1
00:00:02,480 --> 00:00:10,480
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

2
00:00:10,520 --> 00:00:13,720
Speaker 1: Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian

3
00:00:13,800 --> 00:00:16,640
Speaker 1: Curtis and myself for the stories, making news and moving

4
00:00:16,680 --> 00:00:19,560
Speaker 1: markets in the APAC region. You can subscribe to the

5
00:00:19,600 --> 00:00:23,080
Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio,

6
00:00:23,320 --> 00:00:26,080
Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app.

7
00:00:27,560 --> 00:00:27,720
Speaker 2: Well.

8
00:00:27,760 --> 00:00:31,520
Speaker 3: South Korea's economic growth accelerated to a pace faster than

9
00:00:31,640 --> 00:00:36,559
Speaker 3: most optimistic forecasts had been around. Good news to President

10
00:00:36,680 --> 00:00:39,800
Speaker 3: Yun sukyul. A bit late though, given the election setback,

11
00:00:39,800 --> 00:00:42,760
Speaker 3: but anyway, GDP advancing one point three percent in the

12
00:00:42,760 --> 00:00:46,320
Speaker 3: three months through March versus the previous quarter. According to

13
00:00:46,400 --> 00:00:49,160
Speaker 3: the Bank of Korea, the economy grew three point four

14
00:00:49,200 --> 00:00:51,839
Speaker 3: percent year on year, beating the forecast of two and

15
00:00:51,880 --> 00:00:55,560
Speaker 3: a half percent. Now in that environment, as k Heinez said,

16
00:00:55,560 --> 00:00:58,880
Speaker 3: it expects full recovery in the memory market in chips,

17
00:00:59,360 --> 00:01:02,280
Speaker 3: and also that AI demand was spurring the chip maker

18
00:01:02,600 --> 00:01:05,800
Speaker 3: to its fastest revenue expansion since at least twenty ten.

19
00:01:06,200 --> 00:01:09,240
Speaker 3: Joining us now for some discussion is Yu Kung Lee,

20
00:01:09,360 --> 00:01:13,440
Speaker 3: Bloomberg Asia Stocks Reporter. On a closer look at heinez here.

21
00:01:13,520 --> 00:01:17,399
Speaker 3: So I guess the best news here really for general

22
00:01:17,440 --> 00:01:21,000
Speaker 3: investors would be that at least this company expects full

23
00:01:21,040 --> 00:01:22,279
Speaker 3: recovery in the memory market.

24
00:01:23,640 --> 00:01:26,640
Speaker 4: Yeah, that's right. Well, the best news is also might

25
00:01:26,680 --> 00:01:29,360
Speaker 4: be the best opportunity to sell the news, and that's

26
00:01:29,400 --> 00:01:32,800
Speaker 4: how the markets are seemed to be interpreting the latest

27
00:01:32,840 --> 00:01:36,240
Speaker 4: positive string of announcement from eske Heinis. The company reported

28
00:01:36,280 --> 00:01:39,080
Speaker 4: a blue out earnings, Yes, and that demonstrates that the

29
00:01:39,160 --> 00:01:42,920
Speaker 4: chip industry is in full recovery after years of slump

30
00:01:42,959 --> 00:01:47,160
Speaker 4: and downturn, and thanks to this strong demand coming from

31
00:01:47,160 --> 00:01:50,040
Speaker 4: the AI and not just the AI. Some of the

32
00:01:50,160 --> 00:01:54,920
Speaker 4: silver lining the eskehihneys highlighted also included us forecasting bullish

33
00:01:55,000 --> 00:01:59,560
Speaker 4: demand for traditional membership, which means that the demand for

34
00:01:59,640 --> 00:02:03,560
Speaker 4: smart phone and personal computer might be also finally recovery

35
00:02:03,600 --> 00:02:06,880
Speaker 4: going toward the end of this year. So there's a there. Also,

36
00:02:07,040 --> 00:02:09,840
Speaker 4: there are a lot of positive announcements from the company

37
00:02:10,360 --> 00:02:12,239
Speaker 4: from today's earnings results.

38
00:02:12,400 --> 00:02:16,720
Speaker 1: Yeah, you might talked about kind of buy the rumors,

39
00:02:16,800 --> 00:02:19,560
Speaker 1: sell the news. Yesterday the stock was up my more

40
00:02:19,600 --> 00:02:23,120
Speaker 1: than five percent. So when we look at the memory

41
00:02:23,200 --> 00:02:25,960
Speaker 1: chip market, I mean, if the company says to you

42
00:02:26,200 --> 00:02:29,760
Speaker 1: maybe we are entering a full recovery cycle. Are they

43
00:02:29,840 --> 00:02:33,760
Speaker 1: taking into consideration what the competitors are dealing with right

44
00:02:33,760 --> 00:02:35,839
Speaker 1: now or is this pretty much from the company's point

45
00:02:35,840 --> 00:02:36,200
Speaker 1: of view.

