November 5, 2025 • 23 mins
Asian stocks rose at the open, following Wall Street's lead, where buyers stepped in after a brief retreat in technology shares and signs of a resilient US labor market boosted investor sentiment. Also in the states, the US Supreme Court appeared skeptical of President Donald Trump's sweeping global tariffs, as key justices suggested he had overstepped his authority with his signature economic policy. We speak to Mark Cranfield, Bloomberg MLIV Strategist.
Plus - While Wall Street didn't see a buying stampede, equities were able to bounce following a slide that underscored worries over how stretched the market has become and how sensitive it is to unfavorable news. Chipmakers, which bore the brunt of the recent selling, jumped on Wednesday. For more on the markets, we speak to Robert Schein, Chief Investment Officer, Blanke Schein Wealth Management.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak
Asia podcast. I'm Dog Chrisner. The tariff story grabbed headlines
in the US. That was as the Supreme Court heard
oral arguments on the legality of those levies. The justices
(00:23):
seemed to be a little skeptical, and a decision against
the President could force refunds of more than one hundred
billion dollars. Needless to say, it would also remove a
major burden on the US importers paying those tariffs. To
gauge reaction in Asia, I'm joined by Mark Cranfield. He
is Bloomberg Markets Live strategist joining from Singapore. Mark, thank
(00:44):
you so much. We know that JP Morgan is already
on record saying that tariff refunds would be a net
positive for both small businesses and US multinationals, although those
companies are unlikely to pass on the benefit to end customers. Now,
in the last session is I'm sure you saw many
of America's top retail brands were able to push higher.
(01:06):
But I'm really curious as to how this story is
being viewed in the Asia Pacific.
Speaker 2 (01:12):
Not too much in Asia Pacific, there's certainly interest in
the potential that fentanyl might be reversed because it would
affect China, but I think it's pretty much a long road.
Nobody in Asia's really expecting a firm decision on that,
possibly even this year. It might run into January before
we see clarity on that. We have seen some short
(01:35):
covering in American small cap stocks overnight, not too surprising
given they were fairly underperforming against other parts of the market.
From here, as far as traders are concerned, they probably
are not going to hear much for the next few
weeks that will really influence them. In terms of that
Supreme Court decision. We've heard the opening remarks. Some people
(01:57):
have made their decisions based on that initial knee jerk reactions.
We are unlikely to get anything significant for financial markets
in the next few weeks. With much more important is
that is what happens with a shutdown.
Speaker 1 (02:10):
Okay, the shutdown, I'm glad you brought that up. I mean,
how is it impacting markets in the Asia Pacific aside
from what's going on in the Tokyo session where US
treasuries are concerned.
Speaker 2 (02:21):
Really through the channel of the US dollar especially, I
think people are beginning to reassess again, thinking that if
this shutdown isn't solved quickly, it's going to be a
net drag on the on the US dollar, So that
would be positive for Asian currencies sees and flows back
into to some of the markets from that point of view.
Also the impact on the treasury market as well. If
(02:46):
the shutdown continues to go like this, we will be
thinking that it will be a dampening effect on the
US economy. That will put more pressure on the Federal
Reserve to lower interest rates, keep the treasury yield curve subdued,
and that will work its way through to Asian bonb
markets as well. So probably through those two channels is
the most likely place where Asian investors are looking at this.
Speaker 1 (03:08):
Help me understand as long as we're talking about currencies,
the dynamics affecting the Japanese yan right now, I'm seeing
a little bit of weakness creeping at around one fifty
three to ninety against the green bag. What's going on here?
Speaker 2 (03:22):
Yeah, that's one of the things we discussed the most
here on almost on a daily basis. So much of
it is to do with the fact that the Bank
of Japan are really being quite timid in the way
in which they address the changes in interest rates. So
just yesterday we had the minutes from the September meeting
of the Bank of Japan which two people wanted to
(03:44):
have an immediate interest rate hike. That was unusual for
two people to vote against the rest of the board.
And yet since then we've had the October meeting where,
if anything, they were even more dubbish than they were
in September. So you have two sides to the equation.
And the Ministry of Finance have been coming in with
some verbal interventions saying that the yen is starting to
(04:05):
get a bit weak, but the Bank of Japan is
not indicating any readiness to come in with interest rate
hikes until they do. It's like one hand clapping. Traders
can see it. They can see that the yen is weak,
but there's not much incentive for them to go the
other way because the Bankajpan is just not behind it.
In fact, people are even thinking the banker plan might
(04:26):
not even raise interest rates until next year.
Speaker 1 (04:28):
So we had a pretty substantial pullback and the Japanese
equity market on a Tuesday that was related to a
drop in AI related stocks. Here in the States, but
we're not that far away from a record high in
the Japanese equity market at least if you look at
the knee k can you help me understand the connection
between what's going on with the en boj policy as
(04:51):
you just laid out, and this move higher for the
Japanese stock market well.
