1
00:00:02,520 --> 00:00:07,040
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

2
00:00:10,880 --> 00:00:14,080
Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Krisner.

3
00:00:14,480 --> 00:00:18,080
Speaker 2: So US tariffs on Chinese goods are now in effect,

4
00:00:18,160 --> 00:00:21,640
Speaker 2: and then China issued a response of its own. Coming up,

5
00:00:21,680 --> 00:00:24,760
Speaker 2: we'll be looking at the currency market reaction with Eddie Chung.

6
00:00:24,880 --> 00:00:29,600
Speaker 2: He is senior em strategist at Credit Agricol CIB But

7
00:00:29,720 --> 00:00:33,000
Speaker 2: let's begin with Alphabet after the bell Here in the US,

8
00:00:33,080 --> 00:00:36,440
Speaker 2: Alphabet reported earnings for the latest quarter. Joining us now

9
00:00:36,479 --> 00:00:39,640
Speaker 2: for a closer look is Annabel Jewelers, Bloomberg Tech reporter.

10
00:00:40,040 --> 00:00:43,279
Speaker 2: She's in our radio studio in Hong Kong. We can

11
00:00:43,320 --> 00:00:45,680
Speaker 2: talk about the earnings in a moment, but I want

12
00:00:45,720 --> 00:00:49,320
Speaker 2: to circle back to the retaliatory tariffs that we got

13
00:00:49,400 --> 00:00:53,199
Speaker 2: yesterday from Beijing. Part of that story was that Beijing

14
00:00:53,320 --> 00:00:56,200
Speaker 2: is going to probe Alphabet. Can you help me understand

15
00:00:56,240 --> 00:00:57,120
Speaker 2: what's going on here?

16
00:00:57,400 --> 00:00:59,360
Speaker 3: Well, it is a little bit confusing, actually, you could

17
00:00:59,360 --> 00:01:01,840
Speaker 3: probably say, because a lot of people would know that

18
00:01:01,880 --> 00:01:04,880
Speaker 3: the Google hasn't been available as a search engine in

19
00:01:04,959 --> 00:01:07,840
Speaker 3: China going all the way back to twenty ten. So

20
00:01:08,400 --> 00:01:10,959
Speaker 3: you know, the question is really what exactly is China

21
00:01:11,040 --> 00:01:13,679
Speaker 3: going to be looking into, and essentially what they're announced

22
00:01:13,800 --> 00:01:18,880
Speaker 3: is an investigation into Alphabet's Google for alleged antitrust violations.

23
00:01:19,400 --> 00:01:22,080
Speaker 3: The real focus of this is perhaps going to pertain

24
00:01:22,120 --> 00:01:24,200
Speaker 3: and this is what our Bloomberg intelligence team is saying,

25
00:01:24,200 --> 00:01:26,240
Speaker 3: but it could relate to the market dominance of the

26
00:01:26,280 --> 00:01:29,959
Speaker 3: Google Android mobile phone operating system, which is in China's

27
00:01:29,920 --> 00:01:33,320
Speaker 3: smartphone sector, of course, and according to data from IDC,

28
00:01:33,520 --> 00:01:36,440
Speaker 3: approximately seventy percent of smartphones that are sold in China

29
00:01:36,440 --> 00:01:39,440
Speaker 3: were Android based last year, so that could be the

30
00:01:39,480 --> 00:01:41,240
Speaker 3: sort of the broader focus. But in terms of the

31
00:01:41,240 --> 00:01:44,959
Speaker 3: market reaction yesterday, we actually didn't see Alphabet shares moving

32
00:01:45,160 --> 00:01:47,200
Speaker 3: really very much off the back at all. In fact,

33
00:01:47,200 --> 00:01:49,720
Speaker 3: they're closed two percent higher, but it is still the

34
00:01:50,040 --> 00:01:53,280
Speaker 3: cheapest stock in the Magnificent seven group of tech companies,

35
00:01:53,280 --> 00:01:55,960
Speaker 3: and that seems to be more what invests the focusing

36
00:01:56,000 --> 00:01:59,000
Speaker 3: on have been focusing on, of course, ahead of the earnings.

