This is Bloomberg day Break Asia for this Wednesday, April twenty sixth in Hong Kong, Tuesday April twenty fifth in New York, and coming up today.
First Republic Bank is said to be considering selling up to one hundred billion dollars in assets. Shares plunge as much as fifty percent.
Alpha Met's quarterly revenue beats analyst estimates as ad sales recover.
And Microsoft reports strong sales and profit with increased demand for cloud services.
Germany announcing intentions to improve relations with China. Biden makes reelection bit official, China loosens travel test restrictions, I Space Japan as disappointing, and to Moon mission. I'm at Baxter with Global News.
That's all straight ahead on Bloomberg Daybreak Asia, the business news you need to start your day in just one fifteen minute podcast available on Apple, Spotify, the Bloomberg Business App, and everywhere you get your podcasts.
Good morning, I'm Doug Chrisner and I'm Brian Curtiz. Here are the stories we're following today. We hear that First Republic Bank is exploring divesting fifty to one hundred billion dollars worth of long dated mortgage and securities as part of a broader rescue plan. The sales are aimed at reducing the mismatch between the bank's assets and liabilities, and buyers may be offered some incentives to pay above market rates. Here's Bloomberg Shinali Bassok.
There may be sweeteners for potential buyers here, that's part of the deal here. Potentially warrants are preferred equity as an incentive to buy some of these assets. Remember when we looked at First Republic, loans at the end of the quarter were one hundred and seventy three billion, but deposits were one hundred billion. There are a lot of
concerns about the strength of the balance sheet here. But the hope here is that by getting Whittf's assets, selling these assets at above market value, there can be something here for the buyer to hang on to.
We hear that Fresh Republic may need the US government to facilitate negotiations with some of the largest banks in the country to try to stabilize the lender as it executes its turnaround. First Republic shares dropped as much as fifty percent today in the session.
We heard from Microsoft after the closing Bell. The company reported quarterly profit and sales above expectations. Sales of the company's Azure cloud computing business were up thirty one percent. Now, these positive results were due in large part to resilient corporate demand not only for software, but services as well, delivered over the Internet. We got some reaction from Bloomberg's onnarrog Rana.
That's very good, which means that the increased cost of computing because of new AI applications, at least what they have lot so far, is not eating away from the profit. In terms of growth, I think it's going to take a few quarters before we see growth coming.
In Bloomberg's onarrog Rana. Now, going forward, Microsoft is placing massive bets on artificial intelligence. The company is investing ten billion dollars into Open AI and a new bing search chat Microsoft is opening. The increase will help future sales of not only Azure, but search ads as well, along with office productivity programs. Shares and Microsoft were up about five percent in late US trading.
Yeah, and you can contrast that with Google. So right now you've got Google shares up about two point four percent and just looking at Microsoft shares up eight point two percent. In late trading, Alphabet reporting first quarter sales and profit that did top analyst estimates. The results show that Alphabet's search advertising business is weathering an economic downturn. It also performed well even as Google faces heightened competitive
threats from Microsoft and open Ai. We heard earlier from Bloomberg's man Deep Singh.
It was, you know, given the macro environment, probably the best print that we have seen, you know, from Alphabet in terms of digital ad spending holding up and no impact whatsoever from chat GPT. Look, everyone talked about, you know, how howuch at GPT would hurt search volumes. None.
Alphabet's closely watched Cloudy and it also made money for the first time, reporting profit of some one hundred and ninety one million dollars. Alphabet shares, as mentioned, are gaining in the after hours, although they are off the best levels of the day, which was up four percent and at the moment two point three percent.
We had a lot of weakness in semiconductor stocks during the regular session. The Philadelphia Semiconductor Index was down today by three point four percent, and then after the bell, Texas Instruments with a lackluster forecast for the current quarter. The story from Bloomberg's Charlie Pellett.
