1 00:00:02,480 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,039 --> 00:00:13,840 Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis 3 00:00:13,840 --> 00:00:16,560 Speaker 2: along with Doug Krisner. Join us each day for the 4 00:00:16,600 --> 00:00:20,000 Speaker 2: stories making news and moving markets in the Asia Pacific. 5 00:00:20,200 --> 00:00:22,640 Speaker 2: You can subscribe to the show anywhere you get your 6 00:00:22,640 --> 00:00:26,600 Speaker 2: podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and 7 00:00:26,640 --> 00:00:28,280 Speaker 2: The Bloomberg Business app. 8 00:00:28,560 --> 00:00:31,360 Speaker 3: Earlier in the day, we heard from Fed shair J. Powell, 9 00:00:31,400 --> 00:00:33,600 Speaker 3: and he was saying that the Central Bank needs to 10 00:00:33,640 --> 00:00:37,200 Speaker 3: be patient as it weights some more evidence that high 11 00:00:37,240 --> 00:00:40,559 Speaker 3: interest rates are doing a job on curbing inflation. At 12 00:00:40,600 --> 00:00:42,960 Speaker 3: the same time, mister Powell seemed to double down on 13 00:00:43,000 --> 00:00:46,479 Speaker 3: the need to keep those borrowing cost higher for longer. 14 00:00:46,560 --> 00:00:48,720 Speaker 4: I don't think that it's likely, based on the data 15 00:00:48,720 --> 00:00:51,200 Speaker 4: that we have, that the next move that we make 16 00:00:51,560 --> 00:00:53,880 Speaker 4: would be a rate hike. I think it's more likely 17 00:00:53,920 --> 00:00:55,800 Speaker 4: that we'll be at a place where we hold the 18 00:00:55,840 --> 00:00:57,120 Speaker 4: policy rate where it is. 19 00:00:57,400 --> 00:01:01,600 Speaker 3: Fedchhair Ja Powell, speaking earlier today at an event in Amsterdam, 20 00:01:01,880 --> 00:01:04,880 Speaker 3: he said that he expects inflation will move lower on 21 00:01:04,920 --> 00:01:08,639 Speaker 3: a monthly basis. However, price figures in the first quarter 22 00:01:08,720 --> 00:01:10,120 Speaker 3: have tempered that confidence. 23 00:01:10,360 --> 00:01:10,840 Speaker 2: Just a bit. 24 00:01:11,200 --> 00:01:14,120 Speaker 3: He spoke right after the PPI data that we had 25 00:01:14,120 --> 00:01:15,959 Speaker 3: here in the US for the month of April. It 26 00:01:16,080 --> 00:01:20,039 Speaker 3: showed that inflation at the wholesale level rose last month, 27 00:01:20,080 --> 00:01:20,959 Speaker 3: more than forecast. 28 00:01:21,160 --> 00:01:24,840 Speaker 2: Let's get to Sean Darby, Managing director at Mizuho Securities Asia, 29 00:01:25,000 --> 00:01:27,680 Speaker 2: to talk a little bit more about the impact that 30 00:01:27,680 --> 00:01:30,760 Speaker 2: that report has and also how he sees markets moving 31 00:01:30,840 --> 00:01:33,920 Speaker 2: over the short term. Sewan, thank you very much for 32 00:01:33,959 --> 00:01:36,600 Speaker 2: being with us here in our studios on a holiday 33 00:01:36,640 --> 00:01:39,679 Speaker 2: but his birthday in Hong Kong, but nice to have 34 00:01:39,720 --> 00:01:42,039 Speaker 2: you join us here. So when we look at that 35 00:01:42,400 --> 00:01:46,720 Speaker 2: producer prise data, of course the headline data for month 36 00:01:46,760 --> 00:01:49,560 Speaker 2: on month was kind of hot, but then you had 37 00:01:49,560 --> 00:01:52,880 Speaker 2: these other mitigating factors on balance, neutral in your view 38 00:01:53,360 --> 00:01:53,640 Speaker 2: or what. 39 00:01:54,120 --> 00:01:57,080 Speaker 5: Well, certainly the boommark it took it reason to be well, 40 00:01:57,200 --> 00:02:01,280 Speaker 5: so the curve actually dropped across all of the duration. 41 00:02:01,960 --> 00:02:04,240 Speaker 5: I think one of the interesting thing aspects of the 42 00:02:04,320 --> 00:02:07,960 Speaker 5: producer prices is actually corporates are attaining very very strong 43 00:02:08,040 --> 00:02:11,480 Speaker 5: pricing power, and that doesn't really mean that we're going 44 00:02:11,520 --> 00:02:14,560 Speaker 5: to be seeing a recession that soon. Companies are not 45 00:02:14,639 --> 00:02:17,160 Speaker 5: in a position at the moment to having to either 46 00:02:17,520 --> 00:02:21,720 Speaker 5: protect margins particularly or indeed feeling that they're going to 47 00:02:21,720 --> 00:02:25,120 Speaker 5: have to lower prices to either clear infantry or garner demand. 48 00:02:25,680 --> 00:02:30,600 Speaker 5: So all of this really, I think reinstates fairchairperson's power view, 49 00:02:30,680 --> 00:02:32,560 Speaker 5: which is that it's going to be higher for longer, 50 00:02:32,960 --> 00:02:35,200 Speaker 5: and we're not going to be really seeing rate cuts 51 00:02:35,240 --> 00:02:39,240 Speaker 5: potentially really until fourth quarter, and certainly the equity market 52 00:02:39,400 --> 00:02:42,000 Speaker 5: isn't going to get any relief from a very big 53 00:02:42,919 --> 00:02:45,960 Speaker 5: series of rate cuts and perhaps until twenty twenty five. 54 00:02:46,120 --> 00:02:49,280 Speaker 3: You don't seem to be too surprised by that notion. 55 00:02:49,360 --> 00:02:51,600 Speaker 3: Were you expecting the fair to be on hold for 56 00:02:51,639 --> 00:02:52,720 Speaker 3: the foreseeable future. 57 00:02:53,840 --> 00:02:56,480 Speaker 5: I really feel that at the moment, if you look 58 00:02:56,520 --> 00:02:59,480 Speaker 5: at things like producer prices or credit spreads, credit spreads 59 00:02:59,480 --> 00:03:01,800 Speaker 5: are very very tight. For where we are on the cycle, 60 00:03:01,840 --> 00:03:05,160 Speaker 5: you have an inverted Yelk curve, credit spreads tight. They 61 00:03:05,400 --> 00:03:09,440 Speaker 5: have not really presaged a recession at all over the 62 00:03:09,520 --> 00:03:11,920 Speaker 5: last year. In fact, it's failed. I think the FED 63 00:03:11,960 --> 00:03:15,200 Speaker 5: recession model has been at sixty percent for nearly twelve 64 00:03:15,240 --> 00:03:17,720 Speaker 5: months now, and the reason for all that is that 65 00:03:17,840 --> 00:03:21,400 Speaker 5: as people enter the workforce, they actually produce goods that 66 00:03:21,560 --> 00:03:25,040 Speaker 5: economic output picks up and you get a sort of 67 00:03:25,320 --> 00:03:30,120 Speaker 5: an enduring profit cycles people as wages feedback into the economy. 