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Speaker 1: This is Bloomberg Daybreak Asia for this Tuesday May ninth

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Speaker 1: in Hong Kong, Monday May eighth in New York, and

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Speaker 1: coming up today.

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Speaker 2: Traders analyze FED policy after the survey of loan officers

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Speaker 2: shows signs of credit tightening.

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Speaker 1: Apple is said to be selling five and a quarter

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Speaker 1: billion dollars of debt in five parts.

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Speaker 2: And China has kicked off an anti spy campaign targeting

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Speaker 2: violations at consulting firms.

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Speaker 3: Singapore's government taking first steps toward policing online content. Meeting

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Speaker 3: between China's Foreign Ministry and US Ambassador to China Mitch

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Speaker 3: McConnell says he has no secret plan to end the

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Speaker 3: debt ceiling standoff. I'm at Baxter with Global News.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Asia, the business

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Speaker 4: news you need to start your day in just one

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Speaker 4: fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App,

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Speaker 4: and everywhere you get your podcasts.

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Speaker 1: Good morning, I'm Doug Krisner and I'm Brian Curtis. Here

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Speaker 1: are the stories we're following today. US banks reported tighter

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Speaker 1: lending standards and weaker demand for loans in the first quarter.

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Speaker 1: That's according to the FED Senior Loan Officer Opinion Survey.

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Speaker 1: We heard earlier from Bloomberg's Herman Chan Credit.

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Speaker 5: Is tightening across the board, across all loan types, so commercial, commercial,

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Speaker 5: real estate, consumer. The banks are increasing spreads, being more

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Speaker 5: cautious in terms of what loans they're putting on their

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Speaker 5: balance sheet, and it just confirms The report just confirms

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Speaker 5: what we expected heading into the report.

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Speaker 1: The FED survey showed banks cited a lower risk tolerance,

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Speaker 1: a dimmer economic outlook, and worsening industry problems as their

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Speaker 1: main reasons for tightening credit. The collapse of four US

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Speaker 1: regional banks since March has increased concerns among other firms

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Speaker 1: that lenders will reign in access to credit. The studies

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Speaker 1: showed that the share of banks reporting weaker demand for

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Speaker 1: loans rose to fifty five point six percent, and that

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Speaker 1: was in the first court. It was the highest since

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Speaker 1: two thousand and nine, back during the global financial crisis.

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Speaker 1: Also worrisome, the FED warned in its Financial Stability Report

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Speaker 1: that bank concerns about slower growth could lead them to

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Speaker 1: make fewer loans, accelerating an economic downturn. The report said

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Speaker 1: that the bank funding remains relatively stable on the whole,

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Speaker 1: although it highlighted numerous liquidity risks in the corners of

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Speaker 1: financial markets.

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Speaker 2: And then there is the issue of the debt limit

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Speaker 2: here in the US. Today we heard from the head

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Speaker 2: of the Chicago Fed, Austin Goolesby. He was saying a

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Speaker 2: protracted showdown over the debt ceiling will make the Fed's

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Speaker 2: job much more difficult. Here's Goulesby speaking in an interview

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Speaker 2: with Yahoo Finance.

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Speaker 6: The argument about the debt ceiling comes at the worst

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Speaker 6: possible time. We're trying to figure out what is a

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Speaker 6: very strange business cycle coming out of the pandemic, weighing

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Speaker 6: off against the tightening that's coming from these bank failures

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Speaker 6: and uncertainty, and to add on to it this uncertainty

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Speaker 6: about whether the government is going to pay its bills.

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Speaker 6: It just makes it extremely difficult to figure out what

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Speaker 6: will be the conditions for economic growth in the job market.

