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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Daybreak Asia podcast. I'm Doug Krisner. You can join Brian

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Speaker 1: Curtis and myself for the stories, making news and moving

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Speaker 1: markets in the APAC region. You can subscribe to the

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Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App.

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Speaker 2: Well, we've mentioned that it was a pretty strong quarter

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Speaker 2: for BYD, one of our featured stories this morning, and

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Speaker 2: joining us in our studios right here in Hong Kong

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Speaker 2: is Danny Lee, Bloomberg Asia Transport Reporter. So the numbers

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Speaker 2: are fairly impressive from the standpoint of gains year on

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Speaker 2: year if you look at June alone, more than three

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Speaker 2: hundred and forty thousand units versus two hundred and fifty

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Speaker 2: three thousand a year ago. And I think, as you

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Speaker 2: put in your story, almost a million over the second quarter.

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Speaker 2: But Danny, a lot of this, it seems, comes down

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Speaker 2: to price.

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Speaker 3: Yeah, price cutting is the name of the game here

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Speaker 3: if you want to retain market share and if you

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Speaker 3: want to keep your volume highing and for someone like BYD,

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Speaker 3: who has set itself up for selling at these kinds

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Speaker 3: of levels, the more it cannot afford to slip back

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Speaker 3: on production where it's got all the workers in the

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Speaker 3: factory's helping pump out all these vehicles, and so therefore,

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Speaker 3: you know, pricing is always a key strategy. And when

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Speaker 3: for someone like BYD who has managed to to you know,

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Speaker 3: earn so much money over the last several quarters, it's

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Speaker 3: got a big war chest in order to fight on

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Speaker 3: price and to make sure it can defend its volumes

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Speaker 3: over margins.

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Speaker 1: And I'm wondering whether or not part of the intention

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Speaker 1: is to drive rivals out of business, right isn't there

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Speaker 1: a race to the bottom here.

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Speaker 3: I don't necessarily think they're trying to drive away local competition,

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Speaker 3: and I'm sure the Chinese authorities will take a dim

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Speaker 3: view of that. But the reality is they need the competition.

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Speaker 3: They need the competition to stay on their toes, to

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Speaker 3: be able to be just as good. To think of

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Speaker 3: all the other ideas that are coming off onto the market,

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Speaker 3: and to see what they can do to stay just

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Speaker 3: near the head of the pack in order to stay competitive.

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Speaker 3: So I think they wouldn't want to see others for

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Speaker 3: by the wayside, that will happen naturally, as some just

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Speaker 3: run out of money because they just can't sell enough vehicles.

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Speaker 2: You know, the big names that we talk about a lot,

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Speaker 2: in addition to bid with Leotto and Neo and x Punk,

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Speaker 2: they all actually did pretty well in June two. Now

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Speaker 2: there are in different sectors of the market, and Neo

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Speaker 2: for instance, at the higher end. I'm curious, you know,

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Speaker 2: I guess there's just so many EV makers in China

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Speaker 2: and many of them are struggling, but the ones at

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Speaker 2: the top are are faring very well.

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Speaker 3: Yeah, I think across the broad market we have seen

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Speaker 3: a big uptick in sales in the last couple of months, yes,

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Speaker 3: driven by pricing, and so when there was maybe some

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Speaker 3: concern about the start of the year, when sales did

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Speaker 3: to slip backwards compared to where they were over a

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Speaker 3: year ago, there is that momentum building up again. And

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Speaker 3: you can see in China in particular, sales do have

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Speaker 3: a good forward momentum. But when you see someone like

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Speaker 3: some markets like in Europe or in the United States

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Speaker 3: where automakers are who are transitioning into this EV strategy

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Speaker 3: are struggling. They're cutting back, they're pulling back on their

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Speaker 3: investments or ambitions in China, that's not so much the case,

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Speaker 3: and it's only making those EV players stronger.

