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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg

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Speaker 1: Daybreak Asia podcast. I'm Doug Chrisner. On today's episode, we'll

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Speaker 1: look in a moment at the state of US trade talks,

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Speaker 1: especially negotiations involving the European Union and also China. We

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Speaker 1: begin though with the latest on the Chinese ev maker BYD.

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Speaker 1: It shares fell more than eight percent in Hong Kong

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Speaker 1: trading on Monday. The market was reacting to BYD's sweeping

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Speaker 1: price cuts of as much as thirty four percent. The

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Speaker 1: company is offering discounts on twenty two of its electric

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Speaker 1: and plugin high Bred models sold in China until the

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Speaker 1: end of June. Bloomberg's Asia Transport reporter Danny Lee spoke

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Speaker 1: with Bloomberg's Heidi Stroud Watts question how well placed is

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Speaker 1: BYD to engage in a price war with the other

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Speaker 1: Chinese EV makers.

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Speaker 2: Well.

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Speaker 3: BYD, how the first mover advantage by its shifts size,

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Speaker 3: dominating a marketplace and having a huge grip on sales

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Speaker 3: in the world's biggest auto and EV market. And we

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Speaker 3: saw BID taking out the playbook once again to shake

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Speaker 3: up the market and really slash prices prices being cut

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Speaker 3: by thirty four percent over last week, and therefore we

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Speaker 3: saw that market reaction, the market reaction that that saw

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Speaker 3: BID's own shares for almost nine percent, wiping our thirteen

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Speaker 3: billion US dollars off its market cap, and the broader

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Speaker 3: sector they're also following as well. And it really adds

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Speaker 3: to just fears across the sector of not just BYD's

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Speaker 3: largest but the fact that they're all having to respond

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Speaker 3: to BYD's price cuts, price cuts across entire lineup effectively

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Speaker 3: or twenty two models that BID produces. And when you

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Speaker 3: look at kind of the healthiest sector is you know,

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Speaker 3: at the back end of last year, inventories of evs

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Speaker 3: of you know, it rose to fifty seven days and

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Speaker 3: that's a that's a that's quite a high in the

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Speaker 3: most recent period. So therefore, it is going to be

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Speaker 3: a challenge as automakers look to offload stock and to

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Speaker 3: try and compete by having to cut prices.

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Speaker 4: Yeah, Danny, do we know who we expect to be

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Speaker 4: kind of the hardest hit by this change.

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Speaker 3: I mean, every automaker you know seems to be hit,

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Speaker 3: no matter how big or how small. We've seen various

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Speaker 3: rivals of bod from from Leap Motor to to Gili

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Speaker 3: all having to reflect and respond to US, its major

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Speaker 3: competitor in following through with with similar price cuts, price

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Speaker 3: cuts which are not necessarily as large as BID, but

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Speaker 3: still the fact that this will eat into margins and

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Speaker 3: as we've seen many automakers recover from a prior set

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Speaker 3: of price wares over the recent period and recent years,

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Speaker 3: this is a little bit of bad news for the

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Speaker 3: industry as they've been trying to grap with this transition

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Speaker 3: and generally speaking have performed very well compared to piers

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Speaker 3: outside of China, that.

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Speaker 1: Is Bloomberg Stanny Lee. In Beijing, the government is considering

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Speaker 1: a new version of its Made in China twenty twenty

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Speaker 1: five campaign. We know the aim is to boost production

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Speaker 1: of high end technological goods and to prioritize technology that

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Speaker 1: would include chip making equipment. Well. Against that backdrop is

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Speaker 1: the story on global trade and news today that the

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Speaker 1: European Union has agreed to fast track trade negotiations with

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Speaker 1: the US. Here is Bloomberg's MIDMN Low.

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Speaker 5: Well.

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Speaker 4: Very little is being disclosed publicly for now, but we

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Speaker 4: know that this is coming ahead of EU officials traveling

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Speaker 4: to China in July, also ahead of the July nine deadline,

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Speaker 4: when the US is looking to potentially raise tariffs on

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Speaker 4: EU goods from twenty to fifty percent. So it looks

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Speaker 4: like this is an opportunity for both sides to find

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Speaker 4: out what their stand is in terms of how they

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Speaker 4: will deal with the US. And this is the those

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Speaker 4: US threats to the EU not to lean too closely

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Speaker 4: towards China. It looks like the EU is still playing

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Speaker 4: this balancing act here because this is the third time

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Speaker 4: that EU and Chinese official was going to engage publicly.

