1 00:00:02,480 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:09,760 --> 00:00:13,480 Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis 3 00:00:13,520 --> 00:00:16,239 Speaker 2: along with Doug Krisner. Join us each day for the 4 00:00:16,320 --> 00:00:19,680 Speaker 2: stories making news and moving markets in the Asia Pacific. 5 00:00:19,880 --> 00:00:22,320 Speaker 2: You can subscribe to the show anywhere you get your 6 00:00:22,360 --> 00:00:26,280 Speaker 2: podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and 7 00:00:26,320 --> 00:00:27,680 Speaker 2: the Bloomberg Business app. 8 00:00:28,160 --> 00:00:32,080 Speaker 3: Russian President Vladimir Putin is in Vietnam, keen to maintain 9 00:00:32,120 --> 00:00:36,800 Speaker 3: the long standing military ties between Moscow and Hanoi. Let's 10 00:00:36,840 --> 00:00:39,320 Speaker 3: take a closer look now with our own John Hirskowitz, 11 00:00:39,600 --> 00:00:42,800 Speaker 3: Bloomberg East Asia Government Editor, who joins us from our 12 00:00:42,840 --> 00:00:47,640 Speaker 3: studios in Tokyo. So, mister Putin is just off a 13 00:00:47,760 --> 00:00:51,840 Speaker 3: visit to North Korea now in Vietnam, John, what type 14 00:00:51,880 --> 00:00:54,240 Speaker 3: of welcome has he received? What do we know? 15 00:00:55,200 --> 00:00:59,280 Speaker 1: Well, he's received warm welcomes in both places. North Korea 16 00:00:59,360 --> 00:01:01,920 Speaker 1: went out of its way to show its appreciation and 17 00:01:02,080 --> 00:01:05,160 Speaker 1: enthusiasm for the Putin trip, and Vietnam has done the same. 18 00:01:05,680 --> 00:01:08,880 Speaker 1: The Vietnam end of the start of the tour is 19 00:01:08,920 --> 00:01:11,200 Speaker 1: going to the official things are going to be starting 20 00:01:11,600 --> 00:01:14,320 Speaker 1: in a few hours. North Korea is over and done, 21 00:01:14,440 --> 00:01:20,480 Speaker 1: and it was a pretty significant visit for Putin. There 22 00:01:20,680 --> 00:01:24,560 Speaker 1: was the defense mutual defense deal that came about, and 23 00:01:24,760 --> 00:01:29,000 Speaker 1: also this likely strengthened the arms trade between North Korea 24 00:01:29,000 --> 00:01:33,600 Speaker 1: and Russia. North Korea has been suspected of sending millions 25 00:01:33,760 --> 00:01:37,280 Speaker 1: of artillery shells to Russia for its war in Ukraine, 26 00:01:37,959 --> 00:01:43,560 Speaker 1: and the two have had the deepened cooperation since Russia's 27 00:01:43,600 --> 00:01:47,039 Speaker 1: full scale of invasion school full scale invasion of Ukraine 28 00:01:47,080 --> 00:01:48,040 Speaker 1: about two years ago. 29 00:01:49,600 --> 00:01:53,720 Speaker 2: So Putin in Vietnam, I mean that relationship was long 30 00:01:53,760 --> 00:01:57,560 Speaker 2: sort of dedicated on, you know, his historical connections, and 31 00:01:58,360 --> 00:02:01,600 Speaker 2: Vietnam relied on Russia weapons. I take it that that 32 00:02:01,720 --> 00:02:04,440 Speaker 2: has slowed down a lot of late because Vietnam is 33 00:02:05,320 --> 00:02:09,359 Speaker 2: trying not to anger the West too much if we 34 00:02:09,760 --> 00:02:13,640 Speaker 2: talk a little bit about that, and also what Vietnam 35 00:02:14,000 --> 00:02:15,000 Speaker 2: offers to Russia. 36 00:02:16,080 --> 00:02:20,400 Speaker 1: Yeah, the trade weapons has slowed down. Vietnam is worried 37 00:02:20,440 --> 00:02:23,600 Speaker 1: about sanctions from the West if it cooperates too much 38 00:02:23,639 --> 00:02:27,800 Speaker 1: with Russia in terms of security and armaments. But the 39 00:02:27,800 --> 00:02:30,600 Speaker 1: one thing that has gone on with Russia and Vietnam 40 00:02:30,720 --> 00:02:40,160 Speaker 1: is energy cooperation. Just before Putin arrived, of Russia's Novtek 41 00:02:40,600 --> 00:02:46,960 Speaker 1: Senative plans LNG projects in Vietnam. They're looking at cooperation 42 00:02:47,120 --> 00:02:52,600 Speaker 1: wind power development and it helps to have a powerful 43 00:02:52,680 --> 00:02:57,960 Speaker 1: friend in Russia, especially with the tensions in the South 44 00:02:58,120 --> 00:03:03,400 Speaker 1: China Sea. You have Russia's support. With China being more 45 00:03:03,400 --> 00:03:07,160 Speaker 1: assertive in the region, it makes Vietnam stand a little 46 00:03:07,160 --> 00:03:10,080 Speaker 1: bit more short in its explorations in the region. 