WEBVTT - Asian Stocks Gain as Tech Rebounds

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News.

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<v Speaker 2>Welcome to the Daybreak Asia podcast. I'm Doug Prisner in Japan.

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<v Speaker 2>The equity market is breaking to fresh record highs and

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<v Speaker 2>these gains reflect expectations for more fiscal spending as well

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<v Speaker 2>as a cut in the sales tax on food items.

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<v Speaker 2>All of that comes after Prime Minister taki ICHI's snap

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<v Speaker 2>election victory over the weekend seemed to give her a

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<v Speaker 2>mandate to make economic change. Meantime, here in the States,

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<v Speaker 2>equities recovered, especially those software stocks, following last week's sharp losses.

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<v Speaker 2>Now at the time, the spotlight was on how AI

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<v Speaker 2>could undermine various software businesses, and not surprisingly, many of

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<v Speaker 2>those shares were punished. Although last Friday the mood began

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<v Speaker 2>to shift and it continued today. The IGV software ETF

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<v Speaker 2>picked up six point eight percent over the last two sessions.

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<v Speaker 2>For a closer look, I'm joined by Ross Mayfield. He

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<v Speaker 2>is an investment strategist at Baird. Ross is on the

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<v Speaker 2>line from Milwaukee, Wisconsin. Thank you for being here. What

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<v Speaker 2>did you make of the bounce in software shares today?

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<v Speaker 3>Well, I think generally I'm of the view that there

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<v Speaker 3>might be some disruption and there probably will be. But

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<v Speaker 3>I don't think that, you know, most large companies are

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<v Speaker 3>going to rip their their tech stack out in favor

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<v Speaker 3>of you know, AI tools overnight. I think I think

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<v Speaker 3>the selling is overdone, and this is when I would

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<v Speaker 3>I would be kind of legging into some of these names,

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<v Speaker 3>even if the recovery could take some time. I mean,

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<v Speaker 3>these charts are pretty beat up right now.

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<v Speaker 2>It was interesting today Goldman Saxon noted that hedge funds

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<v Speaker 2>had piled into short positions on the notion that we

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<v Speaker 2>were going to see AI disrupt various business models. And

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<v Speaker 2>I'm wondering whether or not some of the positivity that

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<v Speaker 2>we had today may have been tied to some short covering.

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<v Speaker 2>What do you think about that?

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<v Speaker 3>Yeah, I think so. I mean this is, you know,

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<v Speaker 3>the software names where by a lot of metrics at

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<v Speaker 3>their most over sold as they've been in decades, probably

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<v Speaker 3>since the dot com bubble. And so anytime you get

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<v Speaker 3>that kind of you know, violent shift in the market,

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<v Speaker 3>so you're going to get some some technical selling and

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<v Speaker 3>some short covering, and I think that, you know, this

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<v Speaker 3>could be an over sold bounce here. I think you

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<v Speaker 3>could see a resume or resumption downward or at least

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<v Speaker 3>kind of some sideways training as these names carve out

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<v Speaker 3>a new base. But again, if you're investing with a

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<v Speaker 3>year plus timeline, I just think these that the selling

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<v Speaker 3>is overdone and you've got a lot of babies thrown

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<v Speaker 3>out with the bathwater. There are a lot of companies

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<v Speaker 3>you know that are software adjacent that have been sold,

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<v Speaker 3>but I have really diversified businesses with a big entrenched

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<v Speaker 3>user basis.

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<v Speaker 2>We had a very interesting development today from Alphabet. The

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<v Speaker 2>company is going global now is insofar as financing ambitions

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<v Speaker 2>for AI. Alphabet is set to raise about twenty billion

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<v Speaker 2>from a US dollar bond offering, and this offering was

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<v Speaker 2>more than five times oversubscribed. At the same time, today,

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<v Speaker 2>Alphabet began pitching what would be the company's first ever offerings.

