September 21, 2025 • 18 mins
Wall Street closed out the highly anticipated Federal Reserve week with stocks notching fresh all-time highs as prospects for more rate cuts bolstered the outlook for corporate earnings. US President Donald Trump said Friday that he would meet Chinese President Xi Jinping on the sidelines of the upcoming Asia-Pacific Economic Cooperation summit and hailed progress toward finalizing a deal over TikTok, after a highly anticipated call on Friday. The in-person meeting would be the first between the leaders of the world's two largest economies since the US president returned to office, and settles an extended back-and-forth between Washington and Beijing around the venue and timing. The APEC summit is slated to be held in South Korea next month. We get perspective from Patrick Kennedy, Managing Partner at AllSource Investment Management.
Meantime, Asian shares edged higher at the open, led by Japan, after the central bank eased concerns over plans to offload its massive exchange-traded fund holdings. The Nikkei-225 Index jumped 1.3% as trading kicked off in a new week, bouncing back after the Bank of Japan's comments on ETF sales spooked the markets Friday. Shares in Australia and South Korea also rose at the open. We get more on the markets from Alicia Garcia Herrero, Chief APAC Economist at Natixis. She speaks with Bloomberg's Shery Ahn and Avril Hong on The Asia Trade.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia Podcast. I'm deg Chrisner.
So President Trump says that he will meet with Chinese
President Chi Jinping next month on the sidelines of the
APEC summit in South Korea. Now, this follows a phone
call on Friday between the two leaders, and Trump said
it delivered progress toward finalizing a deal over TikTok. Here's
(00:30):
Bloomberg Stephen Engel in Hong Kong.
Speaker 3 (00:32):
Well, they talked and that's a good thing. And then
they're going to meet in person for the first time
since Trump took his second term, so that is good
as well. And they've also come to basic agreement on
the TikTok deal that has been obviously up in the
air for quite some time.
Speaker 2 (00:50):
Bloomberg Stephen Engeled there. Now we'll have more on what
this means for markets in Asia. Momentarily, we'll get the
views of Alithia Garcia Horrero, chief Apakikonomous for Natixis. But
we begin here in the States. Joining me now is
Patrick Kennedy. He is managing partner at All Source Investment Management. Pat,
thank you so much for making time to chat so stateside,
(01:12):
we had the equity market closing at fresh all time
highs Friday. That's for the S and P, NASDAT COMP,
Dow Industrial Average. Are you a little nervous at these levels?
Speaker 4 (01:22):
At twenty four times next year's numbers, Doug, We're not
putting new money to work at the index level. We're
still taking shots underneath the index level right on certain
sectors and names, But at the index level, we feel
like things are a bit frothy. Whenever we're over twenty
two times forward, we feel like momentum has really taken
a hold of things and you need to be really
(01:44):
careful with new money. Therefore, at the index level in
public equities, we're not putting a lot of new money
to work.
Speaker 2 (01:50):
So the FEDS message from last week was pretty clear.
It looks like we've got at least two more rate
cuts coming this year, and how many more in the
next next year We'll have to wait and see. But
has that been fully discounted by the market now? Fed policy?
Speaker 4 (02:06):
You bring up a great point, Doug, And that's kind
of why we're trapped between a rock and a hard
place here, because the old adage is don't fight the FED, right,
So when the FED is cutting, you know, you're supposed
to put your pedal to the metal, so to speak,
and overweight equities and that sort of thing. But I
don't think we've seen the FED cut into you know,
a rate environment that's already producing call it, mid teens
(02:28):
earnings growth next year, a stroing economy, no cracks to
be seen, an AI now taking over the technology world,
which is supposed to have huge efficiency benefits for companies
across the board. So with the FED cutting at such
a time, we're kind of scratching our heads as to why.
Speaker 5 (02:47):
Right.
Speaker 4 (02:48):
You know, we do think that the market likes lower rates,
and we think a lot of that was baked in
over the last call it, sixty to ninety days, so
we wouldn't really be chasing anything here, and we'd be
more concerned with what the cutting will do down the
road when it comes to inflation and even stagflation at that.
You know, when you look twelve to eighteen months.
