Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm deg Krisner. We
Speaker 2: saw a broad risk on tone in US markets in
Speaker 2: front of the Juneteenth holiday. On Friday, the equity session
Speaker 2: was defined by some rotation into information tech, especially the
Speaker 2: chip makers. We had the Philadelphia Semiconductor Index up six
Speaker 2: point four percent to a record high. Importantly shares and
Speaker 2: Intel we're up more than ten percent. That was after
Speaker 2: President Trump said the chip maker will be working with
Speaker 2: Apple to design and produce semiconductors domestically. For a closer
Speaker 2: look at market action in the APEC region, let's bring
Speaker 2: in Bloomberg's Leonting Iwi. Leonting is managing editor for Asia
Speaker 2: Equities and she joins from our studios in Singapore. Thank
Speaker 2: you for being here, and I want to point out
Speaker 2: that we have market holidays today in China and Hong Kong,
Speaker 2: so we're not going to get a complete read on
Speaker 2: some of this tech rally or this tech strength, but
Speaker 2: the Cosby is on fire at the moment. I see
Speaker 2: a gain of around three percent, and I'm going to
Speaker 2: imagine here that you're going to make the connection between
Speaker 2: what we're seeing now in South Korea and what we
Speaker 2: saw in the US session, am I right.
Speaker 3: Yeah, exactly, it's all about Capax. I think the latest
Speaker 3: positive news would include SpaceX.
Speaker 4: Right.
Speaker 3: There was our scoop about how they were planning to
Speaker 3: raise twenty billion dollars for Capax after raising eighty five
Speaker 3: billion dollars in its IPO just recently, and that means
Speaker 3: again a lot of hardware AI related companies are going
Speaker 3: to really benefit from that. And there was also a
Speaker 3: Goldman Sex report talking about how they expect a super
Speaker 3: cycle chip for the chip sector, which again was a
Speaker 3: hot topic for debate whether the memory you know, companies
Speaker 3: are experiencing the kind of cyclicality or it's a super
Speaker 3: cycle really going to last. So the Goldman report really
Speaker 3: added a bit of a fuel for that argument. And
Speaker 3: the third thing is I see some latest TV interviews
Speaker 3: from Japanese corporate executives talking about how they're seeing super
Speaker 3: strong demand for the chip equipment or chip components that
Speaker 3: their companies are producing. One executive was talking about that
Speaker 3: this morning with Sherry Anne saying that they see EPs
Speaker 3: revision upwards every day for their shares.
Speaker 2: I want to talk to you about the story that
Speaker 2: we're having that we're publishing now on the Bloomberg terminal,
Speaker 2: which is the US has told the Dutch semiconductor equipment
Speaker 2: maker ASML it's concerned that China may have the top
Speaker 2: tool from making highly advanced chips. ASML says it has
Speaker 2: never shipped its most cutting edge technology to China, and
Speaker 2: the cutting edge technology is the extreme ultraviolet lithography machines.
Speaker 2: Now I know that they are a part of some
Speaker 2: export controls here. This is a very interesting story and
Speaker 2: difficult to get a read because, as you said, the
Speaker 2: market holidays that we have in Hong Kong and China
Speaker 2: and Taiwan too, where TSMC is based, and TSMC has
Speaker 2: several of these extreme ultraviolet lithography machines. What do you
Speaker 2: make of this story?
Speaker 3: Yeah, I mean it wouldn't be surprising if indeed there
Speaker 3: are some of these machineries in China being you know,
Speaker 3: maybe illegally shipped in. It's not surprising, but it would
Speaker 3: also be very difficult for you know, school bus sized
Speaker 3: machinery to be smuggled into China, and those machineries would
Speaker 3: need constant maintenance from ASML staff members. And ASML should
Speaker 3: know that whether there is a presence of their most
Speaker 3: the advanced machinery in China or not. And there is
Speaker 3: one more point I wanted to mention is that Huawei
Speaker 3: in the last few weeks talking about how it actually
Speaker 3: has a technology to make advanced chips without reliance on
Speaker 3: ASML's EUV machinery, and it's considered a breakthrough. It was
Speaker 3: a surprise to a lot of market participants. But if
Speaker 3: that's really true, then that shakens the most fundamental assumption
Speaker 3: by a lot of chip experts that you advanced chips
Speaker 3: can be made without the EUV machineries.
