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Speaker 1: Good morning.

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Speaker 2: I'm Brian Curtis and I'm Doug Prisner. Here are the

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Speaker 2: stories we're following today.

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Speaker 1: A powerful earthquake hit northwestern Japan over the weekend, followed

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Speaker 1: by more than fifty after shocks. At Baxter has that

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Speaker 1: story and more from the nine to sixty news room

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Speaker 1: in San Francisco.

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Speaker 3: Yeah, you're right, Brian, and officials say they'll probably be

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Speaker 3: more after shocks magnitude seven point six off the Noto Peninsula.

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Speaker 3: At least four people were killed, triggered widespread tsunami warning.

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Speaker 3: Now the warning has been eased, but NHK took the

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Speaker 3: alerts very very seriously.

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Speaker 4: Escape to higher ground and go as far away as

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Speaker 4: possible from the coast.

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Speaker 3: Now again that alert has been lifted. There are six

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Speaker 3: cases of buildings collapsing with people inside. A major fire

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Speaker 3: broke out in the city of Wajima, appearing to spread

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Speaker 3: across several buildings. Johnny Wu was experiencing it.

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Speaker 4: The house also shaking. You can hear those classes are

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Speaker 4: the windows are shaking. So I'm actually worried about if

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Speaker 4: the electric wire like broken or something that will be

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Speaker 4: pity with danger.

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Speaker 3: But Bloomberg's Isabelle Reynolds says authorities are not concerned it

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Speaker 3: will be a repeat of Fukushima as far.

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Speaker 5: As we know. The reports say that even though for example,

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Speaker 5: the one plant is Shika Nuclear Plant, they have been

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Speaker 5: unable to bring in some external electricity supply, but they

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Speaker 5: are still able to continue the cooling process for their

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Speaker 5: spent fuel. So therefore, at this point we should not

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Speaker 5: see any situation like thank goodness, like the Kushima plant

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Speaker 5: in twenty eleven.

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Speaker 3: And the alert is out potentially large after shocks for

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Speaker 3: the next week or so. Iran's dispatched a warship to

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Speaker 3: the Red Sea after the US Navy destroyed three Houthy boats. This,

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Speaker 3: of course, ratchets up tensions in the area complicates getting

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Speaker 3: a safe passageway for cargo through the Red Sea. NSC

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Speaker 3: spokesman John Kirby says, the US does not want war.

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Speaker 2: We don't seek a conflict wider in the region. We

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Speaker 2: certainly aren't looking for a conflict with the Houthis.

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Speaker 3: The best outcome here would be for the houthis to

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Speaker 3: stop these attacks, as we have made clear over and

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Speaker 3: over again. Congressman Mike Turning, Though, the House Intelligence Committee chair,

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Speaker 3: says a Biden administration needs to toughen up.

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Speaker 6: It's really though, is the Iran issue. I mean the

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Speaker 6: houthis has below moss or all satellites funded trained by

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Speaker 6: Iran itself. This administration has been very timid and responding

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Speaker 6: to escalations by Iran.

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Speaker 3: Running alongside this, Iaran is now saying that it's open

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Speaker 3: to fresh talks about its nuclear program. Statement says the

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Speaker 3: diplomatic environment to hold a new round of talks still exists.

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Speaker 3: Israel is downsizing its force in Gaza. Says it's entering

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Speaker 3: the next phase of the war. It is pulling five

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Speaker 3: brigades and coming days shifting to what it says are

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Speaker 3: more targeted operations. This after almost three months of combat.

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Speaker 3: The numbers well several thousand troops going out. It says

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Speaker 3: it is in control of northern Gossam. Meanwhile, Israel's Prime

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Speaker 3: Supreme Court has overturned a highly contested law aimed at

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Speaker 3: weakening the Justice's own power. This is a major loss

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Speaker 3: for Prime Minister Benjamin Nette Yahoo his and his right

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Speaker 3: wing coalition. The ruling hell that the amendment in question

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Speaker 3: causes severe and unprecedented harm to the core characteristics of

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Speaker 3: Israel as a democratic state Global news twenty four hours

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Speaker 3: a day and whenever you want it with Bloomberg News

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Speaker 3: Now in San Francisco. I'm Ed Baxter and this is

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Speaker 3: Bloomberg Brian.

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Speaker 1: Thanks very much, Ed, Brian Curtis and Doug Chrisner and

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Speaker 1: our colleague Paul Allen will join from Sydney a little

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Speaker 1: bit later in the hour. Let's take a look at

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Speaker 1: the top business stories of the hour now. BYD may

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Speaker 1: just have overtaken Tesla as the world leader in EV sales.

