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Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Krisner. Certainly was a risk off day in the US, and that included bitcoin. In a moment, we'll take a look at the crypto space with Peter Chung, head of research at Presto Research. But we begin in Hong Kong with Helen Ju, Managing director and CIO of NF Trinity. Happy New Year, Helen, Thank you for joining us. It's always
a pleasure. There's a lot to cover. We can talk about the FED and some of the policies that we're expecting from the incoming Trump administration in a moment, But I'd like to begin with technology because we saw a pretty good pullback today in Nvidia. I think in New
York trading we were down around six percent. That seemed to be correlated to disappointment over what the market heard yesterday when CEO Jensen Huang gave the keynote address at CEES he fail to mention he failed to mention the company's next generation of chips Rubin, and that may have been driving a lot of the disappointment. How are you viewing AI right now?
Broadly speaking, look, I think that AI has obviously been really the key momentum driver behind the broader market since pretty much March of twenty twenty three, when the.
Chat GPT started to take off.
I think a lot of the upward revision in terms of expectations has already happened, and it really depends on which segment of the ecosystem you're operating in to figure out whether there is still further upside. So what we have seen initially is that most of the focus has been on Nvidia and on the GPU, and then gradually
it actually spread out to other parts as well. Like you know, any company that has some application that has to do with AI, or even like one or two percent of revenues coming from AI starts to become AI
plays and see meaningful valuation expansion. Now we're kind of getting to the stage where the expectation is high enough that it's quite easy to miss the high expectations, and therefore, just like before you had twenty five percent share price move on the back of a slight beat and two percent of revenue AI product, now the opposite can also happen, and so it's becoming much more selective and much more volatile versus Before let's talk.
A little bit about the macro. Some of the economic news that we had here in the US seemed to trigger concern about stubborn inflation, and with that the bet that the FED is not going to be aggressive in cutting rates again, maybe not until July. So how are you viewing the US inflation story right now?
I think a lot of it is still very much dependent on services, and in terms of the goods front, we've already seen meaningful disinflation, and actually the broader trend is not so concerning.
If you look at the small amount.
Of inflation beat versus expectation, it is really kind of like a very very minor amount.
But I think we do see that.
Last night, for example, the macro data across the board was quite strong. Think that, you know, things are really not slowing down. And I think the other main source of the concern about the inflation is not only what we're seeing today from the strong economy, but also what we might see going forward from both the trade tariffs as well as the loss of labor from the immigration
policies that Trump is likely to implement. So that's why people are getting increasingly concerned, not necessarily because of today's data, but because of what might happen policy wise over the next three to six months, where there's a significant amount of uncertainty.
Uncertainty, but you're kind of indicating maybe concern about rising inflation longer term, right, I.
Mean, yeah, I mean the new normal or the kind of longer term normal is certainly going to be higher versus before because of a lot of the structural things that have changed, So for example, the deglobalization, right, so those are or maybe you know, even though the technology has been helping, maybe the impact of the technology disinflationary trend was seen earlier, like maybe one or you know, one and a.
Half decades ago.
So obviously, if AI really has a very significant impact in terms of lifting productivity, that's going to be the huge offsetting factor. But at the moment we're still at the very beginning of that. It's very difficult to quantify or to figure out how much impact it can have.
So if you can accept the idea that maybe we only get one rate cut this year, the dollar really is going to reflect that and remain very robust against the majors. And I'm sure that for someone in the Asia pack that has to put money to work. That's going to be increasingly challenging, is it not.
Yeah, it's already been challenging, right, So obviously, beginning of last year, people were expecting like six rate cuts last year and maybe four more this year, and then now, you know, looking back, the economy has been surprisingly strong in the US, and you know, now I think the expectation is a little bit extreme on the other side because of a few things.
One is that, actually, if you think about it.
A lot of the job's data over the last few one or two quarters has actually been quite volatile. So it's sure this month we had very very strong data, but we can't be assured that the employment data is going to be consistent throughout. And if you do have one or two months of air pocket again, then I think the yields will sell off and people start to
get more concerned again. The second thing is that a lot of this tariff and immigration policy, and tariff in particular is not only inflationary, but also potentially going to hurt growth in the US, hurt US corporates, and hurt overall activity globally, which will then have indirect impact on the US economy as well, So if that actually happens and US data gets affected, that could also actually increase
the expectations regarding more ray cuts versus before. So at the moment, it feels very firm, but usually those are the moments when you can't really see anything going wrong. Those are the moments when you're.
Just like on the cusp of something going wrong.
