Daybreak Asia: January 26, 2023

US and Germany announced the sending of heavy tanks to Ukraine. Russia says the West is escalating the war. China says it sees a major decline in severe COVID cases. I'm at Baxter with Global News. Novak Djokovic moves on to the semis of the Australian Open in dominating fashion. I'm Dan schwartz Been. I'll have that story more coming up

in Bloomberg Sports. That's all straight ahead on Bloomberg Daybreak Asia on Bloomberg eleven three on York, Bloomberg on Washington, d C, Bloomberg one six one, Boston, Bloomberg nine sixties, San Francisco, Sirius XM one nineteen and around the world on Bloomberg Radio dot com and via the Bloomberg Business app. Good morning, I'm Dead Prisoner and I'm Brian Curtis. Here are the stories we're following today. We do have earnings to get right to hear. Tesla reporting better than expected

profits in the latest quarter. It signaled strength to a degree as the company faces growing questions about car buyer demand for it's all electric vehicle lineup. Let's get details from Bloomberg's Charlie Pellett. The Austin, Texas based company reported adjusted earnings per share of a dollar nineteen, beating the dollar twelve share average of analysts estimates compiled by Bloomberg.

The ev market leader says it will increase output quote as quickly as possible, in line with previous guidance for average annual growth of fifty sent over multiple years. It also says it is on track to deliver about one point eight million vehicles this year in New York. Charlie Pellott Bloomberg Daybreak Asia. Well, thank you, Charlie. Now, A key question going forward is whether there's some downside risk

for corporate earnings. In three the c IO of New Vein, Sarah Malic says, the answer is yes, and for that reason she's making the case for fixed income. Just looking at rate heights going forward about fifty more basis points expected from the FAT, So that's starting to move behind it. You can start to increase some of your duration and fixed income and get strong total returns in it without a lot of these heavy macro risks that are going

to hit equity. So earns risk in some of these other areas that ensumer slow down and that impact on revenue growth and all of that with equities considering their valuations is less attractive. That is Sarah Malic there from New ven By the way, Bloomberg Intelligence has fourth quarter earnings for the tech firms within the S and P five hundred are projected to have fallen nine from last year. Here's the thing. Just three months ago those profits were

expected to be flat. Well, shares in Adani Group companies fell. That's after the US investor Hindenburg Research said it was shorting the conglomerate stocks. It accused firms owned by Asia's richest man Gatamadanni of brazen market manipulation and accounting fraud. Adani Group CFO Jushinder Singh later rejected the claims. What they report is suggesting that Adana Group companies have created shell companies and Yui Caribbean Islands and Maulitias which is

leading to a tax theft, corruption and money laundering. However, that Adani Group CFO has countered, then he has he has denied all this allegation and he had said also criticized the timing of this landing of this report because Janu Day, the flagship company of Adani Group, Dania Enterprises, is launching is fullow on offer which is going to be the largest fullow on offer in India. Adani Group

financial officer jusiend Singh. Bloomberg data, by the way, shows the market value of ten Donnie owned stocks was eroded by about twelve billion dollars in Wednesday's trading. Well. The Dutch chip making equipment company A s m L says limiting China's access to certain technologies will have unintended consequences. We have more from Bloomberg's Annabel Jewelers. The Biden administration is leading an effort to curb exports of chip manufacturing

equipment to China. The Netherlands and Japan are expected to join in, but a s mL CEO Peter Venick says the measures could eventually push Beijing to create its own technology. Simply put, he says, if China cannot get access to those machines, the country will create their own. Even so, Vennick admits the complex supply chain, combined with the knowhow required to recreate advanced chipmaking technology will be a massive challenge. Vennick is also critical of export control for other reasons.

He says chip availability could be reduced and limiting access means a less efficient infrastructure and cost will very likely go up. In Hong Kong, I'm Annabel Ruler's bloom blow daybreak Asia. Meantime, in Europe, Germany's business outlook brightened further. A gauge of expectations by the EFO Institute rose to eighty six point four in January from the three point

to the previous month. We heard from EFO President Clemen's Foist companies are telling us they are optimistic regarding the next six months and that suggests overall we will avoid a technical recession with most important risk for the German economy was a gas rationing scenario, so that risk is off the table. Now due to the mild weather, I guess a storage is full. Foist also said that he expects a shrinking economy in the first quarter, but that

will be followed by an improvement towards the summer. Well back here in the States, we are hearing that FED Vice Chair Leo Brainerd is now a top contender to become the head of the National Economic Council. The role within the White House will be vacated by Brian Deese at an undetermined time. Here's Bloomberg's and Marie Hordern. We should no decisions have been made, and there are another names that have been thrown around, like Gene Sperling, like

