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Welcome to the Bloomberg Daybreak Asia podcast. I'm Dan Schwartzman. We're just hours away from the August first tariff deadline imposed by US President Donald Trump. We'll have more on trade in a moment, plus a look at the Chinese property sector. Later on, we'll bring you Doug Prisner's conversation with Adriel Chan, chair of Hang Lung Properties. President Trump will keep minimum global tariff rates at ten percent, according
to a White House statement Thursday. Meantime, it appears that the US and Canada have not reached a trade agreement. The White House says the terifate on Canada has now been increased from twenty five to thirty five percent. Thailand and Cambodi have received a nineteen percent tariff rate, while Taiwan's was set at twenty. Switzerland was a standout the rate of thirty nine percent. For a closer look, we heard from Jenny Gordon, non resident fellow the Loewe Institute.
She spoke with Bloomberg's Sherry on In Heidi Stroud Watts on the Asua trade.
Jenny, really great to have you with us, particularly at a time where the news and the tariff news continues to move at such a frenetic pace. We're still sort of a few hours out from the official deadline, of course, But has anything surprised you about the numbers that we've seen, and also the fact that, you know, obviously for maximum
leverage or negotiating pressure, this is pushed to the eleventh hour. Industry, logistics exporters and importers, not a whole lot of time to be able to prepare for these scenarios.
No, no's that's definitely the case. And I think the other problem is that nobody's clear that August first and all these numbers will be the final round. You know, Trumps could well ask for more at some other point in time, and I suspect probably will, so I guess there's that lack of certainty is a real concern for most countries. I think the one that really surprised me was thirty nine on Switzerland. I had thought they might get kind of treated like the rest of Europe, but
that one was a surprise. The fact that it's fairly common nineteen percent across Indonesia and Malaysia and many of the other countries in Southeast Asia. I suspect is you know, that's a common tariff, the high tariff on Lao and Cambodia. There's very little trade and most of it is in consumer goods. I think that's probably reflecting concerns about transshipment and the ability to control transhipment from China, so it
might reflect that. But none of this is good. None of this is good for the globe, nor actually for the US consumer. And I think one of the big things is the US imports a lot of inputs and so costs are going to rise, even in non traded industries. So you know, it's going to get more expensive to set up a new business or a new factory in the United States as a result of these tariffs on the inputs as well as on the final goods.
It's interesting because as you say, none of this is good. Obviously ten percent tariff is better than a forty percent tariff, and on that it's interesting. Australia isn't even on this annex that we can see at the moment, so not quite clear what the tariff is on the likes of Australia for now. But do you think that there is
a level of complacency. Certainly that we've seen in financial markets that well, these are you know, levels and tariff rates that were better than expected and so therefore somehow more palatable.
Well it's funny, isn't it, Because as you go from almost zero tariffs to ten, fifteen, twenty, you know, thirty five percent, you're kind of saying, oh, thank goodness, I don't have thirty five percent. I've only got fifteen percent.
And so you know, it's kind of interesting because really the baseline was close to zero in most cases, and so this this is a massive cost impost and you know, you could almost think if you had one single uniform tariff, then it would be largely a revenue raising exercise and it would almost be like putting a value added tax on the American consumer. And that'd be one way to think about it. But this is creating different opportunities for
different countries because of different tariff rates. The actual rates don't actually reflect very closely what those countries export to the United States. So there doesn't seem to be an overwhelming strategy of you know, countries that export mainly inputs into production face lower tariffs and countries export final goods. So there seems to be I can't quite work out the rhymal logic to all of this, right, and I don't know stock markets have woken up to it either.
I'm trying to get through this annex and I'm not sure if I'm reading this correctly. But is Brazil's tariffy a ten now? Because then President Trump just threatened fifty percent tariffs and in fact he was ready to impose them, and he had linked some of that animosity with Brazil and President Lula to political reasons around the former president Bilsonaro as well. Right now, I'm seeing the annex, and as we're trying to digest his new tariff rates, Brazil
is now back a ten percent. Jenny. When he comes to linking geopolitical issues with economic sanctions like tariffs, has President Trump changed the pleabook?
