Speaker 1: This is Bloomberg day Break Asia for this Wednesday, May
Speaker 1: twenty fourth in Hong Kong, Tuesday May twenty third in
Speaker 1: New York and coming up today.
Speaker 2: US stocks fall as negotiations over raising the debt ceiling
Speaker 2: remain at an impasse.
Speaker 1: Apple signs a new multi billion dollar deal with Broadcom
Speaker 1: to get five G radio frequency components for its devices.
Speaker 2: And Ali Baba's cloud division will cut its workforce by
Speaker 2: seven percent as it prepares for a spin off.
Speaker 3: China's new ambassador to the US asks for open communication.
Speaker 3: China opposes US trade agreement. Mixed messages coming from debt
Speaker 3: ceiling talk same sticking point as where to play spending caps.
Speaker 3: I'm at Baxter with Global News.
Speaker 4: That's all straight ahead on Bloomberg day Break Asia, The
Speaker 4: business news you need to start your day in just
Speaker 4: one fifteen minute podcast available on Apple, Spotify, the Bloomberg
Speaker 4: Business App, and everywhere you get your podcasts.
Speaker 2: Good morning, I'm Doug Chrisner and I'm Brian Curtiz.
Speaker 1: Here are the stories we're following today. Apple has signed
Speaker 1: a new multi year, multi billion dollar deal with Broadcom
Speaker 1: to get new components for its devices. These would be
Speaker 1: five G radio frequency components. The deal extends the sometimes
Speaker 1: contentious relationship between two of the world's biggest tech companies.
Speaker 1: Let's get more on the story from Bloomberg's Denise Pellgreening.
Speaker 5: Apple says the collaboration will include wireless connectivity components, and
Speaker 5: those components will be designed and built in several US
Speaker 5: manufacturing hubs, including Fort Collins, Colorado, where Broadcom has a
Speaker 5: major facility. Apple says it already helps support more than
Speaker 5: one thousand jobs in Fort Collumns and the partnership will
Speaker 5: enable Broadcom to continue to invest in automation projects. The Iphonemaker,
Speaker 5: as a matter of fact, is spending tens of billions
Speaker 5: of dollars to develop five G technology in the US,
Speaker 5: and these investments are all part of that commitment Apple
Speaker 5: made back in twenty twenty one to invest four hundred
Speaker 5: and thirty billion dollars in the US economy over the
Speaker 5: next five years. Denise Pelgreney, Bloomberg Day Brakesia.
Speaker 2: As I mentioned earlier, WTI crude oil rose in New
Speaker 2: York to just under seventy three dollars a barrel as
Speaker 2: the market evaluated a warning from Saudi Arabia's top energy
Speaker 2: official to short sellers. Here's Saudi Energy Minister Prince Abdulaziz
Speaker 2: Ben Solomon speaking at the Cutter Economic Forum. Speculators like
Speaker 2: any think in any market.
Speaker 5: They are there to say.
Speaker 2: I keep advising them that they will be ouching.
Speaker 5: They did ouch in Avrid.
Speaker 2: That warning, by the way, comes as the market considers,
Speaker 2: or at least indicates that oil short sellers who initially
Speaker 2: fled in April or making a comeback. Crewde traders were
Speaker 2: surprised last month after OPEC Plus announced production cuts intended
Speaker 2: to scare off those speculators. Traders now will have their
Speaker 2: eyes on a meeting between opek Plus and its allies.
Speaker 2: They will review their production policy for the second half
Speaker 2: of the year June third and the fourth well.
Speaker 1: By Dance's TikTok appears to be on track now to
Speaker 1: have all of its US user data hosted and overseen
Speaker 1: by the American company Oracle. TikTok CEO showed that Chew
Speaker 1: said that Oracle has begun a review of his company's
Speaker 1: source code, and he said that Oracle is now the
Speaker 1: default destination for the app's user data US user data now.