46
00:02:37,280 --> 00:02:39,360
Speaker 4: So when you talk about that in the memoryship, they

47
00:02:39,400 --> 00:02:43,400
Speaker 4: are definitely taking into account what the competitors are doing.

48
00:02:43,520 --> 00:02:46,639
Speaker 4: There's pretty much three memoryship supplier in the world when

49
00:02:46,639 --> 00:02:49,799
Speaker 4: it comes to dram the maturity of the memboryship. There's

50
00:02:49,840 --> 00:02:52,560
Speaker 4: SAMs and Electronics, there's ESK Heighnis that, there's the US

51
00:02:52,680 --> 00:02:56,480
Speaker 4: company Micron Technology, and all three of them have been

52
00:02:56,960 --> 00:03:00,320
Speaker 4: in a have been reporting pretty bad results last year,

53
00:03:00,320 --> 00:03:03,120
Speaker 4: but all three of them are expected to report pretty

54
00:03:03,440 --> 00:03:06,680
Speaker 4: solid earnings this year and thanks that's thanks to the

55
00:03:06,720 --> 00:03:12,600
Speaker 4: industry wide recovery that's helping the membership demand for all

56
00:03:12,639 --> 00:03:13,800
Speaker 4: these three companies.

57
00:03:15,320 --> 00:03:19,560
Speaker 3: The announcement this week that Heinex would spend fifteen billion

58
00:03:19,600 --> 00:03:23,000
Speaker 3: dollars in South Korea on a new plant, what does

59
00:03:23,040 --> 00:03:24,680
Speaker 3: that actually mean for the company.

60
00:03:26,080 --> 00:03:31,280
Speaker 4: Sure, so that displays strong confidence coming from SKA Heinix

61
00:03:31,320 --> 00:03:33,839
Speaker 4: that is pretty confident there will be strong demand. Ford

62
00:03:34,080 --> 00:03:38,080
Speaker 4: is a high end membership called HPM that is a

63
00:03:38,080 --> 00:03:42,960
Speaker 4: crucial for AI accelerators such as the ones made by Nvidia.

64
00:03:43,360 --> 00:03:46,840
Speaker 4: So that was a really kind of type of news.

65
00:03:46,880 --> 00:03:49,680
Speaker 4: That is that may be seen as a positive, but

66
00:03:49,800 --> 00:03:54,800
Speaker 4: also for some investors. Typically the membership industry is very

67
00:03:54,960 --> 00:03:59,160
Speaker 4: vulnerable to the supply and demand situation, So therese upcoming

68
00:03:59,200 --> 00:04:02,560
Speaker 4: increase in up could also be a negative news to

69
00:04:02,640 --> 00:04:08,400
Speaker 4: some investor because that could raise concern about potential supply,

70
00:04:08,440 --> 00:04:10,440
Speaker 4: although that may be a lot down on the road.

71
00:04:10,640 --> 00:04:13,840
Speaker 4: So there is this is not all all the all

72
00:04:13,880 --> 00:04:17,960
Speaker 4: the positive good news. There's also some some source of worry.

73
00:04:18,800 --> 00:04:22,200
Speaker 1: Brian was talking about that positive print on GDP walk

74
00:04:22,240 --> 00:04:27,799
Speaker 1: about economics time. How is the South Korean economy performing?

75
00:04:27,839 --> 00:04:30,479
Speaker 1: You're in the capital, right, you have kind of a

76
00:04:30,560 --> 00:04:34,599
Speaker 1: viewpoint on what's happening in a major urban center, but

77
00:04:34,680 --> 00:04:38,080
Speaker 1: you're very much wired into other pockets of the country

78
00:04:38,120 --> 00:04:42,000
Speaker 1: and where manufacturing sites are set up for things like

79
00:04:42,040 --> 00:04:45,400
Speaker 1: not only semiconductors, but automobiles as well. How is the

80
00:04:45,440 --> 00:04:47,159
Speaker 1: economy performing in South Korea?