37
00:01:59,120 --> 00:02:02,320
Speaker 2: So what does this investigation in China mean for Google?

38
00:02:02,920 --> 00:02:05,520
Speaker 3: Well, you know, there's a lack of clarity I guess

39
00:02:05,560 --> 00:02:08,240
Speaker 3: on that front moving forward, and even in the earnings call,

40
00:02:08,320 --> 00:02:10,440
Speaker 3: for instance, today I was listening to it and I

41
00:02:10,480 --> 00:02:13,040
Speaker 3: was reading again the transcript later on, it didn't actually

42
00:02:13,080 --> 00:02:15,920
Speaker 3: come up at all, But certainly there has been greater

43
00:02:16,040 --> 00:02:19,959
Speaker 3: scrutiny on Google's practices and a range of different jurisdictions,

44
00:02:20,280 --> 00:02:23,160
Speaker 3: but the company really hasn't reacted too much to this

45
00:02:23,200 --> 00:02:23,920
Speaker 3: one just yet.

46
00:02:24,000 --> 00:02:25,840
Speaker 2: So let's talk a little bit about what we heard

47
00:02:25,960 --> 00:02:29,440
Speaker 2: on the earnings call disappointing revenue here, is that fair

48
00:02:29,480 --> 00:02:31,320
Speaker 2: to say, and that is one of the reasons the

49
00:02:31,320 --> 00:02:32,160
Speaker 2: stock took a hit.

50
00:02:32,639 --> 00:02:36,240
Speaker 3: Yeah, and really I mean disappointing. With sort of some

51
00:02:36,360 --> 00:02:39,080
Speaker 3: nuances around that. The big focus was, Yes, at a

52
00:02:39,080 --> 00:02:41,000
Speaker 3: top line level, we came in a bit weaker than

53
00:02:41,040 --> 00:02:44,480
Speaker 3: had been expected, But the cloud division was the particular

54
00:02:44,639 --> 00:02:47,640
Speaker 3: watch for investors because this is really sort of the

55
00:02:47,680 --> 00:02:50,320
Speaker 3: growth driver for the business. And after the announce of

56
00:02:50,400 --> 00:02:53,359
Speaker 3: deep Seek, for instance, the Chinese ai startup that's promising

57
00:02:53,400 --> 00:02:55,040
Speaker 3: to do the same as the likes of open Ai

58
00:02:55,160 --> 00:02:58,440
Speaker 3: for instance, or chat GPT, but for less compute power

59
00:02:58,520 --> 00:03:02,160
Speaker 3: and less less chips, well going into it, this is

60
00:03:02,240 --> 00:03:05,520
Speaker 3: really the big focus. Actually, the cloud division disappointed a

61
00:03:05,520 --> 00:03:07,760
Speaker 3: little bit, and we saw revenue coming in at eleven

62
00:03:07,800 --> 00:03:11,120
Speaker 3: point two billion dollars or thereabouts. The estimate had been

63
00:03:11,120 --> 00:03:13,040
Speaker 3: for twelve point two, So it's only a real two

64
00:03:13,120 --> 00:03:16,640
Speaker 3: percent below the forecast or thereabouts, but still investors are

65
00:03:16,639 --> 00:03:19,960
Speaker 3: pretty cautious of that. Given the global macro environment and

66
00:03:20,040 --> 00:03:23,000
Speaker 3: the need for tech companies as well to really be

67
00:03:23,040 --> 00:03:25,079
Speaker 3: able to justify their intense ROI.

68
00:03:25,320 --> 00:03:28,320
Speaker 2: The revenue shortfall is going to pressure any company, whether

69
00:03:28,320 --> 00:03:31,040
Speaker 2: it's Alphabet or any other big tech company to kind

70
00:03:31,080 --> 00:03:33,880
Speaker 2: of justify the capex spending. And in this case, when

71
00:03:33,919 --> 00:03:36,920
Speaker 2: you have a storyline Deep Seek that is bringing to

72
00:03:36,960 --> 00:03:39,240
Speaker 2: the four this idea of maybe there is a more

73
00:03:39,280 --> 00:03:43,240
Speaker 2: efficient way about training these AI models that you've got

74
00:03:43,240 --> 00:03:45,480
Speaker 2: to be very careful when you're throwing a lot of money.

