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Speaker 1: This is Bloomberg Day Break Asia for this Tuesday June

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Speaker 1: twentieth in Hong Kong, Monday June nineteenth in New York

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Speaker 1: and coming up.

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Speaker 2: Today, Airbus secures the biggest aircraft order in aviation history

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Speaker 2: from India's largest airline. However, industry veterans are warning the

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Speaker 2: market is showing signs of overheating.

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Speaker 1: KKR shuffles its Asia Private equity team.

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Speaker 2: And Chinese banks may cut their prime lending rates for

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Speaker 2: the first time since August twenty twenty two.

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Speaker 3: Blinken meets with She opening lines of communication, but major

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Speaker 3: differences remain. China's number two man meeting with European leaders

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Speaker 3: intent search for a submersible that is headed to the

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Speaker 3: Titanic wreckage. I'm at Baxter with Global News.

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Speaker 4: That's all straight ahead on Bloomberg day Break Asia, the

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Speaker 4: business news you need to start your day in just

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Speaker 4: one fifteen minute podcast available on Apple, Spotify, the Bloomberg

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Speaker 4: Business App, and everywhere you get your podcasts.

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Speaker 1: Good morning, I'm Brian Curtis.

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Speaker 2: And I'm Doug Krisner. Here are the stories we're following today.

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Speaker 1: As Doug mentioned, Airbus has secured the largest aircraft order

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Speaker 1: in aviation history from India's biggest airline. More from Bloomberg

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Speaker 1: Scott Car.

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Speaker 5: Airbus will sell five hundred eight three twenty planes to

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Speaker 5: India's dominant airline, Indigo. Top executives from both companies announce

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Speaker 5: the sale at the Paris Air Show. The sale brings

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Speaker 5: Indigo's order backlog close to one thousand planes. Indian carriers

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Speaker 5: have been stocking up on aircraft to handle increasing volumes

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Speaker 5: in the world's fastest growing major aviation market. Indigo already

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Speaker 5: has a local market share of sixty one percent. Now,

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Speaker 5: the airline expects to double in size and scale by

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Speaker 5: the end of the decade, with plans to increase operations

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Speaker 5: in Central Asia. Airbus had predicted in June that aviation

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Speaker 5: center of gravity will shift toward Asia, with China and

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Speaker 5: India driving growth. Scott Car, Bloomberg, Daybreak Asia well.

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Speaker 2: Despite record orders for aircraft, aviation intry veterans are warning

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Speaker 2: of a market with signs of overheating. Airlines have been

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Speaker 2: struggling to meet demand since travelers stormed back to the

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Speaker 2: skies following the pandemic. Here's Steve Udverhesi, the co founder

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Speaker 2: of air Lease.

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Speaker 6: I think right now there's a herd mentality of ordering

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Speaker 6: just to protect future slots. The question is will all

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Speaker 6: of those aircraft deliver as currently contracted, will many of

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Speaker 6: them get deferred or airlines will opt out of some

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Speaker 6: of the aircraft or swap with other buyers.

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Speaker 2: Meantime, the CEO of Cutter Airways, Akbar al Bacher, said

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Speaker 2: that airlines are flooding the market with a huge number

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Speaker 2: of aircraft and he thinks the aviation supply chain may

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Speaker 2: not return to twenty nineteen levels for at least the

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Speaker 2: next couple of years. Baker also saying that airfares will

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Speaker 2: remain high for some time right for.

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Speaker 1: US lawmakers will travel to Detroit this week. They'll press

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Speaker 1: automakers Forward and GM to cut their reliance on supplies

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Speaker 1: from China. The lawmakers are Republicans Mike Gallagher and John

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Speaker 1: Mullinar and Democrats Roger Krishna Morphy and Haley Stevens. We

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Speaker 1: hear they'll raise concerns about Ford's partnership with Chinese auto

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Speaker 1: battery manufacturer Caatl, and they're expected to argue that Cattle

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Speaker 1: is closely tied to the Chinese Communist Party and has

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Speaker 1: received Chinese government subsidies. That allow it to undercut American firms.

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Speaker 1: This is a stance that angered China and has contributed

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Speaker 1: to recent strains with the United States. The American legislators

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Speaker 1: plan to meet Ford's CEO Jim Farley and GM CEO

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Speaker 1: Mary Barra, along with other officials tomorrow.

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Speaker 4: Well.

