Oil Spoils the Global Stock Rally as Brent Tops $102

PAUL: LIVE FROM SYDNEY, I'M PAUL ALLEN YOU ARE WATCHING "INSIGHT." FUEL PRICES AND CHIP SHARES COME UNDER PRESSURE. SAMSUNG FAILING TO EXCITE MARKETS. WILL EXTENDS GAINS ON THE REPORT THE WHITE HOUSE IS SEEKING PRE- MIDTERM MILITARY STRIKE OPTIONS ON IRAN. TKO CAPITAL CO-FOUNDER JOINS US WITH A WARNING ABOUT A DANGEROUS MIX OF MARKET CONCENTRATION, GEOPOLITICAL FRAGMENTATION RESHAPING GLOBAL RETURNS FOR FUEL COSTS RISING, PRIVATE JET DEMAND HOLDING FIRM. VISTAJET FOUNDER THOMAS FLOHR ON WHY HE THINKS THE SECTOR IS SHOWING RESILIENCE. ASIAN MARKETS ARE BEING CHALLENGED ON MULTIPLE FRONTS. SAMSUNG'S RECORD EARNINGS FAILED TO CREATE EXPECTATIONS. TSMC SALES FIGURES FOR FURTHER DIRECTION ON THE TECH TRADE. CHINA'S OPEN IS NOT HELPING MUCH. HOLIDAY SPENDING IS MUTED, TRADE DISPUTES PUSHING AUTO AND OPTICAL STOCKS. ANTHONY STEPHENS JOINS US FROM HONG KONG WITH MORE ON THIS. LET'S START WITH SAMSUNG. CAN YOU TALK US THROUGH THE EARNINGS AND THE MARKET REACTION AND HOW TRADERS ARE SETTING UP FOR THE TSMC NUMBERS? ANTHONY: IT HAS BEEN AN INTERESTING REACTION. WE SAW THE LOCALS RESPOND TO KIND OF POSITIVELY TO THE NUMBERS WHEN THEY CAME OUT. IT'S THE FIRST COMPANY TO 100 TRILLION IN A SINGLE QUARTER. IT HAS SINCE FADED AS THE NUMBERS MISSED VERY ELEVATED ESTIMATES. THAT IS SOMETHING WE HAVE SEEN ACROSS THE TECH SPACE IN THE U.S. AND TAIWAN. SHARES HAVE TRADED AROUND THE LOWS OF THE DAY. ON THE OTHER HAND YOU ARE SEEING A LOT OF EXPOSURE IN THE MEMORY TRADE. HYNEK'S SHARES ARE TRADING SLIGHTLY HIGHER AS IT LOOKS TO MOVE TO THE U.S. AND U.K. OTHER SHARES TREADING QUITE WELL AS IT LOOKS TO PERHAPS INCREASE ITS WEIGHT IN THE TOPICS AFTER A HUGE REBALANCING ACTIVITY TOWARDS THE BACK END OF THIS YEAR. THE CHINESE FALL BEHIND LARGE MANUFACTURING IN KOREA, AROUND THE MEMORY SPACE. THERE IS NOT ANY INVESTOR TOLERANCE FOR THAT. FLIP THE BOARD TO THE CHINESE REOPEN. THERE IS QUITE A BIFURCATED PICTURE. THE OIL MOVE IS HELPING PETROCHINA AND SINOPEC, BIG-TICKET REFINERS AT THE TOP. THE CHINESE BANKING SECTOR IS OUTPERFORMING THE REST OF THE WORLD. ROCKSOLID ON THE BACK OF CHINA'S INSULATION FROM EUROPE'S CRISIS. CHINESE SHIPPING STOCKS ARE DOING REALLY WELL. SHIPPING RATES SKYROCKET INTO THIS ISSUE AROUND GEOPOLITICS AND SHIPPING DIFFICULTIES IN THAT AREA. YOU FLIP THE BOARD COME ON THE DOWNSIDE IN CHINA, IT IS NEW CHINA. IT IS CHINA TECH AND THERE IS MASSIVE NEWS COMING BACK FROM A MULTIYEAR HOLIDAY. THE OPTICAL SECTOR AND THE SMALLER SEMI CONDUCTORS A LITTLE BIT DOWN AFTER COMING BACK FROM A LONG BREAK AS SHARES IN HONG KONG HAVE COME OFF A LOT. YOU ALSO SEE THE AUTO SECTOR UNDER SIGNIFICANT PRESSURE AS THE EUROPEANS PUT SIGNIFICANT TRADE TENSIONS ON THE BLOC WITH CHINA FOR A LOT OF DISCUSSION ABOUT HYBRIDS AND EV'S. PEOPLE ARE SOMETHING FIRST AND ASKING QUESTIONS LATER. LET'S FLIP THE BOARD, THE DEVELOPING CONCERN IN ASIA. THAT IS THE BANKING SECTOR. WE START TO SEE THE BANKING SECTOR PROBLEMS IN THE EUROPEAN REGION AND THE U.S. START TO FILTER INTO ASIA. WE SAW THE WEAKNESS IN SINGAPORE YESTERDAY WITH REALLY BIG MOVES AFTER JP MORGAN REPORTED ON BANKING WEAKNESS. THERE IS A FOLLOW-THROUGH HERE, THE BIGGEST DROP IN SINGAPORE STOCKS IN AROUND SIX MONTHS. IT IS ALSO IN HSBC AND THE JAPANESE FINANCIALS. SO WE SHOULD BE PLAYING -- PAYING CLOSER ATTENTION TO THE BANKING SESSION IN ASIA AS IT FOLLOWS THROUGH FROM EUROPEAN WEAKNESS. PAUL: BLOOMBERG MARKETS REPORTER ANTHONY STEPHENS THERE. LET'S GET MARKET PERSPECTIVE NOW FROM MATTHEW, THE COFOUNDER OF TKO CAPITAL. THANK YOU SO MUCH FOR JOINING US TODAY. I JUST WANT TO START WITH A STORY THAT HAS BEEN SUCKING OXYGEN AND MONEY OUT OF MARKETS IN 2026 AND THAT IS OF COURSE AI. IS THAT YOUR FAVORITE INVESTMENT AT THE MOMENT? MATHIEU: CERTAINLY NOT. THANK YOU FOR HAVING US. FILTERING THROUGH WHAT ANTHONY SAID ABOUT THE MARKET, THE BIG AI THEME THAT HAS BEEN VERY PRESENT FOR SOME MONTHS NOW, RIGHTLY SO. REMEMBER WHEN WE LAST SPOKE WE WERE TALKING ABOUT THE POTENTIAL MISALLOCATION OF CAPITAL. THAT WAS MAYBE SIX MONTHS AGO. INTEREST RATES WERE NOT WHERE THEY WERE. WE ARE SEEING SOME MOMENTS WHERE IT IS FACING REALITY IN TERMS OF THE REAL COST OF LIQUIDITY, THE COST OF FUNDING. THAT WILL NOT SPARE AI. WE KNOW THERE IS SOME -- BEING RAISED RIGHT NOW, TRILLIONS BEING DEPLOYED. THE VERY REASON, THE VERY FACT WE ARE NOW SEEING SOME OF THESE BIG PLAYERS HAVING A LOT OF DEBT ON