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Speaker 1: This is Bloomberg Daybreak Asia for this Wednesday, March first

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Speaker 1: in Hong Kong, Tuesday February twenty eighth in New York

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Speaker 1: and coming up today. Apple suppliers in China are said

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Speaker 1: to be exiting the country faster than anticipated. President Hijinping

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Speaker 1: signals the unveiling of a government overhaul at the annual

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Speaker 1: NPC meetings, and Goldman Sachs is considering strategic alternatives for

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Speaker 1: its consumer lending business. US monitors some Central Asian countries

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Speaker 1: regarding possible Russian sanctioned violations. Kremlin says opened a talking piece,

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Speaker 1: but no agreement to surrender annex territories, seeming trouble for

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Speaker 1: the Biden student loan program at the Supreme Court. I'm

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Speaker 1: at Baxter with Global News. That's all straight ahead on

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Speaker 1: Bloomberg Daybreak Asia, the business news you need to start

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Speaker 1: your day in just one fifteen minute podcast available on Apples, Spotify,

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Speaker 1: the Bloomberg Business app and everywhere you get your podcasts.

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Speaker 1: Good morning, I'm a prisoner and I'm Brian Curtis. Here

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Speaker 1: are the stories we're following today. Well, Goldman Sachs was

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Speaker 1: seeking to restore confidence in its second ever investor Day

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Speaker 1: after last year's plunge in profit, executives emphasized opportunities inside

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Speaker 1: the asset and wealth management businesses. However, it didn't go

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Speaker 1: that way. Investors showed concern about Goldman's consumer lending unit.

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Speaker 1: In particular, the retail effort has lost nearly six billion

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Speaker 1: dollars since it was set up. It prompted the bank

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Speaker 1: to dismantle the plan in its original form. Executives said

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Speaker 1: that they're willing to consider strategic alternatives to what's left

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Speaker 1: of the business. Here's CEO David Solomon. I appreciate that

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Speaker 1: everyone wants more answers on the consumer platforms and their

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Speaker 1: trajectory going forward. We are focused on executing on what's

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Speaker 1: in front of us, and we're looking at strategic all

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Speaker 1: strategic options available to us. And I know that you

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Speaker 1: want more clarity, but I would ask you to appreciate

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Speaker 1: that I'm just not in a position to say anything

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Speaker 1: more than what we said. In one notable update, Goldman

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Speaker 1: said it would take another two years just to break

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Speaker 1: even on its retail division. Solomon indicated that even a

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Speaker 1: sale of Goldman's installment lending or credit card business is

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Speaker 1: a possibility. Well, shares of Novovas are being slammed Here

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Speaker 1: in late US trading after the bell, the company said

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Speaker 1: their substantial doubt about its ability to stay in business

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Speaker 1: through the next year. Now, this warning comes as Novovac

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Speaker 1: struggles to sell its COVID vaccine. Here is Bloomberg's Angelica Peebles,

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Speaker 1: the company has faced a number of delays in getting

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Speaker 1: its COVID vaccine authorized, and by the time it finally

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Speaker 1: did last year, the market was already dominated by the

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Speaker 1: mr Anda vaccine makers Maderna and Fiser, And this really

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Speaker 1: speaks to the issues that the company will face now

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Speaker 1: it has an authorized vaccine, but will people want it?

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Speaker 1: And even if they do want it, will there be

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Speaker 1: a next demand? Absolutely highlighted by the results for the

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Speaker 1: last quarter in nova Zax, reporting sales well below expectations,

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Speaker 1: the stock down as much as twenty five percent Here

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Speaker 1: in late US trading, Apple's Chinese suppliers maybe exiting China

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Speaker 1: faster than anticipated. That story from Bloomberg's yvon Man air

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Speaker 1: pod maker Goertech is one such supplier looking to move.

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Speaker 1: It's investing two hundred and eighty million dollars in a

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Speaker 1: new plant in Vietnam. The company is also looking at India.

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Speaker 1: Goertech says many other suppliers are also looking to move.

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Speaker 1: Bloomberg reporting suggests nine out of ten key Apple suppliers

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Speaker 1: are doing so now. Bloomberg Intelligence estimates it could take

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Speaker 1: as long as eight years for Apple to move just

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Speaker 1: ten percent of capacity out, but Goertech thinks it could

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Speaker 1: happen faster and why companies are looking to escape the

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Speaker 1: fallout from US China tensions in Hong Kong. I'm Van

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Speaker 1: Man Bloomberg Day, Breck Asia Well Staying in China, President

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Speaker 1: Chi Jinping has signaled a major overhaul of China's governmental agencies.

