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Welcome to the Bloomberg Daybreak Asia Podcast. I'm Doug Krisner. We had the S and P five hundred falling from a record high, and you can blame Walmart. The retailer issued a disappointing forecast for the full year, and banks got caught up in some of that selling, with JP Morgan Chase and Goldman Sachs each declining around four percent. In a moment or two, we'll hear from Vance Howard. He is the CEO at Howard Capital Management. But let's begin in Singapore. Joining me now our friend friend of
the program, Bloomberg m Live strategist Mary Nicola. She joins us from our radio studio in the Lion City. Thank you for making time. I'm sure it's a busy day for you, particularly if you're writing about the Japanese yen. But before we get to the currency, I want to get to the CPI print core CPI in Japan rising at an annual rate of three point two percent in January. That's a little above forecast. Does it force the hand of the BOJ Do you think?
Yeah? It just gives confidence to the BOJ to resume with tightening. So they've been talking for quite some time about being able to continue with tightening if they see some progress on inflation and if their forecasts come to fruition. Now we're seeing that happening. We're seeing that even if you look at PMIS this morning, they're still pretty robust, showing that the economy is doing well. Inflation's on the
on the right trajectory. They're reaching their two percent goal, and their two percent target is more than well entrenched, and now they can start moving ahead with confidence on raising rates. So I think you'll start seeing that message really coming through from the boj and it already has, but it's going to just it just gives them more confidence.
No doubt about it, and it's being reflected in the currency. I mean, we're on the strong side of one point fifty en versus the greenback.
Absolutely, and I think that continues, and I think you see a much more pronounced strength of the en against the likes of the euro, because especially with the Euro, the interest rate differential is narrowing, and as long as that continues, there is going to be a lot of upside for the EN, especially against the Euro.
When is the next BOJ meeting that you really think is live in terms of a rate hike.
So March is completely is not being priced in by the traders, and I would agree because it looks like they're taking a more methodical and measured approach to hiking. But if the data continues the way it has been, I think that could make May very much a live meeting, so we could see if this progress continues, we could see some of these rate hikes coming through sooner rather than later.
How much of the end strength can we chalk up to what we've been seeing play out in the US bond market.
I mean, there's definitely a combination of the two, right, So obviously the lower yields helps the end, but of course what we're seeing from the Japan side is really helping as well. So it's a bit of a twofold situation for the end. And obviously the yields in the US drifting lower helps if but it's being accompanied by a much stronger inflation outlook at a much stronger GDP outlook, both of which cement the idea that the BOJ is going to continue hiking rates.
So step back and take a look at what you're seeing across the region where you are, whether we're talking ausion, whether we're talking North Asia, where we're even talking about what's happening on the mainland in China. How unified is the main macro theme right now or is it not? Are we seeing kind of economies that are doing much better than others?
I think it's more especially in the equity markets, it's very much based on what's happening domestically. So of course we're seeing the rise in the surgeon China and Hong Kong equities largely on the back of this AI frenzy, This robotics frenzy that's really coming through Deep Seak has really given it a push. Ali Baba's earnings overnight adds to the momentum as well, So there's a really good combination there. And then of course you had Jijinping embracing
the business community in China. A lot of these just augment and and just solidify this rally, and of course you're going to need earnings, and earnings are absolutely crucial in terms of just showing that there's fundamental support behind this. So for China that's one story, but then you look at the rest of the region, there's still growth hasn't been great. You're seeing a lot of hiccups. Let's say, for example, in whether it's Korea and Indonesia, they're starting
to stall. The central banks are looking to also, they've maintained an easing bias, but they're quite concerned about easing too aggressively because of the currency. So they're in this tricky situation of trying to manage the currency but also trying to manage growth. And until we get some clarity on where the trajectory of tariffs are going, I think they're going to be in that position for quite some time.
Yeah, particularly, I mean we know the story on tariffs as it relates to China, but when you think of a place like South Korea or even Japan, I mean the risk that exporters would face under that situation.
Yeah, absolutely. And a lot of these companies have the US as one of their big markets, and both the two countries you mentioned also have big deficits against the US. So they are clearly going to be in the limelight and in the target for the US administration if they have such big deficits. So I think they're still in a precarious situation. A lot of their leaders have called
for them to be exempt from certain tariffs. Obviously, we haven't heard any feedback in terms of if they are, but at the same time theyre's still especially for someone like Korea. Korea is a small, open economy and they are going to be extremely vulnerable to some of these announcements.
You mentioned a moment ago the story on Deep Seek and what it has done in terms of the equity market, not only on the mainland in China, but to some extent in Hong Kong as well here in the States. The NASDAK Golden Dragon China Index, which obviously is a measure of the ADRs those US listed stocks in Chinese firms, We're up about sixteen percent year to date in the NASDAK Golden Dragon China Index. Nasdaq Composite is only up
three percent. I'm wondering whether or not the earnings that we're going to get next week from in Nvidia will do anything to the story on AI related tech in China. Is there a correlation there that we need to kind of be alert to. Well.
