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Speaker 1: Good morning.

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Speaker 2: It's Wednesday, the twenty seventh of December in London. This

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Speaker 2: is the Bloomberg Daybreak Curate podcast. I'm Stephen Carroll. Coming

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Speaker 2: up today. Risks of a wider conflict in the Middle

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Speaker 2: East rise as the US strikes targets in Iraq and

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Speaker 2: Houthi militants attack another ship in the Red Sea. The

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Speaker 2: SMP five hundred years record highs as the Santa Claus

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Speaker 2: rally picks up steam plus Tesla is about to be

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Speaker 2: surpassed by China's byd as the world leader in electric

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Speaker 2: car sales. Let's start with a round up of our

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Speaker 2: top stories, and there are more warning signs that the

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Speaker 2: war in Gaza could escalate into a wider conflict across

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Speaker 2: the Middle East. Houthi rebels and Yemen renewed their drone

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Speaker 2: strikes on merchant vessels in the Red Sea, with shipping

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Speaker 2: from MSc confirming a container ship was hit while en

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Speaker 2: route to Pakistan. It's the latest in a string of

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Speaker 2: attacks in the region in recent days. On Monday, the

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Speaker 2: United States that its forces launched three air strikes on

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Speaker 2: Iran backed groups in Iraq. Defense Secretary Lloyd Austin called

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Speaker 2: the strikes a necessary and proportionate response to an earlier

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Speaker 2: attack that injured three US personnel. The SMP five hundred

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Speaker 2: is trading close to a record highs The so called

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Speaker 2: Santa Claus rally left the Wall Street benchmark just half

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Speaker 2: a percent off its previous peak, the traditional end of

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Speaker 2: the year gains of average of one point three percent

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Speaker 2: in the last five trading sessions of the year and

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Speaker 2: the first two trading sessions of the new year. Bloomberg's

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Speaker 2: executive editor for Asian Markets, Paul Dobson says some traders

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Speaker 2: have their eyes on a prize.

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Speaker 3: It may be an anticipation of big New year flows

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Speaker 3: into equity funds and people trying to get a little

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Speaker 3: bit ahead of that. As part of the explanation, I think,

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Speaker 3: you know, we're getting very close to that record high

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Speaker 3: in the SMP, and the market loves the target to chase, right,

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Speaker 3: so trying to achieve that before the end of the

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Speaker 3: year is probably something that some people are anticipating.

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Speaker 2: That's Bloomberg's Paul Dobson. Their US docs have risen by

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Speaker 2: four and a half percent this month so far, with

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Speaker 2: the since the start of the year now surpassing twenty

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Speaker 2: four percent. Tesla could soon lose its title as the

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Speaker 2: world's leader in electric vehicles. The Chinese automaker BYDS sales

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Speaker 2: are forecast to overtake Tesla this quarter. It's a meteoric

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Speaker 2: rise for the brand, which Elon Musk wants scoffed at.

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Speaker 2: Here is the Tesla CEO speaking to Bloomberg twelve years ago.

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Speaker 4: There's competitors now ramping up, and as you're familiar with BYD,

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Speaker 4: which is also on the West Coast, I think they're

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Speaker 4: ramping up production of their electric vehicles. A warm buffet

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Speaker 4: owed ten percent.

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Speaker 1: Stake in that.

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Speaker 4: Why do you last trying to compete?

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Speaker 2: Why do you last?

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Speaker 3: Have you seen their car?

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Speaker 4: I have seen their car. Yeah, in fact that the

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Speaker 4: Berkshire Halfway meeting. I saw their cars. Yeah, well they

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Speaker 4: are on a Tell me why you're laughing. You don't

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Speaker 4: see them at all as a competitors.

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Speaker 1: Why is that?

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Speaker 4: I mean they offer a lower price point.

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Speaker 5: I don't think they have a great product.

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Speaker 2: So that was Elon Musk speaking to Bloomberg in twenty eleven.