47 00:03:10,480 --> 00:03:13,200 Speaker 3: John, you and I both know how Vietnam has transformed 48 00:03:13,240 --> 00:03:17,799 Speaker 3: itself into somewhat of a manufacturing economy. Is this something 49 00:03:17,800 --> 00:03:19,320 Speaker 3: that Russia can take advantage of. 50 00:03:21,440 --> 00:03:24,919 Speaker 1: I think it's to me that they're going to look towards. 51 00:03:25,400 --> 00:03:30,320 Speaker 1: But Vietnam is just it has concerns from the West, 52 00:03:30,560 --> 00:03:34,360 Speaker 1: like the many firms look at a China plus one 53 00:03:34,440 --> 00:03:38,320 Speaker 1: for manufacturing plants and China and plants in Vietnam. So 54 00:03:38,480 --> 00:03:43,440 Speaker 1: you'll see it has global It has global players in 55 00:03:43,480 --> 00:03:47,160 Speaker 1: the country now doing manufacturing. Russia is one of them. 56 00:03:47,200 --> 00:03:49,160 Speaker 1: But one thing to keep in mind when it comes 57 00:03:49,160 --> 00:03:54,400 Speaker 1: through Russia's economic capacity capability is that it's not that 58 00:03:54,680 --> 00:03:57,720 Speaker 1: big of a country. I think the GDP for Texas 59 00:03:58,080 --> 00:04:01,320 Speaker 1: is bigger than that of Russia's. So there are a 60 00:04:01,360 --> 00:04:03,560 Speaker 1: lot of players in Vietnam. Russia is one of them, 61 00:04:03,600 --> 00:04:06,200 Speaker 1: but it's probably down the list compared to some of 62 00:04:06,240 --> 00:04:09,680 Speaker 1: the other major economies that are in the country. 63 00:04:09,840 --> 00:04:11,880 Speaker 2: So it sort of begs the question, why did Putin 64 00:04:11,920 --> 00:04:13,000 Speaker 2: go to Vietnam. 65 00:04:13,760 --> 00:04:18,360 Speaker 1: Putin this overall trip is showing a renewed focus from 66 00:04:18,440 --> 00:04:24,320 Speaker 1: Russia into Asia, and Putin has only a few allies, 67 00:04:24,760 --> 00:04:27,440 Speaker 1: and he's turning to those that have been traditionally part 68 00:04:27,480 --> 00:04:31,280 Speaker 1: of the Soviet bloc, a Soviet that were aligned during 69 00:04:31,320 --> 00:04:35,719 Speaker 1: the Soviet Union, North Korea and Vietnam, and both have 70 00:04:35,960 --> 00:04:39,560 Speaker 1: their own interests. For Kim Jong Un, it's support for 71 00:04:39,600 --> 00:04:47,560 Speaker 1: the economy, support for his weapons and technology ambitions. For Vietnam, 72 00:04:47,640 --> 00:04:51,640 Speaker 1: it increases the size of the Russian card that they 73 00:04:51,640 --> 00:04:55,880 Speaker 1: can play as they seek a balance between China, the US, 74 00:04:56,240 --> 00:04:58,760 Speaker 1: the West, Japan and Russia. 75 00:04:58,920 --> 00:05:02,719 Speaker 3: When we last spoke to about Putin's visits to North Korea, 76 00:05:02,800 --> 00:05:05,320 Speaker 3: you and I were talking a little bit about Beijing's 77 00:05:05,360 --> 00:05:08,320 Speaker 3: reaction to this trip on the part of Putin. What's 78 00:05:08,360 --> 00:05:12,320 Speaker 3: your sense of how Beijing views the visit to Vietnam. 