China Stocks Dip As Soft Travel Data Drags on Sentiment

>> 9:00 A.M. SHANGHAI, SHENZHEN, AND HERE IN HONG KONG. >> COUNTING DOWN TO THE OPEN OF MARKETS IN GREATER CHINA. ASIAN STOCKS TRADING LOWER THE TOP OF LOSSES ON WALL STREET. SAMSUNG'S THIRD-QUARTER EARNINGS MISS. MARKETS SET TO RESUME TRADE AS TRADERS RETURN FROM THE HOLIDAY. YVONNE: WORRIES OVER THE HEALTH OF CHINA'S DOMESTIC ECONOMY. DAVID: THE EU IS PREPARING FRESH LIMITS ON IMPORTS OF CHINESE VEHICLES, RAISING TENSIONS AHEAD OF CRUCIAL TRADE TALKS IN BEIJING. YVONNE: MAINLAND MARKETS REOPENING. DAVID ON GLASSES BACK. CERTAINLY IT'S A BIG ONE AS -- FOR AI AS WELL. YOU KNOW. SOMETIMES WHEN YOU LEAVE, A LOT OF STUFF HAPPENS. MAINLAND MARKET STUDENT MISS TOO MUCH. THE DROP IN THE HANG SENG HAS BEEN DRAMATIC AS WELL. WE ARE NOT GETTING MANY POSITIVE TAILWINDS. THE HOLIDAY DATA LOOKING WEAK. DAVID: THE ECO-NUMBERS AND COMMENTARY FROM ECONOMISTS POINT TO THE FACT THAT THIS ECONOMY NEEDS MORE HELP. I'M CURIOUS TO SEE WHAT THE BOND MARKETS REOPEN. THAT WILL BE YOUR FIRST TELL AS WE GO INTO THE REOPEN TODAY. THIS NOTE IS WHAT CAUGHT MY EYE. MIGHT MEET THE TARGET BUT WE ARE CLOSE TO A RECESSION FOR THE DOMESTIC ECONOMY. NOT TO START THE SHOW OFF ON A NEGATIVE NOTE. THAT'S A CONVERSATION AS WE GO INTO THE FOURTH QUARTER. WHETHER THE ECONOMY NEEDS A LITTLE BIT OF A NUDGE. YOU MENTIONED HONG KONG. CERTAINLY THE LACK OF UPWARD MOMENTUM IN THE MARKET. WE WILL SEE HOW THAT PLAYS OUT AS WE GO INTO THE OPEN TODAY. YVONNE: SAMSUNG STORY. RECORD PROFITS BUT STILL MISSED THE STREET. THAT'S THE HEADLINE RIGHT NOW. THE STOCK IS NOT DOING WELL. DOESN'T BODE WELL FOR THE AI TRADE EITHER. DAVID: TSMC ALSO COMING ONLINE RIGHT NOW. TAIWAN IS OUT SEVEN TENTS OF 1%. HEADWINDS FROM OVERNIGHT ON WALL STREET WORTH POINTING OUT. DECLINES IN U.S. STOCKS. PERHAPS THAT'S THE DIRECTION OF TRAVEL. WE MENTIONED GOLD. THE REAL RATE STORY IS RISING GOLD PRICES. ALSO TO TALK ABOUT, WE HAVE SEVERAL BOND OPTIONS. ONE WAS A DECENT U.S. 10 YEAR OVERNIGHT. 30 YEAR BOND OPTION IN JAPAN TODAY. SEVERAL ON DECK AS FAR AS GDB'S ARE CONCERNED. THE OTHER BIG ONE WAS THIS MAJOR OVERHAUL OF THE HANG SENG TECH INDEX. YVONNE: YEAH. THAT'S ONE THING TO WATCH. WE DON'T KNOW WHAT THE STOCKS ARE AND WHAT'S GOING ON NOW AT THE MOMENT. THAT DOES HAVE IMPLICATIONS ON THE TECH TRADE AS THEY START TO SHIFT THINGS AROUND. WE WILL WATCH HOW THAT IMPACTS EV'S AND THE LIKE TODAY. THAT WILL BE A BIG ONE. THERE IS STILL SOME TENSION ON WHETHER THEY COULD REACH A DEAL OR NOT. THERE'S A LOT ON TOPPY OR. GOOD TO HAVE YOU ON THE CHINA SHOW. HOW DO WE THINK THE MAINLAND WILL REOPEN TODAY? >> PROBABLY OPEN LOWER. DURING THE HOLIDAY, HONG KONG IS DOWN SUBSTANTIALLY. CHINESE ADR IS DOWN A BIT AS WELL. ASIA SHOULD OPEN DOWN. WE WILL SEE OVER THE DAY WHAT KIND OF POSITIVE NEWS COULD STEADY THE SHIP. DAVID: THERE'S A GROWING CHORUS OF ECONOMISTS AND ANALYSTS TALKING ABOUT THE NEED FOR MORE STIMULUS. WE ARE IN THE FOURTH QUARTER. WE KNOW WHAT HAPPENED TWO YEARS AGO, SEPTEMBER 2024. ARE WE LIKELY TO GET THAT REFLATIONARY MOVEMENT? >> NORMALLY THIS IS THE SEASON WHEN WE LIVE HERE POLICY ANNOUNCEMENTS. BEFORE THE HOLIDAY, WE HAVE MORTGAGE SUBSIDY WHICH ALLEVIATES SOME OF THE PAINS FOR THE CHINESE HOMEBUYERS. ALSO RELAX HOW THE CHINESE BUYERS WILL GET MORE THAN TWO BANKS. NORMALLY WHEN THE CHINESE GOVERNMENT ANNOUNCES POLICIES, IT TENDS TO BE THE WHOLE PACKAGE. I THINK THE MORTGAGE LOOKS TO BE A HERALD OF THINGS TO COME. OVER THE NEXT COUPLE WEEKS, WE SHOULD HEAR MORE DETAILS ON THE ENTIRE PACKAGE. YVONNE: WHAT DO YOU THINK WILL COME OUT OF THE REST OF THE PACKAGE? >> A QUICK WIN WOULD BE RESUMPTION OF THE CONSUMPTION STIMULUS. LAST YEAR, WE HAD THE CONSUMPTION POUPON -- COUPON. I THINK WE WILL SEE RETAIL SALES IN MANY TIER ONE CITIES GOING INTO THE NEGATIVE. I THINK THAT'S BECAUSE OF THE VERY HIGH BASIS FROM LAST YEAR. A QUICK WIN GIVEN THE CONSUMPTION SITUATION AND THE NATIONAL HOLIDAY SPENDING, A QUICK WIN WOULD BE CONSUMPTION COUPON. OTHER THINGS SUCH AS EXPANDING THE INTEREST RATE PAYMENT SUBSIDY ACROSS MANY INDUSTRIES. NOT JUST MORTGAGE. FOR EXAMPLE, TECH COMPANIES IF THEY WANT TO GET A LOAN FROM THE BANKS. IT WOULD MAKE IT EASIER FOR THEM TO DO MORE INTO THE FUTURE. IT SET HER UP. THERE ARE SO MANY THINGS THAT CAN BE DONE AT THIS STAGE. ALSO THE GOOD OLD AAA INTEREST CAP. DAVID: JUST ON THE STATE OF THE STOCK MARKET. OBVIOUSLY WE DON'T HAVE MAINLAND FOR ABOUT A WEEK NOW. LET'S LOOK AT HONG KONG. WHY DO YOU THINK IT IS DONE TERRIBLY? YVONNE: SENTIMENT IS SO BAD. >> MOSTLY BECAUSE OF THE VERY HIGH U.S. YIELDS. I THINK HONG KONG IS A MARKET THAT HAS BEEN SQUEEZED ON BOTH SIDES. ON ONE HAND, THE CHINESE FUNDAMENTAL IS NOT IMPROVING JUST YET. AT THE SAME TIME, THE FUNDING COST IN THE U.S. AND HERE IN HONG KONG IS BEING SQUEEZED. AT THE SAME TIME, IF YOU LOOK AT WHAT THE CHINESE GOVERNMENT IS DOING, IT'S ACTUALLY TIGHTEN UP CAPITAL OUTFLOWS GOING OUT OF CHINA. PART OF THE HONG KONG MONEY THAT'S GOING TO THE MARKET IS COMING FROM MAINLAND CHINA. FOR EXAMPLE, THE GOVERNMENT TIGHTENED UP IN HONG KONG. IN MY ESTIMATE, MORE THAN ONE THIRD OF HONG KONG FLOW IN THE SECONDARY MARKET HERE. POLICIES SUCH AS THIS IMPACTING HONG KONG IN THE PAST COUPLE MONTHS. ALSO DURING THE HOLIDAY, THERE WAS NO MAINLAND CHINESE MONEY COMING IN AS WELL. THERE'S A LACK OF SUPPORT FOR HONG KONG SHARES. YVONNE: DO I FOCUS MORE ON ONSHORE? THEY'VE HAD A PRETTY VOLATILE FEW WEEKS. >> CHINA AND STAR 50 HAVE GIVEN UP YOUR TODAY GAINS ALREADY. MANY OF THE AI NAMES REMAIN IN THE STORYTELLING STAGE. THEY HAVE VERY LITTLE EARNINGS TO SHOW. NO SALES. THE STORY HAS BEEN BECAUSE IT'S NATIONAL COMPETITION WITH THE U.S.. STRONG POLICY SUPPORT. MONEY SUPPORT FOR MANY OF THESE AI NAMES. AT THE SAME TIME, AFTER THE HYPE IN JUNE AND JULY FOR THE TWO MONTHS, PEOPLE ARE REALLY IMPATIENT TO SEE SOME EARNINGS COMING OUT FROM THIS STORY. THAT'S THE REASON WHY THE U.S. SEMICONDUCTOR NAMES, KOREAN SEMICONDUCTOR NAMES HAD A REBOUND. THE CHINESE NAMES ARE STILL VERY LOW AFTER THE CORRECTION. DAVID: HE WILL BE REJOINING US IN A COUPLE MINUTES HERE. MANAGING PARTNER AND CIO OF ASSET MANAGEMENT. THE HONG KONG TECH ENCZ MARK -- BENCHMARK HAS BEEN CHALLENGED OF LATE. ACTUALLY SET FOR ONE OF THE BIGGEST OVERHAULS YET. IT IS EXPANDING ITS CONSTITUENT COUNT FROM 30 TO 50 WITH GREATER FOCUS ON AI AND ROBOTICS COMPANIES. FOR MORE ON WHAT WE KNOW, OUR MANAGING EDITOR FOR ASIAN EQUITIES IS JOINING US NOW. CERTAINLY A CHANGE THAT IS MUTTON -- MUCH-NEEDED. PEOPLE QUESTION WHETHER OR NOT THE BENCHMARK IS AS RELEVANT TODAY GIVEN THE CURRENT TECH TRENDS. WHAT CHANGES ARE WE LIKELY TO SEE HERE? >> YEAH. GOOD MORNING. AS YOU SAID, THE INDEX IS VASTLY LOSING RELEVANCE. PEOPLE ARE COMPLAINING ABOUT THE INDEX FOR A WHILE NOW. ALL THE CHINESE INTERNET NAMES ARE REALLY STRUGGLING BY THE CONSUMER SIDE OF THEIR BUSINESS. PEOPLE ARE NOT REWARDING THE AI SIDE OF THEIR BUSINESS. THE HEAVYWEIGHTS ARE INTERNET NAMES. HANG SENG INDEX, IT IS LOOKING TO ADD A FEW MORE HARDWARE TECH NAMES THAT ARE REALLY HOT TOPICS RIGHT NOW INTO THAT INDEX TO REJUVENATE INVESTOR IN VAX IN THE INDEX. MAYBE SOME OF THE LLM NAMES. WE'VE WRITTEN STORIES ABOUT HOW THE STOXX 50 INDEX ONSHORE IS NOW THE BENCHMARK, CHASED BY GLOBAL AI INVESTORS. NOBODY IS TALKING ABOUT THE HSTECH INDEX ANYMORE. THAT'S A BIG CONTRAST. TALKING ABOUT HOW THAT EMBODIES CHINA'S CHECK CHAMPION. THESE CHAMPIONS ARE LOSING RELEVANCE. IT'S A MUCH-NEEDED REVAMP. DAVID: JUST TALKED ABOUT HOW THIS MASSIVE OVERHAUL. HANG SENG TECH INDEX. YEARS PASSED. IT'S REALLY LOST ITS LUSTER. 