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

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. We'll

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Speaker 2: begin with crude oil today, which is moving higher for

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Speaker 2: a fifth straight session as the market assesses the widening

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Speaker 2: fallout from the US Israeli war against Iran and the

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Speaker 2: combatants are vowing to press on. Now we are learning

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Speaker 2: that Kurdish Iranian dissident groups based in northern Iraq are

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Speaker 2: preparing for a potential cross border military operation in Iran.

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Speaker 2: At the same time, today, we're seeing a rebound in

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Speaker 2: equity markets across the Asia Pacific after an up arrow

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Speaker 2: story for US talks in South Korea. For example, a

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Speaker 2: powerful rebound is underway following Wednesday's twelve percent sell off

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Speaker 2: for the Cosby For a closer look, now, I'm joined

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Speaker 2: by Bloomberg's Leonting III. Leonting is Managing editor for Asia Equities,

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Speaker 2: and she joins from our studios in seeing Thank you

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Speaker 2: for being here. Can you help me understand what's going

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Speaker 2: on with the South Korean equity market today?

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Speaker 3: The story about Korea basically is a cautionary tell about

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Speaker 3: leveraged bets to buy into stocks. Yesterday we saw you know,

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Speaker 3: the record sell of ever for Korean stocks, more than

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Speaker 3: twelve percent drop, and that was really because the retail

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Speaker 3: investors leading into the wall, going into the war, they

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Speaker 3: were just wrong footed, right. They took out the record

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Speaker 3: amount of debt, and they also put a lot of

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Speaker 3: money into brokerage accounts just sort of to get ready

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Speaker 3: to buy more Korean stocks. So a lot of that

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Speaker 3: buying was really financed by debt, by margins. So that

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Speaker 3: has caused a lot of liquidation in a day when

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Speaker 3: the market plunged. So we see a lot of technicalism

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Speaker 3: behind that, right force liquidation, a lot of gapping down

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Speaker 3: and that that's a result of a historic slump that

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Speaker 3: we saw yesterday. But today I think there was a

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Speaker 3: lot of buyer orders leading into today's open again. Retail

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Speaker 3: investors even yesterday, some of the brave hearted were buying

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Speaker 3: into long leverished ETFs. So there are a lot of

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Speaker 3: sort of still bullish people out there looking to buy

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Speaker 3: the dip. So today's huge rebound is reflective of that.

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Speaker 3: And foreign investors yesterday I wanted to highlight they were

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Speaker 3: actually already buyers. We saw at the end of the

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Speaker 3: day about one billion dollars of foreign inflow into the

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Speaker 3: market yesterday. So that kind of inflow I think today

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Speaker 3: is translating into the big jump pop as well.

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Speaker 2: So when you look at market internals leon ting, is

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Speaker 2: it still technology related and is that trade directly correlated

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Speaker 2: with artificial intelligence?

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Speaker 3: Yes, it's very much so, I think a career You know,

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Speaker 3: if you look at the overnight trading in a Korea

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Speaker 3: ETF in the US, there was almost no sign that

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Speaker 3: that was a big crash in South Korea, you know,

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Speaker 3: earlier in the day e w Y I think that

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Speaker 3: was a ticker for the I shares career ETF was

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Speaker 3: it was up during the night and there was still

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Speaker 3: flows into it, which means global investors, not just the

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Speaker 3: career ones, are still sort of very much bullish about

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Speaker 3: this career story about memoryship shortage, about how they're being

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Speaker 3: well positioned in this AI supply chain. So that to

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Speaker 3: me is quite shocking, right almost to global investors, nothing

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Speaker 3: happened in Korea. People continue to buy into this US

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Speaker 3: ETF of Korea.

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Speaker 2: So Leonteng, we're getting some headlines out of the National

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Speaker 2: People's Congress in China. The growth target has been set

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Speaker 2: in a range of between four and a half to

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Speaker 2: five percent. I think that's the most modest we've seen

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Speaker 2: in about three decades. Some analysts were saying earlier this

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Speaker 2: is in effect and admission that China's model economic model

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Speaker 2: that has powered the country's rapid rise is now beginning

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Speaker 2: to show a little strain. How would you describe what's

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Speaker 2: emerging from the NPC.