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Speaker 4: The European Trade Commissioner, one of the trade representatives traveled

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Speaker 4: to Beijing in March. That was followed by a video

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Speaker 4: call in April, and this time you have the Chinese

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Speaker 4: Commerce Minister one went out traveling to Paris to meet

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Speaker 4: with his European counterpart on the sidelines of the WTO meeting.

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Speaker 4: So whether or not this will lead to some or

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Speaker 4: at least pave the way for some sort of concrete

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Speaker 4: deliverables in July when those EU officials travel to Beijing,

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Speaker 4: that is something we want to look out for. Whether

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Speaker 4: they will continue to perhaps look into picking up discussion

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Speaker 4: of an investment pact that had been put on hold

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Speaker 4: for many years, or perhaps lowering tariffs on Chinese evse.

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Speaker 4: These are of course things to look up for, and

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Speaker 4: whether they will look to deep in trade cooperation as

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Speaker 4: well as both sides counter those impact of US tariffs.

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Speaker 2: Yeah, and manufacturing strength remaining a theme in China as well.

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Speaker 5: Tell us a little bit about this new version.

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Speaker 2: Of the Maid in China Plan that Beijing is said

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Speaker 2: to be preparing.

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Speaker 4: Yeah, so, China first introduced a maiden China Plan in

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Speaker 4: twenty fifteen. It was a ten year plan that's opposed

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Speaker 4: to sort of expire by twenty twenty five, and we

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Speaker 4: understand that policymakers are now looking at a new iteration

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Speaker 4: of this plan, a decade long sort of blueprint to

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Speaker 4: map out China's manufacturing capabilities over the next ten years,

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Speaker 4: and once again it is expected to focus on high

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Speaker 4: tech manufacturing, especially things like chip making gears, given those

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Speaker 4: cubs from the US and how that threatened China's national security.

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Speaker 4: Here you can see in the pie chart that manufacturing

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Speaker 4: has remained a pretty big part of China's share of GDP,

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Speaker 4: and we understand from policy makers that they plan to

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Speaker 4: keep that share of GDP contributed by manufacturing stable in

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Speaker 4: the mid to long term. And again, this doesn't seem

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Speaker 4: to address that criticism from the US of the trade

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Speaker 4: imbalance because that concentration in manufacturing has been one of

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Speaker 4: the key drivers of that imbalance. And this is despite

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Speaker 4: as well Chinese policy makers acknowledging that they need to

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Speaker 4: boost domestic consumption. We know there is this ongoing debate

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Speaker 4: among policy makers as to whether to place a target

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Speaker 4: on how much consumption should contribute as a share of GDP,

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Speaker 4: but according to sources, policy makers are still leaning against

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Speaker 4: putting a target there because they're unsure whether they have

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Speaker 4: enough policy tools to really ramp up consumption.

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Speaker 5: In a big way.

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Speaker 1: That is Bloomberg's Minmnlow speaking with Bloomberg's Paul Allen on

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Speaker 1: the Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast.

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Speaker 1: I'm Doug Christner. In the currency markets today, the dollar

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Speaker 1: is hovering near its lowest level in almost two years now.

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Speaker 1: A portion of this move is tied to a stronger yen. Earlier,

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Speaker 1: Bank of Japan Governor Kazu Ouweda said the boj will

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Speaker 1: adjust easing if the economy improves as expected. Even so,

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Speaker 1: there is no escaping how volatile the dollar has been,

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Speaker 1: largely the result of US trade policy, and it's causing

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Speaker 1: investors in Asia to look away from US assets and

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Speaker 1: examine opportunities in the region. My colleagues at Bloomberg Television

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Speaker 1: caught up with Juhi on Cio of Murray Asset Global Investments,

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Speaker 1: and here she is speaking with David Inglace and Yvonne Mann.

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Speaker 6: You've kind of shifted more in terms of domestic plays

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Speaker 6: right now. Tell us what you've been doing.

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Speaker 7: We made that changes late last year and the early

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Speaker 7: this year. So there are two reasons. Of course, the

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Speaker 7: uncertainties regat in tariff wait on the attractiveness of the exporters.

