WEBVTT - SEC Sues Binance, Apple Unveils VR Headset

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<v Speaker 1>This is Bloomberg Day Break Asia for this Tuesday June

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<v Speaker 1>sixth in Hong Kong, Monday June fifth in New York

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<v Speaker 1>and coming up today.

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<v Speaker 2>The SEC accuses Binance and its CEO of breaking US

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<v Speaker 2>securities rules.

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<v Speaker 1>Apple debuts its mixed reality headset.

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<v Speaker 2>And China Evergrand's property management unit post a profit for

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<v Speaker 2>twenty twenty two.

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<v Speaker 3>Former Vice president Mike pennsfile's paper to run for president,

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<v Speaker 3>heavy fighting report in the Ukraine, and the FBI director

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<v Speaker 3>faces a contempt of Congress hearing. I'm Dan Schwartzman with

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<v Speaker 3>Global News.

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<v Speaker 4>That's all straight ahead on Bloomberg Daybreak Asia, the business

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<v Speaker 4>news you need to start your day, and just one

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<v Speaker 4>fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App,

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<v Speaker 4>and everywhere you get your podcasts.

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<v Speaker 1>Good morning, I'm Doug Krisner and I'm Brian Curtiz. Here

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<v Speaker 1>are the stories we're following today. The US Securities and

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<v Speaker 1>Exchange Commission has accused Binance and it's CEO, Chug Pung

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<v Speaker 1>Jau of breaking securities rules. The SEC alleged that Jaw

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<v Speaker 1>and Binance mishandled customer funds and misled investors and regulators,

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<v Speaker 1>among the allegations. The SEC said that two Binance linked tokens,

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<v Speaker 1>BnB and busd were securities that the firm improperly offered

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<v Speaker 1>and sold. The regulator also alleged that Binance and its

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<v Speaker 1>US affiliate were not actually independent from one another and

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<v Speaker 1>improperly functioned as an exchange. We heard from Bloomberg's Lydia Beyoud.

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<v Speaker 5>The US entity of Binance, which has long claimed that

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<v Speaker 5>it walls off US customers from accessing the international site.

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<v Speaker 5>The SEC seems to be alleging that that was not

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<v Speaker 5>in fact the case, or that controls weren't sufficient.

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<v Speaker 1>Finance called the SEC complaint disappointing, saying it had engaged

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<v Speaker 1>with the regulator in good faith negotiations to settle the matter.

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<v Speaker 1>The Crypto Exchange also said that the SEC was misguided

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<v Speaker 1>in not providing clarity over rules for digital assets, and

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<v Speaker 1>we did see Crypto's take a hit. Bitcoin traded down

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<v Speaker 1>to twenty five thousand and change. At the moment, it

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<v Speaker 1>has ticked up two tens percent twenty five thousand and

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<v Speaker 1>six eighty eight well.

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<v Speaker 2>US regulators have a plan to fortify the US financial system.

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<v Speaker 2>Larger US banks may have to boost their capital by

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<v Speaker 2>an average of twenty percent. We have more from Bloomberg's

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<v Speaker 2>and Kates.

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<v Speaker 6>Bank regulators are considering new rules after several smaller regional

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<v Speaker 6>lenders collapsed earlier this year. That means a broader swath

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<v Speaker 6>of banks would face strict requirements for setting money aside

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<v Speaker 6>under a draft plan designed to bolster the US financial system.

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<v Speaker 6>Specific increases would depend on a lender's business model, and

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<v Speaker 6>banks with at least one hundred billion dollars in assets

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<v Speaker 6>may have to adhere to the regulation. A trade group

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<v Speaker 6>that represents major financial institutions says the proposal would burden

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<v Speaker 6>businesses and borrowers and hamper the economy in Washington and

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<v Speaker 6>Kates Bloomberg Daybreak Asia.

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<v Speaker 1>Well, we mentioned it was a big day for Apple.

