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Well, we've mentioned that it was a pretty strong quarter for BYD, one of our featured stories this morning, and joining us in our studios right here in Hong Kong is Danny Lee, Bloomberg Asia Transport Reporter. So the numbers are fairly impressive from the standpoint of gains year on year if you look at June alone, more than three hundred and forty thousand units versus two hundred and fifty
three thousand a year ago. And I think, as you put in your story, almost a million over the second quarter. But Danny, a lot of this, it seems, comes down to price.
Yeah, price cutting is the name of the game here if you want to retain market share and if you want to keep your volume highing and for someone like BYD, who has set itself up for selling at these kinds of levels, the more it cannot afford to slip back on production where it's got all the workers in the factory's helping pump out all these vehicles, and so therefore,
you know, pricing is always a key strategy. And when for someone like BYD who has managed to to you know, earn so much money over the last several quarters, it's got a big war chest in order to fight on price and to make sure it can defend its volumes over margins.
And I'm wondering whether or not part of the intention is to drive rivals out of business, right isn't there a race to the bottom here.
I don't necessarily think they're trying to drive away local competition, and I'm sure the Chinese authorities will take a dim view of that. But the reality is they need the competition. They need the competition to stay on their toes, to be able to be just as good. To think of all the other ideas that are coming off onto the market, and to see what they can do to stay just near the head of the pack in order to stay competitive.
So I think they wouldn't want to see others for by the wayside, that will happen naturally, as some just run out of money because they just can't sell enough vehicles.
You know, the big names that we talk about a lot, in addition to bid with Leotto and Neo and x Punk, they all actually did pretty well in June two. Now there are in different sectors of the market, and Neo for instance, at the higher end. I'm curious, you know, I guess there's just so many EV makers in China and many of them are struggling, but the ones at the top are are faring very well.
Yeah, I think across the broad market we have seen a big uptick in sales in the last couple of months, yes, driven by pricing, and so when there was maybe some concern about the start of the year, when sales did to slip backwards compared to where they were over a year ago, there is that momentum building up again. And you can see in China in particular, sales do have
a good forward momentum. But when you see someone like some markets like in Europe or in the United States where automakers are who are transitioning into this EV strategy are struggling. They're cutting back, they're pulling back on their investments or ambitions in China, that's not so much the case, and it's only making those EV players stronger.
Yeah, I'm glad you brought up that point, because the issue of excess capacity, particularly when it comes to evs, is been a dominant theme, and you listen to the conversations that developed markets like the US, like Europe have been having around excess capacity and the degree to which Chinese manufacturers may be dumping excess inventory into those foreign markets.
Does the Chinese EV industry need them desperately in order to continue to sustain these growth levels or will there be at some point enough domestic demand to kind of keep certain big players afloat.
It's fascinating when we talk about over capacity because when you really crunch the numbers, what we are seeing when we look at the data is there is production growth
naturally to accommodate for all the future anticipated selves. So that's one component, but it's where we do see the excess capacities coming from these traditional legacy internal combustion engine joint ventures, which between these Chinese partners and these European or US players or the Japanese for example, they have a lot of excess capacity because internal combustion engine cells
are falling. And the problem is if their sales are falling, they've got a lot of empty or quiet production lines. And what is happening in reality is that they are selling and this is where we are seeing excess capacity being removed and all that potential demand and the capacity that is coming on is the ev players from China who don't have an issue right now in finding that demand.
In looking at those numbers that we quoted, those who were total vehicles for a BYD, if you strip it out and just look at electric vehicles, I think the numbers suggest that BID is now within around fifteen thousand of equal in Tesla. Is that a sort of monumental moment in this or just a sort of one step in the road for BYD?
