November 25, 2025 • 21 mins
Asian stocks extended their gains into a third day, tracking advances on Wall Street as weak US consumer data lifted bets on a Federal Reserve interest-rate cut next month. MSCI's regional stock gauge rose 1.2%. Almost all of the 11 industry groups in the index advanced, with as many as three stocks gaining for every one that fell. That came after US benchmarks posted their third day of gains. Chinese equities opened steady as Alibaba Group Holding Ltd. shares fell as much as 2.8% in Hong Kong trading after its earnings. For more outlook on the markets, we spoke to William Bratton, Head of Cash Equity Research for the Asia Pacific at BNP Paribas.
Plus - US consumer confidence slid in November by the most in seven months on growing anxiety about the labor market and the economy. The Conference Board's gauge decreased 6.8 points to 88.7, data out Tuesday showed. The figure was weaker than all estimates in a Bloomberg survey of economists. A gauge of expectations for the next six months declined to the lowest level since April, while a measure of present conditions slumped to a more than one-year low. And in regards to individual stock movers, Alphabet Inc. came off session highs that had driven the search giant closer to a $4 trillion valuation, after The Information reported that Meta Platforms Inc. is in talks to use Google's AI chips. Shares of Nvidia Corp., Advanced Micro Devices Inc. and Oracle Corp. remained lower. We get perspective from Jim Worden, CIO, The Wealth Consulting Group.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak
Asia podcast. I'm Doug Prisoner. It's proving to be a
mostly positive day for equity markets in the Asia Pacific.
We had some strong tailwinds from the US where equities
(00:22):
advanced on the bed for a FED rate cut next month.
Let's take a step back and look at some of
the issues that have been driving the price section across
the Asia Pacific and many will continue to do so.
Joining me now is William Bratton. He has head of
Cash Equity Research for the Asia Pacific at BNP Peabah.
William is joining from our studios in Hong Kong. Thank
(00:43):
you for making time to chat with me. As we
both know, we're nearing an end of the year and
for the most part, markets have had to digest a
tremendous amount of information over the last eleven months. I'm
curious to get your take as to where we are
in terms of relative clarity, if I can call it that.
How much more do we have in the way of understanding.
Speaker 2 (01:06):
Primarily on the tariff side. Suddenly, going into the beginning
of this year, there was a lot of uncertainty as
to where tarifs would set up, particularly US tariffs with
respect to the Asia. You know, the big Asian exporters.
We may not like where they've necessarily settled, but they've
definitely come in. You know, we know where they are, right,
So that's removed a degree of uncertainty in terms of
(01:28):
what the forward looks like. From a corporate point of view,
the visibility on the impact of tariffs is becoming slightly clearer.
So the challenge that they had going into the beginning
of this year was actually that nobody really knew how
tariffs either would be implemented or how they would flow
through the supply chains. So the reality is as of now,
you know, corporates do have more visibility on the impact
(01:50):
of sort of higher costs and how it sort of
filters through the supply chains. Is it perfect, No, it's not.
Is there still a degree of uncertainty as to what
the end costs will be or the end impact will
be is a better way of putting it. Absolutely.
Speaker 1 (02:05):
Does that cause companies to kind of look to alternatives
outside or away from the US? Do you think is
there maybe an impulse to become less dependent on the
United States?
Speaker 2 (02:17):
Well, there's a border I mean, unfortunately, there's a border
sort of challenge that corporates are facing, certainly here in Asia,
and the challenge is this whole sort of decoupling of
the US and China. So ultimately, corporates are starting to
look at the way that the US is sort of
enforcing its view of the world and the way that
China is enforcing its view of the world, and corporates
(02:37):
are having to think now about whether they make a
binary choice. You know, do they basically go with one
of the economies over the other, or do they sort
of run duplicated production systems, you know, do they have
a part of their business that's geared towards China and
a part of their business that's geared towards the US.
This is a real problem for Asian corporates, right because
(02:59):
it's a side with one country over the other, US
over China, or China over the US, or that not
side with. But they gear their systems or their production
towards those economies, then they effectively forego revenues in the
other market. And if they decide to run sort of
parallel duplicated networks or production systems, you actually end up
losing economies of scale and inco higher costs. So the
(03:21):
whole of Asia, you know, the whole of sort of
the Asian export system, including both corporates and countries, are
increasingly caught in this binary choice where the outcome long
term outcomes are not particularly positive. So what's happening is
that lots of corporates are sort of trying to do
as much they can in the current system. But longer term,
there are definitely concerns about the way that the global
(03:44):
economy is evolving and the subsequent impact on production costs
and relative competitiveness across much of Asia, and that's sort
of a longer term, sort of profound challenge facing the
region going forwards.
