Bloomberg Daybreak: Asia 23/05/2024

Summary

Daybreak covers key global market events, including anticipation around Nvidia's results, strong Singapore GDP numbers, and mixed Asian market openings. The discussion highlights central banks' 'higher for longer' policies, U.S. Fed minutes, and the impact of Nvidia's financial performance on the tech sector. Analysts from Goldman Sachs and Sigmoid Capital share insights on Japan's equity market potential and challenges in China's manufacturing sector. The Bank of Korea's steady rate decision and SingTel's future plans amid macroeconomic pressures are also featured.

Takeaways

• 📈 Markets are excited about the start of trading, with strong video numbers driving market sentiment.
• 📊 Global central banks' policies and their impact on the economy remain a primary focus, with higher interest rates being a common theme.
• 🇸🇬 Singapore's GDP numbers for 2024 are better than expected, indicating economic resilience.
• 🇰🇷 Japan, Korea, and Australia show mixed market performances as trading begins, with a strong focus on tech stocks.
• 🧠 Nvidia's strong financial performance, including a forecast for significant revenue growth and a stock split, is a major market driver.
• 🏦 Central banks in New Zealand, Korea, and the US emphasize 'higher for longer' interest rates to control inflation.
• 📈 Indonesia is seen as oversold, with potential for market recovery due to strong fundamentals in the banking sector.
• 🇯🇵 Japan is considered an underappreciated turnaround story, with strong corporate governance reforms and potential for continued equity market growth.
• 🔧 Chinese manufacturing faces potential overcapacity issues, impacting global supply chains and credit growth.
• 📉 The Bank of Korea keeps its key rate steady at 3.5%, with an upgraded GDP forecast, reflecting cautious optimism amid global financial pressures.

Q & A

What is the general sentiment around the start of markets in the transcript?

The general sentiment is excitement, largely due to the impressive video numbers that have been a significant focus and relief for the market, particularly validating the bullish stance.

What is the significance of the video numbers mentioned in the transcript?

The video numbers refer to the strong financial results from Nvidia, a major player in the chip and AI industry. These numbers are significant as they have exceeded expectations and are driving market sentiment and momentum trades in the technology sector.

What central banks are being discussed in the transcript and why are they important?

The transcript discusses the Federal Reserve (The Fed), the Reserve Bank of New Zealand, and the Bank of Korea. They are important because their monetary policies and statements have a direct impact on global financial markets, influencing interest rates, currencies, and investor behavior.

What was the unexpected outcome from Singapore's GDP numbers?

Singapore's GDP numbers for the first quarter were better than expected. The growth estimate for 2024 was maintained between 1 and 3%, with the final first quarter GDP rising by 2.7%, slightly higher than the expected 2.5%.

How did the transcript describe the market's reaction to Nvidia's financial results?

The market reacted positively to Nvidia's financial results, with the company's shares rising about 6% in after-hours trading. Nvidia reported strong sales and a very bullish outlook, which contributed to the positive market sentiment.

What is the current situation with BHP's takeover offer for Anglo American?

BHP has an extended deadline to convince Anglo American of its takeover proposal. While the two companies are reportedly getting closer on price, the structure of the deal, particularly concerning BHP's South African plan, remains a sticking point.

What is the significance of the manufacturing PMI in Japan?

The manufacturing PMI in Japan has expanded above the 50 mark for the first time since May 2023, indicating an expansion in the manufacturing sector after a period of contraction.

What is the current stance of the Bank of Korea regarding interest rates?

The Bank of Korea has decided to keep its key interest rate steady at 3.5%, a decision predicted by all economists surveyed. This marks the 11th consecutive month of maintaining the rate at a level seen as restrictive.

What is the impact of the strong Singapore dollar on SingTel's business?

The strong Singapore dollar is putting pressure on SingTel's business, as over 70% of their operations are outside of Singapore. The strong currency has led to losses due to the translation effects on their foreign businesses.

What are the insights shared by Wendy Chen, CEO of Sigmoid Capital, on the Japanese market?

Wendy Chen believes that Japan is currently the most underappreciated opportunity in global equities. She cites Japan's exit from deflation, a healthy wage increase, and corporate governance reforms as factors that could lead to a rerating and further upside for Japanese equities.

Outlines

00:00

📈 Market Excitement and Global Economic Updates

The script opens with a sense of anticipation for the market opening, driven by strong video and economic numbers. It discusses the validation of the bulls in the market and the focus on global central banks' statements, particularly the Federal Reserve's indication of maintaining higher interest rates for longer. The session also highlights Singapore's better-than-expected GDP numbers and the market's reaction to them. The conversation shifts to Asian markets, with an emphasis on Japan, Korea, and Australia's market performance and the impact of dollar strength and Fed meeting minutes on them. The segment ends with a discussion on Nvidia's financial results and its influence on the market.

05:03

🌏 Global Market Analysis and Investment Insights

This paragraph delves into the investment landscape, focusing on the performance of various Asian markets and the impact of capital flows, particularly the shift of investments towards China. It discusses the potential reasons behind the market pullback in Japan and the fundamental underpinnings that suggest further upside potential. The potential risk of the Japanese yen strengthening due to the Fed's policy is also highlighted. The conversation includes insights on South Korea's market reforms, the short selling ban, and the broader implications of corporate governance improvements in Asia. The segment concludes with an analysis of Indonesia's market status and the potential for a market snapback.

10:04

🤔 Contrarian Views on Market Trends and Geopolitical Impact

The script presents a contrarian view on the market, suggesting that Indonesia is oversold and discussing the macroeconomic changes affecting the markets. It covers the impact of higher rates, currency fluctuations, and geopolitical risks on market performance. The conversation then shifts to China's market performance and policy developments aimed at addressing property overhang and improving corporate governance. The potential impact of the U.S. election on trade policies and tariffs, particularly regarding China, is also explored, along with the broader implications for Asian equity markets.