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<v Speaker 1>Let me say first that Apple stock did trade down

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<v Speaker 1>a little bit, but more or less in line with

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<v Speaker 1>what we saw in the marketplace, off about three quarters

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<v Speaker 1>of one percent. The big day announcing the long awaited

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<v Speaker 1>mixed reality headset at the Worldwide Developers Conference, and also

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<v Speaker 1>some other new products and updates. Bloomberg's Tom Busby has more.

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<v Speaker 7>After more than seven years of development, Apple finally unveiled

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<v Speaker 7>the Apple Vision pro a thirty five hundred dollars mixed

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<v Speaker 7>reality headset. It'll be available next year. It's Apple's first

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<v Speaker 7>totally new hardware products since the Apple Watch made its

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<v Speaker 7>debut about eight years ago, seen by some as a

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<v Speaker 7>successor to its wildly popular iPhone in terms of future revenue.

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<v Speaker 7>The company also announced a new fifteen inch MacBook Air laptop,

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<v Speaker 7>as well as updated software and features for the iPad

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<v Speaker 7>and the iPhone, but investors didn't seem all that impressed

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<v Speaker 7>on Monday, sending shares of Apple down three quarters of

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<v Speaker 7>one percent. Tom busby Bloomberg Daybreak.

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<v Speaker 2>Asia well as I mentioned a short while ago decision

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<v Speaker 2>day for the Reserve Bank of Australia and economist and

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<v Speaker 2>money markets seem to be divided on which way the

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<v Speaker 2>RBA will go. Today's decision two thirty pm Sydney time,

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<v Speaker 2>and we have a preview now from Bloomberg's Paul.

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<v Speaker 8>One third of the thirty economists surveyed by Bloomberg expect

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<v Speaker 8>the RBA will raise its cash rate to four point

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<v Speaker 8>one percent. The majority, including the Commonwealth Bank of Australia,

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<v Speaker 8>anticipate it will stampat at three point eighty five percent,

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<v Speaker 8>and traders pricing in about fifty to fifty odds. Last month,

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<v Speaker 8>Governor Philip Low took RBA watches by surprise when he

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<v Speaker 8>unexpectedly hiked interest rates following a pause in April. His rhetoric, however,

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<v Speaker 8>has recently turned more hawkish as he weighs renewed price

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<v Speaker 8>pressures against the slowing economy. Last week, Low said that

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<v Speaker 8>the RBA Board will do whatever is necessary to bring

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<v Speaker 8>consumer price gains back down to the Central banks two

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<v Speaker 8>to three percent target. The RBA's own forecast show inflation

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<v Speaker 8>only returning to the top of its target in mid

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<v Speaker 8>twenty twenty five. I'm Paul Allen Bloomberg Daybreak Asia.

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<v Speaker 1>The Australian dollar pretty steady here this morning, sixty six

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<v Speaker 1>point one nine US sense, but up from yesterday. Well.

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<v Speaker 1>Everground Group's property management unit has posted a profit for

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<v Speaker 1>twenty twenty Twoobrigs Juan Wong has more from Hong Kong.

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<v Speaker 9>Evergrand Property Services saw net income of one point four

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<v Speaker 9>to two billion yuan or about two hundred million US

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<v Speaker 9>dollars in twenty twenty two. That's an improvement over a

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<v Speaker 9>loss in twenty twenty one, according to a delayed earnings report,

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<v Speaker 9>but profit was far less than an estimate of three

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<v Speaker 9>point eight billion yuan. The disclosure is a key milestone

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<v Speaker 9>toward the lifting of a stock trading suspension. The suspension

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<v Speaker 9>has been in place for more than a year. If

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<v Speaker 9>the band were to be lifted, it would help creditors

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<v Speaker 9>work out the merits of a restructuring of debt. Evergrant

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<v Speaker 9>has offered to the swap debt for equity as part

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<v Speaker 9>of the overhaul, But in order for the band to

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<v Speaker 9>be lifted, Evergrand still needs to show that there are

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<v Speaker 9>no reasonable regulatory concerns on management integrity that's hanging in

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<v Speaker 9>the balance in Hong Kong, joined Wang, Bloomberg, Day Brigasia.