Speaker 1 (03:56):
Can we bring artificial intelligence into the conversation, And I'm
curious about the way in which the technology is being
adopted by these firms and whether or not there is
an advantage. Maybe they're seeing greater productivity or maybe it's
too early to know.
Speaker 2 (04:11):
I think it's far too early to know. You know,
the way that the way that most corporates are now
thinking about AI and advanced technology is more around cost control,
and you know, the ability to sort of get cost
efficiencies moving forwards. But I still think most corporates around
the region are still working out exactly how to maximize
(04:36):
the impact of this new technology. I mean, the immediate
winners are those who are supplying you know, the infrastructure,
whether it's chips or the other sort of supporting infrastructure.
But in terms of the buyer, it's still you know,
there's still some uncertainty as to what the use cases
is or are, and how the use cases improve profit
(05:00):
stability going forwards. So there's a lot of unknown still,
which is sort of complicating the whole sort of AI narrative.
I mean, the clear current winners in the near term
are very obvious, you know, those exporters into the US,
particularly into the US tech ecosystem. But in terms of
users and the buyers of technology, I think lots are
(05:23):
still trying to work out how to utilize it to
achieve longer term gains.
Speaker 1 (05:27):
What about the level of confidence or maybe conviction that
China will ultimately begin to engineer products that can rival
what a company like let's say, Nvidia is able to produce.
Is there still that type of betting going on right now,
or do you just basically conclude at this point in
time the US has that technological superiority, and until China
(05:52):
has allowed greater access to those advanced semiconductors, I mean
the US has the advantage.
Speaker 2 (05:58):
Across the board. The West has tended to underestimate the
ability of China to close technological gaps, so across the
board there has been a consistent tendency to assume that
the West's advantage in technology can be sustained and maintained
(06:18):
going forwards. The reality is that, depending on how you
slice and dice it, China has closed the gap in
numerous technologies and is head in many. Now there are
some where China is still clearly lagging the West or
leading edge Western technologies. However that be defined, and chips
(06:39):
are one of them. But my suggest I would strongly
recommend that people don't assume that that gap is maintained.
I think China is moving incredibly quickly to close the gap.
And you talk about advanced chips. The reality is that
China does not want any dependency on US technologies in
(07:00):
the same way the US doesn't want dependency on Chinese technologies.
There is a clear drive in both countries to put
a clear technological separation between themselves, and even if there
is an opportunity to acquire Western chips. I'm not convinced
that you know there would be substantial demand out of
China for those chips. The reality is that China wants
(07:22):
to have its own technological system. It wants to have
its own leading edge technologies, and it's closing the gap
across a whole slew of technologies at an incredible pace.
And just repeating this point, if I go back ten
years ago and I think about what people were saying
about Chinese tech and how quickly or slowly they would
(07:43):
take to sort of replicate or replace Western tech, China
has consistently surprised to the upside. It is easier to
identify texts where they haven't closed the gap than it
is to identify text where they're now not at the
same sort of leading edge or even actually a head
of leading edge technologies. They're at the forefront. If that
(08:03):
makes any sense.
Speaker 1 (08:04):
It does, and as I'm listening to it seems like
more evidence of further decoupling. But I want to pivot
right now because the conversation began with geopolitics, and we've
got a situation right now between China and Japan that
seems to be a little tense after the Japanese Prime
Minister taka Ichi commented on Taiwan, and I'm trying to
(08:25):
get the sense of from a market participant what this
really means and whether there is an inherent risk here
that we need to explore.
Speaker 2 (08:36):
So the problem being slightly gray head is I've seen
this happen multiple times before. The reality is there's always
a residual tension between Japan and China. We have these
flare ups on a sort of periodic basis. I wouldn't
(08:57):
from a market point of view, I wouldn't read very
much into it. It's basically, you know, both countries trying
to you know, define the boundaries as the sort of
political boundaries between them each of themselves. So I wouldn't
at this point read too much into the current flare up.