Speaker 2 (03:06):
Out, I'm glad you brought up the long end of
the curve and the stagflation worry. We're at four to
twelve right now. In the ten year, I mean, could
we go to four and a quarter? Do you think.
Speaker 4 (03:17):
I think we could when news first came out. We
shouldn't say it first came out, but when it was
understood that we're going to have a rate cut in September,
you saw the back half of the curve actually steep it, right,
So you saw rates go up, the ten year yield
go up, which tells you that investors are saying, hey,
there's going to be an inflation problem because of this.
(03:39):
That's our take at least, right, So when you see
the yield curve actually steep in when the Fed is
saying they're going to start cutting, that's cost for concern
when you look down the road. So when you have
as much debt on the balance sheet as the US
government does and you're now cutting and making money more loose,
we think that that can create an even bigger problem
(04:00):
because it basically gives you the go ahead to take
on more liability, more debt. Right, So we think it's
like pouring gas on a fire at this point. And
we'd be really careful when it comes to any company
or any asset class that's tied to interest rates going
down to benefit.
Speaker 2 (04:19):
So where are you finding opportunity?
Speaker 4 (04:21):
Yeah, it's a great question. So three sectors. We like cybersecurity,
software and biotech. No secret that we've liked software and
cybersecurity for a while. Cybersecurity, we think, is just the
secular growth story plays right into the hands of AI.
The better AI gets, the more cybersecurity we're going to need.
(04:42):
Software is actually just the next step in the evolution
of AI. First you had hardware such as in videos,
so on and so forth, and then you had the
infrastructure plays, the big hayperscalers, and now we think software
is really going to take it, take the baton and
start to run with it. So when it comes to biotech,
that's US not fighting the FED, right, it's US saying, okay, well,
(05:03):
if rates are going to come down the near term
and we want a quick trade, biotech would be rates sensitive. However,
that would be a short term play for US, right,
we'd look to get out of that within the next
six months.
Speaker 2 (05:15):
So we've got this deal now between the US and China.
Apparently the US operations of TikTok will be majority owned
and controlled by Americans. This calls to mind the level
of activity that we have seen in private markets versus
public markets. How are you understanding this landscape? Right now.
(05:35):
Are you more inclined to become involved in private deals
than you are let's say, playing in the public.
Speaker 4 (05:41):
Space, absolutely, Doc, Yeah, you know, our firm is heavily
involved in private markets. We feel like the valuations on
the private side are much more attractive than on the
public side. So we haven't seen much activity since twenty
twenty two on the private side shot through the roof.
(06:01):
You know, when inflation was at nine you saw the
public markets really recover from that. Over the last two years,
you have not seen such a recovery in private equity.
In factor now just starting to see IPOs come back
to the market like Figma, Bullish and a few others.
So we're now just starting to see that recovery take
(06:22):
place within private equity. And I think it's just because
it's more of an institutional stance in private equity where
they actually want to make sure the path is clear
before they put new money to work, so they're a
little slower to grab onto the recovery. With that being said,
we feel like it's a spring coiled recovery because we
haven't seen much activity over the last two years. So
when rates do start to drop a bit, that's where
(06:44):
we'd want to be. We're not saying that the market
is going to fall off a cliff or anything like that.
We're just saying that with rates coming down, yeah, the
natural instinct is to step in and be bullish. But
with valuations this high in the public market, that's not
the asset class that we would to ride that fed wave.
It would be the private equity markets and private markets
in general.
Speaker 2 (07:05):
So give me a sense of how a retail player
would participate into the private space.
Speaker 4 (07:11):
Yeah, yeah, that's a that's a great point. So retail
can do this simply by buying some of the private
equity names like Blackstone, Blue Loowel, Apollo. Now we're buying,
you know, directly into these funds. For our clients, we want,
you know, either a GP or an LP steake direct participation.
But if you want to get exposure to this within
the public markets, a great way to do it is
(07:33):
buying the companies out right, Right, So Blackstone is going
to participate with all of their investors within their fund,
Same with Buile, same with Apollo, Carlisle, so on and
so forth. Now we're not saying that they're all equal, right,
you know, we would just blindly buy that bucket of names.
But we would say, you know, for a retail investor
that wants to take advantage of all of this pent
(07:53):
up demand within private equity, take a look at that
sector and pick a couple names you like.