30 TO 50. HOW DO YOU THINK THIS CHANGES SENTIMENT. >> THE INDEX MAKER HERE IN HONG KONG TEND TO BE LACKING THE MARKET SETTING. WHEN IT HAS LIMITS TO THE HANG SENG TECH INDEX, YOU ARE AT THE PEAK OF THOSE TWO STOCKS. AFTER THAT, 90%. YEAH. I THINK IT'S MORE THAN 70% AS WELL. BECAUSE OF THE MARKET WAVE OF THE TWO NAMES, IF YOU LOOK AT THE CONSTITUENTS WITHIN HSTECH, YOU HAVE SOME EV NAMES IN IT. YOU HAVE SOME INTERNET COMMERCE NAMES. DID VERY POORLY THIS YEAR. MIRROR IMAGE OF THE SOFTWARE CENTER. ALL IN ALL, HSTECH, EVEN THOUGH IT HAS TAKEN ITS NAME, IT DOESN'T REFLECT WHAT'S REALLY GOING ON IN THE MARKETPLACE. YVONNE: I WILL GET YOU BACK IN. HSTECH IS TRYING TO EXPAND. THEY ARE SLASHING HUNDREDS OF STOCKS ON THE BENCHMARK HERE TO LURE INVESTORS. WHAT IS THE MESSAGE TO THE INTERNATIONAL INVESTOR COMMUNITY? ON THIS? >> THE MESSAGE IS REALLY ABOUT IMPROVING THE QUALITY OF THE COMPANIES LISTED. THAT EFFORT HAS BEEN GOING ON FOR QUITE A FEW YEARS. I THINK INITIALLY, TALKED ABOUT THIS WHOLE REVAMP IN 2025. THIS MATCHED A FEW HUNDRED NAMES. WITH THE LATEST OVERHAUL, WE ARE GOING TO SEE THE NUMBER OF COMPANIES LISTED ON THE INDEX TO FALL BELOW 1000 IN A COUPLE OF YEARS TIME. STILL, A LOT OF NAMES TO GRAPPLE WITH. ESPECIALLY WITH PASSING INVESTORS. ELIMINATE SOME OF THOSE A LIQUIDS DOLLAR NAMES -- SMALLER NAMES AND ADD BIGGER NAMES. THE INITIAL FEEDBACK FROM INVESTORS IS OVERWHELMINGLY POSITIVE. ELIMINATING SOME OF THE POOR QUALITY NAMES IS GOOD FOR EVALUATION FOR THE INDEX. ALSO FOR THOSE THAT ARE TRYING TO RETAIN OR REMAIN ON THE INDEX, THEY WILL TRY TO DO MORE CORPORATE GOVERNANCE RELATED IMPROVEMENTS OR IMPROVE THEIR PROFITS AS WELL. THAT INTERRED WHEN TRANSLATE INTO THE KIND OF HIGHER VALUATION FOR THE TOPICS. YVONNE: COUNTING DOWN TO THE OPEN OF TRADE. REOPEN OF ONSHORE MARKETS IS COMING UP. THIS IS THE CHINA SHOW. FUTURES ARE IN THE RED THIS MORNING. ♪ YVONNE: GREATER CHINA AGENDA HERE TODAY. FUTURES NOT LOOKING TOO PRETTY HERE. COULD BE A CATCH DOWN STORY GIVEN WHAT WE SHOT -- SAW THIS WEEK. YOU CHINA TRADE TALKS AS WELL. ARE WE GOING TO SEE A DEAL? THAT'S ONE THING TO WATCH CLOSELY. SECTORS REALLY GOT HIT THIS WEEK. THE SAMSUNG STORY IS NOT GETTING TOO MUCH SPILLOVER EITHER. WE WILL SEE WHAT HAPPENS THERE. GOLD IS ONE THING TO WATCH. TRAVEL IS A BIG ONE. EARLY INDICATIONS OF WHAT WE SAW FOR THE GOLDEN WEEK HOLIDAY WAS NOT GOOD. TO SPENDING, TO FOOT TRAFFIC AND THE LIKE. WE WILL BREAK IT DOWN FOR YOU IN A BIT. I REALLY BUTCHERED THE NAME OF THIS YESTERDAY. CRYSTAL PIE. THERE'S GOING TO BE A BUYBACK UNDERWAY. THERE'S ALSO A JGB SALE. YVONNE: REALLY CRINGE WORTHY. RIGHT? PRODUCERS HAVE CORRECTED ME MASSIVELY. DAVID: EU TALKS IN BEIJING. WE HAVE LEARNED THAT THE EU IS WEIGHING SOME TEMPORARY LIMITS ON IMPORTS IN TERMS OF CHINESE HYBRID VEHICLES. SUCH A MOVE WOULD MARK A STAB IN THE EFFORT TO ADDRESS WIDENING TRADE IMBALANCES, RAISING THE STAKES IN BEIJING. YVONNE: LET'S BRING IN MINMIN LOW. WHAT ARE THE SAFEGUARD MEASURES? WHY HAVE HYBRID VEHICLES COME INTO THE SPOTLIGHT NOW? >> HYBRID VEHICLE SALES HAVE SURGED. THEY MAKE UP ONE IN FOUR IN THE EU. IF YOU TAKE A LOOK AT THE CHART, WHEN IT COMES TO VEHICLES, SALES HAVE SLOWED DOWN BECAUSE OF THE 45% TARIFF THAT HAS BEEN IMPOSED ONLY ON THE ELECTRIC VEHICLES. THE HYBRIDS HAVE SHOT UP. THOSE WERE EXCEPTED FROM THE ADDITIONAL TARIFFS. NOW THE EU WANTS TO PLAY SOME SORT OF LIMIT. IT COULD LOOK LIKE TARIFF RATE QUOTAS WHERE ABOVE A CERTAIN VOLUME OF EXPORTS, YOU GET HIGHER TARIFFS. THIS IS SIMILAR TO WHAT CANADA HAS DONE. CHINA HAS INDICATED THEY ARE OPPOSED TO ANY VOLUNTARY CAP. IF THE EU IMPOSES A UNILATERAL CAP, CHINA MIGHT WRITE TALLY EIGHT. -- RETALIATE. DAVID: HOW ARE CHINESE CAR COMPANIES ADJUSTING TO THIS? >> BECAUSE OF WHAT HAPPENED BEFORE, MANY OF THESE CHINESE CAR COMPANIES HAVE ANTICIPATED THAT THERE COULD BE MORE GEOPOLITICAL HEADWINDS. IT'S BEEN PRETTY DEPRESSED THROUGHOUT THE WHOLE YEAR. MANY OF THESE COMPANIES HAVE BEEN TAKING MEASURES SUCH AS INCREASING LOCALIZED PRODUCTION. BYD EXPECTED TO BE UP ONLINE BY THE END OF THE YEAR. THERE'S A FACTORY IN SPAIN COMING ONLINE SOON. THEN YOU HAVE THE OTHERS THAT ARE LOOKING AT FACTORIES COMING ON IN THE COMING YEARS AS WELL. YVONNE: IS THERE A GROWING CHANCE THAT THIS COULD ESCALATE TO A FULL-BLOWN TRADE WAR? >> THE BASELINE IS THAT NEITHER SIDE WANTS A TRADE WAR. CHINA HAS REPEATEDLY URGED THE EU TO COME TO THE TABLE. THEY HAVE SAID THAT THEY HAVE THE TOOLS TO RETALIATE IF NEEDED. THEY HAVE A FOREIGN SANCTIONS LAW. THEY CAN OPEN UP INVESTIGATIONS INTO FOREIGN SECTORS. ONE OF CHINA'S APPROACHES TO THIS NEGOTIATION HAS ALSO LOST GROUND A LITTLE BIT. USED TO BE ABLE TO DIVIDE AND CONQUER. NOW YOU SEE GERMANY AND FRANCE PRESENTING A UNITED FRONT. THEY GAVE THIS LETTER TO THE EU COMMISSIONER PRESIDENT WITH A STRONGER SET OF MEASURES IN CASE OF A TRADE WAR. GERMANY USED TO BE THE ONE COUNTRY THAT WAS HOLDING UP AGAINST EV TARIFFS ON CHINA BUT THAT HAS STARTED TO SHIFT WITH THE NEW GERMAN CHANCELLOR IN PLACE. YVONNE: THANK YOU. THE LATEST ON THESE EU CHINA TALKS HAPPENING TODAY. NOT LOOKING PRETTY. THE CLIENTS ACROSS HANG SENG. THE BIOTECH SECTOR HAS BEEN A STANDOUT IN HONG KONG. CERTAINLY ONE TO WATCH HERE TODAY. DO YOU SEE ANY SORT OF -- IF EVERYTHING IS SO BAD, HOW DO I LOOK FOR ANY SORT OF POCKETS OF OPPORTUNITIES NOW? WHERE ARE THOSE POCKETS? >> YOU ARE RIGHT TO POINT OUT THAT SENTIMENT IS DEPRESSED RIGHT NOW. THE SELLOFF IS ACCELERATING. MOST OF THIS IS BECAUSE OF U.S. BOND SURGING. IF THE BOND YIELD IS ONE OF THE CULPRITS FOR THIS DECLINE, THE ALLEVIATION OF THE SELLOFF IN THE U.S. TREASURY BONDS COULD BE ONE OF THE CATALYSTS FOR A REBOUND HERE. MANY OF US ARE STILL WAITING FOR MORE DETAILS. IF YOU LOOK AT THE CHINESE THIS YEAR, DESPITE A VERY CHALLENGING ENVIRONMENT. FISCAL SPENDING IS SLOWING DOWN. UP UNTIL JUNE THIS YEAR, I THINK FISCAL SPENDING AS A PERCENTAGE OF TOTAL BUDGET THIS YEAR IS JUST OVER 30%. IN A NORMAL TYPICAL YEAR, IT SHOULD'VE BEEN MORE THAN 40%. YVONNE: HOW BIG OF ISSUES IS EUROPE FACING? >> THE EU IS GOING TO HAVE ITS OWN VERSION OF TRADE WAR WITH CHINA. I THINK THE CONSEQUENCE COULD BE MUCH WORSE THAN THE TRADE WAR BETWEEN THE CHINA -- BETWEEN CHINA AND THE U.S.. CHINA AND U.S. AS A COMPLEMENT RELATIONSHIP. I THINK CHINA AND EUROPE IS VERY DIFFERENT. THE RELATIONSHIP IS LIKE ARRIVAL RELATIONSHIP. EUROPE, LIKE GERMANY AND FRANCE, THEY ARE ALSO VERY STRONG IN PRODUCTION. GLOBAL SUPPLIER. GERMANY IS A GLOBAL SUPPLIER OF CARS. STARTING FROM TWO YEARS AGO, I THINK EUROPEAN MANUFACTURERS HAVE BEEN USING MARKET SHARE BIG-TIME. CHINESE EVE EVE MANUFACTURERS. -- EASY MANUFACTURERS. IF YOU LOOK AT THE CHINESE TRADE STRUCTURE, EVERY MONTH WE ARE PRODUCING 100 BILLION U.S. DOLLARS IN TRADE SURPLUS. IT'S NEVER HAPPENED BEFORE IN HUMAN HISTORY. BASICALLY CHINA IS SUCKING IN ALL THE GLOBAL TRADES. FOREIGN CURRENCIES. I DON'T THINK THE SITUATION IS SUSTAINABLE AND WILL INVITE RETALIATION FROM TRADE PARTNERS. DAVID: MAINLY MARKETS REOPEN AFTER A WEEKLONG SLUMBER. LOTS MORE AHEAD. THIS IS THE CHINA SHOW. YVONNE: SOME STOCKS TO WATCH. CONSUMPTION, TRAVEL, MOVIE STOCKS. WEEK HOLIDAY SPENDING. CASTING A SHADOW AS THE MARKETS REOPEN AND MAINLAND CHINA. NOT A LOT OF MOVEMENT. DOWNSIDE WHEN IT COMES TO TRIP. SOME OF THESE NUMBERS WERE PRETTY SOFT ACROSS THE BOARD. DAVID: YES THEY WERE. WHEN YOU LOOK AT THE HONG KONG SPECIFIC VOLUMES, WE SURPASSED WHAT THE GOVERNMENT WAS EXPECTING IN HONG KONG. 1.4. NEW SPECIFIC SPENDING AND ONE OF THE FANCY MALLS IN THE CITY. I THINK THAT'S A SEPARATE THING ALTOGETHER. VERY QUICKLY, THE BENCHMARKS. MAINLAND MARKETS ARE REOPENING. MAINLAND BENCHMARKS UP. 20 MORE AHEAD. THIS IS THE CHINA SHOW. DAVID: WELCOME BACK. WE ARE COUNTING DOWN TO THE REOPEN OF MAINLAND MARKETS. FIRST GRADING SESSION. EIGHT DAYS INTO THE CALENDAR QUARTER BUT THE FIRST TIME IT WILL BE TRADING FOR THE FOURTH QUARTER FOR MAINLAND MARKETS AFTER THIS WEEK LONG HOLIDAY. BROADER DIRECTION OF TRAVEL DOWN ACROSS EQUITIES. YVONNE: DOESN'T BODE WELL FOR SENTIMENT HERE TODAY. HOLIDAY DATA HAS BEEN SOFT. QUALCOMM DEAL. MAYBE THAT MIGHT HELP THE HARDWARE SIDE OF THINGS. WE WILL SEE. THERE ARE SOME AI RELATED NEWS IN TERMS OF THE FINANCING SIDE, THE LISTING, THE DEBUTS. AT LEAST FOR NOW, NOT SEEING TOO MUCH. 4400 WAS THE KEY TECHNICAL LINE WE'VE BEEN TRACKING. NOT A GOOD SIGN FOR NOW. WE ARE SEEING SHENZHEN AS WELL AS STAR 50. 1% LOSSES FOR THE GAUGE. CERTAINLY THE TECH SPACE IS STILL VULNERABLE TODAY. HONG KONG MARKETS ARE DOING THIS. FINANCIALS ARE A KEY ONE HERE TODAY. WOBBLES AND UNCERTAINTIES AROUND EUROPE. WATCHING THAT VERY CLOSELY. UPWARD MOVEMENT WHEN IT COMES TO A-SHARES. HSBC. CLOSE TO 3% HERE. HSF INDEXES CLOSE DOWN TO 1%. OF COURSE, CONSUMPTION THAT THINGS ARE NOT LOOKING GOOD ON THE GOLDEN WEEK HOLIDAY. IT WAS A WEIRD ONE, GIVEN THAT IT WAS PAIRED WITH THE MIDAUTUMN FESTIVAL. SOME OF THESE NUMBERS ARE RIGHT WEEK. THE LIKES OF AIR CHINA SEEING NOT A LOT OF DIRECTION AT THIS POINT. NATIONAL DAY BOX OFFICE NUMBERS AROUND A 12 YEAR LOW. EU CHINA TOSS UNDERWAY. THERE ARE PLANS ACCORDING TO OUR REPORTING THAT THE EU IS GOING TO IMPORT CAP WHEN IT COMES TO HYBRID CARS IN CHINA THAT HAVE EXPORTS SURGE TO PROTECT THE SECTOR. CERTAINLY A LOT OF QUESTIONS ON HOW THIS WILL ESCALATE. DAVID: A LOT OF PEOPLE HAVE WARNED ABOUT THIS ALREADY. THE GROWING CHORUS OUT OF EUROPE UNDERSCORES THE IMPORTANCE OF THIS MEETING TODAY BECAUSE IT COULD OPEN UP THAT EVEN FURTHER. THE GROWING CHORUS OF PROTECTIONISM, CHINA IS EXPORTING QUITE A BIT. DAVID: FOR SOME FINAL THOUGHTS, STILL WITH US IS THE HONG KONG MANAGING PARTNER AND CIO. YOU MENTIONED THE MAIN REASON HONG KONG HAS DONE BADLY AS HIGHER RATES. IN THE U.S.. WHY IS THE MARKET DOING WELL DESPITE HIGHER RATES? >> BECAUSE CAPITALIST OH FLOWING TO THE U.S., THE STOCK IS DOING VERY WELL. THE TREASURY IS NOW OFFERING FIVE, 6%. I THINK A LOT OF MONEY HAS BEEN RETURNED TO THE U.S.. BESIDES