Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis
Speaker 2: along with Doug Krisner. Join us each day for the
Speaker 2: stories making news and moving markets in the Asia Pacific.
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Speaker 3: Earlier in the day, we heard from Fed shair J. Powell,
Speaker 3: and he was saying that the Central Bank needs to
Speaker 3: be patient as it weights some more evidence that high
Speaker 3: interest rates are doing a job on curbing inflation. At
Speaker 3: the same time, mister Powell seemed to double down on
Speaker 3: the need to keep those borrowing cost higher for longer.
Speaker 4: I don't think that it's likely, based on the data
Speaker 4: that we have, that the next move that we make
Speaker 4: would be a rate hike. I think it's more likely
Speaker 4: that we'll be at a place where we hold the
Speaker 4: policy rate where it is.
Speaker 3: Fedchhair Ja Powell, speaking earlier today at an event in Amsterdam,
Speaker 3: he said that he expects inflation will move lower on
Speaker 3: a monthly basis. However, price figures in the first quarter
Speaker 3: have tempered that confidence.
Speaker 2: Just a bit.
Speaker 3: He spoke right after the PPI data that we had
Speaker 3: here in the US for the month of April. It
Speaker 3: showed that inflation at the wholesale level rose last month,
Speaker 3: more than forecast.
Speaker 2: Let's get to Sean Darby, Managing director at Mizuho Securities Asia,
Speaker 2: to talk a little bit more about the impact that
Speaker 2: that report has and also how he sees markets moving
Speaker 2: over the short term. Sewan, thank you very much for
Speaker 2: being with us here in our studios on a holiday
Speaker 2: but his birthday in Hong Kong, but nice to have
Speaker 2: you join us here. So when we look at that
Speaker 2: producer prise data, of course the headline data for month
Speaker 2: on month was kind of hot, but then you had
Speaker 2: these other mitigating factors on balance, neutral in your view
Speaker 2: or what.
Speaker 5: Well, certainly the boommark it took it reason to be well,
Speaker 5: so the curve actually dropped across all of the duration.
Speaker 5: I think one of the interesting thing aspects of the
Speaker 5: producer prices is actually corporates are attaining very very strong
Speaker 5: pricing power, and that doesn't really mean that we're going
Speaker 5: to be seeing a recession that soon. Companies are not
Speaker 5: in a position at the moment to having to either
Speaker 5: protect margins particularly or indeed feeling that they're going to
Speaker 5: have to lower prices to either clear infantry or garner demand.
Speaker 5: So all of this really, I think reinstates fairchairperson's power view,
Speaker 5: which is that it's going to be higher for longer,
Speaker 5: and we're not going to be really seeing rate cuts
Speaker 5: potentially really until fourth quarter, and certainly the equity market
Speaker 5: isn't going to get any relief from a very big
Speaker 5: series of rate cuts and perhaps until twenty twenty five.
Speaker 3: You don't seem to be too surprised by that notion.
Speaker 3: Were you expecting the fair to be on hold for
Speaker 3: the foreseeable future.
Speaker 5: I really feel that at the moment, if you look
Speaker 5: at things like producer prices or credit spreads, credit spreads
Speaker 5: are very very tight. For where we are on the cycle,
Speaker 5: you have an inverted Yelk curve, credit spreads tight. They
Speaker 5: have not really presaged a recession at all over the
Speaker 5: last year. In fact, it's failed. I think the FED
Speaker 5: recession model has been at sixty percent for nearly twelve
Speaker 5: months now, and the reason for all that is that
Speaker 5: as people enter the workforce, they actually produce goods that
Speaker 5: economic output picks up and you get a sort of
Speaker 5: an enduring profit cycles people as wages feedback into the economy.
Speaker 5: So ironically, at the moment it's been more of a
Speaker 5: labor problem in this cycle than anything else. And certainly,
Speaker 5: certainly in that respect, you're not really going to see
Speaker 5: economic activity fade until sometime in twenty twenty five.
Speaker 2: Yeah, And that seems to be most important because the
Speaker 2: earnings appear to be tied to economic growth and also
Speaker 2: the efficiency of companies and such. And as long as
Speaker 2: inflation doesn't get a lot worse, if it starts to
Speaker 2: go to the other direction, then all bets are off,
Speaker 2: I suppose, because higher interest rates on the FED would
Speaker 2: definitely get markets jangled. But as long as we see growth,
Speaker 2: sort of with the job growth of one hundred and
Speaker 2: seventy five thousand, that's not bad news is good news,
Speaker 2: that's like ok news is good news. Yeah.
