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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.

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Speaker 2: So the US will delay applying tariffs on imported goods

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Speaker 2: from Mexico and Canada for one month. That twenty five

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Speaker 2: percent levey was set to go into effect at twelve

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Speaker 2: one am Tuesday, but it didn't. The shift came after

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Speaker 2: new commitments from both Mexico and Canada when it comes

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Speaker 2: to the issue of border security. Meantime, there has not

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Speaker 2: been a conversation with regard to a potential tariff on

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Speaker 2: Chinese imports. For more. I'm joined now by Bloomberg Opinion

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Speaker 2: columnist Shuley Wren, who joins us from Hong Kong. Surely

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Speaker 2: it's always a pleasure. We know there's been this threat

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Speaker 2: of a blanket ten percent tariff on Chinese goods. I'm

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Speaker 2: less concerned as whether or not there will be a

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Speaker 2: reprieve than I am with trying to understand how this

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Speaker 2: relationship between President Trump and Chi Jinping has changed now

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Speaker 2: or shifted slightly during the early part of the second

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Speaker 2: Trump administration. Can you help me understand this.

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Speaker 1: I think the table has turned quite a bit. I

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Speaker 1: mean back in twenty eighteen, the Chinese economy domestic economy

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Speaker 1: was going pretty well. In fact, you can say China's

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Speaker 1: economy peaked by the end of the twenty nineteen and

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Speaker 1: now like at the beginning of twenty twenty five, the

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Speaker 1: economy is probably in the deepest dong tern since the

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Speaker 1: Cultural Revolution in the mid nineteen seventies. And then also

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Speaker 1: the whole economy is suffering from a pretty deep deflationary pressure.

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Speaker 1: So whereas in the US, I mean, despite all the

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Speaker 1: Trump's terror threats, the US economy has proved to be

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Speaker 1: pretty resilient.

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Speaker 2: So do you think then the Chinese especially vulnerable this

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Speaker 2: time around, and the Trump administration may get more of

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Speaker 2: what it's asking for.

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Speaker 1: I think. So, I mean, if you look at the

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Speaker 1: Chinese economy, there are a couple of things right, the

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Speaker 1: property market, the consumer market, and the explore market. Basically

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Speaker 1: all the big arrows of the economy. Only the export

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Speaker 1: sector was doing pretty well. And basically Trump can threaten

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Speaker 1: to dim the only bright light in this whole economy,

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Speaker 1: and it's a pretty big deal for presence tamping.

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Speaker 2: Where does TikTok enter this conversation. I'm wondering whether or not.

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Speaker 2: The US has an upper hand and there may be

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Speaker 2: a forced divestiture by Edance may relinquish its control of

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Speaker 2: the US operations, It may be sold to an American entity.

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Speaker 2: Is that on the horizon. Do you think as a

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Speaker 2: result of everything that we're kind of laying out here,

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Speaker 2: at least initially.

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Speaker 1: I would think TikTok is definitely something that the presence

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Speaker 1: she can give away because I mean, if Trump wants

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Speaker 1: she to buy more US agricultural goods, that's just not

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Speaker 1: going to work because China has deflation going on right now.

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Speaker 1: Everything that's producing China is much cheaper. And in terms

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Speaker 1: of TikTok, the Wall Street Journal reported that the China

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Speaker 1: is willing to consider treating it as just a commercial

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Speaker 1: asset instead of an asset that has a national strategic interest,

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Speaker 1: which means that they're willing to give it away to Trump,

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Speaker 1: you know, let buy thence investors who happened to be

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Speaker 1: Americans mostly decide what to do with TikTok.

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Speaker 2: Last week, speaking of technology, the big story that we

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Speaker 2: were covering here was around deep seak. This raised a

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Speaker 2: lot of concern about the degree to which China may

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Speaker 2: be advancing in the AI race. It's still not very

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Speaker 2: clear what was happening underneath the surface of this and

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Speaker 2: whether or not American technology was in some way used

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Speaker 2: to get these results. But what is it done to

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Speaker 2: kind of create great tension between Washington and Beijing where

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Speaker 2: it comes to kind of advanced technology.