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Speaker 2: After that clip was reshared online, he responded saying BYD's

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Speaker 2: vehicles are highly competitive these days. The Chinese firm's lower

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Speaker 2: prices have been undercutting Tesla has more expensive vehicles, but

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Speaker 2: BYD is struggling to replicate its domestic success internationally, as

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Speaker 2: the EU is considering joining the US and slapping higher

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Speaker 2: tariffs on imports of Chinese electric cars. Apple will challenge

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Speaker 2: a ban on sales of its watches after the White

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Speaker 2: House refuse to overturn the measure. The tech company is

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Speaker 2: in a patent dispute with medical technology maker Massimocorp over

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Speaker 2: the blood oxygen level sensor in its products. Masamo's CEO

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Speaker 2: Jokiani says Apple should take responsibility for its actions.

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Speaker 6: There needs to be an honest dialogue. There needs to

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Speaker 6: be an apology. These guys have been caught with their

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Speaker 6: hands and the cookie jar, and instead of being embarrassed

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Speaker 6: and doing the right thing, they're blaming everybody and they're

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Speaker 6: fighting everybody.

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Speaker 2: Masamo CEO Joke Kiani, speaking before the ban on Apple watches,

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Speaker 2: which was imposed by the US International Trade Commission. Apple

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Speaker 2: has already stopped selling its Series, Series nine and Ultra

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Speaker 2: two watches, but says it strongly disagrees with the legal

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Speaker 2: decision and will take all actions to return its devices

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Speaker 2: to stores and the European Union is preparing a backup

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Speaker 2: plan worth up to twenty billion euros to help fund Ukraine.

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Speaker 2: That's according to The Financial Times. Now. Unidentified officials speaking

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Speaker 2: to the newspaper say the plan would sidestep Hungary's objections

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Speaker 2: to the plan, which would see member states issue guarantees

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Speaker 2: to the EU budget allowing the European Commission to borrow

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Speaker 2: up to twenty billion euros on capital markets for Ukraine.

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Speaker 2: A spokesperson for the Commission to climb to comment to

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Speaker 2: The Financial Times. This as elsewhere in Europe, Turkey's Foreign

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Speaker 2: Affairs Committee endors Sweden's entry to NATO, paving the way

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Speaker 2: for a vote by its full parliament as early as

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Speaker 2: this week. Now, in a moment, we'll bring you more

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Speaker 2: on that story that China's BYD looks set to overtake

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Speaker 2: Tesla in the electric car making space. But another Bloomberg

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Speaker 2: story that caught my eye this morning, in the spirit

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Speaker 2: of the end of year sales some of you may

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Speaker 2: be indulging in perhaps also reflection of higher interest rates

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Speaker 2: playing out across the commercial property sector, and office building

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Speaker 2: in Los Angeles has sold for fifty two percent less

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Speaker 2: than it did five years ago. The building near Century

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Speaker 2: City in Beverly Hills went for just under forty five

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Speaker 2: million dollars on Tuesday, versus almost ninety three million in

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Speaker 2: twenty eighteen, the last time it was sold. It's the

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Speaker 2: latest big property deal in the LA area, illustrating the

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Speaker 2: pressure in the market this as more companies look to

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Speaker 2: remote work and of course you're dealing with the impact

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Speaker 2: of higher borrowing costs. The property firm Harbor Associates, which

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Speaker 2: both the building with F andF Capital, say they're starting

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Speaker 2: to see distress in parts of the market. Just in

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Speaker 2: case you're looking for a bargain this time of year,

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Speaker 2: might be worth looking at commercial property for that. Well,

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Speaker 2: let's turn back to the stories that are moving markets today,

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Speaker 2: shares rallying and Asia. As we've been telling you is

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Speaker 2: the S and P five hundred on Wall Street is

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Speaker 2: close to another record high. So is this just the

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Speaker 2: SOUNTA rally at work, something we're used to seeing at

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Speaker 2: this time of year, or are there more underlying factors

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Speaker 2: at play. Our executive editor for Asia Markets, Pol dubs

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Speaker 2: And joins us now for more. Paul, great to have

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Speaker 2: you with us. One of the stories moving markets in

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Speaker 2: Asia today, This economic data from China on industrial profits

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Speaker 2: at thirty percent jump year on year in November. What

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Speaker 2: does that tell us, first of all, about the state

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Speaker 2: of the Chinese economy?