Speaker 5: I think the reality is that globally we've had a
Speaker 5: enormous period of immigration, and the OECD wrote about this
Speaker 5: and its outlooked I think two weeks ago that one
Speaker 5: of the important factors that's allowed the economic recovery to
Speaker 5: be extended was the fact that immigration has returned as
Speaker 5: being a big swing factor for labor markets in places
Speaker 5: like the US, UK and Australia, and that has been
Speaker 5: perhaps the savior actually for these central banks in a
Speaker 5: sense that they've not had to face recessionary problems. I
Speaker 5: think the other thing to remember is that the two
Speaker 5: cycles proceeding, so the cycle before the COVID was a
Speaker 5: deflationary one. COVID itself was a defe inflationary experience, but
Speaker 5: actually all the cycles preceding those have actually been inflationary,
Speaker 5: and we're just sort of going back to learn what
Speaker 5: it looks like or how things are during a period
Speaker 5: where you are fighting inflation rather than fighting deflation. I
Speaker 5: think that's also been part of the problem for the
Speaker 5: bomb market. Nobody really has had the experience, including myself
Speaker 5: as well.
Speaker 3: Let's talk a little bit about geopolitics, because we have
Speaker 3: these new tariffs now on certain Chinese goods being implemented
Speaker 3: by the Bide administration. Not surprising that Beijing is going
Speaker 3: to blow back just a little bit and vow measures
Speaker 3: of its own. How do you kind of evaluate where
Speaker 3: we are right now in terms of US China tensions.
Speaker 5: Well, I think the way to succinctly put it is
Speaker 5: things are not getting better and they're getting worse. And
Speaker 5: for me, I think we're still going to be in
Speaker 5: a cycle even after the US elections, in which the
Speaker 5: whole trade sanctions and restrictions are going to be an
Speaker 5: ongoing theme. Actually, so I think the way to put
Speaker 5: it is that we're going to have to live with
Speaker 5: further restrictions, further tariffs, and particularly at the high end
Speaker 5: on the technology end, I don't see any glimmer of
Speaker 5: light in which the US is going to relax any
Speaker 5: of those exports or restrictions on semiconductors. So again, I
Speaker 5: think we're in a there's no sort of endgame in this.
Speaker 5: This is going to be a theme that's going to
Speaker 5: continue for the next three to four years.
Speaker 2: And US China rivalry on semiconductors brings Taiwan into the picture. Now.
Speaker 2: Next week will be an important week. William Lai will
Speaker 2: be inaugurated as Taiwan president. He supports the status quo
Speaker 2: with China Sean, but he calls himself a pragmatic worker
Speaker 2: for Taiwan independence, and the way that he gets at
Speaker 2: that is that Taiwan has de facto independence now and
Speaker 2: that's what the status quo means, But I'm curious whether
Speaker 2: or not you think we might see a Taiwan discount
Speaker 2: to be applied to the equity market there if he
Speaker 2: gets plucky.
Speaker 5: I think the unusual thing at the moment is that,
Speaker 5: for first of all, Taiwan and China's economies are inextricably linked.
Speaker 5: So if you look at the pmis over a three
Speaker 5: or four year period, they generally sort of follow each other.
Speaker 5: There's a symbiotic relationship between the growth rates. The second
Speaker 5: thing is that in many respects, the economy now is
Speaker 5: in its own sort of inflationary boom, which is similar
Speaker 5: to what Japan is, where you have a very undervalued currency,
Speaker 5: you have a central bank that's pretty much quite far
Speaker 5: behind the curve and raising rates in contrast to everyone else.
Speaker 5: And thirdly, everywhere you look, whether it's from land prices
Speaker 5: or producer prices or CPI core CPI, actually Taiwan's is
Speaker 5: actually inflating still. So in that respect, the political or
Speaker 5: geopolitics is actually being sort of surpassed by the fact
Speaker 5: that's actually the economy is doing very well and on
Speaker 5: a very different path to what everyone else is experiencing globally.
Speaker 5: They've also got labor shortages and an extremely low unemployment rate.
