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Welcome to the Daybreak Asia podcast. I'm Dead Christner. We're keeping a close eye on the precious metals market. This is after silver cratered in the Friday session in New York, where the spot price fell twenty six percent. Joining me now is Bloomberg strategist Mark Cranfield, who is in our studio in Singapore. Mark, thank you for being here. Some analysts were tracing the selloff that we had in the precious metals market to news on Kevin Walsh being selected
as President Trump's nominee to lead the FED. He's been known as an inflation hawk, so with that and at least the history that he has, the dollar was able to strengthen quite a bit. In New York trading Friday, we were up about nine tenths of one percent. Was that the only factor here in the pullback in metals prices.
It's very unlikely that it is the only thing. Probably the coincidental timing of the announcement on Friday probably helped
to spook the market a bit more. A big part of what was going on in silver and gold in the past couple of weeks is the massive build up of retail positioning, both in the US and China especially, so we've seen some extraordinary outperformance where the futures prices priced in China have been actually even further ahead than those priced in the US, So you've seen very large
volumes of retail participation in the US markets. We've actually had reports that the silver etf from at certain times, the trading in there by retail people has been more extreme than in Nvidia, which is normally their favorite equity stock. So you can see that speculation was building up dramatically throughout January, it was going to turn at some point, it was already starting to crack, and then you had the Wash announcement at the same time, so that probably
helped to fuel more of it. But if you want to point the fingers in one particular direction, it's retail trading and the fact that they were very quick to try and booking the gains that's seen from earlier in the month.
Do we have a sense of whether these were leveraged positions, levered long so that when you get a move that goes against your trade and it may be that you are forced to liquidate the position. Is is that likely do you think a part of the story highly likely?
Especially in China. It's very typical that Chinese investors have leverage when they're using futures contracts, whether it's for equities, for metals, for currencies, whatever they're trading, they love to use leverage. And if you look at the size of transactions was extraordinary, which again points to the fact that these were mostly enhanced by more than not just single buy and hold positions. These were leverage positions.
So I mentioned that Kevin Warsh has been selected as President Trump's nominee to lead the FED. We had a stronger dollar as a result of that move. I mentioned earlier that he has been viewed in the past as an inflation hark. What do you think this nomination means for global bond markets?
The bond vigilantes are not going to give Kevin wash much of a honeymoon if he does become Chairman of the Federals. They're going to really test him on his inflation credentials. So of course things may change if he gets the job, But in the past he has said that he thinks that AI will help to reduce inflation costs across the board for American companies, which may well pan out. He has also said he would like to reduce the Federal Reserve balance sheet. Trying to achieve both
looks pretty ambitious. Also, there's question marks over whether the CPI data in the US is still really the quality that we used to get in terms of the data in the past. So the bond vigilances are not going
to give him much time. They're going to You can already see the YELD curve was pushing higher on Friday, and that's an understandable response to the fact that you're going to have a potentially a new chairman coming in who's going to have the very quick persuade markets that on the one hand, he might think the interest rates can come a bit lower and yet he can keep
inflation under control. Those two very hard to get them in sync unless you're going into recession, and there's no suggestion that the US is going into recession anytime soon.
I want to change gears and talk a little bit about artificial intelligence, because we heard over the weekend from
Nvidia CEO Jensen Wong. He was saying that his companies proposed one hundred billion dollar investment in open Ai was never a commitment, although to be fair, back in September, in Vidia did sign a letter of intent, and the indication at that time was that the company planned to invest planned my emphasis here to invest as much as one hundred billion in open ai, ostensibly to support new
data center construction and the build out of other AI infrastructure. Friday, though, the Wall Street Journal said this plan had stalled, and I think that Huang over the weekend and in Taipei was ask about this report. The journal went on to say that One privately emphasized that that one hundred billion dollar agreement was non binding. Do we have a sense here of what's happening. It seems like one may have been doing a bit of damage control over the weekend.
I think one thing you need to help us understand this situation is the whole market cap pricing of open ai and the backbone it has provided to all the hype about AI pricing within the market. So if you trace, particularly over the past year, every time open ai does a fundraising, its implied market cap goes higher and higher each time. It adds fuel to the speculation across the AI sector. So as of going in towards the end of last year, open Ai was thought to have a
market cap above eight hundred billion US dollars. People are speculating they're going to bring an IPO. In fact, there was a report last week that the IPO is probably for the fourth quarter of this year. Maybe they're going to be the first trillion dollar company for an IPO in the United States. However, if major investors such as Nvidia are questioning whether they want to be involved in all these fundraisings, suddenly that continuous upward path of the
market cap of ai open Ai is under question. If that stalls, the whole AI space is under threat because people need to see an continuing step up in the valuation to keep on investing in the outlook for AI in general. So really it's the crux of the whole AI bubble. If open Ai suddenly the valuation peaks, that's bad news across the sector and it affects everybody who's been speculating on the AI bubble.
