May 19, 2025 • 18 mins
Asian shares rose for the first time in four days, mirroring gains in the US that placed the S&P 500 index on the brink of a bull market. A regional stock gauge gained 0.5% after the S&P 500 index climbed for a sixth straight day. Shares in Hong Kong advanced 0.3%, with Contemporary Amperex Technology Co. Ltd. jumping 13% in its local debut. Treasuries were steady after whipsawing on Monday with the downgrading of US debt by Moody's Ratings. US equity-index futures edged down while gold dipped 0.1% as haven demand ebbed. We break down the market reaction with Rob Williams, Managing Partner and Chief Investment Strategist at Sage Advisory Services.
Plus - could Hong Kong's status as a global financial hub may be entering a new phase? With major listings like CATL and Hengrui Pharmaceuticals drawing significant foreign inflows, Bloomberg Opinion columnist Shuli Ren joins to discuss how the city is offering Chinese firms a path to global capital while sidestepping geopolitical flashpoints.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Bloomberg
Daybreak Asia Podcast. I'm Doug Chrisner. In a moment, we'll
look at one jurisdiction that may be benefiting from US
China trade tensions. We'll be speaking with Bloomberg opinion columnist
(00:22):
Shuley Wrenn on that. First, the churn of the US
equity market in the last session. That was after Moody's
Ratings downgraded the credit rating of the US late on Friday. Now,
a number of market strategists called this a non event,
since both S and P Global and Fitch made similar
adjustments years ago. We heard earlier from Jim Milstein. He
(00:43):
is the co chair at Guggenheim Securities. He told us
Washington could be headed for a quote fiscal disaster if
a recession were to hit.
Speaker 2 (00:52):
You know, in the last five or six recessions, the
budget deficit actually blows out because tax revenues go down
and spending increases, so called automatic stabilizers. So what today
is six point four percent of GDP as a deficit
two point four trillion dollar deficit could easily expand to
four trillion dollars.
Speaker 1 (01:13):
That is Jim Milstein, Co chair of Guggenheim Securities. Now.
At the same time, today, Moody's cut its ratings for
deposits at some of the big banks. That would include
Bank of America, JP, Morgan Chase, and Wells Fargo. Not surprisingly,
we had weakness in a couple of the bank stocks today,
but a number of strategists said any pullback in the
equity market could be a buying opportunity. So at today's low,
(01:36):
the S and P was down one percent, and indeed
the dip buyer seemed to emerge. The S and P
end of the day higher by a tenth at one percent.
Joining me now for a closer look at markets is
Rob Williams. He is managing partner also the chief investment
strategist at Sage Advisory Services. Rob is on the line
from Austin, Texas. Rob, good of you to join us.
(01:58):
What did you make of today's price section?
Speaker 3 (02:01):
You know, just a lot of what we've seen, you know,
the ebb and flow of pessimism and optimism. You know,
the markets, you know have largely kind of decided to
call a little redo for the year. Once we had
a little de escalation in the China trade situation. You know,
recession odds have you know, fallen back. Markets have recovered,
but yet, you know, I think a lot of people
(02:23):
know we're still probably a little worse off than when
we began the year. So it warrants a lot of caution.
Speaker 1 (02:29):
I think, are you troubled at all by the Moody's
downgrade or is that really something that's already been discounted
by the market, given the fact that S and P
Global and Fitch have already in prior years made similar moves. Yeah,
I think.
Speaker 3 (02:43):
I mean it was largely you know, it's the third one,
you know, like you said, so it was largely baked in,
you know, a little bit, you know. So I don't
think it's going to have It's not a good thing
for the medium term. We all know we're gonna have
to continue to live running very high deficits relative to GDP,
which it is not a great thing.
Speaker 1 (03:01):
I think it's.
Speaker 3 (03:02):
Medium term, it doesn't change our rate outlook. I think
near term it does just put some you know, near
term pressure and maybe some steepness to the curve. But
I think medium term rates we still think rates go
down and the FED gets active later in the year,
you know, on economic weakness.
Speaker 1 (03:19):
It's very interesting. Today the head of Switzerland Central Bank
gave a vote of confidence to the US bond market,
saying there is simply no alternative to them. Does he
have a point?
Speaker 3 (03:31):
Yeah, I mean, look, we're still the reserve currency, We're
still the largest bond market, We're still the safe haven.
