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

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Speaker 2: Welcome to the Daybreak Asia Podcast. I'm Doug Chrisner. Equity

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Speaker 2: markets across the Asia Pacific are slumping on the final

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Speaker 2: trading day of the week. In South Korea, the COSPY

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Speaker 2: is on track for a weekly loss of about three percent.

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Speaker 2: Earlier in the States, equities sold off for the second

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Speaker 2: time in three days. A lot of concern over valuations.

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Speaker 2: That's become a major factor, and that's where we started

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Speaker 2: the conversation with brooksa Iam Tongtong of Aberdeen Investments. She

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Speaker 2: spoke with Bloomberg TV host Von Men and Dave Dinglace.

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Speaker 3: This is coming out a time when people are really

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Speaker 3: questioning the valuations of some of these sort of AI

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Speaker 3: tech darlings that really outperform for much of this year.

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Speaker 3: What has aberbeen been doing in the face of all

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Speaker 3: is volatility now.

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Speaker 4: Yes, so we have been looking at the current earning

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Speaker 4: seasons very carefully, and as you can Mentionine, we in

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Speaker 4: the of the tech earning seasons, both for the key

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Speaker 4: suppliers like Taiwan Career which reported over the.

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Speaker 5: Last two weeks, as well as for the US hyper scalers.

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Speaker 4: And I think the summary of all the results have

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Speaker 4: basically shown that things are still looking pretty robust from

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Speaker 4: a fundamental perspective, and I think the key takeaway is

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Speaker 4: that where we are today, we are getting increasing visibility

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Speaker 4: about the growth in twenty twenty six. So actually all

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Speaker 4: the signs from a fundamental perspective is pointing to a

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Speaker 4: stronger year in twenty twenty six. I think what's not

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Speaker 4: very clear is about how will twenty twenty seven shape like.

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Speaker 4: And the evaluations have run ahead, so I think from

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Speaker 4: our perspective, given how fast the market have run, that might.

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Speaker 5: Be a little bit of a hiccup.

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Speaker 4: I wouldn't be surprised with regard to that, but we

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Speaker 4: will see this as a long term buying optionity because

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Speaker 4: we do think fundamentals are still stecking up.

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Speaker 6: You mentioned some of the AI supply chain markets that

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Speaker 6: career and time people seem to be looking at AI

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Speaker 6: evaluations and to be only and I think it's erroneous,

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Speaker 6: just very extreme versions of it. Right, It's either you're

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Speaker 6: in a bubble or you're completely depressed. How would you

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Speaker 6: describe valuations are they? Do you see room for compression?

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Speaker 6: And might be a separate question, do you think they're overvalued,

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Speaker 6: which is a somewhat separate question to the first one.

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Speaker 5: We don't think they're overvalued.

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Speaker 4: We do think they are probably at the fairer stage

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Speaker 4: than they were at the start of the year, especially

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Speaker 4: when you look back at the Liberation Day that that

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Speaker 4: was a big sell off under a very different circumstance.

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Speaker 5: So we do think that as long.

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Speaker 4: As fundamentals continue to grow and that remains supportive, we

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Speaker 4: should continue to see valuations go up. I think there

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Speaker 4: is a bit of a discrepancy between where valuations of

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Speaker 4: tech companies in Asia and in China are at. But

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Speaker 4: to say that tech companies in the US are at

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Speaker 4: and I think from Asia point of view, the relative

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Speaker 4: valuation that we are having today, that's get a bit

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Speaker 4: of a buffer while fundamentals remain quite strong. So you

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Speaker 4: can tell that we are on the positive side of

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Speaker 4: the trade.

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Speaker 3: Okay, in terms of how to play in position around

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Speaker 3: the AI theme, Now, what sort of advice to clients.

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Speaker 4: From our perspective, we do have quite a good position

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Speaker 4: on a broader perspective. So you have the semiconductor supply chain,

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Speaker 4: which plays into the infrastructure layer. We look at the

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Speaker 4: application layer, which people might have forgotten, but China Internet

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Speaker 4: is actually one of the main players and the key

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Speaker 4: drivers within the application layer, which we do think that

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Speaker 4: the ability to monetize what they have invests in the

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Speaker 4: infrastructure layer is actually very strong.

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Speaker 5: You have the.

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Speaker 4: Broader ecosystem which you talk about. You know, nowadays you

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Speaker 4: are starting to see that power is the real bottleneck

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Speaker 4: as well, and you have the power equipment supply chain,

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Speaker 4: you have the energy storage system.

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Speaker 5: That will be part of the power equipment.

