China Inflation Drops Near Zero | Bloomberg: The China Show 1/9/2025

We're half an hour from the open in Hong
Kong, Shenzhen and Shanghai. You're watching the China show.
I'm Rebecca Cheung Wilkins with David English.
Let's get to your top stories today. The Biden administration is said to plan
further limits on A.I. chip exports from the likes of India in
a final salvo against China's tech ambitions.
And Asian stocks dipped while bonds are under pressure as traders look ahead to
Friday's U.S.

Jobs report.
MSCI China Benchmark Index, of course, meanwhile, is close to bear market
territory and mounting economic headwinds.
If consumer and producer price figures do this are set to show deflationary
pressures persisting. And to that end, China is also pledging
to deepen its anti-corruption drive across various industries, including
finance and energy. Good morning from Hong Kong.
Welcome to the show. Equity markets, as you can see here to
my right, are under pressure right now. 3/10 of 1% is the pullback, broadly
speaking, for us, the benchmark for pulling back about a quarter of 1%.
S&P futures, of course, keep in mind, the closer we get to the jobs report,
the more conversations will have and really do Yields need to be this high?
That's another conversation.

But of course, just keep in mind, the
melt up in yields has really been at least the last 48 hours has been really
a headwind for equity markets. We are seeing that in the Asia Pacific.
Aussie, a Japanese ten year yield. One market that is coming on line,
right. I pay attention to right now, Singapore
pulling back half of 1% really on the back of well, the index closed at an all
time high yesterday. Of course we're all we're watching all
things in the UK of course following that massive melt up in UK gilts gilt
yields yesterday at these levels and cable we're actually extremely close to
taking out the low the trough back in 2024.
That then takes us back to somewhere around the mid 2023 levels and that
again a stronger dollar story flip the boards have a look at the setup as we go
into the Chinese market in the open there.
And of course you just saw the headline coming out of the PBOC might have to do
of course with the currency and where it is right now.
Seven 3542 Gold and dragon index overnight 7/10 of 1%.
So just two figures to tell you about 20%.
We're nearing the 20% threshold which would put us in a bear market on MSCI
China.

That's figure number one.
Figure number two is zero 0%. The you have a lot of economists coming
out looking at this inflation print that's coming out bottom of the hour,
have that forecast for inflation for December.
One of those economists on track is joining us at the bottom of the hour out
of Credit article. Okay.
Very quickly, as you look at that bear market, how far are we?
We have a chart that sort of shows you that.
And interesting enough, we are actually approaching several key levels along
that level. So the under 200 day moving average,
that's actually so right below that is actually in we do enter bear market
there although some of the technicals indicate that you might get some dip
buying because it does seem we did fall a little bit too much too quickly.
But we'll see sort of the momentum. Rebecca, is is certainly to the downside
at this point in time. Yeah.
An enormous amount to to track that David really across assets for China
today as you mentioned these key levels that we're looking at for MSCI China,
that 61 bear market level HCA as well, the level on your screen you're looking
at there, the bottom end of the range after stimulus.
This briefing we had yesterday on the expansion of trade ins, I don't know how
many rice cookers we all need, But, you know, markets weren't really convinced
that didn't really deliver the push that we or some were hoping for.
And then again, in December, inflation data there as you point out, zero and
potentially the mode for the estimates coming in and zero is a milestone.
If we hit zero, it's going be the first time since January 2021.
Are we going to see deceleration there for a fourth straight month?
Let's see elsewhere, sectors for stocks, chips in focus with this new Biden
administration.

That's a fantastic Bloomberg scoop we
have. They're on another round of restrictions
for chip chip i Hong Kong property also city turning more bearish.
We had a no on that earlier to day including sort of trade tensions issues
around home supply. We also entering the window for credit
data and finally Tencent buybacks really underscoring the concern of urgency
around the need to sort of offset after Tencent among other Chinese firms were
added to that Pentagon blacklist. Now, sticking on geopolitics, we're
watching Nvidia's biggest supplies this morning following this Bloomberg scoop
that the US may restrict further its A.I.
chip exports along with those from a deal.
For more, let's bring in Asia tech reporter Annabel Jewelers.
And about just break down the latest.

What are we seeing and explain the sort
of three tier system. Yeah, this is really the heart of it,
the three tiers. We know, of course, that the US has been
looking to restrict China's access to cutting edge technology for several
years now. But but this is sort of like the last
salvo before the US administration changes over, of course, President Trump
in office in just a couple of weeks.

But what we're hearing from sources and
this is again, not confirmed just yet, but the Biden administration could be
looking at creating a so-called three tier system.
So it's about giving access or controlling the access to compute power
across a range of countries. So the first tier that's that's the US
is allies essentially. So Japan, Korea, Taiwan, here in Asia,
Australia, Western Europe, some other places as well.
That's the one that gets the unrestricted access.
Then you've got tier three and you can imagine, of course, that that's the
countries that where the US already has some sort of arms controls in place.
So Russia.

China, Iran.
They're the ones that really stand out in that category.
But the category two or tier two is where it gets a little bit more nuanced
and more complex, because that's essentially rest of world.
So you've got, you know, South Central America, large parts of Africa, India,
across Asia as well. These are all countries and companies
that are headquartered within them that will now need to go and negotiate with
the US government. Of course, if this is put in place,
we're hearing the restrictions could be announced by Friday or the new policies,
but they would need to go and prove essentially that they've got a
demonstrated track record of engaging with U.S.
government officials, that they meet certain human rights standards, other
sorts of metrics in order to get greater access to those aid ships that go into
to air service. Talk to us about reaction.
Yes, it's sort of a mix.

I mean, you can see here today that the
suppliers in Asia aren't really paying too much of attention to this story.
I don't want to downplay the story. It is significant, but I think it also
speaks to the fact that that we don't know what how President elect Trump
would handle this either and whether he would actually continue with this policy
if it were announced. So there's a great amount of uncertainty
with this in terms what we saw on Wall Street, we saw in various slipping, we
saw AMD slipping in after hours.

But the companies themselves, of course,
they're not you know, they're not very happy about this.
And Invitae has put out a statement in there saying that if you've got this
sort of last minute restriction that you put in place, I mean, have you really
thought through the policy and and is it going to really have the intended effect
either because, of course, the flip side, when you so heavily restrict
China's access, it also just reinforces their need to develop their own supply
chains and their sufficiency or self-sufficiency in this area as well.
But bipartisan support that's undoubtedly in place because members of
Congress just last week wrote a wrote a letter to Gina Raimondo saying that this
is a serious once in a generation moment to curtail China's advance in this space
and also to pry country countries and companies from its grasp now.
Thank you, Animal Jewelers there, our tech reporter.
Let's have a look at the market implications of this.
Might this actually be the risk that the markets need to pay attention to this
Teflon? US bull markets.
Markkanen is with us here on set CEO of air of the group Nice to see you and
good morning and happy New Year.

Happy New Year.
Might this be the risk? Might this be the catalyst that leads to
this the end of this US bull market? Because nothing so far has.
I don't think so. I think what we're seeing now is the
next phase of this bifurcation in terms of the use of technology and the
division lines are being drawn. And of course we know what's coming next
with the new administration. We don't know the details.
We don't know the shape and form and the sequencing, but the direction of travel,
I think we know just to pick up on some of those risks for US companies in
particular, I mean, the Pentagon blacklist, we've had Tencent added a
couple of other names.

The for just the four biggest Chinese
companies, the market cap totals 1 trillion USD.
So it is a significant potential hit. How damaging is this for US companies if
we see them discourage from doing business with firms of this kind of
global reach? I think what it does is it creates a
level of uncertainty because it is an open process you can challenge and
companies have disputed being included on these lists and been successful
through that dispute. But it creates another level of
uncertainty of how this split between global powers, the geopolitical
dimension is going to play out in a commercial sense, and that's what
investors don't like, an unknown outcomes from policy, and that's where
investors are going to be cautious. On the other hand, though, there is the
underlying the underlying tide here is a US economy
that, you know, seems to be on the other side of a credit cycle.
Again, it seems to be that we might need to have a conversation around when the
next Fed hike is going to be how strong of an offset is a stronger U.S.
economy to all these risks.

So the US economy is going to be growing
above trend level for 2025, not as strong as the 24, but still strong.
And relative to other major economies, it is significant.
It's where the productivity growth is, is where the innovation is, is where the
growth is, is where the earnings growth is, you could argue is also where the
high valuations are, but it's where the money is going.
It's the direction of travel, if you like, for for investment dollars and the
US will benefit from that. We sort of see another 10% on the S&P
for 2025.