Speaker 2 (03:36):
I know.
Speaker 3 (03:37):
But like I said, things are rockier here. I think
people also realize we're not in vulnerable recession. Odds are
still significant. Trade is going to be a drag on
GDP for sure, job cuts will, the volatility in policy
decisions has increased. So I think, you know, I think
(03:58):
it's a the bare case for the dollar is on
for the medium term. But I think rates it's a
different story. I think I think they won't continue to
rise because I think, you know, some of the soft
sentiment data will start bleeding through to the hard data,
and the FED will have some latitude, you know, later
in the year to start easing.
Speaker 1 (04:17):
So I hear that when it comes to the growth story.
But what about inflation, Because today Jamie Diamond, the head
of a JP Morgan Chase, was saying the chances of
elevated inflation and even stagflation are greater than people think.
I'm wondering what he sees that maybe the market doesn't
see at this point.
Speaker 3 (04:34):
I mean, I think he sees what the FED is
worried about and why they're trying to be patient in
a difficult situation. Is you know, there's going to be
some impact on the good side of inflation. It won't
be like COVID and the supply chains break down, but
goods inflation is going to go up, right. The hope
is that or not, Maybe not the hope, but at
least weaker economic activity is going to lower the service
(04:57):
sector inflation. That's been the sticky part, and I think
sentiments getting bad guidance is hard to put out there.
I think the service sector weakness offset some of that
goods inflation in it and that goods inflation is somewhat temporary,
at least that's the Fed's view. But temporary still means
some ugly numbers, you know, in the future, at least
(05:17):
some ones that look more inflationary, and I think that's
what he's referencing.
Speaker 1 (05:21):
We heard from the head of the Atlanta FED today,
Raphael Bostik, and he was saying that his expectation is
that the FED will deliver one rate cut this year.
The market right now, I think is leaning toward maybe
two twenty five bases point rate cuts. Where are you
right now in forecasting the Fed's move between now and
the end of the year.
Speaker 3 (05:41):
Well, it's interesting, We've been probably two since the beginning
of the year, even when the market got all you know,
frothy over you know, you know, recession and more cuts.
You know, it's kind of come back the other way.
It's easy to get paralyzed short term volatility. But I
think they're going to go for one or two later
(06:01):
in the year as some of the data weaknesses right,
you know, we're going to have drag from terrorists, we
have job weakness. There's going to be some negative feedback
that we haven't felt yet on the data.
Speaker 1 (06:12):
So if you believe directionally bond yields are headed lower,
I'm imagining that you don't believe that there is going
to be any stress that gets built into the balance
sheets of the big banks. I mean today we had
Moodies cutting ratings for deposits at some of the big
banks like Bank of America, JP, Morgan Chase, and Wells Fargo.
I mentioned that a moment ago when I kind of
(06:33):
read the note yesterday from Moody's about the overall downgrade
and the risk that was inherent in the messaging that
maybe US fields could push higher. I remembered what happened
with the Silicon Valley bank debacle and how that stressed
a lot of the regional bank balance sheets. But you
don't see that as a being at all a risk
(06:53):
going forward, do you?
Speaker 4 (06:55):
No.
Speaker 3 (06:55):
I mean, we like the banks both in credit and equities. Honestly,
I think you can car some of the same theme
through your credit side of the portfolio and the equities.
Banks have been largely improving their balance sheets, you know,
since twenty twenty three banking crisis, right, and then we're
sitting in a favorable regulatory environment, and so I think
(07:15):
they have some earnings tailwinds, right, and they don't have
supply chain risk. They have the tailwinds on the earning side,
and they have the deregulation story. So I think volatility
is fine, but we like the banks both within credit
and equities.
Speaker 1 (07:30):
Today on Bloomberg, we heard from the co chair of
Guggenheim Securities, Jim Milstein, and he was saying that lawmakers
are risking a fiscal disaster if a recession were to
hit as they kind of move forward this package of
sweeping text cuts. Does he have a point?
Speaker 3 (07:46):
Yeah, I mean he does have a point. I don't
I think, like I said, I think the markets and
perhaps the policymakers have sort of called a redo and
they're kind of taking this let's wait and see approach,
and whereas we're seeing some of the soft data has
collapsed and some of the job cuts haven't been felt
and rippled through the system. And look with terror, you know,
(08:07):
everyone's excited about China and going from one hundred and
forty five percent to thirty percent, but the effective tariff
rate for the for the you know, for global goods
coming into the US is still in that thirteen fourteen percent.
