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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Daybreak Asia podcast. I'm Doug Krisner. You can join Brian

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Speaker 1: Curtis and myself for the stories, making news and moving

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Speaker 1: markets in the APAC region. You can subscribe to the

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Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app well.

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Speaker 2: The Federal Reserve held its benchmark FED Funds rate steady

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Speaker 2: and a range between five and a quarter to five

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Speaker 2: and a half percent. The decision was unanimous. Officials also

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Speaker 2: maintained their outlook for three twenty five basis point cuts

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Speaker 2: this year. After the decision, Chair J. Powell said that

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Speaker 2: the Fed would require more evidence of a retreat in inflation.

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Speaker 3: The Committee does not expect it will be appropriate to

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Speaker 3: reduce the target range until it has gained greater confidence

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Speaker 3: that inflation is moving sustainably down toward two percent. Of course,

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Speaker 3: we're committed to both sides of our dual mandate, and

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Speaker 3: an unexpected weakening in the labor market could also warrant

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Speaker 3: a policy response.

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Speaker 2: So that again is three rate cuts this year, but

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Speaker 2: for twenty twenty five, the Fed is now forecasting just

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Speaker 2: three rate cuts instead of the previous forecast of four.

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Speaker 2: Joining us now to shed some light on all of

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Speaker 2: this is Lydia Bassour, who's a senior economist at EY,

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Speaker 2: to talk a little bit more in detail here on

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Speaker 2: the FED. Lydia, I heard someone say the other day

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Speaker 2: that j. Pwell has this uncanny ability to not create

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Speaker 2: any news, and I think today was probably an example.

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Speaker 2: It's steady as she goes sort of thing. But I

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Speaker 2: think we can say that one of the points that

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Speaker 2: Powell made effectively, I think was that, look, the FED

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Speaker 2: did not overreact to the seven months of quick disinflation

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Speaker 2: last year, and it's not overreacting now to the slightly

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Speaker 2: hot two months January and February of hot inflation data

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Speaker 2: this year. It so we the poke holes in that,

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Speaker 2: is it?

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Speaker 4: Yeah, So that's right.

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Speaker 5: What we say today is I think a FED that

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Speaker 5: really stayed the course and and really, you know, the

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Speaker 5: FED narrative hasn't really changed. The FED is expecting inflation

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Speaker 5: to continue to move lower, and it's still believing that

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Speaker 5: you know, sometime this year they will be you know,

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Speaker 5: in a position to start lowering interest rate. But as

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Speaker 5: you said, they want to gain greater confidence that inflation

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Speaker 5: is moving sustainable towards two percent, and that means we

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Speaker 5: need more good inflation data in the coming months to

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Speaker 5: start that is in process. In our view, we think

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Speaker 5: that you know, they're likely to be in that position

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Speaker 5: in June, in.

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Speaker 4: The middle of the year.

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Speaker 5: We think that by June they can start theseing process

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Speaker 5: and we do expect to see you know, three rate cuts.

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Speaker 4: Later this year.

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Speaker 1: Is it possible that we're living in a world where

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Speaker 1: the FED will tolerate inflation just above that two percent target?

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Speaker 5: Yeah, there is, you know, there are some there are

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Speaker 5: some factors in the economy, in this post pandemic economy

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Speaker 5: that are pointing to uh, you know, some inflation things

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Speaker 5: somewhat you know, higher than than the inflation target.

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Speaker 4: We've seen some structural changes in the economy.

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Speaker 5: There are also you know, demographic changes, the energy transition

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Speaker 5: to side a few and and the slow down in globalization,

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Speaker 5: and and all of these factors do suggest that, you know,

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Speaker 5: inflation could be hovering slightly above the two person target.

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Speaker 5: Now the FED is still committed to bring inflation back

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Speaker 5: to target. And and I think what was even you know,

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Speaker 5: more important in in the new set of of economic

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Speaker 5: projections on the dot plot. Is the fact that the

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Speaker 5: FED is now I think, really embracing this idea that

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Speaker 5: we can continue to see the tend economic growth with

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Speaker 5: inflation coming back lower thanks to favorable supply side conditions

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Speaker 5: which have normalized significantly, but also pick up in productivity growth.

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Speaker 4: Yeah.

