May 15, 2025 • 21 mins
Asian currencies look poised to benefit from a favorable mix of lower US Treasury yields, softer oil prices, and sustained downward pressure on the greenback. A cautious outlook from Walmart underscores lingering vulnerabilities that may cap gains in US assets. Stateside, traders priced in two Federal Reserve rate cuts this year. Shares in South Korea and Australia climbed early Friday, while Japan's were mixed. US futures inched higher after the S&P 500 rose 0.4% Thursday. JPMorgan Chase CEO Jamie Dimon says recession remains a possibility as tariff fallout continues to buffet global economies. We break down the day's market action with Michael Green, Chief Strategist at Simplify Asset Management.
Plus - we'll get earnings from Chinese EV maker XPeng in the week ahead. Linda Lew, China Autos Reporter for Bloomberg News, joins for a preview.
See omnystudio.com/listener for privacy information.
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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. Welcome to the Bloomberg
Daybreak Asia Podcast. I'm Doug Chrisner. The uncertainty around those
ever changing tariffs from the Trump administration has fueled the
debate as to whether a global recession is inevitable. The
(00:23):
head of JP Morgan Chase, Jamie Diamond, at this point,
is not willing to take it off the table. Diamond
spoke exclusively to Bloomberg and said, there is still a
lot of uncertainty, although some of it preceded the Trump administration.
Speaker 2 (00:36):
We had large deficits, instur rates going up, inflation going
up in summer, you know, tariffs and things, and of
course the geopolitical situation is very tense, very difficult and
hard to resolve.
Speaker 1 (00:47):
Jamie Diamond there, the CEO of JP Morgan Chase, speaking
to Bloomberg from the bank's Global Markets conference in Paris.
In a moment, we'll be taking a look at the
ev industry in China and preview next week's earning from
expun We'll be hearing from Linda Leu, China auto reporter
for Bloomberg News. But we begin this morning with markets
and in the States, where the latest economic news was
(01:10):
on the soft side and very much supportive of FED
rate cuts. Wholesale prices unexpectedly fell last month by the
most in five years. Growth in retail sales decelerated notably,
factory production fell for the first time in six months,
and confidence among homebuilders slumped. So now, at this point,
markets are betting on at least two FED rate cuts
(01:31):
this year to prevent a recession. For a closer look,
I'm joined now by Michael Green. He is the chief
strategist at Simplify Asset Management. Michael is on the line
from here in New York City. Good of you to
make time to chat with us. Michael, Where are you
on the recession call right now?
Speaker 3 (01:47):
So I lean towards what Jamie is reiterating, which is
that we have to consider that the prospect of the
economy slowing markedly and continuing to slow, given the disruption
of tariffs, given the uncertainty around interest rate, and much
more importantly, I would actually argue giving the now acknowledged
deterioration in household balance sheets, where we're seeing student loan
(02:08):
debt come on very quickly, We're seeing credit card delinquencies
and defaults start to rise. Dramatically. Auto repossessions and delinquencies
are also rising. The evidence is very clear that at
least the lower fifty percent of the US consumer is
under tremendous amounts of stress that was largely camouflaged by
the coverage that was provided. And when we decided not
(02:30):
to collect student loans for example, now we're actually going
in the opposite direction. We're beginning the process of garnishing wages, etc.
People cannot escape from this. It's important to remember that
the combination of tariffs and the resumption of student loan debt,
as well as the increase in reporting around things like
buy now, pay later, are effectively forcing austerity onto a
(02:51):
sizable fraction of US households. That can feel like caution,
but it actually very quickly turns into they can't do
what they want want to do, and that shows up
as reduced corporate earnings, it shows up as reduced economic vitality.
Introduce even more uncertainty into that with only a ninety
day pause around tariffs, and it really does feel like
(03:13):
we are setting up for something that will ultimately be
called a recession.
Speaker 1 (03:17):
So a ninety day pause while the two sides, the
US and China, negotiate. There is still a risk that
some of the tariffs that are already in place will
produce a higher level of inflation. Look at Walmart today
saying that it will begin raising some prices. Is there
the risk now that we could see a reacceleration in
the level of inflation.