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Speaker 2: Austin Goolsby there, the head of the Chicago Fed. Now

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Speaker 2: Treasury Secretary Yellen, has said the United States could run

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Speaker 2: out of funds to keep paying its bills on time

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Speaker 2: as early as June first. To get back to Goulesby,

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Speaker 2: he said a potential default could lead to a severe

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Speaker 2: drop in consumer confidence that in turn would add to

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Speaker 2: stress in the financial sector, and then it would push

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Speaker 2: up interest rates as well. So he is calling on

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Speaker 2: lawmakers to get a deal done now. Tomorrow, President Biden

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Speaker 2: will host House Speaker McCarthy and other congressional leaders at

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Speaker 2: the White House to discuss raising the ceiling.

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Speaker 1: Bran Well, Apple is selling debt in the blue chip

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Speaker 1: bond market. We're hearing that the company is selling bonds

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Speaker 1: in a five part deal five and a quarter billion

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Speaker 1: dollars that was originally targeted at about five billion. The

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Speaker 1: longest portion, a thirty year bond, will yield one hundred

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Speaker 1: eight basis points over Tree and this debt sale comes

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Speaker 1: as a flood of borrowers raised cash a head of

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Speaker 1: key inflation readings. Later in the week, we heard from

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Speaker 1: Bloomberg's Ed Ludlow.

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Speaker 7: I guess the point is borrow money because you can

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Speaker 7: not because you need to write. And Apple is in

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Speaker 7: this enviable position, as well as this idea that there's

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Speaker 7: some sign of stabilization in the corporate debt market. Apple's

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Speaker 7: not the first megacap meta tap the market.

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Speaker 1: Last week, dealer surveyed by Bloomberger expecting thirty to thirty

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Speaker 1: five billion dollars of US high grade bond sales this week.

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Speaker 1: Proceeds from Apple sale will be used for general corporate purposes.

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Speaker 1: We're told that that could include stock repurchases, dividend payments,

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Speaker 1: and working capital.

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Speaker 4: Well.

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Speaker 2: China has reportedly kicked off a new anti spy campaign

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Speaker 2: targeting consulting firms. The State Security Agency in shoo Chow

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Speaker 2: is said to have visited the local branch of the

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Speaker 2: consulting firm cap Vision. This news first broke on a

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Speaker 2: TV channel in jung Su Province. The reports said employees

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Speaker 2: at cap Vision were questioned and some items were searched

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Speaker 2: and seized now. Cap Vision also has headquarters in New

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Speaker 2: York and Shanghai. The state broadcaster CCTV also weighed in,

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Speaker 2: saying that consulting firms had ignored national security risk and

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Speaker 2: had illegally acquired sensitive data. Another key firm is said

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Speaker 2: to be targeted. That would be the US consultancy bane

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Speaker 2: In company WHI.

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Speaker 1: John Is trade data for April may actually look stronger

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Speaker 1: than the reality due to a low base from last year.

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Speaker 1: We get the story from Bloomberg's Joan.

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Speaker 8: Loong, a Bloomberg survice suggests exports will show a gain

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Speaker 8: of eight percent, down from the fourteen point eight percent

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Speaker 8: gain in March. Bloomberg Economics expects exports to rise even

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Speaker 8: more at a twelve percent pace for the month, and

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Speaker 8: a low base of comparison will likely be the driving factor.

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Speaker 8: Economists expect a year on year decline and import that

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Speaker 8: is likely to narrow to zero point three percent from

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Speaker 8: one point four percent in March. The trade surplus is

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Speaker 8: likely to narrow to eighty two billion dollars from around

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Speaker 8: eighty eight billion in Hong Kong and join will Bloomberg

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Speaker 8: Day Brigaysia.

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Speaker 1: I'm Brian Curtis along with Doug Krisner and our colleague

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Speaker 1: Rish Salona will join us in a few moments here.

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Speaker 1: So a lot of obvious talking points this morning, Doug

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Speaker 1: with obviously the Apple debt sale, talking about the FED,

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Speaker 1: comments from Austin Goules be there and the Sluice survey.

