WEBVTT - SK Hynix Earnings, Yen Weakness 0:00:02.480 --> 0:00:10.480 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:10.520 --> 0:00:13.720 Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian 0:00:13.800 --> 0:00:16.640 Curtis and myself for the stories, making news and moving 0:00:16.680 --> 0:00:19.560 markets in the APAC region. You can subscribe to the 0:00:19.600 --> 0:00:23.080 show anywhere you get your podcast and always on Bloomberg Radio, 0:00:23.320 --> 0:00:26.080 the Bloomberg Terminal, and the Bloomberg Business app. 0:00:27.560 --> 0:00:27.720 Well. 0:00:27.760 --> 0:00:31.520 South Korea's economic growth accelerated to a pace faster than 0:00:31.640 --> 0:00:36.559 most optimistic forecasts had been around. Good news to President 0:00:36.680 --> 0:00:39.800 Yun sukyul. A bit late though, given the election setback, 0:00:39.800 --> 0:00:42.760 but anyway, GDP advancing one point three percent in the 0:00:42.760 --> 0:00:46.320 three months through March versus the previous quarter. According to 0:00:46.400 --> 0:00:49.160 the Bank of Korea, the economy grew three point four 0:00:49.200 --> 0:00:51.839 percent year on year, beating the forecast of two and 0:00:51.880 --> 0:00:55.560 a half percent. Now in that environment, as k Heinez said, 0:00:55.560 --> 0:00:58.880 it expects full recovery in the memory market in chips, 0:00:59.360 --> 0:01:02.280 and also that AI demand was spurring the chip maker 0:01:02.600 --> 0:01:05.800 to its fastest revenue expansion since at least twenty ten. 0:01:06.200 --> 0:01:09.240 Joining us now for some discussion is Yu Kung Lee, 0:01:09.360 --> 0:01:13.440 Bloomberg Asia Stocks Reporter. On a closer look at heinez here. 0:01:13.520 --> 0:01:17.399 So I guess the best news here really for general 0:01:17.440 --> 0:01:21.000 investors would be that at least this company expects full 0:01:21.040 --> 0:01:22.279 recovery in the memory market. 0:01:23.640 --> 0:01:26.640 Yeah, that's right. Well, the best news is also might 0:01:26.680 --> 0:01:29.360 be the best opportunity to sell the news, and that's 0:01:29.400 --> 0:01:32.800 how the markets are seemed to be interpreting the latest 0:01:32.840 --> 0:01:36.240 positive string of announcement from eske Heinis. The company reported 0:01:36.280 --> 0:01:39.080 a blue out earnings, Yes, and that demonstrates that the 0:01:39.160 --> 0:01:42.920 chip industry is in full recovery after years of slump 0:01:42.959 --> 0:01:47.160 and downturn, and thanks to this strong demand coming from 0:01:47.160 --> 0:01:50.040 the AI and not just the AI. Some of the 0:01:50.160 --> 0:01:54.920 silver lining the eskehihneys highlighted also included us forecasting bullish 0:01:55.000 --> 0:01:59.560 demand for traditional membership, which means that the demand for 0:01:59.640 --> 0:02:03.560 smart phone and personal computer might be also finally recovery 0:02:03.600 --> 0:02:06.880 going toward the end of this year. So there's a there. Also, 0:02:07.040 --> 0:02:09.840 there are a lot of positive announcements from the company 0:02:10.360 --> 0:02:12.239 from today's earnings results. 0:02:12.400 --> 0:02:16.720 Yeah, you might talked about kind of buy the rumors, 0:02:16.800 --> 0:02:19.560 sell the news. Yesterday the stock was up my more 0:02:19.600 --> 0:02:23.120 than five percent. So when we look at the memory 0:02:23.200 --> 0:02:25.960 chip market, I mean, if the company says to you 0:02:26.200 --> 0:02:29.760 maybe we are entering a full recovery cycle. Are they 0:02:29.840 --> 0:02:33.760 taking into consideration what the competitors are dealing with right 0:02:33.760 --> 0:02:35.839 now or is this pretty much from the company's point 0:02:35.840 --> 0:02:36.200 of view. 0:02:37.280 --> 0:02:39.360 So when you talk about that in the memoryship, they 0:02:39.400 --> 0:02:43.400 are definitely taking into account what the competitors are doing. 