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Speaker 2: I think we can argue that the FED can afford

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Speaker 2: to be patient. Inflation now is well below the fed's

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Speaker 2: benchmark rate. I mean by a long shot, it's somewhere

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Speaker 2: around the high threes at the moment, and the benchmark

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Speaker 2: rate is five and a half percent. Unemployment is near

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Speaker 2: record lows, and inflation is below wage increases. So if

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Speaker 2: you ask people, I mean, they're not jumping up and down.

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Speaker 2: They're still complaining about inflation, but the math is working

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Speaker 2: for them.

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Speaker 4: Yeah.

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Speaker 5: I think what was really important is the fact that,

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Speaker 5: as you said, they're willing to look through the noise

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Speaker 5: in the inflation data at the beginning of the year,

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Speaker 5: and they did not overreact to the side surprising inflation.

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Speaker 5: But if you take a step back and look at

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Speaker 5: the broad inflation trend, we continue to think that we

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Speaker 5: remain in a disinflationary environment, and I think that's what

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Speaker 5: the FED is also looking at. We have seen a

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Speaker 5: significant rebalancing in label market conditions and also slow down

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Speaker 5: in wage growth.

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Speaker 4: When we look at.

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Speaker 5: Pricing power, companies have have certainly seen a decrease in

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Speaker 5: their pricing power and and and you know, shrinking in

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Speaker 5: in profit margins as well. And then when we look

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Speaker 5: at some of the inflation drivers such as you know,

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Speaker 5: shelter inflation, we're also expecting to see mode inflation there.

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Speaker 5: So I do think that, you know, as we move

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Speaker 5: throughout the year, you're going to continue to see that

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Speaker 5: broad this inflation trend in you know, playing out. And

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Speaker 5: I think that this is really going to be allowing

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Speaker 5: the FED to start easing and to start the easing cycle.

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Speaker 1: When we look at the macro environment, so often the

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Speaker 1: calculations are based on cold, hard facts, and I'm wondering

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Speaker 1: if there's an affect here that we can maybe you know,

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Speaker 1: believe in, which is to say that maybe this FED

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Speaker 1: is just is poised to cut, it would very much

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Speaker 1: like to cut. Is that the feeling that you get

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Speaker 1: there is.

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Speaker 5: This feeling going out of this meeting that the FED

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Speaker 5: wants to cut whenever it will be appropriate to do

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Speaker 5: so and whenever it can do so. And I think,

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Speaker 5: you know, just looking at the inflation prints, they're going

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Speaker 5: to be looking at the inflation data very closely.

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Speaker 4: We're going to get you know, more data points.

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Speaker 5: But I think that you know, if we see that

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Speaker 5: that's you know, that cool down in those inflation prints,

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Speaker 5: the FED is going to be willing to start you know,

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Speaker 5: that is in process. It's really about balancing the risk

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Speaker 5: between keeping rates too high for too long and and

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Speaker 5: I think the FED doesn't want to be, you know,

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Speaker 5: imposing unnecessary pain to the economy. So they're really cognizant

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Speaker 5: of the fact that you know that the labor market

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Speaker 5: could often significantly and fetch your power.

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Speaker 4: Did mention that as potentially triggering more rate cuts?

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Speaker 2: Yeah, but he I thought, you know, as as an investor,

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Speaker 2: as somebody who covers this, I thought he sounded pretty

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Speaker 2: pretty much not all that concerned about the labor market,

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Speaker 2: even though you know, he was given some examples about

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Speaker 2: where we're seeing pockets of weakness and he was pretty

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Speaker 2: comfortable with what's happening there.

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Speaker 5: Yeah, the labor market has been you know, you continue

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Speaker 5: to see solid job growth, We continue to see solid

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Speaker 5: job growth, but at the same time, the supply side

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Speaker 5: of the label market has been rebounding. We've seen the

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Speaker 5: labor force participation rate, especially for primage workers, rebounding and

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Speaker 5: reaching the highest level since.

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Speaker 4: The early two thousand.

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Speaker 5: So you've got that rebalancing with job openings coming down,

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Speaker 5: liver them and coming down, and liver supply coming back up.

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Speaker 5: And at the same time, the unemployment rate hasn't really

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Speaker 5: moved up significantly. And that's why I think, you know,

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Speaker 5: the FED right now is not that concern whether they're

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Speaker 5: I think welcoming, is the fact that this rebalancing is

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Speaker 5: leading to an easy in WAGH pressures and that's the

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Speaker 5: type of dynamic that they want to see, if you know,

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Speaker 5: to see more dis in patient, especially on the services

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Speaker 5: side of the economy.

