May 8, 2024 • 23 mins
Featuring:
Sarah Zheng, Bloomberg China Tech reporter, on ByteDance's lawsuit over US divest-or-ban TikTok law.
Dan Flatley, Bloomberg National Security Reporter, with the latest on Israel's Rafah operation.
Omar Slim, Co-Head of Asia Fixed Income at PineBridge Investments, shares his market outlook.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the APAC region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio.
(00:23):
The Bloomberg Terminal and the Bloomberg Business.
Speaker 2 (00:25):
App well by Dance has filed suit against the United
States in effort to repeal the TikTok divest or ban law.
Who have sets up what may be a prolonged legal battle,
and it suggests that by Dance is not planning to
sell the app. Bloomberg's Mike Shepard has.
Speaker 3 (00:42):
More since President Joe Biden signed the bill into law
last month, TikTok and its owners, Beijing based Byte Dance
have been preparing this legal challenge, and they're doing so
on First Amendment grounds. They're laying the groundwork for serious
constitutional challenge to this law, saying that will infringe the
free speech rights of one hundred and seventy million TikTok users.
Speaker 2 (01:04):
The lawsuit marks the first legal challenge since Congress passed
the law. By Dance says that selling TikTok as is
specified by the law is unfeasible commercially, technically and legally.
Joining us now in our studios in Hong Kong is
Sarah Jung, who is Bloomberg China Tech reporter for a
little more discussion on this. So, Sarah, not a big
(01:27):
surprise TikTok leadership. I've been talking about this in the
run up to the law passing. They said they would
fight it in court. Bloomberg News is making the statement
that this is a clear sign byte Edance is not
prepared to sell. I suppose that means that if it
loses the case, it just closes the app.
Speaker 4 (01:50):
I think that would be definitely one of the worst
case scenarios. Like you said, we've been hearing from the
company for a while now that they will file this lawsuit.
It seems like internally and externally they're quite confident that
they do have a strong legal argument in the same
way that they were able to overturn the Montana state
ban on TikTok. They're hoping that, you know, by pushing
(02:11):
this violation or first Amendment, you know, saying that the
bill is targeting TikTok very narrowly saying that divestment like
you said, is not legally, commercially or technically possible, including
stating that the Chinese government would not approve of such
a divesture. It's all part of this broader push that
they think can make this legal argument for them. Yeah.
Speaker 1 (02:32):
So in the filing, TikTok is claiming that the ban
will stifle free speech that may be up for debate,
also that the ban would hurt small businesses that rely
on the app. Can you help me understand something when
I reflect back on what China did back in twenty
seventeen when it passed the new cybersecurity law, whether the
(02:53):
United States could point to that law saying I don't
care what the company is saying right now. By law
in China, companies that in this case by Dance is
required to share data with the government. Isn't that something
that's going to be a part of this case or
Am I wrong?
Speaker 4 (03:10):
Definitely? I think that's the crux of the argument. From
the legislator's side. They're saying that because Byteedance is operating
in Beijing, the Chinese government, through the cybersecurity law like
you mentioned, and also other types of national security data
security kind of laws can require that byte Dance provide
data collected by TikTok to the government. This is something
(03:34):
that TikTok and byte Dance have both denied. They've said
it's hypothetical, and actually, if you read their lawsuit, they
address this head on. They say that so far all
of these risks and threats are hypothetical, and that they've
tried to address this with discussions with Sophia's where they
would have what they've called Project Texas, which is to
completely isolate and silo their US data and have that
(03:57):
be overseen by a US company like Oracle. Of course,
that argument hasn't hasn't been one that was convincing enough
to Congress and to President Biden, as we've seen.
Speaker 2 (04:09):
Now we make the point that this lawsuit is the
first legal challenge. Does that Are we expecting other suits
to come forward here, perhaps from some of the users
who feel wronged.
Speaker 4 (04:22):
By this, Yeah, definitely. There have been users talking about
forming class action lawsuits on this. This is something, of course,
that TikTok itself is encouraging. We saw earlier while the
TikTok bill was going through Congress that they were actively
lobbying their users to call their lawmakers, including with that
message on the app say and call your lawmakers. But
(04:44):
that was just used again by Congress as another sign
of how how much influence TikTok does have in the US.
Speaker 1 (04:51):
It's interesting from what I've read, this could wind up
before the US Supreme Court. I mean, it's only going
to be a matter of time, I think, before it
makes it there. But in terms of the litigation process,
do we know what the next step is? I think
the lawsuit was filed in Washington at the US Court
of Appeals, Right, yep.
Speaker 5 (05:10):
That's right.
Speaker 4 (05:12):
But like you said, I think most legal experts are
expecting this will be a year's long process and it
will eventually make its way.
Speaker 5 (05:18):
To this well.
Speaker 2 (05:19):
Given that, would we expect perhaps an injunction filed in
the short term trying to get TikTok to suspend operations
while the case is being decided, or would that be
difficult to get through a lower court?
