December 16, 2025 • 23 mins
Asian shares tracked Wall Street at the open to post a modest decline after sluggish US jobs data did little to boost bets on further interest-rate cuts from the Federal Reserve. For more on the latest reading on the US Jobs data, we spoke to Christopher Zook, Chairman & CIO of CAZ Investments.
Chen Weiliang's chip startup, MetaX Integrated Circuits Shanghai Co., will list in Shanghai with a valuation of $5.9 billion, making Chen close to emerging as a billionaire. For more on the overall AI trade, we heard from Daniel Lam, Head of Equity Strategy at Standard Chartered Wealth Solutions. He spoke to Bloomberg's Avril Hong.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Welcome to the Daybreak
Asia podcast. I'm Doug Chrisner. Markets across the Asia Pacific
are reacting to weaker than expected US jobs data. The
delayed report showed the unemployment rate rose last month to
(00:24):
four point six percent. That's the highest level in more
than four years. Now, the story on payrolls was mixed.
The American economy added sixty four thousand jobs in November,
although in the month of October the economy lost one
hundred and five thousand. Here is the acting head of
the White House Council of Economic Advisors, Pierre R.
Speaker 2 (00:44):
Ed.
Speaker 3 (00:44):
If you look over the totality of those two months,
you have the US economy creating one hundred and twenty
one thousand private sector jobs and shedding one hundred and
sixty two thousand government jobs. Now, a lot of those
government jobs went away because of the fork in the
road efforts, the dose efforts. That meant that many people
who were retired from the federal government basically went off
(01:06):
of payroll in the month of October, and so that
explains what happened there.
Speaker 1 (01:10):
That is Pierre jah Ed. He is the acting head
of the White House Council of Economic Advisors now analyst
as saying the more meaningful jobs report will be December
data for release in early January. For a closer look,
I'm joined by Christopher Zook. He is the chairman also
the CIO at KAZ Investments. Christopher's on the line from Houston, Texas.
(01:32):
Thank you for being here. Give me your sense of
what you learned from this job's data.
Speaker 4 (01:37):
I think the economy is softer than the data would indicate.
The numbers themselves have a lot of noise in them
because of the shutdown and also because of the fact
that it is cloudy. In your previous segment, you talked
about how the gentleman from the White House Economic Council
talked about how you had a lot of private sector
jobs added, then you had a lot of government jobs
(01:57):
that were removed, and that certainly is an interesting dichotomy
of efficiency. But what we're seeing in the last couple
of months is a lot more of the private sector
jobs also being eliminated, primarily in the middle sector, and
what we refer to as the hollowing out of the
American workforce where it's not really the top tier jobs
(02:19):
and it's not really the bottom tier jobs that are
being eliminated, but the stuff in the middle, we're seeing
a lot of that as a result of AI and
other reasons as well.
Speaker 1 (02:29):
So we know the labor market is one half of
the Fed's dual mandate. The other, of course, is inflation.
And today the head of the Atlanta Fed, Raphae Albostic,
was saying that the FED should remain focused on addressing inflation.
With elevated price pressures expected to persist through most of
next year. Does he have a point here?
Speaker 4 (02:49):
I do think he has a point, because I think
we have sticky inflation that's being caused by a lot
of different factors related to the transition of power at
the White House and certainly in Congress, a lot of
the on shoring efforts, but just the reality is that
some things are not being produced at the same level
(03:10):
of price that they used to be, and then some
other things that are not related to really anything somebody
can control. When you look at counter prices and other things,
you know, it's just there's so much of a pressure
from a spending consumer. Whether they should or not, they're
still spending and as a result of that, you're seeing
these pressures. You do have some productivity gains because of
(03:32):
AI and other reasons, but we are seeing consistent and
constant inflation that doesn't appear to be going away anytime soon.
The only thing that we could really forecast that would
cause investors to or the economy, I should say, to
really really stop being an inflationary spiral is a very
(03:53):
serious economic downturn, which we hope doesn't happen. But that
obviously is something that the FED is not anticipate, which
means they need to stay diligent against inflation.
Speaker 1 (04:03):
So right now, if I'm not mistaken, the swaps market
indicates two rate cuts for twenty twenty six. Is that
your view?
Speaker 4 (04:11):
So, you know, I think that's right. I mean, I'm
not going to argue with them. The Fed of course
has one, you know that they're showing, and whether or
not one happens right in the beginning of twenty seven
or in twenty six, that's going to be data driven.
What I can tell you is this, the FED is
in a box and has been in the box for
a long time. They overcorrected on the downside, they overcorrected
(04:32):
on the upside. They're trying to find that happy median.