68 00:03:30,200 --> 00:03:33,080 Speaker 5: So ironically, at the moment it's been more of a 69 00:03:33,160 --> 00:03:37,040 Speaker 5: labor problem in this cycle than anything else. And certainly, 70 00:03:37,120 --> 00:03:40,000 Speaker 5: certainly in that respect, you're not really going to see 71 00:03:40,280 --> 00:03:44,000 Speaker 5: economic activity fade until sometime in twenty twenty five. 72 00:03:44,720 --> 00:03:47,000 Speaker 2: Yeah, And that seems to be most important because the 73 00:03:47,040 --> 00:03:50,720 Speaker 2: earnings appear to be tied to economic growth and also 74 00:03:51,120 --> 00:03:54,800 Speaker 2: the efficiency of companies and such. And as long as 75 00:03:54,840 --> 00:03:58,000 Speaker 2: inflation doesn't get a lot worse, if it starts to 76 00:03:58,000 --> 00:03:59,560 Speaker 2: go to the other direction, then all bets are off, 77 00:03:59,600 --> 00:04:02,520 Speaker 2: I suppose, because higher interest rates on the FED would 78 00:04:02,560 --> 00:04:06,560 Speaker 2: definitely get markets jangled. But as long as we see growth, 79 00:04:07,320 --> 00:04:09,400 Speaker 2: sort of with the job growth of one hundred and 80 00:04:09,440 --> 00:04:12,040 Speaker 2: seventy five thousand, that's not bad news is good news, 81 00:04:12,080 --> 00:04:15,240 Speaker 2: that's like ok news is good news. Yeah. 82 00:04:15,280 --> 00:04:19,360 Speaker 5: I think the reality is that globally we've had a 83 00:04:19,760 --> 00:04:25,320 Speaker 5: enormous period of immigration, and the OECD wrote about this 84 00:04:25,400 --> 00:04:28,120 Speaker 5: and its outlooked I think two weeks ago that one 85 00:04:28,120 --> 00:04:31,400 Speaker 5: of the important factors that's allowed the economic recovery to 86 00:04:31,560 --> 00:04:35,120 Speaker 5: be extended was the fact that immigration has returned as 87 00:04:35,120 --> 00:04:38,239 Speaker 5: being a big swing factor for labor markets in places 88 00:04:38,279 --> 00:04:41,799 Speaker 5: like the US, UK and Australia, and that has been 89 00:04:41,960 --> 00:04:45,599 Speaker 5: perhaps the savior actually for these central banks in a 90 00:04:45,640 --> 00:04:49,480 Speaker 5: sense that they've not had to face recessionary problems. I 91 00:04:49,520 --> 00:04:52,480 Speaker 5: think the other thing to remember is that the two 92 00:04:52,560 --> 00:04:57,640 Speaker 5: cycles proceeding, so the cycle before the COVID was a 93 00:04:57,640 --> 00:05:01,919 Speaker 5: deflationary one. COVID itself was a defe inflationary experience, but 94 00:05:02,000 --> 00:05:05,400 Speaker 5: actually all the cycles preceding those have actually been inflationary, 95 00:05:05,400 --> 00:05:07,600 Speaker 5: and we're just sort of going back to learn what 96 00:05:07,680 --> 00:05:11,040 Speaker 5: it looks like or how things are during a period 97 00:05:11,040 --> 00:05:14,400 Speaker 5: where you are fighting inflation rather than fighting deflation. I 98 00:05:14,400 --> 00:05:16,520 Speaker 5: think that's also been part of the problem for the 99 00:05:16,560 --> 00:05:19,560 Speaker 5: bomb market. Nobody really has had the experience, including myself 100 00:05:19,600 --> 00:05:20,080 Speaker 5: as well. 101 00:05:20,560 --> 00:05:23,080 Speaker 3: Let's talk a little bit about geopolitics, because we have 102 00:05:23,160 --> 00:05:26,640 Speaker 3: these new tariffs now on certain Chinese goods being implemented 103 00:05:26,640 --> 00:05:30,040 Speaker 3: by the Bide administration. Not surprising that Beijing is going 104 00:05:30,080 --> 00:05:32,960 Speaker 3: to blow back just a little bit and vow measures 105 00:05:32,960 --> 00:05:36,840 Speaker 3: of its own. How do you kind of evaluate where 106 00:05:36,839 --> 00:05:39,640 Speaker 3: we are right now in terms of US China tensions. 107 00:05:40,520 --> 00:05:43,200 Speaker 5: Well, I think the way to succinctly put it is 108 00:05:43,560 --> 00:05:46,479 Speaker 5: things are not getting better and they're getting worse. And 109 00:05:46,640 --> 00:05:49,320 Speaker 5: for me, I think we're still going to be in 110 00:05:49,360 --> 00:05:52,839 Speaker 5: a cycle even after the US elections, in which the 111 00:05:53,000 --> 00:05:55,960 Speaker 5: whole trade sanctions and restrictions are going to be an 112 00:05:56,279 --> 00:05:59,280 Speaker 5: ongoing theme. Actually, so I think the way to put 113 00:05:59,320 --> 00:06:01,400 Speaker 5: it is that we're going to have to live with 114 00:06:01,520 --> 00:06:07,200 Speaker 5: further restrictions, further tariffs, and particularly at the high end 115 00:06:07,320 --> 00:06:10,000 Speaker 5: on the technology end, I don't see any glimmer of 116 00:06:10,120 --> 00:06:12,760 Speaker 5: light in which the US is going to relax any 117 00:06:12,800 --> 00:06:18,479 Speaker 5: of those exports or restrictions on semiconductors. So again, I 118 00:06:18,520 --> 00:06:22,919 Speaker 5: think we're in a there's no sort of endgame in this. 119 00:06:22,920 --> 00:06:24,920 Speaker 5: This is going to be a theme that's going to 120 00:06:25,000 --> 00:06:27,159 Speaker 5: continue for the next three to four years. 121 00:06:26,920 --> 00:06:31,599 Speaker 2: And US China rivalry on semiconductors brings Taiwan into the picture. Now. 122 00:06:31,839 --> 00:06:34,000 Speaker 2: Next week will be an important week. William Lai will 123 00:06:34,040 --> 00:06:38,920 Speaker 2: be inaugurated as Taiwan president. He supports the status quo 124 00:06:39,320 --> 00:06:44,480 Speaker 2: with China Sean, but he calls himself a pragmatic worker 125 00:06:44,520 --> 00:06:48,160 Speaker 2: for Taiwan independence, and the way that he gets at 126 00:06:48,160 --> 00:06:51,000 Speaker 2: that is that Taiwan has de facto independence now and 127 00:06:51,200 --> 00:06:53,800 Speaker 2: that's what the status quo means, But I'm curious whether 128 00:06:53,880 --> 00:06:57,440 Speaker 2: or not you think we might see a Taiwan discount 129 00:06:57,440 --> 00:07:00,400 Speaker 2: to be applied to the equity market there if he 130 00:07:00,440 --> 00:07:01,080 Speaker 2: gets plucky. 