Speaker 4 (05:32):
That could be possible, but then TikTok might appeal again.
And also because the government in the bill has laid
out this two hundred and seventy day timeframe, so I
don't think that that's what people are expecting at this moment.
Of course, you know that could happen.
Speaker 1 (05:45):
The timing here is very interesting because obviously in the
States we're in a presidential election year, and when former
President Trump was president, team moved to curtail the app.
It was pretty aggressive about that. Do we know anything
now about where the former president stan should he be
re elected, how might that change? I don't know that
(06:05):
it can now that we've got a law here in
the United States that basically is forcing the company to
be sold or to face a ban. But I'm wondering
if a Trump administration comes into office, let's say after
the first of the year, how does that change the situation.
Speaker 4 (06:22):
Yeah, I think that definitely could throw a wrene into things.
We've seen that President former President Trump over the past
few months has been outwardly saying that he is against
a full TikTok ban because he thinks that that would
elevate META and give them more influence than he believes
that they should have. So it's definitely possible that he
could come into the presidency early next year and potentially
(06:46):
change the way that this whole situation plays out.
Speaker 2 (06:50):
I wonder what people think of Steven Mnusian's idea that
perhaps the algorithm could be reverse engineered in some or
a deal for the American assets. Now we know that
China is not really prepared to sell, and perhaps it
would sell without the algorithm, and then if you could
buy it without the algorithm and somehow recreate it, I mean,
(07:13):
it sort of boggles the mind a little bit. But
what are you hearing on that front?
Speaker 4 (07:17):
To be honest, quite a number of people are quite
skeptical that you would be able to replicate TikTok's current
success without that core algorithm. It's what's known as the
secret sauce of their success. So if you did buy
it would essentially just be the infrastructure and the users. So,
I mean, we've seen Manus come out to say he's
quite confident that they would be able to replicate it,
(07:38):
but we haven't seen TikTok's competitors like Meta and Google
be able to do that so far.
Speaker 1 (07:43):
Sarah, do we have an understanding of how the US operations,
what it's worth, I mean, how it's being valued right now?
I mean, and if imagine the best case scenario where
it does get sold, what's the price tag on something
like this.
Speaker 4 (07:58):
There are actually while a huge spectrum of valuations on this,
just because people are not sure exactly how valuable whatever
they could buy will be. Like we said, without the algorithm,
if you're just buying the TikTok brand or just purely
the user base, how much would that be worth. That's
something that I think, you know, we're just seeing lots
(08:19):
of different valuations yet, so it's hard to pin down exactly.
Speaker 2 (08:23):
Pretty interesting because we saw some comments from Eric Schmidt,
the former CEO of Google, say or Alphabet say that
he had thought about it. He had actually explored a
possible purchase of TikTok, but he's now moved on from
the idea. In addition to Schmidt and Manution, and we
know that Oracle was thinking about it before in terms
(08:45):
of a relationship. Are there any other buyers that have
come forward.
Speaker 4 (08:49):
Yeah, we've been just hearing potentially that like other companies,
even non tech companies, gaming companies might be interested as well.
Manuchin said that he's spoken to a lot of tech companies.
We don't know any of the names yet that he's
referring to, but it sounds like there is some interest.
Speaker 2 (09:05):
Yeah. Apple, I've heard Apple's name as a possibility. They
don't have. They just don't have that kind of of app.
Speaker 1 (09:12):
Even Walmart. Walmart's name has been thrown around as.
Speaker 4 (09:15):
Well, exactly, although with an Apple or like a Meta,
there would definitely be some FDC screwtiny.
Speaker 2 (09:21):
Yeah, if you don't have a social media app, I
suppose you know, this might seem fair game. Anyway. That's
it for that, Thanks so much for joining us, Sarah
Sarah jang there Bloomberg China Tech Report.
Speaker 1 (09:40):
We focus next on Warren Gaza. Today, Israeli officials were
saying major gaps remain with Hamas over the latest proposal
for a cease fire. Joining US now, Dan Flatley, Bloomberg
National Security reporter, making time for US from Washington, DC. Dan,
It's always a pleasure. Maybe we can start with the
operation that took place today in Gaza with the Israeli
(10:03):
troops moving forward and taking control of the Rafa border crossing.
That really wasn't much of a surprise. Now, but where
does this leave the two sides as they try to
work out the potential for a ceasefire? Does this kind
of stymy that process?
Speaker 5 (10:20):
Yeah, I mean it definitely. I don't know that it
means that there won't be a ceasefire agreement at some point,
but it certainly is a ratcheting up of the Israeli's
position here. Of course, as you mentioned, there was a
ceasefire proposed by Hamas that was essentially rejected by Israel.