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Speaker 3: Yeah, the growth targeted between four point five percent to

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Speaker 3: five percent has been very well telegraphed, so that bit

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Speaker 3: of information is not a surprise to market participants at all.

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Speaker 3: Hijinpin's government has been talking about how they wanted the

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Speaker 3: quality of growth, not just a pure number in the

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Speaker 3: GDP figure, So that's again well understood by market participants.

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Speaker 3: So we've asked ten people so far on what's the takeaway.

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Speaker 3: Everybody has said right now, they're not seeing market moving

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Speaker 3: news so far out of the NPC. The stuff that

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Speaker 3: came out, including promotion of human robot and also the

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Speaker 3: AI AI related industry breakthroughs and all that has been

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Speaker 3: sort of reiteration of what we heard before. I think

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Speaker 3: one more thing to watch out for is the kind

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Speaker 3: of plans to boost consumption, to lift to the proportion

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Speaker 3: of consumption in China's GDP that we haven't really seen

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Speaker 3: anything super concrete that has come out of yet, but

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Speaker 3: so far, I think Chinese market today is just being

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Speaker 3: lifted along with global markets. Asia so far has been

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Speaker 3: the worst hit in global stock market since the war began.

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Speaker 3: I think China wasn't spared and today again it's just

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Speaker 3: sort of the rising boat lifting all tides.

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Speaker 2: You know, we know well that the story in China

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Speaker 2: lately in terms of prices has been one of deflation

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Speaker 2: and so the government's had a CPI growth target for

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Speaker 2: this year of around two percent. How do you think

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Speaker 2: they're going to achieve that? Is that going to come

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Speaker 2: strictly from more government spending?

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Speaker 3: There has been room for fscal spending. I think the

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Speaker 3: deficit is still at record high. That was the latest

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Speaker 3: target four percent, But it is very very challenging work

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Speaker 3: to get CPI up to percent. Part of it is

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Speaker 3: because there is a lot of competition and a lot

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Speaker 3: of sort of glut of supply in all sorts of things, materials,

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Speaker 3: even services that we saw in China. Part of it,

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Speaker 3: as you as we reported, is you know even in

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Speaker 3: the tech space, right food delivery wall that's been going

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Speaker 3: on of course, solar is oversupplied, lithium is oversupplied, and

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Speaker 3: latest oversupply that we're seeing is actually AI application models.

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Speaker 3: Every other tech company has an AI model that they

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Speaker 3: wanted to promote, and that has really added pressure on

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Speaker 3: all these Internet names, stock names, I should say, just

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Speaker 3: because they're spending so much to get user sign ups

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Speaker 3: for their latest AI app. So that's really pressure in margins. Again,

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Speaker 3: that doesn't reflect well for their stocks in the stock market,

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Speaker 3: and overall for economy. That just adds to challenge of

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Speaker 3: reaching that two percent CPI.

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Speaker 2: Go I mentioned the push higher for crude oil, and

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Speaker 2: when you consider economies like South Korea, like Japan that

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Speaker 2: are heavy oil importers, what is the sense of the

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Speaker 2: risk of inflation picking up as a result of higher oil?

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Speaker 2: Is that something that people are talking about. Is there

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Speaker 2: a great deal of concern being expressed along those lines.

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Speaker 3: Not really for China. The interesting thing about China is

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Speaker 3: China's now tarted at the biggest beneficiary of this oil

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Speaker 3: crisis that we're seeing right now. Part of it is

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Speaker 3: because it China gets its oil from Russia mainly right

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Speaker 3: and also it can still get from Iran, it can

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Speaker 3: still get from Venezuela. So China actually has a lot

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Speaker 3: of friends in the global cells to get oil supply

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Speaker 3: from these countries, so that sort of spared from buying

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Speaker 3: you know, the recently searched oil prices. So it's a

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Speaker 3: very well positioned market when it comes to energy supply

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Speaker 3: right now.

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Speaker 2: So I mentioned the conflict with Iran earlier, and another

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Speaker 2: headline that has emerged from the NPC is China's plan

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Speaker 2: to increased defense spending by seven percent. That's the slowest

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Speaker 2: sense about twenty twenty two, and I'm curious as to

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Speaker 2: whether anyone surprised by that number.