So wow, another positive view, maybe not
as positive as the last two, but another positive year.
So if you think about, you know, in a multiasset strategy that domination of
U.S. equities and we can talk about whether
or not the market is too concentrated, but that domination is going to be very
much the theme certainly in the first half of 2025.
Let's quickly talk about that concentration.
Are you. Seeing an overconcentration.
You're certainly seeing from a risk perspective, 75% of the risk on the S&P
is coming from the max 11, 25% for the other 493 stocks.
So, you know, there are there are consequences of that.
If the max seven slip up is going to have an impact across the whole market,
because that's where the risk the total risk is occurring.
But having said that, we are seeing a broadening out in the market and that is
an opportunity to reposition and take advantage of those companies which are
now growing reasonably well and are not heavily correlated necessarily with the
in the same industries.

To you guys, is that a compelling enough
opportunity to broaden out that was equity?
Yes. Yes.
I mean, we've been cautious of being over concentrated in our equity
portfolios and the fact the market will broaden out.
If you think about some of the strategies we're looking at.
You know, we're sort of lining up on some of the chip manufacturers and more
into the software companies that are going to benefit from the innovation of.
I just want to turn to China here. I mean, last time you were with us, you
talked about the big issue being this problem of consumer confidence.
What do we need to see to restore that? What do we need to see?
Can we do it without the sort of direct to consumer element?
So you're not going to get the direct consumer element?
We haven't seen it in China. We haven't seen it in this part of the
world as we saw in Europe and North America.
So that's off the table. We continue to see, you know,
a lack of confidence amongst amongst consumers.
You've got $20 trillion locked up in cash in the banking system.
You've had an administration which in 2024 was very focused on making sure
that there was sufficient resiliency in the banking system to withstand shocks
from the property downturn and also to shore up the financial situation with
local governments successful structural, but didn't feed through to the consumer.
Still a lot unknown beginning of the year dearth of data and we're all
waiting for the NPC.

So not a lot is going to happen in
absence. But what we would want to see is fiscal
stimulus. I don't think it's forthcoming.
The we're getting a lot of sell side calls and certainly the question is
timing in the market. It's not so much now if it rallies, but
certainly it's sort of more when HSBC is a good example.
They've again reiterated and upgraded their call in China overweight.
I mean, is it what's your thought? Is it too early to look ahead to, you
know, increasing? I think 425 you're going to see bouts of
rallying, But those rallies typically are going to fade because you're not
going to see the the follow through. You're not going to see the foreign
investors come in and you're not going to see consumers reallocate that cash.
You know, consumers have done well riding the wave of downward pressure on
rates. So the job market has been the top
performing bond market globally.

We think it's overbought and we would be
we would be tightening up and being on the other side of that trade at this
point. But nevertheless, the lack of momentum
means that those rallies are going to fade.
Mark, you'll be sticking with us. So we'll have more with Mark CONAN, CEO
of Air Group, later on the show. Now, coming up today on the China show,
Credit Agricole, Seattle Judge Georgia shares insights as we break China's
December inflation numbers. And we are counting down to the open of
trade in Shanghai, Shenzhen and Hong Kong.
This is the China show. Welcome back.
On your screens, you see some strength coming through in the Chinese currency.
I would go as far as and this is my take here.
This is probably not the fix, but it was probably the earlier headline 18 minutes
back when the PBOC seen those bubbles.

But in the case, of course, you put
those two things together and you get a move like you're seeing today.
Plus, of course, keep in mind, the dollar has, of course, been rally on the
way up and you could make the argument maybe short term, it's slightly more
overbought on the dollar side of the equation.
But again, fundamentals, your yields on the way up in treasuries.
So why not, Right. Mark Corning is still with us, CIO of
A.i.a. You guys must be like a child in a candy
factory looking at the Treasury curve. High yields generally are better for
insurance companies, of course. I mean, you've got fixed money
liabilities and if you can earn more on your fixed income portfolio, then you
can you can do more with the rest of the portfolio.
We typically don't trade rates. We try and we try to hedge out the
volatility from rates because you don't get rewarded for that in the investment
markets. But yes, in terms of dollars, definitely
higher yields better, we think that's close to the peak and we would be going
longer duration shortly depending on what happens over the next two weeks,
three weeks as we start to understand more in US economic policy, financial
policy, China's the other end, of course.
Yes, overbought and probably where the other side of that trade.
Yeah.

China's yield discount to the US is at a
record high. Yesterday on the China ten year for
example, you had the likes of Lombardo saying we're going to test 1%.
Some strategist even saying it might be zero.
What's your forecast for how low we go? So we think we're pretty much about
there or thereabouts now. We think this is largely cyclical, some
structural, but we don't buy into the story of the lost decade compared to
Japan. We think there's underlying growth in
China. I think once we get through this
recession resiliency, if you like, of policy to
support the economy as it comes through the effects of the downturn in the
housing market, we think the growth will pick up.
And therefore but we're at the bottom of that cycle.
Okay.

Just on that point, at the bottom of the
cycle, what are some of the signs that you are seeing?
Are we seeing the sort of concrete effects of stimulus coming through?
What are you watching? Not yeah, as I said, like last year,
2024 was a year of stability to make sure structurally that the right
policies were in place. We're still two supply focused supply
side of the economy focused, and that's a distortion in terms of allocation of
capital. We do need to see consumer confidence
come back. We're going to be very much focused on
the MPC in March to see what the policy initiatives will be at that point.
You've watched this market for a long time alongside the evolution of that
economic toolkit and arguably, too, to the point you just made.
Do you think the toolkit is still very supply side heavy?
Like do they have the the amount of tools?
There is a lot.

There is a long way to go, but there is
a lot of that. There is a lot of innovation in the
financial system and we're very much part of that.
We have a very large business in China and we're and we're part of that process
of developing the derivatives markets, the financial markets, in order to
support the risk transfers that create more of a robust financial system to
support economic growth. Just thinking about the sort of China
inflation story, whether or not we see it, of course, we're waiting for numbers
to come through today. What's your forecast for this year?
What are you expecting through the forecast?
So a lot of unknowns. Rebecca, you know what you just showed
the currency there. If you think about what happened last
time, there was the imposition of tariffs.
The policy could adjust and allow the R and B to weaken and taken some it takes
some of the heat out of those the effect of those tariffs where we are trading
now, that's not possible.

So that will have a negative impact
potentially on earnings. And that's why we don't see a sustained
recovery in equity prices and more sort of short term rallies and fade the back
to the C GB question and put together the reflation story.
I think it was sometime last year. I can't remember it was authorities in
China were warning I think it was the banks.
If you're sitting on too much KGB's on your balance sheet and the market turns,
you know, if KGB sudden sell off, you have a reflation event, then there's a
massive risk in some of these banks as well.
How do I need to be thinking about the second derivative effects if in fact
inflation does come back in China? Well, we've seen significant adjustments
globally in bond prices when there are surprises in terms of inflation levels
and the impact that has on on on real REITs, I don't think we're going to see
it in China because it's not it's not an open capital account and monetary tools
are not a sophisticated.

But it's a point well taken.
And I think what you're going to see, just as we're starting to think that we
want to be the. Other side of that trade.
I think other longer term investors will take a more moderate view where we'll be
over five, ten years and start to position out.
But thank you for joining us. Thank you, Mark CONAN, CEO of Air Group
there. Plenty more ahead.
Stay with us. This is Bloomberg. Welcome back.
You're watching the China show. There we go.
A 10th of 1% to the downside. In case you missed it, perhaps the
reason why most of these benchmarks are where they are is you had the heaviest
weight of stock in many of these benchmarks, actually now has completely
reversed all the stimulus gains. We're talking about ten cent here,
which, by the way, there's also a buyback story to tell you about there,
which we can get to later on as the stock price has fallen.
The buybacks have certainly you can look at you can see that really in the
volumes and turnover as far as stock goes.
And that's story number one.

Story number two is inflation.
That's coming out in less than 5 minutes from now.
Forecast coming up on your screens. The lack of inflation remains.
Rebecca, an issue really here. And as you can see, the december data is
probably going to remind us of that. Yeah, absolutely.
Watching this very, very closely. I mean, 0%, if we get that zero four
CPI, that is going to be a milestone of that level.
First time we get there since Jan 2024. Looking at that very, very closely.
That is the mode estimate at the moment, although median at 0.1 just above that.
But yeah, will we see a fourth straight month of a deceleration in CPI?
So yeah, we're watching that closely.

And elsewhere though, when we think
about chips and stocks that we're watching, Chip, focus, of course, after
this excellent Bloomberg scoop that we had, the Biden administration basically
making this one last push when it comes to trying to curb access to USA chips.
They are introducing this slightly complex three tier system.
Bell was here earlier talking about the sort of second tier.
Who are the people who are sort of the in between.
We do have some dealings with the US, but perhaps not kind of long term, long
history of trading. So a little bit of a question mark
there. The markets are obviously going to be
sort of calibrating what it means for some of those countries.
Think about South America, for instance, anyway, so make up just a touch there.
Pre-market nearly 1%. Yeah, a busy day for us, David.
It's very bad.

