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App well by Dance has filed suit against the United States in effort to repeal the TikTok divest or ban law. Who have sets up what may be a prolonged legal battle, and it suggests that by Dance is not planning to sell the app. Bloomberg's Mike Shepard has.
More since President Joe Biden signed the bill into law last month, TikTok and its owners, Beijing based Byte Dance have been preparing this legal challenge, and they're doing so on First Amendment grounds. They're laying the groundwork for serious constitutional challenge to this law, saying that will infringe the free speech rights of one hundred and seventy million TikTok users.
The lawsuit marks the first legal challenge since Congress passed the law. By Dance says that selling TikTok as is specified by the law is unfeasible commercially, technically and legally. Joining us now in our studios in Hong Kong is Sarah Jung, who is Bloomberg China Tech reporter for a little more discussion on this. So, Sarah, not a big surprise TikTok leadership. I've been talking about this in the run up to the law passing. They said they would
fight it in court. Bloomberg News is making the statement that this is a clear sign byte Edance is not prepared to sell. I suppose that means that if it loses the case, it just closes the app.
I think that would be definitely one of the worst case scenarios. Like you said, we've been hearing from the company for a while now that they will file this lawsuit. It seems like internally and externally they're quite confident that they do have a strong legal argument in the same way that they were able to overturn the Montana state
ban on TikTok. They're hoping that, you know, by pushing this violation or first Amendment, you know, saying that the bill is targeting TikTok very narrowly saying that divestment like you said, is not legally, commercially or technically possible, including stating that the Chinese government would not approve of such a divesture. It's all part of this broader push that they think can make this legal argument for them. Yeah.
So in the filing, TikTok is claiming that the ban will stifle free speech that may be up for debate, also that the ban would hurt small businesses that rely on the app. Can you help me understand something when I reflect back on what China did back in twenty seventeen when it passed the new cybersecurity law, whether the United States could point to that law saying I don't care what the company is saying right now. By law in China, companies that in this case by Dance is
required to share data with the government. Isn't that something that's going to be a part of this case or Am I wrong?
Definitely? I think that's the crux of the argument. From the legislator's side. They're saying that because Byteedance is operating in Beijing, the Chinese government, through the cybersecurity law like you mentioned, and also other types of national security data security kind of laws can require that byte Dance provide data collected by TikTok to the government. This is something
that TikTok and byte Dance have both denied. They've said it's hypothetical, and actually, if you read their lawsuit, they address this head on. They say that so far all of these risks and threats are hypothetical, and that they've tried to address this with discussions with Sophia's where they would have what they've called Project Texas, which is to completely isolate and silo their US data and have that
be overseen by a US company like Oracle. Of course, that argument hasn't hasn't been one that was convincing enough to Congress and to President Biden, as we've seen.
Now we make the point that this lawsuit is the first legal challenge. Does that Are we expecting other suits to come forward here, perhaps from some of the users who feel wronged.
By this, Yeah, definitely. There have been users talking about forming class action lawsuits on this. This is something, of course, that TikTok itself is encouraging. We saw earlier while the TikTok bill was going through Congress that they were actively lobbying their users to call their lawmakers, including with that message on the app say and call your lawmakers. But that was just used again by Congress as another sign of how how much influence TikTok does have in the US.
It's interesting from what I've read, this could wind up before the US Supreme Court. I mean, it's only going to be a matter of time, I think, before it makes it there. But in terms of the litigation process, do we know what the next step is? I think the lawsuit was filed in Washington at the US Court of Appeals, Right, yep.
That's right.
But like you said, I think most legal experts are expecting this will be a year's long process and it will eventually make its way.
To this well.
Given that, would we expect perhaps an injunction filed in the short term trying to get TikTok to suspend operations while the case is being decided, or would that be difficult to get through a lower court?
That could be possible, but then TikTok might appeal again. And also because the government in the bill has laid out this two hundred and seventy day timeframe, so I don't think that that's what people are expecting at this moment. Of course, you know that could happen.
