Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner.
Speaker 2: We had a mixed finish for US equities given some
Speaker 2: angst ahead of earnings this week from four mag seven members,
Speaker 2: and sentiment was dampened a bit as well by news
Speaker 2: over the weekend. The China's Huawei Technologies is set to
Speaker 2: test a new chip. Here is Bloomberg's Valerie Titel.
Speaker 3: Huawei is reportedly preparing to test a new AI chip
Speaker 3: that it hopes can replace some of those products replaced
Speaker 3: by Navidia. This comes from the Wall Street Journal reporting
Speaker 3: that Huawei has approached some Chinese tech companies about testing
Speaker 3: the new chip. The new processor would put China's capabilities
Speaker 3: around two generations behind Navidia's new Blackwell chip.
Speaker 2: That is Bloomberg's Valerie Titel. Their shares an Nvidia. We're
Speaker 2: down today by more than two percent. Now we're also
Speaker 2: expecting a flurry of economic data this week and in
Speaker 2: a moment speaking with Clayton Trick, he is head of
Speaker 2: portfolio management at angel O Capital Advisors. But we begin
Speaker 2: this morning in the Asia Pacific. The Asian Development Bank
Speaker 2: has lowered its growth forecast for the continent, the institution
Speaker 2: saying that US tariffs will shave growth in the region
Speaker 2: by a third of a percentage point, falling to four
Speaker 2: point nine percent in twenty twenty five, and then dropping
Speaker 2: by a full percentage point in twenty twenty six to
Speaker 2: four point seven percent. Now, the ADB released its annual
Speaker 2: outlook on Wednesday, numbers for which were calculated before the
Speaker 2: April second tariff announcement was made by President Trump, and
Speaker 2: the ADB's chief economist has already said those numbers will
Speaker 2: be revised lower in its July report. For more, we
Speaker 2: heard from the President of the Asian Development Bank, Masato Conda.
Speaker 2: He spoke exclusively with Bloomberg sherry On in Tokyo.
Speaker 1: You're really coming directly from Washington, DC. Tell us a
Speaker 1: little bit about those conversations about the trade negotiations and
Speaker 1: how that's really weighing on developing Asia.
Speaker 4: Yeah, of course, we have talked about the you know,
Speaker 4: the challenges, particularly from the conflict, geopolitical attentions, but also
Speaker 4: we discussed much more about the opportunities because you know,
Speaker 4: of course this is a lot of difficult times, but
Speaker 4: we've got to translated these challenges into the opportunities to improve.
Speaker 4: So we have talked very much about the for instance,
Speaker 4: the private sector development and private capital mobilizations, and it
Speaker 4: illiginated with the ministers, including the US A tragedy, security,
Speaker 4: a scot Present and all of the mdb has including
Speaker 4: the world of bank prisons A Jabanga and particularly I
Speaker 4: put my ambition to increase private sector lending full forward
Speaker 4: to thirteen billion annually lending to the private sector.
Speaker 1: How feasible are those plans when the global economy faces
Speaker 1: a potential downturn, given of course, all the challenges around trade.
Speaker 4: Yeah, of course this is strange in time, but this
Speaker 4: is a great opportunity to make more resisions under this,
Speaker 4: you know, building the enabling environment for private sector invests,
Speaker 4: for instance, they through the very good deportics including the
Speaker 4: deregations or or even the privatization, and the capital market
Speaker 4: development and the regional corporation, the connectivity all over, then
Speaker 4: we can support.
Speaker 1: Do you see the potential and risk of a downturn globally?
Speaker 4: Of course we have pretty much vigilant because you know,
Speaker 4: as you mentioned, the Asian economy is a lather exposed
Speaker 4: to the global market. So through not only the trade
Speaker 4: it but also the financial capital market. There by the
Speaker 4: decrease the confidence or the you know, rather weak sentiment.