(09:18):
We've seen it before, We've had them, you know, we've
had these kind of spats before. Usually they calm down
after a period of time, when China or Japan has
made its point and they sort of stabilize. There is
a broader geopolitical issue, though, which is longer term. China's
relative positioning within Asia will continue to strengthen, will continue
(09:42):
to get more pronounced. Its influence and control within Asia
will continue to grow, and this definitely presents a major
challenge for the rest of the region's more minor powers
who have to navigate, you know, a change in balances
of power basically and which country has the influence and
(10:03):
over time over the next five to ten years, our
view is that China's relative sort of influence within Asia
and will continue to grow. It will become more know
the scale asymmetries that has will become more pronounced. The
US and the West will get more displaced over time,
and for countries like Japan and South Korea and others,
this is a major sort of geopolitical challenge that they
(10:24):
have to navigate over the next five to ten years.
Speaker 1 (10:26):
William will leave it there, Thank you so very much.
William Bratton is head of Cash Equity Research for the
APEC at B and p PERIBAD. Joining us here on
the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
I'm Derek Prisoner. The latest US economic data further cemented
(10:49):
bets on a FED rate cut next month. We had
the delayed report on September. Retail sales and if you
don't adjust for inflation, we had an increase of just
two tenths of one percent after several months of much
more robust spending. And at the same time, more current
data from the Conference Board showed consumer sentiment at the
lowest level in seven months, and the reading on consumer
(11:13):
expectations from the Conference Board over the next six months
is now at its lowest level since April. Joining me
now for a closer look is Jim Warden. He is
the CIO at the Wealth Consulting Group. Jim, thank you
so much for making time to chat with us. So
we had a rising equity market in States. On Tuesday,
the S and P picked up around nine tens to
(11:34):
one percent. Healthcare clearly out in front, while information tech
was weak. And it seems as though the market is
still going through some type of rotation. Is that the
way you see it?
Speaker 3 (11:47):
Yeah, it certainly feels like a rotation.
Speaker 4 (11:50):
You know, when I look at my screen, havis screen
that shows all three thousand of the Russell three thousand,
there's a lot of green, not a lot of red,
but the but that's not that doesn't look like what
the indexes would would indicate. Right when we see the numbers,
the percentage numbers, especially with Nvidia being a very large
weighting in most indices, so this is something that it's
(12:13):
almost like two markets within one. Obviously, the news on
Meta buying chips from Alphabet is kind of, you know,
the market's a little I believe, overacting a little bit
when it comes to AI. I'm really really happy to
see the breadth come out with some of these other names,
(12:33):
and like you said, healthcare and some of these other
sectors that really have not participated a whole lot this year.
Speaker 1 (12:41):
I'm so glad you mentioned those AI chips from Google.
These are the tensor processing units known as TPUs. From
what I understand, they are specifically designed for certain AI
related applications, and maybe more importantly, these chips use less
power than in Nvidia's GPUs, those graphic processing units that
(13:01):
were originally developed for computer graphics. When it comes to
the GPUs, I think there's no mistaking the fact that
they are essential now when it comes to various AI applications.
You mentioned the report from the Information on Meta platforms
being in talks to spend billions of dollars on the
Google TPUs, so I'm curious as to how you understand
(13:24):
this development. And whether in your mind it represents any
sort of threat to Invidia's dominance in the market for
these AI chips.
Speaker 3 (13:33):
I don't think it does right now.
Speaker 4 (13:35):
I mean, they've they've got a backlog of roughly three years,
and you know, there's a lot of people trying to
just get their in Nvidia chips. It does kind of
bring the question when does this kind of shift right
We've also seen Broadcom perform really really well. That's another
one of our holdings. In addition to Nvidia, we also
(13:57):
own Alphabet, So like we own all of these names.
You know, we we don't believe that this is going
to be massive, but like the market is certainly looking
to this to see is there something big that comes
of it.
Speaker 3 (14:10):
The evaluations, frankly, aren't that bad.
Speaker 4 (14:13):
When I look at Nvidia as well as Google, you know, Alphabet,
and you know some of these other names. Pallunteer seems
to be a little bit stretched, but you know, what
they're doing with oncology seems to be really really different
than some of the other enterprise wide application uses for AI.
Speaker 1 (14:33):
So, Jim, I'm going to imagine with names like Nvidia,
a company like Alphabet, you have locked in or seen
I should say, pretty handsome gains so far. Are you
tempted to lock in some of that profit now, maybe
reduce a little bit of risk, take some money off
the table, so to speak.
Speaker 3 (14:49):
Yeah, that's a great question.
Speaker 4 (14:50):
So, I mean, we look at our portfolios from a
risk management risk, you know, position sizing standpoint, and we
are constantly looking at, you know, not take not wanting
to take on too much risk.