79 00:05:13,520 --> 00:05:17,440 Speaker 1: It makes things more complicated for Beijing, and the interests 80 00:05:17,440 --> 00:05:21,000 Speaker 1: in the South China Sea with energy are something that's 81 00:05:21,040 --> 00:05:23,839 Speaker 1: going to be a little bit more difficult to carry 82 00:05:23,880 --> 00:05:26,479 Speaker 1: out Beijing's ambitions, so maybe a little bit more difficult 83 00:05:26,520 --> 00:05:30,680 Speaker 1: to carry out. And also Vietnam and China have their 84 00:05:30,800 --> 00:05:36,400 Speaker 1: security difficulties. With Russia stepping up and getting closer to Vietnam, 85 00:05:36,440 --> 00:05:39,400 Speaker 1: it makes things a little bit more problematic for China. 86 00:05:39,560 --> 00:05:41,880 Speaker 2: You mentioned about a Russia card. The Vietnam kind of 87 00:05:41,920 --> 00:05:44,680 Speaker 2: wants to keep that in its back pocket. Is there 88 00:05:44,760 --> 00:05:45,600 Speaker 2: much of a card there. 89 00:05:47,800 --> 00:05:52,720 Speaker 1: It's good to have when you're exploring in the South 90 00:05:52,800 --> 00:05:56,080 Speaker 1: China Sea, knowing that if there are Chinese patrol boats 91 00:05:56,080 --> 00:06:00,000 Speaker 1: around that you may have a friend in the region 92 00:06:00,680 --> 00:06:03,479 Speaker 1: who could come to help. It's something to keep in mind. 93 00:06:04,600 --> 00:06:06,400 Speaker 3: We'll leave it there, John, thank you so much for 94 00:06:06,440 --> 00:06:09,920 Speaker 3: being with us. John Hurstkwitz, Bloomberg East Asia Government editor, 95 00:06:10,200 --> 00:06:12,720 Speaker 3: joining from Tokyo here on Daybreak Asia. As we look 96 00:06:12,760 --> 00:06:22,960 Speaker 3: at Russian President Putin's visit to Vietnam, well, it appears 97 00:06:23,080 --> 00:06:25,120 Speaker 3: as though a trade war is well underway in the 98 00:06:25,120 --> 00:06:28,800 Speaker 3: market for electric vehicles. From the China side, carmakers have 99 00:06:29,040 --> 00:06:32,640 Speaker 3: urged Beijing to adopt a tax of twenty five percent 100 00:06:32,800 --> 00:06:38,000 Speaker 3: on European made cars with large internal combustion engines. This 101 00:06:38,080 --> 00:06:42,839 Speaker 3: is in response to Brussels applying tariffsan Chinese EV's, and stateside, 102 00:06:43,160 --> 00:06:47,400 Speaker 3: we have the Biden administration announcing new levies on Chinese EV's. 103 00:06:47,480 --> 00:06:50,559 Speaker 3: Let's take a closer look at the story with Stephen Dyer. 104 00:06:50,640 --> 00:06:54,080 Speaker 3: He is a co leader of alex Partner's Greater China business. 105 00:06:54,080 --> 00:06:58,120 Speaker 3: He's also the head of Asia Automotive Practice. Stephen, thank 106 00:06:58,160 --> 00:07:01,560 Speaker 3: you for joining us. This is obviously early innings, or 107 00:07:01,839 --> 00:07:04,400 Speaker 3: so it would appear. I mean, how bad could this get? 108 00:07:04,440 --> 00:07:09,760 Speaker 4: Potentially, Well, we're seeing now the ratcheting up of tip 109 00:07:09,800 --> 00:07:14,400 Speaker 4: for tat tariffs, which one might expect in these situations. 110 00:07:15,760 --> 00:07:19,600 Speaker 4: At this point, it seems that the teriffs from Europe 111 00:07:19,800 --> 00:07:24,400 Speaker 4: may have stabilized. They took intermediate measures, not as extreme 112 00:07:24,440 --> 00:07:26,560 Speaker 4: as the US did, so we'll have to wait and 113 00:07:26,600 --> 00:07:27,760 Speaker 4: see if that changes. 114 00:07:28,760 --> 00:07:31,920 Speaker 2: It's an interesting environment when you think about some things. 115 00:07:32,200 --> 00:07:35,160 Speaker 2: For instance, the Chinese economy has been doing pretty poorly 116 00:07:35,200 --> 00:07:38,320 Speaker 2: over the past two to three years, and yet the 117 00:07:38,520 --> 00:07:42,080 Speaker 2: Chinese EV market has grown faster than anywhere in the world. 