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Speaker 1: Lyddy, and the time that we have left with you,

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Speaker 1: i'd like to get your to on what happened this

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Speaker 1: week with the Bank of Japan. What is your view

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Speaker 1: here on what the bo J did and the way

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Speaker 1: in which markets are responding.

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Speaker 4: Yeah, I mean we saw that, we.

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Speaker 5: Saw you know, the the bo J you know, exiting

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Speaker 5: negative rates and and you know, removing moving away from

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Speaker 5: that very accommodated accommodity extense, and I think, you know,

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Speaker 5: if you look at the market reaction and and and

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Speaker 5: the move, I think part of it is, you know

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Speaker 5: the fact that this was maybe a bit more symbolic,

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Speaker 5: you know then than really the signal that we are

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Speaker 5: heading into a tightening cycle. I think economic conditions in

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Speaker 5: Japan remain quite fragile, and the BOG really wants to

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Speaker 5: see the anchor and inflation expectations. So they're not going

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Speaker 5: to be embarking on on a you know, on a

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Speaker 5: on an aggressive tightening cycle. I think they're they're going

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Speaker 5: to be willing to kind of keep some accommodation and

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Speaker 5: many hye policy you know, on financial condition essentially lose

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Speaker 5: so that the economy can continue to recover.

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Speaker 2: So on Monday, we were sort of musing this week,

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Speaker 2: what would be the big event this week? Would it

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Speaker 2: be the FED? Would it be the bo J or

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Speaker 2: Nvidia's developer conference. From your standpoint as a senior economist,

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Speaker 2: what was it?

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Speaker 5: Yeah, it was, Uh, we've got we've got a bit

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Speaker 5: of a I think, I mean, from from an economic standpoint,

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Speaker 5: I think the bo J on the FED and what

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Speaker 5: we've heard, you know, from the central banks is is important,

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Speaker 5: and I think there was a lot of attention today

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Speaker 5: on the dot plot and whether the FED could be

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Speaker 5: signaling only two rate cuts instead of three. It was

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Speaker 5: a close call, and we were one that away from

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Speaker 5: getting fifty basis points a rat cut from that median

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Speaker 5: dot plot. But overall, I think that, you know, it

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Speaker 5: was encouraging to hear that the FEDI is tanged course,

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Speaker 5: and that is it's still willing to get infistrates on

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Speaker 5: looking through that noise in the effiicient data.

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Speaker 4: Yeah.

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Speaker 2: I remember asking almost every guest on the show yesterday,

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Speaker 2: you know, it seems like the market is okay with

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Speaker 2: what we've seen in inflation, a little pickup in January February.

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Speaker 2: The key question for the FED will be is the

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Speaker 2: Fed okay with it? And I think they answered that

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Speaker 2: question today that at least for now, they're okay with it. Lydia,

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Speaker 2: thank you for joining us. Lydia Bassour, a senior economist

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Speaker 2: at EY.

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Speaker 1: This is Bloomberg.

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Speaker 2: Orean Elizzit joins US CMC Market Sales Trader. So what

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Speaker 2: this is as good as it gets. Come on.

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Speaker 6: One and gentlemen, thanks for having me. Yeah, it was

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Speaker 6: a bit of a how to say nothing burger overnight,

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Speaker 6: and I think the market was expecting a little more.

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Speaker 6: Even though there was a poppin equity markets, That dot

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Speaker 6: revision was pretty much cast aside, I think, and really

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Speaker 6: the main focus is on those macro macro indicators, so yeah,

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Speaker 6: I look, they do still have somewhat of a balancing actor.

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Speaker 6: Do commend the Fed in the way they've navigated, you know,

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Speaker 6: around obviously you know, trying to increase you know, growth,

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Speaker 6: but obviously maintain the market. And obviously the dollar remaining stronger,

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Speaker 6: So pretty positive all round. I think we are higher

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Speaker 6: for longer looking at some of those forecasted GDP and

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Speaker 6: also inflation figures, so not too much to report. The

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Speaker 6: dot plot remains fairly steady in terms of its projections.

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Speaker 6: But yeah, it would be interesting to see a surprise

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Speaker 6: and see how the markets reacting.