Speaker 3 (15:05):
We love these names.
Speaker 4 (15:07):
Uh, you know, a lot of our quant driven portfolios
are are capped with the target of two point two percent,
and so when when these things go from two to
three three and a half, some of the smaller positions
have have done gone even higher. So we you know,
it's it's it's not that we don't like the names,
we just don't want to have that much exposure, certainly
a lot less exposure than the index.
Speaker 1 (15:29):
So I mentioned the rotation into healthcare is one possibility.
Are there other areas of the market that you perceived
to be maybe a better value If you're going to
reduce some of your exposure to these big cap tech names,
where would you reallocate that capital.
Speaker 4 (15:46):
Yeah, so we we continue to like industrials and we
can continue to like financials, but we've also added some
to utilities. We believe that you know, the tie in
with A and the need for energy and electricity is real,
and so there's thematically we're looking at some of those
(16:07):
different names, and you know, we don't want to just
have everything moving the same, right, So a lot of
what we're doing is quantitative driven.
Speaker 3 (16:18):
So that means we're going to have some momentum, we're
going to.
Speaker 4 (16:20):
Have some value, we'll have some quality, but we'll also
have some lower volatility and you know, some trend reversals,
some names that you know have really gotten beaten up
that are starting to come back to life.
Speaker 3 (16:33):
We like this from a value standpoint. Particularly.
Speaker 1 (16:37):
Let's talk a little bit about FED policy, because given
some of the data that we had today, I think
we had a further cementing of bets on a rate
cut at the December meeting. I think the probability right now,
if you look at FED fund's futures eighty percent probability
of a rate cut of twenty five basis points? Are
you comfortable with that? Are you worried about that? In
(16:59):
the face of the PPI data today that illustrated that
inflation is still an issue. I mean, perhaps the FED
is moving a little too aggressively. I get that the
labor market is showing weakness, but as recently as a
month ago, there was a lot of doubt about the
possibility of a rate cut, given the fact that there
was so much debate going on among FED policymakers and
(17:21):
inflation seemed to be a big worry.
Speaker 4 (17:25):
Yeah. I mean, when you look at last week, I
think the FED fund's futures were pricing in like thirty
percent or less rate cut for next next month, and
now we're, as you said, eighty percent. We believe that,
you know, the risks are not perfectly balanced. We believe
(17:45):
there's more downside risk when it comes to the labor market.
We believe that you know, some of this inflation is
owner's equivalent rent that's kind of sticky, there's a lag
it's likely to come down. Certainly, the you know, the
policies with you know, immigration and demographics would would indicate that,
(18:08):
you know, there's some deflationary pressures, and certainly with AI
and productivity. Uh, the labor market, on the other hand,
we believe that this is likely weaker then the data
would would currently suggest, and so most of the conversations.
We're having lots of conversations with lots of other investment
(18:28):
managers and experts on this, and they believe that similar
that you know, there's it's better for the FED to
be proactive in cutting rates than to worry too much
about the inflation.
Speaker 1 (18:43):
Jim, I'm wondering whether there's something to be said for
this debate as to whether or not lowering interest rates
is the right prescription for the weakness that we are
seeing in the labor market. And if you'll allow me,
I'm going to cite what we heard from HP Inc.
After the belt The company is going to cut between
four thousand to six thousand jobs through the fiscal year
twenty twenty eight by using more AI tools. So, yeah,
(19:06):
we're at the point where maybe we're in some sort
of regular business cycle that we're familiar with that would
justify cutting infrast rates. But there's also this new transformative
technology that's being embraced and the reality is it's threatening
to reduce the number of workers one hundred percent.
Speaker 3 (19:24):
Agree with that.
Speaker 4 (19:25):
And you know, one of the data that I read
was an executive over at b of A was saying
that you know, rather than you know, only a banker
only managing fifteen client relationships that could manage fifty, and
so that means you don't need as many people. Certainly
that would be something that would be a concern for
(19:48):
the labor market. I would say that that is a
concern for the probably the larger companies that have tens
of thousands of employees. But going back to the interest rates,
lower rates I think would help the smaller businesses, especially
those businesses that were financial conditions for them are a
(20:11):
little bit tighter. Uh, they're not as profitable as the
larger companies, and so that would really help.
Speaker 3 (20:17):
It would help with.
Speaker 4 (20:18):
Consumers some and so I think that you know, doing
that would would actually be helpful. That whether the FED
cuts or not probably isn't.
