Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm Dead Christner. We're
Speaker 2: keeping a close eye on the precious metals market. This
Speaker 2: is after silver cratered in the Friday session in New York,
Speaker 2: where the spot price fell twenty six percent. Joining me
Speaker 2: now is Bloomberg strategist Mark Cranfield, who is in our
Speaker 2: studio in Singapore. Mark, thank you for being here. Some
Speaker 2: analysts were tracing the selloff that we had in the
Speaker 2: precious metals market to news on Kevin Walsh being selected
Speaker 2: as President Trump's nominee to lead the FED. He's been
Speaker 2: known as an inflation hawk, so with that and at
Speaker 2: least the history that he has, the dollar was able
Speaker 2: to strengthen quite a bit. In New York trading Friday,
Speaker 2: we were up about nine tenths of one percent. Was
Speaker 2: that the only factor here in the pullback in metals prices.
Speaker 3: It's very unlikely that it is the only thing. Probably
Speaker 3: the coincidental timing of the announcement on Friday probably helped
Speaker 3: to spook the market a bit more. A big part
Speaker 3: of what was going on in silver and gold in
Speaker 3: the past couple of weeks is the massive build up
Speaker 3: of retail positioning, both in the US and China especially,
Speaker 3: so we've seen some extraordinary outperformance where the futures prices
Speaker 3: priced in China have been actually even further ahead than
Speaker 3: those priced in the US, So you've seen very large
Speaker 3: volumes of retail participation in the US markets. We've actually
Speaker 3: had reports that the silver etf from at certain times,
Speaker 3: the trading in there by retail people has been more
Speaker 3: extreme than in Nvidia, which is normally their favorite equity stock.
Speaker 3: So you can see that speculation was building up dramatically
Speaker 3: throughout January, it was going to turn at some point,
Speaker 3: it was already starting to crack, and then you had
Speaker 3: the Wash announcement at the same time, so that probably
Speaker 3: helped to fuel more of it. But if you want
Speaker 3: to point the fingers in one particular direction, it's retail
Speaker 3: trading and the fact that they were very quick to
Speaker 3: try and booking the gains that's seen from earlier in
Speaker 3: the month.
Speaker 2: Do we have a sense of whether these were leveraged positions,
Speaker 2: levered long so that when you get a move that
Speaker 2: goes against your trade and it may be that you
Speaker 2: are forced to liquidate the position. Is is that likely
Speaker 2: do you think a part of the story highly likely?
Speaker 3: Especially in China. It's very typical that Chinese investors have
Speaker 3: leverage when they're using futures contracts, whether it's for equities,
Speaker 3: for metals, for currencies, whatever they're trading, they love to
Speaker 3: use leverage. And if you look at the size of
Speaker 3: transactions was extraordinary, which again points to the fact that
Speaker 3: these were mostly enhanced by more than not just single
Speaker 3: buy and hold positions. These were leverage positions.
Speaker 2: So I mentioned that Kevin Warsh has been selected as
Speaker 2: President Trump's nominee to lead the FED. We had a
Speaker 2: stronger dollar as a result of that move. I mentioned
Speaker 2: earlier that he has been viewed in the past as
Speaker 2: an inflation hark. What do you think this nomination means
Speaker 2: for global bond markets?
Speaker 3: The bond vigilantes are not going to give Kevin wash
Speaker 3: much of a honeymoon if he does become Chairman of
Speaker 3: the Federals. They're going to really test him on his
Speaker 3: inflation credentials. So of course things may change if he
Speaker 3: gets the job, But in the past he has said
Speaker 3: that he thinks that AI will help to reduce inflation
Speaker 3: costs across the board for American companies, which may well
Speaker 3: pan out. He has also said he would like to
Speaker 3: reduce the Federal Reserve balance sheet. Trying to achieve both
Speaker 3: looks pretty ambitious. Also, there's question marks over whether the
Speaker 3: CPI data in the US is still really the quality
Speaker 3: that we used to get in terms of the data
Speaker 3: in the past. So the bond vigilances are not going
Speaker 3: to give him much time. They're going to You can
Speaker 3: already see the YELD curve was pushing higher on Friday,
Speaker 3: and that's an understandable response to the fact that you're
Speaker 3: going to have a potentially a new chairman coming in
Speaker 3: who's going to have the very quick persuade markets that
Speaker 3: on the one hand, he might think the interest rates
Speaker 3: can come a bit lower and yet he can keep
Speaker 3: inflation under control. Those two very hard to get them
Speaker 3: in sync unless you're going into recession, and there's no
Speaker 3: suggestion that the US is going into recession anytime soon.