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Speaker 2: The investment firm KKR has overhauled its Asia Pacific private

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Speaker 2: equity team on the heels of a fifteen billion dollar

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Speaker 2: capital race. We have more from Bloomberg's Joan Wong in

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Speaker 2: Hong Kong.

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Speaker 7: Mainly KKR's Asia Pacific head will become executive chairman for

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Speaker 7: the regent to focus more on strategy. Hiro Hirano will

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Speaker 7: move on from his role as co head of private

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Speaker 7: Equity to become deputy executive chairman. Several other executives changed

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Speaker 7: roles as well. These are among some of the most

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Speaker 7: sweeping changes for global investment firms in Asia in recent years.

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Speaker 7: It comes just two years after KKR raised its biggest

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Speaker 7: ever buyout fund in the region. Deal making a spotted

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Speaker 7: off late, partly due to strange US China relations, and

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Speaker 7: private equity investors have been finding it more difficult to

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Speaker 7: generate decent returns in Hong Kong joined Wong Bloomberg Day Bragasia.

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Speaker 1: Meantime, Chinese banks will likely cut their benchmark lending rates

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Speaker 1: today for the first time since August of twenty twenty two.

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Speaker 1: Bloomberg's Bonni Ao has more from Hong Kong.

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Speaker 8: China's weaked and expected macro data may prompt more monetary easing.

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Speaker 8: A ten basis point cut in the medium term lending

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Speaker 8: facility rate last week implies the prime rate will be

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Speaker 8: cut a similar amount. Consensus is that lenders would from

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Speaker 8: the one year long prime rate to three point five

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Speaker 8: to five percent from three point sixty five percent, and

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Speaker 8: the five year quote is expected to be cut by

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Speaker 8: a wider margin fifteen basis points to four point one

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Speaker 8: five percent. The five year is the reference rates for

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Speaker 8: mortgage loans. A deficult there is expected to give some

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Speaker 8: extra support to the struggling property markets in Hong Kong.

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Speaker 8: I'm Bonnie ol Bloomberg Day Break Asia.

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Speaker 1: So we had a big down day yesterday in Asia,

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Speaker 1: doug and we continued into Europe. But the one thing

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Speaker 1: about Asian markets is that they closed before Anthony Blinken

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Speaker 1: had his meeting with Shijinping, and since that went reasonably well,

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Speaker 1: at least there was no acrimony in that we may

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Speaker 1: get a little bit of a bump, but you have

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Speaker 1: to say that all of a sudden, the overall mood

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Speaker 1: in global markets is not particularly strong.

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Speaker 2: I think it's fair to say there may have been

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Speaker 2: just a little disappointment that we didn't get some strong

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Speaker 2: indication coming out of the State Council meeting on what

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Speaker 2: stimulus would look like. And you and I were talking earlier,

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Speaker 2: Brian about Premier Lie Chiang being on his first official

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Speaker 2: visit to Germany and France this week. Maybe that suggests

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Speaker 2: that an announcement on stimulus may not occur until he

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Speaker 2: gets back to China.

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Speaker 1: That might be the case, but investors had been expecting

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Speaker 1: some broad moves and having not gotten it, we did

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Speaker 1: see a little bit of a sell off yesterday, the

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Speaker 1: CSI three hundred down eight tens of a percent, and

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Speaker 1: even more in Hong Kong the hanksng Teke Indeck stumbled

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Speaker 1: one point three percent. But today's another day. We might

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Speaker 1: see a little bit of movement. The LPR cut today

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Speaker 1: that we just told you about is largely priced into markets,

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Speaker 1: but one thing that may not be and maybe on

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Speaker 1: the positive side, Warren Buffett raising a stake in Japanese

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Speaker 1: trading houses.

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Speaker 2: Yeah, five of them, to an average of over eight

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Speaker 2: and a half percent. A lot of this has to

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Speaker 2: do with the fact that he's been very positive on Japan.

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Speaker 2: The combination of high commodity prices and a weaker yen

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Speaker 2: really kind of underscoring his thesis as it relates to

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Speaker 2: these trading firms. That said, there was an analyst over

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Speaker 2: at T and D Asset Management saying the upside from

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Speaker 2: here is probably limited since the market has already factored

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Speaker 2: in much in the way of Buffett's thinking.

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Speaker 1: Yeah, that's one of the issues I think for global markets.

