Speaker 1: Bloomberg Audio Studios, podcasts, radio News.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm Deck Chrisner. It
Speaker 2: was concern over an escalation of hostilities between the US
Speaker 2: and Iran that weighed on US markets during the last session.
Speaker 2: There were clashes in the early hours of Wednesday, with
Speaker 2: Kuwait and Bahrain caught in the crossfire, and we had
Speaker 2: the S and P five hundred dropping from a record
Speaker 2: high by seven tens to one percent. Snapping a nine
Speaker 2: day winning streak tack led the decline, and we had
Speaker 2: a key software etf that being the IGV sinking more
Speaker 2: than four percent. Now. A short while ago, the State
Speaker 2: Department said that Israel and Lebanon have agreed to renew
Speaker 2: their fragile Cy's fire. This agreement, by the way, will
Speaker 2: also create a number of pilot security zones inside Lebanon
Speaker 2: from which Hesbalah militants would be banned. Crude oil prices
Speaker 2: are drifting lower on that news. For a look at
Speaker 2: market action, let's bring in Bloomberg's Paul Dobson. Paul is
Speaker 2: Executive editor for Asian Markets. He joins us from our
Speaker 2: studio in Singapore. Thank you for being here. Where do
Speaker 2: you want to begin. Can we talk first about the
Speaker 2: geopolitical story and how it's intersecting with some of the
Speaker 2: price action that we're seeing.
Speaker 3: Yeah, Hi, there doeg absolutely, and it's back on the radar,
Speaker 3: having sort of drifted into the background a little bit
Speaker 3: in recent days. So this newest escalation, the fact that
Speaker 3: although Trump tells us that he's getting closer to reaching
Speaker 3: an agreement with her round, we'sta ll not really seeing
Speaker 3: it is you know, pushing up crude oil prices again
Speaker 3: and seeping back into the broader markets. As a result,
Speaker 3: we have higher bond yields and a stronger dollar on
Speaker 3: top of that as well. I mean, on the positive side,
Speaker 3: we are seeing more tankers and shit escaping from homies,
Speaker 3: bringing a little bit more products onto the market. But
Speaker 3: at the same time, you know, the oil reserves data
Speaker 3: was a good reminder that we're burning through everything at
Speaker 3: a relatively rapid pace and that it can't hold out forever.
Speaker 3: And you still see those countries that are most under pressure,
Speaker 3: and I'm thinking again, you know, we talk about those
Speaker 3: ones in Southeast Asia, like Indonesia under a considerable amount
Speaker 3: of pressure. Indonesia, I think, so its current account surplus
Speaker 3: whittled down to almost nothing because it's spending so much
Speaker 3: on crude oil and other energy products, which is interesting
Speaker 3: one and weight on the currency again yesterday, so.
Speaker 2: We had tech weakness during the regular session in New
Speaker 2: York trading, and then after the bell kind of disappointing
Speaker 2: news from Broadcom I think ai Chip revenue will not
Speaker 2: meet expectations, and then on top of that, CrowdStrike holding
Speaker 2: saying that revenue for the current quarter will be low
Speaker 2: the most optimistic expectations. How is that news being received
Speaker 2: right now in the APEC.
Speaker 3: Yeah, well so bad news on the hardware front, bad
Speaker 3: news on the software front too, And what we saw
Speaker 3: in reaction to that was not just broad Come it's
Speaker 3: self fowarding, but piers across the US tech space like
Speaker 3: marvle AMD also under some pressure. And the futures I
Speaker 3: think for S and p NASDAK around half a percent
Speaker 3: lower as a result. So that's going to weigh on
Speaker 3: the Asia tech sector or things being equal, I think
Speaker 3: it's a little bit of a you know, a reality check,
Speaker 3: like you said, Doug. I mean, the market had been
Speaker 3: up for nine days in a row until yesterday. So
Speaker 3: the bigger picture is that there is still this humongous
Speaker 3: amount of optimism out of there. I think it's good
Speaker 3: every now and then for the markets to think, how
Speaker 3: have we running too far with this story? But also
Speaker 3: to think about, you know, not everybody is necessary already
Speaker 3: going to be a winner. There are going to be
Speaker 3: stronger hands than weaken hands. That's going to become more
Speaker 3: and more evident as we go through this new sort
Speaker 3: of AI infrastructure boom.
Speaker 2: We have some amazing IPOs in the pipeline right now.