Speaker 3 (03:36):
Well, I think there's absolutely a risk, but I think
we have to keep it in context. Right, we've experienced
largely goods deflation for the past two years. That is
meant that the price of eggs has fallen relative to
its peaks during the COVID component's, toilet paper has fallen,
new car prices have fallen, et cetera. There have really
only been two or three key areas that have sustained
(03:57):
or accelerated pricing. Those would be things like insurance. To
a certain extent. Home prices and certainly the costs associated
with homes, whether that is maintenance, insurance, taxes, etc. Have
all risen dramatically and placed additional stress on us households.
But buying large goods has been a very good story
from the inflation front for the past two years or so,
(04:20):
and now that is coming under pressure at exactly the
time that we're starting to see the services component, things
like owner's equivalent rent or rent itself begin to turn negative,
and so it's going to be a We're going to
be skating a very very fine line. Those things that
have helped for the past two years are going to
become less important. The things that have hurt us over
the past two years are finally starting to get the
(04:41):
catalysts to push the more negative. The net result is
it's a toss up, and I think we'll probably see
a little bit of inflation, but certainly nothing that strikes
me as anything like what we experienced in twenty twenty
and twenty twenty one.
Speaker 1 (04:53):
Well, let's talk a little bit about how the FED
may navigate this. Today we heard from FED Governor Michael
Barr and he was saying the econ yes, HiT's on
solid ground, but he added that terraff related supply chain
disruptions could lead to lower growth and higher inflation. Kind
of what we've been talking about a little bit. Where
is the FED right now in your view and the
degree to which we could see some sort of accommodation
(05:16):
between now and the end of the year.
Speaker 3 (05:18):
Well, I think it's really important to remember that when
you introduce inflation. And I'm using that almost in air quotes.
When you introduce inflation that is tied to tax increases,
things like tariffs, et cetera, that's restrictive. It's not the
sign of inflation that is being driven by excessive demand.
It's being driven by costs that are being imposed upon
the system. To raise interest rates or to resist cutting
(05:41):
interest rates in response to that is beyond any economic
policy that I know. The FED itself explicitly addressed this,
and it's twenty eighteen or it's analysis of the twenty
eighteen teriffs saying the right answer is simply to have
done nothing, to have allowed it to pass through the system.
And I'm hopeful that they will do something like that.
I think the FED, like many of us, though, is
(06:02):
at this point so scarred by the transitory inflation, which
it was. It was transitory in terms of the rate
of price change, but it has been durable in terms
of the level of prices. And so we all look
at the eggs that we buy, in the milk that
we buy, and we recognize that we pay more for it.
Now that has created effectively a scar or a scab
(06:26):
that we just can't help but pick at and the
FED is unfortunately kind of trapped by that. They're very,
very frightened that inflation could pick up again, even though
forward looking metrics inflation swaps and in particular, long dated
inflation swaps, have shown absolutely no sign that the market
is trying to price in significant inflation risks.
Speaker 1 (06:47):
So, to go back to the tariff story briefly, we
know that the aim, at least articulated by the Trump
administration was to reshore American manufacturing. Do you have a
sense of whether this is going to be effective? Is
it too soon to know given what you're hearing from
the administration? And I know now the President is in
the Middle East where he is trying to kind of
(07:08):
drum up a lot of foreign direct investment into the
United States. But do you have a sense of whether
or not this tariff policy is going to produce the
desired outcome?
Speaker 3 (07:19):
Well, again, I think you have to be very careful
in terms of interpreting what is being used as press
versus what is being used as an actual objective. With
unemployment in the four percent range, with a very few
Americans trained or desiring work, and in a traditional assembly
line type framework, we're not going to see manufacturing, at
least in its traditional form. Come back. What we have
(07:40):
provided is significant cover for items that are of national
security importance to be reshored to at least be friendshored
in terms of their underlying components, and equally important, I
think it's it would be you would be remiss if
you did not acknowledge that, for all the bluster and
for all the headline about how terribly this was going
(08:02):
for the United States, in this ninety day cooling off period,
China has accepted significantly higher trade barriers on its products
into the United States and largely lifted restrictions and trade
barriers and tariffs on products from the United States. So
it's very hard to score this as anything other than
(08:22):
a win for the Trump administration. We may not like
the manner in which it transpired, but it does bring
home the real heart of the message, which is, at
the end of the day, when you are talking about
trade policy, the customer is always right. The US runs
a massive trade surplus in goods with China and largely
(08:43):
with the rest of the world. We run a significant
trade surplus in services. Those in many situations, things like
Google searches or AI searches, etc. Are somewhat irreplaceable chashki's
from China. We can figure out how to get by
without them, right, most of the stuff that we're buying
from China, Americans, if forced to economize and have one
(09:04):
less potato peeler for a six month period, we'll probably
figure out how to do it with a knife again.