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Speaker 1: We talked about the mood not exactly souring, but just

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Speaker 1: not quite as strong as maybe what we've seen. We

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Speaker 1: had such a big rally in the second quarter that

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Speaker 1: you can imagine some investors just feel a little bit

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Speaker 1: nervous about how sustainable that could be. And so investors

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Speaker 1: and traders both going back and forth between the kind

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Speaker 1: of excitement of the rally and concern that it could

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Speaker 1: be exhausted. It's something we can put to Belita own

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Speaker 1: coming up in a few moments. Chairmen of Dalton Investments

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Speaker 1: now it's time for global news. Well, the US China

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Speaker 1: dialogue went well enough that Secretary of State Anthony Blincoln

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Speaker 1: did meet with President Shi Jen Pingen has mentioned no

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Speaker 1: real acrimony coming out of that. Ed Baxter has the

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Speaker 1: story from the San Francisco nine to sixty news room.

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Speaker 9: Ed.

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Speaker 3: Yeah, that's exactly right, Brian. So communication lanes are more open,

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Speaker 3: but there remained differences and friction though as well. Both

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Speaker 3: were stated in the news briefings afterwards.

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Speaker 10: I came to Beijing to strengthen high level channels of communication,

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Speaker 10: to make clear our position and intentions in areas of disagreement,

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Speaker 10: and to explore areas where we might work together when

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Speaker 10: our interests align on share transnational challenges. And we did

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Speaker 10: all of that.

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Speaker 11: And she, through a translatorow the Chinese side has made

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Speaker 11: our position clear, and the two sides have agreed to

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Speaker 11: follow through with the common understandings President Biden and I

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Speaker 11: had reached in Bali.

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Speaker 3: Now those differences come in common defense.

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Speaker 9: Actually, that means investing in our own capacities and in secure,

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Speaker 9: resilient supply chains, pushing for level playing fields for our

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Speaker 9: workers and our companies, defending against harmful trade practices. And

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Speaker 9: protecting our.

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Speaker 10: Critical technologies so that they aren't used against us.

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Speaker 11: And admonishing from she state to state interactions should always

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Speaker 11: be based on mutual respect and sincerity.

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Speaker 3: Now, the elephant of the room Taiwan. Blinken's saying the

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Speaker 3: US will respect the peaceful relations of the Taiwan straight

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Speaker 3: and will abide by the Taiwan Relations Act, making sure

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Speaker 3: Taiwan has the ability to defend itself. She in a

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Speaker 3: statement says a US says has to respect its internal

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Speaker 3: affairs and not interfere. Both did say that the meetings

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Speaker 3: were very positive. So where are we well? Bloomberg's rosalind

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Speaker 3: Chin says they can claim success at this point if

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Speaker 3: things just plainly don't get worse.

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Speaker 12: It's not really about a fundamental, long term reset in

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Speaker 12: a relationship between the world's two biggest economies. Fundamentally, there

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Speaker 12: are too many friction points between them where you see

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Speaker 12: competition again in the economic space, the business space, the

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Speaker 12: tech space, the cyberspace, the military space. It's simply an

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Speaker 12: off ramp. Is to stop a deterioration from here.

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Speaker 13: Now.

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Speaker 3: President Biden, on his way to California for fundraising, said,

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Speaker 3: talking about Biden, he did a hell of a job.

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Speaker 3: We're on the right trail here.

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Speaker 4: Hoping that over the next several months I'll be mee

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Speaker 4: you is she again?

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Speaker 7: And I'm talking about the.

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Speaker 4: Legitimate differences we have, but also all those areas we

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Speaker 4: can get along.

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Speaker 3: So for now, out of here is current mission accomplished.

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Speaker 3: China's number two official, Lee Shong, on his first overseas

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Speaker 3: trip since becoming premier, held talks in Berlin yesterday with

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Speaker 3: German President Frank Walter Steinmeier. Two goals to prevent ties

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Speaker 3: with Europe from deteriorating. From the German side, get China

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Speaker 3: to use influence on Russia regarding Ukraine. Submersible that takes

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Speaker 3: tourists to the Titanic shipwreck is missing off the North

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Speaker 3: American coast in the Atlantic five people on board, where

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Speaker 3: Admiral John Mauger says of the US Coast Guard is

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Speaker 3: working with Canadian forces and working by air and ground

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Speaker 3: to first find it.

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Speaker 11: Right now, we're focused on locating the vessel, but at

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Speaker 11: the same time, if we find this vessel in the water,

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Speaker 11: then we will have to affect some sort of rescue.