(10:43):
Israel said that some of the concessions or some of
the things that were in that ceasefire agreement did not
meet what they had requested. The US has sort of
caught a little bit betwixt and between, where you have
US officials here in the last couple of days saying
that they see still some room for agreement on that
(11:08):
cease fire deal. That really just amounts to a couple
of small details. That's certainly not the way the Israelis
are viewing this at this point. And you know, this
is really the culmination of the military operation that began
in the weeks after October seventh, when the Israeli government
under the leadership of Benjamin Etna, who said that they
(11:30):
were going to eradicate Hamas. And so this is kind
of the final outpost or final stronghold of Hamas. But
let's not forget that there are over a million people
in Rafa that led from other parts.
Speaker 2 (11:42):
Of Gaza exactly. I mean, Israel told residents in the
eastern part of Rafa to leave immediately. But Rafa's right
on the border with Egypt. I mean, where are they
expecting that residents will go?
Speaker 5 (11:57):
Yes, And I mean this is the heart of the
matter here, because Egypt to say that they don't really
want any refugees coming into their territory. They cite potential
unrest and other issues. The Israelis are not letting them,
obviously cross into their territory. In Gaza, they're sort of stuck,
and they've come basically from all other parts of Gaza
(12:20):
as they've moved south. This city, which is usually home
to about a quarter million people, is now hosting over
a million in tents and other kinds of encampments. And
then you sort of get into some of the remarks
that President Biden made today and some of the campus
protests here in the US. So really the eyes of
the world in many respects are sort of focused on
this city in southern Gaza for many different reasons. But
(12:43):
that's what we're looking out for right now.
Speaker 1 (12:46):
So Dan, has humanitarian aid come to a halt completely?
Is anything getting through?
Speaker 5 (12:52):
I think that there's still there's still maybe some aid
getting through, but it's very difficult obviously now at this
point because of the way that this conflict has evolved
and the way that basically the Israeli troops have forced
all of the all the Hamas fighters to this last city.
(13:15):
So you just have a very concentrated area. So if
you were talking about getting aid to you know, a
few different points in Gaza, that's a different scenario than
if you're just trying to get into a very tightly congested,
tightly packed area. So it makes it very difficult. And
of course from the Israeli troops perspective, you know, they
have said that they're trying to minimize civilian casualties, and
(13:37):
we've seen that there have been some civilian casualties throughout
this conflict. But you know, that's very hard to do.
When you're in a very densely packed urban environment, you
don't necessarily know whose friend or who's foe right off
the bat. So that adds to the complexity of this issue.
Speaker 2 (13:53):
Dan, if you'd have told me a year ago that
the fut Up branch of Palestinians would outfall Israel in
terms of global opinion. I might have bought it given
the sort of newer and more modern leadership that they have,
but Hamas, how has Humas out foxed Israel in terms
(14:14):
of global opinion. Just look what's happening on campuses in
the United States and what it means for President Biden
in the election.
Speaker 5 (14:23):
Yeah, you know, it's a great question, and I'm not
sure that I have a very good answer for you,
but I would say a couple of things. One, you know,
the world map has changed a great deal since the
Russian invasion of Ukraine just two years ago. You know,
there's a majority of countries around the world, especially in
the global South or the more developing countries, that have
(14:46):
abstained from weighing in on that conflict. And so you
see a world that is not necessarily beholden to the
US or the Israeli view of things. And you know
that's true. This has been a development that's been underway
for many years in college campuses, for good or for ill,
where people are questioning sort of the established narratives. And
then you have a very tricky issue with this with
(15:08):
anti Semitism on one side and humanitarian concerns and other
things on the other side, and that's where that's why
this issue is so combustible, and that's where you see
Biden today trying to tamp down some of that. But
it's it's not going to go away, and it's only
going to intentify if we do see continuation of operations.
Speaker 1 (15:27):
I mean, so, what's next if we move toward trying
to get an agreement on a ceasefire, do we have
the next step?
Speaker 5 (15:35):
Well, you know, you could look at the Israeli position now,
as you know, they're trying to drive a hard bargain.
Perhaps they are looking for some concessions from Hamas on
a couple of key points in that ceasefire agreement. But
you have to weigh that against the necessity in the
part of you know that the Israeli government has identified
in eradicating Hamas. So what wins out in the end,
(15:58):
certainly not a permanent cease fire, but maybe it's temporary one.
Speaker 1 (16:01):
All right, we'll look forward to that, hopefully temporary cease fire.
Dan Flatley joining us at Bloomberg National Security reporter.
Speaker 2 (16:13):
Joining us now on the program is Omar Slim, Co,
Head of Asia Fixed Income at pine Bridge Investments. Omar
in terms of fixed income opportunities here in Asia. One
big challenge is the sort of sledgehammer of the dollar.
The dollar has been strong and it seems like it's
likely to stay strong as long as the FED doesn't
(16:35):
start cutting interest rates. What is the impact for your
business on the strength of the dollar?