15:07

💼 Corporate Developments and Market Strategies

This paragraph discusses BHP's efforts to convince Anglo of its takeover proposal, the challenges faced by SingTel, particularly with its Optus brand in Australia, and the company's plans for recovery. It also covers the broader macroeconomic pressures faced by companies, such as the strong Singapore dollar and high interest rates. The segment ends with an optimistic outlook from SingTel's CFO on the company's future growth and transformation.

20:09

💹 Japan's Economic Outlook and Hedge Fund Strategies

The script features insights from Wendy Chen, CEO of Sigmoid Capital, who discusses Japan's economic turnaround and the potential for further growth in Japanese equities. She highlights wage increases, price inflation, and corporate governance reforms as factors contributing to Japan's positive outlook. The conversation also touches on the potential for Chinese domestic brands to become global leaders and the challenges of overcapacity in China's manufacturing sector. Lastly, it addresses the changing landscape for hedge funds and the need for demonstrating alpha generation and strong risk management.

25:10

📉 Market Reactions to Tech Earnings and Central Bank Policies

The paragraph begins with a discussion on the market's mixed reactions to Nvidia's earnings report and the broader implications for tech-heavy markets. It then moves on to the Bank of Korea's decision to keep its key rate steady and the potential implications for the economy and the won. The conversation includes analysis on the impact of the Fed's hawkish stance on other central banks and the likelihood of a 'higher for longer' interest rate environment. The segment concludes with a look at the broader market outlook, considering the mixed signals from economic data and corporate earnings.

Keywords

💡markets

Markets refer to the various financial markets where securities are traded, such as stock exchanges. In the video, the start of market trading sessions in different regions like Japan, Korea, and Australia is discussed, highlighting the anticipation and reaction to economic data and corporate earnings reports.

💡Nvidia

Nvidia is a prominent technology company known for its graphics processing units (GPUs) and contributions to artificial intelligence (AI). The video discusses Nvidia's strong financial performance and its role as a proxy for the AI boom, with significant attention to its recent earnings and stock movements.

💡GDP

Gross Domestic Product (GDP) measures a country's economic output and growth. The video references Singapore's GDP numbers, indicating an increase that exceeded expectations, and discusses the implications for economic forecasts and market reactions.

💡Fed minutes

Fed minutes refer to the detailed notes from the Federal Reserve's meetings, which provide insights into the central bank's economic outlook and policy decisions. In the video, the minutes suggest a 'higher for longer' interest rate environment, affecting market sentiment and financial conditions.

💡central banks

Central banks are national institutions responsible for monetary policy, such as setting interest rates. The video discusses actions by central banks in various countries, including the Fed, Bank of Korea, and New Zealand's central bank, and their impact on financial markets and economies.

💡AI

Artificial Intelligence (AI) refers to the simulation of human intelligence processes by machines, particularly computer systems. Nvidia's role in the AI sector is emphasized, with its technology driving significant demand and market momentum.

💡earnings

Earnings refer to a company's profits over a specific period, often reported quarterly. The video discusses earnings reports from companies like Nvidia and their impact on stock prices and investor sentiment, highlighting better-than-expected financial results.

💡semiconductors

Semiconductors are essential components in electronic devices, crucial for modern technology. The video highlights the strong performance of semiconductor companies, particularly in the context of Nvidia's influence and the broader tech market.

💡corporate reform

Corporate reform involves changes in company policies and practices to improve efficiency, governance, and shareholder value. The video discusses corporate reform trends in regions like Japan and Korea, emphasizing their potential to enhance market performance and investor confidence.

💡inflation

Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. The video touches on inflationary pressures in different economies and the responses of central banks, such as maintaining higher interest rates to manage inflation.

Highlights

Market excitement ahead of the start of trading, with a focus on positive video numbers.

Strong relief in parts of the market, particularly among bulls, due to better-than-expected numbers.

Focus on central banks' commentary and economic indicators influencing market trends.

Singapore's GDP growth estimate for 2024 maintained between 1% and 3%, with first-quarter GDP rising 2.7%.

Mixed market openings in Japan, Korea, and Australia, with some upside despite dollar strength.

Nvidia's impressive numbers and forecasted second-quarter revenue beating estimates significantly.

Nvidia announcing a ten-for-one stock split and boosting its quarterly dividend by 150%.

Positive read-across effects for Taiwan Semiconductor and other tech stocks due to Nvidia's performance.

Utilities emerging as the second-best performing sector in Asia this year, linked to AI energy demands.

Japan's market pullback seen as a 'pause that refreshes,' with strong fundamentals and earnings growth expected.

Concerns about the Japanese yen as a potential risk factor due to Fed's higher-for-longer stance.

Korea's market reforms and potential changes to short selling bans being closely monitored.

Indonesia's market seen as oversold, with strong fundamentals in the banking sector supporting potential recovery.

Impacts of the upcoming U.S. election on Asian markets, particularly in relation to tech sector policies.

Live Nation facing antitrust investigations, potentially leading to a breakup of the business.

Disney selling its minority stake in Tata Play to focus on merging its Indian unit with Mukesh Ambani's media arm.

Bank of Korea keeping its key rate steady at 3.5%, with upgraded GDP forecast for 2024.

Continued emphasis on higher-for-longer rates by central banks, impacting global financial conditions.

Japan's significant potential for further equity market gains due to sustainable economic and corporate reforms.

Concerns about overcapacity in China's manufacturing sector leading to potential downsizing.

Shift in hedge fund strategies in Asia towards more alpha generation amid challenging market conditions.

Transcripts

This is DAYBREAK. Counting down to it.

We are both counting down to the start of markets coming online.

Well, I think we're all just a bit excited, maybe because of those video

numbers that's really front and center. And it's been a big sigh of relief for

big parts of this market. Certainly when it comes to the bulls

really being validated by another huge set of numbers there.

So I suspect that's sort of one of the things that you'll be watching for in

today's session. Yeah, absolutely.

As you said, we're very excited about those and immediate results down after

the bell today. Again, managing to blow past

expectations and against the backdrop of all this commentary around central banks

and and economies that you're tracking as well.

Yeah, and that's really the thing with this out of the way, we kind of go back

to back to basics, the bread and butter, which is again focusing on what these

global central banks are saying. The Fed minutes kind of bringing some of

the air out of the recent rally that we've seen in the US higher for longer.