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Speaker 1: Yeah, Powell's tone seemed kind of dubvish, and I'm wondering

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Speaker 1: whether or not the market may be overlooking a risk.

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Speaker 1: I know what the Fed is saying. Now, Yeah, we're

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Speaker 1: expecting three rate cuts this year, but is it possible

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Speaker 1: that we only get two twenty five basis point cuts?

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Speaker 6: That was something that was I think right to the

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Speaker 6: media was discussed, and I don't think it's completely out,

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Speaker 6: you know, completely you know, not an issue. I think

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Speaker 6: the inflation rate is still fairly manageable, so I can't

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Speaker 6: really see it being pushed, you know, you know, sort

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Speaker 6: of cut back at all if.

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Speaker 1: We were to see too.

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Speaker 6: I guess the question remains, do they accept do they

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Speaker 6: look to accelerate in twenty twenty five? Should should inflation

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Speaker 6: tail off as as sort of expected. No, it's probably

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Speaker 6: my initial you know, sort of gut feeling, gentlemen. But

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Speaker 6: you know, let's see, let's see how this thing plays out.

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Speaker 2: Yeah, markets are so buoyant, you know, we continue to

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Speaker 2: keep discounting. Well, we've got a soft landing and things

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Speaker 2: are looking pretty good.

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Speaker 4: You know.

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Speaker 2: You think you'd think that you'd get an adjustment in

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Speaker 2: that and then you'd need some really big news or

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Speaker 2: you know, to generate these kinds of gains. I mean

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Speaker 2: some of these some of these gains are pretty pretty

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Speaker 2: astronomical now, and I wonder whether or not Oriental Liza

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Speaker 2: thinks that perhaps we're getting overheated.

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Speaker 6: Yeah, that is that is a major concern for me,

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Speaker 6: and something I've spoken about previously on other discussions. I

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Speaker 6: think we are getting a little bit toppy at the

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Speaker 6: moment in terms of some of those markets. My my

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Speaker 6: major concern, gents, is that we the lack of breadth

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Speaker 6: of market is probably maybe more of a factor where

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Speaker 6: you're so concentrated in the so called magnificent magnificent seven

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Speaker 6: stocks that we if we do see any sort of

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Speaker 6: set off, can the broader market sort of prop up

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Speaker 6: or sustain that continued growth? Naturally, profit taking will take

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Speaker 6: place within some of the institutions where those fun flows

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Speaker 6: then go to with obviously bond yields you know, coming

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Speaker 6: off a little bit, and those you know, risk free

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Speaker 6: returns not as handsome how they have been in previously.

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Speaker 6: But I do think we need, yes, maybe a somewhat

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Speaker 6: slight correction in terms of price section.

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Speaker 1: So if you were looking at opportunities right now, I

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Speaker 1: mean not a trading opportunity, something that would have to

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Speaker 1: be buy and hold. Let's say for the four seeable future,

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Speaker 1: what would it be.

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Speaker 6: Well, I'm leaving bitcoin out of this Genso it's the

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Speaker 6: hot topic of the the time, but let's go away

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Speaker 6: from the obvious. I am looking at the moment in

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Speaker 6: terms of a couple of market conviction calls some smaller

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Speaker 6: cap stocks, both in the UK and also in the US.

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Speaker 6: I think that variance in terms of the sort of

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Speaker 6: variance in terms of valuations between those big cap and

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Speaker 6: small cap stocks. So looking at some stocks in the

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Speaker 6: rustle and obviously some in the in the lower cap

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Speaker 6: indexes in the UK of value. You need to be

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Speaker 6: selective though in terms of the specific stocks that you

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Speaker 6: are looking at, because some are priced I had to

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Speaker 6: say for a reason at the lower end of the market.

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Speaker 6: So in terms of you know, sector, I'll be looking

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Speaker 6: at those smaller cap indexes for value.

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Speaker 2: So let's talk a little bit about Japan because we

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Speaker 2: had a major change there. I wouldn't describe what the

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Speaker 2: FED did was a major change, but it did seem

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Speaker 2: like an inflection point. Whether or not they were would

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Speaker 2: be acknowledging that inflation was hot in the first part

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Speaker 2: of the year and something needed to be done about it.

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Speaker 2: That's not the decision they took. But in Japan we

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Speaker 2: did see a well telegraphed move and then we got

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Speaker 2: the move, and outside of the equity market it was

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Speaker 2: a bit of a yawn.