And so again, I'm not trying to denigrate the incredible
innovation stuff that China produces, but the simple reality it's
the customer is always right. And the stage that we
are in this trade negotiation suggests that that logic has
played through.
Speaker 1 (09:23):
One of the major developments that occurred during the President's
tour of the Mid East his team working out with
agreements for parties in Saudi Arabia to acquire tens of
thousands of semiconductors used for artificial intelligence from both in
Nvidia and advanced micro devices. Where are we right now
in the global race for AI and has this visit
(09:46):
by the President to the Mid East changed the landscape
in any way? Well, again, I.
Speaker 3 (09:52):
Would just emphasize that it's very early to know. Right,
we know what we've been told, we know the articulation,
the attraction of AI and surveillance hardware is incredibly attractive
to many of these governments, so I'm not the least
bit surprised that they're very happy to increase their spend
in these areas. But the simple reality is that AI
(10:13):
is somewhat the real deal. I will tell you from
a professional standpoint, I have flipped a massive amount of
the time that I would have spent doing Google searches
or traditional data analysis using cell side research. Much of
that has now migrated over to chat, GBT or to GROCK.
(10:33):
If I want to seek out inflammatory positions or to
perplexity with their clawed AI, I am increasingly using those.
I would suggest that somewhere around fifty to sixty percent
of my search activity has been now replaced by various
forms of AI utilization. And I liken it to having
an almost unlimited number of first year analysts. Are they
(10:54):
really smart?
Speaker 4 (10:55):
Yes?
Speaker 3 (10:56):
Can they be trusted to arrive at the right answer,
right answer and have extraords nearly high quality work product? No,
I have to manage them in that process. But it
is an incredible revolution, and I think we're seeing both
the combination of fear and recognition that this is a
true revolutionary framework that is not significantly different than what
we saw with the Internet. It's starting to sync in.
Speaker 1 (11:18):
Michael will leave it there, great conversation. Thank you so
much for joining us. Michael Green, he is the chief
strategist at Simplify Asset Management. Joining from here in New
York City on the Daybreak Asia podcast. Welcome back to
the Daybreak Asia Podcast. I'm Doug Krisner. The Chinese EV
(11:40):
maker Xpong is gearing up for its earnings report, and
according to options data compiled by Bloomberg, Xpong shares may
move by nearly eight percent. Xpong, if you're wondering, is
set to release results next Wednesday before the market opens.
For a closer look now at what we may hear
from this automaker. I'm joined by Bloomberg's Linda Liu. She
(12:01):
is China autos reporter. She's on the line from Hong Kong. Linda,
thank you for making time to chat with me. This
is such a competitive space when you talk about EV
manufacturers in China. How does x pun differentiate it self
from the crowd.
Speaker 4 (12:16):
So x Pung is a really interesting EV maker. It's
been tilted as the Tesla of China because their advanced
driver assistance technology that's similar to Tesla's FSD is considered
one of the best in China, so they use that
as a strong selling point to set themselves apart from
(12:36):
the other competition, which can go from very affordable mass
market models sold by BYD to a very upscale large
family size SUVs sold by rivals like Neo.
Speaker 1 (12:50):
There was recently the Auto show in Shanghai, and I'm
curious about what x pun unveiled at that exhibit.
Speaker 4 (12:57):
It's actually it was really funny at the Shanghai Auto
Show because the object that stole the show was a
humanoid robot that X Punk's CEO brought with him to
the stage. And again you can see the similarity to
Tesla there, who is also working on their own humanoid robots.
(13:19):
So the robots took a walk around the stage. But
the CEO, you know, also introduced new models for the
company as well as projecting very strong confidence for the
rest of the year. Its sales have been on the
roll is growing pretty fast and that's driven largely by
(13:40):
a new affordable model called the Mona, which they launched
last year. So the year ahead, I think x punk
is very confident of a good performance to.