0:02:43.520 --> 0:02:46.639 There's pretty much three memoryship supplier in the world when 0:02:46.639 --> 0:02:49.799 it comes to dram the maturity of the memboryship. There's 0:02:49.840 --> 0:02:52.560 SAMs and Electronics, there's ESK Heighnis that, there's the US 0:02:52.680 --> 0:02:56.480 company Micron Technology, and all three of them have been 0:02:56.960 --> 0:03:00.320 in a have been reporting pretty bad results last year, 0:03:00.320 --> 0:03:03.120 but all three of them are expected to report pretty 0:03:03.440 --> 0:03:06.680 solid earnings this year and thanks that's thanks to the 0:03:06.720 --> 0:03:12.600 industry wide recovery that's helping the membership demand for all 0:03:12.639 --> 0:03:13.800 these three companies. 0:03:15.320 --> 0:03:19.560 The announcement this week that Heinex would spend fifteen billion 0:03:19.600 --> 0:03:23.000 dollars in South Korea on a new plant, what does 0:03:23.040 --> 0:03:24.680 that actually mean for the company. 0:03:26.080 --> 0:03:31.280 Sure, so that displays strong confidence coming from SKA Heinix 0:03:31.320 --> 0:03:33.839 that is pretty confident there will be strong demand. Ford 0:03:34.080 --> 0:03:38.080 is a high end membership called HPM that is a 0:03:38.080 --> 0:03:42.960 crucial for AI accelerators such as the ones made by Nvidia. 0:03:43.360 --> 0:03:46.840 So that was a really kind of type of news. 0:03:46.880 --> 0:03:49.680 That is that may be seen as a positive, but 0:03:49.800 --> 0:03:54.800 also for some investors. Typically the membership industry is very 0:03:54.960 --> 0:03:59.160 vulnerable to the supply and demand situation, So therese upcoming 0:03:59.200 --> 0:04:02.560 increase in up could also be a negative news to 0:04:02.640 --> 0:04:08.400 some investor because that could raise concern about potential supply, 0:04:08.440 --> 0:04:10.440 although that may be a lot down on the road. 0:04:10.640 --> 0:04:13.840 So there is this is not all all the all 0:04:13.880 --> 0:04:17.960 the positive good news. There's also some some source of worry. 0:04:18.800 --> 0:04:22.200 Brian was talking about that positive print on GDP walk 0:04:22.240 --> 0:04:27.799 about economics time. How is the South Korean economy performing? 0:04:27.839 --> 0:04:30.479 You're in the capital, right, you have kind of a 0:04:30.560 --> 0:04:34.599 viewpoint on what's happening in a major urban center, but 0:04:34.680 --> 0:04:38.080 you're very much wired into other pockets of the country 0:04:38.120 --> 0:04:42.000 and where manufacturing sites are set up for things like 0:04:42.040 --> 0:04:45.400 not only semiconductors, but automobiles as well. How is the 0:04:45.440 --> 0:04:47.159 economy performing in South Korea? 0:04:48.080 --> 0:04:51.000 So, the South Korea economy is very sensitive to global 0:04:51.120 --> 0:04:54.240 trades and global demand, especially the global demand for the 0:04:54.320 --> 0:04:58.119 tech and consumer electronics because chips count for the huge 0:04:58.160 --> 0:05:01.040 part of the South Korea exports and to today's growth 0:05:01.080 --> 0:05:05.720 results also show pretty strong exports growth from the chip 0:05:05.760 --> 0:05:09.120 makers that is helping the growth for the for the 0:05:09.320 --> 0:05:13.880 entire nation. However, this may not be entirely a great 0:05:13.920 --> 0:05:17.159 news for the stock investors, because we are also seeing 0:05:17.760 --> 0:05:20.719 speculations that the central bank in South Korea Bank of 0:05:20.800 --> 0:05:25.799 Korea may be considering delaying its own rate cuts because 0:05:25.880 --> 0:05:28.960 the economy is doing well. This is just like what's 0:05:28.960 --> 0:05:31.960 happening in the US, and the FED made postpone as 0:05:32.120 --> 0:05:34.960 raycut to the later this year, and that may also 0:05:35.360 --> 0:05:38.760 widen the interest rate gap between the US and South Korea. 