THAT, OVER THE FIRST HALF OF THE YEAR, WE HAVE SEEN HUGE IPO ACTIVITIES IN HONG KONG. HONG KONG IS RANKED NUMBER TWO IN THE WORLD FOR THIS YEAR. MUCH OF THE IPO ACTIVITY IS NOT HUGE LIQUIDITY IN THE SYSTEM. ANY DEAL THAT COMES ON STREAM WILL LOCK UP ONE TRILLION HONG KONG DOLLARS. THEY ARE TWO OR THREE TIMES OVERSUBSCRIBED. IT'S DIVERGING A LOT OF LIQUIDITY IN T IPO'S RATHER THAN THE SECONDARY MARKET. TRYING TO USE THE HONG KONG MARKET TO RESOLVE THE FINANCING SITUATION FOR MAINLY MAINLAND CHINESE COMPANIES. THEREFORE THERE WAS A WINDOW GUIDANCE. MAINLAND CHINESE COMPANIES LISTED IN HONG KONG RATHER THAN ASIA. SO AS TO SUPPORT THE ASIAN MARKET. HONG KONG BASICALLY BECOMES A LIQUIDITY TANK FOR THE MAINLAND CHINESE MARKET. BECAUSE OF THE RETURN IN IPO NOT BEING SO GOOD, THE WINDOW OF GUIDANCE SEEMS TO BE CHANGING. IPO ACTIVITIES IN HONG KONG IS GOING TO SLOW DOWN. THAT PROVIDES ALLEVIATION OF THE LIQUIDITY PRESSURE THAT WE ARE EXPERIENCING HERE. YVONNE: RISING RATES USUALLY HELP FINANCIALS. I THINK HONG KONG IS REALLY TAKING A BITE FROM THIS CRISIS THAT WE ARE SEEING WHEN IT COMES TO FRANCE AND THE LIKE. I'M WONDERING HOW I SHOULD LOOK AT FINANCIALS NOW. >> FOR THE U.S., I THINK THAT'S ONE OF THE REASON THEY RESORT TO A TRADE WAR WITH CHINA, TRYING TO RESOLVE THE SITUATION. WITH THE FINANCIALS HERE IN HONG KONG, MANY OF THE NAMES WE HAVE SEEN, THEY HAVE BEEN A HUGE PROVIDER FOR MANY OF THE HONG KONG INVESTORS. IN HONG KONG, ONE OF THE MOST PROFITABLE TRADES IS MONEY THAT GOES INTO HSBC AND THEY GET FIVE OR 6% YIELD. BETTER THAN PUTTING YOUR MONEY IN A SAVINGS ACCOUNT. U.S. TREASURY YIELD IS LEE YIELDING 5%. MUCH OF THE RETAIL MONEY BEFORE THEY BUY HSBC. THAT'S WHY WITH THE U.S. TREASURY YIELD, WE ARE SEEING PRESSURE ON THE HSBC. FOR THE LAST COUPLE WEEKS, WE ARE SEEING HUGE RETAIL FLOWS INTO U.S. TREASURIES AS WELL. DAVID: AND WHY NOT? FIVE, 6%. WHAT ARE THE OPPORTUNITIES IN CHINESE MARKETS SPECIFICALLY? >> RIGHT NOW, THE SENTIMENT IS SO DEPRESSED. IN THE SENSE THAT, BIOTECH. OFFERING GOOD MONEY YEAR TO DATE. THE NAMES IN CHINA AND ALSO HERE IN HONG KONG, THEY ARE OFFERING GOOD PROSPECT OF RETURN. IN GENERAL, WITH THE SHANGHAI COMPOSITE AT 3800 AND HANG SENG TECH AT ABOUT 4200 POINTS. THEY ALL OFFER REALLY GOOD RISK TO RETURN RATIO. ALL OF US ARE WAITING FOR A CATALYST FOR THEM TO COME BACK. YVONNE: GREAT TO HAVE YOU BACK. YEAH. WE ARE SEEING A BIT OF A TURNAROUND ALREADY, JUST SIX MINUTES INTO THE TRADE. THINGS ARE LOOKING BETTER INITIALLY. LET'S TALK ABOUT WHAT THE IMF HAS BEEN SAYING. GOVERNMENTS BECOMING TOO RELIANT ON SPENDING AS PERSISTENT INFLATION AND RISING DEBT RESHAPE ITS GLOBAL ECONOMY. SHE PRAISED 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'S REALLY DIFFICULT IS TO GET THE PUBLIC TO ACCEPT THAT THERE HAS TO BE SOME TIGHTENING. 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'S TIME TO RECOGNIZE THAT THIS STALEMATE THAT THEY HAVE BEEN, UP AND UP AND UP, DOES NOT LEAD TO HEAVEN. >> DO YOU THINK DEVELOPED MARKETS ARE ASKING -- ACTING LIKE EMERGING MARKETS PHYSICALLY? >> THERE IS A LITTLE BIT OF THIS. IT USED TO BE AND EMERGING-MARKET PROBLEM. EMERGING MARKETS OVER THE LAST DECADE HAVE TIGHTENED THEIR FISCAL POSITION. IT IS QUITE STRONG. NOW THEY SEE THE SPREADS THEY SHRANK STILL STAYING RELATIVELY TIGHT. THE BASE IS GOING UP. I THINK THE EMERGING MARKETS ARE STILL A BIT MORE VULNERABLE BECAUSE THEIR ABILITY TO HANDLE THAT KIND OF PRESSURE OF COURSE IS NOT UNLIMITED. ADVANCED ECONOMIES NEED TO TAKE RESPONSIBILITY FOR THEMSELVES BUT ALSO FOR THE REST OF THE WORLD. SO PLEASE DO YOUR JOB. HASLINDA: YOU TALKED ABOUT HOW THE BOND MARKET IS ACTING NORMALLY. IS IT NOW? >> STEP BACK. WE HAVE SEEN THESE KINDS OF JUMPS OF YIELDS. HASLINDA: IT'S ALSO THE PACE. >> WHAT YOU NEED TO LOOK INTO IS WHY IS THIS HAPPENING. IT'S BECOMING FUNDAMENTALS. WHEN YOU'RE IN A SITUATION OF INFLATION GOING UP AND STAYING HIGH AND INTEREST RATES NEEDING TO TIGHTEN AND ON THE OTHERS, GOVERNMENTS WITH HUGE AMOUNTS OF DEBT THEY NEED TO REFINANCE. AND THEN COMES AI. THAT PUTS PRESSURE AND THIS IS WHY IT HAS GONE UP. IT'S 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 IS THERE. 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. DAVID: THERE WE GO. THAT WAS THE IMF MANAGING DIRECTOR, SPEAKING AHEAD OF KEY EVENTS IN SINGAPORE AND NEXT WEEK. YOU CAN REWATCH THAT INTERVIEW CARRUTHERS HE MIGHT'VE MISSED ON THE BLOOMBERG VIDEO HUB. EXPLORE LIVE STUFF. EXPLORE US IF YOU CHOOSE TO DO SO, AT YOUR OWN PERIL. CHECK IT OUT AT BLOOMBERG.COM. PLENTY MORE AHEAD. THIS IS THE CHINA SHOW. ♪ YVONNE: BITCOIN HAS HAD A TROUBLESOME FEW SESSIONS. $720 MILLION OF SOME OF THESE RISKO BAD -- RISKY CRYPTO BETS WIPED OUT. SOMETHING TO WATCH CLOSELY HERE. IT WAS A WAVE OF FORCED SELLING THAT SWEPT ACROSS THE MARKETS HERE. ACCORDING TO WHAT PEOPLE HAVE TALKED ABOUT WHEN IT COMES TO DIGITAL ASSET VENUES. OUR NEXT GUEST THINGS THAT THE CRYPTO MARKET IS NEITHER A BULL NOR A BEAR. IF YOU HAVE TO CHOOSE AN ANIMAL, IT WOULD BE A MONKEY. 125 MILLION USERS GLOBALLY. JOINS US AFTER WE TAKE A LOOK ON WHAT'S BEEN HAPPENING AS WELL. IT'S INTERESTING. CAN YOU TELL US MORE ABOUT WHY YOU ARE NOT READY TO CALL THIS A BULL MARKET YET? >> FOR BULL MARKET OR BEAR MARKET TO BE MORE VALID, WE NEED TO SEE A MORE LONG-TERM TREND. INSTEAD OF A WIDE RANGE OF CHANGES OR SHIFTS. IF YOU GET TO COMPARE 2026 WITH 2022 WHICH WAS THE LAST BEAR MARKET, 2026 MIGHT BE MORE SIMILAR TO THAT. AND YET THERE'S ALSO INTEREST RATE HIKE IN THE U.S.. STRANGELY THAT DOESN'T CHANGE THE PRICE IN TERMS OF IT GOING DOWN. IT'S ACTUALLY GOING UP FOR THE PAST FEW WEEKS. SO IT'S REALLY HARD TO PREDICT THE BITCOIN PRICE RIGHT NOW. THAT'S WHY I THINK IT'S MORE OF A MONKEY MARKET THAN A PURE BULL AND BEAR MARKET. DAVID: SO WHAT KIND OF OPPORTUNITIES, WHAT'S THE INVESTMENT THESIS NOW FOR BITCOIN OR BROADER CRYPTO, GIVEN THAT WE ARE NEITHER HERE NOR THERE? >> SO RIGHT NOW, BITCOIN PRICE IS STILL HIGHLY RELEVANT OR CORRELATED WITH MACROECONOMICS AND GEOPOLITICAL TENSIONS RATHER THAN A SMALL CIRCLE OF CRYPTO ROSE OR NERDS THAT ARE BUILDING A DECENTRALIZED WORLD. THAT WAS MORE OF A PRE-PANDEMIC ERA OF BITCOINS PRICE IMPACTING OR FACTORING. GIVEN THE CLOSE CORRELATION BETWEEN BITCOIN PRICE OR CRYPTOCURRENCY INDUSTRY IN GENERAL INCLUDING MAGNIFICENT 7 TECHNOLOGY STOCKS. ACTUALLY IT HAS A BIPOLAR SORT OF ACTION. ON ONE SIDE IT'S A RISK ASSET, RISKY ASSET CORRELATED OR CONNECTED WITH THEM SEVEN AND U.S. EQUITY IN GENERAL. ON THE OTHERS, IT'S A RISK OFF ASSET WHICH IS MAKING BITCOINS PRICE CORRELATOR CHANGE TOGETHER WITH GOLD AND SOME OTHER COMMODITIES. THE BITCOIN PRICE IS INFLUENCED A LOT BY THE INSTITUTIONAL CLIENTS, ESPECIALLY AFTER BITCOINS ETF BEING APPROVED BY SEC IN JANUARY 2024. SINCE THEN, A LOT OF INFLOW AND OUTFLOW OF THE CAPITAL INDUSTRY IS FROM INSTITUTION RATHER THAN RETAIL OR A SMALL CIRCLE OF CRYPTO BURROS. -- ROSE. YVONNE: YOU ARE SAYING YOU WOULD LOOK INTO BUYING BITCOIN AGAIN IF IT FALLS TO 50,000. TELL US WHY THAT THRESHOLD. IF I WERE TO BUILD A CRYPTO PORTFOLIO, THAT WOULD -- WHAT WOULD THAT LOOK LIKE? >> SO YES. I SAID BELOW 60 K. THAT WAS SAID A COUPLE MONTHS AGO. INDEED AFTER WHAT I SAID WHAT I SAID, BITCOIN DID FALL BELOW 60 K. AND I THINK THAT IS INDEED A GOOD PRICE POINT TO BUILD YOUR BITCOIN PORTFOLIO. GIVEN BITCOINS PRICES ARE UNDER 83 K, MAYBE IT DEPENDS ON THE USER OR THE INVESTOR PORTFOLIO. IF YOU HAVE NO BITCOIN IN YOUR PORTFOLIO BUT YOU ARE LOOKING TO CONTINUE BUYING SOME, DOING DOLLAR COST AVERAGING IS A SMART STRATEGY FROM 70 K TO 80 K OR EVEN 83 K AS THE CURRENT PRICE. IT'S A GOOD STARTING POINT IF YOU HAVE NO PORTFOLIO. BUT IF YOU HAVE A LITTLE BIT ALREADY, I THINK THIS IS THE KIND OF PRICE YOU CAN CONTINUE MONITORING. IF YOU HAVE A LOT OR EVEN IF YOU ARE FULLY ALLOCATED, I DON'T THINK THIS IS THE TIME TO SELL NOR A GOOD PRICE POINT TO CONTINUE BUYING,. IF YOU ARE FORCED BELOW 73 K OR 70 K, I THINK IT'S A GOOD PRICE POINT TO PURCHASE SOME BITCOIN OR DO MORE DOLLAR COST AVERAGING. BUT THAT'S GIVEN YOU HAVE BROTHERS MORE PORTFOLIO -- SMALL PORTFOLIO IN YOUR BITCOIN ALLOCATION. DAVID: JUST TALKING ABOUT THE BUSINESS AND THE TRENDS IN THE INDUSTRY. I NOTICE THAT VOLUMES ON YOUR PLATFORM AND EXCHANGE HAVE GONE FROM ZERO ON NON-CRYPTO TO 20% NON-CRYPTO. WHAT DOES THAT TELL YOU ABOUT TRENDS AND APPETITES FOR OTHER ASSETS? >> YEAH. AT ITS PEAK, MARCH THIS YEAR, OUR NON-CRYPTO TRADING VOLUME WAS 40% OF THE TOTAL VOLUME. FROM ZERO TO 40%, THAT'S QUITE AN INCREASE WITHIN THE YEAR. INDEED IT'S NOT JUST A CRYPTO CENTRALIZED EXCHANGE SINCE ABOUT A YEAR AGO. UNIVERSAL EXCHANGE. THAT'S WHERE OUR USERS CAN TRADE UNIVERSALLY VALUABLE ASSETS INCLUDING CRYPTOCURRENCY, INCLUDING EQUITY OR TOKENIZED AT EQUITY -- EQUITY. SO MANY DIFFERENT