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Speaker 1: Yeah, I'm glad you brought up that point, because the

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Speaker 1: issue of excess capacity, particularly when it comes to evs,

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Speaker 1: is been a dominant theme, and you listen to the

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Speaker 1: conversations that developed markets like the US, like Europe have

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Speaker 1: been having around excess capacity and the degree to which

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Speaker 1: Chinese manufacturers may be dumping excess inventory into those foreign markets.

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Speaker 1: Does the Chinese EV industry need them desperately in order

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Speaker 1: to continue to sustain these growth levels or will there

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Speaker 1: be at some point enough domestic demand to kind of

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Speaker 1: keep certain big players afloat.

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Speaker 3: It's fascinating when we talk about over capacity because when

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Speaker 3: you really crunch the numbers, what we are seeing when

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Speaker 3: we look at the data is there is production growth

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Speaker 3: naturally to accommodate for all the future anticipated selves. So

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Speaker 3: that's one component, but it's where we do see the

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Speaker 3: excess capacities coming from these traditional legacy internal combustion engine

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Speaker 3: joint ventures, which between these Chinese partners and these European

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Speaker 3: or US players or the Japanese for example, they have

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Speaker 3: a lot of excess capacity because internal combustion engine cells

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Speaker 3: are falling. And the problem is if their sales are falling,

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Speaker 3: they've got a lot of empty or quiet production lines.

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Speaker 3: And what is happening in reality is that they are

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Speaker 3: selling and this is where we are seeing excess capacity

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Speaker 3: being removed and all that potential demand and the capacity

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Speaker 3: that is coming on is the ev players from China

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Speaker 3: who don't have an issue right now in finding that demand.

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Speaker 2: In looking at those numbers that we quoted, those who

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Speaker 2: were total vehicles for a BYD, if you strip it

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Speaker 2: out and just look at electric vehicles, I think the

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Speaker 2: numbers suggest that BID is now within around fifteen thousand

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Speaker 2: of equal in Tesla. Is that a sort of monumental

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Speaker 2: moment in this or just a sort of one step

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Speaker 2: in the road for BYD?

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Speaker 3: This is you know they can overtake again. That's obviously

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Speaker 3: a good sign, I think for for Tesla, clearly they're

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Speaker 3: having a bigger struggle right now. They have more downward

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Speaker 3: momentum as they transition and evolve their product lineup, and

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Speaker 3: it's not going to be this year where they're going

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Speaker 3: to see an upturn and fortune. Deil Musk even said

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Speaker 3: that in one of the previous earning schools. So I

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Speaker 3: think for now for Tesla, they have this kind of

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Speaker 3: downward momentum where they are seeing falling sales in China,

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Speaker 3: in Europe and other key markets. For BYD they are

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Speaker 3: you know, they have some momentum. Can they do better? Sure,

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Speaker 3: and they are setting themselves up for that. But the

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Speaker 3: question is for beyond China in these markets where they

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Speaker 3: do want to sell internationally. In Europe, you are seeing

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Speaker 3: the barriers being put up where they are going to

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Speaker 3: have to pay more to sell their vehicles. But you

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Speaker 3: know there is a get out of jail free card

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Speaker 3: here if they look at their product lineup where the

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Speaker 3: tariffs that are being put on or the additional tariffs

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Speaker 3: being put on are for battery electric vehicles. Byd' does

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Speaker 3: sell a lot of hybrids, and they also set themselves

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Speaker 3: up for pretty strong third quarter with near record sales

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Speaker 3: basically on the hybrid sales this year in this quarter.

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Speaker 2: All right, Danny, thanks for coming into the studios and

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Speaker 2: sharing your insights with the Stanny leeb Lumberg Asian Transport Report.

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Speaker 2: Let's get to our guest, ELFREDA. Jonker, client portfolio manager

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Speaker 2: and investment specialists at I'll Finny Investment Management, Alfred. So

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Speaker 2: we understand that companies are facing the highest earnings bar

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Speaker 2: in about three years. That's according to Goldman Sachs. We

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Speaker 2: have worried about growth, We have the debate to consider

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Speaker 2: from last week, and a number of geopolitical concerns. So

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Speaker 2: why the heck are stocks at just about all time highes.

