Equities,
Speaker 1: joining from our studios in Singapore here on the Daybreak
Speaker 1: Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm
Speaker 1: Doug Krisner. Japan is closed for a public holiday today. Nonetheless,
Speaker 1: investors are squarely focused on reports that Prime Minister Takeiichi
Speaker 1: will be calling for a snap election. The view is
Speaker 1: Takeichi will try to leverage her popularity to strengthen her
Speaker 1: coalition's grip on power, and that's where we began the
Speaker 1: conversation with Tobias Harris. He is the founder and principal
Speaker 1: at Japan Foresight. Harris spoke to Bloomberg TV host Paul
Speaker 1: Allen and April Holm.
Speaker 4: Thanks for joining us, son, wondering where you would place
Speaker 4: the odds of Prime Minister Takeiichi calling a snap election
Speaker 4: and she's performing very well in the polls at the moment.
Speaker 4: Is this a strategically useful time to strike them? What
Speaker 4: are the chances of getting a fresh mandate if she does.
Speaker 2: Well?
Speaker 5: I think the you know this, this came on very quickly,
Speaker 5: you know, as early, you know, as recently as really
Speaker 5: last Thursday. She was even saying that she was focused
Speaker 5: on getting the budget passed, which really is you know,
Speaker 5: job number one as far as the new Diet session
Speaker 5: is concerned. And you know, there were too many policy
Speaker 5: issues or too many things going on, and certainly the
Speaker 5: consensus seemed to be that we wouldn't see an election
Speaker 5: before April. April would really be the earliest. And so
Speaker 5: the story that broke late Friday and Yo Muri was
Speaker 5: I think caught everyone by surprise, and frankly, I think
Speaker 5: we should note there's been a lot of pushback, and
Speaker 5: not just from opposition parties. You know, we've had several
Speaker 5: reports over the weekend that Asotado, who of course is
Speaker 5: one of Takesi's biggest backers, does not think that an
Speaker 5: election is suitable at this time. We've had now, of course,
Speaker 5: the leader of the Democratic Party for the People to
Speaker 5: Tamaki Yutito, who you know, whose support is going to
Speaker 5: be essential for passing the budget, and really the deal
Speaker 5: that the LDP made with Tamaki was really the key
Speaker 5: to ensuring the budget was going to pass. He has
Speaker 5: said that if there's an election that he will not
Speaker 5: necessarily follow his promise of supporting the budget. So there's
Speaker 5: a lot of moving parts here. I don't think we
Speaker 5: can say it's one hundred percent guaranteed at this point
Speaker 5: that there's going to be an election.
Speaker 4: Yeah, how much public appetite is there for a snap
Speaker 4: election coming so early? And even if Sanai attacker I
Speaker 4: was successful and won a stronger mandate in the lower house,
Speaker 4: she still hasn't doesn't have a majority in the upper house,
Speaker 4: so they're going to be challenges anyway and getting her
Speaker 4: agenda through.
Speaker 5: That's I mean I think that really is one of
Speaker 5: the questions, really, you know, that has surrounded this entire
Speaker 5: debate about whether she was going to have a snap election,
Speaker 5: where of course he asked, you look at her overall
Speaker 5: headline approval numbers. They're great, they're strong, you know. But
Speaker 5: of course there's been lots of questions about what her
Speaker 5: coattails would actually be like, given that the LDP can
Speaker 5: no longer rely on the support of its longtime coalition
Speaker 5: partner Coomo, too, given some questions about the influence of
Speaker 5: the rise of right wing parties, particularly sansee Toe on
Speaker 5: some of the right wing vote that the LDP needs
Speaker 5: to bring back. So there were questions, I think about
Speaker 5: how the LDP might perform, But I think there was
Speaker 5: also the question of why an election, Why now? And
Speaker 5: I think if you look at opinion polls, the public
Speaker 5: has not convinced that an election is suitable at this time,
Speaker 5: and given that she was so adamant recently that no,
Speaker 5: there's too much to do, there's too much to focus on.
