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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Chrisner. We

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Speaker 2: begin today with a potential deal that would create the

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Speaker 2: world's largest mining company. Glen Core is in talks with

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Speaker 2: Rio Tinto Group about a merger.

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Speaker 1: Now.

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Speaker 2: A little over a year ago, talks between these two collapsed,

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Speaker 2: but today glen Core said it was in preliminary talks

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Speaker 2: with Rio and the options included an all share transaction

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Speaker 2: that would see Rio essentially buy glen Core, and then

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Speaker 2: later in the day Rio confirmed those talks. Glen Core

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Speaker 2: and Rio both own large copper assets. In the US

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Speaker 2: equity market, we saw a rotation out of big cap

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Speaker 2: tech and into smaller cap shares. We had the Nasdaq

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Speaker 2: Composite down about four tens to one percent, but the

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Speaker 2: Russell two thousand jump by more than one percent today.

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Speaker 2: And in the Asia specific it looks to be a

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Speaker 2: mixed picture for stocks. We're seeing positivity in Japan and

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Speaker 2: choppy trading in Seoul. Let's bring in Bloomberg's Winnie Soue.

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Speaker 2: Winnie covers Asian equities and she joins us from our

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Speaker 2: studios in Hong Kong. Thank you for being with US.

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Speaker 2: Happy New year to you. It's been a strong start

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Speaker 2: of the year for equity markets in your region. What

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Speaker 2: have been the primary drivers?

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Speaker 3: Yeah, I guess this year, like you mentioned, it has

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Speaker 3: been a very strong start of the year for the region,

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Speaker 3: and we're seeing key drivers really being still that AI engine,

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Speaker 3: right you're looking at a Cosby and also Taiwan's taiax

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Speaker 3: index hitting fresh new highs with the help of Samsung

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Speaker 3: Electronics ANTISMC.

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Speaker 4: So that is.

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Speaker 3: Still the key drivers for our markets here, and you

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Speaker 3: are still seeing that rotation away from US assets and

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Speaker 3: into the Asia region because of better, more attractive valuations

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Speaker 3: earnings prospects, and that's why you're seeing that Asia actually

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Speaker 3: is still outperforming the US so far this year.

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Speaker 2: Well, here in the States, when you talk about AI,

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Speaker 2: there is a lot of concern about extended valuations. I'm

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Speaker 2: not getting a sense right now that that's a big

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Speaker 2: concern in Asia or am I wrong?

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Speaker 3: Yeah, exactly, it's less of a concern because those high

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Speaker 3: valuations are mainly in these US major tech names. But

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Speaker 3: when you look at Asia, actually we are seeing ice

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Speaker 3: earnings ratio for for example, the MSCI Asia Tech Index

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Speaker 3: about seventeen versus twenty five for the NASTAC one hundred

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Speaker 3: index and also thirty nine for the Socks Index. So

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Speaker 3: you can see how valuation wise, Asia names are actually

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Speaker 3: way more attractive than the US one.

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Speaker 2: So you mentioned Samsung. We just had operating income and

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Speaker 2: revenue numbers that were delivered on Thursday in Seoul. Talk

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Speaker 2: to me about the story in Samsung. I know it's

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Speaker 2: such a big company. Obviously for the COSPY, it's a

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Speaker 2: big contributor, but whatever happens at Samsung seems to permeate

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Speaker 2: across the region, right.

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Speaker 3: Yeah, exactly, just like you mentioned, because it's such a

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Speaker 3: big company in South Korea and also a big representative

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Speaker 3: of that AI strength in Asia, we do see a

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Speaker 3: lot of the spillover effect from this company. You were

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Speaker 3: talking about their earnings, right, and the latest quarterly earnings

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Speaker 3: actually showed profits tripled to a record high, and that's

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Speaker 3: being driven by their ability to hike their hike their

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Speaker 3: memory tip prices, and that goes to show that the

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Speaker 3: demand for AI and also the demand for memory chips

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Speaker 3: are really still very strong. And like we had at

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Speaker 3: the CEES Las Vegas comments from Jensen Huan that there

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Speaker 3: is still kind of a lot of demand behind these

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Speaker 3: memory chips, and hence it's so important for these Asia

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Speaker 3: supply chains to be able to serve that demand, and

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Speaker 3: hence we're seeing that strength in these AI names in Asia.