THEIR BOOKS, WE ALL KNOW IT IS BETTER TO TAKE DEBT WHEN IT IS CHEAP THAN WHEN THE FREE RATE IS FIVE PLUS. WE ARE NOT ENTERING THIS MOMENT WHERE MANY OF THE MEGATREND AND AI BEING ONE OF THEM WILL HAVE TO EFFECTIVELY DELIVER AND SHOW IT IS A PROPER RETURN ON CAPITAL EMPLOYED FOR ANYONE WILLING TO GATHER SOME CAPITAL. ON THIS THEME PAUL: I KNOW THAT YOU SAY DIVERSIFICATION IS ESSENTIAL. THIS IS A VERY OLD IDEA. BUT DO YOU FEEL LIKE THIS IS GETTING REALLY DIFFICULT NOW? AI IS EITHER WOVEN INTO OR IS BEING DISRUPTED OR DISRUPTING AS ARE SO MANY OTHER PARTS OF THE MARKET. HOW DO YOU DIVERSIFY? MATHIEU: THAT IS PROBABLY TRUE ON THE PUBLIC MARKET. WE KNOW AND THERE HAVE BEEN MANY TALKS ABOUT THE CONCENTRATION OF THE VALUE IN THE PUBLIC INDICES. NOW WE ARE SEEING PART OF THE BULL MARKET CAPTURING PART OF THIS DEMAND. BUT WE GET TKO CAPITAL COME AS YOU KNOW, WE ARE TRYING TO FOCUS ON THE PART OF THE MARKET THAT IS MAYBE IN THE BLIND SPOT OF WHERE THE PUBLIC MARKET CAN PULL LIQUIDITY AND GENERATE CAPITAL FORMATION. I REALLY BELIEVE THE PRIVATE MARKET TODAY ARE ONE OF THE KEY TO DIVERSIFICATION FOR ANY ASSET ODORS, ANY ASSET ALLOCATORS. I'M IN SINGAPORE ASIA THIS WEEK, MEETING WITH INVESTORS AND PARTNERS, SHAREHOLDERS. THAT IS THE THING THAT KEEPS COMING BACK. FIRST OF ALL, THE GEOGRAPHICAL DIVERSIFICATION. WE KNOW THE WORLD HAS CHANGED THE PAST 18 MONTHS. WE KNOW THERE IS A DE- GLOBALIZATION TAKING PLACE. I SEE A LOT OF FLOWS EFFECTIVELY COMING BACK AND INVESTING MORE DOMESTICALLY, SPECIFICALLY HERE IN ASIA. AND YOU'VE GOT ALL THESE BIG TRENDS. DEFENSE IS ONE. HOW CAN WE TALK ABOUT DEFENSE. DEGLOBALIZATION, THE ENERGY TRANSITION BECOMES ONE OF THE KEY THEMES ON THE BACK OF THE WAR. OIL IS BACK NEAR $100. PEOPLE WERE HOPING THE PAST FEW MONTHS IT WOULD BE A BIT MORE SOFTENING IN THE OIL PRICE. WE SEE THAT. ALL THESE BIG THEMES, TOGETHER WITH THE DEGLOBALIZATION, AND YOU ADD TO THAT THE SECRET SAUCE , INTEREST RATES AT FIVE-PLUS. IT IS A GREAT MOMENT FOR ASSET OWNERS AND PORTFOLIO MANAGERS TO RETHINK THE DIVERSIFICATION. THERE IS A GREAT DEAL OF DIVERSIFICATION THAT CAN COME FROM THE PRIVATE MARKET ALLOCATION. PAUL: HOW ENDURING DO YOU FEEL THAT SOME OF THESE TRENDS WILL BE? THE WORLD FEELS LIKE IT IS GETTING USED TO $100 OIL. THE MIDEAST CONFLICT WHILE IT FEELS LIKE WILL GO FOREVER OF WILL EVENTUALLY END AT SOME POINT. SIMILARLY WITH THE PROTECTIONISM WE ARE SEEING AT THE MOMENT IN JUST TWO YEARS TIME THERE WILL BE A NEW RESIDENT IN THE WHITE HOUSE. COULD YOU SEE SOME OF THESE TRENDS PERHAPS REVERSING LONGER-TERM? MATHIEU: NO, I HAVE NO CRYSTAL BALL. I DON'T WAIT TO GET INTO THE POLITICS IN THE U.S. BUT I'M DEEPLY CONVINCED THAT WE ARE GOING THROUGH SOME TRANSFORMATIVE STEPS OF THE ECONOMY. WE TOUCHED ON DIGITALIZATION, THE DEFENSE. WHO CAN SAY DEFENSE IS JUST A BLEEP? I THINK IT IS MORE STRUCTURAL WHAT IS HAPPENING HERE. THE AMOUNT OF CAPITAL THAT ARE REQUIRED WORLDWIDE, CERTAINLY OUTSIDE OF THE U.S. AND THE NEWBLOCS, THE NEW ALLIANCES. THE CARBON ELECTRIFICATION IS ANOTHER THING FOR SOME OF IT IS NOT SOMETHING THAT WILL GO AWAY AFTER THE MIDTERMS OR WHEN A NEW ADMINISTRATION COMES INTO THE U.S. AT LEAST THAT IS OUR BELIEF, IT IS STRUCTURAL, IT IS FUNDAMENTALS. IT IS GOING TO DRIVE MANY OF THE GLOBAL FLOWS, INFLOWS, AND IT'S A PROCESS. THESE THINGS TAKE TIME. AS YOUR REPORTER WAS SAYING EARLIER, THE MARKETS ARE DOWN 10%, 20% ON CERTAIN STOCKS BECAUSE IT IS SELL NOW AND THINK LATER. WE ARE THINKING INTO THE LONG-TERM PROCESSES OF THE FUNDAMENTAL TRANSFORMATION THAT REQUIRES SIGNIFICANT CAPITAL. THE PUBLIC MARKET MAY NOT BE OPEN FOR THAT OR BEING HIGHLY DISCRIMINATING. I KEEP COMING BACK TO THAT, BUT INTEREST RATES BEING IN OUR VIEW HIGHER FOR LONGER, YOU HAVE TO FACTOR THAT IN. AND THEN ONCE YOU PUT ALL THAT INTO THE EQUATION, THEN YOU CAN HAVE A PROPER INVESTMENT CASE AROUND THESE BIG THEMES. YET MAKING SIGNIFICANT RETURNS BECAUSE WE ARE IN THE BUSINESS OF EFFECTIVELY GENERATE RETURNS FOR THE FUTURE AND DUTY TO OUR STAKEHOLDERS AND SHAREHOLDERS AND INVESTORS. MOST OF THEM ACKNOWLEDGE THIS IS A ONCE OPPORTUNITY THAT WE HAVEN'T SEEN FOR A LONG TIME. DIGITALIZATION, AI, COMING BACK TO THE FIRST POINT, IS TAKING THE LION'S SHARE OF THE FOCUS, BUT THERE ARE MANY TRENDS TODAY THAT ARE GENERATING GREAT RETURNS FOR THE PEOPLE FOCUSING ON THOSE. PAUL: YOU MADE A COUPLE OF MENTIONS ABOUT THE HIGHER RATES. CAN YOU TALK A BIT ABOUT HOW PRIVATE MARKETS ARE