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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak

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Speaker 1: Asia podcast. I'm Dog Chrisner. The tariff story grabbed headlines

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Speaker 1: in the US. That was as the Supreme Court heard

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Speaker 1: oral arguments on the legality of those levies. The justices

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Speaker 1: seemed to be a little skeptical, and a decision against

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Speaker 1: the President could force refunds of more than one hundred

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Speaker 1: billion dollars. Needless to say, it would also remove a

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Speaker 1: major burden on the US importers paying those tariffs. To

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Speaker 1: gauge reaction in Asia, I'm joined by Mark Cranfield. He

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Speaker 1: is Bloomberg Markets Live strategist joining from Singapore. Mark, thank

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Speaker 1: you so much. We know that JP Morgan is already

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Speaker 1: on record saying that tariff refunds would be a net

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Speaker 1: positive for both small businesses and US multinationals, although those

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Speaker 1: companies are unlikely to pass on the benefit to end customers. Now,

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Speaker 1: in the last session is I'm sure you saw many

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Speaker 1: of America's top retail brands were able to push higher.

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Speaker 1: But I'm really curious as to how this story is

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Speaker 1: being viewed in the Asia Pacific.

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Speaker 2: Not too much in Asia Pacific, there's certainly interest in

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Speaker 2: the potential that fentanyl might be reversed because it would

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Speaker 2: affect China, but I think it's pretty much a long road.

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Speaker 2: Nobody in Asia's really expecting a firm decision on that,

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Speaker 2: possibly even this year. It might run into January before

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Speaker 2: we see clarity on that. We have seen some short

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Speaker 2: covering in American small cap stocks overnight, not too surprising

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Speaker 2: given they were fairly underperforming against other parts of the market.

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Speaker 2: From here, as far as traders are concerned, they probably

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Speaker 2: are not going to hear much for the next few

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Speaker 2: weeks that will really influence them. In terms of that

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Speaker 2: Supreme Court decision. We've heard the opening remarks. Some people

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Speaker 2: have made their decisions based on that initial knee jerk reactions.

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Speaker 2: We are unlikely to get anything significant for financial markets

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Speaker 2: in the next few weeks. With much more important is

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Speaker 2: that is what happens with a shutdown.

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Speaker 1: Okay, the shutdown, I'm glad you brought that up. I mean,

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Speaker 1: how is it impacting markets in the Asia Pacific aside

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Speaker 1: from what's going on in the Tokyo session where US

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Speaker 1: treasuries are concerned.

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Speaker 2: Really through the channel of the US dollar especially, I

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Speaker 2: think people are beginning to reassess again, thinking that if

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Speaker 2: this shutdown isn't solved quickly, it's going to be a

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Speaker 2: net drag on the on the US dollar, So that

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Speaker 2: would be positive for Asian currencies sees and flows back

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Speaker 2: into to some of the markets from that point of view.

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Speaker 2: Also the impact on the treasury market as well. If

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Speaker 2: the shutdown continues to go like this, we will be

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Speaker 2: thinking that it will be a dampening effect on the

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Speaker 2: US economy. That will put more pressure on the Federal

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Speaker 2: Reserve to lower interest rates, keep the treasury yield curve subdued,

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Speaker 2: and that will work its way through to Asian bonb

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Speaker 2: markets as well. So probably through those two channels is

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Speaker 2: the most likely place where Asian investors are looking at this.

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Speaker 1: Help me understand as long as we're talking about currencies,

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Speaker 1: the dynamics affecting the Japanese yan right now, I'm seeing

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Speaker 1: a little bit of weakness creeping at around one fifty

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Speaker 1: three to ninety against the green bag. What's going on here?

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Speaker 2: Yeah, that's one of the things we discussed the most

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Speaker 2: here on almost on a daily basis. So much of

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Speaker 2: it is to do with the fact that the Bank

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Speaker 2: of Japan are really being quite timid in the way

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Speaker 2: in which they address the changes in interest rates. So

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Speaker 2: just yesterday we had the minutes from the September meeting

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Speaker 2: of the Bank of Japan which two people wanted to

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Speaker 2: have an immediate interest rate hike. That was unusual for

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Speaker 2: two people to vote against the rest of the board.

