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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.

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Speaker 2: On today's episode, we'll be looking at today's rate cut

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Speaker 2: from the Bank of Korea, plus those persistent threats of

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Speaker 2: planned tariffs and the potential for end of war in Ukraine.

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Speaker 2: Coming up, we'll hear from Rebecca Walzer. She is president

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Speaker 2: at wallser Wealth Management. But we begin in Hong Kong.

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Speaker 2: Joining me now is Katya Dmitrieva. She is Asia Economy

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Speaker 2: reporter for Bloomberg News. Joining us from our bureau in

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Speaker 2: Hong Kong. It's always a pleasure to chat with you.

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Speaker 2: I want to get your reaction to this Bank of

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Speaker 2: Korea rate cut twenty five basis points. That was pretty

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Speaker 2: much expected, was it not?

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Speaker 1: Yeah, it's it was you know, all economists surveyed, well

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Speaker 1: almost all all but one the survey's out of the

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Speaker 1: central Bank would cut by a quarter point today. And

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Speaker 1: it's really all about the economy. So activity has been weak,

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Speaker 1: the outlook is looking increasingly uncertain. They also, i should note,

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Speaker 1: revised down their growth forecast for this year to one

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Speaker 1: point five that's after already revising it down late last year,

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Speaker 1: and there's kind of a number of reasons. You can

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Speaker 1: kind of call it this perfect storm internally. So domestically,

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Speaker 1: they're having political instability. Of course, we currently have the

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Speaker 1: president who's also the finance minister. That's sort of coming

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Speaker 1: to a close in the coming months with the pending trial,

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Speaker 1: but it's not really helping investors or consumers or businesses

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Speaker 1: when they're thinking about purchasing things or investing. So business

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Speaker 1: confidence is down, consumer confidence that's down to levels previously

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Speaker 1: seen during the pandemic. And of course hanging over everything

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Speaker 1: is President Donald Trump and the trade policies and tariffs

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Speaker 1: that are soon to be coming in.

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Speaker 2: So when we're looking at tariffs for South Korea, are

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Speaker 2: there specific industries that we need to be really alert

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Speaker 2: to being most impacted. I mean, I'm thinking of semiconductors.

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Speaker 2: I'm also thinking of.

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Speaker 1: Steel, Yeah, semiconductors, steel autos is another one that specifically

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Speaker 1: mentioned pharmaceuticals. And the thing is it's not just about

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Speaker 1: what the country makes itself. It's also all of the

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Speaker 1: supply chains that cut through South Korea, so they could

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Speaker 1: be made elsewhere, but things get added and finished in

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Speaker 1: South Korea or vice versa. They're made in South Korea,

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Speaker 1: things get added elsewhere before they're shipped out, and so

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Speaker 1: this is a main sort of the major threat for

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Speaker 1: the economy. And I'm still looking through the report. I

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Speaker 1: think central bankers and revising down their growth outlook at

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Speaker 1: least at the end of last year, said that this

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Speaker 1: was exactly one of the factors. They pointed to sort

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Speaker 1: of geopolitical forces, which is code for Trump and China

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Speaker 1: and sort of the ongoing risks there as well as

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Speaker 1: you know, some other geopolitical conflicts. So trade is trade

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Speaker 1: is a big one.

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Speaker 2: What is the inflation story right now? In South Korea?

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Speaker 1: Inflation has been broadly contained and in fact it's probably

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Speaker 1: going to drift down a bit in the coming months

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Speaker 1: as activity cools down. Now, the one thing that I

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Speaker 1: that I should point out that central bankers have been

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Speaker 1: keen to point out is the currency and sort of

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Speaker 1: the risk that if you cut too quickly, because you

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Speaker 1: would look at the central bank and you'd say, okay,

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Speaker 1: if the activity is this slow, why don't you just

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Speaker 1: cut more? But the risk is, of course the currency.