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Speaker 4: So we really look at things from a from a

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Speaker 4: broader perspective rather than just the actual tech sector as

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Speaker 4: a whole.

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Speaker 6: And on side of that, are those still going to

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Speaker 6: deliver your the the alpha in China? I mean, is

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Speaker 6: it time to be looking at cyclical or is it

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Speaker 6: Are you not seeing that in the data just yet?

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Speaker 4: I think we are not really seeing that in the

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Speaker 4: data just yet, but we it's actually looking pretty interesting.

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Speaker 4: And I think this is really because on the cyclical front,

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Speaker 4: activities have been quite slow and understandably so given you

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Speaker 4: know where the terriff situation have been at. Today we

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Speaker 4: are getting more clarity than than before. And what that

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Speaker 4: means is that as a business and the companies that

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Speaker 4: we talked to on this trip as well. They are

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Speaker 4: looking to continue to their plan and is business as

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Speaker 4: usual right? Once you have the teriff in place, you

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Speaker 4: now know how to plan your supply chain and therefore

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Speaker 4: you will continue to specify out China.

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Speaker 5: Tell us about the trip.

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Speaker 6: So what's what's the sense you're getting from this when

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Speaker 6: as you meet clients and companies.

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Speaker 4: Yes, so I was in Shanghai and Soujo earlier during

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Speaker 4: the week hees meeting the team, but also meeting some

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Speaker 4: of the companies there, and it's a variety of companies.

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Speaker 4: But I think generally what the companies have been seeing.

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Speaker 4: I'm on the AI and Semiconductor's site and and what

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Speaker 4: they are saying continues to be very much what we

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Speaker 4: have observed in the overall market, which is demand remains

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Speaker 4: to be pretty strong. Some are in shot supply and

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Speaker 4: therefore they have to make prepayments.

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Speaker 5: And I think that that very.

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Speaker 4: Much is a good sign with regard to how tight

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Speaker 4: the supply chain is. Right, and and those are the

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Speaker 4: broader you know, data points that you don't get less

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Speaker 4: you start visiting to companies and then you start talking

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Speaker 4: about them about all the social data points.

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Speaker 5: I was going to ask you about what we saw.

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Speaker 3: I mean you starting to see maybe, as you mentioned,

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Speaker 3: China still offers those AI opportunities coming at a time

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Speaker 3: when I'm looking at a market like Korea where volatility

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Speaker 3: is picking up and you know, massive solo for some

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Speaker 3: is really big names that have done so well, and

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Speaker 3: in contrast, China actually has been seeing.

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Speaker 5: Volatility head lower.

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Speaker 3: What is what do these dynamics tell you about what

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Speaker 3: were best to kind of position and kind of hunger

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Speaker 3: down as we count down to this year.

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Speaker 4: I think it still comes back to fundamentals because what

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Speaker 4: you have described is really just about a rotation in

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Speaker 4: the market from you know, things that have gone up

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Speaker 4: and it's looking slightly more expensive to where things that

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Speaker 4: have been so off and perhaps have been not looked

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Speaker 4: very closely. Like I think China volatility has come down,

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Speaker 4: but from a very high base.

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Speaker 5: Yeah, you're still favor career, though we still.

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Speaker 4: Favor career and moving career. I think it's not just

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Speaker 4: about the tech trade.

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Speaker 5: In Korea.

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Speaker 4: We have the value up trade that has been I

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Speaker 4: think not talked about much because of the excitement surrounding tech.

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Speaker 4: But I think if you look at you know, the

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Speaker 4: Korean financials, the insurance companies or even you know cyclical

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Speaker 4: like the shipbuilding companies there are really willing to come

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Speaker 4: up with measures to improve shareholders return as part of

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Speaker 4: the overall government campaign to really increase their dividend payment.

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Speaker 5: So I think we do see quite a.

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Speaker 4: Big change there, and we are excited about the value

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Speaker 4: up opportunities in Korea in addition to the tech.

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Speaker 6: Opportunities estion for you, Southeast Asia, what's what's pretty there

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Speaker 6: going into next year?

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Speaker 5: Southeast Asia?

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Speaker 4: I think what's pretty is the valuation again a forgotten region.

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Speaker 4: I'm from Thailand, and Thailand has been one of the

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Speaker 4: weegest performing market for quite a long period of time

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Speaker 4: until we have a change in government.

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Speaker 5: I think what you see in.

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Speaker 4: Southeast Asia is that the positive side of things.

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Speaker 5: You have pretty good rates cut.

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Speaker 4: Back drop that is going to stimulate the economic growth.

