This is Bloomberg Day Break Asia for It's Wednesday, June seventh in Hong Kong, Tuesday June sixth in New York and coming up today.
Coinbase is being sued by the sec for allegedly breaking US securities rules.
Sequoia Capital will split into three firms by next March.
And China's biggest banks have reportedly been asked by authorities to lower their deposit rates.
Reports of high level talks in the coming weeks between the foreign ministers of the US and China. Ukraine and Russia blame each other for the breach of a critical dam in Ukraine. Chris Christian, I'm at Baxter with Global News.
That's all straight ahead on Bloomberg day Break Asia, the business news you need to start your day in just one fifteen minute podcast available on Apples, 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. The US Securities in Exchange Commission and filing that lawsuit over Coinbase Global. The regulator alleged that the company has been running an illegal exchange. The SEC accused Coinbase of evading its rules for years by letting users trade numerous crypto tookens tokens that were actually unregistered securities. This comes a day after the regulator sued Crypto Exchange Finance for breaking securities rules
as well. SEC chair Gary Gensler has repeatedly argued that most cryptotokens are subject to his agency's oversight. Is Gensler, speaking earlier on Bloomberg, I think.
The crypto industry more broadly, if it's going to have any success going forward, has to come into compliance with basic public policy about disclosure, about avoiding conflicts, about segregating properly, segregating customer funds, and guarding against fraud manipulation.
Gensler said the SEC worked with ten states to bring its complaint against Coinbase, and he said that the agency's efforts to clamp down on crypto are designed to protect investors and the US market integrity. Gwenbe shares finished down twelve percent in New York.
Well Brian teed it up a moment ago. The PGA Tour and Saudi backed Live Golf have agreed to a shocking merger. Now, under terms of this deal, the PGA Tour, Live Golf and the dp World Tour, as well as the European Golf Circuit, will combine their golf related businesses and rights into a new commercial entity, VISA VI and LLC. Now financial terms were not disclosed. Live has spent millions trying to lure away some of the biggest players on the PGA Tour, and this new accord will bring an
end to all litigation between both sides. We heard earlier today from Bloomberg's Jason Kelly.
What happened is basically this was not going to be sustainable. These were like blood rivals in a lot of ways, lawsuits back and forth, and Live really put a dent, at least sort of theoretically in what the PGA was doing. Now they're going to come together and be really the most dominant voices in golf.
That is Bloomberg's Jason Kelly. By the way, this deal also marks a significant victory for Saudi Arabia, which backed Live Golf through its sovereign wealth Fund. The kingdom is now assured of having a prominent voice in a major sport as it deploys oil riches to try to increase its global influence.
Right.
This one was really a big surprise. I heard and saw a lot of players quoted just saying no way, they couldn't believe it. So how they kept it quiet too is interesting.
Well.
Venture capital powerhouse Sequoia Capital said it is breaking up into three distinct entities around the world. The company has been an umbrella brand for three already largely independent ventures. One is focused on China, another on the US in Europe, and a third on India and Southeast Asia. Sequoya said a future split would occur no later than the end of March next year. We get more from Bloomberg'sed Ludlow.
What the partners of each regional unit said in the statement is that they're running decentralized organizations with a centralized back office and it just isn't making any sense, particularly when you consider the competing policy standpoints of the United States and China right now and the difficulty not just the difficulty, but the debate around deploying US originated capital into Chinese startups.
And when the split occurs, the Sequoya China business will retain its existing name in Chinese and adopt the name hong Shan in English. Suquoya India and Southeast Asia meanwhile will become Peak fifteen Partners with fifteen in Roman numerals, and the US and europe venture capital business will continue to be known as Suquoya Capital.
Well, there is a new problem for America's largest aircraft manufacturer, Bloomberg's tom Busby as More.
