WEBVTT - "Fab Four" Chip Group Meets, G20 Wraps

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<v Speaker 1>This is Bloomberg Daybreak Asia for this Monday, February twenty

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<v Speaker 1>seventh in Hong Kong, Sunday February twenty sixth in New York,

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<v Speaker 1>and coming up today. Asian stocks may suffer after that

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<v Speaker 1>hotter than forecast inflation data. Here in the US, the

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<v Speaker 1>biggest chipmaking countries meet to ensure a steady supply chain,

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<v Speaker 1>and China's Renaissance says it's missing chairman has been assisting

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<v Speaker 1>Chinese investigators. Our report, the US Energy Department has moderate

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<v Speaker 1>confidence that COVID started at a lab misshapp in China,

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<v Speaker 1>Macao eas's mask restrictions. US continues to put pressure on

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<v Speaker 1>shijimping not to provide weapons to Russia. Imed Baxter with

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<v Speaker 1>Global News. That's all straight ahead on Bloomberg Daybreak Asia,

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<v Speaker 1>the business news you need to start your day in

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<v Speaker 1>just one fifteen minute podcast available on Apples, Spotify, the

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<v Speaker 1>Bloomberg Business app and everywhere you get your podcasts. Good morning,

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<v Speaker 1>I'm Brian Curtis and I'm Dog Prisoner. Here are the

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<v Speaker 1>stories we're following today. After a hotter than expected PC

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<v Speaker 1>report in the United States, FED officials came out and

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<v Speaker 1>flagged the risk of sticky inflation. Cleveland FED chief Lorettamesters

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<v Speaker 1>said policymakers need to do a little more to ensure

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<v Speaker 1>inflation is moving back down. Her Boston counterparts Susan Collins

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<v Speaker 1>said that the FED has to keep raising rates to

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<v Speaker 1>get them to a sufficiently restrictive level, and Saint Louis

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<v Speaker 1>FED President Jim Bullard also urged the Fed to move

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<v Speaker 1>quickly on interest rates re establish credibility. Now sometimes I

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<v Speaker 1>use the phrase more game theory, less econometrics. Is what

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<v Speaker 1>you really want is the establishment of the credibility of

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<v Speaker 1>the two percent inflation target. There's a certain amount of

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<v Speaker 1>demonstration to markets if you move quickly. In a new study,

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<v Speaker 1>Wall Street economists and academics argue that the Fed will

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<v Speaker 1>need to inflict some economic pain to get pass under control.

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<v Speaker 1>The study included a series of simulations to predict likely

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<v Speaker 1>paths for the benchmark policy rates. Now, a few moments ago,

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<v Speaker 1>Doug mentioned five point four percent that was being predicted

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<v Speaker 1>as the terminal rate. Computer models is suggesting from this study.

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<v Speaker 1>We just mentioned that rates would peak ay the five

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<v Speaker 1>point six percent, six percent, or even six and a

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<v Speaker 1>half percent in the second half of this year. Meantime,

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<v Speaker 1>we also heard from a Bloomberg opinion columnist to Mohammad

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<v Speaker 1>el Aryan, who is saying financial markets are starting to

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<v Speaker 1>doubt whether the FED can bring inflation down to that

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<v Speaker 1>two percent target. He says, inflation indicators are heading very

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<v Speaker 1>simply in the wrong direction. There's a lot of things

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<v Speaker 1>going on the supply side that would argue for a

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<v Speaker 1>slightly high inflation target. Now, of course, the FED cannot

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<v Speaker 1>change its inflation target after missing it for so long,

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<v Speaker 1>so they have a real problem there. I think the

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<v Speaker 1>best we can hope for, honestly, is stable inflation through

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<v Speaker 1>the four Now. El Aryan went on to say that

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<v Speaker 1>if the FED continues to pursue it's two percent inflation target,

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<v Speaker 1>fremendous pain will be inflicted on the American economy. Ran

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<v Speaker 1>In some other matters, we're getting word that the so

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<v Speaker 1>called Fab four Chip Group has held its first senior

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<v Speaker 1>officials meeting to talk about semiconductor global supply. Bloomberg's Denise

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<v Speaker 1>Pellegrini's tracking developments. The February sixteenth video meeting of the

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<v Speaker 1>Alliance of the US, Taiwan, Japan, and South Korea focused

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<v Speaker 1>on supply chain resilience, and sources say the group, also

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<v Speaker 1>called the Chip Four, talked about an early warning system

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<v Speaker 1>to ensure study supply, but did not talk about export controls.

