Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm Dog Krisner. US
Speaker 2: markets were rattled just a bit by a hint of
Speaker 2: trouble around the buildout of AI data centers. Oracle's longtime
Speaker 2: financing partner, Blue Owl Capital, will no longer contribute equity
Speaker 2: capital to a project in Michigan, and that news sent
Speaker 2: shares an Oracle down by more than five percent today,
Speaker 2: and it pushed the cost of insuring against default on
Speaker 2: Oracle's debt to the highest level since two thousand and nine.
Speaker 2: And then after the bell, we heard from Micron Technology.
Speaker 2: This company is the largest US maker of computer memory chips.
Speaker 2: Micron reported a blowout quarter and offered even stronger guidance,
Speaker 2: and we got reaction from Jake Silverman, he is semiconductor
Speaker 2: analyst at Bloomberg Intelligence.
Speaker 3: If you look at the gross margin guidance as well,
Speaker 3: which midpoint was sixty eight percent, or really just implies
Speaker 3: such incredible pricing strength that they have right now, and
Speaker 3: it really comes down to supply and demand, and for
Speaker 3: the most part, there's just been a real supply limitation.
Speaker 3: All of that for the most part, driven well for
Speaker 3: the most part driven by AI. Also, there's been strong
Speaker 3: demand for PCs smartphones.
Speaker 2: That is Jake Silverman's semiconductor analyst at Bloomberg Intelligence. Micron
Speaker 2: shares were up by nearly seven percent in late US trading. Now,
Speaker 2: this company has been a key beneficiary of AI demand
Speaker 2: because it's high bandwidth memory. Those HBM very critical to
Speaker 2: the systems that develop artificial intelligence models. Micron has key
Speaker 2: competitors in both Samsung and s K Heinez, so keep
Speaker 2: your eye on those stocks during the South Korean session.
Speaker 2: To help us understand the forces working on markets in
Speaker 2: the eight pack, let's bring in Paul Dobson. He is
Speaker 2: Bloomberg's executive editor for Asian Markets. Paul, thanks for being here.
Speaker 2: Let's start with the AI trade. To what degree do
Speaker 2: you expect the Micron news to impact markets in the APEC?
Speaker 1: Yeah?
Speaker 4: Hi, that Doug, so as you were saying, Micron may
Speaker 4: have some reader cross for the South Korean chip makers
Speaker 4: in particular, Potentially something positive there in terms of that
Speaker 4: read across, given how glowing those results are. But it
Speaker 4: feels like the start of the Asia trading session is
Speaker 4: going to be more responsive to the down move that
Speaker 4: we saw in US technology companies in the NASDAG. Pretty
Speaker 4: hefty drop there, and that kind of nerve and anxiety
Speaker 4: that we're seeing related to Oracle, to the affordability of
Speaker 4: the data center build out and the appetite to continue
Speaker 4: to put money into it when the payoffs are uncertain
Speaker 4: and the risks arising is challenging the market view into
Speaker 4: year ends.
Speaker 2: So as long as we're talking about AI, there was
Speaker 2: a chip maker in China that debuted yesterday, Metax Integrated
Speaker 2: Circuits Shunghai. I can't believe this stock was up nearly
Speaker 2: seven hundred percent on its first day of trading. What's
Speaker 2: happening here.
Speaker 4: Yeah, pretty phenomenal. So it's the second Chinese chip related
Speaker 4: company in the last few weeks that had a pretty
Speaker 4: astonishing debut. We also saw that with more Threads, which
Speaker 4: was up around five hundred percent on its debut. So
Speaker 4: it seems that the domestic demand for these stocks is
Speaker 4: incredibly strong because they seeing the same thing that we
Speaker 4: saw in the US last year or the year before,
Speaker 4: where there's that gigantic enthusiasm for the growth potential of
Speaker 4: these companies. In China, of course wants to develop its
Speaker 4: own stack away from the US system to use its
Speaker 4: own technology as much as it possibly can, and so
Speaker 4: that all goes particularly well for these kinds of companies.
Speaker 4: It also talks to the idea that, you know, was
Speaker 4: the IPO really priced at the right level of the
Speaker 4: start when you've got this much demand. We saw, you know,
Speaker 4: the allocation being very small for people that were trying
Speaker 4: to get a hold of the shares because there was
Speaker 4: just so much demand for it. And by the way,
Speaker 4: there's five or six other chip makers coming down the
Speaker 4: line that are also getting ready to IPO. So should
Speaker 4: see more enthusiasm for this sector coming through from the
Speaker 4: Chinese mainland in the coming weeks as well.
Speaker 2: So will those IPOs happen on the mainland in Shanghai
Speaker 2: or Shenzen as opposed to Hong Kong. Which market will
Speaker 2: they choose?