So that's multiples of where we were. So I think
there is a bigger I mean, I think the economy
is going to stall and to and to and to
(08:29):
dump a huge spending package or or a poorly thought
out package is not.
Speaker 1 (08:35):
A good thing. So if stall is your base case here,
is it too much to say that we could see
a recession? Or is that not quite kind of where
you're forecasting things.
Speaker 3 (08:47):
You know, it could easily happen because I think we
were already not us, but consensus in the beginning of
the year was already going to have a couple of
quarters of very low growth, you know, sub one percent
and half a percent. That is pretty much stall speed.
So you have anything that ripples through that that is
a little bit worse, and you could worse, and you
could easily hit a couple of negative quarters. But I'll
(09:09):
call it stall it because it's either slightly negative or
close to zero. It's basically the economy stalled. And I
you know, I think rates are more priced for that,
and equities at a twenty one plus p y or
not quite you know, ready for that reality.
Speaker 1 (09:25):
I think. So if stall may be the new reality,
let's get back to the financials, why are you so bullish?
Speaker 3 (09:32):
Well, like I said, I still think you know, they're
on the credit side, they're not cyclically super cyclically inclined, right,
so there's still somewhat defensive on that side, and yields
are attractive, and their balance sheets are very strong. So
I think you want something that can weather you know,
a slowdown from the balance deat perspective, right, I think
(09:53):
you want to minimize, you know, anything that's got obvious
exposure to the policy that's going to be driving this
in recession, like trade policy and job cuts that would
be you know, consumer cyclical. I think that will get
work worth healthcare. We're certainly worried about anything in the
supply chain like autos. So I think it's a better
place to be is in banks utilities. Certainly, utilities are
(10:16):
low beta, but they also have that AI driven you know,
infrastructure spending behind them. You know, I think it's they're
better off than a lot of sectors from a balance
sheep perspective.
Speaker 1 (10:26):
Okay, Rob, we'll leave it there, Thank you so much.
Rob Williams is managing partner also the chief investment strategist
at Sage Advisory Services. Joining from Austin, Texas here on
the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
(10:49):
I'm Doug Chrisner. So markets are still being challenged with
having to navigate the effects of the US China trade
war at the moment, Yes, there does seem to be
a little less anxiety given the recent temporary truth and
some analysts are saying the probability of recession has been reduced.
But what about the beneficiaries of this trade skirmish? Have
(11:10):
there been any? Well, Bloomberg opinion columnist Truly Wren has
identified one Hong Kong. Let's get her inside. Now Shuley
joins us from Hong Kong. It's always a pleasure to
chat with you. You're such a thoughtful columnist, and you're
writing that Hong Kong is finding its footing again in
spite of the fact that we've got this trade war
(11:31):
between the US and China. What's happening here?
Speaker 4 (11:33):
Yeah, it's ironic, right, because you imagine Hong Kong, being
a part of China, will be caught in this US
China trade war. It's a major re exporder of Chinese
electronic goods. And you know, Hong Kong has a lot
of political issues. The twenty nineteenth for Democracy movement didn't
pan out very well and there are a lot of
(11:56):
political dissidents. So it has been on the on the
bedside of the United States, and a lot of people
think Hong Kong has lost its status as a prime
financial center. But ironically, I think Hong Kong is finding
its futing again because now Hong Kong can actually provide
financing to Chinese companies that are eager to go abroad
(12:19):
and become multinationals.
Speaker 1 (12:20):
Where is this foreign capital coming from? Is it coming
from countries other than the US right now? Yes?
Speaker 4 (12:26):
Interestingly, because of President Donald Trump's unpredictable policies, a lot
of global investors, especially in Europe, they're looking for a
plan B. Right like the so called sell American narrative
is picking up pace, and people are trying to find
alternative growth growth models, and they are seeing that some
(12:47):
Chinese companies that are willing to go abroad and localize
and the build factories abroad, they might have a new
growth trajectory and that's why they're coming to Hong Kong.
Speaker 1 (12:58):
So we're talking here about companies that already are established
looking for additional capital. I'm curious as to whether or
not there are new issues coming to market in Hong Kong.
How's the IPO market right now?