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Speaker 3: I would say, yes, that's probably one surprise that has

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Speaker 3: come out of the NPC so far. But there are

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Speaker 3: people saying that, you know, China, Yeah, the official number

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Speaker 3: may be seven percent, but China has many other ways

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Speaker 3: to spend on defense, so the actual number that may

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Speaker 3: not be released to the public could be a lot

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Speaker 3: higher than that. And of course, for China, defense is

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Speaker 3: just becoming increasingly important as we're seeing what's going on

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Speaker 3: in Iran. There's a lot of concern about, you know,

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Speaker 3: what's going to happen to Taiwan in the next couple

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Speaker 3: of years. Before she Jimpin steps down, So I would

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Speaker 3: say defense is of critical importance and China really, you know,

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Speaker 3: will not that slip in terms of the technological breakthrough

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Speaker 3: in the defense sector relative to the rest of the road,

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Speaker 3: especially with the US.

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Speaker 2: Leonting will leave it there. Always a pleasure. Thank you

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Speaker 2: so much, Bloomberg's Leon ting iiO. She is Managing editor

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Speaker 2: for Asia Equities, joining from our studios in Singapore here

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Speaker 2: on the Daybreak Asia podcast. Welcome back to the Daybreak

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Speaker 2: Asia Podcast. I'm Doug Prisner. Financial markets are still facing

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Speaker 2: tremendous uncertainty as the conflict in Iran enters its fifth

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Speaker 2: day and it shows no sign of abating. Tehran is

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Speaker 2: targeting Israel and Gulf states, and at the same time,

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Speaker 2: Israeli and US forces have been bombing targets in the

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Speaker 2: Islamic Republic that would include the US sinking and Iranian

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Speaker 2: warship in international waters. It was on Tuesday when Goldwyn

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Speaker 2: Sachs CEO David Solomon expressed surprise at what he called

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Speaker 2: the market's benign reaction. On Wednesday, Solomon spoke with Bloomberg's

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Speaker 2: Heidi Stroud Watts in Sydney.

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Speaker 1: Your team of strategists led by Peter Oppenheimer is saying,

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Speaker 1: by the too, do you see complacency at this moment?

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Speaker 4: I don't see complacency.

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Speaker 5: I just I think there's a lot of uncertainty around

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Speaker 5: the direction of the conflict, how it will be resolved,

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Speaker 5: you know, what the off ramps are, and you know,

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Speaker 5: I think it's fair to say when you look at markets,

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Speaker 5: market reactions have been relatively benign, and I certainly could

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Speaker 5: have seen over the last couple of days, you know,

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Speaker 5: a little bit more volatility. But I don't think people

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Speaker 5: are being complacent. I think that market participants are looking

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Speaker 5: and trying to say, you know, how is this going

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Speaker 5: to play out? What's the end game? You can see,

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Speaker 5: you know, good scenarios and more difficult scenarios, and as

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Speaker 5: they have more information in the coming days, the coming

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Speaker 5: week or two, you know, I think that will have

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Speaker 5: an impact on risk premiums. I think the moment, what

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Speaker 5: market participants are really looking at is is this going

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Speaker 5: to translate through to things that affect economic growth and activity,

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Speaker 5: particularly energy supply chains, you know so far.

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Speaker 4: I think one of the reasons why markets are.

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Speaker 5: Reacting the way they are is they're encouraged that there

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Speaker 5: is you know, strong support for trying to ensure that

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Speaker 5: doesn't happen. But it's uncertain. You don't know, and we'll

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Speaker 5: see in the long run. For portfolio allocation, and I

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Speaker 5: know Peter Oppenheimer, Charmin, most of bar Ramari need it

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Speaker 5: a call for our wealth clients. You know, if you

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Speaker 5: have portfolio allocation, there's nobody that's saying you should change

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Speaker 5: your fundamental portfolio allocation because of what's going on. But

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Speaker 5: for traders and day to day market participants to think

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Speaker 5: about risk premia, you know every single day.

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Speaker 4: Obviously they're watching very closely what a.

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Speaker 1: Lot of people that run big, major global banks like yours, right,

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Speaker 1: do you worry about the lack of predictability when it

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Speaker 1: comes to policy, when it comes to how this potentially ends,

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Speaker 1: and when it ends, what's going on with your at

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Speaker 1: least operations For anxiety.

