WEBVTT - Trump Backs Off Iran Threat, Sets Five Days for Iran Talks

0:00:02.520 --> 0:00:07.040
<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News.

0:00:11.119 --> 0:00:14.760
<v Speaker 2>Welcome to the Daybreak Asia Podcast. I'm Charlie Tella. Doug

0:00:14.800 --> 0:00:18.440
<v Speaker 2>Prisoner's got the week off. Asian equities are rallying today

0:00:18.480 --> 0:00:22.159
<v Speaker 2>after President Trump signaled a delay and planned strikes on

0:00:22.360 --> 0:00:28.080
<v Speaker 2>Iranian energy infrastructure, citing talks with Tehran and boosting hopes

0:00:28.120 --> 0:00:31.120
<v Speaker 2>for a de escalation in the Middle East. And that's

0:00:31.160 --> 0:00:34.480
<v Speaker 2>where we begin the conversation with surash Duantia. They had

0:00:34.640 --> 0:00:39.720
<v Speaker 2>CIO for Asia Equity Strategy at UBS Global Wealth Management,

0:00:40.080 --> 0:00:43.800
<v Speaker 2>and he spoke to Bloomberg's Heidi Stroud, Watts and Sherry on.

0:00:44.200 --> 0:00:47.519
<v Speaker 1>How do you take the latest signals coming from President

0:00:47.560 --> 0:00:50.879
<v Speaker 1>Trump and Iran and is this positive sentiment that we're

0:00:50.880 --> 0:00:53.440
<v Speaker 1>seeing in the markets justified at this point.

0:00:56.760 --> 0:00:59.360
<v Speaker 3>I think it's quite likely that this week we see

0:00:59.360 --> 0:01:03.760
<v Speaker 3>a refriend given the markets were oversold, but this might

0:01:03.880 --> 0:01:07.920
<v Speaker 3>not be the final solution. The situation is still very fluid.

0:01:08.400 --> 0:01:11.679
<v Speaker 3>It's quite possible that a week later we get an

0:01:11.680 --> 0:01:16.080
<v Speaker 3>a further escalation because they are asked from both side

0:01:16.560 --> 0:01:20.399
<v Speaker 3>and it might be very difficult to reach to a

0:01:20.440 --> 0:01:23.480
<v Speaker 3>final conclusion within a very short period of time. So

0:01:23.560 --> 0:01:26.039
<v Speaker 3>I think markets could still remain very volatile in the

0:01:26.080 --> 0:01:29.760
<v Speaker 3>short term. Our base case is that four to six

0:01:29.800 --> 0:01:32.679
<v Speaker 3>weeks down the line we should see a resolution of

0:01:32.720 --> 0:01:36.039
<v Speaker 3>the conflict because it's not in favor of both. But

0:01:36.160 --> 0:01:39.720
<v Speaker 3>having said that, path to that resolution could be very messy.

0:01:42.080 --> 0:01:44.559
<v Speaker 1>In the meantime, of course, we have seen the volatility

0:01:44.560 --> 0:01:47.200
<v Speaker 1>and gold prices as people are trying to hedge right now.

0:01:47.240 --> 0:01:49.920
<v Speaker 1>We saw that sort of breakdown when it comes to

0:01:49.960 --> 0:01:53.160
<v Speaker 1>the safe haven correlation with the US dollar. What do

0:01:53.240 --> 0:01:56.080
<v Speaker 1>you make of some of these assets and how they're

0:01:56.080 --> 0:02:00.680
<v Speaker 1>training as safe havens and where would you go to hedge.

0:02:02.040 --> 0:02:04.560
<v Speaker 3>It's very common to see this kind of pressure on

0:02:04.640 --> 0:02:10.040
<v Speaker 3>gold during a liquidation crisis because investors were raising cash

0:02:10.400 --> 0:02:13.160
<v Speaker 3>in this crisis, and that's why they were selling any

0:02:13.200 --> 0:02:15.799
<v Speaker 3>asset which had made profit this year. So we saw

0:02:15.840 --> 0:02:19.160
<v Speaker 3>profit booking in gold, in core, in equities, in Japanese equities.