I'm not sure that they're there, but they believe they're there,
and I don't think they have a lot of room
to cut more aggressively because of those inflationary pressures that
we just talked about. I think the FED is really
kind of stuck. And that's one of the reasons why
for several years now we've talked about stagflation and we
(04:52):
think that's where we're headed, and we've already been and
then we're headed there as well. In twenty six is
a relatively stagnant economy but with sticky inflation.
Speaker 1 (05:01):
So one of the things that is influencing the level
of inflation accelerated level of inflation is rising electricity bills.
And today three Democratic senators basically indicated they will investigate
whether and how the operations of certain tech companies are
driving up these prices for electricity. Is this something that's
(05:22):
going to be with us now as we continue to
move more into this age of artificial intelligence.
Speaker 5 (05:28):
Yes.
Speaker 4 (05:29):
And I have to laugh because of the fact that
I'm literally chuckling out loud, because it is so much
like a politician to say, Okay, we haven't done all
the things that we should do to expand electricity capacity.
We have not invested in infrastructure and new lines and
new technologies to expand the ability to get more energy.
So now that somebody is using a lot of it,
(05:50):
let's go tax them somehow. So that's a very jaded view,
but it sure sounds like what you just stated those
senators did talk about. There's absolutely no question that the
AI demand on the grid is going to continue to
be higher, and it's going to accelerate at an accelerating rate.
But it's not just AI. It's just the fact that
(06:12):
you have so many people around the world that are
obviously moving from lower class into middle class, middle class
into upper class, and they just all demand more electricity.
When they get a new iPhone or I for the
first time they actually have heat or power in their home,
they're going to spend more. And so it's one of
the reasons why we are absolutely as bullish on energy
(06:33):
in the long run as we have been in my
nearly thirty five year career. And you know, being in Houston, Texas,
we're very very close to the energy world. In the
short run, be a lot of volatility, but in the
long run, the supply demand and balance is only going
to get worse. And we have to be investing in
(06:54):
all forms of energy, all kinds in order to be
able to meet the man that we're saying coming, because
it's just going to.
Speaker 1 (07:00):
Accelerate so close to the energy world when it comes
to crude oil and natural gas. But doesn't Texas operate
its own grid, And isn't that a potential problem?
Speaker 4 (07:10):
Oh it has been, And yes, a lot of people
don't know this, but in the United States there are
three grids. There's basically East West and then there's Texas.
We're pretty proud of that as a matter of fact.
But at the same time, our grid can be vulnerable
to things. In twenty twenty one, as an example, we
had the horrible freeze that literally took power down for
millions and millions of people because of the fact that
(07:32):
the power stations themselves shrows, and so like anything else,
if you don't have proper backup and contingency power in place,
bad planning is going to end up to bad results.
So one of the things that Texas has worked really
hard on the last couple of years is replacing that
excess capacity. And you know, we use a tremendous amount
(07:54):
of solar in the state, A tremendous amount of wind
in the state, but you can't always count on the
sun shining and the wind blowing, so we have to
have plenty of baseline power. That is something that we
are continuing to invest in, but certainly need to do
a better job, just like every other part of the
United States and around the world. But it's like anything else.
People don't spend money on something until they really realize, oh,
(08:17):
I need this, and it's a big problem if we
don't have it. Fortunately, Texas we're trying to get caught
back up after not probably spending enough. But other parts
of the country we've seen in California and other places
where they are really behind, and it is going to
be you know, I have a favorite saying, which is
people will stay the same until the pain and making
the change is less than the pain of making the
(08:39):
change itself. So people will stay the same until they
just they don't have a choice. And that's what we
think is going to be the case in many states,
and that's going to create a significant increase in spending.
But we have to find new energy sources, whether it
be nuclear or obviously traditional uses of energy fossil fuels,
but basically all of the aboves going to be required.
(09:01):
We're most excited about nuclear and small modular reactors in particular,
but we know there's going to be enormous demand for
traditional fossil fuels as we go, you know, for the
next several decades.
Speaker 1 (09:12):
How are you feeling about the overall trade as it
relates to artificial intelligence and some of these big data
center owners that are having to take on a little
bit more debt to maintain their buildout.
Speaker 4 (09:26):
I'm concerned about the amount of spend that is out there,
particularly when it's being serviced with debt. I do believe
that you're going to have significant demand for these data centers,
but if their pricing is high enough, people will find alternatives.
You know, we've seen a couple of headlines recently about
potentially putting significant amount of data center capability actually in space,
(09:50):
where if you have a satellite there that is a
data center, the sun is always shining, and with now
the technology of starlink and others, you have the ability
to get that information down to wherever it is needed
here on Earth. I don't know if that is plausible yet,
it sounds feasible, but I know there's going to be
(10:11):
billions of dollars investigating the possibility of it.
Speaker 1 (10:14):
So as we look to the.