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<v Speaker 2>This is a debt offering, one in Switzerland, the other

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<v Speaker 2>in the UK. What does this speak to when you

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<v Speaker 2>have one of the hyperscalers going into the credit markets

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<v Speaker 2>to try to raise capital to build out AI infrastructure, Well,

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<v Speaker 2>it changes.

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<v Speaker 3>The narrative on these companies entirely. I mean, for for decades,

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<v Speaker 3>the story around you know, the big tech companies, you know,

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<v Speaker 3>fang to mag seven to all the different acronyms in

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<v Speaker 3>between was huge free cash flow load debt. You know,

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<v Speaker 3>businesses that just print money and then you can, if

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<v Speaker 3>you're Alphabet, you can plunge all that extra cash into

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<v Speaker 3>into moonshots like weimo. These businesses are fundamentally changed. They

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<v Speaker 3>are now asset heavy, they are tapping debt markets. It

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<v Speaker 3>doesn't mean that they're bad investments, but it requires basically

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<v Speaker 3>a whole new way of thinking about the big tech

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<v Speaker 3>companies at the top of the market, from asset light

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<v Speaker 3>to asset heavy and what that requires and what that means.

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<v Speaker 3>But it changes how investors who have leaned on these

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<v Speaker 3>companies for decades a change and how you have to

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<v Speaker 3>think about them.

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<v Speaker 2>So does it create anxiety for you to the extent

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<v Speaker 2>that if you were long, let's say a name like Alphabet,

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<v Speaker 2>that you would try to reduce your position slightly.

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<v Speaker 3>You know, I don't think I would take it that far.

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<v Speaker 3>You know, I do think it raises the stakes a

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<v Speaker 3>little bit. So, you know, we keep a really close

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<v Speaker 3>eye on broader credit spreads and you know, make sure

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<v Speaker 3>the bond market is well behaved. But you know, I

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<v Speaker 3>think there's an interesting dichotomy in the market right now,

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<v Speaker 3>which is that if you look at the software sell

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<v Speaker 3>off and you believe that even some of it is

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<v Speaker 3>justified by the incredible potential of AI tools, whether it's

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<v Speaker 3>you know, Anthropic or Gemini or you know, all of

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<v Speaker 3>the above, then perhaps the level of spending that Amazon

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<v Speaker 3>and Alphabet laid out last week is justified. And I

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<v Speaker 3>would be you know, buyers of the names that again

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<v Speaker 3>are kind of selling the picks and shovels and building

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<v Speaker 3>out the infrastructure to you know, keep this trend going.

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<v Speaker 3>So it requires extra due diligence, but I would not

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<v Speaker 3>be you know, selling a company like Alphabet at this

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<v Speaker 3>point in time with what I think is an AI

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<v Speaker 3>you know trend that's still in the early innings.

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<v Speaker 2>Quite frankly, so, we've seen enormous volatility recently in a

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<v Speaker 2>number of asset classes, and that would include bitcoin. We

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<v Speaker 2>saw a bit of a rebound from the recent cell

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<v Speaker 2>off today and we kind of fluctuated on either side

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<v Speaker 2>of seventy thousand. How are you feeling about the crypto space, Well,

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<v Speaker 2>you know, crypto.

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<v Speaker 3>Is very narrative driven. I mean, like any asset that

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<v Speaker 3>doesn't you know, produce cash flow or have like a

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<v Speaker 3>real industrial use. I mean, it's it doesn't act as

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<v Speaker 3>a currency, particularly in developed markets. It trades on narrative,

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<v Speaker 3>and you know, over the last three four years some

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<v Speaker 3>of the predominant narratives have been really beat up. It

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<v Speaker 3>was not a good inflation hedge in twenty twenty two,

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<v Speaker 3>and it has not really acted like a store of

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<v Speaker 3>value to hedge you know, geopolitical or debasement risk. It's

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<v Speaker 3>not a good sign, if you know, as the digital

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<v Speaker 3>gold for a modern era, it's going down while real

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<v Speaker 3>gold and silver are going up into the right. And

