Samsung Posts Record Profit but Investors Question Sustainability of AI Spending

>> THIS IS THE ASIA TRADE. THE TOP STORIES THIS HOUR. SAMSUNG REPORTS RECORD QUARTERLY PROFITS BUT FALL SHORT OF ANALYST ESTIMATES AMID THE DURABILITY OF CHIP DEMAND. WALL STREET SLIPS FROM RECORD HIGHS. BRENT OIL STUCK AROUND $100, STOKING CONCERNS ABOUT INFLATIONARY PRESSURES. BLOOMBERG REVEALS THE EU IS RAISING TENSIONS AHEAD OF CRUCIAL TAY TALKS IN BEIJING. >> TAKE A LOOK AT THE SET OF RETRADING ACROSS ASIA. WE ARE IN THE THICK OF THINGS IN TERMS OF HOW INVESTORS ARE CONTENDING WITH MULTIPLE FACTORS AT THE MOMENT. WE ARE SEEING REVIVAL OF OIL PRESSURES. ELEVATED OIL PRICES. REALLY RAISING THE RISK OF THE CENTRAL BANKS INCLUDING THE FED GOING HIGHER FOR LONGER HERE. WE ARE SEEING DECLINES BEING POSITIONED AS WE HEAD INTO THE ASIA OPEN. MOVES ON WALL STREET, MOVING ON ACCOUNT OF HIGHER OIL PRICES AND CONCERNS OVER PRICE PRESSURES. WE'VE ALSO GOT THE SHIFT IN THE INTENTION SPAN TO THE UPCOMING EARNINGS SEASON, LOOKING TO SEE WHEN IT COMES TO THIS RED HOT A.I. TRADE, PROFIT GROWTH CAN JUSTIFY SOME EXTREMELY LOFTY VALUATIONS AS WE SEE THE BACKDROP OF THESE MACRO RISKS MOUNTING. SOME DOWNSIDE EXPECTED IN AUSTRALIA AS WE GET INTO THE START OF TRADING. THAT OIL STORY, BRENT CRUDE, TRADING AT .4% LAWYER -- LOWER. WHO HAD A REPORT FROM THE WHITE HOUSE ASKING FOR INPUT BE FOR THE MIDTERM SPIRIT A LOT GOING ON IN TERMS OF WHEN INVESTORS ARE HAVING TO CONTEND WITH AT THE MOMENT. AVRIL: THE SAMSUNG FOR LUMINARY -- PRELIMINARY EARNINGS FOR THE THIRD QUARTER HAVE SEEN A CLIMB BUT WILL IT BE ENOUGH TO SATISFY INVESTORS WANTING JUSTIFICATION FOR SKY HIGH VALUATIONS? 108.7 TRILLION WON -- RATHER 107 WHEN IT COMES TO THE MARKET ANALYSTS WERE EXPECTING. REVENUE ALSO LOWER THAN EXPECTED. THE FOCUS SHIFTS TO ALSO HOW INVESTORS ARE DIGESTING THESE PROFITS. CAN IT JUSTIFY THE A.I. PROPHET BOOM? -- PROFIT BOOM? HAIDI: WONDERING HOW THIS IS GOING TO END AND HOW MUCH MORE RESILIENCE THERE IS IN THIS PARTICULARLY AT A TIME WHEN OF COURSE WE ARE SEEING THE LIKES OF SAMSUNG BACKING AI COMPANIES. THE IDEA OF CIRCULAR FINANCING IS ALSO BECOMING WORRISOME FOR SOME INVESTORS. LET'S GET MORE ON THESE NUMBERS WITH OUR BLOOMBERG INTELLIGENCE SENIOR INDUSTRY ANALYSTS JOINING US NOW. WE APPRECIATE YOU GIVING US THE TIME GIVEN HOW BUSY THE MORNING IS WITH THE NUMBERS. PROFIT CAME IN BELOW CONSENSUS. REPORTER: GOOD MORNING. THE PRINTED NUMBER LOOKS A LITTLE BELOW CONSENSUS. BASED ON THE RECENT MICRO N EARNINGS, THE REVENUE AND OPERATING PROFIT COULD HAVE ACHIEVED A LITTLE BIT OF A STRONGER NUMBER BUT SAMSUNG STARTED TO RECOGNIZE INCENTIVE BONUSES. . THERE MIGHT BE ONE REASON IN THE THIRD QUARTER. PROBABLY SAMSUNG STARTED TO RECOGNIZE BONUS FROM Q2, Q2 WAS BASED ON THE COST FOR THE SIX MONTH. BUT THAT WAS PARTLY CARRIED OVER TO THE THIRD QUARTER. SO WE HAVE TO SEE WHY -- HOW THE INCENTIVE BONUS WOULD BE RECOGNIZED IN THE THIRD QUARTER. THAT SHOULD BE THE FOCUS WHEN THE REPOST EARNINGS AT THE END OF OCTOBER. THE MARKET SHOULD BE DOING ALRIGHT BASED ON THE RECENT MICRON EARNINGS. HAIDI: INTERESTING, YOU HAVE SEEN SHARES AROUND 20% BELOW THE PEAK. INVESTORS BROADLY HAVE CHOSEN TAIWAN OVER THERE KOREA MARKET FOR THIS PLAY. IN TERMS OF WHAT EVERYONE WANTS TO SEE FROM SANSOM WHICH IS THE EVIDENCE OF STAY IN POWER AND THE CYCLE, HOW DO YOU VIEW NEAR-TERM VERSUS LONGER-TERM? REPORTER: IF WE LOOK AT THEIR NUMBERS FOR THE THIRD QUARTER, THE 20% INCREASE QUARTER OVER QUARTER, AND YESTERDAY, TWO DAYS AGO, MARBLEHEAD THE INVESTOR MEETING IN THEY ARE EXPECTING DATA CENTER INVESTMENT WILL BE 3 TRILLION U.S. DOLLARS AND 2030. WE WILL SEE STILL STRONG INVESTMENT GOING ON IN THE MARKET. PROBABLY THE NEXT YEAR AS THE FORECAST FOR THE MEMORY BILL -- MEMORY BUSINESS AS SAMSON GAINS MARKET SHARE IN THE SPACE COME I THINK THAT THE OVERALL MEMORY MARKET SHOULD BE NO PROBLEM. AND THE MEMORY WALL WHICH IS AN ISSUE FOR THE OVERALL A.I. -- MEMORY CHIPS WILL BE STILL A BOTTLENECK. WHICH MEANS MEMORY CHIPS WILL PLAY A KEY ROLE IN THE A.I. ARCHITECTURE. IN TERMS OF MEMORY CHIPS, AS WE GO INTO THE A.I. AND FRIENDS ERA, THERE ARE -- SAMSUNG MEMORY BUSINESS SHOULD BE QUITE GOOD IN 2020 SEVEN. RECENTLY WE ARE TALKING ABOUT TIGHT SUPPLY GOING INTO 2028 EVEN. WE DON'T HAVE VERY MUCH CONCERN ON THE MEMORY BUSINESS. AVRIL: VISIBILITY INTO THE COMING YEARS AS FAR AS AI DEMAND FOR MEMORY IS CONCERNED. THANK YOU, MASAHIRO. IN TERMS OF SOUTH KOREA'S CURRENT ACCOUNT BALANCE, WE HAVE SEEN THE SURPLUS WIDENING TO $46 BILLION FOR THE MONTH OF AUGUST. THAT IS FOR THE CURRENT ACCOUNT SURPLUS. WE ARE ALSO SEEING IT WIDENING TO $46.8 BILLION. ASIDE FROM THAT INVESTORS ARE WEIGHING A STEW OF OTHER THINGS IN THE MARKETS TODAY, NOT JUST SAMSUNG PRELIMINARY EARNINGS. ENERGY PRICES AS WELL AS SOME OF THE FED MINUTES AND THE 10 YEAR OPTION FOR TREASURIES. FOR MORE, STRATEGIST MARK CRANFIELD JOINS US NOW, DO YOU THINK THE NUMBERS WILL HELP OFFSET CONCERNS SURROUNDING INFLATION, THE BOND MARKETS? MARK: IS GOING TO BE A MAJOR TEST. WHAT WE ARE SEEING WITH MAJOR COMPANIES IS THE AI THEMES HAVE GOT THESE COMPANIES PRICED TO PERFECTION AND WE HAVE SEEN INVESTORS HAVE A PRETTY LOW THRESHOLD OF PATIENTS WHEN COMPANIES DO NOT DELIVER -- PAT IENCE WHEN COMPANIES DO NOT DELIVER. AS THEY PROMISED TO DO. INVESTORS MIGHT NOT BE HAPPY ABOUT THAT. 20% FOR ME IS HIGH. IT DOES HELP CUSHION IT TO SOME EXTENT. BUT IT WOULD NOT BE SURPRISING IF WE SEE A BIT OF A SELLOFF FOR SAMSUNG SPILLING OVER TO THE REST OF THE KOREAN MARKET WHEN THEY GET GOING LATER THIS MORNING. WHAT WE HAVE SEEN IS PRETTY SHARP REACTIONS FROM INVESTORS IN THE U.S. AS SOON AS A COMPANIES DON'T BEAT ESTIMATES, WE SEE THE CLEANSE. -- WE SEE DECLINES. IF SAMSUNG GIVES A GOOD EXPEDITION FOR WHERE THE NUMBERS ARE AS THEY ARE, MAY IT CAN HOLD UP. AS SOON AS PEOPLE SEE NUMBERS ARE NOT QUITE UP THERE, THEY WILL SELL THE STOCK. AVRIL: TRADERS ARE INDICATING HIRES SAMSUNG SOX BUT TO YOUR POINT -- STOCKS BUT TO YOUR POINT WE HAVE HEARD TODAY IS GOING TO BE A BIT DICEY GIVEN HOW IT ALSO COINCIDES WITH SEMI CONDUCTOR ETF REBALANCING. TALKED ABOUT THE BROADER MACRO PICTURE WHEN IT COMES TO THE FED MINUTES AND THE 10 YEAR OPTION AS WELL, ARE WE REACHING A TURNING POINT GIVEN HOW IT WENT OK? MARK: WE HAVE A VERY TRICKY 30 YEARS TO COME TODAY BUT IT'S A GOOD SIGN THE FACT THAT CLEARLY PEOPLE SAW VALUE IN THE CURVE ON THE 10 YEAR, THE HIGHEST HAS BEEN FOR A COUPLE OF DECADES. AND HELP TO STABILIZE THE AUCTION -- IT HELPED STABILIZE THE AUCTION. THE FED OPTIONS WERE PRETTY MUCH IS EXPECTED. IF THERE WAS A SURPRISE, IT WAS THE FACT THAT EVERYONE WAS ON BOARD WITH A HIKE. ALL THE VOICES WERE TOGETHER. WE HAVE NOT SEEN THAT IN THE FED MINUTES CONSISTENTLY THIS YEAR, THERE'S BEEN DISCREPANCIES BETWEEN WHAT PEOPLE HAVE TO SAY. IT APPEARS THE FED PEOPLE VOTED FULLY IN FAVOR OF THE LAST RATE HIKE. UNLIKELY AGAIN IN OCTOBER. DOESN'T SEEM TO BE EVERYBODY ON BOARD FOR THAT. BUT THEY ARE PROJECTING DECEMBER IS A LIKELY EVENT. IF CPI NUMBERS NEXT WEEK COME IN LINE WITH THE SAME INFLATION NUMBERS WE HAVE SEEN A RUN THROUGH LEVEL, THAT WILL SET UP A RATE HIKE FOR DECEMBER -- AROUND TO THE 3% LEVEL, THAT WILL SET UP A RATE HIKE FOR SEPTEMBER. ENERGY PRICES ARE FIRM. OIL'S STILL AROUND $100. IT ENSURES CORE INFLATION WILL STAY HIGH RIGHT THROUGH THE FOURTH QUARTER AS WELL. EVERYTHING IS IN PLACE FOR THE FED TO RAISE RATES AGAIN. PROBABLY THEY WILL SKIP OCTOBER, TWO CLOSE TO THE MIDTERM ELECTIONS FOR THAT. THAT GIVES EVERYONE A BENCHMARK TO WORK WITH. EQUITY MARKETS CAN SEE THE FED IS AND GRADUAL MODE, THEY WILL NOT BE SUDDENLY SHOCKING US WITH 50 BASIS POINT HIKES OR 75 LOOK WAS DURING THE PANDEMIC. THAT IS OK FOR THE EQUITY MARKETS BUT EARNINGS NEED TO DELIVER. THIS IS A VERY IMPORTANT EARNINGS SEASON. IT'S JUST GETTING UNDERWAY. WE HAVE SEEN MICRON ALREADY. NVIDIA AT THE END OF THE SERIES. SO, EVERYBODY NEEDS TO BE ON THEIR BEST GAME. INVESTORS WILL NOT BE HAPPY TO SEE MISSES ON ESTIMATES, THEY WANT TO SEE BIG REPORTS BECAUSE SO MUCH IS PRICED INTO THE MARKET. AVRIL: ADD TO THAT CHINA COMING BACK FROM A LONG HOLIDAY AND WE HAVE SOME OF THESE EARLY SIGNS IN TERMS OF THE DATA THAT TRAVEL SPENDING WAS NOT AS DESIRED. WHAT DO YOU EXPECT FOR THE COMING FEW SESSIONS? MARK: MORE SIGNIFICANT IS PEOPLE LOOKING AT THE CHINESE TECH SPACE. NASDAQ HAS HAD A GOOD RUN IN THE DAYS CHINA WAS ON HOLIDAY. U.S. TECH STOCKS DID WELL. THAT IS A GOOD SIGN FOR THE START OF CHINA TRADING. THERE MIGHT BE DISAPPOINTMENT IN THE CONSUMER SECTOR IF THE TRAVEL WAS NOT SO GOOD ACROSS CHINA. A MIXED PICTURE. BUT SO MUCH RECENTLY HAS BEEN DRIVEN BY WHAT HAPPENS IN THE TECH SPACE. THE LAYUP FROM AMERICA IS