WEBVTT - Mideast Risk Hits Stocks, BHP Profit Jumps

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>Welcome to the Daybreak Asia podcast. I'm Doug Prisner. We

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<v Speaker 2>saw a spike and crude oil prices during New York

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<v Speaker 2>trading on signs the US and Iran appear to be

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<v Speaker 2>far apart on any deal to end their war, and

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<v Speaker 2>those higher oil prices, in turn rekindled concern over stubborn inflation.

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<v Speaker 2>We know that inflation has been stuck well above the

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<v Speaker 2>Fed's target for the past five years. It's fair to

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<v Speaker 2>ask whether the FED will be raising interest rates before

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<v Speaker 2>the end of the year to get those prices under control. Today,

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<v Speaker 2>in the treasury market, if you look at the yield

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<v Speaker 2>on the thirty year, it rose to five point three

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<v Speaker 2>one percent. That's the highest in nearly two decades. So

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<v Speaker 2>not surprisingly, the equity market retreated a bit. The S

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<v Speaker 2>and P was down a half of one percent. We

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<v Speaker 2>did have a rally though, among some of the chip makers,

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<v Speaker 2>and the Philadelphia Semiconductor Index rising today by about one

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<v Speaker 2>point six percent. For a closer look at what's happening

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<v Speaker 2>in Asia, let's bring in Bloomberg's Paul Dobson. He is

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<v Speaker 2>executive editor of Asia Markets, and he joins from our

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<v Speaker 2>studios in Singapore. Thank you for being here. I want

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<v Speaker 2>to pick up on the chip strength that we had

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<v Speaker 2>in the States. It seems to be filtering through to

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<v Speaker 2>South Korea, does it not.

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<v Speaker 3>Yeah, Hi there, Doug. So it was a holiday yesterday

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<v Speaker 3>as well for South Korea, so a little bit of

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<v Speaker 3>a catch up trade going on. But people seem relatively

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<v Speaker 3>excited by the ongoing deal announcements that we see from

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<v Speaker 3>the Lakes of Aanthropy from the video. More investment, more

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<v Speaker 3>confidence in the data center build out, and therefore more

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<v Speaker 3>demand for the memory chips. So that's enough to keep

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<v Speaker 3>career in the Asian tech sector looking pretty chipper. If

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<v Speaker 3>you he's the bad pun, okay, you're allowed.

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<v Speaker 2>Talk to me a little bit about what's happening with

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<v Speaker 2>artificial intelligence as it relates to China. We've had some

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<v Speaker 2>pretty dramatic developments over the last few days we.

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<v Speaker 3>Have, and so the China tech stack is really starting

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<v Speaker 3>to show its strength. We had the IPO of CXMT

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<v Speaker 3>not too long ago. That company has immediately surged to

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<v Speaker 3>become the most valuable company in China. And I think

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<v Speaker 3>what's really telling here is that those sort of new

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<v Speaker 3>new technology stocks are really surpassing the older darlings, the

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<v Speaker 3>platform companies of yesteryear as it were. We saw JD

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<v Speaker 3>dot Com reporting earnings not looking good, had a ten

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<v Speaker 3>percent down day. Similar story for ten Cent when it

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<v Speaker 3>reported Eddie Barber also not faring terribly well. And so

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<v Speaker 3>you know, all of the companies that used to be

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<v Speaker 3>kind of the go to names for China investment and

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<v Speaker 3>now sort of falling by the wayside As, we have

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<v Speaker 3>this new emphasis on AI, on chip makers and also

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<v Speaker 3>on robotics, so we have more IPOs coming down the

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<v Speaker 3>line in that space, and that's the next sort of

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<v Speaker 3>big and exciting thing for investments in China.

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<v Speaker 2>Paul, I'm glad you mentioned that, because if you look

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<v Speaker 2>at the monthly Chinese activity data for July, the points

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<v Speaker 2>you just made are supported by the numbers. The growth

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<v Speaker 2>story seems to be more about the global buildout of AI, right.