Speaker 4 (10:15):
Data center world, there could be several of these very large,
expensive data centers that don't have near as much demand
for them as they originally thought, and that could bite
some people and make it painful for them. I'll put
it that way. We are looking very hard at what
can be done in space in other places. But it's
early days, but I am concerned about people spending too
(10:38):
much just based on what might possibly happen over the
next five to seven years.
Speaker 1 (10:43):
Give me your best case scenario for twenty twenty six.
What does the outlook appear to be for the new year.
Speaker 4 (10:51):
I think the best case scenario is that we could
see a pretty significant expansion of earnings that could lead
to better prices. However, however, prices are really really expensive.
The S and P five hundred is one of the
most expensive environments we've seen ever. You got to go
back to nineteen ninety nine. A lot of people don't
(11:12):
even realize that twenty five percent of the S and
P five hundred is now trading at more than ten
times sales, not ten times earnings, ten times revenue. That's
the only time we've ever seen it was twenty twenty
one in the middle of the spac bubble and nineteen
ninety nine when we obviously had the tech bubble. So
we are very concerned about the overall valuation. So we
(11:33):
could make you a much stronger bear case. But your
question was the bull case. The bull case is the
earnings continue to expand at a decent clip, call it
ten percent or so next year, and that valuations stay
strong simply because of the fact that the Federal Reserve
is lowering rates and we do not have too much
of a spike in long rates, and so therefore valuations
stay okay, and that we see earnings, you know, decent
(11:58):
growth as we as we look at the new year.
That's our best case. I can make you a lot
of bare cases that are much worse than that. So
it's very important for people to be in a position
to feel comfortable with the valuations and their portfolio. You know,
we have an old adage. You know, stocks always go
down faster than they go up, so sell when you can,
(12:20):
not when you have to.
Speaker 1 (12:21):
So Christopher, you seem inclined to make the bear case.
I can give you maybe a minute or so to
do so.
Speaker 4 (12:27):
The bare case is that you see reasonable earnings growth
or flattening earnings growth, and then you see a significant
pullback invaluations. We could build you a case that's down
twenty percent in the s and P five hundred simply
because of the fact that those wildly expensive companies that
make twenty five percent, they just pull back twenty percent
in evaluation or thirty percent valuation. With ten percent growth,
(12:48):
you can get a down twenty market. The over under,
I think you have a flatish market next year to
down ten with a lot of volatility in between.
Speaker 1 (12:56):
All right, well leave it there, Christopher, Thank you so
very much. Christopher Zuokez, chair and also the CIO at
Kaz Investments. Joining from Houston, Texas. Here on the Daybreak
Asia podcast. Welcome back to the Daybreak Asia podcast. I'm
(13:18):
deg Chrisner. China will have another major chip debut on Wednesday.
This is Mega X Integrated Circuits shun Hi company. It's
set to begin trading today in its home city. Meta
X makes graphic processing units for artificial intelligence developers. Now,
this company raised five hundred and eighty five point eight
(13:39):
million dollars in an IPO that was nearly Are you
ready for this? Three thousand times oversubscribed in the retail portion.
We took a closer look at the AI trade with
Daniel Lamb. He is head of equity strategy at Standard
Chartered Wealth Solutions. Daniel spoke earlier with Bloomberg TV host
Avril Hong.
Speaker 5 (13:59):
So, Daniel, there are a couple of things to watch
in the market. What is top of mind for you
because it looks like a bit of a struggle into
the end of the year. Is this just repositioning traders
have just clocked off for twenty twenty five or is
this more worrying signs that we need to pay attention.
Speaker 1 (14:17):
To right now?
Speaker 2 (14:22):
I believe the market number one concern is about the
AI stocks. Are they going to get back, you know,
the returns that they have projected after such big investments.
How are they going to finance for this kind of
investment because many of these companies are tapping for the
(14:43):
dead market right now instead of using the free cash flow.
So it's not as clear pictures say, you know, this
year or a few years before. So that's what you know,
we see as a number one key risk in the
market right now, and that's the that's the reason why
you're seeing the correction.
Speaker 5 (15:04):
So you're expecting this to continue for the next couple
of months, or is there something that could turn this
dismal sentiment towards AI related stocks around in terms of
perhaps earnings growth as a driver.
Speaker 2 (15:18):
Well, earnings growth has been strong. It is more about
the guidance of the company. So towards the end of
the last you know, the Q three earning season, basically,
you know, there were a couple of companies that have
demonstrated some weakness, right at least, markets feel that the
guidance was not as good as what they're expecting. And
you know, it's fair to ask because as such variations,
(15:41):
people would be asking a lot, you know, for them
to perform, both in terms of results and also in
ford guidance. So that's fair ask. But at the same
time you have to understand that, you know, over the
last few years, we've had a number of foal stars
for the value stocks, and these kind of value rotation
never lasted for a prolonged period of time, so actually
(16:03):
we're not expecting this time to be any different. We
believe that investors should still be adding to the AI
stocks on the dips, because if you look at how
much they're dominating the US economic growth this year, basically
two thirds of the US economic growth comes from AI
or AI related investments. That's a lot. And the KAPIX
(16:25):
is projected to be growing at forty percent again next year,
So that's hefty numbers and they're still going to carry
the flag for the US economic growth.
