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Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner. On today's episode, we'll bring you part of an exclusive conversation with Taiwan's Vice premier, plus a look at tech and tariffs as we wrap up the trading week in the Asia Pacific, and a bit later we'll catch up with Adam Koons for a look at markets. Adam is the chief investment officer at Winthrop Capital Management. But we begin in Taipei. We heard earlier from Taiwan Vice Premier
Cheng Li Chwin. She told Bloomberg her government is focused on building up its relationship with the US. Chang also said she sees cooperation and investments on tech R and D as a critical area that will benefit both sides in securing a leading role in high tech sectors. Cheng spoke exclusively with Bloomberg's Annabelle Droolers in Taipei.
Who mentioned the US and the importance that it plays in the democratic supply chain for drones. President Trump is still early days in the White House and the outlook for the US Taiwan relationship is a little bit unclear. It could seem what's your perspective on the shape it's going to be taking over the next four years Main.
Bank Guard YAH.
The US has always been Taiwan's most important partner in terms of regional security and in trade. We are attentive to the policies of the new US administration and different local agencies have been studying new areas for cooperation between US.
The more important thing is identifying a strategic direction to the US and Taiwan and maintaining a mutually beneficial working relationship so we can build a democratic supply chain that strengthens the US's leadership in the global high tech industry while also helping Taiwan maintain its competitiveness in making contributions to high tech development.
And what is your assessment of the way that President Trump has changed his position very radically from the Biden administration on Ukraine.
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Taiwan has been monitoring the development of the war in Ukraine and related updates from Europe. We want to do our part for the Indo Pacific region. Enhancing military capabilities is the basis for peace. We want the Taiwanese people to recognize this. Therefore, we are not only committed to building up our defense capabilities. We are also strengthening our economic resilience. This way, we can continue to take on important roles and increase our contributions to the world. President
lay had set the four Pillars for Peace. They represent objectives like enhancing Taiwan's defense capability, enhancing economic safety and resilience, continuing cooperation with light minded countries, and lastly supporting orderly exchanges between Taiwan and China.
How does Taiwan prepare for other eventualities? Because there's the tariff risk that is still very present, not yet fully CLAAR five, but there's the chance that we see twenty five percent tariffs on Taiwan's semiconductors. How is the island preparing for that?
Oh? Women that will meet too, that they're going through Maine, Washington for Shangander.
We are tracking new policies from the Trump administration closely. We want to show that the future of the Taiwan US Corporation is focused on cutting edge technology. This is mutually beneficial and it should be a shared goal, and we're willing to expand our investments in the US with the aim to amplify our innovations in technology, including AI, chips and drones and even R and D in future technologies. We want to stay leaders in the high tech industry
amongst democratic countries. This strategy is critical for both of us. We will also make efforts to balance trade in our increased investments in the US.
Do you think that the US is still a reliable security partner to Taiwan?
Women Way pay me to to em.
We are important partners on regional security, trade and economic collaboration. We hope to deepen ties with the US, and we believe it will be done on the basis of the Taiwan Relations Act and six Assurances. Since Trump became president, he's emphasized the importance of keeping the prostrate peaceful and doesn't want to see a unilateral change of status quite by force, and most democratic countries share this same view.
That was Taiwan Vice Premier Chen Lechwin speaking exclusively with Bloomberg's Annabel Droolers, and I am pleased to say that Annabel is joining us now from Taipei. Always a pleasure. Thank you for making time to chat with us. I'm
sure it's been a busy day for you. I want to begin with this area of defense because I know that Washington supplies Taiwan with billions of dollars in weaponry, and I was curious to discover that Taiwan is now using drone technology as a big part of its defense strategy. Is this technology that is coming from the United States or is Taiwan in the process of developing its own drone technology.
No, it's something that's being developed on the island. I mean, it's not to say that the more advanced drones, where the US still maintains a competitive edge globally, that they wouldn't look to have those drones as part of their inventory. But generally what we've seen during the war in Ukraine is that it's these tactical drones, these low end, low cost drones that are needed if you're going to ever
carry out asymmetric warfare. And asymmetric warfare is essentially what allows a smaller power like time On, for instance, to have any hope of combating a much larger force, and
that is China. So that is really the goal of the island now is to be able to build up its drone infantry, and it's trying to do that within the island, and so it's putting a lot of policy focus and resources into doing just that, and that's really been the purpose of our trip this week is to meet with different policy makers, different different government even local government officials, and also some of the major players in the space to discuss this effort and the challenges that
they're facing and doing that.