Speaker 3 (20:30):
Going to impact the AI story.
Speaker 4 (20:33):
That this is a fast moving train that you know,
you can slow it down some, but it's it's not
going to stop. You know a lot of the as
you know, a lot of these large companies are flesh
with cash, and you know, it's it doesn't really matter
for them what the rate is that they can easily borrow.
Speaker 1 (20:51):
That's a good point. Jim will leave it there, Thank
you so very much. Jim Warden is the CIO at
the Wealth Consulting Group, joining us here on the Daybreak
Asia Pope. 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.
(21:13):
You can find us 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 Prisner, and this is
Bloomberg
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak
Asia podcast. I'm Doug Prisoner. It's proving to be a
mostly positive day for equity markets in the Asia Pacific.
We had some strong tailwinds from the US where equities
(00:22):
advanced on the bed for a FED rate cut next month.
Let's take a step back and look at some of
the issues that have been driving the price section across
the Asia Pacific and many will continue to do so.
Joining me now is William Bratton. He has head of
Cash Equity Research for the Asia Pacific at BNP Peabah.
William is joining from our studios in Hong Kong. Thank
(00:43):
you for making time to chat with me. As we
both know, we're nearing an end of the year and
for the most part, markets have had to digest a
tremendous amount of information over the last eleven months. I'm
curious to get your take as to where we are
in terms of relative clarity, if I can call it that.
How much more do we have in the way of understanding.
Speaker 2 (01:06):
Primarily on the tariff side. Suddenly, going into the beginning
of this year, there was a lot of uncertainty as
to where tarifs would set up, particularly US tariffs with
respect to the Asia. You know, the big Asian exporters.
We may not like where they've necessarily settled, but they've
definitely come in. You know, we know where they are, right,
So that's removed a degree of uncertainty in terms of
(01:28):
what the forward looks like. From a corporate point of view,
the visibility on the impact of tariffs is becoming slightly clearer.
So the challenge that they had going into the beginning
of this year was actually that nobody really knew how
tariffs either would be implemented or how they would flow
through the supply chains. So the reality is as of now,
you know, corporates do have more visibility on the impact
(01:50):
of sort of higher costs and how it sort of
filters through the supply chains. Is it perfect, No, it's not.
Is there still a degree of uncertainty as to what
the end costs will be or the end impact will
be is a better way of putting it. Absolutely.
Speaker 1 (02:05):
Does that cause companies to kind of look to alternatives
outside or away from the US? Do you think is
there maybe an impulse to become less dependent on the
United States?
Speaker 2 (02:17):
Well, there's a border I mean, unfortunately, there's a border
sort of challenge that corporates are facing, certainly here in Asia,
and the challenge is this whole sort of decoupling of
the US and China. So ultimately, corporates are starting to
look at the way that the US is sort of
enforcing its view of the world and the way that
China is enforcing its view of the world, and corporates
(02:37):
are having to think now about whether they make a
binary choice. You know, do they basically go with one
of the economies over the other, or do they sort
of run duplicated production systems, you know, do they have
a part of their business that's geared towards China and
a part of their business that's geared towards the US.
This is a real problem for Asian corporates, right because
(02:59):
it's a side with one country over the other, US
over China, or China over the US, or that not
side with. But they gear their systems or their production
towards those economies, then they effectively forego revenues in the
other market. And if they decide to run sort of
parallel duplicated networks or production systems, you actually end up
losing economies of scale and inco higher costs. So the
(03:21):
whole of Asia, you know, the whole of sort of
the Asian export system, including both corporates and countries, are
increasingly caught in this binary choice where the outcome long
term outcomes are not particularly positive. So what's happening is
that lots of corporates are sort of trying to do
as much they can in the current system. But longer term,
there are definitely concerns about the way that the global
(03:44):
economy is evolving and the subsequent impact on production costs
and relative competitiveness across much of Asia, and that's sort
of a longer term, sort of profound challenge facing the
region going forwards.
Speaker 1 (03:56):
Can we bring artificial intelligence into the conversation, And I'm
curious about the way in which the technology is being
adopted by these firms and whether or not there is
an advantage. Maybe they're seeing greater productivity or maybe it's
too early to know.