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Speaker 4: And with that you have the government stepping in in

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Speaker 4: various countries like Indonesia or Thailand to really drive on

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Speaker 4: the fiscal front to stimulate the economic growth.

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Speaker 5: So we do think things.

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Speaker 4: Are looking pretty attractive and growth is coming back supported

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Speaker 4: by the government.

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Speaker 2: That's Proxym Tong Tong of Aberdeen Investments speaking with Bloomberg

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Speaker 2: TV host Von Mann and David in Glaze bringing it

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Speaker 2: to you here on the Daybreak Asia podcast. Welcome back

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Speaker 2: to the Daybreak Asia podcast. I'm deg Krisner. Shareholders in

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Speaker 2: Tesla approved a one trillion dollar compensation package for CEO

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Speaker 2: Elon Musk. More than seventy five percent of the votes

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Speaker 2: were cast in favor. Now this clears the path from

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Speaker 2: us to expand his stake in Tesla to twenty five

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Speaker 2: percent over the next decade. Here is Bloomberg's ed ludlow.

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Speaker 5: For Elon Musk.

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Speaker 7: This was about having more voting power and voting control.

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Speaker 7: And for those institutional investors that voted no, they were

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Speaker 7: worried about concentration of voting power that he had and

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Speaker 7: dilution for them. In the end, voters have overwhelmingly come

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Speaker 7: out seventy five percent of them all more and said

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Speaker 7: we're happy to hand over more control to Elon Musk

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Speaker 7: and keep him in the driver's seat to realize these

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Speaker 7: longer term goals in robotics in an autonomous driving.

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Speaker 2: That was Bloomberg's ed ludlow. Now, to achieve this full payout,

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Speaker 2: Musk must deliver on targets to significantly expand Tesla's market value.

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Speaker 2: He must also revive Tesla's our business and get the

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Speaker 2: company's robotaxi and robotics efforts off the ground. In the

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Speaker 2: regular session, Tesla shares were down three and a half

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Speaker 2: percent on a day when US equities sold off for

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Speaker 2: the second time in three days. For a look at

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Speaker 2: the market action, I'm joined by Clark Garrinen. He is

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Speaker 2: the chief market strategist at Calbay Investments. Clark is on

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Speaker 2: the line from the Bay Area of California. Thank you

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Speaker 2: so much for making time to chat with me. A

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Speaker 2: little bit of a pullback today inequities. That there's some

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Speaker 2: concern shouldn't be a surprise to you that valuations are stretched,

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Speaker 2: especially when we're talking AI, and perhaps more worrisome for

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Speaker 2: the market is the fact that breadth has been narrowing.

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Speaker 2: Are you still constructive on stocks?

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Speaker 8: I am still constructive on stocks.

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Speaker 1: You know, we have seen sort of this pull back

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Speaker 1: over the past couple of weeks, and really we've seen

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Speaker 1: that the sharp spike in the Vicks, But I'm really

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Speaker 1: not too concerned. We have been bullish really since April

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Speaker 1: and having seen the tariffs not really have the impact

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Speaker 1: that we thought they would. I think a lot of

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Speaker 1: it right now comes down to some of the headline

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Speaker 1: risk with unemployment numbers and the government shut down, so

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Speaker 1: that seems to be kind of playing a part in

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Speaker 1: all of this with the AI bubble, and.

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Speaker 8: Talk about the AI bubble.

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Speaker 1: I mean, we've still been really constructive on earnings and

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Speaker 1: where we're going. We're really not even that concerned about

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Speaker 1: unemployment at this point.

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Speaker 8: So overall, yeah, i'd say we are.

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Speaker 2: So you mentioned the April low. I think we're up

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Speaker 2: around thirty six percent from that low. If you look

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Speaker 2: at the S and P five hundred, that seems like

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Speaker 2: a pretty big move. And I would imagine statistically that

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Speaker 2: a pullback maybe of a magnitude between ten to fifteen

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Speaker 2: percent would not be out of the question.

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Speaker 1: And I would say that maybe maybe between five and

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Speaker 1: ten percent could be where we potentially go. And honestly,

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Speaker 1: it kind of wasn't expecting that until the beginning of

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Speaker 1: the year. We just thought that there was still some

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Speaker 1: more room to run towards the end of the year

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Speaker 1: with rate cuts and just our seasonality in November and December,

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Speaker 1: typically we're going to see at least you know, four

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Speaker 1: to five percent on the positive side, whereas now we've

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Speaker 1: had rate cuts and the market's just been really trading sideways,

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Speaker 1: and so I think some of it is just this

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Speaker 1: fear of like you mentioned the thirty six percent up

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Speaker 1: since April, and I think some of it's also just

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Speaker 1: social too, you know, where you hear about Michael Berry

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Speaker 1: coming out with his puts on specific companies, and I

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Speaker 1: think that just kind of adds fuel to the fire.

