1 00:00:00,120 --> 00:00:10,480 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:10,520 --> 00:00:13,720 Speaker 1: Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian 3 00:00:13,800 --> 00:00:16,640 Speaker 1: Curtis and myself for the stories making news and moving 4 00:00:16,680 --> 00:00:19,560 Speaker 1: markets in the APAC region. You can subscribe to the 5 00:00:19,600 --> 00:00:23,080 Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio, 6 00:00:23,320 --> 00:00:26,120 Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. 7 00:00:26,880 --> 00:00:29,800 Speaker 2: We welcome to the program, Bob Savage, head of Market 8 00:00:29,840 --> 00:00:33,640 Speaker 2: Strategy and Inside set BN. Why joining us here in 9 00:00:33,680 --> 00:00:35,960 Speaker 2: our studios in Hong Kong. Bob, thank you very much 10 00:00:36,360 --> 00:00:40,159 Speaker 2: for coming in. So we mentioned that Asian stocks cautiously lowered, 11 00:00:40,240 --> 00:00:43,800 Speaker 2: today we had US stocks cautiously. Hi, I guess it's 12 00:00:43,800 --> 00:00:47,680 Speaker 2: a week to be cautious. With all those big events 13 00:00:47,720 --> 00:00:51,080 Speaker 2: this week. How are you approaching this kind of avalanche 14 00:00:51,159 --> 00:00:51,600 Speaker 2: of data? 15 00:00:52,240 --> 00:00:55,320 Speaker 3: So it's interesting you say that, Brian, and thank you 16 00:00:55,360 --> 00:00:59,760 Speaker 3: for having me. I wrote about this week ahead as 17 00:01:00,120 --> 00:01:04,520 Speaker 3: parallel universe. Last week was a pretty miserable one for stocks, 18 00:01:04,760 --> 00:01:07,399 Speaker 3: and is this week going to be the same. Well, 19 00:01:07,480 --> 00:01:11,360 Speaker 3: imagine a universe where politics just don't matter as much 20 00:01:11,480 --> 00:01:13,720 Speaker 3: because the race is too close to calling. We just 21 00:01:13,720 --> 00:01:16,360 Speaker 3: don't know what we don't know yet, so you know, 22 00:01:16,480 --> 00:01:20,840 Speaker 3: just cast that aside. Imagine if earnings came out on 23 00:01:20,920 --> 00:01:25,480 Speaker 3: expectations and you didn't have any great volatility of nerves 24 00:01:25,480 --> 00:01:30,360 Speaker 3: around the magnificent seven. And finally, imagine the Fed actually 25 00:01:30,480 --> 00:01:34,800 Speaker 3: talks about talking about cutting and makes clear that September 26 00:01:34,880 --> 00:01:37,440 Speaker 3: is on the table. All of those things, if you 27 00:01:37,440 --> 00:01:40,760 Speaker 3: put them together, make me risk on. So I'm not 28 00:01:40,920 --> 00:01:44,880 Speaker 3: really that bearish. I understand the caution because you just 29 00:01:44,920 --> 00:01:48,200 Speaker 3: got run over and it was the worst day on 30 00:01:48,280 --> 00:01:51,440 Speaker 3: Wednesday last week that we had since twenty two. But 31 00:01:52,840 --> 00:01:54,240 Speaker 3: I'm not a bear Okay. 32 00:01:54,320 --> 00:01:56,080 Speaker 1: So if you want to be long right now, is 33 00:01:56,120 --> 00:01:58,720 Speaker 1: there a strategy that you're using, beg tactical here for 34 00:01:58,800 --> 00:02:02,080 Speaker 1: a moment, put more money to work in areas away 35 00:02:02,080 --> 00:02:04,040 Speaker 1: from technology. 36 00:02:04,160 --> 00:02:07,840 Speaker 3: So that that is the whole premise of the rotation 37 00:02:07,960 --> 00:02:10,240 Speaker 3: trade in my mind, which is there are four hundred 38 00:02:10,280 --> 00:02:13,680 Speaker 3: and ninety three shares in the S and P that 39 00:02:14,440 --> 00:02:19,640 Speaker 3: might be darnings expectations and if the equal weighted SMP, 40 00:02:20,280 --> 00:02:23,440 Speaker 3: you know, rallies back. It's on that basis bottoms up 41 00:02:23,480 --> 00:02:27,320 Speaker 3: analysis that the economy is doing better. When you have 42 00:02:27,320 --> 00:02:30,560 Speaker 3: two point eight percent second quarter growth, you would expect 43 00:02:30,760 --> 00:02:34,639 Speaker 3: second quarter earnings to follow suit and even things out 44 00:02:34,639 --> 00:02:37,800 Speaker 3: in the