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Speaker 2: So Hwang is obviously the CEO of Nvidia, and we

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Speaker 2: know that company uses as its key foundry TSMC in Taiwan.

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Speaker 2: What kind of price section are we seeing lately around

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Speaker 2: Taiwan semiconductor.

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Speaker 3: Yeah, so TSMC is another very exciting one that we're

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Speaker 3: seeing so far this year as well, because we are

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Speaker 3: going to have their earnings next Thursday. So a lot

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Speaker 3: of these price hikes by different analysts across Wall Street

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Speaker 3: has been happening in the past week. We're talking about

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Speaker 3: Goldman Sex talking about McCrory all raising target prices so

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Speaker 3: through this week, and they were talking about how AI

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Speaker 3: is that multi year growth engine for the company and

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Speaker 3: hence they're expecting better earnings and better revenue driven by

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Speaker 3: that solid demand. So TSMC has been it's about forty

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Speaker 3: percent ish close to fifty percent at this point for

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Speaker 3: the TAYAKS index. So the kind of the boost in

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Speaker 3: the stock price also helped the overall tax index to

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Speaker 3: reach record high levels.

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Speaker 4: As well.

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Speaker 2: So this has been a big week for geopolitics, particularly

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Speaker 2: when you consider the situation in Venezuela. And at the

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Speaker 2: same time, we've got these simmering tensions between China and Japan,

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Speaker 2: and that I think was the bigger issue for markets

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Speaker 2: in the Asia Pacific, not the Venezuela story, even though

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Speaker 2: as you and I both know, China is a major

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Speaker 2: importer of venezuela and crude oil. Talk to me about

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Speaker 2: what's going on between China and Japan and the risk

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Speaker 2: that this is kind of created for markets, not just

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Speaker 2: in Tokyo, but perhaps in Beijing and even in Hong Kong.

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Speaker 3: Sure, So to your point about Venezuela, I think what

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Speaker 3: we're seeing right now is that as long as there's

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Speaker 3: not a major shock to the supply chain, markets are

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Speaker 3: brushing off that part of the risk quite quickly. And

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Speaker 3: what we've been seeing over the past year is that

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Speaker 3: markets are getting more used to these gill political moves

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Speaker 3: and that they are digesting these risks relatively smoothly. But

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Speaker 3: when it comes to China Japan, like you mentioned, it

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Speaker 3: has been escalating quite quickly, although at this point it

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Speaker 3: doesn't have a big shock in terms of the broader market.

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Speaker 3: It is affecting different sectors that we're mentioned. For example,

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Speaker 3: this week around the latest development is that China is

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Speaker 3: launching this antitrust probe into Japan's key semiconductor materials, and

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Speaker 3: we saw that these sectors in Japan are actually falling

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Speaker 3: while the ones in China are rising, and China is

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Speaker 3: basically saying that Japan by doing this, it's hurting the

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Speaker 3: interest of China's domestic industry. So you can see how,

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Speaker 3: you know, the relev sectors and the industries in the

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Speaker 3: different countries are moving different directions based on just kind

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Speaker 3: of the ongoing tensions between the two countries.

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Speaker 2: So you mentioned the semiconductor industry, and I think that's

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Speaker 2: great because at the end of last year, we had

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Speaker 2: a couple of big IPOs, new chip makers in China

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Speaker 2: that were issuing stock on the public exchanges. Is this

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Speaker 2: something we're going to see a lot more of this year,

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Speaker 2: a lot more in the way of initial public offerings,

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Speaker 2: not just on the mainline, but in Hong Kong as well,

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Speaker 2: do you think?