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Speaker 1: And so that, combined with a lack of data that

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Speaker 1: we're seeing due to the government shutdown, I think it

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Speaker 1: kind of puts us back in that little side of

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Speaker 1: worry where hey, we don't really know where we're at

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Speaker 1: with inflation and unemployment, and so now we have to

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Speaker 1: really lean on some of the private data, which typically

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Speaker 1: just makes investors feel a little bit nervous, and I

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Speaker 1: think that's why I've seen the VIS run up.

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Speaker 2: Yeah, well, I'm glad you mentioned that we had the

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Speaker 2: data from Challenger, Gray and Christmas today on October job

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Speaker 2: cuts one hundred and fifty three thousand, a little more

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Speaker 2: actually nearly triple the number during the same month last year.

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Speaker 2: Now you mentioned the AI trade, we can get back

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Speaker 2: to that in a moment. But in terms of what

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Speaker 2: the data may suggest about the FED and what it

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Speaker 2: does next. Today's fedspeak was a little hawkish. The head

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Speaker 2: of the Cleveland FED, Beth Hammock, was saying that inflation.

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Speaker 2: The head of the Cleveland FED, Beth Hammock, was saying

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Speaker 2: inflation is a bigger risk than job weakness. And we

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Speaker 2: heard from Austin and goulesby the head of the Chicago FED,

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Speaker 2: and he was telling CNBC the lack of inflation data

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Speaker 2: during the shutdown makes him a little bit uneasy when

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Speaker 2: it comes to talking about rate cuts. I thought it

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Speaker 2: was very interesting if you look at what was happening

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Speaker 2: in money markets yesterday, the odds of a December rate

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Speaker 2: cut were probably around seventy percent. Today that moved down

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Speaker 2: to around sixty percent. Again, inflation seems to be the

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Speaker 2: bigger worry at this point, and I'm wondering whether you

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Speaker 2: feel the same way.

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Speaker 8: You know, I think I do.

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Speaker 1: And it's flip flopped over the past six months, where

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Speaker 1: obviously with tariffs the main concern was going to be inflation,

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Speaker 1: but over the past few months we've really seen it

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Speaker 1: kind of hold tight right around three and I think

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Speaker 1: that is part of the reason why we've seen the

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Speaker 1: markets just flourish and then kind of shifted more towards

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Speaker 1: the unemployment numbers as that concern. Okay, tariffs are off

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Speaker 1: the table, inflation's off the table, and now we got

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Speaker 1: to look at unemployment. And then I think it was

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Speaker 1: last week or two weeks ago when Amazon came out

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Speaker 1: and said that they're going to be laying off thirty

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Speaker 1: thousand more white collar kind of you know, middle management

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Speaker 1: level jobs that I think that kind of sparked everyone's

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Speaker 1: main concern. Meantime, we're not getting any updates on unemployment numbers,

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Speaker 1: and so that was the main concern. But now, after

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Speaker 1: hearing some of the Fed governor's talk today that they're

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Speaker 1: flipping back to inflation, we're really not worried about the

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Speaker 1: unemployment side, and honestly, we don't think that we need

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Speaker 1: another rate cut, so we'd be in the camp of saying, yeah,

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Speaker 1: let's go ahead and pause at the end of the year,

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Speaker 1: reevaluate once we have additional numbers. So I think inflation

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Speaker 1: is probably our main point of target right now as

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Speaker 1: opposed to the unemployment.

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Speaker 2: So have you been surprised by the apparent resilience of

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Speaker 2: the America can economy so far this year.

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Speaker 1: Yes, And I think that always stands as just going

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Speaker 1: back to the consumer. You know, the consumer makes up

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Speaker 1: two thirds of our GDP. And while some people say,

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Speaker 1: you know, don't fight the FED, I think it's also true,

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Speaker 1: don't fight the consumer. And when we see the consumer

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Speaker 1: continue to spend like like they have been, not necessarily

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Speaker 1: in a reckless manner, but seeing that continue has been

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Speaker 1: just great to see, especially from you know, somebody who's

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Speaker 1: in the industry is just making sure that people are

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Speaker 1: still continuing to spend. And you know, our clients haven't

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Speaker 1: had an issue with that, and it's really a key

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Speaker 1: driver of the economy. So making sure that people are

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Speaker 1: still able to spend, making sure wage inflation is still

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Speaker 1: staying above price inflation, I think those are those are

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Speaker 1: really important for us as just a society, as well

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Speaker 1: as the GDP.