economy and not just be a AI hyped 45 00:02:38,240 --> 00:02:42,600 Speaker 3: boom of investment flows. So tactically, yes, you know, the 46 00:02:42,720 --> 00:02:45,880 Speaker 3: rotation trade makes some sense. It's just question which sectors 47 00:02:46,120 --> 00:02:50,120 Speaker 3: and you know, choose wisely. I also think that in 48 00:02:50,160 --> 00:02:54,000 Speaker 3: the longer term and bigger picture, markets are pretty worried about, 49 00:02:54,280 --> 00:02:57,799 Speaker 3: you know, a normalization, not just here in the one 50 00:02:57,880 --> 00:03:00,280 Speaker 3: or two sectors, but also across the whole world world. 51 00:03:00,760 --> 00:03:02,799 Speaker 2: It seems like since we've got two big camps, the 52 00:03:02,880 --> 00:03:06,000 Speaker 2: four ninety three and the seven that you know, coming 53 00:03:06,200 --> 00:03:11,040 Speaker 2: through this earning season, you'd have thought that if the 54 00:03:11,200 --> 00:03:15,560 Speaker 2: megacaps traded sideways to slightly higher, that you probably want 55 00:03:15,600 --> 00:03:19,079 Speaker 2: to overweight some of the four ninety three, But they didn't. 56 00:03:19,400 --> 00:03:22,080 Speaker 2: The top seven actually got hit pretty good. Here We 57 00:03:22,120 --> 00:03:24,880 Speaker 2: mentioned that Nvidia from an inter day levels down twenty 58 00:03:24,919 --> 00:03:27,280 Speaker 2: percent now off the high, so it's almost like now 59 00:03:27,280 --> 00:03:29,320 Speaker 2: it's time to be looking back at the meg seven. 60 00:03:30,440 --> 00:03:35,560 Speaker 3: Yeah. So the historic experience of whenever you have you know, 61 00:03:35,640 --> 00:03:38,840 Speaker 3: forty percent of the S and P market cap geared 62 00:03:38,840 --> 00:03:43,440 Speaker 3: towards one major sector, you normally have a correction. So 63 00:03:44,120 --> 00:03:47,680 Speaker 3: are we in the midst of that correction. Perhaps I'm 64 00:03:47,720 --> 00:03:51,600 Speaker 3: not convinced that it's over yet, but the proof will 65 00:03:51,600 --> 00:03:58,640 Speaker 3: be in the putting them more concerned about how our 66 00:03:58,680 --> 00:04:03,560 Speaker 3: client base has shown own this predilection to caution before 67 00:04:03,760 --> 00:04:07,480 Speaker 3: the earnings and then all in after the earnings. And 68 00:04:08,560 --> 00:04:12,160 Speaker 3: it let's be clear also when I look at our 69 00:04:12,240 --> 00:04:15,040 Speaker 3: data set, and you know we have you know, Bank 70 00:04:15,040 --> 00:04:18,040 Speaker 3: of New York is known for the movement of capital, 71 00:04:18,560 --> 00:04:21,400 Speaker 3: the management of capital, and the safe keeping of capital. 72 00:04:21,440 --> 00:04:26,600 Speaker 3: The world has fifty trillion dollars of money with our custody, 73 00:04:26,640 --> 00:04:29,000 Speaker 3: and you know we measure that every day. So when 74 00:04:29,000 --> 00:04:33,000 Speaker 3: I look at the flow into equities, it's positive, it 75 00:04:33,040 --> 00:04:36,080 Speaker 3: has been positive. And the question of whether you know, 76 00:04:36,200 --> 00:04:39,919 Speaker 3: the selling that we're seeing is cautionary into earnings and 77 00:04:39,960 --> 00:04:42,600 Speaker 3: then they'll buy it back. That has been the modus 78 00:04:42,680 --> 00:04:46,240 Speaker 3: operandi over the last you know year, So is this 79 00:04:46,360 --> 00:04:47,880 Speaker 3: time different? Is the question to ask? 80 00:04:48,160 --> 00:04:50,000 Speaker 4: So of the fifty what was the. 81 00:04:50,040 --> 00:04:53,600 Speaker 1: Number you threw out there, fifty trillion, that's amazing. How 82 00:04:53,680 --> 00:04:54,800 Speaker 1: much of that is in cash? 83 00:04:55,960 --> 00:05:00,000 Speaker 3: Not as much as you'd think. It's a little less 84 00:05:00,120 --> 00:05:02,160 Speaker 3: than that. And it depends on what you mean by 85 00:05:02,200 --> 00:05:06,640 Speaker 3: cash because or cash equivalent yeah, exactly, casha equivalents to 86 00:05:06,680 --> 00:05:09,479 Speaker 3: which we measure. I think it's more like four and 87 00:05:09,480 --> 00:05:12,159 Speaker 3: a half percent. It's down from the highs. 