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<v Speaker 1>And Thok some other developments who will be taking a

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<v Speaker 1>look at this morning. This may disappoint some investors. China

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<v Speaker 1>is sticking with targeted steps to help the economy instead

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<v Speaker 1>of any broad measures. They'll be looking at property and manufacturing.

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<v Speaker 1>It suggests that at least for the moment, the broader

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<v Speaker 1>stimulus like interest rate cuts, seem to be off the table.

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<v Speaker 1>And it was an interesting quote from jershaud jaw at

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<v Speaker 1>Credit Agricole saying that Chinese officials are eyeing more quality

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<v Speaker 1>of growth, not just the pace of the expansion.

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<v Speaker 2>Yeah, it's kind of an exercise in surgery, isn't it,

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<v Speaker 2>Where you really get in and you've become much more

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<v Speaker 2>specific and targeted about the areas in which you'd like

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<v Speaker 2>to see the economy do better. One of the things

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<v Speaker 2>that I was struck by, Brian, if you look at

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<v Speaker 2>this services PMI that we had today, and coupled with

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<v Speaker 2>the fact that that manufacturing PMI last week showing contraction

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<v Speaker 2>for a seven straight month, we seem to be you know,

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<v Speaker 2>world where some pmis, particularly in Asia, are improving a

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<v Speaker 2>little bit, but it seems to be a different story

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<v Speaker 2>here in the US. I wonder what that says about

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<v Speaker 2>global growth right now.

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<v Speaker 1>Yeah, it's interesting that you point that out. I was

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<v Speaker 1>looking at the ISM number there it's just barely and expansion.

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<v Speaker 1>And we have the taishin services yesterday, which doesn't get

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<v Speaker 1>a lot of coverage because it comes after the official PMIS,

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<v Speaker 1>but it was up to fifty seven point one in May,

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<v Speaker 1>and that's higher than what we saw fifty six point

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<v Speaker 1>four the month before, and it was also stronger than

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<v Speaker 1>the survey estimate. So even though we're thinking of a

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<v Speaker 1>stumbling recovery in China, the services number was pretty strong.

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<v Speaker 2>So and if you believe what the consensus call is

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<v Speaker 2>for the Fed to hold rate steady next t week,

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<v Speaker 2>keep it options open maybe for hikes later this year.

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<v Speaker 2>Bloomberg Economics right now says, when you take everything into consideration,

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<v Speaker 2>we're looking at a recession before the end of the

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<v Speaker 2>year is out.

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<v Speaker 1>Yeah, we'll put that question to James Abonte's coming up,

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<v Speaker 1>managing director and chief investment officer at Center Asset Management,

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<v Speaker 1>one of our favorite guests here on the program. Well,

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<v Speaker 1>we love them all, but James definitely is a standout.

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<v Speaker 1>Now it's time for global news. Well, let's take a

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<v Speaker 1>closer look here. I had some of the top stories

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<v Speaker 1>We've got Dan Schwartzman and the Bloomberg Newsroom Dan Hey Brian.

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<v Speaker 3>Tensions remaining high between the US and China. Two recent

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<v Speaker 3>incidents highlighting that tension, as a Chinese warship sailed in

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<v Speaker 3>front of the US destroyer, missing the ship by about

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<v Speaker 3>one hundred and fifty yards, while a Chinese jet recently

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<v Speaker 3>crossed in front of an American spyplane over international waters.

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<v Speaker 3>US National Security Council Coordinator John Kirby talking about the incidents.

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<v Speaker 10>These are part and parcel of an increasing level of

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<v Speaker 10>aggressiveness by the PLA PRC's military in particularly in the

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<v Speaker 10>area of the Taiwan Straits and in the South China Sea.