Speaker 5: I'm not thinking about an election now. For her to
Speaker 5: then turn around, I think she's going to face a
Speaker 5: lot of accusations of opportunism as this debate swirls in
Speaker 5: the next few days.
Speaker 6: In terms of priorities for Takaichi. Given the public's concerns
Speaker 6: about the cost of living, how would you say they
Speaker 6: are assessing the progress she's made on that front.
Speaker 5: I mean, that's really the other debate I think that's happening,
Speaker 5: particularly within the LDP, where you've had a number of
Speaker 5: voices say, you know, we can't move too quickly because
Speaker 5: ultimately we haven't really made an impact on the issues
Speaker 5: that people are most concerned about. We're still vulnerable on
Speaker 5: that front. You know that people are still feeling the
Speaker 5: impact of inflation. You're still seeing food prices rise, seeing
Speaker 5: another rise and rice prices recently. You know, all of
Speaker 5: that I think is still going to be weighing on
Speaker 5: people's minds. And if you add on top of that
Speaker 5: a feeling that this is just an opportunistic move, you know,
Speaker 5: she's trying to grab more seats while you know, while
Speaker 5: the going looks good, and also the fact that she
Speaker 5: then is putting her own budget at risk because frankly,
Speaker 5: you know, a February eighth election, a February fifteenth election,
Speaker 5: you you really only have you know, they need to
Speaker 5: get a budget done before the fiscal year starts in April. First,
Speaker 5: She's really going to be cutting that close, and it
Speaker 5: really is going to raise a lot of questions, and
Speaker 5: I think the opposition is going to be very quick
Speaker 5: to ask those questions. You know, what is she what
Speaker 5: is more important to her? You're doing things that help
Speaker 5: the public, you know, getting a budget done that supposedly
Speaker 5: has all sorts of things that's going to help the
Speaker 5: public deal with cost of living increases. Or is she
Speaker 5: worried about her political her political future first? And I
Speaker 5: think those questions are going to dog, you know, if
Speaker 5: she goes forward with this. I mean, those questions are
Speaker 5: going to be front and center.
Speaker 6: How is the spat with Beaijing affecting her political future?
Speaker 5: I think in the near term, I don't think it's hurt,
Speaker 5: you know, I think the public certainly, if anything, it's
Speaker 5: probably helped her numbers stay as strong as they have
Speaker 5: for as long as they have. I think that, you know,
Speaker 5: of course, the public, you know, does not view Japan
Speaker 5: as in the wrong here. I mean, polls have consistently
Speaker 5: shown that majorities think that there was nothing wrong with
Speaker 5: what Tacolai she said. You know, they're of course concerned
Speaker 5: about what Beijing's doing. Interestingly, and I think this is
Speaker 5: maybe a question for how people might vote. You know,
Speaker 5: there's a real age gap between how the public is
Speaker 5: responding to this dispute with China, where older voters are
Speaker 5: much more divided over you know, first whether they support
Speaker 5: what Takoichi said or whether Japan should be more conciliatory.
Speaker 5: Younger voters, who the LDP is really desperate to bring
Speaker 5: out in its favor and draw away from sanset, to
Speaker 5: draw away from the Democratic Party for the people, are
Speaker 5: much more overwhelmingly supportive of Takoichi. So it's interesting to see,
Speaker 5: you know, you know, one of her theories, you know,
Speaker 5: taking office was can I bring you know, Takiichi? Is
Speaker 5: she the person to bring some of these voters who've
Speaker 5: been attracted to sansee to back to the LDP. And
Speaker 5: maybe this is a sign that actually that that could work.
Speaker 5: But does that will she lose some of the older
Speaker 5: voters the LDP has relied on in recent elections. I
Speaker 5: think that's a question that the party is going to
Speaker 5: face going forward.
Speaker 4: Well, Tobias, your specialty is political risk and advice. I mean,
Speaker 4: what advice would you be giving to Sanaia tek Ag
Speaker 4: if you were asked about how to handle these expot
Speaker 4: controls from China and whether retaliation is even advisable, I think, you.