Speaker 4 (13:10):
Ironically, it's heating up. I mean today there is a
new stock being listed in Hong Kong. It's called cattle Ctl.
It's the world's largest EV battery manufacturer and they just
raised four point six billion. Next week, we'll have a
biotech company called the Juansu hundred coming in and it's
(13:30):
raising one point three billion dollars, and that these are
big IPOs even on the global scale.
Speaker 1 (13:36):
Right, is everything related to some form of electronic technology
or are there other industries that are joining in on
the party.
Speaker 4 (13:45):
I think people are looking at the so called the
manufacturing two point zero. Right, there is electronic two poil,
such as electric vehicle makers like bid ctl, but there
is also the so called biotech two poil terms Chamsuo hundred,
the company that's going to go public in Hong Kong
next week. They are telling their story. They are actually
(14:07):
developing drugs quite fast, and the idea is that they
will build the R and D centers overseas and sell
their drugs overseas as well.
Speaker 1 (14:16):
So you're talking about how Hong Kong is benefiting from
this flow of foreign capital. Ultimately it's going to make
its way to the mainland here, what's the effect going
to be when it reaches China.
Speaker 4 (14:27):
I think all the capital raising Hong Kong actually will
stay in Hong Kong, Hong Kong and overseas, because, I mean,
it's no secret that the China's economy is not doing
so well. All these companies. They're really ambitious. They don't
want to develop further in China because they think that
the economy has saturated. What they want to do is
(14:49):
to use this capital raising Hong Kong outside of mainland
China and reinvest outside of the mainland China as well,
especially say in Latin America, Europe and southeas so.
Speaker 1 (15:00):
I stand corrected. On the mainland. Obviously, there is the
issue of overcapacity when it comes to manufacturing. Different story
I'm imagining when it comes to Hong Kong.
Speaker 4 (15:10):
Right, yes, And the reason why all these like all
the global investors are liking these companies that are wanting
to become multinationals is in part because Chinese economy is
doing so bad and because of the hyper competition at home,
these companies have become really good, you know, Like I mean,
if you're always racing for the last bit of a dollar,
(15:31):
you become highly competitive as well. And as a result,
they think when these companies go abroad, they will kill
the global internationals. For instance, we have already seen that
bid the ev maker, right, it's out pacing Tesla.
Speaker 1 (15:45):
So I'm imagining listening to you, surely that this is
a good time for the investment banks that are established
in Hong Kong, right, it's.
Speaker 4 (15:53):
Better than before. I mean, for three years investment banks
had no business. Now they have some business. But these
Chinese companies, they are also very how to put it,
like a very thrifty, right. They know their hot IPOs
and they want to squeeze the investment banking fees. So yes,
I have her bankers complaining that they're not getting so
(16:16):
much fees and whatever. But at least you have some business, right.
Speaker 1 (16:19):
What about for the exchanges in Hong Kong, the trade equities,
how is their business performing?
Speaker 4 (16:25):
That's doing well. It's kind of like the rest of
the world. It's doing pretty well. Like Hong Kong stock market,
the hands and indexes of fifteen percent, the cost of
the margin loans, the cost of financing has tumbled to
just zero point four percent from four percent at the
beginning of the month. It's doing pretty well.
Speaker 1 (16:43):
When you talk to people in Hong Kong about the
weakness on the mainland, what are they saying. Are they
optimistic that things will begin to turn around and maybe
Hong Kong can benefit from a resurgence in Chinese growth.
Speaker 4 (16:57):
I think people it's hard to find somebody who's optimistic
about China's economy right now. It's very hard. But on
the other hand, I would also like to say the
relative reference point is important. Right, Like, China ten years
ago was growing at ten percent, now it's growing at
one percent. So people feel that the economy is really
(17:19):
really bad. But how bad is it really like compared
to say, some parts of Western Europe? Right, I think
everything is relative, But I really still think that I
have not heard anyone telling me the economy is going well.
Speaker 2 (17:32):
Well.
Speaker 1 (17:32):
We just had the monthly activity data for the month
of April the other day. Industrial production top estimates, but
retail sales disappointed. So it's really a story about continued
weak sentiment among Chinese consumers.
Speaker 4 (17:44):
Right, yes, yes, Chinese consumers. Some of them have money,
but they are a little bit cautious and they don't
really want to spend all.