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<v Speaker 1>Taiwan and South Korea agreed to focus on manufacturing, Japan

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<v Speaker 1>on materials, the US on its role as a major market,

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<v Speaker 1>and the Biden administration has been trying to get global

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<v Speaker 1>partners to agree to curb sales on advanced chip equipment

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<v Speaker 1>to China so China can't challenge US dominance globally so easily.

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<v Speaker 1>And Taiwan is home to the world's largest contract chipmaker,

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<v Speaker 1>and President Seinwen has pledged in the past to make

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<v Speaker 1>sure partners have ample supply of what she is called

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<v Speaker 1>democracy chips. Denise Pellegrin Bloomberg day Break in India, the

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<v Speaker 1>G twenty meetings have wrapped up with no consensus agreement.

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<v Speaker 1>We have more from Bloomberg's Van Men. The world's top

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<v Speaker 1>finance chis failed to agree on a final statement. That's

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<v Speaker 1>because Russia and China disagree with two paragraphs on the

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<v Speaker 1>Ukraine War that happened clear by all other members. German

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<v Speaker 1>Finance Minister Christian Leonards said a shift in attitude by

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<v Speaker 1>China was very regrettable. There was also some disagreement on

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<v Speaker 1>debt restructuring and obligations by various kinds of creditors, but

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<v Speaker 1>on most other topics participants seem to be aligned. Leaders

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<v Speaker 1>called fighting inflation a top priority. In Hong Kong. I'm

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<v Speaker 1>Ivan Man Bloomberg Daybreak Asia, China Renaissance says it's missing

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<v Speaker 1>chairman Bao Fan, has been assisting in an unspecified Chinese investigation.

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<v Speaker 1>We get more from Bloomberg's David Englaze. China Renaissance says

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<v Speaker 1>it has learned that Bao is cooperating in the probe,

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<v Speaker 1>but in a statement, the firm suggests that it has

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<v Speaker 1>not been in touch with Bao and does not know

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<v Speaker 1>where he actually is. The well known executive disappeared earlier

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<v Speaker 1>this month, unnerving China's business elite. Bao has been the

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<v Speaker 1>go to financier for some of the country's biggest companies,

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<v Speaker 1>and his disappearances race speculation of increased scrutiny for the

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<v Speaker 1>nation's finance industry. Several big lenders have requested more information.

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<v Speaker 1>They include BOCOM, China, Citic Bank, and China Merchants Bank.

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<v Speaker 1>In Hong Kong, I'm David Ingless bloom Brick, Day Break Asia,

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<v Speaker 1>and again I'm Brian Curtis along with Doug Krisner. Doug,

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<v Speaker 1>when the data changes, investors can be expected to change,

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<v Speaker 1>and we've seen that happening with the tough commentary from

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<v Speaker 1>the Fed in the inflation data. I would say, the data.

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<v Speaker 1>You can say that maybe the data is more important

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<v Speaker 1>than the Fed, which you have to admit all along

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<v Speaker 1>has been vigilant. Well, the Fed has been vigilant, I

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<v Speaker 1>would say, but there was a gap between what the

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<v Speaker 1>market was in pricing in in terms of a view

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<v Speaker 1>on inflation and what the FED thought. There was a

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<v Speaker 1>sharp pivot, and Jim Bullard, who was the head of

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<v Speaker 1>the Saint Louis FED Bank, was saying that yes, maybe

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<v Speaker 1>the Fed had some room to dial back. So the

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<v Speaker 1>kind of the inflection point wasn't the issue insomuch as

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<v Speaker 1>inflation has really remained stubbornly high. There was a decline,

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<v Speaker 1>but we remain at elevated levels. And I point that

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<v Speaker 1>out because when we were talking about the dollar right now,

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<v Speaker 1>the big question is whether or not the dollar can

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<v Speaker 1>manage further gains. It may be difficult because what the

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<v Speaker 1>market is thinking and what the Fed seemed to be

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<v Speaker 1>thinking are more in alignment right now. Yeah, I think

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<v Speaker 1>that's a fair point. I think we do need to

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<v Speaker 1>say though, it is one month's data that marked a

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<v Speaker 1>big change January, so we'll see whether that continues when

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<v Speaker 1>we look at what happens with the data in February

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<v Speaker 1>and then even after that in March. And also in

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<v Speaker 1>addition to the inflation data, we've had a lot of