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Speaker 2: And yet since then we've had the October meeting where,

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Speaker 2: if anything, they were even more dubbish than they were

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Speaker 2: in September. So you have two sides to the equation.

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Speaker 2: And the Ministry of Finance have been coming in with

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Speaker 2: some verbal interventions saying that the yen is starting to

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Speaker 2: get a bit weak, but the Bank of Japan is

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Speaker 2: not indicating any readiness to come in with interest rate

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Speaker 2: hikes until they do. It's like one hand clapping. Traders

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Speaker 2: can see it. They can see that the yen is weak,

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Speaker 2: but there's not much incentive for them to go the

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Speaker 2: other way because the Bankajpan is just not behind it.

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Speaker 2: In fact, people are even thinking the banker plan might

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Speaker 2: not even raise interest rates until next year.

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Speaker 1: So we had a pretty substantial pullback and the Japanese

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Speaker 1: equity market on a Tuesday that was related to a

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Speaker 1: drop in AI related stocks. Here in the States, but

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Speaker 1: we're not that far away from a record high in

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Speaker 1: the Japanese equity market at least if you look at

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Speaker 1: the knee k can you help me understand the connection

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Speaker 1: between what's going on with the en boj policy as

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Speaker 1: you just laid out, and this move higher for the

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Speaker 1: Japanese stock market well.

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Speaker 2: The relative weakness in the currency. Obviously people from the

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Speaker 2: export point of view. You've also got a new Prime Minister,

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Speaker 2: Sane Takichi, has made it pretty clear that she intends

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Speaker 2: to come up with a fairly expansionary fiscal boost to

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Speaker 2: the economy. It's going to take a few weeks for

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Speaker 2: her to get the full program together, but obviously that's

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Speaker 2: going to be good for boosting the economic growth in Japan,

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Speaker 2: so that will be reflected in the stock market as well.

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Speaker 2: On the long term basis, Japanese equities underperformed for so

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Speaker 2: many years the rest of the world, so even now

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Speaker 2: it's still playing catch up with the rest of the world.

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Speaker 2: It's been a fantastic year for Japanese stocks, although Korean

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Speaker 2: equities have performed even better than Japan. The Ai story

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Speaker 2: is still playing out in Japan to some extent, but

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Speaker 2: there's other positives as well. Look at Nintendo just this week,

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Speaker 2: they had tremendous demand for one of their games, they

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Speaker 2: can't produce it quickly enough to fill orders, and the

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Speaker 2: stock open ten percent higher the following day. And that's

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Speaker 2: a big company, Nintendo the top ten in the Topics index.

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Speaker 2: So there's a lot of positive stories going. And if

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Speaker 2: the banker Japan's going to keep interest rate slow and

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Speaker 2: the yen's going to stay relative very week, it's almost

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Speaker 2: a no brainer. People will look at Japan and say,

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Speaker 2: well that on a relative basis compared to other people

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Speaker 2: in Asia, they have a clear advantage.

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Speaker 1: As long as we're talking about AI. In Vidio CEO

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Speaker 1: Jensen Wang was talking to the Ft recently. He said

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Speaker 1: that China will beat the US in the AI race

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Speaker 1: due to in part, lower energy costs and looser regulations.

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Speaker 1: He was basically indicating as a part of this interview

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Speaker 1: that the West, including the UK, not just the US,

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Speaker 1: is being held back by a little bit of cynicism.

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Speaker 1: Now he's talking his own book, I would imagine he

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Speaker 1: wants access to the Chinese market. But how much of

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Speaker 1: the success story as it relates to AI in China

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Speaker 1: is tied to China being able to access those in Nvidia.

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Speaker 2: Chips, certainly, it will certainly have a part to play,

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Speaker 2: although they appear to be very very quickly developing their

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Speaker 2: own chips. Multiple companies in China have been announcing that

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Speaker 2: they've got their own versions of these AI chips which

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Speaker 2: are either ready now or will be ready very soon,

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Speaker 2: so they're coming up the curve very very quickly. The

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Speaker 2: story about the power supply and power availability in China

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Speaker 2: is nothing new. It's been fairly well known, but the

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Speaker 2: fact that someone like Johnson Kwang brings it to global

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Speaker 2: attention really should be a wake up call for the

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Speaker 2: UK and the United States, because obviously they are far behind,

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Speaker 2: there's no question about it, and that gives China a

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Speaker 2: significant advantage. But as you say, he also would like

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Speaker 2: to sell more chips and make more money in China

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Speaker 2: as well, so there's multiple assets to what he's saying there.

