WEBVTT - BIS Warning, South Korea's 'Mega Projects'

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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 Chrisner. We

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<v Speaker 2>begin today with a warning from the Bank of International

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<v Speaker 2>Settlements the global economy remains caught in the cross currents

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<v Speaker 2>of progress and peril. In its annual report published today,

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<v Speaker 2>the BIS said an artificial intelligence bust, along with inflation

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<v Speaker 2>and fiscal stress, are among the most alarming threats to

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<v Speaker 2>global prosperity at the present now. This report also highlights

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<v Speaker 2>the risk linked to circular financing deals. For a closer

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<v Speaker 2>look at the risks confronting markets and economies globally, let's

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<v Speaker 2>bring in Oliver Shale. Oliver is investment specialist at the

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<v Speaker 2>Rougher Investment Company, joining from here in New York City.

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<v Speaker 2>Thank you, sir for being with us. How do you

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<v Speaker 2>evaluate the risk right now in the current environment, And

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<v Speaker 2>I'd be curious to get your take on how these

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<v Speaker 2>risks are being weighted right now.

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<v Speaker 3>Yeah, High Dige, it's great to be with you. I

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<v Speaker 3>think what we've got at the moment is a market

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<v Speaker 3>which is baking in a lot of good news and

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<v Speaker 3>hope and has coalesced around a very narrow selection of

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<v Speaker 3>stocks and themes meeting a real world and fundamentals that

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<v Speaker 3>are increasingly volatile and bifurcated. And I think specifically on

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<v Speaker 3>the market front, you're seeing the perceptions around some of

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<v Speaker 3>the AI leadership AI build out shifting fast. Not least

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<v Speaker 3>in that BIS report that you mentioned, the investors have

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<v Speaker 3>becoming more skeptical about the adoption of AI, the genuine

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<v Speaker 3>results that it might be bringing, as you say that

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<v Speaker 3>as an increased understanding awareness of the circularity of earnings

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<v Speaker 3>around the whole ecosystem, while companies are encouraging engineers to

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<v Speaker 3>be more cost aware, moving to more token efficiency. So

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<v Speaker 3>a lot is resting on this revolution. A lot is

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<v Speaker 3>resting on the shoulders of a handful of companies, and

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<v Speaker 3>there is not a huge margin of safety in valuations,

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<v Speaker 3>especially for those names, and that's something that we're always

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<v Speaker 3>looking for ways to preserve capital and trying to avoid

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<v Speaker 3>meaningful drawdowns in markets. So that's something that keeps us cautious.

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<v Speaker 2>We had an interesting story on the Bloomberg terminal today,

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<v Speaker 2>in fact, talking about the surge that we have seen

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<v Speaker 2>in market leverage. It seems like demand to borrow money

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<v Speaker 2>has driven an unusual mid year spike and financing cost.

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<v Speaker 2>I think they are now at about the highest level

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<v Speaker 2>that we have seen since December twenty twenty four. To

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<v Speaker 2>what extent is leverage kind of a defining theme for

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<v Speaker 2>the market right now? And if it is, are you

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<v Speaker 2>concerned maybe about elevated levels?

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<v Speaker 3>Yeah, I think that's so important. And you're seeing equity

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<v Speaker 3>funding rates increase. That's driven by the huge amount of supply.

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<v Speaker 3>The large IPOs that are coming to market is driven

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<v Speaker 3>by a demand for those equities and for leverage, and

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<v Speaker 3>it creates a setup which is avalanche prone. The growth

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<v Speaker 3>of or the use of leverage across trading activity, the

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<v Speaker 3>growth of things like leathered ETFs again, which are focused

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<v Speaker 3>on a narrow selection of stocks, can exacerbate moves in

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<v Speaker 3>the market in both directions, and it really makes for

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<v Speaker 3>a market which can be jumpy, avalanche prone, and vulnerable

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<v Speaker 3>to outside or exogynists shots.