NAVIGATING THIS? MATHIEU: YES, OF COURSE. THAT IS THE BASICS OF ANY INVESTMENT DECISION. I THINK WE ARE MORE IN A NORMAL ENVIRONMENT WITH THE RATES WHERE THEY ARE TODAY THAN WHERE THEY WERE FIVE YEARS AGO. THERE ARE TWO CONSEQUENCES TO THAT. THE FIRST ONE, OCTOBER 26 WE ARE NOW IN EFFECT SIX YEARS AFTER COVID. THIS ENVIRONMENT WHERE ON THE VERY BACK OF THE POLICIES FROM THE CENTRAL BANK WE KNOW THAT A LOT OF DEBT HAD BEEN RAISED AT SOME VERY APPEALING RATES. THEY ARE GOING TO HAVE TO BE REFINANCED OR PAID BACK AT SOME POINT. THAT IS COMING NOW. SO THERE WILL BE SOME CAPITAL STRUCTURE THAT WILL REQUIRE SOME FLEXIBILITY BECAUSE YOU WILL NOT BE ABLE TO REFINANCE CERTAIN BUSINESS THE SAME WAY THEY HAD BEEN FINANCED SIX YEARS AGO. THAT IS A GREAT OPPORTUNITY FOR THE CAPITAL SOLUTION, SPECIAL OPPORTUNITIES, MANAGERS CAN PROVIDE. ON THE OTHER HAND, THE OPPORTUNITY FOR THE PRIVATE MARKET IN THIS INTEREST-RATE ENVIRONMENT IS ASSET HOLDERS AND ASSET ALLOCATOR'S, YOU ARE NOW CREATING A BASE AT FIVE PLUS THE SPREAD WHEN IT COMES TO CREDIT. THE REAL ASSETS, YOU HAVE SOME CAPITAL, SOME CAPEX THAT WILL BE REQUIRED. THE VALUATION OF THE ASSETS. IN THE PRIVATE EQUITY WE ALL KNOW THERE HAS BEEN A LITTLE BIT OF PEOPLE WAITING FOR THE MARKET TO REOPEN. THAT MAY NOT HAPPEN. AND AT A MUCH HIGHER INTEREST RATE ENVIRONMENT, THAT IS WHERE YOU ARE ABLE TO HAVE A PROPER RISK AND BE A PRICE SETTER MORE THAN A PRICE TAKER THAT YOU MIGHT BE. PAUL: MATHIEU, WE WERE SAYING EARLIER TODAY THAT SOME BANKS, PARTICULARLY THOSE IN SINGAPORE COMING UNDER PRESSURE TODAY. THERE STOCKS AT LEAST, DUE IN PART TO WHAT WE ARE SEEING HAPPENING WITH EUROPEAN DEBT, PARTICULARLY FRANCE. TKO IS BASED IN FRANCE. I'M WONDERING IF YOU WOULD BE A BUYER AT THE MOMENT. MATHIEU: AT TIKI OH WE ARE LESS FOCUSED ON THE -- AT TKO, WE ARE LESS FOCUSED ON THE PUBLIC MARKET. YEARS AGO WE HAD THE EURO CRISIS, HAPPENING MORE IN THE SOUTHERN PART OF EUROPE, ITALY, PORTUGAL, SPAIN. YOU HAD SOME INTEREST RATES EFFECTIVELY RISING SIGNIFICANTLY THAT NEEDED SOME STEP UP FROM THE ECB. I THINK FRANCE IS NOT THERE YET. WE HAVE TO FACTOR IN THE POLITICAL SITUATION WITH THE PRESIDENTIAL ELECTION COMING IN 6, 9 MONTHS NOW. WE KNOW WE ARE IN A POLITICAL MOMENT COME AT A TIME WHEN THERE IS EFFECTIVELY A BIT OF TENSION ON THE MARKETS. TO BE FAIR, PAUL, PART OF MY ROADSHOW IN ASIA IS TO MEET WITH MANY OF THE LARGE DEBTHOLDERS OF SOVEREIGN DEBT, EUROPEAN DEBT, ALSO GETTING THE SENSE FROM THEM OF THEIR APPROACH. AT THE END OF THE DAY, WE KNOW THAT THE SUPPLY/DEMAND -- WE KNOW IT A SUPPLY DEMAND DRIVEN. THE SECONDARY MARKET WILL TELL YOU SOMETHING OF WHERE THE DEBT SHOULD BE PRICED. BUT WHAT REALLY MATTERS IS WHEN YOU HAVE THIS NEW PRIMARY OFFERING DUE TO GET THAT CLEARED AT REASONABLE LEVELS. THERE HAS EFFECTIVELY BEEN SOME TENSION. WE HAVE BEEN THINKING AND SAYING AT TKO THAT PROBABLY A FEW YEARS AGO, AND THAT IS TRUE FOR MANY WESTERN COUNTRIES, PROBABLY THE LONG-TERM INTEREST RATES WERE TOO LOW. NOW IT'S BACK TO MORE NORMAL LEVELS. WE KNOW THESE THINGS ARE IN CYCLES. BASICALLY IN OUR VIEW, NO SYSTEMIC RISKS ATTACHED TO THAT. IT IS JUSTTHE MARKET COMING BACO BASICS, SO FAIRLY PRICING CREDIT RISK OR AT LEAST THE RATE ATTACHED TO A SOVEREIGN ISSUER. UL: THANK YOU, AS ALWAYS, FOR YOUR ANALYSIS AND YOUR TIME TODAY. COFOUNDER OF TKO P OR APOLLO'S CO-HEAD OF CORPORATE CREDIT SAYS HE EXPECTS $100 TRILLION IN DEBT FINANCING IN THE NEXT DECADE AND TOLD US 20% OF THE MONEY COULD GO TO FUND THE DIGITAL INFRASTRUCTURE BUILDOUT. IF YOU LOOK AT ALL THESE COMPANIES THAT ARE THE BEST COMPANIES IN THE WORLD, THE LARGEST COMPANIES IN THE WORLD, THEY ARE ALL GOING TO CAPITAL MARKETS TO FIND DEBT FINANCING FOR -- YOU NAME IT. DIGITAL INFRASTRUCTURE IS ONE OF THE BIG BUILD OUTS. ALSO ENERGY TRANSITION AND POWER . IT'S NOT SURPRISING THAT THE LARGEST COMPANIES ARE LOOKING AT THIS MARKET PLACE AND SAYING, WE'D LIKE TO FIND STRUCTURED SOLUTIONS FOR COMPLICATED BUILD OUTS, AI BEING ONE OF THEM. THERE'S A HUGE AMOUNT OF THAT HAPPENING. I WOULD EXPECT MORE. IT HAS BEEN CLEAR TO THE MARKETPLACE WHAT THE CAPEX NEEDS ARE TO BUILD UP AI, SO I THINK YOU WILL SEE MORE AND MORE. THAT'S JUST KIND OF WHAT WE ARE -- I REALIZE I'M GOING TO HAVE TO TALK IN THE THEORETICAL BECAUSE YOU CANNOT TALK ABOUT SPACEX, BUT IF WE USE THIS AS AN EXAMPLE, REPORTING SUGGESTS $40 BILLION, BUT THEY WERE IN THE PROBABLY SYNDICATED MARKET AND TREATED POORLY. CAN YOU TALK TO ME ABOUT