Speaker 2 (04:57):
The relative weakness in the currency. Obviously people from the
export point of view. You've also got a new Prime Minister,
Sane Takichi, has made it pretty clear that she intends
to come up with a fairly expansionary fiscal boost to
the economy. It's going to take a few weeks for
her to get the full program together, but obviously that's
going to be good for boosting the economic growth in Japan,
(05:19):
so that will be reflected in the stock market as well.
On the long term basis, Japanese equities underperformed for so
many years the rest of the world, so even now
it's still playing catch up with the rest of the world.
It's been a fantastic year for Japanese stocks, although Korean
equities have performed even better than Japan. The Ai story
(05:43):
is still playing out in Japan to some extent, but
there's other positives as well. Look at Nintendo just this week,
they had tremendous demand for one of their games, they
can't produce it quickly enough to fill orders, and the
stock open ten percent higher the following day. And that's
a big company, Nintendo the top ten in the Topics index.
So there's a lot of positive stories going. And if
(06:05):
the banker Japan's going to keep interest rate slow and
the yen's going to stay relative very week, it's almost
a no brainer. People will look at Japan and say,
well that on a relative basis compared to other people
in Asia, they have a clear advantage.
Speaker 1 (06:16):
As long as we're talking about AI. In Vidio CEO
Jensen Wang was talking to the Ft recently. He said
that China will beat the US in the AI race
due to in part, lower energy costs and looser regulations.
He was basically indicating as a part of this interview
that the West, including the UK, not just the US,
(06:38):
is being held back by a little bit of cynicism.
Now he's talking his own book, I would imagine he
wants access to the Chinese market. But how much of
the success story as it relates to AI in China
is tied to China being able to access those in Nvidia.
Speaker 2 (06:54):
Chips, certainly, it will certainly have a part to play,
although they appear to be very very quickly developing their
own chips. Multiple companies in China have been announcing that
they've got their own versions of these AI chips which
are either ready now or will be ready very soon,
so they're coming up the curve very very quickly. The
(07:16):
story about the power supply and power availability in China
is nothing new. It's been fairly well known, but the
fact that someone like Johnson Kwang brings it to global
attention really should be a wake up call for the
UK and the United States, because obviously they are far behind,
there's no question about it, and that gives China a
significant advantage. But as you say, he also would like
(07:38):
to sell more chips and make more money in China
as well, so there's multiple assets to what he's saying there.
But clearly the fact that he brings up the power
issue is something that the authorities in other countries should
be aware of.
Speaker 1 (07:51):
Where is China in terms of being able to manufacture
chips right now on the foundry side. When we think
of the high end chips that in Vidia designans they
are produced by the foundry that TSMC has in Taiwan.
It could China potentially produce sophisticated chips, whether they are
digital or even analog at scale.
Speaker 2 (08:14):
What we've seen If you take electric vehicles as an example,
there was a long period when Tesla was clearly the
global leader. They were far far ahead of everybody, and
just look how quickly China was able to replicate it
and catch up with Tesla. You can assume something similar
to that is probably going to take place in the
chip space as well. If they can see it and
(08:35):
they can identify what the need is, they seem to
be able to garner all the resources very very quickly
and get the job done faster than any other major
country in the world.
Speaker 1 (08:45):
What about the way in which the Chinese economy is performing.
We talked to Catherine Limb from Bloomberg Intelligence a couple
of days ago about the Singles Day holiday and the
degree to which the government has really invested in making
sure that ssumers in China kind of engage and help
with this problem of weak domestic demand. What do we
(09:07):
know about the way in which China's economy has been performing.
If you look at some of the high frequency data.
Speaker 2 (09:13):
There's been some mixed reports on the high frequency side.
But we've just had this big gathering again where they
came up with their latest five year plan for China,
and boosting consumer demand was right at the top of
the list, along with the tech sector and some other
industrial related features as well, but consumers was right up there.
It was a highlight within the report. So clearly the
(09:36):
government recognizes that they need to do a lot more
from that point of view. They've also been very active
this year. There's been a big fight over the cost
of deliveries. For example, food deliveries in China is a
huge thing and there's been a fight between companies trying
to lower the cost air which have been quite damaging,
and China authority just stepped in and said, okay, enough
is enough. You guys need to make prices realistic and
(09:58):
get back on an even keel here. So they are
beginning to be better at understanding when they need to
come in and to regulate the market on a hands
on approach and step back when they need to. But
all in all, they clearly recognize that the consumers have
to play a bigger part in the overall economy, and
that's part of the next five year plan.
Speaker 1 (10:18):
Mark. Before I let you go, I want to get
your take on what's been going on with the South
Korean equity market. We had a big pullback Tuesday. Not
a surprise there, but it seemed as though for such
a long time that COSPY has been on a tear.
Helped me understand what's driving the price action.