ASSET CLASSES THAT WE ARE COVERING NOW. I THINK THAT'S AN IMPORTANT TREND HAPPENING IN THIS INDUSTRY. CRYPTO IS NOT JUST A SMALL ASSET CLASS. THEY THINK ABOUT BITCOIN THEOREMS AND MANY DIFFERENT MEME COINS. THAT'S NOT THE CASE ANYMORE. AT LEAST IN MY OPINION. CRYPTO IS MORE OF AN IMPORTANT TECHNOLOGY INFRASTRUCTURE DRIVING OR EMPOWERING THE TRADITIONAL FINANCIAL INDUSTRY LARGELY. YOU'VE ALSO SEEN ORGANIZATIONS LIKE NASDAQ IN THE U.S. WHO ARE DIGITALIZING OR TOKEN ICING THEIR ASSETS WHICH IS AN IMPORTANT TREND THAT I THINK THIS INDUSTRY IS EVOLVING TO BE MORE OF INFRASTRUCTURE. THAT'S LARGELY THE VALUE OF BLOCKCHAIN OR OF CRYPTO IN THE FUTURE. WE HAVE CAPTURED THAT TREND. WE HAVE LISTENED -- LISTED TOKENIZED STOCKS MORE THAN A YEAR AGO. TRADING ASSETS HAVE BEEN DOING WELL ON OUR PLATFORM. THAT'S THE FUTURE AS WELL. WE ARE CONTINUALLY BUILDING WHERE WE CAN ALLOW USERS TO TRADE VERY LARGE NUMBERS OF ASSETS IN ONE UMBRELLA. YVONNE: I HAVE TO BRING THIS UP. IT WAS MORE THAN A WEEK AGO WHEN YOU GUYS WERE VICTIMS OF A BANK CAP -- BIG HACK. CAN YOU GIVE US AN UPDATE ON THE OUTFLOW SITUATION? HOW IS IT LOOKING WITH YOUR CUSTOMERS NOW? >> YEAH SURE APPEARING IN -- SURE. SEPTEMBER 24, WE WERE HACKED BY HACKERS. THERE WERE 388 MILLION IN TOTAL ESTIMATED THAT WERE STOLEN ON THAT DAY. ALONG THE WAY, ACTUALLY ABOUT THREE OR FIVE DAYS LATER, EVERYTHING STABILIZED ALREADY. ON THE DAY ITSELF, WE CONTAINED THE INCIDENTS SO THERE WERE NOT FURTHER LOSS AFTER THE 24TH OR 25TH. ALTHOUGH WITHDRAWAL STARTED AND HAD ALL OPENED UP FROM LAST MONDAY TO FRIDAY. SO RIGHT NOW IT FEELS VERY MUCH LIKE BUSINESS BACK TO USUAL. RIGHT BEFORE TOKEN 1209, OUR WHOLE TEAM WERE WORKING ON ONE SIDE CONTINUALLY CONTAINING THE INCIDENT. THE INVESTIGATION OF THE INCIDENT AND AN INCIDENT REPORT. CONTINUALLY TRACING AND FACING OUR TWO STOLEN FUNDS. ON THE OPERATION OR THE MARKET COMMUNICATION SIDE, WE'VE ALSO REPLENISHED OUR PROTECTION FUND WHICH WAS IN BITCOIN AND IT WAS USED AFTER THE INCIDENT TO COVER SOME OF OUR LOSSES. WE HAVE REPLENISHED OUR POTENTIAL FUND BACK. WE'VE ALSO PUBLISHED PROOF RESERVE WHICH IS A BLOCKCHAIN WAY OF VERIFYING USERS. DAVID: THANK YOU SO MUCH. THANK YOU FOR THE UPDATE THERE. THE RECENT HACK THAT THEY HAVE. CSI 300 AND CHINA INDEX OPEN SOFTWARE. THE REOPEN IS ON STRONGER FOOTING AS WE SPEAK. LOTS MORE AHEAD. ♪ DAVID: OK. SOME OF THE BRIGHT SPOTS AS WE LOOK AT THIS REOPEN. TODAY, BOND MARKETS IN FOCUS. WE WILL TALK ABOUT THAT IN A MOMENT HERE. SOME OF THE TECH PLAYS. TRACKING SOME OF THE UPSIDE THAT WAS MISSED. THE CATCH UP TRADE IF YOU THINK ABOUT IT, GIVEN HOW WE GRAVITATED HIGHER ACROSS OFFSHORE AI PLAYS THERE. YET. THAT'S THE BRIGHT SPOT FOR NOW. PLENTY MORE AHEAD IN THE SECOND HOUR. THE CHINA SHOW IS COMING UP NEXT. ♪ >> A QUICK WIN WOULD BE RESUMPTION OF THE CONSUMPTION STIMULUS. IN THE LAST YEAR WE HAD THE CONSUMPTION COUPON WHICH HELPED PROP UP THE RETAIL SELLERS LAST YEAR AND GOING INTO THIS YEAR, RETAIL SALES IN MANY CITIES IS GOING INTO NEGATIVE. HASLINDA: LOTUS, HAL HOLLANDER SPEAKING TO US ABOUT THE WEAKNESS IN THE CONSUMER’S OUTLOOK BUT REALLY WHAT HE’S BEEN TALKING ABOUT IS THE STIMULUS AND WHAT COULD COME THROUGH IN THE MAYBE NEXT WEEKS OR MONTHS AND THEY FOLLOW WITH SOME SORT OF FLURRY OF POLICIES OR SOME SORT OF PACKAGE. SO HE SAYS THIS IS MAYBE A SIGN OF MORE THINGS TO COME. [S:DAVID YEAH. NOT REALLY -- THEY DON’T TEND TO MOVE IN ONE-OFFS. SO JUST EXPECT MORE TO COME IS WHAT HE SAID. AND THIS TAKES ME INTO THE -- IN CASE YOU MISSED IT IT WAS OUT ON WEDNESDAY, CHINA’S DOMESTIC ECONOMY IS ON THE VERGE OF RECESSION. THAT’S ACCORDING TO AT CITY. BUT THE MARKET TAKEAWAY THERE IS THAT CHINA RATES ARE SET TO STAY LOWER FOR LONGER. THE K-SHAPED STOCK MARKET MAY PERSIST AND ON THE STIMULUS SIDE, DO EXPECT SOMETHING, A POLICY PIVOT AKIN TO 2024 LOOKS INEVITABLE NEXT YEAR IF NOT SOONER. CQB SPACE ALL THE WAY TO 30. WE DO HAVE BOND AUCTIONS TODAY SO CHINA SET TO SELL 30-YEAR BONDS THIS HOUR AND IN THE NEXT HOUR, $73 BILLION IN -- 30-YEAR BONDS ARE ALSO -- KEEP IN MIND HANG SENG INDEX ON YOUR SCREENS. THERE’S THIS -- THIS EXPANSION OF THE HANG SENG TECH INDEX CONSTITUENCY COUNT FROM 30 TO 50 AND TAIEX INDEX TO THE DOWNSIDE AND NIKKEI OFF AS WELL AND THE KOSPI MODEST LOSSES ACROSS ASIA PACIFIC EQUITIES. YVONNE: HSTECH, MUCH MORE MODERN AI CENTRIC OR THINKING ABOUT ADDING SOME MORE OF THESE ARTIFICIAL INTELLIGENCE STOCKS? ROBOTICS AND THE LIKE. SO CERTAINLY THAT’S ALL IN FOCUS HERE TODAY. LET’S BRING IN OUR BLOOMBERG MARKETS REPORTER ANTHONY STEPHENS. AS MAINLAND MARKETS RETURN RUSSA SEEING A LITTLE BIT OF GREEN. WHAT STANDS OUT TO YOU SO FAR IN TRADING? >> IT’S AN UNINSPIRING SESSION, RIGHT? BECAUSE THE GAINS ARE BEING DRIVEN BY CHINA’S HEAVY WEIGHTING ON ENERGY AND SHIPPING SECTOR WHICH CONTINUES TO BENEFIT FROM THE IRAN CRISIS. SO THAT IS NOT EXACTLY AN EXCITING STORY. WE ALSO HAVE THE STABILITY OF THE CHINESE BANKING SYSTEM VIS-A-VIS WHAT’S HAPPENING ELSE WHERE ELSE IN THE WORLD. CHINESE BOND YIELDS ARE NOT PROBLEMATIC COMPARED TO WHAT WE’RE SEEING IN EUROPE. AND YOU’RE SEEING MATERIAL OUTPERFORMANCE BY CHINESE BANKS VERSUS EVEN SINGAPORE BANKS THAT HAVE GOT HAMMERED IN THE LAST COUPLE OF DAYS AS THIS KIND OF EUROPEAN CRISIS SPREADS, RIGHT? SO THAT’S THE POSITIVE STORY. ON THE NEGATIVE SIDE OF THINGS, YOU ARE SEEING THE REPERCUSSIONS OF ALL OF THESE ROLLING CHINESE TRADE WARS THAT THEY HAVE WITH EUROPE, ON CARS, POTENTIALLY ON -- ANOTHER ARGUMENT WITH AMERICA ON PHOTONICS AND OPTICALS AND THAT’S SETTING UP QUITE A BIFURCATED MARKET HERE. YOU SEE THE MAINLAND, BIG TICKET INDEX, UP OR FLAT AND YOU SEE THE STARBOARD AND THE INNOVATION INDEX SUFFER, RIGHT? SO REALLY HOW MUCH FURTHER CAN CHINESE INNOVATION CONTINUE UNDER THE THREAT OF THIS INCREASED TRADE TENSIONS? IT REALLY LOOKS LIKE CHINA’S STRAIT PARTNERS ARE GETTING IN THE WAY OF THE GROWTH POTENTIAL OF SOME OF THESE EXCITING NEW INDUSTRIES. DAVID: SPEAKING OF, HOW DOES THE INDEX REFLECT THAT? ONE OF THE THINGS TALKED ABOUT THE HANG SENG TECH, THIS REBALANCE OR THIS EXPANSION, DOES THAT BRING THE TECH BACK INTO THIS INDEX? WHICH I THINK OUR GUEST EARLY ON SAID -- IT’S ANYTHING BUT JUST THE NAME HAS -- ANYTHING AND EVERYWHERE ELSE THIS INDEX IS VERY OLD SCHOOL. >> A VERY STRANGE INDEX ALSO BECAUSE VERY HEAVILY WEIGHTED NAMES LIKE THE I CHINESE EV SPACE WHICH IS AN UNFORTUNATE TIME AND GIVEN THE TRADE TENSIONS. AND IT’S ALSO A CAPPED WEIGHT INDEX. SO YOU HAVE TENCENT. DAVID: THAT’S IMPORTANT. >> ALIBABA, THESE HUGE NAMES THAT ARE CAPPED AT A CERTAIN LEVEL AND CAN BE COMPARABLE TO MUCH SMALLER NAMES LIKE SHOMEI, SO EXPANSION TO 50 NAMES HELPS ALLEVIATE SOME OF THOSE CONCERNS. BUT UNFORTUNATELY, THERE IS AN ASPECT OF THE -- THE BULL MARKET IN SOME OF THESE HARDWARE NAMES IS REALLY STARTING TO DISSIPATE QUITE QUICKLY IN CHINA ALREADY. YOU SEE THE CHIE NEXT INDEX IS OFF SHARPLY AND TAIWAN THE MOST HIGH BETA MEMBERS OF THE -- YOU’VE SEEN KING SLIDE WHICH WAS THE POSTER CHILD OF THE TAIWAN -- YVONNE: THE NEW BILLIONAIRES OF AI? >> AND SERVE -- THAT STOCK HAS BEEN LIMIT DOWN TWO DAYS IN A ROW. MAYBE SOME OF THIS EXCITEMENT IS COMING A LITTLE BIT TOO LATE AND NOW WE HAVE TO WAIT UNTIL NOVEMBER AND IMPLEMENTATION IN DECEMBER. AND WHO KNOWS WHAT THE AI ECOSYSTEM COULD LOOK LIKE BY THEN? BUT HOPEFULLY LESSON LEARNED IN TERMS OF SPEEDING UP THE ENTRY OF INNOVATIVE COMPANIES INTO THIS INDEX. DAVID: OK. JURY’S OUT ON THAT ACCORDING TO -- THEY’VE BEEN VERY REACTIVE TO THE CHANGES. ANTHONY, FANTASTIC. THANK YOU. THE INDEX COMPILER HERE. ANTHONY STEPHENS THERE ON MARKETS. VERY QUICKLY, SO WE HAD A DECENT 10-YEAR U.S. AUCTION OVERNIGHT BORDERS WELL FOR THE 30-YEAR AUCTION IN JAPAN. I BELIEVE THAT’S ALSO TODAY. 30-YEAR COMING UP ON YOUR SCREENS. JAPANESE 30-YEAR, IF WE CAN, GET THAT UP. ALSO TO TALK ABOUT RATE HIKE BETS AS WE GO INTO THE DECEMBER MEETING, SO WE’RE CURRENTLY PRICED FOR A HIKE THERE AS WELL. SO LET’S SEE WHAT -- WHAT THE FUTURE HOLDS AS FAR AS RATE HIKES AND FIXED INCOME IS CONCERNED. YVONNE: YEAH. REALLY INTERESTING, RIGHT? YOU HAVE SEEN THE U.S. JOBS REPORT PRICING FOR RATE HIKES HAS BEEN PRICED OUT IN SOME WAYS, ESPECIALLY FOR THIS MONTH. AND CERTAINLY ONE THING TO WATCH. LET’S BRING IN ASIA FIXED INCOME CIO AT J.P. MORGAN ASSET MANAGEMENT. THIS BOND SELLOFF, PARTICULARLY IN THE LONG END, SEEMS TO BE -- I MEAN, DOESN’T SEEM LIKE WE SEE ANY SORT OF CIRCUIT BREAKER JUST YET. HOW FAR DO YOU THINK WE COULD SEE THIS SELLOFF IN TREASURIES GO? >> WELL, I THINK IT DEPENDS A LOT WHAT HAPPENS WITH INFLATION. AND WITH OIL. I THINK OIL HAS BEEN DRIVING THE FIXED INCOME MARKET IN THE NEAR TERM. THERE IS LIKE GROWING HOPES AT THIS POINT THAT THE FLOW OUT OF THE STRAIT OF HORMUZ IS GROWING. THERE’S SOME EVIDENCE OF THAT. AND IF OIL, YOU KNOW, DRIFTS LOWER, THIS WILL HELP TO ANCHOR RATES. AND WE HAVE CPI NEXT WEEK. SO I THINK THOSE ARE THE KEY THINGS TO MONITOR. IF CPI IS HOT, THEN WE SHOULD BE CONCERNED ABOUT RATES TO BE FAIR. BECAUSE THE POSSIBILITY OF THE MARKET PRICING AGAIN, A DECENT CHANCE OF AN OCTOBER HIKE WILL BE THERE. IF THE -- THE CORE CPI IS REALLY HIGH. DAVID: AND I GUESS AS WE LOOK AT THE RATE OUTLOOK, WHAT’S BEING PRICED RIGHT NOW, DOES ANYTHING LOOK MISPRICED TO YOU ON THE CENTRAL BANK FRONT? >> NO. ACTUALLY, WE -- WE THINK THAT IT’S PRICED A LOT, WE THINK THAT, YOU KNOW, INFLATION WILL DRIFT LOWER. AND WE HAVE A LOT OF VALUE WITH THE -- OVER THE LAST 20 OR 25 YEARS, WE HAVEN’T SEEN, FOR EXAMPLE, THE 10-YEAR TREASURY AT THIS LEVEL. 