Now? Well, I think the US has always used financial sanctions for geopolitical purposes, and so they've tended to use that rather than tariffs. And part of that was because, you know, really they'd been part of this global commitment to bring tariffs down across the world, and the only sort of potential upside of Trump's threatening tariffs was to help other countries who were struggling politically to bring down their tariffs to do so in exchange for lower tariffs.
But I think this has moved the US into entirely new territory. And this is why I don't think we feel like we've seen the end of tariffs and that this final set of numbers is the one that will go ahead, because Trump has changed the way he uses tariffs, and that just increases the uncertainty in the global economy, and if you're trying to get investment going, that's the
last thing you want his uncertainty. Investors need certainty. And so even though he's extracted promises of large amounts of extra investment into the United States, that faces some real barriers to go ahead, because one, you've got a shortage of construction workers anyway in the United States, so constructing new manufacturing plants is going to take time. And two, it's just that you're not sure what that tariff ruling
is going to be. And if you know, the Trump administration gets annoyed at a particular leader in a country or a particular country for doing something, then they might just sort of say, oh, we're going to raise your tariff again. So it just completely undermines the certainty that's needed for investment around world.
And Jenny, we're also seeing that the White House is really emphasizing the transship goods. So if there are any ways to try to evade the thirty five percent tariff, I think it's talking about Canada that there will be subject to transhipment tariffs of forty percent. And that has been a key issue right because we have seen other countries like China, for example, trying to send goods through
Southeast Asian countries. How meaningful is it that this administration is cracking down on transhipments.
Well, I think that actually makes you know, more difficult for China's strategy is to how does it bring down you know, just the stretcham shipment is you just you know, stick it in a container and take it to somewhere and relabel it and ship it off. But the bigger issue is all the componentory. That is where you've got the integrated supply chain problem, where countries, particularly in Asia, import a lot of components, add value to them and may ship it back to China and then gets shipped
back again. The complexity of supply chains is enormous, and so what Asian countries are looking to do is almost have dual supply chains, so that they'll have one set of supply chains that try to keep Chinese content out in order to ship to the US, and then they'll have another set of supply chains that use Chinese content because of the price advantages of it. And so that's I think from what I'm here from Asian colleagues, is
what they're trying to kind of work towards. And it adds costs, so it just is less efficient than the character and which means the prices of everything go up.
That was Jenny Gordon, non Resident fellow at the Lower Institute, speaking to Bloomberg. Sherry On and Heidi Shroud wants coming up a conversation with Adrial Chen Chaff Hang Lung Properties here on the Daybreak Asia podcast.
Welcome back to the Daybreak Asia Podcast. I'm Doug Krisner. Let's turn our attention now to the property markets in both Hong Kong and on the Chinese mainland. Joining me is the chairman of Hong Long Properties, Adrial Chan. Adrill joins us from our studios in Hong Kong. Good of you to make time to chat with me. I want to bring up a source subject right out of the gate. I'm sorry because I noted that net income for your company was down fourteen percent year over year in the
latest period. Can you give me a sense of what's happening, what you're struggling with right now?
Thanks Doug. The decrease in net income really is as a result of a lower number of sales of apartments, and that is something that fluctuates for us. The primary sector of our business is retail leasing and office leasing. So commercial leasing is actually down low single digits, which is a lot less bad than being down fourteen percent, but that's the explanation for that. If you look into retail and offices, retail has been actually surprisingly resilient in
the mainland. I think our share price has reacted relatively well since the announcement of our results, and that was a little bit of a surprise to me, honestly, But I think that the market was perhaps expecting worse. So we're down retail sales low single digits, but I think people were probably expecting worse than that.
So give me a sense of what your portfolio looks like. When you talk about retail spaces, I think shopping malls are you catering to retailers that perhaps service the higher end of the market. Are these luxury type retailers primarily? Absolutely so.
Our biggest exposure is to the luxury brands, and as we've been seeing over the past couple of days, the luxury brands have been posting let's say, mixed results. Asia extrapan is sort of broadly flat ish, while Japan is down significantly, and that kind of I think is what explains our reasonable performance. A lot less Chinese outbound tourism to Japan for shopping and staying on shore to do that shopping. So that's one of the macro trends that
we've seen. I don't know if that's because of all this rumors about earthquakes and this and that, but for various reasons, the Chinese consumers seem to be staying put on shore.