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Speaker 6: That seems to be the Eretrica across all markets in

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Speaker 6: terms of macro announcements this week, where we were expecting

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Speaker 6: a little bit more, you know from price action. Yeah,

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Speaker 6: obviously naturally was very much priced in in terms of

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Speaker 6: the two I guess major markets obviously being the Nike

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Speaker 6: which has seen an all time high this morning, and

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Speaker 6: obviously that dollar yam which has been a hot topic

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Speaker 6: of discussion. Not not much sort of volatility in those

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Speaker 6: two very much baked into the price. I do think

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Speaker 6: it was a historical move by the Bank of Japan,

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Speaker 6: but not so much impactful one. So in terms of

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Speaker 6: them rising rates further to sort of tackle maybe in inflation,

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Speaker 6: it is something that may be considered later in the year.

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Speaker 6: I think some of the debt servicing that the boj

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Speaker 6: needs to look at from their own balance sheet perspective

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Speaker 6: will probably come into focus. And in terms of quantitative

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Speaker 6: easy measures in terms of bond buybacks, which they mentioned

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Speaker 6: they might still be interested in. Is going to take

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Speaker 6: a long time for them to get back to normalization,

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Speaker 6: which is a talk of the town.

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Speaker 1: So if you had to take a position on the

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Speaker 1: equity side in Japan right now, would it be in

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Speaker 1: the banks or do you think that trade is pretty

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Speaker 1: much played out.

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Speaker 6: I think the banks. I think the price action reflected

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Speaker 6: quite sort of aggressively where the banks dropped off obviously

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Speaker 6: when they went to that higher interest rate. Those banks

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Speaker 6: will be looking at, you know, some of their underwriting

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Speaker 6: mechanics to see, you know, what sort of exposures that

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Speaker 6: they do have to you know, outstanding debt. I think

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Speaker 6: that we probably have to move away from the banks

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Speaker 6: similar to similar to the US, take a look into

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Speaker 6: some sort of the tech stocks within with it, within

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Speaker 6: the NIKE. But yeah, banks might be a sort of

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Speaker 6: treade with caution play at the moment given the rising

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Speaker 6: interest rate environment.

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Speaker 2: You said earlier that we had too much concentration in

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Speaker 2: the Magnificent seven, although I think we have to set

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Speaker 2: aside Tesla and Apple because Tesla's down something like thirty

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Speaker 2: five percent year to date. But obviously, you know, we

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Speaker 2: have seen huge gains in particularly those Fab five or

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Speaker 2: whatever you want to call it. But then with the

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Speaker 2: move by the Fed today, we did see regional banks

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Speaker 2: advance more than three percent, and we saw the Russell

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Speaker 2: two thousand of about two percent. Is this kind of

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Speaker 2: a que now for a further broadening in the market, very.

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Speaker 6: Much potentially I've been tracking quite quite I guess acutely

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Speaker 6: the KRE ETF, which is a regional bank ETF, which

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Speaker 6: came after obviously the calamity. It has rebounded quite you know,

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Speaker 6: sort of handsomely. Back to my earlier point about those

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Speaker 6: undervalued stocks, I think they will play a part. They

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Speaker 6: will be sector specific in terms of that broadening or

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Speaker 6: widening of the market effect. But value can be had

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Speaker 6: in some of those, you know, I guess, sort of

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Speaker 6: dump stocks where the wider foundation of those particular sectors

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Speaker 6: are still strong.

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Speaker 1: I'm not going to let you off the hook on

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Speaker 1: the crypto stuff. Here, give me forty five seconds. Your

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Speaker 1: position on bitcoin right now? A lot of volatility, Yeah.

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Speaker 6: Exactly, Yeah, that's I think that's something that's very interesting.

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Speaker 4: And you know what is it?

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Speaker 6: Is it down to mechanics of bitcoin? Is it big talented?

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Speaker 6: The upcoming harving is that going to play a part?

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Speaker 6: Is it overbought? I guess is potentially one other question

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Speaker 6: as well. I think that fun flow into the ETF

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Speaker 6: space from an institutional standpoint, is naturally driven, you know,

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Speaker 6: the price sort of higher. I think proper taking in

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Speaker 6: some of the equity markets and fun flow into bitcoin

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Speaker 6: is also helping it getting propped up.