The timing here is very interesting because obviously in the States we're in a presidential election year, and when former President Trump was president, team moved to curtail the app. It was pretty aggressive about that. Do we know anything now about where the former president stan should he be re elected, how might that change? I don't know that it can now that we've got a law here in the United States that basically is forcing the company to
be sold or to face a ban. But I'm wondering if a Trump administration comes into office, let's say after the first of the year, how does that change the situation.
Yeah, I think that definitely could throw a wrene into things. We've seen that President former President Trump over the past few months has been outwardly saying that he is against a full TikTok ban because he thinks that that would elevate META and give them more influence than he believes that they should have. So it's definitely possible that he could come into the presidency early next year and potentially change the way that this whole situation plays out.
I wonder what people think of Steven Mnusian's idea that perhaps the algorithm could be reverse engineered in some or a deal for the American assets. Now we know that China is not really prepared to sell, and perhaps it would sell without the algorithm, and then if you could buy it without the algorithm and somehow recreate it, I mean, it sort of boggles the mind a little bit. But what are you hearing on that front?
To be honest, quite a number of people are quite skeptical that you would be able to replicate TikTok's current success without that core algorithm. It's what's known as the secret sauce of their success. So if you did buy it would essentially just be the infrastructure and the users. So, I mean, we've seen Manus come out to say he's quite confident that they would be able to replicate it, but we haven't seen TikTok's competitors like Meta and Google be able to do that so far.
Sarah, do we have an understanding of how the US operations, what it's worth, I mean, how it's being valued right now? I mean, and if imagine the best case scenario where it does get sold, what's the price tag on something like this.
There are actually while a huge spectrum of valuations on this, just because people are not sure exactly how valuable whatever they could buy will be. Like we said, without the algorithm, if you're just buying the TikTok brand or just purely the user base, how much would that be worth. That's something that I think, you know, we're just seeing lots of different valuations yet, so it's hard to pin down exactly.
Pretty interesting because we saw some comments from Eric Schmidt, the former CEO of Google, say or Alphabet say that he had thought about it. He had actually explored a possible purchase of TikTok, but he's now moved on from the idea. In addition to Schmidt and Manution, and we know that Oracle was thinking about it before in terms of a relationship. Are there any other buyers that have come forward.
Yeah, we've been just hearing potentially that like other companies, even non tech companies, gaming companies might be interested as well. Manuchin said that he's spoken to a lot of tech companies. We don't know any of the names yet that he's referring to, but it sounds like there is some interest.
Yeah. Apple, I've heard Apple's name as a possibility. They don't have. They just don't have that kind of of app.
Even Walmart. Walmart's name has been thrown around as.
Well, exactly, although with an Apple or like a Meta, there would definitely be some FDC screwtiny.
Yeah, if you don't have a social media app, I suppose you know, this might seem fair game. Anyway. That's it for that, Thanks so much for joining us, Sarah Sarah jang there Bloomberg China Tech Report.
We focus next on Warren Gaza. Today, Israeli officials were saying major gaps remain with Hamas over the latest proposal for a cease fire. Joining US now, Dan Flatley, Bloomberg National Security reporter, making time for US from Washington, DC. Dan, It's always a pleasure. Maybe we can start with the operation that took place today in Gaza with the Israeli troops moving forward and taking control of the Rafa border crossing.
That really wasn't much of a surprise. Now, but where does this leave the two sides as they try to work out the potential for a ceasefire? Does this kind of stymy that process?
Yeah, I mean it definitely. I don't know that it means that there won't be a ceasefire agreement at some point, but it certainly is a ratcheting up of the Israeli's position here. Of course, as you mentioned, there was a ceasefire proposed by Hamas that was essentially rejected by Israel. Israel said that some of the concessions or some of the things that were in that ceasefire agreement did not
meet what they had requested. The US has sort of caught a little bit betwixt and between, where you have US officials here in the last couple of days saying that they see still some room for agreement on that cease fire deal. That really just amounts to a couple of small details. That's certainly not the way the Israelis
are viewing this at this point. And you know, this is really the culmination of the military operation that began in the weeks after October seventh, when the Israeli government under the leadership of Benjamin Etna, who said that they were going to eradicate Hamas. And so this is kind of the final outpost or final stronghold of Hamas. But let's not forget that there are over a million people in Rafa that led from other parts.