131 00:07:02,040 --> 00:07:04,559 Speaker 5: I think the unusual thing at the moment is that, 132 00:07:05,600 --> 00:07:09,360 Speaker 5: for first of all, Taiwan and China's economies are inextricably linked. 133 00:07:09,520 --> 00:07:11,440 Speaker 5: So if you look at the pmis over a three 134 00:07:11,520 --> 00:07:16,000 Speaker 5: or four year period, they generally sort of follow each other. 135 00:07:16,080 --> 00:07:22,440 Speaker 5: There's a symbiotic relationship between the growth rates. The second 136 00:07:22,520 --> 00:07:26,160 Speaker 5: thing is that in many respects, the economy now is 137 00:07:26,440 --> 00:07:29,320 Speaker 5: in its own sort of inflationary boom, which is similar 138 00:07:29,320 --> 00:07:32,560 Speaker 5: to what Japan is, where you have a very undervalued currency, 139 00:07:33,200 --> 00:07:36,880 Speaker 5: you have a central bank that's pretty much quite far 140 00:07:36,960 --> 00:07:40,679 Speaker 5: behind the curve and raising rates in contrast to everyone else. 141 00:07:41,160 --> 00:07:44,920 Speaker 5: And thirdly, everywhere you look, whether it's from land prices 142 00:07:45,080 --> 00:07:50,760 Speaker 5: or producer prices or CPI core CPI, actually Taiwan's is 143 00:07:50,800 --> 00:07:56,120 Speaker 5: actually inflating still. So in that respect, the political or 144 00:07:56,160 --> 00:08:00,280 Speaker 5: geopolitics is actually being sort of surpassed by the fact 145 00:08:00,320 --> 00:08:03,880 Speaker 5: that's actually the economy is doing very well and on 146 00:08:03,960 --> 00:08:08,000 Speaker 5: a very different path to what everyone else is experiencing globally. 147 00:08:08,040 --> 00:08:11,960 Speaker 5: They've also got labor shortages and an extremely low unemployment rate. 148 00:08:12,040 --> 00:08:15,600 Speaker 5: So I think in the sense, geopolitics is actually being 149 00:08:15,880 --> 00:08:18,280 Speaker 5: pushed to one side because the economy is actually doing 150 00:08:18,360 --> 00:08:19,400 Speaker 5: pretty well in Taiwan. 151 00:08:19,600 --> 00:08:21,800 Speaker 3: But I'm curious about the outlook. If we can agree 152 00:08:21,800 --> 00:08:25,080 Speaker 3: that there is just so much concentration of semiconductor of 153 00:08:25,120 --> 00:08:29,200 Speaker 3: production visa v TSMC, and if countries like the US 154 00:08:29,200 --> 00:08:32,280 Speaker 3: are a little uneasy about the level of concentration, and 155 00:08:32,440 --> 00:08:38,240 Speaker 3: other chip makers seek to diversify away from Taiwan, including TSMC, 156 00:08:38,320 --> 00:08:42,240 Speaker 3: which is actually helping to create facilities in the United States, 157 00:08:42,800 --> 00:08:46,480 Speaker 3: might the economy go into a lower gear as the 158 00:08:46,520 --> 00:08:51,920 Speaker 3: world becomes less dependent on chip manufacturing from TSMC. Or 159 00:08:51,960 --> 00:08:54,760 Speaker 3: is it simply too early to make that call. 160 00:08:54,920 --> 00:08:57,280 Speaker 5: No, that's a fair point, I think at the moment, 161 00:08:57,320 --> 00:08:59,920 Speaker 5: as I said, you have this sort of inflationary bio 162 00:09:00,080 --> 00:09:02,679 Speaker 5: which is working through the economy, mainly be caused by 163 00:09:03,040 --> 00:09:06,280 Speaker 5: a very cheap exchange rate. But your point is well taken. 164 00:09:06,440 --> 00:09:11,520 Speaker 5: The irony is that the competitive part of Taiwan semiconductors 165 00:09:11,840 --> 00:09:15,360 Speaker 5: is to some extent being hollowed out through this sort 166 00:09:15,400 --> 00:09:17,320 Speaker 5: of off you know, sort of on shoring in the 167 00:09:17,360 --> 00:09:20,520 Speaker 5: developed world, and in that respect, you're not going to 168 00:09:20,520 --> 00:09:24,760 Speaker 5: get the same level of output growth that you would 169 00:09:24,800 --> 00:09:27,800 Speaker 5: have had in pre proceeding cycles, you know, sometime in 170 00:09:27,880 --> 00:09:30,720 Speaker 5: two or three years from now, so that you know, 171 00:09:30,800 --> 00:09:33,800 Speaker 5: in fairness that time one is going to sort of 172 00:09:33,800 --> 00:09:37,840 Speaker 5: see below trend growth from from twenty twenty five twenty 173 00:09:37,880 --> 00:09:41,600 Speaker 5: six purely because they don't have that same facilities in situ. 174 00:09:41,920 --> 00:09:44,760 Speaker 2: But you are sounding like a Taiwan bull and you're 175 00:09:44,840 --> 00:09:48,880 Speaker 2: you're also quite bulled up on the hanksayg Tech Index, 176 00:09:49,520 --> 00:09:53,200 Speaker 2: it is up thirty four percent since February first. When 177 00:09:53,280 --> 00:09:55,600 Speaker 2: is enough enough? Well? 178 00:09:55,600 --> 00:09:58,559 Speaker 5: I think the interesting thing about the Hansen Tech Index 179 00:09:58,679 --> 00:10:02,440 Speaker 5: is that it's a pure or look at everything that 180 00:10:03,920 --> 00:10:06,679 Speaker 5: is more on the exports side and nothing to do 181 00:10:06,720 --> 00:10:10,440 Speaker 5: with real estate or finance. So it's a very clean 182 00:10:10,559 --> 00:10:14,160 Speaker 5: way of getting to grips of how China's sort of 183 00:10:14,440 --> 00:10:18,400 Speaker 5: other part of the economy is doing. And in fairness, 184 00:10:18,520 --> 00:10:21,199 Speaker 5: the companies, I think we we calculated eighty percent of 185 00:10:21,240 --> 00:10:24,080 Speaker 5: them have cat net cash from the balance sheet free 186 00:10:24,080 --> 00:10:27,080 Speaker 5: cash flow yields on average seven percent. It was a 187 00:10:27,120 --> 00:10:31,040 Speaker 5: sort of outstanding bargain and in that respect, I think 188 00:10:31,200 --> 00:10:33,000 Speaker 5: there was a fair degree of catch up for the 189 00:10:33,200 --> 00:10:36,040 Speaker 5: HS tech compared to all the other global indices in 190 00:10:36,080 --> 00:10:38,199 Speaker 5: the past past two quarters. 191 00:10:38,280 --> 00:10:40,440 Speaker 2: All right, Sean, thanks very much for joining us here 192 00:10:40,480 --> 00:10:43,160 Speaker 2: on a holiday in our studios in Hong Kong. Sean Darby, 193 00:10:43,440 --> 00:10:45,839 Speaker 2: Managing director at Mizuho Securities. 