118 00:07:43,000 --> 00:07:46,680 Speaker 2: China doesn't really sell many electric vehicles in the United States, 119 00:07:46,760 --> 00:07:48,600 Speaker 2: so you could say, well, do they really need the 120 00:07:48,680 --> 00:07:52,680 Speaker 2: United States? Of course, they would like to sell in 121 00:07:52,720 --> 00:07:55,760 Speaker 2: the United States. But it's sort of you've got this 122 00:07:56,200 --> 00:07:59,440 Speaker 2: environment here where people are turning the back on globalization. 123 00:08:00,000 --> 00:08:02,880 Speaker 2: Countries are hunkering down. Whether it's because of jobs or 124 00:08:03,280 --> 00:08:06,800 Speaker 2: because of income or nationalism. It means we go in 125 00:08:06,800 --> 00:08:10,000 Speaker 2: a different direction, but it doesn't necessarily mean that that 126 00:08:10,120 --> 00:08:10,640 Speaker 2: is dire. 127 00:08:13,120 --> 00:08:15,920 Speaker 4: Well, the Chinese auto market is the largest in the world, 128 00:08:15,920 --> 00:08:18,360 Speaker 4: and almost as big as the European and the US 129 00:08:18,400 --> 00:08:23,640 Speaker 4: auto market combined, so certainly with domestic demand in China, 130 00:08:24,080 --> 00:08:28,080 Speaker 4: there's sufficient demand to support a number of Chinese electric 131 00:08:28,120 --> 00:08:34,319 Speaker 4: vehicle makers, but not all of them, so for it's 132 00:08:34,360 --> 00:08:37,319 Speaker 4: also a very competitive market. There's been an ongoing price 133 00:08:37,360 --> 00:08:40,559 Speaker 4: war the electric vehicle industry in China for a year 134 00:08:40,559 --> 00:08:43,720 Speaker 4: and a half now that's gotten quite extreme, and so 135 00:08:44,840 --> 00:08:47,439 Speaker 4: many Chinese firms want to go abroad for a couple 136 00:08:47,440 --> 00:08:50,440 Speaker 4: of reasons. One is to get into sort of blue 137 00:08:50,520 --> 00:08:53,520 Speaker 4: or waters, if you will, competitively where they can charge 138 00:08:53,559 --> 00:08:57,800 Speaker 4: higher prices. And secondly it's another source of growth. And 139 00:08:57,840 --> 00:09:01,920 Speaker 4: then thirdly it's also a mark of prestige in China, 140 00:09:02,000 --> 00:09:05,040 Speaker 4: their home market if they can successfully sell their vehicles 141 00:09:05,120 --> 00:09:05,959 Speaker 4: outside of China. 142 00:09:06,120 --> 00:09:09,800 Speaker 3: So, Steve Venture, do I hear you saying that that 143 00:09:09,840 --> 00:09:13,880 Speaker 3: there really is an overcapacity issue, particularly in the EV space, 144 00:09:13,920 --> 00:09:16,120 Speaker 3: that China is going to have to deal with at 145 00:09:16,120 --> 00:09:18,800 Speaker 3: some point. I mean a lot of the companies would 146 00:09:18,800 --> 00:09:22,080 Speaker 3: not be able to survive. Would it not work not 147 00:09:22,200 --> 00:09:24,199 Speaker 3: for a lot of government support? I mean, is there 148 00:09:24,320 --> 00:09:27,679 Speaker 3: still going to be some level of contraction when you 149 00:09:27,720 --> 00:09:29,280 Speaker 3: look at the EV market in China? 150 00:09:30,920 --> 00:09:34,240 Speaker 4: Well, there are one hundred and thirty seven EV brands 151 00:09:34,320 --> 00:09:37,480 Speaker 4: that have sold at least one vehicle this year in China, 152 00:09:37,559 --> 00:09:41,480 Speaker 4: and alex Partners in a recent analysis estimated that maybe 153 00:09:41,559 --> 00:09:44,760 Speaker 4: twenty of them long term will be viable just given 154 00:09:45,080 --> 00:09:47,880 Speaker 4: the volume and the structure of the industry. So that 155 00:09:48,000 --> 00:09:50,439 Speaker 4: means the rest of them will have to have patient 156 00:09:50,760 --> 00:09:54,720 Speaker 4: investors with deep pockets. But eventually there will be consolidation. 157 00:09:56,200 --> 00:09:59,679 Speaker 2: And we just reported this morning that Chinese carmakers are 158 00:09:59,800 --> 00:10:04,640 Speaker 2: urged Beijing to crack down hard on European cars with 159 00:10:04,760 --> 00:10:08,160 Speaker 2: large engines and they want a tariff of twenty five percent. 