Speaker 2: It's kind of like what we had in the Deep
Speaker 2: Seek moment right where no one expected China to be
Speaker 2: able to create an AI model as sophisticated as deep Sea.
Speaker 3: Yeah. I mean, I think with all the restrictions related
Speaker 3: to exports, China did have to work with you know,
Speaker 3: lesser advanced technology and yeah, fewer resources as well. So
Speaker 3: as you mentioned, the deep c definitely had a breakthrough.
Speaker 3: And just you know, continue on in this large language
Speaker 3: model space, we see a bunch of deep Sea similar
Speaker 3: to you know, companies similar to deep Seak coming up
Speaker 3: to the market and their models are actually really good
Speaker 3: and really really cheap. We saw the likes of Jipu
Speaker 3: and Mini Max rallying pretty hard in Hong Kong in
Speaker 3: the last few sessions. And Jipou's latest open source model,
Speaker 3: which was sort of released after Anthropic's Best Models got
Speaker 3: banned by the US for the access of foreign nationals,
Speaker 3: and that was ranking number two worldwide for front end coding.
Speaker 3: So you know, as you can see, they're actually doing
Speaker 3: quite well.
Speaker 2: So is there still a lot of enthusiasm or maybe
Speaker 2: said a different way, a lot of optimism that this
Speaker 2: AI related trade on the hardware side can continue for
Speaker 2: a while longer.
Speaker 3: Yeah, that's I think that's a consensus. I believe that
Speaker 3: it's really playing out today in Korea and Japan, as
Speaker 3: you mentioned, and Japan, we just saw JP Morgan coming
Speaker 3: out with an upward revision for Nick's target price, and
Speaker 3: yesterday we saw Daiwa, a local Japanese broker, also coming
Speaker 3: out with the target price upgrade. And I think they're
Speaker 3: talking about eighty thousand for the nie K by the
Speaker 3: end of this year, and we just reported NIK broke
Speaker 3: through seventy thousand a couple days ago.
Speaker 2: Yeah, so it's good that we're talking about Japan because
Speaker 2: the yen is now trading on the week side of
Speaker 2: one sixty one against the dollar, and the Finance Minister
Speaker 2: Katayama was delivering a sharp reminder to the market that
Speaker 2: intervention is still in the toolbox. Is there much in
Speaker 2: the way of conversation right now. I know you're in
Speaker 2: Singapore and I'm wondering whether maybe you're hearing echoes of
Speaker 2: concern that maybe the Ministry of Finance in Japan would
Speaker 2: intervene to support the currency, or is it really up
Speaker 2: to what the BOJ does. More on the monetary side,
Speaker 2: I mean, this probably wouldn't have material impact. Maybe it
Speaker 2: would trigger a short squeeze of sorts, but fundamentally, I mean,
Speaker 2: the end is as weak as it is because of
Speaker 2: what the BOJ has been doing.
Speaker 3: Yeah, exactly, it's really the interest rate differential that has
Speaker 3: fundamentally drove driven the yen weaker. Yes, the intervention, as
Speaker 3: you mentioned, it is on top of everyone's watch list,
Speaker 3: I think right now for even traders based in Singapore today,
Speaker 3: with the loss of markets on holiday, liquidity overall would
Speaker 3: be thin for the end. So if they really want
Speaker 3: to intervene, it's also a good opportunity to, you know,
Speaker 3: use limited amount of money to actually have a bigger
Speaker 3: market impact, but for the impact to really have a
Speaker 3: sustained sustainable sustainability in supporting the yen. I think that's
Speaker 3: the question that, you know, if the boj doesn't act
Speaker 3: in catching up with the reality of the inflationary pressure
Speaker 3: in Japan and narrowing the interest rate gap with the US,
Speaker 3: the yen will continue to weaken. I think the next
Speaker 3: point of the end that we're watching out for is
Speaker 3: for it to be the weakest since nineteen eighty six.