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Speaker 7: And secondly, if you just think about the last four

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Speaker 7: to five years and actually consumption and domestic demand to

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Speaker 7: relate the stories where have been very weak, much weaker

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Speaker 7: than the other sectors like a technology and the shells

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Speaker 7: in China, also in India, which are the major countries

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Speaker 7: in Asian region. So the well, there are so many

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Speaker 7: you know the reasons for that, but the key point

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Speaker 7: is from this year, I think from the government's perspective

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Speaker 7: as well, these domestic demand sectors are becoming more important

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Speaker 7: to boost economy. So in China, for example, now we

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Speaker 7: all know that they for the last for five years

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Speaker 7: export export has been stronger than expected. So there's no

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Speaker 7: kind of very the big reason for them to aggressively

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Speaker 7: in the boost domestic demand. But now they have to, uh,

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Speaker 7: you know, make the kind of more internal tool to

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Speaker 7: have less dependence on the US or other external demand.

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Speaker 7: And also in India, as we sult from early this year,

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Speaker 7: this finally after two terms of the Moody and finally

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Speaker 7: this this term, now they are shifting the focus to

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Speaker 7: the domestic consumption from more investment linked sectors. So that's why,

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Speaker 7: that's the kind of background why we shifted our focus

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Speaker 7: to more domestic demand related sectors.

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Speaker 2: That change worked out as far as performance goes.

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Speaker 7: Yeah, so maybe you still doesn't performance or bid or

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Speaker 7: shell me or all the Yeah, those actually are performed well.

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Speaker 7: But in India still the recovery in consumption has been

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Speaker 7: much slower. So but at least now we have seen

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Speaker 7: some signs of recovery. So for example, over ninety percent

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Speaker 7: of NESCI Indian India Index names they already released their earnings,

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Speaker 7: but over fifty eight percent of that they beat the

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Speaker 7: market consensus, which is much higher than the average level,

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Speaker 7: and the only twenty two percent they missed the earnings estimates.

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Speaker 7: And so even like the earnings vise now we believe

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Speaker 7: it's kind of going through the bottom now. And also

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Speaker 7: from the inflation pressure perspective as well, it's still you know,

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Speaker 7: continue to go down. So that's why there will be

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Speaker 7: no pressure from the RBI to you know, cut the

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Speaker 7: weight to boost the domest demand.

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Speaker 2: The So you think we bought them in India because

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Speaker 2: so the market actually led the rally after Liberation Day

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Speaker 2: from Donald Trump.

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Speaker 5: It was one of the best performers.

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Speaker 2: And I'm wondering right now from an earnings perspective, do

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Speaker 2: you think they'll catch up?

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Speaker 7: It will be very gradual, I will say. I want

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Speaker 7: to add, yeah, it's not going to be like a

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Speaker 7: V shape recovery. But at least, you know, for the

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Speaker 7: last three to four quarters, you know, this market has

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Speaker 7: been underperforming while the other in technology sectors or kind

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Speaker 7: of manufacturing AI you know, the kind of sectors kind

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Speaker 7: of for performing. So but if you just think about

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Speaker 7: how underpenetrated so many sectors are in India still with

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Speaker 7: a huge population, and then you the governments. They are

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Speaker 7: very aggressive in the boosting domestic demand as well, and

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Speaker 7: they're also telef issue that unseris is also less so

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Speaker 7: even though they are still treading at the premium compared

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Speaker 7: to the other countries. But we have to have a

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Speaker 7: long term perspective to India. It's actually usually our perspective

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Speaker 7: to the India is much longer than the other in

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Speaker 7: other countries. Because yeah, considering this kind of you know,

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Speaker 7: very positive fundamental reasons.

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Speaker 6: You mentioned the shifted domestic I look at your something

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Speaker 6: top holdings, So TSMC is still in there. This is

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Speaker 6: very much a very global sort of company as well.

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Speaker 7: Yes, having said that, we shifted our focus more to

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Speaker 7: domestic demand ones, but still we have a dissent and

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Speaker 7: then good exposure to some explorers for example technology sectors

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Speaker 7: or industrials. So for example, TSMC is one of the

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Speaker 7: examples in Taiwan. We believe that they have a bargaining

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Speaker 7: power which is strong enough to pass on the type

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Speaker 7: cost to customers. And even though it's still on the

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Speaker 7: pressure from uncertainties regarding the JV with the Intel and

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Speaker 7: also you know the AI demand or even there are

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Speaker 7: so many kind of ertagists are still time. Of course

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Speaker 7: it's going on, but I think if you just consider

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Speaker 7: their valuation, which is only like fourteen times next year,

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Speaker 7: I think a downside risk is manageable. So for the

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Speaker 7: next you know, like one or two quarters, until all

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Speaker 7: the uncertainties become clearer, I think it will be you know,

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Speaker 7: range boundary on the pressure. But we still think that

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Speaker 7: the oft PTI shop is higher than downside risks. And

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Speaker 7: then another example is also kind of transformer manufacturer in

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Speaker 7: Korea as well.

