Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.
Speaker 2: In a moment, we'll take a look at the story
Speaker 2: on tech stocks in China. David Chow will join us.
Speaker 2: He is global market strategist for the APAC at Invesco.
Speaker 2: But we begin in Hong Kong on a day when
Speaker 2: the Trump administration said it's considering reciprocal tariffs on numerous
Speaker 2: trading partners as soon as April. Joining us now is
Speaker 2: Helen Jew. She is managing partner also the CIO at
Speaker 2: NF Trinity. Helen joins from our radio studios in Hong Kong. Helen,
Speaker 2: thank you for making time to chat with us. I'd
Speaker 2: like to begin by getting your reaction when you hear
Speaker 2: that the Trump administration is saying, rather than a blanket tariff,
Speaker 2: we're going to create something with a bit of reciprocity,
Speaker 2: kind of tit for tat tariffs. How do you make
Speaker 2: sense of that?
Speaker 3: I think obviously the market is, you know, responding to
Speaker 3: this positively and seeing it as a better than feared
Speaker 3: type of potential resolution to the tariff threats that we
Speaker 3: have seen.
Speaker 4: So we all don't know.
Speaker 3: Too much about the reciprocal tariff regime, and obviously it's
Speaker 3: being cooked up at the moment. But if indeed it's
Speaker 3: going to be equaling out the tariff imbalance, then it
Speaker 3: actually means that we could have a scenario whereby everybody's
Speaker 3: cutting terriffs rather than just imposing more and more teriffs
Speaker 3: uniformly without.
Speaker 4: You know, rationale, et cetera.
Speaker 3: So that could actually be positive for global growth, and
Speaker 3: it could be positive for globalization and for countries like
Speaker 3: China that don't necessarily have huge tariff imbalances because China's
Speaker 3: not imposing a huge amount of tariffs on US imports,
Speaker 3: it could actually you know, be a relief.
Speaker 2: Speaking of relief, I'm seeing stocks in Hong Kong move
Speaker 2: higher at the moment, with the Hanks saying up about
Speaker 2: one per.
Speaker 4: That's the relief.
Speaker 1: Yeah, that is the relief.
Speaker 2: So is there an industry group that you think would
Speaker 2: benefit mostly from this type of policy.
Speaker 3: I think it really varies by country. So if I
Speaker 3: look at the US's exports, a lot of it is
Speaker 3: going to be like manufacturing in some materials and energy,
Speaker 3: you know, So I think it depends on what kind
Speaker 3: of deal can be worked out. But some of the
Speaker 3: country is most sensitive to the trade tariff imbalance with
Speaker 3: the US, include like for example, Indio, where he's uh,
Speaker 3: you know, obviously Trump has been talking to Moodi in
Speaker 3: the last couple of days. So I think the fact
Speaker 3: that you're going to settle this individually with different countries
Speaker 3: on a on a one by one basis is already
Speaker 3: a huge positive versus what the market was expecting. And
Speaker 3: for you know, very friendly allies that are nearby Mexico, Canada,
Speaker 3: et cetera, it's going to mean less onerous risk to
Speaker 3: them as well, right because they obviously export to the
Speaker 3: US a lot, but don't necessarily import a huge amount.
Speaker 3: And I'm guessing they probably don't have huge tariffs on
Speaker 3: US imports either, so that might actually give them a
Speaker 3: graceful way out and make them look less pressured.
Speaker 2: What is your sense of what is happening these days
Speaker 2: in China is so far as the economy is concerned
Speaker 2: right now, are we on a kind of an up
Speaker 2: trend at the moment? Have things turned a corner? And
Speaker 2: is there enough positivity to get you interested in putting
Speaker 2: money to work on the mainland?
Speaker 3: Well, I think the cyclical picture is basically stabilized, but
Speaker 3: hasn't really shown any meaningful signs of.
Speaker 4: V shape recovery.
Speaker 3: I think there's two main reasons why despite all the
Speaker 3: stimulus that's been put on over the last twelve months,
Speaker 3: there hasn't been too much reaction. One is because of
Speaker 3: the overhang of the uncertainty about the tariffs and the
Speaker 3: trade war.
Speaker 4: And the second one is.