160 00:10:09,280 --> 00:10:13,800 Speaker 2: I wonder what that does to the relationship between Europe 161 00:10:13,840 --> 00:10:16,960 Speaker 2: and China. Can it get I guess it can go 162 00:10:17,000 --> 00:10:18,120 Speaker 2: down a little bit, can it. 163 00:10:19,400 --> 00:10:22,880 Speaker 4: Yeah, it's certainly not a good thing for the relationship, 164 00:10:22,960 --> 00:10:26,640 Speaker 4: but it's to be expected in these cases. Typically you'll 165 00:10:26,679 --> 00:10:32,320 Speaker 4: have some response in these trade wars. So the European 166 00:10:32,360 --> 00:10:36,640 Speaker 4: tariffs are definitely an obstacle for Chinese ev makers, some 167 00:10:36,679 --> 00:10:39,640 Speaker 4: more than others. It's a mix of tariffs and at 168 00:10:39,679 --> 00:10:42,880 Speaker 4: the lower end, some of the OEMs may still be 169 00:10:42,920 --> 00:10:46,800 Speaker 4: able to export profitably to Europe even under those tariff conditions, 170 00:10:47,320 --> 00:10:50,440 Speaker 4: especially if they pass on some to the consumers. But 171 00:10:50,520 --> 00:10:53,960 Speaker 4: it probably will just accelerate the localization of Chinese ev 172 00:10:54,080 --> 00:10:59,080 Speaker 4: maker assembly into Europe, and there are many companies currently 173 00:10:59,120 --> 00:11:02,360 Speaker 4: pursuing that, just as the Japanese and the Korean automakers 174 00:11:02,360 --> 00:11:05,319 Speaker 4: did back in the seventies, eighties and nineties in the US, 175 00:11:05,520 --> 00:11:06,680 Speaker 4: just to get around tariffs. 176 00:11:06,840 --> 00:11:10,199 Speaker 3: What about Chinese manufacturers looking to the global south, whether 177 00:11:10,240 --> 00:11:13,160 Speaker 3: it is South America, even Australia, I mean, is that 178 00:11:13,760 --> 00:11:15,040 Speaker 3: potentially a strategy. 179 00:11:16,960 --> 00:11:20,559 Speaker 4: Yes, the Chinese automakers are very active in South America 180 00:11:20,760 --> 00:11:23,560 Speaker 4: and to a certain extent in Australia, but a little 181 00:11:23,640 --> 00:11:27,680 Speaker 4: less so those are not the biggest markets, so it'll 182 00:11:27,720 --> 00:11:32,880 Speaker 4: be incremental, but definitely many Chinese ev makers are pursuing 183 00:11:32,920 --> 00:11:36,840 Speaker 4: and will continue to pursue opportunities in the south of 184 00:11:36,200 --> 00:11:37,480 Speaker 4: the globe. 185 00:11:38,160 --> 00:11:41,280 Speaker 2: Can you see China using the Mexico route to get 186 00:11:41,320 --> 00:11:42,439 Speaker 2: cars into the US. 187 00:11:43,920 --> 00:11:48,320 Speaker 4: Well, that's been the plan up until now, and currently 188 00:11:48,360 --> 00:11:52,480 Speaker 4: it still looks like some automakers are planning to set 189 00:11:52,520 --> 00:11:55,640 Speaker 4: up assembly in Mexico to get into the US and Canada. Eventually, 190 00:11:56,640 --> 00:12:00,240 Speaker 4: we'll see if those policies in the US change in 191 00:12:00,280 --> 00:12:05,040 Speaker 4: the next six months, which they might to target specifically 192 00:12:05,280 --> 00:12:10,040 Speaker 4: Chinese invested companies. That's problematic from a practical standpoint because 193 00:12:10,280 --> 00:12:13,199 Speaker 4: it's hard to say, well, to what extent is a 194 00:12:13,679 --> 00:12:15,280 Speaker 4: Chinese investment important? 195 00:12:15,400 --> 00:12:18,280 Speaker 2: Yeah, all right, Stephen, thanks very much. We know that 196 00:12:18,280 --> 00:12:22,080 Speaker 2: President Trump has vowed to try to attack that plan. 197 00:12:22,120 --> 00:12:25,240 Speaker 2: Stephen Dyer there, he's the Greater China Business head of 198 00:12:25,360 --> 00:12:35,200 Speaker 2: Automotive Practice. Our guest in our studios in Hong Kong 199 00:12:35,760 --> 00:12:38,960 Speaker 2: is Philip Batschi, chief investment officer and head of investment 200 00:12:39,000 --> 00:12:42,800 Speaker 2: management at Bank Ja Safras Sarasin. Philip, thank you very 201 00:12:42,880 --> 00:12:45,440 Speaker 2: much for coming in to join us here on the program. 