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Speaker 1: It was one of the worst performers last year. It's

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Speaker 1: strengthened somewhat in the first, you know, a couple of

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Speaker 1: weeks of this year through today. But of course they're

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Speaker 1: going to be very central bank officials are going to

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Speaker 1: be very cautious on that because if you if you

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Speaker 1: cut rates, if the currency weakends too much, your prices

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Speaker 1: are going to go to the cost of imports are

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Speaker 1: quite inflationary because the demand for Korean goods goes up,

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Speaker 1: and so that creates this inflationary pressure that central bankers

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Speaker 1: are very worried about. And so that's why the outlook,

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Speaker 1: I think so far, at least the average among economists

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Speaker 1: is three cuts total for this year.

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Speaker 2: So can we pivot now and talk a little bit

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Speaker 2: about trade policy from the US and how this may

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Speaker 2: impact China. So we can leave South Korea and talk

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Speaker 2: about what's happening in Beijing, because it was over the

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Speaker 2: weekend the President Trump, through an executive order, directed the

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Speaker 2: Committee on Foreign Investment in the US to limit Chinese

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Speaker 2: spending on technology and some other strategic US sectors. And

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Speaker 2: I'm going to imagine that this didn't go over very

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Speaker 2: well in Beijing. Are we at risk of a lot

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Speaker 2: more tension in terms of what is happening from Washington

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Speaker 2: and how it may impact Beijing, and I.

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Speaker 1: Think that's to be expected, and also the impact more

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Speaker 1: broadly in the region. So we had emerging stocks, emerging

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Speaker 1: market stocks plunging today or plunging to start the week

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Speaker 1: as these latest executive orders came in. There's also a

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Speaker 1: growing sense that this is much more serious this time.

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Speaker 1: You know, we thought about the twenty eighteen twenty nineteen

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Speaker 1: trade war that was pretty much targeted at China. This

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Speaker 1: time there are a lot of different tariffs flying around

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Speaker 1: that could be hit China, both directly and indirectly. We

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Speaker 1: also know that Trump is focused on things like transshipments

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Speaker 1: or goods that might be made by Chinese companies in

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Speaker 1: other countries, or goods that are made in other countries

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Speaker 1: that are stamped as from that country as opposed to

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Speaker 1: from In other words, it's sort of a broader He

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Speaker 1: wants to contain China in a more broad way. So

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Speaker 1: I think we should expect these tensions only to continue.

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Speaker 2: Do you think this story on deep seek is a

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Speaker 2: part of this narrative at all? Has it certainly shown

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Speaker 2: a very bright light on what China is capable of

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Speaker 2: doing in areas of artificial intelligence?

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Speaker 1: Well, it's certainly something that Trump would be focused on.

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Speaker 1: You know, one of his measures of success is the

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Speaker 1: stock market. And when we have the news on deep Seek,

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Speaker 1: this relatively new technology that was much cheaper, that didn't

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Speaker 1: require as many resources, you saw the US stock market,

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Speaker 1: in particularly tech stocks, reacting immediately, and so that you

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Speaker 1: have to imagine that that has Trump very concerned and

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Speaker 1: hence his plans to curb Chinese spending on tech, energy

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Speaker 1: and these other these other strategic sectors.

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Speaker 2: What are things like on the mainland right now? How

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Speaker 2: is the economy performing.

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Speaker 1: Yeah, things are pretty much where we left off at

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Speaker 1: the end of last year. And by that I mean

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Speaker 1: there's this sort of dual economic growth happening, right So

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Speaker 1: you have an over reliance on exports and industrial industrial production,

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Speaker 1: and then you have the consumer side and spending that's

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Speaker 1: quite a bit low. We've seen that reflected in data

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Speaker 1: so far this year, with investment from China elsewhere falling,

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Speaker 1: with investment into China falling. So things aren't looking like

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Speaker 1: they're improving too much. But officials do think that they

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Speaker 1: can make the same pace of growth as in twenty

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Speaker 1: twenty four in twenty twenty five. So they've set this

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Speaker 1: target about five percent of growth. They're likely to try

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Speaker 1: to meet that. It always possible. We're just talking about

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Speaker 1: deep seek and the technology sector is certainly one where

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Speaker 1: they might be kind of where officials might be pivoting to.

