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Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis
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Speaker 1: And now one of our main stories, China and Russia
Speaker 1: promising to intensify cooperation encountering the US. Russian President Putin
Speaker 1: is in Beijing for a state visit. Now, mister Putin
Speaker 1: and Chinese President She have warned of growing nuclear tension
Speaker 1: between their countries and the United States. We spoke earlier
Speaker 1: with JP Morgan Chase CEO Jamie Diamond. He says, despite
Speaker 1: geopolitical tensions, the US needs to engage fully and deeply
Speaker 1: with China.
Speaker 3: China is not a natural eneer of the United States.
Speaker 3: A lot of their own problems. So you know, to me,
Speaker 3: we could work together as best we can and then
Speaker 3: we have common interest climate, anti nuclear.
Speaker 1: Deforation, JP Morgan Chase CEO Jamie Diamond. Now, despite these
Speaker 1: heightened tensions, he is moving with caution in China. By
Speaker 1: the way, he was speaking earlier with Bloomberg's friends in
Speaker 1: Laqua at JP Morgan Chase's Global Markets conference in Paris.
Speaker 2: Brian, let's bring in John Leu, Bloomberg executive editor in
Speaker 2: Beijing for a discussion about this. So, John, I'm curious
Speaker 2: whether or not you know, we see the relationship between
Speaker 2: Russia and China as transactional in nature, that's what many
Speaker 2: analysts say, or one of shared values and warm bonds.
Speaker 4: I think there's I think there's a little bit of both.
Speaker 4: I think there's no denying that the relationship serves both
Speaker 4: China and Russia well. At this point in time. There
Speaker 4: is a long history between these two countries. Part of
Speaker 4: that history was quite tense. There was a conflict back
Speaker 4: in the sixties and seventies between China and Russia. There's
Speaker 4: a long border that the two countries share. More recently,
Speaker 4: I think the fact that both of them have major
Speaker 4: differences with the United States and with the Western general
Speaker 4: that has pushed the two together and has been a
Speaker 4: big reason why the relationship is strengthened in the recent past.
Speaker 1: Is the dependency on one another pretty much balanced, or
Speaker 1: does someone have the upper hand. Let's say, does China
Speaker 1: essentially have the upper hand in this relationship with Russia?
Speaker 4: Economically, China is the much bigger player on the global stage.
Speaker 4: It is technologically and when it comes to electric cars,
Speaker 4: when it comes to batteries, all sorts of these things.
Speaker 4: China is more advanced when it comes to technology and
Speaker 4: know how, and so in this relationship, especially given the
Speaker 4: fact that Russia is essentially cut off from the global
Speaker 4: economy in many ways because of the war in Ukraine,
Speaker 4: has to depend on China. It doesn't really have another choice,
Speaker 4: and so if you look at it from that perspective,
Speaker 4: China has advantages in that relationship.
Speaker 2: Vladimir Putin described a relationship as one of the main
Speaker 2: stabilizing forces in the international arena. Many in the West
Speaker 2: would probably scoffit that a little bit, But what about
Speaker 2: global South.
Speaker 4: I think the global South is I would call it
Speaker 4: sitting on the fence at this moment. Obviously, from mister
Speaker 4: Putin's perspective, the war he's prosecuting. The prosecuting in Ukraine,
Speaker 4: he would argue as legitimate protecting Russian rights. Obviously, there
Speaker 4: are many the United States of the West at large
Speaker 4: who would object to that, who would say no, it
Speaker 4: is he who is the aggressor. I think for the
Speaker 4: Global South, they are more interested in economic development, how
Speaker 4: to improve the living standards of their populations, and this war,
Speaker 4: I think is having some real down side effects that
Speaker 4: are not good for that that effort, and so there
Speaker 4: is a real interest in seeing some way to put
Speaker 4: it into the conflict.