Speaker 1 (17:53):
Right, Well, leave it there, Truly, it's always a pleasure.
Thank you so much, Bloomberg Opinion columnist Truly Wren joining
us here on the Daybreak Asia podcast. Thanks for listening
to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets finance
and geopolitics in the Asia Pacific. You can find us
(18:15):
on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
else you listen. Join us again tomorrow for insight on
the market moves from Hong Kong to Singapore and Australia.
I'm Doug Chrisner, and this is Bloomberg
Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Bloomberg
Daybreak Asia Podcast. I'm Doug Chrisner. In a moment, we'll
look at one jurisdiction that may be benefiting from US
China trade tensions. We'll be speaking with Bloomberg opinion columnist
(00:22):
Shuley Wrenn on that. First, the churn of the US
equity market in the last session. That was after Moody's
Ratings downgraded the credit rating of the US late on Friday. Now,
a number of market strategists called this a non event,
since both S and P Global and Fitch made similar
adjustments years ago. We heard earlier from Jim Milstein. He
(00:43):
is the co chair at Guggenheim Securities. He told us
Washington could be headed for a quote fiscal disaster if
a recession were to hit.
Speaker 2 (00:52):
You know, in the last five or six recessions, the
budget deficit actually blows out because tax revenues go down
and spending increases, so called automatic stabilizers. So what today
is six point four percent of GDP as a deficit
two point four trillion dollar deficit could easily expand to
four trillion dollars.
Speaker 1 (01:13):
That is Jim Milstein, Co chair of Guggenheim Securities. Now.
At the same time, today, Moody's cut its ratings for
deposits at some of the big banks. That would include
Bank of America, JP, Morgan Chase, and Wells Fargo. Not surprisingly,
we had weakness in a couple of the bank stocks today,
but a number of strategists said any pullback in the
equity market could be a buying opportunity. So at today's low,
(01:36):
the S and P was down one percent, and indeed
the dip buyer seemed to emerge. The S and P
end of the day higher by a tenth at one percent.
Joining me now for a closer look at markets is
Rob Williams. He is managing partner also the chief investment
strategist at Sage Advisory Services. Rob is on the line
from Austin, Texas. Rob, good of you to join us.
(01:58):
What did you make of today's price section?
Speaker 3 (02:01):
You know, just a lot of what we've seen, you know,
the ebb and flow of pessimism and optimism. You know,
the markets, you know have largely kind of decided to
call a little redo for the year. Once we had
a little de escalation in the China trade situation. You know,
recession odds have you know, fallen back. Markets have recovered,
but yet, you know, I think a lot of people
(02:23):
know we're still probably a little worse off than when
we began the year. So it warrants a lot of caution.
Speaker 1 (02:29):
I think, are you troubled at all by the Moody's
downgrade or is that really something that's already been discounted
by the market, given the fact that S and P
Global and Fitch have already in prior years made similar moves. Yeah,
I think.
Speaker 3 (02:43):
I mean it was largely you know, it's the third one,
you know, like you said, so it was largely baked in,
you know, a little bit, you know. So I don't
think it's going to have It's not a good thing
for the medium term. We all know we're gonna have
to continue to live running very high deficits relative to GDP,
which it is not a great thing.
Speaker 1 (03:01):
I think it's.
Speaker 3 (03:02):
Medium term, it doesn't change our rate outlook. I think
near term it does just put some you know, near
term pressure and maybe some steepness to the curve. But
I think medium term rates we still think rates go
down and the FED gets active later in the year,
you know, on economic weakness.
Speaker 1 (03:19):
It's very interesting. Today the head of Switzerland Central Bank
gave a vote of confidence to the US bond market,
saying there is simply no alternative to them. Does he
have a point?
Speaker 3 (03:31):
Yeah, I mean, look, we're still the reserve currency, We're
still the largest bond market, We're still the safe haven.
Speaker 2 (03:36):
I know.
Speaker 3 (03:37):
But like I said, things are rockier here. I think
people also realize we're not in vulnerable recession. Odds are
still significant. Trade is going to be a drag on
GDP for sure, job cuts will, the volatility in policy
decisions has increased. So I think, you know, I think
(03:58):
it's a the bare case for the dollar is on
for the medium term. But I think rates it's a
different story. I think I think they won't continue to
rise because I think, you know, some of the soft
sentiment data will start bleeding through to the hard data,
and the FED will have some latitude, you know, later
in the year to start easing.