A COMPANY'S JUDGMENT ABOUT WHY IT WOULD COME TO APOLLO FOR FINANCING VERSUS THE BSL MARKET? ARE THERE NERVES THAT IT CAN ABSORB BETTER? THERE IS NO DOUBT THAT IF YOU HAVE A PLAIN-VANILLA OFFERING TO DELIVER TO THE MARKET, IT IS A CERTAIN TENOR, CERTAIN COUPON, THAT CAN BE DONE IN THE PROBABLY SYNDICATED MARKET CHEAPER AND FASTER THAN ANY OTHER WAY OF DOING IT. USUALLY, THE PRIVATE MARKETS ARE ADDING SOME NUANCE TO THE ISSUER. MAYBE SOME FLEXIBILITY ON WHEN THEY CAN DRAW AND FUND THESE INSTRUMENTS, MAY BE FLEXIBILITY ON HOW THEY CAN PAY YOU BACK. MAYBE THERE IS A PRIVATE ASSET THEY DO NOT WANT TO GIVE THE WHOLE MARKETPLACE ALL THE INFORMATION ON SO IT IS DONE PRIVATELY. IT IS TWO DIFFERENT MARKETS THAT EXIST SIMULTANEOUSLY. IF YOU LOOK AT THE TOP 10 COMPANIES IN THE WORLD, THEY HAVE BOTH PUBLIC AND PRIVATE DEBT AND GO BACK AND FORTH USING THEM BASED ON THE NEED AT THAT MOMENT. PAUL: THAT IS APOLLO'S COHEAD OF CORPORATE CREDIT. UP NEXT, THE IMF CHIEF TELLS US WHY HIGHER BORROWING COSTS ARE A SIGNAL THAT GOVERNMENTS ACROSS THE WORLD CANNOT IGNORE. THIS IS BLOOMBERG. ♪ PAUL: WELCOME BACK. YOU ARE WATCHING "INSIGHT." THE IMF MANAGER HAS WARNED GOVERNMENTS HAVE BECOME TOO DEPENDENT ON SPENDING. SHE ALSO PRAISED FED CHAIRMAN KEVIN WARSH FOR FOCUSING ON INFLATION. HE SENT A VERY CLEAR SIGNAL THAT PRICE STABILITY IS A PRIORITY FOR THE FED, AND THE FED WILL PURSUE IT, NOT ONLY WITH WORDS BUT ALSO WITH ACTIONS. WHAT IS REALLY DIFFICULT IS TO GET THE PUBLIC TO ACCEPT THAT THERE HAS TO BE SOME TIGHTENING. AND WHY IS THAT SO? WELL, COMES COVID, GOVERNMENTS SPENT. COMES THE WAR IN UKRAINE, GOVERNMENTS SPENT. COMES NOW THE WAR IN THE MIDDLE EAST, THE GOVERNMENTS HAVE PRESSURE FROM THE PUBLIC, DO SOMETHING FOR ME. I THINK IT IS TIME TO RECOGNIZE THAT THIS STAIRWELL THAT THEY HAVE BEEN STEP UP AND UP AND UP DOES NOT LEAD TO HEAVEN. DO YOU THINK DEVELOPED MARKETS ARE ACTING LIKE EMERGING MARKETS FISCALLY? THERE IS A LITTLE BIT OF THIS. IT USED TO BE AN EMERGING-MARKET PROBLEM. EMERGING MARKETS OVER THE LAST DECADES HAVE TIGHTENED. THEIR FISCAL POSITION IS QUITE STRONG, AND NOW THEY SEE THE SPREADS, THEY SHRANK, STILL SAYING -- STAYING RELATIVELY TIGHT, BUT THE BASE IS GOING UP, AND I THINK EMERGING MARKETS ARE STILL A BIT MORE VULNERABLE BECAUSE THEIR ABILITY TO HANDLE THAT KIND OF PRESSURE, OF COURSE, IS NOT UNLIMITED, SO ADVANCED ECONOMIES NEED TO TAKE RESPONSIBILITY FOR THEMSELVES BUT ALSO FOR THE REST OF THE WORLD, SO PLEASE DO YOUR JOB. AT THE LAST PRESS CONFERENCE, YOU TALKED ABOUT HOW THE BOND MARKET IS ACTING NORMALLY. IS IT NOW? STEP BACK. WE HAVE SEEN THESE KINDS OF JUMPS IN YIELDS IN THE PAST, SOME MUCH HIGHER THAN TODAY. WHAT YOU NEED TO LOOK INTO IS WHY IS THIS HAPPENING? IT IS HAPPENING BECAUSE OF FUNDAMENTALS. WHEN YOU ARE IN A SITUATION OF INFLATION GOING UP AND STAYING HIGH AND THEN INTEREST RATES NEEDING TO TIGHTEN, AND THEN ON THE OTHERS, GOVERNMENTS WITH AMOUNTS OF DEBT THEY NEED TO REFINANCE, AND THEN COMES THE NEW KID ON THE BLOCK, AI, AND ALSO GOES TO BORROW, THAT PUTS PRESSURE, AND THIS IS WHY YIELDS HAVE GONE UP. IT IS A RESPONSE TO FUNDAMENTALS. IN THAT SENSE, WE ALSO DON'T SEE ANY -- IT IS MORE EXPENSIVE TO BORROW, BUT YOU CAN BORROW. THE MONEY AS THEY ARE WHERE OUR ATTENTION IS IS NOT THE FUNDAMENTALS AS THEY WERE DEFINED IN THE PAST. IT IS THE ACTIONS TODAY AND THE SIGNALS FOR THE FUTURE. PAUL: THAT IS IMF MANAGING DIRECTOR KRISTALINA GEORGIEVA SPEAKING WITH HASLINDA ON THE -- HASLINDA AMIN. ONE OF THE HORROR STORIES THIS THURSDAY ACROSS ASIA PACIFIC, YOU HAVE DBS DOWN 4.1%. HE WILL BE OF ABOUT 4.7%. REALLY REFLECTING SOME OF THE CONCERN WE SEE OVER SURGING BOND YIELDS, SO THIS IS A SECOND STRAIGHT DAY THAT WE SEE THESE DECLINES. JP MORGAN ALSO WARNING THAT SURGING BOND YIELDS WILL HIT THIRD QUARTER EARNINGS FOR SOUTHEAST ASIAN LENDERS, SO WE HAVE QUITE A BIT OF SOFTNESS THERE. WE ALSO HAVE A JP MORGAN COMMENT THAT THE SURPRISE HEADING INTO THIRD QUARTER 2026 HAS LIKELY SKEWED NEGATIVE FOR QUITE A FEW BANKS UNDER THEIR COVERAGE. COMING UP NEXT, RISING FUEL PRICES, PRIVATE JET DEMAND. DESPITE THAT, APPARENTLY STILL FLYING HIGH. UP NEXT, WE LEARN WHY AND IF THAT IS KEEPING IPO PLANS AIRBORNE. THIS IS BLOOMBERG. ♪ FIGHTING IS INTENSIFYING IN YEMEN AFTER THE IRAN BACKED HOUTHIS ATTACKED TWO AIRPORTS KILLING THREE PEOPLE AND INJURING DOZENS. THE SAUDI LED COALITION IN YEMEN SAYS IT DESTROYED 82 HOUTHIS MILITARY TARGETS. OUR EDITOR