0:05:38.920 --> 0:05:42.000 So the South Korea Central Bank may not be reducing 0:05:42.440 --> 0:05:46.280 interest rate as soon as investors expected. So the GDP 0:05:46.680 --> 0:05:47.719 is not all good news. 0:05:48.160 --> 0:05:50.360 That may not be a bad thing. I mean, there 0:05:50.400 --> 0:05:53.320 are some of us who believe that no rate cuts 0:05:53.360 --> 0:05:56.880 at all is actually the most bullish move for central 0:05:56.920 --> 0:05:59.679 banks this year, just in that once you start getting 0:05:59.680 --> 0:06:02.440 the cut, it's usually because growth is turned down or 0:06:02.839 --> 0:06:05.679 unemployment has started to move up. This is a pretty 0:06:05.680 --> 0:06:08.040 good environment that we're in. If you look at these 0:06:08.600 --> 0:06:11.960 stock chart of Heinez, it's amazing from the lower left 0:06:11.960 --> 0:06:14.680 to the upper right. Noting though that it did sell 0:06:14.680 --> 0:06:18.720 off ten percent before yesterday's big bounce on the Capex 0:06:19.040 --> 0:06:22.279 move And like you said at the very beginning, and 0:06:22.279 --> 0:06:24.240 I'd like to hear more thoughts on this, maybe the 0:06:24.279 --> 0:06:25.560 best is already in. 0:06:26.960 --> 0:06:29.200 Sure. So if you look at the earnings outlook and 0:06:29.240 --> 0:06:32.000 the fundamentals of Esquhiinis, there are may be more legs 0:06:32.000 --> 0:06:34.280 for the rally in the share prices which is hovering 0:06:34.400 --> 0:06:38.720 near the highest level in twenty four years. And you 0:06:38.839 --> 0:06:42.600 see the similar movements for the in the share prices 0:06:42.640 --> 0:06:47.679 of other chip makers Nvidia, TSMC, Samsung, they are either 0:06:47.839 --> 0:06:51.880 near their peaks or breaking their peaks, and then in 0:06:52.000 --> 0:06:56.360 recent weeks they've been falling more than ten percent into. 0:06:56.120 --> 0:06:57.119 The correction level. 0:06:57.279 --> 0:06:59.200 So that's why this season is going to be really 0:06:59.279 --> 0:07:01.240 interesting to see whether or not the earnings is strong 0:07:01.360 --> 0:07:04.400 enough to get everybody powered higher. YUKIONG Lee joins us 0:07:04.440 --> 0:07:16.080 Bloomberg Asia Stocks reporter from Seoul. We're joined by fanchuk 0:07:16.080 --> 0:07:20.440 One Asia CIO of HSBC Global Private Banking and Wealth 0:07:20.800 --> 0:07:23.440 to take a closer look at markets, and we have 0:07:23.560 --> 0:07:26.080 had a lot of up and down here of late. 0:07:26.160 --> 0:07:29.000 We talked about the big drop in Meta shares today, 0:07:29.360 --> 0:07:33.320 but we also had Texas instruments surging, Tesla surging. We 0:07:33.400 --> 0:07:36.400 also had gains in Visa. So it's very much day 0:07:36.440 --> 0:07:39.880 in and day out a different picture on how the 0:07:39.920 --> 0:07:42.920 equity market might be performing. I suppose a lot of 0:07:42.920 --> 0:07:45.080 that is tied up into the individual companies and what 0:07:45.160 --> 0:07:49.000 they're doing, and also the forecast on interest rates. I 0:07:49.120 --> 0:07:52.600 note that you believe that the big central banks are 0:07:52.640 --> 0:07:55.000 on track to start cutting interest rates this year. You're 0:07:55.000 --> 0:07:55.680 sticking by that. 0:07:56.320 --> 0:08:01.040 Yeah, we still expect Divado Macas central banks will start 0:08:01.120 --> 0:08:04.720 with the Montreal easing cycle later this year, but of 0:08:04.720 --> 0:08:10.000 course market reprising for slower fed rate cuts have gone 0:08:10.600 --> 0:08:14.520 quite far. Uh and now to the points that now 0:08:14.600 --> 0:08:19.440 market actually push out the rate cut expectations in the 0:08:19.560 --> 0:08:24.320 US towards the Q four this year, and in some 0:08:24.400 --> 0:08:27.520 forecasts project no rate cut. We think these have gone 0:08:27.520 --> 0:08:33.520 too far. So at XSBC, we currently still expect free 0:08:34.240 --> 0:08:38.280 US interest rate cut this year, but the