Bowing has to delay deliveries of its massive long range seven eighty seven Dreamliner JED after finding flawed parts in the horizontal stabilizer during production. That means it'll have to inspect and repair if necessary, ninety already built Dreamliners waiting to be delivered, as well as the ones now when
its assembly lines in South Carolina. It's the latest snafu for Boeing's Dreamliner production at that aircraft shut down for nearly two years after defects were found in how sections of its fuselage were joined before it got the all clear from the FAA last August. Tom Buzzby Bloomberg Daybreak Asia.
China's biggest banks have reportedly been asked by authorities to lower their deposit rates. Bloomberg's Joan Wong has More.
Bank of China, ICBC and Bank of Communications were said to be advised to cut rates on a range of products. Sources say that includes on demand deposits by five basis points and three year and five year time deposits by at least ten basis points. Were told the cut may happen as soon as this week, and this will be the second time in less than a year a right es have been seeking to do so lending to bolster us lowing economy. Cutting deposit rates with lower costs for
the banks. In theory, that would allow them to reduce lending rates over time, and by extension, it would be more attractive for consumers and businesses to borrow. That said, lower deposit rates would make it less attractive for ordinary consumers to parks or cash at the banks in Hong Kong. Joined one Bloomberg Day Brigasia.
I'm Brian Curtis along with Doug Krisner. Rashad Salama will join us in a few moments. Cutting deposit rates by five basis points doesn't sound too much, but demand deposits only pay twenty five basis points at the moment, so that's a step in a certain direction.
Doug. Yeah.
If you look at the weekly activity index from Bloomberg Economics, if you consider the fact that things like car and home sales, online searches for jobs, everything that we're seeing right now in terms of high frequency data where China is concerned, really indicating that the recovery has stalled or did stall in the month of May. In fact, the Bloomberg Weekly Activity Index brian and is back below levels we saw in twenty nineteen. That seems hard to believe.
Yeah, and it's also interesting, is the same thing happening in the United States, because it's also been a little bit of a transition here of late. It's pretty early in this strange phenomenon that has developed where you get some cyclicals Doug playing ketchup to the s and P five hundred. But it's definitely been happening in June. And you know, it seems odd if the US economy is actually slowing to the point where it could conceivably drift into recession.
Yeah, and so what you're saying there reminds me of a comment made today by the CEO of Apollo Global Management, Mark Rowan. He was saying, the US is having a non recession recession, so financial markets feel some pain while the underlying economy does remain strong. Look at the employment report that we had just last week.
Yeah, it's a very peculiar environment. It's not easy to draw lessons from history. You can imagine that there's some frustration creeping into investors who piled into short term treasuries getting four and a half to five percent, And now the Nasdaq one hundred has returned thirty three percent year today. Now that's not just one stock, that's an index of one hundred well known names. So if you've got bearish and conservative, well you're not getting a lot of love at your dinner party, now.
Are you.
And then you have the FED meeting next week. I think the market right now is convinced that the FED will go on hold, although create maybe an option, some optionality for a rate hike later on this year. Today, though, the former a vice chair of the FED, Richard Clarter, was saying he's thinking it's unlikely that the FED will begin cutting rates until twenty twenty four.
Yeah, that might be a good thing for the bulls, you know, cutting rates, say in a few months, that would send some bad signs.
I suppose.
All right, we are here at ten minutes past the hour. It's time for global news reports emerging that high level China US talks will happen in the coming weeks and back to with Global News in the nine to sixty newsroom in San Francisco.
And yeah, that's right, Brian, this is a US looks to resume the high level talks. Bloomberg sources say he will meet with other high level officials, Bloomberg's and Marie hor Durn.
He'll be meeting with officials, likely his counterpart. But there's also the possibility, and this would really be the win for the Biden administration and potentially also as well for the Chinese Communist Party, is he'll be meeting potentially possibly with Shijing Ping.
Yeah, Ed Anne Marie says. The hope then, too is that it will open the door for others. Others have expressed desire to go, and of course Bloomberg's Wendy Benjaminson says, the US has political implications as well.