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Speaker 5: I worry about a lot of things. We run a

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Speaker 5: big global business. We have an extraord very team, and

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Speaker 5: you know, I think one of the things that we

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Speaker 5: have to accept is the world is a very complicated place.

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Speaker 5: There's always a lot of uncertainty, there's always a lot

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Speaker 5: of nuance. But we have you know, base beliefs and

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Speaker 5: how economies will perform, how the world.

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Speaker 4: Will evolve, and you know we operate around that.

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Speaker 5: But we always are prepared to risk manage and think

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Speaker 5: about downside risks. And I think one of the things

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Speaker 5: you have to do when you run a big, large

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Speaker 5: financial institution is that when you know fact change or

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Speaker 5: risk come up, you've always got to be prepared to

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Speaker 5: pivot to shift to d risk. And you know, we

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Speaker 5: run our business, you know that way always. We run

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Speaker 5: a big balance sheet and we you know, we think

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Speaker 5: about that every day. But there's there's nothing while these

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Speaker 5: are very very significant events and I don't want to

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Speaker 5: diminish them in any stretch. You know, we've operated the

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Speaker 5: firm through lots of very significant events.

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Speaker 4: You're in year out, and that's that's part of what

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Speaker 4: we do.

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Speaker 2: Is it business is normal?

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Speaker 1: Then for say your offices in Saudi Arabia, is this

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Speaker 1: travel going on? What's a communication?

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Speaker 4: The third clients, that's that is complex.

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Speaker 5: We have We've got a significant number of people in

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Speaker 5: and you know in those Middle East countries and obviously,

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Speaker 5: first and foremost we're concerned with their safety and you know,

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Speaker 5: we're trying to do everything we can to support them

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Speaker 5: in their families. I would not say, you know, as

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Speaker 5: business as usual in those markets. You know, all those

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Speaker 5: markets for all businesses you know are operating work from

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Speaker 5: home and and you know, stay safe as a first priority,

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Speaker 5: and so we'll just have to watch closely, you know,

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Speaker 5: how things play out. And you know, we're very, very

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Speaker 5: focused on making sure our people and their families are

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Speaker 5: safe and sound, and at the moment, that's our primary

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Speaker 5: focus in that part.

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Speaker 4: Of the world.

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Speaker 1: Do you think there is a bit of an existential

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Speaker 1: cloud of a Dubai's a financial center, now.

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Speaker 5: Well, you know, I do think safety and security, you know, matters,

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Speaker 5: and I wouldn't say I think it's a little bit

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Speaker 5: premature to talk about existential clouds. But you know, if

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Speaker 5: you're living and operating in a place and you didn't anticipate.

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Speaker 4: This, it's quite scary and it's quite unsettling.

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Speaker 5: And so, as I said, our primary focus is on

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Speaker 5: the safety and security of our people there, were working

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Speaker 5: very hard to make sure that we're protecting them in

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Speaker 5: their families.

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Speaker 1: It's not as so the background prior to this conflict

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Speaker 1: was was crystal clear, right. We just came off really

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Speaker 1: trying to work out what the AI scare trade was

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Speaker 1: going to be. Like, do you still think that when

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Speaker 1: it comes to that narrative of sustainability of you know,

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Speaker 1: I know Jami Dahmond said there's some players doing dumb

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Speaker 1: things for example, does that still have.

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Speaker 4: Further to go?

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Speaker 5: I'm not sure I understood the question exactly are you're

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Speaker 5: talking about kind of AI investment, you know, growth. Look,

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Speaker 5: AI is a fabulous, fabulous, incredible technology that is going

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Speaker 5: to drive massive productivity gains through society. There's a lot

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Speaker 5: of capital being deployed to grow AI capabilities around the world.

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Speaker 5: Some of that capital is going to get reasonable returns.