Speaker 1: This comes as by Dance struggles to win over critics
Speaker 1: that critics are worried about national security implications of TikTok.
Speaker 1: She said that the video app will continue to make
Speaker 1: sure that its data is as safe as possible.
Speaker 5: TikTok is not available in inland China today.
Speaker 6: As we said many times, the Chinese government has actually
Speaker 6: never asked us for US user data and we will
Speaker 6: not provide even if asked.
Speaker 1: Well, to address security concerns, TikTok said that it's US
Speaker 1: and EU projects will have their user information stored locally
Speaker 1: by a local company and it will be overseen by
Speaker 1: local staff. TikTok also said that it will continue to
Speaker 1: work with Oracle and the US government on data protection.
Speaker 2: Ali Baba's Cloud division is said to be reducing its
Speaker 2: staff by seven percent as the company prepares for a spinoff.
Speaker 2: We have more from Bloomberg zvon Menn in Hong Kong.
Speaker 7: The Cloud division is said to have begun offering severance
Speaker 7: paid to employees. Sources say it's either that or workers
Speaker 7: could be transferred to other parts of the Ali Baba group.
Speaker 7: The moves are intended to streamline the business. Ali Baba
Speaker 7: plans to carve out the cloud unit into a separate
Speaker 7: company within a year. It would then prepare for an IPO.
Speaker 7: Some analysts value the cloud business at upwards of thirty
Speaker 7: billion dollars. Ali Baba Cloud is one of the biggest
Speaker 7: companies that will be created in a six way split
Speaker 7: of the parent in Hong Kong. I'm ivon Mann Bloomberg
Speaker 7: day Break Asia and.
Speaker 1: Ali Baba has really struggled here over the past month
Speaker 1: or so, down around five percent or so, and in
Speaker 1: this latest session, even with this news, Baba created lower
Speaker 1: three point seven four percent with its usad rs. The
Speaker 1: Reserve Bank of New Zealand is expected to raise interest
Speaker 1: rates for the twelfth meeting in Row when it meets today.
Speaker 1: Bloomberg's Paul Allen has more from Sydney.
Speaker 8: Eighteen of twenty one economists surveyed by Bloomberg see the
Speaker 8: Arbenz delivering another twenty five basis point rate increase at
Speaker 8: today's meeting that would take the cash rate to five
Speaker 8: and a half percent. The other three economists, well, they
Speaker 8: see an even bigger fifty basis point move rebuilding from
Speaker 8: a severe cyclone earlier this year, combined with the record
Speaker 8: inflows of migrants as boosting economic activity even as inflation
Speaker 8: shows signs of slowing. The RBNZ will also release a
Speaker 8: new set of forecasts, and Governor Adrian Or will hold
Speaker 8: a press conference following today's rate decision. Many economists believe
Speaker 8: that even after today's anticipated twelfth consecutive rate increase, the
Speaker 8: RBNZ may still not be done tightening yet. Paul Allen
Speaker 8: Bloomberg day Break Asia and.
Speaker 1: The Bank of Korea is set to hold its policy
Speaker 1: rate for a third straight meeting when it meets this Thursday,
Speaker 1: that's tomorrow here in Asia. I'm brand Curtis along with
Speaker 1: Doug Christmas. Doug, a little bit of frustration maybe seeping
Speaker 1: into market participants with these debt sealing negotiations.
Speaker 2: Yes, even so, I think that where you're seeing most
Speaker 2: of the stress is obviously at the shorter end of
Speaker 2: the curve. Today we had the two year picking up
Speaker 2: around two basis points. We heard from Neil Kashkari again today,
Speaker 2: the head of the Minneapolis Fed. He was saying that
Speaker 2: if inflation were to become more entrenched, the Fed could
Speaker 2: keep rates elevated for a longer period of time. Now
Speaker 2: tomorrow here in the US, we're going to be getting
Speaker 2: minutes from the last FED meeting. Maybe maybe we'll get
Speaker 2: some insight into whether or not the pause is going
Speaker 2: to happen at the June meeting. That seems to be
Speaker 2: what the market is counting on at this point.