Speaker 5: So I think in the sense, geopolitics is actually being
Speaker 5: pushed to one side because the economy is actually doing
Speaker 5: pretty well in Taiwan.
Speaker 3: But I'm curious about the outlook. If we can agree
Speaker 3: that there is just so much concentration of semiconductor of
Speaker 3: production visa v TSMC, and if countries like the US
Speaker 3: are a little uneasy about the level of concentration, and
Speaker 3: other chip makers seek to diversify away from Taiwan, including TSMC,
Speaker 3: which is actually helping to create facilities in the United States,
Speaker 3: might the economy go into a lower gear as the
Speaker 3: world becomes less dependent on chip manufacturing from TSMC. Or
Speaker 3: is it simply too early to make that call.
Speaker 5: No, that's a fair point, I think at the moment,
Speaker 5: as I said, you have this sort of inflationary bio
Speaker 5: which is working through the economy, mainly be caused by
Speaker 5: a very cheap exchange rate. But your point is well taken.
Speaker 5: The irony is that the competitive part of Taiwan semiconductors
Speaker 5: is to some extent being hollowed out through this sort
Speaker 5: of off you know, sort of on shoring in the
Speaker 5: developed world, and in that respect, you're not going to
Speaker 5: get the same level of output growth that you would
Speaker 5: have had in pre proceeding cycles, you know, sometime in
Speaker 5: two or three years from now, so that you know,
Speaker 5: in fairness that time one is going to sort of
Speaker 5: see below trend growth from from twenty twenty five twenty
Speaker 5: six purely because they don't have that same facilities in situ.
Speaker 2: But you are sounding like a Taiwan bull and you're
Speaker 2: you're also quite bulled up on the hanksayg Tech Index,
Speaker 2: it is up thirty four percent since February first. When
Speaker 2: is enough enough? Well?
Speaker 5: I think the interesting thing about the Hansen Tech Index
Speaker 5: is that it's a pure or look at everything that
Speaker 5: is more on the exports side and nothing to do
Speaker 5: with real estate or finance. So it's a very clean
Speaker 5: way of getting to grips of how China's sort of
Speaker 5: other part of the economy is doing. And in fairness,
Speaker 5: the companies, I think we we calculated eighty percent of
Speaker 5: them have cat net cash from the balance sheet free
Speaker 5: cash flow yields on average seven percent. It was a
Speaker 5: sort of outstanding bargain and in that respect, I think
Speaker 5: there was a fair degree of catch up for the
Speaker 5: HS tech compared to all the other global indices in
Speaker 5: the past past two quarters.
Speaker 2: All right, Sean, thanks very much for joining us here
Speaker 2: on a holiday in our studios in Hong Kong. Sean Darby,
Speaker 2: Managing director at Mizuho Securities.
Speaker 3: Earlier today in the States, President Biden unveiled sweeping tariffs
Speaker 3: and an increase in terraffs on a range of Chinese imports.
Speaker 3: We're going to take a closer look now with our
Speaker 3: own John lu Bloomberg Executive editor, joining us from our
Speaker 3: studios in Beijing. John, it's always a pleasure. I'm going
Speaker 3: to go out on a limb and say that this
Speaker 3: really didn't go down too well in Beijing. Is that
Speaker 3: a fair statement.
Speaker 1: I think that is a fair statement. This adds additional
Speaker 1: pressure on a relationship that is already very tense, that
Speaker 1: is already full of fractious disagreements, and so this is
Speaker 1: not making things any easier in any way.
Speaker 2: John, Is it also fair to say the flip side
Speaker 2: of it, that this may be a little bit more
Speaker 2: political on both sides than it is a real teeth
Speaker 2: in the action.
Speaker 1: I think some of these tariffs were designed for maximum
Speaker 1: political advantage, and maybe not so much for the impact
Speaker 1: on the economy. For example, there are not really many
Speaker 1: Chinese electric cars being exported to the United States from China,
Speaker 1: and putting quadrupling the tariffs on those shipments is not
Speaker 1: going to have that big of an impact on bilateral trade.
Speaker 1: I think we saw something earlier when the Biden administration
Speaker 1: talked about putting additional tariffs on Chinese steel and aluminum,
Speaker 1: which the US buys very little of from China, and
Speaker 1: so a lot of this is more show than it
Speaker 1: is impact.