Speaker 1 (13:50):
What extent is this company looking to markets outside of China.
I'm thinking in particular of Europe and perhaps to a
lesser extent in South America.
Speaker 4 (14:01):
Yes, x said that they are ramping up global sales
this year. They marked their expansion drive with a really big,
glitzy event in Hong Kong where they invited media as
well as EV owners to fly in from all over
the world to see their latest flagship MPV, which is
(14:24):
a luxury minivan launch. X Pong is going to start
localizing production in Indonesia this year, and they said they've
also set up operations in Germany. Obviously, Europe is going
to be a very important market for them because it's
a market where they're very friendly to evs and has
(14:44):
the spending power. Latin America is definitely another place where
x pong is working to expand into, but they are
also going to face intense competition there because other Chinese
EV makers like Byd as well as another automaker called
great Wall Motor, already has factories in Brazil. So x
(15:07):
pong is also going to have to contend with a
lot of competition globally.
Speaker 1 (15:12):
When I think of some of the Chinese EV makers
automakers generally speaking, I think about the degree to which
the smartphone has been integrated into some of the designs.
Is that the case very much with x Pong.
Speaker 4 (15:26):
Yes, x Pong has a very i would say advanced
entertainment system in their evs, although I will have to
say that's becoming very common amongst Chinese evs. So not
only x Pong, You've got an actual smartphone maker, sell
Me that has entered the industry their first EV that
(15:49):
s U seven are sold really well, and that just
shows how fast the Chinese market is kind of adapting
to this changing, changing case. You've got customers are very
open to technology. So now cars are not just I guess,
the transportation tool that takes you from A to B,
(16:11):
but people now also expect to be able to look
up their roots on a very large screen mounted on
the dash and be able to talk to their car
as well as watch movies because some of these cars
have theater screens installed. So yeah, the pace from Chinese
(16:33):
customers are very tech focused.
Speaker 1 (16:35):
When you and I have spoken in the past about
the EV market in China, one of the issues has
been over capacity or certainly a crowded industry to the
extent that we may see even more consolidation. Is that
still the case right now?
Speaker 4 (16:50):
Yes, you're right, Doug, So over capacity is still quite
a big issue for legacy automakers, especially foreign joint ventures.
You've got companies like the Japanese automakers Toyota, Nissan, and Honda,
as well as American ones GM and Ford. Are they
(17:10):
facing slumping demand in China? They are trying very hard
to come up with new models that probably fit more
to the taste of Chinese customers. We also saw Toyota
announce a new EV factory that's for the Lexus brand
in Shanghai, So you see they are trying to grow
(17:30):
EV capacity, but that means they are going to have
to slash internal combustion engine capacity, which just is not
selling well these days.
Speaker 1 (17:41):
What do we know about the research and development that
x pund has undertaken, maybe for something like a flying car.
Is that a reality?
Speaker 4 (17:51):
Yes, x PUND is very confident about rolling out their
flying car. It's more of a like a package. They
have kind of a package where you have the flying
car part that also lands onto a land vehicle. So
(18:12):
for this product, they are expecting mass production within the
next couple of years, and they're hoping that with regulatory
approval also coming online, they'll be able to sell this
to the mass market soon. And so we're watching this
space closely as well, because xpongs not only not the
(18:33):
only company exploring this new type of technology. Other automakers
like another Guangzhou based automaker called GAC is also working
on their evy toll slash flying car. Another area of
research that x poem is focusing on is their own
chip development. Given how much geopolitics is impacting the auto
(18:57):
supply chain, expunks that they are hoping to launch their
own AI chip and start fitting it into the evs,
So hopefully with more of bringing more of these technology
in house, they can minimize the impact to their supply
chain from geopolitics.
Speaker 1 (19:17):
You mentioned a moment ago that expectations are that we
will see pretty strong sales from x PUNK. I'm curious
about the extent to which the government may be trying
to stimulate demand for evs to an even greater extent.
Is that happening, Yes.
Speaker 4 (19:33):
For the second year, Chinese government has extended ash cash
for Clunker's scheme where buyers who purchase qualifying evs or
even fuel efficient gasoline cars may qualify for a subsidy
(19:54):
of up to twenty thousand yen. That subsidy has been
a key driver for maintaining EV sales because a previous
subsidies scheme ended in twenty twenty three. So I think
the government probably will extend our programs like this in
(20:14):
the future to try to keep up consumption because the
economy slowdown is weighing on sentiment in China, so we
expect support to continue from the government's.