81
00:04:48,080 --> 00:04:51,000
Speaker 4: So, the South Korea economy is very sensitive to global

82
00:04:51,120 --> 00:04:54,240
Speaker 4: trades and global demand, especially the global demand for the

83
00:04:54,320 --> 00:04:58,119
Speaker 4: tech and consumer electronics because chips count for the huge

84
00:04:58,160 --> 00:05:01,040
Speaker 4: part of the South Korea exports and to today's growth

85
00:05:01,080 --> 00:05:05,720
Speaker 4: results also show pretty strong exports growth from the chip

86
00:05:05,760 --> 00:05:09,120
Speaker 4: makers that is helping the growth for the for the

87
00:05:09,320 --> 00:05:13,880
Speaker 4: entire nation. However, this may not be entirely a great

88
00:05:13,920 --> 00:05:17,159
Speaker 4: news for the stock investors, because we are also seeing

89
00:05:17,760 --> 00:05:20,719
Speaker 4: speculations that the central bank in South Korea Bank of

90
00:05:20,800 --> 00:05:25,799
Speaker 4: Korea may be considering delaying its own rate cuts because

91
00:05:25,880 --> 00:05:28,960
Speaker 4: the economy is doing well. This is just like what's

92
00:05:28,960 --> 00:05:31,960
Speaker 4: happening in the US, and the FED made postpone as

93
00:05:32,120 --> 00:05:34,960
Speaker 4: raycut to the later this year, and that may also

94
00:05:35,360 --> 00:05:38,760
Speaker 4: widen the interest rate gap between the US and South Korea.

95
00:05:38,920 --> 00:05:42,000
Speaker 4: So the South Korea Central Bank may not be reducing

96
00:05:42,440 --> 00:05:46,280
Speaker 4: interest rate as soon as investors expected. So the GDP

97
00:05:46,680 --> 00:05:47,719
Speaker 4: is not all good news.

98
00:05:48,160 --> 00:05:50,360
Speaker 3: That may not be a bad thing. I mean, there

99
00:05:50,400 --> 00:05:53,320
Speaker 3: are some of us who believe that no rate cuts

100
00:05:53,360 --> 00:05:56,880
Speaker 3: at all is actually the most bullish move for central

101
00:05:56,920 --> 00:05:59,679
Speaker 3: banks this year, just in that once you start getting

102
00:05:59,680 --> 00:06:02,440
Speaker 3: the cut, it's usually because growth is turned down or

103
00:06:02,839 --> 00:06:05,679
Speaker 3: unemployment has started to move up. This is a pretty

104
00:06:05,680 --> 00:06:08,040
Speaker 3: good environment that we're in. If you look at these

105
00:06:08,600 --> 00:06:11,960
Speaker 3: stock chart of Heinez, it's amazing from the lower left

106
00:06:11,960 --> 00:06:14,680
Speaker 3: to the upper right. Noting though that it did sell

107
00:06:14,680 --> 00:06:18,720
Speaker 3: off ten percent before yesterday's big bounce on the Capex

108
00:06:19,040 --> 00:06:22,279
Speaker 3: move And like you said at the very beginning, and

109
00:06:22,279 --> 00:06:24,240
Speaker 3: I'd like to hear more thoughts on this, maybe the

110
00:06:24,279 --> 00:06:25,560
Speaker 3: best is already in.

111
00:06:26,960 --> 00:06:29,200
Speaker 4: Sure. So if you look at the earnings outlook and

112
00:06:29,240 --> 00:06:32,000
Speaker 4: the fundamentals of Esquhiinis, there are may be more legs

113
00:06:32,000 --> 00:06:34,280
Speaker 4: for the rally in the share prices which is hovering

114
00:06:34,400 --> 00:06:38,720
Speaker 4: near the highest level in twenty four years. And you

115
00:06:38,839 --> 00:06:42,600
Speaker 4: see the similar movements for the in the share prices

116
00:06:42,640 --> 00:06:47,679
Speaker 4: of other chip makers Nvidia, TSMC, Samsung, they are either

117
00:06:47,839 --> 00:06:51,880
Speaker 4: near their peaks or breaking their peaks, and then in

118
00:06:52,000 --> 00:06:56,360
Speaker 4: recent weeks they've been falling more than ten percent into.

119
00:06:56,120 --> 00:06:57,119
Speaker 2: The correction level.

120
00:06:57,279 --> 00:06:59,200
Speaker 3: So that's why this season is going to be really

121
00:06:59,279 --> 00:07:01,240
Speaker 3: interesting to see whether or not the earnings is strong

122
00:07:01,360 --> 00:07:04,400
Speaker 3: enough to get everybody powered higher. YUKIONG Lee joins us

123
00:07:04,440 --> 00:07:16,080
Speaker 3: Bloomberg Asia Stocks reporter from Seoul. We're joined by fanchuk

124
00:07:16,080 --> 00:07:20,440
Speaker 3: One Asia CIO of HSBC Global Private Banking and Wealth

125
00:07:20,800 --> 00:07:23,440
Speaker 3: to take a closer look at markets, and we have

126
00:07:23,560 --> 00:07:26,080
Speaker 3: had a lot of up and down here of late.