This is you know they can overtake again. That's obviously a good sign, I think for for Tesla, clearly they're having a bigger struggle right now. They have more downward momentum as they transition and evolve their product lineup, and it's not going to be this year where they're going to see an upturn and fortune. Deil Musk even said that in one of the previous earning schools. So I think for now for Tesla, they have this kind of downward momentum where they are seeing falling sales in China,
in Europe and other key markets. For BYD they are you know, they have some momentum. Can they do better? Sure, and they are setting themselves up for that. But the question is for beyond China in these markets where they do want to sell internationally. In Europe, you are seeing the barriers being put up where they are going to
have to pay more to sell their vehicles. But you know there is a get out of jail free card here if they look at their product lineup where the tariffs that are being put on or the additional tariffs being put on are for battery electric vehicles. Byd' does sell a lot of hybrids, and they also set themselves up for pretty strong third quarter with near record sales basically on the hybrid sales this year in this quarter.
All right, Danny, thanks for coming into the studios and sharing your insights with the Stanny leeb Lumberg Asian Transport Report. Let's get to our guest, ELFREDA. Jonker, client portfolio manager and investment specialists at I'll Finny Investment Management, Alfred. So we understand that companies are facing the highest earnings bar in about three years. That's according to Goldman Sachs. We have worried about growth, We have the debate to consider
from last week, and a number of geopolitical concerns. So why the heck are stocks at just about all time highes.
Yes, good morning, And I think if if you take a step back and you just sort of reflect on where we have come from, I think it's important to note that case. It's been a fantastic year for global equities and specifically for the US equity market, but sixty percent of those sort of returns have come from the top five six stocks, and thirty percent just from Nvidia itself. So we haven't really seen a massive broadening out, which
we were sort of hoping for this year. And if you look at why those companies continue to rally, it's not just because that become a bit more expense, so it's also because they've delivered incredible earnings. So, yes, it is high. Expectations are high, setting out around nine percent, but if you strip out that sort of top six, the rest of the market's only expected to grow revenues in the order of around five percent, so there's not
huge expectations for the rest of the market. It's all sort of centered in that top five, top six.
I would say, so, Alfred, I'm curious you make the point that we have yet to see you broadening in the market, and I'm wondering from your perspective whether that suggests a level of risk that we should be concerned about as we move into the third quarter here and adjust portfolios accordingly. Is does that not make sense?
Yes, it definitely makes sense. I think that's sort of what we have been doing at Affinity for our two global funds is over the last twelve months, we definitely have sort of reduced a bit of the defense of exposure and added quite a bit of psychical exposure your variety of different names on the back of some emerging trends that we've noted, so something like an Eska Heinez that's what's cyclical and also linked to the whole AI trade,
high bankwidth memory. We've also added a Bank of America with capital markets opening up, so there's a whole range of sort of cyclicals that we have added and diversified into.
But getting to the point now where I think there's a lot of concern around growth as you've earlier, As you mentioned earlier, and even though inflation is coming down and the expectation of interest rate cuts continue to come through, there's a lot of uncertainty with the elections, and particularly with potential Trump when you could definitely see inflation sort of going in the other way, other direction if he's sort of been able to push through tariffs and things
like that. So, yes, diversified diversification is definitely required and keeping those megatic positions intact in your portfolios.
You talk a little bit about luxury seeing a lot of earnings downgrades, and you mentioned that Gucci and LVMH. I'm wondering though that even if we see a slightly weaker consumer, that the more well off consumer is probably uh, you know, sort of enjoying the gains in the stock market and such and and may may be a buyer of of luxury if you have to be stock specific. What do you like there?
Yeah, so we currently really only have a position in in Race Rory. I would say it's obviously not a pure luxury stock, but it definitely does trade and deliver earnings like luxury stock. I think for US AID autentity, what we specifically look for those earnings upgrades and the potential to surprise on the earnings upgrades, and that is a company that can manage that very well given the pipeline and the demand that's laid out two years in advanced.