So when you cater to that segment of the real estate market, those higher end retailers, do they have expectations about certain upgrades or modifications that the landlord in your case has to provide them, And does that kind of draw down or maybe force you to do a little bit of cap X.
Oh, it certainly does. So you know, in terms of luxury moles, this sector in the mainland of China has only been around for maybe twenty years or so, twenty twenty five years, and so if you think about the life time of a mall, that's kind of the time that you need to definitely start looking into capex upgrades. We've done quite a few. We've done three upgrades in three of our separate malls across the mainland. They've been
well received. I think now in terms of the market cycles, it's a relative down market, it's probably a good time to be investing in oneself. That being said, because we're in a down market, the tenants have pricing power. It's a buyer's market for our tenants, and so we have to make sure that we're on the ball in terms of how those capex upgrades go and our ability to deliver on operations and service.
Okay, let's change gears talk a little bit about the commercial office space and the return to work. What is that situation right now and how is it impacting your business?
So the return to work phenomenon is more important here in Hong Kong, less important in the mainland of China because in main and China they never really worked from home except for during certain lockdowns here in China. What we're hearing actually just over the past couple of weeks has been that some of the big banks are asking their staff to come back to the office. And you know, there's the vacancies in central Hong Kong have been pretty high.
There's been a lot of new supply, but there's been a lot of pressure on both occupancies and rents, and I think that this request for people to come back into the office is going to help with both of those. I don't know if it can take up all of the slack, but certainly it'll help.
I have to ask you about high technology. There's been so much focus right now in the market around artificial intelligence. Are you tempted to do a little bit in the data center end of things?
You know, we looked at the data center end of things probably ten years ago. At the time, we felt like maybe we were even late to the game. In hindsight, we probably weren't. So yes, we are tempted, if you may, to look at that. But we've made this, We've basically made the decision that that's not our business model. It's real estate, but everything else about it is very different from the location to operations, the capex required.
What about your act sss to capital these days? Are you having difficulty or is it not a problem for a company such as yours.
It's a little bit polarized. So we have a very good access to capital. We just raised ten billion Hong Kong dollars earlier this year, and you know that was We did that at a very favorable rate as well, you know, because we're a high quality and because people trust us because they see our financials in the very sound But definitely it's a polarized market and if you're not in my camp, then it could be a very difficult time to raise money right now.
So you do business obviously, both on the mainland and in Hong Kong. Talk to me a little bit about what happens when you're dealing with two different currencies, the Hong Kong dollar on one hand and the Chinese you on on the other.
I mean, it's it's like any other company that has exposure to multiple currencies. We experienced a depreciation of the R and B over the past half year, so our numbers from mainland China are about one point four percent lower.
In reported currency, which is Hong Kong dollars, and you know, thankfully the fluctuations haven't been too big, but when they come around, you know, we do have to make sure that we're on top of that in terms of currency swaps and the way that we borrow, where we finance in mainland China versus offshore, so on, so forth.
So when you're dealing with let's call it a soft market in relative terms, are you inspired maybe to expand at this time or do you have any expansion plans?
You know, we just announced one partnership in hang Jo, which is the final city in which we have yet to open our mall. And by expansion in partnership, what I mean is we've agreed to rent the neighboring plot to our shopping mall that we're building ourselves. So we have our own asset, which is the main asset, and we've rented the neighboring plot in which we will extend our footprint, and that sort of represents our commitment to
the market, our conviction in the market as well. Honzo is a super strong market in me and then China. I think it's probably the hottest right now.
Because of tech.
But also because of commercial.
Are there areas of the market that you're curious about that you might begin to test And I'm thinking of gaming being one industry. Does that interest you at all?
I am always looking at different sub sectors of the market. Gaming financially is great, it's just not our bread and butter, though. It's something that we have agreed many years to stay away from despite the financial returns, and so that's in particular, it's not something that we're looking at. However, I think it behooves us to make sure that we're looking at all the opportunities in the market.
Adriel, we'll leave it there, Thank you so very much. He is Adriel Chan, the chairman of Hong Long Properties, joining us from Hong Kong 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