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Speaker 1: Where is the downside coming from? That's probably a very

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Speaker 1: good question, gentlemen.

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Speaker 6: Yeah, that's a little bit one which probably needs a

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Speaker 6: little bit more investigating. You know, people, people you know

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Speaker 6: are probably looking to get in and get out and

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Speaker 6: take advantage having had their fingers but in the previous

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Speaker 6: sort of up cycle. So I think there's still a

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Speaker 6: website to be had in bitcoin.

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Speaker 2: Yeah, Doug Oreano is saying that he thinks some money

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Speaker 2: will flow out of equities and end to crypto, and

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Speaker 2: kind of what we've seen of late is both of

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Speaker 2: them rallying at the same time. So only time will tell.

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Speaker 2: Interesting to watch, Oreana, thanks very much for joining us.

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Speaker 2: Oreana Liza CMC markets sales trader with us live here

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Speaker 2: eighteen minutes past the hour.

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Speaker 1: This is Bloomberg.

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Speaker 2: Well ten Cent Holdings is planning to double its stock

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Speaker 2: buyback program to nearly thirteen billion dollars and joining us

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Speaker 2: in our studios here in Hong Kong is the esteemed

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Speaker 2: Vlad Savov, Bloomberg Tech editor. So let me see if

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Speaker 2: I got this right. We had a miss on sales,

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Speaker 2: but that was kind of offset by the buyback and

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Speaker 2: raising the dividend, and we also had slightly better numbers.

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Speaker 2: We had a beat on operating profit and net income,

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Speaker 2: but somehow the miss on sales seems to be the

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Speaker 2: biggest story. I mean, the stock is up, but that's

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Speaker 2: probably because of the buyback. But there's something wrong here, Flad,

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Speaker 2: Is that right?

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Speaker 5: Yeah?

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Speaker 7: Absolutely?

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Speaker 8: I Mean when you think about ten Cent, it's such

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Speaker 8: a vast company, but ultimately its core business is still

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Speaker 8: domestic games within China, and that's been such a disrupted

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Speaker 8: sector and that's what Tencent is reflecting with its latest

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Speaker 8: quarter earnings. It is the lifeblood of the company still,

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Speaker 8: much like the iPhone is for Apple.

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Speaker 7: You can when I've watched.

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Speaker 8: Tencent with its quarti earnings, I mean it was delivering

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Speaker 8: double digit growth over the past three quarters.

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Speaker 7: Is you're one of the best operationally.

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Speaker 8: But if you want to find votes, it is the

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Speaker 8: fact that it hasn't internationalized it its games business quite

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Speaker 8: as much as others and investors might have hoped, and

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Speaker 8: it hasn't diversified. So really, the big takeaway from Tencent's

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Speaker 8: earning score last night is that discussion of how it's

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Speaker 8: going to pursue high quality growth That was its tagline

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Speaker 8: who was repeated a dozen times, and how it's going

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Speaker 8: to diversify away from that business games in China that

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Speaker 8: is not growing as much as tense would like.

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Speaker 1: Where if I heard that phrase before high quality growth?

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Speaker 1: H let me think I'm just kidding.

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Speaker 2: Right from the top.

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Speaker 1: Yeah right, But I'm wondering to your point, if you

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Speaker 1: can't really expand much outside the region, do you have

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Speaker 1: to then drive business by creating a lot more in

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Speaker 1: the way of new titles. Is that the strategy here?

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Speaker 1: You just have to push out more product right well?

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Speaker 7: Cso James Mitchell.

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Speaker 8: He said that they have free priorities and the way

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Speaker 8: that Tencent views the entire sectories, he said, we need

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Speaker 8: to get our own house in the word and the

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Speaker 8: three priorities are.

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Speaker 7: You have these long.

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Speaker 8: Running, kind of everlasting titles like Peacekeeper Elite, which is

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Speaker 8: a local version of PUBG Mobile, and what Tencent has

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Speaker 8: done is it's put new leadership in place to revitalized

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Speaker 8: monetization of those. Then you have the more recent titles,

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Speaker 8: the ones that have just kind of picked up stea

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Speaker 8: more recently, such as Fight for the Goldos Bachelo whose

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Speaker 8: Name I Love? They want to monetize that more aggressively.