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Speaker 1: I wonder whether or not new themes will be coming

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Speaker 1: into the markets having to do with not only the

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Speaker 1: providers of AI but also the recipients. In other words,

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Speaker 1: can you justify higher valuations in looking at the companies

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Speaker 1: that will actually benefit from AI, so they're not actually

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Speaker 1: making the provisions of it to other companies, but they're

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Speaker 1: receiving it. And then in the same token, might some

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Speaker 1: people be looking to sell the companies that don't benefit

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Speaker 1: from AI? Just a few more themes and questions we

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Speaker 1: can put to our guests.

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Speaker 2: Very interesting that you say that, Brian, because after the

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Speaker 2: bell we heard from Palenteer Technologies and the company described

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Speaker 2: demand for its new artificial intelligence products as without precedent.

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Speaker 2: It went on to say it's currently negotiating terms and

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Speaker 2: pricing for access to its platform, and I thought this

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Speaker 2: is very interesting. The CEO, Alex Karp was warning that

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Speaker 2: the risks prevented by the latest and most advanced forms

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Speaker 2: of generative AI are real, and he went on to

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Speaker 2: say that Palenteer has designed its systems with privacy and

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Speaker 2: human safety at the forefront.

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Speaker 1: Yeah, it's definitely one of the themes. And it's interesting

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Speaker 1: because right now it's difficult to make a call between

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Speaker 1: the bulls and the bears, and they're struggling it out

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Speaker 1: a little bit. We have she Chau coming up a

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Speaker 1: financial advisor at UBS that we can put that to

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Speaker 1: and you probably noticed as I did, that Goldman Sachs

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Speaker 1: has joined Barclay's now embedding against FED cuts this year.

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Speaker 1: So this is something that is good fodder for our

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Speaker 1: guests today.

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Speaker 2: You're absolutely right. I was thinking the same thing. Swaps

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Speaker 2: contract right now imply that there is still this is

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Speaker 2: kind of interesting in Goldman and Barclays, as you mentioned,

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Speaker 2: are pushing back on this. The swaps market is still

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Speaker 2: pricing a policy rate that's about seventy basis points lower

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Speaker 2: than where we currently are by the end of the year.

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Speaker 1: It's just so interesting that it's the market that is

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Speaker 1: I guess you can say more bullish, or perhaps it's

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Speaker 1: because they are more bearish about the economy that they're

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Speaker 1: calling for cuts in the FED. Is not all right?

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Speaker 1: It is time now for Global News Senior War's government

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Speaker 1: taking the first steps towards sweeping powers to police so

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Speaker 1: that they can monitor online content and apps at Baxter

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Speaker 1: has Global News in San Francisco.

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Speaker 3: Ed Yeah, Brian, it says, codifying a new Internet safety

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Speaker 3: law that would further control what it calls malicious cyber activity,

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Speaker 3: called the Online Criminal Harms Bill, first reading in Parliament,

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Speaker 3: aimed at cracking down and illicit activities like scams, they say, misinformation, cybercrime,

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Speaker 3: drug trafficking, in the spread of exploitive images. It is

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Speaker 3: not expected to get much opposition as it flies through.

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Speaker 3: FTC is proposing revising agreements with Meta in the US

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Speaker 3: regarding monetizing data collected on youth. It claims Meta is

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Speaker 3: violating a twenty twenty agreement that gives it the right

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Speaker 3: to review it. Bloomberg's Emily Burnbaum says Meta fields the

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Speaker 3: FTC is biased against it.

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Speaker 9: They are going too far in banning them from moonetizing

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Speaker 9: children's data, putting all these new restrictions that would force

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Speaker 9: them to submit to privacy reviews before they launch any

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Speaker 9: new products now.

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Speaker 3: Emily says, the FTC says it has to protect children.