Wally Adamo. But right now what you potentially could see in the coming weeks is that the FEDS number two becomes the number one economic voice in the West Wing. This is on top of a little bit of a shake up at the White House, which is pretty much natural when you have after a metrom election and two years of an administration that is Bloomberg's and Marie hoor Dern. By the way, if Brainerd is appointed, that would open

a slot on the FED seven member board. Now President Biden would then need to find a successor who could win the full backing of the U S. Senate Brian. We are a week away from the next FED decision. But if you're talking central banks, I think it was the BOC moving markets today. Yeah, that was very interesting because all along it has been out in front and this would be the first pause by the G seven central banks, and it has led the FEDS, so it

may send a strong message. All right, let's update Global News next here on day break. Asia Ukraine will soon be some of the heavy artillery and tanks it's been seeking for months. Ad Baxter with more from the Bloomberg News room at San Francisco, Eddie, Yeah, exactly right, Douglas. This comes as a U S and Germany broker a deal to include tanks from a number of NATO countries. German Chancellor all Off Schultz. Our goal is to quickly

provide two tank battalions together with our allies. There are many countries that would like to supply, and we will coordinate that and involve them to make that happen steps by step. Yeah. So with that, U S. President Joe Biden, today I'm announcing that the United States will be sending Abram tanks to Ukraine. Yeah, and along with ukraining Ukrainian

forces and the use of them, he says. Biden says it also sends a strong message at the US and NATO are united in their full support of Ukraine's ability to defend itself and conduct counter offensives. The expectation of the part of Russia's we're going to break up, We're not going to stay united. But we are fully, thorough totally united, yeah, he says, as is the globe now against Russia. Biden did stress that these weapons are not to be used in launching first strike, but in defense

and counter attack. So what does this change, Well, Rose gotten Muller, who is a former NATO Deputy Secretary General now a professor at Stanford, I think it will make a difference because these are the most capable battle tanks in the world today. The Leopards are well known for being reliable, for being capable, and I think the fact that they are deployed across the European NATO allies and also NATO partners such as Finland who have offered up tanks.

She says. Expectations are that Russia will launch major offenses in the coming months and Godly says she feels it will make NATO stronger. This agreement, delivery of tanks will take those months the training begins. Now Russia, well, Russia's decrying the decision, saying this is proof that in fact, the West is escalating the war, and Russian activist hackers have not German website offline in response to the decision. Germany's b s I cyber agency says the digital blitz

has had a little tangible effect. China says a number of COVID related deaths and severe cases and hospitals have declined by more than seventy percent from peak levels in January. It says daily fatalities in hospitals a slid to eight hundred nineties six as of Monday Monday, down from over hundred January four um. Now, China's numbers have been questioned by the World Health Organization, which would like to see more data. And the meta platforms are going to end

Donald Trump's suspension. Facebook says it will have it back up in the coming weeks. In San Francisco, I'm Ad Baxter, this is Bloomberg. This is Bloomberg, Gaybreak Asia. I'm Brian Curtis along with Rishad Salama. Let's get to our guest, Sylvia Jablonsky, co founder, CEO and c i O at defiance E t F S. Well, Sylvia, we seem to be in a kind of muted reaction phase. So we thought maybe Microsoft's guidance yesterday, the week of guidance, would

lead to a sell off today, but didn't happen. Really, Microsoft was down about six tenths of one per cent. Is this because to a certain degree, with the huge losses we saw last year, Microsoft down some so Tesla down two thirds that a lot of this is in the price. Yeah, good evening. I think you make a

great point there. You know, we we had a nice start to the year, particularly with the NAS dock up and looking to recover on some of those tech stocks that were just hammered last year to the tune of twenty or more. UM. And I think, you know, the Microsoft news addition, initially you saw stocks really selling off. You saw, you know, futures pointed sort of grossly low, and the morning was a little bit rough with us. And so I think that ignited concerns that the market

generals were struggling. UM. As you know, rates have been

rising and refreshing. Rest and fears are growing. But I do think that investors who are interested in tech for the long term perhaps came off the sidelines a little bit and thought, you know, while the outlook is sort of bleak for the next year or two, this this sector has been beat up so much, so much of it is in the price already, and here's an opportunity to you know, kind of get it on another pull back if if you have a holding period beyond say so,