Speaker 6 (07:58):
Pat.
Speaker 2 (07:58):
Before I let you go, I want to get you
take on what you're seeing offshore these days. Over the weekend,
a group of senior members of the US House arrived
in China. This is the first of visual visit we
have seen at this level in about six years. Premier
Lee Cheung was at the Great Hall for kind of
an official kickoff, and he called this an ice breaking trip.
(08:19):
Now we know the US in Beijing are trying to
work out a new trade deal. Mentioned the TikTok story
a moment ago. That's obviously a part of it. How
are you feeling about markets in Asia right now?
Speaker 4 (08:31):
Yeah, Unfortunately, our stance really hasn't changed much right so China,
you know, we'll definitely trade it, but we won't stay
as a secular investor, a long term investor, just because
we've seen so many investors get kind of fooled out
in the past where it looks like this secular growth
story is poining together within China, you see a lot
of bullish demand and pent up demand start to flow
(08:54):
that way, and then all of a sudden something happens
within the government that changes all of that. So as
an investor in China, you don't have the same sort
of control as you do here in the US, and
therefore you don't have a stable foundation. You can say, hey,
I can put my money where my mouth is and
go purchase a few good Chinese names for the next
ten years. With that being said, you know, we do
(09:14):
think that there's a lot of momentum within some of
those China names. You're seeing it right now, within Baba, JD,
the k Web, you know, so on and so forth.
So we wouldn't fight that momentum. We would just treat
it as a trade rather than a long term investment.
When we are looking at longer term themes overseas, our
answer still hasn't changed. We like India a lot. We
(09:35):
feel like that's a growing economy, it's a more maturing economy.
And then Japan has just been doing phenomenal across the
board for the same reasons that well, a little bit
different than India. We do feel like it's becoming a
more mature economy in Japan, but it has been for
a while. The Japan story is really about inflation and
coming out of a twenty year deflationary period that was
(09:55):
really set on fire by the most recent inflation kick and.
Speaker 2 (09:59):
The news last week on Friday when the boj said
it's going to begin offloading some of the massive holdings
it has in exchange traded funds. I think that number
is a little north of five hundred billion US pat
Thank you so much. Patrick Kennedy there, managing partner at
All Source Investment Management, joining us here on the Daybreak
Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm
(10:30):
Doug Chrisner. As we have been discussing, President Trump announced
that he has reached a deal Friday to spin off
the US operations of TikTok from its Chinese owner ByteDance,
and in addition, Trump said he would be meeting with
Chinese President Chi Jinping next month on the sidelines of
the APEC summit in South Korea. For more on the
potential impact, we heard from Alithia Garcia Herrero, chief APAC
(10:54):
economist for Natixis. She spoke with Bloomberg TV host Sherry
on and April hon on the Asia trade So.
Speaker 5 (11:02):
Alicia, we just heard Sherry mentioning how the hopes is
that this paves the way for a US China trade deal.
To what extent do you think this helps to mitigate
the risk of the global economy as we wait to
see the tariff pass through.
Speaker 6 (11:16):
Well, partially because a lot of tarists have already been
imposed on.
Speaker 7 (11:22):
Other countries and that's not going to be lifted.
Speaker 6 (11:25):
The only thing that we could see coming down, in
my view, is probably India and Taiwan. Taiwan is on
a temporary twenty percent tariff and there's good chances that
will be lowered, but other than that, you know, the
rest of the tariffs will remain. So in other words,
even if we have a deal with China, we are
(11:46):
in a tariff world, and we're going to remain in
a tariff world.
Speaker 7 (11:50):
So companies have to realize this.
Speaker 5 (11:53):
And as we wait for perhaps companies to realize this,
we're watching out for data as well, including from South
Korea trade data for the first twenty days. Hopefully it
gives us a glimpse on global demand chips exports as well.
What are you seeing as the trajectory for the rest
of the year.
Speaker 6 (12:12):
I think we already have some signs, and you're right.
This Korea has the best kind of forward looking data.
It's very quick to see what's going on, you know,
in the shortest space of time. Back we already have Singapore.
I mean, past data has been horrible, and I think
this is what we're getting. The exception is actually again Taiwan,
(12:34):
because the chip cycle is different, especially high end chips,
GPU related chips.
