1
00:00:00,080 --> 00:00:07,000
Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

2
00:00:11,200 --> 00:00:14,720
Speaker 2: Welcome to the Daybreak Asia Podcast. I'm Dan Schwartzman. Doug

3
00:00:14,760 --> 00:00:18,320
Speaker 2: Chrisner's off this week Asian stocks open higher on Monday,

4
00:00:18,320 --> 00:00:21,919
Speaker 2: following two consecutive weeks of declines. As easing trade tensions

5
00:00:21,920 --> 00:00:25,720
Speaker 2: between the world's largest economies bolstered sentiment. Shares in Japan

6
00:00:25,760 --> 00:00:29,160
Speaker 2: and South Korea rose, while Australia dipped after the region's

7
00:00:29,160 --> 00:00:33,160
Speaker 2: equities fell on Friday and mid concerns on US regional banks. Also,

8
00:00:33,240 --> 00:00:36,800
Speaker 2: one of China's most important meetings begins on Monday. Chinese

9
00:00:36,840 --> 00:00:40,000
Speaker 2: President Shijen Ping and other ruling Communist Party elites will

10
00:00:40,000 --> 00:00:42,080
Speaker 2: gather in Beijing to map out goals for the next

11
00:00:42,080 --> 00:00:44,960
Speaker 2: five years. For more, we heard from Fabi and yip Ig,

12
00:00:45,080 --> 00:00:48,360
Speaker 2: international market analyst. Yip spoke to Bloomberg's Sherry On and

13
00:00:48,400 --> 00:00:49,360
Speaker 2: Anabel Drulers.

14
00:00:49,680 --> 00:00:52,320
Speaker 1: What will you be watching out for this week because, Auntie,

15
00:00:52,400 --> 00:00:54,760
Speaker 1: of data to digest coming from China, but also at

16
00:00:54,800 --> 00:00:57,480
Speaker 1: the same time all of these trade headlines as well.

17
00:00:59,200 --> 00:01:01,319
Speaker 3: That's right, Sherry, A lot of things to watch out

18
00:01:01,360 --> 00:01:04,319
Speaker 3: for this week. Today, it's going to be a very

19
00:01:04,319 --> 00:01:08,360
Speaker 3: important day for China as we see the planum kicking

20
00:01:08,400 --> 00:01:10,000
Speaker 3: off in China, so it's going to be a four

21
00:01:10,040 --> 00:01:14,560
Speaker 3: day session where we'll be hearing from the Chinese leaders

22
00:01:14,920 --> 00:01:19,039
Speaker 3: talking about the social as well as the economical agenda

23
00:01:19,120 --> 00:01:21,760
Speaker 3: for the next five years. So twenty twenty six to

24
00:01:21,840 --> 00:01:25,880
Speaker 3: twenty thirty, we expect to see a lot of news

25
00:01:26,200 --> 00:01:30,080
Speaker 3: around how they will be controlling the deflationary problem in

26
00:01:30,200 --> 00:01:35,959
Speaker 3: China as well as developing the AI and tech advancement

27
00:01:36,040 --> 00:01:39,480
Speaker 3: in China, so a lot of things to watch out for. Obviously,

28
00:01:39,640 --> 00:01:43,400
Speaker 3: personal changes will also be an important topic that we'll

29
00:01:43,440 --> 00:01:47,920
Speaker 3: be focusing for the meetings. And obviously outside of China,

30
00:01:48,080 --> 00:01:51,080
Speaker 3: we see in Japan that there will be a lot

31
00:01:51,080 --> 00:01:58,040
Speaker 3: of key developments on Takaichi's potential election at the Lower House,

32
00:01:58,120 --> 00:02:00,600
Speaker 3: so maybe we'll see a new crime ins in Japan

33
00:02:01,040 --> 00:02:01,840
Speaker 3: being elected.