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<v Speaker 3>Yeah, it's really a case shaped economy of the moment

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<v Speaker 3>where you have that chip sector, you have the experts

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<v Speaker 3>are really thriving, but you have a lot of the

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<v Speaker 3>rest of the economy looking pretty depressed. We had misses

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<v Speaker 3>pretty much across the board on the data that we

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<v Speaker 3>got yesterday, including retail sales, and that speaks to this

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<v Speaker 3>idea that the consumer really isn't thriving in mainland China.

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<v Speaker 3>At the moment, the economy is bobbling along towards the

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<v Speaker 3>weekend of where the government's forecast or ambitions for the

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<v Speaker 3>year are, and it sort of likes to run it

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<v Speaker 3>that way in some ways. So if it feels that

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<v Speaker 3>it's falling too far behind, it may do more stimulus

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<v Speaker 3>to write the course towards the end of the year.

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<v Speaker 3>That's the moment thinking that if it can hold up,

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<v Speaker 3>you know, a sort of just below that five percent

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<v Speaker 3>run rate, then maybe is reasonably happy. But what we

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<v Speaker 3>are seeing in terms of the market is the way

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<v Speaker 3>that investors are expressing this as a couple of things. Yes,

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<v Speaker 3>there's optimism in the tech space, inequities and some differentiation trades,

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<v Speaker 3>but also in the government bond market in China our

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<v Speaker 3>countrary to the rest of the world. Basically, we've got

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<v Speaker 3>falling yield. So we've got the ten year gield the

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<v Speaker 3>lowest in a couple of years, they think, and falling

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<v Speaker 3>while everything yields all around the rest of the world arising.

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<v Speaker 2>Talk to me a little bit about what's going on

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<v Speaker 2>in Japan because we had the second quarter GDP figure

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<v Speaker 2>that was released on Monday surprising weakness. I think it's

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<v Speaker 2>fair to say, at a growth rate of just one

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<v Speaker 2>point one percent, and I'm wondering about how this may

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<v Speaker 2>influence the thinking of the Bank of Japan.

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<v Speaker 3>Yeah, as true, and that sort of sets out a

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<v Speaker 3>little bit the dilemma that's in front for the Bank

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<v Speaker 3>of Japan because really the pressure is on them to

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<v Speaker 3>start raising rates a little bit more aggressively at a

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<v Speaker 3>faster place as well, so maybe bringing forwards the hike

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<v Speaker 3>to September and then maybe signaling as well at some

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<v Speaker 3>sort of a hawkish position. And the reason for that

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<v Speaker 3>is that inflation is still high in the Japanese economy

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<v Speaker 3>and people are worried that the Bank of Japan is

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<v Speaker 3>letting the inflation run out a little bit out of control.

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<v Speaker 3>So that's pushing up yields at the back end of

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<v Speaker 3>the curve. The thirty year yield in particular continues to

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<v Speaker 3>set new highs, the highest level since the nineteen nineties.

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<v Speaker 3>And that's a little bit of a worry. And you know,

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<v Speaker 3>that was part of the reason or that we sort

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<v Speaker 3>of saw the US joining Japan and intervening in the

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<v Speaker 3>currency space. You know, the idea that the people are

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<v Speaker 3>worried generally about the currency and about the bond yields

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<v Speaker 3>running out of control. But what I think the US

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<v Speaker 3>would like to see would be a more proactive stance

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<v Speaker 3>from the Bank of Japan. The problem for them is

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<v Speaker 3>with the economy looking a little bit weak, they don't

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<v Speaker 3>want to hike so aggressively that they end up tipping

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<v Speaker 3>the economy into a recession and blow up all of

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<v Speaker 3>the inflationary impulse there.

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<v Speaker 2>So how much of that sluggish growth in Japan is

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<v Speaker 2>tied to what we are seeing play out in the

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<v Speaker 2>Middle East and elevated oil prices? Is that really capturing

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<v Speaker 2>the lion's share of the blame.