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Speaker 1: Yeah?

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Speaker 3: So the IPO market has been a really hot topic

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Speaker 3: and a really hot market since last year, and that's

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Speaker 3: also what we're going to expect for this year, and

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Speaker 3: the focus is a lot on tech, is a lot

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Speaker 3: on AI. As you can see the two latest blockbusters

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Speaker 3: that we saw from China Metax and More Threats. They

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Speaker 3: were overly subscribed and there was a lot of hype

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Speaker 3: and excitement, especially because this time around the government is

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Speaker 3: behind this in terms of kind of how they are

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Speaker 3: supporting further development in the tech industry, and that's being

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Speaker 3: driven by how they have right now a big focus

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Speaker 3: on this tech self sufficiency and that they especially with

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Speaker 3: attentions going on with the US, they want to put

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Speaker 3: more focus on this and we can see that in

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Speaker 3: their latest five year client as well. So we're expecting

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Speaker 3: further policy support to drive these successful IPOs in the

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Speaker 3: AI theme and that China to put more focus and

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Speaker 3: more resources into boosting their tech industry. Winnie.

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Speaker 2: When you talk to the folks in your circle, the

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Speaker 2: analyst community, many other people who are in markets in Asia,

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Speaker 2: what are they saying about the outlook for twenty twenty

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Speaker 2: six and where are they focused. Are there themes here

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Speaker 2: that may be a little surprising or is it going

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Speaker 2: to be a little bit of what we saw at

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Speaker 2: the end of last year.

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Speaker 3: Yeah, So for this year around, I would say that

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Speaker 3: the biggest theme still is still around AI. Right. There

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Speaker 3: are lots of opportunities, but at the same time, there

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Speaker 3: are also more risks, whether it's that potential AI bubble risk,

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Speaker 3: the fact that we might not be able to see

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Speaker 3: monetization as fast as possible, or that spillover effect if

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Speaker 3: the US tech actually sees a bit of a pullback

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Speaker 3: just because how much concentration we have in these Asia

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Speaker 3: tech names throughout the year. But another key topic that

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Speaker 3: people have been talking about obviously is still that central

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Speaker 3: bank path. We're talking about the FED potentially cutting rates

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Speaker 3: twice and that's going to provide further room for these

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Speaker 3: Asia central banks to cut rates as well. So that

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Speaker 3: would provide telwinds for countries, especially in South East Asia

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Speaker 3: like Thailand, like Malaysia for example. But on the other hand,

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Speaker 3: we have banks like the Bank of Japan and also

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Speaker 3: banks in Australia and New Zealand a bit more on

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Speaker 3: the rate hike path, so that is likely to weigh

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Speaker 3: on some sectors, especially as these countries tackle inflation. So

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Speaker 3: we'll see how those a central bank path kind of

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Speaker 3: diverge in Asia and how that affects the different stock

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Speaker 3: markets and sectors in our region as well.

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Speaker 2: Okay, Wennie, we'll leave it there. Thank you so much.

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Speaker 2: Bloomberg's Winnie Sue covers Asian equities joining us from our

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Speaker 2: studios in Hong Kong. Here on the Daybreak Asia podcast.

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Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner.

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Speaker 2: The brazen move last week by Donald Trump to snatch

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Speaker 2: Nicholas Maduro from his home in Caracas also sent a

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Speaker 2: clear message to Chinese President Chi Jinping. The Western hemisphere

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Speaker 2: has no room for another super power. Let's take a

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Speaker 2: closer look now at these dynamics with Bloomberg opinion columnist

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Speaker 2: Karishma Vaswani. Karishma, thank you so much for being with me.

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Speaker 2: Happy New Year to you. I'd like to begin by

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Speaker 2: getting your view on Beijing's reaction to the US move

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Speaker 2: on Venezuela.