Speaker 2 (10:35):
They have a tremendous retail sector. Their retail investors are
as big in career as they probably are in the
United States, possibly even more so. They have a very
strong AI theme, which is benefiting from everything you hear
about going on the United States with Open Eye and Nvidia,
exactly the same kind of things that are happening in Korea.
(10:56):
Because they are the partner companies to those big US
giants Samsung, sk Heiniz. These kind of companies are benefiting
from the global demand for AI and for the deals
which are being done across the curve there. Even an
old school company like Hondai signed a deal within Video
a few weeks ago, and even their stock is going
(11:17):
through the roof as well, So it's become the leveraged
AI play in Asia, just by being involved in Korean equities.
Plus the currency is relatively cheap as well compared to others,
so from a foreign investor's point of view, get a
little bit extra kicker by going in. From that, so
it's been the outstanding story, probably getting a little bit
(11:38):
overdone at this stage, and that's why you're getting the
high volatility around here. But for the moment, both Japan
and Korea Taiwan to some extent, people still think they
are the best way to play AI in the Asian space.
Speaker 1 (11:51):
All right, Mark, we'll leave it there. It's always a pleasure.
Thanks very much. Mark Cranfield, Bloomberg Markets Live strategist on
the line from Singapore here on the Debrikisha padst Welcome
back to the Daybreak Asia podcast, time Dog Prisner. The
(12:11):
US equity market advanced in the Wednesday session as dip
buyer stepped in following Tuesday's pullback in AI related stocks.
Semiconductor shares rallied. We had the Philadelphia Semiconductor Index up
about three percent, and there was AI related news after
the bell. Snap announced a four hundred million dollar partnership
with Perplexity AI and the British chip designer Armholdings. Gave
(12:36):
it bullish forecast for revenue given the abundant interest in
chips for AI data centers. Joining me now is Robert Shine.
He is the chief investment officer at Blankie Shine Wealth Management.
Robert is on the line from Palm Desert, California. Thank
you for making time to chat with me. Can we
begin by looking at this AI trade? I mentioned the
(12:57):
pullback that occurred on Tuesday today, How do you read
the landscape right now where AI is concerned.
Speaker 3 (13:06):
AI is still in the throes of growth, go go mode,
even though we've had a stall or setback a day
or so ago. If you go back even a week
and you go to the Hyperscalers and meg Tech and
you hear how they've reported, you know full well that
we are in the early stages of the AI growth story.
Speaker 1 (13:29):
I want to focus if I can, on Palanteer Technologies
shares gap down about eight percent on Tuesday. This company
may have become the poster child for extreme valuations where
AI is concerned. Palenteer is trading at around two hundred
and sixty five times estimated earnings. So, Robert, I'm curious
where do you sit in terms of the conversation around valuations,
(13:53):
especially when a name like Palenteers seems so incredibly.
Speaker 3 (13:57):
Stretched, absolutely one of those that is gotten way ahead
of itself from a valuation standpoint, even though the story
you know, is incredible, but you know, one of the
ways you got to think about it, how do you
invest in an environment like this? And it's all about
stock selections. So while there's companies with the Palenteer TYPEE,
(14:22):
there are other companies that are still have tremendous room
to run, not to that extent because we believe that's
ahead of itself, but there are a lot of AI
stories that are still undervalue.
Speaker 1 (14:35):
So where are you looking for value? If we can
talk about the broad AI picture, there are obviously names
like palente which we just pointed out is pretty rich
in terms of valuation. There's the Nvidia story, and then
if you get into the hyperscalers, it's obviously a story
about Alphabet Amazon, to a lesser extent, maybe Microsoft. But
(14:57):
I'm curious about how you discover value if you want
to stay committed to this thesis.
Speaker 3 (15:05):
We're still committed to the mega tech at the early
stages right now, simply because the operational efficiency mindset, which
has really become very infectious. You know. Again, you see
companies like Amazon investing like they are getting the growth
in the cloud, like we're seeing it play out, but
(15:26):
yet they're also laying off thirty thousand employees where they're
still focused on the bottom line and it's a testament
that they could do more with less. So the Mega
Tech is still where we're seeing this simply because of
the AI offsets and productivity growth. Even Goldman Sachs said
that it's a one and a half percent a creative
(15:47):
to output, you know, year over year across across the baseline.
There are four stages as we're seeing of AI, the
traditional AI, generative AI, and then the pre A and
then but we're still in the first couple of stages
right now for from stage one stage two, and so
(16:07):
Mega Tech is really leading the way and that's where
I would stay simply because of the free cash flow
and the fortress like balance sheets.
Speaker 1 (16:16):
Can you give me a sense on how much above
your cost basis right now? You are in some of
these big names tremendous.