Speaker 7 (12:40):
There, we still see a lot of demand.
Speaker 6 (12:43):
But you know, we could be surprised by South Korea,
as you mentioned, because we already have the ban on
NBDIA GPUs from China, so we could start seeing that
even for this very demanded high end chips, we may
see a different trend, and not because of tarists, but
(13:04):
because of a right prohibition this time around from China.
This is this is also affecting trade, so you know,
everything we hear actually is negative, even if we get
a trade deal between the US and China, negative on trade,
negative on global value chains.
Speaker 7 (13:20):
That's where we are now.
Speaker 1 (13:22):
Alicia, we often talk about a two track economy when
it comes to China. Could that two track economy also
be sort of understood as this exuberance over it tech,
the semiconductors, and really Beijing investing in these sectors as
opposed to the real estate market that continues to drag
the broader economy.
Speaker 6 (13:43):
Yes, absolutely, and I would put even more sectors in
this second pack bucket. I would argue that China is
in a dual economy as you said so, but it
is a government driven. It is not so much that
that that on its own China can actually use this
(14:04):
first part of the economy as you mentioned it, semiconductors,
just to run the whole economy. We know that because
times have been absolutely wonderful in terms of exports of
all of these IT related or if you want green
tech related also sectors, but.
Speaker 7 (14:23):
It hasn't been enough.
Speaker 6 (14:24):
We know that companies are making any money because they
are in this evolution situation. They need to basically fight
to get market shared by cutting prices and cutting their
markup on top of everything, meaning the actual room to increase.
Speaker 7 (14:42):
Prices is also shelved.
Speaker 6 (14:44):
So because of that, I think you cannot just run
an economy of the size of China with one part
of the economy.
Speaker 7 (14:52):
It's just too small.
Speaker 6 (14:54):
We need to remember said sector was actually much bigger
than the IT and semic on that sector in China,
So it's just not enough.
Speaker 7 (15:02):
And that's why I.
Speaker 6 (15:03):
Think that these efforts eventually we have to shift to
the rest of the economy.
Speaker 1 (15:12):
When are we going to get a monetary boost? I mean,
we get long prim arates, nothing expected for today, but
then could we see something later in the year.
Speaker 6 (15:20):
We're expecting two cuts ten bps each. I realized this
sounds little compared to what the fact might be doing.
So in terms of you know, the interest rate differential,
actually China will hold ground. But we do expect some
cuts because, as you said, the rest of the economy
(15:40):
and increasingly even the export sector to be frank, is
showing that it isn't as resilient as it used to
be in the first half of the year. So yes,
we do expect cuts, not too many, because again China
has to make sure that it is not extreme capt
(16:00):
that outflow coming from a very large integrate different flow
within us, so they have to keep it there and
that's why we have to ten b cuts up to
twenty six, twenty twenty six.
Speaker 5 (16:14):
Even as we talk about cuts for the FED, for China,
for the BOJ it's about hikes, and we've been seeing
how the markets look relatively resilient despite what the BOG
signaled last Friday. To what extent do you think is
that providing some form of cover for quantitative tightening or
rate hikes from the BOJ.
Speaker 6 (16:34):
Well, you're right, the BOJ somehow is going against the
tide because we see Bank Indonesia cutting I mean many,
not only the Fed. Yeah, it's like everybody's saying, oh
the Fed is cutting. There you go, I have some
room and everybody everybody is worried about Paris. So everybody
is kind of in that easy mode except the BOJ.
(16:55):
But we need to remember the BOJ is already in
an exuberantly, you know, excessively. In a way, it lacks
mode because of its humongous balance sheet beyond the very
low level of rates.
Speaker 7 (17:11):
So in a way it goes without saying.
Speaker 6 (17:14):
They need to tighten a little bit because they have
no room if anything happens in Japan, the BOJ has
no room. This is why I think the bo J
will need to hike this year, maybe just twenty five babps.
Speaker 7 (17:27):
This is what we have. But it's a.
Speaker 6 (17:28):
Signal that the BOJ is back, is back, to play
the game of a central bank that has some room.
And this brings us, of course to quantit that if tightened,
there's no better case for the bo j to start
disposing a little bit of those stocks that it bought.