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Speaker 1: That story from bloombergs David Ingless. President She's comments come

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Speaker 1: just aheads of an annual meeting by the National People's Congress.

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Speaker 1: Shinhua quote She as saying the coming changes will be intense.

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Speaker 1: Among the reforms, Bloomberg reported that the long disbanded Central

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Speaker 1: Financial Work Commission might be revived and that would bring

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Speaker 1: more decision making of China's financial system under She's control.

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Speaker 1: Some analysts say the signals are moved by the party

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Speaker 1: to take over policy making power from state institutions. She

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Speaker 1: will begin a new term as President that the National

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Speaker 1: People's Congress after extending his leadership of the party last

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Speaker 1: October in Hong Kong. I'm David Ingless Bloomberg Day, Brig Asia. Well.

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Speaker 1: The Adani Group is not seeking to refinance debt or

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Speaker 1: inject capital. That's according to its Chief financial Officer, Chushinder Singh.

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Speaker 1: He made the remarks yesterday in response to questions from

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Speaker 1: Bloomberg News at investor meetings here in Hong Kong. It's

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Speaker 1: the second leg of an Asian tour that began in

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Speaker 1: Singapore earlier this week. Singh is seeking to reassure investors

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Speaker 1: after Hindenburg Research had accused a Donnie of accounting fraud

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Speaker 1: and stock manipulation. Our reputation is only as good as

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Speaker 1: a business of doctor Okay. Our business is our India's

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Speaker 1: best and global's best in our category. We will deliver

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Speaker 1: on the business execution, operations and cash flow without exception.

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Speaker 1: CFO Jushinda Singh's investor road show will conclude today in

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Speaker 1: Hong Kong. In the meantime, we hear that India's Capital

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Speaker 1: market regulator is now looking into allegations made by Hindenburg

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Speaker 1: and the Adanni Group against one another. We're told the

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Speaker 1: steps are not an official probe. Well, we had a

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Speaker 1: Donni enterprise this up fourteen point three percent. That's after

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Speaker 1: a fall of about ten percent the day before. So

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Speaker 1: it would appear that investors liked what they heard yesterday

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Speaker 1: at the road show here in Hong Kong. And also

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Speaker 1: Apple traded down about a third of one percent in

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Speaker 1: this session again after that story that we talked about,

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Speaker 1: we're suppliers are looking to move out of China, Doug, Yeah,

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Speaker 1: but that's going to take quite some time. I think

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Speaker 1: the number was what near ten years before near eight years,

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Speaker 1: I think to move ten percent of suppliers out of China,

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Speaker 1: that's what we quoted. Okay, so we've get the pm

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Speaker 1: I data for China today. These are the official numbers.

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Speaker 1: Later in the session, Brian, So manufacturing and services, what

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Speaker 1: do you think of markets are likely to get It

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Speaker 1: seems like we might edge a little bit higher there.

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Speaker 1: We were looking over the estimates there a little bit

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Speaker 1: up on what we saw last week. I think there's

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Speaker 1: an industry question about the meetings this weekend the NPC

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Speaker 1: and the CPPCC. I think a lot of investors are

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Speaker 1: expecting stimulus to be one of the big moves out

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Speaker 1: of this Congress. The bigger story may actually be what

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Speaker 1: we just had there from David, the broad changes in

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Speaker 1: governance sin Wa quoting the president, you know, with this

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Speaker 1: word intense changes. That's a little unusual coming from someone

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Speaker 1: like Hijinping, And it seems I got the core is

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Speaker 1: that the party will take more control over the technocrats

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Speaker 1: and some of the industry leaders at a lot of

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Speaker 1: these state run enterprises. And that's a very big change

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Speaker 1: if indeed that's what happens. Well, we're still seeing in

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Speaker 1: markets a lot of concern about regulatory risk, whether you're

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Speaker 1: looking at financial services industry or even video streaming. Most definitely,

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Speaker 1: we've actually seen a pretty big pullback here now in

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Speaker 1: both China and Hong Kong stocks, and a lot of

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Speaker 1: that is down to regulation. We reported that the NASDA

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Speaker 1: Golden Dragon index is off about fourteen percent from its highs,

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Speaker 1: and the Hanksing Index down more than more than ten percent.

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Speaker 1: All right, good time to get to global news here

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Speaker 1: on Daybreak Asia, the US is saying that some Central

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Speaker 1: Asian countries may be helping Russia circumvent US sanctions at Baxter.