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Speaker 1: I think basically it's a sign that the US actual

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Speaker 1: controls have not really worked. I mean a deep seeker. Basically,

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Speaker 1: they took some technological shortcuts, and basically that I mean,

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Speaker 1: at the end of the day, constring is the mother

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Speaker 1: of all innovation, right, and the Chinese have proved that

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Speaker 1: they can use that physical constraint to do something actually

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Speaker 1: pretty good. And I think Trump and some of his

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Speaker 1: fellow billionaires may have been quite surprised.

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Speaker 2: A lot of those advanced semiconductors, and you and I

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Speaker 2: have talked about this in the past, are manufactured in Taiwan.

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Speaker 2: It's interesting because there have been a number of political analysts,

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Speaker 2: including those at the American Enterprise Institute, that have suggested

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Speaker 2: Trump's views on Taiwan may have shifted and maybe he

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Speaker 2: is a little less supportive now, And I'm wondering whether

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Speaker 2: or not that may allow Beijing to reconsider its strategy

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Speaker 2: as it relates to Taiwan. What do you think.

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Speaker 1: I think the issue with Taiwan is more than economic presence.

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Speaker 1: Hijinping is very into phase. You know, he's a very

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Speaker 1: pro man, and he has said that the Taiwan is

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Speaker 1: part of China, and I don't think he's going to

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Speaker 1: change his mind out that. And also like in terms

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Speaker 1: of just economic interests, there are semiconductor manufacturers in China.

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Speaker 1: Sm C Bingston for instance, it's US mentioned and it's

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Speaker 1: listed in Hong Kong. Sm C is not as good

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Speaker 1: as TSMC TAIWAN'SMC, but will they're able to produce law

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Speaker 1: end chips which might just work for Chinese technologies like

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Speaker 1: deep seek.

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Speaker 2: Is Chichinping painfully aware of the fact that he needs

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Speaker 2: foreign investment to continue to flow into the country, particularly

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Speaker 2: at this time, and is that another reason that he's

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Speaker 2: going to be very careful about kind of pushing back

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Speaker 2: against the Trump administration.

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Speaker 1: Well, absolutely, you know that the government wants to have

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Speaker 1: foreigners and foreign investments. I mean foreign investments are very

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Speaker 1: important in China, especially in terms of employment of the

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Speaker 1: young fresh college graduates. Right Like if you go to Shanghai,

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Speaker 1: oh a lot of young people. They're not happy. They

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Speaker 1: just feel like they have no good jobs. And also,

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Speaker 1: you know, the Chinese government cares because they have been

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Speaker 1: removing visa requirements for a lot of countries. They want

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Speaker 1: foreign tourists, they want tourist dollar, they want investment, and

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Speaker 1: they want them to provide worker opportunities.

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Speaker 2: How is China standing right now in the region holding

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Speaker 2: up given everything that we're describing right now, is it

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Speaker 2: in a somewhat of a weaker position?

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Speaker 1: I think China hasn't been a very good neighbor to

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Speaker 1: anot of fellow Asian nations, and perhaps people don't like

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Speaker 1: China as much. Having said that, Chinese companies have been

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Speaker 1: very eager to go abroad because you know, profit margin

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Speaker 1: in the mainland is just so low because of this

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Speaker 1: whole deflationary pressure. So Chinese companies have been going to

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Speaker 1: Southeast Asia and to India to some extent to open

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Speaker 1: factories and provide jobs, and that kind of helps a

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Speaker 1: little bit. But still, like a lot of the neighbors

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Speaker 1: don't quite light the aggressive militant toll that Beijing is taking.

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Speaker 2: You and I have talked a lot in the past,

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Speaker 2: truly about government stimulus. What are we expecting now, given

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Speaker 2: everything that we're describing in terms of the macro on

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Speaker 2: the Chinese economy, would you expect the government to be

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Speaker 2: forced to do a lot more to open up the spigot.