5.3 OR THE REAL YIELDS, THE TIPS AND THE 10-YEAR GETTING CLOSE TO 3%. WHICH IS PRETTY ATTRACTIVE. SO WE THINK THAT ACTUALLY WHAT THE MARKET IS PRICING IN AND THE -- THERE IS SOME PREMIUM THERE, FOR THE BASELINE SCENARIO, THIS SHOULD BE ATTRACTIVE ENOUGH. AND WE SHOULD BE ON THE VERGE OF DECENT RETURNS IN FIXED INCOME SPACE FOR NEXT YEAR. YVONNE: COULD WE SEE A SIX HANDLE FOR THE U.S. 10-YEAR AT SOME POINT DO YOU THINK? >> THIS ONLY IF THINGS GET WORSE, PARTICULARLY RELATED TO THE OIL AND INFLATION. YVONNE: YEAH. >> WE KNOW THE MANY HE IS SOLID, PARTICULARLY ON THE U.S. SIDE -- THE ECONOMY IS SOLID, PARTICULARLY ON THE U.S. SIDE, RIGHT? AND EVEN IF YOU DOESN’T WANT TO RUN THE U.S. DURATION RISK, THERE ARE OTHER PLACES IN WHICH INFLATION IS BETTER ANCHORED. AND THEN YOU SHOULD GET INVOLVED AS WELL AS AN ALTERNATIVE HERE IN ASIA, FOR EXAMPLE, ON THE DM SIDE, WE LIKE AUSTRALIA RATES. WE THINK THAT RBA IS ABOUT TO FINISH THE HIKE. OR IN KOREA, WHERE INFLATION, YOU KNOW, IS MUCH BETTER ANCHORED THAN IN THE U.S. AND YOU HAVE THE UPSIDE OF THE EFFECTS AS WELL. DAVID: WHAT ABOUT -- THIS KIND OF WORLD, I WANT TO ASK YOU ABOUT CHINA BECAUSE THAT -- IF INFLATION IS YOUR CONCERN, GO -- AND CHINA IS YOUR FRIEND? >> TRUE. WE’VE SEEN THIS YEAR CHINA LOCAL SPACE HAS BEEN THE OUTPERFORMER, RIGHT? AND IN A SCENARIO IN WHICH WE CONTINUE TO SEE THE PRESSURE COMING FROM THE OIL SIDE AND U.S. ECONOMY DOING REALLY WELL. PROBABLY THE CHINA LOCAL SPACE WILL CONTINUE TO OUTPERFORM. WE MUST SAY. BECAUSE FOR TWO REASONS, RIGHT? AND I THINK YOU GUYS DESCRIBED RECENTLY THE DOMESTIC ECONOMY IS SOFT. AND THERE IS NO RISK OF INFLATION IN CHINA. SO RATES SHOULD BE REALLY WELL ANCHORED. AND ON TOP OF THAT, WE SEE THIS STEADY APPRECIATION OF RENMINBI THAT WE THINK THIS WILL CONTINUE. THERE’S THIS -- PART OF THE EFFORT TO INTERNATIONALIZE THE RENMINBI. AND THIS SHOULD BE THERE. YVONNE: HOW DO YOU ASSESS THE SITUATION IN EUROPE RIGHT NOW WHEN I LOOK AT FRENCH BONDS? THEY SEEM TO BE LESS SAFE THAN ITALY EVEN GREECE RIGHT NOW? DO YOU THINK THAT THERE’S MORE TO GO IN WHAT’S HAPPENING IN EUROPE? AND COULD THAT SPILL OVER TO ASIAN BOND MARKETS? >> RIGHT. WELL, IT’S SOMETHING TO MONITOR CLOSELY, PARTICULARLY FROM THE PERSPECTIVE OF RISK ASSETS, RIGHT? OF COURSE, IF FRANCE WILL PAY MUCH MORE, YOU KNOW, HIGHER SPREADS THAN CURRENTLY SPAIN, SO THIS SHOULD BE SOMETHING THAT THE RISK ASSETS WILL DEFINITELY PAY ATTENTION TO. BUT THE WAY WE’RE SEEING, THERE WILL BE A LOT OF NOISE IN THE NEAR TERM. AND THE BEST WAY TO DEAL WITH THAT IS TO LOOK AT PLACES IN WHICH THIS FISCAL CONSOLIDATION HAS ALREADY HAPPENED. FOR EXAMPLE, THE ITALIAN BONDS. AND THE SPREAD THAT WE SEE WIDENING IN ITALY MORE LIKE A CONTAGION COMING FROM FRANCE. WE THINK THIS IS A GENUINE VALUE THAT THE -- THAT THE MARKET PARTICIPANTS CAN ENGAGE WITHOUT RUNNING WITH THE SAME, YOU KNOW, ISSUE ON THE FISCAL SIDE THAT FRANCE WILL BE DEALING FOR A WHILE. YVONNE: AND JUST TO GET IT CLEAR, THIS IS NOT A REPEAT OF WHAT HAPPENED 15 YEARS AGO, THE EUROPEAN DEBT CRISIS, OR DO WE NEED TO START THINKING ABOUT TAIL RISK OF THAT SORT? >> WE DON’T THINK THAT’S LIKELY. DAVID: OK. >> GROWTH IS MUCH BETTER THAN BEFORE. RIGHT? AND WE THINK THAT IN GENERAL, THE FISCAL DETERIORATION IS VERY BROAD BASED, AND NOT SOMETHING THAT IS UNIQUE TO FRANCE. WE KNOW WELL THAT, YOU KNOW, IT’S VERY RARE TO FIND A PLACE IN WHICH YOU DO NOT SEE FISCAL DETERIORATION. AND WE THINK THAT SOME STEPS ON THE FISCAL CONSOLIDATION IN FRANCE WILL ALSO TAKE PLACE NEXT YEAR. YVONNE: I WONDER WHEN IT COMES TO EM’S WHERE ELSE YOU’RE LOOKING AT RIGHT NOW? I THINK BRAHM CERTAINLY HAD A VERY -- BRAHM CERTAINLY HAD A -- A RUNOFF HAPPENED AND TALKING OF FISCAL CONSOLIDATION. HOW BIG OF OPPORTUNITY IS THE LATIN SPACE? >> WE LIKE THE EM CARRY WHICH IS NOT RELATED TO ASIA AND WHAT WE’RE SEEING FROM THE PERSPECTIVE OF RATES AND CARRY, IT’S MORE A LATIN AM TRADE AND THE ASIA PART OF IT IS MORE RELATED TO THE UPSIDE OF FX WHICH WE SAW WITH THE KOREAN WON FROM A BIG UNDERPERFORMER, 7% DOWN IS 7% UP. AND WE THINK THAT, YOU KNOW, LIKE THE JAPANESE YEN AND PARTICULARLY THE TAIWANESE DOLLAR, THEY -- THEY SHARE THE SAME UPSIDE. BECAUSE THE CURRENT ACCOUNT SURPLUS IS REALLY BIG. TECH EXPORTS ARE AMAZING. AND THIS POTENTIAL REPRICING THAT WE SAW ON THE KOREAN WON WE ALSO SEE IN THE REST OF NORTH ASIA. DAVID: TALK TO US A LITTLE BIT MORE ABOUT THIS QUICKLY. SO TAIWAN DOLLAR AND JAPANESE YEN COULD FOLLOW -- THAT’S YOUR VIEW? YVONNE: THE WON? >> THE KOREAN WON, YES. WE THINK THAT THEY SHARE THE SAME POTENTIAL. WHAT HAPPENED IN KOREA IS BASICALLY TWO THINGS, RIGHT? ONE WAS THE HIKES THAT THE BOK IMPLEMENTED AND THE EXPORTERS INTERNALIZING MORE RESOURCES. SO WE THINK THAT PARTICULARLY IN TAIWAN, WHEN THE EXPORTERS STARTS TO INTERNALIZE MORE OF THESE RESOURCES, THIS MASSIVE ACCUMULATION OF DOLLARS, THIS COULD, YOU KNOW, BE THE TIPPING POINT AND THE POTENTIAL FOR APPRECIATION OF THE TAIWAN DOLLAR, WE THINK IT’S MASSIVE. DAVID: OK. THANK YOU. FANTASTIC. HAVE A GREAT -- WELL, TWO DAYS LEFT. MY FIRST DAY BACK. YVONNE: FEELS LIKE A MONDAY. DAVID: IT IS THURSDAY. AT LEAST WE ARE CLOSER TO MONDAY THAN WE ARE JUST -- ASIA FIXED INCOME CIO. J.P. MORGAN ASSET MANAGEMENT. JUST AHEAD HERE ON THE SHOW, SAMSUNG SHARES COMING UP ON YOUR SCREENS. TIGHT RANGE. RECORD PROFITS, THOUGH. DOWN HALF OF 1%. WE’LL UNPACK THE EARNINGS, THE PRELIM EARNINGS WHICH CAME THROUGH A FEW HOURS BACK. THAT’S AHEAD. THIS IS "THE CHINA SHOW." DAVID: WELCOME BACK. WE’RE LOOKING AT SHARES OF SAMSUNG AND THE BROADER SEMIS SECTOR ACROSS THE REGION. HARDWARE VERY MUCH IN FOCUS AS YOU CAN SEE ON YOUR SCREENS. TOKYO ELECTRON DOWN 1% GOING INTO THE JAPANESE LUNCH BREAK. 15 MINUTES AWAY. THE BACKDROP HERE ARE THE PRELIM NUMBERS COMING THROUGH OUT OF SAMSUNG ELECTRONICS. YVONNE: YEAH. 107 TRILLION WON CAME IN FOR THE THIRD QUARTER IN TERMS OF OPERATING PROFIT. THAT STILL WAS A RECORD. BUT STILL NOT ENOUGH TO SATISFY THIS MARKET. SO CERTAINLY JUST GOES TO SHOW WHERE THE DEMAND AND WHERE THAT STORY LIES RIGHT NOW. THE STREET IS REALLY COMMENTING ON THIS RIGHT NOW. TALKING ABOUT LOOK, THE BIG THING PEOPLE ARE WATCHING OUT FOR IS WHEN IT COMES TO CONCERNS OVER THE COST OF FUNDING AND WHERE THAT REMAINS, RIGHT? AND HOW LONG DOES THIS REALLY SUSTAIN THIS WHOLE BIG CAPEX SPEND AND ALL THE LIKE. SO CERTAINLY THAT’S ONE THING. AND SEEING POTENTIAL FOR POTENTIAL SHAREHOLDER RETURN ONE THING TO WATCH. AND ALSO SENTIMENT IS POSITIVE ACCORDING TO GOLDMAN WHEN IT COMES TO THE KOREA SEMIS. I THINK THAT’S -- I’M GOING TO GUESS FROM HIS TEAM AS WELL. THAT’S ONE THING TO WATCH HERE AS WE UNPACK THE PRELIM EARNINGS RIGHT NOW. OF COURSE, WE WILL GET MORE OF THAT BREAKDOWN COMING THROUGH WHEN IT COMES TO SAMSUNG EARNINGS AND THE END OF THIS MONTH. LET’S BRING IN LEE TO TALK US THROUGH THESE TWO NUMBERS THAT WE GOT. YOU KNOW, CERTAINLY THE MARKET IS NOT TOO IMPRESSED. BUT YES. WALK US THROUGH THE NUMBERS SO FAR. >> YEAH. SURE. WHAT STANDS OUT TODAY IS REALLY THE SHEER SCALE OF THE NUMBER. OPERATING PROFIT OF 107 TRILLION WON WHICH IS ABOUT, YOU KNOW, MORE THAN $80 BILLION. THAT’S A REALLY STAGGERING NUMBER. BECAUSE NO OTHER COMPANY IN KOREA HAS POSTED THAT LEVEL OF QUARTERLY OPERATING PROFIT EVER IN THE CORPORATE HISTORY. SO THIS IS REALLY -- WE ARE REALLY GETTING USED TO SAMSUNG SHATTERING ITS OWN RECORD EVERY QUARTER NOW. BUT IT’S PRETTY ELEVATED NUMBER. IF YOU REALLY LOOK AT THE HISTORY OF SAMSUNG, THIS QUARTERLY PROFIT EXCEEDING 100 TRILLION WON, SAMSUNG IS MAKING MORE MONEY THAN IT HAS IN ALL OF LAST THREE YEARS COMBINED. SO WE ARE REALLY GOING THROUGH AN EXTRAORDINARY TIME. IT REALLY -- REALLY BECAUSE OF THE MEMORY. IT’S ALL MEMORY. THERE’S EXTRAORDINARY DEMAND FROM HYPERSCALERS. THERE’S NO -- RELENTLESS AMOUNT OF SPENDING FOR DATA CENTERS. AND ANALYSTS WE HAVE SPOKEN WITH HAVE SAID THEY DON’T SEE ANY SLOWDOWN IN THE AI INFRASTRUCTURE SPENDING IN THE COMING QUARTERS. SO WHICH MEANS THAT IT REALLY BODES WELL FOR SAMSUNG. DAVID: NOW, THIS IS OBVIOUSLY -- THIS IS REALLY