Speaker 4: But I think the agent countries are stronger than in
Speaker 4: the past, but no room for comprecencis. So this is
Speaker 4: the time for Asia to boost the domestic demand. And
Speaker 4: there are parts of the sound economic policy and the
Speaker 4: you know or diversify the uh you know, industries and
Speaker 4: the trade partners as.
Speaker 1: Well, diversified partners and training within the region. Even more
Speaker 1: so when you have when you're facing these incredible rates
Speaker 1: of terists coming from Washington, d C.
Speaker 4: Yeah, I believe that this is the opportunity to you know,
Speaker 4: even open more actually you know, the this is the
Speaker 4: moment the need to find out the more partners the economies,
Speaker 4: but not only from the US or others, but always
Speaker 4: I believe the diversification of the industries is good.
Speaker 1: Does not train include China because Washington wants to restrict
Speaker 1: any conversations with Beijing.
Speaker 4: Not really, but of course the United States is a
Speaker 4: very much important pattern of all us. The foundational, the
Speaker 4: shareholders and the one of the largest that I really value,
Speaker 4: the advices and the looking forward to the even crosser
Speaker 4: partnership with the United States, but also the China is
Speaker 4: a bit important to member countries, so we will try
Speaker 4: to find the solution benefiting benefiting or membership.
Speaker 1: How much of an opportunity is the fact that we
Speaker 1: could see stronger Asian currencies given the sell America sell
Speaker 1: US dollar trade.
Speaker 4: It's quite a difficult to terror because you know, particularly
Speaker 4: the trade street is full of uncertainty and changing ud
Speaker 4: by day. So what we can't do is to protect
Speaker 4: the regional economies against external shocks and the builder resisiens
Speaker 4: uh in the future shocks.
Speaker 1: The fact that, for example here in Japan, the yen
Speaker 1: wasn't incorporated in the trade negotiations. How important is it
Speaker 1: for all of these trading partners to separate those negotiations
Speaker 1: pretending to trade, pretending to financial markets like currencies.
Speaker 4: Or are inter related to the butter trade and the
Speaker 4: currency are quite a different animal, and probably there uh
Speaker 4: you know, needs to be negotiated from the uh you know,
Speaker 4: professional point of views in the respectively, but also for
Speaker 4: the polity side. Always for instance, that we needed to
Speaker 4: pass the sound of Marcro economic apology, which is a
Speaker 4: business protection about the currencies various so and also the
Speaker 4: deepening the capital market. The financial market would be a
Speaker 4: very good in any case. So you know, the what
Speaker 4: we can do and we should do is quite the same.
Speaker 1: Japan is one of the first to negotiate with Washington.
Speaker 1: Could this serve as a model in trade negotiations for
Speaker 1: developing Asia?
Speaker 4: Yeah, not really, I don't think so. But anyway, ADB
Speaker 4: will help all member countries to build their religions against
Speaker 4: these things and the otherwise, and if the shops comes,
Speaker 4: we have a variety of instruments and support, including the
Speaker 4: counta secret COLO assistance and also the UH the data
Speaker 4: management or captain market development. Many things we can do.
Speaker 1: Why don't you think that this trade negotiation model could apply,
Speaker 1: for example for the lights of Thailand Vietnam. We know
Speaker 1: that they also face really stiff tires coming from Washington.
Speaker 4: But as I said, what they can do and we
Speaker 4: can just is to for instance, the divastications of the
Speaker 4: trade partners. Who increases the regigions, so not only inside
Speaker 4: the for instance, the we are supporting their more connectivity
Speaker 4: amongst the same countries or sub regional initiatives, but also
Speaker 4: trying to find the more partners beyond the region and
Speaker 4: Also the deepening the trade agreement inside the region could
Speaker 4: be possible, including the uh you know, you know father
Speaker 4: developing towards the services and sects like.
Speaker 1: Prime Minister issue, for example, was in Thailand in Vietnam.
Speaker 1: What sort of cooperation do we need to see more
Speaker 1: between developing and developed countries?