0:02:19.720 --> 0:02:21.720
<v Speaker 3>In the short term, we do think gold is still

0:02:21.760 --> 0:02:24.959
<v Speaker 3>a very good hatch, especially after the ten percent pullback

0:02:25.000 --> 0:02:27.919
<v Speaker 3>in the last few weeks. At this kind of level,

0:02:27.960 --> 0:02:31.400
<v Speaker 3>it makes sense to buy gold because eventually we do

0:02:31.480 --> 0:02:34.720
<v Speaker 3>think FED will deliver on rate cuts, dollar will be weaker,

0:02:35.120 --> 0:02:38.520
<v Speaker 3>so gold will bounce back. The other areas investors can

0:02:38.560 --> 0:02:42.079
<v Speaker 3>look at is a short dated investment grade bonds. Although

0:02:42.120 --> 0:02:44.320
<v Speaker 3>there's a bit of uncertainty on how the FED is

0:02:44.320 --> 0:02:48.080
<v Speaker 3>going to proceed on the rate cuts, but at least

0:02:48.240 --> 0:02:51.120
<v Speaker 3>short dated bonds are not going to be effected and

0:02:51.160 --> 0:02:53.080
<v Speaker 3>the eils are pretty juicy at current levels.

0:02:55.120 --> 0:02:58.520
<v Speaker 4>Would you still recommend keeping some powder dry? When it

0:02:58.560 --> 0:03:06.480
<v Speaker 4>comes to keeping cash.

0:03:02.919 --> 0:03:04.600
<v Speaker 3>It might not be a bad idea to see keep

0:03:04.600 --> 0:03:08.440
<v Speaker 3>some cash on a sideline. At least investors should hedge

0:03:08.520 --> 0:03:11.280
<v Speaker 3>a little bit of risk in the equity side, reduce

0:03:11.520 --> 0:03:15.720
<v Speaker 3>cyclical exposure. That's what we are doing in our client

0:03:15.720 --> 0:03:19.040
<v Speaker 3>portfolios because you can never be sure and the tail

0:03:19.120 --> 0:03:24.440
<v Speaker 3>risk is very high. Once this thing gets resolution, then

0:03:24.480 --> 0:03:26.280
<v Speaker 3>I think we should say a very strong bounce back

0:03:26.320 --> 0:03:31.760
<v Speaker 3>in the equity market, but meanwhile reduce cyclical exposure, diversify

0:03:32.040 --> 0:03:33.880
<v Speaker 3>and keep some cash on the sideline.

0:03:35.040 --> 0:03:38.680
<v Speaker 4>It's interesting, Sarsh, I see Germany, India, Eurozone facing the

0:03:38.840 --> 0:03:42.800
<v Speaker 4>highest short term risks. If you take a step out,

0:03:42.960 --> 0:03:46.040
<v Speaker 4>where do you see, I guess less risk or less

0:03:46.120 --> 0:03:48.840
<v Speaker 4>or more opportunity with China be one of the markets

0:03:48.840 --> 0:03:49.680
<v Speaker 4>that you could consider.

0:03:52.480 --> 0:03:56.360
<v Speaker 3>You're absolutely right, and this morning actually we downdraad US

0:03:56.400 --> 0:04:00.240
<v Speaker 3>on equities and Indian equities from attractive to neutral. They

0:04:00.280 --> 0:04:03.400
<v Speaker 3>are more cyclical and going to be more affected by

0:04:03.400 --> 0:04:06.920
<v Speaker 3>the high oil prices. Within Asia. I think China secuorities

0:04:06.920 --> 0:04:09.640
<v Speaker 3>are going to be more resilient because China will keep

0:04:09.640 --> 0:04:13.320
<v Speaker 3>getting the oil through the state of homus. Inflation is

0:04:13.400 --> 0:04:17.800
<v Speaker 3>slow and the market has massively underperformed Asian markets over

0:04:17.839 --> 0:04:21.760
<v Speaker 3>the last six months. So we don't see further downside

0:04:21.839 --> 0:04:25.880
<v Speaker 3>in China quity market from current levels unless detailed Lisksnario

0:04:25.920 --> 0:04:29.719
<v Speaker 3>place out. The other areas to look at in Asia

0:04:29.720 --> 0:04:33.160
<v Speaker 3>would be investment grade bonds and definitely goldsted a very

0:04:33.160 --> 0:04:34.680
<v Speaker 3>good hedch at current levels.