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<v Speaker 3>Is definitely a big element because Japan, being an importer,

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<v Speaker 3>is very reliant on that. I mean, you know, I

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<v Speaker 3>think over that reporting period for all that it was

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<v Speaker 3>a period when perhaps there was a little bit less

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<v Speaker 3>pressure in the oil market. So it's not unique uniquely

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<v Speaker 3>the cause of the stresses in the economy. I think

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<v Speaker 3>people in general are struggling to adapt to inflation. Some

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<v Speaker 3>parts of the economy. The younger, vibrant sort of population

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<v Speaker 3>that's seeing wage increases is doing very well. But older

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<v Speaker 3>people's savers who've been used to, you know, kind of

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<v Speaker 3>no increases in costs suddenly having to change the way

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<v Speaker 3>they think. And part of what they're doing therefore is

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<v Speaker 3>spending less. And so the government is addressing that to

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<v Speaker 3>a certain extent by reducing some of the v eight

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<v Speaker 3>like the you know, the taxes on sales for a

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<v Speaker 3>couple of years to try to ease that burden on

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<v Speaker 3>the consumer. But it's the whole adjustment process really getting

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<v Speaker 3>used to the idea that things are getting more expensive

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<v Speaker 3>because of inflation, and so therefore, you know, if you're

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<v Speaker 3>an elderly person or something like that, you need to

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<v Speaker 3>be putting your cash to work somehow as well, not

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<v Speaker 3>just sitting on it and expecting that it will still

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<v Speaker 3>be able to buy the same amount of stuff in

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<v Speaker 3>five years that it can today.

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<v Speaker 2>I mentioned a moment ago that in the US session

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<v Speaker 2>we had that spike in US treasury yields. The thirty

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<v Speaker 2>year jumped to a rate of five point three one

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<v Speaker 2>percent that was the highest in nearly two decades. Now

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<v Speaker 2>we know that there are many inputs when it comes

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<v Speaker 2>to the pricing of bonds, and I'm wondering if you

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<v Speaker 2>had to put your finger on what the big driver

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<v Speaker 2>is of the price section that we have been seeing,

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<v Speaker 2>what would.

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<v Speaker 3>That be excellent question? And the cop out answer is

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<v Speaker 3>there's so there's no single driver. But I do think

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<v Speaker 3>that this is really an important narrative to focus on

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<v Speaker 3>right now because there's slight risk at the back end

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<v Speaker 3>of the yield curve gets out of control, and I

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<v Speaker 3>think the key focuses are worries about inflation and worries

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<v Speaker 3>that central banks aren't being proactive enough to address that.

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<v Speaker 3>So the idea that the FED isn't going to be

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<v Speaker 3>hiking anytime soon is a worry for those investors who

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<v Speaker 3>have long duration exposure because of the impact that inflation

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<v Speaker 3>has on that. I think people are worried about government

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<v Speaker 3>spending plans all around the world as well, and the

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<v Speaker 3>amount of supply that's coming to the market, which in

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<v Speaker 3>addition to that, we also have the amount of fundraising

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<v Speaker 3>that's being done for that AI build out and in

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<v Speaker 3>the AI space as well, and that's another concern for people.

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<v Speaker 3>But I think the other thing, you know, like the

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<v Speaker 3>long term dynamic is and when you look at the

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<v Speaker 3>way that markets are at the moment and the way

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<v Speaker 3>they've been performing. We talked about the chip boom, we

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<v Speaker 3>talked about equities. Equities just look much more appealing to

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<v Speaker 3>all sorts of investors than bonds do at the moment.

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<v Speaker 3>Bonds are losing money at the moment this year. You've

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<v Speaker 3>got to get them to a point where that long

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<v Speaker 3>term yield becomes irrefutably or irresistible to investors in order

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<v Speaker 3>to bring money back in that direction. The only other

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<v Speaker 3>thing that would change the course would be a big

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<v Speaker 3>economic slowdown. Now, one thing that could cause the economic

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<v Speaker 3>slow down could be high enough bond yield, So that's

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<v Speaker 3>something to watch out for. But people will need to

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<v Speaker 3>see them higher before they really start to have concerns

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<v Speaker 3>about funding in the economy and therefore about their equity market.