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Speaker 2: But clearly the fact that he brings up the power

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Speaker 2: issue is something that the authorities in other countries should

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Speaker 2: be aware of.

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Speaker 1: Where is China in terms of being able to manufacture

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Speaker 1: chips right now on the foundry side. When we think

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Speaker 1: of the high end chips that in Vidia designans they

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Speaker 1: are produced by the foundry that TSMC has in Taiwan.

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Speaker 1: It could China potentially produce sophisticated chips, whether they are

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Speaker 1: digital or even analog at scale.

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Speaker 2: What we've seen If you take electric vehicles as an example,

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Speaker 2: there was a long period when Tesla was clearly the

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Speaker 2: global leader. They were far far ahead of everybody, and

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Speaker 2: just look how quickly China was able to replicate it

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Speaker 2: and catch up with Tesla. You can assume something similar

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Speaker 2: to that is probably going to take place in the

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Speaker 2: chip space as well. If they can see it and

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Speaker 2: they can identify what the need is, they seem to

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Speaker 2: be able to garner all the resources very very quickly

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Speaker 2: and get the job done faster than any other major

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Speaker 2: country in the world.

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Speaker 1: What about the way in which the Chinese economy is performing.

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Speaker 1: We talked to Catherine Limb from Bloomberg Intelligence a couple

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Speaker 1: of days ago about the Singles Day holiday and the

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Speaker 1: degree to which the government has really invested in making

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Speaker 1: sure that ssumers in China kind of engage and help

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Speaker 1: with this problem of weak domestic demand. What do we

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Speaker 1: know about the way in which China's economy has been performing.

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Speaker 1: If you look at some of the high frequency data.

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Speaker 2: There's been some mixed reports on the high frequency side.

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Speaker 2: But we've just had this big gathering again where they

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Speaker 2: came up with their latest five year plan for China,

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Speaker 2: and boosting consumer demand was right at the top of

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Speaker 2: the list, along with the tech sector and some other

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Speaker 2: industrial related features as well, but consumers was right up there.

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Speaker 2: It was a highlight within the report. So clearly the

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Speaker 2: government recognizes that they need to do a lot more

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Speaker 2: from that point of view. They've also been very active

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Speaker 2: this year. There's been a big fight over the cost

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Speaker 2: of deliveries. For example, food deliveries in China is a

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Speaker 2: huge thing and there's been a fight between companies trying

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Speaker 2: to lower the cost air which have been quite damaging,

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Speaker 2: and China authority just stepped in and said, okay, enough

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Speaker 2: is enough. You guys need to make prices realistic and

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Speaker 2: get back on an even keel here. So they are

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Speaker 2: beginning to be better at understanding when they need to

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Speaker 2: come in and to regulate the market on a hands

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Speaker 2: on approach and step back when they need to. But

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Speaker 2: all in all, they clearly recognize that the consumers have

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Speaker 2: to play a bigger part in the overall economy, and

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Speaker 2: that's part of the next five year plan.

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Speaker 1: Mark. Before I let you go, I want to get

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Speaker 1: your take on what's been going on with the South

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Speaker 1: Korean equity market. We had a big pullback Tuesday. Not

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Speaker 1: a surprise there, but it seemed as though for such

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Speaker 1: a long time that COSPY has been on a tear.

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Speaker 1: Helped me understand what's driving the price action.

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Speaker 2: They have a tremendous retail sector. Their retail investors are

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Speaker 2: as big in career as they probably are in the

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Speaker 2: United States, possibly even more so. They have a very

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Speaker 2: strong AI theme, which is benefiting from everything you hear

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Speaker 2: about going on the United States with Open Eye and Nvidia,

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Speaker 2: exactly the same kind of things that are happening in Korea.

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Speaker 2: Because they are the partner companies to those big US

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Speaker 2: giants Samsung, sk Heiniz. These kind of companies are benefiting

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Speaker 2: from the global demand for AI and for the deals

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Speaker 2: which are being done across the curve there. Even an

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Speaker 2: old school company like Hondai signed a deal within Video

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Speaker 2: a few weeks ago, and even their stock is going

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Speaker 2: through the roof as well, So it's become the leveraged

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Speaker 2: AI play in Asia, just by being involved in Korean equities.