GOOD SO IF CHINESE STOCKS CAN RUN WITH THAT AND WHAT THEY WILL BE LOOKING FOR AS WELL IS THE PRICING SITUATION -- UNDERPRICING EACH OTHER IN THE CONSUMER SPACE. IT SEEMS TO HAVE DIED DOWN. IF THE NUMBERS COMING OUT FROM THE CHINESE HOLIDAY BREAK SUGGEST PRICING HAS REACHED AN EQUILIBRIUM, THAT WILL BE GOOD AND WE MIGHT SEE A REASONABLE START FOR THE ON SHORE COMPANIES. HAIDI: WE SHALL SEE. GREAT TO CHAT. STILL AHEAD, PRIVATE CREDIT AND FOCUS AMID QUESTIONS OVER LIQUIDITY, TRANSPARENCY AND CREDIT QUALITY. WE WILL DISCUSS KEY RISKS WITH MOOD IS GLOBAL HEAD OF THE SECTOR MARC PINTO. AU PLANS TO -- EU PLANS TO CURB CAR IMPORTS AS LEADERS MEET IN BEIJING. MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. ♪ HAIDI: SAMSUNG POSTED ANOTHER RECORD PROFIT. RELENTLESS SPENDING ON AI INFRASTRUCTURE BOOSTED EARNINGS. A COMPANY'S OPERATING PROFIT FOR THE THREE MONTHS THROUGH SEPTEMBER CLIMBED TO 80.1 BILLION DOLLARS, MORE THAN EIGHT TIMES THE LEVEL A YEAR EARLIER. IT DID FALL SHORT OF THE AVERAGE ESTIMATE BY ANALYSTS, $81.2 BILLION. THERE'S A LOT TO GET THERE WHEN TERMS OF EXPECTATIONS BUILT INTO THIS NUMBERS -- THESE NUMBERS. LET'S GET INTO IT WITH OUR NEXT GUEST. INVESTORS GOING INTO THIS WERE LOOKING FOR EVIDENCE THAT THE CYCLE HAS FURTHER TO GO AND THIS PROFIT BOOM HAS RESILIENCE AND STAYING POWER, DID THEY GET THAT EVEN IF OPERATING PROFIT CAME IN SHY OF EXPECTATIONS? SANJEEV: ACTUALLY, NUMBERS WERE IN LINE WITH OUR EXPECTATIONS AND ALSO THE RECENT, YOU KNOW, EXPECTATIONS IN THE MARKET. SO, THIS IS NOT A SURPRISE. DEFINITELY NOT A NEGATIVE ONE. WE HAD EXPECTED AROUND 107 TRILLION WON IN OPERATING PROFIT AND THE COMPANY DELIVERED ON THAT. WE REMAIN BULLISH ON THE MEMORY CYCLE AND BULLISH ON SAMSUNG ELECTRONICS. THERE'S'S A VERY STRONG DEMAND, IT CONTINUES TO EXCEED SUPPLY. AND PRICING IS POISED FOR A BIG STEP UP IN 2027. SO, WE SEE POTENTIAL FOR SUBSTANTIAL SHAREHOLDER RETURNS AS WELL. HAIDI: OVERALL, OBVIOUSLY THIS IS A SOLID RESULT. TAKE A LOOK AT HOW THE STOCK IS TRADING, 20% OFF THE PEAK. IN A BROADER SENSE YOU ARE SEEING INVESTORS TAKE THAT PREFERENCE OF TAIWAN OVER KOREA. WHY IS THAT? SANJEEV: I THINK THERE ARE SOME CONCERNS ABOUT THE MEMORY CYCLE. SOME IN THE MARKET THINK MEMORY PRICES ARE CLOSE TO PEEKING. AS A RESULT MARGINS WILL BE PEAKING AS WELL. THEY ARE SENDING LONG-TERM CONTRACTS WITH CUSTOMERS, 45 YEAR CONTRACTS -- FOUR TO FIVE YEAR CONTRACTS. VISIBILITY IS IMPROVING THROUGH THESE AND MARKET EVENTUALLY WILL RECOGNIZE THESE EARNINGS OF THESE COMPANIES ARE SUSTAINABLE COMPARED TO THE PAST CYCLES WHEN THEY USED TO CRASH AFTER HITTING A PEAK. SO WE EXPECT 40% EPS, OPERATING PROFIT GROWTH FOR 2027 AND ANOTHER GROWTH IN 2028. MEMORY PRICING IS LIKELY TO REMAIN STRONG IN THE NEXT SEVERAL YEARS, GIVEN VERY STRONG DEMAND AND LIMITED SUPPLY. HAIDI: THE MARKET IS CLEARLY NOT QUITE BUYING THE VIEW AS HE HAS SPOKEN ABOUT BEFORE IN TERMS OF THE LONGER TERM AGREEMENTS AND THE PRICE AGREEMENTS, ALL OF THAT IS THERE. DO YOU EXPECT SAMSUNG MANAGEMENT TO TALK UP A BIT MORE THE SCENARIOS GOING INTO 2027 AND 2028 AND BEYOND? SANJEEV: YES, TODAY'S JUST A PRELIMINARY EARNINGS RELEASE SO OPERATING PROFIT NUMBERS IS WHAT THE MARKET WANTED TO SEE. MORE DETAILS WILL BE RELEASED ON OCTOBER 29 WHEN THE COMPANY WILL BE HOLDING ITS EARNINGS CALL. SO WE EXPECT MORE DETAILS ON LONG-TERM CONTRACTS AS WELL AS THE PRICE NEGOTIATIONS FOR 2027. THE CAPEX PLANS AND OF COURSE THE SHAREHOLDER RETURNS. HAIDI: WHERE DO YOU SEE THE NEXT CATALYST FOR SAMSUNG? THERE ARE SOME ADVANTAGES, THE HBM 4E MARKET. WILL THAT BE A DRIVER FOR ENTHUSIAST HIM, DO YOU THINK? SANJEEV: RIGHT. ACTUALLY SAMSUNG'S HBM EXECUTION AFTER FACING SOME ROUGH TIMES IN 2023 TO 2025 ACTUALLY IS SEEING VERY GOOD PRODUCTION YIELDS AND SHIPMENT GROWTH THIS YEAR IS EXPECTED TO BE ABOUT 3X VERSUS LAST YEAR AND WE EXPECT ANOTHER 50 TO 60 PERCENT GROWTH FOR SHIPMENTS NEXT YEAR. SO SAMSUNG HAS BEEN ABLE TO TURN AROUND ITS HBM BUSINESS I WOULD SAY AND THE COMPANY IS GAINING MARKET SHARE. LAST YEAR THE MARKET SHARE WAS AROUND 20%, THIS YEAR WE ARE EXPECTING 30%+. AND NEXT YEAR IT WILL BE SOMEWHERE BETWEEN 35% AND 40%. HBM EXECUTION HAS BEEN REALLY GOOD AND MOREOVER THE HBM PRICE NEGOTIATIONS FOR 2027 ARE TURNING OUT TO BE IN THE COMPANY'S FAVOR. WE EXPECT SIGNIFICANT PRICE INCREASES FOR HBM IN 2027 AS A RESULT IT WILL BE THE MAJOR PROFIT GROWTH DRIVER FOR THE COMPANY NEXT YEAR. HAIDI: THERE'S ALSO BEEN CURRENCY HEADWINDS AS WELL. DO THESE MATTER TO YOU IN TERMS OF HOW WORRISOME THEY COULD BECOME? AND WHAT OTHER ASPECTS ARE YOU LOOKING AT IN TERMS OF POTENTIAL DOWNSIDE RISKS? SANJEEV: RIGHT. SO, THE KOREAN WON HAS STRENGTHENED IN THE LAST 2-3 MONTHS WHICH HAS LED TO A SERIES OF EARNINGS DOWNGRADES FOR THE COMPANY. BUT NOW IN OCTOBER, WHAT WE ARE HEARING IS PRICING IN THE FOURTH QUARTER IS TURNING OUT TO BE BETTER THAN PREVIOUS EXPECTATIONS AND HBM PRICING FOR NEXT YEAR IS ALSO MOST LIKELY TO TREND HIGHER THAN PREVIOUS CONSENSUS EXPECTATIONS. AS A RESULT, I EXPECT FOR THE CONSENSUS EARNINGS UPGRADES FOR THE COMPANY. SO, FORE RELATEDX. THE UPSET IS YET TO BE REFLECTED IN CONSENSUS ESTIMATES. HAIDI: REALLY GREAT TO HAVE YOU WITH US, THE HEAD OF NORTH ASIA SEMI CONDUCTORS RESEARCH THERE. THE SK HYNIX FLASH MEMORY UNIT HAS A PLAN TO HAVE AN IPO NEXT YEAR PO THE POTENTIAL OF THE POTENTIAL OF A $100 BILLION DOLLAR VALUATION PO WITH PURCHASED THE BUSINESS BACK IN 2021 WHICH FOCUS ON DATA CENTER FOR CUSTOMERS INCLUDING COREWAVE -- COREWEAVE, DELL AND TENCENT. MUCH MORE AHEAD. THIS IS BLOOMBERG. ♪ AVRIL: THE IMF MANAGING DIRECTOR IS WARNING GOVERNMENTS THEY HAVE BECOME TOO RELIANT ON SPENDING AS PERSISTENT INFLATION, HIGHER BORROWING COSTS AND RISING DEBT RESHAPE THE GLOBAL ECONOMY. SPEAKING WITH HASLINDA AMIN, SHE REACTED TO SIGNALS FROM FED CHAIR KEVIN WARSH AND EXPLAINED WHY ADVANCED ECONOMIES NEED TO SHOW GREATER FISCAL DISCIPLINE. >> HE SENT A VERY CLEAR SIGNAL THAT PRICE STABILITY IS A PRIORITY FROM 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, COME COVID, GOVERNMENTS SPEND, THE WAR IN UKRAINE, GOVERNMENTS SPEND. IN THE MIDDLE EAST, THEY HAVE PRESSURE FROM THE PUBLIC, DO SOMETHING FOR ME. IT IS TIME TO RECOGNIZE THAT THIS UP AND UP AND UP DOES NOT LEAD -- THIS STAIRWELL THAT LEADS UP AND UP AND UP DOES NOT LEAD TO HEAVEN. >> DO YOU THINK FOR MARKETS IT LOOKS THAT WAY? >> THERE IS A LITTLE BIT OF THIS. IT USED TO BE IN EMERGING-MARKET PROBLEM. EMERGING MARKETS OVER THE LAST DECADE HAVE TIGHTENED THEIR FISCAL POSITION, IT'S QUITE STRONG. AND NOW THEY SEEK THE SPREADS -- SEE THE SPREADS THAT SHRANK STILL STAYING RELATIVELY TIGHT. BUT 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. SO ADVANCED ECONOMIES NEED TO TAKE RESPONSIBILITY FOR THEMSELVES BUT ALSO FOR THE REST OF THE WORLD. SO PLEASE, DO YOUR JOB. >> AT THE LET'S PRESS CONFERENCE HE TALKED ABOUT HOW THE BOND MARKET IS ACTING NORMALLY. IS IT NOW? >> YOU KNOW, STEP BACK, WE HAVE SEEN THIS KIND OF JUMP IN YIELDS IN THE PAST, MUCH HIGHER THAN TODAY. >> IT IS ALSO THE BASE OF THE JUMP. >> YES. 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 THE INTEREST RATES NEEDING TO TIGHTEN, AND ALL THE OTHERS GOVERNMENTS WITH HUGE AMOUNTS OF DEBT, THEY NEED TO REFINANCE, THEN COMES THE NEW KID ON THE BLOCK -- A.I. IT ALSO GOES TO BORROW. THAT PUTS PRESSURE. THIS IS WHY IT'S GONE UP. IT'S A RESPONSE TO FUNDAMENTALS. WE ALSO DO NOT SEE ANY -- IT IS MORE EXCESSIVE 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. HAIDI: THE IMF MANAGING DIRECTOR SPEAKING WITH HASLINDA AMIN. WE HAVE MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. ♪ SHERY: -- MINMIN: IT IS REALLY ABOUT THE SAMSUNG TO LIMIT -- AVRIL: IT IS REALLY ABOUT THE SAMSUNG PRELIMINARY EARNINGS FROM THE THIRD QUARTER. HOW WILL INVESTORS CONTINUE DIGESTING THIS, GIVEN THAT WE ARE GIVEN THE SENSE OF THESE SKYHIGH VALUATIONS TO CONTEND WITH FOR SAMSUNG STOCK AS WELL AS SOME OF THESE OTHER CHIPMAKING RELATED NAMES. KEEP IN MIND WE ALSO HAVE THE LIKES OF GOLDMAN SALES AND TRADING DESK FLAGGING BECAUSE IT COINCIDES WITH SOME OF THE ETF REBALANCING TO COME AS WELL. HAIDI: IT WILL BE INTERESTING IN TERMS OF HOW THIS ADDS TO FLATNESS FOR SOME DOWNSIDE FOR THE SESSION, PARTICULARLY FOR KOREA, WHICH IS NOT DOING MUCH AT ALL. WE KNOW THERE HAS BEEN A CLEAR PREFERENCE EXPRESSED BY INVESTORS THAT TAIWAN IS THEIR PICK OVER KOREA AT THIS POINT. WE KNOW THERE ARE SOME IDIOSYNCRATIC STORIES AND SAMSUNG WILL BE A BIG ONE. VERY ROBUST NUMBERS, BUT STILL PERCEIVED TO BE THAT MISS, SO THAT WILL ADD TO SHAKINESS IN THE SESSION FOR ASIA AS WELL. IT WILL NOT KEEP THAT SPARK WHEN IT COMES TO REVIVING THIS PART OF THE WORLD, SO THAT TONE IS PRETTY MUCH SET. WE