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<v Speaker 2>One of the big stories near the end of the

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<v Speaker 2>last week was the fact that both Apple and Microsoft

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<v Speaker 2>are having to raise the cost of their devices to

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<v Speaker 2>compensate from higher cost of memory chips and storage. And

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<v Speaker 2>today we are getting indications that South Korea is going

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<v Speaker 2>to unveil a sweeping strategy aimed at driving the great

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<v Speaker 2>leap forward. We've got names like Samsung SK Group involved

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<v Speaker 2>with that, which sounds to me like it's a semiconductor story.

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<v Speaker 2>Where are we right now in this cycle and is

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<v Speaker 2>there the risk that a name like Samsung or sk

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<v Speaker 2>Heinez or SK Group were to add to its capex

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<v Speaker 2>right now to try to build up even greater capacity

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<v Speaker 2>at this particular moment where we may be at an

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<v Speaker 2>inflection point if names like Apple and Microsoft are passing

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<v Speaker 2>on higher cost of their components due to the fundamental

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<v Speaker 2>problem with a shortage of men memory and how prices

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<v Speaker 2>on that front have been pushing higher, is there the

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<v Speaker 2>risk that we could see some level of demand destruction

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<v Speaker 2>and that that could ripple back and impact some of

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<v Speaker 2>the memory manufacturers.

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<v Speaker 3>It's very interesting because it's sort of bringing into focus

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<v Speaker 3>the question of who ultimately absorbs the cost of this

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<v Speaker 3>AI build out and where do the benefits even accrue to.

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<v Speaker 3>I think some of the headlines you mentioned bring in

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<v Speaker 3>to focus a bit of a paradox where the revenue

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<v Speaker 3>for these semiconductor and memory companies is ultimately a cost

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<v Speaker 3>and a rapidly growing one for basically the rest of

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<v Speaker 3>the market and certainly to the hyperscale companies that prop

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<v Speaker 3>up the market. So it's underscoring the kind of intensifying

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<v Speaker 3>margin pressures that come with this booming demand for compute

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<v Speaker 3>and in order to fund this capex cycle, we know

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<v Speaker 3>that these companies are increasingly looking towards investors to finance

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<v Speaker 3>their AI ambitions. They're tapping credit markets, they're coming to

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<v Speaker 3>equity markets. The investors will increasingly ask to see returns

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<v Speaker 3>on those investments. And if at some point they begin

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<v Speaker 3>to go worry, then and either the cost of capital

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<v Speaker 3>starts to rise or the financing is simply withdrawn or

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<v Speaker 3>not there, and the capex that build out has to slow.

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<v Speaker 2>So I'm curious about rougher strategy in the current environment.

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<v Speaker 2>If you have to be exposed to that space somehow,

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<v Speaker 2>anything that's related to artificial intelligence, whether it's the hyperscalers,

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<v Speaker 2>whether it's the semiconductor manufacturers, is that necessarily true? And

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<v Speaker 2>if it is, how do you protect yourself against downside?

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<v Speaker 3>Yeah, it's a great question. What we really look for

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<v Speaker 3>and are obsessed with is asymmetry in asset prices. We

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<v Speaker 3>like things that are not crowded, that have a large

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<v Speaker 3>margin of safety and can produce strong COMICX returns when

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<v Speaker 3>they work. Now we're completely in agreement that AI is

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<v Speaker 3>a thing and we want to take the technology seriously.

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<v Speaker 3>An area where we can get cheaper and more asymmetric

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<v Speaker 3>exposure to that is through the Chinese technology sectors the

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<v Speaker 3>US economy. It's clearly extremely innovative that the models are superior,

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<v Speaker 3>but the capability gap is closing, and there is a

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<v Speaker 3>place in the world for cheaper, kind of good enough models,

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<v Speaker 3>and there are signs that some consumers and businesses are

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<v Speaker 3>even favoring these. So if those models begin to see adoption,

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<v Speaker 3>and they may soon call into question the premium charge

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<v Speaker 3>by some of the more sophisticated US labs. But it goes,

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<v Speaker 3>it goes broader than this. These Chinese companies have very

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<v Speaker 3>strong business models. They train a much cheap evaluations at

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<v Speaker 3>nine times earnings, with strong revenue growth and captive customer bases.

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<v Speaker 3>So that's an area that we seek to get exposure

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<v Speaker 3>to this narrative and theme without taking on so much

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<v Speaker 3>of the valuation risk and the crowding risk.

