Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. It's
Speaker 2: the final trading day in November, and earlier we got
Speaker 2: several key data points for the Japanese economy. First, there
Speaker 2: was Tokyo CPI. Core inflation in the Japanese capital was
Speaker 2: up in the month of November at an annual rate
Speaker 2: of two point eight percent. Now, core excludes fresh food,
Speaker 2: but the forecast was only for an increase of two
Speaker 2: point seven percent, So a bit hotter than expected in
Speaker 2: that regard, and this obviously would support a potential rate
Speaker 2: hike from the Bank of Japan. For a closer look
Speaker 2: now at markets in the Asia Pacific, I'm joined by
Speaker 2: Bloomberg's Paul Dobson. Paul is Executive editor for Asia Markets.
Speaker 2: He joins from our studios in Singapore. So what do
Speaker 2: you think is this enough, this reading on core CPI
Speaker 2: for Tokyo enough to move the needle when we were
Speaker 2: considering a boj raid hike in December.
Speaker 3: It still feels to me a little bit, Doug, like
Speaker 3: it's too early for the Bank of Japan. You know,
Speaker 3: they've backed down, they've been reticent they've taken their time
Speaker 3: so far. Yes, there's plenty of evidence that there's an
Speaker 3: opportunity here to raise interest rates, but the market expectation
Speaker 3: really isn't there, and they tend not to move when
Speaker 3: that isn't priced in. And I think that there's a
Speaker 3: couple of reasons. One, they don't want to get away,
Speaker 3: get in the way of the politics and let Takaichi
Speaker 3: kind of set out her plan and her course before
Speaker 3: they make their next move. They don't want to slow
Speaker 3: the economy too much while she's still bedding in, as
Speaker 3: it were. And I think that the other reason is
Speaker 3: that their longer term outlook for inflation is that it's
Speaker 3: going to slow and come back towards target as well,
Speaker 3: so they want to be a little bit careful on
Speaker 3: that too. Now. You know, that's despite the evidence that actually,
Speaker 3: you know, the inflation is still quite high in the
Speaker 3: cost of living is rising, and food price inflation, which
Speaker 3: isn't included in the core number, is also high at
Speaker 3: the moment. And one of the things that Takaichi actually
Speaker 3: wants to do is to put in place measures to
Speaker 3: kind of counter that on the fiscal side rather than
Speaker 3: on the munetar site. So My view is, and I
Speaker 3: guess the market view is that the Bank of Japan
Speaker 3: isn't getting ready to move in December, but probably at
Speaker 3: the start of next year would be a more realistic
Speaker 3: kind of a timeline. And you can see that by
Speaker 3: the way in the yen in particular, which remains kind
Speaker 3: of weakened under pressure rather than starting to appreciate again.
Speaker 2: From what I understand, Governor Uda will be speaking next
Speaker 2: week and we'll see whether or not he endorses the
Speaker 2: notion of a rate hike. I found it interesting that
Speaker 2: some of the other data points for Japan were far
Speaker 2: above forecast. Industrial output at a gain of one point
Speaker 2: four percent the street was looking for contraction, and the
Speaker 2: retail sales number, with an annual increase of one point
Speaker 2: seven percent, was almost double forecast. So there is a
Speaker 2: lot to be said about the health of the Japanese
Speaker 2: economy despite this situation with tariffs that have been imposed
Speaker 2: by the US.
Speaker 3: And that week, that yin that I was talking about
Speaker 3: suddenly helps that as well, kind of gives the exporterers
Speaker 3: in particular a little bit more of a boost. It's
Speaker 3: an interesting situation in the economy at the moment sort
Speaker 3: of half looks good half doesn't look quite so good,
Speaker 3: and you know, kind of a little bit like we
Speaker 3: see in the US with that case shaped economy. You know,
Speaker 3: there's there's pockets where where things are looking better than
Speaker 3: in other places there. So you know, we've seen in
Speaker 3: the stock market pretty decent signs of strength as well,
Speaker 3: but there's lots of tensions playing out under the surface,
Speaker 3: particularly in the currency market and also of course in
Speaker 3: the Japanese government bond space. Really importantly, this week we
Speaker 3: heard some more about the extra spending plans from the government,
Speaker 3: what it plans to do, how it plans to finance it.