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<v Speaker 3>so the complete split of those two assets I think

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<v Speaker 3>really hurts the narrative that crypto and bitcoin in particular

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<v Speaker 3>is this store of value that can be counted on. Now,

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<v Speaker 3>anyone who's who's watched the space for a while knows

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<v Speaker 3>that this sort of alatility is not uncommon. But every

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<v Speaker 3>crypto bull and bear cycle we go through, as institutional

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<v Speaker 3>adoption picks up and as these narratives get beat up,

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<v Speaker 3>I think there's going to be more and more behind

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<v Speaker 3>the demand for use case and for you know, what

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<v Speaker 3>is this And so I'm somewhat of a skeptic. You know,

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<v Speaker 3>it's just kind of entrenched in me to be a

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<v Speaker 3>little skeptical of this sort of stuff, But I do

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<v Speaker 3>think that that narrative being so beat up over the

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<v Speaker 3>last couple of months is concerning as we go forward.

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<v Speaker 2>We also had news today that the privately held firm

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<v Speaker 2>Jump Trading is set to take some small stakes in

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<v Speaker 2>both Calshi and polymarket. This would be done in exchange

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<v Speaker 2>for providing liquidity on these prediction market platforms. How do

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<v Speaker 2>you view the prediction markets overall.

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<v Speaker 3>You know, for financial markets for investors, I mean, I

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<v Speaker 3>it could add some level of volatility to markets, you know,

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<v Speaker 3>if these platforms really get up to scale. You know,

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<v Speaker 3>I think it's probably not too big of an ise

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<v Speaker 3>shoe for broad investors at this point. You know, it

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<v Speaker 3>probably says more about you know, society than it is

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<v Speaker 3>an indicator for financial markets. But you know, anytime you

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<v Speaker 3>have a lot of interest in leverage in you know,

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<v Speaker 3>the kind of meme stocks, and I think that these

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<v Speaker 3>kind of prediction markets and evan contracts start to fall

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<v Speaker 3>under that umbrella of you know, retail getting really creative

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<v Speaker 3>with ways to try and hit it big. You know,

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<v Speaker 3>maybe even crypto falls under that umbrella. You know, it

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<v Speaker 3>adds a level of volatility and a level of systemic

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<v Speaker 3>risk that it's hard to price because they're so new.

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<v Speaker 3>But it's not a concern, you know. I think if

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<v Speaker 3>you're just an investor in a sixty forty or or

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<v Speaker 3>someone who has kind of a diversified portfolio, now what

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<v Speaker 3>it says about the state of the world is maybe

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<v Speaker 3>a different conversation.

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<v Speaker 2>Change hears very quickly here talk a little bit about Japan,

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<v Speaker 2>because yesterday we had a pretty powerful rally in the

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<v Speaker 2>equity market in Tokyo. That was after Prime Minister tuki

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<v Speaker 2>Ichi managed that historic landslide win in this snap election

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<v Speaker 2>on Sunday, and we've got as I speak to you,

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<v Speaker 2>the NIEK trading at a record high. If you had

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<v Speaker 2>to look at a market off shore, would you would

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<v Speaker 2>you take notice of what's happening in Japan and maybe

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<v Speaker 2>put a little cash to work.

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<v Speaker 3>Absolutely, Japan, Korea. There are a lot of stock markets

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<v Speaker 3>around the world that are acting like leadership and leading

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<v Speaker 3>this global market. I think of all the asset classes,

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<v Speaker 3>US investors are probably the most underweight international. After fifteen

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<v Speaker 3>years of underperformance. I think US investors should really consider

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<v Speaker 3>adding to international here. I think the weaker dollar story

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<v Speaker 3>has legs. There are structural drivers in not just Japan,

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<v Speaker 3>although that's a great story and a great looking chart,

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<v Speaker 3>but in other markets around the world. I think international

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<v Speaker 3>is a really interesting place to be right now. It's

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<v Speaker 3>a kind of a natural hedge to the tech centric

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<v Speaker 3>US markets. I think it's just frankly under owned in

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<v Speaker 3>the US. So Japan looks great, but I would be

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<v Speaker 3>adding the international more broadly as well.