Well, it's interesting because over the weekend we learn that Oracle is planning to raise between forty five billion and fifty billion US dollars this year to build additional capacity for the company's cloud infrastructure. When you get news like that, doesn't that help engender a little bit more optimism or at some level of enthusiasm, or do you think right now it's a little dangerous to conclude.
That combined with what Jensen Huang is saying, some investors will look at that and say, Wow, that's looking like a peak in the investment cycle to me, and maybe it's time for me to step aside. Still a chance that some other investors will be more optimistic. But if you look at the performance of Nazdak futures, for example, they have not been making new highs in the way that you would expect if people were so optimistic. How comes Nestak futures are not taking making record highs in
the way that the SMP index has. For example, just look at last week the diversion between Meta and Microsoft Metas shares popped up, Microsoft collapsed. So it's not a uniform response to what you're seeing in earnings and the outlook, and that is completely different to what we were seeing, say six twelve months ago, when everything was good news in the tech space.
So we've got earnings in the week ahead from Alphabet and Amazon, obviously two players in the cloud space. And I think the market's going to be very attentive to any suggestion that CAPEX is perhaps a little bit off track. Is that the focal point that we need to kind of remain fixated on cap X.
It's about investors are going to be looking for. You've been spending a lot of money already, you plan to spend more money. Where's the return in relation to the amount of money you're putting into these data centers and other aspects of your business. There comes a point when you can tell investors for several months that yes, we
promise these things in the future. Eventually the future arrives, and Navidia may have just told us now's the time to start calculating whether we're really going to get the payback on these investments or not. It's going to be a much tougher week. Alphabet and Amazon would have to be pitch perfect to satisfy investors this week. Any question marks and you could see quite a big reversal in the market.
Mark. Before I let you go, I have to ask about bitcoin. We saw the price in weekend trading here in the States break below seventy seven thousand. We're trading it around that level now in the overnight session, can you help me understand what's going on here with the crypto space a little bit?
Well, crypto is the biggest threat to kryptos really was the rise of precious metals when we had the rallies in gold, silver plating, when they started to build up. That was a serious threat because part of the attraction of cryptos was that they were an alternative to other major currencies and they were possibly potentially a safe haven if there was going to be a blow up in other markets where precious metals do a much better job,
they attracted a lot more money. So people were gradually removing the from the crypto space anyway, So cryptos has gone into a backseat situation here. It's possibly on a decline that which will continue unless gold and silver go back to the kind of levels they were a year ago. The forward looking space or crypto is not as exciting as it has been in the past.
Mark, it's always a pleasure, Thanks so much, Bloomberg Strategist to Mark Cranfield, joining us from Singapore here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm deg Krisner. Developer Hong Long Property says the real estate markets in both Hong Kong and on the Chinese mainland do remain under strain. We had the chance to
catch up with the company's chairman, Adril Chan. Adriel spoke with Bloomberg TV host David Inglesse and Evonne Mann after Hong Long released its latest results.
We're seeing a bit more price discovery, at least in the Hong Kong property market, and we're starting to see the market kind of sense that in some ways that there might be some recovery underway. Do you think that we've found a bit of a bottom.
It feels like we found a bit of a bottom, definitely. If you look at our retail sales numbers, they've been coming back. Second half last year was strong. Fourth quarter was especially strong. We broke records in terms of occupancy, foot traffic and retail sales. So it does feel like it's coming back. Hong Kong a little bit weaker. We're still finding the bottom there. I think we found it, but we'll have to see how the retail numbers come
out these next couple of months. So overall mainland China definitely giving us casts for some hope. That being said, I think the numbers are strong, but we're still a little bit careful on the outlook.
What assumption t making on mainland retail leasing specifically along the luxury space. Of course, you mentioned that's a bright spot for you guys.
So for January so far has been a little bit down, basically flat from last January.
Okay.
The bright spot is that January last year was Chinese New Year. This year, Chinese New Year is in February, so we're hoping that that means good retail sales uplift and we think that it's tracking.
It looks like you've been quite active in expanding your China retail using portfolio ri cities.
Like Shanghai, Hanjo Wu Shi.
How do you compete with some of these domestic big names and big developers and landlords like China Resources Land for example in this market.
So the way I describe ourselves as we're a small and beautiful and you know, so we have to do things in a slightly different way.
Definitely, we don't have the scale.
Everything from finance cost and access to capital is different, so we have to really try to stand out in terms of doing things as high quality, as niche and as high and as possible, and that's what we continue to do.
What we've announced recently is our V three, which.