0:04:36.960 --> 0:04:39.800
<v Speaker 1>When it comes to broader risk sentiment, how much does

0:04:39.839 --> 0:04:43.400
<v Speaker 1>it help on the margins news that we have European

0:04:43.520 --> 0:04:46.760
<v Speaker 1>Union Australia trade deal. I know that we're very much

0:04:46.800 --> 0:04:50.360
<v Speaker 1>distracted with the ongoing Iran war. But if we see

0:04:50.360 --> 0:04:54.440
<v Speaker 1>a more positive sentiment by allies, by other countries and

0:04:54.520 --> 0:04:57.680
<v Speaker 1>not revolving everything around the US, could we see some

0:04:57.880 --> 0:04:58.960
<v Speaker 1>help for markets.

0:05:01.880 --> 0:05:03.880
<v Speaker 3>It's quite possible that we do see a bit of

0:05:04.120 --> 0:05:08.400
<v Speaker 3>really fairly that markets market attention shift from the Iran

0:05:08.480 --> 0:05:13.240
<v Speaker 3>crisis to the free trade deal, which indicate towards continuation

0:05:13.400 --> 0:05:17.279
<v Speaker 3>of the global economic growth. But at the front and center,

0:05:17.400 --> 0:05:19.320
<v Speaker 3>we are still going to be focused more on the

0:05:19.360 --> 0:05:23.200
<v Speaker 3>Iran crisis because the tail risk is very high. If

0:05:23.200 --> 0:05:26.120
<v Speaker 3>you don't see a resolution, it's quite likely that we

0:05:26.160 --> 0:05:29.400
<v Speaker 3>see substantial pullback in the markets. So at the market

0:05:29.520 --> 0:05:31.840
<v Speaker 3>it does help, but I think we do need to

0:05:31.880 --> 0:05:34.320
<v Speaker 3>see a resolution of the crisis in the next four

0:05:34.320 --> 0:05:35.040
<v Speaker 3>to six weeks.

0:05:37.600 --> 0:05:40.599
<v Speaker 1>In the meantime, central banks around the world just struggling

0:05:40.640 --> 0:05:43.840
<v Speaker 1>to understand what the implications of surgeon oil will be.

0:05:43.920 --> 0:05:47.320
<v Speaker 1>Here in Japan, we got inflamation numbers that decelerated, but

0:05:47.400 --> 0:05:50.839
<v Speaker 1>it seems that when it comes to JGB yields, for example,

0:05:50.920 --> 0:05:53.680
<v Speaker 1>they continue to rise to multi decade highs and the

0:05:53.760 --> 0:05:58.480
<v Speaker 1>yen continues to weaken. What are the implications for investors

0:05:58.520 --> 0:06:01.320
<v Speaker 1>when they look at this market and we have already

0:06:01.320 --> 0:06:03.560
<v Speaker 1>seen an incredible round in the last few years.

0:06:06.600 --> 0:06:09.880
<v Speaker 3>Yeah, I think it's quite possible that the GGB yield

0:06:10.080 --> 0:06:12.880
<v Speaker 3>continue to go higher, especially as the US skills have

0:06:12.920 --> 0:06:16.120
<v Speaker 3>been going higher in the short term. But on the

0:06:16.160 --> 0:06:18.480
<v Speaker 3>equity side, we do think that this pullback in the

0:06:18.560 --> 0:06:23.080
<v Speaker 3>Champanese equity market has been oversold and this is actually

0:06:23.080 --> 0:06:26.240
<v Speaker 3>a buying opportunity. In the short term, yes, market could

0:06:26.320 --> 0:06:28.880
<v Speaker 3>remain volatile, but if you look at the medium term

0:06:28.920 --> 0:06:32.880
<v Speaker 3>outlook for Japanese equity market, the earnings this year should

0:06:32.920 --> 0:06:35.560
<v Speaker 3>be up close to high single digit and they are

0:06:35.640 --> 0:06:38.279
<v Speaker 3>reforms coming from the government on the macro front with

0:06:38.440 --> 0:06:42.880
<v Speaker 3>fiscal spending and more corporate governance reforms, and that should

0:06:42.880 --> 0:06:47.120
<v Speaker 3>support higher equity prices. Short so short term more volatile,

0:06:47.240 --> 0:06:49.640
<v Speaker 3>but eventually I think we should see a recovery in

0:06:49.680 --> 0:06:50.799
<v Speaker 3>the Champuese equity market.