127
00:07:26,160 --> 00:07:29,000
Speaker 3: We talked about the big drop in Meta shares today,

128
00:07:29,360 --> 00:07:33,320
Speaker 3: but we also had Texas instruments surging, Tesla surging. We

129
00:07:33,400 --> 00:07:36,400
Speaker 3: also had gains in Visa. So it's very much day

130
00:07:36,440 --> 00:07:39,880
Speaker 3: in and day out a different picture on how the

131
00:07:39,920 --> 00:07:42,920
Speaker 3: equity market might be performing. I suppose a lot of

132
00:07:42,920 --> 00:07:45,080
Speaker 3: that is tied up into the individual companies and what

133
00:07:45,160 --> 00:07:49,000
Speaker 3: they're doing, and also the forecast on interest rates. I

134
00:07:49,120 --> 00:07:52,600
Speaker 3: note that you believe that the big central banks are

135
00:07:52,640 --> 00:07:55,000
Speaker 3: on track to start cutting interest rates this year. You're

136
00:07:55,000 --> 00:07:55,680
Speaker 3: sticking by that.

137
00:07:56,320 --> 00:08:01,040
Speaker 5: Yeah, we still expect Divado Macas central banks will start

138
00:08:01,120 --> 00:08:04,720
Speaker 5: with the Montreal easing cycle later this year, but of

139
00:08:04,720 --> 00:08:10,000
Speaker 5: course market reprising for slower fed rate cuts have gone

140
00:08:10,600 --> 00:08:14,520
Speaker 5: quite far. Uh and now to the points that now

141
00:08:14,600 --> 00:08:19,440
Speaker 5: market actually push out the rate cut expectations in the

142
00:08:19,560 --> 00:08:24,320
Speaker 5: US towards the Q four this year, and in some

143
00:08:24,400 --> 00:08:27,520
Speaker 5: forecasts project no rate cut. We think these have gone

144
00:08:27,520 --> 00:08:33,520
Speaker 5: too far. So at XSBC, we currently still expect free

145
00:08:34,240 --> 00:08:38,280
Speaker 5: US interest rate cut this year, but the risks are

146
00:08:38,320 --> 00:08:42,920
Speaker 5: clearly skewed towards a later start, so we may see

147
00:08:43,400 --> 00:08:46,520
Speaker 5: the fat cuts to come in the second half of

148
00:08:46,600 --> 00:08:52,199
Speaker 5: the year. It's compared with our current projection of a

149
00:08:52,360 --> 00:08:58,040
Speaker 5: June start, so we think the reprising have already taken place,

150
00:08:58,440 --> 00:09:01,880
Speaker 5: and importantly, we think there's very high probability that the

151
00:09:01,960 --> 00:09:08,000
Speaker 5: European Central Bank will kick start with monetary yeasing in June,

152
00:09:08,360 --> 00:09:12,080
Speaker 5: and there's also debate whether there would be another July

153
00:09:12,559 --> 00:09:13,040
Speaker 5: rate cut.

154
00:09:13,480 --> 00:09:14,240
Speaker 2: So with.

155
00:09:15,679 --> 00:09:19,280
Speaker 5: Interest rate sign code turning, we still thinks that is

156
00:09:19,960 --> 00:09:24,199
Speaker 5: important for investor to put in cash to work because

157
00:09:25,760 --> 00:09:31,880
Speaker 5: investment risky asset should deliver better total return compared with cash.

158
00:09:32,240 --> 00:09:37,680
Speaker 5: When central bank now reversing the monetary cycle.

159
00:09:37,679 --> 00:09:40,280
Speaker 1: Fun I want to ask about you. Yeah, well, I

160
00:09:40,400 --> 00:09:43,480
Speaker 1: want to There's a couple of things there. One, I mean,

161
00:09:43,480 --> 00:09:47,000
Speaker 1: if the ECB begins to ease, then maybe risk assets

162
00:09:47,000 --> 00:09:49,839
Speaker 1: in Europe are a bye. But I'm also, as long

163
00:09:49,880 --> 00:09:52,800
Speaker 1: as we're talking about central bank action, curious on the

164
00:09:52,840 --> 00:09:57,240
Speaker 1: Bank of Japan's decision, which is happening Friday. What's your

165
00:09:57,240 --> 00:10:00,119
Speaker 1: sense of what's going on not only with the economy

166
00:10:00,120 --> 00:10:02,760
Speaker 1: in Japan and the rate of inflation, but whether or

167
00:10:02,800 --> 00:10:05,160
Speaker 1: not it's an opportune time to put more money to

168
00:10:05,200 --> 00:10:06,480
Speaker 1: work in Japanese equities.

