Bloomberg Audio Studios, Podcasts, radio news.
Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner. In a moment, we'll take a look at the story on tech stocks in China. David Chow will join us. He is global market strategist for the APAC at Invesco. But we begin in Hong Kong on a day when the Trump administration said it's considering reciprocal tariffs on numerous trading partners as soon as April. Joining us now is Helen Jew. She is managing partner also the CIO at
NF Trinity. Helen joins from our radio studios in Hong Kong. Helen, thank you for making time to chat with us. I'd like to begin by getting your reaction when you hear that the Trump administration is saying, rather than a blanket tariff, we're going to create something with a bit of reciprocity, kind of tit for tat tariffs. How do you make sense of that?
I think obviously the market is, you know, responding to this positively and seeing it as a better than feared type of potential resolution to the tariff threats that we have seen.
So we all don't know.
Too much about the reciprocal tariff regime, and obviously it's being cooked up at the moment. But if indeed it's going to be equaling out the tariff imbalance, then it actually means that we could have a scenario whereby everybody's cutting terriffs rather than just imposing more and more teriffs uniformly without.
You know, rationale, et cetera.
So that could actually be positive for global growth, and it could be positive for globalization and for countries like China that don't necessarily have huge tariff imbalances because China's not imposing a huge amount of tariffs on US imports, it could actually you know, be a relief.
Speaking of relief, I'm seeing stocks in Hong Kong move higher at the moment, with the Hanks saying up about one per.
That's the relief.
Yeah, that is the relief.
So is there an industry group that you think would benefit mostly from this type of policy.
I think it really varies by country. So if I look at the US's exports, a lot of it is going to be like manufacturing in some materials and energy, you know, So I think it depends on what kind of deal can be worked out. But some of the country is most sensitive to the trade tariff imbalance with the US, include like for example, Indio, where he's uh, you know, obviously Trump has been talking to Moodi in
the last couple of days. So I think the fact that you're going to settle this individually with different countries on a on a one by one basis is already a huge positive versus what the market was expecting. And for you know, very friendly allies that are nearby Mexico, Canada, et cetera, it's going to mean less onerous risk to them as well, right because they obviously export to the US a lot, but don't necessarily import a huge amount.
And I'm guessing they probably don't have huge tariffs on US imports either, so that might actually give them a graceful way out and make them look less pressured.
What is your sense of what is happening these days in China is so far as the economy is concerned right now, are we on a kind of an up trend at the moment? Have things turned a corner? And is there enough positivity to get you interested in putting money to work on the mainland?
Well, I think the cyclical picture is basically stabilized, but hasn't really shown any meaningful signs of.
V shape recovery.
I think there's two main reasons why despite all the stimulus that's been put on over the last twelve months, there hasn't been too much reaction. One is because of the overhang of the uncertainty about the tariffs and the trade war.
And the second one is.
Actually because of the lagging and still suffering property market, as prices have come down and price expectation is still negative, which is actually a big burden on people's you know, wealth effect and expectation. So I think the former could have some short term relief if things had in the direction that we're talking about, which is obviously still some tariffs but maybe not as bad as what we had
been anticipating. But the latter one, which is the property market and the price expectation, I think that still takes some time to fix and is probably not going to be an instantaneous recovery. But that said, I think the second derivative is improving, i e. Things are still declining, but declining at a lower pace versus before, so on the margin, I think that's actually a positive to some extent.
So just on the basis of valuation alone, isn't China compelling from a valuation perspective.
Certainly it has been compelling for quite some time.
It's just that people have been worried about the grave uncertainties facing the economy for the reasons that I had mentioned.
I think it has to.
Come from, you know, whatever happens with the tariffs with China. The sooner that you have clarity and it gets sorted out, the better. If everything gets dragged out until end of this year or even into next year, even if the end result ends up being not too bad, just that you know, never ending uncertainty I think is going to be you know, pretty negative for the broader economy because people won't really know whether they should place orders, whether
they should hire people. All of those decisions are going to be you know, in.
Doubt, we had some dollar weakness during New York trading today, the combination of lower treasure yields also the delay of those reciprocal tariffs. To what extent has a strong dollar been problematic for putting money to work in Asia?
Oh, it's been a huge problem. I mean, that's been the key factor to weigh on asset prices in Asia, in China, and particularly in the rest of emerging markets. Actually, in this regard, the R and B has been much more resilient and much less volatile versus most other Asian currencies and emerging market currencies, mostly because of the PBOC
intervention and defense of the currency. But if the dollar can you know, start to weaken to some extent or at least not strengthen even further, I think that would be a massive positive for the rest of the world in terms of asset prices. And we're actually much more positive on the rest of the world versus on US. Obviously last year was all about US exceptionalism, especially after the election heading into the year end.