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Speaker 3: Meta says it's going to court meanwhile. Meta meanwhile says

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Speaker 3: it will end news content on Facebook and Instagram and

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Speaker 3: Canada if lawmakers pass legislation to force media publishers to

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Speaker 3: feature their work. China is going to limit data availability

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Speaker 3: to the outside world. Wall Street Journal reporting This comes

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Speaker 3: to a number of research reports show a limit is

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Speaker 3: in place. Bloomberg's Ed Ludlow the.

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Speaker 7: Move is expected to make it harder to analyze what's

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Speaker 7: going on inside China is take tensions between Beijing and Washington.

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Speaker 3: So one more step between the two in conflict. And

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Speaker 3: the high level meeting between China's Foreign Minister Chingong and

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Speaker 3: US Ambassador Nicholas Burns a signal Beijing may soon allow

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Speaker 3: more senior level discussions, But the chair of the House

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Speaker 3: China Committee congress From Mike Gallagher on Bloomberg's Balance of

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Speaker 3: Power says he's not optimistic that anything can be done

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Speaker 3: at that level.

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Speaker 10: It's a CCP who is threatening peace and stability in

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Speaker 10: the status quo across the Taiwan Straight and of course

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Speaker 10: it's the CCP which continues to seal our intellectual property

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Speaker 10: theft and commit genocide.

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Speaker 3: And Gallagher on Bloomberg's Balance of Power says China will

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Speaker 3: need to back off its aggressive behavior toward Taiwan, and

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Speaker 3: China's Finance ministry has postponed a meeting scheduled for tomorrow

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Speaker 3: between it and Germany short notice. China claim scheduling reasons.

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Speaker 3: The major summon on the Death Ceiling and the ua

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Speaker 3: US is on for tomorrow. President Joe Biden and congressional leaders.

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Speaker 3: Senate Minority Leader Mitch McConnell, will, in an interview with Bloomberg,

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Speaker 3: says he has no secret plan. Bloomberg's Admiry hor Dern

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Speaker 3: quotes him.

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Speaker 11: Here, there is no secret plan. I have to get

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Speaker 11: us through this because many people, both potentially Biden, would

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Speaker 11: be able to see eye to eye with McConnell. They've

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Speaker 11: done debt ceiling deals in the past, and he's saying no,

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Speaker 11: this is really for the Speaker of the House and

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Speaker 11: the President of United States to negotiate.

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Speaker 3: It is set for tomorrow afternoon. Wall Street Time Global

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Speaker 3: leew is powered by more than twenty seven hundred journalists

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Speaker 3: and analysts in over one hundred twenty countries. In San Francisco,

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Speaker 3: I'm at Baxter and this is Bloomberg.

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Speaker 1: And I'm Brian Curtisy in Hong Kong, along with Rashad Selamat.

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Speaker 1: Our guest is Chichaw, financial advisor and Managing director at

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Speaker 1: ubs sheetsch How if you're looking at the S and

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Speaker 1: P five hundred, we're currently at forty one thirty eight

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Speaker 1: on the close today. Can you see say forty four

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Speaker 1: or forty five hundreundred as more likely or more like

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Speaker 1: thirty seven or thirty eight hundred over the next six months.

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Speaker 12: Well, we feel like the current markets are pricing in

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Speaker 12: a lot of optimism, so we are more targeting around

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Speaker 12: thirty nine hundred four thousand towards you're in. There's still

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Speaker 12: some risk factors presenting economy, particularly tighter financial conditions, declining

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Speaker 12: corporate earnings, and relatively high valuations all present risks, but

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Speaker 12: it is very great to see how well the economy

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Speaker 12: is staying strong, the markets are staying strong, but almost

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Speaker 12: pricing in a perfect outcome for the US economy right now.

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Speaker 13: Yeah, I mean, it does seem as though we've got

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Speaker 13: the perfect storm, if you like, in front of us,

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Speaker 13: as well as actually the market's pricing in perfection. If

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Speaker 13: you look at the button market, what do you make

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Speaker 13: of what the differences between all the equity market is

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Speaker 13: saying and what the fixed incol market is saying.

