Speaker 1: This is Bloomberg Daybreak Asia for this Monday, February twenty
Speaker 1: seventh in Hong Kong, Sunday February twenty sixth in New York,
Speaker 1: and coming up today. Asian stocks may suffer after that
Speaker 1: hotter than forecast inflation data. Here in the US, the
Speaker 1: biggest chipmaking countries meet to ensure a steady supply chain,
Speaker 1: and China's Renaissance says it's missing chairman has been assisting
Speaker 1: Chinese investigators. Our report, the US Energy Department has moderate
Speaker 1: confidence that COVID started at a lab misshapp in China,
Speaker 1: Macao eas's mask restrictions. US continues to put pressure on
Speaker 1: shijimping not to provide weapons to Russia. Imed Baxter with
Speaker 1: Global News. That's all straight ahead on Bloomberg Daybreak Asia,
Speaker 1: the business news you need to start your day in
Speaker 1: just one fifteen minute podcast available on Apples, Spotify, the
Speaker 1: Bloomberg Business app and everywhere you get your podcasts. Good morning,
Speaker 1: I'm Brian Curtis and I'm Dog Prisoner. Here are the
Speaker 1: stories we're following today. After a hotter than expected PC
Speaker 1: report in the United States, FED officials came out and
Speaker 1: flagged the risk of sticky inflation. Cleveland FED chief Lorettamesters
Speaker 1: said policymakers need to do a little more to ensure
Speaker 1: inflation is moving back down. Her Boston counterparts Susan Collins
Speaker 1: said that the FED has to keep raising rates to
Speaker 1: get them to a sufficiently restrictive level, and Saint Louis
Speaker 1: FED President Jim Bullard also urged the Fed to move
Speaker 1: quickly on interest rates re establish credibility. Now sometimes I
Speaker 1: use the phrase more game theory, less econometrics. Is what
Speaker 1: you really want is the establishment of the credibility of
Speaker 1: the two percent inflation target. There's a certain amount of
Speaker 1: demonstration to markets if you move quickly. In a new study,
Speaker 1: Wall Street economists and academics argue that the Fed will
Speaker 1: need to inflict some economic pain to get pass under control.
Speaker 1: The study included a series of simulations to predict likely
Speaker 1: paths for the benchmark policy rates. Now, a few moments ago,
Speaker 1: Doug mentioned five point four percent that was being predicted
Speaker 1: as the terminal rate. Computer models is suggesting from this study.
Speaker 1: We just mentioned that rates would peak ay the five
Speaker 1: point six percent, six percent, or even six and a
Speaker 1: half percent in the second half of this year. Meantime,
Speaker 1: we also heard from a Bloomberg opinion columnist to Mohammad
Speaker 1: el Aryan, who is saying financial markets are starting to
Speaker 1: doubt whether the FED can bring inflation down to that
Speaker 1: two percent target. He says, inflation indicators are heading very
Speaker 1: simply in the wrong direction. There's a lot of things
Speaker 1: going on the supply side that would argue for a
Speaker 1: slightly high inflation target. Now, of course, the FED cannot
Speaker 1: change its inflation target after missing it for so long,
Speaker 1: so they have a real problem there. I think the
Speaker 1: best we can hope for, honestly, is stable inflation through
Speaker 1: the four Now. El Aryan went on to say that
Speaker 1: if the FED continues to pursue it's two percent inflation target,
Speaker 1: fremendous pain will be inflicted on the American economy. Ran
Speaker 1: In some other matters, we're getting word that the so
Speaker 1: called Fab four Chip Group has held its first senior
Speaker 1: officials meeting to talk about semiconductor global supply. Bloomberg's Denise
Speaker 1: Pellegrini's tracking developments. The February sixteenth video meeting of the
Speaker 1: Alliance of the US, Taiwan, Japan, and South Korea focused
Speaker 1: on supply chain resilience, and sources say the group, also
Speaker 1: called the Chip Four, talked about an early warning system
Speaker 1: to ensure study supply, but did not talk about export controls.
Speaker 1: Taiwan and South Korea agreed to focus on manufacturing, Japan
Speaker 1: on materials, the US on its role as a major market,
Speaker 1: and the Biden administration has been trying to get global
Speaker 1: partners to agree to curb sales on advanced chip equipment
Speaker 1: to China so China can't challenge US dominance globally so easily.