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Speaker 2: Plus the currency is relatively cheap as well compared to others,

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Speaker 2: so from a foreign investor's point of view, get a

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Speaker 2: little bit extra kicker by going in. From that, so

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Speaker 2: it's been the outstanding story, probably getting a little bit

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Speaker 2: overdone at this stage, and that's why you're getting the

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Speaker 2: high volatility around here. But for the moment, both Japan

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Speaker 2: and Korea Taiwan to some extent, people still think they

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Speaker 2: are the best way to play AI in the Asian space.

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Speaker 1: All right, Mark, we'll leave it there. It's always a pleasure.

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Speaker 1: Thanks very much. Mark Cranfield, Bloomberg Markets Live strategist on

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Speaker 1: the line from Singapore here on the Debrikisha padst Welcome

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Speaker 1: back to the Daybreak Asia podcast, time Dog Prisner. The

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Speaker 1: US equity market advanced in the Wednesday session as dip

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Speaker 1: buyer stepped in following Tuesday's pullback in AI related stocks.

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Speaker 1: Semiconductor shares rallied. We had the Philadelphia Semiconductor Index up

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Speaker 1: about three percent, and there was AI related news after

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Speaker 1: the bell. Snap announced a four hundred million dollar partnership

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Speaker 1: with Perplexity AI and the British chip designer Armholdings. Gave

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Speaker 1: it bullish forecast for revenue given the abundant interest in

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Speaker 1: chips for AI data centers. Joining me now is Robert Shine.

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Speaker 1: He is the chief investment officer at Blankie Shine Wealth Management.

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Speaker 1: Robert is on the line from Palm Desert, California. Thank

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Speaker 1: you for making time to chat with me. Can we

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Speaker 1: begin by looking at this AI trade? I mentioned the

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Speaker 1: pullback that occurred on Tuesday today, How do you read

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Speaker 1: the landscape right now where AI is concerned.

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Speaker 3: AI is still in the throes of growth, go go mode,

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Speaker 3: even though we've had a stall or setback a day

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Speaker 3: or so ago. If you go back even a week

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Speaker 3: and you go to the Hyperscalers and meg Tech and

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Speaker 3: you hear how they've reported, you know full well that

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Speaker 3: we are in the early stages of the AI growth story.

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Speaker 1: I want to focus if I can, on Palanteer Technologies

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Speaker 1: shares gap down about eight percent on Tuesday. This company

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Speaker 1: may have become the poster child for extreme valuations where

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Speaker 1: AI is concerned. Palenteer is trading at around two hundred

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Speaker 1: and sixty five times estimated earnings. So, Robert, I'm curious

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Speaker 1: where do you sit in terms of the conversation around valuations,

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Speaker 1: especially when a name like Palenteers seems so incredibly.

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Speaker 3: Stretched, absolutely one of those that is gotten way ahead

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Speaker 3: of itself from a valuation standpoint, even though the story

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Speaker 3: you know, is incredible, but you know, one of the

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Speaker 3: ways you got to think about it, how do you

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Speaker 3: invest in an environment like this? And it's all about

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Speaker 3: stock selections. So while there's companies with the Palenteer TYPEE,

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Speaker 3: there are other companies that are still have tremendous room

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Speaker 3: to run, not to that extent because we believe that's

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Speaker 3: ahead of itself, but there are a lot of AI

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Speaker 3: stories that are still undervalue.

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Speaker 1: So where are you looking for value? If we can

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Speaker 1: talk about the broad AI picture, there are obviously names

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Speaker 1: like palente which we just pointed out is pretty rich

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Speaker 1: in terms of valuation. There's the Nvidia story, and then

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Speaker 1: if you get into the hyperscalers, it's obviously a story

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Speaker 1: about Alphabet Amazon, to a lesser extent, maybe Microsoft. But

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Speaker 1: I'm curious about how you discover value if you want

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Speaker 1: to stay committed to this thesis.