Speaker 5 (16:37):
Given your point though about how concerned investors are about
this AI payoff, and that seems to be lingering, might
it not make sense to perhaps pick up value.
Speaker 2 (16:51):
Tactically tactically, but how much tactically if you are four
or the medium to the longer term, the growth area
is still on the technology stocks, So you know, our
stands would rather than trying to catch that value bunds,
(17:11):
it is probably wiser to be looking for levels that
you like and be adding on dips for the AI
and technology stocks in general.
Speaker 5 (17:23):
Does that mean that next year, in terms of the
markets that can outperform, is it still going to be
the likes of Japan, South Korea, Taiwan? In your mind,
because we have been seeing this narrative emerging about the
likes of India, for example, that they might benefit because
they don't have an outright way into the AI trade
(17:45):
per se.
Speaker 2 (17:47):
Well, India is a little bit different because it's a
very domestically oriented market and actually their latest GDP growth
number was very encouraging. It's at eight point two percent
versus projected seven point four, so that means that the
government tax reform has been working into the real economy
and also the monetary policy has been easy as well,
(18:08):
so that's good to see, and earning seems to have
bought them out. So actually the market that we like,
we overweight India next year.
Speaker 5 (18:21):
On top of that, what are you saying in terms
of perhaps the raupeat weakness feeding into the appeal of
Indian stocks.
Speaker 2 (18:28):
As well well? Basically that is helps the Indian companies
to be you know, for the exporting companies, it actually
helps them. So that's a good signed to see because
they do export their services as well. And in general,
(18:51):
you know, the market this year has underperformed, so the
valuation is you know, people are always saying that India
is expensive, but it's gotten to a more reasonable variation now,
so that's another plus that we see in the markets.
Speaker 5 (19:09):
We've also been seeing going the other direction from the
rupee is the Chinese yun. I wonder how do you
see that figuring into the equation when you look at
Chinese stocks.
Speaker 2 (19:20):
The basically, yes, the un is looking relatively strong versus
you know the reason past. But at the same time,
I would say that China's economic data has not been
stellar right last set of data, so the government would
(19:40):
probably be having a bias towards an easier monetary policy
rather than a stronger one. So the yuan is probably
going to be staying around the current level, unlikely to
be appreciating significantly from here.
Speaker 5 (19:58):
And how might that feed into what you're seeing in
Chinese stocks? I mean, where do you see the momentum coming?
Are the specific sectors that you are especially optimistic on.
Speaker 2 (20:13):
Well, we have just got a truth between China and
the US. Mean, going back to October, you're seeing that
basically Trump was saying that he once slapped a high
tariff from China, never came to fruition, and it is
basically the truth out of convenience, as I term it,
because of the fact that they have leverage on each other.
(20:35):
So China has the rare earth card and US has
the lead in technology, so both sides believe that it
is best to have a truth out of convenience so
that you know they can work to lessen the leverage
that the other side has on them. So for China,
it is about catching up further on the technology side
of things, and that's where we believe the opportunities lie
(20:57):
in Chinese stocks.
Speaker 5 (21:01):
How else are you positioning as well? Because we're all
hearing about that consumption push the authorities are trying to engineer,
how might that also affect positioning?
Speaker 2 (21:14):
Well, basically, there's the anti involution campaign, but I believe
that is still going to take some time. If you
look at the earnings for the consumer stocks that are
under heavy price competition, they're not there yet at this
moment in time. So for the first half of the year,
(21:37):
the positioning is about going for the stocks where there's
AI technology and self efficiency theme, and after that perhaps
revisiting the stocks that can benefit from the anti involution
because the end game is going to be that you'll
be left with a few big players right such that
(21:58):
you know they have finally the pricing power, and the
smaller players will be you know, push aside.
Speaker 5 (22:06):
When it comes to policy, Daniel, I got to ask
you about the policy mix out of the US and
how that is going to affect the overall trajectory for
Asian stocks in the first half of next year.
Speaker 2 (22:22):
Well, the FAT is saying that next year they will
be cutting once more, but with a FAT new chairperson,
perhaps that will be tilting towards the Delfish side. So
our stance is that next year there's probably going to
be two to three rate cuts from the US rather
than the one that the FAT has mentioned in the
(22:44):
last FMC. So if that's the case, that the dollar
is going to weaken more and that is probably going
to be helping the EMS, okay, because they usually do
well when dollar weakens. So that's the reason and why
we overweight Asian stocks, and also in terms of the
(23:04):
EM local currency bonds, we do like them as well.