Speaker 1: And Taiwan is home to the world's largest contract chipmaker,
Speaker 1: and President Seinwen has pledged in the past to make
Speaker 1: sure partners have ample supply of what she is called
Speaker 1: democracy chips. Denise Pellegrin Bloomberg day Break in India, the
Speaker 1: G twenty meetings have wrapped up with no consensus agreement.
Speaker 1: We have more from Bloomberg's Van Men. The world's top
Speaker 1: finance chis failed to agree on a final statement. That's
Speaker 1: because Russia and China disagree with two paragraphs on the
Speaker 1: Ukraine War that happened clear by all other members. German
Speaker 1: Finance Minister Christian Leonards said a shift in attitude by
Speaker 1: China was very regrettable. There was also some disagreement on
Speaker 1: debt restructuring and obligations by various kinds of creditors, but
Speaker 1: on most other topics participants seem to be aligned. Leaders
Speaker 1: called fighting inflation a top priority. In Hong Kong. I'm
Speaker 1: Ivan Man Bloomberg Daybreak Asia, China Renaissance says it's missing
Speaker 1: chairman Bao Fan, has been assisting in an unspecified Chinese investigation.
Speaker 1: We get more from Bloomberg's David Englaze. China Renaissance says
Speaker 1: it has learned that Bao is cooperating in the probe,
Speaker 1: but in a statement, the firm suggests that it has
Speaker 1: not been in touch with Bao and does not know
Speaker 1: where he actually is. The well known executive disappeared earlier
Speaker 1: this month, unnerving China's business elite. Bao has been the
Speaker 1: go to financier for some of the country's biggest companies,
Speaker 1: and his disappearances race speculation of increased scrutiny for the
Speaker 1: nation's finance industry. Several big lenders have requested more information.
Speaker 1: They include BOCOM, China, Citic Bank, and China Merchants Bank.
Speaker 1: In Hong Kong, I'm David Ingless bloom Brick, Day Break Asia,
Speaker 1: and again I'm Brian Curtis along with Doug Krisner. Doug,
Speaker 1: when the data changes, investors can be expected to change,
Speaker 1: and we've seen that happening with the tough commentary from
Speaker 1: the Fed in the inflation data. I would say, the data.
Speaker 1: You can say that maybe the data is more important
Speaker 1: than the Fed, which you have to admit all along
Speaker 1: has been vigilant. Well, the Fed has been vigilant, I
Speaker 1: would say, but there was a gap between what the
Speaker 1: market was in pricing in in terms of a view
Speaker 1: on inflation and what the FED thought. There was a
Speaker 1: sharp pivot, and Jim Bullard, who was the head of
Speaker 1: the Saint Louis FED Bank, was saying that yes, maybe
Speaker 1: the Fed had some room to dial back. So the
Speaker 1: kind of the inflection point wasn't the issue insomuch as
Speaker 1: inflation has really remained stubbornly high. There was a decline,
Speaker 1: but we remain at elevated levels. And I point that
Speaker 1: out because when we were talking about the dollar right now,
Speaker 1: the big question is whether or not the dollar can
Speaker 1: manage further gains. It may be difficult because what the
Speaker 1: market is thinking and what the Fed seemed to be
Speaker 1: thinking are more in alignment right now. Yeah, I think
Speaker 1: that's a fair point. I think we do need to
Speaker 1: say though, it is one month's data that marked a
Speaker 1: big change January, so we'll see whether that continues when
Speaker 1: we look at what happens with the data in February
Speaker 1: and then even after that in March. And also in
Speaker 1: addition to the inflation data, we've had a lot of
Speaker 1: other factors that have played into selldown in risk assets,
Speaker 1: the anniversary of the Ukraine War, the uneven nature of
Speaker 1: China's room. We've also seen a big sell off in
Speaker 1: tech here of late, and then also US China relations,
Speaker 1: so there's a lot going on here. Well. Speaking of China,
Speaker 1: the NPC meeting will kick off on Friday, and I
Speaker 1: think it's fair to say that markets right now are
Speaker 1: expecting on shore stocks to continue to do better than
Speaker 1: Hong Kong listed chairs because it is likely that the
Speaker 1: government's going to roll out some new stimulus. Yeah, we
Speaker 1: are in full correction mode with the Hanksang Index, which
Speaker 1: is interesting around ten percenters. So it's been a rough
Speaker 1: period here in February. All right, it's time now for
Speaker 1: global news. The US Energy Department is saying that the
Speaker 1: COVID pandemics origin was most likely a laboratory league misshapp
Speaker 1: in China. Let's get to Head Baxter in the nine
Speaker 1: sixty news room for details. Head. Yeah, that's right, Brian.