Speaker 4: It seems like for startups and for first time listings,
Speaker 4: there's a renewed enthusiasm for listing on the mainland, so
Speaker 4: that's what we've seen with the past two But for
Speaker 4: more established companies, they want to get in on the
Speaker 4: Hong Kong action as well, and you know, have exposure
Speaker 4: to the international markets. So it seems like we'll see
Speaker 4: a mix and Hong Kong has been really extremely busy
Speaker 4: in terms of IPOs this year, so is the whole
Speaker 4: of the Asia region for that matter, India too, but
Speaker 4: it's mostly dominated by those Chinese. These companies that already
Speaker 4: have listings on the main Dan now coming to Hong
Speaker 4: Kong to sort of broaden their appeal and ownership structures.
Speaker 2: So, as you know, when we look at the high
Speaker 2: tech story in the US, particularly as it relates to
Speaker 2: artificial intelligence, big question mark over valuations, is that something
Speaker 2: that investors in the apecker are struggling with as well.
Speaker 4: I think it depends what you look. So the more
Speaker 4: established companies Japan, South Korea and of course Taiwan TSMC
Speaker 4: are sort of bumbling along a little bit at the moment.
Speaker 4: They're not going higher, but they're not coming dramatically lower either,
Speaker 4: And it's that people are grappling with the same issues
Speaker 4: that they are in the US, and you know, it
Speaker 4: all becomes a little bit of a one one trade
Speaker 4: in some ways, with that little bit of differentiation depending
Speaker 4: on whether you'll open AI or Google or you know,
Speaker 4: the different chains. I think one of the one of
Speaker 4: the bellwethers that people will look to is soft Bank
Speaker 4: in Japan, which is so heavily into the AI trade,
Speaker 4: it's sold off, it's in n video stock, so it
Speaker 4: could get more into some of the newer and more
Speaker 4: innovative companies that are still building up their sort of profile.
Speaker 4: But that company has had a pretty rocky stock performance
Speaker 4: over the last few weeks because of that confidence that's
Speaker 4: suddenly starting to drain a little bit.
Speaker 1: Now.
Speaker 4: It could all be year end stuff as well, right Doug.
Speaker 4: It doesn't have to necessarily be all about confidence. It
Speaker 4: could just be that it's been such a stead of
Speaker 4: year that people want to take a little bit of
Speaker 4: profit to flooden their books, to broaden their portfolios into
Speaker 4: year end. So I think that the start of next
Speaker 4: year and how we trade in January will be a
Speaker 4: real clear tell for what enthusiasm lest it is for
Speaker 4: the AI trade.
Speaker 2: As long as we're talking about confidence, let's talk a
Speaker 2: little bit about the lack of it as it relates
Speaker 2: to the property market in China. And I was reading
Speaker 2: on Bloomberg the China Van Kuh, once China's largest home builder,
Speaker 2: is moving closer toward what could be one of China's
Speaker 2: largest debt restructurings. What do we know about what's happening currently.
Speaker 4: So it's getting worse, basically, would be a one line
Speaker 4: answer to that question. So Venka was already, you know,
Speaker 4: seeking to delay payments on some bonds, and the bondholders
Speaker 4: weren't willing to accept the terms that it was offering
Speaker 4: a first glance, and so they were demanding more credit
Speaker 4: enhancements and more upfront payments on that one security, which
Speaker 4: was for not a huge amount of money. Now, the
Speaker 4: latest that we're hearing is the VANKA isn't just seeking
Speaker 4: to delay payment on that one bond but other bonds,
Speaker 4: and also talking to its banks about decurring payments on
Speaker 4: some of its debts that are coming due with them
Speaker 4: as well. So it's getting you know, kind of you
Speaker 4: can feel the new kind of tightening in a way
Speaker 4: around the company. People starting to talk openly about the
Speaker 4: prospects for default and need to restructure the debt more holistically.
Speaker 4: It's not quite at that point yet, but you know,
Speaker 4: unless it manages to find some extra money from somewhere
Speaker 4: or some sort of a stay of execution or the
Speaker 4: bondholders get in line, then that does seem to be
Speaker 4: the direction and that this company is headed in which
Speaker 4: is really significant actually because it's sort of quasi state owned.
Speaker 4: It has at least some ownership from a state backed company,
Speaker 4: and that's the sort of that's what separates it from
Speaker 4: all of the other property developers that we saw needing
Speaker 4: to turn to restructuring like Evergrand and Country Garden over
Speaker 4: recent years.
Speaker 2: Does it have an outsize effect when it comes to
Speaker 2: market psychology or because this company has been struggling for
Speaker 2: such a long period of time many many years now,
Speaker 2: is it pretty much accepted and kind of discounted by
Speaker 2: the market.