202 00:12:45,800 --> 00:12:48,960 Speaker 2: So at the moment, the themes in the marketplace seemed 203 00:12:49,000 --> 00:12:53,360 Speaker 2: to be the AI growth story, pretty solid economic data 204 00:12:53,720 --> 00:12:57,520 Speaker 2: and easing inflation. That all seems to be keeping a 205 00:12:57,559 --> 00:13:00,720 Speaker 2: little bit more risk than risk off in markets. Do 206 00:13:00,720 --> 00:13:02,679 Speaker 2: you think that continues in what might change it? 207 00:13:03,800 --> 00:13:07,200 Speaker 5: Yes, thanks for being here. I think it continues, and 208 00:13:07,240 --> 00:13:12,840 Speaker 5: that's why we remain fundamentally bullish because of these trends 209 00:13:12,840 --> 00:13:15,560 Speaker 5: that you have just mentioned. But I think it might 210 00:13:15,640 --> 00:13:18,400 Speaker 5: be a bit on the works of sort of an 211 00:13:18,400 --> 00:13:21,160 Speaker 5: infection point, where particularly on the economic side, we will 212 00:13:21,200 --> 00:13:23,720 Speaker 5: see some weaker data in the second half of the year. 213 00:13:24,200 --> 00:13:28,120 Speaker 5: So the trends on AI certainly continue. I think in 214 00:13:28,200 --> 00:13:30,480 Speaker 5: terms of earnings they will be good in the short term, 215 00:13:30,840 --> 00:13:32,800 Speaker 5: but in the second half of the year we might 216 00:13:32,880 --> 00:13:37,080 Speaker 5: run into some issues there, and therefore our cases that 217 00:13:37,120 --> 00:13:40,400 Speaker 5: we are still bullish, but a bit less so than before. 218 00:13:40,520 --> 00:13:44,640 Speaker 3: Philip, I'm curious about the leading indicators you're looking at 219 00:13:44,679 --> 00:13:47,480 Speaker 3: in order to arrive at the conclusion that data is 220 00:13:47,520 --> 00:13:49,559 Speaker 3: going to kind of roll over and become a little soft. 221 00:13:49,559 --> 00:13:51,720 Speaker 3: The labor market in the States is holding up well. 222 00:13:52,320 --> 00:13:56,040 Speaker 3: The manufacturing economy seems to be doing pretty well as well. 223 00:13:56,320 --> 00:13:58,920 Speaker 3: I mean, there was a soft reading on retail sales 224 00:13:59,040 --> 00:14:01,000 Speaker 3: last week. If that's what you're looking at, maybe I 225 00:14:01,000 --> 00:14:03,880 Speaker 3: can understand. But can you expound a little bit about 226 00:14:03,920 --> 00:14:07,200 Speaker 3: your thinking in terms of forecasting economic weakness. 227 00:14:08,040 --> 00:14:10,360 Speaker 5: Yes, of course, in terms of the US, I mean, 228 00:14:10,480 --> 00:14:14,120 Speaker 5: we were hoping that manufacturing activity would actually pick up, 229 00:14:14,160 --> 00:14:16,199 Speaker 5: and it has done so. At the start of the year, 230 00:14:16,240 --> 00:14:19,160 Speaker 5: we have seen a number of indicators moving higher, sort 231 00:14:19,160 --> 00:14:23,240 Speaker 5: of there was a positive momentum building, but then last 232 00:14:23,240 --> 00:14:27,720 Speaker 5: month's m manufacturing data was actually quite weak. New orders 233 00:14:27,720 --> 00:14:31,840 Speaker 5: were plunging back into contraction, and so this whole story 234 00:14:31,880 --> 00:14:34,720 Speaker 5: that actually manufacturing can pick up, I think it's a 235 00:14:34,720 --> 00:14:38,840 Speaker 5: bit sort of in doubt. On the consumer side. You 236 00:14:38,880 --> 00:14:41,800 Speaker 5: mentioned retail sales, but also if you look at overall trends, 237 00:14:41,840 --> 00:14:44,360 Speaker 5: I mean, the consumer has been resilient, but we think 238 00:14:44,400 --> 00:14:46,960 Speaker 5: that it will