risks are 0:08:38.320 --> 0:08:42.920 clearly skewed towards a later start, so we may see 0:08:43.400 --> 0:08:46.520 the fat cuts to come in the second half of 0:08:46.600 --> 0:08:52.199 the year. It's compared with our current projection of a 0:08:52.360 --> 0:08:58.040 June start, so we think the reprising have already taken place, 0:08:58.440 --> 0:09:01.880 and importantly, we think there's very high probability that the 0:09:01.960 --> 0:09:08.000 European Central Bank will kick start with monetary yeasing in June, 0:09:08.360 --> 0:09:12.080 and there's also debate whether there would be another July 0:09:12.559 --> 0:09:13.040 rate cut. 0:09:13.480 --> 0:09:14.240 So with. 0:09:15.679 --> 0:09:19.280 Interest rate sign code turning, we still thinks that is 0:09:19.960 --> 0:09:24.199 important for investor to put in cash to work because 0:09:25.760 --> 0:09:31.880 investment risky asset should deliver better total return compared with cash. 0:09:32.240 --> 0:09:37.680 When central bank now reversing the monetary cycle. 0:09:37.679 --> 0:09:40.280 Fun I want to ask about you. Yeah, well, I 0:09:40.400 --> 0:09:43.480 want to There's a couple of things there. One, I mean, 0:09:43.480 --> 0:09:47.000 if the ECB begins to ease, then maybe risk assets 0:09:47.000 --> 0:09:49.839 in Europe are a bye. But I'm also, as long 0:09:49.880 --> 0:09:52.800 as we're talking about central bank action, curious on the 0:09:52.840 --> 0:09:57.240 Bank of Japan's decision, which is happening Friday. What's your 0:09:57.240 --> 0:10:00.119 sense of what's going on not only with the economy 0:10:00.120 --> 0:10:02.760 in Japan and the rate of inflation, but whether or 0:10:02.800 --> 0:10:05.160 not it's an opportune time to put more money to 0:10:05.200 --> 0:10:06.480 work in Japanese equities. 0:10:07.160 --> 0:10:10.839 Yeah, we are bullish on Japanese equity, so we stay 0:10:10.920 --> 0:10:15.840 overweight on Japanese dog We don't think the BOJ will 0:10:16.440 --> 0:10:20.240 for the increase interest rate in this week's meeting. But 0:10:20.480 --> 0:10:26.480 given the growing expectations for slower fat rate cuts, and 0:10:27.280 --> 0:10:32.080 this also created room for the BOJ to raise interest 0:10:32.120 --> 0:10:36.320 rate earlier than expected. So currently we expect the BILJ 0:10:36.520 --> 0:10:41.640 will likely raise interest rate again in the third quarter 0:10:41.800 --> 0:10:44.760 of this year and we project two more rate hike 0:10:45.320 --> 0:10:50.080 in twenty twenty five. And given the significant weakness in 0:10:50.120 --> 0:10:54.200 the end and now yen hits more than three decades low, 0:10:55.040 --> 0:10:59.679 so the BILJ would also have the incentive to raise 0:11:00.040 --> 0:11:03.240 policy rates before the end of this year. Uh and 0:11:03.360 --> 0:11:08.320 this would also help to curb the extreme weakness in 0:11:08.400 --> 0:11:09.199 the end. 0:11:09.520 --> 0:11:12.760 What do you like most about what Japanese companies bring 0:11:12.760 --> 0:11:14.119 to the table at the moment. 0:11:14.480 --> 0:11:20.200 I think this more sustainable refras trend in Japan would 0:11:20.200 --> 0:11:23.720 both well for corporate earnings outlook and the Japanese equity 0:11:23.760 --> 0:11:29.480 market is substantially exposed to the tech cycle. Given the 0:11:29.520 --> 0:11:35.080 global AI investment boom is also driving strong capital expenditure 0:11:35.120 --> 0:11:42.200 spending in Japan on digitalization, automation and AI technology to 0:11:42.720 --> 0:11:48.040 mitigate the structure had went from aging demographic so Japan 0:11:48.559 --> 0:11:55.640 is also a very attractive play on the AI investment boom. 0:11:55.720 --> 0:11:58.920 And on the other hand, the accelerating corporate government reforms 0:11:59.360 --> 0:12:06.560 also so prompt more listed companies to introduce corporate actions 0:12:06.559 --> 0:12:10.960 to enhance shareholders value, including increase in diffidend payout and 0:12:11.000 --> 0:12:15.720 share buyback. So this will well for our OE enhancement 0:12:15.960 --> 0:12:19.200 in the medium term. So there are actually a multiple 0:12:19.320 --> 0:12:23.200 driver upon equity market in Japan misfund. 