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Speaker 8: And then the third pillar of that is bringing in

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Speaker 8: new titles such as Dungeon and Fights and Mobile.

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Speaker 7: They talk that up.

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Speaker 8: They're moving up the release date for that to the

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Speaker 8: second quarter of this year in China. That is because

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Speaker 8: that got approved by the Beijing government, and they said

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Speaker 8: that they expect games revenue to pick up from the

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Speaker 8: second quarter as well.

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Speaker 6: Yeah.

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Speaker 2: Bloomberg Intelligence analyst Robert Lee, who we've had on the

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Speaker 2: program a lot, is reasonably positive on ten Cents prospects

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Speaker 2: for this year that they will deliver a double digit

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Speaker 2: earnings growth in twenty twenty four. We've had a number

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Speaker 2: of issues with slowness in the Chinese economy and also

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Speaker 2: the regulatory overhang. Do either of those two look to

443
00:22:53,320 --> 00:22:56,040
Speaker 2: be getting substantially better in the coming year.

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00:22:56,520 --> 00:22:59,200
Speaker 8: Right, Well, this was an interesting thing tents and President

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00:22:59,280 --> 00:23:01,800
Speaker 8: Martin Lao said it during the earning school. There was

446
00:23:01,880 --> 00:23:05,080
Speaker 8: a question about the regulatory situation. If you're a call Brian.

447
00:23:05,320 --> 00:23:09,399
Speaker 8: In December, there was an indication via a draft of

448
00:23:09,480 --> 00:23:13,440
Speaker 8: new regulations about Beijing cracking down again on gaming that

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00:23:13,920 --> 00:23:17,000
Speaker 8: drag down ten cents share price significantly. Martin Leowle's comment

450
00:23:17,160 --> 00:23:19,960
Speaker 8: was really definitive about this. He said, that's not a

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00:23:20,000 --> 00:23:23,639
Speaker 8: concern of ours. He said that in recent times, in

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00:23:23,720 --> 00:23:26,879
Speaker 8: recent weeks and months, the government has really signaled a

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00:23:26,960 --> 00:23:30,280
Speaker 8: much more supportive stance towards gaming. They've given much more

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00:23:30,359 --> 00:23:34,240
Speaker 8: licenses for new games effectively, I mean, he said, if

455
00:23:34,320 --> 00:23:37,439
Speaker 8: those draft regulations even come to pass, so it might

456
00:23:37,520 --> 00:23:38,120
Speaker 8: not even happen.

457
00:23:38,320 --> 00:23:40,520
Speaker 7: Is his position. That's the view. And I would also

458
00:23:40,600 --> 00:23:41,919
Speaker 7: say you mentioned Rob Lee.

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00:23:42,200 --> 00:23:45,000
Speaker 8: He and I would have conversations about this, and I

460
00:23:45,040 --> 00:23:47,160
Speaker 8: would be remiss not to mention the point that he makes,

461
00:23:47,200 --> 00:23:49,760
Speaker 8: which is ten cent is not only moving toward quote

462
00:23:49,800 --> 00:23:53,480
Speaker 8: unquote high quality growth, it's moving toward high margin businesses,

463
00:23:53,680 --> 00:23:57,200
Speaker 8: more fintech, more ads. It's a better way to monetize,

464
00:23:57,359 --> 00:23:59,200
Speaker 8: and maybe it's also a more sustainable way in the

465
00:23:59,240 --> 00:23:59,600
Speaker 8: long run.

466
00:24:00,000 --> 00:24:03,639
Speaker 1: Where does artificial intelligence enter into that conversation, if at all?

467
00:24:03,760 --> 00:24:05,040
Speaker 1: Is it a part of the thinking here?

468
00:24:06,040 --> 00:24:06,200
Speaker 5: Yeah?

469
00:24:06,320 --> 00:24:09,440
Speaker 8: Martin Lao said that at the moment, and for the

470
00:24:09,520 --> 00:24:11,840
Speaker 8: ne itom is going to boast the ten cents add

471
00:24:12,040 --> 00:24:14,760
Speaker 8: the most is helping add targeting, which I don't know

472
00:24:14,800 --> 00:24:19,159
Speaker 8: how to feel about. I don't really want ad pyotogramhy

473
00:24:19,280 --> 00:24:24,040
Speaker 8: that much better but in the long run AI generating content,

474
00:24:24,119 --> 00:24:27,359
Speaker 8: it's also going to feed into the games pipeline, largely

475
00:24:27,480 --> 00:24:28,760
Speaker 8: to create animated content.