That has really been the narrative that we've heard from other central banks

there as well. New Zealand yesterday, we're getting

Bank of Korea later on today. Take a look at some of the data that

we're just crossing at Bloomberg at the moment.

When it comes to Singapore, GDP numbers that 2024 growth estimate has been

maintained between one and 3%, final first quarter GDP rising 2.7%.

That's a little bit hotter than expectations of two and a half percent.

The final first quarter GDP on a quarter on quarter basis seeing a rise of a 10th

of 1%. The estimate was actually for a small

degree of weakness that a contraction of 3/10 of 1%.

So a little bit of better than expected numbers out of Singapore as we get the

cash trading session underway Bill. Yeah, that's right.

We've got markets just coming online this morning as well for Japan, Korea

and Australia. But let's take a look at how Japan and

Korea are coming under way this morning. It's a little bit mix so far what we're

seeing in the numbers. But broadly, we do have some upside

coming through. It is really a few different themes that

we're tracking here this morning. You've got a bit of dollar strength

coming through which could be impacting Asian equities.

You've got those Fed meeting minutes as well where we're getting that emphasis

on the Fed saying higher for longer, but very much in the session today.

It's that focus on Nvidia. And we had those numbers as we said

after the bell in the session today. Chip giant saying that second quarter

revenue is going to be about $28 billion.

That's beating estimates, of course, and the company as well announcing a ten for

one stock split and boosting its quarterly dividend by 150% to $0.10 a

share. But let's change on just take a look at

some of those and video related supplies this morning.

And again, some of those not trading just yet.

Actually, Aventis and I bottom you would say at this point, that's probably

because the beta spread is not matching just yet, which tells us that we're

going to see a pop for those companies in particular when they do finally come

online. But you do see Samsung is behind other

major supplies moving to the upside so far, Heidi.

Yeah, Well, let's get some more market insights with Tim, though.

He's a co-head of Asia macro research is is the chief Asia-Pacific equity

strategist at Goldman Sachs. Tim, great to have you with us.

And let's get it out of the way.

Let's talk about in video, but this is kind of been the dominant theme, the

driving force across so much of the momentum trade.

What do you rate is being I guess, the pass through here in Asia.

So. Well, first of all, thank you very much

for having me on again, Heidi. So, yeah.

Yes, very, very, very strong numbers. Some clear, obvious read across is, I

mean, number one, Taiwan Semiconductor, ADR last night was up a couple of

percent in the US. It just makes all of the various chips.

So that's obviously something where there's an obvious read across.

I would note that that particular stock is the largest component of the MSCI

Taiwan Index. It's about it's over 40% of the index.

And so that's part of the reason why Taiwan is the number one performing

market in Asia this year, up about 19%. So there's a very clear across there as

number one. Number two, in addition to tech hardware

and communications services, which is which has a lot of tech component in it.

Utilities are the second best performing sector in Asia this year.

And there's a growing theme that another way to play AI is through the power and

energy component there, the linkage being that that the data servers require

tremendous amounts of energy. And so there's this there's a secondary

spillover effect from the air into that into that utility sector.

So that's a that's a second area. And the third one, we just note we have

baskets on various parts of the spectrum, both hardware, semiconductors

and those continue to do well. And that's one of the areas we've been

recommending in our strategy, Mark, for some time now.

So those would be the three linkages that I would highlight.

Yeah. And obviously some of those names play

very well into the fact that you could do constructive on Japan, on Korea as

well for Japan in particular, this sort of pause that we've seen in the

exuberance. Do you see that as because investors are

putting flows back into markets like China and really.

Assessing what some of the other opportunities are.

We've kind of seen the flows out of India as well.

Yeah, that's definitely been a theme which has come up in a number of my

conversations. I was in the U.S.

just recently seeing investors there, and that's a topic of conversation which

has come up quite frequently. So as China has rallied strongly and

it's up about 30% off the January 22nd low, that's attracted some attention.

And there has been some diversion of flows from Japan and India, as you

mentioned, to to China. Oh, hasten to add that that that we need

to think about things in a broader context.

It's not as though we're operating in a closed circle where the only money

that's available to go to China, for example, has to come from China, from

either Japan or from or from India. There are other pools of capital as

well. So I would just make that point.

But at the margin, I think there has been some diversion of attention and

flows from those two markets into China. For Japan specifically, we would regard

the pullback that we've seen as, I guess you could call it, the pause that

refreshes. In other words, the market has done

very, very well in the first quarter. We've had what we consider to be a

healthy pullback and seems like a stabilized is beginning to regain some

traction. And I think there's fundamental

underpinnings there in that. Valuations have come back to slightly

below 15 times earnings. We think earnings will grow comfortably

above 10% this year and sort of mid-to perhaps high single digits next year.

So just from a pure multiple to earnings growth perspective, Japan certainly

looks reasonable and that means you're really getting the bottom up corporate

reform story, which we're very much in favor of.

You really getting that without paying too much for it.

So we still think there is further upside momentum or potential in Japan

after the market takes its pause. The one thing I would add there,

however, is that if there's one risk or an Achilles heel, so to speak, in the

story, it would be the Japanese yen. And I think it cycles back to the Fed

and whether there's concerns about the Fed staying higher for longer, not our

view. We think the Fed will start to ease in

July or perhaps a little bit later. But we think there are two easings

coming this year. But if that's not true and the center

stay higher for longer, then this suggests the dollar could stay also

stronger. And that poses some upside risk to the

Japanese yen. And that could be some could become

somewhat dysfunctional for the Japanese equity market stories.

That's the one thing I would point out in the overall positive investment case

that we need to continue to monitor. And Tim, where else?

We've seen market reforms coming through his career, of course.

And you've been bullish on that market for quite a period now.

We do see Korea, though, carrying out other reform policies or looking at ways

that they can mature their market there. And one of those,

I guess, mooted policies really comes down to their short selling ban.

Do you have any views on that policy? What are your expectations around?

Do you see them keeping it in place beyond June?

If so? Well, it's a good question.