Speaker 2: Tonight in the US, the SEC filing from SpaceX reveals
Speaker 2: that the company is looking to raise seventy five billion
Speaker 2: in what would be the largest IPO in history. That
Speaker 2: comes after the Anthropic filing, and then we're still waiting
Speaker 2: to hear from Open AI. How is this news being
Speaker 2: received where you are?
Speaker 3: Yeah, well, I think with a lot of interest. I
Speaker 3: think that you can see that there are many people
Speaker 3: that want to get in on it. Even with the
Speaker 3: high valuations and the extremely large amounts of money that
Speaker 3: are involved and need to be raised, it feels like
Speaker 3: there will be some difficulties for the market to absorb
Speaker 3: it all because it will drain liquidity at least temporarily.
Speaker 3: But on the other hand, I think that you know,
Speaker 3: what we saw, okay, so this is you know, quite
Speaker 3: a good example, I think was we had the technology
Speaker 3: conferences in Asia recently, we had Jensen Huang visiting China
Speaker 3: and various other nations, and just the kind of buzz
Speaker 3: that he generates wherever he shows up in the region.
Speaker 3: You know, whatever he's doing, he's eating a bowl of noodles,
Speaker 3: it's over a social media everywhere, there's lots of excitement.
Speaker 3: You know, he goes to an airport and there's there's fans,
Speaker 3: it's being mobbed a little bit like a like a
Speaker 3: rock star or something like that. I think that that
Speaker 3: sort of talks to the idea that there's a great
Speaker 3: deal of enthusiasm and excitement over the potential for the
Speaker 3: next leg of the AI rally, and the fact that
Speaker 3: what he was talking about was, you know, the other
Speaker 3: companies that can do well. He was talking about software,
Speaker 3: he was talking about robotics and that power of it.
Speaker 3: Just the word was enough to lift for various equities
Speaker 3: markets talks to you know, there's that there is that
Speaker 3: faith in some of these deaders, and I think that
Speaker 3: Elil must certainly carries that same thing. When Sam Oltman
Speaker 3: comes to the region, it has that same effects as well.
Speaker 3: So you know, these are the new these are the
Speaker 3: new superstar CEOs, and and that can get you quite
Speaker 3: a long way, even when you're doing gigantic IPOs.
Speaker 2: And then we have a story. S k Heinez, I
Speaker 2: believe the other day was out with an indication that
Speaker 2: it plans to double its memory chip capacity over the
Speaker 2: coming half decade. This is obviously a part of that
Speaker 2: AI story. So it's not just things being optimistic right now,
Speaker 2: kind of in the short term, but I think in
Speaker 2: terms of the longer view, people are still of the
Speaker 2: opinion that this is a durable trend.
Speaker 3: Yeah. Now, memory chips is obviously highly sicklical based on
Speaker 3: the recent past, so there's booms and busts, and so
Speaker 3: the idea that s k Heinez wants to do that
Speaker 3: huge build out does show you that they're very confident
Speaker 3: on the outlook. But it also you know, we've seen
Speaker 3: over capacity. Oh, we've seen ebbs and flows in demand before,
Speaker 3: so it's not one hundred percent guaranteed that this is
Speaker 3: going to be successful, but it does talk to the
Speaker 3: fact that there's a clamor for the products that they're
Speaker 3: making at the moment, and the fact that the market
Speaker 3: receives it well and not skeptically again talks to that
Speaker 3: same sort of thing. I think the South career at
Speaker 3: the moment, those markets are getting a little bit what
Speaker 3: would be the right word, raising some anxieties among more
Speaker 3: seasoned investors when you see the two times leverage single
Speaker 3: stock ETFs springing up and attracting huge volumes as well,
Speaker 3: and the volatility really whipping up as a result, feels like,
Speaker 3: you know, you need to be careful to control it
Speaker 3: and not to get over confident. Otherwise if we do
Speaker 3: get into too frofi a situation, then the risk of
Speaker 3: sharp corrections only builds as well.
Speaker 2: So in the US we had manufacturing PMI data indicating
Speaker 2: that businesses face the fastest growth in input cost in
Speaker 2: nearly four years during the month of May, and that
Speaker 2: is largely the energy story, where prices have moved sharply higher.
Speaker 2: I know next week in China we get a lot
Speaker 2: of the price data. How is the inflation story playing
Speaker 2: out where you are? Is it much more severe than
Speaker 2: what we're talking about in the States.