Speaker 6 (16:45):
Right, So, in terms of the dollar, I would agree
with the view that it's probably going to stay strong
for the foreseeable future, and the impact really is can
be kind of bucketed in two ways. The first one
when it comes to the local currency markets here. I
think it's very difficult for the local currency bond markets
to perform when the dollar is that strong and when
(17:06):
the interest rate differential is as high. So we're much
more cautious when it comes to some of the local
currencies when it comes to some of the US dollar
denominated bond market in Asia. So when we look at
the kind of the impact on the fundamentals of the
corporates in the region, it tends to be pretty balanced
(17:27):
in the sense that they can withhold a stronger dollar
because part of their revenues and so on is in
US dollar.
Speaker 1 (17:34):
So if you're a monetary authority in em and you're
in the predicament that you just laid out. I mean,
what are your options.
Speaker 6 (17:43):
Well, your options is to wait and see what the
plant does. And in the meantime, the pressure is too
strong on your currency, you hike defensively, like what we
saw in Indonesia. So it's not a great position that
they're in. You know, they don't want to burn and
towards their deserves, so they are essentially price takers at
this point.
Speaker 2 (18:05):
One interesting development I think it's the first time in
forty years or so when you look at cycles that
you actually have the average mortgage rate of Americans. They
have this you know, fixed thirty year and people did
refinance over a long period of time. The average mortgage
rate is like one hundred and fifty basis points lower
(18:26):
than the Fed funds rate, and that's really very beneficial
to American families. I guess almost the reverse is true
in Asia.
Speaker 6 (18:34):
Right, Yeah, I mean on the first point, if I
just can elaborate, I think one of the most interesting
things that's been that we've been looking at is how
interest rate sensitive the economy is, whether it's the US
economy or the global economies. And what you just stayed
out is an interesting example of how it is less
(18:54):
interest rate sensitive, which explains a certain extent at least
the strength of the in the economy. In terms of Asia,
I think the the the kind of the release volve
has been the currency and you see it in full
display when in the in the case of the end,
which you can talk about it if you like.
Speaker 1 (19:12):
Oh, go ahead, for what are you seeing in the
end right now? That's going to give the market some
comfort that maybe intervention is not going to be kind
of the the facto way that that the monetary authority
in Japan defends, you know, the weakness that at some
point is going to be up to the bo j
because of inflationary pressures that are building to actually have
(19:34):
to do its job and raise interest rates.
Speaker 6 (19:38):
Yeah, I think clearly market intervention is ineffective, and certainly
if it's uncoordinated with the US and the ECV, it's
even more ineffective. They're just kind of torching reserves. I
think one of the points which the market has been
missing for a while is that really the policy makers
(19:59):
are neglecting the end in the sense that I don't
know if there's a strong belief that weekend is that
detrimental to the Japanese economy, and it hasn't been a
very coherent policy in terms of intervening. The Bank of
Japan is saying something and then the Ministry of Finance
is doing something else. So I think the end weakness
(20:22):
has not been that detrimental to the economy, and I
think the role now is just to make sure that
the market remains orderly as opposed to really defending the end.
And the only way that they can drop up the
end is to do a pretty aggressive hiking cycle at
the fact which I think there is a very very
(20:43):
low probability of that happening.
Speaker 2 (20:46):
It seemed like earlier when we were talking about the
strong dollar, you said, yeah, I mean it definitely it
hurts local currency bonds in Asia, but not not dollar bonds.
So does that mean that you're actually pretty positive here
on buying dollar bonds throughout the region, and if so,
which areas look best?
Speaker 4 (21:04):
Yeah?
Speaker 6 (21:05):
Dollar bonds I think generally globally have been pretty resilient,
pretty strong. In Asia and particular the performance has been
pretty strong, and it's something that we spoke about in
your so before. The problem now is that pretty much
everywhere you look, particularly when you look at the high
credit quality bonds, they're tight. Even when you look at
some of the high yield bonds in the US, they
(21:29):
are typed. So I think the main risk here is
related to evaluation being typed as opposed to fundamentals. The fundamentals,
to your point, particularly when it comes to the investment
grade market, continues to be strong. In balance, we still
like the investment grade markets in the region, and if
some select opportunities in highyield.
Speaker 1 (21:49):
Are you short duration? I mean, are you at the
shorter end of the curve these days?
Speaker 6 (21:54):
Well, we started the year where we were more aggressive
in terms of then the economic data went the other way,
so we uh and we thought that the market was
two consensus in terms of the number of cuts, particularly
in the beginning of the year and the timing of cuts.
So we took a much more defensive pussure in division,
which worked well, particularly in the past two months. Right now,
(22:16):
I think, particularly after the FED messaging and the jobs number,
I think the distribution outcome has been narrowed and now
we're a bit more overweight division.
Speaker 2 (22:27):
Omar, thank you. Omar Slim, co head of Asia Fixed
Income pine Bridge Investments.
Speaker 1 (22:36):
This has been the Bloomberg Daybreak Asia podcast, bringing you
the stories making news and moving markets in the Asia Pacific.