Speaker 7 (17:48):
And there's no better.
Speaker 6 (17:49):
Time because the market is that it's as it stopped,
you know, and the nick is it's just expensive enough
for them to stop without a concept, we'll.
Speaker 1 (17:58):
Be watching those sales. Alicia, good to have you with us.
Alysia Garciarero of Natixis.
Speaker 2 (18:06):
Thanks for listening to today's episode of the Bloomberg Daybreak
Asia Edition podcast. Each weekday, we look at the story
shaping markets, finance, and geopolitics in the Asia Pacific. You
can find us 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
(18:28):
and Australia. I'm Doug Chrisner and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia Podcast. I'm deg Chrisner.
So President Trump says that he will meet with Chinese
President Chi Jinping next month on the sidelines of the
APEC summit in South Korea. Now, this follows a phone
call on Friday between the two leaders, and Trump said
it delivered progress toward finalizing a deal over TikTok. Here's
(00:30):
Bloomberg Stephen Engel in Hong Kong.
Speaker 3 (00:32):
Well, they talked and that's a good thing. And then
they're going to meet in person for the first time
since Trump took his second term, so that is good
as well. And they've also come to basic agreement on
the TikTok deal that has been obviously up in the
air for quite some time.
Speaker 2 (00:50):
Bloomberg Stephen Engeled there. Now we'll have more on what
this means for markets in Asia. Momentarily, we'll get the
views of Alithia Garcia Horrero, chief Apakikonomous for Natixis. But
we begin here in the States. Joining me now is
Patrick Kennedy. He is managing partner at All Source Investment Management. Pat,
thank you so much for making time to chat so stateside,
(01:12):
we had the equity market closing at fresh all time
highs Friday. That's for the S and P, NASDAT COMP,
Dow Industrial Average. Are you a little nervous at these levels?
Speaker 4 (01:22):
At twenty four times next year's numbers, Doug, We're not
putting new money to work at the index level. We're
still taking shots underneath the index level right on certain
sectors and names, But at the index level, we feel
like things are a bit frothy. Whenever we're over twenty
two times forward, we feel like momentum has really taken
a hold of things and you need to be really
(01:44):
careful with new money. Therefore, at the index level in
public equities, we're not putting a lot of new money
to work.
Speaker 2 (01:50):
So the FEDS message from last week was pretty clear.
It looks like we've got at least two more rate
cuts coming this year, and how many more in the
next next year We'll have to wait and see. But
has that been fully discounted by the market now? Fed policy?
Speaker 4 (02:06):
You bring up a great point, Doug, And that's kind
of why we're trapped between a rock and a hard
place here, because the old adage is don't fight the FED, right,
So when the FED is cutting, you know, you're supposed
to put your pedal to the metal, so to speak,
and overweight equities and that sort of thing. But I
don't think we've seen the FED cut into you know,
a rate environment that's already producing call it, mid teens
(02:28):
earnings growth next year, a stroing economy, no cracks to
be seen, an AI now taking over the technology world,
which is supposed to have huge efficiency benefits for companies
across the board. So with the FED cutting at such
a time, we're kind of scratching our heads as to why.
Speaker 5 (02:47):
Right.
Speaker 4 (02:48):
You know, we do think that the market likes lower rates,
and we think a lot of that was baked in
over the last call it, sixty to ninety days, so
we wouldn't really be chasing anything here, and we'd be
more concerned with what the cutting will do down the
road when it comes to inflation and even stagflation at that.
You know, when you look twelve to eighteen months.
Speaker 2 (03:06):
Out, I'm glad you brought up the long end of
the curve and the stagflation worry. We're at four to
twelve right now. In the ten year, I mean, could
we go to four and a quarter? Do you think.
Speaker 4 (03:17):
I think we could when news first came out. We
shouldn't say it first came out, but when it was
understood that we're going to have a rate cut in September,
you saw the back half of the curve actually steep it, right,
So you saw rates go up, the ten year yield
go up, which tells you that investors are saying, hey,
there's going to be an inflation problem because of this.