Speaker 1 (04:17):
So I hear that when it comes to the growth story.
But what about inflation, Because today Jamie Diamond, the head
of a JP Morgan Chase, was saying the chances of
elevated inflation and even stagflation are greater than people think.
I'm wondering what he sees that maybe the market doesn't
see at this point.
Speaker 3 (04:34):
I mean, I think he sees what the FED is
worried about and why they're trying to be patient in
a difficult situation. Is you know, there's going to be
some impact on the good side of inflation. It won't
be like COVID and the supply chains break down, but
goods inflation is going to go up, right. The hope
is that or not, Maybe not the hope, but at
least weaker economic activity is going to lower the service
(04:57):
sector inflation. That's been the sticky part, and I think
sentiments getting bad guidance is hard to put out there.
I think the service sector weakness offset some of that
goods inflation in it and that goods inflation is somewhat temporary,
at least that's the Fed's view. But temporary still means
some ugly numbers, you know, in the future, at least
(05:17):
some ones that look more inflationary, and I think that's
what he's referencing.
Speaker 1 (05:21):
We heard from the head of the Atlanta FED today,
Raphael Bostik, and he was saying that his expectation is
that the FED will deliver one rate cut this year.
The market right now, I think is leaning toward maybe
two twenty five bases point rate cuts. Where are you
right now in forecasting the Fed's move between now and
the end of the year.
Speaker 3 (05:41):
Well, it's interesting, We've been probably two since the beginning
of the year, even when the market got all you know,
frothy over you know, you know, recession and more cuts.
You know, it's kind of come back the other way.
It's easy to get paralyzed short term volatility. But I
think they're going to go for one or two later
(06:01):
in the year as some of the data weaknesses right,
you know, we're going to have drag from terrorists, we
have job weakness. There's going to be some negative feedback
that we haven't felt yet on the data.
Speaker 1 (06:12):
So if you believe directionally bond yields are headed lower,
I'm imagining that you don't believe that there is going
to be any stress that gets built into the balance
sheets of the big banks. I mean today we had
Moodies cutting ratings for deposits at some of the big
banks like Bank of America, JP, Morgan Chase, and Wells Fargo.
I mentioned that a moment ago when I kind of
(06:33):
read the note yesterday from Moody's about the overall downgrade
and the risk that was inherent in the messaging that
maybe US fields could push higher. I remembered what happened
with the Silicon Valley bank debacle and how that stressed
a lot of the regional bank balance sheets. But you
don't see that as a being at all a risk
(06:53):
going forward, do you?
Speaker 4 (06:55):
No.
Speaker 3 (06:55):
I mean, we like the banks both in credit and equities. Honestly,
I think you can car some of the same theme
through your credit side of the portfolio and the equities.
Banks have been largely improving their balance sheets, you know,
since twenty twenty three banking crisis, right, and then we're
sitting in a favorable regulatory environment, and so I think
(07:15):
they have some earnings tailwinds, right, and they don't have
supply chain risk. They have the tailwinds on the earning side,
and they have the deregulation story. So I think volatility
is fine, but we like the banks both within credit
and equities.
Speaker 1 (07:30):
Today on Bloomberg, we heard from the co chair of
Guggenheim Securities, Jim Milstein, and he was saying that lawmakers
are risking a fiscal disaster if a recession were to
hit as they kind of move forward this package of
sweeping text cuts. Does he have a point?
Speaker 3 (07:46):
Yeah, I mean he does have a point. I don't
I think, like I said, I think the markets and
perhaps the policymakers have sort of called a redo and
they're kind of taking this let's wait and see approach,
and whereas we're seeing some of the soft data has
collapsed and some of the job cuts haven't been felt
and rippled through the system. And look with terror, you know,
(08:07):
everyone's excited about China and going from one hundred and
forty five percent to thirty percent, but the effective tariff
rate for the for the you know, for global goods
coming into the US is still in that thirteen fourteen percent.
So that's multiples of where we were. So I think
there is a bigger I mean, I think the economy
is going to stall and to and to and to
(08:29):
dump a huge spending package or or a poorly thought
out package is not.
Speaker 1 (08:35):
A good thing. So if stall is your base case here,
is it too much to say that we could see
a recession? Or is that not quite kind of where
you're forecasting things.