Speaker 1: This is a classified document of the Wall Street Journal
Speaker 1: reports one of several, but Energy believes that it was
Speaker 1: due to a mishap at a biological lab. As you say.
Speaker 1: National Security Advisor Jake Sullivan on CNN says this is
Speaker 1: part of an ongoing investigation. The reference to the Department
Speaker 1: of Energy. President Biden specifically requested that the National Labs,
Speaker 1: which are part of the Department of Energy be brought
Speaker 1: into this assessment because he wants to put every tool
Speaker 1: at use to be able to figure out what happened here. Yes,
Speaker 1: Sullivan says, key members of Congress will be involved in
Speaker 1: the loop. Now. Macau says, by the way, it is
Speaker 1: easing its masking policy, citing what it calls a stable
Speaker 1: COVID nineteen situation of the territory. Starting today, people will
Speaker 1: not be required to wear masks while outdoors. As China's
Speaker 1: president Chiesi and paying ready to travel to Moscow, Uscia
Speaker 1: Director William Burns on CBS has heard here on Bloomberg
Speaker 1: says there's still the open question about supplying weapons to Russia. Well,
Speaker 1: we're confident that the Chinese leadership is considering the provision
Speaker 1: of lethal equipment. We also don't see that a final
Speaker 1: decision has been made yet, and we don't see evidence
Speaker 1: of actual shipments of lethal equipment, and Burns says that
Speaker 1: is why it is very important that President and Secretary
Speaker 1: of State blank and keep emphasizing what the consequences would
Speaker 1: be if arms did flow that way. Meanwhile, Burne says
Speaker 1: intelligence is showing Russian President Putin isolating himself with just
Speaker 1: a handful of advisers, a sense of cockiness in Eubrius,
Speaker 1: a sense, I think reflecting Putin's own view, his own
Speaker 1: belief today that he can make time work for him,
Speaker 1: that he believes he can grind down the Ukrainians, that
Speaker 1: he can wear down our European allies, that political fatigue
Speaker 1: will eventually sit in and we'll just keep sending his
Speaker 1: military and weaponry to fight. New York City remembering today
Speaker 1: of the nineteen ninety three terrorist attack on the World
Speaker 1: Trade Center. More than one thousand people were injured when
Speaker 1: a van loaded with twelve hundred pounds of explosives was
Speaker 1: detonated under the North Tower. A tower remained until it
Speaker 1: was taken down a nine to eleven eight years later.
Speaker 1: Governor Kathy hokel at the memorial today, words that I
Speaker 1: can give will never he'll the scars, the pain, but
Speaker 1: just know that the memory of your loved one will
Speaker 1: never ever dissipate. It is something we in New York
Speaker 1: will always ensure that the memory is never lost. Six
Speaker 1: people did lose their lives on that day thirty years ago.
Speaker 1: Global News powered by more than twenty seven hundred journalists
Speaker 1: and analysts in over one hundred and twenty countries. In
Speaker 1: San Francisco, I'm at Baxter and this is Bloomberg. This
Speaker 1: is Bloomberg Gaberkasia and Brian Curtis along with Rishad Salamat.
Speaker 1: Our guest is David Chow, global market strategists for the
Speaker 1: Asia Pacific at Investco. David, we talked about a lot
Speaker 1: of these uncertain factors all of a sudden, really hitting
Speaker 1: risk assets. Are you reducing exposure here and if so,
Speaker 1: how much? I think that it makes sense that investors
Speaker 1: are a bit cautious given the higher than an expected
Speaker 1: inflation print that we've seen and some of the unevenness
Speaker 1: in China's reopening. And I think this is healthy given
Speaker 1: you know how well risk as it have perform from
Speaker 1: the start of the gate this year. And I think
Speaker 1: that we're having a moment where investors sess out some
Speaker 1: of the risks and headwinds that the market faces. And
Speaker 1: I think that this is this is to be expected.
Speaker 1: I mean quite in sympitive. It was just a case
Speaker 1: of getting out of the gates too far, too fast.