Speaker 3 (16:25):
I mean we've been in you know, the apples, Amazon's
Microsoft for decades, and so that seems to be the
issue across Wall Street. Not only is the contribution relative
to the cap weighting or the S and P index
how much they've grown, how much they contribute, but yet
a lot of Wall Streets locked into you know, low
(16:46):
cost basis on all of our taxable accounts. So we
do trem like we did trim in Nvidia, we do
trim some of the larger mega tech and reinvest that
in diversify that into balanced. And I will tell you
that's not the phone call you want to get from
a client that sees you sell Nvidia and just a
(17:08):
little bit you take your cost bases off the table
and you hit a tax gain, and then they see
that you invested in something like Warren Buffett and Berkshire,
which is slow and steady and you know over time
it will win out, but it's not in the fast
lane like tech.
Speaker 1 (17:25):
So you mentioned Buffett. His cash position right now is
it a record high? And I'm curious about the level
of cash you have on hand right now.
Speaker 3 (17:34):
Yeah, we're sitting about an eight to ten percent cash
position across the board and cash, I mean cash equivalents.
It's still getting well over four percent for our clients.
But we again step into volatility. We did that earlier
in the year in April, and when the markets basically
came to us, we saw a lot of opportunities. Much
like Warren Buffett is moving forward, you know, we keep
(17:56):
dry powder on the balance sheets for just you know,
whether it's a headline, a tweet, or some geopolitical event
that provides an opportunity. We still believe in the growth
of the market and the growth of the bull market
as well. Moving forward.
Speaker 1 (18:09):
So if there's a pullback in some of these AI names,
are you a buyer or do you want to be
diversified away from some of the big gains that we
have seen right now in the big cap tech space
that you just laid out.
Speaker 3 (18:23):
If an investor has no exposure, you jump on some
of the pullbacks. If you're overexposed overweighted in your portfolio,
it's okay to start trimming into the strength. You're not
going to go broke taking a gain, and over time
you could reallocate that to again the value play, which
(18:44):
balances your portfolio and keeps that balanced in the portfolio
when there is volatility and gives you an opportunity, and
also keep cash on the sidelines so that you're not
one hundred percent invested, so you can jump on these opportunities.
Speaker 1 (18:59):
Let's talk a little bit about the macro picture visa
viv the Fed. I mean, if you look at the
Atlanta GDP now forecast, I think the growth that they
are suggesting in compiling data is around four percent. It's
unclear as to whether or not we get a rate
cut in December. I think the probability right now in
money markets is around seventy percent. Today's economic news was
(19:21):
pretty upbeat. I mean, US services activity expanding at the
fastest pace in eight months. You look at the numbers
from the private payroll services provider ADP, we had job
growth in the private sector jumping by forty two thousand.
So it's not clear that the FED is going to
continue to be accommodative, at least in the short term.
(19:42):
Or am I wrong on that?
Speaker 3 (19:45):
You're one hundred percent right. And that's why we saw
the market pull back when Jerome Powell basically took the
Fed put off the table of a built in baked
in December rate cut, and so markets are pulling ahead
gains from twenty twenty six into twenty twenty five. We
still believe that's going to be the case in terms
(20:05):
of front running the Fed and believing that there are
more rates to come. But our biggest concern moving forward
is just that the Fed we saw that we do
need the Federal Reserve to bring down interest rates to
help housing, which would unlock a good percentage of the
overall economy that has been frozen installed for so many years.
(20:26):
But what if that doesn't happen. We're also going to
get a potential reacceleration in the GDP in the new year,
simply because the One Big Beautiful Bill, the free cash
flow boost to the S and P five hundred companies
right away as well as to the consumer. January one,
there's a tax reduction that goes into effect in payroll
taxes to the QUBBAL one hundred and fifty billion dollars
(20:49):
for next year. So that extra money liquidity is going
to go in the system. That could go against what
the Fed is ultimately trying to do, which is, you know,
put the brakes on in Inflation right now is at
a low grade fever, and so you know, even tariffs
is that one time inflation of bump and oil is
(21:10):
working in its favor right now. But again, it's shelter
and it comes down to the FED and rates.
Speaker 1 (21:15):
So where does the FED leave you when you look
at the financials and you're talking about rates. The expectation
here is that we do maybe not in December, but
in the first part of next year, we do maybe
get another cut. Where are you with the financials in
that scenario.
Speaker 3 (21:31):
Financials is a quality sector again, solid balance sheets and
the large and mega cap names in that space. And
as we know historically, when rates come down, a lot
of that flows to by way of IPOs and liquidity
and just a great space to be in, and financials
(21:53):
will do well as it relates to a lower interest
rate environment moving forward.
Speaker 1 (21:58):
So it's not necessarily a story about more lending. It's
a story about maybe trading revenue. Maybe it's a story
about merger and acquisition activity. If you're looking at the
big banks.
Speaker 3 (22:08):
It'll unlock merger and acquisition activity and IPOs again and again,
unlock that Wall Street spirit.
Speaker 1 (22:16):
Robert will leave it there, Thank you so very much.