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Speaker 4: I mean, I think you know by and large. First

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Speaker 4: of all, I think the caveat that it's quite difficult

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Speaker 4: to get a sense of how everyday Chinese people feel

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Speaker 4: or think about this, except for via social media, and

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Speaker 4: the comments that you see on social media have been

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Speaker 4: split into two camps. One this is just another affirmation

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Speaker 4: of the fact that the United States is this evil

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Speaker 4: empire that goes out there criticizing China. But it's very much,

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Speaker 4: you know, the sort of perpetrator of similar ills. And

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Speaker 4: the idea that a nation could just waltz in and

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Speaker 4: seize the leader of another country, I think baffles the

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Speaker 4: minds of many Chinese, not just people in China, but

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Speaker 4: across the region. Actually, I think on the flip side

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Speaker 4: in China, and this has been reflected in social media

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Speaker 4: as well, although authorities have clamped down on these sorts

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Speaker 4: of comments. Is a recognition that actually the United States

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Speaker 4: and China are not that different, and Siejenping and Trump

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Speaker 4: both share similar qualities when it comes to, for example,

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Speaker 4: wanting to be commander in chief for life. And I've

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Speaker 4: been you know, both amused, but also at the same time,

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Speaker 4: I find that really interesting and revealing about how people

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Speaker 4: in these two giant countries are looking at each other

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Speaker 4: and actually have found more similarities in this particular age

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Speaker 4: of indecent empires, if you will, than ever before.

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Speaker 2: So help me understand if we can apply a little

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Speaker 2: bit of context here, what China's relationship with Venezuela has

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Speaker 2: been and how this may or may not complicate that strategy.

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Speaker 4: Well, you know, in the first instance, it does look like,

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Speaker 4: on the surface, the removal of Nicolas Maduro from Venezuela

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Speaker 4: would be a real loss for China. You know, it

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Speaker 4: is a big buyer of Venezuelan crude. You know, we

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Speaker 4: have to remember, of course, that the country only accounted

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Speaker 4: for about four percent of its imports last year and

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Speaker 4: its biggest creditor. It isn't clear yet what Trump plans

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Speaker 4: to do with Venezuelan oil, although he has suggested that,

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Speaker 4: you know, he's willing to sell it to everybody. China

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Speaker 4: could or could not be on that list. So and

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Speaker 4: also I should add that China is a big investor

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Speaker 4: in Latin America. Venezuela is a big part of that strategy.

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Speaker 4: So in the first instance, it does look like this

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Speaker 4: could be a real setback for China. But I think,

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Speaker 4: as I've written in my piece, that we should be

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Speaker 4: looking at this in quite a different way. And certainly

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Speaker 4: everything that I've been hearing and seeing and people I've

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Speaker 4: been talking to in China suggest that this is actually

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Speaker 4: an opportunity for China because in the long term, if

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Speaker 4: the United States does want to carve the world up

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Speaker 4: in what appears to be spheres of influence. You know,

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Speaker 4: we've seen that in the National Security strategy, for instance.

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Speaker 4: Then this is precisely what China has always wanted. It's

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Speaker 4: wanted the US to stay out of its backyard and

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Speaker 4: not meddle in the South China Sea and not get

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Speaker 4: involved in the Taiwan Strait. And if that's the kind

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Speaker 4: of ideology or a philosophy of how the world works

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Speaker 4: that Trump is trying to sort of push forward, then

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Speaker 4: that's exactly what China wants.

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Speaker 2: But there are other US allies, and I'm thinking of

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Speaker 2: Japan in particular, very concerned about how this action on

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Speaker 2: the part of the Trump administration in Venezuela would embolden

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Speaker 2: China to kind of move toward Taiwan. Does any of

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Speaker 2: that dynamic keep China somewhat in check, whether we're talking

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Speaker 2: about Japan or maybe to a less extent, South Korea.

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Speaker 4: So I don't think that what's happened in Venezuela will

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Speaker 4: change the calculation for China at all when it comes

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Speaker 4: to Taiwan. I think these are two very separate issues.