88 00:05:12,200 --> 00:05:14,280 Speaker 2: We've got a story with Heineken here, so we can 89 00:05:14,279 --> 00:05:17,040 Speaker 2: bring it around to China for a moment. You know, 90 00:05:17,080 --> 00:05:19,960 Speaker 2: Heineken bought into China Resources Beer. 91 00:05:20,000 --> 00:05:21,919 Speaker 4: It's not like anything really terrible has happened. 92 00:05:22,160 --> 00:05:25,240 Speaker 2: But because that stock has gone down a ton, Heineken 93 00:05:25,320 --> 00:05:27,640 Speaker 2: had to take a big impairment charge and the stock 94 00:05:27,680 --> 00:05:31,000 Speaker 2: went down ten percent in the latest session. So how 95 00:05:31,040 --> 00:05:34,520 Speaker 2: are you looking at China now? Risk versus opportunity. 96 00:05:35,560 --> 00:05:39,039 Speaker 3: So I'm actually I would call my view one China 97 00:05:39,160 --> 00:05:42,440 Speaker 3: benign neglect. What do I mean by that? You just 98 00:05:42,480 --> 00:05:46,960 Speaker 3: have to give them time. Their markets are pretty much 99 00:05:46,960 --> 00:05:50,280 Speaker 3: at rock bottom. Can they go lower? Sure, it's like 100 00:05:50,320 --> 00:05:54,240 Speaker 3: a crab crawling along the bottom of the ocean, you know, 101 00:05:54,360 --> 00:05:58,000 Speaker 3: or they're little bumps along the bottom. Sure. I'm not 102 00:05:58,120 --> 00:06:02,640 Speaker 3: convinced that anyone that has put their faith in the 103 00:06:02,640 --> 00:06:06,000 Speaker 3: consumer in China is going to get rewarded right away. 104 00:06:06,640 --> 00:06:09,400 Speaker 3: But in the longer term, I think the policies that 105 00:06:09,440 --> 00:06:12,680 Speaker 3: they're trying to put into place are going to eventually work. 106 00:06:12,720 --> 00:06:14,960 Speaker 3: It's just a question of is it a year or 107 00:06:15,040 --> 00:06:18,240 Speaker 3: is it two years? And how do you wait with 108 00:06:18,400 --> 00:06:19,440 Speaker 3: benign neglects? 109 00:06:19,760 --> 00:06:21,520 Speaker 4: You're here in ten seconds? 110 00:06:21,560 --> 00:06:25,800 Speaker 3: What are you doing so in ten seconds? I like 111 00:06:25,880 --> 00:06:29,840 Speaker 3: the idea of being long yen into the kay. 112 00:06:29,960 --> 00:06:33,480 Speaker 2: All right, interesting, Yeah, this is a big week. 113 00:06:33,800 --> 00:06:35,960 Speaker 4: We got the BOJ, we got the BOE, and we 114 00:06:36,040 --> 00:06:36,800 Speaker 4: got the FED. 115 00:06:37,040 --> 00:06:39,320 Speaker 2: Anyway, Bob, thank you very much, Bob Savage there from 116 00:06:39,360 --> 00:06:49,040 Speaker 2: BN one. In China, more small to medium sized banks 117 00:06:49,080 --> 00:06:52,840 Speaker 2: such as city commercial lenders and rural banks may cut 118 00:06:52,839 --> 00:06:55,640 Speaker 2: their deposit rates soon. That's according to a report by 119 00:06:55,680 --> 00:06:58,880 Speaker 2: the Shanghai Securities News. You wonder what that does for 120 00:06:59,040 --> 00:07:01,400 Speaker 2: people in their deposits. We're joined now by jing Liu, 121 00:07:01,920 --> 00:07:07,040 Speaker 2: Greater China Chief GNOMERS that HSBC Global Research. So clearly, 122 00:07:07,360 --> 00:07:09,120 Speaker 2: you know this is the type of move it's not 123 00:07:09,160 --> 00:07:12,200 Speaker 2: really central to what's happening in China, but it's not 124 00:07:12,280 --> 00:07:16,120 Speaker 2: good for consumers and that's the sector of the market 125 00:07:16,200 --> 00:07:19,520 Speaker 2: that policymakers would like to stimulate. But it does help 126 00:07:19,560 --> 00:07:21,480 Speaker 2: the bank's margins. Yeah. 127 00:07:21,560 --> 00:07:24,960 Speaker 5: I think it's important to some extent that banks still 128 00:07:25,080 --> 00:07:30,920 Speaker 5: has reasonable profitability, and I think the change indeed may 129 00:07:30,960 --> 00:07:34,960 Speaker 5: not be good news for depositors. But this is along 130 00:07:35,280 --> 00:07:38,360 Speaker 5: the line that China also want to encourage the household 131 00:07:38,480 --> 00:07:44,040 Speaker 5: to diversify their asset allocation. So if actually there's more 132 00:07:44,080 --> 00:07:48,600 Speaker 5: options on different kind of asset investment, maybe they can 133 00:07:48,680 --> 00:07:49,640 Speaker 5: divert into those. 