But you know, a few factors.
One is that the US economy, despite being strong, you know, the long end, may not necessarily keep going up, especially you know, Scott Besson talked about bringing down the long end if at all possible, through less supply of treasuries
and so on and so forth. And then I think on the margin, the less than worst case Tariff's scenario is positive for the rest of the world, and on the margin, any kind of progress towards resolution of the wars in the Middle East and Ukraine are going to be more positive for the rest of the world, Europe, etc.
For the US. So some of these factors are shifting away from.
The US exceptionalism thesis that had been in place for a long time.
When we look at the inflation story in China, the latest CPI data showed a slight improvement, a little bit of positivity, but certainly when you look at factory gate data, I think we are negative for a twenty eighth consecutive month, so clearly at the wholesale level mired in deflation. Still, how is Beijing going to deal with this? And if it is not dealt with to what degree? Is this a major problem?
Oh, it has been a major problem for a couple of years.
Are one of eight months.
One of the key issues though, is is that, well, the consumer confidence and you know, the lackluster you know, overall activity level. I think that's definitely been a factor. But the other factor, which might actually reverse on its own, is just that food prices, you know, the hog cycle and so on and so forth, were really dire and dragging down.
The CPI as well.
But that has started to improve as the supply has exited and as the base effect gets easier, so I think the food would be less of a drag. As for the core, it's been positive overall throughout this period, somewhere between zero and one percent positive, so definitely not a huge boost, but certainly I think if there is any kind of improvement in the confidence because of the teriff situation, because of the simulative policies that the government has put on, I think that will eventually start to
show through. The major risk to a reflation story in China would be if energy price is crashed globally because of what's happening outside of China.
Let's say, for example, if.
The wars end and oil price moves down by ten bucks or something like that, then you know, associated with that, metals prices and everything else would react accordingly, which might create an error pocket of de stocking for various companies as they wait to buy things cheaper, you know, three
to six months later. But overall, speaking for a country like China that's very reliant on import of energy and materials, it's still net positive versus the deflationary forces on the rest of the world might be less positive.
We're going to talk about the high tech story in China with our next guest in a moment or two. But I want to get your take on what we've seen recently with the development on deep seek artificial intelligence in China. What do you think is important to tease out here?
Well, I think, you know, it's quite clear that the world has just recognized that there are very rapid technological
developments in China as well as in the US. And this is actually quite surprisingly impactful outside of China as well, because you know, apparently the American consumer cares more about being able to use an LM for free and saving the twenty bucks off TRAGBT and less concerned about whether this is a you know, invasion of Chinese technology into the US society and whether you know, the Chinese are
going to run off with any of their personal queries information. So, you know, if there can be any global potential for China AI, that would be the you know, kind of really upside case scenario. I'm a little bit concerned and skeptical because I think the geopolitical situation is not going to improve so much in the short term that.
Many other countries are going to trust China AI.
There's probably still a more permanent decoupling from a strategic technologies perspective that will last even if the near term cyclical trade situation sees a better than expected outcome.
And we didn't even discuss TikTok. We'll save that for next time. Helen, Thank you so much. Helen's you there, Managing partner and CIO at NF Trinity from our studios in Hong Kong, joining us here on the Daybreak Asia Podcastcome back to the Daybreak Asia Podcast. I'm Doug Chrisner. We go next to Singapore and we find David Choo. He is the global market strategist for the apec at Invesco. David, thanks for being with us. It's always a pleasure to
chat with you. Earlier today in the US, there was a fair amount of positivity as it related to President Trump essentially delaying some of the reciprocal tariffs that the new administration is considering. We understand they're not going to take place right away. Maybe the market's hoping for some
type of negotiation. So when you assess risk of these tariffs as it relates to US trading partners like China, Japan, South Korea, does that cause you a bit of unease in terms of putting new money to work in the Asia Pacific.
Well. To be frank, the teriffs that that am In levied against China, I'm not ten percent was much better than the sixty percent that we feared that President Trump previously hadn't mentioned before.
And I think that.
Taking a much more conciliatory gesture and attitude towards China, which I think is a positive development, and it is also one of the reasons why I think Chinese stocks
have also done well. This reciprocal tariff that has just been announced, I think it's a much bigger deal than the universal measures so previously Trump you know, you know, was interested in imposing a flat universal tariff of ten to twenty percent on imports from all countries, but now it seems like he's moving towards the reciprocal tariffs to be imposed on a country by country basis. Now, if we look at which countries are the big losers and the big winners on that, you know, the big losers
would be like India and Brazil. I think they would be hit the hardest, followed by the EU and the UK, you know, Mexico and Canada and the winners would actually be places like Singapore, Taiwan, and Korea.