Speaker 1 (20:25):
Linda, thank you so much for helping us preview the
earnings in the week ahead from x punk. Linda Liu
is a Bloomberg China autos reporter joining from Hong Kong
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
(20:49):
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 Prisoner
and this is Bloomberg,
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg
Daybreak Asia Podcast. I'm Doug Chrisner. The uncertainty around those
ever changing tariffs from the Trump administration has fueled the
debate as to whether a global recession is inevitable. The
(00:23):
head of JP Morgan Chase, Jamie Diamond, at this point,
is not willing to take it off the table. Diamond
spoke exclusively to Bloomberg and said, there is still a
lot of uncertainty, although some of it preceded the Trump administration.
Speaker 2 (00:36):
We had large deficits, instur rates going up, inflation going
up in summer, you know, tariffs and things, and of
course the geopolitical situation is very tense, very difficult and
hard to resolve.
Speaker 1 (00:47):
Jamie Diamond there, the CEO of JP Morgan Chase, speaking
to Bloomberg from the bank's Global Markets conference in Paris.
In a moment, we'll be taking a look at the
ev industry in China and preview next week's earning from
expun We'll be hearing from Linda Leu, China auto reporter
for Bloomberg News. But we begin this morning with markets
and in the States, where the latest economic news was
(01:10):
on the soft side and very much supportive of FED
rate cuts. Wholesale prices unexpectedly fell last month by the
most in five years. Growth in retail sales decelerated notably,
factory production fell for the first time in six months,
and confidence among homebuilders slumped. So now, at this point,
markets are betting on at least two FED rate cuts
(01:31):
this year to prevent a recession. For a closer look,
I'm joined now by Michael Green. He is the chief
strategist at Simplify Asset Management. Michael is on the line
from here in New York City. Good of you to
make time to chat with us. Michael, Where are you
on the recession call right now?
Speaker 3 (01:47):
So I lean towards what Jamie is reiterating, which is
that we have to consider that the prospect of the
economy slowing markedly and continuing to slow, given the disruption
of tariffs, given the uncertainty around interest rate, and much
more importantly, I would actually argue giving the now acknowledged
deterioration in household balance sheets, where we're seeing student loan
(02:08):
debt come on very quickly, We're seeing credit card delinquencies
and defaults start to rise. Dramatically. Auto repossessions and delinquencies
are also rising. The evidence is very clear that at
least the lower fifty percent of the US consumer is
under tremendous amounts of stress that was largely camouflaged by
the coverage that was provided. And when we decided not
(02:30):
to collect student loans for example, now we're actually going
in the opposite direction. We're beginning the process of garnishing wages, etc.
People cannot escape from this. It's important to remember that
the combination of tariffs and the resumption of student loan debt,
as well as the increase in reporting around things like
buy now, pay later, are effectively forcing austerity onto a
(02:51):
sizable fraction of US households. That can feel like caution,
but it actually very quickly turns into they can't do
what they want want to do, and that shows up
as reduced corporate earnings, it shows up as reduced economic vitality.
Introduce even more uncertainty into that with only a ninety
day pause around tariffs, and it really does feel like
(03:13):
we are setting up for something that will ultimately be
called a recession.
Speaker 1 (03:17):
So a ninety day pause while the two sides, the
US and China, negotiate. There is still a risk that
some of the tariffs that are already in place will
produce a higher level of inflation. Look at Walmart today
saying that it will begin raising some prices. Is there
the risk now that we could see a reacceleration in
the level of inflation.
Speaker 3 (03:36):
Well, I think there's absolutely a risk, but I think
we have to keep it in context. Right, we've experienced
largely goods deflation for the past two years. That is
meant that the price of eggs has fallen relative to
its peaks during the COVID component's, toilet paper has fallen,
new car prices have fallen, et cetera. There have really
only been two or three key areas that have sustained
(03:57):
or accelerated pricing. Those would be things like insurance. To
a certain extent. Home prices and certainly the costs associated
with homes, whether that is maintenance, insurance, taxes, etc. Have
all risen dramatically and placed additional stress on us households.