75
00:03:45,480 --> 00:03:47,600
Speaker 2: It's something that has yet to kind of return that

76
00:03:47,680 --> 00:03:51,040
Speaker 2: as you said, that return that investment exactly.

77
00:03:51,280 --> 00:03:54,000
Speaker 3: And again I was listening in on the earnings call.

78
00:03:54,040 --> 00:03:56,080
Speaker 3: Would Deep Seat be raised at all? And this was

79
00:03:56,120 --> 00:03:59,120
Speaker 3: a question that came up. Google said that its own

80
00:03:59,160 --> 00:04:02,040
Speaker 3: models is still really efficient. But in terms of the

81
00:04:02,080 --> 00:04:06,560
Speaker 3: capex this is interesting because another reason perhaps that we're

82
00:04:06,560 --> 00:04:09,240
Speaker 3: seeing this really sharp market reaction the stock is really

83
00:04:09,320 --> 00:04:12,240
Speaker 3: tumbled in late trade today is because the company is

84
00:04:12,280 --> 00:04:15,840
Speaker 3: guiding for significant outlay for this year, so they're expecting

85
00:04:15,840 --> 00:04:19,240
Speaker 3: capex around seventy five billion dollars. The estimate from Wall

86
00:04:19,279 --> 00:04:22,039
Speaker 3: Street had been for around fifty eight billion dollars. It's

87
00:04:22,080 --> 00:04:24,200
Speaker 3: more than they spend in twenty twenty four as well.

88
00:04:24,400 --> 00:04:26,360
Speaker 3: A lot of it's going to come in the first quarter,

89
00:04:26,560 --> 00:04:29,680
Speaker 3: so they're really doubling down in an environment again where

90
00:04:29,720 --> 00:04:33,559
Speaker 3: there's concerns whether that need for compute power is going

91
00:04:33,640 --> 00:04:35,159
Speaker 3: to be sustained moving forward.

92
00:04:35,360 --> 00:04:35,520
Speaker 4: Now.

93
00:04:35,520 --> 00:04:38,200
Speaker 2: I know you cover a lot of technology from Hong Kong.

94
00:04:38,279 --> 00:04:41,120
Speaker 2: We also heard from Advanced micro Devices after the bell

95
00:04:41,160 --> 00:04:43,839
Speaker 2: and I think these two stories are connected right when

96
00:04:43,839 --> 00:04:46,240
Speaker 2: it comes to this idea that we're going to be

97
00:04:46,279 --> 00:04:50,000
Speaker 2: spending much more money to develop this computing power. And AMD,

98
00:04:50,160 --> 00:04:52,240
Speaker 2: I think in their data center division that was a

99
00:04:52,240 --> 00:04:53,680
Speaker 2: bit of disappointment on that front.

100
00:04:54,200 --> 00:04:56,880
Speaker 3: Yeah, exactly, and again it sort of all relates back

101
00:04:56,920 --> 00:04:59,239
Speaker 3: to this story around deep seek and a we're seeing

102
00:04:59,240 --> 00:05:02,120
Speaker 3: sort of a new paradigm emerging for AI tools. We

103
00:05:02,160 --> 00:05:05,120
Speaker 3: move from the large language model to the small language

104
00:05:05,120 --> 00:05:08,160
Speaker 3: model instead. And so that's really shining a spotlight again,

105
00:05:08,200 --> 00:05:10,840
Speaker 3: as you say, on AMD's data center unit, and that

106
00:05:11,160 --> 00:05:13,159
Speaker 3: was a weakest spot that came through in the earning.

107
00:05:13,200 --> 00:05:16,000
Speaker 3: So the division reported revenue of around three point nine

108
00:05:16,040 --> 00:05:19,320
Speaker 3: billion dollars for the latest quarter. The average analyst estimate

109
00:05:19,360 --> 00:05:21,880
Speaker 3: had been for four point one So there is that

110
00:05:22,000 --> 00:05:25,640
Speaker 3: concern that AMD's push into AI equipment is losing momentum,

111
00:05:25,640 --> 00:05:28,760
Speaker 3: and again we're seeing that reflected in the share price today.