Speaker 4: I think it depends where you're looking, because the problem
Speaker 4: is again that sort of what it talks to in
Speaker 4: terms of consumer confidence and confidence in the property sector.
Speaker 4: So each time another developer for into trouble, the people
Speaker 4: wanting to buy homes in China will think, oh boy,
Speaker 4: that we're not out of this yet. Prices are still
Speaker 4: going to fall. So where should I buy a new
Speaker 4: home yet? I'll wait until I can get it cheaper,
Speaker 4: And so in terms of confidence in the economy, I
Speaker 4: think that it has a quite significant impact. In terms
Speaker 4: of impact on the broader market for sort of read
Speaker 4: across from Vanka itself, probably as you were saying, since
Speaker 4: we've known that the property sector has been in that
Speaker 4: down wood slump and hasn't really managed to put itself
Speaker 4: clear so far, I feel like perhaps not so much,
Speaker 4: but it will be interesting to keep an eye on
Speaker 4: other state owned property developers that have yet to default
Speaker 4: on debts, just to check. So far, they seem to
Speaker 4: be weathering the storm reasonably well. But you know the
Speaker 4: in a bond market or a credit situation, often people
Speaker 4: turn their attention to the next one in the chain
Speaker 4: once a weeklink is found.
Speaker 2: Paul, I want to get your take on this week's
Speaker 2: rate decision from the Bank of Japan. We'll do that
Speaker 2: next here on the Daybreak Asia podcast. Welcome back to
Speaker 2: the Daybreak Asia Podcast. I'm Doug Prisner. On Friday in Tokyo,
Speaker 2: the Bank of Japan is widely expected to raise its
Speaker 2: benchmark interest rate to the highest level in three decades.
Speaker 2: Let's bring back Paul Dobson. He is Bloomberg Executive Editor
Speaker 2: for Asian Markets. So we know, Paul that a key
Speaker 2: focus will not be just on the idea of a
Speaker 2: rate hike, which I think right now the market is
Speaker 2: clearly expecting. I think the probability is well above ninety percent,
Speaker 2: But the focal point seems to be on how Governor
Speaker 2: Uweita will present the path forward. Is that a fair statement?
Speaker 1: Yeah?
Speaker 4: Absolutely, I think that the a pretty much consensus view
Speaker 4: among analysts and economists is that they're going to be
Speaker 4: hiking interest rates. They've been pretty clear in communication about
Speaker 4: that for this meeting. So it's that future path that
Speaker 4: will be of interest and the idea that they'll be
Speaker 4: communicating they can go beyond zero point seventy five percent
Speaker 4: carry on hiking through next year. So what people will
Speaker 4: want to know is, well, what does that look like
Speaker 4: in terms of pace, and what does that look like
Speaker 4: in terms of endpoint? You know, how high can interest
Speaker 4: rates go and how quickly are we going to get there.
Speaker 4: The Bank of Japan has been incredibly slow and cautious
Speaker 4: about the way that it's been raising rates so far,
Speaker 4: and you can understand that, right They've been through twenty
Speaker 4: years and more of very low inflation. They don't want
Speaker 4: to raise rates too quickly and snuff that out. But
Speaker 4: at the same time, they do want what they would
Speaker 4: say refer to as normalize interest rates. How you get
Speaker 4: them to levels more comparable with other economies around the
Speaker 4: world and lower and a lot higher than they are
Speaker 4: right now, so they will probably not want to rock
Speaker 4: the boat too much, but also make it clear that
Speaker 4: the path that we're on is still for higher interest
Speaker 4: rates over time.
Speaker 2: Could you make a case that the move up and
Speaker 2: yields that we have seen across the curve in Japan
Speaker 2: the tightening has done some of the work that the
Speaker 2: BOJ intends to do. Is that plausible?
Speaker 4: It is a bit at the same time that it
Speaker 4: hasn't really worked in terms of the currency space, because
Speaker 4: we've still seen the yen continue to weaken. So I
Speaker 4: don't think that you will characterize financial conditions as tight
Speaker 4: by any means in Japan. I think that what people
Speaker 4: are more worried about when you look at the BUN
Speaker 4: yield curve is whether the government is going to be
Speaker 4: able to continue to finance its debts, and how worried
Speaker 4: people get about that. At the moment, we seem to
Speaker 4: have sort of stabilized in terms of longer term yields.
