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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Chrisner.

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Speaker 2: Asian markets are reacting to comments earlier today from President Trump.

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Speaker 2: They happened late Monday when he announced a massive five

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Speaker 2: hundred billion dollar investment in AI infrastructure. He also reiterated

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Speaker 2: his stance on tariffs for Chinese goods.

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Speaker 1: We're talking about a tariff of ten percent on China

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Speaker 1: based on the fact that this ending Fenton all to

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Speaker 1: Mexico in Canada.

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Speaker 2: Coming up, we'll hear from Fred Newman. He is the

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Speaker 2: Chief Asia Economist at HSBC, And a little later we'll

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Speaker 2: talk fixed income with Joanne bianco partner and senior investment

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Speaker 2: strategist at Bond Blocks. But let's begin with artificial intelligence.

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Speaker 2: SoftBank Group is now teaming up with Open Ai and

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Speaker 2: Oracle in a new AI initiative in the US. It's

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Speaker 2: being dubbed Dargate. President Trump made the announcement earlier today

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Speaker 2: alongside SoftBank CEO Masayoshi Sun, as well as Open Ais

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Speaker 2: Sam Altman and Oracle chairman Larry Ellison. Joining us now

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Speaker 2: for a closer look is Rohini Cossolo Venture partner at

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Speaker 2: Fusion Fund. She most recently served as Deputy Assistant to

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Speaker 2: President Biden and Domestic Policy Advisor to Vice President Kamala

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Speaker 2: Harris Rohini, thank you so much for making time. Can

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Speaker 2: I just begin by getting your reaction to this initiative?

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Speaker 3: Well, thanks for having me. This announcement comes today as

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Speaker 3: a number of companies in the AI sector, to no

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Speaker 3: one's surprise or grappling with how we make sure the

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Speaker 3: United States continues its competitive edge on artificial intelligence. So

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Speaker 3: this is certainly an exciting day for Americans to hear

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Speaker 3: about where we're investing our priorities in terms of AI infrastructure,

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Speaker 3: what about.

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Speaker 2: The regulatory regime that may be required, so safety is

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Speaker 2: given its proper ranking in the list of priorities.

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Speaker 3: Well specifically as it pertains to data centers, which is

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Speaker 3: really the heart of what was being announced today. What

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Speaker 3: we know is that the conversation that's been happening around

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Speaker 3: artificial intelligence in the future for training these models that

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Speaker 3: people work with all the time, just to get some context,

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Speaker 3: the energy capability and the needs for these models can

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Speaker 3: be as much as a small town for a year,

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Speaker 3: So just to train one model, it could be as

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Speaker 3: much as a small town. And when you think about

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Speaker 3: in the real context about the needs of what America

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Speaker 3: needs to continue its leading edge, it comes as no

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Speaker 3: surprise that companies are starting to step up in a

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Speaker 3: way to really think through how can we partner together

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Speaker 3: to make sure that we all benefit from all the

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Speaker 3: real needs we have around capabilities, which sources of energy

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Speaker 3: and also similarly, how do we deal with safety and security.

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Speaker 3: But when we look across America, there's a lot of

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Speaker 3: energy updated needs that need to happen for all of

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Speaker 3: the future to take place.

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Speaker 2: So, from what I understand, President Trump rescinded the executive

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Speaker 2: order of his predecessor when it comes to AI. This

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Speaker 2: is after the Biden administration tried to strike a very

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Speaker 2: careful balance here, and from what I understand now that

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Speaker 2: the Trump administration is going to be a little bit

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Speaker 2: more permissive. Safety transparency requirements for AI developers has been halted.

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Speaker 3: Does that concern you, well, of course, I mean, I

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Speaker 3: think that it's important to make sure that you know,

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Speaker 3: as I wrote about just released today, it's important that

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Speaker 3: we think about this conversation not as so much about

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Speaker 3: a regulatory deregulatory environment, but truly about what do consumers

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Speaker 3: need in order to move forward and make sure that

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Speaker 3: all Americans are protected but also empowered by the new

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Speaker 3: technology that we're going to experience and putting whether you're

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Speaker 3: in Washington, d C. Still Combat, New York, or anywhere

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Speaker 3: across America, it's important that the needs of everyday Americans

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Speaker 3: are put first when we have these conversations about what

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Speaker 3: is needed to have a future in artificial intelligence.