169
00:10:07,160 --> 00:10:10,839
Speaker 5: Yeah, we are bullish on Japanese equity, so we stay

170
00:10:10,920 --> 00:10:15,840
Speaker 5: overweight on Japanese dog We don't think the BOJ will

171
00:10:16,440 --> 00:10:20,240
Speaker 5: for the increase interest rate in this week's meeting. But

172
00:10:20,480 --> 00:10:26,480
Speaker 5: given the growing expectations for slower fat rate cuts, and

173
00:10:27,280 --> 00:10:32,080
Speaker 5: this also created room for the BOJ to raise interest

174
00:10:32,120 --> 00:10:36,320
Speaker 5: rate earlier than expected. So currently we expect the BILJ

175
00:10:36,520 --> 00:10:41,640
Speaker 5: will likely raise interest rate again in the third quarter

176
00:10:41,800 --> 00:10:44,760
Speaker 5: of this year and we project two more rate hike

177
00:10:45,320 --> 00:10:50,080
Speaker 5: in twenty twenty five. And given the significant weakness in

178
00:10:50,120 --> 00:10:54,200
Speaker 5: the end and now yen hits more than three decades low,

179
00:10:55,040 --> 00:10:59,679
Speaker 5: so the BILJ would also have the incentive to raise

180
00:11:00,040 --> 00:11:03,240
Speaker 5: policy rates before the end of this year. Uh and

181
00:11:03,360 --> 00:11:08,320
Speaker 5: this would also help to curb the extreme weakness in

182
00:11:08,400 --> 00:11:09,199
Speaker 5: the end.

183
00:11:09,520 --> 00:11:12,760
Speaker 3: What do you like most about what Japanese companies bring

184
00:11:12,760 --> 00:11:14,119
Speaker 3: to the table at the moment.

185
00:11:14,480 --> 00:11:20,200
Speaker 5: I think this more sustainable refras trend in Japan would

186
00:11:20,200 --> 00:11:23,720
Speaker 5: both well for corporate earnings outlook and the Japanese equity

187
00:11:23,760 --> 00:11:29,480
Speaker 5: market is substantially exposed to the tech cycle. Given the

188
00:11:29,520 --> 00:11:35,080
Speaker 5: global AI investment boom is also driving strong capital expenditure

189
00:11:35,120 --> 00:11:42,200
Speaker 5: spending in Japan on digitalization, automation and AI technology to

190
00:11:42,720 --> 00:11:48,040
Speaker 5: mitigate the structure had went from aging demographic so Japan

191
00:11:48,559 --> 00:11:55,640
Speaker 5: is also a very attractive play on the AI investment boom.

192
00:11:55,720 --> 00:11:58,920
Speaker 5: And on the other hand, the accelerating corporate government reforms

193
00:11:59,360 --> 00:12:06,560
Speaker 5: also so prompt more listed companies to introduce corporate actions

194
00:12:06,559 --> 00:12:10,960
Speaker 5: to enhance shareholders value, including increase in diffidend payout and

195
00:12:11,000 --> 00:12:15,720
Speaker 5: share buyback. So this will well for our OE enhancement

196
00:12:15,960 --> 00:12:19,200
Speaker 5: in the medium term. So there are actually a multiple

197
00:12:19,320 --> 00:12:23,200
Speaker 5: driver upon equity market in Japan misfund.

198
00:12:23,840 --> 00:12:27,600
Speaker 1: So much of what happens in the APEC region is

199
00:12:27,679 --> 00:12:30,720
Speaker 1: driven by economic activity. In China. We know that and

200
00:12:30,800 --> 00:12:34,240
Speaker 1: clearly the economy is struggling. We're waiting for some type

201
00:12:34,240 --> 00:12:37,320
Speaker 1: of turn. Maybe it's happened, and we won't know that

202
00:12:37,360 --> 00:12:40,960
Speaker 1: clearly for a few months. Now, what's your sense on

203
00:12:41,200 --> 00:12:44,280
Speaker 1: China and whether or not there are opportunities to put

204
00:12:44,280 --> 00:12:45,320
Speaker 1: capital to work there.

205
00:12:46,600 --> 00:12:51,080
Speaker 5: We currently have neutral allocation to China equities, but we

206
00:12:51,160 --> 00:12:55,280
Speaker 5: adop a most selective positioning given that the recovery out

207
00:12:55,280 --> 00:12:59,559
Speaker 5: of remain divergence. So the property market stress remain a

208
00:12:59,640 --> 00:13:03,280
Speaker 5: key on the economy. But looking at the Q one

209
00:13:03,400 --> 00:13:09,200
Speaker 5: China GDP report, infrastructure spending actually came in better than expected.

210
00:13:09,320 --> 00:13:13,400
Speaker 5: On the other hand, industrial protection growth and retail sales

211
00:13:13,600 --> 00:13:18,160
Speaker 5: actually came in weaker than consensus estimate. So this is

212
00:13:18,240 --> 00:13:21,720
Speaker 5: clearly a mixed picture in terms of the recovery outlook,

213
00:13:21,800 --> 00:13:26,839
Speaker 5: So this would imply divergent corporate earnings performance. So we

214
00:13:26,880 --> 00:13:33,320
Speaker 5: see more resilient financial performance from the surface consumption sector.