Speaker 3: Again is the dollar.
Speaker 2: So I'm curious it's Friday where you are, and you're
Speaker 2: going to be I'm sure talking to members of your team.
Speaker 2: You're going to be making assignments for people to kind
Speaker 2: of sit with over the weekend. What are some of
Speaker 2: the topics top of mind for you these days as
Speaker 2: you kind of consider some of the enterprise reporting that
Speaker 2: your team is going to be working on in the
Speaker 2: days ahead.
Speaker 3: Yeah, the main thing would be MSCI decision next Wednesday morning,
Speaker 3: Asia time, and that is definitely something a lot of
Speaker 3: Asia traders are watching out for. Indonesia very hot topic,
Speaker 3: whether it's going to be downgraded to frontier market or not. Korea,
Speaker 3: whether it's going to be added to DM market watch
Speaker 3: list or not. And also Vietnam becomes interesting as well,
Speaker 3: whether it's going to be added to the review list
Speaker 3: for emerging markets from Frontier Markets. So a lot to
Speaker 3: watch out for next week.
Speaker 2: Okay, Leonting, it's always a pleasure. Thank you so very
Speaker 2: much for making time. Bloomberg's Leonting III, Managing editor for
Speaker 2: Asia Equities, joining from Singapore here on the Daybreak Asia podcast.
Speaker 2: Welcome back to the Daybreak AAISHA Podcast. I'm deg Krisner.
Speaker 2: So the US Iran Interim piece deal is now in effect,
Speaker 2: and today we had a flurry of oil tanker traffic
Speaker 2: returning to the Strait of Horror moves. At the same time,
Speaker 2: the US declared an end of its naval blockade on
Speaker 2: vessels transitting to and from Iranian ports and coastal areas.
Speaker 2: At the same time, today, Vice President JD. Vance skirted
Speaker 2: questions about whether Iran will one day be able to
Speaker 2: charge fees for vessels crossing the Strait. And that's where
Speaker 2: we begin our conversation with Jesse Moritz. Jesse is a
Speaker 2: senior lecturer at the Austria Earlier National Universities Center for
Speaker 2: Arab and Islamic Studies. She spoke to Bloomberg TV host
Speaker 2: Heidi Stroud Watson Cherry on.
Speaker 1: We heard from Vice President JD. Vans not necessarily being
Speaker 1: very clear about what happens to these tools around the
Speaker 1: straight of fore moves. What are the risks that this
Speaker 1: might actually just transform into service charges or other types
Speaker 1: of fees for the waterway.
Speaker 4: Yeah, I'd assessed that risk as relatively high, actually, because
Speaker 4: the deal only only allows for six months or so
Speaker 4: of toll free or fee free passage, and the Iranians
Speaker 4: have already been very clear that they intend to continue
Speaker 4: negotiating with Oman over control of the Strait of Hormones,
Speaker 4: not necessarily not to allow ships and out, but to
Speaker 4: try to charge They're calling it sort of a service fee,
Speaker 4: if you like. And so they're trying to navigate around
Speaker 4: international maritime law and to find a way in which
Speaker 4: they can continue to exert authority over the strait, and
Speaker 4: that would be a major strategic win through Iran out
Speaker 4: of this conflict.
Speaker 1: Exactly. I was going to say, what exactly has Washington
Speaker 1: gutten out of it? If we are seeing, of course,
Speaker 1: potential losses on the straight Orford moved side of things,
Speaker 1: not to mention, of course, no real clarity on a
Speaker 1: nuclear deal or even what's happening with Lebanon at this point.
Speaker 4: Yeah, so it's very clear that this is a deal
Speaker 4: to avert immediate economic crisis. Trump was very clear about
Speaker 4: that in some comments recently, that this was something he
Speaker 4: felt was necessary to deal with the fact that our
Speaker 4: strategic petroleum reserves have been declining at a very rapid pace,
Speaker 4: and that when they do hit a sort of minimum
Speaker 4: operating floor, for example, that's a serious issue for the
Speaker 4: global economy, and so he was trying to avert that.