Visit the Bloomberg Podcast channel on YouTube to get more
episodes of this and other shows from Bloomberg. Subscribe to
the podcast on Apple, Spotify, or anywhere else you listen
and always on Bloomberg Radio, the Bloomberg Terminal, and the
(22:56):
Bloomberg Business app.
Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg
Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the APAC region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio.
(00:23):
The Bloomberg Terminal and the Bloomberg Business.
Speaker 2 (00:25):
App well by Dance has filed suit against the United
States in effort to repeal the TikTok divest or ban law.
Who have sets up what may be a prolonged legal battle,
and it suggests that by Dance is not planning to
sell the app. Bloomberg's Mike Shepard has.
Speaker 3 (00:42):
More since President Joe Biden signed the bill into law
last month, TikTok and its owners, Beijing based Byte Dance
have been preparing this legal challenge, and they're doing so
on First Amendment grounds. They're laying the groundwork for serious
constitutional challenge to this law, saying that will infringe the
free speech rights of one hundred and seventy million TikTok users.
Speaker 2 (01:04):
The lawsuit marks the first legal challenge since Congress passed
the law. By Dance says that selling TikTok as is
specified by the law is unfeasible commercially, technically and legally.
Joining us now in our studios in Hong Kong is
Sarah Jung, who is Bloomberg China Tech reporter for a
little more discussion on this. So, Sarah, not a big
(01:27):
surprise TikTok leadership. I've been talking about this in the
run up to the law passing. They said they would
fight it in court. Bloomberg News is making the statement
that this is a clear sign byte Edance is not
prepared to sell. I suppose that means that if it
loses the case, it just closes the app.
Speaker 4 (01:50):
I think that would be definitely one of the worst
case scenarios. Like you said, we've been hearing from the
company for a while now that they will file this lawsuit.
It seems like internally and externally they're quite confident that
they do have a strong legal argument in the same
way that they were able to overturn the Montana state
ban on TikTok. They're hoping that, you know, by pushing
(02:11):
this violation or first Amendment, you know, saying that the
bill is targeting TikTok very narrowly saying that divestment like
you said, is not legally, commercially or technically possible, including
stating that the Chinese government would not approve of such
a divesture. It's all part of this broader push that
they think can make this legal argument for them. Yeah.
Speaker 1 (02:32):
So in the filing, TikTok is claiming that the ban
will stifle free speech that may be up for debate,
also that the ban would hurt small businesses that rely
on the app. Can you help me understand something when
I reflect back on what China did back in twenty
seventeen when it passed the new cybersecurity law, whether the
(02:53):
United States could point to that law saying I don't
care what the company is saying right now. By law
in China, companies that in this case by Dance is
required to share data with the government. Isn't that something
that's going to be a part of this case or
Am I wrong?
Speaker 4 (03:10):
Definitely? I think that's the crux of the argument. From
the legislator's side. They're saying that because Byteedance is operating
in Beijing, the Chinese government, through the cybersecurity law like
you mentioned, and also other types of national security data
security kind of laws can require that byte Dance provide
data collected by TikTok to the government. This is something
(03:34):
that TikTok and byte Dance have both denied. They've said
it's hypothetical, and actually, if you read their lawsuit, they
address this head on. They say that so far all
of these risks and threats are hypothetical, and that they've
tried to address this with discussions with Sophia's where they
would have what they've called Project Texas, which is to
completely isolate and silo their US data and have that
(03:57):
be overseen by a US company like Oracle. Of course,
that argument hasn't hasn't been one that was convincing enough
to Congress and to President Biden, as we've seen.
Speaker 2 (04:09):
Now we make the point that this lawsuit is the
first legal challenge. Does that Are we expecting other suits
to come forward here, perhaps from some of the users
who feel wronged.
Speaker 4 (04:22):
By this, Yeah, definitely. There have been users talking about
forming class action lawsuits on this. This is something, of course,
that TikTok itself is encouraging. We saw earlier while the
TikTok bill was going through Congress that they were actively
lobbying their users to call their lawmakers, including with that
message on the app say and call your lawmakers. But
(04:44):
that was just used again by Congress as another sign
of how how much influence TikTok does have in the US.
Speaker 1 (04:51):
It's interesting from what I've read, this could wind up
before the US Supreme Court. I mean, it's only going
to be a matter of time, I think, before it
makes it there. But in terms of the litigation process,
do we know what the next step is? I think
the lawsuit was filed in Washington at the US Court
of Appeals, Right, yep.
Speaker 5 (05:10):
That's right.
Speaker 4 (05:12):
But like you said, I think most legal experts are
expecting this will be a year's long process and it
will eventually make its way.
Speaker 5 (05:18):
To this well.
Speaker 2 (05:19):
Given that, would we expect perhaps an injunction filed in
the short term trying to get TikTok to suspend operations
while the case is being decided, or would that be
difficult to get through a lower court?
Speaker 4 (05:32):
That could be possible, but then TikTok might appeal again.
And also because the government in the bill has laid
out this two hundred and seventy day timeframe, so I
don't think that that's what people are expecting at this moment.
