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Welcome to the Daybreak Asia podcast. I'm Deck Chrisner. It was concern over an escalation of hostilities between the US and Iran that weighed on US markets during the last session. There were clashes in the early hours of Wednesday, with Kuwait and Bahrain caught in the crossfire, and we had the S and P five hundred dropping from a record high by seven tens to one percent. Snapping a nine day winning streak tack led the decline, and we had a key software etf that being the IGV sinking more
than four percent. Now. A short while ago, the State Department said that Israel and Lebanon have agreed to renew their fragile Cy's fire. This agreement, by the way, will also create a number of pilot security zones inside Lebanon from which Hesbalah militants would be banned. Crude oil prices are drifting lower on that news. For a look at market action, let's bring in Bloomberg's Paul Dobson. Paul is Executive editor for Asian Markets. He joins us from our
studio in Singapore. Thank you for being here. Where do you want to begin. Can we talk first about the geopolitical story and how it's intersecting with some of the price action that we're seeing.
Yeah, Hi, there doeg absolutely, and it's back on the radar, having sort of drifted into the background a little bit in recent days. So this newest escalation, the fact that although Trump tells us that he's getting closer to reaching an agreement with her round, we'sta ll not really seeing it is you know, pushing up crude oil prices again and seeping back into the broader markets. As a result, we have higher bond yields and a stronger dollar on
top of that as well. I mean, on the positive side, we are seeing more tankers and shit escaping from homies, bringing a little bit more products onto the market. But at the same time, you know, the oil reserves data was a good reminder that we're burning through everything at a relatively rapid pace and that it can't hold out forever.
And you still see those countries that are most under pressure, and I'm thinking again, you know, we talk about those ones in Southeast Asia, like Indonesia under a considerable amount of pressure. Indonesia, I think, so its current account surplus whittled down to almost nothing because it's spending so much on crude oil and other energy products, which is interesting one and weight on the currency again yesterday, so.
We had tech weakness during the regular session in New York trading, and then after the bell kind of disappointing news from Broadcom I think ai Chip revenue will not meet expectations, and then on top of that, CrowdStrike holding saying that revenue for the current quarter will be low the most optimistic expectations. How is that news being received right now in the APEC.
Yeah, well so bad news on the hardware front, bad news on the software front too, And what we saw in reaction to that was not just broad Come it's self fowarding, but piers across the US tech space like marvle AMD also under some pressure. And the futures I think for S and p NASDAK around half a percent lower as a result. So that's going to weigh on the Asia tech sector or things being equal, I think it's a little bit of a you know, a reality check,
like you said, Doug. I mean, the market had been up for nine days in a row until yesterday. So the bigger picture is that there is still this humongous amount of optimism out of there. I think it's good every now and then for the markets to think, how have we running too far with this story? But also to think about, you know, not everybody is necessary already going to be a winner. There are going to be
stronger hands than weaken hands. That's going to become more and more evident as we go through this new sort of AI infrastructure boom.
We have some amazing IPOs in the pipeline right now. Tonight in the US, the SEC filing from SpaceX reveals that the company is looking to raise seventy five billion in what would be the largest IPO in history. That comes after the Anthropic filing, and then we're still waiting to hear from Open AI. How is this news being received where you are?
Yeah, well, I think with a lot of interest. I think that you can see that there are many people that want to get in on it. Even with the high valuations and the extremely large amounts of money that are involved and need to be raised, it feels like there will be some difficulties for the market to absorb it all because it will drain liquidity at least temporarily.
But on the other hand, I think that you know, what we saw, okay, so this is you know, quite a good example, I think was we had the technology conferences in Asia recently, we had Jensen Huang visiting China and various other nations, and just the kind of buzz that he generates wherever he shows up in the region. You know, whatever he's doing, he's eating a bowl of noodles, it's over a social media everywhere, there's lots of excitement.