I really think that earnings are going to set the tone for the market in the next couple of weeks. And uh, you know, we'll see some of this choppiness day by day depending on what the generals do. They always sort of seeing to drive the market mentality or psychology for the week. Well, you know, Silver, you you make a good point that I mean, when you talk about psychology, it's almost as if it's how could you

say hurry up? And wait? I mean, we are looking at these stocks, you know, for for a tech particularly, we're looking at five G quantum computing, we're looking at AI. These are all things which are going to take time before they come on stream, and uh, you know that those things are in the price to some extent, and you know, at the end of the day, it's hang on a second, you know what, I can get some value somewhere else right now too. Yeah, well, I think

that's a great point as well. You need to diversify

your portfolio rights. So I think that if you look at the broader macro um you know, kind of economy out there and some of the uncertainty in the near near term, if you're looking at the short term, then I would expect traders to look in more sort of defensive sectors or at least make sure that they're allocating to things like you know, bonds trateguries that pay four percent whatever it might be, um their private trading accounts where the cash cash degree three and a half percent.

You know, defensive stocks like healthcare and things like that. But they're the time to pick, to pick up on a thematic ETFs and ideas for the future, and ideas that will play out in the next few years. It is now. It is when when you know the prices are kind of knocked off of their highs multiples or or you know, cut in half or a third, and when you think about these ideas, you know, five G is the name of a theme, right and quantum computing

in AI of the names of themes. But these companies it's important to number one invest in those teams, right. So so if you think about open AI for example, right that the big big investment by Microsoft, that is going to be something that can be monetized. It's something that you know, can replace workers that companies can't find. For example, UM it's it's you know, there's real value

to that and it affects the bottom line. But then these themes like five G again quantum computing, they require stocks like semiconductor stocks, and so those funds UM that hold those names, those those companies are doing other things, so A and D and and Nvidia. They're part of you know, metaverse, they're part of UM running our coffee machine, electric vehicles drivers, as far as AI machine learning. So there's a lot there. So so so one, do you

like those companies? Are you starting to buy SMH and some of the some of the semiconductor individual names. And secondly, because I think this can be wrapped into Tesla blamed China for many of its issues, saying that the challenges were largely concentrated in China. That's all changing now there's no more lockdowns and they're getting back to business. Does that add to any optimism, Yeah, it does. So on

the first question, I do like semi conductors. I think that, you know, if you look at the outlook for the semi conductor space, and I like you know, and D and the video sort of most because they're well capitalizing part of every one of these revolutions, that revenue is supposed to get to about two hundred and fifty billion by that's not so far off, right. So I do like semi conductors. They've been beat up. I think that they're going to sort of start seeing their their resurrection.

There's a natural tail one for that space coming um where it's just been straight head winds for the last two years. To the test the question, you know, what are demand looks like it's outpacing two x what what the industry expected. And while you know Elon Musk came out and said he expects it to contract this year, you know they do have trying to reopening. How much

will that play out? I don't know. But with with Tesla, I think that, you know, you still have this situation where the company is just by far the leader in this space. Yes, they're going to have you know, sort of more competition, but there will also be you know, a higher market share for the EB space and that also has talents of UM Inflation Reduction Act and you know some of the tax credits and things like that that that have been passed, and we'll go towards the

you know, the knuckle of going carbon neutral. So I do think that they have they continue to benefit in coming years. So I want to get back to your point about semi conductors here. Sure, the government's giving some compensation for the uh lots of China as a market, but you're still talking about thirty percent of their market disappearing here. That's got to hurt of their market is disappearing, but uh, you know, large sums of their market are

are reappearing right so automatically. So automative industry is just highly reliant on semiconductors, and then you're expecting to see you know, massive revenue growth there. The focus of tech companies again, we talked about Microsoft AI chart GBT. You know this this week's favorite word. All of this requires um, you know, sort of managing big data, little wait and see that is that all comes through semi conductors. You need semi conductors for natural language processing. You know the

feature of five G depends on it. So I just think that whatever is sort of lost will be replaced. This is Bloomberg Daybreak Asia, your morning brief on the stories making news from Hong Kong to Singapore and Wall Street. Look for us on your podcast feed every day, on Apple,

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and on Bloomberg dot Com. I'm Brian Curtis and I'm Doug Chrisner. Join us again tomorrow for all the news you need to start your day right here on Bloomberg day Break Asia.