Is starting an asset light path and this is definitely going to make better use of our capital, especially when that's constrained. We're working on reducing our gearing, and the question is how do you expand while reducing your gearing, And that's basically with us light. So that's what we've been doing, and only in the cities where we have the strongest presence and the best performance already, So that's where we're working to Expand.
How does that So what does it mean as far as a business model, it's concerned So you imagine asset light, So try to explain that to a five year old for example.
So if I go back, our last version, version two was really asset heavy, where we'd buy a plot of land, we'd develop it, and then we lease it. So this is really where we're leasing the plot of land or leasing an existing mall and operating it. So if you look at chying to reach a real estate prices, you
know they feel like they've topped out. It's hard to see a lot of upside in the near to medium term and therefore, you know, so we used to want to capture that capital upside, and now we're more about capturing the operational upside, so increasing our operational exposure without having too much capital exposure.
You mentioned Hong Kong's recovery might be a bit not I mean, maybe not as solid right now as mainline of what you're seeing. At what point are you going to start looking at maybe opportunities then, I mean, are you looking to sell more properties or even acquire any new projects in Hong Kong this year?
So in Hong Kong, we've really been working hard to sell. Last year, we actually sold a lot, we contracted a lot of sales, but we're not going to recognize a lot of it until this year. So last year was actually a good year for sales, but that'll be recognized this year.
We're looking to sell down more.
We still have some properties for sale, mostly on the high end, but we have some remaining in aperture.
So that's what we're looking to do.
Obviously, if good opportunities come by, I think we're happy to buy as well. We do feel like the markets have bottomed, or at least we found the bottom on this round.
What do you think is driving this recovery.
So in Hong Kong.
By in Hong Kong, there's a lot of mainland New Hong Kong people coming in. The talent scheme has definitely brought in and brought up rental levels, and as these people have rented now for a couple of years, they may be looking to buy. These tend to be slightly higher end buyers. So I'm more bullish the top end of the market than i am on the mass. I think the mass has seen sort of a structural rerating
over the past couple of years. It'll be some time before that comes back, Whereas I think the high end is definitely more cyclical and therefore more resilient for us.
I mean, it's really been noticeable the pickup in tourists, visitor flow, let's just call it tourists and businesses. And we've had a lot of mega events. We're moving into March where traditionally it's a mega event month. Right, you have everything from ark Basil all the way to the sevenths Tangibly, is that starting to show up? As far as you talked about foot traffic, but what about lisas and retail sales for example, is that starting to pick up too.
We're really happy that foot traffic is picked up, and we're not as happy at the retail sales. They haven't picked up the say at the same pace that traffic has. It's usually lagging, a lagging indicator. But we're gonna have to work harder to transmit those foot traffic into sales. And you know, right now, the the appeal of Shenjin is still strong Hong Kong people. Even though it sounds like they're going up a little bit less, it's still difficult to compete on price.
You we still were still able to maintain your occupancy rate during these turbulent times, right ninety offices, Yeah, yeah, of your office portfolio, despite the headwinds, but revenue was still kind of edging lower.
I mean because of following rents.
Of course, do you think that that's the next place to follow in terms of this recovery. But now that we've seen at least when it comes to the housing market is recovering, that maybe rental is going to be the next thing to watch.
I would really like for office rents to rise this year.
That's what I love how you started answer already.
That was really what dragged our numbers last year because offices have been tough, both in Hong Kong and in the mainland. It actually took away some of the gains that we made in retail. So retail's done well, office is not so much. I don't see the end in
sight for office is just yet. Of course, here in Hong Kong, we're talking about the IPOs and the financial services industries helping with that occupancy, but there's still a lot of occupancy, especially here in central and so I think occupancy has to come up before prices are going to come up, and I don't yet see the end to that.
And the strategy to maintain the sort of ninety percent occupancy rate is that. Do you think that's going to be down to price? Supply seems to be an issue, I think, is what you're mentioning too.
Yeah, so I think there's still gonna be a little bit of price pressure because occupancies haven't fully caught up yet. In the main end of China, it's also tough offices. I think it's you know, I've had this discussion with a lot of my friends and peers.
Is it cyclical or is it structural?
And when you're having that discussion, it's not a good discussion to have. That means that things are bad, and so I don't yet see the end for office rentals in China yet.
What is the answer to that though? Is it cyclical or more structural.
My answer is actually that it's more cyclical, and I think that if the economy comes back, when it comes back, office rents will come back. You know, there's still that dynamism, and if they can reignite that, then I think that offices can come back, at least at the high end of the market.
That is Honglong Property Chairman Adril Chan speaking to Bloomberg TV host David Englase and Evon Mann 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 Chrisner, and this is Bloomberg