HAD THE TOPIX AT RECORD HIGHS. WE HAD MICRON DOING WELL IN THE PREVIOUS SESSION, BUT THAT MAY NOT HAPPEN IN THE KOREAN SESSION TODAY. EXPECTATIONS OF AT LEAST A SMOOTH AUCTION TODAY AFTER WE HAD A SUCCESSFUL 10-YEAR TREASURY OPTION AS WELL OVERNIGHT, SO THAT OUTCOME WILL BE MORE OF A COMFORT WHEN IT COMES TO BOND MARKETS AS WELL. AVRIL: AGAIN, ESPECIALLY WHEN YOU HAVE THE 10 YEAR OPTION OUT OF THE U.S. GOING OK. THAT SAID, TREASURY FUTURES ARE LOOKING A LITTLE SOFT AS THE BOND MARKET SELLOFF IS FRONT AND CENTER AS WELL. IT'S INTERESTING, WE SEEK SHORT-SELLERS TARGETING PRIVATE CREDIT. IF YOU LOOK AT SOME OF THE DATA, IT SHOWS HOW SHORT INTEREST IN PRIVATE CREDIT ETF'S HAS BEEN TRENDING HIGHER SINCE 2023. BEARISH BETS SHOW AROUND 89 $1 MILLION IN THE FIRST HALF OF SEPTEMBER, ROUGHLY DOUBLE THE NUMBERS FROM AUGUST. JOINING US IS THE GLOBAL HEAD OF PRIVATE CREDIT AT MOODY'S RATINGS. GOOD TO HAVE YOU WITH US. LOOKING AT SOME OF THESE CONCERNS IN THE PRIVATE CREDIT MARKET, WHAT DO YOU SEE IN TERMS OF DEMAND FOR THE FORESEEABLE FUTURE WHEN IT COMES TO THE U.S. AND EUROPE IN PARTICULAR? >> DEMAND IS REALLY GOOD, I WOULD SAY RIGHT NOW, IN THE SENSE THAT THIS MARKET CONTINUES TO GROW, AND THERE ARE TWO MAIN DRIVERS FOR THAT. THE FIRST YOU HAVE BEEN TALKING ABOUT QUITE A BIT ALL MORNING, IS COMPUTING DEMAND. WITH AI IN THE MARKET, THIS WILL BE A GAME CHANGER. WHEN I TRY TO GET MY HEAD AROUND IT, IT'S LIKE WE ARE GOING FROM A HORSE TO A PORSCHE OVERNIGHT. NOW THAT EVERYONE WANTS TO BUY A PORSCHE, WE WILL NEED DATA CENTERS. WE ARE SEEING MASSIVE DATA CENTER GROWTH. MOODY’'S ESTIMATES OVER $3 TRILLION IN DATA CENTERS WILL BE BUILT OVER THE NEXT FIVE YEARS, AND PRIVATE CREDIT WILL BE PART OF THAT FINANCING STREAM. AVRIL: WITH THIS UNPRECEDENTED DEMAND THAT YOU ALLUDE TO, YOU ALSO GET THE SENSE THAT DEAL STRUCTURE COULD BECOME MORE COMPLICATED. HOW COULD THE RISK AROUND THESE ISSUES BE MITIGATED? >> YEAH, WELL, PRIVATE CREDIT IS STRUCTURED CREDIT. THIS IS NOT PLAIN VANILLA LENDING. THERE'S A COUPLE OF RISKS THAT WE LOOK AT. FIRST OF ALL, THERE ARE FEATURES OF THIS MARKET WHERE YOU HAVE COMPLEXITY, OPACITY, AND ILLIQUIDITY. THESE FEATURES OF THE MARKET NEED TO BE SCRUTINIZED CAREFULLY. SECOND, INVESTORS NEED TO REALIZE THIS IS A VERY LIGHTLY REGULATED MARKET. THIRD, THIS MARKET HAS NEVER BEEN TESTED. IT HAS BEEN QUIZZED BUT NEVER TESTED. ALL OF THESE FEATURES NEED TO BE CONSIDERED WHEN INVESTORS ARE LOOKING TO PUT THEIR MONEY TO WORK IN PRIVATE CREDIT. AVRIL: WE HAVE THE LIKES OF POLO , WE GET DAILY PRICING IN TERMS OF TRADING OF PRIVATE CREDIT. DO YOU THINK THIS HELPS TO EASE SOME OF THESE MARKET CONCERNS TO SOME EXTENT? >> I THINK TO SOME EXTENT, IT IS STILL JUST SCRATCHING THE SURFACE. THIS MARKET REALLY NEEDS MORE TRANSPARENCY, AND I THINK THE REGULATORS ARE PUSHING THAT. EVEN THE PRIVATE CREDIT LENDERS THEMSELVES ARE TRYING TO PUT MORE TRANSPARENCY IN THE MARKET TO REDUCE SOME OF THE CONCERNS THAT INVESTORS HAVE ABOUT PUTTING MONEY TO WORK HERE. AVRIL: IF WE GET MORE REGULATORY OVERSIGHT OR SCRUTINY, WHICH YOU SEEM TO BE ADVOCATING, WHAT SHOULD THAT LOOK LIKE? >> I THINK WHAT WILL HAPPEN IS YOU WILL LIKELY SEE MORE GUARDRAILS AS OPPOSED TO STRICT GUIDELINES. IF YOU THINK ABOUT IT, PRIVATE CREDIT GROUP IN SOME RESPECTS OUT OF THE ENHANCED REGULATION WE SAW ON BANKS POST THE GREAT FINANCIAL CRISIS. I THINK ABOUT CREDIT LIKE A BALLOON. IF YOU PUSH IT DOWN HERE, THAT IS EFFECTIVELY WHAT REGULATORS DID. THEY PUSHED ASSET RISK OUT OF THE BANKING SECTOR, IT POPS UP SOMEWHERE ELSE, AND IT HAS POPPED UP IN THE PRIVATE CREDIT WORLD. IF THEY PUT TOO MUCH REGULATION ON THE PRIVATE CREDIT WORLD, THE CONCERN IS THE RISK GOES BACK TO THE BANKS WHERE THEY DON'T WANT IT OR YOU REDUCE AVAILABLE CAPITAL WITHIN THE ECONOMY. THEY ARE IN A SOMEWHAT TRICKY POSITION, BUT I DO THINK WE WILL SEE MORE GUARDRAILS OVERALL. THE SECOND AREA YOU MIGHT SEE GUARDRAILS IS AROUND RETAIL PERCENT -- RETAIL PARTICIPATION. WE TALKED ABOUT THE RISKS OF PRIVATE CREDIT. THIS IS A SOPHISTICATED MARKET AND NOT FOR THE AVERAGE INVESTOR. CONSUMER PROTECTION REGULATION WILL LIKELY COME INTO PLAY WITHIN THE PRIVATE CREDIT MARKET AS WELL. AVRIL: I WONDER, WHAT IS YOUR VIEW ON PERHAPS HAVE THE SITUATION IN U.S. AND EUROPE DIFFERS. WE HAVE BEEN SEEING CONCERNS FRONT AND CENTER, ESPECIALLY GIVEN THIS RETAIL PARTICIPATION. WHAT ARE THE RISKS SURROUNDING THAT? >> IT IS INTERESTING BECAUSE PRIVATE CREDIT IS GROWING A LITTLE BIT DIFFERENTLY ALL AROUND THE WORLD. IN THE U.S., YOU HAVE A FAIR AMOUNT OF COMPETITION BETWEEN THE BANKS AND PRIVATE CREDIT LENDERS. IN EUROPE, I TURN IT HAS -- TERM IT AS COOPETITION WHERE YOU HAVE COMPETITION BUT ALSO COOPERATIONS. IT IS MUCH MORE OF A COLLABORATIVE ENVIRONMENT, SO WE SEE -- FOR EXAMPLE, I'M IN TOKYO TODAY. WE SEE IN JAPAN A FAIR AMOUNT OF COLLABORATION OR TALKS AT LEAST TOWARDS COLLABORATING ON CERTAIN TYPES OF LOANS. MAYBE LONGER-TERM LOANS OR MEZZANINE DEBT STRUCTURES WHERE THE BANKS HAVE SOME CONSTRAINTS. DEPOSIT GROWTH IS RELATIVELY MEAGER, AND THE BANKS, BECAUSE THEY OWN THE CLIENT, THEY ARE VERY WILLING TO WORK WITH PRIVATE CREDIT LENDERS TO PROVIDE ADDITIONAL CAPITAL TO THE ECONOMY. AVRIL: HOW CLOSELY ARE YOU WATCHING DEVELOPMENTS OUT OF AUSTRALIA WHERE PROPERTY IS TIED CLOSELY TO PRIVATE CREDIT? >> IN AUSTRALIA, WE HAVE HAD SOME ISSUES OF LATE, AND THEY ARE GOOD REMINDERS THAT INVESTORS NEED TO BE VIGILANT WHEN THEY ENTER INTO THIS MARKET. THEY NEED TO UNDERSTAND STRUCTURE. THEY NEED TO UNDERSTAND SPONSOR BEHAVIOR. THEY NEED TO UNDERSTAND VALUATIONS AND LIQUIDITY. AS I MENTIONED BEFORE, THIS IS NOT A PLAIN-VANILLA TYPE LOAN TYPICALLY THAT PRIVATE CREDIT LENDERS ARE DOING. IF I WERE LOOKING AT A PRIVATE CREDIT LOAN, IT IS A ICE CREAM SUNDAE WITH STRAWBERRY, CHOCOLATE, WHIPPED CREAM, CHERRY ON TOP AND YOU MIGHT EVEN HAVE A JALAPENO PEPPER TO KEEP IT INTERESTING. THIS IS A COMPLEX TYPE OF LENDING STRUCTURE, AND INVESTORS NEED TO BE VIGILANT ABOUT IT. AVRIL: THAT SOUNDS LIKE QUITE A COMPLICATED DESSERT. THANK YOU FOR JOINING US. HAIDI: LET'S HOPE WE DON'T GO INTO DIABETIC SHOCK WITH THESE PRIVATE CREDIT COMPANIES. LET'S GET TO A COMPANY WE ARE FOCUSED ON IN AUSTRALIA. A DATA CENTER COMPANY CLOSING THE BOOK ON ITS IPO AFTER BANKERS WORKED OVERNIGHT TRYING TO SAVE THE OFFERING. THE TARGET PRICE EARLIER THIS WEEK WAS $11. PAUL ALLEN JOINS US NOW. TO PUT IT INTO CONTEXT, THERE WAS SO MUCH ANTICIPATION, RIGHT? THIS WAS AUSTRALIA'S BIG SOVEREIGN A I HOPE, MEANT TO BE THE SECOND-BIGGEST LISTING IN AUSTRALIAN HISTORY. PAUL: FIRST OF ALL, THIS IPO IS SCHEDULED FOR OCTOBER 20 THREE, WHICH IS GETTING CLOSE. AFR REPORTING THE REPRICING IS GOING AHEAD. THE AUSTRALIAN NEWSPAPER REPORTING IT MIGHT BE PULLED COMPLETELY. IT HAS GRAND PLANS TO BUILD BIG DATA CENTERS IN AUSTRALIA, MALAYSIA, INDONESIA AS WELL. IT HAS YET TO BUILD ANY OF THESE AND RENTS CHIPS TO META AND NVIDIA AT THE MOMENT. NVIDIA IS A SUPPLIER AND UNDERWRITER, SO THAT IMMEDIATELY GETS PEOPLE STROKING THEIR CHINS SAYING THAT IT LOOKS LIKE A CIRCULAR DEAL. IT HAS SOME BIG BACKERS AS WELL, BUT DOCUMENTS CIRCULATED TO INVESTORS SAY IT WILL GENERATE 5.8 BILLION DOLLARS IN 12 MONTHS. GREAT. VERY LIGHT ON DETAILS, THOUGH. HAIDI: WE ARE SEEING AT THE MOMENT THE GROUP LISTED FALLING 30% OVER UNCERTAINTY OVER THE IPO. AS YOU SAY, THE ONIONS, THE LABORERS GET MORE AND MORE COMPELLING. THIS IS A COMPANY THAT HAS MADE SOME VERY STRONG CLAIMS IN TERMS OF WHAT THEY CAN DO. PAUL: OH, YEAH, LET'S GET TO THE NEXT LAYER. GETTING INTO THE WEEDS, BUT STAY WITH US. PERFECT SCORE ON THE COUNT MEANS EVERY OUNCE OF ENERGY, EVERY WATT OF ENERGY IS GOING INTO RUNNING THE CHIPS. NOTHING GETS LOST. GOOGLE, MICROSOFT, THEY ARE REALLY BIG PLAYERS. THEY GET A SCORE OF ABOUT ONE POINT TWO AND STRUGGLED TO GET THERE. THERMOS IS CLAIMING IT CAN DO 1.03, WHICH IS CLOSE TO THE LIMITS OF WHAT IS PHYSICALLY POSSIBLE. AGAIN, GREAT. HOWEVER, NO INDEPENDENT VERIFICATION OF THIS. THERE HAS BEEN NO AUDIT. THERMOS EXPLAINS THIS BY SAYING THE CERTIFICATION BODY FOR TECHNOLOGY THIS GOOD DOES NOT EXIST AT THE MOMENT. ALL RIGHT, FINE. THIS COMPANY ALSO STARTED AS A BITCOIN MINERS THEN PIVOTED TO AI. NOTHING WRONG WITH THAT. BUT THE CO-OWNER SENT TWO YEARS FOR INSIDER TRADING. REGULATORS CLEARED HIM AS BEING A FIT AND PROPER PERSON TO RUN THE BUSINESS. EVERYONE DESERVES A SECOND CHANCE, BUT SO MANY QUESTIONS. I WILL LEAVE IT WITH A RECENT HEADLINE FROM MEDIUM -- IS THERMOS THE NEXT THERANOS? I WILL LEAVE IT THERE. HAIDI: WE CONTINUE TO WATCH THE STORY WITH AN ENORMOUS AMOUNT OF INTEREST. A MEASURE OF SPACEX'S CREDIT RISK SURGING TO A FRESH HIGH AS THE COMPANY BONDS WE CAN IN THE SECONDARY MARKET. THE FIVE-YOUR CREDIT DEFAULT SWAP'S ROSE TO THE HIGHEST SINCE THEY STARTED ACTIVELY TRADING IN JUNE. SPACEX IS SAID TO BE LOOKING TO RAISE $4 BILLION TO BUY NVIDIA CHIPS IN ONE OF THE BIGGEST EVER DEBT FINANCING DEALS FOR THE AI BUILDOUT. ELON MUSK SAYS HIS COMPANIES WILL BUILD AND OPERATE THE SHIP-MAKING PLANT THEMSELVES, PUSHING BACK ON SPECULATION THAT TSMC COULD TAKE ON A LARGER ROLE, CLARIFYING THAT TSMC MAY TAKE A LARGER PART OF THE TEXAS SIDE -- SIDE BUT WILL NOT TAKE RESPONSIBILITY. BROADCOM IS REPORTEDLY ARRANGING MORE THAN $50 BILLION IN FINANCING FOR THE CUSTOM CHIP IT IS DEVELOPING WITH OPENAI. "THE WALL STREET JOURNAL" AS PROSPECTIVE LENDERS INCLUDE APOLLO GLOBAL AND BLACKSTONE. THE COMPANIES ARE SEEKING THE FIELDS IN THE FACE OF SOARING COSTS TO OUTFIT DATA CENTERS. WE DO HAVE MORE NUMBERS CROSSING THE BLOOMBERG WHEN IT COMES TO LG ENERGY. OPERATING PROFIT FOR THE THIRD QUARTER COMING THROUGH WELL AHEAD OF EXPECTATIONS IN TERMS OF NUMBERS. 