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Speaker 3: The Coastguard estimates it has between seventy and ninety six

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Speaker 3: hours of emergency oxygen left. So wow, global newspower by

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Speaker 3: more than twenty seven hundred journalist and analyst in over

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Speaker 3: one hundred twenty countries. In San Francisco, I'm at Baxter

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Speaker 3: and this is Bloomberg.

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Speaker 1: I'm Brian Curtis along with Rashad Salamat in Hong Kong.

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Speaker 1: Joining us now is Belita Own, chairman of Dalton Investments.

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Speaker 1: Bl We talked a little bit about the global mood

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Speaker 1: maybe having eased back a little bit. We might get

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Speaker 1: a little bump in Asia because of the Blink and

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Speaker 1: She meetings, But then there's the frustrations over nothing coming

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Speaker 1: out of the State Council, and then also that Warren

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Speaker 1: Buffett news emerges that he's raised his stake in Japan,

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Speaker 1: which of those is sort of front of mine this

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Speaker 1: morning here on a Tuesday.

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Speaker 13: In Asia, we take a long term view towards investing,

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Speaker 13: and Japan is no different, and we investd one company

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Speaker 13: at a time. So for us, it's just great to

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Speaker 13: see Japan finally getting noticed as a market where you

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Speaker 13: can find good bargains on good companies and where finally,

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Speaker 13: after decades, you're seeing some potential of sustainable growth because

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Speaker 13: of an increase in wages. So I would say that

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Speaker 13: of all the different factors you've mentioned, Warren Buffett's faith

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Speaker 13: or view that there are attractive opportionities in Japan is

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Speaker 13: something that's most akin to ours. So we're very pleased

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Speaker 13: to see the changes that have taking place on the

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Speaker 13: part of foreign investors getting back into Japan in a

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Speaker 13: very big way and finally paying attention to the change

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Speaker 13: in corporate governance and has led to different, much better

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Speaker 13: behavior on the part of company managements towards shareholders.

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Speaker 14: That's been some time coming, but I think it's the

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Speaker 14: need boss of the TSX who's kind of cemented this.

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Speaker 14: But it also comes with some have said to us

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Speaker 14: a change of mentality. Do you have any idea where.

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Speaker 4: That's come from.

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Speaker 13: Yes, definitely. We engage with our company managements regularly and

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Speaker 13: there's been a mark change in the way they view

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Speaker 13: our suggestions proposals for how they might return more capital

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Speaker 13: to shareholders if they don't need it. So, as is

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Speaker 13: well known, there's an excessive amount of cash capital on

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Speaker 13: the balance sheets of many companies that operate profitably and

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Speaker 13: don't need that sort of capital, and they just never

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Speaker 13: seem to be much of a reason for them to

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Speaker 13: want to do the right thing by shareholders until now

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Speaker 13: the Tokyo Stock Exchange reorganization and the possible downgrading if

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Speaker 13: they don't meet certain performance standards has woken these managements up,

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Speaker 13: and I think also maybe more so, the feeling that

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Speaker 13: they need to do the right thing by shareholders for

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Speaker 13: the good of the country. Because the fact is, Japan,

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Speaker 13: as we all know, also is an old country where

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Speaker 13: many people live off pensions, and where the largest shareholder

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Speaker 13: now is the Japanese government through the government pension plan

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Speaker 13: and also the BOJ So doing the right thing by

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Speaker 13: shareholders actually benefits the government and in turn the pensioners

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Speaker 13: and investors in the economy. So it's I think, finally

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Speaker 13: sort of you know, stunk into some extent that doing

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Speaker 13: the right thing for shareholders is actually the right thing

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Speaker 13: for the country as a whole and Japan.

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Speaker 1: Okay, let me counter that. Let me counter that with

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Speaker 1: an argument. Warren Buffett is also famous for not liking

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Speaker 1: bonds too much because he's worried about the currency possibility

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Speaker 1: of instability. Now if the end, if by chance, the

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Speaker 1: Bank of Japan decides to change policy and you know,

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Speaker 1: get a little tighter here, you could see a reversal

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Speaker 1: in the en, and and goodness forbid, if you were

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Speaker 1: to get a repatriation of yen back to the country,

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Speaker 1: that might strengthen the en, and it could have an

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Speaker 1: impact on the equity market. Could not, especially after such

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Speaker 1: a big rally year to date.