34
00:02:03,880 --> 00:02:07,040
Speaker 1: I think with China forced though, Fabian, I mean you said,

35
00:02:07,160 --> 00:02:08,960
Speaker 1: we do have plenty of data and a lot of

36
00:02:09,000 --> 00:02:11,440
Speaker 1: it could actually point to more weakness. But at the

37
00:02:11,520 --> 00:02:15,680
Speaker 1: same time, an incredible rally in Chinese stocks MSCI China

38
00:02:15,800 --> 00:02:18,799
Speaker 1: headed for its best year since twenty seventeen or so,

39
00:02:19,480 --> 00:02:23,240
Speaker 1: does that rally have legs, especially given the AI theme

40
00:02:23,320 --> 00:02:24,359
Speaker 1: that you also mentioned.

41
00:02:26,600 --> 00:02:29,760
Speaker 3: Yeah, I think there's a lot of optimism being priced

42
00:02:29,960 --> 00:02:32,560
Speaker 3: into the Chinese stock markets right now, but if you

43
00:02:32,600 --> 00:02:35,840
Speaker 3: look at the corporate earnings, I think the numbers are

44
00:02:36,280 --> 00:02:41,160
Speaker 3: quite quite pretty diverge. I would say we're seeing roughly

45
00:02:41,240 --> 00:02:45,520
Speaker 3: like a below two percent earnings growth in companies that

46
00:02:45,560 --> 00:02:47,880
Speaker 3: are listed on shore, and if you compare that to

47
00:02:47,919 --> 00:02:52,520
Speaker 3: the US, where we're seeing earnings growth of low teens,

48
00:02:53,240 --> 00:02:56,239
Speaker 3: we do see a stock difference and there could be

49
00:02:56,280 --> 00:02:59,959
Speaker 3: a discrepancy between how the market is looking at potential

50
00:03:00,200 --> 00:03:04,359
Speaker 3: growth in AI as well as bio technology, but at

51
00:03:04,360 --> 00:03:07,120
Speaker 3: the same time, the corporate earnings are yet to reflect that,

52
00:03:07,240 --> 00:03:09,720
Speaker 3: so I would be a little bit cautious on that.

53
00:03:09,800 --> 00:03:14,080
Speaker 3: And last week an interesting observation as well, where we

54
00:03:14,160 --> 00:03:18,839
Speaker 3: saw tech and AI stocks did pull back from their

55
00:03:18,960 --> 00:03:23,560
Speaker 3: highs and there was a sector rotation into SOE companies

56
00:03:23,680 --> 00:03:29,040
Speaker 3: that did pretty well during the years before, So that

57
00:03:29,080 --> 00:03:30,960
Speaker 3: could be an interesting trend to watch.

58
00:03:33,639 --> 00:03:36,200
Speaker 4: It does seem that that markets the sentiment is still

59
00:03:36,200 --> 00:03:41,240
Speaker 4: pretty fragile because we've seen elevator volatility for instance. What

60
00:03:41,280 --> 00:03:43,320
Speaker 4: do you think that that sets us up for in

61
00:03:43,440 --> 00:03:46,080
Speaker 4: terms of the key risks that are facing traders as well?

62
00:03:48,120 --> 00:03:50,160
Speaker 3: Yeah, I think we did talk about a lot of

63
00:03:50,200 --> 00:03:52,840
Speaker 3: trade headlines, so I think that's going to definitely still

64
00:03:53,120 --> 00:03:56,800
Speaker 3: dominate the market sentiments. The other thing to watch is

65
00:03:56,880 --> 00:04:02,040
Speaker 3: obviously how market is expecting cuts to come in quite aggressively,

66
00:04:02,440 --> 00:04:06,240
Speaker 3: once in October and once in December. That has already

67
00:04:06,240 --> 00:04:10,640
Speaker 3: been fully priced, and that has also been moving asset

68
00:04:10,680 --> 00:04:14,040
Speaker 3: prices up, including stocks as well as things like gold

69
00:04:14,120 --> 00:04:19,039
Speaker 3: and silver. So if we will be hearing obviously the

70
00:04:19,120 --> 00:04:22,599
Speaker 3: CPI report later this week, if the reports come in

71
00:04:22,680 --> 00:04:26,479
Speaker 3: a bit hotter than expected, or if we're even seeing

72
00:04:26,880 --> 00:04:32,040
Speaker 3: huge deterioration in US economy, this could derail stock markets

73
00:04:32,080 --> 00:04:34,839
Speaker 3: and risk assets quite quite a lot. So that would

74
00:04:34,880 --> 00:04:36,159
Speaker 3: be a curius to watch as well.