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Speaker 1: You know, of course, we saw President she meeting with

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Speaker 1: a lot of tech executives soon after that news came out,

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Speaker 1: So it's sort of this showing officials might be showing

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Speaker 1: or indicating that they're going to be pivoting towards more

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Speaker 1: support of this sector and perhaps pulling back a little

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Speaker 1: bit from over reliance on exports because it'll just be

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Speaker 1: that much harder this year with Trump.

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Speaker 2: Katya will leave it there. Thank you so much for

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Speaker 2: joining us. Katya Dmitrieva. She is Asia Economy reporter for

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Speaker 2: Bloomberg News, joining us from our bureau in Hong Kong.

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Speaker 2: Here on the Daybreak Asia podcast. Welcome back to the

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Speaker 2: Daybreak Asia Podcast. I'm Doug Krisner. The US equity market

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Speaker 2: faltered a bit today. That was after President Trump said

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Speaker 2: he is expecting tariffs planned for Canada and Mexico to

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Speaker 2: go ahead in early March. Now, these levies, you may recall,

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Speaker 2: were initially delayed by one month. That is a way

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Speaker 2: of giving Canada and Mexico some more time to address

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Speaker 2: the president's concerns over border security. Joining me now is

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Speaker 2: Rebecca Wallser. She is president at Wallser Wealth Management, joining

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Speaker 2: us from Florida. Good of you to make time to

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Speaker 2: chat with us. It seemed like the market was holding

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Speaker 2: up reasonably well until the news on the tariffs broke.

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Speaker 2: What is your sense of the risk right now for

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Speaker 2: equities if in fact the US were to impose new

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Speaker 2: tariffs on Canada and Mexico.

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Speaker 3: Well, certainly, Doug, it's more volatility, right. Uncertainty breathes volatility.

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Speaker 3: The markets don't like uncertainty, and this is something that

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Speaker 3: I think maybe wasn't quite being expected. If you look

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Speaker 3: at a statement out of Melanie Jolly, who is a

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Speaker 3: Canadian finance minister, she basically said that the US is

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Speaker 3: very interesting sentiment. She said, the US is a net importer,

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Speaker 3: like we basically are importing more guns, morphan more migrants

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Speaker 3: to Canada than they are to US.

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Speaker 4: And so she said that that would.

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Speaker 3: Be something that would need to be looked at quite

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Speaker 3: extensively if these tariffs do in fact go in force.

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Speaker 3: And I think that there was a general sentiment Doug

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Speaker 3: that since Trump was so willing to delay it just

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Speaker 3: by a month to get control of the border and

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Speaker 3: sort of get you control of this fentanyl slash migrant issue,

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Speaker 3: that there might be some ability to continue to work

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Speaker 3: through that. And the fact that today when he was

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Speaker 3: with a crown from France said it was so very

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Speaker 3: clear that they were on track to continue to go

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Speaker 3: into effect next month, that it was it was quite

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Speaker 3: a reverberation through the markets.

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Speaker 2: Yeah, next week, more like it. Right, I'm wondering whether

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Speaker 2: or not you're hopeful that maybe we can get some

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Speaker 2: type of negotiation working here to avoid the worst case scenario.

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Speaker 3: I mean, the thing is is there's negotiations on so

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Speaker 3: many fronts. Right, we have not only the Mexico Canadian situation,

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Speaker 3: but then we also have him talking about a lot

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Speaker 3: of things in March March twelve, we've got to steal

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Speaker 3: an aluminum one that's supposed to go into effect twenty

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Speaker 3: five percent. We already have the ten percent Chinese one.

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Speaker 3: And then he's obviously talking about a lot of of

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Speaker 3: the media refers to as retaliatory, but of course Trump

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Speaker 3: talks about reciprocal and that if there is a country

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Speaker 3: and this would be country wide, specifically looking at Brazil

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Speaker 3: and India's directly, but countries that are putting tariffs on

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Speaker 3: their imports into US that we don't like likewise and

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Speaker 3: like manner tariff goods that we're exporting to them that

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Speaker 3: we would reciprocate here so that in his world it

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Speaker 3: would be a more balanced country to country trading environment.

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Speaker 3: So there's actually a lot that is happening quite quickly,

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Speaker 3: and it's going to reread a lot of volatility, Doug.