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Speaker 3: Yeah, hi, good morning, Stephen. I think there's a few

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Speaker 3: different ways to read and interpret that data. First of all,

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Speaker 3: you know, on the headliner or on the surface, on

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Speaker 3: the headline, it looks like a pretty strong figure, quite

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Speaker 3: a lot more than people expected. Now, if you dig

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Speaker 3: into it a little bit, one of the explanations is

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Speaker 3: that there was a large number incorporated in there as

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Speaker 3: the sort of one off kind of windfall for some companies.

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Speaker 3: It's not exactly clear what that relates to. The detail

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Speaker 3: is rather sketchy. It's only one sentence in a several

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Speaker 3: page long announcement, but it looks like some companies benefited

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Speaker 3: from the overall rally in equity markets and also the

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Speaker 3: stronger currency to realize some gains that they've been sort

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Speaker 3: of waiting to cash in chips on. So that gave

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Speaker 3: the gave the sort of industrial profits figure and extra

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Speaker 3: kind of rosy sheen. But if you look at the

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Speaker 3: year on year or the year to date figure more precisely,

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Speaker 3: for the eleven months, we're still down compared with the

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Speaker 3: same period a year ago, So that tells you more

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Speaker 3: about the kind of struggle that Chinese industrial companies have

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Speaker 3: been under this year. Despite one or two bright spots

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Speaker 3: you mentioned, you know, kind of electric vehicles as being

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Speaker 3: one of them, but overall, the corporate outlook is still

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Speaker 3: very gloomy. The confidence is still low, and the equity

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Speaker 3: prices are reflecting that this.

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Speaker 2: Is coming, Paul. After we had that massive route on

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Speaker 2: Chinese shares last Friday, eighty billion dollars wiped off some

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Speaker 2: of the country's biggest tech names. This over fear is

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Speaker 2: of a crackdown online gaming. Today things are looking a

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Speaker 2: bit more positive for that sector. What's happened?

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Speaker 3: Yeah, and again it's a bit of a glass half full,

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Speaker 3: glass half empty kind of a story. Yes, they're looking

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Speaker 3: a bit more positive, but no, they haven't retraced all

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Speaker 3: of the losses that we saw on Friday. What we

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Speaker 3: got over the weekend was some retrenchment, some signals that

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Speaker 3: maybe the authorities realized they might have gone a little

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Speaker 3: bit too far. So there was some talk in the

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Speaker 3: local media about the possibility that these guidelines or regulations

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Speaker 3: aren't final and that there could be some recalibration of

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Speaker 3: that still going forwards. There was some explanation about what

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Speaker 3: the benefits of those could be as well, and there

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Speaker 3: were a lot of new approvals given full games over

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Speaker 3: the past few days as well. And on top of that,

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Speaker 3: a bunch of gaming companies announced buybacks, so several different

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Speaker 3: kind of strands to try to all the market back

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Speaker 3: from that really negative sentiment hit that it took on Friday.

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Speaker 3: But you know, again, it's those clouds hanging over the market.

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Speaker 3: It's the restrictions the readiness of the authorities to take

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Speaker 3: these kinds of actions in that kind of big common

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Speaker 3: prosperity unbreda. That's one of the reasons the confidence is

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Speaker 3: so shot in the market at the moment, among international

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Speaker 3: investors in particular.

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Speaker 2: Okay, so that's the situation that some of the stories

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Speaker 2: playing out in Asian markets today. If we look at

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Speaker 2: the US, though, we had the S and B five

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Speaker 2: hundreds on the cosp of record high yesterday. Is this

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Speaker 2: just the traditional Santa rally or is there something more

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Speaker 2: significant here?

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Speaker 3: It's a good question. I mean, the Santa Rally is

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Speaker 3: kind of a legitimate phenomenon. It's over these sort of

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Speaker 3: last five days of trading in December and then the

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Speaker 3: first two of the next year, typically the market does rally.