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Speaker 2: You touched on the issue of energy a moment ago,

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Speaker 2: and I know that these AI data centers are very,

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Speaker 2: very energy consuming. I mean they use vast amounts of

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Speaker 2: electric power. What should the plan be in terms of

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Speaker 2: policy on energy production going forward for these data centers?

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Speaker 3: Well, I think more conversations in terms of public private

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Speaker 3: partnerships are excellent. Any initiative that signals economic growth, especially

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Speaker 3: when we look at downstream effects of things like cloud computing, semiconductors,

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Speaker 3: hardware manufacturing. These are things that it really doesn't matter

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Speaker 3: who which administration is in charge of what policies. These

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Speaker 3: things just need to happen in order for our economy

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Speaker 3: to grow in a broad based way. So many different

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Speaker 3: companies around can should be considering it's they're not already

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Speaker 3: how they position themselves to benefit from the demand that

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Speaker 3: we're going to continue having around the need for AI

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Speaker 3: solutions and supporting technologies. So I think, if anything, we'll

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Speaker 3: see more partnerships in these sectors that are critical to

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Speaker 3: AI infrastructures, like what we're seeing today including chip manufacturing, logistics,

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Speaker 3: supply chain issues. So all of these things are really

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Speaker 3: important and they're complementary to each other.

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Speaker 2: What about adoption of more nuclear power? Is that something

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Speaker 2: that is essential do you think?

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Speaker 3: I definitely think it's important to make sure that that

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Speaker 3: is a very important part of the conversation. I mean,

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Speaker 3: these are huge energy storage cape needs and we should

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Speaker 3: be looking across all sorts of energy sources, renewable, the

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Speaker 3: conversation around nuclear as it comes to as no surprise

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Speaker 3: in this space, we also have to think about, just

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Speaker 3: as you talked about different sources of energy, also about

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Speaker 3: how we're skilling and new skilling workers to meet this

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Speaker 3: demand too, So that one I think will be a

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Speaker 3: critical area moving forward in terms of the demand for

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Speaker 3: AI related experience and how we make sure that we're

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Speaker 3: creating jobs for the future.

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Speaker 2: Rohindy. Before I let you go, one of the things

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Speaker 2: that the Biden administration did effectively was to put export

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Speaker 2: controls on advanced technology, especially advanced semiconductor technology, trying to

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Speaker 2: keep that out of the hands of China. We've not

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Speaker 2: really heard much in the way of that issue being

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Speaker 2: addressed on the part of the Trump administration. What would

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Speaker 2: your advice be on that front?

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Speaker 3: Well, I think everybody is aligned in America that we

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Speaker 3: have to move forward making sure that we are continually

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Speaker 3: going to be the leaders in artificial intelligence. I think

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Speaker 3: you will see so many people that have been doing

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Speaker 3: work in the last administration move forward with their work

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Speaker 3: in this administration. Just in terms of companies moving forward.

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Speaker 3: The need is so great in terms of what we

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Speaker 3: have to get done on artificial intelligence and how fast

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Speaker 3: things are moving. Even the data centers that we talk

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Speaker 3: about right now, you know in the future they'll have

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Speaker 3: to be able to be adaptable to the changing nature

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Speaker 3: of the very conversation we're having. And so as much

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Speaker 3: as flexibility as people can build in moving forward, knowing

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Speaker 3: that we are in a very rapid technological cycle and

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Speaker 3: it's exciting for everyone to be a part of.

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Speaker 2: But should AI technology be used as a negotiating strategy

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Speaker 2: and dealing with Beijing or are you of a different view, Well.

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Speaker 3: I'll leave the negotiations in terms of the leave it

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Speaker 3: to others in terms of, you know, the different carets

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Speaker 3: and sticks approaches to our relationships with our other partners

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Speaker 3: and allies, adversaries and people of countries all in between.

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Speaker 3: But what I think is important is announcements like today

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Speaker 3: where government comes forward and is working hand in hand

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Speaker 3: with the private sector, as we saw in the last administration,

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Speaker 3: companies stepping forward. These are all good things in the

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Speaker 3: nature of making sure that AI is moving forward, but

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Speaker 3: like I said, also ensuring at the same time that

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Speaker 3: we have a balance with workers being able to be

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Speaker 3: the center of this and making sure that again as

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Speaker 3: I alluded to earlier, that really everyday Americans are at

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Speaker 3: the heart of what we're doing. Moving forward will help

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Speaker 3: us to find a much better future for America.