JOINS US NOW. WHAT DO WE KNOW ABOUT THE LATEST ATTACKS ON THE SAUDI AIRPORTS AND HOW DO THE ESCALATING TENSIONS AFFECT THE WIDER REGION? JOHN: AS YOU SAID, WE SAW THREE DEAD, SEVERAL DOESN'T INJURED. IT IS THE FIRST TYPE OF ATTACK IF THIS SORT IN MANY YEARS. AND IT RAISES THE RISK OF LEARNED HOW TORY CYCLE, WHICH WE WILL SEE FIGHTING INTENSIFIED. THE ONE KEY ISSUE TO LOOK AT THIS IS THE CRUCIAL WATERWAY AT THE BOTTOM OF THE RED SEA. AT ONE POINT, ABOUT 10% OF GLOBAL TRADE PASSED THROUGH THIS WATERWAY. THIS IS WHAT THE HOUTHIS WANT TO CONTROL. IT COULD INCREASE THE THREAT TO SHIPPING OIL IN THE REGION. AND THERE IS ALSO ANOTHER FACET OF THIS, THAT PAKISTAN, WHICH HAS A MILITARY ARRANGEMENT WITH SAUDI ARABIA, APPEARS TO BE JOINING THE FIGHTING. IT IS UNUSUAL FOR THIS TO HAPPEN. PAKISTAN IS ALSO WORKING AS A MEDIATOR IN THE IRAN-U.S. CONFLICT. LOTS AT PLAY. RISK OF THE WIDENING CYCLE OF RETALIATION AND THE WATERWAY SHIPPING AND OIL SUPPLIES, ALL AT RISK BECAUSE OF WHAT'S GOING ON. PAUL: WE HAVE HAD SOME REPORTING FROM THE ATLANTIC. WHAT IS IT SAYING ABOUT THE POSSIBILITY OF RENEWED U.S. STRIKES ON IRAN AND THE REASONING BEHIND THIS? JON: THE ATLANTIC SPOKE TO SOME ADMINISTRATION OFFICIALS SAYING TRUMP IS LOOKING AT THE POSSIBILITY OF STRIKING IRAN BEFORE THE MIDTERMS. TRUMP PREVIOUSLY SAID THIS IS SOMETHING HE WILL LOOK AT AFTER THE MIDTERMS WHEN THE U.S. MOVES ONE MORE AIRCRAFT CARRIER STRIKE GROUP TO THE REGION. THE REASONING BEHIND THIS IS THAT TRUMP WANTS TO SHOW STRENGTH AHEAD OF THE ELECTIONS, AND PERHAPS SHOW SOME WAY CLAIM A VICTORY AS VOTERS GO TO THE POLLS. THE ONE THING IS WE HAVE SEEN WHAT HAPPENS WITH THE STRAKES. IRAN RESPONDS BY ATTACKING U.S. ALLIES IN THE REGION, U.S. MILITARY BASES. TO GOES AFTER ENERGY INFRASTRUCTURE. AND WE SEE A THREAT TO THE U.S. MILITARY, OIL SUPPLIES, AND THIS LEADS TO INCREASED PRICES FOR OIL. SOMETHING THE REPUBLICANS AND TRUMP DON'T WANT TO SEE AHEAD OF THEM IN TERMS. THE POPE -- WE HAVE SEEN WHAT HAPPENS WITH THE STRIKES BEFORE, AND THE RESULT THAT TRUMP MAY BE LOOKING FOR MAY BE QUITE DIFFERENT FROM WHAT ACTUALLY HAPPENS, IF HE DOES GO AHEAD OF THE STRIKES AHEAD OF THE MIDTERM ELECTIONS. PAUL: WE ALSO HAVE A REPORT THAT A TANKER WAS ATTACKED OFF THE COAST OF QATAR. HOW SIGNIFICANT IS THIS? JON: THE INTERESTING THING IS THE PLACE WHERE IT HAPPENED IS ONE OF THE DEEPEST STRIKES IN ABOUT A MONTH SINCE IRAN WAS WARNING ABOUT SHIPPING IN THE REGION. IT SHOWS THE THREAT TO SHIPPING, AS WE HAVE SEEN AN INCREASE IN OIL GETTING OUT OF THE STRAIT OF HORMUZ. BY GOING DEEP IN THERE, IT SHOWS THAT SHIPS IN VARIOUS PARTS OF THIS WATERWAY ARE AT RISK. IT RENEWS WORRIES ABOUT WHAT MAY HAPPEN NEXT. IT IS A RENEWAL OF THE THREATS WE HAVE SEEN BEFORE, AND JUST RAISES NEW WORRIES ABOUT SHIPPING AND OIL SUPPLIES. PAUL: BLOOMBERG EDITOR JON HERSKOVITZ THERE. LET'S CHECK ON HOW THE REGIONAL AIRLINE STOCKS ARE DOING. RISING CRUDE PRICES HAVE MAJOR ASIA-PACIFIC CARRIERS LOWER IN TODAY'S TRADING AS JET FUEL COSTS SQUEEZE OPERATING MARGINS. CATHAY PACIFIC SEEMS TO BE THE ONLY ONE BUCKING THE TREND. LET'S GET MORE ON THE ENERGY PRICE IMPACT ON AVIATION WITH THOMAS FALK, FOUNDER AND CHAIRMAN OF THE VISTA GLOBAL, ONE OF THE WORLD'S TOP GLOBAL PRIVATE AVIATION COMPANIES. THANK YOU FOR YOUR TIME TODAY. I'M WONDERING AGAINST THIS BACKDROP OF HIGHER ENERGY PRICES, HOW ARE YOU FINDING DEMAND AT THE MOMENT COMPARED TO PREVIOUS YEARS? THOMAS: GOOD MORNING. HAPPY TO BE WITH YOU. DEMAND IS REALLY AT THE STRONGEST LEVEL SINCE THE POST-COVID DAYS. WE ARE SEEING GLOBAL DEMAND CONNECTING CONFIDENT -- COUNTED -- CONTINENTS FROM OUR USUAL CUSTOMER BASE. IT BENEFITS FROM THIS MASSIVE SHIFT TO A SUBSCRIPTION GOOD -- BUSINESS MODEL P THE COMPANY IS GROWING. WE HAVE SEEN A RECORD FIRST NINE MONTHS OF NUKE AND -- NEW SUBSCRIPTION SALES. THE FUEL PRICES AS IT RELATES TO THE PRIVATE AVIATION INDUSTRY IS A PASS-THROUGH. IT DOESN'T AFFECT THE COMPANY IN TERMS OF OUR OPERATING MARGINS. PAUL: SO YOU PASS THE COST IN FULL ON TO CUSTOMERS OR DO YOU RUN HEDGING PROGRAMS AS WELL? THOMAS: ABSOLUTELY NO HEDGING. IT IS A FULL PASS-THROUGH. WE ARE COMPARED TO FULLY AIRCRAFT OWNERSHIP. WE ARE FLYING A LOT MORE HOURS IN THE SAME INFRASTRUCTURE. HENCE WE ARE SIGNIFICANTLY MORE COST ATTRACTIVE THAN OWNING AN AIRPLANE. IF YOU WERE TO OWN AN AIRPLANE, YOU WOULD PAY THE SAME FUEL WITH RATES AT HIGHER LEVELS OR LOWER LEVELS. PAUL: YOU MENTIONED THAT DEMAND IS AS GOOD