Speaker 3: But I'm wondering if the subtext here is what we
Speaker 3: need to be talking about, which is the issue of overcapacity.
Speaker 3: I mean, that's been right out in the open from
Speaker 3: both sides, right, not just from Treasury Secretary Yellen, but
Speaker 3: the German Chancellor all Off Schultz as well.
Speaker 1: That is a big issue because the concern is that
Speaker 1: Chinese factories are making far more than can be consumed domestically,
Speaker 1: and so the obvious answer for China when it comes
Speaker 1: to what to do with all these goods being produced
Speaker 1: is to export them. And if cutting the prices, exporting
Speaker 1: those things at a cheaper price helps to get moved,
Speaker 1: the move the product, and that is an obvious strategy,
Speaker 1: and that is something that would of course concern the Germans,
Speaker 1: the French, the Americans, lots of different markets around the world.
Speaker 2: And of course we started out with talking about China's response.
Speaker 2: We haven't seen it yet. It may amount to something
Speaker 2: quite material. It could be something directed at Tesla and
Speaker 2: companies like Apple. Have you been sort of looking at
Speaker 2: this and what are we thinking?
Speaker 1: So the Chinese have come out so far and said
Speaker 1: that they will take action to protect their rights. I
Speaker 1: think as they're trying to figure out what they should
Speaker 1: do next, they are going to have to balance a
Speaker 1: number of different factors. One, going after companies like Apple
Speaker 1: or Tesla. That's not going to be good for China's
Speaker 1: own economy because those companies are such large presences here
Speaker 1: because they employ so many people. Discouraging foreign investment in
Speaker 1: China is not going to help Hug get the economy
Speaker 1: booming again. And so he's going to have to try
Speaker 1: and find some action that is both going to appease
Speaker 1: a domestic audience which thinks that the government needs to
Speaker 1: stand up for China, but then also not shoot China
Speaker 1: in its own foot.
Speaker 3: Don't we need to also take a look at proportionality.
Speaker 3: I mean the leverages that we're talking about here from
Speaker 3: the US that covers around eighteen billion in goods for
Speaker 3: an eighteen trillion dollar economy, So this is literally a
Speaker 3: drop in the bucket.
Speaker 1: Well, I think the Chinese will take that into consideration,
Speaker 1: and I think there is a lot of mutual understanding
Speaker 1: that ahead of this year's presidential election in the United
Speaker 1: States that the rhetoric coming out of Washington is going
Speaker 1: to be more heated than normal. And I think also
Speaker 1: factoring into this is, of course the other candidate in
Speaker 1: the race, former President Trump, and some of the more
Speaker 1: aggressive tariffs that he's talked about taking or putting into
Speaker 1: place if he were elected president. So there's a number
Speaker 1: of things in play here.
Speaker 2: John. Obviously, trade is a big issue for China, but
Speaker 2: Taiwan is probably the biggest issue. And we have William
Speaker 2: Lai to be inaugurated next week as president. He supports
Speaker 2: the status quo, but he's always kind of leaned a
Speaker 2: little bit toward Taiwan independence. He calls himself a pragmatic
Speaker 2: worker for Taiwan independence. Should we be concerned that Taiwan,
Speaker 2: the economy, semiconductors, everything may get a little bit of
Speaker 2: a downgrade going forward as a result of that tricky relationship.
Speaker 1: So I think Taiwan is definitely the most dangerous, dangerous
Speaker 1: flashpoint in this relationship between the United States and China.
Speaker 1: Whether William Laie's ascendence to the presidential office will be
Speaker 1: the spark that sets off some sort of conflict, I
Speaker 1: think that looks relatively unlikely at the moment. We are
Speaker 1: expecting him to stick to the line from the previous
Speaker 1: administration of Taiing I. He has said that publicly he
Speaker 1: plans to be a continuity president of anything. I think
Speaker 1: the speech that he will be giving his inauguration will
Speaker 1: be tuned to try and both show him and his
Speaker 1: party is defending Taiwan, but also not to cause any
Speaker 1: upsetness in Beijing or Washington.
Speaker 3: John, it's always a pleasure. Thank you so much for
Speaker 3: making time to chat with us. Covered a lot of
Speaker 3: ground there with John Lou Bloomberg executive editor in Beijing.