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Speaker 2: Rohini, thank you so much for making time to chat

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Speaker 2: with us here on the subject of artificial intelligence. She's

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Speaker 2: Rohini Cassolo, venture partner at Fusion Fund, most recently serving

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Speaker 2: as Deputy Assistant to President Biden and domestic policy advisor

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Speaker 2: to Vice President Kamala Harris. Rohini joining us here on

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Speaker 2: the Daybreak Asia podcast. Welcome back to the Bloomberg Daybreak

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Speaker 2: Asia Podcast. I'm Doug Prisner, and in a moment we'll

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Speaker 2: be looking at fixed income with Joanne Bianco of Bond Blocks.

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Speaker 2: Asian equity markets are following their US peers higher on

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Speaker 2: the bed for fewer restrictions for business under the Trump administration.

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Speaker 2: We heard earlier from Fred Newman. He is the chief

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Speaker 2: Asia economist at HSBC. He spoke with our Paul Allen

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Speaker 2: in Sydney.

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Speaker 4: In terms of what we've just seen this morning, Fred,

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Speaker 4: the Year of the Snake is meant to be the

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Speaker 4: year where we embrace uncertainty. We didn't get tariffs yesterday,

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Speaker 4: it looks like we've got them today. What's your reading

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Speaker 4: on how the US China relationship evolves from here and

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Speaker 4: how do you see China countering any potential impact from

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Speaker 4: trade policy.

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Speaker 1: Well, there's of course plenty of relief right now that

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Speaker 1: we don't have the imposition immediately of terrorists by the

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Speaker 1: US on the imports of goods from China, and there

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Speaker 1: is a bit of a hope here that we could

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Speaker 1: get the two sides talking in the coming months. Maybe

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Speaker 1: kind of there might be an opening here to blunt

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Speaker 1: some of the biggest tariff increases if indeed a deal

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Speaker 1: can be struck, But the risk is not off the table.

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Speaker 1: And just as we've heard just a short moment ago,

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Speaker 1: a ten percent tariff might still come and because a

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Speaker 1: fentanyl for example, and even though we haven't seen the

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Speaker 1: immediate position of tariffs, there's certainly not off the table

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Speaker 1: for the Year of the Snake, and so China will

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Speaker 1: still need to brace four potential terrorfs and that's going

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Speaker 1: to slow down exports. This year comes to a very

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Speaker 1: difficult time for the Chinese economy, and there's not much

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Speaker 1: really that China can do apart from trying to negotiate

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Speaker 1: to kind of avert that particular trajectory that we have

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Speaker 1: currently underway.

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Speaker 4: Yeah, well, we did also here from the Chinese Vice

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Speaker 4: premiere saying that China will expand imports to promote balanced trades.

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Speaker 4: So there seems to be certainly a willingness to work

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Speaker 4: this out on both sides. But China's got domestic problems

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Speaker 4: as well, obviously around the property market, consumption and deflation. Also,

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Speaker 4: do you see twenty twenty five as being the year

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Speaker 4: that China emerges from deflation, still a.

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Speaker 1: Long way to get out of deflation. Maybe towards the

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Speaker 1: second half of the year, we see some indicators turning

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Speaker 1: more positive again, but it will require quite.

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Speaker 4: A bit of stimulus.

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Speaker 3: We need to get the.

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Speaker 1: Consumer spending again in China. That requires stabilization of the

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Speaker 1: property market. It would require more fiscal spending. So there's

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Speaker 1: still a long rate road to go. The other thing

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Speaker 1: that was interesting with the common Spy Vice Premier ding

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Speaker 1: this morning is that he's also trying to reach out

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Speaker 1: to other countries in terms of trade, saying that maybe

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Speaker 1: least developed countries may not face tariffs when exporting to China,

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Speaker 1: trying to work with other economies. So the strategy here

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Speaker 1: is negotiate with the US, trying to keep other trading

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Speaker 1: partners on board, and try to do as much as

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Speaker 1: you can domestically to revive growth. But on all fronts,

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Speaker 1: I think China has its work cut out for itself,

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Speaker 1: at least in the next seven quarters.

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Speaker 4: Well, you've been attaining a series of staff and client

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Speaker 4: meetings this month to kick off the year. What's the

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Speaker 4: sentiment around not just China, but Asia's other major economies

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Speaker 4: in twenty twenty.

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Speaker 1: Five, everybody's looking across the Pacific and seeing what signals

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Speaker 1: we get out of Washington. Tariffs is only one thing.