194 00:10:53,160 --> 00:10:57,440 Speaker 3: Earlier today in the States, President Biden unveiled sweeping tariffs 195 00:10:57,679 --> 00:11:00,800 Speaker 3: and an increase in terraffs on a range of Chinese imports. 196 00:11:00,800 --> 00:11:03,120 Speaker 3: We're going to take a closer look now with our 197 00:11:03,160 --> 00:11:06,319 Speaker 3: own John lu Bloomberg Executive editor, joining us from our 198 00:11:06,360 --> 00:11:09,600 Speaker 3: studios in Beijing. John, it's always a pleasure. I'm going 199 00:11:09,640 --> 00:11:11,840 Speaker 3: to go out on a limb and say that this 200 00:11:11,960 --> 00:11:15,200 Speaker 3: really didn't go down too well in Beijing. Is that 201 00:11:15,240 --> 00:11:16,040 Speaker 3: a fair statement. 202 00:11:16,720 --> 00:11:19,800 Speaker 1: I think that is a fair statement. This adds additional 203 00:11:19,960 --> 00:11:23,920 Speaker 1: pressure on a relationship that is already very tense, that 204 00:11:24,040 --> 00:11:27,640 Speaker 1: is already full of fractious disagreements, and so this is 205 00:11:27,679 --> 00:11:29,640 Speaker 1: not making things any easier in any way. 206 00:11:30,840 --> 00:11:33,240 Speaker 2: John, Is it also fair to say the flip side 207 00:11:33,240 --> 00:11:35,959 Speaker 2: of it, that this may be a little bit more 208 00:11:35,960 --> 00:11:39,400 Speaker 2: political on both sides than it is a real teeth 209 00:11:39,640 --> 00:11:40,199 Speaker 2: in the action. 210 00:11:41,280 --> 00:11:47,200 Speaker 1: I think some of these tariffs were designed for maximum 211 00:11:47,200 --> 00:11:51,840 Speaker 1: political advantage, and maybe not so much for the impact 212 00:11:51,960 --> 00:11:56,000 Speaker 1: on the economy. For example, there are not really many 213 00:11:56,400 --> 00:11:59,760 Speaker 1: Chinese electric cars being exported to the United States from China, 214 00:11:59,800 --> 00:12:04,959 Speaker 1: and putting quadrupling the tariffs on those shipments is not 215 00:12:05,000 --> 00:12:08,400 Speaker 1: going to have that big of an impact on bilateral trade. 216 00:12:08,600 --> 00:12:11,040 Speaker 1: I think we saw something earlier when the Biden administration 217 00:12:11,120 --> 00:12:14,760 Speaker 1: talked about putting additional tariffs on Chinese steel and aluminum, 218 00:12:15,120 --> 00:12:17,760 Speaker 1: which the US buys very little of from China, and 219 00:12:17,840 --> 00:12:21,200 Speaker 1: so a lot of this is more show than it 220 00:12:21,280 --> 00:12:22,640 Speaker 1: is impact. 221 00:12:22,760 --> 00:12:24,960 Speaker 3: But I'm wondering if the subtext here is what we 222 00:12:25,000 --> 00:12:27,800 Speaker 3: need to be talking about, which is the issue of overcapacity. 223 00:12:27,840 --> 00:12:30,040 Speaker 3: I mean, that's been right out in the open from 224 00:12:30,120 --> 00:12:34,120 Speaker 3: both sides, right, not just from Treasury Secretary Yellen, but 225 00:12:34,200 --> 00:12:36,960 Speaker 3: the German Chancellor all Off Schultz as well. 226 00:12:37,080 --> 00:12:40,400 Speaker 1: That is a big issue because the concern is that 227 00:12:40,559 --> 00:12:46,200 Speaker 1: Chinese factories are making far more than can be consumed domestically, 228 00:12:46,240 --> 00:12:49,280 Speaker 1: and so the obvious answer for China when it comes 229 00:12:49,320 --> 00:12:51,480 Speaker 1: to what to do with all these goods being produced 230 00:12:51,559 --> 00:12:55,800 Speaker 1: is to export them. And if cutting the prices, exporting 231 00:12:55,880 --> 00:12:59,520 Speaker 1: those things at a cheaper price helps to get moved, 232 00:12:59,600 --> 00:13:02,720 Speaker 1: the move the product, and that is an obvious strategy, 233 00:13:02,720 --> 00:13:06,720 Speaker 1: and that is something that would of course concern the Germans, 234 00:13:06,760 --> 00:13:10,720 Speaker 1: the French, the Americans, lots of different markets around the world. 235 00:13:11,000 --> 00:13:14,080 Speaker 2: And of course we started out with talking about China's response. 236 00:13:14,120 --> 00:13:16,800 Speaker 2: We haven't seen it yet. It may amount to something 237 00:13:16,880 --> 00:13:20,360 Speaker 2: quite material. It could be something directed at Tesla and 238 00:13:20,520 --> 00:13:24,680 Speaker 2: companies like Apple. Have you been sort of looking at 239 00:13:24,720 --> 00:13:26,600 Speaker 2: this and what are we thinking? 240 00:13:27,520 --> 00:13:29,400 Speaker 1: So the Chinese have come out so far and said 241 00:13:29,440 --> 00:13:33,880 Speaker 1: that they will take action to protect their rights. I 242 00:13:33,960 --> 00:13:36,559 Speaker 1: think as they're trying to figure out what they should 243 00:13:36,600 --> 00:13:38,839 Speaker 1: do next, they are going to have to balance a 244 00:13:38,920 --> 00:13:43,120 Speaker 1: number of different factors. One, going after companies like Apple 245 00:13:43,240 --> 00:13:46,000 Speaker 1: or Tesla. That's not going to be good for China's 246 00:13:46,000 --> 00:13:50,000 Speaker 1: own economy because those companies are such large presences here 247 00:13:50,559 --> 00:13:54,920 Speaker 1: because they employ so many people. Discouraging foreign investment in 248 00:13:55,040 --> 00:13:57,679 Speaker 1: China is not going to help Hug get the economy 249 00:13:58,240 --> 00:14:01,320 Speaker 1: booming again. And so he's going to have to try 250 00:14:01,360 --> 00:14:06,400 Speaker 1: and find some action that is both going to appease 251 00:14:06,440 --> 00:14:09,240 Speaker 1: a domestic audience which thinks that the government needs to 252 00:14:09,280 --> 00:14:11,679 Speaker 1: stand up for China, but then also not shoot China 253 00:14:11,800 --> 00:14:12,559 Speaker 1: in its own foot. 254 00:14:12,800 --> 00:14:15,559 Speaker 3: Don't we need to also take a look at proportionality. 255 00:14:15,600 --> 00:14:17,480 Speaker 3: I mean the leverages that we're talking about here from 256 00:14:17,520 --> 00:14:20,840 Speaker 3: the US that covers around eighteen billion in goods for 257 00:14:20,960 --> 00:14:24,240 Speaker 3: an eighteen trillion dollar economy, So this is literally a 258 00:14:24,320 --> 00:14:25,160 Speaker 3: drop in the bucket. 