TI is the chip industry's most diversified maker of electronic components, and it indicates that a slump in demand is spreading two previously unscathed areas. The outlook suggests that even the chip industry's bright spots, such as the industrial market, are getting swept up in the broader slowdown. Texas Instruments gets a large portion of its revenue from factory equipment, and that had helped the company's sidestep of sales slide suffered
by personal computers and smartphones in New York. Charlie Pellett Bloomberg Daybreak Asia.
Apple plans to put AI to work as your personal wellness coach. Let's get that story from Bloomberg's Tracy Junkie.
Apple has made health and wellness features central to devices, including the Apple Watch. People with Knowledge tell Bloomberg that Apple is now working to combine data from the watch with machine learning to create a personalized coaching service code named Quartz. The aim is to motivate people to exercise and improve their eating and sleeping habits, plus moderate people to pay for the service. Apple is also developing a mood tracker that will be added to the current health
app this year. I'm Tracy Johnkie Bloomberg Daybreak Asia.
I'm Brian Curtis, along with Doug Christner and Rashad Salama will join us in a few moments. Our guest coming up is Poojamalk, partner at Niepun Capital, So that should be an interesting discussion, Dug, a lot more give and take. So we had a take day in the markets, as you pointed out, it was a real risk off, David. Now you look at the futures. Nasdak I mini's up one point four percent, So here we go again.
Yeah, a lot of the earnings after the bell giving positivity to the Nasdaq one hundred contract. But you got to pay attention, and I think, Brian, to the bond market and the signal it may be sending right now with this big move lower right across the curve today. And I was struck by the fact that in the swaps market right now it seems to be pricing in just twenty one basis points in FED tightening from current levels, which as you know, would be less than a full
quarter point move. So right now the market seems to be very, very divided on what the Fed may begin to do.
Yeah, and in terms of June is down to only nine percent for a hike. But obviously a lot of this comes down to the data. You mentioned the consumer confidence was weak, yet some of the economic data that we've seen has been reasonably solid. I wanted to get a quick word in Doug on this possibility of a property tax coming in China, and we were speaking with a China economist yesterday about possible reforms that might be good for nurturing along the economy. But it wasn't tax
hikes that we were talking about. It was the possibility of tax cuts. So at the moment, given where they are, although this is probably inevitable to bring in a property tax, that timing does not look good.
Yeah.
The infrastructure, from what I understand, Brian, has been put in place, this nationwide real estate registration system, so it appears to be a property tax is just one step away from this.
Yeah, this has been coming for a decade or so. And as mentioned, it would be probably good for the Chinese economy because it would be raising tax from the wealthier classes, so it would be good for a lot of the people that Hi Jinping is trying to help with the common prosperity. So it's coming, but the timing again just doesn't look all that great. By the way, you can learn a lot more about this on the terminal, not only from our piece, our news piece, but also
from the China Today column. It's time now for global news. Germany is openly announcing today that it wants to improve relations with China in the coming months. At Baxter has Global News from the nine to sixty newsroom in San Francisco. As you like to say, it.
Is yeah, thank you, Brian. Yeah. Chancellor Olive Schultz has invited Chinese Premiarily Tying for talks in Berlin June twentieth. It is the latest bid by Germany to ease attentions between Europe and Beijing. Schultz wants to talk global peace and tackle climate change while setting out changes to the status quo in Taiwan and it's official President Joe Biden launching his twenty twenty four campaign for reelection and vitio on video once again saying freedom is on the line.
Around the country.
Mag you're extremists, We're light enough to take on those bedrock freedoms, cutting social security and you've paid for your entire life, while cutting taxes from very wealthy, dictating what healthcare decisions women can make, banning books, and telling people who they can love all I'm making it more difficult for you to be able to vote.
He says they're strong record of legislative achievement in spite of the obstruction of the MAGA Republicans and a battle again for the soul of the Republic. Bloomberg's Mario Parker on Bloomberg's Balance of Power notes. The video opened with scenes from the January sixth insurrection as a first attack on Republicans.