It might get a little bit busier if this
index you see on your screen spot a little bit for the 61 spot oh five is
the level you're tracking. Bear markets on deck, perhaps possibly
the open index. This is Bloomberg. Welcome back.
You're watching the China show. We are counting down to the open of
markets here today. Quite a few things in focus, namely the
MSCI, the most watched China benchmark. Are we going to get a bear sighting?
It's what we have, a bear sighting.

There's the bear come up and claw
yourself in the face a little bit more, I think, on the benchmark itself.
So I think we're at 61, 50, 61, just above that level.
That takes us technically into a bear market.
So that's 20 you know, how quickly things have reversed 20% down from the
peak. And really a lot of that has to do with
the numbers that are coming through in a couple of minutes.
Right. So we have the stimulus pronouncements.
We have yet to see earnings and the economy respond.
And the number that's about to come in five, four, three, two, one is going to
tell you that inflationary pressures are perhaps still lacking.
These are numbers for December and they should be dropping on your on our
screens any time now as we wait for that declines in the opening goings here for
both a quarter of 1% to the downside here, 3/10 of 1%.
And the Shanghai comp, what else are we tracking here?
Can we flip the boards, please, out of the PBOC?
Earlier on, we did have of course, maybe some mopping up is how that headline was
phrased of liquidity.

They'll be issuing 60 billion renminbi
in built in Hong Kong. And typically to do that, of course then
you do have of course a picking up in some things like high bar.
Okay, here we go. Rebecca is coming in.
So CPI rising 0.1%. That was the median estimate, just a
touch over the most common estimate, the 0%, which would have been a milestone.
So perhaps a little bit on the positive side.
But of course, we still have this whole issue of what the inflation story is
actually going to look like for 2025, whether or not we are going to see
enough coming in, particularly when we think about some of these sort of
efforts to spur consumption.

Of course, we had that briefing
yesterday as well. Yeah, Yeah, we did.
And we've really yet to see sort of major reflationary points,
although I think to the point Rebecca was just mentioning there as well, we
are getting a lot more support in details and an expansion really in the
trading programme and the sort of the categories that that includes,
you know, this economy is going need a lot more help on the demand side of
things to really think. See, fortunately we've got the perfect
guest to join us to talk us through all of this.
Let's bring in south Georgia chief China economist at Credit Agricole.
Let's start with the numbers there. So you are a 0% estimate.
What do you make of that? 0.1% for CPI?
I think for CPI, we have to admit that it has been hovering at a relatively low
level for the past few months, despite the step up of policy easing.
That really shows that China will have to do a little bit more, perhaps a lot
more to sell in 25 in order to really to drive the reflationary backing to in the
picture we have, if you look at the CPI, 0.1% and this is very low compared to
the average of 2% before the pandemic.

And also, if you look at the I think it
is again, it is slightly better in the market expectations, but is still more
than -2%. And also so I think that deflationary
pressure is still there in China. So China will have to do more and we are
definitely going to see a little bit more coming in the coming months as
well. So, yeah, just on that point, China
needs to do a bit more, quite a bit more in fact.
What is it that you want to see and what will drive inflation If we do see also,
of course, monetary easing will have to come through on the policy and the new
Politburo has already mentioned they are going to implement this moderately loose
monetary policies in 2025.

So we are going to still likely to see
more of a policy rate control cut as well as the policy has its room to
expand its balance sheet in 2025 with this right to reverse proposals and also
continue the now purchase of CB issuance in order to provide liquidity and to
drive credit expansion. But what is really easing policy
allowing is solve the can not really solving the problem because I think in
China, I think everybody would agree that domestic demand is still quite
weak. So fiscal policy easing will have to
come through when people and the private sector is now quite reluctant to put
down the money on the table to consume very confidently to expand their
capacity.

And that.
So that's why the fiscal policy easing have to come through and and making
things a little bit more complex, the mix of the fiscal policy easing.
It's also very important whether China will be able to do a little bit more of
a demand stimulus, whether it will be sufficient enough to to to drive this
consumption keep coming while China is still very much on the supply side and
look to continue to really expand the so-called
new productive forces, that could add a little bit more pressure on the supply
demand balance that will be a little bit different and difficult.
So I think in 2025, I think it will be a continued battle for Chinese government
to weigh various factors and to look at the short term and long term
considerations in order to drive their stimulus coming through.
What are you two part question? What are you hearing?
The fiscal deficit, the budget deficit target will be And what do you think it
should be? I think our focus is that the general
physical budget deficit will be will rise to 4% compared to 3%.
I think this is very much kind of the consensus now.
I think after we have heard the various reports at the Central Economic
conference, because China will likely to still said that GDP growth could add
around 5% to on appealing the market expectations to try to boost the
confidence or China will continue to make, you know, to prioritize economic
development and to counter this a lot of the external challenges.
So at 4%, I think it is quite a bit of a step up and a very important signal
compared to their previous around 3% target.
But I think beyond that, we will have to see a little bit more beyond that, the
general fiscal budget coming through.

So, for example, special issuance is we
think will likely to be the until to raise two
or 3 trillion so that it will be including 2 trillion to support
consumption as well as investment plus 1 trillion to to raise the capital for the
large state banks. So putting all this together and.
And also if we consider all those the quasi fiscal measures always in the
augmented the fiscal deficit for China will be about a 2.8 percentage percent
of GDP plus compared to last year. So I'm wondering and you know, they've
signaled that the growth target and obviously that's going to become
official in March, we'll be around the same growth rate as last year.
And I wonder from an economic standpoint, does it make sense to set
something higher? Because if you go by last year's number
and clearly they met the target last year based on what we see so far, it
wasn't enough, though, to spur inflation.
And I'm wondering whether there's a signaling utility to being able to then
say here is a higher growth target.

And that's a signaling effort to tell
the market and tell the consumers that further support is coming.
I think a very important element for China to really stabilize growth and
drive this a recovery that the market has been really longing for is to
increase by quotation. I think even they said that something
lower people will just lose that anchor in the sink, that the Chinese government
would not be 100% very willing to to continue to
stimulate the economy. So that that's not really work out in
terms of how they really want to revive this confidence.
So I think the China, even though the policy is a room now compared to
previous cycles, it becomes a lot smaller, but they still have room to do
it, especially as for physical. And this rule is bending the central on
the balance sheet. If you look at the central government,
that that ratio is is still less an absurd 2% of GDP that is relatively low
compared to many other economies, even though the.
Yeah. Even though the you know, we are very
concerned about the debt to GDP ratios for our local government and the local
affiliated as always and etcetera.

But for the central government, the
balance sheet, the youth definitely has room to expand.
And also if you look at the Peebles's balance sheet, it has the the policy has
the balance sheet. Balance sheet in terms of nominal GDP is
is is also quite healthy. So so if you look at the is about
3% of GDP. So it is in comparison to other major
economies and a lot lower than, say, biology is Belushi's size.
So if you look at also look at the policies holding of CDB is is a really
low so doubly even though the policy is non ready to you know to really
introduce QE at this moment but it definitely has room to do a little bit
more beyond policy recon and triple record.
Just to your your point earlier on this sort of quite muted demand and sentiment
in the private market and also some of those local government strains that you
mentioned, there's been this reluctance in some provinces to use their full
quota when it comes to sort of shifting sentiment to really restore confidence.
And particularly I'm thinking about credit here, getting demand for credit
back.

What is the most critical fact and
policymaking thinking? I would say the first quarter, the first
half of this year, I think key property markets easing is
something that we hope that we can see more of the measures coming through.
We see a lot of pledges already. And so, for example, asking the local
government to really drive the destocking of the local housing
inventories, that may not be you know, the pace may not be matching to the
market expectations and the may not matching to the pace that to to tell the
household that, yeah, we are indeed seeing a sustained stabilization of the
property market yet so is in the March National People's Congress that we are
hearing a little bit more that China is willing to use more of the resources
from the central government to help the local government to solve this issue.
I think that would help to bring some of the confidence coming back for the
property market.

Of course, we are already seeing some of
the improvement in our home market, especially in those major tier cities by
the for the lower tier cities. I think the housing inventories and the
struggles of the local government to stabilize the market is something that
they need to address because if you look at the Chinese household, the 60 to 70%
off no walls has stalled in property market.
Even they are only seeing some of the real changes here.
It's very difficult for them to really be very confident to to to to consume in
a sustained way.

Okay.
Well, hopefully the next time we talk, things will be better.
You're optimistic in 5 seconds or so, right?
Yes or no? Optimistic, constructively.
You know, positive outlook in China will continue to drive policy easing.
Very nice. Thank you so much.
Thank you. Chief economist at Crédit Agricole.
One stock we're continuing to track right now, about 12 minutes to the
session. We're looking at Tencent.
Looking across my multiple screens here, I can't see it.
There we go. Thank you so much.
Finally, some upside here. Biggest buybacks since, what, 2006
consecutive days of massive buying out of the company where the stock price
where it is. Charlotte yang is with us, our Asia
equities reporter to tell us about the buyback and how much they've actually
been buying in the market.