Speaker 2 (04:11):
I think it's far too early to know. You know,
the way that the way that most corporates are now
thinking about AI and advanced technology is more around cost control,
and you know, the ability to sort of get cost
efficiencies moving forwards. But I still think most corporates around
the region are still working out exactly how to maximize
(04:36):
the impact of this new technology. I mean, the immediate
winners are those who are supplying you know, the infrastructure,
whether it's chips or the other sort of supporting infrastructure.
But in terms of the buyer, it's still you know,
there's still some uncertainty as to what the use cases
is or are, and how the use cases improve profit
(05:00):
stability going forwards. So there's a lot of unknown still,
which is sort of complicating the whole sort of AI narrative.
I mean, the clear current winners in the near term
are very obvious, you know, those exporters into the US,
particularly into the US tech ecosystem. But in terms of
users and the buyers of technology, I think lots are
(05:23):
still trying to work out how to utilize it to
achieve longer term gains.
Speaker 1 (05:27):
What about the level of confidence or maybe conviction that
China will ultimately begin to engineer products that can rival
what a company like let's say, Nvidia is able to produce.
Is there still that type of betting going on right now,
or do you just basically conclude at this point in
time the US has that technological superiority, and until China
(05:52):
has allowed greater access to those advanced semiconductors, I mean
the US has the advantage.
Speaker 2 (05:58):
Across the board. The West has tended to underestimate the
ability of China to close technological gaps, so across the
board there has been a consistent tendency to assume that
the West's advantage in technology can be sustained and maintained
(06:18):
going forwards. The reality is that, depending on how you
slice and dice it, China has closed the gap in
numerous technologies and is head in many. Now there are
some where China is still clearly lagging the West or
leading edge Western technologies. However that be defined, and chips
(06:39):
are one of them. But my suggest I would strongly
recommend that people don't assume that that gap is maintained.
I think China is moving incredibly quickly to close the gap.
And you talk about advanced chips. The reality is that
China does not want any dependency on US technologies in
(07:00):
the same way the US doesn't want dependency on Chinese technologies.
There is a clear drive in both countries to put
a clear technological separation between themselves, and even if there
is an opportunity to acquire Western chips. I'm not convinced
that you know there would be substantial demand out of
China for those chips. The reality is that China wants
(07:22):
to have its own technological system. It wants to have
its own leading edge technologies, and it's closing the gap
across a whole slew of technologies at an incredible pace.
And just repeating this point, if I go back ten
years ago and I think about what people were saying
about Chinese tech and how quickly or slowly they would
(07:43):
take to sort of replicate or replace Western tech, China
has consistently surprised to the upside. It is easier to
identify texts where they haven't closed the gap than it
is to identify text where they're now not at the
same sort of leading edge or even actually a head
of leading edge technologies. They're at the forefront. If that
(08:03):
makes any sense.
Speaker 1 (08:04):
It does, and as I'm listening to it seems like
more evidence of further decoupling. But I want to pivot
right now because the conversation began with geopolitics, and we've
got a situation right now between China and Japan that
seems to be a little tense after the Japanese Prime
Minister taka Ichi commented on Taiwan, and I'm trying to
(08:25):
get the sense of from a market participant what this
really means and whether there is an inherent risk here
that we need to explore.
Speaker 2 (08:36):
So the problem being slightly gray head is I've seen
this happen multiple times before. The reality is there's always
a residual tension between Japan and China. We have these
flare ups on a sort of periodic basis. I wouldn't
(08:57):
from a market point of view, I wouldn't read very
much into it. It's basically, you know, both countries trying
to you know, define the boundaries as the sort of
political boundaries between them each of themselves. So I wouldn't
at this point read too much into the current flare up.
(09:18):
We've seen it before, We've had them, you know, we've
had these kind of spats before. Usually they calm down
after a period of time, when China or Japan has
made its point and they sort of stabilize. There is
a broader geopolitical issue, though, which is longer term. China's
relative positioning within Asia will continue to strengthen, will continue
(09:42):
to get more pronounced. Its influence and control within Asia
will continue to grow, and this definitely presents a major
challenge for the rest of the region's more minor powers
who have to navigate, you know, a change in balances
of power basically and which country has the influence and
(10:03):
over time over the next five to ten years, our
view is that China's relative sort of influence within Asia
and will continue to grow. It will become more know
the scale asymmetries that has will become more pronounced. The
US and the West will get more displaced over time,
and for countries like Japan and South Korea and others,
this is a major sort of geopolitical challenge that they
(10:24):
have to navigate over the next five to ten years.
Speaker 1 (10:26):
William will leave it there, Thank you so very much.