Don't I don't have a specific answer as far as when they might be lifted, but I

haven't indications that they do intend to lift it in due course.

So I think the direction of travel is is going to be in the right direction with

all the timing of it, as far as I'm aware, is still somewhat uncertain.

But I think that I just like to go up sort of one level there from that

specific instance to the broader topic of overall reform.

And here's where we think the market is being perhaps overly negative or

petulant about not giving enough credit for, again, the direction of travel that

Korea is taking in terms of corporate reform and just broader improvement,

corporate governance and shareholder returns.

And we've really gone from basically no official program to two one.

So that's a positive change. The market was concerned that there

wasn't enough specificity. And also with the outcome of the

election and there being a split government, that the chances of a change

to inheritance tax law has come down significantly.

You know, that's true. But it's also important to note that the

opposition is also in favor of of of reform.

They are very much, as are progressives and liberals and therefore on the side

of the smaller shareholder. And so there's a desire to change

corporate law somewhat and to engender more shareholder protection.

So the point I'm making here is that there's actually a very strong direction

of travel in terms of positive reform to corporate governance and shareholder

returns. And that is something which you're not

paying for in the market at one point, one times price to book, especially when

earnings are recovering the strongest in the region this year.

We and consensus of revised up numbers from 60% this year.

We're at 70%. Consensus at 80%.

So you've got very, very strong improvement in corporate earnings, which

ought to be coming through in the first quarter.

You've got an exposure theme on top of that.

And then on top of that, you've got the corporate reform stories.

We think that all that at card valuations and with an entry point of

roughly 1360 on the US dollar clearance rate.

We think all that is a pretty compelling investment case to the positive side.

I'm just taking a look at your notes now, Tim, and I'm saying your contrarian

view is that Indonesia is oversold. Can you can you shed some light on that

one? Yeah, absolutely.

So I guess the way to describe it is maybe two or three key points.

One, there have been a whole series of macro changes which have taken place

really starting in in March and April in terms of higher for longer rates, both

in the short and long end, stronger dollar increase in commodity prices,

increasing geopolitical risk, and then also an increase in growth expectations

for the US and for China. So we've done some macro modeling to put

all those together and to see how markets might trade them, and then we

could see what would actually happen in terms of price performance and see where

markets have either over under traded their fundamentals.

On the positive side, China has done better than you would have thought.

I think that's a function of starting conditions, low prices as well as the

positive moves from a policy perspective on property in Indonesia's case.

Indonesia is significantly under traded, it's under trade and the macro changes

to the greatest extent. And we think that's really two things.

One, there's some pressure that's come onto the Indonesian rupiah and there was

a precautionary reactionary increase in rates by Bank Indonesia, which are

economists were expecting but was surprise to the market.

And I think that's been something where the uncertainty of the currency has had

some weighing effect on the equity market.

The second thing is kind of more technical, where banks in Indonesia

account at least for the MSCI index that we follow account for 62% of the market

capitalization. And there was some selling in the banks

because of shareholder crowdedness. And we're very popular trade and with

results coming in. Okay, but not perhaps fantastic.

There were some selling pressure on them.

We've actually just gone our banks and lost a trip in Indonesia just last week

and we're confident in the fundamentals. That's still our favorite banking

sector. So we think the market has been oversold

there and we think it could be a snapback as we go through the next

several months. It came with the sort of slightly better

performance and maybe kind of at least the poor sentiment being bottomed out

for China. Are you seeing a correlation with other

EMS or is that more of a dollar strength story?

That's probably more of a dollar strength story.

I think that there's really some more China specific positives that were

taking place. And we just wrote about this earlier

this week and raised our forecast for the MSCI China Index from 60 to 70.

And that's a function of slightly better earnings and kind of going through time,

but also a recovery in the multiple from very oversold levels to somewhat more

normalized ones and potential perhaps for some further multiple recovery if

policy continues to come through. And I think this is well known now

there's really two main policy threads or developments which which people

should be aware of. Number one, of course, is the move to

address the property overhang from a supply side inventory adjustment

perspective. And the second one is with respect to

the so-called nine measures in the A-SHARE index, which has to do with

improving corporate governance. And that cycles back to our early

conversation on Japan and Korea, where there's a burgeoning theme across the

region now of improving corporate corporate performance and shareholder

returns. So China's that is the latest addition

to that overall narrative. Tim, how you thinking about the upcoming

U.S. election and the impact that any sort of

policy shifts or or changes could have on those trends that you've been

discussing and thinking about, particularly with related relationship

to the to the tech sector? So there's a couple of things we can say

about about this. And our markets analysts and strategists

have been opining on this specifically. I think it's fair to say that if

President Biden succeeds, that that's more of a known quantity as sort of a

continuation of current of current events.

If candidate Trump comes in, then it's obviously less well known, policies

would be less, would be less clear. One thing which has of course, been very

much top of mind, is the the threat of much higher tariff imposition across the

board if if Trump was elected. And that is something that would clearly

have a greater impact on on China in particular, the recent increase in

tariffs, which is taking place is something which won't have that much of

an impact on the economic fundamentals, because the affect only about 4% of

China's imports in the United States. If you broaden that out to a much wider

group of of the imports with a much higher rate of tariffs, then obviously

there'd be greater fundamental consequences.

So I think that that's that's one one angle and one lens to look at things

through. The second one is that our our market

strategists think that if if Trump is elected, they'll probably be more

positive for the U.S. dollar.

And I think that would have a broadly challenging flow through effect to Asia,

because there's a very clear and longstanding inverse correlation between

the US dollar and Asian equity market performance, and it's statistically

relevant in the short in the short term. So if the dollar remains strong, then

that's something which would be more of a headwind for Asian markets.

So there's a lot to unpack there. And of course, then there's also the

issue of whether either in the election or after it, there would be heightened

tension from the geopolitical standpoint.

So I think there are a number of different

avenues through which the election may flow through into Asian equity market

performance. And that clearly something we need to

continue to monitor carefully in the second half.

Tim, always great to chat with you too. Mirko, Head of research at Asia in Asia

and in Chief, Asia Pacific Regional Equity strategist at Goldman Sachs.