Yeah, so we're seeing that Tencent has
been doubling down its share buyback efforts ever since he was added by the
Pentagon to the Chinese military company blacklist.
So we're seeing that Tencent has bought back, you know, the biggest by share
account, which was about 3.93 million on Tuesday.
That's the biggest since 2006 and an even bigger amount on Wednesday.
So I think where this even though going to put you putting this into context on
Tencent has really been doing that over the past years of like returning value
to shareholders. You know, they've been bought, they had
a target of buying more than 100 billion HKD in 2020 last year.
But even with that, you know, this amount really shows the urgency of
trying to calm some investors nerves, even though, you know, this this
blacklist thing that doesn't really have a lot of impact on the business
operations. There's also no legal restraint in terms
of American funds investing in Tencent. But there is some, you know,
unpredictability I think investors sees, especially with what's going to come
when Trump comes into office in a few weeks.
And even if we look at presidents we shall meet that was successfully removed
from Dallas.

It took a few months.
But I think what Tencent wants to do is to come coming and help stabilize the
shares a bit. And I think today, you know, it's doing
a little bit better. Now talk to us a little bit about the
mood on trading floors after this blacklisting news, because part of it is
the ambiguity around precisely what this means, whether you can be remove like
Xiaomi, whether it means an escalation. What is the mood on trading?
Floors and also this whole sort of process of buybacks.
We had record buybacks last year.

Is it actually an effective tool in
combating some of this nervousness? I think it definitely helps comes in.
I mean, such a surprise move, you know, when everybody just returned from their
holiday and then you see, see 80 out and then the large cap on our show in Hong
Kong, you know, being added to this list.
And I think it also was tense. And I think for if you're like global
portfolio manager, you're going to invest in China.
It's like it has such strong fundamentals.
The company communicates with investors as well.
So I think this, this and now, you know, I think that, you know, they're coming
with real money.

It's I think it definitely helps in
terms of coming to nervous. You guys are in bear market watch, too,
right? Yes.
Way Miss China. Last time it was like less than 1%, I
think, of hitting that bear on a bear market territory.
It's a lot of pressure points. I think for the bottom.
A lot of it comes from external. We're seeing, you know, Biden
administration trying to rush out things while they still here.
And then you don't know what Trump is going to do with trade and also the
weakness. So it's a lot of things weighing on
market right now. And I think what investors closely
watching is we're going to see the national team coming in to help
stabilize the Fed. That's Bloomberg's Asia equities
reporter, Charlotte Yang all across this story.
Now coming up, why China's biggest effort to lure foreign tourists is
falling flat despite a growing number of travelers.
We'll have all the details on that next.

This is Bloomberg. Welcome back.
Now, China has eased visa restrictions for several countries last year, opening
its doors to a potential 1.9 billion visitors.
Unfortunately, only a fraction of those tourists are actually going.
So visitors from the US and most of Western Europe have stayed away amid
geopolitical spats. Instead, tourists from nearby Asian
countries in less developed markets came calling.
Bloomberg's one ha joins us for more. One fantastic story, excellent
reporting. Just lay out what we're seeing in terms
of the numbers here.

Well, it is really the size and scope of
it is huge. And it's an unprecedented undertaking by
China to really open its borders to all these foreign tourists.
Right. I mean, since 2023, we've seen China
enact more than a dozen rounds of visa waivers in which they open their doors
to 1.9 billion tourists. And so, of course, the questions we had
was, is it working? Are these tourists coming and where are
they coming from? Of course, this being China data is not
really readily available. But our analysis did show that, of
course, only a fraction of the hoped for tourists would come.
And, you know, I mean, that strikingly, you know, China offered so many diseases
unilaterally.

Right.
It really wanted people to come. But really, it's an independent opening
on many levels. You know, these countries didn't
reciprocate. But and on top of that, I mean, what we
saw, of course, Europeans, that they targeted European countries because of
the developed economies, more, more travel spending.
And those those Europeans also stayed away.
Westerners very much stayed away. And it was really the nearby countries,
Asians, you know, from Malaysia, from Thailand, from Vietnam, were the ones
who really traveled to China quite a bit last year that we saw.
It was 23 million, you know, through September.
And that was still about 63% of the level in 2019.
So really not the very full rebound and really full throated rebound that China
had wanted to see.

You mentioned some of the neighboring
sources of tourists. And I'm wondering, is it a matter of
proximity So we know the what do we know the why?
Yeah, it is it is proximity. It's easier.
You know, it makes it more, more accessible.
But I think what the biggest reason why people have stayed away really, you
know, what we heard over and over again and really what what the data shows is
really it's a perception issue. Right.
I mean, China right now has trade spats with with the U.S., with Western
countries. It's becoming more aggressive, of
course, in the South China Sea. And when we looked at this Pew survey of
attitudes, it really there is a correspondence, you know, where in
countries like Germany, like France, like Italy, where people have far less
positive views of China, we're seeing that that also corresponds to lowered
depress travel bookings as well.

And then, of course, you've got the
economy, right. I mean, China's weakened economy, It's
not bringing in, you know, business deals is not bringing
in investments. And so because of that travel bookings,
business travel bookings are also half of what they were in 2019.
You know, I had I had one spoke to one very established travel agency, travel
agent who said, you know, at this point in pre-COVID, he would book routinely
side trips for executives coming to Asia afterwards.
It's a oh, book me a leisure trip. You know, I'll join my family in Beijing
or Shanghai. And now they're going instead to Japan.
They're going to Bali, they're going to Thailand.
They're not going to China. So it is in many ways a very firm pivot
away from China by global travelers.

For our boomer clients and viewers, you
can catch the details and look at the details of that story.
A fantastic piece there. Comprehensive, a lot of data, a lot of
anecdotes as well there from one on the team, on the terminal and also on the
website. There we go on your screen.
We will leave you as well with some live pictures coming through out of Kuala
Lumpur. Of course.
There we go. The prime minister on your screen
speaking at the Malaysia Economic Forum. In fact, we will be having more we'll be
having more from that event later on. Our colleague Haslinda Amin is on the
ground for us there in. Plenty more ahead.
This is Bloomberg. Right.
Welcome back. Just recap the December inflation
figures out earlier on, right off your screens.
Are the estimates coming in roughly in line there with projections 0.1%,
slightly more inflation than what some economists had pencilled in a zero.
But obviously, take a step back.

That's really a lack of inflation here.
Rebecca Yeah, I mean, how many microwaves, rice cookers, mobile phones
are we going to have to buy to get inflation?
Yeah, yeah. Cars, refrigerators, what have you.
It's going to have to be a really big upgrade.
And on the domestic side, really of the supply of the economic curve there, I
mean, to the point that so far we've been hearing from economists, we've
heard a lot in fact, maybe too much on the supply side.
The demand side is perhaps wanting, but that's really where I guess, the
opportunities increase for policymakers. And again, the other question, too, is
have we just not waited enough for some of these policy pronouncements and
measures that have been announced and put in place to really take effect?
Right. Is it hard to know?
We've been sort of talking about these green shoots or so-called green shoots
for the last six months or so, but obviously we're not really seeing the
full consequence come through of a lot of the stimulus measures, property being
a really big one.

We sort of had these full spurts in, you
know, seeming bottoming out. Do we actually get that bottoming out in
the first quarter? And to your point, the data certainly
hasn't showed that yet. Anecdotally to your other point, two
first tier cities are seeing a little bit of a pickup to an activity, although
on aggregate, does it move the needle on a mindset, which is really the crux of
the issue here? Okay, look at Mark for that.
CEOs are three one half while trading flat there.
And of course, this big trading debut here in the city.
Not a bad good day for us.

Good.
That's cool. Well, whatever is if you think about it,
you're watching the China show. Good morning.
Welcome back to the show. If you join us for the first hour,
entering the second hour of the China show and a look at the CSI 300 on your
screen. So we gapped slightly lower.
And I mentioned that gap almost with small caps, really, because as you can
see, we're back to zero. The other question as well as you can
talk about U.S. market in a moment.
You know, the chip story arounds are reporting around President Biden's last
salvo post The US market closed.

We did get a pullback as well for the
likes of in video, which by the way, has been pulling back recently as well.
What does it mean for U.S. equity markets later on today?
Inflation also coming through out of China about 30 minutes back roughly in
line with estimates. But I think the big story there is there
is a lack of inflation still in the economy.
Let's bring in Julius I co-anchor for the rest of this hour.
Well, I think what's interesting now, you just pointed out about the chip
curbs that could be announced later this week.
So the US looking at trying to further restrict China's access to advanced chip
making technology and chips that go into servers.
But the flip side of that, of course, is
when you so heavily restrict China, it also just forces that push toward self
sufficiency and reliance within its own supply chain.
And the market reaction today, yeah, we've got China stocks that are sitting
fairly steady right now, but actually the likes of Smic, for instance, Wah
Huang, these China semi names are moving high, so it just tells you, okay, maybe
people are gearing up for even more support from Beijing into these names.
But you mentioned, of course, that, you know, the China inflation story and that
has been really the big theme, that weakness in the economic readings and
stimulus measures that just really not seem to to play out just yet into the
numbers.