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<v Speaker 3>Kirby was speaking at the White House. Former Vice President

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<v Speaker 3>Mike pens has filed the necessary paperwork to run for

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<v Speaker 3>President President Trump's former VP, joining a field that continues

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<v Speaker 3>to get more crowded, as former New Jersey Governor Chris

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<v Speaker 3>Christi and North Dakota Governor Doug Bergham are expected to

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<v Speaker 3>announce this week. One name that has decided not to

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<v Speaker 3>run is New Hampshire Governor Chris Sununu. A House committee

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<v Speaker 3>will vote on the contempt of Congress resolution against FBI

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<v Speaker 3>Director Christopher Ray on Thursday. The move comes after Ray

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<v Speaker 3>did not comply with the subpoena for a document held

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<v Speaker 3>by the FBI the Republicans say links President Biden to

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<v Speaker 3>a five million dollar bribery scheme with an unnamed foreign national.

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<v Speaker 3>The FBI says it produced a document in a reading

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<v Speaker 3>room at the Capitol. New details emerging regarding the private

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<v Speaker 3>plane entering restricted airspace over Washington yesterday before crashing in Montebello, Virginia,

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<v Speaker 3>with four fatalities Bloomberg's Nancy Lions with more.

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<v Speaker 11>The incident prompted F sixteen fighter jets to scramble to

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<v Speaker 11>see why the plane was in restricted airspace. They discovered

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<v Speaker 11>the pilot was unconscious. Adam Gerhart with the National Transportation

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<v Speaker 11>Safety Board says there are plenty of unanswered questions.

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<v Speaker 2>When exactly did the pilot become unresponsive and why did

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<v Speaker 2>the airplane fly the flight track that it did fly.

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<v Speaker 11>The plane eventually crashed near Stanton, Virginia, and Gearhart says

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<v Speaker 11>the wreckage is scattered and in mountainous terrain, making for

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<v Speaker 11>a tough recovery Thanks Nancy.

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<v Speaker 3>An ongoing hacking campaign has claimed British Airways, Pharmacy Chain, Boots,

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<v Speaker 3>and the BBC as victims. The payroll provider to those companies,

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<v Speaker 3>Zealous says a cyber Attech may have compromised personal information

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<v Speaker 3>of thousands of employees to those companies. The government of

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<v Speaker 3>Nova Scotia, Canada, has also been named a victim in

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<v Speaker 3>this scheme, with potentially thousands of companies still vulnerable to

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<v Speaker 3>be compromised as well. California state leaders are blasting Florida

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<v Speaker 3>governor and Republican presidential hopeful rond de Santis. The anger

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<v Speaker 3>stems from two flights of migrants from New Mexico to

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<v Speaker 3>Sacramento that were sent there allegedly at the direction of

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<v Speaker 3>Florida officials. California Governor Gavin Newsom has hinted that the

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<v Speaker 3>state could pursue criminal charges against DeSantis for the moves.

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<v Speaker 3>Global News twenty four hours a day, power by more

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<v Speaker 3>than twenty seven hundred journalists and analysts in over one

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<v Speaker 3>hundred and twenty countries. I'm Dan Schwartzman, and this is Bloomberg.

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<v Speaker 1>I'm Brian Curtis in Hong Kong along with Rashad Salmon.

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<v Speaker 1>Our guest is James Demonte, managing director and chief investment Officer,

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<v Speaker 1>Center Asset Management. So a little bit of weak data

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<v Speaker 1>there today, but the data has been mixed of late.

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<v Speaker 1>There's been a few things that were stronger than expected.

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<v Speaker 1>How do you see the FED moving at this this

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<v Speaker 1>month's meeting, James, Well, I.