Speaker 4: You know, this is quite simple, deeper under the you know,
Speaker 4: more opener so the you know, in terms of the
Speaker 4: uh you know products, you know, it could be broadened
Speaker 4: including the services sectors and also the uh you know,
Speaker 4: the liberal protection could be a lot of other So
Speaker 4: there are many things we can do, but it depends
Speaker 4: on the specific institutions, particularly the you know, each country
Speaker 4: has their own domestic political stations, so we've got to
Speaker 4: be very capful. But in principle probably the sticking to
Speaker 4: the open economy will be good for the.
Speaker 1: Digital sat Kana really good to have you with us
Speaker 1: here in the Tokyo studio. He's president of the Asian
Speaker 1: Development Bank.
Speaker 2: Welcome back to the Daybreak Asia podcast. I'm Derek Krisner.
Speaker 2: So in the States, it will be a busy week
Speaker 2: for both corporate earnings and economic data, and I think
Speaker 2: it's fair to say that the key question here is
Speaker 2: whether these numbers will begin to illustrate the impacts of
Speaker 2: the trade war. We're joined now by clay and Trick.
Speaker 2: He is head of portfolio management at angel O Capital Advisors.
Speaker 2: Clayton joining us from Atlanta, Georgia. Good of you to
Speaker 2: make time to chat with us. Give me your sense
Speaker 2: of where you think the overall economy is right now
Speaker 2: up against the tariffs that the Trump administration has put
Speaker 2: into effect.
Speaker 5: Yeah, definitely been an interesting start to the year. We
Speaker 5: really had anticipated this year could have a lot of turbulence.
Speaker 5: Investors went into twenty twenty five, you know, very very
Speaker 5: bolish on potential deregulation and tax cut bill at some
Speaker 5: point in twenty twenty five. But we definitely got a
Speaker 5: lot of turbulence. In the short term. The US economy,
Speaker 5: or at least capital markets in the last week really stabilized,
Speaker 5: but we are at different levels. You know, the SMP
Speaker 5: is down about ten percent from the peak in the
Speaker 5: first quarter. Corporate credit spreads are a little bit wider,
Speaker 5: but we are sinsing a stabilization here in the markets.
Speaker 5: It's really trying to see if some of the soft data,
Speaker 5: which has been getting a lot weaker in the last
Speaker 5: thirty days, you know, translates to weakness in hard data,
Speaker 5: and so you know, the jobs numbers coming out Friday,
Speaker 5: We're getting is report very soon, and so there's a
Speaker 5: lot that we're going to have to digest as market participants.
Speaker 2: We had an interesting piece on the Bloomberg today indicating
Speaker 2: that the US is still receiving containerships that departed China
Speaker 2: pre teariff, and if you accept the idea that it
Speaker 2: takes maybe thirty days perhaps a little more for those
Speaker 2: vessels to travel from China to the nearest US port,
Speaker 2: we really haven't felt the full impact quite yet, have we.
Speaker 5: Yeah, I don't think we have. I think that especially
Speaker 5: in DC, things these are moving very quickly. It does
Speaker 5: seem that deals are potentially going to get done very fast.
Speaker 5: So you know, things could evolve in the coming days
Speaker 5: and weeks on what deals get done between mean global leaders.
Speaker 5: But I agree, you know, we haven't seen that full
Speaker 5: impact yet. You know, the hard data has continued to
Speaker 5: be very strong. First quarter data looks to continue to
Speaker 5: be strong. We haven't really seen much of a slowing
Speaker 5: in the labor market. We really haven't seen a big,
Speaker 5: large increase in jobless claims, right in companies laying off.
Speaker 5: So overall, the hard data still looks pretty strong. It's
Speaker 5: really around trying to dissect when when the data potentially
Speaker 5: does change later this year. And for us, you know,
Speaker 5: the big question is there are a lot of cross
Speaker 5: currents right now happening in DC. Some are expansionary policy,
Speaker 5: some are contractionary policy. It's really around what is going
Speaker 5: to outweigh each other. And we think that you know,
Speaker 5: returns for market investors are really going to have much
Speaker 5: larger tails, both in the upside and downside risks. So
Speaker 5: a lot of things can really be evolving here.