Speaker 1: So if the Global South is sitting on the sidelines,
Speaker 1: and then I think it's basically the European Union and
Speaker 1: the US against China and Russia. I mean, am I
Speaker 1: right in that? And in what is the kind of
Speaker 1: the level of tension that exist? Are we stalemated here
Speaker 1: or is something going to give in one way or
Speaker 1: the other?
Speaker 4: I think the China, the way that I have heard
Speaker 4: the Chinese position on Ukraine described, is sitting on the
Speaker 4: fence but leaning very significantly pro Russia. And so what
Speaker 4: you have seen is China providing rhetorical support, China providing
Speaker 4: things that are dual use technology, so things that have
Speaker 4: a civilian but also potentially a military use. What we
Speaker 4: have not seen is China is not like North Korea
Speaker 4: or Iran, providing weapons for the Russian war effort. And
Speaker 4: so it is I think certainly Putin and she have
Speaker 4: a very strong relationship in Beijing is trying to support Russia,
Speaker 4: does not want to see Russia fall apart. Is it
Speaker 4: is it explicitly US West versus Russia and China. I
Speaker 4: think that's a little bit hard to say at the moment.
Speaker 2: So we know that there's a lot of symbolism at
Speaker 2: play here, and we've talked a little bit about that.
Speaker 2: Also some practical considerations, some contracts signed, some agreements made.
Speaker 2: You know, I don't want to put you on the
Speaker 2: spot and go into a lot of detail on this,
Speaker 2: but if you could just in broad strokes talk a
Speaker 2: little bit about what they are achieved in that area.
Speaker 4: So there, the two economies are becoming ever more integrated,
Speaker 4: and that is partly because they fit because Russia produces
Speaker 4: a lot of energy commodities that China needs in China
Speaker 4: has a lot of consumer manufactured goods that China that
Speaker 4: Russia now needs to import because it cannot from anywhere else,
Speaker 4: and so they fit economically, but also because of the war,
Speaker 4: because Russia is dependent more on China economically than ever before,
Speaker 4: the two countries have become much more integrated so we've
Speaker 4: seen agreements when it comes to agricultural products to AI
Speaker 4: to all sorts of industries, and I think that will continue.
Speaker 4: And you actually heard mister Putin talking about how ninety
Speaker 4: percent of trade between the two countries now is being
Speaker 4: done in ruble and and emphasizing that that now protects
Speaker 4: them against a third country of the United States.
Speaker 1: When it comes to oil, we know that a fair
Speaker 1: amount of oil from Russia is going to China, but
Speaker 1: I don't think we can ignore the fact that a
Speaker 1: lot of Iranian crude has made its way to China
Speaker 1: for refining, and this has been a real source spot
Speaker 1: for the Treasury Department. With the possibility of sanctions being
Speaker 1: imposed on Chinese financial institutions, can you imagine a world
Speaker 1: john where something like that would unfold.
Speaker 4: I think the Chinese financial institutions, especially the big global players,
Speaker 4: have been extremely cautious about how how they deal with
Speaker 4: Russian interest, Russian companies, Iranian companies, any any any entity
Speaker 4: that is sanctioned, because the last thing they want to
Speaker 4: be is cut off from the US dollar markets around
Speaker 4: the world, and that that would be that would be
Speaker 4: extremely harmful to their well being. And so they are
Speaker 4: being very careful. That does not rule out that there
Speaker 4: are some companies in China who are less integrated with
Speaker 4: the global economy and global markets who would take that risk.
Speaker 4: I think this is an ongoing issue and will continue
Speaker 4: to be as long as the United States and China
Speaker 4: cannot agree on what is the what is the best
Speaker 4: way forward for the world at.
Speaker 2: Large, John, I wanted to just spend a minute talking
Speaker 2: about the IMF and its criticism of the United States
Speaker 2: really on a number of levels, surging debt, trade restrictions,
Speaker 2: and some of these policies that are aimed at China
Speaker 2: any in the FED. So I'm curious, you know, the
Speaker 2: the IMF is is basically saying, why can't we all
Speaker 2: get along? Is the IMF mostly in blame with the
Speaker 2: US or does it share some of that blame for China?