You know, he goes to an airport and there's there's fans, it's being mobbed a little bit like a like a rock star or something like that. I think that that sort of talks to the idea that there's a great deal of enthusiasm and excitement over the potential for the next leg of the AI rally, and the fact that what he was talking about was, you know, the other companies that can do well. He was talking about software, he was talking about robotics and that power of it.
Just the word was enough to lift for various equities markets talks to you know, there's that there is that faith in some of these deaders, and I think that Elil must certainly carries that same thing. When Sam Oltman comes to the region, it has that same effects as well. So you know, these are the new these are the new superstar CEOs, and and that can get you quite a long way, even when you're doing gigantic IPOs.
And then we have a story. S k Heinez, I believe the other day was out with an indication that it plans to double its memory chip capacity over the coming half decade. This is obviously a part of that AI story. So it's not just things being optimistic right now, kind of in the short term, but I think in terms of the longer view, people are still of the opinion that this is a durable trend.
Yeah. Now, memory chips is obviously highly sicklical based on the recent past, so there's booms and busts, and so the idea that s k Heinez wants to do that huge build out does show you that they're very confident on the outlook. But it also you know, we've seen
over capacity. Oh, we've seen ebbs and flows in demand before, so it's not one hundred percent guaranteed that this is going to be successful, but it does talk to the fact that there's a clamor for the products that they're making at the moment, and the fact that the market receives it well and not skeptically again talks to that
same sort of thing. I think the South career at the moment, those markets are getting a little bit what would be the right word, raising some anxieties among more seasoned investors when you see the two times leverage single stock ETFs springing up and attracting huge volumes as well, and the volatility really whipping up as a result, feels like, you know, you need to be careful to control it
and not to get over confident. Otherwise if we do get into too frofi a situation, then the risk of sharp corrections only builds as well.
So in the US we had manufacturing PMI data indicating that businesses face the fastest growth in input cost in nearly four years during the month of May, and that is largely the energy story, where prices have moved sharply higher. I know next week in China we get a lot of the price data. How is the inflation story playing out where you are? Is it much more severe than what we're talking about in the States.
Yeah, Well, it's country by country basis. I think is part of it because google energy exposure and costs varies from place to place, and I think you're right to draw attention to that. I think the bond markets run
the pressure pretty much everywhere at the moment. So that's a testimony to it, and that a lot of Asian central banks have already started hiking to get ahead of it, and those that aren't, like the boj are getting punished, and so they're sort of having to make noises that they're also coming around to the idea that likes to
going to be needed relatively soon. And I think not to be forgotten within that DOUG actually is not just those energy costs, but also the costs of the semiconductors and all the equipment because the market is seeing all of these bottlenecks at the moment. The companies that are making the technology hardware have pricing power, and if they're raising prices, then that does feed into the costs for everything.
And so we've seen you know, a few isolated, I would say so far, but nevertheless quite prominent squeals of pain, the likes of Nintendo talking about how the cost of the chips that it's putting into it's you know, gaming equipment and things like that is also going up, so that idea I think people are calling it chipflation is also something that needs a little bit more attention.
I think.
Okay, Paul, good stuff. We'll leave it there. Thank you so much. Bloomberg's Paul Dobson, Executive Editor for Asia Markets, joining from Singapore here on the Daybreak Asia podcast. Welcome back to the Daybreak as your podcast. I'm Doug Prisner, and as I mentioned earlier, SpaceX is seeking to raise a record seventy five billion dollars through its initial public offering. This would be the largest IPO in history, and it could clear the path for even more mega listings. That's
where we begin our conversation with Sylvia Jablonski. She is the chief investment officer at Defiance ETFs, and Sylvia spoke with Bloomberg TV host Heidi Stroud, Watts and Cherry on.
Such a hectic time for market participants. Let's start off with the mega IPOs with SpaceX. How do you view this offering for all of its ways that is quite unconventional, I should say, coming at a time where the valuations for a lot of these companies are just so hefty.
And so first, thank you for having me here.