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Speaker 2: Well, I'm glad you mentioned the consumer clerk because Bloomberg

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Speaker 2: data show the richest ten percent of households are fueling

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Speaker 2: nearly half half of total US spending. Yes, that's largely

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Speaker 2: due to the wealth effect. We know that the stock

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Speaker 2: market has been surging the last few days, kind of

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Speaker 2: put aside for a moment. But if there is a

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Speaker 2: more substantial pullback let's say in stocks and the richer

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Speaker 2: households in the economy kind of curtail they're spending, might

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Speaker 2: that not set us up for maybe a little bit

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Speaker 2: of a downturn in the economy. I won't say recession,

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Speaker 2: but certainly much more in the way of weakness.

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Speaker 5: Sure.

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Speaker 1: I think that's always the case, you know, is that

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Speaker 1: I think, like you mentioned, we've seen that number of

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Speaker 1: top ten percent. It moved from forty percent of the

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Speaker 1: spending I think ten years ago now to fifty percent

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Speaker 1: of the spending, and obviously that's not a great trend.

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Speaker 1: In the heart part is how do we fix that

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Speaker 1: as a society, And so I think that's kind of

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Speaker 1: always a risk that's on the table, you know, moving

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Speaker 1: into next year. If we do see a pullback within equities,

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Speaker 1: does that mean the high end consumer will stop spending

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Speaker 1: at the same clip?

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Speaker 5: You know?

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Speaker 1: Maybe, But at the same time, I'm also really hoping

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Speaker 1: that we see mortgage rates continue to come down so

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Speaker 1: that that would be a case for additional cuts just

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Speaker 1: so that we can see the housing market start to

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Speaker 1: move around again, because I know that's going to have

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Speaker 1: an impact on both the high end earner as well

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Speaker 1: as the low end earner.

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Speaker 2: So let's get back to AI as I promised, and

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Speaker 2: you mentioned Michael Burry's move earlier in the week. He

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Speaker 2: spent more than a billion dollars to buy some put

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Speaker 2: options on both Nvidia and Peloton. You're in the Bay area,

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Speaker 2: tell me what the conversation is like where you are

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Speaker 2: when it comes to artificial intelligence and whether people are

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Speaker 2: perhaps a little concerned that things have become maybe a

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Speaker 2: little extended.

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Speaker 1: You know, I do think that a lot of people have,

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Speaker 1: you know, expressed the fact that they think some things

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Speaker 1: are extended. I've seen that even with clients. You know,

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Speaker 1: I had one client that actually placed a trade in

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Speaker 1: a high end AI name last week and already decided

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Speaker 1: to jump out of the position this week. And I

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Speaker 1: think that kind of shows some of the greed and

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Speaker 1: fear that we're seeing in the markets right now. And

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Speaker 1: so I think there was a lot of fomo or

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Speaker 1: the fear of missing out for many clients where they

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Speaker 1: decide to jump in and then they see a pullback

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Speaker 1: and everybody just starts.

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Speaker 8: To pile on and pull back.

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Speaker 1: Based off of some of what you see in the

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Speaker 1: news like you hear about the Michael Burry position, and

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Speaker 1: to be honest with that position after it came out,

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Speaker 1: I believe that those were actually placed a few months ago,

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Speaker 1: and so for all we know, those could already be

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Speaker 1: closed out. So it's just interesting how stories like that

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Speaker 1: can be put around and can have such an impact

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Speaker 1: on just our general emotions as we see fear and

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Speaker 1: greed just play into this year, especially so much.

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Speaker 2: Clark will leave it there, Thank you so very much.

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Speaker 2: Clark Garrinon is the chief market strategist at Calba Investments,

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Speaker 2: joining from the Bay Area of California here on the

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Speaker 2: Daybreak Asia podcast. Thanks for listening to today's episode of

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Speaker 2: the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look

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Speaker 2: at the story shaping markets, finance, and geopolitics in the

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Speaker 2: Asia Pacific. You can find us on Apple, Spotify, the

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Speaker 2: Bloomberg Podcast YouTube channel, or anywhere else you listen. Join

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Speaker 2: us again tomorrow for insight on the market moves from

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Speaker 2: Hong Kong to Singapore and Australia. I'm Doug Chrisner and

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Speaker 2: this is Bloomberg.

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Speaker 6: Hmm.