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Speaker 4: I know there's been a lot of parallels drawn you know,

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Speaker 4: by analysts. But my view on that is that Taiwan

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Speaker 4: for China is an internal issue. It sees Taiwan as

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Speaker 4: its own territory, and the calculations that are involved in

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Speaker 4: whether or not it will launch a quarantine or a

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Speaker 4: blockade or you know, an invasion. And again, I don't

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Speaker 4: think that's the way that Sijinping wants to go about

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Speaker 4: unifying with Taiwan. I think he wants to win without fighting.

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Speaker 4: I think those calculations are based on things like is

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Speaker 4: the people's liberation army ready yet is the domestic economy

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Speaker 4: at a point where it could withstand what would be

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Speaker 4: quite a heavy hit. And right now neither of those

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Speaker 4: things appear to be true. But what I do think

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Speaker 4: the Venezuela, you know, there's sort of actions by the

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Speaker 4: US and Venezuela they do provide China is this sort

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Speaker 4: of cheap ammunition. As one analyst put it to me,

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Speaker 4: that if the United States can do that in a

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Speaker 4: country that doesn't belong to it, that thinking in Beijing

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Speaker 4: goes that, then of course our territory is well within

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Speaker 4: our rights to do whatever we want with So it's

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Speaker 4: more of a justification as if China even needed that

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Speaker 4: to be honest, rather than a sort of excuse to

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Speaker 4: do the same thing, if that makes sense.

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Speaker 2: So we know that Trump administration has only been in

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Speaker 2: office for a year now, We've got three years left

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Speaker 2: in the term of Donald Trump. Is there a conversation

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Speaker 2: around perhaps some mean type reversion after Trump leaves office

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Speaker 2: or do we really have to grapple with the possibility

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Speaker 2: that this is the new normal where the US is concerned.

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Speaker 4: I think, you know, a question I asked myself a

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Speaker 4: lot in my reporting these days, is what the world

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Speaker 4: look like after Donald Trump leaves? And my estimation of

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Speaker 4: that was that it was going to be in the

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Speaker 4: next election cycle and the midterms coming up. And you know,

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Speaker 4: somebody said to me the other day, what if it's

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Speaker 4: not with you know, what if it's within the realm

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Speaker 4: of possibility that that timeline gets extended. And another thing

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Speaker 4: that you know, I think about a lot is again

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Speaker 4: based on some of the commentary we've been we've been

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Speaker 4: talking about in Chinese social media as well. One aspect

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Speaker 4: of this is just how much closer the Chinese and

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Speaker 4: the Americans might be in the way that they operate

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Speaker 4: in the world. And if this is the law of

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Speaker 4: the jungle. If this is about might equals right, then

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Speaker 4: that is something the Chinese know how to deal with

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Speaker 4: and are very comfortable with. I think that the calculus

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Speaker 4: for Beijing now is to find a way to get

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Speaker 4: Donald Trump to to make the trade war less painful

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Speaker 4: for China, and I think those things are in play,

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Speaker 4: and we will see a meeting between Siegenping and Donald Trump,

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Speaker 4: either in April or later in the year at the

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Speaker 4: Apex Summit and Chenjin or even the G twenty for instance,

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Speaker 4: and I think we will see moments where that relationship

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Speaker 4: is tense and under pressure. But I think the long

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Speaker 4: term trajectory, while the United States and China continue to

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Speaker 4: be strategic rivals under Trump, I think the focus for

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Speaker 4: America will be much more domestic, and that plays into

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Speaker 4: what China wants.

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Speaker 2: It was only yesterday here in the US that President

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Speaker 2: Trump signaled plans to increase military spending by fifty percent.

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Speaker 2: We're talking about one and a half trillion US dollars

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Speaker 2: by twenty twenty seven. Are you seeing evidence that countries

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Speaker 2: in the Asia Pacific are really feeling like they have

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Speaker 2: no choice now but to add much more in the

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Speaker 2: way of military spending.

