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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 Dan Schwartzman.

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Speaker 2: Doug Risner has the week off. It's a busy start

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Speaker 2: to the month of September in the pack Rim. World

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Speaker 2: leaders have converged on Tianjin, China for the Shanghai Cooperation

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Speaker 2: Organization Summit. On Sunday, Indian Prime Minister Neuendromodi met with

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Speaker 2: Chinese President Shijhin Ping as the two nations look to

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Speaker 2: restore economic ties. Bloomberg's North Asia correspondent Steven Engel is

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Speaker 2: at the summit.

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Speaker 3: It's been around since two thousand and one, but hasn't

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Speaker 3: really gained a lot of global prominence yet. But this

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Speaker 3: is going to be the biggest one to date with

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Speaker 3: more than twenty world leaders. Actually, in fact, you're going

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Speaker 3: to have the leaders of China, India, Russia, Iran Pakistan

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Speaker 3: among others, all on the same stage for the first

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Speaker 3: time in many years. So there is some growing clout,

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Speaker 3: of course, amid the ongoing trade friction coming from Washington.

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Speaker 3: And I think you know, the China Russia dynamic is

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Speaker 3: going to build upon strengths the no Limits partnership between

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Speaker 3: Sheep and Putin is going to be there. Whether we're

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Speaker 3: going to get any oil deals or energy deals announced,

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Speaker 3: it's yet to be seen. This might not be a

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Speaker 3: real newsworthy event. It's more about China sort of courting.

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Speaker 3: India is the big fish to catch right now because

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Speaker 3: they're long time known for strategic autonomy. They don't really

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Speaker 3: have any defense treaties signed with anybody. Yes, they're part

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Speaker 3: of the Quad along with the United States, Australia and Japan.

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Speaker 3: They're also part of BRICKS and then SEO, but they

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Speaker 3: don't have any security alliance inked. They like that strategic

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Speaker 3: ambiguity or strategic autonomy. So that's why the full court press,

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Speaker 3: if you will. The courting of Modi here is ongoing

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Speaker 3: and already render Modi has announced that they're going to

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Speaker 3: resume flights between the two countries between China and India

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Speaker 3: that have been suspended since the pandemic and never resumed

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Speaker 3: because of border clashes back in twenty.

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Speaker 2: Twenty Bloomberg Stephen Engel reporting from chian Jin. Coming up,

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Speaker 2: we'll bring you more on the potential economic impact to

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Speaker 2: this week's summit, but we begin in Indonesia. President Prabovo

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Speaker 2: Subianto is calling for comm following violent demonstrations over the weekend.

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Speaker 2: Protests in the country turned deadly after a police vehicle

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Speaker 2: ran over a twenty one year old food courier in Jakarta.

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Speaker 2: For more, we hear from Bloomberg's Paris Mactar in the

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Speaker 2: Indonesian capital. He spoke at Bloomberg's sherry On in April.

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Speaker 2: Honk on the Asia Trade.

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Speaker 4: Farrist talk us through what triggered the protest? Why are

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Speaker 4: the people demanding?

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Speaker 5: Yes, April so, like you know, as you pointed out,

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Speaker 5: the flash point was really the pugs for the lawmakers

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Speaker 5: in parliament and the people at this juncture are seeing

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Speaker 5: economic slowdown, weakening consumption, and on top of that they

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Speaker 5: have viewing the lawmakers is rubbing salt on their wounds

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Speaker 5: by demanding for you know, higher allowances for example, more

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Speaker 5: housing allowance, and these you know, frustrations have actually built

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Speaker 5: up over the past few months as Indonesia see layoffs

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Speaker 5: after layoffs, factories closing down because of you know, the

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Speaker 5: domestic slowdown in that sense, and the request by the

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Speaker 5: lawmakers are seen as excessive and seen as you know,

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Speaker 5: the political elites being out of touch with the ground.

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Speaker 1: The president has been in power for less than a year,

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Speaker 1: so what is he trying to do in order to

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Speaker 1: try to appease the public.