756 BILLION WON IS WHAT WE ARE GETTING. THE ESTIMATE WAS JUST OVER 365 BILLION. THAT INCLUDES THE U.S. TAX CREDIT, BUT THAT IS PROFIT FOR THE THIRD QUARTER THAT BEAT THE AVERAGE ANALYST ESTIMATE. SALES ALSO COMING IN, 9.40 6 TRILLION WON, ALSO HIGHER THAN THE 8.40 8 TRILLION WON ON THOSE EXPECTATIONS. WE WILL CONTINUE TO WATCH HOW LG ENERGY CONTINUES TO TRADE. THIS AS WE CONTINUE TO WATCH SOME OF THE UNCERTAINTIES ACROSS THE CURRENT SPACE COMEDY ENERGY SPACE MORE BROADLY, THE REVIVED POSSIBILITY OF YET MORE CONFRONTATIONS AND MILITARY CONFLICT BETWEEN THE U.S. AND IRAN AS WELL AS SOME OF THOSE DISRUPTIONS ON ACCOUNT OF WEATHER IN THE U.S. AS WELL. WE ARE SEEING SOME MOVES WHEN IT COMES TO OIL PRICES. MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. >> THE EUROPEAN UNION IS WEIGHING TEMPORARY MEASURES ON IMPORTS OF CHINESE VEHICLES. WHAT ARE THESE SAFEGUARD MEASURES BACK ON WHY HAVE THESE HYBRID VEHICLES COME INTO THE SPOTLIGHT NOW? MINMIN: IT IS MAINLY BECAUSE HYBRID VEHICLE SALES TO THE EU FROM CHINA HAVE SURGED. IT MAKES UP ABOUT A QUARTER OF TOTAL SALES. IF YOU REMEMBER, THE EU HAS IMPOSED TARIFFS, BUT ONLY ON FULL ELECTRIC VEHICLES UP TO 45%. SALES ON THOSE BATTERY ELECTRIC VEHICLES HAVE SLOWED DOWN. THAT'S THE PURPLE LINE OVER THERE. BUT THE WHITE LINE HAS SURGED AND OVERTAKEN FULL ELECTRIC VEHICLES. THAT'S WHY THE EU WANTS TO PEDDLE -- PLACE AND CAP ON IMPORTS, AND THIS COULD LOOK LIKE POTENTIALLY A TARIFF QUOTA CAP, SO ABOVE A CERTAIN VOLUME OF IMPORTS, THE EU MIGHT WANT TO PLACE HIGHER TARIFFS ON THESE HYBRID VEHICLES. CHINA HAS PREVIOUSLY ALREADY BEEN OPPOSED TO A VOLUNTARY CAP ON THESE EXPORTS, SO IT'S NOT CLEAR WHAT CHINA'S REACTION WOULD BE TO THIS PROPOSED UNILATERAL CAP THAT THE EU WANTS TO IMPOSE, RIGHT? THIS IS ACCORDING TO A SOURCES TELL US SO FAR, SO THIS AT LEAST WILL BE ON THE AGENDA AS THE EU TRADE COMMISSIONER TRAVELS TO BEIJING TODAY FOR THIS TRADE TALKS. HAIDI: WHAT ELSE ARE WE EXPECTING OR LOOKING AHEAD TO IN TERMS OF WHAT WILL BE ON THE AGENDA FOR THESE TALKS? AVRIL -- MINMIN: THE BIGGEST AND MOST IMPORTANT STICKING POINT HAS BEEN THE TRADE IMBALANCE. IT WAS ABOUT 360 BILLION EUROS LAST YEAR AND CONTINUES TO EXPAND, SO THE EU WANTS TO SEE CHINA BUY MORE GOODS FROM THE EU. THAT IS ONE, BUT THE OTHER THING IS THEY WANT TO SEE THE EASING OF RESTRICTIONS ON CERTAIN PRODUCTS. SOME OF THESE RESTRICTIONS WERE RETALIATION FROM CHINA IN RESPONSE TO THOSE EV TARIFFS, SO THEY WANT THE EASE OF RESTRICTIONS ON CERTAIN GOODS, AND THEN THEY WANT LOWER TRADE BARRIERS OVERALL, BUT THIS IS SOMETHING CHINA HAS SAID NEEDS TO GO TWO WAYS. CHINA HAS COMPLAINED ABOUT THE EU SCREENING INVESTMENTS FROM CHINA, PARTICULARLY WHEN IT COMES TO THE GREEN ENERGY INDUSTRY, FOR EXAMPLE OR MEDICAL DEVICES, FOR EXAMPLE, AND OF COURSE, IP RISE IS ALWAYS AN ISSUE, BUT EXPORT CONTROLS IS THE BIG BAZOOKA CHINA HAS. THOSE EXPORT CONTROLS THAT -- TO LIFT THOSE EXPORT CONTROLS IS EXPECTED TO EXPIRE BY EARLY NOVEMBER, SO THE EU WOULD WANT CHINA TO EXTEND THAT DEAL, AND ONCE A FAST TRACK TO ALLOW CHINESE RARE EARTHS TO ENTER THE ECONOMY MORE QUICKLY. HAIDI: WE HAVE MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. ♪ AVRIL: WE HAVE SOME DATA OUT OF JAPAN IN TERMS OF THE COUNTRY'S CURRENT ACCOUNT BALANCE FROM AUGUST, IT HAS WIDE AND FROM THE TWO POINT TRILLION YEN OF THE PRIOR READING TO ¥4.06 TRILLION. OUT OF JAPAN, WE WILL ALSO BE WATCHING TWO OF THE COUNTRY'S BIGGEST RETAILERS AS THEY REPORT EARNINGS LATER TODAY. AT FAST RETAIL, INVESTORS WILL BE LOOKING FOR ANOTHER STRONG QUARTER FOR UNIGLO. FOR SEVEN AND I, THE RECORD WILL BE LOOKING FOR FASTER TRAFFIC. JAPAN EXCHANGE, MEANWHILE, HAS UNVEILED THE BIGGEST EVER RESHUFFLE OF THE TO PAX, A REVAMP THAT SHRINKS ONE OF ASIA'S MAJOR EQUITY BENCHMARKS. ANTHONY STEPHENS JOINS US FROM HONG KONG. WHAT DETAILS DO WE HAVE ON THIS REBALANCING? ANTHONY: WE HAVE AROUND 683 COMPANIES COMING OUT AND 35 POTENTIALLY COMING IN, AND THAT IS A BIG KIND OF COAL -- BIG KIND OF CULL. IT POINTS TO THE INDEX BECOMING MORE CONCENTRATION HEAVY. T AUXIER, FOR EXAMPLE, IT'S RATING WILL GO UP, AND THAT WILL CLOSE THE RECENT RATINGS GAP THAT HAS OPENED UP. IT IS IMPORTANT BECAUSE THE TOPIX IS A CLOSER REPRESENTATION OF JAPAN'S ECONOMY. A LOT OF PASSIVE MONEY DOLLARS IT. AS A RESULT, THAT KIND OF RATIONALIZATION WILL BE IMPORTANT. IT WILL ALSO PROBABLY SPUR SMALL CAPS AND MID-CAPS' ATTEMPTS TO STAY IN THE INDEX. IN THE FORM OF PASSING MONEY, ENFORCING CORPORATE REFORM DYNAMIC AS WELL, AND THAT WILL BE AN IMPORTANT THING TO WATCH IN TERMS OF THE PRICE ACTION FOLLOWING THIS REBALANCE. THERE'S A LOT OF TIME FOR THE REBALANCE TO TAKE EFFECT. THERE WILL BE AN INCREASE IN TRADING AS PEOPLE RESHUFFLE HOLDINGS. WE WILL HAVE PERHAPS SOME BLOCK SALES IN THE NAMES COMING OUT AND THE NAMES THAT WILL STAY INSIDE, MAYBE YOU WILL SEE SOME CORPORATE REFORM. AVRIL: WHAT ABOUT THE KOSPI? WHAT ARE WE EXPECTING GIVEN THE SAMSUNG PRELIMS? ANTHONY: THERE IS INTERESTING BIFURCATION IN THE FACT THAT THIS IS A RECORD NUMBER, FOR QUARTERS IN A ROW SAMSUNG HAS POSTED RECORD NUMBERS. A LOT OF BIG HEADLINES THAT LOCALS WILL LIKE, AND YOU SEE SOME OF THAT STRENGTH FOLLOW-THROUGH IN THE NEXT TRADE SESSION, BUT ON THE OTHER HAND, IT IS MISSING ANALYST TRADE EXPECTATIONS, AND THIS IS AN INTERPLAY OF THE KIND OF DYNAMICS THAT HAVE HIT MICRON RECENTLY WHERE YOU HAVE STRONG ANALYST EXPECTATIONS MEETING VERY STRONG FUNDAMENTALS, AND IT'S KIND OF THE FLOW HAS TO MEET THE STRONG FUNDAMENTAL DEMAND. WE DID SEE MICRON BOUNCED FINALLY YESTERDAY, AGAIN ON STRONG ANALYST EXPECTATIONS, SO LET'S SEE HOW IT RESULTS IN TERMS OF MEMORY, BUT KOREA HAS GONE IN A SIDEWAYS DIRECTION FOR A CONSIDERABLE PERIOD OF TIME. THERE NEEDS TO BE A NEW SPARK OF EXCITEMENT AND SOME KIND OF EARNINGS CLARITY FROM SAMSUNG PERHAPS HELPS, ESPECIALLY VERSUS HYNEK'S, WHICH IS STARTING TO MATERIALLY LAG NOW -- ESPECIALLY VERSUS SK HYNIX, WHICH IS STARTING TO MATERIALLY LAG. HAIDI: GOLD MINERS IN PARTICULAR ARE HAVING A HARD TIME OF IT TODAY AS WE SEE GOLD TRADING THERE THAT NINE-WEEK LOW. TENSIONS IN THE STRAIT OF HORMUZ HEIGHTENING THESE WAR-DRIVEN CONCERNS, BUILDING INTO EXPECTATIONS FOR AT LEAST ONE MORE HIKE FROM THE FED THIS YEAR, BUT WE ALSO SEE THE BROADER RESOURCES INDUSTRY LAGGING AT THE MOMENT. THE LIKES OF FORTESCUE, THE IRON ORE. THE BROADER INDUSTRY REALLY DIGESTING THAT CLIMATE-RELATED RULING HANDED DOWN BY THE HIGH COURT WEDNESDAY. THIS COULD SET FAR-REACHING PRECEDENTS IN TERMS OF HOW OIL AND MINING SECTORS NEED TO ACCOUNT FOR THE CLIMATE CHANGE IMPACTS OF NOT JUST THE EMISSIONS CREATED AT HOME BUT ALSO THE IMPACT WHEN IT COMES TO INTERNATIONAL CUSTOMERS BURNING COAL. THIS IS WITH REGARD TO A DECISION ON A MINE IN NEW SOUTH WALES. IT IS ANOTHER HURDLE FOR MINE APPROVALS. THESE EMISSIONS HAD NOT PREVIOUSLY BEEN CONSIDERED IN THIS PROCESS. LOTS MORE TO COME. THIS IS BLOOMBERG. AVRIL: THE AI TRADE IS GOING TO BE FRONT AND CENTER TODAY GIVEN THOSE SAMSUNG PRELIMINARY EARNINGS SHOWING RARE PROFIT THAT JUMP FROM THE YEAR BEFORE. I THINK ABOUT HOW THERE WAS A CHALLENGE SESSION IN THE U.S. OVERNIGHT. SOME OF THESE CONCERNS RELATED TO SPACEX'S AMBITIOUS FUNDRAISING. HAIDI: IS IT ENOUGH TO CONVINCE THE INVESTOR POTENTIALLY TO SHIFT BACK TO KOREA? BECAUSE THERE HAS BEEN SUCH A HEAVY PREFERENCE FOR TEHRAN. AVRIL: ADD TO THAT SOME INDIGESTION WHEN IT COMES TO THE FED MINUTES WHICH IS KIND OF A REARVIEW MIRROR LOOK GIVEN THE DATA WE HAVE BEEN GETTING SINCE THE LAST MEETING IN TERMS OF SOFTWARE PCE INFLATION AND JOBS NUMBERS, SO TRADERS ARE LOOKING AHEAD TO WHAT THE FED MIGHT DO AGAINST THAT BACKDROP OF ELEVATED YIELDS AND ENERGY PRICES. YOU ARE RUNNING INTO A BIT OF A WALL AS FAR AS