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Welcome to the Daybreak Asia podcast. I'm deg Krisner. We saw a broad risk on tone in US markets in front of the Juneteenth holiday. On Friday, the equity session was defined by some rotation into information tech, especially the chip makers. We had the Philadelphia Semiconductor Index up six point four percent to a record high. Importantly shares and Intel we're up more than ten percent. That was after President Trump said the chip maker will be working with
Apple to design and produce semiconductors domestically. For a closer look at market action in the APEC region, let's bring in Bloomberg's Leonting Iwi. Leonting is managing editor for Asia Equities and she joins from our studios in Singapore. Thank you for being here, and I want to point out that we have market holidays today in China and Hong Kong, so we're not going to get a complete read on some of this tech rally or this tech strength, but
the Cosby is on fire at the moment. I see a gain of around three percent, and I'm going to imagine here that you're going to make the connection between what we're seeing now in South Korea and what we saw in the US session, am I right.
Yeah, exactly, it's all about Capax. I think the latest positive news would include SpaceX.
Right.
There was our scoop about how they were planning to raise twenty billion dollars for Capax after raising eighty five billion dollars in its IPO just recently, and that means again a lot of hardware AI related companies are going
to really benefit from that. And there was also a Goldman Sex report talking about how they expect a super cycle chip for the chip sector, which again was a hot topic for debate whether the memory you know, companies are experiencing the kind of cyclicality or it's a super cycle really going to last. So the Goldman report really
added a bit of a fuel for that argument. And the third thing is I see some latest TV interviews from Japanese corporate executives talking about how they're seeing super strong demand for the chip equipment or chip components that their companies are producing. One executive was talking about that this morning with Sherry Anne saying that they see EPs revision upwards every day for their shares.
I want to talk to you about the story that we're having that we're publishing now on the Bloomberg terminal, which is the US has told the Dutch semiconductor equipment maker ASML it's concerned that China may have the top tool from making highly advanced chips. ASML says it has never shipped its most cutting edge technology to China, and the cutting edge technology is the extreme ultraviolet lithography machines. Now I know that they are a part of some
export controls here. This is a very interesting story and difficult to get a read because, as you said, the market holidays that we have in Hong Kong and China and Taiwan too, where TSMC is based, and TSMC has several of these extreme ultraviolet lithography machines. What do you make of this story?
Yeah, I mean it wouldn't be surprising if indeed there are some of these machineries in China being you know, maybe illegally shipped in. It's not surprising, but it would also be very difficult for you know, school bus sized machinery to be smuggled into China, and those machineries would need constant maintenance from ASML staff members. And ASML should know that whether there is a presence of their most
the advanced machinery in China or not. And there is one more point I wanted to mention is that Huawei in the last few weeks talking about how it actually has a technology to make advanced chips without reliance on ASML's EUV machinery, and it's considered a breakthrough. It was a surprise to a lot of market participants. But if that's really true, then that shakens the most fundamental assumption by a lot of chip experts that you advanced chips can be made without the EUV machineries.
It's kind of like what we had in the Deep Seek moment right where no one expected China to be able to create an AI model as sophisticated as deep Sea.
Yeah. I mean, I think with all the restrictions related to exports, China did have to work with you know, lesser advanced technology and yeah, fewer resources as well. So as you mentioned, the deep c definitely had a breakthrough. And just you know, continue on in this large language model space, we see a bunch of deep Sea similar to you know, companies similar to deep Seak coming up to the market and their models are actually really good
and really really cheap. We saw the likes of Jipu and Mini Max rallying pretty hard in Hong Kong in the last few sessions. And Jipou's latest open source model, which was sort of released after Anthropic's Best Models got banned by the US for the access of foreign nationals, and that was ranking number two worldwide for front end coding. So you know, as you can see, they're actually doing quite well.
So is there still a lot of enthusiasm or maybe said a different way, a lot of optimism that this AI related trade on the hardware side can continue for a while longer.
Yeah, that's I think that's a consensus. I believe that it's really playing out today in Korea and Japan, as you mentioned, and Japan, we just saw JP Morgan coming out with an upward revision for Nick's target price, and yesterday we saw Daiwa, a local Japanese broker, also coming out with the target price upgrade. And I think they're talking about eighty thousand for the nie K by the end of this year, and we just reported NIK broke through seventy thousand a couple days ago.