75
00:04:37,839 --> 00:04:40,080
Speaker 4: Yeah, and of course, the the US government shutdown has

76
00:04:40,120 --> 00:04:42,480
Speaker 4: been blocking a lot of the key data to date.

77
00:04:42,880 --> 00:04:46,839
Speaker 4: You mentioned Japanese markets before. What do you anticipate in

78
00:04:46,920 --> 00:04:50,720
Speaker 4: terms of the market dynamics if we do get political

79
00:04:50,760 --> 00:04:52,200
Speaker 4: clarity on that front as well.

80
00:04:54,200 --> 00:04:57,039
Speaker 3: Yeah, I think the market has already slightly been reflecting

81
00:04:57,080 --> 00:05:00,479
Speaker 3: that earlier this morning in the yen see that it

82
00:05:00,600 --> 00:05:02,960
Speaker 3: held at the dollar. Yen held at a one hundred

83
00:05:02,960 --> 00:05:08,360
Speaker 3: and fifty level after a recovery of yen last week,

84
00:05:08,880 --> 00:05:15,160
Speaker 3: with the clarity on Takaichi's premiership. I think stock markets

85
00:05:15,240 --> 00:05:17,800
Speaker 3: will be poised to do pretty well this week, and

86
00:05:17,839 --> 00:05:20,839
Speaker 3: the yen could weaken towards the one hundred and fifty

87
00:05:20,839 --> 00:05:23,479
Speaker 3: three level. So those are some key levels that we're watching.

88
00:05:24,000 --> 00:05:26,680
Speaker 3: But obviously we need to watch out for risk on

89
00:05:27,560 --> 00:05:31,000
Speaker 3: how the trades have been pretty concentrated right now in

90
00:05:31,080 --> 00:05:35,479
Speaker 3: certain companies. So corporate governance is an interesting and important

91
00:05:35,520 --> 00:05:39,320
Speaker 3: area to watch out for where we think that it's

92
00:05:39,360 --> 00:05:42,279
Speaker 3: important to be stock pickers instead of just buying the market.

93
00:05:42,920 --> 00:05:46,000
Speaker 2: That was Fabian yip Ig, international market analysts speaking to

94
00:05:46,000 --> 00:05:49,520
Speaker 2: Bloomberg's Annabel Rulers and Sharry On. Coming up next, we'll

95
00:05:49,520 --> 00:05:53,560
Speaker 2: hear from Nicholas Smith, Japan strategists at CLSA, to discuss

96
00:05:53,560 --> 00:06:06,120
Speaker 2: the latest in Japanese politics. Welcome back to the Debreak

97
00:06:06,160 --> 00:06:09,120
Speaker 2: Asia podcast. I'm Dan Schwartzman in for Doug Prisner. We

98
00:06:09,160 --> 00:06:12,159
Speaker 2: go to Japan next, where the ishing opposition party held

99
00:06:12,160 --> 00:06:15,360
Speaker 2: an executive meeting on Sunday as a mold the possibility

100
00:06:15,400 --> 00:06:18,120
Speaker 2: of joining forces with the ruling party, a decision that

101
00:06:18,120 --> 00:06:21,080
Speaker 2: could determine the country's next prime minister. For more, we

102
00:06:21,120 --> 00:06:24,960
Speaker 2: heard from Nicholas Smith CLSA Japan strategist. He spoke to

103
00:06:24,960 --> 00:06:27,720
Speaker 2: Bloomberg Xannabel Rulers in Sherry on what does this.

104
00:06:27,720 --> 00:06:31,800
Speaker 1: Mean Japan's Eaching Party and LDP coming together. Does it

105
00:06:32,000 --> 00:06:35,280
Speaker 1: change the policy direction and the implications for the markets?