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Speaker 1: With more from a Bloomberg newsroom in San Francisco Eddie.

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Speaker 1: US Secretary of State Anthony blink and Your Right says

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Speaker 1: the US will not hesitate to slap sanctions on those

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Speaker 1: countries or on China itself. He says, the global message

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Speaker 1: has to be very clear. If we allow them to

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Speaker 1: be violated with impunity, then that does open the prospect

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Speaker 1: that Russia itself will continue I will consider further aggression

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Speaker 1: against other countries if it sets its site on them,

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Speaker 1: or other countries will learn the wrong lesson and would

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Speaker 1: be aggressors in every part of the world will say, well,

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Speaker 1: if Russia can get away with this, then we can too.

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Speaker 1: So it looks like the US will try a different tact.

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Speaker 1: It will provide an additional twenty five million dollars to

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Speaker 1: help Central Asian states diversify trade relationships and export routs,

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Speaker 1: as well as trying to help businesses get out of

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Speaker 1: previous relationships that could violate those sanctions. Kremlin is saying

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Speaker 1: Russia is open to Ukraine peace talks but will not

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Speaker 1: give up any annexed regions has taken since the invasion.

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Speaker 1: That is a non starter for Ukraine, so Ukrainian allies

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Speaker 1: consider what it'll be coming to fight the invasion. Former

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Speaker 1: Ambassador to NATO Kay Bailey Hutchison is suggesting that Ukraine

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Speaker 1: get what it's asking for to send a message to

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Speaker 1: the rest of the world making sure that Russia, not China,

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Speaker 1: not Iran North Korea. These autocrats that think they can

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Speaker 1: just do things to other countries that violate their sovereignty

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Speaker 1: have to be stood up to. Hutchison says she feels

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Speaker 1: President Biden has done a very good job to this point,

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Speaker 1: but Bloomberg's Balance of Power Today says the message should

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Speaker 1: be clear that Vladimir Putin is not going to wind down.

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Speaker 1: US Supreme Court is hearing arguments about President Biden's student

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Speaker 1: Alwan forgiveness program, and conservatives and moderates on the court.

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Speaker 1: The justices are asking questions, leading analysts to say they

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Speaker 1: have major concerns about it. Bloomberg's Elizabeth Wasserman says Morris

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Speaker 1: focused on a narrow legal point, what they call the

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Speaker 1: expansion of executive power in given emergency conditions, which is

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Speaker 1: what the Biden administration had argued that because of COVID,

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Speaker 1: they wanted to institute this student owned forgiveness. Yeah. Democrats

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Speaker 1: in Congress say after ruling goes the wrong way, they

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Speaker 1: will initiate legislation to hopefully get some relief, saying it

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Speaker 1: is crushing millions of Americans, and Volkswagen has reaffirmed his

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Speaker 1: commitment to a plant in Xiangjong. This despite constant concerns

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Speaker 1: about potential human rights abuses against wigers. It says it

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Speaker 1: has no indication that workers are mistreated and that it

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Speaker 1: looks like all other JV plants in China. Global News

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Speaker 1: powered by more than twenty seven hundred journalists and analysts

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Speaker 1: in over one hundred twenty countries. In San Francisco, I'm

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Speaker 1: at Baxter and this is Bloomberg. This is Bloomberg gaber Kasia.

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Speaker 1: I'm Brand Curtis along with Rashad salamat here in Hong Kong,

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Speaker 1: and our guest is Joyce Chang, Chair of Global Research,

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Speaker 1: Corporate and Investment Bank JP Morgan Joey's a real pleasure

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Speaker 1: to have you on the program. We had home prices down,

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Speaker 1: and that's a day after we had existing home sales up,

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Speaker 1: and so I'm wondering if that suggests that sellers are

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Speaker 1: now finally accepting lower prices, which is often how it works.

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Speaker 1: They resist that, but then once they finally accepted. You

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Speaker 1: get this kind of action if you take that with

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Speaker 1: consumer confidence down, some pretty interesting indicators. No, I may

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Speaker 1: think the indicators are interesting here, and I think it

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Speaker 1: is hitting home that, you know, the message really is

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Speaker 1: that this is going to be longer, deeper, and higher rates.