Speaker 2: I want to change gears and talk a little bit
Speaker 2: about artificial intelligence, because we heard over the weekend from
Speaker 2: Nvidia CEO Jensen Wong. He was saying that his companies
Speaker 2: proposed one hundred billion dollar investment in open Ai was
Speaker 2: never a commitment, although to be fair, back in September,
Speaker 2: in Vidia did sign a letter of intent, and the
Speaker 2: indication at that time was that the company planned to
Speaker 2: invest planned my emphasis here to invest as much as
Speaker 2: one hundred billion in open ai, ostensibly to support new
Speaker 2: data center construction and the build out of other AI infrastructure. Friday, though,
Speaker 2: the Wall Street Journal said this plan had stalled, and
Speaker 2: I think that Huang over the weekend and in Taipei
Speaker 2: was ask about this report. The journal went on to
Speaker 2: say that One privately emphasized that that one hundred billion
Speaker 2: dollar agreement was non binding. Do we have a sense
Speaker 2: here of what's happening. It seems like one may have
Speaker 2: been doing a bit of damage control over the weekend.
Speaker 3: I think one thing you need to help us understand
Speaker 3: this situation is the whole market cap pricing of open
Speaker 3: ai and the backbone it has provided to all the
Speaker 3: hype about AI pricing within the market. So if you trace,
Speaker 3: particularly over the past year, every time open ai does
Speaker 3: a fundraising, its implied market cap goes higher and higher
Speaker 3: each time. It adds fuel to the speculation across the
Speaker 3: AI sector. So as of going in towards the end
Speaker 3: of last year, open Ai was thought to have a
Speaker 3: market cap above eight hundred billion US dollars. People are
Speaker 3: speculating they're going to bring an IPO. In fact, there
Speaker 3: was a report last week that the IPO is probably
Speaker 3: for the fourth quarter of this year. Maybe they're going
Speaker 3: to be the first trillion dollar company for an IPO
Speaker 3: in the United States. However, if major investors such as
Speaker 3: Nvidia are questioning whether they want to be involved in
Speaker 3: all these fundraisings, suddenly that continuous upward path of the
Speaker 3: market cap of ai open Ai is under question. If
Speaker 3: that stalls, the whole AI space is under threat because
Speaker 3: people need to see an continuing step up in the
Speaker 3: valuation to keep on investing in the outlook for AI
Speaker 3: in general. So really it's the crux of the whole
Speaker 3: AI bubble. If open Ai suddenly the valuation peaks, that's
Speaker 3: bad news across the sector and it affects everybody who's
Speaker 3: been speculating on the AI bubble.
Speaker 2: Well, it's interesting because over the weekend we learn that
Speaker 2: Oracle is planning to raise between forty five billion and
Speaker 2: fifty billion US dollars this year to build additional capacity
Speaker 2: for the company's cloud infrastructure. When you get news like that,
Speaker 2: doesn't that help engender a little bit more optimism or
Speaker 2: at some level of enthusiasm, or do you think right
Speaker 2: now it's a little dangerous to conclude.
Speaker 3: That combined with what Jensen Huang is saying, some investors
Speaker 3: will look at that and say, Wow, that's looking like
Speaker 3: a peak in the investment cycle to me, and maybe
Speaker 3: it's time for me to step aside. Still a chance
Speaker 3: that some other investors will be more optimistic. But if
Speaker 3: you look at the performance of Nazdak futures, for example,
Speaker 3: they have not been making new highs in the way
Speaker 3: that you would expect if people were so optimistic. How
Speaker 3: comes Nestak futures are not taking making record highs in
Speaker 3: the way that the SMP index has. For example, just
Speaker 3: look at last week the diversion between Meta and Microsoft
Speaker 3: Metas shares popped up, Microsoft collapsed. So it's not a
Speaker 3: uniform response to what you're seeing in earnings and the outlook,
Speaker 3: and that is completely different to what we were seeing,
Speaker 3: say six twelve months ago, when everything was good news
Speaker 3: in the tech space.