106
00:06:35,360 --> 00:06:37,400
Speaker 1: Are we sort of broadly on the same page.

107
00:06:37,600 --> 00:06:39,480
Speaker 5: Surely from the point of view of market It just

108
00:06:39,680 --> 00:06:43,880
Speaker 5: strengthens the position that Cormetto had always been something of

109
00:06:43,920 --> 00:06:45,839
Speaker 5: a ce anchor on what they were trying to do

110
00:06:46,200 --> 00:06:49,240
Speaker 5: the two I mean Cormetto had been a serial urn

111
00:06:49,360 --> 00:06:51,279
Speaker 5: coat that hadn't supported them on a lot of the

112
00:06:51,279 --> 00:06:54,920
Speaker 5: things the LDP was trying to do. So the advantage

113
00:06:55,000 --> 00:06:59,080
Speaker 5: of taking in eating is it's bigger and it's more aligned.

114
00:06:59,240 --> 00:07:03,280
Speaker 5: So whereas Cormetor had twenty four seats, the Echines got

115
00:07:03,320 --> 00:07:06,040
Speaker 5: to her thirty seven seats. It takes them pretty much

116
00:07:06,120 --> 00:07:09,760
Speaker 5: to the two thirty three seats they need for a majority.

117
00:07:10,120 --> 00:07:13,520
Speaker 5: Not quite, but they'll I did not think they'll have

118
00:07:13,600 --> 00:07:16,720
Speaker 5: much trouble getting the support of other parties to busting through.

119
00:07:16,760 --> 00:07:19,080
Speaker 1: Now those two parties are now more aligned. Does that

120
00:07:19,240 --> 00:07:21,240
Speaker 1: mean that we could see a doubling down of the

121
00:07:21,280 --> 00:07:25,080
Speaker 1: takaichi trades, that her points of view become more relevant

122
00:07:25,120 --> 00:07:28,880
Speaker 1: now to the markets weaker yen r bog delaying. Perhaps

123
00:07:28,960 --> 00:07:30,920
Speaker 1: Reid hikes a lot of the trades that we've seen

124
00:07:31,000 --> 00:07:31,400
Speaker 1: so far.

125
00:07:32,800 --> 00:07:36,040
Speaker 5: I'm not convinced that the government has power to her

126
00:07:36,080 --> 00:07:39,240
Speaker 5: to control the Bank of Japan. I mean, obviously it

127
00:07:39,320 --> 00:07:42,480
Speaker 5: got its independence from the Bank of Japan Law of

128
00:07:42,560 --> 00:07:45,680
Speaker 5: nineteen ninety seven. But on top of that, the time

129
00:07:45,720 --> 00:07:48,680
Speaker 5: when you get to influence a central bank is when

130
00:07:48,760 --> 00:07:51,880
Speaker 5: you're changing the governor or the chair. And so that's

131
00:07:51,880 --> 00:07:54,000
Speaker 5: an issue for the US at the moment. Because Powell

132
00:07:54,040 --> 00:07:56,680
Speaker 5: goes out in her in May, it's not an issue

133
00:07:56,680 --> 00:07:58,800
Speaker 5: for who with because he's got two and a half

134
00:07:58,880 --> 00:08:03,000
Speaker 5: years more to run. I think that email well assert

135
00:08:03,160 --> 00:08:06,200
Speaker 5: himself we have a problem in Japan with the cost

136
00:08:06,280 --> 00:08:10,360
Speaker 5: of living crisis. He absolutely needs to do that. It

137
00:08:10,480 --> 00:08:13,600
Speaker 5: is strange the politicians have failed to see They've talked

138
00:08:13,640 --> 00:08:18,760
Speaker 5: about giving tax cuts, which would certainly irritate the Ministry

139
00:08:18,760 --> 00:08:21,200
Speaker 5: of Finance, and they haven't tumbled to the idea that

140
00:08:21,520 --> 00:08:24,240
Speaker 5: actually a very large part of the inflation we have

141
00:08:24,320 --> 00:08:26,920
Speaker 5: here is important inflation, and all you need to do

142
00:08:27,040 --> 00:08:27,560
Speaker 5: is hike.