Speaker 1: Yeah, a little interesting that long term yields were lower
Speaker 1: while the short term was up. And I think you've
Speaker 1: got the one month, the three month, the six month,
Speaker 1: the one year, all over five percent. Yet the equity
Speaker 1: markets have hung in there today not so much. But
Speaker 1: we've talked a little bit about if and when the
Speaker 1: bear might change their stripes, and I was interested to
Speaker 1: hear Bank of America's Cevita Supermanian turned a little bit bullish.
Speaker 1: Years she's talking forty three hundred now for the S
Speaker 1: and P five hundred. That's not a huge game. She
Speaker 1: made a couple of interesting points on surveillance, which is
Speaker 1: right before bedtime for me, but I thought it was
Speaker 1: kind of interesting. And one point is that big tech
Speaker 1: doesn't really have to crack from here if their duration
Speaker 1: risk is shortened. Now that needs a little unpacking. Perhaps
Speaker 1: you can get to that. And the second point is
Speaker 1: that the S and P five hundred equal weight can
Speaker 1: take up the slack going forward and can outperform through
Speaker 1: the next many months. I found that quite.
Speaker 2: Interesting, and I'm wondering when it comes to what's happening
Speaker 2: in the foreign exchange, when you begin to consider the
Speaker 2: revenue outlook for American companies, how much of that is
Speaker 2: predicated on the dollar kind of weakening just a bit
Speaker 2: and improving the fortunes the potential fortunes of US multinationals.
Speaker 2: I thought it interesting today that Goldman Sachs was saying
Speaker 2: enough that the dollar has more room to strengthen from here,
Speaker 2: more so than the market is currently estimating, which kind
Speaker 2: of surprised me.
Speaker 1: It is surprising. I think the market is a bit
Speaker 1: split on this whether or not if the FED really
Speaker 1: sticks to higher for longer and inflation stays up there,
Speaker 1: that probably means, you know, a firm dollar. But a
Speaker 1: lot of people think the reverse will happen, and they
Speaker 1: are betting that, especially if recession comes in, maybe yields
Speaker 1: moved down a little bit and the dollar would ease
Speaker 1: a little as well. It's all there, it's all there
Speaker 1: for us over the next many months, and thank goodness
Speaker 1: we have these jobs. It's time now for global news. Well,
Speaker 1: China's new ambassador to the United States is asking for
Speaker 1: some cooperation from the White House to build relations at
Speaker 1: Baxter has Global News in the nine to sixty newsroom
Speaker 1: in San Francisco.
Speaker 3: Yeah, exactly right. Ambassador Chiafang is a citing disputes over
Speaker 3: technology spying allegations and Taiwan at.
Speaker 6: Presence signo, US relations is facing serious difficulties and challenges.
Speaker 6: We hope that the United States will work together with
Speaker 6: China to increase dialogue.
Speaker 3: So is he. He is here now. His appointment is
Speaker 3: thought to try and normalize relations going forward. China says
Speaker 3: it's firmly opposed to the US Taiwan trade agreement. It's
Speaker 3: urging the US to honor the One China principle not
Speaker 3: to support Taiwan independence. Russian Prime Minister Mikhail Mitsubishi has
Speaker 3: kicked off a two day visit to China. This is
Speaker 3: Bosco seeking to deepen trade ties with Beijing. Russia has
Speaker 3: said the nation's farmers are ready to significantly increase agricultural
Speaker 3: exports to China. While the staffs of the two sides
Speaker 3: and the dead ceiling talks in the US meet today,
Speaker 3: House Speaker Kevin McCarthy is sounding anything but optimistic. His
Speaker 3: tone today not optimistic at all saying things are not
Speaker 3: even close.