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Speaker 3: We're still committed to the mega tech at the early

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Speaker 3: stages right now, simply because the operational efficiency mindset, which

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Speaker 3: has really become very infectious. You know. Again, you see

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Speaker 3: companies like Amazon investing like they are getting the growth

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Speaker 3: in the cloud, like we're seeing it play out, but

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Speaker 3: yet they're also laying off thirty thousand employees where they're

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Speaker 3: still focused on the bottom line and it's a testament

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Speaker 3: that they could do more with less. So the Mega

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Speaker 3: Tech is still where we're seeing this simply because of

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Speaker 3: the AI offsets and productivity growth. Even Goldman Sachs said

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Speaker 3: that it's a one and a half percent a creative

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Speaker 3: to output, you know, year over year across across the baseline.

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Speaker 3: There are four stages as we're seeing of AI, the

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Speaker 3: traditional AI, generative AI, and then the pre A and

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Speaker 3: then but we're still in the first couple of stages

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Speaker 3: right now for from stage one stage two, and so

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Speaker 3: Mega Tech is really leading the way and that's where

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Speaker 3: I would stay simply because of the free cash flow

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Speaker 3: and the fortress like balance sheets.

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Speaker 1: Can you give me a sense on how much above

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Speaker 1: your cost basis right now? You are in some of

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Speaker 1: these big names tremendous.

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Speaker 3: I mean we've been in you know, the apples, Amazon's

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Speaker 3: Microsoft for decades, and so that seems to be the

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Speaker 3: issue across Wall Street. Not only is the contribution relative

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Speaker 3: to the cap weighting or the S and P index

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Speaker 3: how much they've grown, how much they contribute, but yet

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Speaker 3: a lot of Wall Streets locked into you know, low

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Speaker 3: cost basis on all of our taxable accounts. So we

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Speaker 3: do trem like we did trim in Nvidia, we do

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Speaker 3: trim some of the larger mega tech and reinvest that

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Speaker 3: in diversify that into balanced. And I will tell you

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Speaker 3: that's not the phone call you want to get from

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Speaker 3: a client that sees you sell Nvidia and just a

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Speaker 3: little bit you take your cost bases off the table

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Speaker 3: and you hit a tax gain, and then they see

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Speaker 3: that you invested in something like Warren Buffett and Berkshire,

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Speaker 3: which is slow and steady and you know over time

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Speaker 3: it will win out, but it's not in the fast

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Speaker 3: lane like tech.

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Speaker 1: So you mentioned Buffett. His cash position right now is

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Speaker 1: it a record high? And I'm curious about the level

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Speaker 1: of cash you have on hand right now.

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Speaker 3: Yeah, we're sitting about an eight to ten percent cash

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Speaker 3: position across the board and cash, I mean cash equivalents.

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Speaker 3: It's still getting well over four percent for our clients.

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Speaker 3: But we again step into volatility. We did that earlier

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Speaker 3: in the year in April, and when the markets basically

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Speaker 3: came to us, we saw a lot of opportunities. Much

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Speaker 3: like Warren Buffett is moving forward, you know, we keep

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Speaker 3: dry powder on the balance sheets for just you know,

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Speaker 3: whether it's a headline, a tweet, or some geopolitical event

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Speaker 3: that provides an opportunity. We still believe in the growth

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Speaker 3: of the market and the growth of the bull market

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Speaker 3: as well. Moving forward.

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Speaker 1: So if there's a pullback in some of these AI names,

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Speaker 1: are you a buyer or do you want to be

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Speaker 1: diversified away from some of the big gains that we

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Speaker 1: have seen right now in the big cap tech space

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Speaker 1: that you just laid out.

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Speaker 3: If an investor has no exposure, you jump on some

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Speaker 3: of the pullbacks. If you're overexposed overweighted in your portfolio,

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Speaker 3: it's okay to start trimming into the strength. You're not

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Speaker 3: going to go broke taking a gain, and over time

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Speaker 3: you could reallocate that to again the value play, which

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Speaker 3: balances your portfolio and keeps that balanced in the portfolio

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Speaker 3: when there is volatility and gives you an opportunity, and

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Speaker 3: also keep cash on the sidelines so that you're not

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Speaker 3: one hundred percent invested, so you can jump on these opportunities.