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<v Speaker 2>So before I let you go, I'm going to see

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<v Speaker 2>if we can tie some things together. Because we touched

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<v Speaker 2>on the weakness in the Japanese yen a moment ago,

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<v Speaker 2>and there was that coordinated intervention that took place between

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<v Speaker 2>Japan and the US, and I think from the US perspective,

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<v Speaker 2>one of the things that Scott Bess at the US

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<v Speaker 2>Treasury Secretary may have been a little concerned about if

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<v Speaker 2>Japanese officials had to raise funds in order to defend

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<v Speaker 2>their currency, they may have been put in a position

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<v Speaker 2>to reduce their holdings of US treasuries. That would have

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<v Speaker 2>been a negative for the treasury market and had upward

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<v Speaker 2>pressure on yields. Do you think that's a factor at all,

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<v Speaker 2>that somewhere in the background there is concern that Japan

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<v Speaker 2>may have to lighten its inventory of US treasuries or

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<v Speaker 2>do you think the relationship between Washington and Tokyo will

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<v Speaker 2>prevent that from occurring.

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<v Speaker 1>No.

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<v Speaker 3>I do think that that's a concern, and I think

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<v Speaker 3>that there's two reasons to worry about that. First of all,

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<v Speaker 3>as you identified that sort of direct link where Japan,

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<v Speaker 3>if it needs to continue to raise dollars, it will

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<v Speaker 3>need to sell some of it overseas assets. I think

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<v Speaker 3>in the latest TICK data, we saw overseas investors curb

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<v Speaker 3>their holdings of US treasuries even after valuation effects. With

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<v Speaker 3>Japan that's showing the biggest drop. So that's one thing

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<v Speaker 3>that people are worried about. But I think the other

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<v Speaker 3>thing that people starting to whisper or murmur about is

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<v Speaker 3>the idea that if the US really doesn't want you

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<v Speaker 3>to sell US treasuries then, and you're holding them as

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<v Speaker 3>that sort of reserve asset, that sort of store of

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<v Speaker 3>value that you can tap when you need it. If

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<v Speaker 3>it's not actually going to be able to serve that purpose,

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<v Speaker 3>then is it that much of a useful reserve asset

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<v Speaker 3>for people to be holding after all?

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<v Speaker 1>You know?

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<v Speaker 3>And so I think that the recovery that we've seen

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<v Speaker 3>in gold recently speaks a little bit of that idea

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<v Speaker 3>as well, and so that I think puts a little

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<v Speaker 3>bit more of a question marker overthinks it's another concern

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<v Speaker 3>for our long term debt managers.

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<v Speaker 2>Paul will leave it there, Thank you so very much.

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<v Speaker 2>Bloomberg's Paul Dobson, Executive editor for Asia Markets, joining from

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<v Speaker 2>Singapore here on the Daybreak Asia podcast. Welcome back to

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<v Speaker 2>the Daybreak Asia Podcast. I'm Doug Christner. We moved to

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<v Speaker 2>some earnings news next from the Australian mining giant BHP Group.

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<v Speaker 2>The company reported full year underlying profit above expectations. These

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<v Speaker 2>results were fueled in part by higher copper prices, and

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<v Speaker 2>we got reaction from Julia Lee. Julia is investment director

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<v Speaker 2>at Shaw and partner's asset management. She spoke with Bloomberg

0:12:07.760 --> 0:12:09.040
<v Speaker 2>TV host Paul Allen.

0:12:09.280 --> 0:12:11.920
<v Speaker 4>Copper a great story for them today, but is it

0:12:11.960 --> 0:12:13.240
<v Speaker 4>as great as it could have been?