William Bratton is head of Cash Equity Research for the
APEC at B and p PERIBAD. Joining us here on
the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
I'm Derek Prisoner. The latest US economic data further cemented
(10:49):
bets on a FED rate cut next month. We had
the delayed report on September. Retail sales and if you
don't adjust for inflation, we had an increase of just
two tenths of one percent after several months of much
more robust spending. And at the same time, more current
data from the Conference Board showed consumer sentiment at the
lowest level in seven months, and the reading on consumer
(11:13):
expectations from the Conference Board over the next six months
is now at its lowest level since April. Joining me
now for a closer look is Jim Warden. He is
the CIO at the Wealth Consulting Group. Jim, thank you
so much for making time to chat with us. So
we had a rising equity market in States. On Tuesday,
the S and P picked up around nine tens to
(11:34):
one percent. Healthcare clearly out in front, while information tech
was weak. And it seems as though the market is
still going through some type of rotation. Is that the
way you see it?
Speaker 3 (11:47):
Yeah, it certainly feels like a rotation.
Speaker 4 (11:50):
You know, when I look at my screen, havis screen
that shows all three thousand of the Russell three thousand,
there's a lot of green, not a lot of red,
but the but that's not that doesn't look like what
the indexes would would indicate. Right when we see the numbers,
the percentage numbers, especially with Nvidia being a very large
weighting in most indices, so this is something that it's
(12:13):
almost like two markets within one. Obviously, the news on
Meta buying chips from Alphabet is kind of, you know,
the market's a little I believe, overacting a little bit
when it comes to AI. I'm really really happy to
see the breadth come out with some of these other names,
(12:33):
and like you said, healthcare and some of these other
sectors that really have not participated a whole lot this year.
Speaker 1 (12:41):
I'm so glad you mentioned those AI chips from Google.
These are the tensor processing units known as TPUs. From
what I understand, they are specifically designed for certain AI
related applications, and maybe more importantly, these chips use less
power than in Nvidia's GPUs, those graphic processing units that
(13:01):
were originally developed for computer graphics. When it comes to
the GPUs, I think there's no mistaking the fact that
they are essential now when it comes to various AI applications.
You mentioned the report from the Information on Meta platforms
being in talks to spend billions of dollars on the
Google TPUs, so I'm curious as to how you understand
(13:24):
this development. And whether in your mind it represents any
sort of threat to Invidia's dominance in the market for
these AI chips.
Speaker 3 (13:33):
I don't think it does right now.
Speaker 4 (13:35):
I mean, they've they've got a backlog of roughly three years,
and you know, there's a lot of people trying to
just get their in Nvidia chips. It does kind of
bring the question when does this kind of shift right
We've also seen Broadcom perform really really well. That's another
one of our holdings. In addition to Nvidia, we also
(13:57):
own Alphabet, So like we own all of these names.
You know, we we don't believe that this is going
to be massive, but like the market is certainly looking
to this to see is there something big that comes
of it.
Speaker 3 (14:10):
The evaluations, frankly, aren't that bad.
Speaker 4 (14:13):
When I look at Nvidia as well as Google, you know, Alphabet,
and you know some of these other names. Pallunteer seems
to be a little bit stretched, but you know, what
they're doing with oncology seems to be really really different
than some of the other enterprise wide application uses for AI.
Speaker 1 (14:33):
So, Jim, I'm going to imagine with names like Nvidia,
a company like Alphabet, you have locked in or seen
I should say, pretty handsome gains so far. Are you
tempted to lock in some of that profit now, maybe
reduce a little bit of risk, take some money off
the table, so to speak.
Speaker 3 (14:49):
Yeah, that's a great question.
Speaker 4 (14:50):
So, I mean, we look at our portfolios from a
risk management risk, you know, position sizing standpoint, and we
are constantly looking at, you know, not take not wanting
to take on too much risk.
Speaker 3 (15:05):
We love these names.
Speaker 4 (15:07):
Uh, you know, a lot of our quant driven portfolios
are are capped with the target of two point two percent,
and so when when these things go from two to
three three and a half, some of the smaller positions
have have done gone even higher. So we you know,
it's it's it's not that we don't like the names,
we just don't want to have that much exposure, certainly
a lot less exposure than the index.
Speaker 1 (15:29):
So I mentioned the rotation into healthcare is one possibility.
Are there other areas of the market that you perceived
to be maybe a better value If you're going to
reduce some of your exposure to these big cap tech names,
where would you reallocate that capital.