Yeah, so it's good that we're talking about Japan because the yen is now trading on the week side of one sixty one against the dollar, and the Finance Minister Katayama was delivering a sharp reminder to the market that intervention is still in the toolbox. Is there much in
the way of conversation right now. I know you're in Singapore and I'm wondering whether maybe you're hearing echoes of concern that maybe the Ministry of Finance in Japan would intervene to support the currency, or is it really up to what the BOJ does. More on the monetary side, I mean, this probably wouldn't have material impact. Maybe it would trigger a short squeeze of sorts, but fundamentally, I mean, the end is as weak as it is because of what the BOJ has been doing.
Yeah, exactly, it's really the interest rate differential that has fundamentally drove driven the yen weaker. Yes, the intervention, as you mentioned, it is on top of everyone's watch list, I think right now for even traders based in Singapore today, with the loss of markets on holiday, liquidity overall would
be thin for the end. So if they really want to intervene, it's also a good opportunity to, you know, use limited amount of money to actually have a bigger market impact, but for the impact to really have a sustained sustainable sustainability in supporting the yen. I think that's the question that, you know, if the boj doesn't act in catching up with the reality of the inflationary pressure in Japan and narrowing the interest rate gap with the US,
the yen will continue to weaken. I think the next point of the end that we're watching out for is for it to be the weakest since nineteen eighty six. Again is the dollar.
So I'm curious it's Friday where you are, and you're going to be I'm sure talking to members of your team. You're going to be making assignments for people to kind of sit with over the weekend. What are some of the topics top of mind for you these days as you kind of consider some of the enterprise reporting that your team is going to be working on in the days ahead.
Yeah, the main thing would be MSCI decision next Wednesday morning, Asia time, and that is definitely something a lot of Asia traders are watching out for. Indonesia very hot topic, whether it's going to be downgraded to frontier market or not. Korea, whether it's going to be added to DM market watch list or not. And also Vietnam becomes interesting as well, whether it's going to be added to the review list for emerging markets from Frontier Markets. So a lot to watch out for next week.
Okay, Leonting, it's always a pleasure. Thank you so very much for making time. Bloomberg's Leonting III, Managing editor for Asia Equities, joining from Singapore here on the Daybreak Asia podcast. Welcome back to the Daybreak AAISHA Podcast. I'm deg Krisner. So the US Iran Interim piece deal is now in effect, and today we had a flurry of oil tanker traffic
returning to the Strait of Horror moves. At the same time, the US declared an end of its naval blockade on vessels transitting to and from Iranian ports and coastal areas. At the same time, today, Vice President JD. Vance skirted questions about whether Iran will one day be able to charge fees for vessels crossing the Strait. And that's where we begin our conversation with Jesse Moritz. Jesse is a senior lecturer at the Austria Earlier National Universities Center for
Arab and Islamic Studies. She spoke to Bloomberg TV host Heidi Stroud Watson Cherry on.
We heard from Vice President JD. Vans not necessarily being very clear about what happens to these tools around the straight of fore moves. What are the risks that this might actually just transform into service charges or other types of fees for the waterway.
Yeah, I'd assessed that risk as relatively high, actually, because the deal only only allows for six months or so of toll free or fee free passage, and the Iranians have already been very clear that they intend to continue negotiating with Oman over control of the Strait of Hormones, not necessarily not to allow ships and out, but to try to charge They're calling it sort of a service fee,
if you like. And so they're trying to navigate around international maritime law and to find a way in which they can continue to exert authority over the strait, and that would be a major strategic win through Iran out of this conflict.
Exactly. I was going to say, what exactly has Washington gutten out of it? If we are seeing, of course, potential losses on the straight Orford moved side of things, not to mention, of course, no real clarity on a nuclear deal or even what's happening with Lebanon at this point.
Yeah, so it's very clear that this is a deal to avert immediate economic crisis. Trump was very clear about that in some comments recently, that this was something he felt was necessary to deal with the fact that our strategic petroleum reserves have been declining at a very rapid pace, and that when they do hit a sort of minimum operating floor, for example, that's a serious issue for the global economy, and so he was trying to avert that.
And the Iranians, of course, they know that the US is always going to be more responsive due to its power, is the largest economy in the world and seat of the world's superpower. It's going to be more responsive to the concerns of the global economy, whereas Iran could withhold a little bit longer. The Trump, of course, is also a democratically elected president, and he's looking down the line at midterms, and he's looking at the impacts on the
Republican Party and his personal popularity. And then there's internal factionalism between within the marga movement between himself and potentially g D devance around this conflict. So, for various reasons, largely to do with the fact that the US is a democracy, they were more likely to be under pressure to end this conflict. Even if this deal is not particularly durable, and you've raised Lebanon and the nuclear issue is to issues that could still yet see this Ceasfial deal collapse.