THE CURSE OF BEING A PUBLIC COMPANY, RIGHT? YOU DO EXTREMELY WELL. BUT YOU’RE ALWAYS BENCHMARKED AGAINST ANALYSTS WHO ARE ALSO REVISING THEIR EXPECTATIONS OF THE COMPANY. HELP US UNDERSTAND WHEN WE GET THE BREAKDOWN OF THE EARNINGS, AND THE COMPANY COMES OUT AND GIVES US CONTEXT, WHAT SORT OF GUIDANCE DO YOU THINK WE SHOULD BE PAYING ATTENTION TO HERE? ESPECIALLY ON MEMORY SPECIFICALLY. >> ABSOLUTELY. SO I THINK THE OCTOBER 29 FULL FINANCIAL RESULTS AS WELL AS EARNINGS CALL WOULD BE A VERY IMPORTANT EVENT FOR INVESTORS. WE ARE LOOKING OUT FOR SAMSUNG’S COMMENTS AROUND HBM, PARTICULARLY HBM-4 THE LATEST GENERATION. THEY HAVE BEGAN RAMPING UP THE PRODUCTION AND SUPPLYING TO BIG COMPANIES LIKE NVIDIA AND AMD STARTING THE SECOND OR THIRD QUARTER OF THIS YEAR. SO WE ARE NOT REALLY SEEING THE FULL IMPACT ON THE -- ON THAT BUSINESS IN THE EARNINGS. A LOT OF ANALYSTS ARE EXPECTING THAT PERFORMANCE TO REALLY RAMP UP THERE -- THEIR PROFITABILITY NEXT YEAR AS WELL. SO WE ARE LOOKING OUT FOR THEIR COMMENTS AROUND THAT. AS WELL AS CAPEX. I MEAN, WE WANT TO KNOW HOW MUCH SPENDING THEY ARE GOING TO DO IN TERMS OF CAPITAL EXPENDITURE. SO WE ARE LOOKING FOR SOME GUIDELINES AROUND THAT. AND ALSO WE ARE LOOKING FOR -- THEIR COMMENTS AROUND THE SHOULDER RETURNS. THEY HAVE ANNOUNCED SPENDING 100 -- AS MUCH AS 110 TRILLION WON FOR SHAREHOLDER RETURN PROGRAM INCLUDING 30 TRILLION WON FOR THE THIRD QUARTER. SO WE ARE REALLY GOING TO LOOK OUT FOR THERE, COMMENTS AROUND THAT, TOWARD THE END OF THIS YEAR. DAVID: THANK YOU SO MUCH. IN SEOUL FOR US. NOW, RELATED TO THIS, OF COURSE, IS TSMC, THAT’S THE OTHER BIG AI STORY THIS YEAR. IN THE ASIA PACIFIC. AND IN THE COMPANY’S CASE, AND BY VIRTUE OF THE SEPTEMBER SALES NUMBER, SECOND QUARTER REVENUE NUMBERS ARE COMING OUT. IMMINENTLY, AHEAD OF THIRD QUARTER EARNINGS NEXT WEEK. BLOOMBERG INTELLIGENCE THINKS THAT THE 3-Q REVENUE COULD REACH THE TOP END OF THE GUIDANCE HERE OF ABOUT $45.8 BILLION. SENIOR TECH ANALYST STEVEN TUNG WITH US ON SET TO HELP US UNDERSTAND THE CONTEXT OF THE COMPANY HERE. TELL US WHY YOU EXPECT THIS TO REACH THE TOP END? >> OK. I THINK BASICALLY THE COMPANY ALREADY REACHED THE RECORD HIGH REVENUE IN BOTH JULY AND AUGUST. AND THEN EVEN WE SEE SOME SEQUENTIAL DECLINES IN SEPTEMBER. THE COMPANY IS STILL VERY SAFE TO REACH THE HIGHER BOUNDS OF THE GUIDANCE. SO WE DON’T REALLY SEE SURPRISE THERE, ACTUALLY. I MEAN, AND ACCORDING TO COMPANY GUIDANCE, THE KEY IS PROBABLY ON THE MARGIN, THE COMPANY DID SPEND MARGIN TO DECLINE A LITTLE BIT ON THE SWINGS BASIS. -- ON THE SEQUENTIAL BASE. BUT THE MAIN GUIDANCE IS 66%. LAST YEAR ABOUT -- ACTUAL BELOW 60%. SO THE YEAR-ON-YEAR GROWTH EXPANSION IN MARGINS IS PRETTY SIGNIFICANT. AND THE MARGIN, THE MODERATE CONTRACTION OF MARGIN IN Q3 IS BECAUSE THE INCREASING CONTRIBUTION FROM THE TWO NANOMETER PROCESS WHICH IS STILL IN THE PROCESS WHERE THE MARGIN IS BELOW A. AVERAGE WHICH NORMAL FOR THE NEW PROCESS AND THAT’S WHAT WE SEE FOR Q3. YVONNE: WHAT DOES IT TELL YOU ABOUT THE SUSTAINABILITY OF WHERE WE ARE IN THIS WHOLE MEMORY CHIP CYCLE AND THE LIKE AND THIS WHOLE AI CYCLE RIGHT NOW? >> I THINK THE FOUNDRY BUSINESS IS NOT AS VOLATILE AS MEMORY AND ALSO TSMC HAD AN ABSOLUTE LEADING POSITION IN THE ADVANCED PROCESS AREA. SO FROM THAT PERSPECTIVE, WE DON’T REALLY SEE A LOT OF VOLATILITY. AND I SUSPECT THE -- OBVIOUSLY INVESTOR WILL CONTINUE TO FOCUS ON WHAT IS GOING TO HAPPEN IN THE SECOND HALF. BUT MORE IMPORTANTLY, I THINK THEY MIGHT LOOK INTO WHAT MAY HAPPEN IN 2027. GIVEN THAT, RECENT MEDIA, TALKING ABOUT THE POTENTIAL EXPANSION, A NEW FAB IN -- YVONNE: ARIZONA. >> I’M TALKING ABOUT A NEW FAB ACTUALLY IN TEXAS. YVONNE: YES, YES. >> AND STILL KIND OF SPECULATION AND ALSO ELON MUSK TALKING ABOUT THE POTENTIAL COLLABORATION WITH TSMC ON TERRA FAB. SO I ASSUME INVESTORS ARE GOING TO BE VERY INTERESTED TO FIGURE OUT EXACTLY WHAT IS GOING TO HAPPEN THERE. YEAH. SO PRETTY MUCH I WOULD SAY THE FUNDAMENTALLY THE COMPANY IS STILL QUITE SOLID AND STRONG. YVONNE: OUR BLOOMBERG INTELLIGENCE SENIOR TECH ANALYST. COMING OUT, WE’RE GOING TO BREAK DOWN CHINA’S GOLDEN WEEK HOLIDAY NUMBERS AND SPENDING FIGURES AND THE LIKE AND SO FAR LOOKING PRETTY SOFT AS WE WAIT FOR THE OFFICIAL NUMBERS. BUT WE’LL CHECK THE MARKETS THERE, TRAVEL STOCKS AND THE LIKE. IN THE NEXT -- AFTER THIS BREAK. THIS IS BLOOMBERG. YVONNE: CHECKING MOVERS. CHIYEN, GOLDMAN AN INTERESTING CALL. RATED A NEW PIE FOR THE COMPANY. -- BUY FOR THE COMPANY. AND A EXPECTED PRICE TARGET OF $62 AND COULD DOUBLE IN THE NEXT FEW DAYS OR MONTHS. HOW DEPRESSED THE CURRENT VALUATION IS AND IMPLIES WHAT THE MARKET IS PRICING IN PROLONGED CASH BURN WHICH THEY VIEW AS OVERLY PESSIMISTIC HERE RIGHT NOW. YES, THEY SAY, REVENUE IS GOING TO BE -- DECLINE AS A FORECAST YEAR ON YEAR. BUT MAYBE NOT AS BAD AS WHAT THE MARKET IS PRICING IN RIGHT NOW. BUT THEY STILL EXPECT REVENUE GROWTH TO RECOVER TO 10% NEXT YEAR. THAT’S ONE THING TO WATCH. ON THE RETAIL SAYS, CONSUMPTION SPACE, SASA INTERNATIONAL, THE STOCK IS DOING THIS. PRETTY GOOD NUMBERS, TOO, WHEN IT CAME TO THE SECOND QUARTER. THEY SAID THEIR SALES ROSE SOME 37% AS WELL. THERE’S A PLACEMENT AROUND BE BEER -- AS WELL. AND ABOUT 4.4 BILLION HONG KONG DOLLARS FOR THAT ONE, DAVE. DAVID: THE MID PRICE WAS AT 38 -- 31.08. THE STOCK IS PLAYING A BIT OF CATCHDOWN. BUT ANOTHER COMPANY THAT’S HITTING THESE MARKETS AND TAPPING THESE MARKETS FROM OUR FUNDS. QUITE A DECENT AMOUNT IN TERMS OF THE PLACEMENT THERE. SO 4-B, THAT’S ROUGHLY HALF A BILLION U.S. DOLLARS, OF COURSE. TO THE POINT THAT HAL HONG WAS MAKING EARLIER ON, ALL THE FUNDRAISING THAT’S GOING ON HERE IN THE CITY IS REALLY COMING AT THE COST OF THE BENCHMARK AND A PLAY ACROSS MARKETS TODAY. SPEAKING OF INDEXES, LET’S HAVE A LOOK AT THAT. WE WILL BE BACK SHORTLY. WE’LL TAKE A SHORT BREAK. THIS IS "THE CHINA SHOW." ♪ YVONNE: 11:29 AM IN TOKYO. THE LUNCH BREAK IN JAPAN IN JUST A MOMENT AND THE NIKKEI AND TOPIX ARE BOTH LOWER HERE THIS HISTORIC. WE’RE DOWN ABOUT 1% FOR THE NIKKEI AND 1.5% FOR THE TOPIX AND TALKING ABOUT HOW THEY’RE DOING A BIG REVAMP FOR THE TOP EX AS WELL AND SLASHING HUNDREDS OF STOCKS ON THAT BENCHMARK AND THE GLOBAL INVESTORS BACK INTO THAT SPACE. SO A BIT OF DOWNSIZING AND CLEANING UP I GUESS YOU COULD SAY. DOLLAR-YEN IS A LITTLE BIT ON THE STRONGER SIDE OF THINGS BUT REALLY WHAT WE ARE TRACKING THIS MORNING -- DAVID: THEY’RE ADDING McDONALD’S, THERE. YVONNE: ARE THEY? DAVID: YEAH. YVONNE: WHY NOT? DAVID: McDONALD’S, FERRO TECH. THEY’RE -- THIS IS JUST A VERY SHORT LIST OF SOME OF THE CHANGES THERE, TOO. YVONNE: YEAH. DAVID: THE BENCHMARKS THERE. COXIA UP ABOUT 3% AND NOW WE HAVE A LUNCH IDEA. YVONNE: McDONALD’S? DAVID: SHOULD WE PULL THE TRIGGER ON THIS ONE? YOU’RE BACK FROM YOUR RUN. SO LOAD UP. DAVID: LET’S GO ALL OUT. LET’S GO ALL OUT. YVONNE: SPEAKING OF TRAVELING. DAVID: WHY NOT? LET’S GET TO THIS. CHINESE MEDIA WE HAVE SOME BIG NUMBERS ACROSS WHAT REALLY BEEN QUITE A BUSY -- TRAVEL ACTIVITY AND NOT SO MUCH SPENDING BUT THE NUANCE IN A MOMENT. CHINESE MEDIA SAYS REGIONAL -- CROSS-REGIONAL TRIPS FOR THE HOLIDAY PERIOD WERE SET TO INCREASE BY .7% LAST YEAR. REACHING 2.1 BILLION. MINMIN LOW WITH SOME OF THE MUM’S FROM THIS RECENT GOLDEN WEEK HOLIDAY. >> A DEARTH OF ACTUAL NUMBERS AND GRANULAR DATA THAT ALLOWS US TO PREPARE LIKE FOR LIKE NUMBERS. BUT WE KNOW, FOR EXAMPLE, IF YOU PULL OUT THIS BOARD THAT WE HAVE COMPILED, 250 MILLION AL TRIPS AND WE DON’T KNOW THE NUMBER LAST YEAR. BUT WE KNOW ON THE FIRST DAY OF OCTOBER, THERE WAS A SINGLE DAY RECORD OF ABOVE 25 MILLION. AND THERE WAS A DATA FROM THE FIRST THREE DAYS AS WELL. TRACKING SOME OF THE KEY COMMERCIAL -- THE INITIAL COMMERCE TRACK AND SAYS THERE’S AN INCREASE IN FOOTFALL AND REVENUE BY ABOUT 3% AND 5% RESPECTIVELY. SO OVERAL LOOKING PRETTY GOOD. THERE’S A RISE IN INBOUND AND OUTBOUND TRAVEL AS WELL. EXPECTED. AND PEOPLE TEND TO TAKE THE DAYS IN BETWEEN AND MAKE IT A LONGER HOLIDAY SO THEY CAN TRAVEL OVERSEAS. SO OUTBOUND CERTAINLY, THAT IS A BRIGHT SPOT THERE, INBOUND AS WELL BECAUSE. VISA-FREE POLICY AND SHANGHAI SEEING RECORD NUMBERS. BUT I THINK WHAT IS KEY TO WATCH IS REALLY THE PER TRIP AND PER CAPITA SPENDING. AND WE DON’T HAVE THE DATA FOR THAT BUT ANALYSTS EXPECT SOFT DATA THIS YEAR. SO IF YOU LOOK AT THE STOCKS, YES, THE -- AND SEEING A POP TODAY. BUT SOME OF THE DOMESTIC CONSUMPTION NAMES, THOSE ARE NOT DOING TOO WELL. YVONNE: IN TERMS OF WHAT ELSE DESTINATIONS WHERE ARE THEY GOING TO? WHAT SORT OF TRENDS CAME OUT? >> THIS IS PRETTY INTERESTING. THE TOP 10 DESTINATIONS, FLASH THAT BOARD AS WELL AND THE TOP FIVE ARE ALL ASIAN NATIONS. THE LIKE OF U.S., ITALY, THEY HAVE BEEN RELEGATED TO LOWER IN THE RANKING. SO THIS TELLS YOU A COUPLE OF OF THINGS, RIGHT? IS IT BECAUSE