Speaker 9: People spent too much money and the dim that want
Speaker 9: to even spend more than the new spent last year.
Speaker 9: That is not going to happen.
Speaker 3: And he says things are far apart.
Speaker 4: We could still finish this by June first.
Speaker 3: In a timeline, Have McCarthy says Democrats are not showing
Speaker 3: any urgency, though disputed by White House spokes when Kareine
Speaker 3: Jean Pierre.
Speaker 5: Republicans saying that the White House is not showing any
Speaker 5: urgency is a ridiculous question. Is a ridiculous statement for
Speaker 5: them to be making now.
Speaker 3: On the negotiations, Bloomberg Michael Shepherd says, the sticking point
Speaker 3: seems to be where to set the spending cap.
Speaker 10: Whether it's twenty twenty three or twenty twenty four levels,
Speaker 10: and how long they decided to keep these caps in place.
Speaker 10: Those seem to be the two key issues. Once they
Speaker 10: lock that down, the rest of the deal seems to
Speaker 10: be falling into place more quickly.
Speaker 3: So that could be good news. But Republicans are also
Speaker 3: questioning how Treasury is figuring out the so called X
Speaker 3: State Congressman Steve Scalise, we'd like.
Speaker 9: To see more transparency on how they come to that date.
Speaker 9: Pa Janet Yell and herself. She left the door open
Speaker 9: to delaying that in her tweets yesterday. The comments that
Speaker 9: she sent out yesterday implied that it's June first or later,
Speaker 9: giving some openness to the idea that June first may
Speaker 9: not be the so called XT stage.
Speaker 3: So any transparency. Illinois Attorney General's Office has released results
Speaker 3: of the investigation of sexual abuse at the hands of
Speaker 3: clerics of the Catholic Church, ag Kawani Raul, saying that
Speaker 3: it comes from roughly six hundred interviews with survivors abuse
Speaker 3: between nineteen fifty and twenty nineteen.
Speaker 11: This report reveals the names and detail informations information of
Speaker 11: four hundred and fifty one Catholic clerics and religious brothers
Speaker 11: who abuse at least one nine hundred and ninety seven
Speaker 11: children across all of the diocese in the state of Illinois.
Speaker 3: Raoul says because of the Statute of limitations, many of
Speaker 3: the cases will never be prosecuted, but that decades of
Speaker 3: Catholic leaders have allowed abuses to hide in planes site
Speaker 3: and that the culture and that part of the church
Speaker 3: needs to be exposed. Global News powered by more than
Speaker 3: twenty seven hundred journalists and analysts in over one hundred
Speaker 3: twenty countries in San Francisco. I'm Ed Baxter, and this
Speaker 3: is Bloomberg.
Speaker 1: Brian curtis here in Hong Kong along with Rishad Salamad,
Speaker 1: and our guest is Mary Manning, global portfolio manager at
Speaker 1: Alfinity Investment Management. So today, Mary, was a risk off day.
Speaker 1: It's today that many people probably showed a little bit
Speaker 1: of fear over COVID running through China, the inconsistency of
Speaker 1: the negotiations on the debt ceiling, and also fears about
Speaker 1: inflation and the Fed. Were you buying today or were
Speaker 1: you part of the gang that was lightening up?
Speaker 5: Good morning?
Speaker 12: Thank you very much for having me on the show.
Speaker 12: Actually last night we weren't doing anything. Affinity is a
Speaker 12: long term investor, and you know we don't invest or
Speaker 12: divest based on what's happening daily on the market. But
Speaker 12: you do raise a good point that we've had a
Speaker 12: very good run year to date, particularly in some of
Speaker 12: the larger caps, the megacap tech stocks, and yesterday was
Speaker 12: definitely a down day. The other thing which happened yesterday
Speaker 12: was there is quite a significant sell off in some
Speaker 12: of the luxury stocks in Europe, which has been another
Speaker 12: sector that's been on a tear for you know, eighteen months,
Speaker 12: two years now. So we're definitely watching those developments very closely,
Speaker 12: but not changing the portfolio, you know, based on what's
Speaker 12: happening overnight.