sort of run out of saving soon 239 00:14:47,000 --> 00:14:48,880 Speaker 5: and that probably the second half of the year will 240 00:14:48,920 --> 00:14:52,120 Speaker 5: be a bit tougher for consumption, and that it might 241 00:14:52,160 --> 00:14:54,480 Speaker 5: fade on the labor market as well. I mean, we 242 00:14:54,520 --> 00:14:56,960 Speaker 5: have seen some very positive news, but sort of the 243 00:14:57,080 --> 00:14:59,840 Speaker 5: underlying trends in terms of job openings, in terms of 244 00:15:00,280 --> 00:15:04,960 Speaker 5: also chocoless claims, which have recently moved higher, they're not 245 00:15:05,080 --> 00:15:08,280 Speaker 5: all on the positive side. But we're not speaking about 246 00:15:08,320 --> 00:15:11,280 Speaker 5: the economy falling off a cliff. We're not forecasting a recession, 247 00:15:11,360 --> 00:15:14,840 Speaker 5: but just kind of the trend of surprises turning probably 248 00:15:14,840 --> 00:15:16,360 Speaker 5: into some disappointments. 249 00:15:16,480 --> 00:15:18,680 Speaker 2: So do you think then that central banks are looking 250 00:15:18,680 --> 00:15:20,520 Speaker 2: a little bit too much in the rearview mirror when 251 00:15:20,520 --> 00:15:22,600 Speaker 2: they say they're data dependent and they should be looking 252 00:15:22,640 --> 00:15:25,800 Speaker 2: more at what you're looking at early indicators that Doug 253 00:15:25,840 --> 00:15:29,920 Speaker 2: mentioned as well, and perhaps start tweaking a little. Yeah. 254 00:15:29,960 --> 00:15:32,240 Speaker 5: I think that is the case. And we have seen 255 00:15:32,280 --> 00:15:34,440 Speaker 5: that in Europe to some extent. I mean we have 256 00:15:34,520 --> 00:15:37,000 Speaker 5: seen the ECB starting to cut rates. We have seen 257 00:15:37,040 --> 00:15:40,240 Speaker 5: the Swiss National Bank they're actually meeting today later today 258 00:15:40,280 --> 00:15:44,160 Speaker 5: again and might also do another rate cut basically looking 259 00:15:44,200 --> 00:15:47,280 Speaker 5: at sort of the weakening economy. What we see is 260 00:15:47,320 --> 00:15:51,400 Speaker 5: that rate hikes of the last two years they are 261 00:15:51,520 --> 00:15:54,840 Speaker 5: impacting the economy, but only very very slowly, and so 262 00:15:55,160 --> 00:15:57,880 Speaker 5: we think that it will take some time, particularly in 263 00:15:57,920 --> 00:16:01,400 Speaker 5: the US as well, but central bank should probably start 264 00:16:01,560 --> 00:16:06,120 Speaker 5: now to reduce a bit the restrictive policy in order 265 00:16:06,160 --> 00:16:08,320 Speaker 5: to avoid too much of a slowdown. 266 00:16:08,480 --> 00:16:12,400 Speaker 3: So will that accommodation be the driver for equity markets 267 00:16:12,440 --> 00:16:16,240 Speaker 3: going forward or will the markets become more concerned about 268 00:16:16,240 --> 00:16:19,320 Speaker 3: the quality of earnings going forward? And maybe we're due 269 00:16:19,360 --> 00:16:21,840 Speaker 3: for some type of corrective behavior. 270 00:16:23,040 --> 00:16:24,720 Speaker 5: Well, I think it's a bit of both. I think 271 00:16:24,720 --> 00:16:26,880 Speaker 5: on the one hand, I think that the next few 272 00:16:26,880 --> 00:16:30,280 Speaker 5: months could well continue to deliver some positive surprises on 273 00:16:30,320 --> 00:16:34,920 Speaker 5: the inflation side, also kind of reinniting hopes for more 274 00:16:35,000 --> 00:16:38,000 Speaker 5: rate cuts to come. But when growth actually softens, I 275 00:16:38,000 --> 00:16:40,640 Speaker 5: think also the market could become a bit worried about 276 00:16:40,760 --> 00:16:45,160 Speaker 5: the earning side of things, and therefore some type of 277 00:16:45,200 --> 00:16:48,000 Speaker 5: correction is quite likely at some point. But we're not 278 00:16:48,120 --> 00:16:53,360 