134 00:07:50,080 --> 00:07:52,640 Speaker 1: Is there a way for the government to kind of 135 00:07:52,760 --> 00:07:57,320 Speaker 1: coordinate a reduction in the rate that deposits at banks 136 00:07:57,960 --> 00:07:58,880 Speaker 1: are yielding. 137 00:08:00,440 --> 00:08:03,760 Speaker 5: Well, I think you know, it sometimes comes in the 138 00:08:03,800 --> 00:08:08,520 Speaker 5: format of the communication the window guidance, but the banks 139 00:08:09,200 --> 00:08:12,440 Speaker 5: actually have a certain level of discretion on how they 140 00:08:12,480 --> 00:08:15,320 Speaker 5: want to do that. In the past, we also observe 141 00:08:15,920 --> 00:08:19,720 Speaker 5: some banks try to circumvent the regulation one way or 142 00:08:19,760 --> 00:08:23,680 Speaker 5: the other. I think the concern from the regulator's perspective 143 00:08:23,840 --> 00:08:26,360 Speaker 5: is that they don't want the banks to engage in 144 00:08:26,400 --> 00:08:30,360 Speaker 5: the fierce price competition to the extent that they high 145 00:08:30,400 --> 00:08:35,360 Speaker 5: cup the deposit rate massively just try to keep their 146 00:08:35,440 --> 00:08:38,280 Speaker 5: market share or expand. That happened last year. In some 147 00:08:38,400 --> 00:08:43,079 Speaker 5: cases the smaller banks end up with inverted net interest margin. 148 00:08:43,720 --> 00:08:46,040 Speaker 4: So we're looking at everything in China really to get 149 00:08:46,040 --> 00:08:47,480 Speaker 4: a feel on when. 150 00:08:47,320 --> 00:08:50,880 Speaker 2: The animal spirits might be released. For instance, the box 151 00:08:50,960 --> 00:08:53,839 Speaker 2: office was pretty good for that blockbuster film that. 152 00:08:53,840 --> 00:08:54,480 Speaker 4: Just came out. 153 00:08:54,679 --> 00:08:59,080 Speaker 2: And also the smartphone shipments in June were at fourteen 154 00:08:59,160 --> 00:09:01,280 Speaker 2: point three percent year on year, and now we got 155 00:09:01,360 --> 00:09:05,359 Speaker 2: this from the China Academy of Information and Communications Technology, 156 00:09:05,800 --> 00:09:10,360 Speaker 2: an institute under one of the industry groups. So it's 157 00:09:10,440 --> 00:09:13,160 Speaker 2: kind of interesting that there are pockets of strength, but 158 00:09:13,240 --> 00:09:15,000 Speaker 2: it's just it's gonna take a while. 159 00:09:15,800 --> 00:09:18,120 Speaker 5: Yeah, I agree with you. I think we do see 160 00:09:18,120 --> 00:09:23,199 Speaker 5: the pocket of strengths, especially you know, those relatively cheap items. 161 00:09:23,240 --> 00:09:27,520 Speaker 5: I think because of the purchasing power from the lower 162 00:09:27,520 --> 00:09:31,640 Speaker 5: income group has improved after the end of the pandemic, 163 00:09:31,920 --> 00:09:35,120 Speaker 5: especially because of the certainty in their jobs, et cetera. 164 00:09:35,840 --> 00:09:38,160 Speaker 5: So we have seen a lot along those lines. And 165 00:09:38,240 --> 00:09:43,080 Speaker 5: also after the pandemic, people emphasize more on experiencing different things. 166 00:09:43,160 --> 00:09:47,640 Speaker 5: So services consumption continue to perform well. But overall we 167 00:09:47,760 --> 00:09:53,800 Speaker 5: need the household balance sheet improvement continue to make progress, 168 00:09:54,240 --> 00:09:58,280 Speaker 5: and also the labor market outlook to improve to see 169 00:09:58,280 --> 00:10:00,720 Speaker 5: the broad based animal spirit to come back. 170 00:10:01,640 --> 00:10:05,720 Speaker 1: What is your recipe or prescription that you would offer 171 00:10:06,200 --> 00:10:09,199 Speaker 1: the authorities in China when it comes to addressing deflation. 