Speaker 3: We go to China next. And those big earnings reports
Speaker 3: that we have been waiting for ten Cent Holdings, on
Speaker 3: one hand, reported better than expected earnings, a sixty two
Speaker 3: percent surge. Okay, so that's the good news. On the
Speaker 3: other hand, Ali Baba with a plunge and profit. We're
Speaker 3: talking about net income tumbling eighty six percent. That's after
Speaker 3: an unexplained write down for losses in Baba's publicly traded holdings.
Speaker 3: There was a little bit of commonality though, among these
Speaker 3: two giants. Both ten Cent and Ali Baba reported better
Speaker 3: than expected revenue growth, although it was in the single digits. However,
Speaker 3: there was divergence when you look at the share prices
Speaker 3: here in New York. The ADRs and ten Cent up
Speaker 3: about four point seven percent, but the ADRs and Baba
Speaker 3: were down six percent.
Speaker 2: Brian Well joining us now to discuss this as Lad Savov,
Speaker 2: Bloomberg Tech editor, who is looking very closely at the
Speaker 2: ten Cent and Baba earnings and was on our blog,
Speaker 2: really getting to all the comments as they came. Vlad,
Speaker 2: nice to have you with us in our studios. Let's
Speaker 2: start off with Ali Baba first, because one of the
Speaker 2: things that we observed over the past many, many weeks
Speaker 2: was that Ali Baba faces a lot more stiff competition
Speaker 2: at the moment than ten Cent does, and so ten
Speaker 2: cents earnings had to beat and we can talk about
Speaker 2: that too. But Ali Bab a couple of things. Doug
Speaker 2: mentioned one that basically there was some unexplained losses in
Speaker 2: its holdings of public companies, and that's one thing, but
Speaker 2: it also had to spend more to fight off the
Speaker 2: competition and it was costly.
Speaker 6: Absolutely, Brian, and I think you got to exactly right.
Speaker 6: Ali Baba's competitive landscape is so different from ten cents.
Speaker 7: In years past.
Speaker 6: It used to be that Ali Baba was the big
Speaker 6: dog in e commerce and in the same way that
Speaker 6: ten Cent is with games publishing, and ten Cent situation
Speaker 6: is still the case. It's still the world's biggest games publisher.
Speaker 6: He's the biggest by far in China. It one has
Speaker 6: Netty's to compete with, whereas Alibaba. On the other hand,
Speaker 6: you have by Dance coming in, you have PDD. Everyone
Speaker 6: is getting into its turf. So one of the things
Speaker 6: that stood out from Ali Baba's announcement was they mentioned,
Speaker 6: with respect to Timo and Talbau price competitive. They mentioned
Speaker 6: a couple of times in their announcements. So really what
Speaker 6: they're saying is it costs us money to compete. These
Speaker 6: guys are undercutting us, so we need to undercut them back.
Speaker 3: You know, sometimes the candy. I mean, at least these
Speaker 3: days for the market has been any mention of artificial intelligence.
Speaker 3: Where do Baba and Tencent come down? Visa VI you
Speaker 3: know this move into AI, right.
Speaker 6: That's another commonality for both of them. They consider AI
Speaker 6: a central pillar. Now the detail is where it becomes interesting,
Speaker 6: and we don't have enough to EATA from either company.
Speaker 6: I mean, one of the things that Ali Baba has
Speaker 6: mentioned for a couple of quarters now is that they
Speaker 6: will deploy generative AI to help make its e commerce
Speaker 6: more appealing.
Speaker 7: I don't see how that's happening. I mean, these are
Speaker 7: two very different things.
Speaker 6: Generaty of AI is something that's still very nascent, very early,
Speaker 6: and nobody's really figured out exactly how to deploy it.
Speaker 6: Whereas e commerce there are proven ways to entice people
Speaker 6: to buy stuff. And actually at the moment, the thing
Speaker 6: that's really doing it is short video is stuff like
Speaker 6: TikTok and dowy in and that's the thing that Tencent
Speaker 6: is leaning into with wechair and it's we chat video.
Speaker 6: So one of the big figures that Tencent reported is
Speaker 6: eighty percent growth. Can use the time spent in we
Speaker 6: chat video accounts and what really that says we chat
Speaker 6: vide account. You can equate that to ten cents TikTok.
Speaker 6: The more people use in that service, the more that
Speaker 6: ten Cent commnetize, the more it can introduce e commerce opportunities.