Of Gaza exactly. I mean, Israel told residents in the eastern part of Rafa to leave immediately. But Rafa's right on the border with Egypt. I mean, where are they expecting that residents will go?
Yes, And I mean this is the heart of the matter here, because Egypt to say that they don't really want any refugees coming into their territory. They cite potential unrest and other issues. The Israelis are not letting them, obviously cross into their territory. In Gaza, they're sort of stuck, and they've come basically from all other parts of Gaza as they've moved south. This city, which is usually home to about a quarter million people, is now hosting over
a million in tents and other kinds of encampments. And then you sort of get into some of the remarks that President Biden made today and some of the campus protests here in the US. So really the eyes of the world in many respects are sort of focused on this city in southern Gaza for many different reasons. But that's what we're looking out for right now.
So Dan, has humanitarian aid come to a halt completely? Is anything getting through?
I think that there's still there's still maybe some aid getting through, but it's very difficult obviously now at this point because of the way that this conflict has evolved and the way that basically the Israeli troops have forced all of the all the Hamas fighters to this last city.
So you just have a very concentrated area. So if you were talking about getting aid to you know, a few different points in Gaza, that's a different scenario than if you're just trying to get into a very tightly congested, tightly packed area. So it makes it very difficult. And of course from the Israeli troops perspective, you know, they have said that they're trying to minimize civilian casualties, and we've seen that there have been some civilian casualties throughout
this conflict. But you know, that's very hard to do. When you're in a very densely packed urban environment, you don't necessarily know whose friend or who's foe right off the bat. So that adds to the complexity of this issue.
Dan, if you'd have told me a year ago that the fut Up branch of Palestinians would outfall Israel in terms of global opinion. I might have bought it given the sort of newer and more modern leadership that they have, but Hamas, how has Humas out foxed Israel in terms of global opinion. Just look what's happening on campuses in the United States and what it means for President Biden in the election.
Yeah, you know, it's a great question, and I'm not sure that I have a very good answer for you, but I would say a couple of things. One, you know, the world map has changed a great deal since the Russian invasion of Ukraine just two years ago. You know, there's a majority of countries around the world, especially in the global South or the more developing countries, that have abstained from weighing in on that conflict. And so you see a world that is not necessarily beholden to the
US or the Israeli view of things. And you know that's true. This has been a development that's been underway for many years in college campuses, for good or for ill, where people are questioning sort of the established narratives. And then you have a very tricky issue with this with anti Semitism on one side and humanitarian concerns and other things on the other side, and that's where that's why this issue is so combustible, and that's where you see
Biden today trying to tamp down some of that. But it's it's not going to go away, and it's only going to intentify if we do see continuation of operations.
I mean, so, what's next if we move toward trying to get an agreement on a ceasefire, do we have the next step?
Well, you know, you could look at the Israeli position now, as you know, they're trying to drive a hard bargain. Perhaps they are looking for some concessions from Hamas on a couple of key points in that ceasefire agreement. But you have to weigh that against the necessity in the part of you know that the Israeli government has identified in eradicating Hamas. So what wins out in the end, certainly not a permanent cease fire, but maybe it's temporary one.
All right, we'll look forward to that, hopefully temporary cease fire. Dan Flatley joining us at Bloomberg National Security reporter.
Joining us now on the program is Omar Slim, Co, Head of Asia Fixed Income at pine Bridge Investments. Omar in terms of fixed income opportunities here in Asia. One big challenge is the sort of sledgehammer of the dollar. The dollar has been strong and it seems like it's likely to stay strong as long as the FED doesn't start cutting interest rates. What is the impact for your business on the strength of the dollar?