Speaker 1 (23:08):
That's Daniel Lamb, head of Equity strategy at Standard Chartered
Wealth Solutions, speaking with Bloomberg TV host April home 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
(23:28):
in the Asia Pacific. 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 Chrisner,
and this is Bloomberg
Bloomberg Audio Studios, podcasts, radio news. Welcome to the Daybreak
Asia podcast. I'm Doug Chrisner. Markets across the Asia Pacific
are reacting to weaker than expected US jobs data. The
delayed report showed the unemployment rate rose last month to
(00:24):
four point six percent. That's the highest level in more
than four years. Now, the story on payrolls was mixed.
The American economy added sixty four thousand jobs in November,
although in the month of October the economy lost one
hundred and five thousand. Here is the acting head of
the White House Council of Economic Advisors, Pierre R.
Speaker 2 (00:44):
Ed.
Speaker 3 (00:44):
If you look over the totality of those two months,
you have the US economy creating one hundred and twenty
one thousand private sector jobs and shedding one hundred and
sixty two thousand government jobs. Now, a lot of those
government jobs went away because of the fork in the
road efforts, the dose efforts. That meant that many people
who were retired from the federal government basically went off
(01:06):
of payroll in the month of October, and so that
explains what happened there.
Speaker 1 (01:10):
That is Pierre jah Ed. He is the acting head
of the White House Council of Economic Advisors now analyst
as saying the more meaningful jobs report will be December
data for release in early January. For a closer look,
I'm joined by Christopher Zook. He is the chairman also
the CIO at KAZ Investments. Christopher's on the line from Houston, Texas.
(01:32):
Thank you for being here. Give me your sense of
what you learned from this job's data.
Speaker 4 (01:37):
I think the economy is softer than the data would indicate.
The numbers themselves have a lot of noise in them
because of the shutdown and also because of the fact
that it is cloudy. In your previous segment, you talked
about how the gentleman from the White House Economic Council
talked about how you had a lot of private sector
jobs added, then you had a lot of government jobs
(01:57):
that were removed, and that certainly is an interesting dichotomy
of efficiency. But what we're seeing in the last couple
of months is a lot more of the private sector
jobs also being eliminated, primarily in the middle sector, and
what we refer to as the hollowing out of the
American workforce where it's not really the top tier jobs
(02:19):
and it's not really the bottom tier jobs that are
being eliminated, but the stuff in the middle, we're seeing
a lot of that as a result of AI and
other reasons as well.
Speaker 1 (02:29):
So we know the labor market is one half of
the Fed's dual mandate. The other, of course, is inflation.
And today the head of the Atlanta Fed, Raphae Albostic,
was saying that the FED should remain focused on addressing inflation.
With elevated price pressures expected to persist through most of
next year. Does he have a point here?
Speaker 4 (02:49):
I do think he has a point, because I think
we have sticky inflation that's being caused by a lot
of different factors related to the transition of power at
the White House and certainly in Congress, a lot of
the on shoring efforts, but just the reality is that
some things are not being produced at the same level
(03:10):
of price that they used to be, and then some
other things that are not related to really anything somebody
can control. When you look at counter prices and other things,
you know, it's just there's so much of a pressure
from a spending consumer. Whether they should or not, they're
still spending and as a result of that, you're seeing
these pressures. You do have some productivity gains because of
(03:32):
AI and other reasons, but we are seeing consistent and
constant inflation that doesn't appear to be going away anytime soon.
The only thing that we could really forecast that would
cause investors to or the economy, I should say, to
really really stop being an inflationary spiral is a very
(03:53):
serious economic downturn, which we hope doesn't happen. But that
obviously is something that the FED is not anticipate, which
means they need to stay diligent against inflation.
Speaker 1 (04:03):
So right now, if I'm not mistaken, the swaps market
indicates two rate cuts for twenty twenty six. Is that
your view?
Speaker 4 (04:11):
So, you know, I think that's right. I mean, I'm
not going to argue with them. The Fed of course
has one, you know that they're showing, and whether or
not one happens right in the beginning of twenty seven
or in twenty six, that's going to be data driven.
What I can tell you is this, the FED is
in a box and has been in the box for
a long time. They overcorrected on the downside, they overcorrected
(04:32):
on the upside. They're trying to find that happy median.
I'm not sure that they're there, but they believe they're there,
and I don't think they have a lot of room
to cut more aggressively because of those inflationary pressures that
we just talked about. I think the FED is really
kind of stuck. And that's one of the reasons why
for several years now we've talked about stagflation and we
(04:52):
think that's where we're headed, and we've already been and
then we're headed there as well. In twenty six is
a relatively stagnant economy but with sticky inflation.
Speaker 1 (05:01):
So one of the things that is influencing the level
of inflation accelerated level of inflation is rising electricity bills.