Speaker 4: I think I think over the last thirty years, in
Speaker 4: the more recent past, we lived through a period of
Speaker 4: global economic integration of free trade where goods, capital and talent,
Speaker 4: people for the most part, were able to move very
Speaker 4: freely around the world. That is coming to an end,
Speaker 4: and I think that is becoming more obvious by the day.
Speaker 4: And you heard we interviewed Emmanuel Maccron, the President of France,
Speaker 4: and he talked about how now the US is anti
Speaker 4: w World Trade Organization, China's anti World Trade Organization. It's
Speaker 4: only Europe that's still supporting the W two. So I
Speaker 4: think a lot of people are feeling that way that
Speaker 4: what used to be the world order, the way the
Speaker 4: global economy worked, is now changing. And I think the
Speaker 4: mf's complaint about US policy reflects.
Speaker 1: That we have the new president, that of Taiwan that
Speaker 1: will be inaugurated next week, and we know, as you
Speaker 1: said to us the last time we had a chance
Speaker 1: to visit, John, that this is obviously the hot spot
Speaker 1: when you look at US China. Is there something that
Speaker 1: Russia Ukraine has taught China about how to approach a
Speaker 1: situation like Taiwan very quickly?
Speaker 4: I think the Ukraine situation probably is going to make
Speaker 4: Beijing more cautious about any considerations about military options because
Speaker 4: that has not worked out the way that the Russians
Speaker 4: vision that about Vladimir Putin. The vision has not been
Speaker 4: a quick war executed swiftly. And Taiwan, unlike Ukraine, is
Speaker 4: an island, it is protected by the United States. It
Speaker 4: would be a much more challenging proposition than I think
Speaker 4: Ukraine has been.
Speaker 2: John, thanks so much for taking out the time to
Speaker 2: be with us, John Liu, Bloomberg Executive Editor in Beijing.
Speaker 2: Let's get to our guests. An it'sa NIP head of
Speaker 2: fixed income research for Asia at upp I. So we
Speaker 2: had some FED speak today and they hit some familiar
Speaker 2: notes there with higher for longer on rates. The FED
Speaker 2: maybe in a little bit of a tricky position here.
Speaker 2: I want to get your views on this because they
Speaker 2: didn't want to overreact after about three months of harder
Speaker 2: inflation readings. Now we just got a little softer inflation
Speaker 2: reading and they probably will feel some pressure not to
Speaker 2: overreact to this either, so they'll have to kind of
Speaker 2: maintain this positioning of higher for longer for at least
Speaker 2: a time. How does that affect your approach to fixed income?
Speaker 5: Basically, we reckon that the inflation it's going to be
Speaker 5: sticky going forward, even though we see one figure on
Speaker 5: the core CPI which has been seems to be lower.
Speaker 5: But I think for fat themselves one figure may not
Speaker 5: be good enough really to determine the trend. They need
Speaker 5: to monitor more the labor market since showing some sort
Speaker 5: of weakness from the non vane perio number last time.
Speaker 5: But then again, you know, one figure doesn't mean anything,
Speaker 5: So I think FED would be patients and at the
Speaker 5: same time they will monitor the data. What we feel
Speaker 5: would be cut could happen in December this year rather
Speaker 5: than you know, like the market sort of consensus of
Speaker 5: saying July we reckon that. You know, FED would more
Speaker 5: need more time to look at that, so most likely
Speaker 5: there will only be one cut December twenty twenty four.
Speaker 5: Can we talk.
Speaker 1: About China now? There is so much going on there,
Speaker 1: especially where the property market is concerned. One of our
Speaker 1: Bloomberger reporters pushed out a story talking about the government
Speaker 1: in Beijing planning to hold a meeting today with key
Speaker 1: officials to discuss remedies. And today, from what I understand,
Speaker 1: is the day that we're going to have the ultra
Speaker 1: long bonds sold into the market. I think it's about
Speaker 1: one hundred and thirty eight billion. How do you expect
Speaker 1: this sale to go? Well?