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<v Speaker 2>All right, Ross, thank you so much. We'll leave it there.

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<v Speaker 2>Ross Mayfield is investment strategist at Baird joining from Milwaukee, Wisconsin.

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<v Speaker 2>Here on the Daybreak Asia podcast. Welcome back to the

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<v Speaker 2>Daybreak Asia Podcast. I'm Doug Krisner. The US employment report

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<v Speaker 2>for the month of January is due on Wednesday, and today,

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<v Speaker 2>the director of the National Economic Council, Kevin Hassett, said

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<v Speaker 2>softer monthly jobs gains are likely in the coming months

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<v Speaker 2>as labor force growth slows. Today, it was anxiety about

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<v Speaker 2>the jobs data that helped a weeken the dollar. We

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<v Speaker 2>had the Bloomberg Dollar Spot Index falling six tens to

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<v Speaker 2>one percent in New York trading. And that's where we

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<v Speaker 2>begin our conversation with Carrie Lee. She is the global

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<v Speaker 2>market strategist at DBS, Carrie spoke to Bloomberg TV host

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<v Speaker 2>Cherry On and April Hong.

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<v Speaker 1>Where are we in these conversations debate around the dollar

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<v Speaker 1>debasement trade.

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<v Speaker 4>Yeah, well, I think over the past two sessions the

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<v Speaker 4>decline THESD dollar actually was driven mainly by the resumption

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<v Speaker 4>of this debatement trade. But in a short term, on

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<v Speaker 4>the tactical horizon, actually we think the dollar index may

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<v Speaker 4>still find some support around ninety five to ninety six because,

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<v Speaker 4>first of all, we've seen the latest data like sm

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<v Speaker 4>Manufacturing and Services Index actually point to a still resilient

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<v Speaker 4>US economy. And then last night we've also seen the

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<v Speaker 4>quite resilient US DOC market, And because of the solid,

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<v Speaker 4>solid equity market and economy, it feels like the Federal

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<v Speaker 4>Reserve self may not be as dolfish as expected. If

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<v Speaker 4>this is the case, then the new advantage itself may

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<v Speaker 4>also help to support the US dollar around ninety five

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<v Speaker 4>to ninety sixth level at this moment.

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<v Speaker 1>How closely are you watching who becomes the next chair

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<v Speaker 1>of the Federal Reserve. We just got the latest comments

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<v Speaker 1>from Kevin Walsh talking about how he wanted to transform

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<v Speaker 1>the institution.

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<v Speaker 4>Well, for the upcoming fet chair. Actually we think she

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<v Speaker 4>is going to still protect the US the federal reserves independence,

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<v Speaker 4>which is actually not a negative effector for the US dollar.

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<v Speaker 4>But however, at the end of the day, we've seen

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<v Speaker 4>in the longer term the US dollar itself may still

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<v Speaker 4>have a structural moderate down trend which has already formed

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<v Speaker 4>since twenty twenty two the start of Russia Ukraine wal

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<v Speaker 4>because this is not about the next fetch Chair, but

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<v Speaker 4>more about the US policy uncertainty actually shakes the US

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<v Speaker 4>led world order, and the market is also still concerned

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<v Speaker 4>about the US fiscal sustainability in the long term, which

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<v Speaker 4>probably the reason why we will see this on and

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<v Speaker 4>of the basement trade still weighing down the US dollar

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<v Speaker 4>in the longer term.