Speaker 3: Actually because of the lagging and still suffering property market,
Speaker 3: as prices have come down and price expectation is still negative,
Speaker 3: which is actually a big burden on people's you know,
Speaker 3: wealth effect and expectation. So I think the former could
Speaker 3: have some short term relief if things had in the
Speaker 3: direction that we're talking about, which is obviously still some
Speaker 3: tariffs but maybe not as bad as what we had
Speaker 3: been anticipating. But the latter one, which is the property
Speaker 3: market and the price expectation, I think that still takes
Speaker 3: some time to fix and is probably not going to
Speaker 3: be an instantaneous recovery. But that said, I think the
Speaker 3: second derivative is improving, i e. Things are still declining,
Speaker 3: but declining at a lower pace versus before, so on
Speaker 3: the margin, I think that's actually a positive to some extent.
Speaker 2: So just on the basis of valuation alone, isn't China
Speaker 2: compelling from a valuation perspective.
Speaker 4: Certainly it has been compelling for quite some time.
Speaker 3: It's just that people have been worried about the grave
Speaker 3: uncertainties facing the economy for the reasons that I had mentioned.
Speaker 4: I think it has to.
Speaker 3: Come from, you know, whatever happens with the tariffs with China.
Speaker 3: The sooner that you have clarity and it gets sorted out,
Speaker 3: the better. If everything gets dragged out until end of
Speaker 3: this year or even into next year, even if the
Speaker 3: end result ends up being not too bad, just that
Speaker 3: you know, never ending uncertainty I think is going to
Speaker 3: be you know, pretty negative for the broader economy because
Speaker 3: people won't really know whether they should place orders, whether
Speaker 3: they should hire people. All of those decisions are going
Speaker 3: to be you know, in.
Speaker 2: Doubt, we had some dollar weakness during New York trading today,
Speaker 2: the combination of lower treasure yields also the delay of
Speaker 2: those reciprocal tariffs. To what extent has a strong dollar
Speaker 2: been problematic for putting money to work in Asia?
Speaker 3: Oh, it's been a huge problem. I mean, that's been
Speaker 3: the key factor to weigh on asset prices in Asia,
Speaker 3: in China, and particularly in the rest of emerging markets. Actually,
Speaker 3: in this regard, the R and B has been much
Speaker 3: more resilient and much less volatile versus most other Asian
Speaker 3: currencies and emerging market currencies, mostly because of the PBOC
Speaker 3: intervention and defense of the currency. But if the dollar
Speaker 3: can you know, start to weaken to some extent or
Speaker 3: at least not strengthen even further, I think that would
Speaker 3: be a massive positive for the rest of the world
Speaker 3: in terms of asset prices. And we're actually much more
Speaker 3: positive on the rest of the world versus on US.
Speaker 3: Obviously last year was all about US exceptionalism, especially after
Speaker 3: the election heading into the year end.
Speaker 4: But you know, a few factors.
Speaker 3: One is that the US economy, despite being strong, you know,
Speaker 3: the long end, may not necessarily keep going up, especially
Speaker 3: you know, Scott Besson talked about bringing down the long
Speaker 3: end if at all possible, through less supply of treasuries
Speaker 3: and so on and so forth. And then I think
Speaker 3: on the margin, the less than worst case Tariff's scenario
Speaker 3: is positive for the rest of the world, and on
Speaker 3: the margin, any kind of progress towards resolution of the
Speaker 3: wars in the Middle East and Ukraine are going to
Speaker 3: be more positive for the rest of the world, Europe, etc.
Speaker 4: For the US. So some of these factors are shifting
Speaker 4: away from.
Speaker 3: The US exceptionalism thesis that had been in place for
Speaker 3: a long time.
Speaker 2: When we look at the inflation story in China, the
Speaker 2: latest CPI data showed a slight improvement, a little bit
Speaker 2: of positivity, but certainly when you look at factory gate data,
Speaker 2: I think we are negative for a twenty eighth consecutive month,
Speaker 2: so clearly at the wholesale level mired in deflation. Still,
Speaker 2: how is Beijing going to deal with this? And if
Speaker 2: it is not dealt with to what degree? Is this
Speaker 2: a major problem?
Speaker 4: Oh, it has been a major problem for a couple
Speaker 4: of years.
Speaker 2: Are one of eight months.