One of the stocks that we're watching, which is what about 50 minutes into the

start of cash trading here in Sydney, BHP is front and center.

We're seeing some declines of about 2.7% there.

This as we saw really Angler opening up talks again with BHP after rejecting

that $49 billion offer of increased that offer from BHP but still wants a more

complicated structure there. We have seen English as trading below

the value of that offer, but we are getting sort of

the extension of that deadline as well mid-week or London time 5 p.m.

had been that deadline, but BHP now has an additional week to try and convince

Anglo that its South African plan to work.

They are getting closer, we hear when it comes to the price, but the structure

remains the main sticking point with Anglo wanting BHP to cover the costs of

a deal in South Africa. So that extra week will be key as to

whether this $49 billion takeover plan will get over the line.

That intractable obstacle about what to do when it comes to South Africa will be

front and centre over the next few days. Valuation is now closer is what we hear.

So that's one we're watching. We can get a roundup of stories you need

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This is Bloomberg.

Let's take a look at some key Korean assets ahead of the Bank of Korea

decision. We are expecting

really a potential upgrade when it comes to the economic outlook from the Bank of

Korea. But today, of course, front and center

will be the focus when it comes to related stocks.

Of course, we are seeing quite a bit of reaction there given the very strong

forecast from Nvidia. More broadly, though, we're seeing

weakness across the cost be a bit of a move when it comes to the one as well

ahead of the break. But let's get some more from our career

economist at Bloomberg Hong Kong who joins us in Seoul.

And it was on the Nikkei expected to keep rates steady upward.

They've revised its growth forecast. So it's sort of this steady drumbeat of

a number of these central banks having to recalibrate the trajectory of this

next part of the monetary policy path. So yeah, we saw the surprising rapid

growth in the first quarter. And this is this might implies that the

economy is more resilient than anticipated to restructure monetary

policy to be okay. But at the same time we need to consider

that a greater contribution came from the external side, driven by the growing

demand for air related ships and also along the domestic demand side.

One of factors will import. And so this suggests that inflationary

pressure from domestic demand will remain largely unchanged, so that it

would not change the monetary policy strategy dramatically.

But I think at this point what is more important is the uncertainty of the US

monetary policy. It is associated with

the delays in the timing of Fed, but also with the pace of future rate cuts.

So US military policy is a key factor that determines the global financial

conditions. So PAC needs to recalibrate its monetary

policy to changes in the US monetary policy stance.

So previously I thought that the okay Mike could give a clearer forward

guidance at today's meeting on future monetary policy easing.

But at this point I think the chances are very low.

It is more likely that the PLC will reiterate the importance of data and

importance of more evidence to have more confidence.

And it will also probably lead to emphasize the importance of data

dependence in conducting monetary policy.

And today, of course, what else is a bit of a wildcard?

Is this two new board members that are going to be taking part in the decision.

So is that going to influence the thinking around monetary policy at all?

I think it's very hard to tell because we don't have much information about the

preference of new members, but I think generally it's a new member joining stop

of a passport, taking this more time, a long time to get accustomed to it,

monetary policy decision process, and also get accustomed to all the

indicators that poor steps provide. So it is more likely that the new

members will follow the leadership of the governor for some time.

So my view is that the leadership of Governor V will become

more influential from today's meeting. That was our career, economists say.

Here are some quan insoles. Thanks so much for your time.

We'll have more ahead on DAYBREAK Asia. This is Bloomberg.

Taking a look at how IBD is faring in after hours.

And we're still holding around that 6% jump.

They're really coming down to the earnings, of course, we had have had at

after the bell today. Strong sales out, strong sales, rather

very bullish outlook. We had a stock split as well to some of

the key headlines that came across. And and here on on the other side of the

screen, you're seeing those big supplies into in video.

And likewise, you do have those mostly moving higher today.

But let's get more on Nvidia's numbers and bring in our executive editor for

Asia Technology. That's Peter Elster in Tokyo.

And Peter, as we knew, I mean, it's been the focus for for a long time now.

This countdown to the numbers, the bar was set so high, but once again in video

seems able to jump over it. Yeah, that's exactly right.

I mean, video has become a proxy for the AI boom at this point.

And it's worth emphasizing the point you made that expectations were very, very,

very high for this company. The stock more than tripled last year.

It's up already 90% this year. It's market valuation.

Before this report was at $2.3 trillion. Number three, in the in the world behind

only Apple and Microsoft and yet in video came out and really beat those

expectations handily. It also gave a forecast for the current

quarter that was far above what analysts had been expecting.

So as you pointed out, in late trading, shares are up pretty handily on top of

that. So it's a very, very strong financial

performance. I'd say the one note of caution is that

the company said that it gets about 40% of its sales from only four companies,

Amazon Motor, Microsoft and Google or Alphabet, actually.

And that concentration is a bit of a concern because that's driving so much

of this revenue growth right now. And the question and the point they made

in their conference calls that they want to diversify, that they want to have a

broader spectrum of customers so that the demand that they're seeing is more

sustainable. But

there's also some concern that maybe there'll be a little bit of sort of

overlap between the better product offerings that they've been sort of

teasing and whether that might cannibalize some of what they have

already. Yeah, that's a very good point.

We have not watched the progression of semiconductors this closely, probably

since Intel was leading the PC boom a couple of decades ago.

Now within video, they have there are 100 accelerators that have been very,

very popular, and yet they're talking about the next generation of chips.

So the question was whether that was going to slow down, demand a little bit

as people waited for the new chips. It looks like it's not happening at this

point. I think the existing is 100 chips.

The cutting edge chips that they've got are in such strong supply that customers

are scooping those up as quickly as they can get them and they'll buy them the

next generation when they get the opportunity.

Always active editor for Asia Technology, Peter Ostrom there on video.

More ahead on DAYBREAK. Asia, This is Bloomberg.

You're watching DAYBREAK. Asia.

Just taking a look at some eco data that has just crossed the terminal was

actually got P.I. numbers coming out.