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Speaker 4: Oh, yes, definitely. And this is a trend that is

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Speaker 4: continued from last year. I mean part of the issue,

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Speaker 4: or part of the pressure point, I should say, came

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Speaker 4: from the Trump administration itself, when you know, they said

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Speaker 4: this to allies in Europe, but they've also said it

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Speaker 4: to countries in Asia, and they've said you've got to

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Speaker 4: increase your defense spending. Well, that's precisely what's happened. We've

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Speaker 4: seen that with Japan, South Korea, even India is expanding

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Speaker 4: its naval capabilities, partly because of the threat from China,

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Speaker 4: but also because of the insecurity that they feel now.

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Speaker 4: These nations that in the past there was this sort

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Speaker 4: of tacit understanding that the United States would be there,

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Speaker 4: you know, the security guarantee of last resort if you will.

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Speaker 4: I'm not sure that everybody feels the same way now.

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Speaker 4: So what you have, the situation that you have now

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Speaker 4: is countries arming themselves and you know, building up their

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Speaker 4: defense posture. And I think that's going to continue.

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Speaker 2: Have you thought much about how these events might redesign

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Speaker 2: trade relations, but particularly be between China and the United States, or,

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Speaker 2: to a lesser extent, China and Japan. China and South Korea,

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Speaker 2: China and India.

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Speaker 4: I think what we will see is the role of

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Speaker 4: middle powers becoming I mean, you know, for want of

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Speaker 4: any other option, becoming more prominent, or at least the

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Speaker 4: attempt to become more prominent and rely on each other

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Speaker 4: as these superpowers continue to behave as badly as they are.

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Speaker 4: You know, you've got countries like Australia, Japan, India already

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Speaker 4: trying to come together in some sort of grouping Singapore,

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Speaker 4: which is the emblem of small power influence. I suppose

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Speaker 4: making those kinds of noises where you know, it's saying

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Speaker 4: that the United States is now a sort of landlord

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Speaker 4: seeking rent and trying to sort of make the case

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Speaker 4: that we need to go back to a rules based order.

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Speaker 4: But I think right now the situation is in such

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Speaker 4: flux that these countries are constantly scrambling, one trying to

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Speaker 4: deal with the impact of the trade war and the

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Speaker 4: tariffs that the Trump administration has put on them, and

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Speaker 4: two dealing with the fact that as China has been

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Speaker 4: shut out effectively of the US market, it is dumping

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Speaker 4: goods in these countries. I mean, I put a piece

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Speaker 4: out before Christmas about how the trillion dollar surplus that

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Speaker 4: China recorded last year towards the end of last year

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Speaker 4: is having a direct impact on some of these developing

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Speaker 4: countries that it says it wants to partner with and

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Speaker 4: has been you know, investing in and Indonesia as a

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Speaker 4: case in point, where there have been job losses recorded

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Speaker 4: in many of the factories that you know, in the

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Speaker 4: past would have given jobs or provided jobs for a

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Speaker 4: youthful demographic that instead is very worried about and insecure

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Speaker 4: about its future. And I think there is a link

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Speaker 4: to be tied to some of the gen Z protests

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Speaker 4: that we've seen in these countries to job in security

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Speaker 4: and the way that the Chinese economy is operating right

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Speaker 4: now as a result of the tensions with the United States.

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Speaker 4: So it's a really you know, I don't want to

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Speaker 4: start the new year off with this abysmal picture, but

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Speaker 4: I'm afraid I have no choice really, given the events

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Speaker 4: that we're dealing with.

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Speaker 2: Well, there is a tremendous amount to consider, and I

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Speaker 2: think you've helped summarize it very very well, Karshma, Thank

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Speaker 2: you so much. Happy New Year to you. Bloomberg Opinion

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Speaker 2: columnist Karishma Vaswani joining us here on the Daybreak Asia podcast.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Prisner, and this is Bloomberg