172 00:10:09,440 --> 00:10:11,360 Speaker 1: Is it something we're a lot more in the way 173 00:10:11,400 --> 00:10:14,400 Speaker 1: of fiscal stimulus is needed. It's is it a different 174 00:10:14,440 --> 00:10:18,720 Speaker 1: way in approaching monetary policy. What's the prescription here? 175 00:10:20,240 --> 00:10:23,160 Speaker 5: I think, you know, there are different things. First of all, 176 00:10:23,840 --> 00:10:29,000 Speaker 5: the consumer sentiment. If there is improvement, substantial improvement, that 177 00:10:29,080 --> 00:10:32,640 Speaker 5: can help, and I think you know that will depend 178 00:10:32,720 --> 00:10:35,120 Speaker 5: on what's the next step in terms of the housing 179 00:10:35,200 --> 00:10:39,360 Speaker 5: market measures and other things. And the other thing I 180 00:10:39,400 --> 00:10:42,640 Speaker 5: want to mention is that usually in China's history, when 181 00:10:42,679 --> 00:10:46,680 Speaker 5: we observe the deflation, especially on the PPI and some 182 00:10:46,880 --> 00:10:52,360 Speaker 5: level of you know, consolidation by the upstream industries, you know, 183 00:10:52,960 --> 00:10:56,840 Speaker 5: like the h to tackle the overcapacity problem, usually help 184 00:10:56,920 --> 00:10:59,600 Speaker 5: quite a bit. And we do see steps trying to 185 00:10:59,640 --> 00:11:00,280 Speaker 5: tackle that. 186 00:11:01,280 --> 00:11:03,680 Speaker 4: Yeah, it's hurt. It's hurt companies in their stock prices, 187 00:11:03,720 --> 00:11:04,120 Speaker 4: for sure. 188 00:11:04,160 --> 00:11:06,920 Speaker 2: I mean there's deflation in the producer prices sector, but 189 00:11:07,000 --> 00:11:09,080 Speaker 2: not in consumer prices companies. 190 00:11:09,559 --> 00:11:11,280 Speaker 4: Companies are struggling a little bit with this. 191 00:11:12,559 --> 00:11:17,040 Speaker 5: Yeah, I think we have observed one reason which actually 192 00:11:17,080 --> 00:11:20,720 Speaker 5: has caused a lot of concerns by treating partners. It's 193 00:11:20,760 --> 00:11:26,480 Speaker 5: this price competition among different h manufacturers. I think to 194 00:11:26,520 --> 00:11:29,520 Speaker 5: some extent it might be a reflection of the perfect competition. 195 00:11:29,679 --> 00:11:32,679 Speaker 5: But at the other end of the story might be 196 00:11:33,200 --> 00:11:37,080 Speaker 5: we still see some of the companies which should already 197 00:11:37,320 --> 00:11:40,400 Speaker 5: you know, exit but still continue to survive. That is 198 00:11:40,440 --> 00:11:43,679 Speaker 5: why in the third planeum, we see there's a specific 199 00:11:43,840 --> 00:11:47,840 Speaker 5: mention that China will actually go after the local government 200 00:11:47,960 --> 00:11:53,920 Speaker 5: which might engage in illegal stimulus or tax breaks for companies. 201 00:11:53,960 --> 00:11:56,199 Speaker 5: And I think if that's the case, that can help 202 00:11:56,800 --> 00:12:01,360 Speaker 5: deal with an overcapacity problem. And also we have seen, 203 00:12:02,160 --> 00:12:04,920 Speaker 5: you know, the measures to push for the green transition 204 00:12:05,480 --> 00:12:08,880 Speaker 5: actually will call for you know, a certain standard of 205 00:12:09,000 --> 00:12:13,920 Speaker 5: emission for example, which means those not so ESG type 206 00:12:13,960 --> 00:12:18,280 Speaker 5: of producers might eventually exit the market as well. 207 00:12:18,480 --> 00:12:18,920 Speaker 4: Jing Blue. 208 00:12:19,440 --> 00:12:21,960 Speaker 1: Last question here, and it's about tariffs. I mean, what 209 00:12:22,000 --> 00:12:26,320 Speaker 1: could tariffs from increased tariffs from the United States and 210 00:12:26,600 --> 00:12:28,760 Speaker 1: the tariffs that we already have in place from Europe. 211 00:12:28,760 --> 00:12:30,160 Speaker 1: But what could that mean for China. 212 00:12:31,559 --> 00:12:35,600 Speaker 5: Well, I think this is probably a very complicated process. 