PMI data, rather, coming out from Japan and and taking a look at those results

here. We've actually just had the the

manufacturing rating expanding above that 50 line for the first time since

May of 2023. This is, of course, the private survey

that comes through from Japan Bank. But we are just tracking that.

As I said, the manufacturing PMI coming in at 50.5.

These are the preliminary numbers that are coming out for May.

So the first time we've seen that above 50 in a year.

Other readings as well. Note we've got services here, a slight

deterioration from the month prior, but still again above that 50 mark, 53.6 it

was 54.3 in the month prior. And then also the composite rating is

pretty much steady at 52.4 here. But that focus, as we say, very much on

the services, PMI or manufacturing, rather, above 50 for the first time

since May of last year Heidi. Let's take a look at how we're seeing in

terms of how markets are tracking at the moment.

And it has been sort of a mixed session, but it was a mixed session overnight as

well. So the pass through when it comes to

those outstanding and video numbers, not immediately clear other than, of course,

when you take a look at the tech heavy markets, the Nikkei 2 to 5 up by 6/10 of

a percent. Even some of the moves that we've seen

across the and chip related names in Korea not quite managing to get the

broader cost up. It's a little bit softer there as well.

We are seeing us features a little bit higher here in Sydney.

We're seeing declines of 9/10 of 1%. Some of the big rallies we've seen

across the copper price, for example, starting to pull back a little bit, oil

also a little bit softer. We're also seeing big declines in the

big heavyweight of BHP as well as we get that extended deadline for reaching a

potential deal to get the takeover deal with Anglo over the line over the next

week. Kiwi stock's up flat at the moment after

we saw of course the Rbnz's hawkish hold, well Singapore's largest telco,

SingTel has reported full year operating revenue that Mr.

estimates the company had already flagged exceptional non-cash impairment

provisions for the second half of 3.1 billion SGD.

Joining us now is the CFO, Arthur Lang. Also really great to have you with us

and give us your impression in terms of on the balance of things, how you view

these numbers, how much of these pressures are going to be ongoing, do

you think? Hi, everyone.

Well, as Heidi, you mentioned, we've announced the impairments a few weeks

ago. So I think it's really a lot of, you

know, kind of fixing our business in the last three years, transforming it and

then looking forward. And I think if we look forward, I think

we're very optimistic about our prospects because all the hot will, all

the transformation have been done. You know, with fixed cost, we simplified

the structures, we got rid of loss making businesses.

That's why our revenues actually decreased because we we sold off some

businesses that was a contributor to revenues but did not contribute to

profits. So looking forward, I think you've seen

with significantly increase our dividends because it's a strong message

that we are optimistic about the next next kind of level for our business.

You know, the last three years we really had not transformed it and now we're

focusing on growth. I wanted to sort of get some commentary

when it comes to, I guess, the broader macro environment.

What sort of pressures are you seeing within Singapore and also with some of

the other markets that you have assets in?

Sure. I think the biggest pressure, Heidi, is

really the strong Singapore dollar relative to many of our other

businesses, because we have about over 70 plus

percent of our businesses that come from outside of Singapore.

And with the Singapore strong Singapore dollar, we've actually inclined, you

know, for the last few years effects losses because of our left, you know,

businesses in India, Indonesia, Australia and many other places.

So that's the I wouldn't say one big issue.

The second one is interest rates. Interest rates continue to be high.

But the good thing is that, you know, with our capital recycling program, you

know, we've sold about $8 billion of assets.

We actually pay down debt in an environment where the last three years

interest rates actually triple. We actually saw a decrease in interest

expense. So.

So I would say more macro type of risk. Of course, our own internal you know,

internally we are also watching, you know, a lot of our own business prices

are that we're seeing the industry, as you know, is facing a significant amount

of challenges. But, you know, we are we are fairly

optimistic about the future because the last three years, I think we've really,

you know, kind of come out with a leaner cost structure and and really kind of,

you know, set the business for the future

where I think a lot of investors are really interested to know more about is

your plans for Optus, in particular the telco giant in Australia.

The brand is clearly tarnished after outages and we've had CEO changes that

are being announced. What are your plans for this part of the

business? Annabel Great question.

It's something we're just taking the bull by the horns.

I think we need to really win back customers trust.

You know, we have two incidents in the past that happened to Optus.

First, it was the cyber outage, which was, I think almost two years ago and

then last year or rather the cyber incident and then last year was the

outage. So we we have to do better.

Right. And what we need to do is to really

focus on winning back customers trust, focusing on network resilience, really

making sure that the business actually will serve customers well.

And and you're right. I mean, Optus is a giant in Australia

and we need to do better. From Singtel's perspective, Optus is an

important business for us. We're here for the long term and and we

have to turn this business around. But what are your plans exactly then?

How are you going to win back customers trust and how are you going to do

better, do you think? I think it's a real hot nose approach to

the operations of the business. We need to go back to the basics,

ensuring our network. IT systems are secure, it's resilient.

We need to make sure that we, you know, as I mentioned, win back the customers

trust, ensuring that, you know, people want Optus to win, customers will

support Optus. So it's a very back to basics type of

approach. You know, the capital structure, the

balance sheet is strong. So you're not not no concerns there.

It's really an operational focus, making sure we do not, you know, you know, kind

of go back to the two incidents of the past and really, really look forward to

that. And of course, with, you know, Stephen

Rue, the new CEO coming in in a few months time, we you know, we have I

think he has good plans for Optus and together working with all of us and we

we that's the approach very hard nosed approach and and then we you know, hope

for the best for the future of Optus. And how ambitious is that future?

Because I do wonder if what's happened with Optus has perhaps made more

cautious on overseas expansion, or is that something that you're still looking

at given both Singapore and the Australian markets are maturing?

Oh, we are absolutely ambitious for proof of concept growth in a profitable

way. You know, with with you know, we are

very focused on the digital infrastructure business publicly in data

centres. So, you know, we have I mean, you've

seen the announcements we have drawn in Cairns upon of our data centre business

and we intend to grow that quite significantly with the capital

partnership that we have with KKR, with focus on Thailand, across Southeast

Asia, Indonesia and many places on digital infrastructure in Australia is

really IT services. So you'll see on our services and see

us, I think about 18, two years ago we actually made some significant

acquisitions in Australia on I.T. services.