Speaker 2: So, in other words, we should not read that twenty
Speaker 2: six percent rise in ad sales by ten Cent. We
Speaker 2: probably shouldn't take that as a good barometer on the
Speaker 2: Chinese economy. It's more like the algorithm. It's more like
Speaker 2: what they're doing to attract and keep Wi Chat users
Speaker 2: with those short form videos.
Speaker 7: That's right, Brian.
Speaker 6: If you want to flatter a Tencent for their execution,
Speaker 6: you're free to do that.
Speaker 7: But I think you're right. I think you're correct.
Speaker 2: Well, I was going to flatter you by saying you're
Speaker 2: the big dog looking at these big tech companies.
Speaker 7: Well, here's the thing.
Speaker 6: Ali Baba's chairman, Joe Zie He said that the company
Speaker 6: is seeing positive signs of the Chinese consumer being willing
Speaker 6: to spend. Again, that was not the same sentiment coming
Speaker 6: out of Tencent. Martin Laud, the president of Tencent. He
Speaker 6: said that the Chinese economy is mixed, and therefore the
Speaker 6: advertising landscape necessarily is also mixed. So ten Cent itself
Speaker 6: is taking the credit for this as well. They're saying
Speaker 6: that they're doing better, and they do give some credit
Speaker 6: to AI helping them optimize ads on and other platforms.
Speaker 3: So when you're a company like Ali Baba Vlad and
Speaker 3: you're struggling, is the remedy, at least in the short
Speaker 3: term stock buyback? Is that enough to kind of get
Speaker 3: the market a little enthused?
Speaker 6: Well, Brian said it. I mean, you said it yourself.
Speaker 6: The stock market is not reacting positively. They did announce
Speaker 6: a four billion.
Speaker 7: Dollar buyback, so everyone is quite serious.
Speaker 6: One of the really interesting things across the tech ecosystem,
Speaker 6: no matter the geography, is that everyone's doing a buyback
Speaker 6: right now. We're talking Sony in Japan, Ali Baba, Tense
Speaker 6: has one in ongoing. Apple announced the world's biggest buyback
Speaker 6: ever Google Meta. Everyone is doing it right now because
Speaker 6: they have been sitting on these big cash piles and
Speaker 6: at the same time as they investing heavily in AI.
Speaker 7: And this is true both for Tense and Ali Baba.
Speaker 6: One of the ways that they can, like you say,
Speaker 6: you sustain the share price and give some satisfaction to
Speaker 6: investors is to give some money back.
Speaker 2: We saw a little bit of caution in games for
Speaker 2: Tencent to walk us through some of the details there.
Speaker 6: Well, I mean, this is the other really interesting thing
Speaker 6: to hear Tencent talk about his business. It keeps about
Speaker 6: high quality growth and how it's kind of shifting away
Speaker 6: from games. But then to hear the analysts on the
Speaker 6: analysts call and their priorities and questions, they keep focusing
Speaker 6: on games.
Speaker 7: And here's the thing. Tencent is now.
Speaker 6: Talking more about grocery septs as well as revenue, which
Speaker 6: kind of muddies the picture. So if you look at
Speaker 6: domestic games, they were up three percent in grocery septs
Speaker 6: but down two percent in revenue.
Speaker 7: So those are the growth figures.
Speaker 6: Much like e commas for Ali Baba, that everyone is
Speaker 6: really paying attention to gaming is still the biggest thing,
Speaker 6: and that growth rate is never rising above three four
Speaker 6: percent each quarter.
Speaker 7: And it's tricky.
Speaker 6: It's tricky for Tencent to do anything about this because
Speaker 6: they are relying on a lot of evergreen games and
Speaker 6: they don't really have that games pipeline that's necessary to
Speaker 6: fire up new growth.
Speaker 3: You know, when I think about Ali Baba and the
Speaker 3: fact that we had put so much stock in the
Speaker 3: possibility of some spinoffs here IPOs of different divisions. I
Speaker 3: mean that seems to be really off the table right now.
Speaker 3: I mean, is that kind of eventually occur. Do you
Speaker 3: think is it in Baba's best interest to spinoffs of
Speaker 3: these divisions.