213 00:12:35,679 --> 00:12:39,720 Speaker 5: It will involve the dynamics such as you know, the 214 00:12:39,840 --> 00:12:45,400 Speaker 5: interaction between China and other trading partners, and I think 215 00:12:45,880 --> 00:12:50,839 Speaker 5: Chinese government is now proactively engaged in conversations with different 216 00:12:50,880 --> 00:12:55,439 Speaker 5: trading partners try to mitigate the potential tariffs and offer 217 00:12:55,600 --> 00:12:59,079 Speaker 5: to invest more to replace the export Jin. 218 00:12:59,160 --> 00:13:02,680 Speaker 2: Thank you for Jowining is jinglu Greater China, chief economist 219 00:13:02,720 --> 00:13:04,400 Speaker 2: at HSBC Global Research. 220 00:13:10,480 --> 00:13:14,120 Speaker 1: Let's bring in Bloomberg m Live strategist Mark Cranfield, who 221 00:13:14,280 --> 00:13:17,880 Speaker 1: joins us from our studios in Singapore. Market. It's always 222 00:13:17,920 --> 00:13:22,120 Speaker 1: a pleasure, especially when we have three major central bank 223 00:13:22,160 --> 00:13:24,920 Speaker 1: meetings to talk about this week. Can we start with 224 00:13:25,080 --> 00:13:28,080 Speaker 1: the BOJ because there's been so much strength lately. In 225 00:13:28,160 --> 00:13:30,760 Speaker 1: the end, I think it's a reflection of the market 226 00:13:30,760 --> 00:13:33,200 Speaker 1: betting that we're going to get two things from the 227 00:13:33,240 --> 00:13:36,640 Speaker 1: BOJ this week. Maybe that would move in the direction 228 00:13:36,720 --> 00:13:41,560 Speaker 1: of policy normalization, a rate hike and a commitment to 229 00:13:41,640 --> 00:13:43,200 Speaker 1: reduce bond buying. Is that fair? 230 00:13:43,960 --> 00:13:46,960 Speaker 6: Yes, I think that's exactly a big part of the 231 00:13:47,000 --> 00:13:49,640 Speaker 6: reason why that Jenna's has a pretty good run for 232 00:13:49,679 --> 00:13:52,240 Speaker 6: the past couple of weeks. But at what At the 233 00:13:52,280 --> 00:13:56,520 Speaker 6: same time, it raises the stakes dramatically for this Bank 234 00:13:56,559 --> 00:14:00,520 Speaker 6: of Japan meeting because if trade does remember pretty well 235 00:14:00,520 --> 00:14:03,200 Speaker 6: what happened in June. Going into that meeting, there were 236 00:14:03,240 --> 00:14:07,600 Speaker 6: also expectations that there would be some form of policy tightening, 237 00:14:07,720 --> 00:14:11,320 Speaker 6: which didn't happen at all. There was no change, and 238 00:14:11,440 --> 00:14:14,480 Speaker 6: even then the press conference and Governor Luada he actually 239 00:14:14,520 --> 00:14:17,560 Speaker 6: seemed to dial back and it sounded quite dubvish, and 240 00:14:17,600 --> 00:14:20,680 Speaker 6: of course that was the trigger for Dolly yen to 241 00:14:20,760 --> 00:14:23,840 Speaker 6: rise towards one hundred and sixty two area. Since then, 242 00:14:23,880 --> 00:14:27,280 Speaker 6: we had some intervention and we're back to levels in 243 00:14:27,280 --> 00:14:30,360 Speaker 6: the one fifties again now, so the stakes are very, 244 00:14:30,440 --> 00:14:30,960 Speaker 6: very high. 245 00:14:31,440 --> 00:14:33,600 Speaker 2: I wanted to ask you about the unwinding of the 246 00:14:33,720 --> 00:14:36,480 Speaker 2: kerry trade. It's one of the things that's gotten some 247 00:14:36,520 --> 00:14:39,840 Speaker 2: credit for the selloff in megacap tech, because you know, 248 00:14:40,240 --> 00:14:42,920 Speaker 2: the trades that a lot of people were lined up 249 00:14:42,920 --> 00:14:45,920 Speaker 2: on were shortening the yen and going along megacap tech, 250 00:14:45,960 --> 00:14:48,440 Speaker 2: and then when the yen all of a sudden boom 251 00:14:48,480 --> 00:14:51,920 Speaker 2: from one sixty one to one fifty three, that caused 252 00:14:51,920 --> 00:14:53,520 Speaker 2: a lot of people to have to you know, cover 253 00:14:53,560 --> 00:14:57,840 Speaker 2: their shorts and sell I realized there's you know, there's 254 00:14:57,880 --> 00:14:59,720 Speaker 2: a lot of different prongs here, but there is a 255 00:14:59,720 --> 00:15:01,720 Speaker 2: certain one that got some attention last week. 256 00:15:02,520 --> 00:15:06,320 Speaker 6: I think that's a convenient