Speaker 3: They haven't yet told us exactly how they plan to
Speaker 3: allocate the extra cash that they need to raise, and
Speaker 3: that will include some extra sales of government bonds. The
Speaker 3: market is asking them to put that in the short
Speaker 3: end of the year yield curve and to actually slow
Speaker 3: the issue and so of the back end of the
Speaker 3: yeal curve where there really isn't that demand. And you've
Speaker 3: seen that in the very big increase in longer term
Speaker 3: interest rates, which is bad news for Japan because it
Speaker 3: raises that over the overall cost of financing on the
Speaker 3: long term tea.
Speaker 2: What about tension between Japan and China, particularly after Prime
Speaker 2: Minister taka ICHI's comments on Taiwan.
Speaker 3: It's been a fascinating thing to watch, hasn't it. I
Speaker 3: think from a market perspective, it's hard to read too
Speaker 3: much into it just yet, but certainly this idea that
Speaker 3: China had that call with Trump and then Trump had
Speaker 3: the call with Takaichi and apparently asked her to just
Speaker 3: call things a little bit does talk a lot to
Speaker 3: policy between US and China relations, how important it is
Speaker 3: for Trump to sell these agricultural products into China, and
Speaker 3: also what it means for the long term future viability
Speaker 3: prospects and so on in Taiwan itself. And so we
Speaker 3: heard this week Taiwan talking some more about their own
Speaker 3: spending plans for defense and how you know there's going
Speaker 3: to be lots of long term investment going in to
Speaker 3: try to protect the island, but it probably is feeling
Speaker 3: a little bit more vulnerable at the moment. So I
Speaker 3: was watching, actually the implied volatility on the Taiwan dollars
Speaker 3: see if there's any pickup in stresses in financial markets there.
Speaker 3: So far hasn't really registered too much, but I do
Speaker 3: think that it's worth monitoring, particularly if you look at
Speaker 3: what the contours of the deal for peace in Russia
Speaker 3: and Ukraine might look like and what that might mean
Speaker 3: as well for how safe and secure Taiwan feels from
Speaker 3: investor's point of view and from a policymakers point of
Speaker 3: view as well.
Speaker 2: So as long as we're talking about China, Paul I
Speaker 2: think we have to tease out what's been happening in
Speaker 2: the real estate sector. Guess it suffered another blow recently
Speaker 2: after China Von Kah proposed delaying repayment on a local bond.
Speaker 2: Is this just kind of reinvigorating the anxiety that existed
Speaker 2: or has existed for years now when it comes to
Speaker 2: the property market.
Speaker 3: It is, but it's prising, I think on three fronts.
Speaker 3: Maybe one Thanka itself was one of the biggest property
Speaker 3: developers in China, and it was seen as a bit
Speaker 3: of a bell weather as one of the last kind
Speaker 3: of companies standing without having defaulted for the market's potential recovery.
Speaker 3: Not only that it has sort of semi or quasi
Speaker 3: state links because of some of its shareholders being state
Speaker 3: owned companies as well. And yet you know the idea
Speaker 3: that it also is struggling to repay local debts, wants
Speaker 3: to extends some bond payments. Maybe heading into a more
Speaker 3: of a crunch for the bond market is a sign that,
Speaker 3: you know that really the real estate market has not
Speaker 3: been sorted yet, is still in a great deal of pain,
Speaker 3: and it's bad news for bond holders in that company
Speaker 3: and in any other company which has yet to default.