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<v Speaker 2>In the US, it seems like you can't be discussing

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<v Speaker 2>artificial intelligence without addressing the power issue. Is that a

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<v Speaker 2>space that you're playing in right now? Do you have

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<v Speaker 2>a view on that.

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<v Speaker 3>We don't play directly in that at the moment, but

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<v Speaker 3>it's it perhaps highlights that we are we're moving to

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<v Speaker 3>this world where countries companies need to shift from a

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<v Speaker 3>just in time optimized model to one of resilience. You know,

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<v Speaker 3>you can't guarantee that you have access to these commodities, power,

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<v Speaker 3>the chips that you need at the prices you might

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<v Speaker 3>have expect did and all of that is underpinning these shifts,

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<v Speaker 3>something which we think is really important to a world

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<v Speaker 3>of higher and more volatile inflation. We're seeing this in

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<v Speaker 3>trends like supply chain, on shoring, commodity stockpiling, a remilitarization,

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<v Speaker 3>and I think that's a really important trend for markets

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<v Speaker 3>in the coming cycle, that inflation is here to stay

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<v Speaker 3>and we should expect more inflation volatility.

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<v Speaker 2>So what does that mean in terms of the house

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<v Speaker 2>outlook for interest rates? Can you give me a forecast?

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<v Speaker 3>We are part of the thesis and the reason for

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<v Speaker 3>fearing inflation volatility is that if you look at inflation

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<v Speaker 3>episodes through time, they very rarely occur in just a

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<v Speaker 3>single wave. They typically come in waves, and that's usually

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<v Speaker 3>because the rus and the policies that are needed to

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<v Speaker 3>quash inflation are not in place and not palatable after

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<v Speaker 3>the first wave. And so that tells you a little

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<v Speaker 3>bit about how we think about where interest rates heading.

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<v Speaker 3>That we think it will be difficult to meaningfully raise

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<v Speaker 3>interest rates on a structural basis, and that allows the

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<v Speaker 3>inflation impulse to come through. That said, it seems like

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<v Speaker 3>the US Central Bank and Kevin Walsh have enacted a miniatry,

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<v Speaker 3>mini monetary policy regime change and are leaning more hawkishly

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<v Speaker 3>and markets are having to digest that. And it's very

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<v Speaker 3>possible that we see tightening attempts and that could equally

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<v Speaker 3>undermine the valuation basis of particularly US assets.

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<v Speaker 2>Oliver will leave it there, thank you so very much.

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<v Speaker 2>Oliver Shale is investment specialist at the Rougher Investment Company.

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<v Speaker 2>Joining from here in New York City on the Daybreak

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<v Speaker 2>Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm

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<v Speaker 2>Doug Chrisner. South Korea will unveil a sweeping industrial policy

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<v Speaker 2>later today. It's expected to focus on sectors including semiconductors, AI,

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<v Speaker 2>data centers and physical AI and as a part of

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<v Speaker 2>this plan, Samsung and sk Group are expected to announce

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<v Speaker 2>major investment plans. Korea Economic Daily says the value is

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<v Speaker 2>expected to be one point three trillion dollars over the

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<v Speaker 2>next ten years. And that's where we begin our conversation

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<v Speaker 2>with Sean Cochrane. Shawn is head of research at Sidik CLSA.

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<v Speaker 2>He spoke with Bloomberg TV host Paul Allen and Cherry on.

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<v Speaker 1>We talked about this rotation trade in the markets, right

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<v Speaker 1>that sell off from tech South Korea very reflective of

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<v Speaker 1>the jitters around AI spending. What will the announcements today

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<v Speaker 1>have more investments to come in this sector do for

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<v Speaker 1>the market in the long term.

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<v Speaker 4>Well, that's exactly the question the market is trying to

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<v Speaker 4>resolve and why we're seeing the volatility, which is that

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<v Speaker 4>it's very clear there's a very strong demand for memory

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<v Speaker 4>and that's coming from this AI revolution that we're all

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<v Speaker 4>witnessing unfold. What the market is trying to decide is

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<v Speaker 4>two things. First of all, how much supply will come

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<v Speaker 4>and then how will that be consumed. The real challenge

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<v Speaker 4>that's actually driving the end volatility is the market's trying

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<v Speaker 4>to decide what's the true profitability of this memory that's

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<v Speaker 4>been purchased for the purposes of AI, which will then

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<v Speaker 4>tell us what's the sustainable nature of that spending.