OF PEOPLE SORT OF CONSUMPTION DOWNGRADE HERE AND WANT TO TRAVEL TO CLOSER NEARBY COUNTRIES OR IS IT BECAUSE OF GEOPOLITICAL TENSIONS WITH WESTERN COUNTRIES THAT ARE PREVENTING THEM FROM GOING FURTHER AFIELD EVEN THOUGH THEY HAVE A LONG SORT OF STRETCH OF HOLIDAY AND CAN BOTH -- GOLDEN WEEK. AND THE POLICY THAT’S AN ISSUE AS WELL? THE OTHER THING THAT STANDS OUT IS JAPAN IS NOT IN THAT TOP 10 LIST. LAST YEAR, IT WAS THE NUMBER ONE SPOT. AND REMEMBER, AFTER -- DAVID: WHAT HAPPENED? >> THE HOLIDAYS, NOVEMBER WHEN TAKAICHI MADE THOSE COMMENTS ABOUT TAIWAN THAT LED TO A SOURING OF RELATIONS AND THE CHINESE GOVERNMENT HEAVILY ENCOURAGED THESE TRAVEL AGENCIES TO CUT GROUP TOURS TO JAPAN. SO THAT REALLY SHOWS YOU HOW GEOPOLITICS HAVE A HUGE IMPACT ON CONSUMER TRAVEL PATTERNS AS WELL. DAVID: MINMIN, THANK YOU SO MUCH. MINMIN LOW, OUR CHINA CORRESPONDENT THERE. LET’S PIVOT NOW AND HAVE A LOOK AT OBVIOUSLY THAT’S THE OUTBOUND TOURISM STORY THERE. THAT TAKES US INTO PART OF WHAT MINMIN ALLUDED TO JUST NOW IS MAYBE THE LACK OF DOMESTIC SPENDING THAT’S TAKING PLACE. NOW, THAT TAKES US INTO THE NEXT PILLARS OF INVESTMENT GROWTH, RIGHT? SO THE OLD ECONOMY PLAYBOOK WOULD TELL YOU, ALONG THE LINES OF PROPERTY. YVONNE: PROPERTY. DAVID: CAPEX SPENDING. YVONNE: LOCAL BOSTON BORROWING. DAVID: INFRASTRUCTURE. IT’S A DIFFERENT KIND OF INFRASTRUCTURE SPEND GOING ON RIGHT NOW, RIGHT? YVONNE: YEAH. DAVID: B OF A WITH THEIR TAKE ON THIS 25 TRILLION -- INTO 2030 OF THE SIX DIFFERENT AREAS WITH YOUR LOOKING AT ENERGY, COMPUTING, LOGISTICS, WATER SYSTEMS AND URBAN INFRASTRUCTURE. AND ALSO WORTH POINTING OUT THAT WE DO HAVE NUMBERS FOR FOUR OF THE SIX AND YOU CAN EXTRAPOLATE WITH THE OTHER TWO PERHAPS ALSO HAVE IN STORE FOR US HERE. YVONNE: THE REPORT ESTIMATES THAT THE NEW INVESTMENT WILL REACH 25 TRILLION RENMINBI OR THAT TRANSLATES TO ABOUT $3.7 TRILLION OVER THE NEXT FIVE YEARS. LET’S BRING IN HELEN CHOW, CHIEF ECONOMIST AT B OF A GLOBAL RESEARCH. WITH HER REPORT. SO 25 TRILLION RENMINBI OF INVESTMENT. IS THIS REALLY GOING TO BE ENOUGH TO OFFSET SORT OF THE -- THE TURN THAT -- THE DOWNTURN THAT WE’RE SEEING IN INVESTMENT IN THE ECONOMY? >> WELL, AT THE MOMENT, I THINK IT’S HARD TO TELL. MAINLY BECAUSE WE DON’T KNOW HOW MUCH OF THAT WILL BE ALLOCATED THIS YEAR VERSUS THE REST OF FOUR YEARS. THE REST OF FIVE YEARS. BUT WE WILL SAY THAT IT COULD POTENTIALLY HELP AT A TIME WHEN OVI ALL SUCCESS IN THE INVESTMENT HAS BEEN DECELERATING QUITE SIGNIFICANTLY. IN FACT, STARTED FROM SECOND HALF 2025. WE ALREADY SAW THAT FAI GROWTH COMING DOWN PRETTY SHARPLY AS THE RESULT OF A COMBINATION OF THREE THINGS HAPPENING. LOCAL GOVERNMENTS RUNNING OUT OF MONEY. INFRASTRUCTURE INVESTMENT WERE WEAK AND PROPERTY IN TERRIBLE SHAPE BECAUSE OF OVERCAPACITY, THE MANUFACTURING-RELATED INVESTMENT WERE VERY WEAK. SO ON THE BACK OF THAT, WE THINK THAT THE CHINESE GOVERNMENT IS ROLLING OUT THIS NETWORK INVESTMENT AS THE FUTURE FOR INFRASTRUCTURE INVESTMENT. AND THAT I THINK IS VERY HELPFUL AT THE MOMENT. BECAUSE, YOU KNOW, AT A TIME WHEN PRIVATE PARTIES ARE RELATIVELY, YOU KNOW, LACK OF CONFIDENCE TO INVEST, THE ONLY HOPE WE CAN PLACE ON IS FOR PUBLIC SECTOR TO BORROW AND ESPECIALLY CENTRAL GOVERNMENT OR CENTRAL GOVERNMENT OWNED, HAS TO BORROW MORE. SO THAT’S KIND OF HOW IT DIFFERENTIATES FROM THE PAST. DAVID: PUT THE 25 TRILLION RENMINBI FIGURE IN CONTEXT FOR US. HOW LARGE IS THAT IN THE GREATER SCHEME OF THINGS? >> WELL, I WOULD SAY THAT, YOU KNOW, IF WE’RE TALKING ABOUT DIVIDING INTO FIVE YEARS -- DAVID: THAT’S -- >> FIVE TRILLION RENMINBI PER YEAR, AND THAT’S KIND OF LIKE 3% TO 4% OF GDP PER YEAR. DAVID: OK. >> BUT I WOULD SAY THAT WITHIN THE YEAR, WE SEE SO MUCH KIND OF DELIVERED. THAT’S THE BIG QUESTION MARK. WE DON’T KNOW WHETHER THE PACE WILL BE ACCELERATED AT THE VERY BEGINNING OR TOWARD THE END AND WE’RE NOT SO SURE. BUT RELATIVE TO PROPERTY, YOU KNOW, INVESTMENT, WHICH PROBABLY REACHED A 10 TRILLION PLUS, THIS IS NOT NECESSARILY COMPARABLE IN TERMS OF THE SIZE, RIGHT? HOWEVER, I THINK THAT THE PROPERTY INVESTMENT IS MUCH LOWER NOW AFTER A SIGNIFICANT DECELERATION FOR FIVE YEARS. AND EACH YEAR, THE DRAG IS PROBABLY SMALLER, YOU KNOW, LESS THAN TWO TRILLION. SO I WOULD SAY THIS IS QUITE HELPFUL IN TERMS OF OFFSETTING THE DRAG FROM THE PROPERTY INVESTMENT AND WEAKNESS AS WELL AS THE SLOWDOWN IN LOCAL GOVERNMENT SPONSORED INFRASTRUCTURE INVESTMENT. YVONNE: HOW DO YOU SEE AI FILTERING -- HOW DOES IT ALL IN SOME WAYS RESHAPE THAT INVESTMENT MIX RIGHT NOW WITHIN THESE SIX NETWORKS? >> THAT’S RIGHT. THE AI, THE AI INVESTMENT AT THE MOMENT IS STILL IN BABY FORM. YVONNE: YEAH. >> FROM ALL WE CAN PUT TOGETHER AND ADDED, IT’S NOT YET ONE TRILLION RENMINBI AS OF 2026. SO IT’S STILL RELATIVELY SMALL. BUT WE THINK THAT IT IS GROWING AT A VERY FAST PACE. WE THINK IT CAN GROW AS SOMETHING LIKE AROUND 22% TO 30% A YEAR. BY 2028 OR 2029, THIS IS GOING TO GROW TO A MUCH BIGGER PART COMPARED TO THE DRAG THAT WE SEE STILL FROM THE PROPERTY SECTOR. BECAUSE PROPERTY SECTOR, BECOMING SMALLER AND SMALLER. AND AI BECOMING BIGGER SUSPECT BIGGER. SO THAT IN A WAY WE THINK THAT IN THE NEXT ONE TO TWO YEARS A FULL OFFSET FROM THE AI SECTOR TO HELP AT A TIME THAT PROPERTY SECTOR IS STILL ON THE MEND. BUT THAT SAID, THE SIX NETWORKS IS THE KIND OF PRE-CONDITION FOR AI SECTOR TO CONTINUE TO GROW BY LEAPS AND BOUNDS GOING FORWARD. BECAUSE YOU NEED THE POWER. YOU NEED THE WATER. YOU NEED THE COMPUTER POWER AND COMMUNICATION NETWORKS TO WORK TOGETHER. SO WE THINK THAT THIS IS THEREFORE A VERY IMPORTANT AREA WHERE THERE COULD BE MORE INVESTMENT NOW. AND WE DON’T HAVE TO WORRY ABOUT THE OVERCAPACITY IN THE NEAR FUTURE. SO THAT IS KEY FOR AI DEVELOPMENT. AND KEY FOR CHINESE CURRENT COUNTER-CYCLICAL POLICY ADJUSTMENT AS WELL. DAVID: AND WHERE DO YOU SEE SPACE TO FINANCE THIS OPERATION? YVONNE: RAMPING UP THE SCHOOL SPENDING AND HOW WILL IT LOOK LIKE? >> IT’S PROBABLY HAS TO BE A COMBINATION OF MANY THINGS. BUT I WOULD SAY MOST DISTINCTIVELY FROM THE CENTRAL GOVERNMENT BORROWING. WHERE CENTRAL GOVERNMENT OWNED SOE-RELATED BORROWING. SO IF WE’RE STILL TALKING ABOUT, FOR EXAMPLE, THE RECENT PSL, AND ONE OF THE MONETARY POLICY TOOLS THAT THE PBOC HAS CONSEQUENTLY MENTIONED LAST WEEK -- RECENTLY MENTIONED LAST WEEK REGARDING THE EASING MEASURES, SUCH STRUCTURAL LENDING TOOLS CAN BE EFFECTIVELY GETTING MORE MONEY INTO POLICY BANKS. AND POLICY BANKS MAKE THE LENDING INTO, YOU KNOW A SPECIFIC PROJECT TO SUPPORT A SIX NETWORKS. AND ONCE THIS MONEY COMES INTO THEIR ACCOUNT, THIS WILL BE SEEN AS EQUITY RATHER THAN CREDIT. LOANS. AND THEREFORE THEY WOULD BE ABLE TO USE THIS AMOUNT, RIGHT? TO -- FOR EXAMPLE, THE 800 BILLION WE MENTIONED IN AUGUST AND THAT HAS BEEN DEPLOYED, WOULD BE MULTIPLIED BY MANY TIMES BECAUSE COMMERCIAL BANKS SEEING THAT AS THE EQUITY WOULD BE ABLE TO COME WITH MATCHING LOANS. THAT IS FOUR TO FIVE OR FIVE TO SIX TIMES MORE. YVONNE: YEAH. SO BEYOND JUST MAYBE COVERING FOR THAT SHORTFALL IN INVESTMENT, HOW DO YOU SEE THIS SPILLING OUT TO THE REST OF THE ECONOMY? AND IN WHAT FORM COULD THAT TAKE? IS IT MANUFACTURING? IS IT SERVICES? COULD IT BOOST PRODUCTIVITY EVEN? >> I CERTAINLY THINK THAT WILL BE CASE. BECAUSE FIRST OF ALL, THERE WILL BE ORDERS COMING OUT. AND THEREFORE, THE -- ESPECIALLY THOSE IN MANUFACTURING SECTOR, IN THE -- YOU KNOW, FROM UPSTREAM ALL THE WAY TO DOWNSTREAM WILL PROBABLY BENEFIT FROM THAT. YOU SEE EQUIPMENT PURCHASE. YOU SEE LABOR. ALSO BEING EMPLOYED. GENERATING INCOME. SO NOT ONLY THAT -- THIS INVESTMENT IS GOING TO, YOU KNOW, CREATE A SUPPORT FOR, YOU KNOW, INDUSTRIAL PRODUCTION, BUT AT THE SAME TIME, I THINK THEY GENERATE ENOUGH JOBS TO ALSO PROP UP CONSUMPTION. WHICH IS VERY MUCH NEEDED AS WELL. SO WE THINK THAT THIS IS GOING TO POTENTIALLY SUPPORT THE DEVELOPMENT GOING FORWARD OF THE TECHNOLOGY SECTOR. SO THINK ABOUT THE FACT THAT IN THE PAST, WE NEED AIRPORT, RAILWAY, AND ALSO HIGHWAYS TO GET THE LOW VALUE-ADDED MANUFACTURING GOING. NOW WE NEED THE SIX NETWORKS TO GET BASICALLY THE AI-RELATED HIGH-TECH SECTORS GOING. SO THAT’S THE VERY BASIC. FOR EXAMPLE, IF YOU TRAVEL NOWADAYS, YOU WILL SEE THAT SOMETIMES THE YES AI MODELS ARE VERY FAST. FOR EXAMPLE, RECENTLY, I WAS TRAVELING IN THE U.S. AND FOUND YES AI MODELS THERE WERE WORKING GREAT. BUT ACTUALLY, THE -- THE RECEPTION IS QUITE POOR. WHEN COMMUNICATION NET WORKS DON’T NECESSARILY PLAY CATCH-UP, YOU COULD POTENTIALLY SEE THAT EVEN THE FASTEST AND MOST ADVANCED MODELS COULD BE SET BACK BECAUSE OF THAT. YVONNE: YEAH. IF YOU -- DAVID: YEAH. IF YOU CAN’T GET INTO THE RESTAURANT, YOU CAN’T ORDER THE MICHELIN STAR DISH. AND A STRAINED ANALOGY. DOES THIS TAKE PLACE THE PLACE OF OLD SCHOOL -- I LOOK AT SOMETHING LIKE THIS AND DOES THAT -- DOES THAT THEN MEAN WE WON’T