0:12:23.840 --> 0:12:27.600 So much of what happens in the APEC region is 0:12:27.679 --> 0:12:30.720 driven by economic activity. In China. We know that and 0:12:30.800 --> 0:12:34.240 clearly the economy is struggling. We're waiting for some type 0:12:34.240 --> 0:12:37.320 of turn. Maybe it's happened, and we won't know that 0:12:37.360 --> 0:12:40.960 clearly for a few months. Now, what's your sense on 0:12:41.200 --> 0:12:44.280 China and whether or not there are opportunities to put 0:12:44.280 --> 0:12:45.320 capital to work there. 0:12:46.600 --> 0:12:51.080 We currently have neutral allocation to China equities, but we 0:12:51.160 --> 0:12:55.280 adop a most selective positioning given that the recovery out 0:12:55.280 --> 0:12:59.559 of remain divergence. So the property market stress remain a 0:12:59.640 --> 0:13:03.280 key on the economy. But looking at the Q one 0:13:03.400 --> 0:13:09.200 China GDP report, infrastructure spending actually came in better than expected. 0:13:09.320 --> 0:13:13.400 On the other hand, industrial protection growth and retail sales 0:13:13.600 --> 0:13:18.160 actually came in weaker than consensus estimate. So this is 0:13:18.240 --> 0:13:21.720 clearly a mixed picture in terms of the recovery outlook, 0:13:21.800 --> 0:13:26.839 So this would imply divergent corporate earnings performance. So we 0:13:26.880 --> 0:13:33.320 see more resilient financial performance from the surface consumption sector. 0:13:33.480 --> 0:13:35.800 So you have to be a stock picker, yes. 0:13:35.840 --> 0:13:39.320 And focus on the resilient sector. 0:13:39.720 --> 0:13:41.480 Yeah. I want to go back to a comment you 0:13:41.520 --> 0:13:44.280 made at the beginning of our conversation, which I think 0:13:44.600 --> 0:13:46.360 a lot of people would take heart from. I mean, 0:13:46.400 --> 0:13:48.880 they would say, you're right that right now there's the 0:13:49.040 --> 0:13:53.800 risk of fewer interest rate cuts than more, and so 0:13:54.120 --> 0:13:57.040 as a money manager, you have to be very cognizant 0:13:57.080 --> 0:13:59.880 of that. So that would augur for being pretty careful here. 0:14:00.240 --> 0:14:02.920 You said that you think it's a great time to 0:14:02.960 --> 0:14:05.600 take advantage put money to work in the stock market. 0:14:05.679 --> 0:14:08.080 How do you reconcile those two thoughts. 0:14:08.240 --> 0:14:12.720 Yeah, we actually don't think a lower start of the 0:14:12.760 --> 0:14:16.720 FED rate cut is a negative development because the key 0:14:16.840 --> 0:14:23.119 reason accounting for this trend is stronger than expected US 0:14:23.360 --> 0:14:28.000 growth and this has been reflected in earnings expectation. We 0:14:28.160 --> 0:14:33.440 expect our market projection for US earnings growth to further improve, 0:14:33.840 --> 0:14:36.600 so this will actually support further broadening of the US 0:14:36.680 --> 0:14:38.360 equity rati in our opinion. 0:14:38.640 --> 0:14:42.800 All right, thanks very much, Ms Vanchukwan there Asacio of 0:14:42.960 --> 0:14:54.920 HSBC Global Private Banking and Wealth. Us A Takeda, portfolio 0:14:54.960 --> 0:14:58.400 manager of the Hennessey Japan Fund. We talked about a 0:14:58.480 --> 0:15:03.120 number of issues that we would raise with you. Massa Takaida, 0:15:03.200 --> 0:15:05.360 thank you very much for being with us. Let's start 0:15:05.400 --> 0:15:08.520 off with possible intervention. Would it be a little weird 0:15:08.560 --> 0:15:11.880 for the Ministry of Finance to intervene in these two 0:15:11.960 --> 0:15:13.640 days when the BOJ is meeting. 