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Speaker 4: Yes, good morning, And I think if if you take

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Speaker 4: a step back and you just sort of reflect on

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Speaker 4: where we have come from, I think it's important to

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Speaker 4: note that case. It's been a fantastic year for global

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Speaker 4: equities and specifically for the US equity market, but sixty

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Speaker 4: percent of those sort of returns have come from the

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Speaker 4: top five six stocks, and thirty percent just from Nvidia itself.

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Speaker 4: So we haven't really seen a massive broadening out, which

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Speaker 4: we were sort of hoping for this year. And if

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Speaker 4: you look at why those companies continue to rally, it's

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Speaker 4: not just because that become a bit more expense, so

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Speaker 4: it's also because they've delivered incredible earnings. So, yes, it

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Speaker 4: is high. Expectations are high, setting out around nine percent,

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Speaker 4: but if you strip out that sort of top six,

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Speaker 4: the rest of the market's only expected to grow revenues

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Speaker 4: in the order of around five percent, so there's not

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Speaker 4: huge expectations for the rest of the market. It's all

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Speaker 4: sort of centered in that top five, top six.

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Speaker 1: I would say, so, Alfred, I'm curious you make the

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Speaker 1: point that we have yet to see you broadening in

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Speaker 1: the market, and I'm wondering from your perspective whether that

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Speaker 1: suggests a level of risk that we should be concerned

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Speaker 1: about as we move into the third quarter here and

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Speaker 1: adjust portfolios accordingly. Is does that not make sense?

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Speaker 4: Yes, it definitely makes sense. I think that's sort of

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Speaker 4: what we have been doing at Affinity for our two

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Speaker 4: global funds is over the last twelve months, we definitely

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Speaker 4: have sort of reduced a bit of the defense of

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Speaker 4: exposure and added quite a bit of psychical exposure your

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Speaker 4: variety of different names on the back of some emerging

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Speaker 4: trends that we've noted, so something like an Eska Heinez

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Speaker 4: that's what's cyclical and also linked to the whole AI trade,

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Speaker 4: high bankwidth memory. We've also added a Bank of America

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Speaker 4: with capital markets opening up, so there's a whole range

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Speaker 4: of sort of cyclicals that we have added and diversified into.

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Speaker 4: But getting to the point now where I think there's

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Speaker 4: a lot of concern around growth as you've earlier, As

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Speaker 4: you mentioned earlier, and even though inflation is coming down

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Speaker 4: and the expectation of interest rate cuts continue to come through,

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Speaker 4: there's a lot of uncertainty with the elections, and particularly

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Speaker 4: with potential Trump when you could definitely see inflation sort

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Speaker 4: of going in the other way, other direction if he's

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Speaker 4: sort of been able to push through tariffs and things

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Speaker 4: like that. So, yes, diversified diversification is definitely required and

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Speaker 4: keeping those megatic positions intact in your portfolios.

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Speaker 2: You talk a little bit about luxury seeing a lot

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Speaker 2: of earnings downgrades, and you mentioned that Gucci and LVMH.

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Speaker 2: I'm wondering though that even if we see a slightly

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Speaker 2: weaker consumer, that the more well off consumer is probably uh,

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Speaker 2: you know, sort of enjoying the gains in the stock

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Speaker 2: market and such and and may may be a buyer

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Speaker 2: of of luxury if you have to be stock specific.

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Speaker 2: What do you like there?

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Speaker 4: Yeah, so we currently really only have a position in

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Speaker 4: in Race Rory. I would say it's obviously not a

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Speaker 4: pure luxury stock, but it definitely does trade and deliver

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Speaker 4: earnings like luxury stock. I think for US AID autentity,

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Speaker 4: what we specifically look for those earnings upgrades and the

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Speaker 4: potential to surprise on the earnings upgrades, and that is

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Speaker 4: a company that can manage that very well given the

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Speaker 4: pipeline and the demand that's laid out two years in advanced.