No.
And, you know, I think this time yesterday, we were we somewhat had
somewhat higher expectations around the joint briefing yesterday.
We did get some details, though, markets.
And I think as markets have been behaving so far in China, that they have
been front running a lot of the speculation and the pronouncements and
then they've been selling off on the news.
And again, to the point there are opportunities there, trading
opportunities.

They've so far made tactical,
not so much sort of a structural structure reallocation back into the
Chinese market, which is why I guess when you look at this chart, which takes
you all the way back to the start of well, two things here at the start of
that policy pivot, we're actually almost back to square one.
We're not just there just yet, but we are close to a bear market.
It's number one. And the biggest stock, most valuable
stock in China, which is Tencent, is a lot less valuable now because of the
risks that we've seen play out this week.
Yeah, well being added to a list in the US that essentially illicit the US is
deeming that they've got some sort of link to the play.
Now it doesn't actually prohibit any sort of trading activity with Tencent,
but it certainly does cast a big shadow over the stock.
And we digging into the details of that more this hour, really what it means for
the bright, broader relationship between the US and and China.
But right now of course that big focus on inflation data just dropped in the
last 3 minutes or so.

Yeah absolutely.
Let's bring in our team, of course, out of Bloomberg Economics to take us
through their initial take on that. David Chu is here on set with us for
your initial reaction to the to the numbers.
Well, it's complicated to be, to be honest, because that way, if you want to
seek some positive info from the data, you can I guess if you look at it a
month en masse, move off of the prices, You can find the, you know, either in
the decline as the previous month. But still, if you look at the bigger
picture, the things are still worrying because the that the PVI has been in the
deflation the for several months in the row and the the CPI is barely inflation.
But you know we still think that we can not interpret it as a good thing.
So overall speaking, I think the for myself personally, I think the time
that is already in the inflation because if you look at the average of the CPI
and the pie, it is negative and that doesn't seem like the trend is going to
be reversed anytime soon either.

Well, it's actually either because my
memory in the early 2000, after the Asian financial crisis, China was in
this inflation situation for several years.
Although the numbers can be positive or negative in this month or next month,
the things or the different, this inflation remains almost a three years.
So I think at this time for China, it could be hard to reverse the whole
thing. And also i.
Bloomberg economists there. David true.
Thanks very much for joining in. It's of course, the market reaction.
I mean, it's been it's been very telling of the concern that there is not just in
terms of investors that are very bearish on the outlook but also.
The expectation that we see further easing in and see jobs that, for
instance, have been the key one to track around that 1.6% level.
But we have been saying some people are saying it could even reach down to 1%.
So it's that story of the possible Japan ification of of the economy right on cue
here, because that was the 30 year yield in China slipped below Japan's 30 year
last year.

And this is one we're watching.
Of course, we're within 50 basis points on the ten year itself.
And really what I think this tells you from a global asset allocation
perspective is why even I guess to some extent, why even bother looking away
from a market and a trade that's work, which is really a US market that's been.
Can't stop rallying US Exceptionalism certainly has been the theme so far this
year.

Does that continue or has that sort of
US exceptionalism conversation run its course or are there other opportunities
right now to at least entertain going into 2025 to help us answer that
question? Stephen Whiting, chief investment
strategist at Citi Wealth. Stephen, it's nice to see you and good
morning. Thank you for the invite.
Your thoughts on that. The US exceptionalism on one hand, do I
even bother looking at the rest of the world?
Well, I would bear in mind American corporate profits have grown faster than
the world, but American share prices have been rewarded even more at a more
rapid rate.

And it isn't just the 20% outperformance
of the last 12 months. It's 15 years of outperformance of U.S.
shares. That's the longest stretch in history.
So when you can find companies that can execute well in places, it could be
India, it could be beaten down, markets that are cyclical that we can find in
Latin America. For example, if you take a look at
Japan, Korea, if you think about, again, some of these bounce back opportunities
or just the companies that do technology and innovation really well, whether it's
in China, whether it's in Europe, you know, these companies are certainly, you
know, options to invest in. I mean, you want to think about American
companies. Now, again, the big picture, after the
15 years of outperformance, you know, US equities are worth twice as much as all
of the rest of the world in terms of traded market cap.
So, again, that might be sustainable.

They've got a lot going for us.
We're not bearish on American earnings and we're still somewhat overweight U.S.
equities after trimming them back. But this is the kind of thing that you
might sustain would be very difficult to repeat in the next 15 years.
Maybe you don't get to the point of 20% plus returns.
I mean, that would be hard, at least historically, to match again.
At the same time, it's just that story of such a high degree of uncertainty,
not just around Trump's tariffs, what it means for the Fed, what that means for
the dollar, and these markets in Asia, particularly impacted by all of those
factors. So is it also a case of maybe the better
the devil you know that you know, you're a little bit too nervous to to also put
money into other markets? Well, that kind of bearishness again,
usually opens the return opportunity. You know, I'll just go back to the first
Trump administration.

Let's go from 2017 to 2019.
Before COVID hit, non-U.S. equities returned 13% per year with the
trade wars and with 200 basis points of Fed tightening during that period of
time. Now, that didn't match the United
States, but now here we are, 40% cheaper compared to when Donald Trump was first
elected. So I think that we're in for a volatile
ride. We don't think that after a 52% return
for two years on the S&P 500, by the way, EPS up 10% over that period.
Right? It came from a depressed 2022.
It was a very good time to be overweight, large cap U.S.
But we just do think that there is a lot of return opportunity, untapped value
around many other assets, including some American stocks.
Look at the health care sector. Look at small and mid-cap profitable
companies that have seen their valuation, too, calling for ten years.
So all of this we've been talking about yields things that would trouble Asia,
but yet yield opportunities are now just so much stronger than they were the Fed
funds rate.

The policy rate in the United States
averaged 1.75% for the last 20 years. You know, so just think about what yield
that can do for a portfolio now. So I don't think it's all about just
chasing less trade. So simplified it for us.
What are your top one or two recommendations if it if it's not simply
I'll paraphrase it simply if it's not an S&P 500 ETF.
Yes. What would it be?
Okay.

So small and mid-cap U.S.
growth companies, you know, think about software, not just more chips from two
companies in the world. Think about Asia.
Some of the countries that have large export markets
that are going to be diversifying sources away from four supply chains
away from China. I'm think about some of the real
domestic oriented markets like India or beaten down Brazil that have extremely
little trade exposure and yet still have, in the case of Brazil, a crushed
currency, crushed valuations. You know, 7% dividend yields eight times
earnings. So you build a portfolio with these
things, you build a portfolio with income.
We think yields on loans, for example, can get us to an 8% return over the
coming year. Now, when the S&P is up 25%, you'll say,
why would I bother? But what if it isn't up 25%?
All right. A lot to dig into in the next book.
So Stephen Whiting is staying with us from Citi Wealth.
But still ahead on the China show as well, the Chinese government is set to
widen its anti-corruption drive across a broad range of industries that includes
finance and includes energy.

We'll have the details ahead.
This is Bloomberg. You're watching the China Show.
And we're back with Stephen Whiting. He's chief investment strategist at Citi
Wealth. And they've got a 2025 outlook
cautioning against long term or investors relying solely on the S&P 500
returns. That's what I wanted to say.
But the point is, is that you've got ten opportunistic positions and and there's
one that actually stood out to me in particular, and that's the the defense
contractors. And I'm curious if that's something that
you're also looking at in an environment of rising geopolitical tensions.
Well, it seems as if geopolitics is driving business.
This is far from the ideal world. We wish we could invest in where that
would be a factor. But we believe that defense deterrents
are still going to be a strengthening business that ideally, again, can be the
way in which we get less actual conflict in the world now.
But that isn't sort of the basis for the investment.
The whole whole point is, is that what's happened in Europe, what's happening
around the world? You know, broadly speaking, geopolitics
is driving a lot of investments.

There is
cybersecurity. Investments are getting are very much
the same sort of thing. Now, some of this is not really related
to state actors or or conflict, but all of these things are not ideal things
that we invest in, but are important things that are being driven by, in some
cases, geopolitics. Talk to us about one of the other items
here which caught my eye at least, is enablers of cryptocurrency.
Well, this is, again, a you know, under a basket.
A bunch of these things are deregulation beneficiaries.
And in this particular case, we went from an environment of great uncertainty
about whether the infrastructure to build digital assets and trading, these
sorts of things would occur in the United States.
And now a regulatory environment that's going to very much be permissive on
this. Now, these digital assets, these
companies will be on a wild ride.