It's interesting we had from President Trump speaking to Axios earlier saying refuting the idea that these negotiations, the way that the war has been carried out, has kind of shown him the limitations of his power. Right, he is getting a lot of pressure domestically, how much pressure do you think he's also getting from allies, particularly when it comes to the collateral damage that's been suffered by Golf States in a war that they didn't have any part of and didn't start.
Absolutely enormous pressure, and not just from the Golf States, but from every state that's dependent on transiting supply, whether it's oil and gas, or it's aluminium or fertilizers, there anything else coming through that strait. They were pushing for Trump to find a way out of this conflict. The strategic challenge of this conflict was always going to be that Iran did have the capacity to hold the Straight,
and it has caused economic challenges for Iran. It's not great for them to not be able to get their own oil and gas out at least through the Strait, putting aside Central Asia sort of land routs. But they were always in this position to be able to hold the Straight for longer than the US was going to
be able to tolerate the Strait being closed. So the fact that Trump, in a number of comments admitted that they didn't have a plan or that they didn't have a strategy for dealing with the closure of the Straight or rom Us is a major stretch era, I would say. And the interesting thing that's happened with the GCC states in particular has been some disunity within them around how
to respond to this conflict. So the UAE, for example, has been hit with some of the largest drone and missile barrages during this conflict, and they have wanted and have pushed for a more aggressive response from both the US and from international partners to sort of retake and re seize the Strait of Homuz, whereas states like Saudi Arabia and Qatar and Oman and others have been looking for a negotiated end to the conflict, and so you're
starting to see that negotiation, particularly through the cutteries and all monies as well, bear some fruit with this seas far a deal, but we're going to we should expect to see some disunity amongst the Golf states in the next couple of years out of this conflict.
What happens from the Iranian side, Obviously there's been damaged, particularly when it comes to the upper echelons of its leadership.
Does this take us actually further away from the prospects of regime change of Iran becoming a more responsible international player, particularly if the sort of initial maximalist demands on the nuclear program are now watered down to the point where the stockpiles are still buried, their nuclear richment knowledge is still intact, and arguably perhaps they have more reason than ever to believe that they do need to hold onto their nuclear program.
Yeah, I mean much. We're in the early days of this deal, and much will depend on what for actual action we see from Iran in order to get more of their cash released and sanctions lifted In the longer term, we will see this go into longer term negotiations depending on what happens in Lebanon, but internally within Iran, unfortunately, much of this conflict has empowered hardliners rather than cause the type of big stabilization that you might expect to
see ahead of regime collapse. And both Israel and the US were very clear, at least in early stages, that they did want to see the Iranian regime collapse. One of the challenges when you take a country to war like this and it doesn't the regime survives is that the regime is then very incentivized to crack down in a very violent and repressive way on domestic political opponents.
They'll use the excuse of the conflict to do that, and I'm very concerned that that's what we might see in Iran in the next coming months, is a crackdown on domestic opposition, which is the exact opposite of what the US interest in this conflict would be.
How big of a shift was it that Iran Supreme leader accepted direct talks with Washington, And does this give us any indication of how the negotiations could go from here?
There is, of course this new disunity that's been created within the Iranian regime between sort of not just the traditional hardliner and reformist camps, but also between those who are more connected to the IRGC and have been directing the military perry response to this conflict, and those who lead the civilian political apparatus, that including those who were
directly involved in the negotiations. So to see the Supreme Leader more directly involved suggests that they are attempting to bridge that disunity and ensure that everyone's on the same page. Because the previous cease for our deal that we had, of course was so fragile, largely because immediately there had been protests within Iran from hardliners on those aligned with the sort of IRGC infections against the seas Far deal. That disunity seems to be a little bit reduced this time.
It's still there, it's still very present, but there seems to be some attempts from inside the Iranian regime to bridge those device and ensure that they have one clear negotiating position with the US, especially because their best outcome here is to get as much of their own oil and gas out through the street while the street is open in case for example, the cease Far deal collapsed
again over Lebanon. Particularly, is the Israeli government and Ben Gever and Smotrich in particular have been very clear that they don't see why Israel should be held to the terms of this deal, and they've continued firing in Lebanon.
That was Jesse Moritz, senior lecturer at the A and U Center for Arab and Islamic Studies, speaking with Bloomberg TV host Heidi Stroud, Watts and 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 Prisner, and this is Bloomberg