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Speaker 5: So the political parties met last evening and the president

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Speaker 5: delivered a statement saying that you know, they're scrapping those perks,

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Speaker 5: that Parliament needs to be more in touch, you know,

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Speaker 5: with people's sentiments. Some are actually saying that you know this,

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Speaker 5: you know the statement, you know, the intervention should have

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Speaker 5: made earlier, you know, before the realities happened to calm

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Speaker 5: the ground. And as you pointed out, Sherry, like you know,

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Speaker 5: since President Pravo took over, it has been a tumultuous,

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Speaker 5: you know rain for him. That were massive protests early

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Speaker 5: in February. You know, the stocks and markets plunged in

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Speaker 5: March because of you know, concerns over his expensive uh

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Speaker 5: you know, and expensive policies. So right now, for the government,

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Speaker 5: the focus is to calm sentiments. Companies are already instituting

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Speaker 5: work from home policies, you know, out of precautionary measures

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Speaker 5: that you know, protests could occur today and the ensuing days.

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Speaker 4: Far is how much worse might it get for the president?

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Speaker 4: What is the way forward now for him and his government.

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Speaker 5: Right now, the protest what is actually sending to the

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Speaker 5: lawmakers and to the government is that you know, the

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Speaker 5: people are actually you know, really fed up with the

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Speaker 5: economic situation. Uh. You know, there is no stable salaries

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Speaker 5: for them. You know, it is hard to find a job.

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Speaker 5: It is really awake call for the political elites that

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Speaker 5: the people will be watching and scrutinizing their every move

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Speaker 5: and that you know, should another display of excessive lifestyle

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Speaker 5: by the politicians would trigger similar protests. Right now, the

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Speaker 5: focus is really to calm the situation. The president has

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Speaker 5: already said that, you know, authorities would take firmer action

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Speaker 5: should there be more you know, anarchy on the streets.

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Speaker 5: But right now I think it is really trying to

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Speaker 5: reconfigure how to govern Indonesia better and be more in

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Speaker 5: touch with people sentiments.

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Speaker 1: We have Indonesia's inflation data later today. The number is

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Speaker 1: supposed to have stabilized for the month of August. What

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Speaker 1: are we seeing in the broader economy and what the

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Speaker 1: central bank can also do for the country.

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Speaker 5: Yes, so the central bank has constantly been intervening, you know,

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Speaker 5: whether it's because of geopolitical headwinds, or is it because

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Speaker 5: of you know, domestic instability. You know, on the broadest cope,

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Speaker 5: what we have been seeing over the last few months

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Speaker 5: is really weakening consumption, and that's pointing to you know,

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Speaker 5: multiple factors, which is you know, people not being able

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Speaker 5: to secure jobs, and those people include graduates. In fact,

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Speaker 5: what you're seeing is that you know, people are not

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Speaker 5: getting stable salaries because of the loss of jobs, and therefore,

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Speaker 5: you know, they can't really contribute much to the economy.

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Speaker 5: And on top of like, you know, the domestic instability

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Speaker 5: and on top of the lack of clarity in terms

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Speaker 5: of domestic policies, Indonesia has to contend with you know,

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Speaker 5: the geopolitical headwinds from the tariffs. So it's kind of

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Speaker 5: like a double whermy in that sense for the country.

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Speaker 5: So right now, what the government is trying to do

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Speaker 5: is just digging its sills and executing its policies. But

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Speaker 5: at the same time you are also seeing flexibility to

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Speaker 5: like you know, intervene in the markets when when needed

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Speaker 5: and adjusting the policies when needed, which the president has

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Speaker 5: done so so far.

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Speaker 4: Farris, thank you so much. Farres Motta for US Bloomberg

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Speaker 4: Southeast Asia Global Business reporter.

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Speaker 2: Welcome back to the Daybreak Gasia podcast. I'm Dan Schwartzman.