GET THE SHORT-TERM STIMULUS THAT THE ECONOMY DOES SEEM TO NEED AT THIS POINT IN TIME? WHERE DO WE -- HOW DO WE LOOK AT THOSE? HOW COMPETING THEMES? >> DAVID, I WILL CALL THIS THIS IS PART OF THE SHORT-TERM COUNTER-CYCLICAL POLICY ADJUSTMENT. THEY ARE COMING OUT WITH. BUT HOPEFULLY THAT THEY CAN DO IT A LITTLE BIT FASTER. WE SEE MORE OF THE SUPPORT COMING FROM THIS SIDE. IN ADDITION, DO WE SEE, FOR EXAMPLE, INTEREST RATE CUTS? OR, YOU KNOW, INTRA-YEAR BUDGET AND DEFICIT EXPANSION? ETC., THE MORE TYPICAL TYPE OF STUFF THAT THE MARKET WILL BE EXPECTING? I THINK THE PROBABILITY OF THAT IS RELATIVELY LOW. PARTLY BECAUSE THAT OVERALL GROWTH IS STILL OK. ESPECIALLY AT A TIME WHEN EXPORT IS STILL RUNNING AT 25% TO 28% YEAR ON YEAR. SO WE THINK THAT POLICY COMPLACENCY LEVEL IS STILL AT MEDIUM TO HIGH LEVEL. AND THEREFORE, IT WOULD TAKE SOME TIME BEFORE MORE MEASURES WILL BE PACKED TOGETHER. AND THAT I THINK WILL BE MORE LIKELY AT A TIME WHEN WE SEE A MORE MEANINGFUL CORRECTION IN EXPORT GROWTH. WHICH IS NOT IMMINENT YET. DAVID: YEAH. STILL GOING STRONG, ISN’T IT? NOW, ALL THE SPENDING, FROM EXPERIENCE, DOES THIS GO INTO SOE’S, PRIVATE SECTOR COMPANIES, SEE SOME OF THIS CAPEX -- FROM A MARKET PERSPECTIVE, HOW DO WE LOOK AT THIS IN TERMS OF FUTURE REVENUES OF ALL THESE COMPANIES FURTHER DOWNSTREAM IN THE ECONOMY? >> WELL, I THINK THAT FROM INFRASTRUCTURE AND OVERALL. NETWORKS, INVESTMENT PERSPECTIVE, USUALLY THE BIG SOE’S WILL PROBABLY BENEFIT MORE. BECAUSE THEY TEND TO BE UPSTREAM. THEY TEND TO GET THE -- THE ORDERS FASTER. HOWEVER, I WOULD SAY THAT THIS -- SUCH INFRASTRUCTURE LAYOUT IS POTENTIALLY PAVING THE WAY FOR THE NEXT, YOU KNOW, INDUSTRIALIZATION AND TECH BOOM. AND THEREFORE, I THINK THAT WILL DEFINITELY BENEFIT FROM THE -- THE SECOND WAVE OR THIRD WAVE PERSPECTIVE, RIGHT? EVEN IF THAT -- THE PRIVATE SECTOR MAY NOT GET THE IMMEDIATE ORDERS RIGHT AWAY, I THINK THEY WILL BENEFIT TREMENDOUSLY FROM, YOU KNOW, HAVING FASTER COMMUNICATION AND MORE EFFICIENT DELIVERY OF ENERGY AND THE LOWER ENERGY COSTS, ETC. SO THIS IS JUST LIKE BUILDING THE ROAD AND -- IN THE 1980’S AND 1990’S. DAVID: THEY WILL COME. >> BUSINESS CAN COME AND YOU CAN SHIFT OVERSEAS AND SHIP IT AROUND IN CHINA. SO THAT IS THE VERY BASIC STUFF THAT CHINESE POLICYMAKERS SEE AS BEING THE MOST IMPORTANT FOUNDATION ON WHICH THAT YOU CAN ACTUALLY BUILD ON TOP OF THIS HIGH-TECH STUFF. DAVID: WATCH THIS CLOSELY. THE SIX NETWORKS, $3.7 TRILLION. HELEN CIAO, CHIEF GREATER ECONOMIST. LOOKING AT CASH MARKETS, SO WE HAVE NOW REVERSED THE EARLY GAINS AND WE’RE NOT -- NOW TRADING LOWER. SPECIFICALLY ON THE CHINEXT INDEX OF 1.4%. LOTS MORE AHEAD. THURSDAY "THE CHINA SHOW." ♪ YVONNE: THE NEXT THING TO WATCH OUT OF CHINA EU-CHINA TALKS KICKING OFF AND BLOOMBERG HAS LEARNED THAT THE EU IS PREPARED TO LIMIT IMPORTS OF CHINESE HYBRID VEHICLES. NOW, SALES OF THOSE CARS HAVE SURGED IN EUROPE. NOW ACCOUNTING FOR, GET THIS, ABOUT A QUARTER OF TOTAL VEHICLE SALES. BRUSSELS PLANS TO USE HYBRID VEHICLES AS A TEST CASE WITH SIMILAR MEASURES POTENTIALLY EXTENDED TO OTHER SECTORS WITH THE BLOCK C TRADE IMBALANCES. DAVID: AND BOTH SIDES ON PAPER LOOK LIKE THEY’RE HEADED TOWARD A TRADE CLASH. OUR BLOOMBERG OPINION COLUMNIST ARGUES THAT BEIJING HAS A CHANCE TO EASE TENSIONS. AND SHE’S HERE WITH US ON SET TO TALK US THROUGH WHY WOULD CHINA MAKE A MOVE TO WEAKEN ITS ADVANTAGES HERE IS THE QUESTION. >> YEAH. IT SHOULD ABSOLUTELY BE DOING THAT. I THINK IT’S A NO BRAINER AT THIS POINT. SO WHAT I’M TALKING SPECIFICALLY IS THESE EXPORT REBATES THAT CHINESE CAR MAKERS WHEN THEY EXPORT THEIR CARS OVERSEAS CAN THEN CLAIM BACK. AND THIS IS SOMETHING THAT, YOU KNOW, HAS APPLIED TO MULTIPLE INDUSTRIES SINCE THE 1980’S AND YOU CAN IMAGINE BACK IN THE DAY WHY THIS IS IMPORTANT. AT THAT POINT, CHINA WAS STILL TRYING TO BUILD UP ITS CAPABILITIES, BOTH FOR MANUFACTURING AS WELL AS EXPORTS AND ALSO NOT SOMETHING THAT’S VERY UNUSUAL. THIS IS SOMETHING THAT COUNTRIES AROUND THE WORLD DO. SO ESSENTIALLY IT MEANS THAT YOU GET A SLIGHT TAX BREAK ON THE INPUTS THAT YOU BUY TO MAKE SOMETHING FINISH THAT YOU THEN SELL OVERSEAS. IT’S NOT THE KIND OF THING THAT WOULD TRIGGER ANY KIND OF CASE AND VERY COMMONLY USED. MY ARGUMENT IS NOW THAT OBVIOUSLY CHINA’S CAR INDUSTRY IS DOING SO WELL, IT DOESN’T NEED THIS KIND OF SUPPORT ANYMORE. IT DOESN’T NEED THIS KIND OF INCENTIVE. AND IN FACT, THAT MONEY THAT DOESN’T GO TO CHINESE CAR MAKERS COULD BE REINVESTED AT HOME AND -- IN MANY DIFFERENT WAYS AND ALSO ANOTHER WAY OF REDUCING THIS KIND OF TRADE FRICTION THAT WE’RE SEEING WITH PARTNERS. IT’S PRETTY CLEAR THAT THAT IS WHERE CHINA EU ARE HEADING. I DON’T KNOW IF THE TALKS ARE STARTED JUST YET BUT THEY ARE GOING TO VERY SHORTLY AND GO FOR TWO DAYS. YVONNE: DO YOU KNOW THINK REMOVING THESE REBATES IS ENOUGH TO CONSOLIDATE THE SECTOR? >> OBVIOUSLY THAT’S A MUCH BIGGER QUESTION. BUT I THINK THERE’S NO QUESTION THAT THE CHINA WANTS THIS TO HAPPEN. THERE ARE SO MANY DIFFERENT BRANDS. THERE ARE MORE THAN 100 EV BRANDS OPERATING WITHIN THE COUNTRY. WE’RE SEEING, YOU KNOW, HUGE COMPETITION, MARGINS THAT ARE SO SUPER THIN. I GOT A CHART IN THE COLUMN. I DON’T KNOW IF WE CAN BRING THAT UP. BUT IT’S -- NOT A SUSTAINABLE SITUATION. EITHER AT HOME OR OVERSEAS. AND SO, YEAH, THE FIRST THING I THINK CHINA SHOULD BE DOING IS IN THE NEW YEAR, NEW CALENDAR YEAR, SHOULD BE REMOVING AT LEAST THESE EXPORT, YOU KNOW, EXPORT SUBS DIBS. YVONNE: JULIANNA, CHECK OUT HER COLUMN ON BLOOMBERG OPINION COLUMNIST. CHINA CAN GIVE EUROPE A BREAK WHEN IT COMES TO EV’S. SOME OTHER STORIES THAT WE’RE TRACKING FOR YOU TODAY. THE PEOPLE’S BANK OF CHINA ADDED MORE GOLD TO RESERVES LAST MONTH. EXPANDING THEIR HOLDINGS BY 740,000 OUNCES. NOW, THAT MARKS A 23RD MONTH OF ACCUMULATION AS PRICES WEAKEN TOWARD $4,000 AN OUNCE. GOLD SHED OVER 6% LAST MONTH. A SOARING ENERGY PRICE IN THE MIDDLE EAST CONFLICT DID FAN INFLATION. BLOOMBERG’S 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. OUR SOURCE SAYS A CANOPY AND WEAPONS BAY DOOR FROM AUSTRALIA WERE SENT THROUGH HONG KONG TO SPEED UP DELIVERY. THE 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 AT A PLAGUE RESEARCH LAB. THE UN AGENCY HAS BACKED AWAY FROM AN EARLIER DECLARATION THAT THE RISK TO THE GENERAL POPULATION WAS LOW. SAYING IT’S IMPOSSIBLE TO MAKE AN ASSESSMENT. PRESIDENT TRUMP SAYS HE’LL RAISE THE ISSUE WITH RUSSIAN PRESIDENT VLADIMIR PUTIN WHEN THE LEADERS SPEAK BY PHONE. WE HAVE PLENTY MORE AHEAD. THIS IS BLOOMBERG. ♪ YVONNE: TERRIBLE STORY TAKING PLACE RIGHT NOW ACROSS THE BANKING SPACE. AND ONE WOULD THINK GIVEN HIGHER YIELDS ONE WOULD HELP. BUT THERE’S A THRESHOLD AND IT LOOKS LIKE MIGHT HAVE HIT THE THRESHOLD WHERE IT’S BECOME THE STORY ACROSS FINANCIAL SPACE. BUT RISING YIELDS. IN SINGAPORE, JUST CASE IN POINT, YOU CAN SEE THIS JUST ABOUT ACROSS THE REGION. TO HSBC, ALTHOUGH THAT HAS THE EUROPEAN CONTAGION NAST THAT’S PLAYING OUT AS FAR AS THOSE ARE CONCERNED. BUT TO SAY FINANCIALS HAVE SEEN BETTER DAYS. AR HARDWARE STOCKS, JUST REMEMBER MAINLAND MARKETS ARE REOPENING TODAY SO A BIT OF CATCH-UP. UP TRADE HERE, SOME OF THE ONES ON YOUR SCREEN ARE THE ONES OVER HERE IN HONG KONG MOSTLY. A CASH DOWN TRADE AND SOME OF THE OTHERS LIKE OPTICAL REALLY -- EARLIER ON -- DID SEE SOME GAINS AND USING PAST TENSE THERE BECAUSE AS YOU CAN SEE THE CHINEXT INDEX AS I SPEAK IS NOW PUSHING 2% TO THE DOWNSIDE. IT SHOULD BE SESSION LOWS AS WE SPEAK. SHIPPING STOCKS COMING UP ON YOUR SCREEN, THIS WILL SHOW YOU SOME GREEN. U.S. STRIKES AND PLANS AROUND THAT PERHAPS BOOSTING THE SHORT-TERM OUTLOOK THERE, AROUND SOME OF THE SHIPPING NAMES HERE IN -- UP ON THE MAINLAND. TRADED IN SHANGHAI. SPEAKING OF SHANGHAI CRUDE COMING UP ON THE SCREENS. THE OIL STORY, THE RISING YIELD STORY, INFLATION PRINT IS REALLY WHAT’S SCARING SOME OF THE BULLS AWAY RIGHT NOW. WHERE YES, WE ARE NOW BACK ABOVE $100. 102. ANTHONY: 50 ON BRENT. GOLD AS YOU CAN SEE ON YOUR SCREEN HALF A PERCENT TO THE UPSIDE. ALTHOUGH 4 4 -- >> BITCOIN SEES RED AFTER WE WIPED OUT -- YOU KNOW, MARKET CAP AND THE LIKE. JUST -- DAVID: LAST NIGHT. YVONNE: YEAH. THERE WAS A LOT GOING ON. BUT YEAH. WE’LL SEE HOW THIS MONKEY MARKET LOOKS ACCORDING TO OUR GUEST PREVIOUSLY. BECAUSE -- DAVID: THAT’S A VERY WEIRD -- YVONNE: IT GOES UP AND DOWN AND NOT A BULL OR A BEAR. YES. WHAT ELSE DID WE TALK ABOUT? DAVID: AND NOT A BEAR, NOT A BULL. BONOBO IS SIMILAR TO A MONKEY. A BONOBO MARKET. AND WE ARE -- THIS IS A VERY -- WE HAVE TIME, RIGHT? 30 SECONDS LEFT. SO WE’RE CLOSER TO BONOBOS THAN CHIMPANZEES. OUR DNA. SO THEY ARE CLOSEST LIVING MAMMALIAN RELATIVE. BONOBOS. I’LL LEAVE YOU WITH THAT THOUGHT. YVONNE: A SLOW NEWS DAYS AND DAVID HAS NOT TALKED SINCE HE’S BEEN RUNNING THE LAST FEW DAYS. THAT’S IT FOR "THE CHINA SHOW."