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Speaker 1: The other thing is still worries persist around how much

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Speaker 1: inflation is there in the US, How quickly can the

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Speaker 1: Federal Reserve lower interest rates? What does this mean for

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Speaker 1: the dollar and there for Asian currencies in Asian central banks.

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Speaker 1: So the beginning of the year, the square focus is

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Speaker 1: on the US and not just on the trade policy,

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Speaker 1: but domestic policy as well. Beyond that, I think there

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Speaker 1: are some slight optimism coming in here that maybe we

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Speaker 1: have kind of averted the most acute imposition of teriffs,

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Speaker 1: that there are still room for negotiation. That's certainly reflected,

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Speaker 1: and hope markets have trade in the last few days,

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Speaker 1: and there's a bit of a hope that maybe in

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Speaker 1: China we will get more stimulus come through. But it's

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Speaker 1: the US at the moment that sets the tone for

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Speaker 1: global macroeconomic policy that will likely stay the case for

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Speaker 1: the next few months.

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Speaker 4: The Trump inauguration has seized a lot of the headlines

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Speaker 4: this week, but we do have a major central bank

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Speaker 4: meeting coming up on Friday. It is, of course Japan,

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Speaker 4: and we've got traders seeing ninety percent chance, or it

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Speaker 4: may even be higher than that. Now more tightening this Friday.

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Speaker 4: Now what's your view of the path ahead for policy

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Speaker 4: normalization in Japan?

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Speaker 1: Well, most indicators suggest that monetary policy should it can

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Speaker 1: be normalized further. Inflation is on the right trajectory, the

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Speaker 1: labor mark is on the right trajectory. Growth is expected

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Speaker 1: to be rebound this year, partly because consumers are coming back.

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Speaker 1: So it's a question of tactical timing for the BOJ,

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Speaker 1: not whether they will hide, but when they will hike.

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Speaker 1: And so this Friday seems as good day as any

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Speaker 1: to hike after the volatility that we've seen as start

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Speaker 1: of the year. Maybe that will hiking now will provide

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Speaker 1: a bit of a support for the Japanese yen as

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Speaker 1: we head into potentially more volatility into the coming months.

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Speaker 1: So this Friday seems like trust at least that it's

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Speaker 1: a likely hike. And we know that the BOJ, after

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Speaker 1: last summer's surprise, maybe doesn't want to catch the market

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Speaker 1: too much off guard, and so we get a bit

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Speaker 1: of a hint here from officials that really a rate

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Speaker 1: hike is on the table. So Friday is a goal

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Speaker 1: for us, but of course what happens in the next

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Speaker 1: twenty four hours may well push the decision one way

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Speaker 1: or the other.

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Speaker 2: That was Fred Newman, Chief Asia Economist at HSBC in

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Speaker 2: conversation with Bloomberg's Paul Allen. I'm joined now by Joanne

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Speaker 2: bianco partner and senior investment strategist at Bond Blocks. Joanne

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Speaker 2: joining us from Chicago here on the Daybreak Asia podcast.

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Speaker 2: Thanks for making t to chat with us. Can we

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Speaker 2: begin with what the market had been expecting prior to

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Speaker 2: Trump's inauguration, when the conversation around his economic policies seemed

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Speaker 2: to suggest a little bit of concern about inflationary pressures building.

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Speaker 2: Is that a concern for you at all?

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Speaker 5: It doesn't concern us necessarily, but it is just something

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Speaker 5: that you have to factor into your outlook for financial

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Speaker 5: markets and fixed income markets in particular.

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Speaker 2: We're seeing yields move lower today in the US session

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Speaker 2: right across the treasury curve. It's kind of been interesting

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Speaker 2: over the last couple of days to see this big

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Speaker 2: move lower in yields. What do you think the market

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Speaker 2: is indicating at this point with those lower yields.

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Speaker 5: I think it really stemmed from the main news last

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Speaker 5: week that the USCPI rose by less than forecast in December,

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Speaker 5: and so that was welcome news for the financial markets,

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Speaker 5: both income and equity, and you saw rates rally sharply

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Speaker 5: across the curve. It probably doesn't end up changing what

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Speaker 5: the Fed does in and of itself, just one lower

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Speaker 5: CPI print. It looks to us that you know, they're

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Speaker 5: going to continue to be on hold for further rate

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Speaker 5: cuts right now. So the amount of further reductions and

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Speaker 5: yield is something that you know remains to be seen.

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Speaker 2: So when do you think we'll get the first cut?

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Speaker 2: Sometime after midyear.