112
00:05:28,920 --> 00:05:32,000
Speaker 2: So as long as we're talking about deep Seek, is

113
00:05:32,040 --> 00:05:33,840
Speaker 2: there news that you can share? I know that from

114
00:05:33,920 --> 00:05:36,680
Speaker 2: the US side, there have been a few investigations, one

115
00:05:37,480 --> 00:05:40,160
Speaker 2: on the part of Microsoft and open Ai looking at

116
00:05:40,160 --> 00:05:43,760
Speaker 2: how this model was trained. And then I guess from

117
00:05:43,800 --> 00:05:45,720
Speaker 2: the point of view of the US government whether or

118
00:05:45,760 --> 00:05:48,880
Speaker 2: not deep Seek was able to access some of these

119
00:05:48,880 --> 00:05:53,400
Speaker 2: more advanced semiconductors that have been under export controls, and

120
00:05:53,400 --> 00:05:55,919
Speaker 2: I'm thinking principally the chips from Nvidia. Do we know

121
00:05:55,960 --> 00:05:56,600
Speaker 2: anything more?

122
00:05:57,160 --> 00:05:59,840
Speaker 3: No, this has been a sort of a question as

123
00:05:59,839 --> 00:06:03,880
Speaker 3: well well. For its part, Nvidia said that deep Seak

124
00:06:03,920 --> 00:06:06,960
Speaker 3: had been able to build this within the export restrictions

125
00:06:06,960 --> 00:06:10,240
Speaker 3: that are in place. There is concern about how possibly

126
00:06:11,120 --> 00:06:13,960
Speaker 3: deep Seak could have used other AI models like chat

127
00:06:14,000 --> 00:06:16,440
Speaker 3: GPT for instance, to train its own. So these are

128
00:06:16,480 --> 00:06:20,200
Speaker 3: sort of ongoing investigations for the market or the moves

129
00:06:20,240 --> 00:06:22,839
Speaker 3: that we're seeing in Asia. There are some interesting ones

130
00:06:22,880 --> 00:06:25,680
Speaker 3: where governments are clearly becoming more wary. One that just

131
00:06:25,760 --> 00:06:28,760
Speaker 3: broke in the last few hours is actually in Australia

132
00:06:28,800 --> 00:06:32,200
Speaker 3: because they've banned deep seek ai services from all government

133
00:06:32,240 --> 00:06:35,560
Speaker 3: systems and devices. That doesn't extend, of course, to personal

134
00:06:35,600 --> 00:06:39,799
Speaker 3: devices of private citizens. But there is real question marks

135
00:06:39,800 --> 00:06:42,040
Speaker 3: around how this tool is going to be used, where

136
00:06:42,080 --> 00:06:44,520
Speaker 3: it's going to be available. But it does seem like

137
00:06:44,680 --> 00:06:47,160
Speaker 3: they did manage to get around those export restrictions, or

138
00:06:47,160 --> 00:06:50,320
Speaker 3: they weren't rather evading the export restrictions that have already

139
00:06:50,360 --> 00:06:50,719
Speaker 3: in place.

140
00:06:50,760 --> 00:06:53,520
Speaker 2: Annabell, thank you so much for helping us understand more

141
00:06:53,520 --> 00:06:57,520
Speaker 2: about what's happening in the area of technology. Bloomberg's Annabel Jewelers,

142
00:06:57,520 --> 00:07:00,800
Speaker 2: who covers tech for us from our bureau in Hong Kong,

143
00:07:00,880 --> 00:07:12,360
Speaker 2: joining us here on the Daybreak Asia podcast. Welcome back

144
00:07:12,400 --> 00:07:15,760
Speaker 2: to the Daybreak Asia Podcast. I'm Doug Chrisner. The latest

145
00:07:15,840 --> 00:07:19,360
Speaker 2: US China trade war continues to loom over foreign exchange

146
00:07:19,400 --> 00:07:21,920
Speaker 2: markets right now. The offshore you want is holding near