Robert Shine is the chief investment officer at Blankie Shine
Wealth Management. He's on the line from Palm Desert, California
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
(22:39):
in the Asia Pacific. You can find us on Apple, Spotify,
the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Join us again tomorrow for insight on the market moves
from Hong Kong to Singapore and Australia. I'm Doug Chrisner,
and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak
Asia podcast. I'm Dog Chrisner. The tariff story grabbed headlines
in the US. That was as the Supreme Court heard
oral arguments on the legality of those levies. The justices
(00:23):
seemed to be a little skeptical, and a decision against
the President could force refunds of more than one hundred
billion dollars. Needless to say, it would also remove a
major burden on the US importers paying those tariffs. To
gauge reaction in Asia, I'm joined by Mark Cranfield. He
is Bloomberg Markets Live strategist joining from Singapore. Mark, thank
(00:44):
you so much. We know that JP Morgan is already
on record saying that tariff refunds would be a net
positive for both small businesses and US multinationals, although those
companies are unlikely to pass on the benefit to end customers. Now,
in the last session is I'm sure you saw many
of America's top retail brands were able to push higher.
(01:06):
But I'm really curious as to how this story is
being viewed in the Asia Pacific.
Speaker 2 (01:12):
Not too much in Asia Pacific, there's certainly interest in
the potential that fentanyl might be reversed because it would
affect China, but I think it's pretty much a long road.
Nobody in Asia's really expecting a firm decision on that,
possibly even this year. It might run into January before
we see clarity on that. We have seen some short
(01:35):
covering in American small cap stocks overnight, not too surprising
given they were fairly underperforming against other parts of the market.
From here, as far as traders are concerned, they probably
are not going to hear much for the next few
weeks that will really influence them. In terms of that
Supreme Court decision. We've heard the opening remarks. Some people
(01:57):
have made their decisions based on that initial knee jerk reactions.
We are unlikely to get anything significant for financial markets
in the next few weeks. With much more important is
that is what happens with a shutdown.
Speaker 1 (02:10):
Okay, the shutdown, I'm glad you brought that up. I mean,
how is it impacting markets in the Asia Pacific aside
from what's going on in the Tokyo session where US
treasuries are concerned.
Speaker 2 (02:21):
Really through the channel of the US dollar especially, I
think people are beginning to reassess again, thinking that if
this shutdown isn't solved quickly, it's going to be a
net drag on the on the US dollar, So that
would be positive for Asian currencies sees and flows back
into to some of the markets from that point of view.
Also the impact on the treasury market as well. If
(02:46):
the shutdown continues to go like this, we will be
thinking that it will be a dampening effect on the
US economy. That will put more pressure on the Federal
Reserve to lower interest rates, keep the treasury yield curve subdued,
and that will work its way through to Asian bonb
markets as well. So probably through those two channels is
the most likely place where Asian investors are looking at this.
Speaker 1 (03:08):
Help me understand as long as we're talking about currencies,
the dynamics affecting the Japanese yan right now, I'm seeing
a little bit of weakness creeping at around one fifty
three to ninety against the green bag. What's going on here?
Speaker 2 (03:22):
Yeah, that's one of the things we discussed the most
here on almost on a daily basis. So much of
it is to do with the fact that the Bank
of Japan are really being quite timid in the way
in which they address the changes in interest rates. So
just yesterday we had the minutes from the September meeting
of the Bank of Japan which two people wanted to
(03:44):
have an immediate interest rate hike. That was unusual for
two people to vote against the rest of the board.
And yet since then we've had the October meeting where,
if anything, they were even more dubbish than they were
in September. So you have two sides to the equation.
And the Ministry of Finance have been coming in with
some verbal interventions saying that the yen is starting to
(04:05):
get a bit weak, but the Bank of Japan is
not indicating any readiness to come in with interest rate
hikes until they do. It's like one hand clapping. Traders
can see it. They can see that the yen is weak,
but there's not much incentive for them to go the
other way because the Bankajpan is just not behind it.
In fact, people are even thinking the banker plan might
(04:26):
not even raise interest rates until next year.
Speaker 1 (04:28):
So we had a pretty substantial pullback and the Japanese
equity market on a Tuesday that was related to a
drop in AI related stocks. Here in the States, but
we're not that far away from a record high in
the Japanese equity market at least if you look at
the knee k can you help me understand the connection
between what's going on with the en boj policy as
(04:51):
you just laid out, and this move higher for the
Japanese stock market well.
Speaker 2 (04:57):
The relative weakness in the currency. Obviously people from the
export point of view. You've also got a new Prime Minister,
Sane Takichi, has made it pretty clear that she intends
to come up with a fairly expansionary fiscal boost to
the economy. It's going to take a few weeks for
her to get the full program together, but obviously that's
going to be good for boosting the economic growth in Japan,
(05:19):
so that will be reflected in the stock market as well.