Speaker 2: So we had a measure of manufacturing activity today for
Speaker 2: Texas published by the Dallas FED, and it weakened significantly.
Speaker 2: A lot of the businesses that were surveyed used towards
Speaker 2: like chaos and insanity to describe the turmoil as a
Speaker 2: result of these tariffs. And I'm wondering whether or not
Speaker 2: if things follow this same path, whether the level of
Speaker 2: pain expressed in market action is going to put some
Speaker 2: pressure on the administration to get deals done sooner rather
Speaker 2: than later, or whether you think there's a risk that
Speaker 2: the administration may stick to its guns and try to
Speaker 2: get more of what it's after, irrespective of what markets
Speaker 2: are saying.
Speaker 5: Yeah, no, we think that trying to happen. It seems
Speaker 5: the administration was definitely holding its ground early in April
Speaker 5: when there was the initial saw off in the equity markets.
Speaker 5: It really was the sharp move higher in the treasury
Speaker 5: yield that really happened over one week from four percent
Speaker 5: to north of four and a half percent. They're really
Speaker 5: seemed to create you know, indigestion if you will, in
Speaker 5: d C. And so it does seem like the overall
Speaker 5: tone is shifting, and the data has been slowing. To
Speaker 5: your point that Dallas FED was a pretty shocking lower number.
Speaker 5: There's a lot of soft data through surveys don't look
Speaker 5: quite good in the Beige Book talks about, you know,
Speaker 5: a slowing of hiring. So all those things are starting
Speaker 5: to crab collaborate and create an environment where we do
Speaker 5: think the tone is changing in DC. And so that's
Speaker 5: why we think markets in the short term redly stabilized.
Speaker 5: You know, we're not seeing a return of stock market,
Speaker 5: you know, to previous highs. We do think it's stabilized
Speaker 5: here as to tone and shifting and there's a lot
Speaker 5: more discussion around a tax build that seems a little
Speaker 5: more eminent. So it seems like things are happening in
Speaker 5: the background, but you know, don't feel like markets are
Speaker 5: out of the woods yet.
Speaker 2: It's going to be a very interesting week when it
Speaker 2: comes to the economic data. A couple of data points
Speaker 2: on the growth side GDP and at the end of
Speaker 2: the week the April employment report, and then we've got
Speaker 2: numbers that are more aligned with the inflation story. And
Speaker 2: I'm thinking here of the employment cost Index and the
Speaker 2: report on first quarter PCEE. Where are you right now
Speaker 2: in your view when you look at the balance between
Speaker 2: inflation on one hand and growth on the other.
Speaker 5: Yeah, we're in the camp that you know, typically when
Speaker 5: you get an inflation shock to tear ups, it is
Speaker 5: a little more transitory. We think the bond market right
Speaker 5: now is really pricing a FED that has changed their
Speaker 5: tune from an inflation reducing regime to a more of
Speaker 5: a growth supporter regime. This is the kind of the
Speaker 5: biggest wildcard, and that's where the markets are pricing in
Speaker 5: the FED funds rate to get you know, sub three
Speaker 5: percent in the coming quarters. So that's a that's a
Speaker 5: pretty big change in FED policy in environment where inflation
Speaker 5: you can could rise. Here, that's a huge wildcard that
Speaker 5: the market's pricing in. If we don't get the cuts
Speaker 5: that are expected, it could be quite different our perspective,
Speaker 5: but we think is going to happen. We definitely think
Speaker 5: you could see a slight move higher in inflation. But
Speaker 5: we're in the camp that growth was expected to continue
Speaker 5: to slow into twenty twenty five. So we've been looking
Speaker 5: for slower growth in the United States. The US consumer,
Speaker 5: which is the largest portion of GDP consumer spending, and
Speaker 5: the consumer was extremely strong conteenue to have really strong
Speaker 5: consumer spending through the fourth quarter. If you didn't have
Speaker 5: that strong of a consumer, you would have not had
Speaker 5: a positive GDP print. And so if you get a
Speaker 5: pause in a slowing a consumer spending throughout the middle
Speaker 5: of this year, we think that the FED is going
Speaker 5: to be more focused on the growth side of the equation,
Speaker 5: which we thought was already going to take place before
Speaker 5: this new kind of self inflicted on certain neighbor getting
Speaker 5: in DC.