So so while you're right, I think we need to strike a balance between the

developed markets and the emerging markets, but Australia is still a very

important market for us. We do see potential of course,

macroeconomic, just like any other country in the world today, is facing

challenges. But you know, we are known to please and

we do believe in Australia and and we're putting more capital to work in

Australia. We have to execute, right?

That's a critical part. Great to have you with us today.

As a loan, who's a group CFO at Syntel. You can watch us later and catch up on

some of those past conversations on narrative TV function That's at TV go.

You can also dive into any of the securities at the Bloomberg functions we

talk about. You can join the conversation as well.

Send us messages during our shows. This is for Bloomberg subscribers only

to check it out. It's at TV.

Go. This is Bloomberg.

The Sun Investment Conference returns to Hong Kong on Thursday.

The most of last year's bullish pitches are doing well.

Japan is set to take centre stage a year after it joined India in capturing

international investors, shifting away from China along coal and a Tokyo based

disco. But Haidi Lun capital management trumped

other pitches in a year when AI and energy transition were, of course, the

other buzzwords. The stock has more than tripled since

last year's conference. And let's actually speak with one of the

main people that will be headlining the event here.

This is Wendy Chen. She's founder and CEO Sigmoid Capital,

an equity fund seeking to identify transformational businesses in Asia.

And Wendy, I'm not going to ask you to pick because I know that those are a bit

of a secret, but I do want to start off a bit bigger picture.

As we said, Japan is really going to be center stage perhaps again this year.

You've called Japan perhaps the most underappreciated turnaround story for

global equities. Does that mean that you see further

upside in the rally from here? Yes, we do.

So we do think that Japan is probably the most under story in the global

equities. This year, Japan has just exited

deflation for the first time. There is a healthy amount of wage

increase, about 5% a year, and also some moderate amount of price inflation.

Now, this positive cycle of wage increase and price inflation leads us to

project a nominal GDP growth rate of 2 to 2.5% for Japan for next two years,

which is very good. On top of that, we also see corporate

governance reform in Japan so that Japanese corporations used to have very

low values. Back in 2013, it was about 4%.

Now and then it has increased to about 9% as of last year.

We project that through share buybacks and cross shareholdings sales.

This hour you can increase to 12% by the end of 2025.

Now, just sustain all the increase can lead to a rerating of Japanese equities

in our view. A lot of investors had really been

optimistic about Japan and we have seen big inflows into the market and we have

seen a big rise in stocks as well. If you're saying it's the most

underappreciated opportunity, does that mean you're seeing a significant upside

potential from here, given there's already a lot of investors that are

bullish? We do think there's a lot more upside

from here. We think this regime change in Japan is

actually sustainable this time. I think every ten years or so people

tend to get excited about Japan and it's faded away.

But this time, because of a builders efforts in getting Japan out of

deflation and raising interest rates to the positive territory.

We think that the wage increase and the price inflation is here to stay.

And as well, we think that the rerating is going to continue to happen in Japan,

which will lead to further upside for Japanese equities.

The other thing which is quite intriguing is the idea of Chinese

domestic brands going global, right? It is actually one example that you

make. It's obviously under a lot of pressure

from Western markets in terms of the overcapacity claims.

Do you mean that the dominance of Chinese brands, for example, will be in

in markets that are not in the US and not Europe?

Yeah, Heidi, we do think that if you look at the Chinese domestic consumer

brands such as Eve, ten years from now out of the top ten companies, we

estimate that five of them will be Chinese.

If you look at the product competitive competitiveness, you look at the supply

chain cost advantages. We think that the speed of that

happening would actually be faster than the market

believes. Obviously, there is a lot of tariff

worries that we have to watch out for. But given the cost advantages on more

than 50% compared to a lot of the global players, even with some level of

tariffs, we still think that the price difference and that advantage is due

here to remain. At the same time, though, and I

understand that these two things and perhaps not mutually exclusive, there

are concerns about the overcapacity issue for you.

Yes. So one of the sectors that we're

cautious about is the manufacturing sector in China.

We think that there may be potential overcapacity in the Chinese

manufacturing sectors and there is a path to downsize in the next few years.

For example, China accounts for 18% of the global GDP, and its share of the

global investment is an astonishing 32% of China's GDP to grow at 4 to 5% for

the next decade. China will become 21% of the global GDP

in ten years, and its share of global investment will grow even more to 37%.

This means the rest of the world will have to reduce its own share of

investment by one percentage points to accommodate China.

Can the rest of world absorb such an increase?

While we think US and EU has already voiced the concerns about trade

imbalance with China and US has already launched various measures to move

manufacturing back home. So we think it may be very challenging

for the rest of world to continue to consume more while allow China to

manufacture more. Hence, we think China's manufacturing

capacity may have reached a peak and there may be a need to downsize for the

next few years. And that has very profound implications

for credit growth, consumption and global supply chain.

Can you share some insights into to hedge fund, hedge fund thinking or

strategies in this region as well? Because traditionally there have been

sort of long biased and. And given what we've seen in Chinese

equities in particular have really underperformed of late.

So do you see that that trading strategies are needing to shift as a

result? Yeah, Annabel, I think that's a very

good question. We see that in the past ten years a lot

of the Asia hedge funds have been riding on the positive beta of China, and now

that beta has turned negative for the past three years.

Some of the performances have been challenging in the sector.

We think that given this new world order, volatility

have increased and the next generation hedge fund managers do really need to

show alpha generation on both long and short side.

For example, a sigmoid, we evaluate ourself on alpha generation versus our

benchmark MSCI Asia-Pacific on a quarterly basis, and our goal is to

achieve a larger than five percentage of alpha generation on a consistent basis.

So I think in future it is important for a hedge fund manager to demonstrate

alpha generation and strong risk management.

All right, Wendy, thanks. Enjoy the conference later today as

well. That was Wendy Chen, the founder and CEO

seed Sigmoid Capital. We're going to have more tomorrow with

some of the fund managers joining this year's Hong Kong conference.