0:15:15.880 --> 0:15:21.160 Well, it's hard to say what and when the bog 0:15:21.360 --> 0:15:24.760 might do something, but I do think that chief Jpy 0:15:24.920 --> 0:15:28.240 Japanese yen is here to stay because of several reasons 0:15:28.280 --> 0:15:32.320 such as real interest rates still negative for Japanese in 0:15:32.400 --> 0:15:34.360 I think, what's one of the few currencies, if not 0:15:34.400 --> 0:15:35.600 the only one. 0:15:35.560 --> 0:15:37.240 With negative interest rates. 0:15:37.320 --> 0:15:41.440 And also trade balance that has structurally changed in the 0:15:41.520 --> 0:15:45.600 last twenty years, so there's a very there's so much 0:15:45.840 --> 0:15:48.600 less purchase nowadays. 0:15:48.960 --> 0:15:52.280 So tomorrow it's not just the BOJ meeting, although that's 0:15:52.320 --> 0:15:56.640 clearly center stage. Tokyo April CPI data and I'm curious, 0:15:56.680 --> 0:16:00.000 can you help me understand what the inflation story is 0:16:00.560 --> 0:16:01.600 right now in Japan? 0:16:03.560 --> 0:16:08.240 Well, so it's been trending above two percent for I 0:16:08.280 --> 0:16:12.640 think the last two years now, And initially in twenty 0:16:12.720 --> 0:16:13.240 twenty two. 0:16:13.880 --> 0:16:16.880 I thought that Japanese inflation would be transient. 0:16:16.960 --> 0:16:20.920 But as time went by, I came to realize that 0:16:20.960 --> 0:16:24.640 there's a little much structural element to it. So at 0:16:24.640 --> 0:16:27.360 first it was the you know, the Fed raising rates 0:16:27.400 --> 0:16:32.160 and appreciated Japanese yen and increased import prices. 0:16:33.040 --> 0:16:35.240 But now it seems like the botton is being. 0:16:35.120 --> 0:16:40.440 Passed to more structural reasons, like you know, labor shortage 0:16:41.480 --> 0:16:47.000 arising from shrinking population. So our feeling is that Japan's 0:16:47.040 --> 0:16:48.800 inflation will stay higher for longer. 0:16:49.800 --> 0:16:52.720 Yeah, and with inflation high and the currency week, they 0:16:52.800 --> 0:16:55.880 kind of feed off each other, I suppose, and it's 0:16:55.920 --> 0:16:57.880 not good for people. I mean you probably heard me 0:16:57.920 --> 0:17:01.640 say Japan Airlines CEO's who go to Tori said, it's 0:17:01.680 --> 0:17:05.320 a big problem. Who is it the most big the problem? 0:17:05.359 --> 0:17:06.320 Who is it the biggest for? 0:17:08.840 --> 0:17:14.520 Well, definitely how sports are feeling the pinch and also 0:17:14.800 --> 0:17:19.600 you know importers. But I think, you know, as Japan 0:17:19.800 --> 0:17:25.520 is now finally coming out of decades long deflation, I 0:17:26.080 --> 0:17:31.320 think this should start virtual cycle where you have higher 0:17:31.359 --> 0:17:34.920 inflation which leads to higher interest rate nominal interest rate, 0:17:35.440 --> 0:17:39.719 while the overall monitor policy is still being accommodated, and 0:17:39.760 --> 0:17:44.560 that should change the consumer's mindset and that should produce 0:17:45.320 --> 0:17:46.639 a positive feedback loops. 0:17:46.720 --> 0:17:49.040 So I think the trend we're generally moving in the 0:17:49.119 --> 0:17:49.679 right direction. 0:17:49.800 --> 0:17:52.600 So what does it mean massive for the equity market 0:17:52.640 --> 0:17:53.119 in Japan. 0:17:55.280 --> 0:17:58.560 Well, obviously, if you have negative interest rates, that's good 0:17:58.640 --> 0:18:04.320 for equities. Although as an investor, we were also focus 0:18:04.359 --> 0:18:10.520 We always focus on, you know, companies with durable economic modes, 0:18:10.560 --> 0:18:14.760 with strong pricing power, and so we are macroagnostic and 0:18:14.840 --> 0:18:15.800 benchmark agnostic. 0:18:17.200 --> 0:18:20.080 So some of the governess changes that people speak so 0:18:20.160 --> 0:18:22.800 highly of for Japan, things like being able to offer 0:18:23.320 --> 0:18:27.879 dividends and and allowing more buybacks and and making better 0:18:28.359 --> 0:18:32.560 governance decisions, is that something that you see can be sustainable. 