On the long term basis, Japanese equities underperformed for so
many years the rest of the world, so even now
it's still playing catch up with the rest of the world.
It's been a fantastic year for Japanese stocks, although Korean
equities have performed even better than Japan. The Ai story
(05:43):
is still playing out in Japan to some extent, but
there's other positives as well. Look at Nintendo just this week,
they had tremendous demand for one of their games, they
can't produce it quickly enough to fill orders, and the
stock open ten percent higher the following day. And that's
a big company, Nintendo the top ten in the Topics index.
So there's a lot of positive stories going. And if
(06:05):
the banker Japan's going to keep interest rate slow and
the yen's going to stay relative very week, it's almost
a no brainer. People will look at Japan and say,
well that on a relative basis compared to other people
in Asia, they have a clear advantage.
Speaker 1 (06:16):
As long as we're talking about AI. In Vidio CEO
Jensen Wang was talking to the Ft recently. He said
that China will beat the US in the AI race
due to in part, lower energy costs and looser regulations.
He was basically indicating as a part of this interview
that the West, including the UK, not just the US,
(06:38):
is being held back by a little bit of cynicism.
Now he's talking his own book, I would imagine he
wants access to the Chinese market. But how much of
the success story as it relates to AI in China
is tied to China being able to access those in Nvidia.
Speaker 2 (06:54):
Chips, certainly, it will certainly have a part to play,
although they appear to be very very quickly developing their
own chips. Multiple companies in China have been announcing that
they've got their own versions of these AI chips which
are either ready now or will be ready very soon,
so they're coming up the curve very very quickly. The
(07:16):
story about the power supply and power availability in China
is nothing new. It's been fairly well known, but the
fact that someone like Johnson Kwang brings it to global
attention really should be a wake up call for the
UK and the United States, because obviously they are far behind,
there's no question about it, and that gives China a
significant advantage. But as you say, he also would like
(07:38):
to sell more chips and make more money in China
as well, so there's multiple assets to what he's saying there.
But clearly the fact that he brings up the power
issue is something that the authorities in other countries should
be aware of.
Speaker 1 (07:51):
Where is China in terms of being able to manufacture
chips right now on the foundry side. When we think
of the high end chips that in Vidia designans they
are produced by the foundry that TSMC has in Taiwan.
It could China potentially produce sophisticated chips, whether they are
digital or even analog at scale.
Speaker 2 (08:14):
What we've seen If you take electric vehicles as an example,
there was a long period when Tesla was clearly the
global leader. They were far far ahead of everybody, and
just look how quickly China was able to replicate it
and catch up with Tesla. You can assume something similar
to that is probably going to take place in the
chip space as well. If they can see it and
(08:35):
they can identify what the need is, they seem to
be able to garner all the resources very very quickly
and get the job done faster than any other major
country in the world.
Speaker 1 (08:45):
What about the way in which the Chinese economy is performing.
We talked to Catherine Limb from Bloomberg Intelligence a couple
of days ago about the Singles Day holiday and the
degree to which the government has really invested in making
sure that ssumers in China kind of engage and help
with this problem of weak domestic demand. What do we
(09:07):
know about the way in which China's economy has been performing.
If you look at some of the high frequency data.
Speaker 2 (09:13):
There's been some mixed reports on the high frequency side.
But we've just had this big gathering again where they
came up with their latest five year plan for China,
and boosting consumer demand was right at the top of
the list, along with the tech sector and some other
industrial related features as well, but consumers was right up there.
It was a highlight within the report. So clearly the
(09:36):
government recognizes that they need to do a lot more
from that point of view. They've also been very active
this year. There's been a big fight over the cost
of deliveries. For example, food deliveries in China is a
huge thing and there's been a fight between companies trying
to lower the cost air which have been quite damaging,
and China authority just stepped in and said, okay, enough
is enough. You guys need to make prices realistic and
(09:58):
get back on an even keel here. So they are
beginning to be better at understanding when they need to
come in and to regulate the market on a hands
on approach and step back when they need to. But
all in all, they clearly recognize that the consumers have
to play a bigger part in the overall economy, and
that's part of the next five year plan.
Speaker 1 (10:18):
Mark. Before I let you go, I want to get
your take on what's been going on with the South
Korean equity market. We had a big pullback Tuesday. Not
a surprise there, but it seemed as though for such
a long time that COSPY has been on a tear.
Helped me understand what's driving the price action.
Speaker 2 (10:35):
They have a tremendous retail sector. Their retail investors are
as big in career as they probably are in the
United States, possibly even more so. They have a very
strong AI theme, which is benefiting from everything you hear
about going on the United States with Open Eye and Nvidia,
exactly the same kind of things that are happening in Korea.