Speaker 5: Basically, the the long bonds, Oh, it's more targeting for
Speaker 5: the infrastructure projects. From what we reckon, we reckon, it
Speaker 5: could receive, you know, pretty good response. The main reason
Speaker 5: we'll be there has been sort of like limited supply
Speaker 5: on the long end for a while, so anything that
Speaker 5: put out at the moment would definitely help to set
Speaker 5: the benchmark curve and at the same time, you know,
Speaker 5: for people to be able to invest longer. Talking about
Speaker 5: the property market, the measures that they you know, trying
Speaker 5: to put up, it's basically trying to clear a few things.
Speaker 5: First will be to look at the inventory level, because
Speaker 5: I think that's the top focus that they have. Will
Speaker 5: be sort of lower the inventory level that at the moment.
Speaker 5: The other will be trying to restore the confidence of
Speaker 5: the buyer and also to stabilize the price of the property.
Speaker 5: So I think they need to target it, you know,
Speaker 5: in different ways in order to stabilize the market. But
Speaker 5: at this point we reckon, you know, we still would
Speaker 5: look at what's going on and what's the policy they're
Speaker 5: going to come up. We still reckon that those defaulted
Speaker 5: property developer would still continue with their restructuring because of
Speaker 5: the quidity tight So.
Speaker 2: On the story that we moved about officials meeting with
Speaker 2: various sectors of the market trying to push local governments
Speaker 2: to buy up some of these unsold homes. Obviously the
Speaker 2: developers who are beneficiary in their stocks jumps, what do
Speaker 2: you think about their credit? I mean, is there is
Speaker 2: there sort of a sneaky time to make some money.
Speaker 5: There in a way? I think you know their target
Speaker 5: is basically to clear inventory. At the moment, we still
Speaker 5: need to see what the plans look like. In particular,
Speaker 5: they're saying that they're all they are you going to
Speaker 5: buy from a properly developer at this counter prices? And
Speaker 5: what sort of this counter prices would that have a
Speaker 5: spill over impact to this secondary market as well on
Speaker 5: other properties. So we don't know yet. So we need
Speaker 5: to look at the plan and how it's going to
Speaker 5: fund it through s OE, through LGV. So I think
Speaker 5: there's a lot of questions still on what sort of
Speaker 5: plan they're going to come up equities and bonds. I
Speaker 5: will look at it in a different way because for
Speaker 5: developers who are unable to make payments, those deforce it,
Speaker 5: I think they would still continue with the restructuring. But
Speaker 5: those that have been surviving I think definitely would be
Speaker 5: a good move for them to improve their liquid to
Speaker 5: say so, we get the.
Speaker 1: Data at the top of the hour of the monthly
Speaker 1: activity data for April. I'm wondering if there's a house
Speaker 1: view from UBP on what we're likely to see, especially
Speaker 1: where the consumer is concerned.
Speaker 5: We reckon that it could you know, sort of like
Speaker 5: stabilize a little bit in particular on the consumption side,
Speaker 5: but were not particularly you know, like looking at a
Speaker 5: significant jump in terms of the consumption. But we think
Speaker 5: that it's going to be sort of like you know,
Speaker 5: neutral going forward.
Speaker 2: So we've talked quite a lot about China today. Where
Speaker 2: else in Asia would you see value in credit or
Speaker 2: indeed in sovereigns.
Speaker 5: Well, we have to look at, you know, where the
Speaker 5: fat would go right at the moment, we reckon like
Speaker 5: December will be the time that is going to get
Speaker 5: rigged cut, So fixing income we look at it would
Speaker 5: be more for carrey rather than for capital gain.
Speaker 6: For Asia.
Speaker 5: We like some of the short data Hong Kong corporates,
Speaker 5: some of the local banks here in which they're giving
Speaker 5: you around like six percent yel which is not too bad.