And today three Democratic senators basically indicated they will investigate
whether and how the operations of certain tech companies are
driving up these prices for electricity. Is this something that's
(05:22):
going to be with us now as we continue to
move more into this age of artificial intelligence.
Speaker 5 (05:28):
Yes.
Speaker 4 (05:29):
And I have to laugh because of the fact that
I'm literally chuckling out loud, because it is so much
like a politician to say, Okay, we haven't done all
the things that we should do to expand electricity capacity.
We have not invested in infrastructure and new lines and
new technologies to expand the ability to get more energy.
So now that somebody is using a lot of it,
(05:50):
let's go tax them somehow. So that's a very jaded view,
but it sure sounds like what you just stated those
senators did talk about. There's absolutely no question that the
AI demand on the grid is going to continue to
be higher, and it's going to accelerate at an accelerating rate.
But it's not just AI. It's just the fact that
(06:12):
you have so many people around the world that are
obviously moving from lower class into middle class, middle class
into upper class, and they just all demand more electricity.
When they get a new iPhone or I for the
first time they actually have heat or power in their home,
they're going to spend more. And so it's one of
the reasons why we are absolutely as bullish on energy
(06:33):
in the long run as we have been in my
nearly thirty five year career. And you know, being in Houston, Texas,
we're very very close to the energy world. In the
short run, be a lot of volatility, but in the
long run, the supply demand and balance is only going
to get worse. And we have to be investing in
(06:54):
all forms of energy, all kinds in order to be
able to meet the man that we're saying coming, because
it's just going to.
Speaker 1 (07:00):
Accelerate so close to the energy world when it comes
to crude oil and natural gas. But doesn't Texas operate
its own grid, And isn't that a potential problem?
Speaker 4 (07:10):
Oh it has been, And yes, a lot of people
don't know this, but in the United States there are
three grids. There's basically East West and then there's Texas.
We're pretty proud of that as a matter of fact.
But at the same time, our grid can be vulnerable
to things. In twenty twenty one, as an example, we
had the horrible freeze that literally took power down for
millions and millions of people because of the fact that
(07:32):
the power stations themselves shrows, and so like anything else,
if you don't have proper backup and contingency power in place,
bad planning is going to end up to bad results.
So one of the things that Texas has worked really
hard on the last couple of years is replacing that
excess capacity. And you know, we use a tremendous amount
(07:54):
of solar in the state, A tremendous amount of wind
in the state, but you can't always count on the
sun shining and the wind blowing, so we have to
have plenty of baseline power. That is something that we
are continuing to invest in, but certainly need to do
a better job, just like every other part of the
United States and around the world. But it's like anything else.
People don't spend money on something until they really realize, oh,
(08:17):
I need this, and it's a big problem if we
don't have it. Fortunately, Texas we're trying to get caught
back up after not probably spending enough. But other parts
of the country we've seen in California and other places
where they are really behind, and it is going to
be you know, I have a favorite saying, which is
people will stay the same until the pain and making
the change is less than the pain of making the
(08:39):
change itself. So people will stay the same until they
just they don't have a choice. And that's what we
think is going to be the case in many states,
and that's going to create a significant increase in spending.
But we have to find new energy sources, whether it
be nuclear or obviously traditional uses of energy fossil fuels,
but basically all of the aboves going to be required.
(09:01):
We're most excited about nuclear and small modular reactors in particular,
but we know there's going to be enormous demand for
traditional fossil fuels as we go, you know, for the
next several decades.
Speaker 1 (09:12):
How are you feeling about the overall trade as it
relates to artificial intelligence and some of these big data
center owners that are having to take on a little
bit more debt to maintain their buildout.
Speaker 4 (09:26):
I'm concerned about the amount of spend that is out there,
particularly when it's being serviced with debt. I do believe
that you're going to have significant demand for these data centers,
but if their pricing is high enough, people will find alternatives.
You know, we've seen a couple of headlines recently about
potentially putting significant amount of data center capability actually in space,
(09:50):
where if you have a satellite there that is a
data center, the sun is always shining, and with now
the technology of starlink and others, you have the ability
to get that information down to wherever it is needed
here on Earth. I don't know if that is plausible yet,
it sounds feasible, but I know there's going to be
(10:11):
billions of dollars investigating the possibility of it.
Speaker 1 (10:14):
So as we look to the.
Speaker 4 (10:15):
Data center world, there could be several of these very large,
expensive data centers that don't have near as much demand
for them as they originally thought, and that could bite
some people and make it painful for them. I'll put
it that way. We are looking very hard at what
can be done in space in other places. But it's
early days, but I am concerned about people spending too
(10:38):
much just based on what might possibly happen over the
next five to seven years.
Speaker 1 (10:43):
Give me your best case scenario for twenty twenty six.