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Speaker 1: Let's talk a little bit about the macro picture visa

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Speaker 1: viv the Fed. I mean, if you look at the

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Speaker 1: Atlanta GDP now forecast, I think the growth that they

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Speaker 1: are suggesting in compiling data is around four percent. It's

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Speaker 1: unclear as to whether or not we get a rate

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Speaker 1: cut in December. I think the probability right now in

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Speaker 1: money markets is around seventy percent. Today's economic news was

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Speaker 1: pretty upbeat. I mean, US services activity expanding at the

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Speaker 1: fastest pace in eight months. You look at the numbers

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Speaker 1: from the private payroll services provider ADP, we had job

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Speaker 1: growth in the private sector jumping by forty two thousand.

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Speaker 1: So it's not clear that the FED is going to

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Speaker 1: continue to be accommodative, at least in the short term.

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Speaker 1: Or am I wrong on that?

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Speaker 3: You're one hundred percent right. And that's why we saw

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Speaker 3: the market pull back when Jerome Powell basically took the

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Speaker 3: Fed put off the table of a built in baked

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Speaker 3: in December rate cut, and so markets are pulling ahead

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Speaker 3: gains from twenty twenty six into twenty twenty five. We

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Speaker 3: still believe that's going to be the case in terms

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Speaker 3: of front running the Fed and believing that there are

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Speaker 3: more rates to come. But our biggest concern moving forward

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Speaker 3: is just that the Fed we saw that we do

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Speaker 3: need the Federal Reserve to bring down interest rates to

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Speaker 3: help housing, which would unlock a good percentage of the

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Speaker 3: overall economy that has been frozen installed for so many years.

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Speaker 3: But what if that doesn't happen. We're also going to

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Speaker 3: get a potential reacceleration in the GDP in the new year,

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Speaker 3: simply because the One Big Beautiful Bill, the free cash

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Speaker 3: flow boost to the S and P five hundred companies

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Speaker 3: right away as well as to the consumer. January one,

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Speaker 3: there's a tax reduction that goes into effect in payroll

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Speaker 3: taxes to the QUBBAL one hundred and fifty billion dollars

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Speaker 3: for next year. So that extra money liquidity is going

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Speaker 3: to go in the system. That could go against what

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Speaker 3: the Fed is ultimately trying to do, which is, you know,

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Speaker 3: put the brakes on in Inflation right now is at

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Speaker 3: a low grade fever, and so you know, even tariffs

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Speaker 3: is that one time inflation of bump and oil is

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Speaker 3: working in its favor right now. But again, it's shelter

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Speaker 3: and it comes down to the FED and rates.

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Speaker 1: So where does the FED leave you when you look

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Speaker 1: at the financials and you're talking about rates. The expectation

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Speaker 1: here is that we do maybe not in December, but

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Speaker 1: in the first part of next year, we do maybe

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Speaker 1: get another cut. Where are you with the financials in

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Speaker 1: that scenario.

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Speaker 3: Financials is a quality sector again, solid balance sheets and

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Speaker 3: the large and mega cap names in that space. And

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Speaker 3: as we know historically, when rates come down, a lot

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Speaker 3: of that flows to by way of IPOs and liquidity

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Speaker 3: and just a great space to be in, and financials

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Speaker 3: will do well as it relates to a lower interest

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Speaker 3: rate environment moving forward.

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Speaker 1: So it's not necessarily a story about more lending. It's

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Speaker 1: a story about maybe trading revenue. Maybe it's a story

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Speaker 1: about merger and acquisition activity. If you're looking at the

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Speaker 1: big banks.

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Speaker 3: It'll unlock merger and acquisition activity and IPOs again and again,

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Speaker 3: unlock that Wall Street spirit.

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Speaker 1: Robert will leave it there, Thank you so very much.

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Speaker 1: Robert Shine is the chief investment officer at Blankie Shine

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Speaker 1: Wealth Management. He's on the line from Palm Desert, California

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Speaker 1: here on the Daybreak Asia podcast. Thanks for listening to

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Speaker 1: today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 1: we look at the story shaping markets, finance, and geopolitics

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Speaker 1: in the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 1: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 1: Join us again tomorrow for insight on the market moves

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Speaker 1: from Hong Kong to Singapore and Australia. I'm Doug Chrisner,

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Speaker 1: and this is Bloomberg