Speaker 5: expecting the market to kind of fall dramatically. I mean, 279 00:16:53,360 --> 00:16:56,480 Speaker 5: it could create a bit more volatilities quite likely. We 280 00:16:56,560 --> 00:17:00,360 Speaker 5: have also the US presidential election coming up. You still 281 00:17:00,400 --> 00:17:02,400 Speaker 5: expect the market to be sort of at a similar 282 00:17:02,480 --> 00:17:05,280 Speaker 5: level or even slightly higher at the end of the year, 283 00:17:05,520 --> 00:17:08,840 Speaker 5: but in the meantime, volatility is higher. So if you're 284 00:17:08,880 --> 00:17:11,240 Speaker 5: looking whether you want to add risk, at some point, 285 00:17:11,359 --> 00:17:15,479 Speaker 5: you probably can buy the market a bit lower than today, Philip. 286 00:17:15,480 --> 00:17:19,520 Speaker 2: Because of competitive pressures, most managers probably have to be 287 00:17:19,920 --> 00:17:23,159 Speaker 2: to a certain degree exposed to artificial intelligence and the 288 00:17:23,200 --> 00:17:26,399 Speaker 2: tsmcs and videos of the world. So how do you 289 00:17:26,480 --> 00:17:32,200 Speaker 2: actually reduce positions here and diversify to protect yourself without 290 00:17:32,280 --> 00:17:33,040 Speaker 2: killing returns? 291 00:17:34,440 --> 00:17:38,399 Speaker 5: Well, I think we are quite positive or optimistic about 292 00:17:38,400 --> 00:17:42,359 Speaker 5: these big leaders, like in Nvidia, you mentioned we have 293 00:17:42,440 --> 00:17:45,719 Speaker 5: a positive view on the stock, so it's not necessarily 294 00:17:45,760 --> 00:17:49,280 Speaker 5: that we want to kind of go underweight or reduce 295 00:17:49,359 --> 00:17:51,960 Speaker 5: those market leaders because as long as the market is 296 00:17:52,000 --> 00:17:54,480 Speaker 5: going up, I think it will continue to be led 297 00:17:54,480 --> 00:17:58,359 Speaker 5: by these names. So if you want to take off 298 00:17:58,400 --> 00:18:00,560 Speaker 5: the risk, I think rather than the verse DeFi is 299 00:18:00,800 --> 00:18:03,840 Speaker 5: probably you take off kind of overall the market level 300 00:18:03,920 --> 00:18:07,639 Speaker 5: risks that you have. You do that for example buying 301 00:18:07,640 --> 00:18:12,080 Speaker 5: some put options or via futures, but not necessarily by 302 00:18:12,520 --> 00:18:14,760 Speaker 5: taking off the risk to large cap names. We think 303 00:18:14,920 --> 00:18:18,800 Speaker 5: large cup leadership will continue. It's also driven a lot 304 00:18:18,840 --> 00:18:22,520 Speaker 5: by passive investing, which obviously is a booster of this 305 00:18:22,640 --> 00:18:23,480 Speaker 5: momentum trade. 306 00:18:24,320 --> 00:18:26,440 Speaker 2: And Philip, I see that you are adding to your 307 00:18:26,480 --> 00:18:30,160 Speaker 2: investment grade bonds with the two to five year duration. 308 00:18:30,880 --> 00:18:32,879 Speaker 2: Thank you very much for for joining us and for 309 00:18:32,960 --> 00:18:36,720 Speaker 2: sharing your ideas. Philip Batshe, who is Chief Investment Officer, 310 00:18:36,760 --> 00:18:39,920 Speaker 2: head of Investment Management at Bank Jsafra Sarasin. 311 00:18:42,560 --> 00:18:45,480 Speaker 3: This has been the Bloomberg Daybreak Asia podcast, bringing you 312 00:18:45,520 --> 00:18:48,640 Speaker 3: the stories making news and moving markets in the Asia Pacific. 313 00:18:49,160 --> 00:18:52,280 Speaker 3: Visit the Bloomberg Podcast channel on YouTube to get more 314 00:18:52,320 --> 00:18:55,919 Speaker 3: episodes of this and other shows from Bloomberg. Subscribe to 315 00:18:55,960 --> 00:18:59,760 Speaker 3: the podcast on Apple, Spotify, or anywhere else you'll listen 316 00:19:00,080 --> 00:19:03,440 Speaker 3: always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg 317 00:19:03,480 --> 00:19:04,040 Speaker 3: Business app.