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Speaker 13: That's true, it's for most investors the en seems to

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Speaker 13: be self hedging. When the market goes up, the end

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Speaker 13: goes down, and so forth. But if you take a

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Speaker 13: step back and look at where the yen is to

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Speaker 13: where it was at its peak at what was it

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Speaker 13: seventy seven or seventy yen to the dollar, and that

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Speaker 13: was in gosh I can't remember how long ago that was,

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Speaker 13: but that was, you know, in the twenty elevens, I

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Speaker 13: think it was. The yen has appreciated by almost fifty percent.

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Speaker 13: I think it's forty five percent of something like that,

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Speaker 13: and that makes Japanese companies very competitive right now. So

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Speaker 13: there's plenty of room for the yen to appreciate, satisfy investors.

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Speaker 13: Foreign investors for are investing in the Japanese market now

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Speaker 13: and still keep Japan competitive. So I don't see that

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Speaker 13: the problem is immediate and huge, rather than it takes

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Speaker 13: a long time for currency moves to take place. You know,

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Speaker 13: I remember when the en was three fifty to the dollar,

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Speaker 13: and it took gosh, that took decades to correct. But

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Speaker 13: it does correct. It takes a very long time, and

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Speaker 13: it's a you know, it's a very long path. And

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Speaker 13: with this particularly en level, I think it's very much

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Speaker 13: in the interest of the Japanese government to keep it

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Speaker 13: competitive so that they can stimulate growth.

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Speaker 14: But I want to just broad it out away from

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Speaker 14: Japan and about sister. To do that, let's have a

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Speaker 14: look at, you know, perhaps a thematic approach to investing

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Speaker 14: and gives a sense of how perhaps these these four

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Speaker 14: d's perhaps shape the way that you look at companies

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Speaker 14: and the way you look in the in the long term.

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Speaker 14: Here I'm talking about decobanization, demography, decoupling, and digitization.

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Speaker 13: Those are good four d They're all top of mind

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Speaker 13: for us when we invest. We have a strong ESG policy.

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Speaker 13: Every company we look at we take an independent look

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Speaker 13: through a ESG lens. And the reason is not just

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Speaker 13: because we are you know, desires of looking good to investors.

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Speaker 13: The reality is that companies that think about the long term,

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Speaker 13: think about sustainability issues. They treat their employees well and

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Speaker 13: they look for ways to make sure that the supply

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Speaker 13: chains and their customers are also sustainable. So there and

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Speaker 13: they treat their shoholder as well. So for us, those

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Speaker 13: things are just part and parcel of being good managers

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Speaker 13: of a company. In terms of demography, India clearly is

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Speaker 13: the star. It has a very young population. Long term,

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Speaker 13: I would say we probably find India to be the

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Speaker 13: most compelling place to invest if you're looking at decades out.

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Speaker 13: Japan for now is just incredibly attractive to us because

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Speaker 13: it's so cheap. But long term, India has a lot

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Speaker 13: of the right bones for sustained multi decade growth. So

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Speaker 13: young population, very very low per capita GDP, making it

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Speaker 13: extremely successful. Huge scale that there's a chance to supplant

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Speaker 13: kind of in some manufacturing capacities and well run.

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Speaker 1: Let me use that as a prong to get to China.

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Speaker 1: What's more important organic growth coming back or we get

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Speaker 1: this big round of stimulus or better US China relations.

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Speaker 13: I think very much wants to become a much more

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Speaker 13: independent of the rest of the world, and the economy

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Speaker 13: is so large they can get there. The question is how,

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Speaker 13: and it can't happen right away. It's too it's too

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Speaker 13: much of an adjustment for any country to take on.

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Speaker 13: And so, you know, I would expect that for the

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Speaker 13: near term the China, the hurdles facing China will be

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Speaker 13: detrimental to their growth, so particularly the property sector, you

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Speaker 13: can't reverse, you know, the impact of decades of prosperity

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Speaker 13: because of rising real estate prices, and expect a smooth

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Speaker 13: transition to a lower growth path without some pain to

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Speaker 13: the population, which I think is why Sin Ping had

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Speaker 13: talked about recently that the Chinese people should prepare for

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Speaker 13: you know, in his in his words, I suppose sort

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Speaker 13: of discrimination if you like, or you know, bad behavior

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Speaker 13: by foreigners that might get in the way of their growth.

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Speaker 13: So I think it's preparing the Chinese people for some

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Speaker 13: time ahead of more difficulty economic difficulty.

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