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<v Speaker 12>Think if you look and really during the entire cycle,

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<v Speaker 12>the one year treasure yield has led the FED funds

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<v Speaker 12>rate over this entire period, and similar to the peak

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<v Speaker 12>of the rate cycle tops in two thousand and two

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<v Speaker 12>thousand and six. Right now, we see the FED funds

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<v Speaker 12>rate trading at about fifty basis points premium above the

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<v Speaker 12>one year treasure note, and that's the widest we've seen

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<v Speaker 12>of this cycle. And each time that's occurred, that has

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<v Speaker 12>indicated that the FED be on hold. And as we've

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<v Speaker 12>always said, we think that the Fed's targets here during

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<v Speaker 12>this entire cycle was to raise the real Fed funds

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<v Speaker 12>rate that's the FED funds rate minus inflation to positive territory.

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<v Speaker 12>And if you look at tips, whether it's five years

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<v Speaker 12>or out through ten years, they're around one and a

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<v Speaker 12>half percent positives. So I think the FED could say

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<v Speaker 12>mission accomplished in terms of the hiking cycle, but they

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<v Speaker 12>will definitely wait for inflation to subside further before I

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<v Speaker 12>think moving again. But they will basically pause I think

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<v Speaker 12>at the upcoming meeting.

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<v Speaker 13>Well, I mean they should, don't you think here, James.

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<v Speaker 12>Absolutely, because what you see is, you know, inflation figures

0:12:17.720 --> 0:12:21.240
<v Speaker 12>coming down in goods. If you look at commodity prices today,

0:12:21.280 --> 0:12:23.640
<v Speaker 12>even with the very positive news with regards to the

0:12:23.640 --> 0:12:27.640
<v Speaker 12>Saudi Arabia cutting supply of oil, oil prices and industrial

0:12:27.640 --> 0:12:30.920
<v Speaker 12>commodity prices were relatively muted what that tells you is

0:12:31.160 --> 0:12:34.360
<v Speaker 12>is a demand problem and that indicates some kind of

0:12:34.400 --> 0:12:38.760
<v Speaker 12>cyclical downturn. And perhaps if you think about where inflation

0:12:38.840 --> 0:12:41.439
<v Speaker 12>has been embedded in the last few months, it's been

0:12:41.440 --> 0:12:43.840
<v Speaker 12>in the services sector. And to the extent that the

0:12:43.880 --> 0:12:48.320
<v Speaker 12>ISM services figure came in today at around fifty, you know,

0:12:48.400 --> 0:12:52.280
<v Speaker 12>indicating no longer expansion and less pricing pressure in the

0:12:52.280 --> 0:12:55.079
<v Speaker 12>services sector. I think it gives the FED the opportunity

0:12:55.120 --> 0:12:57.280
<v Speaker 12>to really pause here at this point in time.

0:12:57.440 --> 0:12:59.920
<v Speaker 13>Well, certainly with all these t builders are going to

0:12:59.960 --> 0:13:01.400
<v Speaker 13>be coming to the market as well. I mean we're

0:13:01.400 --> 0:13:04.280
<v Speaker 13>talking in a veritable tsunami nearly a trillion dollars worth.

0:13:04.600 --> 0:13:09.000
<v Speaker 13>Now my point here is also that's going to suck

0:13:09.080 --> 0:13:12.000
<v Speaker 13>liquidity out of the system. That's number one. Number two,

0:13:12.440 --> 0:13:13.400
<v Speaker 13>who's going to buy them?

0:13:13.559 --> 0:13:16.480
<v Speaker 12>Well, I think you'll see the banks and pension funds

0:13:16.720 --> 0:13:20.200
<v Speaker 12>continue to be buyers, particularly as we saw an announcement

0:13:20.400 --> 0:13:25.200
<v Speaker 12>of a potential raise in capital requirements for banks. Banks

0:13:25.240 --> 0:13:28.920
<v Speaker 12>have been the most voracious buyers of treasury bills and

0:13:29.040 --> 0:13:32.240
<v Speaker 12>bonds over this period of time since the fedes launched

0:13:32.320 --> 0:13:35.640
<v Speaker 12>quantitative easing, and even during the current period of time.

0:13:35.760 --> 0:13:38.240
<v Speaker 12>So you're still going to see very healthy demand for

0:13:38.679 --> 0:13:42.439
<v Speaker 12>particularly these types of yields from the major institutions in

0:13:42.520 --> 0:13:45.120
<v Speaker 12>the financial services sector, insurance, banking, et cetera.