I think that's the sex IPO is going to be one of the most exciting IPOs in history. There are so many investors that are just you know, kind of chomping at the bit to get exposure and access to the shares and trying to figure out, you know, how they're going to do it, whether it's going to be they're an ETF wrapper, whether it's going to be you know, buying the stock itself once at IPOs, and I just think that the interest is massive.
The SpaceX IPO is interesting on a lot of levels.
I think first, it shows that there is this huge focus on the future of AI and that will be you know, kind of space space connectivity, AI space compute different ways to have you know, connectivity outside of what we have here on Earth essentially, so you know, lower latency, lower energy use, things like this. It could be a potential AI company, as you said in your intro there. And I think the second thing is just you know, how much excitement there is about some of the IPOs lately,
Like Quantinium is another exciting one. It's twelve billion, you know, kind of is much smaller than SpaceX, but investors are very much investor in the next generation of computing, and I think, you know, these quantum companies, these space companies.
Are just what that brings.
Are there enough pieces of the pie for everyone at this point or are you going to see this kind of desperation to be first to market suck up a lot of the oxygen.
I think, you know, I think both.
I think there'll be a lot of competition and a lot of you know, who's getting first to market, But I think the opportunities are also vast.
Right.
AI just started with this chat shipt moment, and you know, a year or so ago, that's what AI was to everyone, and you know, then it kind of broadened out to chatbots and now it's it's a much different thing. Right We're talking now about defense AI. We're talking about the power and infrastructure of AI, the cooling, the photonics aspect
of it, you know, memory. I just think that the moat of AI is so massive right now that investors have so many different angles by which they can play this trade and get exposure to it.
Sylvia.
But at the end of the day, this fine the foam on the e zub rants around artificial intelligence we're talking about a huge flood of stock supply coming to market. What will be the broader repercussions for market levels, especially when you take it from the passive investor side of things and they take a look at these big atfs and how some very few companies are dominating the broader market.
Right.
Well, you know, I do think that you'll have this verification of stocks in the market if that happens, and if you do get this congestion problem. But again, I just think that some of the companies that are iploing and coming to the market offers something a little bit different than the others that were already familiar with. You know, there are a lot of newer names in AI for you know, I could I could name like a po E l or Iron, which is to be a bit
mining company. They're involved in AI infrastructure. There's so many, you know, kind of small cap companies that are actually starting to generate revenues and have come to market and gained investor attention and they're actually doing quite well.
So I do that the runway for some of these.
Stocks continues to be there potentially there anyway, as AI grows.
Do you have to be more concerned about diversifying in this environment, and how would you do that?
Yeah, I mean, I think it's always smart to diversify, right. We always say that, you know, you kind of want to have different alternatives in your portfolio. And I think that there are ways of doing that. So if investors feel that they're starting to get very heavily allocated to you know, specific AI companies for example, or just tech stocks, they could look at things like XMG and you know, kind of take out the exposure of the mag seven and get the broader diversity of the S and P
five hundred. So there's certainly ways to diversify that. I think, you know, investors are going to start looking at companies that will actually benefit from AI, So you know this this this type of concept, right, And I you know, I do think that there are ways to diversify by seeing where AI will play out in different and broader sectors that are not necessarily technology based.
Can you point out this is not just a software story for AI anymore, or even a ship story. It's an energy supply story. Is that one of the biggest risks?
You think?
Yeah, I do.
I think that's I think that's a big bottleneck, and I think it's why you're seeing some of these other companies, you know, doing very well. A lot of the top energy companies, for example, the photonics companies, the laser you know, the Lumentums, Coherence, the.
Poets of the.
Universe are doing quite well because I think there's this thought that you know, as we continue to consume energy and we're trying to build out these big AI data centers and workloads, you know, some of the smaller companies that are doing it and moving data in different ways will benefit from that.
That was Sylvia Jablonski, CIO at Defiance ETFs, speaking to Bloomberg TV host Heidi Stroud Watson Sherry on bringing you their conversation 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 prisoner, and this is Bloomberg