Speaker 3 (08:47):
You know, it could easily happen because I think we
were already not us, but consensus in the beginning of
the year was already going to have a couple of
quarters of very low growth, you know, sub one percent
and half a percent. That is pretty much stall speed.
So you have anything that ripples through that that is
a little bit worse, and you could worse, and you
could easily hit a couple of negative quarters. But I'll
(09:09):
call it stall it because it's either slightly negative or
close to zero. It's basically the economy stalled. And I
you know, I think rates are more priced for that,
and equities at a twenty one plus p y or
not quite you know, ready for that reality.
Speaker 1 (09:25):
I think. So if stall may be the new reality,
let's get back to the financials, why are you so bullish?
Speaker 3 (09:32):
Well, like I said, I still think you know, they're
on the credit side, they're not cyclically super cyclically inclined, right,
so there's still somewhat defensive on that side, and yields
are attractive, and their balance sheets are very strong. So
I think you want something that can weather you know,
a slowdown from the balance deat perspective, right, I think
(09:53):
you want to minimize, you know, anything that's got obvious
exposure to the policy that's going to be driving this
in recession, like trade policy and job cuts that would
be you know, consumer cyclical. I think that will get
work worth healthcare. We're certainly worried about anything in the
supply chain like autos. So I think it's a better
place to be is in banks utilities. Certainly, utilities are
(10:16):
low beta, but they also have that AI driven you know,
infrastructure spending behind them. You know, I think it's they're
better off than a lot of sectors from a balance
sheep perspective.
Speaker 1 (10:26):
Okay, Rob, we'll leave it there, Thank you so much.
Rob Williams is managing partner also the chief investment strategist
at Sage Advisory Services. Joining from Austin, Texas here on
the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
(10:49):
I'm Doug Chrisner. So markets are still being challenged with
having to navigate the effects of the US China trade
war at the moment, Yes, there does seem to be
a little less anxiety given the recent temporary truth and
some analysts are saying the probability of recession has been reduced.
But what about the beneficiaries of this trade skirmish? Have
(11:10):
there been any? Well, Bloomberg opinion columnist Truly Wren has
identified one Hong Kong. Let's get her inside. Now Shuley
joins us from Hong Kong. It's always a pleasure to
chat with you. You're such a thoughtful columnist, and you're
writing that Hong Kong is finding its footing again in
spite of the fact that we've got this trade war
(11:31):
between the US and China. What's happening here?
Speaker 4 (11:33):
Yeah, it's ironic, right, because you imagine Hong Kong, being
a part of China, will be caught in this US
China trade war. It's a major re exporder of Chinese
electronic goods. And you know, Hong Kong has a lot
of political issues. The twenty nineteenth for Democracy movement didn't
pan out very well and there are a lot of
(11:56):
political dissidents. So it has been on the on the
bedside of the United States, and a lot of people
think Hong Kong has lost its status as a prime
financial center. But ironically, I think Hong Kong is finding
its futing again because now Hong Kong can actually provide
financing to Chinese companies that are eager to go abroad
(12:19):
and become multinationals.
Speaker 1 (12:20):
Where is this foreign capital coming from? Is it coming
from countries other than the US right now? Yes?
Speaker 4 (12:26):
Interestingly, because of President Donald Trump's unpredictable policies, a lot
of global investors, especially in Europe, they're looking for a
plan B. Right like the so called sell American narrative
is picking up pace, and people are trying to find
alternative growth growth models, and they are seeing that some
(12:47):
Chinese companies that are willing to go abroad and localize
and the build factories abroad, they might have a new
growth trajectory and that's why they're coming to Hong Kong.
Speaker 1 (12:58):
So we're talking here about companies that already are established
looking for additional capital. I'm curious as to whether or
not there are new issues coming to market in Hong Kong.
How's the IPO market right now?
Speaker 4 (13:10):
Ironically, it's heating up. I mean today there is a
new stock being listed in Hong Kong. It's called cattle Ctl.
It's the world's largest EV battery manufacturer and they just
raised four point six billion. Next week, we'll have a
biotech company called the Juansu hundred coming in and it's
(13:30):
raising one point three billion dollars, and that these are
big IPOs even on the global scale.
Speaker 1 (13:36):
Right, is everything related to some form of electronic technology
or are there other industries that are joining in on
the party.