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Speaker 2: Maybe not the full Pazuoka, but to do a lot

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Speaker 2: more in terms of fiscal and monetary stimulus.

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Speaker 1: To be honest, a lot of investors are very disappointed.

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Speaker 1: They feel that the Beijing is gas lighting them because

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Speaker 1: they've been talking about big stimulus since the late September,

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Speaker 1: and we saw that Chinese stocks piped a bit after

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Speaker 1: the big announcements, but so far there have been fewer

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Speaker 1: actual concrete actions and a lot more empty words. And

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Speaker 1: I think part of the reason is because of the

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Speaker 1: physical dynamic in China. I mean in China, it's more

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Speaker 1: the local governments that are doing you know, construction, infrastructure projects,

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Speaker 1: and these days they just don't have much morel to

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Speaker 1: speak of because President she is doing anti corruption drive

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Speaker 1: and that he is cutting civil servant paid, so people

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Speaker 1: were like, why do we want to stick our head out?

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Speaker 1: And the act right, there is no upside and only downside.

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Speaker 1: So he has a lot of I would say institutional

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Speaker 1: problems to deal with Suly.

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Speaker 2: We'll leave it there. Happy New Year too. Thank you

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Speaker 2: so much for joining us. A Bloomberg opinion columnist, Truly Wren,

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Speaker 2: joining us from Hong Kong here on the Daybreak Asia podcast.

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Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.

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Speaker 2: So the threat of a trade war loomed large over

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Speaker 2: the equity market. On Monday, we had the S and

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Speaker 2: P five hundred recovering from session lows. That was after

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Speaker 2: Mexico's president Claudia Scheinbaum tweeted that the US and Mexico

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Speaker 2: had reached an agreement that would postpone tariffs for one month. So,

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Speaker 2: after having been down nearly two percent intra day, the

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Speaker 2: S and P five hundred closed off just eight tens

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Speaker 2: to one percent. Joining me now for a look at

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Speaker 2: the price action is Chris Saccarelli. He is the chief

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Speaker 2: investment officer at north Light Asset Management. Joining from Charlotte,

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Speaker 2: North Carolina. Chris, thanks for making time to chat with

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Speaker 2: us here. What did you make of today's price section overall?

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Speaker 1: So, I think it was really interesting.

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Speaker 3: You know, you saw with the futures before even the

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Speaker 3: cash open that markets were down to three percent and

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Speaker 3: as you mentioned, they quickly got down to those lower

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Speaker 3: price levels. However, as news came in throughout the day

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Speaker 3: that Mexico had agreed to some of Trump's demands and

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Speaker 3: later Canada did as well, you saw the market stage recovery.

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Speaker 3: And so obviously we didn't get we didn't earn back

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Speaker 3: all of the losses, but you saw much of the

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Speaker 3: earlier losses earned back and saw retlacement, and so that

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Speaker 3: really just goes to show you that the market wasn't

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Speaker 3: entirely prepared for the breadth of the tariffs, or really

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Speaker 3: the magnitude in terms of a twenty five percent tariff

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Speaker 3: on Canada and Mexico, and that's why you saw that

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Speaker 3: price action, and there was a little bit of a

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Speaker 3: relief rally when it appeared that at least for now,

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Speaker 3: it'll be postponed for a month. So I think you've

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Speaker 3: got a little taste of what it would be like

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Speaker 3: if we did impose tariffs. It was almost a shot

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Speaker 3: across the dow, if you will.

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Speaker 2: So there seems to be some level of negotiation happening.

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Speaker 2: Are you comfortable with the idea that there won't be

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Speaker 2: a full blown trade war that a month from now

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Speaker 2: will have some type of an agreement.

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Speaker 3: Not necessarily, you know, I agree. I think the idea

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Speaker 3: that the Trump administration is going to use tariffs as

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Speaker 3: a negotiating tool is something that's been talked about, and

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Speaker 3: I think the reason the markets have been pretty anguin

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Speaker 3: so far is that they've been anticipating that the Trump

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Speaker 3: administration won't go through with the tariffs. It'll be really

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Speaker 3: more bark than bite.

