December 18, 2025 • 18 mins
TikTok's long-delayed plan to separate from Chinese parent ByteDance Ltd. was put in motion Thursday when the video sharing sensation said it's being bought by a group of buyers led by Oracle Corp. TikTok Chief Executive Officer Shou Chew told employees that the company and ByteDance signed binding agreements to create a US joint venture majority-owned by American investors, according to an internal memo reviewed by Bloomberg. Chew wrote that he was "pleased to share some great news" and said agreements with Oracle, Silver Lake and MGX have been signed. The deal is expected to close on Jan. 22, 2026, though Chew added that "there's more work to be done" before then.
Asian equities rose after cooling US inflation data backed the case for Federal Reserve interest-rate cuts and calming tech jitters supported American stocks. We heard from Amy Xie Patrick, Head of Income Strategies at Pendal Group. She spoke to Bloomberg's Annabelle Droulers and Paul Allen.
Plus - A solid outlook from giant Micron Technology Inc. underscored the voracious appetite for all things related to artificial intelligence. The S&P 500 rose nearly 1%, halting a four-day slide. We spoke to Keith Buchanan, Senior Portfolio Manager at Globalt.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
Welcome to the Daybreak Asia podcast. I'm Derek Krisner. We
begin today with TikTok. The company assigned a deal to
sell its US business to three American investors, Oracle, Silver Lake,
and MGX. We've also learned that US user data will
be stored locally in a system run by Oracle, and
TikTok's algorithm will be retrained on US user data to
(00:33):
ensure the content feed is free from outside manipulation. Here
is Bloomberg's Mike Shephard.
Speaker 3 (00:40):
The idea is that it would be a copy leased
from byte Dance, but then retrained to some degree or
another by Oracle and also walled off in a way.
They would create some sort of a security firewall or
barrier that would keep byte Dance from ever gaining access
to US data to the algorithm itself, out of concerns
(01:02):
that there could be some manipulation.
Speaker 2 (01:04):
That is Bloomberg's Mike Shepard. On Thursday, in the US,
the CPI report showed retail inflation cooled at a startling
clip last month. The so called core rate of CPI
increased at an annual rate of two point six percent
in November. That is the slowest pace since twenty twenty one.
But there's a caveat. Because of the government shutdown, the
(01:25):
BLS could not collect prices throughout October, and price sampling
in November started later than usual, and for that reason,
FED policymakers may be a little skeptical on the accuracy
of the CPI data. Markets, however, were undeterred. We had
a rally in both US stocks and bonds, and we
got some reaction from Amy Shea Patrick, head of income
(01:48):
Strategies at Pendle Group. She spoke with Bloomberg TV host
Paul Allen and Annabel Drulers.
Speaker 4 (01:54):
We've got that too ye yield now in the US
at a three months low, and even though that CPI
DOTA walls shut down impacted, it does suggest more easings coming.
I guess the question is when what's your timeline?
Speaker 5 (02:06):
Does it?
Speaker 1 (02:07):
Though? I had a question because I looked at the
Yel curve moves last night as well. And the reason
the Yel curve is important is because generally when the
market believes that the FED or any central bank is
in an easing cycle that has a lot more room
to run, then the curve is happy to Stephen. But
now when I look at the reaction in the US
curve relative to the downside surprise of last night, notwithstanding
(02:28):
some of the caveats around the data, I kind of
think the market already got there. The market already got
there in terms of for the way that US inflation
is turning out right now. I know all the other
data points that we've had, you know, around unemployment and
things like that. You know, we've got two plus cuts
baked in for the FED for next year, and the
market didn't really want to do more than that last night.
(02:49):
So I question, with the way that things currently are
shaping up in the US, where the more easings will
be necessary from the FED next year.
Speaker 4 (02:56):
Well, that's an interesting point that you make, because it
was certainly a theme of twenty twenty five, the market
really getting ahead of itself in terms of what it
was expecting and then the FED not following through. Do
you see this happening again?
Speaker 1 (03:05):
Possibly? Right, So I would say that the two plus
cuts we have in the front of the curve is
broadly matching what the economic fundamentals should suggest. So you've
got inflation still coming down but still a little bit stubborn.
You know, the place inflation target is two percent, and
so where we are right now is not two percent. Obviously, unemployment, yes,
it's the labor markets loosening, but there is no unemployment
(03:28):
crisis that would suggest recession is around the corner. So
why would we have more than two cuts priced in? Well,
I think it's a little bit of what my colleagues
and I describe as the Trump tail trade. Right to
the extent that he hires somebody into the FED chair
role that is a bit of a yes man and
threatens FED independence. It's got to put some premium into that,
(03:48):
So there's a bit of that. And then to the
extent that Trump also manages to engage in large scale
tax cuts that would be you know, not all that
beneficial to the back end as well, but has an
anchor at the front because he is hider yes man.
Then maybe that keeps the front end down as well.
So I feel like that's the way the market's pricing
(04:09):
in that sort of Trump tail risk at the front
end of the curve is not entirely economic at this stage.
Speaker 5 (04:15):
What about what we're getting from other central banks, Because
one of the other key things we've been talking about
is central bank desynchronization that could have been anticipated for
next year? I mean we had the BOE for instance,
the ECB both maybe saying overnight we're done on the
easing front. Do you see then in light of your
views around the FED and it maybe not much as
easy as could have been anticipated. Are we're going to
(04:36):
be a little bit more synchronized perhaps then for twenty
twenty six.