Cloud Alpha Capital, Oasis Management will be hearing from both of those

tomorrow on DAYBREAK Asia. And of course, be sure to tune in to

Bloomberg Radio to hear more from the day's big newsmakers and get in-depth

analysis from the DAYBREAK team. They're broadcasting live right now from

our studio in Hong Kong. You can listen via the app Radio Plus or

Bloomberg Radio.com. We'll have more ahead.

Stay with us.

Let's get the latest on the corporate front and some of the headlines that

we're following here. Shares of Live Nation Entertainment are

falling. Let us trading.

Bloomberg revealing that a Justice Department move seeking the breakup of

the business over antitrust violations. Sources telling us that the case is

related to Ticketmaster's unrivaled control of concert ticket sales.

The 2010 merger of Live Nation and Ticketmaster has been subject to several

antitrust investigations. Bloomberg has learned that Disney will

sell its minority stake in a subscription TV broadcaster to India's

Tata Group. Sources say the sale of the almost 30%

stake values Tata play at about $1 billion.

Tata Group will take full control of the unit, allowing Disney to focus on the

merger of its Indian unit with Mukesh Ambani's media arm.

Well, Heidi, we've got some breaking news crossing the terminal here.

Bank of Korea policy decision coming out, keeping its key rate steady here at

3.5%. That was a decision that was predicted

by all 21 economists in our survey here. The be okay standing pen actually for an

11th time. The bank last hiked in January of 2023

and has really kept the rate at a level it sees as restrictive since then

continuing that inflation fight. What we're going to be tracking, of

course, is that press that comes up later.

We want to know more about the bank's growth forecasts and also

the outlook, perhaps currency implications, because we have seen the

the Korean one in particular that trading level adding two reasons for why

the bank is cautious about signaling a policy pivot.

We also have two new board members that are taking part in the decision on

Thursday. So that could also be something that

really factors in perhaps to that presser after.

But this is the outlook here, Heidi. But let's bring in our our

executive editor for MLive, Michael Moore, joining us.

And Mark, what is actually getting a few more headlines here that the bank is

forecasting CPI at a similar level to what it saw back in February, 2.6%.

But they've actually upgraded the the GDP forecast and now seeing it at 2.5%,

2.5% versus that 2.1% projection back in February,

be okay. Really seems a little bit constrained at

this point in time by the actions of the Fed as well.

I think you're absolutely right that they are constrained.

They're constrained on two forces here. First of all, we have the kind of

hawkish minutes of the Fed last night. We have generally dollar bullishness.

We have global yields rising, and that is putting a little bit of pressure on

the Korean one. It is a tightening of financial

conditions. On the flipside, part of the reason that

we're seeing the US growth stay strong, part of the reason we're seeing the Fed

having to tone back on their earlier dovish list is because of the chip

sector, is because the AI boom. And obviously that's a key market in

Korea and that is providing support to the economy there.

That's why it's unsurprising that their growth forecasts are being upgraded.

But it doesn't necessarily mean that even other growth forecasts may be

upgraded, even though they're not sounding overly dovish, it doesn't

necessarily mean that the Korean one will escape the pressure from a

strengthening dollar. And Mark, this is sort of joining really

the chorus and the hymn, if you will, of major central banks talking about saying

higher for longer and in fact, staying higher for longer here.

Is it sort of just waiting for the Fed at this point?

And what are the implications for these markets?

It started out the year with such high hopes that we would see easing

potentially even by this point. Yeah.

Look, I think definitely higher for longer is the case.

We've seen the RBA make that point. This weakness in the RBA and said made

that point this week and even the Fed minutes came out slightly more hawkish

than expected. Now we do know that Jerome Powell

himself has a very different reaction function.

He is determined to try cutting rates, but there's really no justification to

be talking about rate cuts. Financial conditions in the US are

extraordinarily easy. Growth is strong, stock markets are

doing well, labour market is strong. It is absolutely bonkers to be talking

about easing at the moment unless you see some kind of crisis on the horizon,

some kind of hidden crisis. It is not obvious out there and maybe

one will come at some point. But I think it's not just about

unwinding the bets on rate cuts. I think the idea of potential rate hikes

will stay on the radar until we see the growth rollover in the US.

Is the Fed leading? This is every other central bank leaving

this? Yes, the Fed is one of the most

important components, but the fact is inflation around the world is sticky and

that makes sense. We we lost control of inflation a few

years ago due to excess excessive kind of fiscal stimulus, excessive, easy

monetary policy. And when you lose control of inflation,

you don't get re control of it until you severely curb aggregate demand.

That's what economic theory teaches you. That's what economic history teaches

you, And severe curbing of aggregate demand is essentially a recession.

So until we see growth rollover, yes, central banks are not going to cut rates

as aggressively as there are ones talking about six months ago.

And that has been further exacerbated by the extreme kind of rise we're seeing in

commodities right across most of the commodities sector.

Mark, can we just move also to the broader market outlook for today?

Because I'm a bit confused a little bit actually by

invidious numbers and we're seeing that stock around 6% higher in after hours

and there was so much anticipation around it.

We've got US futures that are looking higher, Nasdaq futures pointing to, you

know, move to the upside. But still today in the session, we're

seeing weakness coming through. It does is that perhaps a story around

the Fed meeting minutes? What what's really driving the dynamic

today for Asia trading? Yeah, it's a great question, Annabel,

because I'm actually surprised we're not seeing a little bit more exuberance

given the in video numbers as the big thing we hoped for and they really have

delivered. It shows that I guess expectations were

kind of just so high. We went into those results with U.S.

stocks right by a record high. I think it video has delivered.

I think it encourages the bullish backdrop that we've had all year.

I expect that to continue overall in the next couple of months.

It might be a little bit more volatility from here just because valuations have

got a bit more expensive. But the backdrop stay strong.

Executive editor Mark Cudmore there. And just to recap, the Bank of Korea as

expected, leaving that key right on hold at three and a half percent.

Much more to come. This is Bloomberg.