It's one of the, again, higher risk
positions, but broadly speaking, in some cases away from the crypto itself,
you're dealing with companies that provide this infrastructure that are
below 20, 21 levels and it fits into broader financial deregulation.
Now, perhaps it isn't going back and unwinding all sorts of capital rules,
these sorts of things. That's not what we're talking about.
At the same time that we have new deregulation in the financial system, we
have to remember the yield curve was inverted for 28 months.
That held bank bank profitability, tight spreads, a high cost of funds, M&A
activity, 40% below 2021 levels. You know, it's not really surprise to
see that banks and derivative plays on that.
Even again, alternatives like digital assets are part of this trade of
recovery. What else stands out to you on the list.
What what's sort of your other pros think about some things that are a
little bit, you know, lower in risk medical equipment and supplies in
general, the health care sector is just like technology.
It's rising as a share of corporate profits throughout the world, and yet it
trades with a very low confidence level in the future.
Profits, information technology trades with great confidence about the future
of corporate profits, but health care trades cheaply and medical equipment,
supplies, tech.

All of that has been in recovery.
We think that like tech in 2022, EPS are recovering now, inflecting more
positively. And you can think about that as a
defensive growth industry that is relatively depressed.
What about alternatives? How much is that come up?
Well, quite strongly. We've done a lot to try to rationalize
and really get to the heart of what returns could be like in private
markets. And when you think about even if you
have conservative exit rates, you know, for private investments, we still get to
a ten year return outlook of about of over 12%, 12 and a half percent.
So if you think about all asset markets have rallied in the past couple of
years, our ten year return estimates have come down because they're higher in
price. That's what happens when when things get
richer or cheaper. And we think that those assets and
private markets again lag behind public markets.
So in many respects, there's still a strong return opportunity there that
stands out compared to S&P 500. Yeah, I think the in case our viewers
missed the earlier segment, you were making a very good point about where
yields are in the fixed income space.

People are sleeping on how that could
actually boost your your annual returns. And I'm curious, with Treasury yields
here, let's call it 5%. Yes.
Is that an enabler or does that discourage people from going into upward
parts of their fixed incomes, including private credit, where you get maybe 12
to 15%? In other words, is 55% good enough for
most people? The adjustment process of getting to
five probably again harms all markets. We have to reprice every asset, affects
every other one in the world. And the rise that you have in yields
does create some more volatility. Woody and concern.
But when we think about stronger return opportunities in fixed income, that
could be six or 7% in US dollar returns. It's not just Treasuries, right?
The whole market for high quality fixed income is getting the stronger base rate
level of U.S. Treasuries in it as an entry point for
fixed income. So how do you position then for the
renewed volatility? Well, for one of those things, hedging
and hedging is not something you can say, you know, today and look back a
month and say you have to again, be very active, you know, every single day in
this.

But, you know, if you looked at that
list, one of the things we think is that the VIX will be higher on average this
year than last year, just as a wider range is a new administration.
We know less about it than the last one, a whole possibility for different
aspects of policy moving markets around the world.
So if a more volatile market, you have to have an asset allocation that you can
live with. You know, it might have been fine to
pick three tech stocks last year and say, I wish that was my whole portfolio,
but that's probably not the lowest the best risk return opportunity, right,
that you have going forward for a portfolio.
The how do I need to be thinking about currency exposure to the point that I
was making on hedging, for example. And one of the things that you mentioned
that is part of the list, very few though, is Brazil.
So for dollar investors, how do I need to be looking at non dollar exposure and
for those that their starting point is non dollar.
How do I need to be thinking.

Yeah well do you look at the US dollar
now at its second highest level in history.
You know we saw when the first Trump administration came in, almost all of
the political change was priced in fairly discretely over the course of two
months. And you know, we now have thought that
the Federal Reserve would not ease quite as much.
The market goes wild in terms of going from pricing in excessive easing to no
easing at all or tightening. And the Federal Reserve is on course to
deliver Most of the currency weakness that we're going to see from the dollar
is going be driven by the Fed, not other central banks.
So Japan wants to raise rates very gradually.
Well, if the Federal Reserve says that its long term policy rate is three, here
it is at four and a half, it's going to be the Fed that's going to be taking
down again the US dollar relative to Japan at some point.
Now, again, is it going to be gradual? We're not again, investing with a whole
lot of U.S. currency weakness in mind, but we're
thinking that a lot of the the hardship.

Right.
The idea that the US will harm the world with the strength of its currency, a lot
of that we think is out of the way. Last question.
If someone comes to you and they say, Stephen, I've got $100,000 to invest
this year, what would be your recommendation?
Well, it's going to be depending on what their risk tolerance is, on what exactly
they're trying to accomplish. And if we're seeing that it's a medium
risk investor who's investing over the longer term, you know, it's going to be
global, not just us. It's not going to be it's going to be
very broad in terms of its exposure to asset markets that lagged behind large
cap tech in the last ten years. And with that, with a non global
footprint, there be less than 50% or above 50%.
Oh, it's less than 50% at this point. This is something that we have to to
transition to. I think earnings broaden.
I think that we can get some of that stronger performance this year after
whatever wild ride we get.

But this is this is the kind of thing
that we're not taking some sort of wildly strong bet that US exceptionalism
is over. It's not like that, but it's certainly
priced with great confidence. There we go.
Fantastic to see. Thank you.
And Stephen Whiting there, chief investment strategist at Citi.
Well, plenty more ahead This is trying to show. Welcome back.
Here are some of the big corporate stories we're tracking at this point.
Bloomberg has learned that Bridgewater's Shanghai based private fund management
arm saw around a 40% growth in assets last year.
Its all weather plus on shore fund return.
Get this, more than 35% for all of 2024. That's more than three times the average
return for similar funds at space. And of course, data compiled by Shenzhen
PI, Pi Wang Investments and management that Bloomberg reported yesterday.
Of course, on the story roughly that Bridgewater had dismissed 7% of its
workforce this week in a bid to maintain flexibility.
Now BlackRock says it's telling it's letting go, rather letting go of around
200 employees, around 1% of its staff.

And that job cuts are part of the
company's efforts to realign resources and comes after it committed over $25
billion for acquisitions to expand its reach in private market assets and data.
The firm says that recent acquisitions will help them hire around 2000 people
this year. Morgan Stanley has promoted 173
employees to the top rank of managing director.
Congratulations. That's a percent more than last year,
but lower than each of the two years prior.
Now, major U.S. banks have been bulking up promotions to
top ranks, reflecting strong performance and also brighter business prospects.
The largest Wall Street firms in the past year have all outperformed gains
for broader stock benchmarks. The big story today, one of the big
stories we're tracking is this Biden administration move to possibly further
restrict China's access to chips from the likes of NVIDIA and AMD.
So that has been sort of the major one the last several hours at the Bloomberg
scoop.

Today, we're getting the market reaction
and we did see NVIDIA and AMD a little bit weaker in after hours.
But here are the Chinese chip makers or chip linked stocks in the session and
you're seeing these moving higher. I think it's a really interesting sort
of second order reaction and probably one that the US doesn't intend.
They don't want to they of course want to restrain China's advancements in this
area. But the flip side, of course, is when
you restrain, you only end up getting more investment from Beijing into the
sector to increase its reliance, your self-sufficiency.
And so again, you're seeing these stocks rising off the back.
These are the names in China.

We've sort of seen a mixed reaction for
other chip makers in Asia that have more of a supply relationship with NVIDIA,
for instance. The other big story we're tracking or
adjacent to that, but is NetEase in a session today?
This has been an interesting one to watch because we've been really tracking
that gaming renaissance of sorts in China.
Last year we had blacksmith Wukong coming out.
That was the first triple-A game that we had ever seen from China and it is sort
of a pickup in gaming demand that we're seeing.
And these are companies that as well have exposure not just in mainland China
but also outside. But essentially Morgan Stanley has
upgraded the ideas on the PC games outlook.
And again, you're seeing that market reaction here today.
Okay.

There's another stock.
We'll tell you about it on the other side of this break.
But here it is on your screens if you're wondering why.
Stay tuned for that. It's 11:29 a.m.
in Tokyo. Japanese markets just about to go into
their lunch break and it hasn't been the best session really for Japanese
equities so far. So they're dropping, as you can see here
quite clearly. But the the led by tech firms, also car
makers. So there's this continuing concern
around the outlook for Fed rate cuts and the impacts of that generally in terms
of of the outlook for growth as well. And then also you've got this tariff
risk and and they're names, of course, that are very heavily exposed to that in
Japan as well.

Yeah.
How long is the BOJ from today? 15 days.
I think the market's sleeping on that risk that they might do something,
although it might be part and this is purely speculation on my end, it might
be part of the strategy not to give markets too much of too much away to
markets right now if indeed a hike is coming.
But it's certainly something that a lot of people have brought up here and shows
that. Right, because they didn't do anything
in December, it might be something that's actually on deck over Japan.
We could talk about it later. But as you can see on your screen, it
certainly is still a strong dollar story.
158. HANDLER And again, go ahead, the 24th of
January.