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Speaker 1: But we're not so sure.

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Speaker 3: We think at some point the Trump administration is going

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Speaker 3: to impose tariffs, and to the extent that they do that,

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Speaker 3: we will see those counter we'll see those retaliations, so

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Speaker 3: whether that's tariffs and or boycotts from the country that

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Speaker 3: they impose tariffs on, and so this could become a

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Speaker 3: little bit more prolonged than the market's thinking. In our minds,

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Speaker 3: a lot of people are just dismissing what's happening as

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Speaker 3: more of a negotiating tactic, and we think there may

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Speaker 3: be more to it, and we may end up with

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Speaker 3: tariffs actually imposed on not only Canada and Mexico, but

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Speaker 3: also the European Union as well. I think this is

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Speaker 3: going to be a story that's going to be with

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Speaker 3: us for most of this year. It's not going to

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Speaker 3: be something that's going to be quickly resolved within the

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Speaker 3: first quarter.

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Speaker 2: I would like to focus on a couple of the

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Speaker 2: big news stories today. Next one, President Trump directing the

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Speaker 2: creation of a sovereign wealth fund here in the States,

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Speaker 2: and Treasury Secretary Besont was saying the fund would be

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Speaker 2: created in the next twelve months. Is this and that positive?

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Speaker 3: It's a really interesting idea, and you know, clearly looking

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Speaker 3: at what Norway and what other countries have done within

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Speaker 3: their sovereign wealth funds, you know, typically oil rich or

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Speaker 3: commodities rich nations, So I think it's a more of

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Speaker 3: a nuanced picture. I think, on the one hand, you know,

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Speaker 3: clearly the United States could stand to benefit from some

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Speaker 3: of this economic power. On the other hand, the US

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Speaker 3: has the most deepest and most liquid markets in the world,

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Speaker 3: and a lot of the strength of the United States,

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Speaker 3: especially the economy, is that so much money and so

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Speaker 3: much investment is in private hands. My concern would be

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Speaker 3: that if you create this sovereign wealth fund and start,

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Speaker 3: you know, putting too much power in the hands of

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Speaker 3: the government. It really will depend on exactly who's running

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Speaker 3: that fund. And I know there's been an announcement of

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Speaker 3: who we'll be reading the fund from the beginning, or

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Speaker 3: at least there's an announcement on who may take take

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Speaker 3: the reins. But you know, over time, like all other

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Speaker 3: government programs, it's really going to depend on who's running

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Speaker 3: them and what they do with those programs. That's something

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Speaker 3: that I would be a little bit concerned with, and

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Speaker 3: I think, you know, most people who love free market

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Speaker 3: capitalism should have some concerns about.

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Speaker 2: We heard from Palaneer Technologies after the bell and the

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Speaker 2: company issued a full year revenue forecast well above expectations.

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Speaker 2: The company CEO Alex Karp was saying this is due

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Speaker 2: to untamed organic growth in demand for its AI software.

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Speaker 2: And I'm looking at the stock right now, twenty four

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Speaker 2: percent in late US trading. Last week, the big story

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Speaker 2: was on Deep Seek and this caused a great deal

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Speaker 2: of introspection in terms of valuation. Are some of these

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Speaker 2: companies overvalued? How are you reading the AI trade at

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Speaker 2: the moment?

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Speaker 3: So for us, you know, we've obviously been following it

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Speaker 3: closely as most people had, and we think there is

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Speaker 3: a lot of promise out there for artificial intelligence, and

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Speaker 3: we didn't necessarily take the deep seek news as negatively

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Speaker 3: as most people did last Monday. We actually stepped in

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Speaker 3: and did some buying ourselves the following day. But in

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Speaker 3: our minds it's clearly a demonstration that first of all,

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Speaker 3: China clearly is much farther ahead in terms of their

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Speaker 3: development than we had originally thought, and the idea of

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Speaker 3: doing sanctions in terms of more sophisticated chips. Either they're

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Speaker 3: finding ways around those sanctions or they're figuring out ways

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Speaker 3: to make do with less. In any event, we think

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Speaker 3: it actually shows the promise of artificial intelligence. We're of

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Speaker 3: the camp that if it turns out that you can

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Speaker 3: do things more cheaply or on a larger scale, it

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Speaker 3: will be more likely end up in a larger group

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Speaker 3: of people's hands, it wouldn't be just concentrated within the hyperscalers.