Speaker 4: We've got the tenure just below two percent. It hasn't
Speaker 4: breached above that level yet. We may well get there
Speaker 4: if the BOJ does give us a sense that it's
Speaker 4: going to be on a more determined hiking cycle. I
Speaker 4: think that that will be really interesting because it matters
Speaker 4: not just for the Japanese government bond market, but for
Speaker 4: global markets as well, because remember, Japan's supposed to be
Speaker 4: the anchor for global rates, and if those yields get
Speaker 4: high enough, then they will start to tempt Japanese money
Speaker 4: into jgb's in you know, as an alternative to investing
Speaker 4: in say US treasuries or UK or French government bonds.
Speaker 2: So with higher JGB yields, isn't that a positive for
Speaker 2: some of the big banks in Japan?
Speaker 4: It is, well, it is some finance socks all around
Speaker 4: the world have had a really brilliant second half of
Speaker 4: the year, And yes, definitely a steeper yield curve and
Speaker 4: higher higher rates is good news for Japanese banks, you know,
Speaker 4: which which which are already pretty flushed with cash I think,
Speaker 4: and having a reasonable time of it. The question is
Speaker 4: can they get cash flowing through the economy more and
Speaker 4: continue to fuel growth, because what you don't want is
Speaker 4: a situation where you still have reasonably high inflation. You
Speaker 4: have the central bank raising interest rates, but that kind
Speaker 4: of squishing the economy as well. So there is that balance,
Speaker 4: and I think that the you know, if you look
Speaker 4: at what the new leader Takahi has been saying, she's
Speaker 4: very hot on the need to kind of keep inflation
Speaker 4: under wraps from a fiscal points of view as well,
Speaker 4: and try to keep on stimulating the economy and keeping
Speaker 4: growth going at the same time.
Speaker 2: So away from the financials and the banks in Japan,
Speaker 2: what is the outlook for the overall equity market? Would
Speaker 2: stronger yen necessarily be a negative for the n K
Speaker 2: Let's say.
Speaker 4: What you want to think about is would a week
Speaker 4: a yen be helpful? Probably not with much stronger yen,
Speaker 4: as you said, the beneficial maybe it can be in
Speaker 4: the sense that although Japan is still quite a big exporter,
Speaker 4: at the same time, if you have more of a
Speaker 4: sort of sense of confidence flowing back into the economy
Speaker 4: and reflective through a stronger exchange rate, that can be
Speaker 4: beneficial both for sort of confidence and growth and also
Speaker 4: for the outlook for the companies and so bring in
Speaker 4: more money, you know, and we've seen overseas investors have
Speaker 4: been interested in Japanese stocks and bonds this year and
Speaker 4: putting money to work there. You know, the stocks are
Speaker 4: still quite close to record highs too. It doesn't take
Speaker 4: an awful lot to keep their momentum going.
Speaker 2: So, Paul, before I let you go, what else is
Speaker 2: top of mind as you look at markets today?
Speaker 4: It's very dynamic of the moment. I think that we've
Speaker 4: got a lot of interesting things going on in currencies
Speaker 4: right across Asia. We've got the koreem one where the
Speaker 4: authorities are really battling to try to support it at
Speaker 4: the moment, but it comes on too continuing pressure. Likewise,
Speaker 4: we've seen quite a lot of weakness in Taiwan's currency
Speaker 4: we recently and in some of the Southeast Asian nations,
Speaker 4: and on the flip side of that, we've seen quite
Speaker 4: a lot of undesired strength in some of the markets
Speaker 4: as well. The type bart just keeps on going up
Speaker 4: and the authorities don't really want that. We had a
Speaker 4: cut by the Central Bank yesterday to see if they
Speaker 4: can control it a little bit more. And the Chinese
Speaker 4: un just continues to steadily strengthen day by day as well.
Speaker 4: So I think those are interesting things. Those tensions in
Speaker 4: the Chinese equity market, despite the excitement over the AI space,
Speaker 4: also are pretty interesting. And then over in India. You know,
Speaker 4: the rupee as well has been under seedge recently, weakening
Speaker 4: to record lows on a mid daily basis. Yesterday we
Speaker 4: saw really strong and aggressive pushback from the central Bank
Speaker 4: to try to stop the market from getting too one
Speaker 4: sided in those bets. So lots of strength, tensions, and stresses,
Speaker 4: I think in the FX market is what I'm particularly
Speaker 4: interested in as we head into your ends.
Speaker 2: All right, Paul, we'll leave it there. Thank you so
Speaker 2: much for being here. Paul Dobson, Bloomberg's Executive editor for
Speaker 2: Asian Markets, joining us here on the Daybreak Asia podcast.
Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak
Speaker 2: Asia Edition podcast. Each weekday, we look at the story
Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You
Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,
Speaker 2: or anywhere else you listen. Join us again tomorrow for
Speaker 2: insight on the market moves from Hong Kong to Singapore
Speaker 2: and Australia. I'm Doug Chrisner, and this is Bloomberg