Speaker 1: I think so. I think especially on some of the
Speaker 1: Chinese reopening play, and I think that play is essentially
Speaker 1: over now. I think that investors will start to focus
Speaker 1: more on fundamentals and what rich sectors and industry will
Speaker 1: will continue to rebound in China for the rest of
Speaker 1: the year. Well, we mentioned that it was one month's
Speaker 1: data really that caused a change in thinking. Once you
Speaker 1: had that Job's report, and then followed up by the
Speaker 1: CPI and the PPI data and now the PCE, you've
Speaker 1: seen a real change in investor behavior. Is it important
Speaker 1: to move cautiously because that may not follow through in
Speaker 1: February and March or do you think that that's been
Speaker 1: the story all along. Well, that's right. One month data
Speaker 1: does not make a trend. But how many times have
Speaker 1: we've heard or we've expected the FED to pivot because
Speaker 1: of inflation coming down, you know, around the corner, and
Speaker 1: that certainly hasn't happened, and so I think that investors
Speaker 1: could be disappointed, especially those that expect that have been
Speaker 1: expecting a pause or a cut later on this year.
Speaker 1: I think it's very clear that we're not going to
Speaker 1: get that cut at the end of the year. It
Speaker 1: could be as you know, more like you know, the
Speaker 1: middle of next year, and so it's just expectations I'm
Speaker 1: not being met. So, you know, with that thesis as
Speaker 1: to what you think may will be happening with the
Speaker 1: FED reserve, how do you position yourself to gain from that? Well,
Speaker 1: I think that it makes sense for fixed income investors
Speaker 1: to be positioned on the shore duration short end of
Speaker 1: the curve. The market is paying investors to wait a
Speaker 1: short term, though I think taking on additional duration could
Speaker 1: provide limited benefits, though it could act as a recessionary head.
Speaker 1: We talked about all these other factors besides inflation and
Speaker 1: the FED. It happened that it was the anniversary of
Speaker 1: the Ukraine War, so that's very much in focus. The
Speaker 1: reopening in China has been called into question a little,
Speaker 1: and you have US China tensions, a sell down in tech.
Speaker 1: I'm curious about the bow Fund story, and you're thinking
Speaker 1: on that now that he's said to be cooperating according
Speaker 1: to the company itself, does that challenge the adage of
Speaker 1: kill the chicken to scare the monkey. Well, I am
Speaker 1: a bit surprised that this has been telegraphed so broadly.
Speaker 1: I was in the mindset that the government is pretty
Speaker 1: much in the green when it comes to kind of
Speaker 1: oversight issues, given that the focus has really been prioritized
Speaker 1: on economic growth this year. So I think we'll really
Speaker 1: have to see how this one plays out. But in general,
Speaker 1: I think that the government has taken a much more
Speaker 1: market trendly approach towards ensuring that we have growth and
Speaker 1: that and that I think that we're pretty much out
Speaker 1: of the regulatory woods for at least for this year. Yeah,
Speaker 1: we're always a good against some hiccups like this, I
Speaker 1: suppose ultimately, and that always then remains that there's going
Speaker 1: to become some sort of a discount for Chinese equities
Speaker 1: and If so, what do you think it is. Well,
Speaker 1: we've seen a historical discount between Chinese equities and the
Speaker 1: US equities and developed markets, and I think that I
Speaker 1: think that as China's economy continues to mature and become
Speaker 1: you know, it's the second largest econoty of the world,
Speaker 1: and the capital markets also start to mature as well,
Speaker 1: I think that that historical discount to start too narrow.
Speaker 1: But certainly there there are there are significant differences in
Speaker 1: the political economy between China uh and the developed markets,
Speaker 1: and I think that that will continue to be an
Speaker 1: issue that that investors will have to see through or
Speaker 1: better understand. We had some key earnings last week in
Speaker 1: this part of the world from Baidu and Ali Baba.
Speaker 1: Did you learn anything in there that you didn't know before? Well,
Speaker 1: I would say that what I cleaned is that the
Speaker 1: consumption recovery, especially to to e commerce, continues to be
Speaker 1: very strong. The data, the consumption data coming out of
Speaker 1: Chinese New Year was very strong um and especially in
Speaker 1: mobility and also on the purchases. But I would say
Speaker 1: that the consumption recovery for the rest of the year
Speaker 1: will will continue, but it will it could be a
Speaker 1: bit lumpy um, and so we're not going to see
Speaker 1: a very strong V shape recovery. We know that Chinese
Speaker 1: household are sitting on a pile of xss CAT, but
Speaker 1: we don't expect them to spend that as quickly. I say,
Speaker 1: how American households did blackhum thousand and twenty one. This
Speaker 1: is Bloomberg Daybreak Asia, your morning brief on the stories
Speaker 1: making news from Hong Kong to Singapore and Wall Street.
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Speaker 1: Doug Prisoner. Join us again. Tomorrow for all the news
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Speaker 1: Asia Hey