215
00:13:33,480 --> 00:13:35,800
Speaker 3: So you have to be a stock picker, yes.

216
00:13:35,840 --> 00:13:39,320
Speaker 5: And focus on the resilient sector.

217
00:13:39,720 --> 00:13:41,480
Speaker 3: Yeah. I want to go back to a comment you

218
00:13:41,520 --> 00:13:44,280
Speaker 3: made at the beginning of our conversation, which I think

219
00:13:44,600 --> 00:13:46,360
Speaker 3: a lot of people would take heart from. I mean,

220
00:13:46,400 --> 00:13:48,880
Speaker 3: they would say, you're right that right now there's the

221
00:13:49,040 --> 00:13:53,800
Speaker 3: risk of fewer interest rate cuts than more, and so

222
00:13:54,120 --> 00:13:57,040
Speaker 3: as a money manager, you have to be very cognizant

223
00:13:57,080 --> 00:13:59,880
Speaker 3: of that. So that would augur for being pretty careful here.

224
00:14:00,240 --> 00:14:02,920
Speaker 3: You said that you think it's a great time to

225
00:14:02,960 --> 00:14:05,600
Speaker 3: take advantage put money to work in the stock market.

226
00:14:05,679 --> 00:14:08,080
Speaker 3: How do you reconcile those two thoughts.

227
00:14:08,240 --> 00:14:12,720
Speaker 5: Yeah, we actually don't think a lower start of the

228
00:14:12,760 --> 00:14:16,720
Speaker 5: FED rate cut is a negative development because the key

229
00:14:16,840 --> 00:14:23,119
Speaker 5: reason accounting for this trend is stronger than expected US

230
00:14:23,360 --> 00:14:28,000
Speaker 5: growth and this has been reflected in earnings expectation. We

231
00:14:28,160 --> 00:14:33,440
Speaker 5: expect our market projection for US earnings growth to further improve,

232
00:14:33,840 --> 00:14:36,600
Speaker 5: so this will actually support further broadening of the US

233
00:14:36,680 --> 00:14:38,360
Speaker 5: equity rati in our opinion.

234
00:14:38,640 --> 00:14:42,800
Speaker 3: All right, thanks very much, Ms Vanchukwan there Asacio of

235
00:14:42,960 --> 00:14:54,920
Speaker 3: HSBC Global Private Banking and Wealth. Us A Takeda, portfolio

236
00:14:54,960 --> 00:14:58,400
Speaker 3: manager of the Hennessey Japan Fund. We talked about a

237
00:14:58,480 --> 00:15:03,120
Speaker 3: number of issues that we would raise with you. Massa Takaida,

238
00:15:03,200 --> 00:15:05,360
Speaker 3: thank you very much for being with us. Let's start

239
00:15:05,400 --> 00:15:08,520
Speaker 3: off with possible intervention. Would it be a little weird

240
00:15:08,560 --> 00:15:11,880
Speaker 3: for the Ministry of Finance to intervene in these two

241
00:15:11,960 --> 00:15:13,640
Speaker 3: days when the BOJ is meeting.

242
00:15:15,880 --> 00:15:21,160
Speaker 6: Well, it's hard to say what and when the bog

243
00:15:21,360 --> 00:15:24,760
Speaker 6: might do something, but I do think that chief Jpy

244
00:15:24,920 --> 00:15:28,240
Speaker 6: Japanese yen is here to stay because of several reasons

245
00:15:28,280 --> 00:15:32,320
Speaker 6: such as real interest rates still negative for Japanese in

246
00:15:32,400 --> 00:15:34,360
Speaker 6: I think, what's one of the few currencies, if not

247
00:15:34,400 --> 00:15:35,600
Speaker 6: the only one.

248
00:15:35,560 --> 00:15:37,240
Speaker 2: With negative interest rates.

249
00:15:37,320 --> 00:15:41,440
Speaker 6: And also trade balance that has structurally changed in the

250
00:15:41,520 --> 00:15:45,600
Speaker 6: last twenty years, so there's a very there's so much

251
00:15:45,840 --> 00:15:48,600
Speaker 6: less purchase nowadays.

252
00:15:48,960 --> 00:15:52,280
Speaker 1: So tomorrow it's not just the BOJ meeting, although that's

253
00:15:52,320 --> 00:15:56,640
Speaker 1: clearly center stage. Tokyo April CPI data and I'm curious,

254
00:15:56,680 --> 00:16:00,000
Speaker 1: can you help me understand what the inflation story is

255
00:16:00,560 --> 00:16:01,600
Speaker 1: right now in Japan?

256
00:16:03,560 --> 00:16:08,240
Speaker 6: Well, so it's been trending above two percent for I

257
00:16:08,280 --> 00:16:12,640
Speaker 6: think the last two years now, And initially in twenty

258
00:16:12,720 --> 00:16:13,240
Speaker 6: twenty two.