But buying large goods has been a very good story
from the inflation front for the past two years or so,
(04:20):
and now that is coming under pressure at exactly the
time that we're starting to see the services component, things
like owner's equivalent rent or rent itself begin to turn negative,
and so it's going to be a We're going to
be skating a very very fine line. Those things that
have helped for the past two years are going to
become less important. The things that have hurt us over
the past two years are finally starting to get the
(04:41):
catalysts to push the more negative. The net result is
it's a toss up, and I think we'll probably see
a little bit of inflation, but certainly nothing that strikes
me as anything like what we experienced in twenty twenty
and twenty twenty one.
Speaker 1 (04:53):
Well, let's talk a little bit about how the FED
may navigate this. Today we heard from FED Governor Michael
Barr and he was saying the econ yes, HiT's on
solid ground, but he added that terraff related supply chain
disruptions could lead to lower growth and higher inflation. Kind
of what we've been talking about a little bit. Where
is the FED right now in your view and the
degree to which we could see some sort of accommodation
(05:16):
between now and the end of the year.
Speaker 3 (05:18):
Well, I think it's really important to remember that when
you introduce inflation. And I'm using that almost in air quotes.
When you introduce inflation that is tied to tax increases,
things like tariffs, et cetera, that's restrictive. It's not the
sign of inflation that is being driven by excessive demand.
It's being driven by costs that are being imposed upon
the system. To raise interest rates or to resist cutting
(05:41):
interest rates in response to that is beyond any economic
policy that I know. The FED itself explicitly addressed this,
and it's twenty eighteen or it's analysis of the twenty
eighteen teriffs saying the right answer is simply to have
done nothing, to have allowed it to pass through the system.
And I'm hopeful that they will do something like that.
I think the FED, like many of us, though, is
(06:02):
at this point so scarred by the transitory inflation, which
it was. It was transitory in terms of the rate
of price change, but it has been durable in terms
of the level of prices. And so we all look
at the eggs that we buy, in the milk that
we buy, and we recognize that we pay more for it.
Now that has created effectively a scar or a scab
(06:26):
that we just can't help but pick at and the
FED is unfortunately kind of trapped by that. They're very,
very frightened that inflation could pick up again, even though
forward looking metrics inflation swaps and in particular, long dated
inflation swaps, have shown absolutely no sign that the market
is trying to price in significant inflation risks.
Speaker 1 (06:47):
So, to go back to the tariff story briefly, we
know that the aim, at least articulated by the Trump
administration was to reshore American manufacturing. Do you have a
sense of whether this is going to be effective? Is
it too soon to know given what you're hearing from
the administration? And I know now the President is in
the Middle East where he is trying to kind of
(07:08):
drum up a lot of foreign direct investment into the
United States. But do you have a sense of whether
or not this tariff policy is going to produce the
desired outcome?
Speaker 3 (07:19):
Well, again, I think you have to be very careful
in terms of interpreting what is being used as press
versus what is being used as an actual objective. With
unemployment in the four percent range, with a very few
Americans trained or desiring work, and in a traditional assembly
line type framework, we're not going to see manufacturing, at
least in its traditional form. Come back. What we have
(07:40):
provided is significant cover for items that are of national
security importance to be reshored to at least be friendshored
in terms of their underlying components, and equally important, I
think it's it would be you would be remiss if
you did not acknowledge that, for all the bluster and
for all the headline about how terribly this was going
(08:02):
for the United States, in this ninety day cooling off period,
China has accepted significantly higher trade barriers on its products
into the United States and largely lifted restrictions and trade
barriers and tariffs on products from the United States. So
it's very hard to score this as anything other than
(08:22):
a win for the Trump administration. We may not like
the manner in which it transpired, but it does bring
home the real heart of the message, which is, at
the end of the day, when you are talking about
trade policy, the customer is always right. The US runs
a massive trade surplus in goods with China and largely
(08:43):
with the rest of the world. We run a significant
trade surplus in services. Those in many situations, things like
Google searches or AI searches, etc. Are somewhat irreplaceable chashki's
from China. We can figure out how to get by
without them, right, most of the stuff that we're buying
from China, Americans, if forced to economize and have one
(09:04):
less potato peeler for a six month period, we'll probably
figure out how to do it with a knife again.