Speaker 2: So if growth is going to slow and you're confident
Speaker 2: that any inflationary impact from the tariffs will be temporary,
Speaker 2: does that mean there are compelling opportunities right now in
Speaker 2: the bond market, let's say at the long end.
Speaker 5: Yeah, we would definitely agree the bond market looks quite attractive.
Speaker 5: You know, the figures we were talking about as a
Speaker 5: team today was that the fixed income market looks very solid,
Speaker 5: especially amidst a lot of the amount of volatility we
Speaker 5: are facing and headwinds potentially facing here in twenty twenty five,
Speaker 5: and so we think there's great opportunities and really investment
Speaker 5: grade fixed income areas like agency mortgages, even just treasuries,
Speaker 5: you're wrapped around kind of a four percent treasury yield
Speaker 5: that's north of inflation, so positive real rate level. So
Speaker 5: that at this juncture, given the really uncertainty you have
Speaker 5: on growth and the valuations, you see inequities. You know,
Speaker 5: we've been recommending investors look to be overweight US fixed income,
Speaker 5: but really focused on higher quality given the tails seem
Speaker 5: like you could have a lot more, it could be
Speaker 5: a lot fatter. Later in twenty twenty five, you were
Speaker 5: a little more cautious on lower quality areas of US
Speaker 5: fixed income. So we're more focused on the front end
Speaker 5: of the year curve relative to the long end but
Speaker 5: US high quality looks really attractive right now.
Speaker 2: In terms of corporate versus munis versus sovereign. How are
Speaker 2: you balanced right now?
Speaker 5: Yeah, so we're more weighted to two areas, one being
Speaker 5: the US homeowner and then also US corporate high investment
Speaker 5: great corporate credit. So while corporate credit is going to
Speaker 5: be more correlated with equity returns, we think that below
Speaker 5: investment grade corporate credit will be more correlated. We think
Speaker 5: high quality should actually perform quite well. The best real
Speaker 5: opportunity to rere tilted toward is the US homeowner. Agency
Speaker 5: mortgages being the primary example, one of the largest bond
Speaker 5: markets in the world. That is an area that is
Speaker 5: really benefiting from this higher rate volatility. Ie, you get
Speaker 5: a much higher income historically today than you do relative
Speaker 5: to treasury yields. Also, investors tend to overlook areas like
Speaker 5: non agency mortgages and asset back bonds. Those markets certainly
Speaker 5: never fully retraced from the seller off in twenty twenty
Speaker 5: two that we saw equities and corporate credit retrays, not
Speaker 5: agency mortgages and asset bag bonds, and they never go
Speaker 5: back to the levels that we had in twenty one,
Speaker 5: And so we see that as really the best opportunity
Speaker 5: for later in this year. We've been overweight those areas
Speaker 5: of the market, you know, really throughout twenty and twenty
Speaker 5: five to start, and we plan to continue to do
Speaker 5: that in the second world.
Speaker 2: All Right, we'll leave it there, Clayton, Thank you so much.
Speaker 2: Clayton Trick, he is head of portfolio management at angel
Speaker 2: Oak Capital Advisors. Joining us from Atlanta, Georgia here on
Speaker 2: the Daybreak Asia Podcast. Thanks for listening to today's episode
Speaker 2: of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we
Speaker 2: look at the story shaping markets, finance, and geopolitics in
Speaker 2: the Asia Pacific. You can find us on Apple, Spotify,
Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Speaker 2: Join us again tomorrow for insight on the market moves
Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Krisner
Speaker 2: and this is Bloomberg
Speaker 1: MHM.