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Speaker 5: They're just not projecting that right now, because I think

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Speaker 5: our view is that, you know, there's there in the

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Speaker 5: face of the data that we're seeing, is that there's

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Speaker 5: not really a reason to cut rates further from the

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Speaker 5: hundred basis points that they've already cut.

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Speaker 2: I know it's a minority view, but there are some

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Speaker 2: on the street talking about the next move being a hike.

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Speaker 2: That's if these inflationary pressures not only proved to be stubborn,

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Speaker 2: but in fact maybe accelerate just a bit. Is that

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Speaker 2: something that concerns you at all?

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Speaker 5: Again, you know, not really a concern. It would that

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Speaker 5: would just be a real change, that would be a

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Speaker 5: departure from what we think is going to happen. I

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Speaker 5: think that our view is that you know, rates remain

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Speaker 5: higher for longer, not necessarily that there will be rate

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Speaker 5: hikes again.

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Speaker 2: So you mentioned the CPI data obviously measuring the retail inflation.

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Speaker 2: How do you understand the strength or the health of

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Speaker 2: the American consumer.

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Speaker 5: Consumer has been very resilient and has really helped this

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Speaker 5: economy stay strong, and it's in turn help corporations do well.

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Speaker 5: So it's just been a very resilient consumer that continue

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Speaker 5: to surprise people. But it is what it is.

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Speaker 2: Where are you seeing opportunity right now in the fixed

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Speaker 2: income space?

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Speaker 5: Well, you know, we really think that fixed income offers

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Speaker 5: a wide variety of opportunities right now. But the environment

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Speaker 5: that we see right now is really just supports what

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Speaker 5: our main investment thesis is by credit, so US high

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Speaker 5: yield investment, great corporates, particularly triple bs, but stay shortened

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Speaker 5: duration just because you know there's going to continue to

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Speaker 5: be pretty high volatility, especially in the long end of

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Speaker 5: the treasury curve. And then finally to just be tax

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Speaker 5: aware and you're investing. It's not necessarily about only investing

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Speaker 5: in municipals, but looking at the whole set of opportunities

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Speaker 5: that are available to investors and figuring out what is

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Speaker 5: the best after tax type of opportunity When you're looking.

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Speaker 2: At high yield, I'm curious about the industries right now

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Speaker 2: that represent value. Is it the energy space or maybe

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Speaker 2: something else where companies are taking a great deal more

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Speaker 2: risk and you're not at all concerned about the risk

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Speaker 2: of default.

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Speaker 5: Well, I can't say that we're not at all concerned

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Speaker 5: about the risk of the default. There's always going to

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Speaker 5: be some defaults in high yield, but what we're expecting

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Speaker 5: is that the default rate would will be lower than

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Speaker 5: the long term average once again in twenty twenty five,

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Speaker 5: and certainly supportive of the current level of spreads in

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Speaker 5: the current level of valuations for many of the companies.

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Speaker 5: You know. So what we wouldn't our main view right

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Speaker 5: now is that you're being paid to take the risk

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Speaker 5: in high yield, even down to the triple C rating

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Speaker 5: category because of the strength that we see in fundamentals

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Speaker 5: for high yield corporation.

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Speaker 2: Is there a theme here an industry group that you're

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Speaker 2: particularly attracted to at the moment.

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Speaker 5: I mean, we're not shying away from consumer cyclical you know,

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Speaker 5: we just feel like there's we're not expecting that the

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Speaker 5: US could is headed into a recession. You think that

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Speaker 5: there's probably you're probably being paid more for some of

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Speaker 5: the higher risk sectors. And right now, that's the TMT

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Speaker 5: sector is the area that has the highest yield among

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Speaker 5: major industry sectors. There's definitely some risk there and but

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Speaker 5: overall when you look at that sector, there seems to

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Speaker 5: be opportunity as well.

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Speaker 2: Joanne Bianco, she is partner also senior investment strategist at

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Speaker 2: Bond Blocks in Chicago. Joining us here on the Daybreak

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Speaker 2: Asia Podcast. Thanks for listening to today's episode of the

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Speaker 2: Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at

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Speaker 2: the story shaping markets, finance, and geopolitics in the Asia Pacific.

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Speaker 2: You can find us on Apple, Spotify, the Bloomberg Podcast

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Speaker 2: YouTube channel, or anywhere else you listen. Join us again

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Speaker 2: tomorrow for insight on the market moves from Hong Kong

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Speaker 2: to Singapore and Australia. I'm Doug Prisoner and this is

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Speaker 2: Bloomberg