That's the right decision to make.
Okay, There we go. 50 days ago,
what else are we doing here except. Oh, yes, I'm sorry, I forgot about it.
We teased it, but here we are at the Today Reveal Day.
This is the big reveal of two and a half percent to the upside.
This is a company, of course, it's listed here in Hong Kong.
It's the Chinese company out with some guidance.
And yeah, there we go. And the markets are really running with
the 2.4% to the upside here, fourth quarter operating brand retail sector
through that single high digit growth takes us into the dashboard today.
So a couple of markets to tell you about as you look at markets today.
So yesterday, Singapore hit an all time high.
We are seeing a pullback, roughly speaking, across most sectors, most
benchmarks. And certainly we're looking at the
Chinese market specifically because we're extremely close to entering a bear
market on MSCI China and Hang Seng China index.
A lot of that has to do with the recent down leg in Tencent pulling the
benchmarks down.

Interestingly enough, you have to almost
opposing views, your HSBC coming on and say they've upgraded Hong Kong stocks.
They have been overweight on China. We put that question, in fact, what the
sell side is doing. Sorry, but the buy side is doing what
all the sell side calls in China. And we asked Markkanen how he would
actually be trading the Chinese markets this year and this is what he had to
respond. This was his response to HSBC call.
But you're going to see bouts of rallying, but those rallies typically
are going to fade because you're not going to see the the follow through,
you're not going to see the foreign investors come in and you're not going
to see consumers reallocate that cash. You know, consumers have done well
riding the wave of downward pressure on rates.
So the job market has been the top performing bond market globally.
We think it's overbought and we would be we would be tightening up and being on
the other side of that trade at this point.
But nevertheless, the lack of momentum means that those rallies are going to
fade.

Yes, I'm not not really that optimistic,
it seems, and not someone who's looking to put too much money to work in China
either. I think geopolitics sort of hangs over
all of this because I was just thinking about it earlier this morning that the
calls that we're getting now, do we need to have direct stimulus, for instance,
in China? Do people need to be given cash?
If that's going to be enough, would that be enough to try and spur some sort of
consumer rebound? And I think what makes people so
cautious to get out and I do think that geopolitics really plays into this
because there's just such a high level of uncertainty between the US and China,
the two most powerful economies in the world.
But today that's really playing out in terms of the Biden administration.
Yeah.

Last couple of days before they get out
the door and and they're still trying to further restrict China's access to
advanced technology, possibly extending the curbs, but not too much of a
reaction to that Bloomberg skipped so far in this session, but I'm glad you
brought it up. In fact, we'll talk more about this in a
moment. But the you know, the so we've been
talking about geopolitics, what it means for market as a risk, what it means for,
you know, potential earnings impact. And, you know, so far the focus has most
of the focus has been on Chinese companies.
When you if you think about it, the exposure of Chinese companies to the US
market is a lot less than the opposite. The the exposure of US firms,
particularly the large cap US companies to the Chinese market.
From a regulatory risk perspective, another Chinese regulatory risk, I'm
talking about US policy risk restricting many of these US large caps from doing
business in China.

And is that a risk that markets are
sleeping on, particularly if you're sitting again on an S&P 500 ETF?
We put that question yesterday to Helen Joo and here's how she phrased the
answer. Seattle, for example, was also put on
the same list as Henson. And obviously, right now the U.S.
government isn't procuring from them. But what if in the future Tesla isn't
allowed to procure from them? Then what happens to Tesla?
What happens to the global supply chain? And there is not a lot of substitutes
for Seattle. And the Korean and Japanese alternatives
can't come up with the supply in time to meet all of their needs.
So if that's the case, it would definitely be negative for companies
like Tesla, like Apple, like many of the other major names in the US indices that
have performed spectacularly well and have been holding up the indices.
So that's something that I think that the new incoming administration has to
take into consideration as well.

Yeah.
Take into consideration, you know, this sort of high fence, small yard.
What is that fence specifically? Kathryn Staubach, our Bloomberg opinion
columnist, thinks that the US does need to clarify the link between consumer
tech and national security. She joins us now.
Kathryn, why do you think that is? Why do you think so?
Good morning. So, yeah, I do think that the US needs
to be a lot more clear and strategic about when it throws around national
security. You know, with Tencent, this big gaming
company, when they added it to this blacklist for alleged Chinese military
ties, they didn't exactly say what the link was.
And we've seen with Show Me Back in 2021 when they sued to get off the same
blacklist that the link that the US government had between Xiaomi and the
Chinese military back then was that they were investing in AI and 5G, which could
have military applications but is also what everybody was doing at the time,
and also that its founder had won an award which so many other Chinese
entrepreneurs had won, including the makers of a chili sauce brand.
So I think it's, you know, when when we throw around national security so much
without sort of a clear aligned and excuse me explanation of what that
means, I think it risks sort of becoming hollow and just kind of provoking
Beijing to retaliate.

So there's sort of a precedent there of
how other companies have managed this this in the past, this designation,
Tencent. Do you think that they're going to be
able to get themselves off this blacklist then?
I do think Tencent will be able to get themselves off this blacklist, but I do
think the reputational hit is there and at the same time, like I said, it's also
sort of provoking Beijing and spurring the sort of tit for tat.
But like I said, show me was able to get itself off of this blacklist.
And I think with Tencent, we'll either see what the alleged ties to the Chinese
military military actually are, which, you know, a lot of consumers and
companies are curious if that actually exists.
And if not, it'll just sort of, like I said, escalate this kind of tit for tat
and sort of drag more companies into the mix.
And so, Catherine, how do we how do we avoid finding ourselves in a lose lose
situation? How do you think the incoming White
House and their team should be looking to avoid that outcome?
So I think now is really the time for the incoming administration to sort of
take stock of what's been done so far and how this tit for tat has played out
so far and what their actual goals are, what they're hoping to achieve and how
they can best sort of not position US tech companies from getting caught in
the middle of this whole thing and, you know, blocking Beijing from retaliating.
So I think now's the time not to sort of run ahead with tariffs and run ahead
with, you know, further measures, but really to to sort of assess what we've
accomplished so far and what their actual goals are here.
That was at Bloomberg Opinion columnist Catherine Thorpe back there in Tokyo.
Now to some of the other geopolitical stories that we're tracking this
morning.

And advisers to President elect Donald
Trump are said to be considering Michelle Bowman as the Fed's next vice
chair for supervision. Michael Barr has said he will step down
from the vice chair role while retaining his seat on the Fed's Board of
Governors. Trump advisers have also begun drawing
up a short list of potential replacements for Chair Jay Powell, whose
term ends in May 20, 26. Malaysian Prime Minister Anwar Ibrahim
says he remains optimistic about the incoming Trump administration and its
policies and hopes for the best. He spoke exclusively to Bloomberg's
Haslinda Amin as his government hosted a major economic forum in Kuala Lumpur.
We have been able to sustain for some years now.
As you know, the second year we hope for the best.
But, you know, geopolitical leadership must be considered.
All right. And what do you think the Trump policies
you talk about geopolitical considerations.
How do you think Trump policies will impact?
We hope for the best because, after all, he's a
very pro-business. Let's be more optimistic and deal with
it.

Staying with Malaysia.
Its second finance minister says growth is set to exceed her top 5% this year,
thanks to strong FDI and also strong supports from state funds.
Now speaking exclusively to us, Amir Hamza Aziz, and says that the this new
special economic zone in Singapore will benefit both countries have a lot.
It is important to recognize this was not an overnight thing, right?
It's been something that both countries have been focused about building
alignment because it was important to align to agree that this is possible.
And therefore, understanding what are the complexities of making it work and
what facilitation that we can do. And the facilitation could be things in
terms of agreeing priority investments that need to be done.
Facilitation in terms of easing the movement of goods that cross the
borders. Facilitation in terms of easing the
movement of people across borders. And I think that that investment that we
all did in trying to get that alignment done
eases the next stage. And if not is an idea, then easily ran
into bureaucratic blockages along the way.
Second thing then is see making sure that incentives which are given to
actually a focus about the right things that we want to do and we saw with the
roll out of the GST is that that incentives are matching
the desired growth areas in that segment.
So in the gestures that have broken down in different zones that are prioritizing
things such as logistics, manufacturing, digital leisure and tourism analytics.
So when incentives are given, they're not given blanket, they're given that in
order to push that, because then you you kind of coalesce the ecosystem in the
right form along the way.

So I think we've now put ingredients
that will facilitate the quick realisation of things along the way.
And prior years of investments have also come to play releases.
Infrastructure, whether you talk about roads or rails, are getting better.
The connectivity in terms of arts is growing along the way and it's building
the ease of motion along the way. So again, what what's happened is that
it's moved from people ideas to fundamental infrastructure, things that
are really going to make things activated.
So I'm confident that this thing goes out and announcements are done,
discussions are on the ground now to actually realise the first round
investments given by Minister.