Speaker 4 (15:46):
Yeah, so we we continue to like industrials and we
can continue to like financials, but we've also added some
to utilities. We believe that you know, the tie in
with A and the need for energy and electricity is real,
and so there's thematically we're looking at some of those
(16:07):
different names, and you know, we don't want to just
have everything moving the same, right, So a lot of
what we're doing is quantitative driven.
Speaker 3 (16:18):
So that means we're going to have some momentum, we're
going to.
Speaker 4 (16:20):
Have some value, we'll have some quality, but we'll also
have some lower volatility and you know, some trend reversals,
some names that you know have really gotten beaten up
that are starting to come back to life.
Speaker 3 (16:33):
We like this from a value standpoint. Particularly.
Speaker 1 (16:37):
Let's talk a little bit about FED policy, because given
some of the data that we had today, I think
we had a further cementing of bets on a rate
cut at the December meeting. I think the probability right now,
if you look at FED fund's futures eighty percent probability
of a rate cut of twenty five basis points? Are
you comfortable with that? Are you worried about that? In
(16:59):
the face of the PPI data today that illustrated that
inflation is still an issue. I mean, perhaps the FED
is moving a little too aggressively. I get that the
labor market is showing weakness, but as recently as a
month ago, there was a lot of doubt about the
possibility of a rate cut, given the fact that there
was so much debate going on among FED policymakers and
(17:21):
inflation seemed to be a big worry.
Speaker 4 (17:25):
Yeah. I mean, when you look at last week, I
think the FED fund's futures were pricing in like thirty
percent or less rate cut for next next month, and
now we're, as you said, eighty percent. We believe that,
you know, the risks are not perfectly balanced. We believe
(17:45):
there's more downside risk when it comes to the labor market.
We believe that you know, some of this inflation is
owner's equivalent rent that's kind of sticky, there's a lag
it's likely to come down. Certainly, the you know, the
policies with you know, immigration and demographics would would indicate that,
(18:08):
you know, there's some deflationary pressures, and certainly with AI
and productivity. Uh, the labor market, on the other hand,
we believe that this is likely weaker then the data
would would currently suggest, and so most of the conversations.
We're having lots of conversations with lots of other investment
(18:28):
managers and experts on this, and they believe that similar
that you know, there's it's better for the FED to
be proactive in cutting rates than to worry too much
about the inflation.
Speaker 1 (18:43):
Jim, I'm wondering whether there's something to be said for
this debate as to whether or not lowering interest rates
is the right prescription for the weakness that we are
seeing in the labor market. And if you'll allow me,
I'm going to cite what we heard from HP Inc.
After the belt The company is going to cut between
four thousand to six thousand jobs through the fiscal year
twenty twenty eight by using more AI tools. So, yeah,
(19:06):
we're at the point where maybe we're in some sort
of regular business cycle that we're familiar with that would
justify cutting infrast rates. But there's also this new transformative
technology that's being embraced and the reality is it's threatening
to reduce the number of workers one hundred percent.
Speaker 3 (19:24):
Agree with that.
Speaker 4 (19:25):
And you know, one of the data that I read
was an executive over at b of A was saying
that you know, rather than you know, only a banker
only managing fifteen client relationships that could manage fifty, and
so that means you don't need as many people. Certainly
that would be something that would be a concern for
(19:48):
the labor market. I would say that that is a
concern for the probably the larger companies that have tens
of thousands of employees. But going back to the interest rates,
lower rates I think would help the smaller businesses, especially
those businesses that were financial conditions for them are a
(20:11):
little bit tighter. Uh, they're not as profitable as the
larger companies, and so that would really help.
Speaker 3 (20:17):
It would help with.
Speaker 4 (20:18):
Consumers some and so I think that you know, doing
that would would actually be helpful. That whether the FED
cuts or not probably isn't.
Speaker 3 (20:30):
Going to impact the AI story.
Speaker 4 (20:33):
That this is a fast moving train that you know,
you can slow it down some, but it's it's not
going to stop. You know a lot of the as
you know, a lot of these large companies are flesh
with cash, and you know, it's it doesn't really matter
for them what the rate is that they can easily borrow.
Speaker 1 (20:51):
That's a good point. Jim will leave it there, Thank
you so very much. Jim Warden is the CIO at
the Wealth Consulting Group, joining us here on the Daybreak
Asia Pope. 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.
(21:13):
You can find us 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 Prisner, and this is
Bloomberg
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