explanation. I think it's more 257 00:15:06,360 --> 00:15:09,560 Speaker 6: of a coincidence. I suggest that actually what was going 258 00:15:09,600 --> 00:15:14,320 Speaker 6: on is you had portfolio reduction to cover P and 259 00:15:14,440 --> 00:15:17,760 Speaker 6: L losses, so or at least a reduced P and 260 00:15:17,880 --> 00:15:21,640 Speaker 6: l prospects anyway. So two of the biggest trades, and 261 00:15:21,720 --> 00:15:24,120 Speaker 6: they're not the only trade, but two trades that sh 262 00:15:24,200 --> 00:15:27,520 Speaker 6: have had a big theme are being long of the 263 00:15:27,640 --> 00:15:31,120 Speaker 6: big tech stocks, particularly with the AI narrative shortening the 264 00:15:31,160 --> 00:15:33,920 Speaker 6: yen against a variety of currencies, not just a dollar, 265 00:15:33,960 --> 00:15:38,200 Speaker 6: but also the euro or the others as well. It coincidentally, 266 00:15:38,320 --> 00:15:41,680 Speaker 6: at the same time, as people became more hawkish on 267 00:15:41,720 --> 00:15:46,600 Speaker 6: the Bank of Japan and fairly confident that the Federal 268 00:15:46,640 --> 00:15:49,800 Speaker 6: Reserve would announce a rate cup pretty soon. That helped 269 00:15:49,800 --> 00:15:52,120 Speaker 6: the end move. At the same time, we had weak 270 00:15:52,200 --> 00:15:55,920 Speaker 6: earnings and people thinking that the AI narrative had been 271 00:15:55,920 --> 00:15:59,880 Speaker 6: well overdone. The two coincided. It meant that quite a 272 00:16:00,080 --> 00:16:02,080 Speaker 6: then you would find there be portfolio managers who have 273 00:16:02,200 --> 00:16:05,240 Speaker 6: both trades. They would have the tech trade, they would 274 00:16:05,240 --> 00:16:07,080 Speaker 6: have the yend trade, they would have others as well. 275 00:16:07,560 --> 00:16:10,560 Speaker 6: Suddenly they're reducing positions all over the place. 276 00:16:10,880 --> 00:16:13,120 Speaker 1: Let's get back to the policy side, and an interesting 277 00:16:13,160 --> 00:16:16,200 Speaker 1: piece in the New York Times here today indicating that 278 00:16:16,280 --> 00:16:20,200 Speaker 1: Japan wanted higher inflation. It's here and it hurts. Do 279 00:16:20,280 --> 00:16:23,000 Speaker 1: you think the boj waited too long to kind of 280 00:16:23,040 --> 00:16:26,000 Speaker 1: make major changes to policy. I know it's a kind 281 00:16:26,000 --> 00:16:28,240 Speaker 1: of subjective point of view, but I'd like your thought. 282 00:16:28,960 --> 00:16:31,280 Speaker 6: I think there's a reasonable case that they're behind the curve. 283 00:16:31,520 --> 00:16:34,560 Speaker 6: I think if any central bank around the world can 284 00:16:34,600 --> 00:16:37,800 Speaker 6: be accused of taking too long, it probably is the 285 00:16:37,800 --> 00:16:41,360 Speaker 6: Bank of Japan. I think they fumbled the opportunities that 286 00:16:41,600 --> 00:16:44,720 Speaker 6: the window was there pretty clearly after they raised interest 287 00:16:44,760 --> 00:16:47,520 Speaker 6: rates in March, there was clearly a window for them 288 00:16:47,520 --> 00:16:50,200 Speaker 6: to follow up in April to increase again. The only 289 00:16:50,240 --> 00:16:53,160 Speaker 6: move by ten basis points, So really they could have 290 00:16:53,160 --> 00:16:55,720 Speaker 6: done another small move in April and probably another small 291 00:16:55,800 --> 00:17:00,880 Speaker 6: move in June. Here we are three meetings and now 292 00:17:01,320 --> 00:17:03,320 Speaker 6: they finally look as though they're going to move forward, 293 00:17:03,320 --> 00:17:04,320 Speaker 6: but they could have done it before. 