259 00:14:26,360 --> 00:14:28,920 Speaker 1: Well, I think the Chinese will take that into consideration, 260 00:14:29,040 --> 00:14:32,760 Speaker 1: and I think there is a lot of mutual understanding 261 00:14:32,800 --> 00:14:36,680 Speaker 1: that ahead of this year's presidential election in the United 262 00:14:36,720 --> 00:14:39,560 Speaker 1: States that the rhetoric coming out of Washington is going 263 00:14:39,600 --> 00:14:43,480 Speaker 1: to be more heated than normal. And I think also 264 00:14:43,520 --> 00:14:45,960 Speaker 1: factoring into this is, of course the other candidate in 265 00:14:46,000 --> 00:14:49,880 Speaker 1: the race, former President Trump, and some of the more 266 00:14:49,960 --> 00:14:55,160 Speaker 1: aggressive tariffs that he's talked about taking or putting into 267 00:14:55,200 --> 00:14:57,920 Speaker 1: place if he were elected president. So there's a number 268 00:14:57,920 --> 00:14:58,840 Speaker 1: of things in play here. 269 00:14:59,400 --> 00:15:02,600 Speaker 2: John. Obviously, trade is a big issue for China, but 270 00:15:02,680 --> 00:15:05,920 Speaker 2: Taiwan is probably the biggest issue. And we have William 271 00:15:06,000 --> 00:15:10,120 Speaker 2: Lai to be inaugurated next week as president. He supports 272 00:15:10,120 --> 00:15:12,000 Speaker 2: the status quo, but he's always kind of leaned a 273 00:15:12,080 --> 00:15:15,480 Speaker 2: little bit toward Taiwan independence. He calls himself a pragmatic 274 00:15:15,520 --> 00:15:20,000 Speaker 2: worker for Taiwan independence. Should we be concerned that Taiwan, 275 00:15:20,200 --> 00:15:24,120 Speaker 2: the economy, semiconductors, everything may get a little bit of 276 00:15:24,160 --> 00:15:28,560 Speaker 2: a downgrade going forward as a result of that tricky relationship. 277 00:15:29,120 --> 00:15:33,040 Speaker 1: So I think Taiwan is definitely the most dangerous, dangerous 278 00:15:33,160 --> 00:15:36,040 Speaker 1: flashpoint in this relationship between the United States and China. 279 00:15:36,120 --> 00:15:40,720 Speaker 1: Whether William Laie's ascendence to the presidential office will be 280 00:15:40,840 --> 00:15:44,280 Speaker 1: the spark that sets off some sort of conflict, I 281 00:15:44,280 --> 00:15:47,520 Speaker 1: think that looks relatively unlikely at the moment. We are 282 00:15:47,680 --> 00:15:52,200 Speaker 1: expecting him to stick to the line from the previous 283 00:15:52,200 --> 00:15:54,920 Speaker 1: administration of Taiing I. He has said that publicly he 284 00:15:55,080 --> 00:15:59,200 Speaker 1: plans to be a continuity president of anything. I think 285 00:15:59,280 --> 00:16:02,640 Speaker 1: the speech that he will be giving his inauguration will 286 00:16:02,680 --> 00:16:07,080 Speaker 1: be tuned to try and both show him and his 287 00:16:07,120 --> 00:16:10,480 Speaker 1: party is defending Taiwan, but also not to cause any 288 00:16:10,640 --> 00:16:12,480 Speaker 1: upsetness in Beijing or Washington. 289 00:16:12,880 --> 00:16:14,760 Speaker 3: John, it's always a pleasure. Thank you so much for 290 00:16:14,800 --> 00:16:16,560 Speaker 3: making time to chat with us. Covered a lot of 291 00:16:16,600 --> 00:16:20,120 Speaker 3: ground there with John Lou Bloomberg executive editor in Beijing. 292 00:16:27,360 --> 00:16:30,240 Speaker 3: We go to China next. And those big earnings reports 293 00:16:30,240 --> 00:16:32,720 Speaker 3: that we have been waiting for ten Cent Holdings, on 294 00:16:32,720 --> 00:16:36,080 Speaker 3: one hand, reported better than expected earnings, a sixty two 295 00:16:36,160 --> 00:16:39,640 Speaker 3: percent surge. Okay, so that's the good news. On the 296 00:16:39,680 --> 00:16:42,400 Speaker 3: other hand, Ali Baba with a plunge and profit. We're 297 00:16:42,440 --> 00:16:46,800 Speaker 3: talking about net income tumbling eighty six percent. That's after 298 00:16:46,880 --> 00:16:51,479 Speaker 3: an unexplained write down for losses in Baba's publicly traded holdings. 299 00:16:51,840 --> 00:16:54,560 Speaker 3: There was a little bit of commonality though, among these 300 00:16:54,600 --> 00:16:57,480 Speaker 3: two giants. Both ten Cent and Ali Baba reported better 301 00:16:57,520 --> 00:17:02,120 Speaker 3: than expected revenue growth, although it was in the single digits. However, 302 00:17:02,160 --> 00:17:04,560 Speaker 3: there was divergence when you look at the share prices 303 00:17:04,800 --> 00:17:07,679 Speaker 3: here in New York. The ADRs and ten Cent up 304 00:17:07,680 --> 00:17:10,840 Speaker 3: about four point seven percent, but the ADRs and Baba 305 00:17:10,920 --> 00:17:12,480 Speaker 3: were down six percent. 306 00:17:12,640 --> 00:17:16,360 Speaker 2: Brian Well joining us now to discuss this as Lad Savov, 307 00:17:16,359 --> 00:17:19,080 Speaker 2: Bloomberg Tech editor, who is looking very closely at the 308 00:17:19,119 --> 00:17:22,240 Speaker 2: ten Cent and Baba earnings and was on our blog, 309 00:17:22,640 --> 00:17:25,480 Speaker 2: really getting to all the comments as they came. Vlad, 310 00:17:25,720 --> 00:17:28,639 Speaker 2: nice to have you with us in our studios. Let's 311 00:17:28,680 --> 00:17:31,480 Speaker 2: start off with Ali Baba first, because one of the 312 00:17:31,480 --> 00:17:34,840 Speaker 2: things that we observed over the past many, many weeks 313 00:17:34,960 --> 00:17:37,720 Speaker 2: was that Ali Baba faces a lot more stiff competition 314 00:17:37,760 --> 00:17:40,200 Speaker 2: at the moment than ten Cent does, and so ten 315 00:17:40,240 --> 00:17:42,640 Speaker 2: cents earnings had to beat and we can talk about 316 00:17:42,680 --> 00:17:44,960 Speaker 2: that too. But Ali Bab a couple of things. Doug 317 00:17:45,040 --> 00:17:49,240 Speaker 2: mentioned one that basically there was some unexplained losses in 318 00:17:49,280 --> 00:17:52,760 Speaker 2: its holdings of public companies, and that's one thing, but 319 00:17:52,800 --> 00:17:55,399 Speaker 2: it also had to spend more to fight off the 320 00:17:55,440 --> 00:17:57,480 Speaker 2: competition and it was costly. 