(03:39):
That's our take at least, right, So when you see
the yield curve actually steep in when the Fed is
saying they're going to start cutting, that's cost for concern
when you look down the road. So when you have
as much debt on the balance sheet as the US
government does and you're now cutting and making money more loose,
we think that that can create an even bigger problem
(04:00):
because it basically gives you the go ahead to take
on more liability, more debt. Right, So we think it's
like pouring gas on a fire at this point. And
we'd be really careful when it comes to any company
or any asset class that's tied to interest rates going
down to benefit.
Speaker 2 (04:19):
So where are you finding opportunity?
Speaker 4 (04:21):
Yeah, it's a great question. So three sectors. We like cybersecurity,
software and biotech. No secret that we've liked software and
cybersecurity for a while. Cybersecurity, we think, is just the
secular growth story plays right into the hands of AI.
The better AI gets, the more cybersecurity we're going to need.
(04:42):
Software is actually just the next step in the evolution
of AI. First you had hardware such as in videos,
so on and so forth, and then you had the
infrastructure plays, the big hayperscalers, and now we think software
is really going to take it, take the baton and
start to run with it. So when it comes to biotech,
that's US not fighting the FED, right, it's US saying, okay, well,
(05:03):
if rates are going to come down the near term
and we want a quick trade, biotech would be rates sensitive. However,
that would be a short term play for US, right,
we'd look to get out of that within the next
six months.
Speaker 2 (05:15):
So we've got this deal now between the US and China.
Apparently the US operations of TikTok will be majority owned
and controlled by Americans. This calls to mind the level
of activity that we have seen in private markets versus
public markets. How are you understanding this landscape? Right now.
(05:35):
Are you more inclined to become involved in private deals
than you are let's say, playing in the public.
Speaker 4 (05:41):
Space, absolutely, Doc, Yeah, you know, our firm is heavily
involved in private markets. We feel like the valuations on
the private side are much more attractive than on the
public side. So we haven't seen much activity since twenty
twenty two on the private side shot through the roof.
(06:01):
You know, when inflation was at nine you saw the
public markets really recover from that. Over the last two years,
you have not seen such a recovery in private equity.
In factor now just starting to see IPOs come back
to the market like Figma, Bullish and a few others.
So we're now just starting to see that recovery take
(06:22):
place within private equity. And I think it's just because
it's more of an institutional stance in private equity where
they actually want to make sure the path is clear
before they put new money to work, so they're a
little slower to grab onto the recovery. With that being said,
we feel like it's a spring coiled recovery because we
haven't seen much activity over the last two years. So
when rates do start to drop a bit, that's where
(06:44):
we'd want to be. We're not saying that the market
is going to fall off a cliff or anything like that.
We're just saying that with rates coming down, yeah, the
natural instinct is to step in and be bullish. But
with valuations this high in the public market, that's not
the asset class that we would to ride that fed wave.
It would be the private equity markets and private markets
in general.
Speaker 2 (07:05):
So give me a sense of how a retail player
would participate into the private space.
Speaker 4 (07:11):
Yeah, yeah, that's a that's a great point. So retail
can do this simply by buying some of the private
equity names like Blackstone, Blue Loowel, Apollo. Now we're buying,
you know, directly into these funds. For our clients, we want,
you know, either a GP or an LP steake direct participation.
But if you want to get exposure to this within
the public markets, a great way to do it is
(07:33):
buying the companies out right, Right, So Blackstone is going
to participate with all of their investors within their fund,
Same with Buile, same with Apollo, Carlisle, so on and
so forth. Now we're not saying that they're all equal, right,
you know, we would just blindly buy that bucket of names.
But we would say, you know, for a retail investor
that wants to take advantage of all of this pent
(07:53):
up demand within private equity, take a look at that
sector and pick a couple names you like.
Speaker 6 (07:58):
Pat.
Speaker 2 (07:58):
Before I let you go, I want to get you
take on what you're seeing offshore these days. Over the weekend,
a group of senior members of the US House arrived
in China. This is the first of visual visit we
have seen at this level in about six years. Premier
Lee Cheung was at the Great Hall for kind of
an official kickoff, and he called this an ice breaking trip.
(08:19):
Now we know the US in Beijing are trying to
work out a new trade deal. Mentioned the TikTok story
a moment ago. That's obviously a part of it. How
are you feeling about markets in Asia right now?