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Speaker 3: The average is gain of more than one percent in

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Speaker 3: that period, so there is something to be held within that,

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Speaker 3: and there may be an anticipation of big New year

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Speaker 3: flows into equity funds and people trying to get a

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Speaker 3: little bit ahead of Father's part of the explanation. I think,

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Speaker 3: you know, we're getting very close to that record high

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Speaker 3: in the SMP, and the market loves to target to chase, right,

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Speaker 3: So trying to achieve that before the end of the

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Speaker 3: year is probably something that some people are anticipating and

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Speaker 3: quite excited about as well. The real question is do

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Speaker 3: we touch that and then immediately nose dive or is

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Speaker 3: this just a barrier we push through and carry on

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Speaker 3: going into the new year. There's certainly plenty of reasons

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Speaker 3: that the market is excited about the outlook through the economy,

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Speaker 3: particularly if the Fed can engineer this soft landing and

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Speaker 3: start to reduce interest rates without having to panic, and

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Speaker 3: do it in a way to sort of save a

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Speaker 3: worsening outlook for the economy. So that's what people will

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Speaker 3: People will be weighing as they as they think about

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Speaker 3: those record highs and that Santa rally into the new year.

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Speaker 2: Thank you for legitimizing my use of the term Santa rally.

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Speaker 2: It always sounds much more incredible if you tell us

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Speaker 2: about the too. Look, of course, you mentioned the BET

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Speaker 2: and the Federal Reserve there. That's one of the big

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Speaker 2: factors that we're mentioning or we're on in markets. We

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Speaker 2: did have a treasury auction in the US yesterday, big

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Speaker 2: demand there. What does that tell us about that expectations

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Speaker 2: around radcuts in the US?

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Speaker 3: Yeah, well, they're there, and they're they're pretty firmly entrenched now.

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Speaker 3: And that's one of the questions I think, is that

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Speaker 3: supply demand factor for treasuries. Earlier in the year, there

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Speaker 3: was quite a lot of concern about just how much

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Speaker 3: you debt the US was going to need to sell

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Speaker 3: in order to fund the deficits, and that seemed to

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Speaker 3: add to that kind of really bearish move that we

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Speaker 3: saw in treasuries in say the second and third quarters.

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Speaker 3: But that seems to have swung around, and appetite seems

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Speaker 3: to be there at the moment, particularly for those just

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Speaker 3: shorter maturities, which is where the auction's focused. Yesterday, you

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Speaker 3: know the FED bets are already quite keenly priced. The

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Speaker 3: market is looking for five or six over the course

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Speaker 3: of the year. The Fed says we'll do three. So

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Speaker 3: the market is, you know, kind of already looking for

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Speaker 3: something much more aggressive. And so whether you know that

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Speaker 3: eventuality can play out, and whether there's still value for

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Speaker 3: treasuries when yields to this low is another thing that

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Speaker 3: investors will meet away and be watching the data very

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Speaker 3: carefully for going into going into twenty twenty four.

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Speaker 2: Okay, Paul Dobson, our executive editor for Asian Markets, thanks

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Speaker 2: so much for joining us the details of some of

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Speaker 2: those market moving stories as we move towards the final

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Speaker 2: trading days of the year. Now, China's BYD is poised

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Speaker 2: to surpass Tesla as the new worldwide leader in fully

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Speaker 2: electric vehicle sales. It'll be both a symbolic turning point

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Speaker 2: when it happens for the EV market and further confirmation

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Speaker 2: of China's growing clout and the global automotive industry. It's

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Speaker 2: a subject of today's Bloomberg Big Take. Katrina Necklace joins

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Speaker 2: us now for more on the story. Katrina, great to

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Speaker 2: have you with us, So BYD looks to be ending

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Speaker 2: twenty twenty three on a high. When will we actually

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Speaker 2: know whether the Chinese automakers are pass Tesla?

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Speaker 5: Yeah, hi there, so we'll actually get those details in

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Speaker 5: early January, probably the second of January, when both BYD

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Speaker 5: and Tesla will release their December sales figures, which will

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Speaker 5: also also be the fourth quarter sales figures. Analysts that

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Speaker 5: track elon Musk Company expect it to shift about four

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Speaker 5: hundred and eighty two thousand cars in the fourth quarter,

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Speaker 5: and that is not going to be enough to surpass

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Speaker 5: BYD at this stage, even though we do expect Tesla

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Speaker 5: to get a bit of a late boost from a

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Speaker 5: revamped Model three. And you'll also probably remember it launched

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Speaker 5: this stainless steel clad cyber trunk which began deliveries in

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Speaker 5: late late November.