0:06:51.040 --> 0:06:55.080
<v Speaker 2>So rash Tantia, the head CIO for Asia Equity Strategy

0:06:55.120 --> 0:06:59.720
<v Speaker 2>at UBS Global Wealth Management, speaking to Bloomberg's highly Scround

0:06:59.760 --> 0:07:11.360
<v Speaker 2>What and Sherry on Welcome back to the Daybreak Asia podcast.

0:07:11.440 --> 0:07:14.760
<v Speaker 2>I'm Charlie Pellett, Doug Chrisner's got the week off And

0:07:14.840 --> 0:07:18.240
<v Speaker 2>as we mentioned earlier, President Trump says the US will

0:07:18.280 --> 0:07:24.360
<v Speaker 2>postpone strikes against Iran's energy infrastructure after productive conversations with

0:07:24.480 --> 0:07:27.880
<v Speaker 2>the country. And for more analysis, we heard from rhanda

0:07:27.920 --> 0:07:31.480
<v Speaker 2>Slim Middle East program lead at the Stimpson Center, and

0:07:31.560 --> 0:07:35.600
<v Speaker 2>she spoke to Bloomberg's Heidi Stroud, Watts and Sherry.

0:07:35.240 --> 0:07:37.840
<v Speaker 4>On President Trump clearly looking for an off ramp who

0:07:37.840 --> 0:07:42.360
<v Speaker 4>has extended this deadline for negotiations to five days.

0:07:43.000 --> 0:07:44.000
<v Speaker 1>The Iranians say, no.

0:07:43.960 --> 0:07:46.640
<v Speaker 4>Such negotiations are taking place, and in fact, you know

0:07:47.240 --> 0:07:50.600
<v Speaker 4>that the tone and the aggression is pretty intense coming

0:07:50.600 --> 0:07:55.560
<v Speaker 4>from that side. Is this an asymmetric desire to find

0:07:55.560 --> 0:07:58.680
<v Speaker 4>an end to the war at this point, No.

0:07:58.800 --> 0:08:01.640
<v Speaker 5>I think we have entered the bizarre phase of this war,

0:08:01.840 --> 0:08:04.280
<v Speaker 5>and each side is going to try to get as

0:08:04.360 --> 0:08:08.400
<v Speaker 5>much as possible ahead of the actual negotiation and trying

0:08:08.400 --> 0:08:11.280
<v Speaker 5>to improve their position. And that's what the Iranians are doing.

0:08:11.360 --> 0:08:13.920
<v Speaker 5>If we look at the contacts that have been established,

0:08:14.080 --> 0:08:18.120
<v Speaker 5>for example, between the Iranian officials and Pakistani officials or

0:08:18.120 --> 0:08:20.680
<v Speaker 5>a rumored to be one of the three of countries

0:08:20.720 --> 0:08:23.240
<v Speaker 5>that are helping with the mediation right now between the

0:08:23.840 --> 0:08:27.040
<v Speaker 5>two countries, it proves that the Iranians are speaking with

0:08:27.160 --> 0:08:30.720
<v Speaker 5>a potential mediator now, whether they have agreed on the

0:08:30.840 --> 0:08:34.080
<v Speaker 5>terms of a meeting. I think mister Trump maybe has

0:08:34.760 --> 0:08:39.120
<v Speaker 5>gone overboard, partly to help shape the market ahead of

0:08:39.160 --> 0:08:43.239
<v Speaker 5>this morning opening, but definitely the two sides are interested

0:08:43.640 --> 0:08:46.120
<v Speaker 5>and each one is going, especially the Iranian is going

0:08:46.120 --> 0:08:49.679
<v Speaker 5>to try to improve the pre negotiation conditions. Let's put

0:08:49.720 --> 0:08:52.360
<v Speaker 5>it this way in their favor.