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Speaker 2: Yeah, I was going to ask you about since we're

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Speaker 2: talking about tech in in vidious reporting this week and

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Speaker 2: so far, have you any key takeaway so far from

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Speaker 2: the sort of the big tech earnings and what that

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Speaker 2: means for TSMC or is the bet on TSMC something

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Speaker 2: something else?

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Speaker 7: So I also traveled to Taiwan last week and kept

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Speaker 7: computer text you know, the conference as well. So I

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Speaker 7: think that so far, I think the demand and that

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Speaker 7: all the tones of the of the companies and the

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Speaker 7: AI demand is still very quite strong and rosy. But

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Speaker 7: still we have to see the final numbers of coas

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Speaker 7: you know, the expansion plan from TSMC. There are so

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Speaker 7: like three or four key factors that we have to

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Speaker 7: keep watching. So I think the food the second half,

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Speaker 7: it's still possible that we are going to see some

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Speaker 7: volatility in the second half, but at least in first half,

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Speaker 7: I think we still see the momentum to continue to

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Speaker 7: be strong.

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Speaker 6: Talked about a little bit more about the domestic place,

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Speaker 6: and certainly one thing we're focused on is of course

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Speaker 6: the consumption side of things in China. Is it still

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Speaker 6: opportunities there.

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Speaker 7: Yes, I think that we have to keep the long

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Speaker 7: term perspective to consumption opportunities. So because compared to the

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Speaker 7: other sectors, the consumption and consumers mindset and behaviors patterns,

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Speaker 7: actually the changes.

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Speaker 5: Are much slower.

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Speaker 7: So now again for the last four to five years,

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Speaker 7: it has been very weak and then now it's we

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Speaker 7: are going through the inflection phase. I would say it's

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Speaker 7: not an inflection point. So yeah, because of the governments,

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Speaker 7: they need to put lots of efforts to restore the

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Speaker 7: confidence and they but luckily this time you know the

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Speaker 7: very differently gesture to private companies early this year in China.

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Speaker 7: Actually it's very helpful and very meaningful for consumption as well,

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Speaker 7: because now I think at the burden to hire more

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Speaker 7: people or kind of you know, like the improved the

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Speaker 7: income growth, they kind of burden can be shared by

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Speaker 7: private companies, which is cash reach tech companies for example.

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Speaker 7: So I think the government at the same time they

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Speaker 7: can just take care of the risks coming from property

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Speaker 7: or local government debt issues. So now I think it's

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Speaker 7: it's step by step they're going to do more and more.

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Speaker 7: But the thing is now, because of the delayed negotiations,

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Speaker 7: the tariff negotiations between the China and the US, I

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Speaker 7: think that implementation of this, you know, very aggressive. The

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Speaker 7: similest plan in China is also being delayed. So I

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Speaker 7: think in terms of timing, initially we thought maybe at

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Speaker 7: the end of you know, first half or early second half,

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Speaker 7: but it's kind of keep pushing back in terms of timing.

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Speaker 2: That's interesting the way you phrased msorider interrupt. You know,

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Speaker 2: we for a long time we talk about how China

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Speaker 2: is using its banks in terms of national service right

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Speaker 2: to help boost the economy to some extent. Like what

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Speaker 2: you're saying, correctly, I'm wrong is that they're outsourcing some

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Speaker 2: of the subsidies for consumption to the private company themselves.

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Speaker 5: That comes at the cost of margining.

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Speaker 2: And I think the question I have is the are

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Speaker 2: you concerned about margin pressure?

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Speaker 7: Isn't the margin pressure if the reason that the com

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Speaker 7: private companies they didn't really hire the people or they

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Speaker 7: didn't really spend on kpex, it's because of lack of confidence.