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Speaker 5: Some of that capital is not. They're going to be winners,

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Speaker 5: They're going to be losers. As within any technology super cycle,

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Speaker 5: I think we're early in that process, but I think

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Speaker 5: it's exciting and I actually look at the glass being

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Speaker 5: half full. That doesn't mean that there won't be you know,

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Speaker 5: capital that's burned, companies that don't work out. But I

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Speaker 5: think overall, the benefits to enterprise productivity, you know, the

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Speaker 5: accomp I mean broadly, as this technology gets developed and deployed,

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Speaker 5: is going to be quite exciting. And I'm looking at

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Speaker 5: the optimism of you know, what's ahead from all this,

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Speaker 5: and of course try to manage the risk of downside,

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Speaker 5: the speed bumps that will inevitably come along the way.

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Speaker 1: I like the earlier you said, you know, in your job,

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Speaker 1: you worry about a lot of things, right trade tariffs,

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Speaker 1: US policy is obviously one of them. And I think

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Speaker 1: this is the first time we've spoken to you since

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Speaker 1: the Supreme Court passed down their judgment. Does the further

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Speaker 1: lack of predictability on trade policy? Is that also a

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Speaker 1: concern when it comes to business sentiment, when it comes

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Speaker 1: to your views on how the US economy is going

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Speaker 1: to cope?

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Speaker 5: You know, I think uncertainty does affect business sentiment broadly,

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Speaker 5: But I just say I don't think that. I don't

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Speaker 5: think that at the moment, US trade policy is that uncertain,

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Speaker 5: you know. I think this administration has been clear about

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Speaker 5: how they intend to drive a trade policy. I think

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Speaker 5: the Supreme Court decision affects a certain discharge of tariffs

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Speaker 5: into the economy, but there's certainly other avenues for the president.

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Speaker 5: I think the President's made quite clear, you know, how

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Speaker 5: we thinks about tariff and trade. And I think while

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Speaker 5: this administration is in place that is going to be

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Speaker 5: a construct that we have to operate in. Of course,

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Speaker 5: if there could be more can be more certainty around

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Speaker 5: exactly how that looks, And I think the important thing

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Speaker 5: is how it will look in longer perpetuity. You know,

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Speaker 5: of course the market would appreciate that, but I think

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Speaker 5: the market operates knowing that there's a level uncertainty around

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Speaker 5: trade and trade policy that we just have to adapt to.

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Speaker 4: And we have to live with.

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Speaker 1: I wanted to get a bit more on while you're here,

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Speaker 1: for example in beautiful Sydney Times, that base of increased

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Speaker 1: global and certainty, does it make a relatively more idiosyncratic

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Speaker 1: market like Australia more interesting.

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Speaker 4: Well, Australia has always been interesting market.

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Speaker 5: We have four hunder people here that are a lot

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Speaker 5: of very very important companies in Australia. We have a

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Speaker 5: good wealth business in Australia. You know, Australia is an

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Speaker 5: important market and an important economy, not just for the world,

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Speaker 5: but also for Golden Sex. You know, any market, any

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Speaker 5: economy that's important is important for gold and Sex. Given

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Speaker 5: our global footprint. I try to get here about once

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Speaker 5: a year. I try to do it around an.

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Speaker 4: Event like this.

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Speaker 5: So we've got a lot of our clients for together

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Speaker 5: first of all for this conference. But this has always

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Speaker 5: been you know, this has always been an important market,

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Speaker 5: an important economy for Golden Sacks, and you know, I

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Speaker 5: think that's consistent, you know, in any environment. So I

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Speaker 5: was here the same week last week, and I'm excited

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Speaker 5: to be back again this year.

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Speaker 1: What else are you excited about around the region? Are

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Speaker 1: there as a house view comment SECT is very bullish

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Speaker 1: on China or it's of course National People's Congress week

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Speaker 1: as well. What's your feel about that market given some

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Speaker 1: of the crosswinds on trade, on tech, on geopolitics.

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Speaker 5: Is China is one of the largest China is one

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Speaker 5: of the largest economies in the world. That's going to

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Speaker 5: continue to be one of the largest economies.

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Speaker 4: In the world. You know.