Speaker 4 (13:45):
I think people are looking at the so called the
manufacturing two point zero. Right, there is electronic two poil,
such as electric vehicle makers like bid ctl, but there
is also the so called biotech two poil terms Chamsuo hundred,
the company that's going to go public in Hong Kong
next week. They are telling their story. They are actually
(14:07):
developing drugs quite fast, and the idea is that they
will build the R and D centers overseas and sell
their drugs overseas as well.
Speaker 1 (14:16):
So you're talking about how Hong Kong is benefiting from
this flow of foreign capital. Ultimately it's going to make
its way to the mainland here, what's the effect going
to be when it reaches China.
Speaker 4 (14:27):
I think all the capital raising Hong Kong actually will
stay in Hong Kong, Hong Kong and overseas, because, I mean,
it's no secret that the China's economy is not doing
so well. All these companies. They're really ambitious. They don't
want to develop further in China because they think that
the economy has saturated. What they want to do is
(14:49):
to use this capital raising Hong Kong outside of mainland
China and reinvest outside of the mainland China as well,
especially say in Latin America, Europe and southeas so.
Speaker 1 (15:00):
I stand corrected. On the mainland. Obviously, there is the
issue of overcapacity when it comes to manufacturing. Different story
I'm imagining when it comes to Hong Kong.
Speaker 4 (15:10):
Right, yes, And the reason why all these like all
the global investors are liking these companies that are wanting
to become multinationals is in part because Chinese economy is
doing so bad and because of the hyper competition at home,
these companies have become really good, you know, Like I mean,
if you're always racing for the last bit of a dollar,
(15:31):
you become highly competitive as well. And as a result,
they think when these companies go abroad, they will kill
the global internationals. For instance, we have already seen that
bid the ev maker, right, it's out pacing Tesla.
Speaker 1 (15:45):
So I'm imagining listening to you, surely that this is
a good time for the investment banks that are established
in Hong Kong, right, it's.
Speaker 4 (15:53):
Better than before. I mean, for three years investment banks
had no business. Now they have some business. But these
Chinese companies, they are also very how to put it,
like a very thrifty, right. They know their hot IPOs
and they want to squeeze the investment banking fees. So yes,
I have her bankers complaining that they're not getting so
(16:16):
much fees and whatever. But at least you have some business, right.
Speaker 1 (16:19):
What about for the exchanges in Hong Kong, the trade equities,
how is their business performing?
Speaker 4 (16:25):
That's doing well. It's kind of like the rest of
the world. It's doing pretty well. Like Hong Kong stock market,
the hands and indexes of fifteen percent, the cost of
the margin loans, the cost of financing has tumbled to
just zero point four percent from four percent at the
beginning of the month. It's doing pretty well.
Speaker 1 (16:43):
When you talk to people in Hong Kong about the
weakness on the mainland, what are they saying. Are they
optimistic that things will begin to turn around and maybe
Hong Kong can benefit from a resurgence in Chinese growth.
Speaker 4 (16:57):
I think people it's hard to find somebody who's optimistic
about China's economy right now. It's very hard. But on
the other hand, I would also like to say the
relative reference point is important. Right, Like, China ten years
ago was growing at ten percent, now it's growing at
one percent. So people feel that the economy is really
(17:19):
really bad. But how bad is it really like compared
to say, some parts of Western Europe? Right, I think
everything is relative, But I really still think that I
have not heard anyone telling me the economy is going well.
Speaker 2 (17:32):
Well.
Speaker 1 (17:32):
We just had the monthly activity data for the month
of April the other day. Industrial production top estimates, but
retail sales disappointed. So it's really a story about continued
weak sentiment among Chinese consumers.
Speaker 4 (17:44):
Right, yes, yes, Chinese consumers. Some of them have money,
but they are a little bit cautious and they don't
really want to spend all.
Speaker 1 (17:53):
Right, Well, leave it there, Truly, it's always a pleasure.
Thank you so much, Bloomberg Opinion columnist Truly Wren joining
us here on the Daybreak Asia podcast. Thanks for listening
to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets finance
and geopolitics in the Asia Pacific. You can find us
(18:15):
on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere
else you listen. Join us again tomorrow for insight on
the market moves from Hong Kong to Singapore and Australia.
I'm Doug Chrisner, and this is Bloomberg
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