Speaker 2: So we've got earnings in the week ahead from Alphabet
Speaker 2: and Amazon, obviously two players in the cloud space. And
Speaker 2: I think the market's going to be very attentive to
Speaker 2: any suggestion that CAPEX is perhaps a little bit off track.
Speaker 2: Is that the focal point that we need to kind
Speaker 2: of remain fixated on cap X.
Speaker 3: It's about investors are going to be looking for. You've
Speaker 3: been spending a lot of money already, you plan to
Speaker 3: spend more money. Where's the return in relation to the
Speaker 3: amount of money you're putting into these data centers and
Speaker 3: other aspects of your business. There comes a point when
Speaker 3: you can tell investors for several months that yes, we
Speaker 3: promise these things in the future. Eventually the future arrives,
Speaker 3: and Navidia may have just told us now's the time
Speaker 3: to start calculating whether we're really going to get the
Speaker 3: payback on these investments or not. It's going to be
Speaker 3: a much tougher week. Alphabet and Amazon would have to
Speaker 3: be pitch perfect to satisfy investors this week. Any question
Speaker 3: marks and you could see quite a big reversal in
Speaker 3: the market.
Speaker 2: Mark. Before I let you go, I have to ask
Speaker 2: about bitcoin. We saw the price in weekend trading here
Speaker 2: in the States break below seventy seven thousand. We're trading
Speaker 2: it around that level now in the overnight session, can
Speaker 2: you help me understand what's going on here with the
Speaker 2: crypto space a little bit?
Speaker 3: Well, crypto is the biggest threat to kryptos really was
Speaker 3: the rise of precious metals when we had the rallies
Speaker 3: in gold, silver plating, when they started to build up.
Speaker 3: That was a serious threat because part of the attraction
Speaker 3: of cryptos was that they were an alternative to other
Speaker 3: major currencies and they were possibly potentially a safe haven
Speaker 3: if there was going to be a blow up in
Speaker 3: other markets where precious metals do a much better job,
Speaker 3: they attracted a lot more money. So people were gradually
Speaker 3: removing the from the crypto space anyway, So cryptos has
Speaker 3: gone into a backseat situation here. It's possibly on a
Speaker 3: decline that which will continue unless gold and silver go
Speaker 3: back to the kind of levels they were a year ago.
Speaker 3: The forward looking space or crypto is not as exciting
Speaker 3: as it has been in the past.
Speaker 2: Mark, it's always a pleasure, Thanks so much, Bloomberg Strategist
Speaker 2: to Mark Cranfield, joining us from Singapore here on the
Speaker 2: Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
Speaker 2: I'm deg Krisner. Developer Hong Long Property says the real
Speaker 2: estate markets in both Hong Kong and on the Chinese
Speaker 2: mainland do remain under strain. We had the chance to
Speaker 2: catch up with the company's chairman, Adril Chan. Adriel spoke
Speaker 2: with Bloomberg TV host David Inglesse and Evonne Mann after
Speaker 2: Hong Long released its latest results.
Speaker 4: We're seeing a bit more price discovery, at least in
Speaker 4: the Hong Kong property market, and we're starting to see
Speaker 4: the market kind of sense that in some ways that
Speaker 4: there might be some recovery underway. Do you think that
Speaker 4: we've found a bit of a bottom.
Speaker 5: It feels like we found a bit of a bottom, definitely.
Speaker 5: If you look at our retail sales numbers, they've been
Speaker 5: coming back. Second half last year was strong. Fourth quarter
Speaker 5: was especially strong. We broke records in terms of occupancy,
Speaker 5: foot traffic and retail sales. So it does feel like
Speaker 5: it's coming back. Hong Kong a little bit weaker. We're
Speaker 5: still finding the bottom there. I think we found it,
Speaker 5: but we'll have to see how the retail numbers come
Speaker 5: out these next couple of months. So overall mainland China
Speaker 5: definitely giving us casts for some hope. That being said,
Speaker 5: I think the numbers are strong, but we're still a
Speaker 5: little bit careful on the outlook.
Speaker 6: What assumption t making on mainland retail leasing specifically along
Speaker 6: the luxury space. Of course, you mentioned that's a bright
Speaker 6: spot for you guys.
Speaker 5: So for January so far has been a little bit down,
Speaker 5: basically flat from last January.
Speaker 1: Okay.