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Speaker 4: I think some of the other stocks like an LVMH,

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Speaker 4: for example, has historically been one of our favorite plays

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Speaker 4: just because it is so diversified across its product range,

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Speaker 4: and it is a stock that we will continue to

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Speaker 4: watch at the moment that are still seeing earnings downgrades,

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Speaker 4: and it is interesting. I think there's obviously a bit

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Speaker 4: of a high neck with consumers stepping back a bit,

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Speaker 4: probably spending a bit more on luxury trips. If you

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Speaker 4: look at what's happening to cruise liners, and you know,

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Speaker 4: some of the other areas within the vacationing section of

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Speaker 4: the market is still doing pretty well. So it's probably

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Speaker 4: a little bit of let's wait and see what will

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Speaker 4: happen to prices going forward, because the expectation is that

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Speaker 4: inflation will come down. So it's definitely not broken. But

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Speaker 4: I do think you need to be pretty stock specific

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Speaker 4: because some of these names like a Gucci for example,

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Speaker 4: also have product issues with new designer stepping in, So

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Speaker 4: for us something like an LDMAH is differentely one that

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Speaker 4: we will continue to watch.

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Speaker 1: Alfreda that we were talking a moment ago about some

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Speaker 1: of the sales figures for the EV makers. Really a

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Speaker 1: number of the car makers in China by D selling

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Speaker 1: a record number of not only EV's but hybrids and

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Speaker 1: Q two. I think the number was nearly a million models.

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Speaker 1: Talk to me a little bit about the degree to

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Speaker 1: which Chinese evs are showing up in Australia. Is that

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Speaker 1: going to be a developing market for them?

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Speaker 4: I definitely think they would want it to be. I

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Speaker 4: think what we have seen in Australia to date is

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Speaker 4: definitely not a massive uptake in EV sales just yet.

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Speaker 4: I think some of it has got to do with

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Speaker 4: just availability of product, but also just the infrastructure, the

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Speaker 4: availability of charging stations. So I do think that is

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Speaker 4: definitely something that they will try and do, particularly because

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Speaker 4: I think a lot of people are waiting for hybrids

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Speaker 4: and potentially a cheaper entpoint into the electric vehicle space

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Speaker 4: relative to a tesla, So there's definitely an opportunity there.

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Speaker 4: There's always of course tariffs and the risk around that

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Speaker 4: that you need to bear in mind as well. I

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Speaker 4: think overall, if you look at the overall space in

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Speaker 4: evs globally, it's not been a happy space. There's a

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Speaker 4: huge amount of stock sitting all across these vehicle makers,

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Speaker 4: and Tesline particular has had to drop prices, has had

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Speaker 4: to reduce their volume forecasts. So it's not a space

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Speaker 4: that we are particularly excited about. But even someone like

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Speaker 4: a Ferrari for example, is also planning to do a

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Speaker 4: lot of sort of hybrids going forward, so we do

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Speaker 4: have some exposure there, but we are not rushing into

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Speaker 4: buying any of the others just yet.

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Speaker 2: Alfreda, thank you very much for joining us. Freda Jonker,

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Speaker 2: client portfolio manager and investment specialist at Alfinity Investment Management. Well,

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Speaker 2: joining us now is Chuck Camello, President and chief executive

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Speaker 2: officer at Essex Financial. To take a closer look at markets, Chuck,

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Speaker 2: it's tempting to think that at the moment the FED

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Speaker 2: and perhaps inflation is taking a back seat to earnings.

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Speaker 2: But I would note that in the last earnings period

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Speaker 2: the numbers were actually great, but the equal weight S

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Speaker 2: and P was actually down for the quarter. It had

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Speaker 2: a good first quarter, but it was actually down when

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Speaker 2: those strong earnings were coming out. In the second quarter,

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Speaker 2: it was about inflation and higher rates. So what are

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Speaker 2: you most focused on here at the moment?

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Speaker 5: Yeah, well, thank you so much for having me tonight. Anson.

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Speaker 5: I think when you look at the markets, it always

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Speaker 5: comes down to the two big things, earnings and interest rates.

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Speaker 5: As you just said, you know, we continued to look

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Speaker 5: quite candidly at both. Earnings has been very, very strong.