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Speaker 3: So it does make sense to us that a company

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Speaker 3: like in Nvidia, which is really has almost a monopoly

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Speaker 3: on the chips, would potentially be a little bit less

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Speaker 3: valuable given this information. If it is true that you

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Speaker 3: don't necessarily have to have the most cutting edge chips

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Speaker 3: where as many chips. But on the other hand, if

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Speaker 3: you're a software provider or a user of AI, and

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Speaker 3: I would say palenteers in that category, as as Apple

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Speaker 3: and some of the other companies. You saw that those

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Speaker 3: stocks did a lot better relatively speaking, versus in Nvidia,

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Speaker 3: and so I think it's just an additional wrinkle in

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Speaker 3: terms of just thinking about AI in terms of a

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Speaker 3: monol thick trade, and it's getting a little bit more nuanced,

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Speaker 3: where the idea that software companies, where people who are

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Speaker 3: using AI more cheaply and can get it into the

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Speaker 3: hands of more people will actually benefit from what we

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Speaker 3: saw last week and not necessarily be hurt by it.

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Speaker 2: Chris, Before I let you go, I want to get

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Speaker 2: your take on some of the fun flow analysis that

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Speaker 2: we have been looking at today. Data from Goldman indicating

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Speaker 2: that in the most recent week, hedge funds were sellers

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Speaker 2: of US equities for a fifth straight week. But on

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Speaker 2: the flip side, JP Morgan issued some analysis today showing

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Speaker 2: that retail investors in the last Friday session alone poured

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Speaker 2: more than two billion dollars into the US equity market.

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Speaker 2: Who's got it right? Seems like we're bifurcated here.

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Speaker 3: Yeah, it does seem like you've got the institutional money

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Speaker 3: on one side, and resell on the other and so

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Speaker 3: like most things, I think there'll be a combination of both.

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Speaker 3: It is our concern in the near term that you know,

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Speaker 3: the institutions, the hedge funds may have it that now

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Speaker 3: may be a good time to de risk if you've

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Speaker 3: got a shorter time round. And however, if your time

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Speaker 3: arising is longer, you're looking at one years, three years,

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Speaker 3: five years, etc. They sent that retail isn't just following

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Speaker 3: momentum and buying every single dip just because they think

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Speaker 3: they they'll be quickly rewarded, but are actually putting money

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Speaker 3: to work for the long term. I think both can

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Speaker 3: be right. In the short run, we could have some

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Speaker 3: type of a pullback or a lot of volativity in

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Speaker 3: the next couple of months, next couple quarters.

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Speaker 1: But over the long term.

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Speaker 3: I think you'll see a lot of the companies that

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Speaker 3: have gone on sale will go on to much higher

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Speaker 3: highs over the next three, five and ten years. And

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Speaker 3: so I think if you're a long term investor, it

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Speaker 3: does make sense to start nibbling when you see some

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Speaker 3: of these companies on sale.

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Speaker 2: Chris, thanks so much for making time to chat with us.

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Speaker 2: Chris Saccarelli there. He is the Chief Investment Officer at

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Speaker 2: Northlite Asset Management, joining from Charlotte, North Carolina. Here on

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Speaker 2: the Daybreak Asia Podcast. Thanks for listening to today's episode

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Speaker 2: of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we

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Speaker 2: look at the story shaping markets, finance, and geopolitics in

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Speaker 2: the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 2: Join us again tomorrow for insight on the market moves

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Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Prisoner

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Speaker 2: and this is Bloomberg