Speaker 5: Know, Japan doesn't necessarily have the same tools or the
Speaker 5: same desire to retaliate in the ways. You know that
Speaker 5: you know, China has been using its various levers to
Speaker 5: you know, to pressure Japan. I mean, I think ultimately,
Speaker 5: you know, Japan is going to have to do the
Speaker 5: kinds of things that it's been doing really for a
Speaker 5: long time, which is diversifying away from China. And that's
Speaker 5: not unfortunately, it's not a short term response to China.
Speaker 5: That's not really something that they can fix overnight. But
Speaker 5: we you know, we already saw that after the incidents
Speaker 5: in you know, twenty ten. In twenty twelve, you know,
Speaker 5: Japanese companies started diversifying. Japan as a whole, started diversifying
Speaker 5: away from rare earth's and finding other sources for rare
Speaker 5: earth and other critical minerals. That process is going to
Speaker 5: pick up, and just in general, I think if you
Speaker 5: look at surveys over the last several months, I mean
Speaker 5: corporate Japan, you know, there's not a whole lot of
Speaker 5: appetite for new investment in China, you know, I think,
Speaker 5: of course there's not a lot of appetite for decoupling either.
Speaker 5: But when it comes to deepening Japan's engagement, I mean,
Speaker 5: that appetite I think is not there. And I think
Speaker 5: there's you know, real sensitivity to the political risks in
Speaker 5: China and trying to find other markets, trying to find
Speaker 5: other places to go. And of course that also explains
Speaker 5: perhaps the interest that we've seen in deepening ties with
Speaker 5: the United States, even though that comes with its own
Speaker 5: risks as well.
Speaker 6: Yeah, I was going to ask, to what extent do
Speaker 6: you think there's appetite for the Trump administration in terms
Speaker 6: of support for Takeichi, given how there are a number
Speaker 6: of fronts, foreign fronts that the US administration, including Venezuela,
Speaker 6: is having to look at even closer now.
Speaker 5: I think that phone call between Trump and Takoichi last year,
Speaker 5: you know, certainly was a sign that this was not
Speaker 5: going to be an issue that the US is going
Speaker 5: to be invested in at the highest levels. I mean,
Speaker 5: we've seen messages of support from the embassy in Tokyo
Speaker 5: and from other parts of the administration, but certainly at
Speaker 5: the presidential level, at the veriest highest level, they're not
Speaker 5: investing political capital and showing a lot of support for Takigi.
Speaker 5: And of course you have the prospect of the President
Speaker 5: going to China in April. That of course, as far
Speaker 5: as Asia is concerned, that maybe is you know, absolutely
Speaker 5: front of mind more than any other issue. But yes,
Speaker 5: and then in the immediate term there are things that
Speaker 5: are just taking much more attention and Japan in a
Speaker 5: lot of ways maybe is on its own I mean,
Speaker 5: and again that can be overstated. We're going to see
Speaker 5: i think this week with the defense mister Quozmisin he'll
Speaker 5: be in Washington, finance mister Katsuyama will be in Washington
Speaker 5: talking about the supply chain resilient. So there's I mean,
Speaker 5: there's cooperation there, there's going to be messages of support.
Speaker 5: But when it comes to actually, you know, really throwing
Speaker 5: US weight behind Japan and it's just and trying to
Speaker 5: get China to back down, that's not something I expect
Speaker 5: that we'll see from the United States.
Speaker 1: That was Tobias Harris, founder and principal at Japan Foresight,
Speaker 1: speaking with Bloomberg TV host Paul Allen and April Hong
Speaker 1: here on the Daybreak Asia Podcast. Thanks for listening to
Speaker 1: today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,
Speaker 1: we look at the story shaping markets, finance, and geopolitics
Speaker 1: in the Asia Pacific. You can find us on Apple, Spotify,
Speaker 1: the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Speaker 1: Join us again tomorrow for insight on the market moves
Speaker 1: from Hong Kong to Singapore and Australia. I'm Doug Prisner,
Speaker 1: and this is Bloomberg