0:08:54.679 --> 0:08:57.160
<v Speaker 4>I think it's easier to see a scenario where the

0:08:57.320 --> 0:09:00.360
<v Speaker 4>US and Iran can come to the table for some

0:09:00.400 --> 0:09:03.280
<v Speaker 4>sort of ceisfile compromise. What about Israel, though, because I

0:09:03.400 --> 0:09:08.800
<v Speaker 4>have a fairly different set of ambitions in this conflict.

0:09:08.360 --> 0:09:11.520
<v Speaker 5>I totally agree with you. I mean, Israel remains interested

0:09:11.640 --> 0:09:15.160
<v Speaker 5>in achieving its objective, which is Iranian regime collapse. The

0:09:15.240 --> 0:09:19.080
<v Speaker 5>Americans are not interested in this objective. They want somebody

0:09:19.400 --> 0:09:21.880
<v Speaker 5>who can they can deal with, you know, as mister

0:09:21.920 --> 0:09:25.440
<v Speaker 5>Trump put it, another Ayatula or another insider from the

0:09:25.480 --> 0:09:28.760
<v Speaker 5>regime that they can deal with, similar to the Venezuelan model.

0:09:30.440 --> 0:09:33.240
<v Speaker 5>But at the same time, Israel cannot wage this war

0:09:33.760 --> 0:09:36.720
<v Speaker 5>the way it is being waged without the American approval

0:09:36.720 --> 0:09:40.200
<v Speaker 5>and the American assistance, and especially without mister trump approval,

0:09:40.480 --> 0:09:42.040
<v Speaker 5>and so I think they are going to be in

0:09:42.080 --> 0:09:44.400
<v Speaker 5>a bind. At some point they have to accede to

0:09:44.440 --> 0:09:47.520
<v Speaker 5>mister Trump's demands if he gets to the point where

0:09:47.559 --> 0:09:49.080
<v Speaker 5>he wants a ceasfire.

0:09:51.120 --> 0:09:55.480
<v Speaker 1>Randa, where is the Iranian uprising? The popular uprising that

0:09:55.559 --> 0:09:58.200
<v Speaker 1>we keep hearing might come, especially at a time when

0:09:58.200 --> 0:10:01.120
<v Speaker 1>the Iranian security forces have been battered by these us

0:10:01.200 --> 0:10:02.000
<v Speaker 1>is really strike.

0:10:03.800 --> 0:10:06.920
<v Speaker 5>But yes, but when bombs are falling, you know from

0:10:06.960 --> 0:10:10.240
<v Speaker 5>the skies on your towns, on your cities, it's very

0:10:10.280 --> 0:10:13.840
<v Speaker 5>hard to go into the streets and and do enterprising.

0:10:13.960 --> 0:10:16.160
<v Speaker 5>I mean, I lived through a civil war in Lebanon,

0:10:16.400 --> 0:10:18.360
<v Speaker 5>and I know what people feel when you are in

0:10:18.400 --> 0:10:21.120
<v Speaker 5>a state of war, and it's going to be very

0:10:21.120 --> 0:10:25.160
<v Speaker 5>hard later. Now, if the regime survives, it's going to survive. Weakened,

0:10:25.200 --> 0:10:27.880
<v Speaker 5>it's going to be to survive. Followed out, then you

0:10:28.000 --> 0:10:31.880
<v Speaker 5>have conditions, political conditions on the ground that could lead

0:10:31.920 --> 0:10:36.000
<v Speaker 5>to the regime collapse and change. But under in a

0:10:36.080 --> 0:10:39.680
<v Speaker 5>war scenario, it's very hard to have a citizen uprising.

0:10:43.040 --> 0:10:45.480
<v Speaker 1>How strong is the Ranian regime right now? And I'm

0:10:45.480 --> 0:10:48.320
<v Speaker 1>not just talking within the country, but also when it

0:10:48.320 --> 0:10:51.480
<v Speaker 1>comes to its proxy ecosystem.