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<v Speaker 1>other factors that have played into selldown in risk assets,

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<v Speaker 1>the anniversary of the Ukraine War, the uneven nature of

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<v Speaker 1>China's room. We've also seen a big sell off in

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<v Speaker 1>tech here of late, and then also US China relations,

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<v Speaker 1>so there's a lot going on here. Well. Speaking of China,

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<v Speaker 1>the NPC meeting will kick off on Friday, and I

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<v Speaker 1>think it's fair to say that markets right now are

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<v Speaker 1>expecting on shore stocks to continue to do better than

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<v Speaker 1>Hong Kong listed chairs because it is likely that the

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<v Speaker 1>government's going to roll out some new stimulus. Yeah, we

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<v Speaker 1>are in full correction mode with the Hanksang Index, which

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<v Speaker 1>is interesting around ten percenters. So it's been a rough

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<v Speaker 1>period here in February. All right, it's time now for

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<v Speaker 1>global news. The US Energy Department is saying that the

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<v Speaker 1>COVID pandemics origin was most likely a laboratory league misshapp

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<v Speaker 1>in China. Let's get to Head Baxter in the nine

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<v Speaker 1>sixty news room for details. Head. Yeah, that's right, Brian.

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<v Speaker 1>This is a classified document of the Wall Street Journal

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<v Speaker 1>reports one of several, but Energy believes that it was

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<v Speaker 1>due to a mishap at a biological lab. As you say.

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<v Speaker 1>National Security Advisor Jake Sullivan on CNN says this is

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<v Speaker 1>part of an ongoing investigation. The reference to the Department

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<v Speaker 1>of Energy. President Biden specifically requested that the National Labs,

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<v Speaker 1>which are part of the Department of Energy be brought

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<v Speaker 1>into this assessment because he wants to put every tool

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<v Speaker 1>at use to be able to figure out what happened here. Yes,

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<v Speaker 1>Sullivan says, key members of Congress will be involved in

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<v Speaker 1>the loop. Now. Macau says, by the way, it is

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<v Speaker 1>easing its masking policy, citing what it calls a stable

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<v Speaker 1>COVID nineteen situation of the territory. Starting today, people will

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<v Speaker 1>not be required to wear masks while outdoors. As China's

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<v Speaker 1>president Chiesi and paying ready to travel to Moscow, Uscia

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<v Speaker 1>Director William Burns on CBS has heard here on Bloomberg

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<v Speaker 1>says there's still the open question about supplying weapons to Russia. Well,

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<v Speaker 1>we're confident that the Chinese leadership is considering the provision

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<v Speaker 1>of lethal equipment. We also don't see that a final

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<v Speaker 1>decision has been made yet, and we don't see evidence

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<v Speaker 1>of actual shipments of lethal equipment, and Burns says that

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<v Speaker 1>is why it is very important that President and Secretary

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<v Speaker 1>of State blank and keep emphasizing what the consequences would

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<v Speaker 1>be if arms did flow that way. Meanwhile, Burne says

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<v Speaker 1>intelligence is showing Russian President Putin isolating himself with just

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<v Speaker 1>a handful of advisers, a sense of cockiness in Eubrius,

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<v Speaker 1>a sense, I think reflecting Putin's own view, his own

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<v Speaker 1>belief today that he can make time work for him,

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<v Speaker 1>that he believes he can grind down the Ukrainians, that

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<v Speaker 1>he can wear down our European allies, that political fatigue

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<v Speaker 1>will eventually sit in and we'll just keep sending his

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<v Speaker 1>military and weaponry to fight. New York City remembering today

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<v Speaker 1>of the nineteen ninety three terrorist attack on the World

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<v Speaker 1>Trade Center. More than one thousand people were injured when

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<v Speaker 1>a van loaded with twelve hundred pounds of explosives was

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<v Speaker 1>detonated under the North Tower. A tower remained until it

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<v Speaker 1>was taken down a nine to eleven eight years later.

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<v Speaker 1>Governor Kathy hokel at the memorial today, words that I

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<v Speaker 1>can give will never he'll the scars, the pain, but

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<v Speaker 1>just know that the memory of your loved one will

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<v Speaker 1>never ever dissipate. It is something we in New York

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<v Speaker 1>will always ensure that the memory is never lost. Six

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<v Speaker 1>people did lose their lives on that day thirty years ago.