And I think expectations about the US economy and it's robustness and the yield outlook are quite quite uppy at the moment.
How are you viewing China right now? And opportunities there.
Opportunity is definitely there, But I don't think it's about domestic stimulus necessarily. Domestic simulus is only enough to get people to feel like things aren't getting incrementally much worse.
But all the sentiment and expectation and hopes and confidence rests on really the geopolitical aspect, right So if you do have very egregious trade policies, it's going to massively hit sentiment and the markets are not going to perform no matter how much domestic policy stimulus you have, And so I think that's the key thing to watch.
I think I hope that China and the US as well as.
The US and other major markets that it's dealing with, will have a rapid negotiation at the beginning of this year and try to sort out some of the differences rather than having it you know, drag out through the rest of the year, which would be actually very negative for global economy and sentiment.
So we've covered a lot of themes, Helen, can you help me understand what the investment strategy would be going forward?
Here?
How does everything translate?
So I think there's two possible outcomes. One is the Goldilock scenario, which is that the US economy is intact and the jail politics are not as bad as expected. In that case, everything else catches up to the US and a synchronized global recovery, and you actually have the dollar weekend a little bit and everywhere else that's been totally hammered catch up.
That's the best case scenario.
In the worst case scenario, you know, the administration gets a little bit too hawk as drags it out tariffs, immigration, they end up being negative for the US and.
Elsewhere as well.
The US starts to catch down with the rest of the world, and everything actually on the risk assets front actually starts to go down.
In the first scenario, what we.
Would look at would be like cyclicals and non US markets for that catch up play, because they are basically the ones that are lagging and the ones that would benefit the most from that scenario. And the second scenario, I think is really about holding cash and maybe treasuries and defensives, you know, all the places where nobody has any exposure. In the equity market, I wouldn't even be going that much into like credit just because the credit
spread is so so so narrow at the moment. It has to widen if there is any kind of recession or soft landing fears, So that would be the way that we would look at it. And you know hedging as well, because vis is still low.
So what about things to avoid it all caused when I was listening to you kind of sketch out the China story, I'm thinking, well, avoid anything that has to do with the Chinese consumer.
The Chinese consumer has definitely been weak. But that Chinese consumer derating or sell off is actually behind us. Is actually about six to nine months ago, so that was the worst of it. Previously, expectation was always for twenty percent plus growth, and the stocks were trading at like twenty to thirty times PE and the positioning was very heavy. I think all of that has already unwound in the
last six to twelve months. Obviously, whether it rebounds to a significant extent remains to be seen.
The low end.
Consumer is probably the one that the government cares the most about, and so certain consumer staples and other stuff I think is the area that we would look at.
I think on the luxury and so on and so forth front.
You know, most of the global luxury stocks have sold off, but they're not like super.
Distressed per se.
And I don't think the Chinese consumer is necessarily going to rebound aggressively on the luxury front, even if the trade TARFF concerns go away.
We'll leave it there. Helen, thank you so much for joining us. Helen ju is managing director also the CIO at NF Trinity. Joining us from our studios in Hong Kong. Here on the Daybreak Asia podcast. Welcome back to the Bloomberg Daybreak Asia Podcast. I'm Doug Krisner. So bitcoins march back above one hundred thousand didn't last very long today During New York trading Bitcoin slid about five percent along with a broader retreat in US risk assets. Let's take
a closer look now at the crypto space. We are joined by Peter Chung. He is head of research at Presto Research. Peter joining us from Hong Kong. It's always a pleasure. Happy New Year. Can you help me understand what was going on with the price action in bitcoin today?
By Happy New Year to you as well. I think what happened last twenty four hours is just the typical risk assic behavior of bitcoin reacting to some very strong macro data that came out in the early hours of the US equity market trading. So I think along with the broader risk asset selloff, I think the bitcoin also went through some correction. And yeah, I think that's what happened.
When you look at bitcoin, Peter, the risk asset that is strongly or most strongly correlated with the cryptocurrency, would it be equities, would it be what's going on in the US dollar? How do you understand the signal that the bitcoin market is getting from other risk markets.
Yeah, I think the segment of the traditional finance market that has the highest correlation with the crypto and bitcoin is the big text, especially the Magnificent sevens. I mean, I think because bitcoin actually because it's an emerging asset class that has an element of network effect. So one looking at a bitcoin is viewed as sort of like a Internet startup that has a lot to gain from
the adoption of the network by the public. And that's exactly what bigcoin Networker has been going through in the first fifteen years of its life.