But companies in China haven't they already repositioned some of their supply chains to try to get around these tariffs.
That's right.
I mean they've had what like around eight years to be able to prepare, and we've seen significant supply chain diversification. So if you look at the trade between the US and China, it's it's downced pretty meaningfully over the past eight years. Although the China still enjoys a trade surplus, it's it's much less than what it was before. Now China does more trade between you know, China and Southeast
Asia than and than China and US. But to be frank, you know, maybe some of these Chinese companies are using places like Mexico to rewraup some of this trade and get around some of these tariff barriers into the US. And so we've seen that the trade deficit between Mexico and the US has grown around you know, the same amount as the trade deficit between China and Mexico.
There is no mistaking the exuberance that we have seen in China regarding artificial intelligence recently, especially since the unveiling of that chatbot from deep Seek. Is this a trade that you must be participating in right now?
Well, we have become more constructive on Chinese equities starting around them the summer of last year. Given where valuations were, we thought that they really reached kind of the bottom, and then we saw significant fiscal and monetary stimulus measures that were announced.
It seems like the government has really pivoted.
Towards ensuring that both the market and the economy starts to turn around.
Now.
Now, this Deep Seek development, I think is a gift in terms of a catalyst that investors can use.
To look at Chinese equities again.
And when foreign investors pivot back to China, we know that Chinese equities have been unloved so long that the first stocks that they buy are the big cap tech stocks you know, trading on on Hong Kong. And we've seen you know, the Hangsang Tech type index you know, up double digits so far these days. So I think that if investors wanted to dip their toes back into China bond, Chinese tech would be the place to look at.
I'd like to get your perspective on where we are in the recovery of the mainland economy, especially as it relates to the property market. Are things is a bottom? Let me put it that way, is a bottom firmly in place.
I'm not I'm not going to be the one that called, you know, the property in China, you know, has bottom. What I will say, things are getting less bad, and I think that's already a pretty positive development.
So what we have to.
See, you know, is at bottoming would be when across the board the property data starts to stabilize or improve. We're starting to see prices in first year cities like Shanghai and Beijing both you know, primary and secondary home prices start to improve, but not so much in Tier three in tier four cities, but it seems like the government is taking a much more muscled approach, you know, bailing out developers, really loosening restrictions on property purchases.
So what I would say is that I expect more of a stability of housing prices, new home starts floor area sold by the middle of this year, and if the property market can just stabilize and you know from the second half of this year, now that really add a tail into economic growth in China for the year.
So stability, does that necessarily translate into improved consumer sentiment? And maybe while we're talking about the Chinese consumer, you can give me your perspective on what you observed over the recent Lunar New Year holiday.
Sure, I'd say that there are green shoots in consumer spending, household spending in China, and.
The initial data out of China during the Lunar Nei year last week pointed to pretty strong activity.
So domestic trips were.
Up five point nine percent compared to last year, and spending on these trips rose seven percent according to the Chinese data.
And Chinese thoughts reacted.
Pretty strongly, you know, when they reopened following the holiday. So as you know, domestic spending is the key. It's the crux I think for more investors this year, whether it picks up or not. And I think that it is directly linked to the property market, so you can see more stable signs coming out of the property market. I think that investors feel a lot more confident to go out and consume.
So away from China, you mentioned the positivity that you're seeing in Singapore. I'm wondering if they're other markets or jurisdictions in the APEC region where maybe foreign investors would find value.
Well, I think what's interesting is going on in India Indian stock. Indian stocks are down around you know, eleven twelve percent from their highs in September. But this is after you know, they've had you know, a huge bowl run. Right, Indian stocks are the only stock that have outperformed the S and P over the past twenty years.
So the economy experiencing a bit of a cyclical slowdown.
The previous quarter growth was something like, you know, five and a half five point seven percent, you know, you know, which missed expectations, you know, which were around six and a half percent, and that was because you know, consumer spending is also taking a bit of a back seat. Government spending, uh, you know, was on a pause, you know, after the elections last year as the government formed a cabinet. But things I think are starting to turn up for
for the cyclical growth part in India. And so despite Indian stocks being expensive, you know, investors have traditionally paid up for growth, and IDIA is the only major economy where growth is going to accelerate, you know, from five point seven to six and a half percent in the coming year. Maybe seven and a half percent in the
next year. So I'm bullish on Indian stocks. I think that for investors that had been waiting, you know, for Indian socks that come down, I think this could be an interesting opportunity.
David, thank you so much for taking the time to chat with us. David Chow there, global market strategist for the APEC at Invesco, joining from Singapore 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 Risner and this is Bloomberg.
Hmm.