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<v Speaker 1>And really, while we're trying to understand if this will

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<v Speaker 1>pay off or not, we have seen this US exceptionalism narrative,

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<v Speaker 1>continuous strength in the dollar as well, combined with what

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<v Speaker 1>the effect could potentially do in a more hawkish narrative

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<v Speaker 1>now on unfolding at the moment, what are the implications

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<v Speaker 1>for Asia and economies that of course are also suffering

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<v Speaker 1>from pressuring their currencies.

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<v Speaker 4>It's really interesting in that there's the growth element to

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<v Speaker 4>it which is pulled around North Asia in that for

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<v Speaker 4>those economies that are geared towards the AI capex boom

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<v Speaker 4>and they're participating in what we might call this K

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<v Speaker 4>shaped economic structure where economies are seeing strong capex which

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<v Speaker 4>is holding up the economic growth overall. At the same time,

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<v Speaker 4>the general population is not necessarily participating in so far

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<v Speaker 4>as we're not getting pervasive jobs, it's not moving out

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<v Speaker 4>into consumption. At the same time, we have a new

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<v Speaker 4>FED environment and the signal is relatively clear, which is

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<v Speaker 4>this new FED is saying we will not provide strong

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<v Speaker 4>guidance to the market. The market is actually a core

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<v Speaker 4>source of intelligence for them, and then are more of

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<v Speaker 4>a fact driven scenario. Is what the FED is signaling

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<v Speaker 4>to us now, so the markets are trying to balance

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<v Speaker 4>these mixed signals overall, This is a meaning that yields

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<v Speaker 4>are pushed up into this change in the FED. Overall, However,

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<v Speaker 4>the long term meals are already quite elevated, and it's

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<v Speaker 4>unlikely that the market can sustained very high levels of

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<v Speaker 4>yields increases, especially at the long end.

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<v Speaker 3>Of the curve.

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<v Speaker 5>Yeah, in one of your recent reports, you say the

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<v Speaker 5>end's looking attractive. This is even though it was hovering

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<v Speaker 5>around forty years lows. So maybe a buying opportunity here.

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<v Speaker 5>But what's your outlook for the currency for the US dollar?

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<v Speaker 5>And is it intervention that's going to finally break the

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<v Speaker 5>down trend for the yen or is it something else? Ideally, well,

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<v Speaker 5>probably Bank of Japan tightening.

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<v Speaker 4>Right, So two very important questions. Let's unpack them separately.

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<v Speaker 4>So if we look at the US dollar, we've been

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<v Speaker 4>contrarian bullish on the dollar. It's been quite fashionable to

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<v Speaker 4>be bearish on the dollar, and some time ago there

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<v Speaker 4>was the view that there was going to be an

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<v Speaker 4>engineered decline in the dollar in that certainly it's performed

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<v Speaker 4>well and it's not cheap relative to global currencies. That said,

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<v Speaker 4>the challenge has become the global economy has been very

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<v Speaker 4>much dependent on credit provision to continue this growth. We're

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<v Speaker 4>even seeing this in the tech sector. Overall. This means

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<v Speaker 4>that as credit conditions get worse, as the debt loads

0:15:10.240 --> 0:15:14.280
<v Speaker 4>become higher relative to the sustainable cash flows, this increases

0:15:14.280 --> 0:15:18.320
<v Speaker 4>demand for high quality collateral and over time creates demand

0:15:18.360 --> 0:15:20.200
<v Speaker 4>for the dollar. The next phase for this is a

0:15:20.240 --> 0:15:23.400
<v Speaker 4>deterioration in the credit cycle and more demand for the dollar.

0:15:23.480 --> 0:15:26.040
<v Speaker 4>So tactically I would say we're bullish on the dollar.