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Speaker 1: Bloomberg's Johan Wong has more from Hong Kong.

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Speaker 7: BYD sold more than five hundred and twenty six thousand

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Speaker 7: fully electric vehicles in the fourth quarter. This may be

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Speaker 7: enough to overtake Tesla as the world's biggest seller of

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Speaker 7: fully electric evs. In total, BYD sold over three million

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Speaker 7: units in twenty twenty three. Its full year volumes were

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Speaker 7: almost as much as its EVY and hybrid sales over

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Speaker 7: the previous five years combined. The rapid growth has put

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Speaker 7: BID into the top ten ranking of global car sales

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Speaker 7: for the first time. Tesla will need a record showing

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Speaker 7: to maintain its number one status when it unveils sales

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Speaker 7: figures on Tuesday in Hong Kong. Join Wong Bloomberg Radio.

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Speaker 2: Well, speaking of Tesla tomorrow, we are expected to get

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Speaker 2: an announcement on another record year in terms of delivery.

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Speaker 2: We have that story from Bloomberg's Denise Pellegrini.

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Speaker 8: The Austin based EV maker is estimated to have handed

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Speaker 8: over almost four hundred eighty three thy two hundred vehicles

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Speaker 8: in the fourth quarter, according to analysts surveyed by Bloomberg,

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Speaker 8: and that would mean Tesla probably exceeded its goal to

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Speaker 8: deliver a record one point eight million cars last year.

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Speaker 8: This would be thanks in large part due to die

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Speaker 8: hard Elon Musk fans and tech savvy early adopters. The

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Speaker 8: record those just a fraction of what Toyota or General

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Speaker 8: Motors normally sell, meaning for its next phase of growth,

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Speaker 8: Tesla has to win over everyday buyers who primarily select

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Speaker 8: vehicles based on more mundane qualities things like price, are

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Speaker 8: ease of use. Denise Pelgreeny Bloomberg Radio.

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Speaker 1: So both companies they are likely with the record, but

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Speaker 1: sales of evs in the United States could lose some

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Speaker 1: speed now after the government issued new rules for a

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Speaker 1: tax credit. Bloomberg Sarah Livesey has more.

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Speaker 9: New rules from the Biden administration take effect today, and

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Speaker 9: they reduce the number of EV models eligible for a

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Speaker 9: seventy five hundred dollars consumer tax credit. The total number

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Speaker 9: is now thirteen. That's down from about two dozen. Under

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Speaker 9: the new rules, vehicles using battery components from Chinese manufacturers

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Speaker 9: don't qualify for the credit. In twenty twenty five, restrictions

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Speaker 9: are set to expand to include suppliers of raw battery materials,

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Speaker 9: including lithium and nickel. The US Treasury Department has been

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Speaker 9: coordinating closely with automakers on the new restrictions. Tesla's Model

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Speaker 9: Y and Ford's F one to fifty lightning pickup are

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Speaker 9: among the vehicles still eligible. I'm Sarah Livesey, Bloomberg Radio Well.

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Speaker 2: The Dutch chip making equipment firm ASML has canceled a

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Speaker 2: number of ma sheen chipments to China now. This decision

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Speaker 2: was made at the request of the Biden administration, and

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Speaker 2: it comes week before export bans on advanced chip making

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Speaker 2: equipment are set to go into effect. ASML had licenses

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Speaker 2: to ship three deep ultraviolet lithography machines to some firms

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Speaker 2: in China. Now those licenses are active until later this month,

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Speaker 2: when Dutch export restrictions are to take full effect. However,

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Speaker 2: we are told National Security Advisor Jake Sullivan asked ASML

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Speaker 2: to immediately halt pre scheduled shipments. It's not immediately clear

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Speaker 2: how many of the devices were involved. By the way,

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Speaker 2: these devices can cost tens of millions of dollars apiece right.

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Speaker 1: Well, President Sijinping has pledged to strengthen China's economic recovery

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Speaker 1: after a tough year. Bloomberg's Bonny al with that story

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Speaker 1: from Hong Kong.

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Speaker 10: The president gave a admission of a difficult twenty twenty

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Speaker 10: three during his annual New Year's address. He said there

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Speaker 10: have been domestic headwinds facing the country, but he pledged

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Speaker 10: strength and economic momentum and job creation. China's You've unemployment

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Speaker 10: hits a record high over the summer before the government

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Speaker 10: stopped publishing figures. She said the government's goal is delivering

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Speaker 10: a better life for the people. China is entering a

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Speaker 10: pivotal period as policymakers try to boost growth, stabilize a

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Speaker 10: crisis in the property market, and prevents deflation. Beijing is

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Speaker 10: expected to target a growth goal of around five percent

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Speaker 10: again in twenty twenty four in Hong Kong. I'm Bonnie

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Speaker 10: al Bloomberg Radio.