0:13:45.280 --> 0:13:47.839
<v Speaker 1>You noted the slowing, but what was unusual was at

0:13:47.840 --> 0:13:50.040
<v Speaker 1>the end of last week we had a real bounce

0:13:50.240 --> 0:13:55.439
<v Speaker 1>in cyclical stocks, as though people might give the NASDAQ

0:13:55.480 --> 0:13:58.080
<v Speaker 1>one hundred stocks a little bit of a pause and

0:13:58.320 --> 0:14:01.959
<v Speaker 1>pile into the more or equal weight companies. But it

0:14:02.040 --> 0:14:04.720
<v Speaker 1>seems to run counter to that slowing economy that you mentioned.

0:14:05.040 --> 0:14:07.040
<v Speaker 12>It does, and I think one of the most frustrating

0:14:07.080 --> 0:14:10.960
<v Speaker 12>things for you know, active managers is that what we

0:14:11.040 --> 0:14:14.640
<v Speaker 12>have witnessed thus far is, you know, the dominance of

0:14:14.720 --> 0:14:19.240
<v Speaker 12>cap weighted inducees against equal weighted induses. It is frankly

0:14:19.320 --> 0:14:21.760
<v Speaker 12>unheard of. If you're thinking about this being a new

0:14:21.800 --> 0:14:25.320
<v Speaker 12>bull market. You know, if you look at any beginning

0:14:25.360 --> 0:14:27.240
<v Speaker 12>of a bull market, whether it goes back to even

0:14:27.320 --> 0:14:29.680
<v Speaker 12>nineteen ninety, two thousand and two, two thousand and nine,

0:14:30.040 --> 0:14:33.640
<v Speaker 12>twenty twenty, equal weighted is always outperformed cap weighted. I

0:14:33.640 --> 0:14:36.000
<v Speaker 12>think that's consistent with what we're seeing in the sense

0:14:36.040 --> 0:14:40.880
<v Speaker 12>that people are gravitating towards higher quality, larger companies because

0:14:40.920 --> 0:14:46.360
<v Speaker 12>we're still in the phase where profits are decelerating, sales

0:14:46.400 --> 0:14:50.800
<v Speaker 12>growth is decelerating, the ANALYP is kind of deteriorating, but

0:14:50.880 --> 0:14:54.800
<v Speaker 12>not at a at a expedited manner, so people want

0:14:54.840 --> 0:14:57.480
<v Speaker 12>to gravitate source quality. We're nowhere near the bottom of

0:14:57.520 --> 0:15:00.480
<v Speaker 12>the economic cycle or the profit cycle, which is why,

0:15:00.680 --> 0:15:03.720
<v Speaker 12>you know, it's been an environment where quality and larger

0:15:03.720 --> 0:15:07.640
<v Speaker 12>cap companies has demonstrated about the differential between cap weighted

0:15:07.720 --> 0:15:09.400
<v Speaker 12>and equated in disease.

0:15:09.000 --> 0:15:12.080
<v Speaker 13>Have shown well, I just thought it was you know,

0:15:12.200 --> 0:15:14.480
<v Speaker 13>the second part of my question was of course about liquidity,

0:15:14.520 --> 0:15:15.960
<v Speaker 13>and I just want to ask how much do you

0:15:15.960 --> 0:15:19.840
<v Speaker 13>think the FED is cognizant of the way that credit

0:15:19.920 --> 0:15:22.680
<v Speaker 13>has tightened and how that's doing their job for them?