0:15:26.080 --> 0:15:28.800
<v Speaker 4>Certainly I'm personally bullish on the dollar. The end is

0:15:28.920 --> 0:15:31.320
<v Speaker 4>very interesting in that the END is a net creditor,

0:15:31.360 --> 0:15:33.360
<v Speaker 4>a very strong economy in terms of the amount of

0:15:33.400 --> 0:15:36.560
<v Speaker 4>capital letter has to deploy, often deployed offshore, and so

0:15:36.600 --> 0:15:40.320
<v Speaker 4>in an environment of tightening credit conditions, you'd normally see

0:15:40.880 --> 0:15:44.000
<v Speaker 4>en capital repatriated home, which should put upward pressure on

0:15:44.040 --> 0:15:46.480
<v Speaker 4>the END. What's fascinating is that the END has been

0:15:46.520 --> 0:15:50.600
<v Speaker 4>weakening for some time, whereby historically its monetary conditions were

0:15:50.600 --> 0:15:53.600
<v Speaker 4>too loose relative to global conditions. They've been seeking to

0:15:53.680 --> 0:15:56.360
<v Speaker 4>tighten and the market is yet to respond. And obviously

0:15:56.440 --> 0:15:59.280
<v Speaker 4>there's inflationary pressures that have built in Japan that is

0:15:59.400 --> 0:16:03.680
<v Speaker 4>unusual in the historical contexts. Base case would be that

0:16:03.720 --> 0:16:06.000
<v Speaker 4>the end can find a flaw here and can rally

0:16:06.000 --> 0:16:09.160
<v Speaker 4>in tightening credit conditions. If that doesn't happen, that would

0:16:09.200 --> 0:16:11.400
<v Speaker 4>be a major change in the way that the market

0:16:11.480 --> 0:16:12.120
<v Speaker 4>is looking at the end.

0:16:15.720 --> 0:16:19.520
<v Speaker 1>There were some ideas that the weakness of the Japanese

0:16:19.600 --> 0:16:21.360
<v Speaker 1>yen and the extra pressure that we're getting on the

0:16:21.400 --> 0:16:24.360
<v Speaker 1>currency was because also Japanese starts were rallying at the

0:16:24.360 --> 0:16:27.680
<v Speaker 1>same time. So when you have foreigners hedging the gains

0:16:27.760 --> 0:16:30.000
<v Speaker 1>in the NIKE, you have to rebalance and that will

0:16:30.040 --> 0:16:35.440
<v Speaker 1>actually lead to huge en selling. How does the pressure

0:16:35.480 --> 0:16:39.760
<v Speaker 1>on the en affect the equity space net net because

0:16:39.840 --> 0:16:41.840
<v Speaker 1>you have some of those big exporters. But at the

0:16:41.880 --> 0:16:44.480
<v Speaker 1>same time, when you have a weekending economy, won't that

0:16:44.600 --> 0:16:45.440
<v Speaker 1>dampen demand?

0:16:47.280 --> 0:16:47.520
<v Speaker 2>Right?

0:16:47.600 --> 0:16:51.480
<v Speaker 4>So certainly, from a cause of perspective, the most likely

0:16:51.520 --> 0:16:54.200
<v Speaker 4>thing I could see investors having conviction is the idea

0:16:54.200 --> 0:16:57.080
<v Speaker 4>that as long as the the end is weakening, it

0:16:57.120 --> 0:17:00.560
<v Speaker 4>creates an environment where equities as a real esset provide

0:17:00.560 --> 0:17:02.960
<v Speaker 4>a natural inflation heads and as a result, a weakening

0:17:03.000 --> 0:17:06.240
<v Speaker 4>of the end creates an increased risk of future inflation,

0:17:06.640 --> 0:17:10.119
<v Speaker 4>and investors will therefore be more inclined to be interested

0:17:10.160 --> 0:17:12.960
<v Speaker 4>in equities because that provides the natural hedge. Combined with

0:17:13.000 --> 0:17:15.400
<v Speaker 4>the fact that Japan as an economy has been performing

0:17:15.480 --> 0:17:18.080
<v Speaker 4>reasonably well, and there's clearly the value up theme that

0:17:18.119 --> 0:17:22.080
<v Speaker 4>has increased the investor's conviction that equity can deliver value

0:17:22.160 --> 0:17:25.640
<v Speaker 4>given that Japanese equities are not expensive in a global context,

0:17:25.840 --> 0:17:28.560
<v Speaker 4>albeit equities as an asset class and not cheap right

0:17:28.560 --> 0:17:30.119
<v Speaker 4>now in a long term perspective.