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Speaker 1: Mark Matthews joins us now head of Asia Research at

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Speaker 1: Julius Bear, joining Paul Allen in Sydney and me Brian Curtis. Mark,

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Speaker 1: thanks very much for taking out the time right near

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Speaker 1: the holiday to be with us. So investors are wrestling

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Speaker 1: with the kind of equity conundrum at the moment. The

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Speaker 1: S and B five hundred and up twenty six percent

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Speaker 1: in twenty twenty three, but it was down a similar

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Speaker 1: amount in twenty twenty two. So we're either up a

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Speaker 1: lot or we've gone nowhere in two years. It makes

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Speaker 1: it a little tricky to frame that.

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Speaker 9: How do we frame it.

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Speaker 11: Well, Brian, I think we could look at technicals, or

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Speaker 11: we could look at fundamentals. And on the technical side,

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Speaker 11: if we assume the S and P does manage to

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Speaker 11: rise more than half a percent in the next few days,

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Speaker 11: which I think it will, and make a new high,

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Speaker 11: then we can just look back in history and see

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Speaker 11: what happened after the S and P made a new high,

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Speaker 11: after you know, a long time of not being at

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Speaker 11: a new high. And so we have data on that.

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Speaker 11: Going back to nineteen fifty, there were fourteen times when

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Speaker 11: the S and P made a new high after not

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Speaker 11: having had one for the previous year, and in thirteen

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Speaker 11: out of those fourteen times, it was up both three

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Speaker 11: months later and twelve months later, and returns of five

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Speaker 11: percent and twelve fifteen percent, respectively. So the one time

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Speaker 11: that didn't work was the global financial crisis in two

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Speaker 11: thousand and eight. I think, barring a recession, those technicals

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Speaker 11: stand us in good steads. And then just the other

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Speaker 11: thing quickly, on fundamentals, we're looking for earnings growth in

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Speaker 11: the S and P of about ten percent this year

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Speaker 11: and next year the consensus looks for a similar number,

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Speaker 11: and if that's achievable, I just feel the combination of

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Speaker 11: those two things makes it very difficult for the market

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Speaker 11: to go down.

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Speaker 12: Of course, a lot of the gains that we saw

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Speaker 12: in the past twelve months have come from just a

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Speaker 12: handful of stocks. Do you think the breadth of strong

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Speaker 12: performance is going to improve in twenty twenty four?

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Speaker 11: I hope so, Paul, And of course in the fourth

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Speaker 11: quarter we did see the breath improving. But I'd like

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Speaker 11: to say two things if I may, about that The

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Speaker 11: first is that, yes, the breadth is very concentrated in

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Speaker 11: the S and P right now, in those Magnificent seven,

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Speaker 11: but if you look back in history, there's no predictive

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Speaker 11: power in weak breadth. In other words, just because the

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Speaker 11: breadth is very concentrated doesn't mean that the market can't

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Speaker 11: go on to have very good return and, by the way,

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Speaker 11: remain very concentrated. And the second thing I want to

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Speaker 11: say is we think it will stay concentrated. I'm contradicting

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Speaker 11: myself a little bit because I just said it broadened

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Speaker 11: out a bit in the fourth quarter. Maybe that broadening

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Speaker 11: out continues, But if you look at the forecast revenue

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Speaker 11: and profit growth of the Magnificent seven over the next

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Speaker 11: two years relative to the other four hundred and ninety

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Speaker 11: three stalks in the S and P, it's still much

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Speaker 11: much higher. And historically stocks outperform based on their earnings growth.

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Speaker 11: So if they're still going to have high earnings growth,

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Speaker 11: I think they're still going to outperform.

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Speaker 1: I know you like to focus on Asia, and another conundrum,

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Speaker 1: at least for me, is Hong Kong and China. The

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Speaker 1: valuations are quite low, the performance has been really kind

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Speaker 1: of stinky, over the past couple of years, really, but

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Speaker 1: we need to look at it and try to determine

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Speaker 1: whether or not this is a cyclical kind of downturn

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Speaker 1: or whether it's really secular structural in nature. Has something

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Speaker 1: changed permanently, Mark.