0:15:22.720 --> 0:15:25.360
<v Speaker 12>Partly, Yeah, I think that's the other thing to look

0:15:25.400 --> 0:15:28.120
<v Speaker 12>at in the fixed income world, and probably more important,

0:15:28.400 --> 0:15:30.560
<v Speaker 12>it's not so much what the FED funds rate is doing,

0:15:30.600 --> 0:15:33.280
<v Speaker 12>but to look at the spreads, and right now we've

0:15:33.280 --> 0:15:36.400
<v Speaker 12>actually seen for the first time, you know, a noticeable

0:15:36.520 --> 0:15:41.600
<v Speaker 12>uptick in junk bond yields. This has been you know,

0:15:41.720 --> 0:15:44.520
<v Speaker 12>quite significant. It's nowhere near the levels that we saw

0:15:44.720 --> 0:15:48.080
<v Speaker 12>back in the global financial crisis or even back in

0:15:48.120 --> 0:15:50.960
<v Speaker 12>two thousand but the FED has to be well aware

0:15:51.080 --> 0:15:54.080
<v Speaker 12>that the risk off and the spike in junk bond

0:15:54.120 --> 0:15:57.880
<v Speaker 12>and even investment grade bonds has been quite dramatic and

0:15:58.240 --> 0:16:02.480
<v Speaker 12>something to be another another notch to basically give them

0:16:02.480 --> 0:16:04.240
<v Speaker 12>some caution here to let it play out.

0:16:04.520 --> 0:16:07.800
<v Speaker 1>We don't often talk extensively about China, but we can

0:16:07.880 --> 0:16:10.400
<v Speaker 1>do for a moment or two. I think some investors

0:16:10.840 --> 0:16:13.720
<v Speaker 1>may be looking for more stimulus from authorities in China,

0:16:13.800 --> 0:16:15.480
<v Speaker 1>but it seems that they want to stick with the

0:16:15.560 --> 0:16:19.800
<v Speaker 1>targeted approach. It's it's a mixed environment there and much

0:16:19.800 --> 0:16:22.000
<v Speaker 1>the same way it's mixed in the US. So would

0:16:22.040 --> 0:16:24.200
<v Speaker 1>you deploy capital to China at this juncture?

0:16:24.520 --> 0:16:27.920
<v Speaker 12>It's been very frustrating, you know, in our Global Infrastructure

0:16:27.960 --> 0:16:31.560
<v Speaker 12>Fund and other global investments that we manage. You know, China,

0:16:32.360 --> 0:16:35.440
<v Speaker 12>whether it's via Hong Kong or on shore, has been

0:16:36.360 --> 0:16:39.400
<v Speaker 12>you know, a continuing source of frustration and continues to

0:16:39.440 --> 0:16:43.360
<v Speaker 12>stay in a trading range. You know, we seem to

0:16:43.440 --> 0:16:45.960
<v Speaker 12>continue and was touched upon in the news segment of

0:16:46.000 --> 0:16:48.880
<v Speaker 12>having this uneven recovery globally, and a lot of it

0:16:48.920 --> 0:16:53.600
<v Speaker 12>has to do with when individual economies unleashed or allowed

0:16:54.040 --> 0:16:56.920
<v Speaker 12>COVID restrictions to come off. And that's what makes this

0:16:57.040 --> 0:16:59.400
<v Speaker 12>cycle so difficult to navigate, whether it's here in the

0:16:59.480 --> 0:17:03.280
<v Speaker 12>United States here in China, is to somehow reconcile a

0:17:03.480 --> 0:17:08.560
<v Speaker 12>historical business cycle, stock market cycle to the very unusual

0:17:08.560 --> 0:17:12.040
<v Speaker 12>set of circumstances, both in terms of the drop in recovery,

0:17:12.160 --> 0:17:16.720
<v Speaker 12>drop in economic activity and the extraordinary stimulus following COVID,

0:17:17.040 --> 0:17:19.440
<v Speaker 12>which was really a very short period of time ago.