0:17:32.320 --> 0:17:34.359
<v Speaker 5>Sean, I just want to get back to this AI

0:17:34.440 --> 0:17:36.399
<v Speaker 5>story because we had a very interesting report over the

0:17:36.400 --> 0:17:39.200
<v Speaker 5>weekend from the Bank of International Settlements warning of a

0:17:39.520 --> 0:17:41.879
<v Speaker 5>potential AI bust and the short term but in the

0:17:41.920 --> 0:17:45.200
<v Speaker 5>longer term the utter hollowing art of the middle class,

0:17:45.200 --> 0:17:47.560
<v Speaker 5>and they point out that this is not like other

0:17:47.640 --> 0:17:50.680
<v Speaker 5>tech revolutions. AI can pretty much handle any new job

0:17:51.040 --> 0:17:54.360
<v Speaker 5>up or down the value chain near term, medium term,

0:17:54.400 --> 0:17:56.440
<v Speaker 5>long term. Do you lose any sleep over these kinds

0:17:56.440 --> 0:17:57.920
<v Speaker 5>of themes and how do you play them?

0:18:00.119 --> 0:18:02.760
<v Speaker 4>Certainly I've done markets a long time, and the one

0:18:02.760 --> 0:18:04.879
<v Speaker 4>thing that you learn with enough time in markets is

0:18:05.000 --> 0:18:07.040
<v Speaker 4>we don't know anything for sure, and so we need

0:18:07.080 --> 0:18:10.159
<v Speaker 4>to be extremely open minded. That said, the long arc

0:18:10.240 --> 0:18:14.040
<v Speaker 4>of history suggests that usually technologies create more jobs than

0:18:14.040 --> 0:18:16.720
<v Speaker 4>they destroy, and that would be my base case until

0:18:16.760 --> 0:18:20.520
<v Speaker 4>there's very strong evidence to the contrary. Now, what we're

0:18:20.680 --> 0:18:24.440
<v Speaker 4>witnessing right now is a peak concern around job destruction

0:18:24.600 --> 0:18:28.640
<v Speaker 4>or the replacement of humans via machine solutions, simply because

0:18:28.920 --> 0:18:31.560
<v Speaker 4>it's a slightly naive application of how these models should

0:18:31.560 --> 0:18:34.240
<v Speaker 4>be applied. What do I mean by that? If you

0:18:34.280 --> 0:18:36.439
<v Speaker 4>think of how models are being applied right now, some

0:18:36.480 --> 0:18:39.119
<v Speaker 4>of the most advanced front team models give us a

0:18:39.160 --> 0:18:42.480
<v Speaker 4>PhD level capability in certain context, think of us as

0:18:42.520 --> 0:18:45.280
<v Speaker 4>having our own children from the Big Bang available to

0:18:45.359 --> 0:18:48.320
<v Speaker 4>us at call. The challenge becomes that rather than asking

0:18:48.359 --> 0:18:50.880
<v Speaker 4>this individual to help us solve string theory, where sometimes

0:18:50.880 --> 0:18:55.120
<v Speaker 4>asking this individual to solve simple problems. The market's slowly

0:18:55.160 --> 0:18:57.159
<v Speaker 4>going to figure out that we need to apply the

0:18:57.240 --> 0:19:00.880
<v Speaker 4>right technology in the right context, and that will give

0:19:00.960 --> 0:19:03.440
<v Speaker 4>us a better solution in terms of the cost involved

0:19:03.680 --> 0:19:06.360
<v Speaker 4>and how this will be evolved in terms of how

0:19:06.440 --> 0:19:07.960
<v Speaker 4>companies actually apply it.