I think what the Deep Seek and robotics frenzy has really shaken things up in the US to the core, showing that Chin can be a competitor in this space and now, and especially because US companies are spending so much money and they're questioning the valuations, especially when Deep Seek is doing it at a fraction of the cost, So why aren't the US companies doing something very similar?
So I think what we're going to see is that if Nvidia needs to have blockbuster results to really drag the Nasdaq, hire not to call valuations into questions into question, because that's the key thing right now for the US is that valuations are still very frothy, and then especially if you compare them to China, valuations are still very cheap. And of course we've been in this environment where is
China a value trapped for so long. But if earnings continue to show that we're seeing a real turn in China, then they could actually show and bring the US and give it a run for its money.
So we had the ADRs in Ali Baba up about to eight in New York trading, obviously playing off the very strong results that we had for the latest quarter. What's the feeling about the Chinese consumer right now? If you look at the Ali Baba.
Story, it's showing good signs. It's showing positive signs, but we still have to remember that there's a deflationary pattern and disinflation. If you look at Q four GDP, we still had a negative GDP deflator obviously impacting that deflation still persists in the economy. You're still seeing signs, especially
in home prices, that they're still negative. So the consumer hasn't really made a strong recovery yet, and I think a lot of investors are going to be looking to the March NPC meeting to see what really is the government going to do to turn this around, because if you do have persistent deflation, that's still going to weigh on EPs growth.
One of the things that we learned today that US Treasury Secretary Scott Bessant will be speaking with his Chinese counter part on Friday later today in the APAC region. One of the things that we learned in a conversation with the Treasury Secretary earlier is that he will be pushing China to do more to stimulate domestic demand. Certainly, that's one of the key concerns for anyone who's been watching the economy in China, and Mary, you mentioned stimulus.
We've got the two Sessions meeting coming up in a few weeks, and I'm wondering whether or not the market is really putting a lot on the idea that we're going to get much more in the way of domestic stimulus.
I mean, that's what investors are looking for. So I think that's going to be the key thing, because that's what's really dragging the Chinese economy down. We've seen in some of the monetary data that there's been a fiscal push, and the fiscal push is actually materializing, and domestic demand is still very weak if you look at the monetary data for January, so there's still a lot to be desired in terms of consumption and how consumption is unfolding,
and that's still the key trigger. I mean, we've talked a few times about the Japanification of China, and of course a big part of that is that deflation component, and deflation is going to stay in that scenario, or the economy is going to stay in a deflationary scenario if you don't see a revival in consumption. So consumption is going to be absolutely critical for the NPC to really target and reinforce.
Mary, thank you so much for joining us. It's always a pleasure. Bloomberg m Live strategist Mary Nicola there joining us from Singapore here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner. So today the US equity market dropped from all time highs. That came after a disappointing forecast from Walmart, and then on the call with analysts, Walmart execs seem to acknowledge there are still quite a few uncertainties related to consumer
behavior as well as global economic and geopolitical concerns. So the Walmart story only added to the concern about US economic growth following that disappointing read on retail sales in the States last week. Let's take a closer look now with our guest Vance Howard. He is the CEO and portfolio manager at Howard Capital Management. Thanks for making time to chat with his fans. Can you give me your read on the American consumer right now? How do you see things?
I think things are very positive. I mean, even with the Walmart's news today, there's a lot of you know, tornadoes swirling around right now that you know, are causing a lot of anks for investors, and I think that's the reason you saw a little bit of a drop in Walmart, which is a very good company. I think with this six percent pullback, I think you've got a buying opportunity here. But you know, you've got sanctions that are starting to kick that have been implemented. I'm not
sure we've seen the full effects of sanctions yet. We clearly haven't. Unemployment, you know, stable, but it's range bound. It's really not up or down, but it continues to go sideways. I think you should be bullish on this. You know, we've had a great start to January and even to the middle of February. The market's up nicely year to date, so I think there's really nothing to complain about. Just because you have a drop in one stock, it wouldn't be too concerned about it.
But we also heard from Rivian, the automaker, talking about the risk of tariffs, the drag that that would create on its business. You're not concerned at all about tariff policy going forward.
I think tariff policy is going to create volatility in the market. And you know, I'm an active trader, Doug. You know that you've known me for quite some time, so you know movement you know, creates opportunities for guys like me, and I think it creates opportunities for investors and traders to boot both folks. But one thing you need to look at, Doug, is you've got to look
at the trend of the market. And you know, you've talked to me numerous times about the eight cm byline that is our proprietary trend indicator, and it's still positive. It's very positive actually, So any pullback we see as a buying opportunity until the trend changes. So you've got to get your head to what's actually happening in the market. And the market's looking pretty strong. It continues to move higher. You're up, you know what, two or three or four on the S and P year to date. That's an
amazing number for the first six weeks. I think people should be incredibly happy.