Of course, you know that could happen.
Speaker 1 (05:45):
The timing here is very interesting because obviously in the
States we're in a presidential election year, and when former
President Trump was president, team moved to curtail the app.
It was pretty aggressive about that. Do we know anything
now about where the former president stan should he be
re elected, how might that change? I don't know that
(06:05):
it can now that we've got a law here in
the United States that basically is forcing the company to
be sold or to face a ban. But I'm wondering
if a Trump administration comes into office, let's say after
the first of the year, how does that change the situation.
Speaker 4 (06:22):
Yeah, I think that definitely could throw a wrene into things.
We've seen that President former President Trump over the past
few months has been outwardly saying that he is against
a full TikTok ban because he thinks that that would
elevate META and give them more influence than he believes
that they should have. So it's definitely possible that he
could come into the presidency early next year and potentially
(06:46):
change the way that this whole situation plays out.
Speaker 2 (06:50):
I wonder what people think of Steven Mnusian's idea that
perhaps the algorithm could be reverse engineered in some or
a deal for the American assets. Now we know that
China is not really prepared to sell, and perhaps it
would sell without the algorithm, and then if you could
buy it without the algorithm and somehow recreate it, I mean,
(07:13):
it sort of boggles the mind a little bit. But
what are you hearing on that front?
Speaker 4 (07:17):
To be honest, quite a number of people are quite
skeptical that you would be able to replicate TikTok's current
success without that core algorithm. It's what's known as the
secret sauce of their success. So if you did buy
it would essentially just be the infrastructure and the users. So,
I mean, we've seen Manus come out to say he's
quite confident that they would be able to replicate it,
(07:38):
but we haven't seen TikTok's competitors like Meta and Google
be able to do that so far.
Speaker 1 (07:43):
Sarah, do we have an understanding of how the US operations,
what it's worth, I mean, how it's being valued right now?
I mean, and if imagine the best case scenario where
it does get sold, what's the price tag on something
like this.
Speaker 4 (07:58):
There are actually while a huge spectrum of valuations on this,
just because people are not sure exactly how valuable whatever
they could buy will be. Like we said, without the algorithm,
if you're just buying the TikTok brand or just purely
the user base, how much would that be worth. That's
something that I think, you know, we're just seeing lots
(08:19):
of different valuations yet, so it's hard to pin down exactly.
Speaker 2 (08:23):
Pretty interesting because we saw some comments from Eric Schmidt,
the former CEO of Google, say or Alphabet say that
he had thought about it. He had actually explored a
possible purchase of TikTok, but he's now moved on from
the idea. In addition to Schmidt and Manution, and we
know that Oracle was thinking about it before in terms
(08:45):
of a relationship. Are there any other buyers that have
come forward.
Speaker 4 (08:49):
Yeah, we've been just hearing potentially that like other companies,
even non tech companies, gaming companies might be interested as well.
Manuchin said that he's spoken to a lot of tech companies.
We don't know any of the names yet that he's
referring to, but it sounds like there is some interest.
Speaker 2 (09:05):
Yeah. Apple, I've heard Apple's name as a possibility. They
don't have. They just don't have that kind of of app.
Speaker 1 (09:12):
Even Walmart. Walmart's name has been thrown around as.
Speaker 4 (09:15):
Well, exactly, although with an Apple or like a Meta,
there would definitely be some FDC screwtiny.
Speaker 2 (09:21):
Yeah, if you don't have a social media app, I
suppose you know, this might seem fair game. Anyway. That's
it for that, Thanks so much for joining us, Sarah
Sarah jang there Bloomberg China Tech Report.
Speaker 1 (09:40):
We focus next on Warren Gaza. Today, Israeli officials were
saying major gaps remain with Hamas over the latest proposal
for a cease fire. Joining US now, Dan Flatley, Bloomberg
National Security reporter, making time for US from Washington, DC. Dan,
It's always a pleasure. Maybe we can start with the
operation that took place today in Gaza with the Israeli
(10:03):
troops moving forward and taking control of the Rafa border crossing.
That really wasn't much of a surprise. Now, but where
does this leave the two sides as they try to
work out the potential for a ceasefire? Does this kind
of stymy that process?
Speaker 5 (10:20):
Yeah, I mean it definitely. I don't know that it
means that there won't be a ceasefire agreement at some point,
but it certainly is a ratcheting up of the Israeli's
position here. Of course, as you mentioned, there was a
ceasefire proposed by Hamas that was essentially rejected by Israel.
(10:43):
Israel said that some of the concessions or some of
the things that were in that ceasefire agreement did not
meet what they had requested. The US has sort of
caught a little bit betwixt and between, where you have
US officials here in the last couple of days saying
that they see still some room for agreement on that
(11:08):
cease fire deal. That really just amounts to a couple
of small details. That's certainly not the way the Israelis
are viewing this at this point. And you know, this
is really the culmination of the military operation that began
in the weeks after October seventh, when the Israeli government
under the leadership of Benjamin Etna, who said that they
(11:30):
were going to eradicate Hamas. And so this is kind
of the final outpost or final stronghold of Hamas. But
let's not forget that there are over a million people
in Rafa that led from other parts.