0:19:09.760 --> 0:19:13.480
<v Speaker 1>In the meantime, while we get to that equilibrium, will

0:19:13.520 --> 0:19:16.520
<v Speaker 1>we see more of that key shaped recovery that we

0:19:16.560 --> 0:19:19.800
<v Speaker 1>talk about within economies? Among economies we have seen this

0:19:20.280 --> 0:19:23.879
<v Speaker 1>inequality leading to protests in South Korea, for example, between

0:19:23.960 --> 0:19:27.400
<v Speaker 1>chip workers and non chip workers. And what does that

0:19:27.480 --> 0:19:30.399
<v Speaker 1>mean for investors that are trying to really bet on

0:19:30.440 --> 0:19:31.560
<v Speaker 1>the next big sector?

0:19:33.280 --> 0:19:33.520
<v Speaker 3>Right?

0:19:33.560 --> 0:19:37.239
<v Speaker 4>So, certainly, as long as the market remains focused on

0:19:37.359 --> 0:19:41.040
<v Speaker 4>capex driven growth, which is it oriented than this case,

0:19:41.040 --> 0:19:44.719
<v Speaker 4>shape phenomena will continue, and you will have this bifurcation

0:19:44.840 --> 0:19:47.399
<v Speaker 4>between those that participate in that and those that don't,

0:19:47.600 --> 0:19:50.280
<v Speaker 4>which will create political tension if we think about what's

0:19:50.359 --> 0:19:52.879
<v Speaker 4>driving that. The core dynamic for now is the market

0:19:52.960 --> 0:19:55.720
<v Speaker 4>is looking forward to the potential of AI. We don't

0:19:55.760 --> 0:19:58.400
<v Speaker 4>know exactly how companies will make money from my AI,

0:19:58.520 --> 0:20:01.840
<v Speaker 4>that is the core question. As a result, capital markets

0:20:01.840 --> 0:20:04.520
<v Speaker 4>are playing a crucial role. What we're witnessing is a

0:20:04.520 --> 0:20:08.240
<v Speaker 4>lot of private companies that are a large part of

0:20:08.280 --> 0:20:11.679
<v Speaker 4>the purchasing where this capex is coming from. The money

0:20:11.680 --> 0:20:14.320
<v Speaker 4>that's funding that is typically through equity and to a

0:20:14.359 --> 0:20:17.479
<v Speaker 4>lesser extent for the private sector debt raisers and certainly

0:20:17.480 --> 0:20:20.320
<v Speaker 4>for the public sector for debt raisers. As we come

0:20:20.359 --> 0:20:23.240
<v Speaker 4>into the process of some of these companies listing, that

0:20:23.280 --> 0:20:28.080
<v Speaker 4>should reduce the ability for consistent aggressive equity capital raisings,

0:20:28.240 --> 0:20:31.320
<v Speaker 4>which should slow the capics. When that happens, it should

0:20:31.320 --> 0:20:34.159
<v Speaker 4>then slow the orientation on AI and the market's focus

0:20:34.200 --> 0:20:37.199
<v Speaker 4>will move to other sectors which can either broaden or

0:20:37.200 --> 0:20:38.040
<v Speaker 4>slow the economy.

0:20:38.080 --> 0:20:41.440
<v Speaker 2>That with Sean Cochran, head of research at Sidik CLSA,

0:20:41.880 --> 0:20:45.679
<v Speaker 2>speaking with Bloomberg TV host Sherryon and Paul Allen, bringing

0:20:45.680 --> 0:20:51.680
<v Speaker 2>you their conversation here on the Daybreak Aasia Podcast. Thanks

0:20:51.720 --> 0:20:55.320
<v Speaker 2>for listening to today's episode of the Bloomberg Daybreak Asia

0:20:55.480 --> 0:20:59.920
<v Speaker 2>Edition podcast. Each weekday, we look at the story shaping markets, finance,

0:21:00.280 --> 0:21:03.359
<v Speaker 2>and geopolitics in the Asia Pacific. You can find us

0:21:03.400 --> 0:21:07.600
<v Speaker 2>on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

0:21:07.640 --> 0:21:10.720
<v Speaker 2>else you listen. Join us again tomorrow for insight on

0:21:10.760 --> 0:21:14.920
<v Speaker 2>the market moves from Hong Kong to Singapore and Australia.

0:21:15.320 --> 0:21:17.800
<v Speaker 2>I'm Doug Prisner, and this is Bloomberg