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Speaker 12: I think government bomb markets relatively stable in April, and

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Speaker 12: of course if you're looking at equities has been very strong,

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Speaker 12: so you know, I think a lot of the outlook

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Speaker 12: is still going to depend on FED policy, even though

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Speaker 12: that is opening the door to pausing rate hiking the

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Speaker 12: rate hiking cycle, but a lot of that is still

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Speaker 12: going to depend on data and the pace of the

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Speaker 12: actual pausing or when ray kites may actually take place.

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Speaker 1: We talk to a lot of people on the program

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Speaker 1: about say twelve to fifteen every day, and they tilt

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Speaker 1: bearish for many of the reasons that you outline. When

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Speaker 1: we look at the actual market performance, particularly for risk assets,

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Speaker 1: we're constantly getting at the question of why are they

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Speaker 1: performing the way they are? And for instance, you're seeing

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Speaker 1: people accepting higher valuations in staple companies. So if you

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Speaker 1: look at McDonald's and Procter and Gamble and Coke and

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Speaker 1: all those companies, they're trading at like eight twenty eight

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Speaker 1: times earnings, and so the question becomes, why is that happening?

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Speaker 1: Are there reasons for it? I mentioned just for fun

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Speaker 1: at the top of the hour that AI might be

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Speaker 1: used as a kind of prod for understanding higher valuations,

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Speaker 1: and that companies are looking at ways to get a

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Speaker 1: lot more intelligence into their operating procedures. Do you think

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Speaker 1: about that? Do you think about these higher valuations and

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Speaker 1: try to justify them?

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Speaker 4: Yes?

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Speaker 12: Absolutely, I mean we try to justify them everyday. Valuation

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Speaker 12: the equity market is not just in the more value

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Speaker 12: oriented companies you mentioned butt in the equity market in

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Speaker 12: general are prising in very roathy for an outcome, an

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Speaker 12: outcome for the economy. The SMP is actually trading roughly

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Speaker 12: around eighteen point eight times forwer earnings right now over

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Speaker 12: the last four months, so that's a sixteen percent premium

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Speaker 12: to the ten year average. So, I mean, a lot

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Speaker 12: of the higher valuation is due to the better macro

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Speaker 12: economics condition we have, but I think because of the

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Speaker 12: tighter financial conditions and some of the declining corporate earnings,

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Speaker 12: and we are going into a possible recession, you know,

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Speaker 12: the valuation could come down with it going into your end.

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Speaker 13: Yeah, I mean, you know, we saw that non farm

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Speaker 13: PAYERU reporting. It did your employment solid not not really

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Speaker 13: consistent with any real deep recession. But something has changed

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Speaker 13: up for the better. And the banking crisis is going

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Speaker 13: to have an important impact on the economy, even if

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Speaker 13: it doesn't threaten the financial system. Now credit is definitely

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Speaker 13: going to get tighter. That's going to create more headwinds

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Speaker 13: for the economy, and that's not good for a stock

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Speaker 13: market that is still historically quite expensive.

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Speaker 12: Right exactly. I mean, you're absolutely right. I mean these

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Speaker 12: are a lot of I mean, the banking crisis was

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Speaker 12: actually kind of a surprise to the economy. I mean,

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Speaker 12: you know, we didn't expect that it was going to

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Speaker 12: present as much of a problem, but it did prove

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Speaker 12: to be pretty resilient, and the economy is looking over

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Speaker 12: it and the markets are trading a little bit better now,

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Speaker 12: but I think the risks are still there, and with

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Speaker 12: the potential recession, you know, we're we are our outlook

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Speaker 12: for the SMP is not as high and it probably

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Speaker 12: will be relatively stable going into the rest of the year.

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Speaker 1: So the notes are sometimes pretty terracets. So you're talking

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Speaker 1: about buying quality bonds, are you talking about sovereigns there?

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Speaker 1: Or are there areas of credit you like?