Speaker 3: It sort of tells you that repayment risks are still
Speaker 3: out there and is bad, you know, in terms of
Speaker 3: consumer confidence in the wealth effect, because what would really
Speaker 3: help reinvict right the consumer in China would be a
Speaker 3: little bit more confidence in property given that so much
Speaker 3: of the household wealth is tied up in real estate
Speaker 3: investments and house ownership. So that sort of wigs as
Speaker 3: a cloud on the economy. I think that there's one
Speaker 3: other thing that you can look at, though, which is
Speaker 3: this idea that actually that might not be such a
Speaker 3: terrible thing for the stock market. And it goes like
Speaker 3: this one for years and years, the first thing that
Speaker 3: Chinese people would look to invest in would be the
Speaker 3: real estate market because they saw the chance for continuing
Speaker 3: capital appreciation, and that's not been there for several years now.
Speaker 3: So that kind of confidence has gone to trusting corporate bonds,
Speaker 3: and the bond market in general, where yields are very low,
Speaker 3: is not so good at the moment. So three, what's
Speaker 3: the viable alternative. Maybe it's the equities market, which has
Speaker 3: had a really strong year this year, starting to look
Speaker 3: a little bit more appealing for people that are trying
Speaker 3: to find somewhere safe to put their cash get some
Speaker 3: capital appreciation where they can't go in the real estate
Speaker 3: and can't go in the bond markets.
Speaker 2: Paul, when we continue the conversation in a moment, I'd
Speaker 2: like to focus a little bit on the FED cutting
Speaker 2: interest rates faster than the market previously thought, and maybe
Speaker 2: we can talk a bit about Bitcoin above ninety one
Speaker 2: thousand for the first time in a week. Speaking here
Speaker 2: with Paul Dobson, Executive editor for Asia Markets, on the
Speaker 2: Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
Speaker 2: I'm Doug Prisner speaking with Paul Dobson, Executive editor for
Speaker 2: Asia Markets, joining from our studios in Singapore. So much
Speaker 2: of what we have seen stateside, Paul, in terms of
Speaker 2: this recovery or stability in the US equity market has
Speaker 2: been tied to kind of further betting on the FED
Speaker 2: cutting interest rates at the December meeting. I think the
Speaker 2: probability right now if you look at money markets about
Speaker 2: eighty percent. How does that filter into what you're seeing
Speaker 2: in the price section in Asia.
Speaker 3: Asia's markets have also been buoyed by this. What we
Speaker 3: have is a week a dollar as a result of
Speaker 3: the prospects of LOFE US interest rates, and so that's
Speaker 3: been boosting currencies in the region, and you have that
Speaker 3: sort of knock on effect from the recovery in US
Speaker 3: equity markets also feeding into Asia. I think in particular,
Speaker 3: obviously the tech market, which has had more of a
Speaker 3: wobble than most, starting to find a bit more stability
Speaker 3: in because Asia's tech heavy gauges, particularly South Korea, Taiwan
Speaker 3: and Japan, are so dependent on those global supply chains
Speaker 3: and the prospects for AI development in the US and
Speaker 3: globally that the recovery stateside has definitely had a beneficial
Speaker 3: impact on Asia's markets as well. So interesting, you know,
Speaker 3: it's been such a wobbly month, and yet getting towards
Speaker 3: the end of it, I think on a global gauge,
Speaker 3: we're only point five percent or thereabouts away from erasing
Speaker 3: all of the losses for November, So turning it into
Speaker 3: a positive month after all of the question marks that
Speaker 3: we've had would definitely be, you know, kind of an interesting.
Speaker 2: Development, particularly when you look at how highly correlated the
Speaker 2: AI trade here is in the US, with let's say,
Speaker 2: the South Korean equity market and names like sk Heinix
Speaker 2: and Samsung and also Taiwan and TSMC.