(10:56):
Because they are the partner companies to those big US
giants Samsung, sk Heiniz. These kind of companies are benefiting
from the global demand for AI and for the deals
which are being done across the curve there. Even an
old school company like Hondai signed a deal within Video
a few weeks ago, and even their stock is going
(11:17):
through the roof as well, So it's become the leveraged
AI play in Asia, just by being involved in Korean equities.
Plus the currency is relatively cheap as well compared to others,
so from a foreign investor's point of view, get a
little bit extra kicker by going in. From that, so
it's been the outstanding story, probably getting a little bit
(11:38):
overdone at this stage, and that's why you're getting the
high volatility around here. But for the moment, both Japan
and Korea Taiwan to some extent, people still think they
are the best way to play AI in the Asian space.
Speaker 1 (11:51):
All right, Mark, we'll leave it there. It's always a pleasure.
Thanks very much. Mark Cranfield, Bloomberg Markets Live strategist on
the line from Singapore here on the Debrikisha padst Welcome
back to the Daybreak Asia podcast, time Dog Prisner. The
(12:11):
US equity market advanced in the Wednesday session as dip
buyer stepped in following Tuesday's pullback in AI related stocks.
Semiconductor shares rallied. We had the Philadelphia Semiconductor Index up
about three percent, and there was AI related news after
the bell. Snap announced a four hundred million dollar partnership
with Perplexity AI and the British chip designer Armholdings. Gave
(12:36):
it bullish forecast for revenue given the abundant interest in
chips for AI data centers. Joining me now is Robert Shine.
He is the chief investment officer at Blankie Shine Wealth Management.
Robert is on the line from Palm Desert, California. Thank
you for making time to chat with me. Can we
begin by looking at this AI trade? I mentioned the
(12:57):
pullback that occurred on Tuesday today, How do you read
the landscape right now where AI is concerned.
Speaker 3 (13:06):
AI is still in the throes of growth, go go mode,
even though we've had a stall or setback a day
or so ago. If you go back even a week
and you go to the Hyperscalers and meg Tech and
you hear how they've reported, you know full well that
we are in the early stages of the AI growth story.
Speaker 1 (13:29):
I want to focus if I can, on Palanteer Technologies
shares gap down about eight percent on Tuesday. This company
may have become the poster child for extreme valuations where
AI is concerned. Palenteer is trading at around two hundred
and sixty five times estimated earnings. So, Robert, I'm curious
where do you sit in terms of the conversation around valuations,
(13:53):
especially when a name like Palenteers seems so incredibly.
Speaker 3 (13:57):
Stretched, absolutely one of those that is gotten way ahead
of itself from a valuation standpoint, even though the story
you know, is incredible, but you know, one of the
ways you got to think about it, how do you
invest in an environment like this? And it's all about
stock selections. So while there's companies with the Palenteer TYPEE,
(14:22):
there are other companies that are still have tremendous room
to run, not to that extent because we believe that's
ahead of itself, but there are a lot of AI
stories that are still undervalue.
Speaker 1 (14:35):
So where are you looking for value? If we can
talk about the broad AI picture, there are obviously names
like palente which we just pointed out is pretty rich
in terms of valuation. There's the Nvidia story, and then
if you get into the hyperscalers, it's obviously a story
about Alphabet Amazon, to a lesser extent, maybe Microsoft. But
(14:57):
I'm curious about how you discover value if you want
to stay committed to this thesis.
Speaker 3 (15:05):
We're still committed to the mega tech at the early
stages right now, simply because the operational efficiency mindset, which
has really become very infectious. You know. Again, you see
companies like Amazon investing like they are getting the growth
in the cloud, like we're seeing it play out, but
(15:26):
yet they're also laying off thirty thousand employees where they're
still focused on the bottom line and it's a testament
that they could do more with less. So the Mega
Tech is still where we're seeing this simply because of
the AI offsets and productivity growth. Even Goldman Sachs said
that it's a one and a half percent a creative
(15:47):
to output, you know, year over year across across the baseline.
There are four stages as we're seeing of AI, the
traditional AI, generative AI, and then the pre A and
then but we're still in the first couple of stages
right now for from stage one stage two, and so
(16:07):
Mega Tech is really leading the way and that's where
I would stay simply because of the free cash flow
and the fortress like balance sheets.
Speaker 1 (16:16):
Can you give me a sense on how much above
your cost basis right now? You are in some of
these big names tremendous.
Speaker 3 (16:25):
I mean we've been in you know, the apples, Amazon's
Microsoft for decades, and so that seems to be the
issue across Wall Street. Not only is the contribution relative
to the cap weighting or the S and P index
how much they've grown, how much they contribute, but yet
a lot of Wall Streets locked into you know, low
(16:46):
cost basis on all of our taxable accounts. So we
do trem like we did trim in Nvidia, we do
trim some of the larger mega tech and reinvest that
in diversify that into balanced. And I will tell you
that's not the phone call you want to get from
a client that sees you sell Nvidia and just a
(17:08):
little bit you take your cost bases off the table
and you hit a tax gain, and then they see
that you invested in something like Warren Buffett and Berkshire,
which is slow and steady and you know over time
it will win out, but it's not in the fast
lane like tech.