Speaker 3: One of the key issues though, is is that, well,
Speaker 3: the consumer confidence and you know, the lackluster you know,
Speaker 3: overall activity level. I think that's definitely been a factor.
Speaker 3: But the other factor, which might actually reverse on its own,
Speaker 3: is just that food prices, you know, the hog cycle
Speaker 3: and so on and so forth, were really dire and
Speaker 3: dragging down.
Speaker 4: The CPI as well.
Speaker 3: But that has started to improve as the supply has
Speaker 3: exited and as the base effect gets easier, so I
Speaker 3: think the food would be less of a drag. As
Speaker 3: for the core, it's been positive overall throughout this period,
Speaker 3: somewhere between zero and one percent positive, so definitely not
Speaker 3: a huge boost, but certainly I think if there is
Speaker 3: any kind of improvement in the confidence because of the
Speaker 3: teriff situation, because of the simulative policies that the government
Speaker 3: has put on, I think that will eventually start to
Speaker 3: show through. The major risk to a reflation story in
Speaker 3: China would be if energy price is crashed globally because
Speaker 3: of what's happening outside of China.
Speaker 4: Let's say, for example, if.
Speaker 3: The wars end and oil price moves down by ten
Speaker 3: bucks or something like that, then you know, associated with that,
Speaker 3: metals prices and everything else would react accordingly, which might
Speaker 3: create an error pocket of de stocking for various companies
Speaker 3: as they wait to buy things cheaper, you know, three
Speaker 3: to six months later. But overall, speaking for a country
Speaker 3: like China that's very reliant on import of energy and materials,
Speaker 3: it's still net positive versus the deflationary forces on the
Speaker 3: rest of the world might be less positive.
Speaker 2: We're going to talk about the high tech story in
Speaker 2: China with our next guest in a moment or two.
Speaker 2: But I want to get your take on what we've
Speaker 2: seen recently with the development on deep seek artificial intelligence
Speaker 2: in China. What do you think is important to tease
Speaker 2: out here?
Speaker 3: Well, I think, you know, it's quite clear that the
Speaker 3: world has just recognized that there are very rapid technological
Speaker 3: developments in China as well as in the US. And
Speaker 3: this is actually quite surprisingly impactful outside of China as well,
Speaker 3: because you know, apparently the American consumer cares more about
Speaker 3: being able to use an LM for free and saving
Speaker 3: the twenty bucks off TRAGBT and less concerned about whether
Speaker 3: this is a you know, invasion of Chinese technology into
Speaker 3: the US society and whether you know, the Chinese are
Speaker 3: going to run off with any of their personal queries information. So,
Speaker 3: you know, if there can be any global potential for
Speaker 3: China AI, that would be the you know, kind of
Speaker 3: really upside case scenario. I'm a little bit concerned and
Speaker 3: skeptical because I think the geopolitical situation is not going
Speaker 3: to improve so much in the short term that.
Speaker 4: Many other countries are going to trust China AI.
Speaker 3: There's probably still a more permanent decoupling from a strategic
Speaker 3: technologies perspective that will last even if the near term
Speaker 3: cyclical trade situation sees a better than expected outcome.
Speaker 2: And we didn't even discuss TikTok. We'll save that for
Speaker 2: next time. Helen, Thank you so much. Helen's you there,
Speaker 2: Managing partner and CIO at NF Trinity from our studios
Speaker 2: in Hong Kong, joining us here on the Daybreak Asia
Speaker 2: Podcastcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.
Speaker 2: We go next to Singapore and we find David Choo.
Speaker 2: He is the global market strategist for the apec at Invesco. David,
Speaker 2: thanks for being with us. It's always a pleasure to
Speaker 2: chat with you. Earlier today in the US, there was
Speaker 2: a fair amount of positivity as it related to President
Speaker 2: Trump essentially delaying some of the reciprocal tariffs that the
Speaker 2: new administration is considering. We understand they're not going to
Speaker 2: take place right away. Maybe the market's hoping for some
Speaker 2: type of negotiation. So when you assess risk of these
Speaker 2: tariffs as it relates to US trading partners like China, Japan,
Speaker 2: South Korea, does that cause you a bit of unease
Speaker 2: in terms of putting new money to work in the
Speaker 2: Asia Pacific.