0:12:13.880 --> 0:12:15.520
<v Speaker 5>I think first of all, we have to applaud the

0:12:15.559 --> 0:12:17.760
<v Speaker 5>results today. It's on the back of a very strong

0:12:17.800 --> 0:12:22.240
<v Speaker 5>operational performance together with rising prices and that dividend. You know,

0:12:22.280 --> 0:12:25.440
<v Speaker 5>the market was expecting to see eighty three usns coming

0:12:25.480 --> 0:12:28.559
<v Speaker 5>in that ninety nine us sense I still remember, you know,

0:12:28.600 --> 0:12:31.440
<v Speaker 5>when BHP was a growth stock, reinvesting a lot of

0:12:31.440 --> 0:12:34.880
<v Speaker 5>its profits into its business, and as the business has matured,

0:12:34.960 --> 0:12:38.360
<v Speaker 5>you've really seen that very strong cash generation coming through.

0:12:38.559 --> 0:12:41.600
<v Speaker 5>So as an income investor in the Australian market, you know,

0:12:41.640 --> 0:12:45.040
<v Speaker 5>it's very hard to dismiss those type of returns coming through.

0:12:45.360 --> 0:12:47.839
<v Speaker 5>But you're absolutely right on the growth picture. When you're

0:12:47.840 --> 0:12:50.760
<v Speaker 5>looking sort of five to seven years out, well, where's

0:12:50.760 --> 0:12:53.199
<v Speaker 5>the growth going to come from? We know with iron

0:12:53.240 --> 0:12:56.800
<v Speaker 5>ore that we've seen a declining picture there. Copper is fantastic,

0:12:56.960 --> 0:12:58.920
<v Speaker 5>but M and A is very difficult, So how do

0:12:58.960 --> 0:13:01.880
<v Speaker 5>you grow the copper business from here? And podcash is

0:13:02.000 --> 0:13:05.200
<v Speaker 5>very long dated, so you're looking a lot further out.

0:13:05.280 --> 0:13:07.720
<v Speaker 1>So I guess A big question for BHP is.

0:13:07.640 --> 0:13:10.080
<v Speaker 5>You know, it's running at full steam at the moment,

0:13:10.160 --> 0:13:14.400
<v Speaker 5>it's generating these great results, but the next leg of

0:13:14.440 --> 0:13:16.480
<v Speaker 5>investment and the next leg of growth.

0:13:16.360 --> 0:13:18.920
<v Speaker 4>It takes a long time to bring a copper mind online.

0:13:18.920 --> 0:13:21.120
<v Speaker 4>So M and A the only option. What are you

0:13:21.160 --> 0:13:24.240
<v Speaker 4>expecting to see in that space in the coming from months.

0:13:24.360 --> 0:13:26.040
<v Speaker 5>I mean, compon is a stranger, and we have seen

0:13:26.040 --> 0:13:29.160
<v Speaker 5>copper prices at these very high levels and a lot

0:13:29.160 --> 0:13:31.760
<v Speaker 5>of that is trying to get in before some of

0:13:31.800 --> 0:13:35.440
<v Speaker 5>the tariff potential tariff actions. But copper can also be

0:13:35.520 --> 0:13:38.480
<v Speaker 5>substituted for aluminum. So do we start to see a

0:13:38.520 --> 0:13:42.080
<v Speaker 5>substitution effect coming through and are you bringing sort of

0:13:42.120 --> 0:13:44.800
<v Speaker 5>future demand into the present and then do you see

0:13:45.440 --> 0:13:47.000
<v Speaker 5>pull back a little bit later on.

0:13:47.120 --> 0:13:49.360
<v Speaker 1>So, yes, copper is great because of.

0:13:49.280 --> 0:13:53.160
<v Speaker 5>The AI the growing of the data center story as well,

0:13:53.640 --> 0:13:56.600
<v Speaker 5>But in terms of just copper, I think it's going

0:13:56.640 --> 0:13:59.920
<v Speaker 5>to be a bit harder for BHP to gain more exposure.

0:14:00.040 --> 0:14:03.400
<v Speaker 5>But for both BHP and RIO tinto very strong copper,

0:14:03.480 --> 0:14:05.800
<v Speaker 5>making more than half of their earnings now from copper.