Speaker 13: So how are you at the moment, Then what's your
Speaker 13: trajectory if you will you know, because you're obviously passive
Speaker 13: yet active.
Speaker 12: Yeah, so we're definitely active investors, but just taking a
Speaker 12: long term view. So I think the trajectory is at alfinity,
Speaker 12: we follow Earning's leadership, so that means we are investing
Speaker 12: in stocks that are in an Earning's upgrade cycle or
Speaker 12: you know, they're beating and raising every quarter or every half.
Speaker 12: And I think what we've seen for maybe the last
Speaker 12: year and a half is that there has been companies
Speaker 12: have been in an earnings down grade cycle. So you
Speaker 12: saw the big tech companies, there was pressure on cloud,
Speaker 12: there was pressure in a lot of different aspects of
Speaker 12: the economy of the market. But then this last quarterly
Speaker 12: earnings were actually a little bit better than expected, and
Speaker 12: so we have made some changes in the portfolio around
Speaker 12: that earnings outlook. But two areas that I'll call out
Speaker 12: for the trajectory going forward. One would be big tech,
Speaker 12: and you know, you saw over the last year a
Speaker 12: lot of these companies get into earnings downgrade cycles, whether
Speaker 12: it's Microsoft because of cloud or Amazon because of consumer Meta,
Speaker 12: had a lot of different things going on, and those
Speaker 12: companies have all turned the corner now or an earning's
Speaker 12: upgrade cycle. So we own more of those companies and
Speaker 12: more of them than we did twelve months ago. And
Speaker 12: then the second thing which is developing is probably the
Speaker 12: US consumer and there was some news on that last night,
Speaker 12: particularly with lows coming out. You've seen a lot of
Speaker 12: downgrades from US consumer or maybe not downgrades, but negative
Speaker 12: commentary in the earnings releases, and that's something that we're
Speaker 12: watching very closely.
Speaker 1: Let's talk a little bit about big tech. Many investors
Speaker 1: obviously last year worried about having long duration assets like
Speaker 1: that with interest rates as high as they were, and
Speaker 1: it seemed like coming into this year they were planning
Speaker 1: for a pivot on the FED. We still haven't got
Speaker 1: that yet, but the stocks have run. The comment that
Speaker 1: I mentioned a few moments ago, if you heard the
Speaker 1: beginning of our program, you talked about Savita SUPERMANI and
Speaker 1: from Bank of America, who had been pretty bearish now
Speaker 1: turning a little more bullish and making the point that
Speaker 1: the big tech doesn't actually have to weaken a lot
Speaker 1: if their duration risk you short. And I think what
Speaker 1: she means by that is, if you're not such a
Speaker 1: long duration asset, if you're starting to pay some dividends
Speaker 1: and return capital to shareholders and cut costs so that
Speaker 1: you're able to put forward better returns in the shorter term,
Speaker 1: that they can still hold onto those games. Do you
Speaker 1: see that happening in big tech?
Speaker 12: Yeah, you've raised some really interesting points there. I don't
Speaker 12: necessarily think it's a duration factor, but I think there
Speaker 12: are some things that have changed in big tech which
Speaker 12: will result in earnings upgrades more in the near medium term,
Speaker 12: which is, you know, sort of consistent with a duration argument.
Speaker 5: So a few things I'll call out.
Speaker 12: One is AI AI or maybe at like peak AI
Speaker 12: in the media and talking about it, but for certain
Speaker 12: of the big tech stocks, it really is a game
Speaker 12: changer versus where we were maybe middle of last year.