They're almost giddy looking at poles, saying that there's a rematch for twenty twenty. Not thirty seconds into the video, President Biden was evoking MAGA. I mean that was a clear sign and that's the fight they want.
To see them.
Yeah. Mario also saying it's time to make some money and that a group of potential donors will come to the White House the end of the week. GOLP presidential candidate Nikki Haley is out today talking about the issue of abortion, which is sure to become a major campaign issue. She says what is needed is consensus.
No one talks about finding consensus. Everyone goes to the barricades and attacks the other side. They turned a sensitive issue that has long divided people into a kind of gotcha bidding war.
Yeah, she says she wants to save as many babies as can be saved. But that agreement of how to be reached, well, she says, it can't be political. China will no longer require travelers to the country to provide a negative PCR test result. This opens the door to get rid of a major deterrent for visitation since China has emerged from COVID isolation in January. Disappointment today at the end of Japan's I space landing process on its mission to the Moon.
And now we are at the moment of planned landing time again. Everyone, please give us a few moments to confirm.
Moments past our.
Mcc crew standing by waiting to confirm. You can really feel at tension and despair and it is so difficult feeling hollowless now, But all we can do is cheer them up.
Yeah. And later the crew assembled, mission head Takashi Hatamata.
We confound DOT. We have established the communication until very end of randin.
Yeah, and lead them to conclude the lander was damaged not able to communicate. But note that the launch happened in December, thrown into orbit by SpaceX Falca Iron rocket, orbiting the Moon for three months, picking up data and sending it home.
We are very proud of the fact that we have already achieved many things during this mission.
WAM and prepare for missions two and three. Global News powered by more than twenty seven hundred journalists and analysts in over one hundred and twenty countries in San Francisco. I'm at Baxter.
This is Bloomberg.
I'm Brian Curtis here in Hong Kong alongside Rashad Salamat and as you heard there at Baxter on News and Krisner looking at markets. So we've got it all covered for you. And our guest is Pooja Malik, partner at Nipun Capital, and she's here to provide the pithy comment. So Pooja, thanks very much for joining with us or joining us. You're just looking at markets here and how
to navigate through this. We've had a period of low volatility, but you'd almost think that given the really diverse outcomes that we're seeing from earnings and from economic data that we should see an increase in volatility. Would you buy volatility here?
Yeah, you're absolutely right. I think weal city is set to rise across the world as well as in emerging markets in Asia, and the market can come from manufacturers. There's, of course, the geopolitical risks, the situation between the US China, with other countries like Korea and Germany now sort of
being involved in the middle. There's also tailed risk coming from the high levels of interest rates in the US, So I see a lot of risk on the horizon that their quer market is manufacturing in as of now.
Well, tell me something, what's going on with First Republic? How worried are you about that? And perhaps other banks finding themselves in the same position in the weeks and days to come.
I have no doubt that a lot of other banks are in similar positions. The extent of how bad the situation is, of course varies, and the access to new capital to cover some of these problems also varies. And I said that, I think the good news is that emerging market banks are more or less isolated from this issue.
You know, most central banks in em have been raising weights for a while, and rates are quite deep in those markets, and I would say the grates might be even behind us in most of em The banks mem have also been very resilient because they've been through crisis in the past and have learned from that, so they're very well capitalized. So the good news here is that banks across emerging markets seem very stable and less vulnerable to this interest rate situation, whereas regional banks in the US.
Definitely I could see more problems looming ahead.
I just want to get to where we are in this part of the world. And you know, the whole reopening story. Is that something which is now in the rear view mirror and is it done?
I think so. I think we have seen the headlines relating to the reopening story, but we're still seeing earnings recovery on the ground. Earnings for Chinese companies both this year and next year are projected to be in double digit The next year will be particularly strong. So I think we will see the recovery story play out and translate into earnings over the next twelve to twenty four months, and that will hopefully then act as a mechanism or a catalyst for rerating equities as well.