476
00:24:28,840 --> 00:24:29,800
Speaker 7: That's what Tencent said.

477
00:24:30,280 --> 00:24:32,600
Speaker 2: You remember in the past when we had pees up

478
00:24:32,640 --> 00:24:36,040
Speaker 2: around fifty or so for ten Cent currently forward pees

479
00:24:36,119 --> 00:24:40,800
Speaker 2: fourteen and trailing pe twenty two. Those days are gone,

480
00:24:40,960 --> 00:24:43,520
Speaker 2: aren't they though? With ten Cent because it had revenues

481
00:24:43,560 --> 00:24:46,679
Speaker 2: at those during those years, growing so forty fifty percent

482
00:24:46,840 --> 00:24:47,240
Speaker 2: as well.

483
00:24:47,880 --> 00:24:50,760
Speaker 7: That's right. I mean, one way to think about this.

484
00:24:50,920 --> 00:24:53,000
Speaker 8: My best analogy for Tencent is actually that it's kind

485
00:24:53,040 --> 00:24:56,080
Speaker 8: of like an alcohol maker. There's a set base of

486
00:24:56,119 --> 00:24:58,040
Speaker 8: people who will keep buying your products. Some of them

487
00:24:58,040 --> 00:25:01,359
Speaker 8: were probably addicted. But the difference ten Cent because it's inteen,

488
00:25:01,440 --> 00:25:04,720
Speaker 8: because it's in AI, it has this upside which is

489
00:25:04,840 --> 00:25:08,080
Speaker 8: largely unpredictable, where it can strike gold, it can produce

490
00:25:08,160 --> 00:25:11,240
Speaker 8: something like TikTok. Like I say, operationally, ten Cent showing

491
00:25:11,280 --> 00:25:14,280
Speaker 8: itself to be really good. It's a vast company and

492
00:25:14,880 --> 00:25:17,920
Speaker 8: there's always a potential for the company to grow through that.

493
00:25:18,200 --> 00:25:19,640
Speaker 7: But took into our stocks, colleague.

494
00:25:19,680 --> 00:25:21,879
Speaker 8: They did say that the shap Rice currently has like

495
00:25:22,119 --> 00:25:25,000
Speaker 8: zero premium for the potential of AI with intense, and

496
00:25:25,040 --> 00:25:28,280
Speaker 8: so investors at least don't have the confidence that maybe.

497
00:25:28,119 --> 00:25:30,639
Speaker 1: I have last question I can only give you about

498
00:25:31,200 --> 00:25:34,400
Speaker 1: twenty or thirty seconds to answer, is the regulatory risk.

499
00:25:34,600 --> 00:25:35,760
Speaker 1: It's no longer a factor.

500
00:25:36,600 --> 00:25:39,159
Speaker 7: That's what Tencent says. I'm not sure that everybody believes

501
00:25:39,160 --> 00:25:39,600
Speaker 7: the company.

502
00:25:40,280 --> 00:25:42,520
Speaker 2: All right, Glad, thanks very much. I'm glad that that

503
00:25:43,160 --> 00:25:45,760
Speaker 2: Doug asked you about AI because AI doesn't come up

504
00:25:45,840 --> 00:25:49,320
Speaker 2: that much with ten Cent, and when I interviewed Rob,

505
00:25:49,520 --> 00:25:53,199
Speaker 2: you know, previewing the earnings, I didn't even ask him

506
00:25:53,240 --> 00:25:55,119
Speaker 2: about AI and he didn't even bring it up. So

507
00:25:55,480 --> 00:25:58,199
Speaker 2: it does. It is an interesting question, and it's one

508
00:25:58,320 --> 00:26:01,360
Speaker 2: that you know, there is some room there for or Tencent,

509
00:26:01,840 --> 00:26:05,359
Speaker 2: you know, if it does manage to expand their Tencent analysis.

510
00:26:05,440 --> 00:26:07,440
Speaker 2: Here from Glad Sava, Bloomberg Tech Editor.

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Speaker 1: This has been the Bloomberg Daybreak Asia podcast, bringing you

512
00:26:11,119 --> 00:26:14,200
Speaker 1: the stories making news and moving markets in the Asia Pacific.

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