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Speaker 3: That is what it's going to be in the short term,

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Speaker 3: a lot of volatility.

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Speaker 2: Can we talk a little bit about artificial intelligence? We

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Speaker 2: had this report today from an analyst to T. D.

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Speaker 2: Cowen saying that Microsoft has canceled some leases for its

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Speaker 2: US data center capacity, and I think that raised a

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Speaker 2: lot of worry over whether or not Microsoft is securing

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Speaker 2: more AI computing capacity than it needs in the longer term.

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Speaker 2: And obviously Wednesday, after the bell we have the numbers

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Speaker 2: from in Nvidia. How are you feeling about the AI

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Speaker 2: trade overall?

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Speaker 3: Yeah, this is uh, this is a different space right

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Speaker 3: now than where we were the last i would say

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Speaker 3: thirty six months, and that is obviously related to the

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Speaker 3: deep Seek situation, because you had Nvidia come out and

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Speaker 3: the CEO come out and say that that functionality that Deep.

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Speaker 4: Seek obtained was through legal chips.

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Speaker 3: In other words, it wasn't these advanced, super expensive chips

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Speaker 3: that are banned and are not allowed to be exported

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Speaker 3: to China, but they were with some lower level chips

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Speaker 3: that were legal and they were able to know.

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Speaker 4: Everyone believes that.

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Speaker 3: The obviously the IP was was stolen, as is China's MO,

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Speaker 3: but doesn't matter if what the end result doesn't matter.

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Speaker 3: If the end result is that we can get much

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Speaker 3: cheaper AI development on lower level chips, much reduced costing chips,

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Speaker 3: then that does have a huge implication for the relie

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Speaker 3: research and development that is happening by all of our

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Speaker 3: MAGS seven into AI and into the AI frontier. And

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Speaker 3: so what we really need to do is really figure

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Speaker 3: out what is this technology that they have reduced these

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Speaker 3: these lower grade chips too, because if in fact that

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Speaker 3: has come to fruition DOUG, then why would we have

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Speaker 3: as big of an R and D spend. It's really

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Speaker 3: I don't want to say it this way, but it's

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Speaker 3: a CTJ moment for the AI space of what does

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Speaker 3: it really take.

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Speaker 4: How much money does it really take?

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Speaker 3: And it will impact the mag seven R and D

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Speaker 3: investment accordingly.

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Speaker 2: And today we had news that Apple is going to

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Speaker 2: produce some AI servers here in the US, spending about

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Speaker 2: five hundred billion domestically over the next four years. And

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Speaker 2: I was just dumbfounded by the fact that Apple is

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Speaker 2: going to hire twenty thousand new workers to this end.

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Speaker 2: Is Apple one of the ways that you want to

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Speaker 2: maybe play the AI trade here?

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Speaker 3: Yeah, I think that this is in part, obviously not totally,

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Speaker 3: but this is definitely in part with Trump's very strong

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Speaker 3: stance against China and really talking about going after I

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Speaker 3: know right now he's focused on tariffs, but he has

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Speaker 3: been a very very staunch defender of the dominancy of

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Speaker 3: the US dollar and very much wants to go after

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Speaker 3: China for IP problems. And I think Apple is already

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Speaker 3: so embedded with their phone production in the Chinese world

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Speaker 3: that maybe they're seeing a different light for the development

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Speaker 3: of the AI space and data centers outside of and

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Speaker 3: apart from China, especially if we do see Trump really

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Speaker 3: go after the IP intellectual property faft that we know

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Speaker 3: that exists on an ongoing basis and the production and

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Speaker 3: intellectual property as well as tech actual hardware out of China.

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Speaker 2: So let's talk about another aspect of geopolitics. Today marks

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Speaker 2: three years since Russia invaded Ukraine, and Ukraine today saying

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Speaker 2: it's in the final stages of talks with the US

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Speaker 2: over a deal to give Washington a cut of Ukraine's

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Speaker 2: natural resources. Does that surprise you at all?