Going into the election. I think it will be who can be the most hawkish on China. But I also think voters want to see a steady hand, responsible hand, and not war, so they will they even if they're being hawkish. I think they will try. The Democrats are being hawkish. I think they will try to sound reasonable and resent.
Yeah, so coming weeks, they say. Both Ukraine and Russia are blaming each other for the breach of the Novakoki of A dam and the Dnepro River. It threatens power supplies and also the Zappaforia nuclear power plant nearby. National Security Coordinator John Kirby says that US is definitely watching.
You know, there are casualties, including likely many deaths, though these are early reports and we cannot quantify them right now.
Yes, leaves more for Ukraine to manage well in the midst of a counter offensive. House Speaker Kevin McCarthy meanwhile, as opposed to push by fellow Republican Hawks to expedite more funding for Ukraine. He also says he will block any bill that undercuts the new caps on US spending. He says he has not ruled out further funding, that there is no need for a rush, and President Joe Biden heading into a cabinet meeting today.
Today we're going to discuss the progress for making investing in America and the steps each agency around the table here is taken to build on that progress and finish the job.
Because we're not finished yet. We have more to do, and that's the US. He says that there will be continued support for Ukraine as well, and on a much lighter note, the President. Over the golf weekend, Yeah, PGA Live, mister President. A former in New Jersey governor Chris Christi will formally announce his run for President's schedule for about half an hour in New Hampshire. He has taken out the papers. Republican strategist in Bloomberg contributor Lisa Cabuso Miller
says Christie brings something new. He will not be afraid to go after Donald Trump.
He really does cut through a lot of that nonsense and calls up what the facts really are and that I think of all the strategists that I see on these campaigns, the team that he is assembling are amongst the best Republican operatives I know. They are some of the sharpest. They know how to build a campaign in a way that others perhaps haven't in the past.
Christie putting a lot of chips in a good showing in New Hampshire, and China's cracked down to entertainment even now hit the gay Pride events, first wave of last mint of concert cancelations and gathering started last month continuing now Global News powered by more than twenty seven hundred journalists and analysts in over one hundred and twenty countries. In San Francisco, I'm Ed Baxter, and this is Bloomberg.
I'm Brian Curtis in Hong Kong, along with Rashad Salamat, and our guest is Ann Maletti, head of Active Equity at all Spring Global Investments. And so looking at the Wall Street here, we're not exactly performing like a bull market given some of the inner metrics, but then not exactly like a bear market either. Of twenty percent over seven eight months and higher lows every time we get a dip. How do you see things moving here over the next three to nine months.
Well, I think you ask a really important question. It is a confusing market for many investors today, and I think what we're doing is really looking bottom up and looking at company by company and trying to find the best opportunities out there. And they do, but you have to look carefully, as you suggest it. Those companies at the top, some would call them the magnificence in seven have really taken the news by storm and really controlled the narrative those are.
Sure, but I know, I know people really think that. That's why I mentioned NASTAC one hundred itself isteen thirty three percent, So you know that's that is that is itself dominated by those name But still you can buy the cues easy.
You can. And I do think what we're seeing is when you even ignore the large cap tech names, there is a lot of interesting companies that are performing underneath. And really what's Brian, what's most interesting is that instead of being driven by just Macro twenty twenty three, stocks are moving because of fundamentals, and that's really important and it actually bodes well for stock pickers and active management and our and our teams are doing really while this year because of that.
Yeah, and this brings U nicey to talk about. How do you think that earnings are being reflected in the stock prices and do you think that the outlook for the second half of this year is looking rather optimistic?