China is its own big beast. But for the rest of the world. And I know you've been pushing emerging markets in this discussion, but isn't the key question still if the US goes into recession, all bets are off. So how you figure that is what you.
Want to do in em or No, If the US goes into recession, definitely there's huge rapper cussions for ams, especially for globally exposed stocks, so thinking Korea, Taiwan, the supply chain, et cetera. We're seeing more and more signs of decoupling between US and China, which is a good thing because if the US does go into recession, we're still seeing five percent growth in China, so that will somewhat offet the effect for US specifically, we are saying
very close to domestic themes. We are saying away from globally exposed stocks and we're looking for true emotional market stocks that are exposed to the dynamics of local demand. So stocks like telecom, hospitals, medical services, stocks that are benefiting from growth in domestic markets and reopening.
Actually when he comes to hospitals because of healthcare tourism.
Exactly in fact, one of the stocks that we favor is a Thailand hospital stock called Bamaran Grad, and it's exactly the thesis you stated.
Yeah, absolutely, such a famous one.
You know.
The property text story in China in a sense is a great little microcosm for looking at China. There's a lot of things that they would like to do, but they're held back a little bit because they're trying to, as I put it earlier, nurture this economic recovery. You'd almost think that they would be trying to remove some of the friction, some of the fees and charges and some of the taxes that they have that are holding
the economy back. Yet it just so happens that one of our big stories today is that they've put in this registration system. It now would enable them to put in a property tax. Do you agree with our take that that's kind of a good long term story but might be disastrous at the moment.
Definitely agree that this may not be the right time to do it. Having said that, I think the government is more focused on refund that is the kind of health, the technology, the data, the AI and the semi conductor sectors. Right now, given what's happening with the US and rest of the world. So that's a theme where you're likely to see positive reform versus the common prosperity story is sort of a long term thing that they almost have to stick with, not viewing that so much in as
sort of a short term problem to fix. But I would expect more positive support for tech and semiconductor in the new term.
Indeed, So I want to get a said sols really of what you are looking at in terms of the you know, the geopolitical situation here as well, and is there any way of actually actually playing that.
The geopolitical situations actually worsen before it gets better, right, you know, with a US trying to get Korea on its side instead of ally all the Western nations together. The way we're putting this is to stick with smaller cap stocks mid cap stocks, and if you look here today, it's small cap domestic Chinese stocks as measured by the CSI one thousand have outperformed MSCI China by almost eight percent.
So that's I think a thing that's likely to continue, which is small cap stocks, stocks that are give to was the domestic economy, stocks that are not in technology. We're looking at consumer staples. We're looking at dolcom stable cash flow yielding stocks that are unlikely to be impacted by the geopolitical situation, or it least likely to be impacted less than high momentum, has absoluty growth or staying away from those teams in the.
Big broad macro story and what the FED does and how the US economy is doing. One final question, we talked about the diversity of outcomes. Today. You had the earnings from Visa in Chipotle and McDonald's that were all pretty strong and looked pretty solid. Microsoft and Google, you know, the big monster tech companies also very strong, and yet you know, we've had a lot of misses too. How do you put it all together into a strategy.
Yeah, I think this portion is going up definitely in the US, but also across the world in China as well. Right, we've seen sectors really outperformed, and we've seen information technology, consumer discretionary vice super voltails actually down for the year. At this point, this disportion is really creating a strong
opportunity for ACTIVEMN and for stock picking. So again we see the way to play this as sticking with strong, consistent dividing using stocks sticking with domestically oriented stocks, sticking with mid caps well cap stocks, and staying away from high momentum hyped teams like batteries or even very high gloth internet stocks.
Pooja, thanks so much for joining us. Pooja MALEG, partner at Nippon Capital. This is Bloomberg Daybreak Asia, your morning brief on the stories making news from Hong Kong to Singapore and Wall Street.
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