STOCKS ARE CONCERNED, SO LOOKING A BIT SOFT . DON'T FORGET AS WELL, TRADERS WILL ALSO BE DIGESTING THE TOPICS REBALANCING -- THE TOPIX REBALANCING. MAYBE WE SEE A BIT OF A GAP BETWEEN THE NIKKEI AND THE TOPIX . UNSURPRISING TO SEE DOLLAR-YEN AT THE 158 HANDLE. OF COURSE, GIVEN THE EUROPEAN DEBT CONCERNS THAT HAVE BEEN DRIVING SOME OF THE SAFE HAVEN LOWS INTO THE GREENBACK. WE DO HAVE AN OPTION OUT OF JAPAN TODAY FOR THE 30-YEAR, KEEPING AN EYE ON THE 10-YEAR. TAKE A LOOK AT HOW SOUTH KOREA IS FARING IN THE EARLY GOINGS. WE ALREADY SAW INDICATIONS FOR THAT POP HIGHER, AND THIS IS WHAT YOU ARE GETTING IN TERMS OF THE STOCK PERFORMANCE. WE ARE HEARING AS WELL FROM ONE OF ITS UNITS. ALSO INTERESTING TO NOTE HOW PERHAPS WHEN IT COMES TO SOME OF THE MEMORY EARNINGS, THUS THE KOREAN WON'S RESURGENCE. HAIDI: LET'S TAKE A LOOK, IN TERMS OF THE MADDOX, WE ARE STILL LOOKING TO THE BREAD-AND-BUTTER. ONE IS WHAT IS GOING ON WITH TREASURY MARKETS. THAT 10-YEAR OPTION WILL GIVE A BIT OF RELIEF AND WE ARE LOOKING AT THE 30-YEAR JGB AUCTION TO FOLLOW THAT SAME TONE. WHEN IT COMES TO OIL PRICES, WE ARE SEEING THAT REVIVAL OF RISK AGAIN ON ACCOUNT OF A REPORT FROM THE WHITE HOUSE ASKING THE PENTAGON TO DROP STRIKE OPTIONS AGAINST IRAN THAT COULD GET EXECUTED BEFORE THE MIDTERMS. A LOT OF POSSIBILITY OF ACTION BEFORE OR AFTER THE MIDTERMS, SOME OF WHICH COME FROM PRESIDENT TRUMP HIMSELF, SO THAT IS DRIVING UP PRICES WE ARE SEEING AFTER THIS REPORT. SOME OF THOSE WEATHER-RELATED U.S. OUTPUT WOES AS WELL. AT LOT HAPPENING WHEN IT COMES TO CRUDE MARKETS. WE SEE BRENT UP BY 1%. WTI TRADING HIGHER AS WELL. WE SEE THAT REFLECTED IN AUSTRALIA IN PARTICULAR WITH ENERGY ONE OF THE STRONGEST GAINERS DESPITE QUITE A BIT OF DOWNSIDE ACROSS MINING RESOURCES. LET'S TALK A BIT MORE ON ALL THESE EVENTS WITH THE COFOUNDER AND LEAD PORTFOLIO MANAGER. INVESTORS CONTINUE TO LOOK FOR THIS CATALYST, THIS GUARANTEE THAT WE WILL SEE STAYING POWER OF THE PROPHET BOOM. DO YOU THINK THIS TRADE IS STARTING TO GET A LITTLE LONG IN THE TOOTH? >> I DO THINK INVESTORS ARE QUESTIONING MORE ABOUT HOW LONG THIS SUSTAINS AND ALSO AS WELL AS WITH THE BIG CAPEX SPEND, WILL WE SEE THE SORT OF RETURN THAT HAS BEEN PROMISED. AT THE SAME TIME WHERE COST OF FUNDING IS GOING UP AS WELL, SO BORROWING COSTS AROUND THE WORLD GOING HIGHER, AND THAT EATS INTO THE POTENTIAL RETURN PROSPECT. OVERALL, NET-NET, INVESTOR DOES QUESTION A LITTLE MORE IN TERMS OF WHAT IT WOULD LOOK LIKE THE NEXT FOUR MONTHS. HAIDI: THE QUESTIONING PART OF WHAT IS GOING ON. A LOT OF UNCERTAINTY AFTER WHAT WAS SUPPOSED TO BE THE SECOND BIGGEST IPO IN AUSTRALIAN HISTORY. GIVE US YOUR VIEW OF WHAT'S GOING ON HERE. >> THAT'S BEEN FASCINATING. I HAVE NEVER SEEN AN IPO SO POLARIZING. THIS SEEMS TO BE A LOT OF CONTRACT FROM THE MAJOR HYPERSCALERS, AND THE CONTRACTS ARE VERY LONG DATED, BUT THE CHALLENGE IS THAT THEY HAVE YET TO BUILD A LOT OF THOSE DATA CENTERS THAT THEY PROMISED TO, AND THAT WILL TAKE MANY YEARS TO COME. THE MULTIPLES THEY ASK FOR INVESTORS JUST SEEM WAY TOO LONG DATED AND WITH A HIGH MULTIPLE THEY ARE PAYING FOR SOMETHING THAT HAS YET TO BE BUILT. THERE IS A LOT OF SKEPTICISM IN TERMS OF THIS IPO. THERE WERE A LOT OF INTERNATIONAL INVESTORS INTERESTED, AND WHEN IT COMES TO THE CRUNCH, IT CERTAINLY SEEMS LIKE THE DEMAND IS NOT THERE WHEN THEY ARE ASKED TO PUT UP THE AMOUNT OF CAPITAL REQUIRED. REMEMBER, COMPANIES REQUIRE A LOT OF CAPITAL FOR THE NEXT MANY YEARS. THEY WILL BE SHORT CAPITAL IN 8, 12 MONTHS TIME AGAIN, SO IT'S ONE OF THOSE BUSINESSES THAT YOU MIGHT SEE SOME RETURN, AND BEFORE YOU KNOW IT, THEY ARE COMING BACK TO THE MARKET AND ISSUING MORE SCRIPTS. IT WILL BE INTERESTING TO SEE HOW THEY GENERATE SUSTAINED RETURN WHEN THERE'S SO MUCH CAPITAL REQUIRED. ALL OF THAT JUST OPEN QUESTIONS. HAIDI: IN TERMS OF THE PROCESS, THE WAY IT WAS MARKETED OR RUN, WASN'T TYPICAL OF WHAT YOU WOULD SEE OR MORE TYPICAL OF WHAT YOU ARE SEEING AT THE MOMENT IN THIS SPACE? >> I THINK IT IS VERY ATYPICAL OF WHAT WE SEE IN THIS PROCESS. AS AN AUSTRALIAN INSTITUTIONAL INVESTOR, WE OFTEN HAVE A LOT OF INVESTMENT WITH MANAGEMENT. YOU CAN TIME WITH MANAGEMENT IN ONE-ON-ONE MEETINGS, AND YOU LEARN YOU CAN PROVIDE INFORMATION, ASK QUESTIONS, BUT I THINK IT IS SKEWED TOWARDS TARGETING OFFSHORE INVESTORS, AND THE MORE RETAIL WEALTH ADVISOR TYPE OF INVESTORS. I WOULD SAY IT IS VERY UNUSUAL. THAT'S PROBABLY WHY WHEN IT FINALLY COMES TO FINAL TIME FOR BIDDING, DEMAND FOR NATIONAL INSTITUTIONAL INVESTORS SEEMS VERY SMALL AND IT SEEMS LIKE INTERNATIONAL FALLS SHORT AS WELL. HAIDI: IT SEEMED LIKE IN A MATTER OF DAYS, IT WENT TO HAVE ALLOCATED FROM VERY STRONG FOUNDATIONAL INVESTORS TO WE ARE HEARING THAT DEMAND IS NOW VERY LIGHT. IF THIS GETS PULLED, WHAT ARE THE NEXT STEPS FORWARD, AND WHAT ARE THE BROADER REPERCUSSIONS? AUSTRALIAN INVESTORS WANT THAT -- WANT ACCESS TO THAT AI STORY. >> IF IT DOES GET PULLED, I THINK IT'S LIKELY THAT THEY WILL GO BACK TO INVESTORS THEY PREVIOUSLY RAISED MONEY FROM. AS RECENTLY AS AUGUST, THEY JUST RAISED A FEW BILLION DOLLARS. THEY ARE TRYING NOW TO DOUBLE THE VALUATION LISTING ON THE SX SEEMS TO BE A BIT -- THEY ARE TRYING NOW TO DOUBLE THE ELATION. THEIR LISTING ON THE DEUS EX SEEMS AMBITIOUS. ALSO WHAT HAPPENED OVERNIGHT IN TERMS OF THE SPACEX AMAZING AND OVERNIGHT, THERE WAS A DATA CENTER RAISING FUNDING COSTS, SO YOU SEE THE FUNDING COST IS GOING HIGHER, AND HOW MUCH THAT EATS INTO EQUITY RAISES MORE QUESTIONS. FOR THE REST OF THE ACCESS IN AUSTRALIA, WE STILL SEE A LOT OF OPPORTUNITY. THERE'S LOTS OF COMPANIES THAT ACTUALLY SUPPLY. WE ALREADY HAVE QUITE A VIBRANT DATA CENTER SPACE, AND THEY ARE BUILDING AND HAVE ACCESS TO ENERGY. THEY HAVE ACCESS TO LOTS OF INFRASTRUCTURE THAT HAS ALREADY BEEN BUILT, SO IN A WAY, IT MAKES EXISTING DATA CENTERS AND CONTRACTS MORE VALUABLE, AND WE SEE THAT VERY VIBRANT AND WE HOPE TO SEE BREAKING GROUND IN LOTS OF PLACES AND START BUILDING, BUT ASIDE FROM THEM, WE HAVE QUITE A VIBRANT INVESTMENT CYCLE INTO THE DATA CENTER, AND THEN IT'S GOOD TO SEE MANY OF THESE COMPANIES LISTED ON THE EXCHANGE. HAIDI: ALWAYS GOOD TO TALK WITH YOU. AVRIL: A QUICK LOOK AT HOW SOME OF THESE CHIP-RELATED STOCKS ARE FARING IN EARLY HOURS. WE SAW RECORD PROFIT, AND THAT SEEMS TO BE TAKEN WELL BY MARKETS EVEN THOUGH IT MISSED THE CONSENSUS ESTIMATE. FOR MORE ON THOSE EARNINGS, LET'S BRING IN OUR SEOUL BUREAU CHIEF. TALK TO US ABOUT THESE RESULTS. IT WAS PROBABLY IN LINE WITH EXPECTATIONS, BUT THEY WERE SHY OF CONSENSUS. WHAT DOES THIS MEAN? >> IT WAS SLIGHTLY SHY OF ESTIMATES, BUT THE ESTIMATES THEMSELVES WERE LOFTY. THIS IS STILL AN ABSOLUTELY RECORD-BREAKING PROFIT. IT REALLY SPEAKS TO HOW WELL SAMSUNG ELECTRONICS IS DOING AS A RESULT OF THIS GLOBAL AI BUILD OUT. OBVIOUSLY, THEIR VOCAL COUNTERPART. AS A RESULT, SOUTH KOREA, WHERE THE GOVERNMENT HAS SAID THEY ARE ANTICIPATING AN ABSOLUTE RECORD YEAR FOR TAXES, TAX REVENUE, LARGELY AS A RESULT OF THESE BUMPER PROFITS WE ARE SEEING FROM SK AND SAMSUNG. FOR SOUTH KOREA AND THESE COMPANIES, EVEN THOUGH THEY HAVE SLIGHTLY MISSED EXPECTATIONS, IT HAS BEEN A REALLY STELLAR PERIOD, AND THEY ARE HOPING IT WILL CONTINUE FOR THE NEXT FEW YEARS AT LEAST. AVRIL: GIVEN HOW WE HAVE ALREADY SEEN THIS RUN UP TO THESE CHIP MAKING RELATED STOCKS DESPITE A WOBBLE SINCE THE MONTH OF JULY. WHAT ARE WE EXPECTING IN TERMS OF THE MARKET'S CONTINUED REACTION? >> IT SEEMS TO BE QUITE POSITIVE SO FAR THIS MORNING. THE CONCERN IS HOW LONG THIS WILL CONTINUE. SAMSUNG AND SK THEMSELVES, THEY HAVE SAID THEY ARE CONFIDENT FOR THE NEXT FEW YEARS, BUT AT THE SAME TIME, THEY ARE WORKING TO ADD HUGE CAPACITY. IN SOUTH KOREA, THEY HAVE COMMITTED TO 800-PLUS BILLION DOLLAR PROJECT WITH THE GOVERNMENT TO BUILD OUT AND ADD VAST CAPACITY IN THE SOUTH OF THE COUNTRY. THEIR COMPETITORS ARE ALSO WORKING TO BRING ONLINE MORE, SO THE QUESTION IS -- HOW LONG CAN THESE HIGH PRICES BE SUSTAINED? HOW LONG WILL WE SEE THESE PROFITS GO? B MARKET IS QUESTIONING HOW LONG THEY CAN TO RIDE THIS AND HOW LONG THEY CAN KEEP PRICES AS HIGH AS THEY ARE, WHICH IS OBVIOUSLY DRIVING RECORD PROFITS. IT IS CERTAINLY AN OPEN QUESTION AT THIS STAGE. AVRIL: THANK YOU SO MUCH. OF COURSE, AMONG THE EARNINGS WE HAVE BEEN LOOKING AT, INCLUDE LG ENERGY AS WELL AS THIRD-QUARTER OPERATING PROFIT BEAT ESTIMATES. YOU ARE SEEING THAT CLIMB IN THE STOCK, A POP OF ABOUT 3%. HAIDI: WE HAVE MORE DETAILS WHEN IT COMES TO THIS WARNER BROS. BUYOUT. WE ARE HEARING THE ELLISONS INVESTED APPROXIMATELY $17 BILLION TO COMPLETE PARAMOUNT SKYDANCE'S ACQUISITION OF WARNER BROS. DISCOVERY. DAVID ELLISON IS THE SON OF THE ORACLE CO-FOUNDER LARRY ELLISON. HE AND HIS FAMILY ACQUIRED AN