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Speaker 12: We we actually right now like more of the investment grade,

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Speaker 12: the defensive, defensive sector of bonds. So you know, I

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Speaker 12: think the valuations are good there. Plus you know, the

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Speaker 12: current uh, it's a better risk of war if you're

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Speaker 12: comparing bond to equities, comparing bond to just the overall

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Speaker 12: equities of the US equity markets. But we plan to

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Speaker 12: stay in the safe for the more defensive, the more

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Speaker 12: investment grade part of fixed income.

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Speaker 13: Yeah, absolutely, you know you're looking at being very different

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Speaker 13: and equity wise as well. I mean I think that

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Speaker 13: you prefer at least prefer to consumer discretion, financials, and

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Speaker 13: information technology. So what do you like? Obviously conceive that

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Speaker 13: staples would be the obvious one.

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Speaker 12: Right, So consumer stables, utilities, industrials, those are still some

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Speaker 12: of our favorite areas. And I think just diversifying beyond

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Speaker 12: the US and growth stops, you know, emerging markets. China

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Speaker 12: reopening is actually now more reopening air recovery, so that

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Speaker 12: will lead growth there and surrounding emerging markets Australia. So

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Speaker 12: looking beyond the US are some of our actual better

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Speaker 12: market that we like at.

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Speaker 1: This point, I think there's a little bit of a

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Speaker 1: myth out there that China has run to the upside

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Speaker 1: on the reopening. Actually April was a pretty rough month.

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Speaker 1: The CSI three hundred now year today is up four

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Speaker 1: percent compared to say seven and three quarters for the

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Speaker 1: S and P five hundred, So people are still playing

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Speaker 1: alongside for China stocks, but it has been a little

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Speaker 1: bit of a bumpy ride. Does that concern you and

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Speaker 1: how do you hedge you gain?

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Speaker 12: Absolutely? I mean China is always concerning you know, there's

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Speaker 12: a lot of geal political tensions just you know, the

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Speaker 12: stuff that we can't really control. But uh, you know,

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Speaker 12: China is coming out of this pandemic and you know

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Speaker 12: pretty well going into the reopening and now in a

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Speaker 12: recovery phase. We feel the China economics cycle is is

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Speaker 12: going to grow and we expect about five point seven

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Speaker 12: percent growth this year and a lot of that a

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Speaker 12: lot of the growth actually will probably be led by

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Speaker 12: Chinese consumer durables and services, and that includes industrial transportation,

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Speaker 12: capital goods, materials, and digital economy. All these sectors are

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Speaker 12: going to stand to benefit from the reopening and the

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Speaker 12: recovery of China.

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Speaker 13: So as well as manager, you know, what is the

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Speaker 13: sort of the questions you're getting from a lot of

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Speaker 13: your clients now, which is the most important thing on

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Speaker 13: their minds.

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Speaker 12: I think still a lot of investors are sitting on

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Speaker 12: the sidelines with cash. It's hard to you know, not

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Speaker 12: want to be in cash because rates are high right

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Speaker 12: now if you're parking cash in the bank or if

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Speaker 12: you're getting feel but you know, investors want to get invested.

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Speaker 12: But I think there's still a lot of caution just

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Speaker 12: because of the uncertainties that I mentioned in the in

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Speaker 12: the beginning, and also we still don't have that confidence

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Speaker 12: of when that fed my podse okay, or start cutting rates.

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Speaker 12: So I think until we have a more stable macroeconomic condition,

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Speaker 12: investors are not going to fully invest or fully fuel

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Speaker 12: uh se hear enough to invest directly or completely into

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Speaker 12: the equity market. So I still think there's there's that

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Speaker 12: caution there.

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Speaker 1: Yeah, time to be cautious. Still, okay, Sheetschau, thank you

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Speaker 1: very much for joining us. Sheets youll financial advisor managing

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Speaker 1: director at UBS. This is Bloomberg Daybreak Asia, your morning

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