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Speaker 2: Doug Chrisner is off this week. Geopolitics will be one

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Speaker 2: of the key market themes this morning. US President Donald

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Speaker 2: Trump's tariff campaign hit a snag on Friday. That's when

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Speaker 2: a federal court ruled that his global levies were illegally

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Speaker 2: imposed under an emergency law. For now, the duties, though,

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Speaker 2: remain in place, with the administration likely to appeal to

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Speaker 2: the US Supreme Court. Meantime, investors are turning to Asian

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Speaker 2: markets as a safe haven for more. We heard from

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Speaker 2: Ron Temple, chief market strategist at Lazard. He spoke at

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Speaker 2: Bloomberg Sherryon and April Hank on the Asia trade.

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Speaker 4: Ron wondering if you could just first way in because

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Speaker 4: we did get numbers out of Japan on capital expenditure

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Speaker 4: that looked quite strong. We know this tells us about

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Speaker 4: longer how businesses are planning in the country. What is

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Speaker 4: your sense of the extent in which this solidifies the

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Speaker 4: bit for a bog hike in October.

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Speaker 6: I'm still a bit skeptical that we'll get a rate

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Speaker 6: hike from the BOJ in October. And frankly, I'm skeptical

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Speaker 6: that we would get one even by the end of

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Speaker 6: the year. The markets are saying about an eighty percent

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Speaker 6: chance of one twenty five basis point hike by year end.

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Speaker 6: I think, given the amount of uncertainty in the global backdrop, though,

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Speaker 6: the boj would be well served not to raise rates.

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Speaker 6: We'll have to wait for any additional signals. There clearly

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Speaker 6: inflation running well above their target. But I think again,

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Speaker 6: there are some clear signs if you look in the data,

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Speaker 6: that that inflation will fade as we move through the

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Speaker 6: next year, and so I'm a bit skeptical in terms

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Speaker 6: of that rate hike likelihood.

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Speaker 4: How do you feel about Japanese stocks so as a

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Speaker 4: way to position diversify away from the US.

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Speaker 6: Yeah, I'm positive on Japanese equities, but I think it's

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Speaker 6: absolutely critical to be activelyged managing your exposure in Japan.

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Speaker 6: To me, when I look at Japan, this is not

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Speaker 6: a macroeconomic growth story. The structural issues around demographics, around

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Speaker 6: the burden of debt have not really changed. But what

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Speaker 6: I see that's really exciting in Japan is finally we

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Speaker 6: have basically a three part thesis deflation is dead, Number two,

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Speaker 6: corporate governance reforms and changes to the corporate takeover code

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Speaker 6: are forcing companies to basically better manage their capital base

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Speaker 6: and their operations. And number three, we continue to see

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Speaker 6: flows of capital in the household sector out of bank

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Speaker 6: deposits and currency into risk your assets. And so I

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Speaker 6: do think the companies that have basically gotten religion in

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Speaker 6: terms of improving their returns on capital will deliver better

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Speaker 6: returns to shareholders and can basically give you somewhat of

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Speaker 6: an idiosyncratic play in a world where US market gyrations

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Speaker 6: tend to move the rest of the markets to some

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Speaker 6: degree upward or downward.

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Speaker 2: That's what I was.

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Speaker 1: Going to ask, is about relative attractiveness. Right, So, for example,

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Speaker 1: if you compare it to the United States, we have

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Speaker 1: seen the course valuations already pretty stretch tech rallying, and

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Speaker 1: on top of that, September is supposed to be a

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Speaker 1: week or month. So does this mean that you would

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Speaker 1: take money a little bit off the table in the

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Speaker 1: US and go elsewhere including Japan?

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Speaker 6: Yeah? I mean I do think. By the way, if

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Speaker 6: you look back over the last seventeen or eighteen years,

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Speaker 6: literally from late two thousand and seven all the way

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Speaker 6: through the end of twenty twenty four, US equities have

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Speaker 6: significantly outperformed almost all major developed and even emerging market

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Speaker 6: equity markets. I think for investors it's time to reevaluate

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Speaker 6: that asset allocation. You know, the US is seventy four

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Speaker 6: percent of the MSCI World Index, sixty four percent of

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Speaker 6: the all country world INDECKS. That is a really high exposure,

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Speaker 6: driven in part by those years of outperformance. But in

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Speaker 6: my view, we're at the beginning of the end of

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Speaker 6: American exceptional GDP growth rates are structurally slowing down, inflations

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Speaker 6: likely to be higher than most markets for the next

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Speaker 6: one to two years, and I think there are many

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Speaker 6: other factors that led to the US being seen as

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Speaker 6: the gold standard. From a currency perspective, the reserve currency,

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Speaker 6: treasuries the safest place to park your money, and equity

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Speaker 6: is a great place to get growth. I think different

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Speaker 6: facets of those arguments are being chiseled away at this point,

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Speaker 6: and the valuation is very stretched, So I think it's

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Speaker 6: a very good time for investors to be looking at

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Speaker 6: non US markets, and.