ESTIMATED 1.4 BILLION SHARES IN THE STOCK OFFERING. WE HAVE NOT HAD A COMMENT FROM THE NEWLY EMERGED BUSINESS, WHICH IS NOW CALLED SKYDANCE, BUT THE ACQUISITION INVOLVED AN EQUITY INVESTMENT OF $47 BILLION. MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. >> WE CHOOSE THE UNAPOLOGETIC PURSUIT OF NATIONAL POWER TO TAKE BACK CONTROL OF OUR CRITICAL SUPPLY CHAINS, TO RE-INDUSTRIALIZE OUR ECONOMY, TO REBUILD OUR DEFENSE, TO FIGHT FOR DOMINANCE OF THE TECHNOLOGIES AND INDUSTRIES OF THE FUTURE. HAIDI: U.S. SECRETARY OF STATE MARCO RUBIO SPEAKING IN ATHENS ABOUT A U.S. REVIVAL, WARNING RIVALS ABOUT THE DANGERS OF A U.S. DECLINE. TAKING A LOOK AT WHAT WE ARE WATCHING IN TERMS OF THE SET UP FOR THIS THURSDAY SESSION, WE ARE SEEING STOXX 50 FUTURES OFF BY JUST ABOUT 1.7%. THIS INFLATION WORRY IS BEING PERVASIVE AT A GLOBAL LEVEL NOW, BUT PARTICULARLY IN TERMS OF SECTORS, EUROPEAN BANK STOCKS CONTINUE TO SYNC. THEY ARE AT THE LOWEST LEVEL SINCE JULY AS WE SEE THAT PRESSURE ON EUROPEAN BONDS, BUT IT IS FRANCE WHERE WE EXPECT TO SEE THAT FURTHER PRESSURE. FRENCH STOCKS WILL CONTINUE TO SEE THAT STRUGGLE AS WE HAVE SOME OF THE POLITICAL AND DOMESTIC ISSUES AT PLAY THERE AS WELL. THE EUROPEAN UNION IS WEIGHING TEMPORARY LIMITS ON IMPORTS OF CHINESE HYBRID VEHICLES, MARKING A NEW STEP IN THE EFFORT TO ADDRESS WIDENING TRADE IMBALANCES IN BEIJING. LET'S BRING OUR CHINA CORRESPONDENT IN HONG KONG. WHAT ARE THESE SAFEGUARD MEASURES, AND WHY HAVE THE VEHICLES COME INTO THE SPOTLIGHT NOW? MINMIN: THE EU IS LOOKING AT PLACING SOME LEVEL OF IMPORT CAP WHEN IT COMES TO HYBRID VEHICLES. IT COULD LOOK LIKE TARIFF QUARTER CAPS ABOVE A CERTAIN VOLUME OF IMPORTS. THIS IS SIMILAR TO WHAT CANADA HAS ALREADY DONE FOR CHINESE ELECTRIC VEHICLES. WHEN IT COMES TO EV'S, THEY ARE FULL BATTERY ELECTRIC VEHICLES AND HYBRIDS, SO THE BATTERY ELECTRIC VEHICLES IS WHAT HAD BEEN SUBJECTED TO TARIFFS PREVIOUSLY, UP TO 45%. YOU LOOK AT THE PURPLE LINE AND YOU CAN SEE THE SLOWDOWN IN THOSE CHINESE EXPORTS, BUT WHEN IT COMES TO HYBRIDS, THOSE ARE NOT SUBJECTED TO HIGHER TARIFFS. THEY ARE STILL AT BASELINE 10%, SO THAT'S WHY WE SAW THIS SURGE IN HYBRID EXPORTS, UP TO 25% OF TOTAL HYBRID SALES IN THE EU RIGHT NOW, SO THAT'S WHY THE EU IS TRYING TO PROTECT ITS INDUSTRY. SO FAR, CHINA HAS EXPRESSED THAT IT IS OPPOSED TO ANY VOLUNTARY CAP ON THESE EXPORTS AND VIEWS THIS AS PART OF ITS DEVELOPMENTAL RIGHTS AS PART OF THE STRENGTH OF CHINESE EXPORT THAT HAS SPENT MANY YEARS BUILDING UP. SO WE WILL HAVE TO SEE IF CHINA WOULD RETALIATE IF THE EU WERE TO IMPOSE THESE CAPS UNILATERALLY, AND THIS WILL BE THE SUBJECT OF DISCUSSIONS AT THE EU-CHINA TRADE TALKS THIS WEEK. HAIDI: WHAT ELSE WILL BE UP FOR DEBATE? MINMIN: HYBRID CARS IS ONE, BUT OVERALL, THE TRADE IMBALANCE HAS BEEN EXPANDING. 360 BILLION EUROS LAST YEAR. IT CONTINUES TO WIDEN THIS YEAR, SO CLEARLY THE EU IS DESPERATELY WANTING CHINA TO BUY MORE OF ITS PRODUCTS, PARTICULARLY WHEN IT COMES TO SPECIFIC PRODUCTS WHERE CHINA HAS IMPOSED TARIFFS IN RETALIATION TO THE EV TARIFFS, SO THEY WANT THOSE RESTRICTIONS ROLLED BACK. THEY ALSO WANT LOWER TRADE BARRIERS OVERALL, PARTICULARLY WHEN IT COMES TO THINGS LIKE MEDICAL EQUIPMENT. HERE IS WHERE CHINA SAYS THERE IS WHERE CHINA SAYS THERE'S A DOUBLE STANDARD BECAUSE THE EU AT THE SAME TIME HAS BEEN SCREENING CHINESE INVESTMENTS AND PREVENTING THEM FROM INVESTING IN AREAS LIKE GREEN ENERGY. FOR EXAMPLE, CHINESE MEDICAL DEVICES HAVE BEEN HAVING A HARD TIME WITH GOVERNMENT PROCUREMENT IN THE EU AS WELL. THOSE EXPORT CONTROLS, THE DEAL IS EXPECTED TO EXPIRE BY EARLY NOVEMBER, SO THE EU ONCE THE DEAL TO BE EXTENDED. THEY ARE ALSO WORKING ON CREATING SOME SORT OF FAST TRACK APPLICATION MECHANISM FOR CHINESE RARE EARTH TO GET INTO THE EU QUICKLY. YOU CAN SEE THIS IS HOW DEPENDENT THE EU IS ON CHINESE RAW MATERIALS. 100% ON HEAVY RARE EARTH ELEMENTS. THIS IS WHERE CHINA REALLY HAS THE LEVERAGE THAT COULD POTENTIALLY ESCALATE THIS INTO A FULL-BLOWN TRADE WAR IF BOTH SIDES DO NOT COMPROMISE ON THEIR POSITIONS. HAIDI: IT SOUNDS LIKE THERE IS A FAIR BIT OF TENSION IN TERMS OF THE TONE OF THIS RELATIONSHIP. ARE WE SEEING RISKS OF A TRADE WAR? MINMIN: THE BASELINE IS THAT NEITHER SIDE WANTS A FULL-BLOWN TRADE WAR. CHINA WANTS THE EU TO COME TO THE TABLE, BUT CHINA'S PREVIOUS APPROACH TO WORKING WITH THE EU HAS ALSO LOST GROUND A LITTLE BIT. IT USED TO BE ABLE TO SORT OF DIVIDE AND CONQUER, BUT WE ARE SEEING HOW FRANCE AND GERMANY ARE STARTING TO PRESENT A UNITED FRONT. THEY SENT A JOINT LETTER TO THE EUROPEAN COMMISSION PRESIDENT CALLING FOR STRONGER MEASURES AGAINST A TRADE WAR. PREVIOUSLY, GERMANY HAD BEEN ONE OF THOSE OPPOSED TO EV TARIFFS. GERMANY HAS A LOT OF OF CAR COMPANIES IN CHINA, BUT THE SITUATION IS SHIFTING BECAUSE OF INTENSE COMPETITION EVEN IN THE CHINESE MARKET. ALSO THE RIGHTWARD SHIFT IN GERMANY POLITICS. A NEW GERMAN CHANCELLOR HAS BEEN MORE HAWKISH ON CHINA, SO THINGS ARE HARDENING OVERALL BETWEEN THE EU AND CHINA. AVRIL: WE HAVE SOME OTHER TOP GLOBAL HEADLINES WE ARE FOLLOWING AS WELL. THE WORLD HEALTH ORGANIZATION IS PRESSING RUSSIA MORE INFORMATION ON THE DEATH OF A WORKER AT A PLAGUE RESEARCH LAB. PRESIDENT TRUMP SAYS HE WILL RAISE THE ISSUE WITH RUSSIAN PRESIDENT VLADIMIR PUTIN WHEN THE LEADERS SPEAK BY PHONE. BLOOMBERG HAS BEEN TOLD THAT CHINA GOT HOLD OF PARTS FROM AN F 35 STEALTH FIGHTER JET AFTER A UPS EMPLOYEE MISSED IN EMAIL WARNING NOT TO ROUTE THE SHIPMENT THROUGH HONG KONG. A SOURCE SAYS THEY WERE MISTAKENLY SENT THROUGH HONG KONG TO SPEED UP DELIVERY. THE PENTAGON AND STATE DEPARTMENT ARE INVESTIGATING WHILE U.S. LAWMAKERS WANT A REVIEW OF THE GLOBAL SUPPLY CHAIN FOR U.S. ARMS. BRENT CRUDE TAKE HIGHER AFTER A REPORT THE WHITE HOUSE IS SEEKING OPTIONS FOR MILITARY STRIKES ON IRAN BEFORE NEXT MONTH'S MIDTERM ELECTIONS. THE ATLANTIC SITES ADMINISTRATION OFFICIALS SAY AN PRESIDENT TRUMP WANTS TO SEE PROGRESS IN THE CONFLICT BEFORE THE KEY VOTE. BATTLEGROUND STATES FACE VOTER DISCONTENT OVER THE ELEVATED COST OF LIVING. TAKE A LOOK AT HOW ENERGY PRICES ARE FARING. BRENT IS ON THE FRONT FOOT, THOUGH IT HAS BEEN PRETTY RANGE BOUND, HOVERING AROUND THE 101 HANDLE. ENERGY PRICES HAVE BEEN ELEVATED OVERALL IN SPITE OF SOME OF THESE RELEASES IN ENERGY, INCLUDING FROM THE LIKES OF THE EU. WE HAVE MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. AVRIL: TAKE A LOOK AT HOW ASSETS IN JAPAN ARE FARING. YOU SEE THE TOPIX'S LIGHTING. THIS IS GIVEN THE BACKDROP OF THIS BIGGEST EVER RESHUFFLING OF THE BROAD-BASED INDEX THAT JAPAN EXCHANGE GROUP UNVEILED JUST A DAY AGO. IT WILL CALL ABOUT 100 COMPANIES FROM THE INDEX AND INTENSIFY THE PRESSURE FOR JAPANESE FIRMS TO BOOST MARKET APPEAL. WE ARE LOOKING AT DOLLAR-THE AND NUDGING BELOW THE 8.15 HANDLED. WE WILL ALSO BE WATCHING FAST RETAILING AND SEVEN AND I WITH INVESTORS WATCHING FOR FRESH CLUES ON JAPANESE CONSUMER SPENDING TRENDS. LET'S START WITH THE OPERATOR OF FAST RETAILING. WHAT ARE WE EXPECTING? >> YES, FAST RETAILING EXPECTED TO REPORT FISCAL EARNINGS AFTER THE MARKET CLOSES TODAY IN JAPAN. THE COMPANY HAS HAD A VERY GOOD YEAR. THE STOCK IS UP 33%. ANALYSTS ARE EXPECTING THE COMPANY TO REPORT THAT ANNUAL REVENUE GREW ABOUT 30% THIS YEAR. THEY ALSO EXPECT THE COMPANY TO GIVE GUIDANCE ON EARNINGS GROWTH BUT OVER 10% IN BOTH OPERATING INCOME AND NET SALES. ONE BIG TAILWIND HAS BEEN THIS INTERNATIONAL BUSINESS THAT'S NOW OVER 60% OF SALES. THE COMPANY HAS REALLY GROWN ITS BRAND AWARENESS OVER THE YEARS, ESPECIALLY WITH OVERSEAS SHOPPERS, AND I THINK INVESTORS WILL BE REALLY LOOKING TO SEE HOW THE COMPANY PLANS TO SUSTAIN THAT MOMENTUM AND GROW IT EVEN MORE. ANOTHER POINT INVESTORS MIGHT BE WATCHING HIS COMMENTS ON THE WEATHER. THE COMPANY HAS FAMOUSLY HISTORICALLY BEEN VERY SUSCEPTIBLE TO IMPACT FROM THE WEATHER, AND THIS IS AN EL NIÑO YEAR. OBVIOUSLY, THE WEATHER IS NOT GREAT. YOU DON'T WANT TO GO SHOPPING OR IF THE WEATHER CHANGES, IT INFLUENCES SHOPPING BEHAVIOR, SO I THINK THAT WILL BE A LOT OF EYES ON HOW MUCH THE WEATHER THIS YEAR WILL IMPACT SALES AND HOW THAT MIGHT GO INTO NEXT YEAR. AVRIL: WHAT ABOUT 47 AND I? THE CONVENIENCE STORE OPERATOR IS FACING PRESSURE. WHAT ARE WE WATCHING OUT OF THAT? >> YES, VERY DIFFERENT BUSINESS, OPERATING AND FRANCHISING CONVENIENCE STORES GLOBALLY, AND THEY ARE ALSO IN A VERY DIFFERENT STATE THAN FAST RETAIL IN TERMS OF BUSINESS. ANALYSTS EXPECT THEM TO REPORT THAT REVENUE WENT UP SLIGHTLY AND OPERATING INCOME WILL FALL 13% FOR THAT SECOND QUARTER LATER TODAY. FOR JAPANESE CONSUMERS, THEY ARE EXPERIENCING INFLATION FOR THE FIRST TIME IN ALMOST A GENERATION. THAT HAS CUT BACK A LOT A LOT OF DISCRETIONARY SPENDING, A LOT OF IMPULSE