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Speaker 1: Rather but still probably enough, not.

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Speaker 5: Enough to retain the title of the world's number one

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Speaker 5: selling electric car maker. And you know, it's really quite

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Speaker 5: an extraordinary rise for BYD. It's annual sales are expected

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Speaker 5: to come in at around three point one million units.

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Speaker 5: That actually is enough to catapult this Chinese car maker

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Speaker 5: into the top ten car sellers globally, not just for

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Speaker 5: electric cars, But for any sort of cars, you know,

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Speaker 5: it's still a.

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Speaker 1: Long way off.

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Speaker 5: You know, world leaders like Toyota, which you know, just

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Speaker 5: as an example, is expected to sell about ten point

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Speaker 5: seven million cars in twenty twenty three. But considering now

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Speaker 5: this Chinese car maker who is taking on the Japanese

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Speaker 5: and European legacy giants, and it's the only Chinese car

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Speaker 5: maker to be doing this, it's really something.

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Speaker 2: Yeah, it certainly is. Now, Tesslain BYD have taken quite

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Speaker 2: different approaches. How have BYD you managed to get to

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Speaker 2: this point? How have they managed to push up their

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Speaker 2: sales to this extent.

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Speaker 5: Well, one of the quite unique things about BYD is

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Speaker 5: that it makes its own batteries. Many people don't know,

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Speaker 5: but Wang chong Fu he started BYD back in nineteen

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Speaker 5: ninety five, and back then it was actually a battery maker.

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Speaker 5: It was the first Chinese lithium supplier to Motorola and

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Speaker 5: Nokia back in the early two thousands. And you know,

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Speaker 5: he used to actually joke back in the time that

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Speaker 5: BYD stood for bringing your dollars because back then the

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Speaker 5: company was selling batteries mainly to overseas clients and they

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Speaker 5: were paying in US dollars. It actually stands for build

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Speaker 5: your dreams. So the fact that BYD makes its own

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Speaker 5: batteries and now it also makes its own chips, that

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Speaker 5: has shielded the company from a lot of supply chain

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Speaker 5: qrunches over the years. Remember back in twenty twenty during COVID,

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Speaker 5: we had a worldwide shortage of semiconductors and that snarled

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Speaker 5: a lot of automakers. They couldn't get the chips that

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Speaker 5: they needed to make their cars. BYD was largely you know,

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Speaker 5: shielded from that because it actually makes its own chips

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Speaker 5: and its own batteries. Another thing that's really put BYD

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Speaker 5: in the you know, prime position where with regard to

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Speaker 5: where it.

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Speaker 1: Is now is its range.

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Speaker 5: You know, has always played up the very top premium

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Speaker 5: end of electric cars, whereas BYD has electric cars all

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Speaker 5: along the price points. So right down at the one

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Speaker 5: end you've got the budget Seagull cheap electric compact at

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Speaker 5: retails for about ten k I think, and that goes

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Speaker 5: right through up into what they've called the Yungwe sports

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Speaker 5: utility vehicle, which costs around one hundred and fifty.

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Speaker 1: Two thousand dollars.

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Speaker 5: So you know, wherever you are, you know, in the

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Speaker 5: if you walk into a showroom, you've got a full

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Speaker 5: choice of cars when it comes to BYD Electric ones.

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Speaker 1: And also it's good looks.

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Speaker 5: I mean, you know, back a few years ago BYD

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Speaker 5: was really selling quite boxy, unattractive looking cars. But in

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Speaker 5: twenty sixteen it hired this guy called wolfling Egger as

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Speaker 5: their chief design chief, and he was previously with Audi

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Speaker 5: and Alfa Romeo. Over the years, it's also lured away

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Speaker 5: some other international executives, including for Rari head of exterior Design.

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Speaker 5: So now they cans look really good as well.

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