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Speaker 1: My non US markets, would you also lean towards emerging markets.

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Speaker 1: We have seen the longest winning streak on a monthly

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Speaker 1: basis in twenty seventeen, But at the same time, how

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Speaker 1: much of that was just China? And would you up

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Speaker 1: your bet on China as well?

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Speaker 6: My favorite market at this point is emerging markets, and

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Speaker 6: that's on a five to ten year view. We've had

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Speaker 6: again that extended period of underperformance and emerging markets. It's

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Speaker 6: always hard to disentangle how much is just driven by China.

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Speaker 6: But when I look at emerging markets, I see growing economies. Yes,

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Speaker 6: there are issues, I mean what we're seeing recently in

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Speaker 6: Indonesia and Thailand, or great reminders that you can have

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Speaker 6: political instability in different countries that can be temporary, can

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Speaker 6: become more extended. But when I look at the broader

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Speaker 6: growth opportunities in these markets, I look at evaluation that

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Speaker 6: is nine pees nine multiples cheaper than the United States,

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Speaker 6: and by the way, over the next twelve months, where

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Speaker 6: you're likely to get better earnings growth in emerging markets

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Speaker 6: than the US. I think this is a story that

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Speaker 6: goes well beyond China and is a very attractive one

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Speaker 6: for investors.

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Speaker 4: For markets such as South Korea, though there's still sort

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Speaker 4: of headwinds when it comes to chips. I mean, we're

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Speaker 4: seeing how the ending got in the crosshairs of the

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Speaker 4: Trump administration with revoking off some of these waivers. How

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Speaker 4: are you including that in your assessment?

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Speaker 6: Yeah, I think that's a great point in terms of

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Speaker 6: you know, and developed markets many times, well increasingly it's

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Speaker 6: true of all markets. You're always trying to look as

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Speaker 6: an investor, as an analyst or portfolio manager, your goal

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Speaker 6: is to forecast the cash flows of a company, then

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Speaker 6: figure out what the right discount rate is, to figure

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Speaker 6: out what today's fair value is. But when you move

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Speaker 6: into emerging markets, you also tend to have to layer

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Speaker 6: on all kinds of other complexities around issues such as geopolitics,

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Speaker 6: rule of law, government policy changes, etc. And so I

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Speaker 6: think it's really critical, regardless of the country you're looking in,

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Speaker 6: that you have a really firm grasp of the fundamentals

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Speaker 6: of each company, understand how macro and geopolitical factors can

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Speaker 6: affect those fundamentals and put a price on it. And

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Speaker 6: even with all of those kind of headwinds or cross currents,

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Speaker 6: I do think you've still got some exceptionally good opportunities

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Speaker 6: across emerging markets, including some companies within Korea and a

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Speaker 6: broad range of markets in the global em.

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Speaker 1: Yeah, we'll be watching as Khinix and Samson Electronics given

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Speaker 1: of course those chip news that you guys mentioned on

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Speaker 1: Temple gad to have you with a chief market strategist

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Speaker 1: at Lazard.

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Speaker 6: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 6: Asia Edition podcast. Each weekday, we look at the story

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Speaker 6: shaping markets, finance, and geopolitics in the Asia Pacific.

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Speaker 1: You can find us on Apple, Spotify, the Bloomberg Podcast

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Speaker 1: YouTube channel, or anywhere else you listen. Join us again

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Speaker 1: tomorrow for insight on the market moves from Hong Kong

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Speaker 1: to Singapore and Australia.

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Speaker 6: I'm Doug Prisoner and this is Bloomberg