And so again, I'm not trying to denigrate the incredible
innovation stuff that China produces, but the simple reality it's
the customer is always right. And the stage that we
are in this trade negotiation suggests that that logic has
played through.
Speaker 1 (09:23):
One of the major developments that occurred during the President's
tour of the Mid East his team working out with
agreements for parties in Saudi Arabia to acquire tens of
thousands of semiconductors used for artificial intelligence from both in
Nvidia and advanced micro devices. Where are we right now
in the global race for AI and has this visit
(09:46):
by the President to the Mid East changed the landscape
in any way? Well, again, I.
Speaker 3 (09:52):
Would just emphasize that it's very early to know. Right,
we know what we've been told, we know the articulation,
the attraction of AI and surveillance hardware is incredibly attractive
to many of these governments, so I'm not the least
bit surprised that they're very happy to increase their spend
in these areas. But the simple reality is that AI
(10:13):
is somewhat the real deal. I will tell you from
a professional standpoint, I have flipped a massive amount of
the time that I would have spent doing Google searches
or traditional data analysis using cell side research. Much of
that has now migrated over to chat, GBT or to GROCK.
(10:33):
If I want to seek out inflammatory positions or to
perplexity with their clawed AI, I am increasingly using those.
I would suggest that somewhere around fifty to sixty percent
of my search activity has been now replaced by various
forms of AI utilization. And I liken it to having
an almost unlimited number of first year analysts. Are they
(10:54):
really smart?
Speaker 4 (10:55):
Yes?
Speaker 3 (10:56):
Can they be trusted to arrive at the right answer,
right answer and have extraords nearly high quality work product? No,
I have to manage them in that process. But it
is an incredible revolution, and I think we're seeing both
the combination of fear and recognition that this is a
true revolutionary framework that is not significantly different than what
we saw with the Internet. It's starting to sync in.
Speaker 1 (11:18):
Michael will leave it there, great conversation. Thank you so
much for joining us. Michael Green, he is the chief
strategist at Simplify Asset Management. Joining from here in New
York City on the Daybreak Asia podcast. Welcome back to
the Daybreak Asia Podcast. I'm Doug Krisner. The Chinese EV
(11:40):
maker Xpong is gearing up for its earnings report, and
according to options data compiled by Bloomberg, Xpong shares may
move by nearly eight percent. Xpong, if you're wondering, is
set to release results next Wednesday before the market opens.
For a closer look now at what we may hear
from this automaker. I'm joined by Bloomberg's Linda Liu. She
(12:01):
is China autos reporter. She's on the line from Hong Kong. Linda,
thank you for making time to chat with me. This
is such a competitive space when you talk about EV
manufacturers in China. How does x pun differentiate it self
from the crowd.
Speaker 4 (12:16):
So x Pung is a really interesting EV maker. It's
been tilted as the Tesla of China because their advanced
driver assistance technology that's similar to Tesla's FSD is considered
one of the best in China, so they use that
as a strong selling point to set themselves apart from
(12:36):
the other competition, which can go from very affordable mass
market models sold by BYD to a very upscale large
family size SUVs sold by rivals like Neo.
Speaker 1 (12:50):
There was recently the Auto show in Shanghai, and I'm
curious about what x pun unveiled at that exhibit.
Speaker 4 (12:57):
It's actually it was really funny at the Shanghai Auto
Show because the object that stole the show was a
humanoid robot that X Punk's CEO brought with him to
the stage. And again you can see the similarity to
Tesla there, who is also working on their own humanoid robots.
(13:19):
So the robots took a walk around the stage. But
the CEO, you know, also introduced new models for the
company as well as projecting very strong confidence for the
rest of the year. Its sales have been on the
roll is growing pretty fast and that's driven largely by
(13:40):
a new affordable model called the Mona, which they launched
last year. So the year ahead, I think x punk
is very confident of a good performance to.
Speaker 1 (13:50):
What extent is this company looking to markets outside of China.
I'm thinking in particular of Europe and perhaps to a
lesser extent in South America.