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Speaker 7: Also because if you remember in twenty twenty one, the

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Speaker 7: big regulator crackdown on private sector as well. So now

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Speaker 7: they are they kind of you know, the negative things

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Speaker 7: are being restored. So that's why I think they want

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Speaker 7: to invest a little more and then more, and then

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Speaker 7: they want to hire more people, and especially in a

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Speaker 7: tech sector, they need more younger people. And then now

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Speaker 7: the unemployment issue is actually more material in youth, you know,

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Speaker 7: the sector. So that's why I think the kind of

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Speaker 7: the positive you know, virtus cycle is going to be

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Speaker 7: created from what we saw early this year. So I

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Speaker 7: think it's going to be very gradual. Again in the

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Speaker 7: consumption story is always yeah yeah, but the direction wise,

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Speaker 7: I think it's going to be different from what we

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Speaker 7: have seen for the last four to five years.

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Speaker 5: What is the playbook then?

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Speaker 6: I mean, I know you're looking at tourism, you look

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Speaker 6: at cosmetics in sort of these domestic places.

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Speaker 5: Why these sectors. Yeah, So first of all, I think.

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Speaker 7: The people they tend to spend more on experiences than goods,

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Speaker 7: so the tourism is one of them, and also cosmetic

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Speaker 7: is a good. But actually, you know, they want to

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Speaker 7: take care of their kind of the beauty or inner

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Speaker 7: beauty or health. So we have more exposures to healthcare

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Speaker 7: and or kind of the consumer services in China and

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Speaker 7: Korea and also in India across Asia.

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Speaker 5: The just a hard pivot here.

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Speaker 2: The other thing I'm going to ask you is how

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Speaker 2: has this melt up and treasure yields affected what you do?

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Speaker 7: So I believe the impact, of course, you know, usually

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Speaker 7: the general impact on equity is negative, but I think

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Speaker 7: from our Asian I'm the investors in Asia perspective, I

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Speaker 7: think it will be less than we saw in the

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Speaker 7: past because now very unusual divergence between the treasury yield

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Speaker 7: and US dollar. So that's why I think because of that,

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Speaker 7: I think the central banks in emerging Asian countries they

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Speaker 7: have less pressure when they cut the rates to to

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Speaker 7: the you know, the boost domestic demand, because now their

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Speaker 7: currency is relatively strengthening. So that's actually less negative than

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Speaker 7: we used to see in the past, That's what I

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Speaker 7: can say.

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Speaker 6: And for the dollars, is the path of this resistance

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Speaker 6: still for the dollar to go lower? Sorry, is the

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Speaker 6: path of these resistance for the dollars still to go lower.

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Speaker 7: It really depends on the further progressing the tariff and

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Speaker 7: old napologies from the US. But I think so death

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Speaker 7: is it's very hard to predict, but at least you

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Speaker 7: know this this this time so many people and then

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Speaker 7: the governments and central banks they find that it was

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Speaker 7: tricker for them to think about, oh we I need

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Speaker 7: some other alternatives. So the trend wise unless we are

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Speaker 7: going to see very sweet the conclusion of the tariff

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Speaker 7: and then they are going to do more marketferently policies

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Speaker 7: like you know, text cuts, what these regulations, because if

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Speaker 7: there are those three are kind of needs to be

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Speaker 7: more balanced. So now although the timing of those market

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Speaker 7: friendly ones are being pushed back, but at least you

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Speaker 7: know they have to do it considering the midterm election

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Speaker 7: next year. So it really depends on how fast they

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Speaker 7: are going to conclude the tariff and then they move

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Speaker 7: on to the more positive ones.

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Speaker 2: Have you seen in your strategies inflows of ALM and

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Speaker 2: funds because of this you know, US exceptionalism fading away.

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Speaker 2: And actually the other question there is do you see

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Speaker 2: a catalyst that might that might spur a reversal in

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Speaker 2: those flows back into you as at some point this year.

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Speaker 7: But our investors finally they think about the non US assets,

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Speaker 7: so many people they are getting out of the US

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Speaker 7: you know, exceptionalism. So that's why I think the inflow

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Speaker 7: wise so far it was not very very much yep,

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Speaker 7: but I got lots of requests from our clients and

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Speaker 7: our investors that they are more interested in China or

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Speaker 7: other non US assets including equities.

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Speaker 5: Okay, fantastic, Thank you so much.

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Speaker 2: It was great there With Julie on there, we covered

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Speaker 2: everything CIO of Mira Acid Global Investment.

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Speaker 1: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 1: Asia Edition podcast. Each weekday we look at the story

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Speaker 1: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 1: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 1: or anywhere else you listen. Join us again tomorrow for

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Speaker 1: insight on the market moves from Hong Kong to Singapore

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Speaker 1: and Australia. I'm Doug Prisoner and this is Bloomberg