Speaker 2 (11:42):
Of Gaza exactly. I mean, Israel told residents in the
eastern part of Rafa to leave immediately. But Rafa's right
on the border with Egypt. I mean, where are they
expecting that residents will go?
Speaker 5 (11:57):
Yes, And I mean this is the heart of the
matter here, because Egypt to say that they don't really
want any refugees coming into their territory. They cite potential
unrest and other issues. The Israelis are not letting them,
obviously cross into their territory. In Gaza, they're sort of stuck,
and they've come basically from all other parts of Gaza
(12:20):
as they've moved south. This city, which is usually home
to about a quarter million people, is now hosting over
a million in tents and other kinds of encampments. And
then you sort of get into some of the remarks
that President Biden made today and some of the campus
protests here in the US. So really the eyes of
the world in many respects are sort of focused on
this city in southern Gaza for many different reasons. But
(12:43):
that's what we're looking out for right now.
Speaker 1 (12:46):
So Dan, has humanitarian aid come to a halt completely?
Is anything getting through?
Speaker 5 (12:52):
I think that there's still there's still maybe some aid
getting through, but it's very difficult obviously now at this
point because of the way that this conflict has evolved
and the way that basically the Israeli troops have forced
all of the all the Hamas fighters to this last city.
(13:15):
So you just have a very concentrated area. So if
you were talking about getting aid to you know, a
few different points in Gaza, that's a different scenario than
if you're just trying to get into a very tightly congested,
tightly packed area. So it makes it very difficult. And
of course from the Israeli troops perspective, you know, they
have said that they're trying to minimize civilian casualties, and
(13:37):
we've seen that there have been some civilian casualties throughout
this conflict. But you know, that's very hard to do.
When you're in a very densely packed urban environment, you
don't necessarily know whose friend or who's foe right off
the bat. So that adds to the complexity of this issue.
Speaker 2 (13:53):
Dan, if you'd have told me a year ago that
the fut Up branch of Palestinians would outfall Israel in
terms of global opinion. I might have bought it given
the sort of newer and more modern leadership that they have,
but Hamas, how has Humas out foxed Israel in terms
(14:14):
of global opinion. Just look what's happening on campuses in
the United States and what it means for President Biden
in the election.
Speaker 5 (14:23):
Yeah, you know, it's a great question, and I'm not
sure that I have a very good answer for you,
but I would say a couple of things. One, you know,
the world map has changed a great deal since the
Russian invasion of Ukraine just two years ago. You know,
there's a majority of countries around the world, especially in
the global South or the more developing countries, that have
(14:46):
abstained from weighing in on that conflict. And so you
see a world that is not necessarily beholden to the
US or the Israeli view of things. And you know
that's true. This has been a development that's been underway
for many years in college campuses, for good or for ill,
where people are questioning sort of the established narratives. And
then you have a very tricky issue with this with
(15:08):
anti Semitism on one side and humanitarian concerns and other
things on the other side, and that's where that's why
this issue is so combustible, and that's where you see
Biden today trying to tamp down some of that. But
it's it's not going to go away, and it's only
going to intentify if we do see continuation of operations.
Speaker 1 (15:27):
I mean, so, what's next if we move toward trying
to get an agreement on a ceasefire, do we have
the next step?
Speaker 5 (15:35):
Well, you know, you could look at the Israeli position now,
as you know, they're trying to drive a hard bargain.
Perhaps they are looking for some concessions from Hamas on
a couple of key points in that ceasefire agreement. But
you have to weigh that against the necessity in the
part of you know that the Israeli government has identified
in eradicating Hamas. So what wins out in the end,
(15:58):
certainly not a permanent cease fire, but maybe it's temporary one.
Speaker 1 (16:01):
All right, we'll look forward to that, hopefully temporary cease fire.
Dan Flatley joining us at Bloomberg National Security reporter.
Speaker 2 (16:13):
Joining us now on the program is Omar Slim, Co,
Head of Asia Fixed Income at pine Bridge Investments. Omar
in terms of fixed income opportunities here in Asia. One
big challenge is the sort of sledgehammer of the dollar.
The dollar has been strong and it seems like it's
likely to stay strong as long as the FED doesn't
(16:35):
start cutting interest rates. What is the impact for your
business on the strength of the dollar?
Speaker 6 (16:45):
Right, So, in terms of the dollar, I would agree
with the view that it's probably going to stay strong
for the foreseeable future, and the impact really is can
be kind of bucketed in two ways. The first one
when it comes to the local currency markets here. I
think it's very difficult for the local currency bond markets
to perform when the dollar is that strong and when
(17:06):
the interest rate differential is as high. So we're much
more cautious when it comes to some of the local
currencies when it comes to some of the US dollar
denominated bond market in Asia. So when we look at
the kind of the impact on the fundamentals of the
corporates in the region, it tends to be pretty balanced
(17:27):
in the sense that they can withhold a stronger dollar
because part of their revenues and so on is in
US dollar.