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<v Speaker 1>Global News powered by more than twenty seven hundred journalists

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<v Speaker 1>and analysts in over one hundred and twenty countries. In

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<v Speaker 1>San Francisco, I'm at Baxter and this is Bloomberg. This

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<v Speaker 1>is Bloomberg Gaberkasia and Brian Curtis along with Rishad Salamat.

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<v Speaker 1>Our guest is David Chow, global market strategists for the

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<v Speaker 1>Asia Pacific at Investco. David, we talked about a lot

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<v Speaker 1>of these uncertain factors all of a sudden, really hitting

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<v Speaker 1>risk assets. Are you reducing exposure here and if so,

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<v Speaker 1>how much? I think that it makes sense that investors

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<v Speaker 1>are a bit cautious given the higher than an expected

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<v Speaker 1>inflation print that we've seen and some of the unevenness

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<v Speaker 1>in China's reopening. And I think this is healthy given

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<v Speaker 1>you know how well risk as it have perform from

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<v Speaker 1>the start of the gate this year. And I think

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<v Speaker 1>that we're having a moment where investors sess out some

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<v Speaker 1>of the risks and headwinds that the market faces. And

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<v Speaker 1>I think that this is this is to be expected.

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<v Speaker 1>I mean quite in sympitive. It was just a case

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<v Speaker 1>of getting out of the gates too far, too fast.

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<v Speaker 1>I think so. I think especially on some of the

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<v Speaker 1>Chinese reopening play, and I think that play is essentially

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<v Speaker 1>over now. I think that investors will start to focus

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<v Speaker 1>more on fundamentals and what rich sectors and industry will

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<v Speaker 1>will continue to rebound in China for the rest of

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<v Speaker 1>the year. Well, we mentioned that it was one month's

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<v Speaker 1>data really that caused a change in thinking. Once you

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<v Speaker 1>had that Job's report, and then followed up by the

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<v Speaker 1>CPI and the PPI data and now the PCE, you've

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<v Speaker 1>seen a real change in investor behavior. Is it important

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<v Speaker 1>to move cautiously because that may not follow through in

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<v Speaker 1>February and March or do you think that that's been

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<v Speaker 1>the story all along. Well, that's right. One month data

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<v Speaker 1>does not make a trend. But how many times have

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<v Speaker 1>we've heard or we've expected the FED to pivot because

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<v Speaker 1>of inflation coming down, you know, around the corner, and

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<v Speaker 1>that certainly hasn't happened, and so I think that investors

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<v Speaker 1>could be disappointed, especially those that expect that have been

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<v Speaker 1>expecting a pause or a cut later on this year.

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<v Speaker 1>I think it's very clear that we're not going to

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<v Speaker 1>get that cut at the end of the year. It

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<v Speaker 1>could be as you know, more like you know, the

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<v Speaker 1>middle of next year, and so it's just expectations I'm

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<v Speaker 1>not being met. So, you know, with that thesis as

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<v Speaker 1>to what you think may will be happening with the

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<v Speaker 1>FED reserve, how do you position yourself to gain from that? Well,

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<v Speaker 1>I think that it makes sense for fixed income investors

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<v Speaker 1>to be positioned on the shore duration short end of

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<v Speaker 1>the curve. The market is paying investors to wait a

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<v Speaker 1>short term, though I think taking on additional duration could

0:13:09.040 --> 0:13:13.559
<v Speaker 1>provide limited benefits, though it could act as a recessionary head.

0:13:15.160 --> 0:13:18.200
<v Speaker 1>We talked about all these other factors besides inflation and

0:13:18.240 --> 0:13:20.959
<v Speaker 1>the FED. It happened that it was the anniversary of

0:13:20.960 --> 0:13:23.600
<v Speaker 1>the Ukraine War, so that's very much in focus. The

0:13:23.640 --> 0:13:26.360
<v Speaker 1>reopening in China has been called into question a little,

0:13:26.400 --> 0:13:29.640
<v Speaker 1>and you have US China tensions, a sell down in tech.

0:13:30.840 --> 0:13:35.040
<v Speaker 1>I'm curious about the bow Fund story, and you're thinking

0:13:35.200 --> 0:13:40.120
<v Speaker 1>on that now that he's said to be cooperating according

0:13:40.200 --> 0:13:44.040
<v Speaker 1>to the company itself, does that challenge the adage of

0:13:44.160 --> 0:13:48.280
<v Speaker 1>kill the chicken to scare the monkey. Well, I am

0:13:48.320 --> 0:13:53.000
<v Speaker 1>a bit surprised that this has been telegraphed so broadly.