Speaker 3: Absolutely absolutely this kind of integral kind of part of
Speaker 3: the supply chain. I do think there's one interesting sort
Speaker 3: of additional thing that we saw over the past week
Speaker 3: or so, which is just a little bit of a
Speaker 3: fragmentation in terms of how people are viewing a future
Speaker 3: of AI, more concerns and doubts about one stack and
Speaker 3: more favorable for the other. The Google emergence, the strength
Speaker 3: of its new AI programs and the prospect of its
Speaker 3: selling some of its chips it's TPUs rather than NA
Speaker 3: video chips, has quite of caused a little bit of
Speaker 3: a consternation I think among investors who are thinking, hang
Speaker 3: on a second, you know, this looks like maybe there's
Speaker 3: some viable alternatives to the video and that supply chain
Speaker 3: and to open AI and that supply chain, and so
Speaker 3: you're starting to see just people thinking about, you know,
Speaker 3: where's the best opportunity within tech rather than just trading.
Speaker 3: Tech has one big unanimous blot.
Speaker 2: When we look for signs of kind of the risk
Speaker 2: appetite returning, you don't have to look any farther than bitcoin.
Speaker 2: And right now we're above ninety one thousand for the
Speaker 2: first time in about a week in your neck of
Speaker 2: the woods, and I'm speaking to you from Singapore. How
Speaker 2: is the crypto market used as a leading indicator of
Speaker 2: appetite for risk?
Speaker 3: It's really interesting, isn't it. Just how much it feels
Speaker 3: a bit like the tail wagging the dog or something
Speaker 3: like that at the moment, But how much those movements
Speaker 3: in crypto fast trigger movements give you that sort of
Speaker 3: insight into which way the wind is blowing. And so
Speaker 3: all of this draw down that we've seen has certainly
Speaker 3: had more of an impact on mainstream markets than we
Speaker 3: might have seen in previous crypto booms and busts. I
Speaker 3: do think, you know, it's more of a sentiment driven
Speaker 3: thing rather than a particular big wealth effect or anything
Speaker 3: like that thing. But I do also think that more
Speaker 3: of the real economy is invested in crypto now than
Speaker 3: it was previously, so there is some more direct read
Speaker 3: across and people have been paying attention to it. Crypto itself, though,
Speaker 3: doesn't have that many fundamentals, so it is about sentiments.
Speaker 3: So I suppose if you're looking to discern the feel
Speaker 3: for the market, then that is a pretty true indicator.
Speaker 2: So I mentioned the data points for Japan earlier Tokyo
Speaker 2: CPI along with industrial production and retail sales. What are
Speaker 2: the other important data points that you're going to be
Speaker 2: looking for on this final trading day in November?
Speaker 3: Oh, good question. We have ECB minutes. People are wondering
Speaker 3: are they going to try and squeeze another cutout at
Speaker 3: some point. We've seen so many policymakers being adamant that
Speaker 3: they're done, and yet maybe some arguments might start to
Speaker 3: come on to the horizon again pointing in that direction.
Speaker 3: But otherwise I think you know, what's going to be
Speaker 3: really interesting just is to see where we get to
Speaker 3: a month end. Can markets close out in November in
Speaker 3: positive or is it going to be the first down
Speaker 3: month that we've had for several months, and what does
Speaker 3: that tell us about the prospects for that Santa Ralli
Speaker 3: that everybody who's bullish on equities is hoping for it.
Speaker 2: There. It's always a pleasure. Thanks so very much. Paul Dobson,
Speaker 2: a Bloomberg Executive editor for Asia Markets, joining from our
Speaker 2: studios in Singapore here on the Daybreak Asia Podcast. Thanks
Speaker 2: for listening to today's episode of the Bloomberg Daybreak Asia
Speaker 2: Edition podcast. Each weekday, we look at the story shaping markets, finance,
Speaker 2: and geopolitics in the Asia Pacific. You can find us
Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
Speaker 2: else you listen. Join us again tomorrow for insight on
Speaker 2: the market moves from Hong Kong to Singapore and Australia.
Speaker 2: I'm Doug Chrisner, and this is Bloomberg