Speaker 5: And we also like some of the Korean corporates and
Speaker 5: also banks, but they are just around like five point
Speaker 5: three five point five percent, which is not too exciting,
Speaker 5: but good for carry. We also like some of the
Speaker 5: Japanese insurance company, but they are a little bit longer integration.
Speaker 5: We still prefer IG three to five years. But then
Speaker 5: one thing that I you know, we recently increase exposure
Speaker 5: with short data high yield because we reckon that credit
Speaker 5: spread would be resilient. So it's you know, would be
Speaker 5: good to look at some of the Indian high yield
Speaker 5: at this stage.
Speaker 2: Okay, Well, Anita, thanks very much, not only for the
Speaker 2: discussion but for coming into our studios here. We appreciate
Speaker 2: it and it's a nip. Head of fixed income research
Speaker 2: for Asia at ubp.
Speaker 1: Our guest is adri Go, a head of set allocation
Speaker 1: for Standard Chartered Wealth Management Group. Audrea joins us from
Speaker 1: the line city of Singapore. Good of you to stop
Speaker 1: by final trading day of the week. A couple of
Speaker 1: things seem to be positive for risk assets right now.
Speaker 1: In the States, I think the market is kind of
Speaker 1: increasingly confident in this idea of a genuine soft landing.
Speaker 1: And from the China side, we're getting indications that officials
Speaker 1: are really kind of trying to address the property problem
Speaker 1: and maybe maybe the economy will feel some sense of fortification.
Speaker 1: Are you apt to belong risk assets right now?
Speaker 6: Yes, we are quite constructive in terms of all week
Speaker 6: to our equity markets relative to bonds. We continue to
Speaker 6: believe that the soft lending narrative is actually very much
Speaker 6: in play, given that even from a US well data
Speaker 6: point has been disappointing in recent months. For example, they
Speaker 6: are few reasonably supportive of not too hot not too
Speaker 6: cold economy that shouldn't figure any additionary heights by the fact,
Speaker 6: for that matter, So if you look at the latest
Speaker 6: industrial production or even sales scrow for that matter, it's
Speaker 6: thought somewhat in April. But having said that, labor markets
Speaker 6: will continue to be charging along quite nicely, so that
Speaker 6: really feeds into the narrative of a soft lending which
Speaker 6: should then support risk assets in our view, and on
Speaker 6: China itself and the cooking of a China is dat
Speaker 6: point is actually starting to improve, nbs being economic surprises
Speaker 6: actually holding up better relative to the US, which is
Speaker 6: why in the short term some funds throw are rotating
Speaker 6: out from the US into China as well.
Speaker 2: I will push back a little not a personal view,
Speaker 2: but just an observation that revenue for some of these
Speaker 2: big companies like Ali, Baba, Tencent, and JD dot Com.
Speaker 2: We're only up around six to seven percent. You know,
Speaker 2: that's a far cry from what those companies used to
Speaker 2: be doing. And in terms of equities in the US,
Speaker 2: you know, we're sort of back to what we thought
Speaker 2: we had before, which is disinflation. We had this spook
Speaker 2: in the first three months, and now we're back to
Speaker 2: something that was already factored into markets. The market's already
Speaker 2: gained a lot, so you know, they're probably not a
Speaker 2: big catalyst from disinflation because we knew it, we planned
Speaker 2: on it, we expected it. And in terms of growth,
Speaker 2: growth looks like it's going to stumble a little bit
Speaker 2: here in the short term. So are you concerned at
Speaker 2: all that, you know, we might actually have a little
Speaker 2: bit of trouble gaining inequities even while the environment seems okay.