Speaker 6: Well, never say never on that happening again. But let's
Speaker 6: bear in mind that that was under the leadership of
Speaker 6: Daniel Jiang who was the previous CEO, and the new CEO,
Speaker 6: Eddie Wu, and even the earnings announcement last night very
Speaker 6: much stressed the synergy. I mean, this is the funny
Speaker 6: thing we talked about IPOs and spinning stuff off. Now
Speaker 6: Alibaba is all about synergy. One of the ways that
Speaker 6: they highlighted this was Kaine out the logistics unit. They
Speaker 6: said several times it's doing a lot to help both
Speaker 6: e commas domestically, but also the international arms things like
Speaker 6: Ali Express. A lot of the growth for the logistics
Speaker 6: unit is coming out of helping the international e commerce,
Speaker 6: which is actually the one with the healthiest growth.
Speaker 7: That grew by forty five percent.
Speaker 2: I'll give you some numbers here, which I know you know,
Speaker 2: but the audience may not. That's quite astounding. Ten cents.
Speaker 2: Revenue was roughly twenty two billion ali Baba's thirty one billion,
Speaker 2: yet ten cents market cap is double that of Ali Baba.
Speaker 1: That tells you a lot.
Speaker 6: Oh absolutely well, I mean as a gamer, I can
Speaker 6: just say that it tells you a lot about the
Speaker 6: value of games. But really the way that you should
Speaker 6: think about this is games software. These are things with
Speaker 6: a low cost base, Like the marginal cost of selling
Speaker 6: another game is nothing basically versus Ali Baba having to
Speaker 6: do all the logistics, having to do all this investment
Speaker 6: in data centers and so on in order to provide
Speaker 6: its AI.
Speaker 7: Services to people.
Speaker 6: And the really interesting thing with Tencent, and it's something
Speaker 6: that they kind of picked up on in the call,
Speaker 6: was the fact that they can entice people via we
Speaker 6: chat via all these consumer services into it's broader ecosystem
Speaker 6: of services that includes AI, generative AI and such other
Speaker 6: subscriptions that they might be able to provide.
Speaker 3: So vilaib when you consider guidance, I mean, is this
Speaker 3: something that was played up a lot? I mean, and
Speaker 3: what do we know about the trajectory of growth that
Speaker 3: these companies see right now in the current environment.
Speaker 6: Well, I don't know that we've got great visibility from
Speaker 6: either company, I mean, Ali Baba's said that they will
Speaker 6: keep investing in Taubau and team or the team, or
Speaker 6: they will keep competing with the likes of PDD that
Speaker 6: I mentioned.
Speaker 7: As with Tencent.
Speaker 6: They do anticipate things improving in the second half, they said.
Speaker 6: And one of the interesting things, I mean, they mentioned
Speaker 6: a number of games that they consider kind of flagship
Speaker 6: games that are going to fire up growth in their estimation.
Speaker 6: I'm not really sure about this because the blockbuster games
Speaker 6: that we see on the global stage half the time,
Speaker 6: they're kind of unpredictable. I mean, we had a game
Speaker 6: like Powell that came out of nowhere. So the thing
Speaker 6: again with the gaming ecosystem is you're not really sure
Speaker 6: what is going to be an absolute runaway hit. So
Speaker 6: we kind of have to play that as it goes.
Speaker 2: And just briefly, I know you're peripherally familiar with ant
Speaker 2: group as well. Quarterly earnings down nineteen percent, struggling, struggling
Speaker 2: to find new drivers of growth.
Speaker 6: And honestly, I kind of explained that one because being
Speaker 6: based here in Hong Kong, anytime I get to a checkout,
Speaker 6: I see Alipay as an option, not so much.
Speaker 7: We chat pay.
Speaker 6: So as far as Ali Baba announce, getting the distribution,
Speaker 6: getting the reach, and getting the retailers to embrace their
Speaker 6: payment system.
Speaker 7: Even here in Hong Kong, it's kind of.
Speaker 6: Ubiquitous and probably that is the strongest indicator to the
Speaker 6: earlier point Brian about the Chinese consumer. So maybe Ali
Speaker 6: Baba tells us is seeing signs of it recovering, but
Speaker 6: the facts that telling us otherwise.
Speaker 2: Yeah, all right, thanks Flad, Let's have off with us,
Speaker 2: Bloomberg Tech editor talking Ali Bomba and ten Cent and
Speaker 2: even a little there on.
Speaker 1: End.
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