Speaker 3: Yeah, Well, it's country by country basis. I think is
Speaker 3: part of it because google energy exposure and costs varies
Speaker 3: from place to place, and I think you're right to
Speaker 3: draw attention to that. I think the bond markets run
Speaker 3: the pressure pretty much everywhere at the moment. So that's
Speaker 3: a testimony to it, and that a lot of Asian
Speaker 3: central banks have already started hiking to get ahead of it,
Speaker 3: and those that aren't, like the boj are getting punished,
Speaker 3: and so they're sort of having to make noises that
Speaker 3: they're also coming around to the idea that likes to
Speaker 3: going to be needed relatively soon. And I think not
Speaker 3: to be forgotten within that DOUG actually is not just
Speaker 3: those energy costs, but also the costs of the semiconductors
Speaker 3: and all the equipment because the market is seeing all
Speaker 3: of these bottlenecks at the moment. The companies that are
Speaker 3: making the technology hardware have pricing power, and if they're
Speaker 3: raising prices, then that does feed into the costs for everything.
Speaker 3: And so we've seen you know, a few isolated, I
Speaker 3: would say so far, but nevertheless quite prominent squeals of pain,
Speaker 3: the likes of Nintendo talking about how the cost of
Speaker 3: the chips that it's putting into it's you know, gaming
Speaker 3: equipment and things like that is also going up, so
Speaker 3: that idea I think people are calling it chipflation is
Speaker 3: also something that needs a little bit more attention.
Speaker 4: I think.
Speaker 2: Okay, Paul, good stuff. We'll leave it there. Thank you
Speaker 2: so much. Bloomberg's Paul Dobson, Executive Editor for Asia Markets,
Speaker 2: joining from Singapore here on the Daybreak Asia podcast. Welcome
Speaker 2: back to the Daybreak as your podcast. I'm Doug Prisner,
Speaker 2: and as I mentioned earlier, SpaceX is seeking to raise
Speaker 2: a record seventy five billion dollars through its initial public offering.
Speaker 2: This would be the largest IPO in history, and it
Speaker 2: could clear the path for even more mega listings. That's
Speaker 2: where we begin our conversation with Sylvia Jablonski. She is
Speaker 2: the chief investment officer at Defiance ETFs, and Sylvia spoke
Speaker 2: with Bloomberg TV host Heidi Stroud, Watts and Cherry on.
Speaker 5: Such a hectic time for market participants. Let's start off
Speaker 5: with the mega IPOs with SpaceX. How do you view
Speaker 5: this offering for all of its ways that is quite unconventional,
Speaker 5: I should say, coming at a time where the valuations
Speaker 5: for a lot of these companies are just so hefty.
Speaker 6: And so first, thank you for having me here.
Speaker 4: I think that's the sex IPO is going to be
Speaker 4: one of the most exciting IPOs in history. There are
Speaker 4: so many investors that are just you know, kind of
Speaker 4: chomping at the bit to get exposure and access to
Speaker 4: the shares and trying to figure out, you know, how
Speaker 4: they're going to do it, whether it's going to be
Speaker 4: they're an ETF wrapper, whether it's going to be you know,
Speaker 4: buying the stock itself once at IPOs, and I just
Speaker 4: think that the interest is massive.
Speaker 6: The SpaceX IPO is interesting on a lot of levels.
Speaker 4: I think first, it shows that there is this huge
Speaker 4: focus on the future of AI and that will be
Speaker 4: you know, kind of space space connectivity, AI space compute
Speaker 4: different ways to have you know, connectivity outside of what
Speaker 4: we have here on Earth essentially, so you know, lower latency,
Speaker 4: lower energy use, things like this. It could be a
Speaker 4: potential AI company, as you said in your intro there.
Speaker 4: And I think the second thing is just you know,
Speaker 4: how much excitement there is about some of the IPOs lately,
Speaker 4: Like Quantinium is another exciting one. It's twelve billion, you know,
Speaker 4: kind of is much smaller than SpaceX, but investors are
Speaker 4: very much investor in the next generation of computing, and
Speaker 4: I think, you know, these quantum companies, these space companies.
Speaker 6: Are just what that brings.
Speaker 7: Are there enough pieces of the pie for everyone at
Speaker 7: this point or are you going to see this kind
Speaker 7: of desperation to be first to market suck up a
Speaker 7: lot of the oxygen.
Speaker 6: I think, you know, I think both.