143
00:08:27,480 --> 00:08:29,480
Speaker 1: The fact that you bring up the federal reserve and

144
00:08:29,520 --> 00:08:31,880
Speaker 1: the fact that they are going to see these changes

145
00:08:31,920 --> 00:08:37,319
Speaker 1: at the AIRFOMCEE. Does that give you an indication that,

146
00:08:37,600 --> 00:08:40,160
Speaker 1: no matter what happens, because of what the FED is doing,

147
00:08:40,240 --> 00:08:42,680
Speaker 1: we might see more strengthening of the Japanese yend because

148
00:08:42,720 --> 00:08:44,319
Speaker 1: at the same time we're just going in different in

149
00:08:44,360 --> 00:08:45,360
Speaker 1: opposite directions.

150
00:08:46,280 --> 00:08:51,839
Speaker 5: So with the FED, of course the President Trump is

151
00:08:51,880 --> 00:08:54,040
Speaker 5: looking for a person that he can depend on to

152
00:08:54,120 --> 00:08:57,880
Speaker 5: cut more. And of course the Federal Reserve moves in

153
00:08:58,080 --> 00:09:01,000
Speaker 5: a bigger steps than the Bank of and does, so

154
00:09:01,480 --> 00:09:03,480
Speaker 5: they're more important in all of this. But I think

155
00:09:03,559 --> 00:09:06,920
Speaker 5: the Bank of Japan will be wanting to raise rates,

156
00:09:07,040 --> 00:09:09,120
Speaker 5: So I think people are getting worried about that and

157
00:09:09,160 --> 00:09:12,440
Speaker 5: getting over excited by the politics. But the situation on

158
00:09:12,480 --> 00:09:16,640
Speaker 5: the ground is a serious, serious cost of living crisis

159
00:09:16,640 --> 00:09:18,840
Speaker 5: that's been holding back consumption in Japan.

160
00:09:22,160 --> 00:09:26,200
Speaker 4: What about the also trade talks? In this prospect we

161
00:09:26,240 --> 00:09:28,880
Speaker 4: see further trade talks between the US and Japan. If

162
00:09:29,360 --> 00:09:33,080
Speaker 4: President Trump makes it a stop later this week, will

163
00:09:33,080 --> 00:09:36,600
Speaker 4: that be also something that has an impact on market sentiment?

164
00:09:36,679 --> 00:09:40,400
Speaker 4: Do you see?

165
00:09:40,960 --> 00:09:46,040
Speaker 5: I see the Takeishi being more forthright about things than

166
00:09:46,120 --> 00:09:51,640
Speaker 5: beliegued to her Ishiba was, So I think that it

167
00:09:51,679 --> 00:09:54,360
Speaker 5: will be much more of well, what's the quid pro

168
00:09:54,440 --> 00:09:59,160
Speaker 5: quo for what you're asking for? I don't I think

169
00:09:59,160 --> 00:10:02,920
Speaker 5: that the talks are pretty much done and you can't

170
00:10:02,920 --> 00:10:08,520
Speaker 5: particularly like a fifteen percent import tariff, but the Japanese

171
00:10:08,520 --> 00:10:09,679
Speaker 5: can probably live with that.

172
00:10:11,520 --> 00:10:15,800
Speaker 1: Given or headed with political changes, not to mention, of course,

173
00:10:15,840 --> 00:10:19,440
Speaker 1: the trade negotiations they seem to be done with. But

174
00:10:19,520 --> 00:10:21,600
Speaker 1: at the same time, you never know with President Trump,

175
00:10:22,559 --> 00:10:24,360
Speaker 1: what are we going to see in terms of volatile

176
00:10:24,480 --> 00:10:26,520
Speaker 1: in the JGB space. Of course, we've seen a lot

177
00:10:26,559 --> 00:10:27,679
Speaker 1: of movement in the long end.