Speaker 1 (17:34):
So if you're a monetary authority in em and you're
in the predicament that you just laid out. I mean,
what are your options.
Speaker 6 (17:43):
Well, your options is to wait and see what the
plant does. And in the meantime, the pressure is too
strong on your currency, you hike defensively, like what we
saw in Indonesia. So it's not a great position that
they're in. You know, they don't want to burn and
towards their deserves, so they are essentially price takers at
this point.
Speaker 2 (18:05):
One interesting development I think it's the first time in
forty years or so when you look at cycles that
you actually have the average mortgage rate of Americans. They
have this you know, fixed thirty year and people did
refinance over a long period of time. The average mortgage
rate is like one hundred and fifty basis points lower
(18:26):
than the Fed funds rate, and that's really very beneficial
to American families. I guess almost the reverse is true
in Asia.
Speaker 6 (18:34):
Right, Yeah, I mean on the first point, if I
just can elaborate, I think one of the most interesting
things that's been that we've been looking at is how
interest rate sensitive the economy is, whether it's the US
economy or the global economies. And what you just stayed
out is an interesting example of how it is less
(18:54):
interest rate sensitive, which explains a certain extent at least
the strength of the in the economy. In terms of Asia,
I think the the the kind of the release volve
has been the currency and you see it in full
display when in the in the case of the end,
which you can talk about it if you like.
Speaker 1 (19:12):
Oh, go ahead, for what are you seeing in the
end right now? That's going to give the market some
comfort that maybe intervention is not going to be kind
of the the facto way that that the monetary authority
in Japan defends, you know, the weakness that at some
point is going to be up to the bo j
because of inflationary pressures that are building to actually have
(19:34):
to do its job and raise interest rates.
Speaker 6 (19:38):
Yeah, I think clearly market intervention is ineffective, and certainly
if it's uncoordinated with the US and the ECV, it's
even more ineffective. They're just kind of torching reserves. I
think one of the points which the market has been
missing for a while is that really the policy makers
(19:59):
are neglecting the end in the sense that I don't
know if there's a strong belief that weekend is that
detrimental to the Japanese economy, and it hasn't been a
very coherent policy in terms of intervening. The Bank of
Japan is saying something and then the Ministry of Finance
is doing something else. So I think the end weakness
(20:22):
has not been that detrimental to the economy, and I
think the role now is just to make sure that
the market remains orderly as opposed to really defending the end.
And the only way that they can drop up the
end is to do a pretty aggressive hiking cycle at
the fact which I think there is a very very
(20:43):
low probability of that happening.
Speaker 2 (20:46):
It seemed like earlier when we were talking about the
strong dollar, you said, yeah, I mean it definitely it
hurts local currency bonds in Asia, but not not dollar bonds.
So does that mean that you're actually pretty positive here
on buying dollar bonds throughout the region, and if so,
which areas look best?
Speaker 4 (21:04):
Yeah?
Speaker 6 (21:05):
Dollar bonds I think generally globally have been pretty resilient,
pretty strong. In Asia and particular the performance has been
pretty strong, and it's something that we spoke about in
your so before. The problem now is that pretty much
everywhere you look, particularly when you look at the high
credit quality bonds, they're tight. Even when you look at
some of the high yield bonds in the US, they
(21:29):
are typed. So I think the main risk here is
related to evaluation being typed as opposed to fundamentals. The fundamentals,
to your point, particularly when it comes to the investment
grade market, continues to be strong. In balance, we still
like the investment grade markets in the region, and if
some select opportunities in highyield.
Speaker 1 (21:49):
Are you short duration? I mean, are you at the
shorter end of the curve these days?
Speaker 6 (21:54):
Well, we started the year where we were more aggressive
in terms of then the economic data went the other way,
so we uh and we thought that the market was
two consensus in terms of the number of cuts, particularly
in the beginning of the year and the timing of cuts.
So we took a much more defensive pussure in division,
which worked well, particularly in the past two months. Right now,
(22:16):
I think, particularly after the FED messaging and the jobs number,
I think the distribution outcome has been narrowed and now
we're a bit more overweight division.
Speaker 2 (22:27):
Omar, thank you. Omar Slim, co head of Asia Fixed
Income pine Bridge Investments.
Speaker 1 (22:36):
This has been the Bloomberg Daybreak Asia podcast, bringing you
the stories making news and moving markets in the Asia Pacific.
Visit the Bloomberg Podcast channel on YouTube to get more
episodes of this and other shows from Bloomberg. Subscribe to
the podcast on Apple, Spotify, or anywhere else you listen
and always on Bloomberg Radio, the Bloomberg Terminal, and the
(22:56):
Bloomberg Business app.
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