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Speaker 1: And so I think you're right, there is some acceptance

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Speaker 1: coming in that you know, we're not going to get

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Speaker 1: some of these bounces back. But we're looking really closely

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Speaker 1: at the consumer confidence numbers because we are seeing that

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Speaker 1: a lot of this excess savings cushion is coming down

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Speaker 1: right now and we're seeing a cost of higher capital

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Speaker 1: for longer that's finally getting factored in. I mean, the

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Speaker 1: real debate right now has been will the FED need

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Speaker 1: to move much higher? I mean talk about a terminal

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Speaker 1: rate that will need to go to six percent. So

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Speaker 1: I think that you know, one of the messages we've

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Speaker 1: had this year is you know, wait for it, you know,

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Speaker 1: eminent procession. The data, you know has not been pointing

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Speaker 1: to that, but are we in for a period of

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Speaker 1: higher rates? You a long time horizon, but that later

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Speaker 1: in the year will play out, particularly as the savings

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Speaker 1: cushion goes away. Well, the savings cushion, does it go

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Speaker 1: away ultimately here, Joyce, because with the essentially bond yields

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Speaker 1: where they are, it's every incentive to save now if

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Speaker 1: you possibly can, and that's something one should be wary of.

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Speaker 1: And let's not also forget that credit card and consumer

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Speaker 1: loans at the moment running at record levels. Well, I mean,

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Speaker 1: I'm talking about the excess savings. I mean number that

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Speaker 1: you had over two trillion dollars in excess savings, and

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Speaker 1: that excess savings is coming down. But you're absolutely right

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Speaker 1: there have been some cushions in place, I mean, fixed

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Speaker 1: incomes back, it's investable. I mean, the other thing we've

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Speaker 1: seen is this big cost of living adjustment in January.

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Speaker 1: You know, for Social Security. We also still have a

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Speaker 1: lot of um, you know, stimulus that's still going in

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Speaker 1: that hadn't been spent from some of the previous packages

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Speaker 1: at the state and local level, as well as the

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Speaker 1: bipartisan infrastructure of the Inflation Reduction Act CHIPS and sciences.

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Speaker 1: So you know, we we haven't seen a lot of

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Speaker 1: this confidence go away. And you're absolutely right that the

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Speaker 1: credit card data has remained very robust here. But what

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Speaker 1: we are seeing are some early signs of distress that

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Speaker 1: are starting to appear in certain pockets. You know, if

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Speaker 1: you look at things like commercial mortgage bond sales, for example,

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Speaker 1: if you look at some of the recent defaults that

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Speaker 1: we've seen in office and retail property, so it's not

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Speaker 1: hitting the household sector as much, but you know, residential

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Speaker 1: real estate is also coming under more pressure. So I

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Speaker 1: think that we are seeing some of these costs of

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Speaker 1: higher for longer that are starting to place through in

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Speaker 1: certain parts of the economy now. And that distress that

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Speaker 1: you refer to is not just what the FAI needs.

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Speaker 1: And once I think that, you know, the key thing

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Speaker 1: that the FED has said is, you know, look, m

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Speaker 1: you know, I think that if you're late, you may

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Speaker 1: you may need to be louder here. And I think

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Speaker 1: they've actually sent a really you know, consistent message that

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Speaker 1: it's early to position for the end of the cycle.

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Speaker 1: And I think that we are looking at, you know,

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Speaker 1: really a question of whether you see these rate hikes,

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Speaker 1: not just from the FED, but you know, continue You're

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Speaker 1: well into the middle of the year, so we've been

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Speaker 1: adding to a lot of our forecast right now. As

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Speaker 1: far as central bank tightening cycles, to be extended m

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Speaker 1: you know, we are looking at for the March meetings,

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Speaker 1: fifty basis points by the ECB, twenty five basis points

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Speaker 1: from the FED, the BOE, and we've added further tightening

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Speaker 1: in the middle of the year. We have the Bank

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Speaker 1: of England hiking cycle now being extended, you with a

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Speaker 1: terminal rate at four point seven five percent ECB taking

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Speaker 1: the terminal rate to three and a half percent, another

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Speaker 1: twenty five basis points added there. So it really is

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Speaker 1: a message of I think that the central banks you

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Speaker 1: have seen that you know, inflation is just not near

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Speaker 1: their comfort zone right now. Well, risk reward, let's look

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Speaker 1: good about strategy has got to be favoring right now, well,

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Speaker 1: cash and perhaps short duration fixed income. Yeah, I mean, look,

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Speaker 1: we are underweight equities here and more overweight on the

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Speaker 1: bond side. And I do think that you know, you know,

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Speaker 1: one and a half to five percent you know, for