Speaker 1 (17:25):
So you mentioned Buffett. His cash position right now is
it a record high? And I'm curious about the level
of cash you have on hand right now.
Speaker 3 (17:34):
Yeah, we're sitting about an eight to ten percent cash
position across the board and cash, I mean cash equivalents.
It's still getting well over four percent for our clients.
But we again step into volatility. We did that earlier
in the year in April, and when the markets basically
came to us, we saw a lot of opportunities. Much
like Warren Buffett is moving forward, you know, we keep
(17:56):
dry powder on the balance sheets for just you know,
whether it's a headline, a tweet, or some geopolitical event
that provides an opportunity. We still believe in the growth
of the market and the growth of the bull market
as well. Moving forward.
Speaker 1 (18:09):
So if there's a pullback in some of these AI names,
are you a buyer or do you want to be
diversified away from some of the big gains that we
have seen right now in the big cap tech space
that you just laid out.
Speaker 3 (18:23):
If an investor has no exposure, you jump on some
of the pullbacks. If you're overexposed overweighted in your portfolio,
it's okay to start trimming into the strength. You're not
going to go broke taking a gain, and over time
you could reallocate that to again the value play, which
(18:44):
balances your portfolio and keeps that balanced in the portfolio
when there is volatility and gives you an opportunity, and
also keep cash on the sidelines so that you're not
one hundred percent invested, so you can jump on these opportunities.
Speaker 1 (18:59):
Let's talk a little bit about the macro picture visa
viv the Fed. I mean, if you look at the
Atlanta GDP now forecast, I think the growth that they
are suggesting in compiling data is around four percent. It's
unclear as to whether or not we get a rate
cut in December. I think the probability right now in
money markets is around seventy percent. Today's economic news was
(19:21):
pretty upbeat. I mean, US services activity expanding at the
fastest pace in eight months. You look at the numbers
from the private payroll services provider ADP, we had job
growth in the private sector jumping by forty two thousand.
So it's not clear that the FED is going to
continue to be accommodative, at least in the short term.
(19:42):
Or am I wrong on that?
Speaker 3 (19:45):
You're one hundred percent right. And that's why we saw
the market pull back when Jerome Powell basically took the
Fed put off the table of a built in baked
in December rate cut, and so markets are pulling ahead
gains from twenty twenty six into twenty twenty five. We
still believe that's going to be the case in terms
(20:05):
of front running the Fed and believing that there are
more rates to come. But our biggest concern moving forward
is just that the Fed we saw that we do
need the Federal Reserve to bring down interest rates to
help housing, which would unlock a good percentage of the
overall economy that has been frozen installed for so many years.
(20:26):
But what if that doesn't happen. We're also going to
get a potential reacceleration in the GDP in the new year,
simply because the One Big Beautiful Bill, the free cash
flow boost to the S and P five hundred companies
right away as well as to the consumer. January one,
there's a tax reduction that goes into effect in payroll
taxes to the QUBBAL one hundred and fifty billion dollars
(20:49):
for next year. So that extra money liquidity is going
to go in the system. That could go against what
the Fed is ultimately trying to do, which is, you know,
put the brakes on in Inflation right now is at
a low grade fever, and so you know, even tariffs
is that one time inflation of bump and oil is
(21:10):
working in its favor right now. But again, it's shelter
and it comes down to the FED and rates.
Speaker 1 (21:15):
So where does the FED leave you when you look
at the financials and you're talking about rates. The expectation
here is that we do maybe not in December, but
in the first part of next year, we do maybe
get another cut. Where are you with the financials in
that scenario.
Speaker 3 (21:31):
Financials is a quality sector again, solid balance sheets and
the large and mega cap names in that space. And
as we know historically, when rates come down, a lot
of that flows to by way of IPOs and liquidity
and just a great space to be in, and financials
(21:53):
will do well as it relates to a lower interest
rate environment moving forward.
Speaker 1 (21:58):
So it's not necessarily a story about more lending. It's
a story about maybe trading revenue. Maybe it's a story
about merger and acquisition activity. If you're looking at the
big banks.
Speaker 3 (22:08):
It'll unlock merger and acquisition activity and IPOs again and again,
unlock that Wall Street spirit.
Speaker 1 (22:16):
Robert will leave it there, Thank you so very much.
Robert Shine is the chief investment officer at Blankie Shine
Wealth Management. He's on the line from Palm Desert, California
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
(22:39):
in the Asia Pacific. You can find us on Apple, Spotify,
the Bloomberg Podcast YouTube channel, or anywhere else you listen.
Join us again tomorrow for insight on the market moves
from Hong Kong to Singapore and Australia. I'm Doug Chrisner,
and this is Bloomberg
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