Speaker 4 (08:31):
Yeah, Unfortunately, our stance really hasn't changed much right so China,
you know, we'll definitely trade it, but we won't stay
as a secular investor, a long term investor, just because
we've seen so many investors get kind of fooled out
in the past where it looks like this secular growth
story is poining together within China, you see a lot
of bullish demand and pent up demand start to flow
(08:54):
that way, and then all of a sudden something happens
within the government that changes all of that. So as
an investor in China, you don't have the same sort
of control as you do here in the US, and
therefore you don't have a stable foundation. You can say, hey,
I can put my money where my mouth is and
go purchase a few good Chinese names for the next
ten years. With that being said, you know, we do
(09:14):
think that there's a lot of momentum within some of
those China names. You're seeing it right now, within Baba, JD,
the k Web, you know, so on and so forth.
So we wouldn't fight that momentum. We would just treat
it as a trade rather than a long term investment.
When we are looking at longer term themes overseas, our
answer still hasn't changed. We like India a lot. We
(09:35):
feel like that's a growing economy, it's a more maturing economy.
And then Japan has just been doing phenomenal across the
board for the same reasons that well, a little bit
different than India. We do feel like it's becoming a
more mature economy in Japan, but it has been for
a while. The Japan story is really about inflation and
coming out of a twenty year deflationary period that was
(09:55):
really set on fire by the most recent inflation kick and.
Speaker 2 (09:59):
The news last week on Friday when the boj said
it's going to begin offloading some of the massive holdings
it has in exchange traded funds. I think that number
is a little north of five hundred billion US pat
Thank you so much. Patrick Kennedy there, managing partner at
All Source Investment Management, joining us here on the Daybreak
Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm
(10:30):
Doug Chrisner. As we have been discussing, President Trump announced
that he has reached a deal Friday to spin off
the US operations of TikTok from its Chinese owner ByteDance,
and in addition, Trump said he would be meeting with
Chinese President Chi Jinping next month on the sidelines of
the APEC summit in South Korea. For more on the
potential impact, we heard from Alithia Garcia Herrero, chief APAC
(10:54):
economist for Natixis. She spoke with Bloomberg TV host Sherry
on and April hon on the Asia trade So.
Speaker 5 (11:02):
Alicia, we just heard Sherry mentioning how the hopes is
that this paves the way for a US China trade deal.
To what extent do you think this helps to mitigate
the risk of the global economy as we wait to
see the tariff pass through.
Speaker 6 (11:16):
Well, partially because a lot of tarists have already been
imposed on.
Speaker 7 (11:22):
Other countries and that's not going to be lifted.
Speaker 6 (11:25):
The only thing that we could see coming down, in
my view, is probably India and Taiwan. Taiwan is on
a temporary twenty percent tariff and there's good chances that
will be lowered, but other than that, you know, the
rest of the tariffs will remain. So in other words,
even if we have a deal with China, we are
(11:46):
in a tariff world, and we're going to remain in
a tariff world.
Speaker 7 (11:50):
So companies have to realize this.
Speaker 5 (11:53):
And as we wait for perhaps companies to realize this,
we're watching out for data as well, including from South
Korea trade data for the first twenty days. Hopefully it
gives us a glimpse on global demand chips exports as well.
What are you seeing as the trajectory for the rest
of the year.
Speaker 6 (12:12):
I think we already have some signs, and you're right.
This Korea has the best kind of forward looking data.
It's very quick to see what's going on, you know,
in the shortest space of time. Back we already have Singapore.
I mean, past data has been horrible, and I think
this is what we're getting. The exception is actually again Taiwan,
(12:34):
because the chip cycle is different, especially high end chips,
GPU related chips.
Speaker 7 (12:40):
There, we still see a lot of demand.
Speaker 6 (12:43):
But you know, we could be surprised by South Korea,
as you mentioned, because we already have the ban on
NBDIA GPUs from China, so we could start seeing that
even for this very demanded high end chips, we may
see a different trend, and not because of tarists, but
(13:04):
because of a right prohibition this time around from China.
This is this is also affecting trade, so you know,
everything we hear actually is negative, even if we get
a trade deal between the US and China, negative on trade,
negative on global value chains.
Speaker 7 (13:20):
That's where we are now.