Speaker 4 (14:01):
Yes, x said that they are ramping up global sales
this year. They marked their expansion drive with a really big,
glitzy event in Hong Kong where they invited media as
well as EV owners to fly in from all over
the world to see their latest flagship MPV, which is
(14:24):
a luxury minivan launch. X Pong is going to start
localizing production in Indonesia this year, and they said they've
also set up operations in Germany. Obviously, Europe is going
to be a very important market for them because it's
a market where they're very friendly to evs and has
(14:44):
the spending power. Latin America is definitely another place where
x pong is working to expand into, but they are
also going to face intense competition there because other Chinese
EV makers like Byd as well as another automaker called
great Wall Motor, already has factories in Brazil. So x
(15:07):
pong is also going to have to contend with a
lot of competition globally.
Speaker 1 (15:12):
When I think of some of the Chinese EV makers
automakers generally speaking, I think about the degree to which
the smartphone has been integrated into some of the designs.
Is that the case very much with x Pong.
Speaker 4 (15:26):
Yes, x Pong has a very i would say advanced
entertainment system in their evs, although I will have to
say that's becoming very common amongst Chinese evs. So not
only x Pong, You've got an actual smartphone maker, sell
Me that has entered the industry their first EV that
(15:49):
s U seven are sold really well, and that just
shows how fast the Chinese market is kind of adapting
to this changing, changing case. You've got customers are very
open to technology. So now cars are not just I guess,
the transportation tool that takes you from A to B,
(16:11):
but people now also expect to be able to look
up their roots on a very large screen mounted on
the dash and be able to talk to their car
as well as watch movies because some of these cars
have theater screens installed. So yeah, the pace from Chinese
(16:33):
customers are very tech focused.
Speaker 1 (16:35):
When you and I have spoken in the past about
the EV market in China, one of the issues has
been over capacity or certainly a crowded industry to the
extent that we may see even more consolidation. Is that
still the case right now?
Speaker 4 (16:50):
Yes, you're right, Doug, So over capacity is still quite
a big issue for legacy automakers, especially foreign joint ventures.
You've got companies like the Japanese automakers Toyota, Nissan, and Honda,
as well as American ones GM and Ford. Are they
(17:10):
facing slumping demand in China? They are trying very hard
to come up with new models that probably fit more
to the taste of Chinese customers. We also saw Toyota
announce a new EV factory that's for the Lexus brand
in Shanghai, So you see they are trying to grow
(17:30):
EV capacity, but that means they are going to have
to slash internal combustion engine capacity, which just is not
selling well these days.
Speaker 1 (17:41):
What do we know about the research and development that
x pund has undertaken, maybe for something like a flying car.
Is that a reality?
Speaker 4 (17:51):
Yes, x PUND is very confident about rolling out their
flying car. It's more of a like a package. They
have kind of a package where you have the flying
car part that also lands onto a land vehicle. So
(18:12):
for this product, they are expecting mass production within the
next couple of years, and they're hoping that with regulatory
approval also coming online, they'll be able to sell this
to the mass market soon. And so we're watching this
space closely as well, because xpongs not only not the
(18:33):
only company exploring this new type of technology. Other automakers
like another Guangzhou based automaker called GAC is also working
on their evy toll slash flying car. Another area of
research that x poem is focusing on is their own
chip development. Given how much geopolitics is impacting the auto
(18:57):
supply chain, expunks that they are hoping to launch their
own AI chip and start fitting it into the evs,
So hopefully with more of bringing more of these technology
in house, they can minimize the impact to their supply
chain from geopolitics.
Speaker 1 (19:17):
You mentioned a moment ago that expectations are that we
will see pretty strong sales from x PUNK. I'm curious
about the extent to which the government may be trying
to stimulate demand for evs to an even greater extent.
Is that happening, Yes.
Speaker 4 (19:33):
For the second year, Chinese government has extended ash cash
for Clunker's scheme where buyers who purchase qualifying evs or
even fuel efficient gasoline cars may qualify for a subsidy
(19:54):
of up to twenty thousand yen. That subsidy has been
a key driver for maintaining EV sales because a previous
subsidies scheme ended in twenty twenty three. So I think
the government probably will extend our programs like this in
(20:14):
the future to try to keep up consumption because the
economy slowdown is weighing on sentiment in China, so we
expect support to continue from the government's.
Speaker 1 (20:25):
Linda, thank you so much for helping us preview the
earnings in the week ahead from x punk. Linda Liu
is a Bloomberg China autos reporter joining from Hong Kong
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
(20:49):
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 Prisoner
and this is Bloomberg,
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