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Speaker 5: As you said, the Fed seems to be in a

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Speaker 5: pretty good position the city where they hope to have inflation,

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Speaker 5: especially with these numbers that just came out in June

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Speaker 5: reflecting what happened in May. So we're looking at it all.

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Speaker 5: But I think you're also seeing a reflection of all

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Speaker 5: the other stocks that make up the S and B

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Speaker 5: five hundred. So forget, you know, the magnificent seven. So

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Speaker 5: of those four hundred and ninety three other stocks, there

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Speaker 5: are a lot of good ones out there, but those

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Speaker 5: top seven, you know, and you know testl lately has

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Speaker 5: joined the party after sitting out for quite some time.

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Speaker 5: But there's a tremendous amount of demand and a tremendous

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Speaker 5: amount of momentum in those names, and it literally sucks

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Speaker 5: the air and sucks the money out of the market

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Speaker 5: to those top stocks.

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Speaker 1: The challenge is really separating signal to noise, and I'm

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Speaker 1: trying to understand whether the market is really having some

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Speaker 1: a challenge right now. It's struggling with the political implications

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Speaker 1: of what played out here in the US last Thursday

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Speaker 1: with a presidential debate. I was reading some commentary early

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Speaker 1: talking about a possible Trump presidency that would bring a

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Speaker 1: combination of higher spending, tax cuts and faster inflation, and

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Speaker 1: obviously that would be problematic for the bond market. I

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Speaker 1: don't know that any of that was being discounted today.

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Speaker 1: But at what point do politics become a factor in this?

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Speaker 2: Chuck?

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Speaker 5: Yeah, Well, I think you saw, you know, the with

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Speaker 5: the bond market actions today a reflection of, you know,

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Speaker 5: an inflationary environment under Trump if he gets re elected

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Speaker 5: at i e. Tax cuts, tariffs which were both inflationary

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Speaker 5: which certainly and again more government spending, which again makes

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Speaker 5: the Fed's job that much harder. And we started this

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Speaker 5: year with the Fed expectation of six rate cuts, which

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Speaker 5: you know, I'm not exurectly. Sure who actually believed that,

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Speaker 5: but that was the number in a networre down to two,

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Speaker 5: maybe maybe one, But you know that. I think for

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Speaker 5: the markets and where we are with the political side

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Speaker 5: of things, I mean the debate last week, there was

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Speaker 5: a vast chunk of the country that thought Biden was

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Speaker 5: too old and was showing signs of not being up

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Speaker 5: to another four years. And for those folks, and for

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Speaker 5: a lot of folks, Thursday night sort of hammered that

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Speaker 5: point home and it just sort of reinforced it. I

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Speaker 5: think the big difference was you saw the other side

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Speaker 5: of the aisle i e. Democrats, a lot of the

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Speaker 5: Democrats coming around to saying geez, that was very surprising.

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Speaker 5: And I think the market was already pricing in the

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Speaker 5: fact that Trump had it, you know, depending upon the poll,

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Speaker 5: looked like we was in a pretty good position to

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Speaker 5: beat Biden. So I think the market's already looking ahead

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Speaker 5: to that. But I think you saw it today in

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Speaker 5: the bond market, a reflection of, hey, if Trump does win,

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Speaker 5: you know, even under Biden, it's still going to be

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Speaker 5: a tough inflationary environment. With Trump, it might even be worse.

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Speaker 2: Do you think that the market will start taking these

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Speaker 2: higher rates that might be attributed to a Trump presidency

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Speaker 2: and sales stocks as a result, because they've been the

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Speaker 2: market has been a little testy about rates rising.

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Speaker 5: It has, but today was really interesting. Market didn't budge.

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Speaker 5: I think that's because as long as the ten year

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Speaker 5: stays within that certain range, right, don't start getting up

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Speaker 5: to four eight, four nine, things like that, where then

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Speaker 5: I think the market would have a big problem with it.

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Speaker 5: Think if it stays in this range and it bounces around,

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Speaker 5: I think the market can deal with it. But you know,

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Speaker 5: the you know, if we start seeing a sustained increase

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Speaker 5: in rates, oh, I think the market will feel that,

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Speaker 5: and you will you will start to see a big pullback.