Speaker 12: So Microsoft obviously with open AI and the implications for
Speaker 12: chat GPT that you'll be able to see that in
Speaker 12: their earnings in twenty twenty four, so that is sort
Speaker 12: of like a near and present opportunity, whereas before it
Speaker 12: was maybe longer term. Similarly, for Google, Google had its
Speaker 12: Google Io day maybe two weeks ago, and I think
Speaker 12: the market really changed their view on what generative AI
Speaker 12: can do for Google's earnings in the near term. And
Speaker 12: then you very rightly point out that these big tech companies,
Speaker 12: for the first time since I can remember, have actually
Speaker 12: started focusing on costs, and that's really important. Meta is
Speaker 12: probably the best example there. The cost cutting the five
Speaker 12: point five billion dollars is quite significant. And then also
Speaker 12: in other companies you've seen layoffs which don't make a
Speaker 12: huge impact on the bottom line, but it shows that
Speaker 12: these companies are actually focused on costs to the extent
Speaker 12: that they haven't been before. So I do agree with
Speaker 12: you know, the the thesis that big tech can continue
Speaker 12: to to continue to perform. Well, I will add one
Speaker 12: other thing is about valuation. So you know, a lot
Speaker 12: of times when people think about the technology sector and duration,
Speaker 12: you know, those unprofitable tech companies where you have to
Speaker 12: use some sort of DCF or some sort of very
Speaker 12: extended valuation metric to justify the stock prices. That is
Speaker 12: not the case at all for the you know, the
Speaker 12: sort of feg Mans or the former fang Man's. Right now,
Speaker 12: Google is training at sixteen times pe a few weeks ago.
Speaker 12: Now it's at twenty. But these are still very reasonable
Speaker 12: valuations where you don't need to fiddle with your whack
Speaker 12: to justify the share prices.
Speaker 13: So tell me something here, Mary's, well, you know, you
Speaker 13: look at big tech and then you see, are they
Speaker 13: morphing now into becoming more like utilities in a funny
Speaker 13: sort of way.
Speaker 12: No, I don't think so, because the growth is still there.
Speaker 12: So generally, you know, conceptually, I would consider something a
Speaker 12: utility where there's no growth and there's no more opportunities,
Speaker 12: so they just become sort of dividend.
Speaker 5: They're highly regulated.
Speaker 12: And they become you know, end payers, and I think
Speaker 12: we're far away from that sort of characterization for Big Tech.
Speaker 12: As I mentioned before, AI is a huge growth driver
Speaker 12: going forward. They still have high growth, and they're still
Speaker 12: actually you know, finding internal projects, and without internal projects,
Speaker 12: they're using that money to buy back shares that that's
Speaker 12: you know, better than paying dividends. So I would say
Speaker 12: no in terms of utility.
Speaker 1: Okay, We've got to finish on this. We have this
Speaker 1: omicron variant XBB that's seemingly sweeping through China, and one
Speaker 1: of your picks is LVMH LVMH and Hermez and others
Speaker 1: got whacked pretty good. Are you concerned about the recovery
Speaker 1: in China? In say, forty seconds.
Speaker 5: Yes, I am.
Speaker 12: I think there's a lot of momentum baked into what's
Speaker 12: going to happen in China. And you know, particularly in
Speaker 12: Europe or for portfolio managers in Europe, they are very
Speaker 12: strongly positioned in those luxury stocks because there's no big
Speaker 12: tech in Europe and the China macro data has been
Speaker 12: quite mixed. So I'm actually going to China this weekend
Speaker 12: and I'm going to spend next week there getting an
Speaker 12: on the ground view. But for right now, I'm probably
Speaker 12: more concerned than I was three weeks ago.
Speaker 1: Well, you better swing by Hong Kong and visit us then, Mary, Yes,
Speaker 1: that's very bleach. Thanks for being on the show. Mary
Speaker 1: Manning from Alfinity Investment Management. This is Bloomberg Daybreak Asia,
Speaker 1: your morning brief on the stories making news from Hong
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