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<v Speaker 5>Carrie, talk to us about the other side of the

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<v Speaker 5>dollar trade in Asia, specifically for the Roman Bee. We

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<v Speaker 5>saw about firmness following Bloomberg reports that China has told

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<v Speaker 5>financial institutions or banks to reduce the exposure to treasuries,

0:13:35.440 --> 0:13:39.079
<v Speaker 5>and this is not because of geopolitical maneuverings, to be clear,

0:13:39.120 --> 0:13:41.640
<v Speaker 5>but more because of pairing back some of the risk

0:13:42.000 --> 0:13:46.440
<v Speaker 5>in markets as investors rethink what the US assets are

0:13:46.440 --> 0:13:48.160
<v Speaker 5>going to look like the cr What are you seeing

0:13:48.200 --> 0:13:50.439
<v Speaker 5>in China?

0:13:50.559 --> 0:13:54.199
<v Speaker 4>Well, in China, we've seeing the PBOC always talk about

0:13:54.320 --> 0:13:59.520
<v Speaker 4>roman Bee internationalization and they also try to transform the

0:13:59.520 --> 0:14:04.480
<v Speaker 4>econ ME towards a growth consumption driven growth model, and

0:14:04.640 --> 0:14:08.880
<v Speaker 4>this probably needs the realming Bee to strengthen a fair bit.

0:14:09.640 --> 0:14:12.680
<v Speaker 4>In the meantime, we've also seen quite a fair bit

0:14:12.760 --> 0:14:16.400
<v Speaker 4>of capital inflows as well as the record high current

0:14:16.400 --> 0:14:20.080
<v Speaker 4>account syl plus, all supporting the UN And more importantly,

0:14:20.400 --> 0:14:24.160
<v Speaker 4>the PBOC has set the dollar CNY daily fixing rate

0:14:24.240 --> 0:14:28.200
<v Speaker 4>lower and lower gradually, firstly below the seven mark and

0:14:28.280 --> 0:14:31.400
<v Speaker 4>now towards the six point nine to five level. It

0:14:31.640 --> 0:14:35.800
<v Speaker 4>feels like the PBOC does allow some further strength in

0:14:35.920 --> 0:14:39.080
<v Speaker 4>the reming Bee, and if we look at the realming

0:14:39.160 --> 0:14:43.200
<v Speaker 4>Bee index, actually it's still below it's five year average,

0:14:43.240 --> 0:14:46.680
<v Speaker 4>which means that the catch up play for the reming

0:14:46.720 --> 0:14:50.440
<v Speaker 4>Bee still has some room to run. So we do

0:14:50.560 --> 0:14:55.240
<v Speaker 4>expect the dollar cm H to fall fair bit towards

0:14:55.240 --> 0:14:59.000
<v Speaker 4>the nine point six point nine level, and then for

0:14:59.200 --> 0:15:02.000
<v Speaker 4>the next step, whether it will go to six point

0:15:02.080 --> 0:15:05.200
<v Speaker 4>eight or even six point seven, it depends on the

0:15:05.240 --> 0:15:08.680
<v Speaker 4>next move of the US dollar. If the dollar index

0:15:08.800 --> 0:15:12.280
<v Speaker 4>is trying lower towards ninety four, and if there is

0:15:12.440 --> 0:15:17.160
<v Speaker 4>size that the China's economy is improving further than it's

0:15:17.200 --> 0:15:20.640
<v Speaker 4>possible for the dollar c H or dollars CNY to

0:15:20.800 --> 0:15:24.680
<v Speaker 4>try lower towards six point eight or even six point

0:15:24.760 --> 0:15:26.480
<v Speaker 4>seven in the rest of this year.

0:15:28.520 --> 0:15:32.640
<v Speaker 5>Kerry, what about dollar Japanese yen? Is the verbal intervention

0:15:32.720 --> 0:15:34.600
<v Speaker 5>we've been getting off le going to be enough to

0:15:34.760 --> 0:15:35.680
<v Speaker 5>keep things down?

0:15:37.800 --> 0:15:38.040
<v Speaker 2>Well?

0:15:38.560 --> 0:15:42.480
<v Speaker 4>Actually, I think the yen strength over the past session

0:15:42.880 --> 0:15:46.480
<v Speaker 4>is a bit surprising, but it's mainly driven by the

0:15:46.560 --> 0:15:51.160
<v Speaker 4>rechacement in the US dollar as well as the verbal intervention.