Speaker 6: Well, I think there's room for other parts of the
Speaker 6: equity market to catch up, whether is it you know,
Speaker 6: from the US tech broadening out into other parts of
Speaker 6: other sector sectors in the US, or whether is it
Speaker 6: from the US into other parts of the markets, for
Speaker 6: example in China in Asia. So we do see room
Speaker 6: for that to happen if you think about so, I
Speaker 6: think the the fundamental construct behind US equities is really
Speaker 6: solid when we've just been through the firs Q earning
Speaker 6: season and more than tutters of the companies have outperform
Speaker 6: their estimates. And more importantly, we have also seen analysts
Speaker 6: revising up their earliest estimates for this year and into
Speaker 6: next year as well. So that's quite a strong fundamental
Speaker 6: backdrop supporting US equities. Yes, you're right, they could take
Speaker 6: a breeder in the short term because they have done
Speaker 6: pretty well to date so far, which is why in
Speaker 6: the near term we do see some signs of funds
Speaker 6: actually rotating our US which has performed well into some
Speaker 6: of the laggots. And here we talk about China as
Speaker 6: whereas Asia where data point are maybe not as disupporting
Speaker 6: as before but starting to stabilize. But above all, positioning
Speaker 6: is light and they are also quite cheap from evaluation perspective.
Speaker 1: Adre where are you guiding clients right now into what markets?
Speaker 6: So we are still await in terms of the US market.
Speaker 6: So that's our largest or wait that we have. In
Speaker 6: addition to that as well, we are also constructive on
Speaker 6: Japanese aquities and we see the recent consolidation in Japanese
Speaker 6: equities because of a stronger year as a we're buying
Speaker 6: opportunity for investors to consider buying on debs. So those
Speaker 6: are the two key markets that we like. But above
Speaker 6: all we are constructed on global equities as a whole
Speaker 6: because we do see the business cycle continuing and extending,
Speaker 6: given that romanetary policy is probably said to turn easier
Speaker 6: over the last half of this competuvity a year and
Speaker 6: half a goal where it was all about itat heights.
Speaker 2: Yeah, one good thing with this inflation might be a
Speaker 2: lower dollar. I know there's so many inputs in the currencies,
Speaker 2: it's kind of hard to figure these things. But if
Speaker 2: the dollar does weekend, is that particularly good for Asia
Speaker 2: and even more so for Southeast Asia.
Speaker 6: Yeah, certainly there would be one additional catalyst for Asian
Speaker 6: markets China markets to perform is via lower US dollar
Speaker 6: as well as lower a US bord views as well.
Speaker 6: So that normally has a positive effect in terms of
Speaker 6: fund throws into this part of the world. In terms
Speaker 6: of the dollar, this year we have a more of
Speaker 6: a ringebound view because it is an election year and
Speaker 6: depending on the policy to be enlected by the incoming
Speaker 6: new president, the dollar may react quite differently, which is why.
Speaker 6: But this year we actually believe the expect the dollar
Speaker 6: to probably treat in a range until we get more
Speaker 6: charity in terms of what the new policies might be
Speaker 6: from the next president.
Speaker 1: We've been talking a lot on this show about artificial
Speaker 1: intelligence today. How are you feeling about the AI trade
Speaker 1: these days? Is it pretty much stretched so finally that
Speaker 1: there may be limited upside from here?
Speaker 6: No, we're still like the AI trade. We do think
Speaker 6: that there's still room for it to continue. In fact,
Speaker 6: one of the key driver for AI is to really
Speaker 6: enhance productivity for some of the range. Media worker for example,
Speaker 6: mid the market worker for example, which is an area
Speaker 6: which I think is underappreciated by the market because if
Speaker 6: the thing about it, instead of thirty minutes to write
Speaker 6: a report, we can spend on ten minutes. So it's
Speaker 6: a great productivity booster.
Speaker 1: Okay, a big booster. We'll leave it there. A great
Speaker 1: weekend to you, Audrey Audrey Gough, head of Asset Allocation
Speaker 1: at Standard Chartered Wealth managementoint US from Singapore.
Speaker 2: This is the Bloomberg Daybreak Asia podcast, bringing to the
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