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Speaker 11: I think something has, Brian, we have to we have

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Speaker 11: to acknowledge that. I think President She's number one priority

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Speaker 11: on the economic front is cleaning up the property sector,

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Speaker 11: which until recently was the largest sector in the Chinese economy,

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Speaker 11: and he seems very willing to sacrifice growth toward that end. Now,

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Speaker 11: if it ever gets to a stage where it creates

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Speaker 11: a systemic risk, then I think he would he would

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Speaker 11: act to prevent that. But I do think it's going

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Speaker 11: to be a tough year for the Chinese economy again.

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Speaker 11: Now having said that, to my mind, in Asia, there

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Speaker 11: is one fantastic way to play the FED cutting interest rates.

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Speaker 11: It is Hong Kong property. You rightly mentioned Hong Kong's

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Speaker 11: been through you stinky few years. Let me just put

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Speaker 11: a number on stinky. Hong Kong property sector is down

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Speaker 11: sixty percent from it's high in twenty nineteen. It's trading

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Speaker 11: on point four times books, so it is extremely cheap

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Speaker 11: that's less than half the long term adverts valuation. And

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Speaker 11: if the FED does cut rates, let me just say,

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Speaker 11: even especially if it cuts rate aggressively, then of all

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Speaker 11: the places in the emerging world, because of the Hong

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Speaker 11: Kong dollar peg to the US dollar, Hong Kong property

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Speaker 11: has the most direct link to interest rate. But I

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Speaker 11: would I wonder.

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Speaker 1: I know, and I get that mark and it makes

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Speaker 1: a lot of sense, but I just wonder whether Hong

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Speaker 1: Kong is just not as special as it used to be.

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Speaker 1: I mean, it's a different place now, right, And maybe

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Speaker 1: you know, we know that it's very expensive property. You

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Speaker 1: can say, well it's down you know this much. But

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Speaker 1: it started from a very high level, right, I mean,

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Speaker 1: is Hong Kong still special in your mind?

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Speaker 11: Yes, it is, because I think that Shanghai will never

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Speaker 11: really be allowed to become the you know, the financial

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Speaker 11: center that it should be, just for internal political reasons

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Speaker 11: in China. I think Hong Kong has a place. And

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Speaker 11: the second thing I would say is that, to my mind,

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Speaker 11: this is not when we're talking about Hong Kong property

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Speaker 11: stocks and their upside in the first half of this year,

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Speaker 11: we're not talking about the Chinese economy we're talking about

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Speaker 11: the Federal Reserve, and if the FED cuts aggressively and

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Speaker 11: Hong Kong interest rates are directly linked to US rates

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Speaker 11: and Hong Kong property stocks are down sixty percent, to me,

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Speaker 11: this looks like the best trade of the first half

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Speaker 11: of this year.

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Speaker 4: You know.

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Speaker 12: Let's talk about the FID though. Do you think it's

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Speaker 12: going to cut aggressively or is it going to be

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Speaker 12: something a little bit more modest. That's certainly what the

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Speaker 12: dots and what some of the fids speak as a suggesting.

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Speaker 11: Well, Paul, all I'll say is we're looking for GDP

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Speaker 11: growth this year of about one and a half percent

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Speaker 11: and inflation at about two and a half percent. And

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Speaker 11: we all know the Fed funds rate is up at

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Speaker 11: five and a half, so it should not be at

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Speaker 11: five and a half and they need to cut rates

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Speaker 11: before there's something like another banking crisis that happens like

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Speaker 11: the one that happened in the first half of last year.

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Speaker 11: But also just because it five and a half percent,

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Speaker 11: the Fed funds rate is a serious impediment to growth.

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Speaker 11: So I also think we do have the presidential election

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Speaker 11: coming up in the second half of next year. It

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Speaker 11: makes it more difficult for the FED to move in

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Speaker 11: the second half of the year. I think that that

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Speaker 11: there is a fairly narrow window to cut and that

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Speaker 11: window is in the first half.

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Speaker 1: Okay, So what does that mean for the dollar? Then?

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Speaker 1: Do you see the dollar declining pretty steadily from here?

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Speaker 11: Intuitively it should mean the dollar would be weaker versus

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Speaker 11: most currencies. However, the FED is not the only central

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Speaker 11: bank that's going to be cutting rates. In fact, we

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Speaker 11: think the ECP is going to move before the FED.

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Speaker 11: And if you look at all the emerging market central

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Speaker 11: banks added up there now firmly in cutting mode. So

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Speaker 11: the only currency I can kind of put my hand

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Speaker 11: on my heart and say that thing should go up.

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