Well, you know, I think we do have some challenges ahead, and we've seen some of the challenges throughout this earning cycle. It wasn't easy for everyone. We've seen some margin compression, we've seen some blips, and that's why it's not the right time to own everything. It's the time to be really selective. Some companies are going to see continued challenges ahead and continued margin pressures. Others will be able to
thrive and survive in this type of environment. But I think Forshad, You're right, I see more clouds in the sky and potentially storms ahead, and so investors are going to have to continue to be very, very thoughtful and careful about the names that they are investing in.
It's tempting to think that you have this one big story of artificial intelligence that is so big. I mean it's like if you look at three big waves, the Internet, then mobile and cloud as the second one, and now AI. Is it big enough that it kind of changes the story going forward? And maybe, you know, if we didn't have the market telling us this, we might think we're drifting into recessions. So you know, make sure you have
strong umbrella. But now you've got, you know, this kind of winning product that could change everything about the way the companies can do business, lower costs, improve their margins and such.
Yeah, I do you know, when I talk to our investment professionals, it is clear that regenitive, regenitive AI. It's a real thing. This is not something that is going to go away overnight. That being said, it's not something that's going to change every company overnight. Either these things happen.
It's not a smooth path. There's bumps along the road, and it changes the competitive landscape, which means there's going to be winners and there's going to be losers, and so it creates a lot more work and a lot more analysis to try to pick through who can be the winners and who are going to be the losers. And so don't expect it to be a smooth path.
I just asks your chat GBT, who's.
Surely I would love to know the answer exactly.
But I just said, everybody's going to have chat, GPT or some sort of form of AI as their personal advisor, and it's going to tell you everything about how to improve things that you do. Every day you google it, you know, you get ten twenty thirty things you have to read through, and then you have to piece together and you have to compare and then finally come to a decision. Now somebody's going to do that for you.
It's going to disintermediate, disintermediate a lot of businesses but it's not going to replace many others. Who is still going to come and do the plumbing in your house, Who's going to do the electrical work in your house? You know, I mean when we talk about AI, it's going to add a lot of efficiency to a lot of businesses, but it's not going to replace everything. And again I'm talking about, you know, some very specific trades. But if it's just an easy way to think about it,
it's not going to change everything overnight. I even think about the asset management business. It can create a lot of efficiencies in certain business models, maybe back in the operational side, et cetera. But is chat GDP really going to be able to pick stocks better than our active management better than our active managers? Probably not in the first couple of years at least, right And it's still is going to take human beings to teach, you know, the AI to be able to do this over.
Time, it seems to and that you and just go back to your strategy here as well, that you know, you're more sort of bottom up than top down, So what do you look for and what have you been buying that? And are probably not going to be stock specific, but give us an idea of the industry groups.
Yeah, well, one of the things, you know, we started the conversation by you know, some very large groups really controlling a big part of the market. And you know, if you just take for example, you know, Apple's market cap, it's approaching three trillion dollars, I know, something everybody's talking
a lot about. If you take the entire Russell two thousand index, that index is less than the market cap of Apple today, and so if you look at all of the names underneath that, so kind of the small and mid cap space, I think there's a lot of opportunities still for investors there. I do think even the emerging markets are a place that have underperformed for a
very long time. I know there's a lot of discussion around whether the US is the best place to be or not, but I do believe there's many emerging markets that are offering good risk reward here. And when I talk to our investment teams that manage those markets. Given the stability of the dollar and some pressure with the dollar that we've seen this year, I do think that that could be another opportunity place to invest.
Just thirty seconds on China.
You know, I you know, I know, I heard you earlier talking about the Chinese banks. I do think that is a sign that the government's a little bit worried about the uneven recovery that they've seen there, and so it is right, I think, to be a little bit cautious about China. But they're headed in the right direction by adding that stimulus. We're not going to see the same kind of stimulus that we get here, but it's the right direction.
This is Bloomberg Daybreak Asia, your morning brief on the story's making news from Hong Kong to Singapore and Wall Street.
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And I'm Doug Chrisner. Join us again tomorrow for all the news you need to start your day right here on Bloomberg Daybreak Asia