0:10:51.960 --> 0:10:54.560
<v Speaker 5>The proxy has been weakened. But at the same time,

0:10:54.720 --> 0:10:58.960
<v Speaker 5>we thought that Hasbalala has been weakened a lot. Now

0:10:59.080 --> 0:11:02.520
<v Speaker 5>we knew that it was. It was weakened, but not out,

0:11:02.720 --> 0:11:05.400
<v Speaker 5>not defeated. But we did not think, at least I

0:11:05.480 --> 0:11:08.280
<v Speaker 5>did not think, having studied has Bollah for a long time,

0:11:08.360 --> 0:11:11.360
<v Speaker 5>that they will be as able as they have shown

0:11:11.520 --> 0:11:14.400
<v Speaker 5>until now. To be able to mount and attack in

0:11:14.480 --> 0:11:19.160
<v Speaker 5>response to the Israeli attacks on Lebanon, the hashed in Iraq.

0:11:19.320 --> 0:11:23.080
<v Speaker 5>The pm F seems, you know, they are strong, but

0:11:23.160 --> 0:11:25.360
<v Speaker 5>not too I mean, not as as strong as has

0:11:25.400 --> 0:11:27.800
<v Speaker 5>Bola and the Hooties have not yet joined the fight.

0:11:28.080 --> 0:11:30.679
<v Speaker 5>They are being held in reserve in my opinion by

0:11:30.720 --> 0:11:31.720
<v Speaker 5>the Iranians.

0:11:34.280 --> 0:11:37.760
<v Speaker 1>And how are you factoring in you and semestic politics

0:11:37.960 --> 0:11:42.199
<v Speaker 1>in how this conflict also really evolves from this point

0:11:42.240 --> 0:11:45.800
<v Speaker 1>because we have seen, as Haidi mentioned, President Trump really

0:11:45.800 --> 0:11:48.360
<v Speaker 1>wanting an off ramp from here. But where do we

0:11:48.400 --> 0:11:52.120
<v Speaker 1>go with Washington politics really combining with what these railings

0:11:52.160 --> 0:11:54.280
<v Speaker 1>want and how this conflict might evolve.

0:11:55.400 --> 0:11:58.440
<v Speaker 5>Look, there are two factors that are going to push

0:11:59.120 --> 0:12:04.360
<v Speaker 5>you know, the administration to seek a ceasfire. One is munitions.

0:12:04.640 --> 0:12:07.160
<v Speaker 5>They are running law on munitions and their ally is

0:12:07.240 --> 0:12:09.720
<v Speaker 5>running law on munition. We know that the countries in

0:12:09.760 --> 0:12:12.679
<v Speaker 5>the Gulf are running law on interceptors. And then the

0:12:12.720 --> 0:12:16.880
<v Speaker 5>second is basically money. Is the stock market and the

0:12:16.960 --> 0:12:20.480
<v Speaker 5>impact of not only the stop market but the oil

0:12:20.640 --> 0:12:23.240
<v Speaker 5>fuel And now we are starting to hear from American

0:12:23.320 --> 0:12:27.640
<v Speaker 5>farmers who are you know, are paying too much, too

0:12:27.720 --> 0:12:31.319
<v Speaker 5>high a price for diesel. They are running short on fertilizers,

0:12:31.520 --> 0:12:34.000
<v Speaker 5>so you are going to start seeing now the impact

0:12:34.000 --> 0:12:37.800
<v Speaker 5>of this war manifesting itself domestically in different segments of

0:12:37.840 --> 0:12:38.840
<v Speaker 5>the American society.

0:12:39.080 --> 0:12:42.760
<v Speaker 2>Run the Slim Middle East programmed leader The Stimson Setter

0:12:43.080 --> 0:12:46.480
<v Speaker 2>speaking to Bloomberg's High These Ground, Watts and shay On,

0:12:48.080 --> 0:12:51.440
<v Speaker 2>Thanks for listening to today's episode of the Bloomberg Daybreak

0:12:51.600 --> 0:12:55.000
<v Speaker 2>Asia Edition podcast. Each weekday we look at the story

0:12:55.080 --> 0:12:59.400
<v Speaker 2>shaping markets, finance, and geopolitics in the Asia Pacific. You

0:12:59.440 --> 0:13:03.560
<v Speaker 2>can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

0:13:03.679 --> 0:13:06.680
<v Speaker 2>or anywhere else you listen. Join us again tomorrow for

0:13:06.800 --> 0:13:10.320
<v Speaker 2>insight on the market moves from Hong Kong to Singapore

0:13:10.720 --> 0:13:14.479
<v Speaker 2>and Australia. I'm Doug Prisoner and this is Bloomberg