0:17:19.560 --> 0:17:21.480
<v Speaker 12>And I'm almost of the belief that we have to

0:17:21.560 --> 0:17:26.280
<v Speaker 12>kind of, you know, think about this cycle within a

0:17:26.400 --> 0:17:29.200
<v Speaker 12>longer period of time. This is not a very specific

0:17:29.240 --> 0:17:31.880
<v Speaker 12>set of quarters to look at, but look back and

0:17:32.040 --> 0:17:36.040
<v Speaker 12>somehow blend the COVID environment to this current cycle to

0:17:36.119 --> 0:17:39.120
<v Speaker 12>somehow give a better picture, to compare it to other

0:17:39.160 --> 0:17:39.920
<v Speaker 12>periods of time.

0:17:40.119 --> 0:17:41.960
<v Speaker 13>Well, this is it, isn't it The base effects of

0:17:42.760 --> 0:17:44.920
<v Speaker 13>you have thought would have been flattering the economic data

0:17:44.920 --> 0:17:47.640
<v Speaker 13>coming out of China of late, But no.

0:17:47.480 --> 0:17:47.800
<v Speaker 1>Not really.

0:17:47.840 --> 0:17:50.960
<v Speaker 13>It's actually just highlighted how perhaps things looking back. But

0:17:51.000 --> 0:17:52.720
<v Speaker 13>then again, you look at the market there and it's

0:17:52.920 --> 0:17:59.000
<v Speaker 13>incredibly good in terms of valuations being inexpensive. And I

0:17:59.000 --> 0:18:00.680
<v Speaker 13>think as Bank of America came up with a great

0:18:00.720 --> 0:18:04.280
<v Speaker 13>language was China's too cheap to shortened, too mediocre to

0:18:04.320 --> 0:18:04.800
<v Speaker 13>go long.

0:18:06.000 --> 0:18:08.080
<v Speaker 12>Yeah. That being said, you know, one of the biggest

0:18:08.160 --> 0:18:13.159
<v Speaker 12>dangers that or traps that value investors fall into is

0:18:13.240 --> 0:18:17.359
<v Speaker 12>buying low PE companies just before the E disappears and

0:18:17.400 --> 0:18:21.560
<v Speaker 12>they become you know, PE with which are incalculable because

0:18:21.560 --> 0:18:24.840
<v Speaker 12>there's no earnings. The fact is China's market is much

0:18:24.880 --> 0:18:28.480
<v Speaker 12>more cyclical than the United States. You know, what we've seen,

0:18:28.520 --> 0:18:31.120
<v Speaker 12>particularly with the offshoring over the past couple of decades,

0:18:31.480 --> 0:18:34.520
<v Speaker 12>is the inventory and capital intensity cycles that used to

0:18:34.520 --> 0:18:36.800
<v Speaker 12>be resident here in the United States and Europe have

0:18:36.880 --> 0:18:43.760
<v Speaker 12>been basically imported into China. So that capital cyclicality, you know,

0:18:43.880 --> 0:18:48.360
<v Speaker 12>gives operating leverage a much kind of larger standard deviation.

0:18:48.480 --> 0:18:51.240
<v Speaker 12>So if indeed the global economy started to slow down,

0:18:51.280 --> 0:18:53.640
<v Speaker 12>and US consumers in particular are going to slow down,

0:18:53.800 --> 0:18:58.200
<v Speaker 12>that's going to have a significant impact on China's manufacturing

0:18:58.200 --> 0:19:02.439
<v Speaker 12>capabilities and productivity utilization rates. And you'll see, you know,

0:19:02.480 --> 0:19:05.680
<v Speaker 12>companies that are earning in very low PE attractiveness from

0:19:05.680 --> 0:19:10.080
<v Speaker 12>an optical perspective go to loss making, which will basically

0:19:10.119 --> 0:19:13.120
<v Speaker 12>make that valuation seem you know, not so appealing.

0:19:14.000 --> 0:19:16.280
<v Speaker 1>James Thanks for being with us today. We appreciate it.

0:19:16.359 --> 0:19:21.080
<v Speaker 1>James Abote, Managing Director, Chief Investment Officer, Center Asset Management.

0:19:21.840 --> 0:19:24.720
<v Speaker 1>This is Bloomberg Daybreak Asia, your morning brief on the

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