AS YOU HAVE SEEN WHERE THE BEST YOU HAVE SEEN SINCE COVID. CAN YOU TELL US WHAT YOUR BEST MARKETS ARE AT THE MOMENT? AND WHO IS DRIVING THIS DEMAND? WHO ARE YOUR KEY CUSTOMERS? THOMAS: WE HAVE SEEN THE DEVELOPMENT OVER THE LAST COUPLE OF YEARS, WHAT WE CALL THE BORDERLESS BILLIONAIRES. THERE IS WEALTH BEING CREATED AROUND THE GLOBE. ESPECIALLY DUE TO THE RECENT INTRODUCTION OF OUR GLOBAL 8000 FLEET. IT REALLY CONNECTS ALL THE CONTINENTS IN THE WORLD PRETTY MUCH NONSTOP. WE HAVE THE LARGEST FLEET OF THOSE MOBILE 8000. SOUTHEAST ASIA IS FINALLY CONNECTED NONSTOP TO AMERICA. FINALLY CONNECTED NONSTOP TO EUROPE. WHEN WE TALK ABOUT THE BORDERLESS BILLIONAIRES, IT IS REALLY THE TECH INDUSTRY, THE FINANCE INDUSTRY DRIVING THAT GROWTH. WE HAVE SEEN A LOT OF CORPORATE DEMAND. AND WHAT CAN MAYBE BE DONE ON ZOOM FOR OPERATING LEVEL, ULTIMATELY DEALS ARE DONE BETWEEN HUMAN BEINGS. AND THEY NEED TO GET TO POINT-TO-POINT TO THE REMOTEST PLACES ON THE PLANET. AND THAT IS WHAT REALLY FACILITATED THE NOTICE THAT IS REALLY DRIVING THE GROWTH AT THE TOP END. PAUL: AT THIS CORPORATE END, DO YOU FIND, JUST TO CIRCLE BACK TO YOUR FIRST POINT, WITH ENERGY COSTS ELEVATED, DO YOU FIND THAT SOME CORPORATE CLIENTS ARE TRIMMING COSTS BY GETTING RID OF THE CORPORATE JET AND COMING TO YOU FOR THE SUBSCRIPTION MODEL INSTEAD? THOMAS: WHAT WE HAVE SEEN IS IN GENERAL, THERE IS THIS TRANSFORMATIONAL DEVELOPMENT OF ASSET LIGHT BEING MORE ACCEPTED. IF YOU DO A SUBSCRIPTION WITH VISTA, IT IS OPEC'S VERSUS GOING TO THE BOARD AND ASKING FOR A CAPEX INVESTMENT INTO A 50 MILLION OR $80 MILLION JET. THAT TREND IS STRONG. IT IS ALL AROUND THE WORLD. IT USED TO BE MAY BE MORE IN THE WESTERN WORLD. NOW IT IS EVERYWHERE AROUND THE GLOBE. AND THAT IS REALLY DRIVING THE SUBSCRIPTION MODEL VERSUS THE FULL FRACTIONAL AIRCRAFT MODEL. PAUL: I UNDERSTAND YOU ARE EXPANDING YOUR FLEET AS WELL. CAN YOU GIVE US MORE DETAIL ON THOSE UPGRADES, WHAT YOU ARE BUYING? IS THERE ANY PARTICULAR MANUFACTURER YOU FAVOR AND ARE YOU DOING RE-FITS? THOMAS: IT IS NOT REALLY ABOUT FAVORING A MANUFACTURER. FOR EVERY AIRCRAFT PURCHASE, WE DO A PROPER RFP. WE COMPARE THE MANUFACTURERS. WE HAVE A HIGH CONCENTRATION OF HOME MORTGAGES. WE HAVE A 20 PLUS YEAR RELATIONSHIP WITH BUM BARDI. WITH THE GLOBAL 8000, WE HAVE UPGRADED OUR EXISTING FLEETS OF 7500 TO 8000'S, ALLOWING US FOR CLOSE TO TWO HOURS OF RANGE AND BETTER PERFORMANCE. LOWER CABIN PRESSURE. THAT IS CERTAINLY ONE PROGRAM WE ARE IN FULL EXECUTION MODE. ON THE SUPERMOON TRANSCONTINENTAL JET INFRASTRUCTURE, WE PLACED A LANDMARK ORDER IN FEBRUARY FOR 40 FIRM AND ADDITIONAL OPTIONS, GIVING THE COMPANY ACCESS TO A TOTAL OF POTENTIALLY 160 AIRPLANES. THAT IS A 10 YEAR TRANSACTION SECURING SUPPLY FOR US THAT WAS EXTREMELY IMPORTANT, GIVEN THE DEMAND SIGNALS THAT WE ARE HAVING ALL AROUND THE WORLD. IN US A CLEAR PATH TO FULFILL THIS DEMAND, WHILE AT THE SAME TIME HAVING OPTIONALITY BETWEEN THE FIRM ORDER AND OPTIONS THAT WE HAVE ACCESS TO OVER THAT PERIOD OF 10 YEARS. PAUL: THESE PLANES ARE NOT CHEAP. AND ALSO WE ARE IN THEN A ERA OF EXPENSIVE MONEY, RISING BORROWING COSTS AND A LOT OF COMPETITION FOR THAT MONEY. HOW ARE YOU NAVIGATING THAT ENVIRONMENT? THOMAS: OUR BALANCE SHEET IS MOSTLY INSTITUTIONALLY FINANCED WITH LONGER-TERM COMMITMENTS. WHERE -- WE ARE AT A STAGE WHERE WE ARE PRE-SELLING THE CAPACITY THAT WE ARE TAKING ON. IF WE TAKE A CHALLENGER 3500, USUALLY WE WOULD PROBABLY SELL THE CAPACITY TO FULL FIVE CLIENTS COMING ON. IT IS PRETTY MUCH SELF FINANCING. ALTHOUGH IT GOES ON THE BALANCE SHEET. THERE IS AN IMMEDIATE DELEVERAGING FACT BECAUSE OF WHAT THE AIRPLANES ARE CREATING ONE THERE -- ONCE THE AIRPLANE IS DELIVERED. EVERY FLIGHT WE DO IS A PROFITABLE FLIGHT BECAUSE WE ARE NOT DEPENDING ON LOAD FACTORS OR ANYTHING ELSE. IT IS THE EXACT OPPOSITE OF AN AIRLINE. THE SUBSCRIPTION GIVES US LONG-TERM VISIBILITY, USUALLY THREE TO FIVE YEAR CONTRACTS. GIVES US BUILD -- VISIBILITY ON REVENUE AND CASH, AND HENCE THAT IS THE WAY IT IS FINANCED AS WE ARE ROLLING OUT THIS. PAUL: ANOTHER WAY TO RAISE MONEY WOULD BE TO GO PUBLIC, HAVE AN IPO. I KNOW THIS IS SOMETHING YOU HAVE CONSIDERED. IS THERE ANY DETAIL YOU CAN GIVE US OR UPDATE ON THAT FRONT? THOMAS: YOU SAW THE ARTICLES THAT BLOOMBERG CAME OUT WITH. AT THIS POINT IN TIME, I CAN CONFIRM THE COMPANY HAS RETAINED INVESTMENT BANKS TO ADVISE IT ON ITS OPTIONALITY'S. THAT IS WHAT WE HAVE BEEN WORKING WITH THE INVESTMENT