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Speaker 3: I think what's more surprising is how this administration has

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Speaker 3: already been able to convince the UN to sort of

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Speaker 3: change its policy or its directive on the fact that

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Speaker 3: Russia instigated the war. I mean, this is phenomenal movement

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Speaker 3: here that we've seen, Doug. I mean, obviously, you know

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Speaker 3: the invasion happening, what I called the invasion, but you know,

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Speaker 3: going back to March of twenty twenty two, and that

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Speaker 3: being the world's understanding of how that started, and Trump

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Speaker 3: being in office less than not even five weeks and

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Speaker 3: already getting you know, the UN to change that stance,

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Speaker 3: and even going against some of our Western allies who

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Speaker 3: don't agree with that. So there is definitely something afoot.

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Speaker 3: Which is a weird way to say it, but there's

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Speaker 3: definitely something going on between the semantics between the Ukraine

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Speaker 3: Russia US relationship, and I do believe that Zelenski feels

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Speaker 3: that he doesn't have nearly the ally and Trump that

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Speaker 3: he had in Biden, and that he's going to have

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Speaker 3: to play a little bit of a different role than

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Speaker 3: he's been playing. He really is starting to get a

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Speaker 3: little bit out of you know, steam, out of blocks

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Speaker 3: to play.

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Speaker 4: If you will.

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Speaker 2: So, Rebecca, how are you feeling generally speaking about US

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Speaker 2: economic growth these days?

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Speaker 3: I mean, I think that if it's really kind of

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Speaker 3: a tail of of two worlds in two ways. The

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Speaker 3: first thing is is that when when the Trump election happened,

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Speaker 3: you saw the global world really think okay, this is great,

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Speaker 3: and all of the you know, M and A activity,

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Speaker 3: Hedge funds everyone excited, investment banks excited. We're going to

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Speaker 3: see a lot more M and A activity, a lot

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Speaker 3: of more deals globally and all of these things, and

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Speaker 3: there's a lot of enthusiasm. Both the CEO and the

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Speaker 3: CFO survey show that, yes, the sixty percent plus were

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Speaker 3: very positive to the upside.

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Speaker 4: Under the new incoming Trump administration.

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Speaker 3: When you look now at what's happening and looking kind

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Speaker 3: of beneath the sheets, you're seeing in America alone, you know,

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Speaker 3: less than just over ten percent of our economy is

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Speaker 3: spending just under all fifty percent of all consumption. So

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Speaker 3: we really are now seeing truly a truly bifurcated economy.

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Speaker 4: We have retail sales dropping in January.

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Speaker 3: We consumer sent been dropping from December to January. We

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Speaker 3: have CPI and PPI ticking back up and being sticky again,

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Speaker 3: showing that inflation once again is going to rear it's

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Speaker 3: ugly ahead and be a problem not only for Trump

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Speaker 3: but for how to navigate. So you have all of

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Speaker 3: those things happening, and then on top of that, you

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Speaker 3: have the protectionist tariff policies, which I'm not saying I'm

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Speaker 3: for or against. I'm just letting the markets know they

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Speaker 3: are disruptive. And anytime you have disruption, you get volatility.

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Speaker 3: Anytime you get volatility, you're going to have to time

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Speaker 3: the market just right, or you're going to have to

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Speaker 3: go for the long value plays and not try to

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Speaker 3: get the price action that you might have otherwise tried

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Speaker 3: to get on the upside. So all around, it's disruptive,

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Speaker 3: it's volatile, and we need to give this probably a

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Speaker 3: good three months out to really have an understanding of

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Speaker 3: where we're going to be with this administration over these

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Speaker 3: next twelve months.

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Speaker 2: It's always a pleasure to talk with you. Thank you, Rebecca.

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Speaker 2: Rebecca Walls are there, President of walls Er Wealth Management,

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Speaker 2: joining from Florida here on the Daybreak Asia Podcast. Thanks

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Speaker 2: for listening to today's episode of the Bloomberg Daybreak Asia

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Speaker 2: Edition podcast. Each weekday, we look at the story shaping markets, finance,

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Speaker 2: and geopolitics in the Asia Pacific. You can find us

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Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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Speaker 2: else you listen. Join us again tomorrow for insight on

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Speaker 2: the market moves from Hong Kong to Singapore and Australia.

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Speaker 2: I'm Doug Chrisner, and this is Bloomberg