321 00:17:57,840 --> 00:18:00,600 Speaker 6: Absolutely, Brian, and I think you got to exactly right. 322 00:18:00,640 --> 00:18:04,280 Speaker 6: Ali Baba's competitive landscape is so different from ten cents. 323 00:18:04,320 --> 00:18:05,080 Speaker 7: In years past. 324 00:18:05,119 --> 00:18:07,440 Speaker 6: It used to be that Ali Baba was the big 325 00:18:07,480 --> 00:18:09,960 Speaker 6: dog in e commerce and in the same way that 326 00:18:10,080 --> 00:18:13,160 Speaker 6: ten Cent is with games publishing, and ten Cent situation 327 00:18:13,359 --> 00:18:16,000 Speaker 6: is still the case. It's still the world's biggest games publisher. 328 00:18:16,640 --> 00:18:18,560 Speaker 6: He's the biggest by far in China. It one has 329 00:18:18,600 --> 00:18:21,240 Speaker 6: Netty's to compete with, whereas Alibaba. On the other hand, 330 00:18:21,280 --> 00:18:24,360 Speaker 6: you have by Dance coming in, you have PDD. Everyone 331 00:18:24,600 --> 00:18:27,360 Speaker 6: is getting into its turf. So one of the things 332 00:18:27,359 --> 00:18:31,160 Speaker 6: that stood out from Ali Baba's announcement was they mentioned, 333 00:18:31,800 --> 00:18:34,800 Speaker 6: with respect to Timo and Talbau price competitive. They mentioned 334 00:18:34,840 --> 00:18:36,919 Speaker 6: a couple of times in their announcements. So really what 335 00:18:36,960 --> 00:18:39,679 Speaker 6: they're saying is it costs us money to compete. These 336 00:18:39,760 --> 00:18:42,120 Speaker 6: guys are undercutting us, so we need to undercut them back. 337 00:18:42,640 --> 00:18:45,240 Speaker 3: You know, sometimes the candy. I mean, at least these 338 00:18:45,359 --> 00:18:49,080 Speaker 3: days for the market has been any mention of artificial intelligence. 339 00:18:49,560 --> 00:18:53,560 Speaker 3: Where do Baba and Tencent come down? Visa VI you 340 00:18:53,600 --> 00:18:56,240 Speaker 3: know this move into AI, right. 341 00:18:56,080 --> 00:18:58,760 Speaker 6: That's another commonality for both of them. They consider AI 342 00:18:58,840 --> 00:19:02,240 Speaker 6: a central pillar. Now the detail is where it becomes interesting, 343 00:19:02,320 --> 00:19:04,480 Speaker 6: and we don't have enough to EATA from either company. 344 00:19:04,480 --> 00:19:05,919 Speaker 6: I mean, one of the things that Ali Baba has 345 00:19:05,920 --> 00:19:07,800 Speaker 6: mentioned for a couple of quarters now is that they 346 00:19:07,800 --> 00:19:11,960 Speaker 6: will deploy generative AI to help make its e commerce 347 00:19:12,040 --> 00:19:12,680 Speaker 6: more appealing. 348 00:19:13,200 --> 00:19:16,240 Speaker 7: I don't see how that's happening. I mean, these are 349 00:19:16,320 --> 00:19:17,320 Speaker 7: two very different things. 350 00:19:17,320 --> 00:19:20,840 Speaker 6: Generaty of AI is something that's still very nascent, very early, 351 00:19:20,880 --> 00:19:23,000 Speaker 6: and nobody's really figured out exactly how to deploy it. 352 00:19:23,240 --> 00:19:27,879 Speaker 6: Whereas e commerce there are proven ways to entice people 353 00:19:28,400 --> 00:19:30,080 Speaker 6: to buy stuff. And actually at the moment, the thing 354 00:19:30,119 --> 00:19:32,000 Speaker 6: that's really doing it is short video is stuff like 355 00:19:32,040 --> 00:19:34,359 Speaker 6: TikTok and dowy in and that's the thing that Tencent 356 00:19:34,400 --> 00:19:37,119 Speaker 6: is leaning into with wechair and it's we chat video. 357 00:19:37,480 --> 00:19:39,960 Speaker 6: So one of the big figures that Tencent reported is 358 00:19:40,000 --> 00:19:42,960 Speaker 6: eighty percent growth. Can use the time spent in we 359 00:19:43,080 --> 00:19:45,320 Speaker 6: chat video accounts and what really that says we chat 360 00:19:45,359 --> 00:19:47,680 Speaker 6: vide account. You can equate that to ten cents TikTok. 361 00:19:48,280 --> 00:19:50,280 Speaker 6: The more people use in that service, the more that 362 00:19:50,440 --> 00:19:54,000 Speaker 6: ten Cent commnetize, the more it can introduce e commerce opportunities. 363 00:19:54,200 --> 00:19:57,040 Speaker 2: So, in other words, we should not read that twenty 364 00:19:57,080 --> 00:20:00,399 Speaker 2: six percent rise in ad sales by ten Cent. We 365 00:20:00,480 --> 00:20:02,920 Speaker 2: probably shouldn't take that as a good barometer on the 366 00:20:03,000 --> 00:20:06,280 Speaker 2: Chinese economy. It's more like the algorithm. It's more like 367 00:20:06,320 --> 00:20:09,600 Speaker 2: what they're doing to attract and keep Wi Chat users 368 00:20:09,800 --> 00:20:11,160 Speaker 2: with those short form videos. 369 00:20:11,400 --> 00:20:12,119 Speaker 7: That's right, Brian. 370 00:20:12,520 --> 00:20:14,600 Speaker 6: If you want to flatter a Tencent for their execution, 371 00:20:14,680 --> 00:20:15,480 Speaker 6: you're free to do that. 372 00:20:15,880 --> 00:20:17,520 Speaker 7: But I think you're right. I think you're correct. 373 00:20:18,359 --> 00:20:20,480 Speaker 2: Well, I was going to flatter you by saying you're 374 00:20:20,520 --> 00:20:24,000 Speaker 2: the big dog looking at these big tech companies. 375 00:20:24,240 --> 00:20:25,480 Speaker 7: Well, here's the thing. 376 00:20:26,320 --> 00:20:29,760 Speaker 6: Ali Baba's chairman, Joe Zie He said that the company 377 00:20:29,800 --> 00:20:33,080 Speaker 6: is seeing positive signs of the Chinese consumer being willing 378 00:20:33,119 --> 00:20:36,160 Speaker 6: to spend. Again, that was not the same sentiment coming 379 00:20:36,200 --> 00:20:39,000 Speaker 6: out of Tencent. Martin Laud, the president of Tencent. He 380 00:20:39,119 --> 00:20:42,320 Speaker 6: said that the Chinese economy is mixed, and therefore the 381 00:20:42,359 --> 00:20:46,760 Speaker 6: advertising landscape necessarily is also mixed. So ten Cent itself 382 00:20:46,840 --> 00:20:48,600 Speaker 6: is taking the credit for this as well. They're saying 383 00:20:48,600 --> 00:20:51,159 Speaker 6: that they're doing better, and they do give some credit 384 00:20:51,200 --> 00:20:55,200 Speaker 6: to AI helping them optimize ads on and other platforms. 