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Speaker 1: So we had the PMI data which was a little

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Speaker 1: lackluster today. The big news will happen at the end

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Speaker 1: of the week with the employment data. What are your

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Speaker 1: expectations check on jobs for the month of June.

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Speaker 5: Yeah, I mean, listen, jobs have been extremely, extremely strong.

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Speaker 5: I mean you go back look back to May and

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Speaker 5: I've obviously stating the obvious there, but you know, back

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Speaker 5: with May you had one hundred and eighty thousand was

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Speaker 5: the expected number. It came into two seventy two. You know,

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Speaker 5: I think you're going to probably see another strong jobs month.

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Speaker 5: Now the flip side of that is if you don't

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Speaker 5: and all of a sudden you get a weaker than

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Speaker 5: expected number, well, now maybe you're going to start to

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Speaker 5: see the FED, you know, start to pick up that

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Speaker 5: the language around maybe a rate that give if employment

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Speaker 5: starts to fall off. But you know, I mean, I

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Speaker 5: don't know, but you guys but out and about and

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Speaker 5: you know, the normal course of a day or normal

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Speaker 5: course of the weekend, there are still awful lot of

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Speaker 5: help wanted signs up. And you know, every place still

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Speaker 5: seems to be looking for workers. I can tell you

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Speaker 5: first hand, hiring for our company is still a major

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Speaker 5: challenge of finding the right candidate.

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Speaker 2: So growth has been an issue. So it might be

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Speaker 2: good to get a reasonably strong number because you've seen

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Speaker 2: consumers struggle a little bit. So you talk about growth

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Speaker 2: as an issue. Politics has an issue, perhaps inflation has

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Speaker 2: an issue. And to earnings, back to earnings Goldman Sachs

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Speaker 2: saying that companies face the highest earnings bar in about

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Speaker 2: three years. Is that possibly a catalyst for the next

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Speaker 2: cell down?

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Speaker 5: Most certainly look and you've seen look at look at Walgreens,

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Speaker 5: and look at Nike right when when they miss and

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Speaker 5: just the carnage that ensues. But you know, I think,

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Speaker 5: you know, the challenge we have going forward is the

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Speaker 5: consumer has really held in there, but the consumer is

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Speaker 5: starting to feel it, right And yes, even though we

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Speaker 5: have these lower or more moderate inflation readings, they are

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Speaker 5: still off of a much much higher base than they

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Speaker 5: were years ago. I think the average person and even

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Speaker 5: the the you know, above average person in terms of

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Speaker 5: income or net worth, starts to feel it as they

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Speaker 5: see it in their every day life. And I think

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Speaker 5: you're at the point where like people are pushing back

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Speaker 5: on any more price increases and things of that nature. So,

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Speaker 5: without a doubt, it's going to be a challenge. But

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Speaker 5: I also think with earnings it's all about the industry

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Speaker 5: and the company. And so you know, if you've got

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Speaker 5: a Nike and you you know, you miss, that's a big,

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Speaker 5: big story, where as opposed to maybe a different type

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Speaker 5: of company and a different industry where you know, maybe

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Speaker 5: they get a little bit more, a little bit of

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Speaker 5: give from the market. But without any question, earnings are

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Speaker 5: going to be and have always been tremendously important. They

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Speaker 5: certainly will be with this next season. But you know companies,

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Speaker 5: you know the American economy, American companies are so dynamic,

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Speaker 5: they can they can pretty much adapt on a dime.

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Speaker 5: And they've weathered some really really bad storms. And there's

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Speaker 5: nothing to think, given the environment that we're in today

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Speaker 5: and looking forward, that they can't continue to do that

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Speaker 5: and listen, geopolitical risk whole different story. God only knows

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Speaker 5: what happens with this election where it all couns up, all.

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Speaker 2: Right, Chuck, Thanks so much, Chuck Camello, President, Chief executive

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Speaker 2: Officer at Essex Financially.

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