Speaker 5: The bright spot is that January last year was Chinese
Speaker 5: New Year. This year, Chinese New Year is in February,
Speaker 5: so we're hoping that that means good retail sales uplift
Speaker 5: and we think that it's tracking.
Speaker 4: It looks like you've been quite active in expanding your
Speaker 4: China retail using portfolio ri cities.
Speaker 7: Like Shanghai, Hanjo Wu Shi.
Speaker 4: How do you compete with some of these domestic big
Speaker 4: names and big developers and landlords like China Resources Land
Speaker 4: for example in this market.
Speaker 5: So the way I describe ourselves as we're a small
Speaker 5: and beautiful and you know, so we have to do
Speaker 5: things in a slightly different way.
Speaker 1: Definitely, we don't have the scale.
Speaker 5: Everything from finance cost and access to capital is different,
Speaker 5: so we have to really try to stand out in
Speaker 5: terms of doing things as high quality, as niche and
Speaker 5: as high and as possible, and that's what we continue
Speaker 5: to do.
Speaker 1: What we've announced recently is our V three, which.
Speaker 5: Is starting an asset light path and this is definitely
Speaker 5: going to make better use of our capital, especially when
Speaker 5: that's constrained. We're working on reducing our gearing, and the
Speaker 5: question is how do you expand while reducing your gearing,
Speaker 5: And that's basically with us light. So that's what we've
Speaker 5: been doing, and only in the cities where we have
Speaker 5: the strongest presence and the best performance already, So that's
Speaker 5: where we're working to Expand.
Speaker 6: How does that So what does it mean as far
Speaker 6: as a business model, it's concerned So you imagine asset light,
Speaker 6: So try to explain that to a five year old
Speaker 6: for example.
Speaker 5: So if I go back, our last version, version two
Speaker 5: was really asset heavy, where we'd buy a plot of land,
Speaker 5: we'd develop it, and then we lease it. So this
Speaker 5: is really where we're leasing the plot of land or
Speaker 5: leasing an existing mall and operating it. So if you
Speaker 5: look at chying to reach a real estate prices, you
Speaker 5: know they feel like they've topped out. It's hard to
Speaker 5: see a lot of upside in the near to medium
Speaker 5: term and therefore, you know, so we used to want
Speaker 5: to capture that capital upside, and now we're more about
Speaker 5: capturing the operational upside, so increasing our operational exposure without
Speaker 5: having too much capital exposure.
Speaker 4: You mentioned Hong Kong's recovery might be a bit not
Speaker 4: I mean, maybe not as solid right now as mainline
Speaker 4: of what you're seeing. At what point are you going
Speaker 4: to start looking at maybe opportunities then, I mean, are
Speaker 4: you looking to sell more properties or even acquire any
Speaker 4: new projects in Hong Kong this year?
Speaker 5: So in Hong Kong, we've really been working hard to sell.
Speaker 5: Last year, we actually sold a lot, we contracted a
Speaker 5: lot of sales, but we're not going to recognize a
Speaker 5: lot of it until this year. So last year was
Speaker 5: actually a good year for sales, but that'll be recognized
Speaker 5: this year.
Speaker 1: We're looking to sell down more.
Speaker 5: We still have some properties for sale, mostly on the
Speaker 5: high end, but we have some remaining in aperture.
Speaker 1: So that's what we're looking to do.
Speaker 5: Obviously, if good opportunities come by, I think we're happy
Speaker 5: to buy as well. We do feel like the markets
Speaker 5: have bottomed, or at least we found the bottom on
Speaker 5: this round.
Speaker 7: What do you think is driving this recovery.
Speaker 1: So in Hong Kong.
Speaker 5: By in Hong Kong, there's a lot of mainland New
Speaker 5: Hong Kong people coming in. The talent scheme has definitely
Speaker 5: brought in and brought up rental levels, and as these
Speaker 5: people have rented now for a couple of years, they
Speaker 5: may be looking to buy. These tend to be slightly
Speaker 5: higher end buyers. So I'm more bullish the top end
Speaker 5: of the market than i am on the mass. I
Speaker 5: think the mass has seen sort of a structural rerating
Speaker 5: over the past couple of years. It'll be some time
Speaker 5: before that comes back, Whereas I think the high end
Speaker 5: is definitely more cyclical and therefore more resilient for us.