385 00:20:55,240 --> 00:20:57,719 Speaker 3: So when you're a company like Ali Baba Vlad and 386 00:20:57,760 --> 00:21:01,040 Speaker 3: you're struggling, is the remedy, at least in the short 387 00:21:01,119 --> 00:21:04,240 Speaker 3: term stock buyback? Is that enough to kind of get 388 00:21:04,280 --> 00:21:06,240 Speaker 3: the market a little enthused? 389 00:21:07,440 --> 00:21:10,040 Speaker 6: Well, Brian said it. I mean, you said it yourself. 390 00:21:10,119 --> 00:21:13,360 Speaker 6: The stock market is not reacting positively. They did announce 391 00:21:13,359 --> 00:21:14,200 Speaker 6: a four billion. 392 00:21:13,960 --> 00:21:15,920 Speaker 7: Dollar buyback, so everyone is quite serious. 393 00:21:16,000 --> 00:21:19,360 Speaker 6: One of the really interesting things across the tech ecosystem, 394 00:21:19,640 --> 00:21:21,959 Speaker 6: no matter the geography, is that everyone's doing a buyback 395 00:21:22,040 --> 00:21:24,680 Speaker 6: right now. We're talking Sony in Japan, Ali Baba, Tense 396 00:21:24,840 --> 00:21:29,600 Speaker 6: has one in ongoing. Apple announced the world's biggest buyback 397 00:21:29,640 --> 00:21:32,480 Speaker 6: ever Google Meta. Everyone is doing it right now because 398 00:21:32,480 --> 00:21:35,040 Speaker 6: they have been sitting on these big cash piles and 399 00:21:35,280 --> 00:21:37,879 Speaker 6: at the same time as they investing heavily in AI. 400 00:21:37,920 --> 00:21:39,720 Speaker 7: And this is true both for Tense and Ali Baba. 401 00:21:40,800 --> 00:21:42,880 Speaker 6: One of the ways that they can, like you say, 402 00:21:42,880 --> 00:21:45,879 Speaker 6: you sustain the share price and give some satisfaction to 403 00:21:45,920 --> 00:21:47,800 Speaker 6: investors is to give some money back. 404 00:21:48,440 --> 00:21:51,359 Speaker 2: We saw a little bit of caution in games for 405 00:21:51,480 --> 00:21:54,439 Speaker 2: Tencent to walk us through some of the details there. 406 00:21:55,200 --> 00:21:57,320 Speaker 6: Well, I mean, this is the other really interesting thing 407 00:21:57,520 --> 00:22:00,439 Speaker 6: to hear Tencent talk about his business. It keeps about 408 00:22:00,520 --> 00:22:03,119 Speaker 6: high quality growth and how it's kind of shifting away 409 00:22:03,119 --> 00:22:05,119 Speaker 6: from games. But then to hear the analysts on the 410 00:22:05,119 --> 00:22:08,000 Speaker 6: analysts call and their priorities and questions, they keep focusing 411 00:22:08,040 --> 00:22:08,600 Speaker 6: on games. 412 00:22:08,800 --> 00:22:11,000 Speaker 7: And here's the thing. Tencent is now. 413 00:22:10,880 --> 00:22:13,480 Speaker 6: Talking more about grocery septs as well as revenue, which 414 00:22:13,520 --> 00:22:15,080 Speaker 6: kind of muddies the picture. So if you look at 415 00:22:15,119 --> 00:22:17,960 Speaker 6: domestic games, they were up three percent in grocery septs 416 00:22:18,000 --> 00:22:19,800 Speaker 6: but down two percent in revenue. 417 00:22:20,000 --> 00:22:21,960 Speaker 7: So those are the growth figures. 418 00:22:21,680 --> 00:22:24,080 Speaker 6: Much like e commas for Ali Baba, that everyone is 419 00:22:24,080 --> 00:22:26,400 Speaker 6: really paying attention to gaming is still the biggest thing, 420 00:22:26,880 --> 00:22:29,800 Speaker 6: and that growth rate is never rising above three four 421 00:22:29,840 --> 00:22:31,639 Speaker 6: percent each quarter. 422 00:22:32,080 --> 00:22:33,040 Speaker 7: And it's tricky. 423 00:22:33,800 --> 00:22:36,480 Speaker 6: It's tricky for Tencent to do anything about this because 424 00:22:36,480 --> 00:22:38,879 Speaker 6: they are relying on a lot of evergreen games and 425 00:22:38,920 --> 00:22:41,720 Speaker 6: they don't really have that games pipeline that's necessary to 426 00:22:41,760 --> 00:22:42,720 Speaker 6: fire up new growth. 427 00:22:42,800 --> 00:22:44,639 Speaker 3: You know, when I think about Ali Baba and the 428 00:22:44,680 --> 00:22:47,520 Speaker 3: fact that we had put so much stock in the 429 00:22:47,560 --> 00:22:52,080 Speaker 3: possibility of some spinoffs here IPOs of different divisions. I 430 00:22:52,080 --> 00:22:54,400 Speaker 3: mean that seems to be really off the table right now. 431 00:22:54,480 --> 00:22:57,320 Speaker 3: I mean, is that kind of eventually occur. Do you 432 00:22:57,359 --> 00:23:00,200 Speaker 3: think is it in Baba's best interest to spinoffs of 433 00:23:00,240 --> 00:23:01,400 Speaker 3: these divisions. 434 00:23:02,520 --> 00:23:05,040 Speaker 6: Well, never say never on that happening again. But let's 435 00:23:05,040 --> 00:23:06,600 Speaker 6: bear in mind that that was under the leadership of 436 00:23:06,680 --> 00:23:09,440 Speaker 6: Daniel Jiang who was the previous CEO, and the new CEO, 437 00:23:09,600 --> 00:23:13,800 Speaker 6: Eddie Wu, and even the earnings announcement last night very 438 00:23:13,920 --> 00:23:16,240 Speaker 6: much stressed the synergy. I mean, this is the funny 439 00:23:16,240 --> 00:23:18,439 Speaker 6: thing we talked about IPOs and spinning stuff off. Now 440 00:23:18,480 --> 00:23:20,920 Speaker 6: Alibaba is all about synergy. One of the ways that 441 00:23:20,960 --> 00:23:24,000 Speaker 6: they highlighted this was Kaine out the logistics unit. They 442 00:23:24,000 --> 00:23:27,240 Speaker 6: said several times it's doing a lot to help both 443 00:23:27,320 --> 00:23:30,600 Speaker 6: e commas domestically, but also the international arms things like 444 00:23:30,600 --> 00:23:33,400 Speaker 6: Ali Express. A lot of the growth for the logistics 445 00:23:33,520 --> 00:23:36,199 Speaker 6: unit is coming out of helping the international e commerce, 446 00:23:36,400 --> 00:23:38,440 Speaker 6: which is actually the one with the healthiest growth. 447 00:23:38,440 --> 00:23:39,840 Speaker 7: That grew by forty five percent. 448 00:23:40,480 --> 00:23:42,760 Speaker 2: I'll give you some numbers here, which I know you know, 449 00:23:42,920 --> 00:23:47,119 Speaker 2: but the audience may not. That's quite astounding. Ten cents. 