Speaker 4: I think there'll be a lot of competition and a
Speaker 4: lot of you know, who's getting first to market, But
Speaker 4: I think the opportunities are also vast.
Speaker 6: Right.
Speaker 4: AI just started with this chat shipt moment, and you know,
Speaker 4: a year or so ago, that's what AI was to everyone,
Speaker 4: and you know, then it kind of broadened out to
Speaker 4: chatbots and now it's it's a much different thing. Right
Speaker 4: We're talking now about defense AI. We're talking about the
Speaker 4: power and infrastructure of AI, the cooling, the photonics aspect
Speaker 4: of it, you know, memory. I just think that the
Speaker 4: moat of AI is so massive right now that investors
Speaker 4: have so many different angles by which they can play
Speaker 4: this trade and get exposure to it.
Speaker 6: Sylvia.
Speaker 8: But at the end of the day, this fine the
Speaker 8: foam on the e zub rants around artificial intelligence we're
Speaker 8: talking about a huge flood of stock supply coming to market.
Speaker 8: What will be the broader repercussions for market levels, especially
Speaker 8: when you take it from the passive investor side of
Speaker 8: things and they take a look at these big atfs
Speaker 8: and how some very few companies are dominating the broader market.
Speaker 6: Right.
Speaker 4: Well, you know, I do think that you'll have this
Speaker 4: verification of stocks in the market if that happens, and
Speaker 4: if you do get this congestion problem. But again, I
Speaker 4: just think that some of the companies that are iploing
Speaker 4: and coming to the market offers something a little bit
Speaker 4: different than the others that were already familiar with. You know,
Speaker 4: there are a lot of newer names in AI for
Speaker 4: you know, I could I could name like a po
Speaker 4: E l or Iron, which is to be a bit
Speaker 4: mining company. They're involved in AI infrastructure. There's so many,
Speaker 4: you know, kind of small cap companies that are actually
Speaker 4: starting to generate revenues and have come to market and
Speaker 4: gained investor attention and they're actually doing quite well.
Speaker 6: So I do that the runway for some of these.
Speaker 4: Stocks continues to be there potentially there anyway, as AI grows.
Speaker 8: Do you have to be more concerned about diversifying in
Speaker 8: this environment, and how would you do that?
Speaker 4: Yeah, I mean, I think it's always smart to diversify, right.
Speaker 4: We always say that, you know, you kind of want
Speaker 4: to have different alternatives in your portfolio. And I think
Speaker 4: that there are ways of doing that. So if investors
Speaker 4: feel that they're starting to get very heavily allocated to
Speaker 4: you know, specific AI companies for example, or just tech stocks,
Speaker 4: they could look at things like XMG and you know,
Speaker 4: kind of take out the exposure of the mag seven
Speaker 4: and get the broader diversity of the S and P
Speaker 4: five hundred. So there's certainly ways to diversify that. I think,
Speaker 4: you know, investors are going to start looking at companies
Speaker 4: that will actually benefit from AI, So you know this
Speaker 4: this this type of concept, right, And I you know,
Speaker 4: I do think that there are ways to diversify by
Speaker 4: seeing where AI will play out in different and broader
Speaker 4: sectors that are not necessarily technology based.
Speaker 7: Can you point out this is not just a software
Speaker 7: story for AI anymore, or even a ship story. It's
Speaker 7: an energy supply story. Is that one of the biggest risks?
Speaker 5: You think?
Speaker 6: Yeah, I do.
Speaker 4: I think that's I think that's a big bottleneck, and
Speaker 4: I think it's why you're seeing some of these other companies,
Speaker 4: you know, doing very well. A lot of the top
Speaker 4: energy companies, for example, the photonics companies, the laser you know,
Speaker 4: the Lumentums, Coherence, the.
Speaker 6: Poets of the.
Speaker 4: Universe are doing quite well because I think there's this
Speaker 4: thought that you know, as we continue to consume energy
Speaker 4: and we're trying to build out these big AI data
Speaker 4: centers and workloads, you know, some of the smaller companies
Speaker 4: that are doing it and moving data in different ways
Speaker 4: will benefit from that.
Speaker 2: That was Sylvia Jablonski, CIO at Defiance ETFs, speaking to
Speaker 2: Bloomberg TV host Heidi Stroud Watson Sherry on bringing you
Speaker 2: their conversation 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 prisoner, and this is Bloomberg