It is a return on investment.
How soon do you think you'll see that return?
Well, I think if you ask people how they look at the data centres for example,
right, five years ago, it's very scarce and I think that that
image is enjoying that capacity, that is realising the growth that nature centres
because we have the availability of our water, labour space and so on.
So I think that conditions actually it's been built up and when we talk about it,
it has it again move away from the what we've put on paper, but understand is
the infrastructure is owning that things are putting, facilitating that.
I think that base condition is the big change from Malaysia and I think from a
Singapore point of view, I think there are tremendous benefits whereby both
parties can gain in terms of pushing segments of businesses in the right zone
and helping complement each other to position both countries better.
And of course, jobs is a focus, 100,000 jobs, highly skilled jobs.
How do you think those jobs can be filled?
Is Malaysia prepared to fill those jobs? I think Malaysia is learning along the
way in terms of how to accelerate building good talent along the way.
The energy sector has proven that we can do it.
And so when we started in the 1970s, it was a new skill set, right?
But over the years, we've added in vet trainings, we've added in potentially
training and so on.

We create a pipeline of people that can
serve the industry. Now we try to migrate that same
methodology into our jobs and that sort of methodology, and we put the
incentives to it to allow facilitation. So if you see our knowledge worker
incentives put in a lower tax rate in order to attract knowledge workers to
come to Malaysia, in order to facilitate accelerated growth along the way.
At the same time, commitment put but in order to train locals to be able to to
support businesses are coming up. That was Malaysia's second finance
minister, Amir Hamzah, as he's on speaking with Bloomberg's Haslinda Amin.
And you can catch the full interview at 11 a.m.
Hong Kong time on INSIGHT with Haslinda Amin.
I'm going to have more, of course, from the economic forum in Kuala Lumpur
ahead.

Deborah Elms from the Heinrich
Foundation joins us Lynda later. And also our exclusive with the
Malaysian economy minister, Rafi Ramlawi, coming up on the China show.
We've got Beijing and taking aim at sectors including finance, energy,
sports as at widens its anti-corruption fight.
We'll have the details ahead. This is Bloomberg. We've got an update on the deadly Los
Angeles fires. This is being called the worst natural
natural disaster in Los Angeles since the 1994 Northridge earthquake.
Right now, we're hearing that parts of Hollywood have been evacuated as the new
Bush fire erupts.

We have also been talking about
Palisades as well, and houses and homes being burned to the ground.
This is a developing situation, but that is the latest say that parts of
Hollywood have been evacuated as the new bushfire erupts.
And as we said, the worst natural disaster that we've seen in Los Angeles
going back to 1994. Yeah, there we go.
We'll keep you on top of the story. Live pictures on your screens of
Pasadena. There we go.
Which is somewhere in the general area. More on that later on.
In the meantime, though, let's have a look at what is trending.
And back to this part of the world trending in China and a key topic of
focus for Chinese media that has anti-graft watchdogs meeting that's
wrapped up in Beijing on Wednesday. Now, the regulator singling out areas
such as finance and also energy as sectors of focus.
Let's bring in Rebecca who is here with us, of course, and set to talk us
through it, to break down for us really what's being said.
Yeah. Where we are in this general story here.
Yeah. A lot of focus on this anti-corruption
watchdog, the CDA.

This week they had their annual plenum.
It's basically been running through this week.
And Xi Jinping made his opening remarks, essentially doubling down on this
anti-corruption campaign that was across Chinese state media front pages.
We're now closing out the plenum, officials saying, reiterating
essentially this emphasis, particularly highlighting some sectors not
particularly new here, but again, this sort of renewed and continued emphasis.
Energy, for example, is included, finances included.
And accompanying all of this, we also had this new documentary that was put
out sort of in collaboration with the anti anti-corruption watchdog and
Chinese state media. And this documentary essentially
featured 12 cases across four different episodes.
And you're looking for something to watch tonight, guys.
And essentially all these officials sort of confessing precisely what it is that
they did wrong. They go into some details.
They sort of euphemistically one talks about how small things can quickly
become big issues.

Another one saying that, you know, he
sort of dramatically pumped up the GDP number because he was looking for
political sort of advancement and ambition.
And interesting here. But, you know, this is sort of part of
the conflict here that actually China faces more broadly, that on the one
hand, they are trying to crack down on this kind of corruption.
They do not want these sort of inflated GDP numbers, for example.
But on the other hand, to what extent does this then lead to officials lying
flat? We've talked a lot about this low morale
in the civil service in China. Of course, we had that, you know, nice
scoop about the pay bump slightly coming through for civil servants.
But there is this sort of real risk off feeling among the government and local
officials that it's not the time that they want to sort of take part in risks.
And of course, that's having ripple through effects in the economy.
So really interesting sort of mixture of different themes coming through.
Yeah, the anti-corruption drive certainly sent a chill through through
private and public sectors, but it still seems like it's not enough to deter Xi
from the overall goal.

Yeah, it's really interesting.
I mean, this has been a part of sort of character characteristic part of his
campaign from the very beginning back in 2012.
But what we have seen over the last couple of years is it really ramped up.
So 20, 23, 24, we saw a record number of Chinese officials being probed.
I think Xinhua said the number was more than 50 last year.
So there has been this acceleration. And interestingly, we also had a little
bit of a shift in time when these very rare comments from Xi Jinping President
Xi coming out late last year saying that actually this is a feature and not a bug
of the system, these kinds of disruptions and anti-corruption probes
are, you know, quote unquote, inevitable in order to keep people on their toes,
which is a kind of interesting reframing of how he is thinking of
anti-corruption.

But as you say, it has had this ripple
through effect, particularly when you think about the private sector.
We had those very, very prominent detentions in the finance sector last
year that's coming against this warning from the OECD.
Also this earlier about, you know, hedonistic bankers warning them not to
adopt the sort of Western approach and essentially this idea of belt tightening
across all sectors of private and public just at a moment when they are really
actually trying to get people spending more.
All right. That was at Bloomberg Asia Government
and politics correspondent Rebecca Chang.
Wilkinson will have plenty more ahead, leaving you with a look of how Asian
equities are faring.

And we're actually seeing the Hang Seng
turning positive here today led by Tech Morehead.
This is Bloomberg. Right.
Looking back, just very quickly, going through some of the big market moves
across your screens, We have LG Energy there.
That's that's an earnings. That's a long story to be more precise
here. We were looking for a 16 billion won
profit when we got was the not just the opposite but as you can see, multiples
more than what was expected, 5% to the downside.
The other one is oil, of course, within the same space there.
But this is more guidance along the earnings theme.
Brokerage, higher securities expect robust fourth quarter earnings of s oil.
Staying on the energy team theme on the broker theme, too, I think we're looking
at Shenhua Energy getting a downgrade.

We're down about 1% and that is coming
out of Goldman cutting the stock to sell on its outlook on the coal market.
So that's the story there. And just very quickly, we're looking at
Hyundai Group, this spending report of quite a massive amount here, 24
trillion. And this is one.
Yeah, there we go. So I was going to say dollars, but like,
what are they doing that might be underwhelming?
I guess? No, overwhelming.
Anyway, let me point is, is that at 17 billion USD, that's the conversion.
So that that plan actually represents a more than 19% increase versus last
year's domestic investment. This is the reporting that we're getting
from Yonhap, but we have seen shares really reacting positively to this and
in terms of broader market. So we're also tracking what's happening
in the Hang Seng today and and Chinese equities.
I mean, there's a couple of different things that we're really noting here.
Firstly, you've had the inflation figures that came out.
Yeah.

And in line basically with with
estimates, you'd say at least for the CPI, but it was still barely in
inflation territory. And actually we were just speaking with
David Chiu before from Bloomberg Economics saying, you know, put PBI and
CPI together, you're in deflation territory.
Yeah. Which is I guess why the market can't
stop rallying right now looking at the economic numbers too.
And I think what's what's what's what's key here in case of yours missed it too,
I think this week we had Winnie Wu who joined us.
And the reason I say that is when her number one leading indicator for B of A
for Chinese equity markets is credit growth.
Yeah, we are entering entering the window where we could get December
credit numbers coming through.

So what they're basically saying is when
that picks up, expect the economy to follow in a couple of months time in
between that the market should start to see that coming.
And that's where we might actually see the market start to rally shorter term.
So it could happen second half of this year, assuming the credit numbers start
to reflect sometime over the next few months or so.
And that is the big if, you know, because despite all of these stimulus
measures, you just do not see it playing out.
So far in demand for corporate from households, loan demand from corporates
and households really battling today. Yeah, well, thank God we're about to end
the show with 10 seconds left. We are done for the China show.
We've got insights from Haslinda Amin. That's next.
Stay with us..

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