I think some of the other stocks like an LVMH, for example, has historically been one of our favorite plays just because it is so diversified across its product range, and it is a stock that we will continue to watch at the moment that are still seeing earnings downgrades, and it is interesting. I think there's obviously a bit of a high neck with consumers stepping back a bit,
probably spending a bit more on luxury trips. If you look at what's happening to cruise liners, and you know, some of the other areas within the vacationing section of the market is still doing pretty well. So it's probably a little bit of let's wait and see what will happen to prices going forward, because the expectation is that
inflation will come down. So it's definitely not broken. But I do think you need to be pretty stock specific because some of these names like a Gucci for example, also have product issues with new designer stepping in, So for us something like an LDMAH is differentely one that we will continue to watch.
Alfreda that we were talking a moment ago about some of the sales figures for the EV makers. Really a number of the car makers in China by D selling a record number of not only EV's but hybrids and Q two. I think the number was nearly a million models. Talk to me a little bit about the degree to which Chinese evs are showing up in Australia. Is that going to be a developing market for them?
I definitely think they would want it to be. I think what we have seen in Australia to date is definitely not a massive uptake in EV sales just yet. I think some of it has got to do with just availability of product, but also just the infrastructure, the
availability of charging stations. So I do think that is definitely something that they will try and do, particularly because I think a lot of people are waiting for hybrids and potentially a cheaper entpoint into the electric vehicle space relative to a tesla, So there's definitely an opportunity there. There's always of course tariffs and the risk around that that you need to bear in mind as well. I think overall, if you look at the overall space in
evs globally, it's not been a happy space. There's a huge amount of stock sitting all across these vehicle makers, and Tesline particular has had to drop prices, has had to reduce their volume forecasts. So it's not a space that we are particularly excited about. But even someone like a Ferrari for example, is also planning to do a lot of sort of hybrids going forward, so we do have some exposure there, but we are not rushing into buying any of the others just yet.
Alfreda, thank you very much for joining us. Freda Jonker, client portfolio manager and investment specialist at Alfinity Investment Management. Well, joining us now is Chuck Camello, President and chief executive officer at Essex Financial. To take a closer look at markets, Chuck, it's tempting to think that at the moment the FED and perhaps inflation is taking a back seat to earnings. But I would note that in the last earnings period the numbers were actually great, but the equal weight S
and P was actually down for the quarter. It had a good first quarter, but it was actually down when those strong earnings were coming out. In the second quarter, it was about inflation and higher rates. So what are you most focused on here at the moment?
Yeah, well, thank you so much for having me tonight. Anson. I think when you look at the markets, it always comes down to the two big things, earnings and interest rates. As you just said, you know, we continued to look quite candidly at both. Earnings has been very, very strong. As you said, the Fed seems to be in a pretty good position the city where they hope to have inflation, especially with these numbers that just came out in June
reflecting what happened in May. So we're looking at it all. But I think you're also seeing a reflection of all the other stocks that make up the S and B five hundred. So forget, you know, the magnificent seven. So of those four hundred and ninety three other stocks, there are a lot of good ones out there, but those top seven, you know, and you know testl lately has joined the party after sitting out for quite some time.
But there's a tremendous amount of demand and a tremendous amount of momentum in those names, and it literally sucks the air and sucks the money out of the market to those top stocks.
The challenge is really separating signal to noise, and I'm trying to understand whether the market is really having some a challenge right now. It's struggling with the political implications of what played out here in the US last Thursday with a presidential debate. I was reading some commentary early talking about a possible Trump presidency that would bring a combination of higher spending, tax cuts and faster inflation, and
obviously that would be problematic for the bond market. I don't know that any of that was being discounted today. But at what point do politics become a factor in this?
Chuck?