0:14:06.400 --> 0:14:08.120
<v Speaker 4>When you look at the copper space, is there any

0:14:08.120 --> 0:14:10.560
<v Speaker 4>miner that you favor in particular, and I mean we

0:14:10.640 --> 0:14:13.839
<v Speaker 4>mentioned vhprio tinto, but four to Skew Metals finally as

0:14:13.880 --> 0:14:17.000
<v Speaker 4>diversified into copper with an acquisition of its own, very

0:14:17.000 --> 0:14:19.360
<v Speaker 4>good timing. But which of those miners and the gunior

0:14:19.400 --> 0:14:21.440
<v Speaker 4>miners do you think the best place to take advantage

0:14:21.440 --> 0:14:21.920
<v Speaker 4>of the sperm.

0:14:22.120 --> 0:14:24.520
<v Speaker 5>Yeah, I think when we look at our portfolios, we're

0:14:24.560 --> 0:14:27.560
<v Speaker 5>most highly exposed to BHP bulletin in that space, we've

0:14:27.600 --> 0:14:29.520
<v Speaker 5>got very little for to Skew exposure.

0:14:29.800 --> 0:14:31.040
<v Speaker 1>But of course, you know, the.

0:14:31.000 --> 0:14:34.920
<v Speaker 5>Copper story is fantastic for now, but still looking for

0:14:34.960 --> 0:14:37.400
<v Speaker 5>that extra leg of growth. And one of the areas

0:14:37.400 --> 0:14:39.880
<v Speaker 5>that we have like is the lithium space where we

0:14:39.920 --> 0:14:43.320
<v Speaker 5>have been adding our stuffs like Pilber minerals where you know,

0:14:43.680 --> 0:14:47.440
<v Speaker 5>lithium was another area where we saw very strong demand

0:14:47.480 --> 0:14:50.800
<v Speaker 5>coming through a very strong supplier response and then prices

0:14:51.080 --> 0:14:53.720
<v Speaker 5>are collapsing. But just over the last few months we've

0:14:53.760 --> 0:14:56.400
<v Speaker 5>really seen prices coming back and we still think that

0:14:56.560 --> 0:14:59.560
<v Speaker 5>story has a bit to run. So diversifying into other

0:14:59.640 --> 0:15:02.200
<v Speaker 5>areas because we know coppers had a very strong run

0:15:02.440 --> 0:15:04.880
<v Speaker 5>and looking at things like lithium and uranium as well.

0:15:05.160 --> 0:15:07.520
<v Speaker 4>We do need to talk about CSL as well, because

0:15:07.600 --> 0:15:11.000
<v Speaker 4>today's price pump has been quite spectacular. I think we're

0:15:11.000 --> 0:15:15.120
<v Speaker 4>above seventeen percent now. Revenue was a narrow beat. It

0:15:15.160 --> 0:15:17.480
<v Speaker 4>made a huge loss two and a half billion dollars.

0:15:17.480 --> 0:15:20.560
<v Speaker 4>But looking forward for CSL, what do you see in

0:15:20.560 --> 0:15:21.920
<v Speaker 4>that stock's future? Would you be a.

0:15:21.840 --> 0:15:22.320
<v Speaker 2>Buyer of it?

0:15:22.720 --> 0:15:24.840
<v Speaker 1>I mean, we have been adding CSL.

0:15:25.600 --> 0:15:28.640
<v Speaker 5>The big question for investors is not so what has happened,

0:15:28.800 --> 0:15:31.080
<v Speaker 5>but is most of the bad news behind us? Have

0:15:31.120 --> 0:15:33.320
<v Speaker 5>we seen a peak in terms of the bad news

0:15:33.320 --> 0:15:36.480
<v Speaker 5>coming through? And I think these results show that, yes,

0:15:36.520 --> 0:15:39.000
<v Speaker 5>there is some still, you know on the headline numbers

0:15:39.000 --> 0:15:41.880
<v Speaker 5>because of the right downs, we are seeing some bad news,

0:15:42.160 --> 0:15:46.440
<v Speaker 5>but in some of the key underlying areas we've seen stabilization.