259
00:16:13,880 --> 00:16:16,880
Speaker 2: I thought that Japanese inflation would be transient.

260
00:16:16,960 --> 00:16:20,920
Speaker 6: But as time went by, I came to realize that

261
00:16:20,960 --> 00:16:24,640
Speaker 6: there's a little much structural element to it. So at

262
00:16:24,640 --> 00:16:27,360
Speaker 6: first it was the you know, the Fed raising rates

263
00:16:27,400 --> 00:16:32,160
Speaker 6: and appreciated Japanese yen and increased import prices.

264
00:16:33,040 --> 00:16:35,240
Speaker 2: But now it seems like the botton is being.

265
00:16:35,120 --> 00:16:40,440
Speaker 6: Passed to more structural reasons, like you know, labor shortage

266
00:16:41,480 --> 00:16:47,000
Speaker 6: arising from shrinking population. So our feeling is that Japan's

267
00:16:47,040 --> 00:16:48,800
Speaker 6: inflation will stay higher for longer.

268
00:16:49,800 --> 00:16:52,720
Speaker 3: Yeah, and with inflation high and the currency week, they

269
00:16:52,800 --> 00:16:55,880
Speaker 3: kind of feed off each other, I suppose, and it's

270
00:16:55,920 --> 00:16:57,880
Speaker 3: not good for people. I mean you probably heard me

271
00:16:57,920 --> 00:17:01,640
Speaker 3: say Japan Airlines CEO's who go to Tori said, it's

272
00:17:01,680 --> 00:17:05,320
Speaker 3: a big problem. Who is it the most big the problem?

273
00:17:05,359 --> 00:17:06,320
Speaker 3: Who is it the biggest for?

274
00:17:08,840 --> 00:17:14,520
Speaker 6: Well, definitely how sports are feeling the pinch and also

275
00:17:14,800 --> 00:17:19,600
Speaker 6: you know importers. But I think, you know, as Japan

276
00:17:19,800 --> 00:17:25,520
Speaker 6: is now finally coming out of decades long deflation, I

277
00:17:26,080 --> 00:17:31,320
Speaker 6: think this should start virtual cycle where you have higher

278
00:17:31,359 --> 00:17:34,920
Speaker 6: inflation which leads to higher interest rate nominal interest rate,

279
00:17:35,440 --> 00:17:39,719
Speaker 6: while the overall monitor policy is still being accommodated, and

280
00:17:39,760 --> 00:17:44,560
Speaker 6: that should change the consumer's mindset and that should produce

281
00:17:45,320 --> 00:17:46,639
Speaker 6: a positive feedback loops.

282
00:17:46,720 --> 00:17:49,040
Speaker 2: So I think the trend we're generally moving in the

283
00:17:49,119 --> 00:17:49,679
Speaker 2: right direction.

284
00:17:49,800 --> 00:17:52,600
Speaker 1: So what does it mean massive for the equity market

285
00:17:52,640 --> 00:17:53,119
Speaker 1: in Japan.

286
00:17:55,280 --> 00:17:58,560
Speaker 6: Well, obviously, if you have negative interest rates, that's good

287
00:17:58,640 --> 00:18:04,320
Speaker 6: for equities. Although as an investor, we were also focus

288
00:18:04,359 --> 00:18:10,520
Speaker 6: We always focus on, you know, companies with durable economic modes,

289
00:18:10,560 --> 00:18:14,760
Speaker 6: with strong pricing power, and so we are macroagnostic and

290
00:18:14,840 --> 00:18:15,800
Speaker 6: benchmark agnostic.

291
00:18:17,200 --> 00:18:20,080
Speaker 3: So some of the governess changes that people speak so

292
00:18:20,160 --> 00:18:22,800
Speaker 3: highly of for Japan, things like being able to offer

293
00:18:23,320 --> 00:18:27,879
Speaker 3: dividends and and allowing more buybacks and and making better

294
00:18:28,359 --> 00:18:32,560
Speaker 3: governance decisions, is that something that you see can be sustainable.

295
00:18:35,119 --> 00:18:35,800
Speaker 2: Yeah, I think so.

296
00:18:35,920 --> 00:18:39,320
Speaker 6: I mean, I think the key thing is not the

297
00:18:39,359 --> 00:18:46,640
Speaker 6: shareholder shareholder return policies. I think that it's about raising

298
00:18:46,680 --> 00:18:52,000
Speaker 6: awareness around you know, returns on capital, cost.

299
00:18:51,760 --> 00:18:52,879
Speaker 2: Of equity and so on.