In terms of Fed policy, we heard from one FED president today indicating that maybe two rate cuts are still in the cards this year. Is that the way you see things.
I don't know if I see two, but I definitely see one. You know, the Fed has been pretty clear that they're going to hold rates stable for a little bit longer, and I don't think that really hurts anything or affects anything. I think we'll see some pressure on the FED to make a move, probably to drop rates, because I think that's Trump. That's the way Trump would like to see interest rates go. I think that's the
way we'd all like to see interest rates go. We would help mortgages, it would help the you know, the housing market, would you know, pop up a little bit, because we had a little bit of a drop in the housing market, so that would be beneficial. But I'm not too concerned about rates. I don't think that they're
being too big of a drag right now. And you know, there's a lot of other issues out there that I think are causing some anks with investors, and I think over the next two three four months, we'll work our way through these and I think you'll probably see a pretty healthy market. Especially the last two quarters of twenty twenty five I think could be really dynamic. And one of the reasons for that, Doug, is the amount of
cash that's on the sideline. With six point eight trillion dollars in money market, it's one of the largest cash build ups I've ever seen. In doing this for thirty five years.
I have to ask you about gold, and maybe you're not a player in bullion, but we did hear from neumont A Mining after the bell. We're talking about a dollar forty per share that was thirty four cents above what the street was looking for. There has been so much positivity around gold, and I think part of that story is concerned about inflation. First of all, would you use gold as a hedge right now?
I don't know if I'd use gold as a hedge. I think right now, like I said, the eight cm bylines positives stay long this market. I wouldn't be too worried about gold. I'll tell you, if you want to trade something that's somewhat of a hedge, look at bitcoin. Trade bitcoin. That's been a pretty decent hedge, and it's been a very active tradeable investment mechanism for people, especially
since they came out with the ETF on bitcoin. But as far as go gos, you know, people the gold bugs always want to run those up, but you know they're often wrong. I'd be very cautious on gold. It's a hard commodity to trade.
Mega cap stocks have been a big favorite for this market for quite some time, and I'm wondering whether or not you feel you've just got to be exposed to those big names.
We own them, I mean everybody owns them, and yeah, you're right, you can't really be in this market without owning, you know, the Magnificent seven or at least pieces of them. But here's some good news though. Did you know that forty eight percent of the broader market is now outperforming the indexes? So that's a really positive sign that things are starting to move out a small caps are doing better,
mid caps are doing better. You're seeing you're seeing names pop up on news channels like yours, Doug where that we didn't hear about a year ago or two years ago, that are making a lot of money and they're really producing some great returns and they're great producing some great products.
Are you seeing any value in the bond market these days?
Very little? And you know, if you're going to trade the bonds, I think you need to be looking at the convertible bond, something like a CWB. That's what the ETF for the convertible bonds, where we do on quite a bit of convertible bond right now. They've done well year to date. I would be more looking at the convertibles than I would in the ten or the twenty year treasuries.
For sure, we had pretty impressive numbers from Ali Baba early today. It's going to be very interesting to see how these shares trade in Hong Kong. Do you want to be exposed to markets offshore right now, to companies like Ali Baba in China.
I'm having so much fun with our domestic markets, Doug. I'm really not too very interested in going overseas right now. I think there's a lot of instability over there, a lot of questions that are going on Ukraine, Russia, You've got Europe that's a little bit I guess i'd say a little bit unsettled. It's some of the comments that Trump has made with Putin. So I think you're staying here in our domestic markets. I think he can make
just as much money, if not more. And I think you've got a more stable in a more stable environment too to buy stocks and to own stocks in.
It's interesting vance today. The price action led to a conversation around a possible pullback for the equity market. Now. We really haven't seen a meaningful correction for some time, have we. So I'm wondering in the short term whether the US equity market is a little vulnerable here. What do you think, Well, I.
Think that we could be, but you've also you know, the queues broke out a little bit, the S and P broke out a little bit. If you're looking at the queues, it needs to break about about five point forty one on the queues for a solid breakout. But remember this, Doug is, don't ever short a dull market, and this is definitely the past two and a half months has been a dull market. The vix is dull.
It's just been going sideways. I'd be really cautious on being too negative because if we do get a solid breakout, we get one piece of great news on inflation, or we get one piece of great news that you know, something's working with the Trump administration with their deregulation that they're implementing, you could see the market really pop. And I think if you see it pop, I think you're going to see a lot of shorters get hurt, and I think that they're going to be scrambling to cover,
which will push the market even higher.
Interesting point, Vance, thank you so much for making time for US. Vance Howard There. He is the CEO also portfolio manager at Howard 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