0:15:46.840 --> 0:15:49.120
<v Speaker 5>I think the reason for the pop in the share

0:15:49.160 --> 0:15:50.440
<v Speaker 5>price today though.

0:15:50.480 --> 0:15:51.280
<v Speaker 1>Is its outlook.

0:15:51.480 --> 0:15:54.520
<v Speaker 5>The market had been forecasting no growth, and it looks

0:15:54.560 --> 0:15:56.800
<v Speaker 5>like the market believes what the company is saying, which

0:15:56.840 --> 0:16:00.320
<v Speaker 5>is forecasting five percent growth now. So great to see

0:16:00.400 --> 0:16:04.120
<v Speaker 5>CSL having a strong run. We're overweighting the portfolio given

0:16:04.120 --> 0:16:06.920
<v Speaker 5>the depressed valuations that it's been at, and it's been

0:16:06.960 --> 0:16:10.120
<v Speaker 5>a pretty bumpy ride for healthcare stocks.

0:16:10.120 --> 0:16:12.480
<v Speaker 1>I mean, we've seen CSL as well as co Clear

0:16:12.720 --> 0:16:13.400
<v Speaker 1>up about.

0:16:13.160 --> 0:16:15.960
<v Speaker 5>Thirty percent over the last three months, but still down

0:16:16.000 --> 0:16:17.840
<v Speaker 5>in the year to date, So that tells a big

0:16:17.880 --> 0:16:20.160
<v Speaker 5>story on the volatility in the sector.

0:16:20.560 --> 0:16:23.280
<v Speaker 4>Is there a story here as well about rotation out

0:16:23.280 --> 0:16:25.680
<v Speaker 4>of AI, which Australia doesn't have a great deal of

0:16:25.720 --> 0:16:28.720
<v Speaker 4>exposure to, into Australian healthcare stocks.

0:16:29.320 --> 0:16:33.760
<v Speaker 5>We certainly have seen healthcare in focus, and I think

0:16:33.920 --> 0:16:36.720
<v Speaker 5>the story with Australia has been very much that it

0:16:36.880 --> 0:16:39.120
<v Speaker 5>is less expensive than the rest of the world. There

0:16:39.200 --> 0:16:42.160
<v Speaker 5>is a value component to it and you can see

0:16:42.160 --> 0:16:43.960
<v Speaker 5>that in the M and A activity that's.

0:16:43.760 --> 0:16:44.600
<v Speaker 1>Happening at the moment.

0:16:44.640 --> 0:16:47.400
<v Speaker 5>We're seeing a lot of offshore companies hunting for companies

0:16:47.600 --> 0:16:50.560
<v Speaker 5>here in Australia because of our lower valuations. We've seen

0:16:50.800 --> 0:16:54.520
<v Speaker 5>clean away Insignia, I mean today we also saw equity

0:16:54.560 --> 0:16:57.760
<v Speaker 5>trustees coming through, so a number of takeovers and M

0:16:57.840 --> 0:17:00.000
<v Speaker 5>and A and I think that's because of the value component,

0:17:00.320 --> 0:17:03.720
<v Speaker 5>and healthcare has benefited from that rotation into some of

0:17:03.760 --> 0:17:06.320
<v Speaker 5>those value areas. But if you want tech, I guess

0:17:06.359 --> 0:17:08.359
<v Speaker 5>you're going to have to look at either the fixed

0:17:08.400 --> 0:17:11.240
<v Speaker 5>income area. Talk of that Kangaroo bond coming through from

0:17:11.280 --> 0:17:15.560
<v Speaker 5>Google with exposure to the AI through the credit area.

0:17:15.680 --> 0:17:18.720
<v Speaker 5>Otherwise it's off shore markets that have that greater exposure.

0:17:19.000 --> 0:17:22.919
<v Speaker 5>The Australian share market only has a two percent technology sector.

0:17:22.960 --> 0:17:26.760
<v Speaker 5>That's compared to South Korea, where Samsung and sk Heinis

0:17:26.800 --> 0:17:28.399
<v Speaker 5>make up fifty percent of their market.