So a lot of the conversation that you had with the Vice Premier focused on technology. We know the story on semiconductors. Is their real concern here that if the US were to impose tariffs on chips coming from Taiwan into the US that a company like TSMC could be adversely impacted. Is that a real risk?
I think that the more likely scenario is that those tariffs will get passed on to customers or companies back in the US. There has been a concerted effort and pressure on Taiwanese companies like TSMC to establish more advanced technology outside or off the island, and so the US obviously wants to be a base for that. We've seen TSMC establishing a plant already in Germany, for instance, but that's for more of their lower end technologies, not their
most advanced ones. Taiwan, for its part, it sees the science park model. This is sort of the ecosystem where all of the players around semiconductors come into one key place. It sees that as really pivotal to the success of its industries like semiconductors. It's the same police they're trying to replicate with drones now, and so that's one of the reasons they don't want to move it off Taiwan.
And of course at the same time it becomes the so called silicon shield, which we know about as well, and that also helps it to work with partners to help them also want to provide that level of assurance of military assistance if it's ever needed in the future.
So we've talked about drone technology being developed on Taiwan. We've also talked about semiconductors, what o their high tech industries are being developed on the island, they would.
Be the main ones, and obviously looking at how AI is integrated into both of those efforts, and so that's what again coming back to what we're seeing in drones now. That is sort of the future of where drones go from here as well, because we talk about the integration of AI so that these drones are able to fly in large numbers together drone swarms for instance, and that's when the units are able to communicate with each without having any sort of human intervention. And so AI I
think really cuts across both semiconductors. And obviously you see that those chips that are needed to create things like like service Cloud Service for instance, AI services and on Hi for instance, is another big name in that market. You see it really going across both sectors.
Annabel will leave it. There are always a pleasure. Thanks for taking time to catch up with us from Taipei, Bloomberg's Annabel Droolers. Joining us here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm Doug Krisner. So the angst over tariffs, along with some mixed economic news seemed to hang over markets today, but I think more fundamentally it was the weakness in chip stocks that
led the equity market lower. Nvidia is good but not great numbers sank those shares eight and a half percent, and at the end of the day, the S and P was down about one one point six percent, with the benchmark breaking below that one hundred day moving average. Joining us now for a closer look at the price action is Adam Kuhns. He is chief investment officer at Winthrop Capital Management. Good of you to make time to visit. What did you make of today's trading activity?
Yeah, well, first, thanks for having me. I think this is kind of the setup for the year, which is high expectations, and if those expectations aren't met, you're going to see pain. And I think when you look at something like Navidia, where obviously you kind of hit on it right at the beginning, is a good quarter isn't
good enough anymore? And when you've got valuations that are somewhat stretched across a particular tech in the S and P five hundred, that doesn't necessarily mean people are going to just sell because the pe ratio is a little off tilt. What it does mean is that if you don't exceed expectations, if your outlook isn't stronger than expected, it's going to be difficult for your stock to perform
in this environment. That's coupled with obviously the fact that we've got this overhanging from as you mentioned that the tariffs and just kind of some of the things coming out of DC, so that those are the real big moving objects in the market right now.
Have no doubt about that. We'll talk more about tariffs in a moment. Let's talk about this mixed economic news. So we had a revision on fourth quarter GDP unrevised though at two point three percent. I think it's kind of interesting that consumers spending held up as well as it did, rising at a four point two percent pace. And at the same time today we got news that Durbal goods orders in January were able to rebound by
about three point one percent. So that's the positive. Now the negative weekly jobless claims rising to a level of two hundred and forty two thousand, Now that seems to coincide with a lot of the staff reductions that we have seen in Washington. But on top of that, sales of existing homes dropping to a record low in January, and yet we hear from the FED that they're just going to hold firm right now. Is that the right policy approach? Do you think for this moment in time?
Well, I mean if I would say no, but I understand the Fed's position here is that the data isn't really pointing to them needing to decrease rates moving towards you know, a looser monetary policy because hit the first thing you said there was the consumer. That has been the story for the last two years. The consumer has remained so resilient. It has proven every economist wrong that's called for a recession, you know, and that's been an ongoing theme.