147
00:07:22,040 --> 00:07:25,560
Speaker 2: record lows this morning. Yesterday, you'll recall the US imposed

148
00:07:25,640 --> 00:07:29,120
Speaker 2: that blanket ten percent tariff on Chinese goods, and China

149
00:07:29,160 --> 00:07:32,880
Speaker 2: responded with its own retaliatory tariffs on some fourteen billion

150
00:07:32,920 --> 00:07:36,600
Speaker 2: dollars worth of American goods, and Beijing took other steps

151
00:07:36,640 --> 00:07:39,080
Speaker 2: as well. For more, we heard from Eddie Chung. He

152
00:07:39,160 --> 00:07:43,720
Speaker 2: is the senior em strategist at Credit Agricol CIB. Eddie

153
00:07:43,720 --> 00:07:46,960
Speaker 2: spoke earlier with Bloomberg, Sherryon and Heidi Stroud Watts.

154
00:07:47,360 --> 00:07:49,480
Speaker 5: Let's start with a big news today, I mean, Chinese

155
00:07:49,480 --> 00:07:52,360
Speaker 5: mainland markets coming back online from the Lunar New Year holidays,

156
00:07:52,360 --> 00:07:55,320
Speaker 5: and there's so much to digest on the tariff front,

157
00:07:55,360 --> 00:07:57,640
Speaker 5: not to mention that they missed out all of the

158
00:07:57,720 --> 00:08:00,520
Speaker 5: volatility around the Chinese startup Deep Seek.

159
00:08:00,560 --> 00:08:02,160
Speaker 1: What are you expecting today.

160
00:08:02,400 --> 00:08:05,000
Speaker 6: Well, I think for the moment, if we're talking about FX,

161
00:08:05,000 --> 00:08:06,880
Speaker 6: it's going to be still steady.

162
00:08:06,920 --> 00:08:07,800
Speaker 4: As she goes story.

163
00:08:07,880 --> 00:08:10,880
Speaker 6: Basically, heading into the holidays, we saw there was some

164
00:08:10,960 --> 00:08:13,960
Speaker 6: pressure on the CNY. The authorities were basically holding dollars

165
00:08:14,040 --> 00:08:15,200
Speaker 6: d and y fixing.

166
00:08:14,960 --> 00:08:15,800
Speaker 4: Very very steady.

167
00:08:16,080 --> 00:08:18,640
Speaker 6: Since then, as you mentioned, there's been a lot of volatility.

168
00:08:19,040 --> 00:08:21,840
Speaker 6: Dollar snage has been moving around back and forth. But

169
00:08:22,000 --> 00:08:25,400
Speaker 6: our view is in the context of this potential trade

170
00:08:25,400 --> 00:08:27,680
Speaker 6: war between US and China, in the context of the

171
00:08:27,720 --> 00:08:31,080
Speaker 6: tears that are happening, it doesn't really make sense for

172
00:08:31,120 --> 00:08:34,280
Speaker 6: trying to introduce more FX volatility at this point in time.

173
00:08:34,440 --> 00:08:37,480
Speaker 6: So in terms of dollar CNY fixing today, we are

174
00:08:37,520 --> 00:08:41,360
Speaker 6: expecting a fairly steady fix. They've been holding this fixing

175
00:08:41,400 --> 00:08:44,880
Speaker 6: below seven twenty for a while. We don't expect them

176
00:08:44,920 --> 00:08:48,199
Speaker 6: to allow a very very large move upward in dollars

177
00:08:48,240 --> 00:08:50,960
Speaker 6: cd andy spot at this time. There's really no sense

178
00:08:51,000 --> 00:08:55,199
Speaker 6: in giving the US more ammunition to hold against China

179
00:08:55,280 --> 00:08:57,320
Speaker 6: right now. So it's going to be more a steady

180
00:08:57,360 --> 00:08:58,760
Speaker 6: as she goes for now.