0:18:35.119 --> 0:18:35.800 Yeah, I think so. 0:18:35.920 --> 0:18:39.320 I mean, I think the key thing is not the 0:18:39.359 --> 0:18:46.640 shareholder shareholder return policies. I think that it's about raising 0:18:46.680 --> 0:18:52.000 awareness around you know, returns on capital, cost. 0:18:51.760 --> 0:18:52.879 Of equity and so on. 0:18:53.400 --> 0:18:56.440 Because they had they hadn't, there was there was no 0:18:57.440 --> 0:19:01.359 capitalism in a Western sense, you know, ten, fifteen, twenty 0:19:02.600 --> 0:19:07.640 years ago, and now with the government initiatives and activists 0:19:07.640 --> 0:19:11.320 and even mister Buffett or Bookshire halfway. I think companies 0:19:11.359 --> 0:19:15.760 are becoming more and more conscious about, you know, improving 0:19:15.800 --> 0:19:20.239 capital efficiency, and I think that's sustainable thanks to all 0:19:20.240 --> 0:19:21.240 these external pressures. 0:19:21.359 --> 0:19:21.679 Masa. 0:19:21.760 --> 0:19:23.960 We have talked on this show a great deal about 0:19:24.000 --> 0:19:28.880 how companies are diversifying manufacturing and supply chain operations away 0:19:28.960 --> 0:19:33.119 from China, resharing of semiconductor manufacturing, let's say here in 0:19:33.160 --> 0:19:36.920 the United States. How is Japan benefiting from this drive 0:19:36.960 --> 0:19:39.520 if at all? 0:19:39.680 --> 0:19:43.959 Oh, yeah, definitely. So first of all, it may create 0:19:44.560 --> 0:19:49.560 extra demand coming from other parts of the world, you know, 0:19:49.600 --> 0:19:55.080 by moving away from China, although that might create supply 0:19:55.200 --> 0:19:59.000 glood at some distant point in time. But Japan and 0:19:59.080 --> 0:20:05.040 Japan is definitely benefiting from being in a geopolitically neutral position. 0:20:06.240 --> 0:20:08.040 And then also, you know, Japan is. 0:20:08.240 --> 0:20:11.879 Now cheap country, so you know, it's smcs of the world. 0:20:11.920 --> 0:20:16.119 They can hire high quolitic engineers, are very affordable cost 0:20:16.320 --> 0:20:20.040 and also the cost of construction is everything is is 0:20:20.080 --> 0:20:25.080 becoming quite quite attractive in terms of the cheapness. 0:20:25.359 --> 0:20:28.159 Mars, you're a PM for the Hennessy Japan Fund. You 0:20:28.200 --> 0:20:32.040 mentioned a number of companies in your list, companies like 0:20:32.160 --> 0:20:36.040 Mitsubishi Electric and Hitachi. What's your best pick at the moment? 0:20:36.119 --> 0:20:46.720 Why, well, right now, I think that some of the financials. 0:20:46.760 --> 0:20:48.879 And by the way, it's not Mitsubishi Electric. We have 0:20:48.960 --> 0:20:53.200 our Mitsubishi Corporation and MITTSBECI EFH Financial Group. But we 0:20:53.359 --> 0:20:57.640 like insurance companies in Japan because it's polygopolistic, three players 0:20:57.640 --> 0:21:00.840 controlling only not only three player s contry in ninety 0:21:00.840 --> 0:21:01.840 percent of the market. 0:21:02.320 --> 0:21:04.159 Yeah, all right, well we'll put that as as a 0:21:04.240 --> 0:21:07.719 jumping off point for our next discussion. Masticated their portfolio 0:21:07.760 --> 0:21:10.159 manager at Hennessey Japan Fund. 0:21:12.119 --> 0:21:15.080 This has been the Bloomberg Daybreak Asia podcast, bringing you 0:21:15.119 --> 0:21:18.240 the stories, making news and moving markets in the Asia Pacific. 0:21:18.760 --> 0:21:21.880 Visit the Bloomberg Podcast channel on YouTube to get more 0:21:21.920 --> 0:21:25.520 episodes of this and other shows from Bloomberg. Subscribe to 0:21:25.560 --> 0:21:29.320 the podcast on Apple, Spotify, or anywhere else you listen, 0:21:29.440 --> 0:21:32.520 and always on Bloomberg Radio, the Bloomberg Terminal, and the 0:21:32.560 --> 0:21:33.640 Bloomberg Business app.