0:17:28.560 --> 0:17:30.119
<v Speaker 4>Go if you want to heade, I guess this is

0:17:30.160 --> 0:17:33.160
<v Speaker 4>the place to come before we let you go. Look,

0:17:33.200 --> 0:17:36.000
<v Speaker 4>we're at a chunk through Australian earning season so far.

0:17:36.080 --> 0:17:38.159
<v Speaker 4>What's your report card so far and what are you

0:17:38.200 --> 0:17:39.800
<v Speaker 4>looking out for in the next couple of weeks.

0:17:39.840 --> 0:17:43.560
<v Speaker 5>We went into earning season with very high expectations. Twelve

0:17:43.600 --> 0:17:46.320
<v Speaker 5>percent growth was expected and that's the highest growth rate

0:17:46.480 --> 0:17:48.320
<v Speaker 5>that we've seen in around about four years.

0:17:48.359 --> 0:17:50.280
<v Speaker 1>Typically we expect earnings.

0:17:49.880 --> 0:17:52.280
<v Speaker 5>To be about four to four and a half percent growth,

0:17:52.480 --> 0:17:54.840
<v Speaker 5>and I think that's been reflected in the Australian share

0:17:54.880 --> 0:17:58.400
<v Speaker 5>market where we did see record highs being reached earlier.

0:17:58.000 --> 0:17:58.680
<v Speaker 1>On in the month.

0:17:59.119 --> 0:18:01.680
<v Speaker 5>But as earning this season has continued, we've seen a

0:18:01.720 --> 0:18:04.680
<v Speaker 5>bit of from loss of earning's momentum growth now expected

0:18:04.720 --> 0:18:08.280
<v Speaker 5>at eleven point seven percent, and that's not devastatingly low, it's.

0:18:08.200 --> 0:18:09.119
<v Speaker 1>Still very high.

0:18:09.280 --> 0:18:11.159
<v Speaker 5>But the fact is We are starting to see a

0:18:11.160 --> 0:18:14.360
<v Speaker 5>bit of moderation in terms of earning's momentum, and that's

0:18:14.359 --> 0:18:15.680
<v Speaker 5>across eleven sectors.

0:18:15.840 --> 0:18:18.720
<v Speaker 1>It's being worse in some like consumer discretionary. We know

0:18:18.800 --> 0:18:20.040
<v Speaker 1>that's been hit hot, but.

0:18:20.040 --> 0:18:23.679
<v Speaker 5>Other sectors have started to shine, into healthcare, energy in

0:18:23.720 --> 0:18:24.639
<v Speaker 5>the material space.

0:18:24.920 --> 0:18:28.280
<v Speaker 2>That was Julia Lee, investment director at Shaw and Partner's

0:18:28.359 --> 0:18:32.399
<v Speaker 2>Asset Management, speaking with Bloomberg TV host Paul Allen, bringing

0:18:32.440 --> 0:18:38.560
<v Speaker 2>you their conversation here on the Daybreak Asia Podcast. Thanks

0:18:38.560 --> 0:18:42.119
<v Speaker 2>for listening to today's episode of the Bloomberg Daybreak Asia

0:18:42.359 --> 0:18:46.800
<v Speaker 2>Edition podcast. Each weekday, we look at the story shaping markets, finance,

0:18:47.119 --> 0:18:50.239
<v Speaker 2>and geopolitics in the Asia Pacific. You can find us

0:18:50.240 --> 0:18:54.480
<v Speaker 2>on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

0:18:54.480 --> 0:18:57.560
<v Speaker 2>else you listen. Join us again tomorrow for insight on

0:18:57.600 --> 0:19:01.760
<v Speaker 2>the market moves from Hong Kong to a poor and Australia.

0:19:02.200 --> 0:19:04.639
<v Speaker 2>I'm Doug Prisoner and this is Bloomberg

0:19:11.600 --> 0:19:11.639
<v Speaker 5>M