Right.
Oh, there are recessions coming, there's an inverted curve. There has to be a recession coming. But the thing that's held that up, that's dis proven that this this go around, at least up to this point, is that the consumer has been able to kind of extend this cycle much further than what was expected. Now, I think what you're going to see and the next point is that we are starting to see the employment market give way a
little bit. And I think some of the things you know, coming from DOGE to make some cuts you know, from the public sector, that will have an effect, at least in the near term, to increase unemployment, which obviously leads to some sort of contraction. Now I understand it's you know, marginal from what they amount of cuts so far and how that will bleed through the economy, but it will still have a negative effect on the economy.
I'm wondering whether we can change gears and talk a little bit about US trade because the question right now for markets is whether we're on the verge of a trade war in North America. We've got these tariffs that are being threatened for next Tuesday from the Trump administration twenty five percent on Canada and Mexico, and the leaders of those countries are basically saying that they are ready to retaliate. Where are you in all of this in understanding how it will ultimately impact markets?
Well, this is somewhat more unpredictable than the stock market.
But you know, I right now.
I think what we've seen is that there's this narrative push around tariffs and kind of the you know, strongest guy in the prison yard mentality. And I think what we're going to continue to see is that now we may see tariffs enacted, but it'll probably be this negotiation tool and that you're hearing people talk more more about that. It seems to be Trump's primary tool in negotiations to come with that you know, heavy hand right up front,
that gives him leeway to negotiate down the road. Right now, I'm going to continue to believe that that is what we're going to see happening through this kind of talk of tariffs and trade. But you know, you never know of these things is someone can just kind of take a hard stance and that can unravel the whole thing, and that would lead to a trade war. So I hope that doesn't happen because that's not positive in my opinion,
for any of these economies that we're talking about. So right now, I still believe that this is rhetoric until proven otherwise.
I remember in the days leading up to January twentieth, when President Trump was sworn in for a second time, the markets had really been anticipating a lot more in the way of deregulation and merger and acquisition activity. We really haven't seen that yet. Do you think that will ultimately happen?
I do. I think, you know, look, we're still in the first hundred days, but you're right, we haven't really heard anything about that. So I think the focus really is on kind of the two dynamics. It stows the cutting of jobs in the public sector, and then on the other side of that of the tariffs. I think once that starts to cool it off a little bit, then we'll see the push towards deregulation, and in some ways deregulation comes hand in hand with the cuts in
the public sector. Right So, if they're going to be cutting a large amount of staff from the sec irs and the like, then that probably leads to a natural deregulation simply because they're just not the staff to regulate the way they were before.
So, given everything that we're talking about in the big picture, I'm wondering how you're trendslating that into an investment strategy. What are you doing these days?
Yeah?
So, I mean I still think there's you've got these kind of polar opposites pulling and pushing the market. So I still think you want to be fully invested. I don't think you want to be moving to cash or anything like that. I do think if you're, you know, in your equity allocation, do you want to take two years in a row of plus twenty percent and maybe pull back the risk profile a little bit? That probably
makes some sense right now. By no means are we, you know, completely in a bubble or stretched in equity markets. But there is a growing number of events that create uncertainty, and there's nothing that equity markets like less than uncertainty, so that that leads us to kind of moving more defensively.
And when I am speaking about kind of you know, defensive names in the equity market, I'm looking at lower beta, the higher quality factor type stocks, those that maybe pay a higher dividend or have you know, a higher free cash flow and giving up a little bit of the growth factor. And then the other side of that coin is we are overweight fixed income in particular, we are
extending our duration within the fixed income allocation. I think you know, we have most likely seen the peak in interest rates to the cycle, and even if the FED does not cut rates, we're okay with just sitting here and collecting the income and the safety that we get out that we get out of fixed income right now. And if rates do come down for any particular reason, then that obviously we get some appreciation there. And that is that's another way to play defenses by being a
little overweight fixed income. If we did see an economic slow down, if we did see some of these initiatives out of DC create some contraction, that would lead to a flight to quality. And I think a trade war would be another scenario where you would see a flight to quality that would decrease interest rates on the long end of the curve.
Adam, We'll leave it there. Always a pleasure. Thank you so much for joining us. Adam Koons is chief investment Officer at Winthrop Capital Management, joining us 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 Prisoner and this is Bloomberg.
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