It's interesting that you mentioned the Magnificent seven. I think the Bloomberg gauge of the mag seven was down about two and a half percent today, so clearly a lot of selling pressure. Let's talk a little bit about your expectations on bitcoin policy or crypto policy more broadly, with the new Trump administration. What are your expectations in terms of the regulatory environment.
Yeah, so I think, I mean, there are a few things that will happen. But first and almost I think with the Trump in the White House, there are things that can happen relatively quickly through the presidential power. These include things like repealing set on one, which is the SEC guidelines that effectively prevents traditional Costilian banks from entering
into the digital asset custody space. Another thing that could happen, I think is the end of the so called the Operation chockpoint two point zero, which is a name given to the anti cryptop policies undertaken by the Biden of the administration. I think that you know that that can be easily fixed by replacing some of the key UH
members of the federal regulatory agencies. And then the other thing that could happen is on the legislation side in the Congress, now that we have, you know, the Republican majority Congress, and the many of the policy is that I think the Trump advocated in terms of nurturing the crypto industry requires a legislative process, and these things can These can be undertaken as well, but this will be a little bit more lengthier process given that it needs to get buy ins from many lawmakers.
So, Peter, when I hear you describe a lot of the changes that you're expecting here in the US, I'm curious about how that may impact markets like Hong Kong or Singapore where crypto is concerned. Do you have a sense of that.
Yes, So, I think many jurisdictions in Asia look to what's happening in the US in terms of crypto policies and regulations, and I like to use that as a benchmark given that there are you know, the many of the opinion leaders on the on the crypto industry is
actually they reside in the US. So I think, you know, policymakers in Hong Kong and Singapore, they both view the blockchain as a technology that can enhance their competitive positioning as financial hubs, and I think they are paying a very close attention to what's going to happen, especially with things like a stable coin, for instance, which is the initiative that Hong Kong government in particular is quite interested in.
So I mentioned a moment ago that during New York trading, Bitcoin broke back below one hundred thousand. Do you have a price target this year for where bitcoin may end up?
We do. Actually, we published the twenty twenty five Crypto Market Outlook Report in December where we talk about a few things, but one of them is the price predictions for major cryptocurrencies and bitcoin. We have a price target
of a two hundred and ten thousand. I know a lot of people kind of get surprise to hear a big number like that, but remember that the bitcoin has done crazier things in the past two hundred ten thousand dollar The target is about one hundred percent upside from current point on, which is the modest increase compared to the bull cycles of the last fifteen years. And we actually have a quantitative kind of approach to this number.
So what we did was, you know, we just didn't We didn't just pull the number out of the thing there. We estimated what we call the realized value for next year for bitcoin network, which is a metric that we think captures the uh the adoption of bigcoin as an asset class by the by the traditional finance and that number has been steadily increasing about five percent every month since the January of last year, which is when spot
big quin t TF was first introduced. So we think the adoption of that asset class through vehicles like the ETF will continue into next year. And as long as that happens, I think the hour real the realized value target is quite fairly realistic. And we apply three and a half times multiple to our realized value estimate to arrive at our fear value estimate for the bitcoin market cap.
So right now, as I'm speaking to you, I'm looking at a price of just under ninety seven thousand, and you are forecasting two hundred and ten thousand by the end of twenty twenty five. Now, how does that map with the overall market cap for bitcoin? I mean, what do you believe the overall market will be at the end of the year.
Yeah, so that's the number will be about four point two trillion dollars for bitcoin. So our twenty ten thousand dollars higher price is simply by dividing that number with outsending bitcoin units.
So we've talked about a price target of two hundred and ten thousand in the year ahead for bitcoin. I'm curious Peter, as to whether or not you're making other bold predictions for the year ahead.
Yeah. So another prediction that we make in that report is that that we think at least one nation state or one sent five and the company will embrace bitcoins as a treasury asset. And on the nation state side, it's actually a trend that's been happening for the last at least four years. You know, we saw the first of that from Elsa Vador when they announced the adoption of a bitcoin as the legal tender. The announcement from Elsavada was in twenty twenty one, and every year since
then at least one country has been announcing it. You can find the list of those countries in the report. Obviously, last year was you know, US announced the plan to do so, although it still requires approval from you know, from the Congress. You know. I think the mere fact that the US is considering this option, I think it's going to trigger a lot of discussions in other countries based on the game theory dynamics.
Peter will leave it there. It's always a pleasure. Thanks so much for joining us, Peter Chung, they're head of research at Presto Research. Joining us here on the Daybreak Asia Podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast
YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Chrisner and this is Bloomberg