181
00:09:00,080 --> 00:09:03,040
Speaker 1: When it comes to morgor market currencies, given of course

182
00:09:03,240 --> 00:09:06,560
Speaker 1: the pressure on the weakness of the Chinese yuan that's

183
00:09:06,600 --> 00:09:10,600
Speaker 1: always been perceived as an anchor for em Asia, how

184
00:09:10,640 --> 00:09:13,280
Speaker 1: are we expecting them to trade given also the other

185
00:09:13,360 --> 00:09:15,760
Speaker 1: side of that trade, the strength of the US dollar.

186
00:09:16,520 --> 00:09:17,760
Speaker 4: Well, I think it's been very clear.

187
00:09:17,800 --> 00:09:21,240
Speaker 6: I think firstly the US dollar remains in the driving seats,

188
00:09:21,559 --> 00:09:23,640
Speaker 6: and as long as for dollars, seeing while we're not

189
00:09:23,720 --> 00:09:27,320
Speaker 6: seeing unprecedented volatility, as long as we're not seeing massive

190
00:09:27,400 --> 00:09:30,240
Speaker 6: volatility from that point of view, the impact on dollar

191
00:09:30,280 --> 00:09:30,959
Speaker 6: Asia in our.

192
00:09:31,000 --> 00:09:32,440
Speaker 4: View is still fairly muted.

193
00:09:33,120 --> 00:09:36,880
Speaker 6: Of course, in the context of the trade war or

194
00:09:36,920 --> 00:09:40,200
Speaker 6: the tariff news that that is happening right now, that

195
00:09:40,280 --> 00:09:43,160
Speaker 6: does form a bit of a drag in our view.

196
00:09:43,240 --> 00:09:47,760
Speaker 6: The more cyclical currencies, the more trade oriented currencies, the

197
00:09:47,920 --> 00:09:51,200
Speaker 6: likes of the Korean one, Malaysian ring at Singapore dollar,

198
00:09:51,280 --> 00:09:53,920
Speaker 6: these are the currencies which will be a lot more impacted.

199
00:09:54,280 --> 00:09:56,959
Speaker 4: We have seen a bit more volatility in these.

200
00:09:56,800 --> 00:10:00,319
Speaker 6: Currencies, but for now, as the dollar is soft a

201
00:10:00,320 --> 00:10:03,760
Speaker 6: little bit since yesterday, it's probably looks to be a

202
00:10:03,760 --> 00:10:06,240
Speaker 6: bit more of a positive start. But after that it

203
00:10:06,440 --> 00:10:09,720
Speaker 6: will still be very very driven by the trade headlines,

204
00:10:10,320 --> 00:10:13,800
Speaker 6: how China responds, and of course where we start with dollar,

205
00:10:13,880 --> 00:10:14,320
Speaker 6: C and Y.

206
00:10:15,000 --> 00:10:17,520
Speaker 7: The main impact, of course has been the primary targets

207
00:10:17,600 --> 00:10:21,480
Speaker 7: of these tariffs China, Canada, Mexico. But I do wonder

208
00:10:21,559 --> 00:10:23,959
Speaker 7: there's some optimism when it comes to how much China

209
00:10:24,000 --> 00:10:27,400
Speaker 7: is diversified. It's trade flows, But what's the vulnerability is

210
00:10:27,440 --> 00:10:28,720
Speaker 7: if you take a look at some of the trading

211
00:10:28,760 --> 00:10:32,600
Speaker 7: partners within Asia, Vietnam for example, or even the likes

212
00:10:32,640 --> 00:10:33,120
Speaker 7: of Korea.

213
00:10:34,040 --> 00:10:36,000
Speaker 4: I think there's two sets of vulnerabilities.

214
00:10:36,000 --> 00:10:38,520
Speaker 6: So firstly, if we look at Trump and his policies,

215
00:10:39,320 --> 00:10:41,960
Speaker 6: he is still very very focused on the biattle trade

216
00:10:42,000 --> 00:10:46,000
Speaker 6: deficits between US and the individual Asian economies.

217
00:10:46,000 --> 00:10:48,120
Speaker 4: So for example, as you mentioned, Vietnam has a.