What does the outlook appear to be for the new year.
Speaker 4 (10:51):
I think the best case scenario is that we could
see a pretty significant expansion of earnings that could lead
to better prices. However, however, prices are really really expensive.
The S and P five hundred is one of the
most expensive environments we've seen ever. You got to go
back to nineteen ninety nine. A lot of people don't
(11:12):
even realize that twenty five percent of the S and
P five hundred is now trading at more than ten
times sales, not ten times earnings, ten times revenue. That's
the only time we've ever seen it was twenty twenty
one in the middle of the spac bubble and nineteen
ninety nine when we obviously had the tech bubble. So
we are very concerned about the overall valuation. So we
(11:33):
could make you a much stronger bear case. But your
question was the bull case. The bull case is the
earnings continue to expand at a decent clip, call it
ten percent or so next year, and that valuations stay
strong simply because of the fact that the Federal Reserve
is lowering rates and we do not have too much
of a spike in long rates, and so therefore valuations
stay okay, and that we see earnings, you know, decent
(11:58):
growth as we as we look at the new year.
That's our best case. I can make you a lot
of bare cases that are much worse than that. So
it's very important for people to be in a position
to feel comfortable with the valuations and their portfolio. You know,
we have an old adage. You know, stocks always go
down faster than they go up, so sell when you can,
(12:20):
not when you have to.
Speaker 1 (12:21):
So Christopher, you seem inclined to make the bear case.
I can give you maybe a minute or so to
do so.
Speaker 4 (12:27):
The bare case is that you see reasonable earnings growth
or flattening earnings growth, and then you see a significant
pullback invaluations. We could build you a case that's down
twenty percent in the s and P five hundred simply
because of the fact that those wildly expensive companies that
make twenty five percent, they just pull back twenty percent
in evaluation or thirty percent valuation. With ten percent growth,
(12:48):
you can get a down twenty market. The over under,
I think you have a flatish market next year to
down ten with a lot of volatility in between.
Speaker 1 (12:56):
All right, well leave it there, Christopher, Thank you so
very much. Christopher Zuokez, chair and also the CIO at
Kaz Investments. Joining from Houston, Texas. Here on the Daybreak
Asia podcast. Welcome back to the Daybreak Asia podcast. I'm
(13:18):
deg Chrisner. China will have another major chip debut on Wednesday.
This is Mega X Integrated Circuits shun Hi company. It's
set to begin trading today in its home city. Meta
X makes graphic processing units for artificial intelligence developers. Now,
this company raised five hundred and eighty five point eight
(13:39):
million dollars in an IPO that was nearly Are you
ready for this? Three thousand times oversubscribed in the retail portion.
We took a closer look at the AI trade with
Daniel Lamb. He is head of equity strategy at Standard
Chartered Wealth Solutions. Daniel spoke earlier with Bloomberg TV host
Avril Hong.
Speaker 5 (13:59):
So, Daniel, there are a couple of things to watch
in the market. What is top of mind for you
because it looks like a bit of a struggle into
the end of the year. Is this just repositioning traders
have just clocked off for twenty twenty five or is
this more worrying signs that we need to pay attention.
Speaker 1 (14:17):
To right now?
Speaker 2 (14:22):
I believe the market number one concern is about the
AI stocks. Are they going to get back, you know,
the returns that they have projected after such big investments.
How are they going to finance for this kind of
investment because many of these companies are tapping for the
(14:43):
dead market right now instead of using the free cash flow.
So it's not as clear pictures say, you know, this
year or a few years before. So that's what you know,
we see as a number one key risk in the
market right now, and that's the that's the reason why
you're seeing the correction.
Speaker 5 (15:04):
So you're expecting this to continue for the next couple
of months, or is there something that could turn this
dismal sentiment towards AI related stocks around in terms of
perhaps earnings growth as a driver.
Speaker 2 (15:18):
Well, earnings growth has been strong. It is more about
the guidance of the company. So towards the end of
the last you know, the Q three earning season, basically,
you know, there were a couple of companies that have
demonstrated some weakness, right at least, markets feel that the
guidance was not as good as what they're expecting. And
you know, it's fair to ask because as such variations,
(15:41):
people would be asking a lot, you know, for them
to perform, both in terms of results and also in
ford guidance. So that's fair ask. But at the same
time you have to understand that, you know, over the
last few years, we've had a number of foal stars
for the value stocks, and these kind of value rotation
never lasted for a prolonged period of time, so actually
(16:03):
we're not expecting this time to be any different. We
believe that investors should still be adding to the AI
stocks on the dips, because if you look at how
much they're dominating the US economic growth this year, basically
two thirds of the US economic growth comes from AI
or AI related investments. That's a lot. And the KAPIX
(16:25):
is projected to be growing at forty percent again next year,
So that's hefty numbers and they're still going to carry
the flag for the US economic growth.