Speaker 5: Well. To be frank, the teriffs that that am In
Speaker 5: levied against China, I'm not ten percent was much better
Speaker 5: than the sixty percent that we feared that President Trump
Speaker 5: previously hadn't mentioned before.
Speaker 1: And I think that.
Speaker 5: Taking a much more conciliatory gesture and attitude towards China,
Speaker 5: which I think is a positive development, and it is
Speaker 5: also one of the reasons why I think Chinese stocks
Speaker 5: have also done well. This reciprocal tariff that has just
Speaker 5: been announced, I think it's a much bigger deal than
Speaker 5: the universal measures so previously Trump you know, you know,
Speaker 5: was interested in imposing a flat universal tariff of ten
Speaker 5: to twenty percent on imports from all countries, but now
Speaker 5: it seems like he's moving towards the reciprocal tariffs to
Speaker 5: be imposed on a country by country basis. Now, if
Speaker 5: we look at which countries are the big losers and
Speaker 5: the big winners on that, you know, the big losers
Speaker 5: would be like India and Brazil. I think they would
Speaker 5: be hit the hardest, followed by the EU and the UK,
Speaker 5: you know, Mexico and Canada and the winners would actually
Speaker 5: be places like Singapore, Taiwan, and Korea.
Speaker 2: But companies in China haven't they already repositioned some of
Speaker 2: their supply chains to try to get around these tariffs.
Speaker 1: That's right.
Speaker 5: I mean they've had what like around eight years to
Speaker 5: be able to prepare, and we've seen significant supply chain diversification.
Speaker 5: So if you look at the trade between the US
Speaker 5: and China, it's it's downced pretty meaningfully over the past
Speaker 5: eight years. Although the China still enjoys a trade surplus,
Speaker 5: it's it's much less than what it was before. Now
Speaker 5: China does more trade between you know, China and Southeast
Speaker 5: Asia than and than China and US. But to be frank,
Speaker 5: you know, maybe some of these Chinese companies are using
Speaker 5: places like Mexico to rewraup some of this trade and
Speaker 5: get around some of these tariff barriers into the US.
Speaker 5: And so we've seen that the trade deficit between Mexico
Speaker 5: and the US has grown around you know, the same
Speaker 5: amount as the trade deficit between China and Mexico.
Speaker 2: There is no mistaking the exuberance that we have seen
Speaker 2: in China regarding artificial intelligence recently, especially since the unveiling
Speaker 2: of that chatbot from deep Seek. Is this a trade
Speaker 2: that you must be participating in right now?
Speaker 5: Well, we have become more constructive on Chinese equities starting
Speaker 5: around them the summer of last year. Given where valuations were,
Speaker 5: we thought that they really reached kind of the bottom,
Speaker 5: and then we saw significant fiscal and monetary stimulus measures
Speaker 5: that were announced.
Speaker 1: It seems like the government has really pivoted.
Speaker 5: Towards ensuring that both the market and the economy starts
Speaker 5: to turn around.
Speaker 3: Now.
Speaker 5: Now, this Deep Seek development, I think is a gift
Speaker 5: in terms of a catalyst that investors can use.
Speaker 1: To look at Chinese equities again.
Speaker 5: And when foreign investors pivot back to China, we know
Speaker 5: that Chinese equities have been unloved so long that the
Speaker 5: first stocks that they buy are the big cap tech
Speaker 5: stocks you know, trading on on Hong Kong. And we've
Speaker 5: seen you know, the Hangsang Tech type index you know,
Speaker 5: up double digits so far these days. So I think
Speaker 5: that if investors wanted to dip their toes back into
Speaker 5: China bond, Chinese tech would be the place to look at.
Speaker 2: I'd like to get your perspective on where we are
Speaker 2: in the recovery of the mainland economy, especially as it
Speaker 2: relates to the property market. Are things is a bottom?
Speaker 2: Let me put it that way, is a bottom firmly
Speaker 2: in place.
Speaker 5: I'm not I'm not going to be the one that called,
Speaker 5: you know, the property in China, you know, has bottom.
Speaker 5: What I will say, things are getting less bad, and
Speaker 5: I think that's already a pretty positive development.
Speaker 1: So what we have to.
Speaker 5: See, you know, is at bottoming would be when across
Speaker 5: the board the property data starts to stabilize or improve.