218
00:10:48,200 --> 00:10:54,080
Speaker 6: Very very large surplus, Korea, Taiwan, Malaysia, these also have

219
00:10:54,280 --> 00:10:58,199
Speaker 6: very very large trade surpluses and it has actually increased

220
00:10:58,280 --> 00:11:01,280
Speaker 6: since his first term. From that point of view, we

221
00:11:01,400 --> 00:11:04,200
Speaker 6: do expect that to be a point of vulnerability to

222
00:11:04,280 --> 00:11:06,880
Speaker 6: also be a concern. If you look at the USFX

223
00:11:06,920 --> 00:11:10,480
Speaker 6: Treasury report that came out in November of last year,

224
00:11:10,760 --> 00:11:14,880
Speaker 6: these also highlighted the large bilateral surpluses.

225
00:11:14,240 --> 00:11:16,360
Speaker 4: That these economies had with the US. So that will

226
00:11:16,400 --> 00:11:17,040
Speaker 4: be the first thing.

227
00:11:17,400 --> 00:11:20,120
Speaker 6: The second thing will be well in terms of the

228
00:11:20,160 --> 00:11:23,840
Speaker 6: integration of the supply chains across Asia. Clearly, these trade

229
00:11:23,840 --> 00:11:28,080
Speaker 6: oriented economies, they also are very integrated in terms of

230
00:11:28,160 --> 00:11:31,360
Speaker 6: the supply chains going through China going to the US,

231
00:11:31,440 --> 00:11:31,840
Speaker 6: and of.

232
00:11:31,760 --> 00:11:33,199
Speaker 4: Course vice versa.

233
00:11:33,400 --> 00:11:37,200
Speaker 6: So if we see this rising trade friction coming through

234
00:11:37,240 --> 00:11:41,760
Speaker 6: between US and China, then clearly for all these economies.

235
00:11:41,440 --> 00:11:43,480
Speaker 4: It will also impact their trade flows.

236
00:11:43,840 --> 00:11:46,160
Speaker 6: We saw this morning, we saw the Singapore PMI came

237
00:11:46,200 --> 00:11:49,199
Speaker 6: out a bit lower in terms of the Asian PMIS.

238
00:11:49,240 --> 00:11:51,160
Speaker 6: Actually it has been turning a bit more mixed. We

239
00:11:51,200 --> 00:11:53,200
Speaker 6: believe that heading into the end of the year, there

240
00:11:53,280 --> 00:11:57,000
Speaker 6: was a bit of front loading for exports and for manufacturing,

241
00:11:57,000 --> 00:11:59,480
Speaker 6: and now that potentially softens off of it now that

242
00:11:59,520 --> 00:12:01,479
Speaker 6: we are now entering January and February.

243
00:12:02,080 --> 00:12:05,120
Speaker 7: Your baseline when it comes to China tariffs was a

244
00:12:05,160 --> 00:12:07,480
Speaker 7: great deal, sort of more serious and what we've seen

245
00:12:07,559 --> 00:12:11,199
Speaker 7: so far has that baseline shifted or is there always

246
00:12:11,559 --> 00:12:15,280
Speaker 7: that degree of uncertainty because there's so many different ways

247
00:12:15,320 --> 00:12:17,440
Speaker 7: that this would play out. If he gets a deal,

248
00:12:17,520 --> 00:12:20,440
Speaker 7: if there isn't a deal, if there's you know, broader

249
00:12:20,480 --> 00:12:23,440
Speaker 7: issues that might result in a more hawkish approach from

250
00:12:23,480 --> 00:12:24,360
Speaker 7: the new administration.

251
00:12:25,280 --> 00:12:27,560
Speaker 6: Well, absolutely, I would definitely agree there is a lot

252
00:12:27,559 --> 00:12:29,000
Speaker 6: of uncertainty at this point in time.

253
00:12:29,040 --> 00:12:32,480
Speaker 4: So our baseline is we don't We're not in.

254
00:12:32,400 --> 00:12:35,160
Speaker 6: The most aggressive scenario of sixty percent tariffs.

255
00:12:35,400 --> 00:12:37,160
Speaker 4: We're looking for somewhere in between.

256
00:12:36,920 --> 00:12:39,840
Speaker 6: Around forty or thirty to forty percent or so. So

257
00:12:39,960 --> 00:12:43,080
Speaker 6: clearly Trump starting off with ten percent, I would say

258
00:12:43,120 --> 00:12:46,720
Speaker 6: it's slightly positive in terms of that China response yesterday.