BUYS, WHICH IS WHAT CONVENIENCE STORES REALLY LIVE AND DIE BY, AND CONVENIENCE STORES ARE BEING REALLY DELIBERATE AND PLANNING THEIR SHOPPING EXPENDITURES. WITH HIGH OIL PRICES, CONSUMERS ARE MORE LIKELY TO GO OUT AND FILL UP THEIR TANK. OBVIOUSLY 711 LAST YEAR FAMOUSLY FENDED OFF A TAKEOVER ATTEMPT, AND THEY ARE UNDER PRESSURE TO GET SHARES UP. THIS YEAR, SHARES ARE DOWN ABOUT 12 PERCENT, SO IT'S NOT GOING VERY WELL. I THINK A LOT OF INVESTORS WILL BE LOOKING TO SEE WHAT PLANS THE COMPANY HAVE IN PLACE. LAST QUARTER, WHEN 7-ELEVEN REPORTED, THEY PUSHED BACK THEIR IPO FOR THE NORTH AMERICAN BUSINESS, WHICH HAD BEEN A TAILWIND THAT PEOPLE WERE EXPECTING. THEY NOW HAVE A NEW EXECUTIVE LEADING THE NORTH AMERICAN BUSINESS, SO I THINK WHEN THEY REPORT EARNINGS, PEOPLE WILL BE WATCHING TO SEE ANY UPDATE PLANS FOR THAT IPO. HAIDI: LOOKING AT THE JAPAN SESSION, OASIS MANAGEMENT NOW URGING THE COMPANY TO PUT ITSELF ON THE AUCTION BLOCK DUE TO WANING CONFIDENCE IN MANAGEMENT'S ABILITY TO RECOVER FROM THIS ACCOUNTING SCANDAL. OASIS CULLING THE COMPANY'S BOARD TO HIRE FINANCIAL ADVISORS, SOLICIT PRELIMINARY PROPOSALS FROM STRATEGIC BUYERS IN PRIVATE EQUITY AS WELL SAYING THAT THESE IRREGULARITIES MAY FORCE REMOVAL FROM THE TSC. THIS IS BLOOMBERG. ♪ >> FIRST OF ALL, IT'S A GLOBAL PHENOMENON. SINCE PRESIDENT TRUMP CAME IN, THE U.S. HAS BEEN THE BEST PERFORMING BOND MARKET IN THE 10-YEAR SPACE. WE CAN SEE THAT FOR THE U.S., UNLIKE OTHER COUNTRIES, IT IS A REAL RATE ISSUE. IT IS BECAUSE OF GROWTH. GROWTH HERE IS STRONG. AVRIL: TREASURY SECRETARY SCOTT BESSENT DISCUSSING HIGH BORROWING COSTS AND THE STATE OF THE U.S. ECONOMY. AMONG THOSE CONCERNS, YOU ALSO HAVE INFLATION, ENERGY PRICES, THE AI BORROWING. TAKE A LOOK AT HOW ASIA BONDS ARE ERRING AFTER THE U.S. PERFORMANCE OVERNIGHT WHERE WE DID SEE THOSE YIELDS CONTINUING TO CREEP HIGHER IN THE ASIA SESSION AS WELL. A BIT OF STABILITY, THOUGH, RETURNING WHEN IT COMES TO JAPAN'S 10-YEAR. WE HAVE A 30-YEAR OPTION OUT OF JAPAN AS WELL TODAY. IN THE MEANTIME, ABBVIE -- IN THE MEANTIME, THE MANAGER OF THE IMF IS WARNING THAT GOVERNMENTS HAVE BECOME TOO COMPLACENT IN SPENDING. SHE ALSO PRAISED KEVIN WARSH FOR FOCUSING ON PRICE STABILITY. >> 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? COMES COVID, GOVERNMENTS SPEND. 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 STEPPED UP AND UP AND UP DOES NOT LEAD TO HEAVEN. HASLINDA: ARE YOU CONCERNED THAT DEVELOPED MARKETS ARE ACTING LIKE EMERGING MARKETS FISCALLY? >> THERE IS A BIT OF THIS. IT USED TO BE AN EMERGING MARKETS OVER THE LAST DECADES HAVE TIGHTENED. THEIR FISCAL POSITION IS QUITE STRONG. NOW THEY SEE THE SPREADS THEY SHRANK, STILL 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. HASLINDA: 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. HASLINDA: THERE IS ALSO THE PACE. >> YES. 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 ON THE OTHERS, GOVERNMENTS WITH HUGE AMOUNTS OF DEBT THEY NEED TO REFINANCE, AND THEN COMES THE NEW KID ON THE BLOCK, AI. ALSO GOES TO FARRO. THAT PUTS PRESSURE, AND THIS IS WHY YIELDS HAVE GONE UP. IT IS A RESPONSE TO FUNDAMENTALS. IN THAT SENSE, WE ALSO DO NOT 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 SIGNALS FOR THE FUTURE. AVRIL: LET'S GET PERSPECTIVE FROM THE DEPUTY HEAD OF GLOBAL ECONOMICS AT P JIM -- AT PGIM. WE HAVE HEARD HOW KRISTALINA GEORGIEVA IS PRAISING THE CENTRAL BANK HEAD OUT OF THE U.S. DO YOU THINK HE HAS DONE ENOUGH TO BURNISH HIS CREDENTIALS IN A WAY, AND IS THERE A BIT LESS NEED FOR THAT GIVEN THE SOFTER DATA OUT OF THE U.S. WE HAVE BEEN GETTING SINCE THE LAST FED MEETING? >> IN A WORD, I WOULD SAY NO, NOT ENOUGH YET. THE GOOD NEWS IS I THINK THE COMMUNICATIONS WE HAVE HEARD FROM THE NEW FED GOVERNOR SINCE FOR EXAMPLE JACKSON HOLE AND THAT INITIAL RATE INCREASE COMING OUT OF THE FED, AND, CRUCIALLY, WHAT WE LEARNED OVERNIGHT WITH THE MINUTES IS THAT THIS WAS REALLY UNANIMOUS, AND ACTUALLY WENT BEYOND THE VOTING COMMITTEE AT THE FED. ALL OF THAT IS REALLY GIVING QUITE A GOOD SIGNAL, I THINK, TO MARKETS, REINFORCING THE MESSAGE THAT THE FED UNDER THIS NEW CHAIR REALLY CARES A LOT ABOUT GETTING INFLATION BACK TO TARGET, BUT I THINK MORE DOES NEED TO BE DONE TO REALLY DEMONSTRATE A COMMITMENT TO THAT , BUT IT IS A TRICKY BALANCE FOR THE FED TO TREAD BECAUSE ON THE ONE HAND, I THINK THEY DO NEED TO REALLY DEMONSTRATE THAT COMMITMENT TO BRINGING INFLATION BACK TO TARGET WITHOUT SORT OF TIPPING OVER INTO WHAT ECONOMISTS CALL THE INFLATION NUTTER, NOT GOING TOO FAR GIVEN THE REASONS THAT YOU CITED, THAT THERE IS SOME SOFTNESS WE ARE SEEING IN THIS DATA, SO A BIT MORE DEMONSTRATION BUT NOT GETTING TOO FAR AHEAD OF THEMSELVES IN TERMS OF SIGNALING REALLY AGGRESSIVE INTEREST RATE RISES FROM HERE. HASLINDA: HOW EXACTLY -- AVRIL: HOW EXACTLY WILL THE PATH TO DEMONSTRATING THAT LOOK LIKE, GIVEN THEY SEE AND OCTOBER RATE HIKE AS UNLIKELY AS TIGHTENING COMING BEFORE THE MIDTERMS? >> YES, I THINK THAT REALLY DOES REFLECT THE LATEST DATA FLOW THAT HAS BEEN A BIT SOFTER, AS YOU MENTIONED, BUT NEVERTHELESS, OUR VIEW IS WHAT THAT MODERATE HIKING CYCLE WILL LOOK LIKE IS TWO MORE INTEREST RATE RISES COMING OUT OF THE FED. WE SEE THAT CURRENTLY COMING IN IN DECEMBER AND AGAIN IN THE FIRST QUARTER OF NEXT YEAR. SO QUIET AND MODEST RATE HIKING CYCLE, BUT NEVERTHELESS, WE THINK THAT WOULD BE ENOUGH BASED ON WHAT WE KNOW NOW ABOUT THE DATA TO REALLY DEMONSTRATE THE FED'S COMMITMENT. OF COURSE, IF IN THAT INTERVENING PERIOD WE SEE GROWING SIGNS THAT THE INFLATION RISK IS JUST THAT LITTLE BIT BIGGER THAN WHAT IT LOOKS LIKE TODAY, THEN MAYBE THE FED DOES NEED TO DO A BIT MORE, BUT THAT WILL REALLY DEPEND ON THE DATA FLOW WE SEE IN THE COMING MONTHS. AVRIL: WHAT ABOUT WHAT THE BOJ NEEDS TO DEMONSTRATE? WE SEE HOW MAYBE THE UPSIDE RISK TO TIGHTENING ARE THERE. MAYBE SOME OF THE CONSTRAINTS SURROUNDING THAT HAVE ALSO BEEN REMOVED. HOW DIFFERENT IS THE PICTURE NOW COMPARED TO, SAY, THE START OF THE YEAR? >> LET ME START BY SAYING I THINK THE BANK OF JAPAN HAVE DONE A REALLY EXCELLENT JOB IN TERMS OF NORMALIZING MONETARY POLICY AS THEY HAVE DONE SO FAR, AND SO I THINK THE TRICK FOR THEM NOW IS TO NOT FAIL AT THE FINAL HURDLE, IF YOU LIKE. MY SENSE IS THAT THE BANK OF JAPAN IS REALLY ON TRACK ESSENTIALLY TO TAKE RATES TO WHERE THEY SEE THE MID RANGE OF NEUTRAL, SO JUST A FEW MORE RATE HIKES, BUT AGAIN, LIKE THE FED, YES, RATES NEED TO BE HIGHER, BUT THAT NEEDS TO HAPPEN IN A WAY THAT IS SORT OF MODERATE, CONTROLLED, VERY MINDFUL, AND OF COURSE, VERY MUCH DATA-DEPENDENT, SO IT WILL REALLY BE CONDITIONED ON -- DO THE MACRO DATA CONTINUE TO EVOLVE IN THE WAY THAT THE BANK OF JAPAN EXPECTS THEM TO DO, WHICH IS TO REALLY REINFORCE AND TO RAISE THEIR CONVICTION THAT INFLATION IS SUSTAINABLY AT 2%? I THINK SOME OF THE EXPECTATIONS MAY HAVE UNWOUND NOW FROM MARKETS OF REALLY AGGRESSIVE RATE RISES COMING OUT OF THE BANK OF JAPAN. WE -- WERE REALLY PROBABLY A BIT TOO MUCH, AND MY SENSE IS THAT THE BANK OF JAPAN WILL WANT TO CONTINUE ON THIS KIND OF STEADY AS SHE GOES NORMALIZATION PROCESS THAT HAS REALLY STOOD THEM IN REMARKABLY GOOD STEAD SO FAR. AVRIL: GIVEN THE REACTION IN SOME OF THESE G10 DEBT MARKETS, THE FISCAL CONCERNS CONTINUE TO WAY. I WONDER WHAT IS YOUR SENSE OF THE INTERPLAY BETWEEN MONETARY AND FISCAL POLICY. IT ALMOST SEEMS AS THOUGH THE ONUS IS NOW ON CENTRAL BANKS TO BURNISH THEIR CREDIBILITY AND HELP EASE THE RUPTURES IN BOND MARKETS. >> YES, AND I'M NOT SURE THAT MARKET EXPECTATIONS WILL GET MET BY CENTRAL BANK ACTIONS. MY SENSE IS THAT CENTRAL BANKS ARE QUITE LASER FOCUSED ON THEIR MANDATE, WHICH IS PRICE STABILITY, AND WANT TO DRAW A LINE BETWEEN THAT MANDATE AND THAT OF THE FISCAL AUTHORITY, WHICH IS TO GET THEIR HOUSE IN ORDER ON THAT SIDE OF THE POLICY, BUT SOME MARKET EXPECTATIONS, IF WE LOOK, FOR EXAMPLE, SPECIFICALLY IN THE CASE OF FRANCE, I THINK SOME OF THESE EXPECTATIONS AROUND THE ECB STEPPING IN WITH SOME OF THEIR TRANSMISSION PROTECTION INSTRUMENT TOOLS, FOR EXAMPLE, ARE REALLY QUITE PREMATURE. I COULD BE PROVEN WRONG. WE HAVE NOT SEEN THE TPI BE DEPLOYED BY THE ECB IN THE PAST, AND IT IS HIGHLY DISCRETIONARY AND JUDGMENTAL, BUT MY SENSE IS THAT THE BAR FOR THAT IS REALLY QUITE HIGH AND THAT THE ECB WILL NOT SEE THEIR ROLE AS BEING TO DEPLOY THIS INSTRUMENT IN THE CASE OF FRANCE, SO REALLY WANTING TO DRAW A VERY CLEAR LINE BETWEEN WHAT IS THEIR MANDATE FOR ACHIEVING PRICE STABILITY, AND WHAT IS FIRMLY IN THE HANDS OF ELECTED OFFICIALS TO COME TO DECISIONS AROUND FISCAL POLICY. AVRIL: A REALLY GREAT TO HAVE YOU WITH US. WE HAVE MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. HAIDI: THE OUTPERFORMANCE OF TAIWAN OVER