300
00:18:53,400 --> 00:18:56,440
Speaker 6: Because they had they hadn't, there was there was no

301
00:18:57,440 --> 00:19:01,359
Speaker 6: capitalism in a Western sense, you know, ten, fifteen, twenty

302
00:19:02,600 --> 00:19:07,640
Speaker 6: years ago, and now with the government initiatives and activists

303
00:19:07,640 --> 00:19:11,320
Speaker 6: and even mister Buffett or Bookshire halfway. I think companies

304
00:19:11,359 --> 00:19:15,760
Speaker 6: are becoming more and more conscious about, you know, improving

305
00:19:15,800 --> 00:19:20,239
Speaker 6: capital efficiency, and I think that's sustainable thanks to all

306
00:19:20,240 --> 00:19:21,240
Speaker 6: these external pressures.

307
00:19:21,359 --> 00:19:21,679
Speaker 3: Masa.

308
00:19:21,760 --> 00:19:23,960
Speaker 1: We have talked on this show a great deal about

309
00:19:24,000 --> 00:19:28,880
Speaker 1: how companies are diversifying manufacturing and supply chain operations away

310
00:19:28,960 --> 00:19:33,119
Speaker 1: from China, resharing of semiconductor manufacturing, let's say here in

311
00:19:33,160 --> 00:19:36,920
Speaker 1: the United States. How is Japan benefiting from this drive

312
00:19:36,960 --> 00:19:39,520
Speaker 1: if at all?

313
00:19:39,680 --> 00:19:43,959
Speaker 6: Oh, yeah, definitely. So first of all, it may create

314
00:19:44,560 --> 00:19:49,560
Speaker 6: extra demand coming from other parts of the world, you know,

315
00:19:49,600 --> 00:19:55,080
Speaker 6: by moving away from China, although that might create supply

316
00:19:55,200 --> 00:19:59,000
Speaker 6: glood at some distant point in time. But Japan and

317
00:19:59,080 --> 00:20:05,040
Speaker 6: Japan is definitely benefiting from being in a geopolitically neutral position.

318
00:20:06,240 --> 00:20:08,040
Speaker 2: And then also, you know, Japan is.

319
00:20:08,240 --> 00:20:11,879
Speaker 6: Now cheap country, so you know, it's smcs of the world.

320
00:20:11,920 --> 00:20:16,119
Speaker 6: They can hire high quolitic engineers, are very affordable cost

321
00:20:16,320 --> 00:20:20,040
Speaker 6: and also the cost of construction is everything is is

322
00:20:20,080 --> 00:20:25,080
Speaker 6: becoming quite quite attractive in terms of the cheapness.

323
00:20:25,359 --> 00:20:28,159
Speaker 3: Mars, you're a PM for the Hennessy Japan Fund. You

324
00:20:28,200 --> 00:20:32,040
Speaker 3: mentioned a number of companies in your list, companies like

325
00:20:32,160 --> 00:20:36,040
Speaker 3: Mitsubishi Electric and Hitachi. What's your best pick at the moment?

326
00:20:36,119 --> 00:20:46,720
Speaker 6: Why, well, right now, I think that some of the financials.

327
00:20:46,760 --> 00:20:48,879
Speaker 6: And by the way, it's not Mitsubishi Electric. We have

328
00:20:48,960 --> 00:20:53,200
Speaker 6: our Mitsubishi Corporation and MITTSBECI EFH Financial Group. But we

329
00:20:53,359 --> 00:20:57,640
Speaker 6: like insurance companies in Japan because it's polygopolistic, three players

330
00:20:57,640 --> 00:21:00,840
Speaker 6: controlling only not only three player s contry in ninety

331
00:21:00,840 --> 00:21:01,840
Speaker 6: percent of the market.

332
00:21:02,320 --> 00:21:04,159
Speaker 3: Yeah, all right, well we'll put that as as a

333
00:21:04,240 --> 00:21:07,719
Speaker 3: jumping off point for our next discussion. Masticated their portfolio

334
00:21:07,760 --> 00:21:10,159
Speaker 3: manager at Hennessey Japan Fund.

335
00:21:12,119 --> 00:21:15,080
Speaker 1: This has been the Bloomberg Daybreak Asia podcast, bringing you

336
00:21:15,119 --> 00:21:18,240
Speaker 1: the stories, making news and moving markets in the Asia Pacific.

337
00:21:18,760 --> 00:21:21,880
Speaker 1: Visit the Bloomberg Podcast channel on YouTube to get more

338
00:21:21,920 --> 00:21:25,520
Speaker 1: episodes of this and other shows from Bloomberg. Subscribe to

339
00:21:25,560 --> 00:21:29,320
Speaker 1: the podcast on Apple, Spotify, or anywhere else you listen,

340
00:21:29,440 --> 00:21:32,520
Speaker 1: and always on Bloomberg Radio, the Bloomberg Terminal, and the

341
00:21:32,560 --> 00:21:33,640
Speaker 1: Bloomberg Business app.