Speaker 4: And the Iranians, of course, they know that the US
Speaker 4: is always going to be more responsive due to its power,
Speaker 4: is the largest economy in the world and seat of
Speaker 4: the world's superpower. It's going to be more responsive to
Speaker 4: the concerns of the global economy, whereas Iran could withhold
Speaker 4: a little bit longer. The Trump, of course, is also
Speaker 4: a democratically elected president, and he's looking down the line
Speaker 4: at midterms, and he's looking at the impacts on the
Speaker 4: Republican Party and his personal popularity. And then there's internal
Speaker 4: factionalism between within the marga movement between himself and potentially
Speaker 4: g D devance around this conflict. So, for various reasons,
Speaker 4: largely to do with the fact that the US is
Speaker 4: a democracy, they were more likely to be under pressure
Speaker 4: to end this conflict. Even if this deal is not
Speaker 4: particularly durable, and you've raised Lebanon and the nuclear issue
Speaker 4: is to issues that could still yet see this Ceasfial
Speaker 4: deal collapse.
Speaker 5: It's interesting we had from President Trump speaking to Axios
Speaker 5: earlier saying refuting the idea that these negotiations, the way
Speaker 5: that the war has been carried out, has kind of
Speaker 5: shown him the limitations of his power. Right, he is
Speaker 5: getting a lot of pressure domestically, how much pressure do
Speaker 5: you think he's also getting from allies, particularly when it
Speaker 5: comes to the collateral damage that's been suffered by Golf
Speaker 5: States in a war that they didn't have any part
Speaker 5: of and didn't start.
Speaker 4: Absolutely enormous pressure, and not just from the Golf States,
Speaker 4: but from every state that's dependent on transiting supply, whether
Speaker 4: it's oil and gas, or it's aluminium or fertilizers, there
Speaker 4: anything else coming through that strait. They were pushing for
Speaker 4: Trump to find a way out of this conflict. The
Speaker 4: strategic challenge of this conflict was always going to be
Speaker 4: that Iran did have the capacity to hold the Straight,
Speaker 4: and it has caused economic challenges for Iran. It's not
Speaker 4: great for them to not be able to get their
Speaker 4: own oil and gas out at least through the Strait,
Speaker 4: putting aside Central Asia sort of land routs. But they
Speaker 4: were always in this position to be able to hold
Speaker 4: the Straight for longer than the US was going to
Speaker 4: be able to tolerate the Strait being closed. So the
Speaker 4: fact that Trump, in a number of comments admitted that
Speaker 4: they didn't have a plan or that they didn't have
Speaker 4: a strategy for dealing with the closure of the Straight
Speaker 4: or rom Us is a major stretch era, I would say.
Speaker 4: And the interesting thing that's happened with the GCC states
Speaker 4: in particular has been some disunity within them around how
Speaker 4: to respond to this conflict. So the UAE, for example,
Speaker 4: has been hit with some of the largest drone and
Speaker 4: missile barrages during this conflict, and they have wanted and
Speaker 4: have pushed for a more aggressive response from both the
Speaker 4: US and from international partners to sort of retake and
Speaker 4: re seize the Strait of Homuz, whereas states like Saudi
Speaker 4: Arabia and Qatar and Oman and others have been looking
Speaker 4: for a negotiated end to the conflict, and so you're
Speaker 4: starting to see that negotiation, particularly through the cutteries and
Speaker 4: all monies as well, bear some fruit with this seas
Speaker 4: far a deal, but we're going to we should expect
Speaker 4: to see some disunity amongst the Golf states in the
Speaker 4: next couple of years out of this conflict.
Speaker 5: What happens from the Iranian side, Obviously there's been damaged,
Speaker 5: particularly when it comes to the upper echelons of its leadership.