Right, So, in terms of the dollar, I would agree with the view that it's probably going to stay strong for the foreseeable future, and the impact really is can be kind of bucketed in two ways. The first one when it comes to the local currency markets here. I think it's very difficult for the local currency bond markets to perform when the dollar is that strong and when
the interest rate differential is as high. So we're much more cautious when it comes to some of the local currencies when it comes to some of the US dollar denominated bond market in Asia. So when we look at the kind of the impact on the fundamentals of the corporates in the region, it tends to be pretty balanced in the sense that they can withhold a stronger dollar because part of their revenues and so on is in US dollar.
So if you're a monetary authority in em and you're in the predicament that you just laid out. I mean, what are your options.
Well, your options is to wait and see what the plant does. And in the meantime, the pressure is too strong on your currency, you hike defensively, like what we saw in Indonesia. So it's not a great position that they're in. You know, they don't want to burn and towards their deserves, so they are essentially price takers at this point.
One interesting development I think it's the first time in forty years or so when you look at cycles that you actually have the average mortgage rate of Americans. They have this you know, fixed thirty year and people did refinance over a long period of time. The average mortgage rate is like one hundred and fifty basis points lower than the Fed funds rate, and that's really very beneficial to American families. I guess almost the reverse is true in Asia.
Right, Yeah, I mean on the first point, if I just can elaborate, I think one of the most interesting things that's been that we've been looking at is how interest rate sensitive the economy is, whether it's the US economy or the global economies. And what you just stayed out is an interesting example of how it is less interest rate sensitive, which explains a certain extent at least
the strength of the in the economy. In terms of Asia, I think the the the kind of the release volve has been the currency and you see it in full display when in the in the case of the end, which you can talk about it if you like.
Oh, go ahead, for what are you seeing in the end right now? That's going to give the market some comfort that maybe intervention is not going to be kind of the the facto way that that the monetary authority in Japan defends, you know, the weakness that at some point is going to be up to the bo j because of inflationary pressures that are building to actually have to do its job and raise interest rates.
Yeah, I think clearly market intervention is ineffective, and certainly if it's uncoordinated with the US and the ECV, it's even more ineffective. They're just kind of torching reserves. I think one of the points which the market has been missing for a while is that really the policy makers are neglecting the end in the sense that I don't know if there's a strong belief that weekend is that detrimental to the Japanese economy, and it hasn't been a
very coherent policy in terms of intervening. The Bank of Japan is saying something and then the Ministry of Finance is doing something else. So I think the end weakness has not been that detrimental to the economy, and I think the role now is just to make sure that the market remains orderly as opposed to really defending the end.
And the only way that they can drop up the end is to do a pretty aggressive hiking cycle at the fact which I think there is a very very low probability of that happening.
It seemed like earlier when we were talking about the strong dollar, you said, yeah, I mean it definitely it hurts local currency bonds in Asia, but not not dollar bonds. So does that mean that you're actually pretty positive here on buying dollar bonds throughout the region, and if so, which areas look best?
Yeah?
Dollar bonds I think generally globally have been pretty resilient, pretty strong. In Asia and particular the performance has been pretty strong, and it's something that we spoke about in your so before. The problem now is that pretty much everywhere you look, particularly when you look at the high credit quality bonds, they're tight. Even when you look at some of the high yield bonds in the US, they are typed. So I think the main risk here is
related to evaluation being typed as opposed to fundamentals. The fundamentals, to your point, particularly when it comes to the investment grade market, continues to be strong. In balance, we still like the investment grade markets in the region, and if some select opportunities in highyield.
Are you short duration? I mean, are you at the shorter end of the curve these days?
Well, we started the year where we were more aggressive in terms of then the economic data went the other way, so we uh and we thought that the market was two consensus in terms of the number of cuts, particularly in the beginning of the year and the timing of cuts. So we took a much more defensive pussure in division,
which worked well, particularly in the past two months. Right now, I think, particularly after the FED messaging and the jobs number, I think the distribution outcome has been narrowed and now we're a bit more overweight division.
Omar, thank you. Omar Slim, co head of Asia Fixed Income pine Bridge Investments.
This has been the Bloomberg Daybreak Asia podcast, bringing you the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.