294 00:17:06,480 --> 00:17:08,960 Speaker 2: Hey, Mark, I'm kind of curious about one other big 295 00:17:09,000 --> 00:17:11,240 Speaker 2: mover in markets over the past couple of weeks, the 296 00:17:11,600 --> 00:17:15,600 Speaker 2: rotation trade, or at least some sort of broadening out 297 00:17:15,920 --> 00:17:19,240 Speaker 2: of the markets. There you've got people like Mike Wilson 298 00:17:19,280 --> 00:17:23,120 Speaker 2: at Morgan Stanley saying the dimmer outlook for corporate earnings 299 00:17:23,320 --> 00:17:27,439 Speaker 2: will hurt stocks that are tied to the economy, and 300 00:17:27,520 --> 00:17:31,000 Speaker 2: Lori Calvacina at RBC Capital Markets said that trends in 301 00:17:31,080 --> 00:17:35,679 Speaker 2: earnings revisions don't yet support a further rotation. Have you 302 00:17:35,720 --> 00:17:38,359 Speaker 2: been looking at this and did you see this as 303 00:17:38,359 --> 00:17:40,879 Speaker 2: a healthy move or perhaps not a very wise one. 304 00:17:41,960 --> 00:17:44,479 Speaker 6: I think rotation is always is a good thing. That 305 00:17:44,480 --> 00:17:46,800 Speaker 6: there have been times this year when people have said 306 00:17:46,800 --> 00:17:48,560 Speaker 6: that the moves, particularly in the S and P five 307 00:17:48,640 --> 00:17:52,479 Speaker 6: hundred two, concentrated, particularly on things like the big seven 308 00:17:52,880 --> 00:17:55,960 Speaker 6: tech names, the so called Magnificent seven, driving too much 309 00:17:56,000 --> 00:17:59,600 Speaker 6: of the market. So any kind anything that spreads out 310 00:17:59,840 --> 00:18:02,800 Speaker 6: the the market into other sectors as well obviously is 311 00:18:02,840 --> 00:18:05,800 Speaker 6: a good thing. But the interesting point about this is 312 00:18:06,520 --> 00:18:08,680 Speaker 6: we come out to a huge week this week. We've 313 00:18:08,680 --> 00:18:12,800 Speaker 6: got four of the biggest tech companies reporting Just them 314 00:18:12,840 --> 00:18:15,720 Speaker 6: alone is worth something like twelve trillion US dollars between 315 00:18:15,760 --> 00:18:18,679 Speaker 6: the three the four big tech stocks, and we still 316 00:18:18,720 --> 00:18:24,240 Speaker 6: haven't had a nvidea. So if we get stories which 317 00:18:24,280 --> 00:18:28,360 Speaker 6: are more AI positive and that narrative rebuilds, I suspect 318 00:18:28,400 --> 00:18:30,359 Speaker 6: that we won't be seeing much in the way of 319 00:18:30,440 --> 00:18:31,360 Speaker 6: rotation after that. 320 00:18:31,880 --> 00:18:33,200 Speaker 1: You want to make a bed, What do you think 321 00:18:33,200 --> 00:18:38,159 Speaker 1: we're going to get in aggregate when we hear from Apple, Amazon, Microsoft, 322 00:18:38,480 --> 00:18:39,840 Speaker 1: and there's. 323 00:18:39,640 --> 00:18:41,320 Speaker 4: One you get throw a Samsung in there too. 324 00:18:41,400 --> 00:18:44,160 Speaker 1: Yeah. Meta platforms, Yeah, in aggregate, what do we get? 325 00:18:44,280 --> 00:18:45,840 Speaker 1: Is it going to be positive or is it going 326 00:18:45,880 --> 00:18:48,280 Speaker 1: to be risk off? When it comes to these big four. 327 00:18:48,640 --> 00:18:50,240 Speaker 6: I think we do okay. I think for me the 328 00:18:50,240 --> 00:18:52,399 Speaker 6: big one is Microsoft. I think they will have the 329 00:18:52,520 --> 00:18:55,560 Speaker 6: clearest view on the AI world because of their relationship 330 00:18:55,560 --> 00:18:57,720 Speaker 6: with Chat GDP. They'll give us the best read on 331 00:18:57,800 --> 00:18:58,359 Speaker 6: what's going on. 332 00:18:58,600 --> 00:19:00,880 Speaker 1: Market's always a pleasure. Thanks for making time to chat 333 00:19:00,880 --> 00:19:06,240 Speaker 1: with us. Mark Cranfield, there, Bloomberg m Live Strategist. This 334 00:19:06,280 --> 00:19:09,199 Speaker 1: has been the Bloomberg Daybreak Asia podcast, bringing you the 335 00:19:09,240 --> 00:19:12,200 Speaker 1: stories making news and moving markets in the Asia Pacific. 336 00:19:12,720 --> 00:19:15,840 Speaker 1: Visit the Bloomberg Podcast channel on YouTube to get more 337 00:19:15,880 --> 00:19:19,480 Speaker 1: episodes of this and other shows from Bloomberg. Subscribe to 338 00:19:19,520 --> 00:19:23,280 Speaker 1: the podcast on Apple, Spotify, or anywhere else you listen 339 00:19:23,400 --> 00:19:26,520 Speaker 1: and always on Bloomberg Radio, the Bloomberg Terminal, and the 340 00:19:26,520 --> 00:19:27,600 Speaker 1: Bloomberg Business App.