Speaker 6: I mean, it's really been noticeable the pickup in tourists,
Speaker 6: visitor flow, let's just call it tourists and businesses. And
Speaker 6: we've had a lot of mega events. We're moving into
Speaker 6: March where traditionally it's a mega event month. Right, you
Speaker 6: have everything from ark Basil all the way to the
Speaker 6: sevenths Tangibly, is that starting to show up? As far
Speaker 6: as you talked about foot traffic, but what about lisas
Speaker 6: and retail sales for example, is that starting to pick
Speaker 6: up too.
Speaker 5: We're really happy that foot traffic is picked up, and
Speaker 5: we're not as happy at the retail sales. They haven't
Speaker 5: picked up the say at the same pace that traffic has.
Speaker 5: It's usually lagging, a lagging indicator. But we're gonna have
Speaker 5: to work harder to transmit those foot traffic into sales.
Speaker 5: And you know, right now, the the appeal of Shenjin
Speaker 5: is still strong Hong Kong people. Even though it sounds
Speaker 5: like they're going up a little bit less, it's still
Speaker 5: difficult to compete on price.
Speaker 4: You we still were still able to maintain your occupancy
Speaker 4: rate during these turbulent times, right ninety offices, Yeah, yeah,
Speaker 4: of your office portfolio, despite the headwinds, but revenue was
Speaker 4: still kind of edging lower.
Speaker 7: I mean because of following rents.
Speaker 4: Of course, do you think that that's the next place
Speaker 4: to follow in terms of this recovery. But now that
Speaker 4: we've seen at least when it comes to the housing
Speaker 4: market is recovering, that maybe rental is going to be
Speaker 4: the next thing to watch.
Speaker 1: I would really like for office rents to rise this year.
Speaker 6: That's what I love how you started answer already.
Speaker 5: That was really what dragged our numbers last year because
Speaker 5: offices have been tough, both in Hong Kong and in
Speaker 5: the mainland. It actually took away some of the gains
Speaker 5: that we made in retail. So retail's done well, office
Speaker 5: is not so much. I don't see the end in
Speaker 5: sight for office is just yet. Of course, here in
Speaker 5: Hong Kong, we're talking about the IPOs and the financial
Speaker 5: services industries helping with that occupancy, but there's still a
Speaker 5: lot of occupancy, especially here in central and so I
Speaker 5: think occupancy has to come up before prices are going
Speaker 5: to come up, and I don't yet see the end
Speaker 5: to that.
Speaker 6: And the strategy to maintain the sort of ninety percent
Speaker 6: occupancy rate is that. Do you think that's going to
Speaker 6: be down to price? Supply seems to be an issue,
Speaker 6: I think, is what you're mentioning too.
Speaker 5: Yeah, so I think there's still gonna be a little
Speaker 5: bit of price pressure because occupancies haven't fully caught up yet.
Speaker 5: In the main end of China, it's also tough offices.
Speaker 5: I think it's you know, I've had this discussion with
Speaker 5: a lot of my friends and peers.
Speaker 1: Is it cyclical or is it structural?
Speaker 5: And when you're having that discussion, it's not a good
Speaker 5: discussion to have. That means that things are bad, and
Speaker 5: so I don't yet see the end for office rentals
Speaker 5: in China yet.
Speaker 7: What is the answer to that though? Is it cyclical
Speaker 7: or more structural.
Speaker 5: My answer is actually that it's more cyclical, and I
Speaker 5: think that if the economy comes back, when it comes back,
Speaker 5: office rents will come back. You know, there's still that dynamism,
Speaker 5: and if they can reignite that, then I think that
Speaker 5: offices can come back, at least at the high end
Speaker 5: of the market.
Speaker 2: That is Honglong Property Chairman Adril Chan speaking to Bloomberg
Speaker 2: TV host David Englase and Evon Mann here on the
Speaker 2: Daybreak Asia Podcast. Thanks for listening to today's episode of
Speaker 2: the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look
Speaker 2: at the story shaping markets, finance, and geopolitics in the
Speaker 2: Asia Pacific. You can find us on Apple, Spotify, the
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Speaker 2: us again tomorrow for insight on the market moves from
Speaker 2: Hong Kong to Singapore and Australia. I'm Doug Chrisner, and
Speaker 2: this is Bloomberg