0:13:53.679 --> 0:13:56.040
<v Speaker 1>I was in the mindset that the government is pretty

0:13:56.120 --> 0:14:00.959
<v Speaker 1>much in the green when it comes to kind of

0:14:01.440 --> 0:14:05.240
<v Speaker 1>oversight issues, given that the focus has really been prioritized

0:14:05.320 --> 0:14:08.920
<v Speaker 1>on economic growth this year. So I think we'll really

0:14:08.920 --> 0:14:12.000
<v Speaker 1>have to see how this one plays out. But in general,

0:14:12.040 --> 0:14:14.400
<v Speaker 1>I think that the government has taken a much more

0:14:15.760 --> 0:14:19.600
<v Speaker 1>market trendly approach towards ensuring that we have growth and

0:14:19.720 --> 0:14:21.720
<v Speaker 1>that and that I think that we're pretty much out

0:14:21.720 --> 0:14:25.160
<v Speaker 1>of the regulatory woods for at least for this year. Yeah,

0:14:25.200 --> 0:14:27.240
<v Speaker 1>we're always a good against some hiccups like this, I

0:14:27.280 --> 0:14:31.640
<v Speaker 1>suppose ultimately, and that always then remains that there's going

0:14:31.720 --> 0:14:35.000
<v Speaker 1>to become some sort of a discount for Chinese equities

0:14:35.040 --> 0:14:38.880
<v Speaker 1>and If so, what do you think it is. Well,

0:14:38.920 --> 0:14:43.760
<v Speaker 1>we've seen a historical discount between Chinese equities and the

0:14:43.880 --> 0:14:49.080
<v Speaker 1>US equities and developed markets, and I think that I

0:14:49.120 --> 0:14:53.080
<v Speaker 1>think that as China's economy continues to mature and become

0:14:53.120 --> 0:14:54.760
<v Speaker 1>you know, it's the second largest econoty of the world,

0:14:55.560 --> 0:14:58.160
<v Speaker 1>and the capital markets also start to mature as well,

0:14:58.200 --> 0:15:01.120
<v Speaker 1>I think that that historical discount to start too narrow.

0:15:01.360 --> 0:15:06.640
<v Speaker 1>But certainly there there are there are significant differences in

0:15:06.640 --> 0:15:10.640
<v Speaker 1>the political economy between China uh and the developed markets,

0:15:10.680 --> 0:15:13.040
<v Speaker 1>and I think that that will continue to be an

0:15:13.040 --> 0:15:15.880
<v Speaker 1>issue that that investors will have to see through or

0:15:15.960 --> 0:15:20.120
<v Speaker 1>better understand. We had some key earnings last week in

0:15:20.160 --> 0:15:23.320
<v Speaker 1>this part of the world from Baidu and Ali Baba.

0:15:23.600 --> 0:15:28.440
<v Speaker 1>Did you learn anything in there that you didn't know before? Well,

0:15:28.480 --> 0:15:31.440
<v Speaker 1>I would say that what I cleaned is that the

0:15:31.720 --> 0:15:36.400
<v Speaker 1>consumption recovery, especially to to e commerce, continues to be

0:15:36.480 --> 0:15:39.800
<v Speaker 1>very strong. The data, the consumption data coming out of

0:15:40.040 --> 0:15:44.840
<v Speaker 1>Chinese New Year was very strong um and especially in

0:15:45.040 --> 0:15:48.560
<v Speaker 1>mobility and also on the purchases. But I would say

0:15:48.600 --> 0:15:50.840
<v Speaker 1>that the consumption recovery for the rest of the year

0:15:50.920 --> 0:15:53.280
<v Speaker 1>will will continue, but it will it could be a

0:15:53.280 --> 0:15:55.080
<v Speaker 1>bit lumpy um, and so we're not going to see

0:15:55.080 --> 0:15:57.840
<v Speaker 1>a very strong V shape recovery. We know that Chinese

0:15:57.880 --> 0:16:00.760
<v Speaker 1>household are sitting on a pile of xss CAT, but

0:16:00.880 --> 0:16:03.880
<v Speaker 1>we don't expect them to spend that as quickly. I say,

0:16:04.120 --> 0:16:09.760
<v Speaker 1>how American households did blackhum thousand and twenty one. This

0:16:10.000 --> 0:16:12.800
<v Speaker 1>is Bloomberg Daybreak Asia, your morning brief on the stories

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