178
00:10:28,800 --> 00:10:31,959
Speaker 5: Well, obviously we've had a big pick up in the

179
00:10:32,440 --> 00:10:35,040
Speaker 5: ultra long end, and that's been a global move. But

180
00:10:35,120 --> 00:10:40,920
Speaker 5: it's also concerns about increased inflation in Japan. So we've

181
00:10:40,960 --> 00:10:43,599
Speaker 5: had a drop on the short end and increase in

182
00:10:43,640 --> 00:10:45,800
Speaker 5: the long because people are saying I'm worried that they

183
00:10:45,840 --> 00:10:48,960
Speaker 5: won't continue with the policy moves. I think that they

184
00:10:49,040 --> 00:10:51,760
Speaker 5: probably will continue with the policy moves, and I think

185
00:10:51,800 --> 00:10:54,960
Speaker 5: that that will reign in inflation a little bit, which

186
00:10:54,960 --> 00:10:58,240
Speaker 5: will mean that the ultra long end will calm down

187
00:10:58,280 --> 00:10:58,520
Speaker 5: a bit.

188
00:10:59,120 --> 00:11:03,679
Speaker 1: Consequential, a GGB moved now to global markets.

189
00:11:04,000 --> 00:11:08,560
Speaker 5: I think ultimately the concern is that that Japan there's

190
00:11:08,640 --> 00:11:12,120
Speaker 5: not only the en carry trade, there's also the vast

191
00:11:12,120 --> 00:11:16,520
Speaker 5: amount of Japanese money overseas. So the net international investment

192
00:11:16,520 --> 00:11:19,960
Speaker 5: position is what three and a half best part of

193
00:11:19,960 --> 00:11:25,600
Speaker 5: four trillion dollars, whereas the carry trade, well BIS says

194
00:11:25,600 --> 00:11:28,000
Speaker 5: two hundred and fifty billion dollars. I think more likely

195
00:11:28,480 --> 00:11:31,400
Speaker 5: plenty of leverage. It's probably about twice that. But those

196
00:11:31,480 --> 00:11:34,240
Speaker 5: two together, as soon as the end starts to strengthen,

197
00:11:34,640 --> 00:11:38,000
Speaker 5: then people be worrying about the carry trade, and then

198
00:11:38,040 --> 00:11:44,040
Speaker 5: about repatriation of Japanese markets, Japanese money, and obviously ultimately

199
00:11:44,080 --> 00:11:46,880
Speaker 5: what that means is worry about some of the more

200
00:11:46,920 --> 00:11:51,000
Speaker 5: fragile markets out there. So within bond markets, say Europe,

201
00:11:51,000 --> 00:11:54,760
Speaker 5: perhaps you know the French bond market, and then a

202
00:11:54,800 --> 00:11:59,320
Speaker 5: lot of stocks that had moved up too far, too fast,

203
00:12:00,000 --> 00:12:01,880
Speaker 5: they'll be questions about them.

204
00:12:02,240 --> 00:12:06,400
Speaker 2: That was Nicholas Smith, CLSA Japan Strategist, speaking of Bloomberg's

205
00:12:06,400 --> 00:12:11,880
Speaker 2: Anabel Drulers and Sherry On. Thanks for listening to today's

206
00:12:11,880 --> 00:12:15,440
Speaker 2: episode of the Bloomberg Daybreak Asia Edition podcast.

207
00:12:15,760 --> 00:12:18,880
Speaker 1: Each weekday, we look at the story shaping markets, finance,

208
00:12:19,240 --> 00:12:21,360
Speaker 1: and geopolitics in the Asia Pacific.

209
00:12:21,600 --> 00:12:24,880
Speaker 2: You can find us on Apple, Spotify, the Bloomberg Podcast

210
00:12:24,960 --> 00:12:27,280
Speaker 2: YouTube channel, or anywhere else you listen.

211
00:12:27,679 --> 00:12:30,600
Speaker 5: Join us again tomorrow for insight on the market moves

212
00:12:30,640 --> 00:12:33,800
Speaker 5: from Hong Kong to Singapore and Australia.

213
00:12:34,280 --> 00:12:36,760
Speaker 2: I'm Doug Prisoner and this is Bloomberg