KOREA. AS WELL ANTHONY STEPHENS IS BACK WITH MORE, SO IS THIS GOING TO JUST CONSOLIDATE THAT BROADER STORY OF INVESTORS PREFERRING TAIWAN OVER KOREA AS WE GET THIS TSMC EARNINGS? ANTHONY: YEAH, IT HAS BEEN A RECENT TREND WHERE TAIWAN HAS BANK ON THE FACT THAT IT HAS A WIDER TECH BASE TO PUSH BACK AGAINST THE MEMORY STORY. THIS TRADE DOES HAVE A BIT OF AN ELON MUSK PROBLEM COMING INTO TODAY AS ELON MUSK PUSHES BACK ON TSMC'S PROJECT. HE SAID IT BEST THEY WILL LEASE PART OF IT BUT WILL CERTAINLY NOT BE RUNNING IT. IT DOES LOOK LIKE TAIWAN WILL BE IN LINE WITH THE REGION TODAY. YOU ARE SEEING SOME TECH WEAKNESS ACROSS THE REGION, BUT MORE BROADLY SPEAKING, TSMC'S FOUNDRY BUSINESS IS AN ABSOLUTE BENCHMARK. THEY MAKE CHIPS FOR EVERYBODY AT THE VERY TOP END, AND THEIR CAPACITY CONSTRAINED FOR YEARS GOING FORWARD, SO IT WILL BE THE OPERATING STRENGTH OF THE RESULTS AND WHAT THEY PLAN ON SPENDING ON CAPEX THAT WILL BE LOOKED AT FOR THE REST OF THE MARKET. TSMC IS A GUSHER OF CASH THAT PAYS DOWNWIND IN TAIWAN AND THAT IS LIFTING MULTIPLE TAIWANESE STOCKS TO GAINS. WE SAW SOME PUSHBACK FROM INVESTORS IN THE SESSION YESTERDAY WITH SOME EARNINGS COMING THROUGH. WE ALSO HAD WEEK-IS COMPARISON NUMBERS FOR SEPTEMBER SALES, SO COMPARISONS ARE BECOMING HARDER TO BEAT IN TAIWAN, AND THAT MIGHT SLOW DOWN THE PACE OF THE RALLY FROM THESE LEVELS. HAIDI: TELL US MORE ABOUT WHEN IT COMES TO THE HONG KONG TECH REBALANCING, THAT POTENTIAL IMPACT. ANTHONY: THE HSTECH IS RESPONDING TO INVESTOR CONCERNS THAT THE MARKET COMPOSITION HAS NOT REALLY REFLECTED THE VAST GROWTH IN THE ECOSYSTEM OF CHINA'S AI SPACE. THEY HAVE A NOD OF -- A LOT OF NEW LISTINGS IN THE HARDWARE SPACE. THERE'S NEW LISTINGS IN THE SEMICONDUCTOR MEN TO RINGS BASED THAT ARE NOT REALLY REFLECTED IN THE HSTECH. EVEN THE AI LLM MODELS TOOK A LONG TIME TO COME INTO THE HSTECH AND THAT WAS AFTER A LOT OF EXCITEMENT HAD FADED AWAY. HSTECH IS LOOKING TO ADDRESS THIS. THAT ALSO REDUCES SOME OF THE DEPENDENCE HSTECH HAS IN THE CHINESE EV SPACE WHICH IS NOW GETTING INCREASINGLY CHALLENGED BY TRADE REGULATIONS AND TRADE BARRIERS, MOST NOTABLY IN THE HEADLINES COMING THROUGH FROM THE EU THAT THEY ARE LOOKING TO CAP HYBRID SALES. THAT PUSH AND PULL BETWEEN THE DIFFERENT SECTORS MAY LOOK TO GET RESOLVED BY THIS REBALANCE THAT MAKES IT LOOK LIKE IT IS A MORE WIDESPREAD INDEX THAT WOULD ATTRACT SOME INCOMING PASSIVE FLOWS. AVRIL: A GREAT TO CHAT. THANK YOU SO MUCH. ONTO SOME OTHER CORPORATE STORIES WE ARE TRACKING, BROADCOM IS REPORTEDLY ARRANGING MORE THAN $50 BILLION IN FINANCING FOR THE CUSTOM CHIP IT IS DEVELOPING WITH OPENAI. PROSPECTIVE LENDERS INCLUDE APOLLO, GLOBAL, AND BLACKSTONE. ORACLE IS ALSO IN TALKS WITH APOLLO AND GOLDMAN SACHS TO ARRANGE MONEY FOR ITS OWN BIG PURCHASE OF CHIPS. SK HYNIX'S FLASH MEMORY UNIT IS SET TO PAY GOLDMAN SACHS AND MORGAN STANLEY TO LEAD A PLAN TO U.S. IPO NEXT YEAR. SOURCES SAY THE DEAL COULD RAISE $10 BILLION WITH A POTENTIAL $100 MILLION VALUATION. AND NOW FOCUSES ON AI DATA CENTER STORAGE FOR CUSTOMERS, INCLUDING DELL AND TENCENT. A MEASURE OF SPACEX CREDIT RISK SURGED TO A FRESH HIGH AS THE COMPANY'S BONDS WEAKENED IN THE SECONDARY TRADE MARKET. FIVE-YEAR CREDIT DEFAULT SWAPS ROSE AS MUCH AS 16.7 BASIS POINTS, THE HIGHEST SINCE THEY STARTED ACTIVELY TRADING IN JUNE. SPACEX IS SAID TO BE LOOKING TO RAISE $40 BILLION TO BUY NVIDIA CHIPS IN ONE OF THE BIGGEST EVER DEBT FINANCING DEALS FOR THE AI BUILDOUT. HAIDI: LET'S LOOK AT WHAT WE ARE WATCHING WHEN IT COMES TO TRADING IN THE NEXT HOUR. WE SPOKE A LITTLE BIT IN TERMS OF THE HONG KONG TECH REBALANCING STORY. WE WILL BE WATCHING FOR HOW TECH STOCKS COME ON BOARD. HONG KONG FUTURES -- HANG SENG FUTURES, I SHOULD SAY, LOOKING SOFTER AS WE HEAD INTO THE START OF TRADING. WE HAVE SOME MACRO HEADWINDS AS WELL, WORRIES ABOUT CHINA'S DOMESTIC ECONOMY, WHICH HAS BEEN AT A STABLE LEVEL OF MINIMIZATION, STARTING TO GENERATE MORE CONVERSATION. CITI, FOR ONE, SAYING THE DOMESTIC ECONOMY IS ON THE VERGE OF RECESSION DESPITE HEADLINE GROWTH STILL MEETING TARGETS THIS YEAR, SO WATCHING FOR ANY KIND OF REACTION TO THAT. PLUS WE HAVE THOSE BROADER LIQUIDITY SITUATIONS WITH HOLIDAYS ON THE MAINLAND AS WELL. THE FTSE 850 CHINA FUTURES DOWN BY JUST ABOUT .1%, SO THAT PRESSURE WILL BE THE STORY WHEN TRADING RESUMES. WE HAVE HAD A WEEK-LONG BREAK IN CHINESE EQUITIES. LET'S BRING IN OUR ASIA STOCKS REPORTER. IT IS A LOT FOR INVESTORS TO COME BACK WITH, NOTWITHSTANDING MAINLAND CHINESE MARKETS TEND TO BE QUITE IDIOSYNCRATIC. THE REOPENING AFTER THE GOLDEN WEEK HOLIDAY, WHAT ARE WE SEEING AS THE NEWS FLOW THAT WILL BE MOST IMPACTFUL IN DRIVING SENTIMENT? >> YES, I THINK THERE WERE SO MANY THINGS TO DIGEST. ON THE ONE HAND, IT IS PRETTY WEAK. FOR EXAMPLE, IN-PERSON CAP SPENDING ON THE CONSUMPTION SIDE REMAINS REALLY WEAK. ON THE OTHER HAND, IF YOU LOOK AT OTHER AREAS LIKE BOX OFFICE HAVE BEEN PARTICULARLY WEAK, SO ALL IN ALL, THE INVESTOR DOES NOT HAVE A VERY COMPELLING MACRO CASE TO CONVINCE THEMSELVES THIS IS THE TIME WE ARE GOING TO GO BACK. ON THE OTHER, HANG SENG INDEX AND HANG SENG CHINA GAUGE, THE PERFORMANCE HAS BEEN PRETTY WEAK DURING THE HOLIDAYS. I THINK THAT ALSO SET A VERY NEGATIVE TONE FOR THE OPEN. ALL IN ALL, I THINK IT WILL BE A LOWER, CAUTIOUS OPEN. IT WOULD REALLY SURPRISE ME IF WE SEE A VERY BIG JUMP FOR THIS YEAR, BUT HAVING SAID THAT, THERE WERE A FEW BRIGHT SPOTS AS WELL. FOR EXAMPLE, I THINK THE LICENSE AND USE BETWEEN HUAWEI AND QUALCOMM DURING THE HOLIDAYS, OF COURSE, IT HAS SENT SOME HONG KONG-LISTED HARDWARE NAMES HIGHER DURING THE HOLIDAYS. WHEN THE ASIAN MARKET REOPENS, THAT COULD PROVIDE SOME SUPPORT FOR THE LOCAL SEMI PLAYS. ON THE OTHER HAND, I THINK SOMETIMES THE WEEK MACRO DATA TRIGGERS SOME EXPECTATIONS FOR SOME POLICY SUPPORT AS WELL. BEFORE THE HOLIDAYS, I THINK THE CHINESE GOVERNMENT ANNOUNCED A FEW PROPERTY STIMULUS, BUT IT WAS NOT THAT IMPRESSIVE FOR INVESTORS. OVER THE HOLIDAYS, I THINK THE FINANCE MINISTER HAVE ALREADY CALLED FOR MORE MEASURES ON THE FISCAL FRONT TO SUPPORT THE ECONOMY. I THINK THAT IS ONE OF THE ENCOURAGING SIGNS FOR INVESTORS. MAYBE THEY WILL LOOK TO POLICIES DOWN THE ROAD POTENTIALLY BEING POSITIVE FOR THE ECONOMY, SO THAT IS ANOTHER POSITIVE ELEMENT FOR THE MARKETS AS WELL. HAIDI: THE ANNOUNCEMENT WHEN IT COMES TO STIMULUS MEASURES BEFORE THE HOLIDAY BREAK IS PRETTY MUTED, RIGHT? IS THERE ANY INDICATION FISCAL SUPPORT WILL BE MORE AGGRESSIVE? >> I THINK ALL THE EYES ARE ON THE FIFTH PLENUM, WHICH WILL BE HELD AROUND THE END OF THIS MONTH. I THINK THIS IS ONE OF THE KEY EVENTS WATCHED BY ALL THE MARKET PLAYERS, IF THE CHINESE GOVERNMENT WILL STEP UP MEASURES, ESPECIALLY ON THE FISCAL FRONT. ONE OF THE KEY THINGS THEY ARE LOOKING FOR IS IF FOR EXAMPLE ON THE PROPERTY FRONTS, IF PROPERTY SALES REMAIN TO WEEK, IF THERE IS ANOTHER SET OF STIMULUS TO BE ANNOUNCED IN ORDER TO SHORE UP THE ECONOMY, AND ALSO, ANOTHER THING, FOLLOWING WHAT THE FINANCE MINISTER CALLED ON DURING THE HOLIDAYS TO BOOST THE FISCAL MEASURES, I THINK SOME SPECIFIC MEASURES ARE ALSO BEING ANTICIPATED BY INVESTORS IN ORDER TO BOOST THE ECONOMY. HAIDI: WE ARE HEADING TOWARDS THE REOPENING. THERE'S MORE ON THE MAINLAND MARKET REOPENING AND SLUGGISH HOLIDAY SPENDING COMING UP ON OPEN THE THE CHINA SHOW -- ON " THE CHINA SHOW." MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. AVRIL: LET'S LOOK AT HOW COMMODITY PRICES AND THE 10-YEAR TREASURY ARE FARING TODAY AFTER TRUMP SAID HE DOES NOT THINK AN IRAN DEAL IS SOMETHING HE WANTS TO DO. THIS FOLLOWING ON FROM "THE ATLANTIC" REPORTING THAT THE WHITE HOUSE IS SEEKING OPTIONS FROM THE PENTAGON IN TERMS OF MORE STRIKES TO IRAN THAT COULD TAKE PLACE BEFORE THE MIDTERMS. YOU ARE SEEING A TAKE-UP IN GOLD THOUGH IT IS HOVERING THERE NINE-YEAR LOWS AS THE GREENBACK REBOUNDS. GIVEN THE SAFE HAVEN DEMAND, WE ARE ALSO SEEING BRENT ON THE FRONT FOR THE MOMENT. OVERNIGHT, WE DID GET A 10-YEAR OPTION THAT SHOWED SOLID DEMAND OUT OF THE U.S. THAT MAY HAVE HELPED TO EASE SOME OF THOSE CONCERNS IN THE BOND MARKET, BUT YOU ARE SEEING THE YIELD ON THE 10-YEAR TAKING A LITTLE HIGHER ON THE ASIA SESSION FOR NOW. HAIDI: WATCHING THOSE YIELDS IN TERMS OF THIS FLOW WANT TO EFFECT WE SEE FROM ENERGY PRICES NOW ELEVATED AGAIN, CONCERNS ABOUT THIS WHITE HOUSE REPORT ABOUT POTENTIAL FURTHER ESCALATION. WE ARE ALSO HEARING FROM PRESIDENT TRUMP THIS HOUR CASTING DOUBT ON IF HE WANTS TO DO A DEAL WITH IRAN, MAKING THESE REMARKS IN TEXAS, SAYING THAT THE DEAL IS SOMETHING THAT -- I DON'T THINK IT'S SOMETHING I WANT TO DO, SO THAT CERTAINLY NOT FEEDING INTO POSITIVE SENTIMENT. WE ARE SEEING DECLINES ACROSS ASIA AT THE MOMENT. THIS IS BLOOMBERG.