0:15:51.800 --> 0:15:55.160
<v Speaker 4>I think the market probably is still concerned about another

0:15:55.280 --> 0:16:00.240
<v Speaker 4>round of coordinated ratecheck by the US and Japan. As

0:16:00.240 --> 0:16:03.560
<v Speaker 4>long as there is only verbal intervention and there is

0:16:03.640 --> 0:16:08.280
<v Speaker 4>no real intervention, then probably in the market's focus will

0:16:08.560 --> 0:16:13.880
<v Speaker 4>shift back towards the concerns about the fiscal sustainability under

0:16:13.880 --> 0:16:19.120
<v Speaker 4>the Tachilogy government. If that is the case, then probably

0:16:19.200 --> 0:16:21.760
<v Speaker 4>the Japanese yen is not yet out of the woods.

0:16:22.040 --> 0:16:25.760
<v Speaker 4>The dollar yen will still find some support around one

0:16:25.880 --> 0:16:29.720
<v Speaker 4>fifty four point five before one fifty two, and then

0:16:29.760 --> 0:16:33.280
<v Speaker 4>the risk is still to the towards the upside. Probably

0:16:33.960 --> 0:16:37.520
<v Speaker 4>towards the previous high around one fifty nine point four five.

0:16:40.280 --> 0:16:42.880
<v Speaker 1>Yeah, that was achieved around mid January, right, a twenty

0:16:42.920 --> 0:16:45.480
<v Speaker 1>twenty four low against the Green Bank. What are we

0:16:45.520 --> 0:16:48.000
<v Speaker 1>expecting in terms of the Bank of Japan. Could we

0:16:48.080 --> 0:16:51.400
<v Speaker 1>see accelerated rate hikes given the weakness in the yen.

0:16:53.400 --> 0:16:57.960
<v Speaker 4>Well in terms of bog Actually, our expectation is for

0:16:58.040 --> 0:17:02.040
<v Speaker 4>them to hike once more here towards one percent, but

0:17:02.160 --> 0:17:05.320
<v Speaker 4>there is also scope for them to hike further in

0:17:05.359 --> 0:17:08.200
<v Speaker 4>the later part of this year or the early twenty

0:17:08.280 --> 0:17:14.479
<v Speaker 4>twenty seven. If the Takaichi government's upcoming fiscal expansion is

0:17:14.520 --> 0:17:19.240
<v Speaker 4>going to support the economy and support the wage growth,

0:17:19.520 --> 0:17:23.320
<v Speaker 4>and if that is the case, then probably for Japanese yen,

0:17:23.640 --> 0:17:27.720
<v Speaker 4>they may also find some scope for further interest rate hikes.

0:17:27.800 --> 0:17:31.280
<v Speaker 2>That is carry Lee Global Market Strategistic DBS speaking to

0:17:31.280 --> 0:17:35.320
<v Speaker 2>Bloomberg TV host Sharry On and April Hog giving you

0:17:35.359 --> 0:17:40.560
<v Speaker 2>the conversation right here on the Daybreak Asia podcast. Thanks

0:17:40.600 --> 0:17:44.240
<v Speaker 2>for listening to today's episode of the Bloomberg Daybreak Asia

0:17:44.400 --> 0:17:48.840
<v Speaker 2>Edition podcast. Each weekday, we look at the story shaping markets, finance,

0:17:49.200 --> 0:17:52.280
<v Speaker 2>and geopolitics in the Asia Pacific. You can find us

0:17:52.320 --> 0:17:56.480
<v Speaker 2>on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

0:17:56.520 --> 0:17:59.600
<v Speaker 2>else you listen. Join us again tomorrow for insight on

0:17:59.640 --> 0:18:03.800
<v Speaker 2>the market moves from Hong Kong to Singapore and Australia.

0:18:04.240 --> 0:18:06.720
<v Speaker 2>I'm Doug Prisoner and this is Bloomberg