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Speaker 1: for cash here, there's no reason to necessarily have to

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Speaker 1: go out on the limb and take risks the way

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Speaker 1: that you had been the case when we were at

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Speaker 1: zero yields. But you know, just taking a look at

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Speaker 1: the risk reward for equities at the current levels you know,

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Speaker 1: we are looking at the cost of capital and how

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Speaker 1: that's going to affect certain segments, particularly small caps, that

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Speaker 1: are disproportionately hit by greater sensitivity to the rising cost

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Speaker 1: of capital. And I think that you know, when we

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Speaker 1: look at the cost of capital, for the increase for

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Speaker 1: barrows is growing at the fastest pace we've seen in

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Speaker 1: forty years. So some of this is taking some while

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Speaker 1: to feed through into the system, but we are beginning

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Speaker 1: to see that, you know, market participants are really looking

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Speaker 1: at terminal rate at five percent we had just gotten

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Speaker 1: used to do. We really have to be looking at

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Speaker 1: you know, six percent, and I don't think that's been

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Speaker 1: fully factored in Joyce. What's perplexing about this is it's

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Speaker 1: tempting to think. I mean, when you hear everybody talking

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Speaker 1: about buying bonds, treasuries at the short end of the curve.

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Speaker 1: But this is a terrible period. It has been a

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Speaker 1: terrible period for the two year for instance. I mean,

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Speaker 1: yields are up seventy one basis points from four ten

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Speaker 1: to four eighty one in the past month, and that

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Speaker 1: means that they're selling down the bonds, not buying them, right,

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Speaker 1: So who's buying them. I think that you know, we

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Speaker 1: still see um, you know, I think you're right that

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Speaker 1: just over the longer term, I mean, there is this

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Speaker 1: question of just you demand for treasuries, where's it going

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Speaker 1: to come from? Where you've seen fed you know, some

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Speaker 1: of the foreign investors, some of the depository banks, you'll

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Speaker 1: pull back here. But I do think that you know,

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Speaker 1: there's space within you know, a pension funds retail where

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Speaker 1: they're still going to add here. And overall, there had

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Speaker 1: been such an overweight on equities that those allocations in

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Speaker 1: the fixed income over the longer term are coming back.

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Speaker 1: You know, look with the rise in yields we've repriced

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Speaker 1: the way we think about sixty forty. We think that's

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Speaker 1: more of a six and a half percent return right now,

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Speaker 1: double what we had been saying just a couple of

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Speaker 1: years ago. So there is a rotation still that's coming

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Speaker 1: into fixed income. But I think part of what the

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Speaker 1: market is adjusting to is just the speed with which

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Speaker 1: a lot of the market movements have been taking place

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Speaker 1: and the velocity of those moves. And that was a

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Speaker 1: theme in the second half of the year that continues

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Speaker 1: this year. Okay, Well, you know, with all that in mind.

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Speaker 1: The thing is, what do you think currently is the

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Speaker 1: status with geopolitics, many suggesting it could be the biggest

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Speaker 1: risk out there, and certainly the tussle with China, Washington, Beijing,

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Speaker 1: in other words, is getting to almost at what it

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Speaker 1: feels like an inflection point. Well, I do think that

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Speaker 1: some of these geopolitical risk are going to stay with us,

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Speaker 1: and we could re escalate in the near future, whether

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Speaker 1: it is concerns about a new Russian offensive, whether it

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Speaker 1: is you know, just sort of a period that thought

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Speaker 1: everyone thought, I think would bring a little bit more

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Speaker 1: um you know, constructive dialogue between the US and China,

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Speaker 1: but which has not come into fruition. I mean, tonight

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Speaker 1: we're watching the Select Committee is actually on China, you know,

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Speaker 1: convening for the first time, and so there are you know,

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Speaker 1: concerns that we're going to see more um you know,

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Speaker 1: export restrictions, possibly more sanctions that have been targeting individual

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Speaker 1: companies you know, coming online. So I think this is

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Speaker 1: a risk that the market has learned to live with

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Speaker 1: over time. But the question is whether you know you're

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Speaker 1: going to see re escalation in certain areas after we

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Speaker 1: had thought that perhaps you know, there was a more

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Speaker 1: constructive tone that would play out at the end of

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Speaker 1: last year, which has not. The spy balloon sort of

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Speaker 1: you know, ended that period. But we are watching very

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Speaker 1: carefully some of the things that are going on in

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Speaker 1: the Congress. Even tonight's This is Bloomberg Daybreak Asia, your

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