Speaker 1 (13:22):
Alicia, we often talk about a two track economy when
it comes to China. Could that two track economy also
be sort of understood as this exuberance over it tech,
the semiconductors, and really Beijing investing in these sectors as
opposed to the real estate market that continues to drag
the broader economy.
Speaker 6 (13:43):
Yes, absolutely, and I would put even more sectors in
this second pack bucket. I would argue that China is
in a dual economy as you said so, but it
is a government driven. It is not so much that
that that on its own China can actually use this
(14:04):
first part of the economy as you mentioned it, semiconductors,
just to run the whole economy. We know that because
times have been absolutely wonderful in terms of exports of
all of these IT related or if you want green
tech related also sectors, but.
Speaker 7 (14:23):
It hasn't been enough.
Speaker 6 (14:24):
We know that companies are making any money because they
are in this evolution situation. They need to basically fight
to get market shared by cutting prices and cutting their
markup on top of everything, meaning the actual room to increase.
Speaker 7 (14:42):
Prices is also shelved.
Speaker 6 (14:44):
So because of that, I think you cannot just run
an economy of the size of China with one part
of the economy.
Speaker 7 (14:52):
It's just too small.
Speaker 6 (14:54):
We need to remember said sector was actually much bigger
than the IT and semic on that sector in China,
So it's just not enough.
Speaker 7 (15:02):
And that's why I.
Speaker 6 (15:03):
Think that these efforts eventually we have to shift to
the rest of the economy.
Speaker 1 (15:12):
When are we going to get a monetary boost? I mean,
we get long prim arates, nothing expected for today, but
then could we see something later in the year.
Speaker 6 (15:20):
We're expecting two cuts ten bps each. I realized this
sounds little compared to what the fact might be doing.
So in terms of you know, the interest rate differential,
actually China will hold ground. But we do expect some
cuts because, as you said, the rest of the economy
(15:40):
and increasingly even the export sector to be frank, is
showing that it isn't as resilient as it used to
be in the first half of the year. So yes,
we do expect cuts, not too many, because again China
has to make sure that it is not extreme capt
(16:00):
that outflow coming from a very large integrate different flow
within us, so they have to keep it there and
that's why we have to ten b cuts up to
twenty six, twenty twenty six.
Speaker 5 (16:14):
Even as we talk about cuts for the FED, for China,
for the BOJ it's about hikes, and we've been seeing
how the markets look relatively resilient despite what the BOG
signaled last Friday. To what extent do you think is
that providing some form of cover for quantitative tightening or
rate hikes from the BOJ.
Speaker 6 (16:34):
Well, you're right, the BOJ somehow is going against the
tide because we see Bank Indonesia cutting I mean many,
not only the Fed. Yeah, it's like everybody's saying, oh
the Fed is cutting. There you go, I have some
room and everybody everybody is worried about Paris. So everybody
is kind of in that easy mode except the BOJ.
(16:55):
But we need to remember the BOJ is already in
an exuberantly, you know, excessively. In a way, it lacks
mode because of its humongous balance sheet beyond the very
low level of rates.
Speaker 7 (17:11):
So in a way it goes without saying.
Speaker 6 (17:14):
They need to tighten a little bit because they have
no room if anything happens in Japan, the BOJ has
no room. This is why I think the bo J
will need to hike this year, maybe just twenty five babps.
Speaker 7 (17:27):
This is what we have. But it's a.
Speaker 6 (17:28):
Signal that the BOJ is back, is back, to play
the game of a central bank that has some room.
And this brings us, of course to quantit that if tightened,
there's no better case for the bo j to start
disposing a little bit of those stocks that it bought.
Speaker 7 (17:48):
And there's no better.
Speaker 6 (17:49):
Time because the market is that it's as it stopped,
you know, and the nick is it's just expensive enough
for them to stop without a concept, we'll.
Speaker 1 (17:58):
Be watching those sales. Alicia, good to have you with us.
Alysia Garciarero of Natixis.
Speaker 2 (18:06):
Thanks for listening to today's episode of the Bloomberg Daybreak
Asia Edition podcast. Each weekday, we look at the story
shaping markets, finance, and geopolitics in the Asia Pacific. You
can find us 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
(18:28):
and Australia. I'm Doug Chrisner and this is Bloomberg
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com