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Speaker 5: At the moment, I'm very focused on the by ladder

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Speaker 5: relationship between the US and China. I'm looking forward to

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Speaker 5: President Trump's visit with President Chief. It's planned for later

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Speaker 5: this month, the beginning of April. It'll be interesting to

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Speaker 5: see what comes out of that, and you know, whether

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Speaker 5: or not China and the US can make more progress,

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Speaker 5: you know, on their Biladder relationship. I think that's important

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Speaker 5: for growth in the world, and I think it's important

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Speaker 5: for both the US and China, and I think at

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Speaker 5: the moment that's fragile, and I'm very curious to see,

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Speaker 5: you know, how that progresses. In the meantime, Chinese markets

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Speaker 5: have done very well in the last twelve months. That's

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Speaker 5: increased capital flows, you know, into the region. We obviously

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Speaker 5: participate in that, but we're going to watch those bilateral

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Speaker 5: meetings and progress in the Biladder relationship very closely.

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Speaker 1: What would you like to come out in terms of

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Speaker 1: deliverables from.

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Speaker 5: I'd like to see, you know, more certainty and clarity

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Speaker 5: around how the bilateral relationship will work going forward. I

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Speaker 5: think there are things that the US wants and things

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Speaker 5: that China wants. I'd like more clarity around what that's

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Speaker 5: going to look like, you know, not just in twenty

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Speaker 5: twenty six, but you know, over the coming years. And

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Speaker 5: I think that's still relatively uncertain.

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Speaker 4: What are we not talking about enough.

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Speaker 1: I know we've talked a little bit about private credit.

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Speaker 1: You don't think it's a sort of a systemic risk

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Speaker 1: at this point.

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Speaker 4: I think credit formation.

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Speaker 5: Around the world is really correlated to you know, economic

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Speaker 5: growth and economic activity. I do think that we've gone

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Speaker 5: if I just look at the US market, which is

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Speaker 5: obviously when you talk about private credit, a very very

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Speaker 5: large market. The context of private credit, we've gone a

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Speaker 5: long time without a credit cycle. We've gone a long

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Speaker 5: time without a recession. I do think when you have

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Speaker 5: these long dated cycles, they're a variety of things that happen. One,

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Speaker 5: credit spreads narrow. Two lending standards, people have more capital

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Speaker 5: deploy they get aggressive, lending standards deteriorate a little bit

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Speaker 5: due diligent standards deteriorate, and so we're watching very closely

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Speaker 5: to see if there's been a little bit too much

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Speaker 5: aggression froftiness in those markets. But fundamentally, when you look

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Speaker 5: at the underlying credit portfolios, particularly below investment grade credit,

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Speaker 5: while there have been a bunch of idiosyncratic events where

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Speaker 5: there have been problems, the broad portfolios are performing reasonably well.

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Speaker 5: Why are they performing reasonably well because the economy is

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Speaker 5: doing fine, and it's very hard to have broad underperformance

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Speaker 5: and a broad diversified credit portfolio. If the economy is

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Speaker 5: doing well. When we do have a slow down in

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Speaker 5: the economy, you will see it. I think because of

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Speaker 5: the length of the cycle, you probably will find places

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Speaker 5: where the losses are higher than people.

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Speaker 4: We're very, very focused on.

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Speaker 5: Back leverage and things that could affect or amplify in

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Speaker 5: a more difficult economic environment, you know, credit deployment.

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Speaker 4: But at the moment, when you.

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Speaker 5: Look broadly across portfolios, we're not seeing things that are

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Speaker 5: super concerning.

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Speaker 4: That's a completely.

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Speaker 5: Different issue than retail participation and retail investors wanting liquidity

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Speaker 5: from what are fundamentally illiquid products, and so that's getting

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Speaker 5: a lot of attention, But that's different than the underlying

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Speaker 5: credit portfolios.

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Speaker 4: But I do think that.

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Speaker 5: When there is a slowdown in the economy or we

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Speaker 5: do get to a place where we have, you know,

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Speaker 5: a recession, you're going to see losses and credit portfolios,

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Speaker 5: and you know those losses could be meaningful, but you know,

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Speaker 5: we'll watch that closely while the economy is jugging along.

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Speaker 5: You know, that's that's not the primary focus.

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Speaker 2: That was Goldman Sachs CEO David Solomon speaking with Bloomberg's

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Speaker 2: Heidi Stroud Watts at the Goldman Sachs Australia Week Alternatives

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Speaker 2: and Macro Summit, bringing you their conversation here on the

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Speaker 2: Daybreak Asia podcast. Thanks for listening to today's episodpisode of

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

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

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

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

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

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

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Speaker 2: this is Bloomberg