BANKS ON. UNTIL FURTHER NOTICE, WE WILL COME BACK IF THERE IS ANY NEWS BREAKING ON THAT. PAUL: YOU ARE WORKING IN A COMPETITIVE SPACE. DO YOU SEE ANY CONSOLIDATION HAPPENING, OR ARE THERE ANY TARGETS YOU ARE LOOKING AT FOR AN ACQUISITION? THOMAS: NO ACQUISITIONS IN MIND. WE DID A FEW ACQUISITIONS POST-COVID WORLD. THE ORDER WE PLACED WITH BUM BARDI IN FEBRUARY GIVES US LONG-TERM SUPPLY FOR THE DEMAND WE ARE HAVING. WE ARE THE ONLY COMPANY WITH A TRULY GLOBAL INFRASTRUCTURE. THERE REALLY IS NOTHING TO BUY OUT THERE. OUR MAIN COMPETITION IS FULL AIRCRAFT OWNERSHIP. AND GLOBAL INFRASTRUCTURE WE HAVE TODAY DOES NOT REQUIRE WE ENTER A NEW MARKET. I THINK INDIA IS AN EXAMPLE THAT IS ORGANIC GROWTH, WHERE THE ONLY INTERNATIONAL PLAYER -- WHERE WE ARE THE ONLY INTERNATIONAL PLAYER IN INDIA. THAT IS HOW WE SATISFY THE GROWTH. YOU WILL NOT SEE ANY M&A ACTIVITY AT VISTA IN THE FORESEEABLE FUTURE. PAUL: YOUR HEADQUARTERS IS OF COURSE IN DUBAI. YOU DID EXPERIENCE SOME DISRUPTION EARLIER THIS YEAR. NOW IT'S BUSINESS AS USUAL. DO YOU THINK ABOUT OR FACTOR IN THE ODDS OF AN UPSURGE IN THE CONFLICT IN THE GULF, AND WHAT ARE YOUR PLANS IF THAT HAPPENS? THOMAS: LOOK, I ALWAYS SAY THESE GEOPOLITICAL THINGS THAT ARE HAPPENING ARE REALLY BEYOND OUR CONTROL. ANYTHING WE CAN'T INFLUENCE, WHAT WE DO IS WE PLAN WELL FOR THEM. JUST LIKE WE PLANNED IN ANY CASE OR ANY OF THESE GEOPOLITICAL DISRUPTIONS. USUALLY WHAT HAPPENS IN THE FIRST 30 TO 60 DAYS, THERE IS A SLIGHT DISRUPTION TO THE INFRASTRUCTURE. WHAT DOES THAT MEAN? WE MIGHT HAVE A CREW CHANGE IN DUBAI AT THAT POINT IN TIME. A NUMBER OF PILOTS MIGHT BE STUCK. THERE IS ENOUGH CONTINGENCY BUILT INTO THIS. THE COMPANY IS 22 YEARS OLD. WE HAVE SEEN A LOT IN THOSE 22 YEARS. THERE IS A HUGE AMOUNT OF EXPERIENCE IN THE COMPANY, HOW TO DEAL AND HOW TO PLAN FOR SUCH POTENTIAL DISRUPTIONS. YES, BUSINESS IS MOSTLY BACK TO USUAL. IT IS MONITORED ON ONE CONCERN. SAFETY FOR OUR CLIENTS, OUR CREWS, AND THAT IS HOW WE ARE MANAGING IT DAY IN AND DAY OUT. WE ARE MONITORING THE DEVELOP IN'S AND THERE IS DAILY BRIEFINGS ON POTENTIAL RISK FACTORS. AND WE ARE PLANNING ACCORDINGLY AND COMMUNICATE WITH OUR CLIENTS ACCORDINGLY. OF COURSE, THEY ARE VERY UNDERSTANDING FOR ANY POTENTIAL SMALL DISRUPTIONS THAT MIGHT HAPPEN ON THE DAY OR WEEK WHEN THEY WANT TO TRAVEL. PAUL: THOMAS, THANK YOU SO MUCH FOR YOUR TIME. THAT IS THOMAS FLOHR, FOUNDER AND CHAIRMAN OF VISTA GLOBAL. HERE ARE THE STORIES WE ARE FOLLOWING. BLOOMBERG HAS BEEN TOLD THAT CHINA GOT HOLD OF PARTS FROM AN F-35 STEALTH FIGHTER JET AFTER A UPS EMPLOYEE MISSED AN EMAIL WARNING NOT TO ROUTE THE SHIPMENT THROUGH HONG KONG. THE SOURCES THE WEAPONS FROM AUSTRALIA WERE MISTAKENLY SENT THROUGH HONG KONG TO SPEED UP DELIVERY. PENTAGON AND STATE DEPARTMENT ARE INVESTIGATING WHILE U.S. LAWMAKERS WANT TO REVIEW THE GLOBAL SUPPLY CHAIN FOR U.S. ARMS. THE WORLD HEALTH ORGANIZATION IS PRESSING RUSSIA FOR MORE INFORMATION ON THE DEATH OF A WORKER ADA RESEARCH LAB. THE U.N. AGENCY HAS BACKED AWAY FROM AN EARLIER DECLARATION THAT THE RISK TO THE GENERAL POPULATION WAS LOW, SAYING IT IS IMPOSSIBLE TO MAKE AN ASSESSMENT. PRESIDENT TRUMP SAYS HE WILL RAISE THE ISSUE WITH VLADIMIR PUTIN WHEN THE LEADERS SPEAK BY PHONE. THE PEOPLE'S BANK OF CHINA ADDED MORE GOLD TO RESERVES LAST MONTH, EXPANDING THEIR HOLDINGS BY 740,000 OUNCES. THIS MARKS THE 23RD MONTH OF ACCUMULATION, AS PRICES WEAKENED TOWARD $4000 AN OUNCE. GOLD SHED MORE THAN 6% LAST MONTH, SOARING ENERGY PRICES FROM THE MIDDLE EAST CONFLICT FANNED INFLATION. PLENTY MORE AHEAD. THIS IS BLOOMBERG. ♪ PAUL: LET'S TAKE A QUICK CHECK OF HOW CRYPTOCURRENCIES ARE PERFORMING AT THE MOMENT. LITTLE BIT OF WEAKNESS CREEPING IN. BITCOIN HAS BEEN DOWN ABOUT 3%. EITHER -- ETHER SLUMPING AS WELL. THIS DRAWDOWN HAS BEEN ACCELERATING. ETHEREUM EVER SO SLIGHTLY STRONGER, BUCKING THE TREND. OUR NEXT GUEST BELIEVES TOKENIZATION IS MOVING BEYOND EXPERIMENTATION AND STARTING TO RESHAPE THE INFRASTRUCTURE OF FINANCIAL MARKETS. LET'S GET TO THE HEAD OF DIGITAL ASSETS DISTRIBUTION AT FIDELITY INTERNATIONAL. THANKS SO MUCH FOR JOINING US TODAY. YOU SEE TOKENIZATION EXPANDING BEYOND THAT EXPERIMENTAL STAGE. HOW DO YOU SEE IT GETTING APPLIED IN REAL-WORLD SETTINGS AT THE MOMENT? EMMA: GOOD MORNING. THIS WEEK, FIDELITY INTERNATIONAL HAS LAUNCHED A DIGITAL LIQUIDITY STRATEGY, AND TO ANSWER YOUR QUESTION, IT'S BECAUSE WE SEE A LOT OF INSTITUTIONS MOVING ON CHAIN AT THE