450 00:23:47,160 --> 00:23:51,080 Speaker 2: Revenue was roughly twenty two billion ali Baba's thirty one billion, 451 00:23:51,560 --> 00:23:55,200 Speaker 2: yet ten cents market cap is double that of Ali Baba. 452 00:23:55,359 --> 00:23:56,320 Speaker 1: That tells you a lot. 453 00:23:56,960 --> 00:23:59,680 Speaker 6: Oh absolutely well, I mean as a gamer, I can 454 00:23:59,720 --> 00:24:01,040 Speaker 6: just say that it tells you a lot about the 455 00:24:01,119 --> 00:24:03,400 Speaker 6: value of games. But really the way that you should 456 00:24:03,400 --> 00:24:06,960 Speaker 6: think about this is games software. These are things with 457 00:24:07,080 --> 00:24:10,160 Speaker 6: a low cost base, Like the marginal cost of selling 458 00:24:10,240 --> 00:24:13,840 Speaker 6: another game is nothing basically versus Ali Baba having to 459 00:24:13,880 --> 00:24:16,760 Speaker 6: do all the logistics, having to do all this investment 460 00:24:16,800 --> 00:24:19,520 Speaker 6: in data centers and so on in order to provide 461 00:24:19,520 --> 00:24:20,120 Speaker 6: its AI. 462 00:24:19,960 --> 00:24:20,840 Speaker 7: Services to people. 463 00:24:21,160 --> 00:24:23,280 Speaker 6: And the really interesting thing with Tencent, and it's something 464 00:24:23,320 --> 00:24:24,920 Speaker 6: that they kind of picked up on in the call, 465 00:24:25,560 --> 00:24:29,760 Speaker 6: was the fact that they can entice people via we 466 00:24:30,000 --> 00:24:35,119 Speaker 6: chat via all these consumer services into it's broader ecosystem 467 00:24:35,160 --> 00:24:38,360 Speaker 6: of services that includes AI, generative AI and such other 468 00:24:38,359 --> 00:24:40,080 Speaker 6: subscriptions that they might be able to provide. 469 00:24:40,160 --> 00:24:42,600 Speaker 3: So vilaib when you consider guidance, I mean, is this 470 00:24:42,720 --> 00:24:44,439 Speaker 3: something that was played up a lot? I mean, and 471 00:24:44,480 --> 00:24:47,600 Speaker 3: what do we know about the trajectory of growth that 472 00:24:47,640 --> 00:24:50,720 Speaker 3: these companies see right now in the current environment. 473 00:24:51,920 --> 00:24:55,040 Speaker 6: Well, I don't know that we've got great visibility from 474 00:24:55,040 --> 00:24:57,320 Speaker 6: either company, I mean, Ali Baba's said that they will 475 00:24:57,359 --> 00:24:59,680 Speaker 6: keep investing in Taubau and team or the team, or 476 00:24:59,720 --> 00:25:03,320 Speaker 6: they will keep competing with the likes of PDD that 477 00:25:03,359 --> 00:25:03,960 Speaker 6: I mentioned. 478 00:25:04,880 --> 00:25:05,560 Speaker 7: As with Tencent. 479 00:25:05,640 --> 00:25:08,280 Speaker 6: They do anticipate things improving in the second half, they said. 480 00:25:09,280 --> 00:25:10,920 Speaker 6: And one of the interesting things, I mean, they mentioned 481 00:25:10,960 --> 00:25:13,720 Speaker 6: a number of games that they consider kind of flagship 482 00:25:13,760 --> 00:25:17,160 Speaker 6: games that are going to fire up growth in their estimation. 483 00:25:17,440 --> 00:25:20,240 Speaker 6: I'm not really sure about this because the blockbuster games 484 00:25:20,240 --> 00:25:22,440 Speaker 6: that we see on the global stage half the time, 485 00:25:22,480 --> 00:25:24,400 Speaker 6: they're kind of unpredictable. I mean, we had a game 486 00:25:24,440 --> 00:25:27,560 Speaker 6: like Powell that came out of nowhere. So the thing 487 00:25:27,600 --> 00:25:30,399 Speaker 6: again with the gaming ecosystem is you're not really sure 488 00:25:30,480 --> 00:25:32,960 Speaker 6: what is going to be an absolute runaway hit. So 489 00:25:33,000 --> 00:25:34,760 Speaker 6: we kind of have to play that as it goes. 490 00:25:35,440 --> 00:25:39,760 Speaker 2: And just briefly, I know you're peripherally familiar with ant 491 00:25:39,800 --> 00:25:44,600 Speaker 2: group as well. Quarterly earnings down nineteen percent, struggling, struggling 492 00:25:44,600 --> 00:25:47,000 Speaker 2: to find new drivers of growth. 493 00:25:47,320 --> 00:25:49,640 Speaker 6: And honestly, I kind of explained that one because being 494 00:25:49,640 --> 00:25:52,240 Speaker 6: based here in Hong Kong, anytime I get to a checkout, 495 00:25:52,320 --> 00:25:54,640 Speaker 6: I see Alipay as an option, not so much. 496 00:25:54,680 --> 00:25:55,280 Speaker 7: We chat pay. 497 00:25:55,320 --> 00:25:58,960 Speaker 6: So as far as Ali Baba announce, getting the distribution, 498 00:25:59,160 --> 00:26:02,679 Speaker 6: getting the reach, and getting the retailers to embrace their 499 00:26:02,720 --> 00:26:03,720 Speaker 6: payment system. 500 00:26:03,760 --> 00:26:05,440 Speaker 7: Even here in Hong Kong, it's kind of. 501 00:26:06,119 --> 00:26:09,520 Speaker 6: Ubiquitous and probably that is the strongest indicator to the 502 00:26:09,520 --> 00:26:13,200 Speaker 6: earlier point Brian about the Chinese consumer. So maybe Ali 503 00:26:13,200 --> 00:26:15,439 Speaker 6: Baba tells us is seeing signs of it recovering, but 504 00:26:15,560 --> 00:26:16,920 Speaker 6: the facts that telling us otherwise. 505 00:26:17,160 --> 00:26:19,439 Speaker 2: Yeah, all right, thanks Flad, Let's have off with us, 506 00:26:19,480 --> 00:26:23,840 Speaker 2: Bloomberg Tech editor talking Ali Bomba and ten Cent and 507 00:26:23,880 --> 00:26:24,919 Speaker 2: even a little there on. 508 00:26:25,320 --> 00:26:25,520 Speaker 1: End. 509 00:26:28,320 --> 00:26:31,240 Speaker 3: This has been the Bloomberg Daybreak Asia podcast, bringing you 510 00:26:31,320 --> 00:26:34,440 Speaker 3: the stories making news and moving markets in the Asia Pacific. 511 00:26:34,920 --> 00:26:38,040 Speaker 3: Visit the Bloomberg Podcast channel on YouTube to get more 512 00:26:38,080 --> 00:26:41,679 Speaker 3: episodes of this and other shows from Bloomberg. Subscribe to 513 00:26:41,720 --> 00:26:45,520 Speaker 3: the podcast on Apple, Spotify, or anywhere else you'll listen, 514 00:26:45,600 --> 00:26:48,680 Speaker 3: and always on Bloomberg Radio, the Bloomberg Terminal, and the 515 00:26:48,720 --> 00:26:49,800 Speaker 3: Bloomberg Business app.