Speaker 5: Does this take us actually further away from the prospects
Speaker 5: of regime change of Iran becoming a more responsible international player,
Speaker 5: particularly if the sort of initial maximalist demands on the
Speaker 5: nuclear program are now watered down to the point where
Speaker 5: the stockpiles are still buried, their nuclear richment knowledge is
Speaker 5: still intact, and arguably perhaps they have more reason than
Speaker 5: ever to believe that they do need to hold onto
Speaker 5: their nuclear program.
Speaker 4: Yeah, I mean much. We're in the early days of
Speaker 4: this deal, and much will depend on what for actual
Speaker 4: action we see from Iran in order to get more
Speaker 4: of their cash released and sanctions lifted In the longer term,
Speaker 4: we will see this go into longer term negotiations depending
Speaker 4: on what happens in Lebanon, but internally within Iran, unfortunately,
Speaker 4: much of this conflict has empowered hardliners rather than cause
Speaker 4: the type of big stabilization that you might expect to
Speaker 4: see ahead of regime collapse. And both Israel and the
Speaker 4: US were very clear, at least in early stages, that
Speaker 4: they did want to see the Iranian regime collapse. One
Speaker 4: of the challenges when you take a country to war
Speaker 4: like this and it doesn't the regime survives is that
Speaker 4: the regime is then very incentivized to crack down in
Speaker 4: a very violent and repressive way on domestic political opponents.
Speaker 4: They'll use the excuse of the conflict to do that,
Speaker 4: and I'm very concerned that that's what we might see
Speaker 4: in Iran in the next coming months, is a crackdown
Speaker 4: on domestic opposition, which is the exact opposite of what
Speaker 4: the US interest in this conflict would be.
Speaker 1: How big of a shift was it that Iran Supreme
Speaker 1: leader accepted direct talks with Washington, And does this give
Speaker 1: us any indication of how the negotiations could go from here?
Speaker 4: There is, of course this new disunity that's been created
Speaker 4: within the Iranian regime between sort of not just the
Speaker 4: traditional hardliner and reformist camps, but also between those who
Speaker 4: are more connected to the IRGC and have been directing
Speaker 4: the military perry response to this conflict, and those who
Speaker 4: lead the civilian political apparatus, that including those who were
Speaker 4: directly involved in the negotiations. So to see the Supreme
Speaker 4: Leader more directly involved suggests that they are attempting to
Speaker 4: bridge that disunity and ensure that everyone's on the same page.
Speaker 4: Because the previous cease for our deal that we had,
Speaker 4: of course was so fragile, largely because immediately there had
Speaker 4: been protests within Iran from hardliners on those aligned with
Speaker 4: the sort of IRGC infections against the seas Far deal.
Speaker 4: That disunity seems to be a little bit reduced this time.
Speaker 4: It's still there, it's still very present, but there seems
Speaker 4: to be some attempts from inside the Iranian regime to
Speaker 4: bridge those device and ensure that they have one clear
Speaker 4: negotiating position with the US, especially because their best outcome
Speaker 4: here is to get as much of their own oil
Speaker 4: and gas out through the street while the street is
Speaker 4: open in case for example, the cease Far deal collapsed
Speaker 4: again over Lebanon. Particularly, is the Israeli government and Ben
Speaker 4: Gever and Smotrich in particular have been very clear that
Speaker 4: they don't see why Israel should be held to the
Speaker 4: terms of this deal, and they've continued firing in Lebanon.
Speaker 2: That was Jesse Moritz, senior lecturer at the A and
Speaker 2: U Center for Arab and Islamic Studies, speaking with Bloomberg
Speaker 2: TV host Heidi Stroud, Watts and Sherry On bringing you
Speaker 2: their conversation here on the Daybreak Asia podcast. Thanks for
Speaker 2: listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Speaker 2: Each weekday, we look at the story shaping markets, finance,
Speaker 2: and geopolitics in the Asia Pacific. You can find us
Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
Speaker 2: else you listen. Join us again tomorrow for insight on
Speaker 2: the market moves from Hong Kong to Singapore and Australia.
Speaker 2: I'm Doug Prisner, and this is Bloomberg