Yeah, Well, I think you saw, you know, the with the bond market actions today a reflection of, you know, an inflationary environment under Trump if he gets re elected at i e. Tax cuts, tariffs which were both inflationary which certainly and again more government spending, which again makes the Fed's job that much harder. And we started this year with the Fed expectation of six rate cuts, which
you know, I'm not exurectly. Sure who actually believed that, but that was the number in a networre down to two, maybe maybe one, But you know that. I think for the markets and where we are with the political side of things, I mean the debate last week, there was a vast chunk of the country that thought Biden was too old and was showing signs of not being up to another four years. And for those folks, and for a lot of folks, Thursday night sort of hammered that
point home and it just sort of reinforced it. I think the big difference was you saw the other side of the aisle i e. Democrats, a lot of the Democrats coming around to saying geez, that was very surprising. And I think the market was already pricing in the fact that Trump had it, you know, depending upon the poll, looked like we was in a pretty good position to beat Biden. So I think the market's already looking ahead
to that. But I think you saw it today in the bond market, a reflection of, hey, if Trump does win, you know, even under Biden, it's still going to be a tough inflationary environment. With Trump, it might even be worse.
Do you think that the market will start taking these higher rates that might be attributed to a Trump presidency and sales stocks as a result, because they've been the market has been a little testy about rates rising.
It has, but today was really interesting. Market didn't budge. I think that's because as long as the ten year stays within that certain range, right, don't start getting up to four eight, four nine, things like that, where then I think the market would have a big problem with it. Think if it stays in this range and it bounces around,
I think the market can deal with it. But you know, the you know, if we start seeing a sustained increase in rates, oh, I think the market will feel that, and you will you will start to see a big pullback.
So we had the PMI data which was a little lackluster today. The big news will happen at the end of the week with the employment data. What are your expectations check on jobs for the month of June.
Yeah, I mean, listen, jobs have been extremely, extremely strong. I mean you go back look back to May and I've obviously stating the obvious there, but you know, back with May you had one hundred and eighty thousand was the expected number. It came into two seventy two. You know, I think you're going to probably see another strong jobs month.
Now the flip side of that is if you don't and all of a sudden you get a weaker than expected number, well, now maybe you're going to start to see the FED, you know, start to pick up that the language around maybe a rate that give if employment starts to fall off. But you know, I mean, I don't know, but you guys but out and about and you know, the normal course of a day or normal course of the weekend, there are still awful lot of help wanted signs up. And you know, every place still
seems to be looking for workers. I can tell you first hand, hiring for our company is still a major challenge of finding the right candidate.
So growth has been an issue. So it might be good to get a reasonably strong number because you've seen consumers struggle a little bit. So you talk about growth as an issue. Politics has an issue, perhaps inflation has an issue. And to earnings, back to earnings Goldman Sachs saying that companies face the highest earnings bar in about three years. Is that possibly a catalyst for the next cell down?
Most certainly look and you've seen look at look at Walgreens, and look at Nike right when when they miss and just the carnage that ensues. But you know, I think, you know, the challenge we have going forward is the consumer has really held in there, but the consumer is starting to feel it, right And yes, even though we have these lower or more moderate inflation readings, they are still off of a much much higher base than they
were years ago. I think the average person and even the the you know, above average person in terms of income or net worth, starts to feel it as they see it in their every day life. And I think you're at the point where like people are pushing back on any more price increases and things of that nature. So, without a doubt, it's going to be a challenge. But I also think with earnings it's all about the industry
and the company. And so you know, if you've got a Nike and you you know, you miss, that's a big, big story, where as opposed to maybe a different type of company and a different industry where you know, maybe they get a little bit more, a little bit of give from the market. But without any question, earnings are going to be and have always been tremendously important. They
certainly will be with this next season. But you know companies, you know the American economy, American companies are so dynamic, they can they can pretty much adapt on a dime. And they've weathered some really really bad storms. And there's nothing to think, given the environment that we're in today and looking forward, that they can't continue to do that and listen, geopolitical risk whole different story. God only knows what happens with this election where it all couns up, all.
Right, Chuck, Thanks so much, Chuck Camello, President, Chief executive Officer at Essex Financially.
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