Speaker 5: We're starting to see prices in first year cities like
Speaker 5: Shanghai and Beijing both you know, primary and secondary home
Speaker 5: prices start to improve, but not so much in Tier
Speaker 5: three in tier four cities, but it seems like the
Speaker 5: government is taking a much more muscled approach, you know,
Speaker 5: bailing out developers, really loosening restrictions on property purchases.
Speaker 6: So what I would say is that I expect more
Speaker 6: of a stability of housing prices, new home starts floor
Speaker 6: area sold by the middle of this year, and if
Speaker 6: the property market can just stabilize and you know from
Speaker 6: the second half of this year, now that really add
Speaker 6: a tail into economic growth in China for the year.
Speaker 2: So stability, does that necessarily translate into improved consumer sentiment?
Speaker 2: And maybe while we're talking about the Chinese consumer, you
Speaker 2: can give me your perspective on what you observed over
Speaker 2: the recent Lunar New Year holiday.
Speaker 7: Sure, I'd say that there are green shoots in consumer spending,
Speaker 7: household spending in China, and.
Speaker 5: The initial data out of China during the Lunar Nei
Speaker 5: year last week pointed to pretty strong activity.
Speaker 1: So domestic trips were.
Speaker 5: Up five point nine percent compared to last year, and
Speaker 5: spending on these trips rose seven percent according to the
Speaker 5: Chinese data.
Speaker 1: And Chinese thoughts reacted.
Speaker 5: Pretty strongly, you know, when they reopened following the holiday.
Speaker 5: So as you know, domestic spending is the key. It's
Speaker 5: the crux I think for more investors this year, whether
Speaker 5: it picks up or not. And I think that it
Speaker 5: is directly linked to the property market, so you can
Speaker 5: see more stable signs coming out of the property market.
Speaker 5: I think that investors feel a lot more confident to
Speaker 5: go out and consume.
Speaker 2: So away from China, you mentioned the positivity that you're
Speaker 2: seeing in Singapore. I'm wondering if they're other markets or
Speaker 2: jurisdictions in the APEC region where maybe foreign investors would
Speaker 2: find value.
Speaker 5: Well, I think what's interesting is going on in India
Speaker 5: Indian stock. Indian stocks are down around you know, eleven
Speaker 5: twelve percent from their highs in September. But this is
Speaker 5: after you know, they've had you know, a huge bowl run. Right,
Speaker 5: Indian stocks are the only stock that have outperformed the
Speaker 5: S and P over the past twenty years.
Speaker 1: So the economy experiencing a bit of a cyclical slowdown.
Speaker 5: The previous quarter growth was something like, you know, five
Speaker 5: and a half five point seven percent, you know, you know,
Speaker 5: which missed expectations, you know, which were around six and
Speaker 5: a half percent, and that was because you know, consumer
Speaker 5: spending is also taking a bit of a back seat.
Speaker 5: Government spending, uh, you know, was on a pause, you know,
Speaker 5: after the elections last year as the government formed a cabinet.
Speaker 5: But things I think are starting to turn up for
Speaker 5: for the cyclical growth part in India. And so despite
Speaker 5: Indian stocks being expensive, you know, investors have traditionally paid
Speaker 5: up for growth, and IDIA is the only major economy
Speaker 5: where growth is going to accelerate, you know, from five
Speaker 5: point seven to six and a half percent in the
Speaker 5: coming year. Maybe seven and a half percent in the
Speaker 5: next year. So I'm bullish on Indian stocks. I think
Speaker 5: that for investors that had been waiting, you know, for
Speaker 5: Indian socks that come down, I think this could be
Speaker 5: an interesting opportunity.
Speaker 2: David, thank you so much for taking the time to
Speaker 2: chat with us. David Chow there, global market strategist for
Speaker 2: the APEC at Invesco, joining from Singapore here on the
Speaker 2: Daybreak Asia podcast. Thanks for listening to today's episode of
Speaker 2: the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look
Speaker 2: at the story shaping markets, finance, and geopolitics in the
Speaker 2: Asia Pacific. You can find us on Apple, Spotify, the
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Speaker 2: us again tomorrow for insight on the market moves from
Speaker 2: Hong Kong to Singapore and Australia. I'm Doug Risner and
Speaker 2: this is Bloomberg.
Speaker 3: Hmm.