MOMENT. WE THINK WE HAVE THREE MAIN PIECES COMING TOGETHER. FIRST, REGULATION. SECOND, BETTER CONDUCTIVITY BETWEEN OFF CHAIN AND ON CHAIN INFRASTRUCTURE, AND THIRD AND MORE IMPORTANTLY, CLIENT DEMAND. AS WELL, BANKING INSTITUTIONS LOOKING AT REBUILDING FOR CAPITAL MARKETS, SO WE ARE REALLY EXCITED ABOUT THAT. PAUL: WHEN DO YOU EXPECT TO SEE TOKENIZED ASSETS START TO GET COMMONLY USED AND WHAT MIGHT BE THE CATALYST THAT BRINGS THEM INTO THE MAINSTREAM? EMMA: AS I MENTIONED, REGULATION. WE ARE HERE BASED IN ASIA. REGULARITY HAS BEEN GIVEN BY SINGAPORE, BY HONG KONG, BY MANY IN ASIA, BUT ONE OF THE CATALYSTS HAS BEEN THE U.S. THE SEC HAS PROVIDED AN INNOVATION EXEMPTION, ENABLING A LOT OF USE CASES TO BE DEVELOPED BY FINANCIAL INSTITUTIONS, AND EVENTUALLY, THIS WILL BRING MORE ASSETS ON CHAIN. WHAT WE ARE EXCITED IS THE FACT THAT THOSE ASSETS, THANKS TO TOKENIZATION, CAN HAVE MORE UTILITY. WITH OUR TOKENIZED LIQUIDITY STRATEGY, WE ARE SEEING SOME OF OUR CLIENT BASE TRYING TO LOOK BEYOND JUST HOLDING THE ASSET BUT USING IT AS COLLATERAL IN SOME FINANCIAL USE CASES, SO THAT IS INTERESTING. -- THAT IS AN INTERESTING DEVELOPMENT WE ARE SEEING. WE SEE THAT MORE AND MORE GOING FORWARD. PAUL: THERE ARE A FEW ADVANTAGES TO TOKENIZATION. INSTANT SETTLEMENT, HIGH LIQUIDITY, 24/7 MARKETS AS WELL, BUT DO YOU SEE THAT HAVING SOME KNOCK ON EFFECT IN TERMS OF VOLATILITY, AND WHAT ABOUT INVESTORS THAT DO NOT HAVE THE RESOURCES TO MONITOR INVESTMENTS 24/7? WE BELIEVE THAT LONG-TERM MARKETS WILL BECOME MORE 24/7 SO THAT WE ALL HAVE TO ADAPT IN THIS NEW 24/7 WORLD. DO YOUR POINT, THIS CAN CREATE SOME RISK, BUT WHAT WE THINK IS THE NEWEST GENERATION IS EXPECTING MARKETS TO BE AVAILABLE 20 47. A LOT OF YOUNGER INVESTORS HAVE STARTED TO INVEST INTO CRYPTO AT A YOUNGER AGE, REACHING A MOMENT WHERE THEY ARE REACHING TRADITIONAL INVESTMENT AT EXPECTING THE SAME EXPERIENCE CRYPTO HAS GIVEN THEM. IF WE WANT TO STAY CLOSER TO OUR CUSTOMER, WE HAVE TO DEVELOP A PRODUCT THAT SATISFIES THEIR YEARS OF EXPERIENCE. THAT IS WHAT TOKENIZATION CAN OFFER, BUT IT'S NOT ONLY TOKENIZATION BUT THE ABILITY TO CONNECT THE TOKEN WITH THE OVERALL PAYMENT INFRASTRUCTURE, AND, YES, THIS CAN OFFER -- THIS CAN BRING NEW RISK TO THE MARKET. OUR OPERATIONAL INFRASTRUCTURE, OUR GOVERNANCE SYSTEM AS WELL, SO IT IS ANOTHER OVERALL UPLIFT, AND THAT'S WHY WE DO NOT LEAVE THE WEEKEND ON FRIDAY NEXT WEEK AND NEXT MONDAY, EVERYTHING WILL BE 24/7 ON CHAIN. WE DO NOT BELIEVE THAT. WE THINK IT WILL BE GRADUAL, AND AS A RESULT, TECHNOLOGY WILL ADAPT TO THAT NEW MARKET REALITY. PAUL: IF THIS DOES GET WIDELY ADOPTED, THERE IS OBVIOUSLY A LOT OF POTENTIAL FOR DISRUPTION OF A TRADITIONAL INDUSTRY. WHAT HAPPENS TO INDUSTRY ROLES LIKE AGENTS, CUSTODIANS, OTHER INTERMEDIARIES AS WELL? THOSE ROLES WILL EXIST BUT CHANGE. IF YOU LOOK FOR EXAMPLE AT OUR TOKENIZED LIQUIDITY STRATEGY, THE TRANSFER AGENT HAS A NEW HOLD, SO THEY MAINTAIN THE RECORD OF OWNERSHIP ON CHAIN. IT IS ENABLING ACCESS FOR INVESTORS. THIS IS A SORT OF EVOLUTION AROUND MONITORING MORE WHAT'S HAPPENING AND AROUND THE TOKENS, THIS IS WHAT WE CALL KY T, SO BASICALLY WHERE THE TOKEN IS COMING FROM. EVEN MORE IMPORTANT, ESPECIALLY IN THE CONTEXT OF DIGITAL ASSET CUSTODY, THIS HAS BEEN CONTROL AND SAFEKEEPING, A KEY PART OF DIGITAL ASSETS, SO THIS WILL BECOME EVEN GREATER. AN EVOLUTION OF THE WHOLE ANDY FUNCTION, THOSE PROVIDERS ARE BRINGING TO THE INDUSTRY. PAUL: IF WE HAVE THIS CONVERSATION AGAIN IN 2030, WHAT DO YOU THINK CAPITAL MARKETS LOOK LIKE THEN? WE THINK BY 2030, THERE COULD BE 1% TO 2% OF CAPITAL MARKETS THAT WILL BE ON CHAIN AT THAT POINT AND POTENTIALLY 10% OF LIQUIDITY, SO VOLUME TRADING WILL INCREASE AS A RESULT. ENABLING A YOUNGER GENERATION TO INVEST, TO PREPARE FOR THEIR FUTURE AND FOR INSTITUTIONS TO DO MORE WITH THEIR ASSETS THAN JUST HOLD ASSETS. BRINGING VOLATILITY, PUTTING PORTFOLIO ON CHAIN, SO IT IS REALLY AN EXCITING WORLD THAT IS AHEAD OF US. PAUL: THANKS SO MUCH FOR YOUR TIME TODAY. JUST BEFORE WE GO, LET'S TAKE A QUICK LOOK AT TOMORROW'S SHOW. WE WILL EXAMINE INDONESIA'S INVESTMENT PRIORITIES. WE BE JOINED BY THE CIO. PLUS, WE WILL BE ASKING FORMULA ONE'S CEO IF THE REGION'S SMOKE HAZE PROBLEM COULD DAMPEN ATTENDANCE. WE WILL ALSO BE JOINED BY FRANKLIN TEMPLETON'S CEO WHO WILL JOIN US FOR A DISCUSSION ABOUT MARKETS, BONDS, AND THE AI RACE. "HORIZONS MIDDLE EAST & AFRICA" IS UP NEXT. KEEP IT HERE WITH US. THIS IS BLOOMBERG. ♪