Speaker 5 (16:37):
Given your point though about how concerned investors are about
this AI payoff, and that seems to be lingering, might
it not make sense to perhaps pick up value.
Speaker 2 (16:51):
Tactically tactically, but how much tactically if you are four
or the medium to the longer term, the growth area
is still on the technology stocks, So you know, our
stands would rather than trying to catch that value bunds,
(17:11):
it is probably wiser to be looking for levels that
you like and be adding on dips for the AI
and technology stocks in general.
Speaker 5 (17:23):
Does that mean that next year, in terms of the
markets that can outperform, is it still going to be
the likes of Japan, South Korea, Taiwan? In your mind,
because we have been seeing this narrative emerging about the
likes of India, for example, that they might benefit because
they don't have an outright way into the AI trade
(17:45):
per se.
Speaker 2 (17:47):
Well, India is a little bit different because it's a
very domestically oriented market and actually their latest GDP growth
number was very encouraging. It's at eight point two percent
versus projected seven point four, so that means that the
government tax reform has been working into the real economy
and also the monetary policy has been easy as well,
(18:08):
so that's good to see, and earning seems to have
bought them out. So actually the market that we like,
we overweight India next year.
Speaker 5 (18:21):
On top of that, what are you saying in terms
of perhaps the raupeat weakness feeding into the appeal of
Indian stocks.
Speaker 2 (18:28):
As well well? Basically that is helps the Indian companies
to be you know, for the exporting companies, it actually
helps them. So that's a good signed to see because
they do export their services as well. And in general,
(18:51):
you know, the market this year has underperformed, so the
valuation is you know, people are always saying that India
is expensive, but it's gotten to a more reasonable variation now,
so that's another plus that we see in the markets.
Speaker 5 (19:09):
We've also been seeing going the other direction from the
rupee is the Chinese yun. I wonder how do you
see that figuring into the equation when you look at
Chinese stocks.
Speaker 2 (19:20):
The basically, yes, the un is looking relatively strong versus
you know the reason past. But at the same time,
I would say that China's economic data has not been
stellar right last set of data, so the government would
(19:40):
probably be having a bias towards an easier monetary policy
rather than a stronger one. So the yuan is probably
going to be staying around the current level, unlikely to
be appreciating significantly from here.
Speaker 5 (19:58):
And how might that feed into what you're seeing in
Chinese stocks? I mean, where do you see the momentum coming?
Are the specific sectors that you are especially optimistic on.
Speaker 2 (20:13):
Well, we have just got a truth between China and
the US. Mean, going back to October, you're seeing that
basically Trump was saying that he once slapped a high
tariff from China, never came to fruition, and it is
basically the truth out of convenience, as I term it,
because of the fact that they have leverage on each other.
(20:35):
So China has the rare earth card and US has
the lead in technology, so both sides believe that it
is best to have a truth out of convenience so
that you know they can work to lessen the leverage
that the other side has on them. So for China,
it is about catching up further on the technology side
of things, and that's where we believe the opportunities lie
(20:57):
in Chinese stocks.
Speaker 5 (21:01):
How else are you positioning as well? Because we're all
hearing about that consumption push the authorities are trying to engineer,
how might that also affect positioning?
Speaker 2 (21:14):
Well, basically, there's the anti involution campaign, but I believe
that is still going to take some time. If you
look at the earnings for the consumer stocks that are
under heavy price competition, they're not there yet at this
moment in time. So for the first half of the year,
(21:37):
the positioning is about going for the stocks where there's
AI technology and self efficiency theme, and after that perhaps
revisiting the stocks that can benefit from the anti involution
because the end game is going to be that you'll
be left with a few big players right such that
(21:58):
you know they have finally the pricing power, and the
smaller players will be you know, push aside.
Speaker 5 (22:06):
When it comes to policy, Daniel, I got to ask
you about the policy mix out of the US and
how that is going to affect the overall trajectory for
Asian stocks in the first half of next year.
Speaker 2 (22:22):
Well, the FAT is saying that next year they will
be cutting once more, but with a FAT new chairperson,
perhaps that will be tilting towards the Delfish side. So
our stance is that next year there's probably going to
be two to three rate cuts from the US rather
than the one that the FAT has mentioned in the
(22:44):
last FMC. So if that's the case, that the dollar
is going to weaken more and that is probably going
to be helping the EMS, okay, because they usually do
well when dollar weakens. So that's the reason and why
we overweight Asian stocks, and also in terms of the
(23:04):
EM local currency bonds, we do like them as well.
Speaker 1 (23:08):
That's Daniel Lamb, head of Equity strategy at Standard Chartered
Wealth Solutions, speaking with Bloomberg TV host April home 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
(23:28):
in the Asia Pacific. 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 Chrisner,
and this is Bloomberg
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