259
00:12:46,720 --> 00:12:49,080
Speaker 6: It was also very very targeted, So I would say

260
00:12:49,120 --> 00:12:51,320
Speaker 6: both sides are kind of positioning for there to be

261
00:12:51,360 --> 00:12:55,360
Speaker 6: some sort of a negotiation However, with regards to negotiating

262
00:12:55,440 --> 00:12:58,880
Speaker 6: and whether there will be a successful negotiation, I think

263
00:12:58,960 --> 00:13:01,000
Speaker 6: there are still a lot of issues which both sides

264
00:13:01,040 --> 00:13:03,959
Speaker 6: will still need to work on, and probably that will

265
00:13:04,000 --> 00:13:06,000
Speaker 6: mean that what we saw over the past two days

266
00:13:06,040 --> 00:13:09,280
Speaker 6: is more of an opening salvo. It just allows the

267
00:13:09,280 --> 00:13:11,600
Speaker 6: two sides to come to the table talk a bit more,

268
00:13:11,760 --> 00:13:14,720
Speaker 6: and potentially there will be more escalation further out. We're

269
00:13:14,840 --> 00:13:17,400
Speaker 6: just at the beginning of Trump's term. Both sides are

270
00:13:17,440 --> 00:13:20,720
Speaker 6: still feeling each other out. Of course, there are pressures

271
00:13:20,720 --> 00:13:24,320
Speaker 6: from China's side as well, but there's also pressures both ways.

272
00:13:24,600 --> 00:13:26,920
Speaker 6: If we do see a massive escalation of teriffs, our

273
00:13:27,080 --> 00:13:30,040
Speaker 6: estimate is in terms of the GDP, a drag on

274
00:13:30,200 --> 00:13:32,320
Speaker 6: US growth that can drag down US both by about

275
00:13:32,360 --> 00:13:35,000
Speaker 6: one hundred and ten basis points over several years. It

276
00:13:35,080 --> 00:13:37,440
Speaker 6: can push up inflation by semity basis points. So that

277
00:13:37,600 --> 00:13:40,520
Speaker 6: is also going to impact the US and we must

278
00:13:40,520 --> 00:13:41,840
Speaker 6: not forget that side of the picture.

279
00:13:41,840 --> 00:13:44,320
Speaker 4: It's not just going to be about the China growth story.

280
00:13:44,440 --> 00:13:47,679
Speaker 6: So given all these considerations, I think it makes sense

281
00:13:47,720 --> 00:13:50,080
Speaker 6: for both sides to come to the table. But in

282
00:13:50,160 --> 00:13:52,760
Speaker 6: terms of getting to a final agreement, we think probably

283
00:13:52,800 --> 00:13:54,600
Speaker 6: that will need a bit more time, and that's also

284
00:13:54,640 --> 00:13:56,680
Speaker 6: why we're probably in a bit more of an uncertain

285
00:13:56,800 --> 00:13:57,600
Speaker 6: environment for now.

286
00:13:58,480 --> 00:13:58,680
Speaker 4: Eddie.

287
00:13:58,720 --> 00:13:59,720
Speaker 1: Always great to have you with us.

288
00:13:59,800 --> 00:14:03,760
Speaker 7: Eddie Chung, Senior Emergie market Strategist at Credit AGRICOLCIB.

289
00:14:06,320 --> 00:14:09,680
Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

290
00:14:09,840 --> 00:14:13,240
Speaker 2: Asia Edition podcast. Each weekday, we look at the story

291
00:14:13,280 --> 00:14:17,640
Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

292
00:14:17,679 --> 00:14:21,800
Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

293
00:14:21,920 --> 00:14:24,920
Speaker 2: or anywhere else you listen. Join us again tomorrow for

294
00:14:25,040 --> 00:14:28,560
Speaker 2: insight on the market moves from Hong Kong to Singapore

295
00:14:28,960 --> 00:14:32,720
Speaker 2: and Australia. I'm Doug Chrisner, and this is Bloomberg