Speaker 1 (04:41):
My social answer is I do think we're going to
be more synchronized, because there is nothing to suggest that
the world is all that desynchronized right now. There are
certain pockets of stories. You know, Europe will have more
physical stimulus next year, China question mark about which way
their stimulus is going to go. But overall, I do
think there will be more synchronization than what is currently
priced into markets. And for me, the biggest standout, and
(05:03):
we haven't touched on it yet, is the pricing for
the RBA. Yeah, in Australia, all right, so we are
essential bank where the market thinks that next year two
hikes is actually appropriate rather than any further cuts. And
again I look around at our economy and yes, where
this you know country that's further away and we've got
our own immigration dynamics, but there's nothing fundamentally or that
(05:23):
different economically about Australia that would mean that, you know,
inflation is somehow getting out of control here and only here.
Speaker 5 (05:31):
Yeah, because yesterday, for instance, we were talking about just
that the split that we're seeing from the from the
big four banks essentially on whether even February is appropriate
for the first hike. So are you sort of very
much staying away from that.
Speaker 1 (05:42):
Then I don't feel strong enough to put a trade
on for February at this stage. But I would argue that,
you know, the RBA is definitely waiting for the trimmean data.
I would argue that there's even further room to look
to wait a little bit longer some of the blips
that we've been seeing coming through our inflation data. When
(06:04):
I think about it, it's to do with the timing
of subsidies being coming off. But when I think about
the trends in wages that you see in Australia, you know,
the reason, as essential banker, you'd really worry about inflation
getting out of control again in your country is if
you see signs of any spiral happening right, whether it's
expectations into actual inflation, whether it's wage pressures into actual inflation.
(06:27):
None of these things are happening in Australia. So if
you even you know, do get a let's say one
percentrium mean course on quarter, there might still be room
to wait beyond that. If I had to put a
trade on, I would probably still lean against not February
the first hike, if indeed any hikes next year.
Speaker 4 (06:46):
A growth in Australia is pretty anemic though, I mean
it's not part of the RBA's mandate and it's mostly
being propped up by government spending. At the moment, would
that be a factor considering inflation? You know, as you say,
isn't out of control?
Speaker 1 (06:58):
Yeah? So right, growth is, it's anemic, but you know,
there are signs that the consumer is starting to spend
a little bit more. The huge problem in Australia seems
to be productivity, right, and I think the public spending
and the productivity that's hugely related because the public spending
in Australia has led to more of the employment growth
(07:19):
in Australia being in sectors that are productivity constrained by nature.
So you know, more healthcare workers because of NDIS things
like that, and as a result we're not seeing proper
investment in Australia into areas that can actually be far
more productive. Now on the other side of the pond,
in the US, they have been more productive. But is
that productivity story being now offset by the fact that
(07:42):
Trump's immigration policy is causing you know, the cheap and
perhaps undocumented labor that was propping up those products activity
numbers in the US to now shrink and reflect the
real productivity underlying.
Speaker 6 (07:55):
In the US as well?
Speaker 5 (07:56):
What about the speaking of the currency, I mean one
and c P will been watching is the Japanese yen
versus that you aren't as well? And what are you
thinking about about the Chinese economy and as well what
do you want signaling? But also the outlook for stimulus.
Speaker 1 (08:10):
The Chinese economy has been really interesting this year, and
especially when you put it against for example, how the
MSCI China Index has been doing this year. So this
year's been another year of a lot of hope about
what Beijing will do for the Chinese economy in the
wake of the property bubble bursting, and yet a lot
of talk, not a lot of stimulus yet the equity
(08:31):
market has actually done pretty well in China this year,
so I think it's a tale of two halves. The
equaity market is probably a reflection of this is what
happens to markets when expectations are so dire, when so
many people have given up on a growth story. You
don't need a lot of stability. You don't even need
growth for the equity market to be able to perform.
But on the actual policy side of things, I mean,
(08:52):
I've wanted again and again to have a trade on
where you bet that yields will rise in China, But
I still think it's too soon for that trade. You know,
every time we've had some momentum in Chinese government bondy
old selling off it, you know, some policy disappointment comes through.
I think that ultimately, for Beijing, what they need to
(09:13):
come to sort of grips with is how much of
a fiscal lever they're willing to pull without it affecting
the property market, which obviously they don't want to again,
such that they can convince Chinese consumers, who are the
real weapon here in terms of the next part of
the Chinese growth story, to take over that mantle from
public to private and move forward. They're no, Beijing is
(09:36):
nowhere near comfortable in engaging in that sort of helicopter
money stimulus might view.
Speaker 5 (09:41):
Okay, So if you're not, if you're not not quite
having enough conviction around Chinese and also around Australia disminishing
there with the RBA, what is your strongest conviction call
for next year?
Speaker 1 (09:52):
Then? Oh uh, it's I'm actually a little bit worried
for next year and I'm I'm not sure what is
going to be the best way to express it. So normally,
whenever you guys have asked me that question, and I've
not had strong views on equities, I've not had strong
views on China, I've not had strong views on bonds,
I've kind of gone, oh, investment grade credit is where
you should park your money because a bit of floating
(10:14):
rate credit nicer crawl down the curve. That's a great
way to you know, just sleep at night and make money.
Now I feel like that story could have a couple
of wobbles in twenty twenty six, main reasons being not
that defaults are going up wildly, but what is going
to happen with the valuations baked into AI or the
(10:34):
hope of the AI capex that is happening right now,
what is funding that AI capex, and then all the
worries behind private credit as well. So this idea that
there are potentially two bubbles, I don't know if they're
really bubbles, to be honest, but if there are two bubbles,
and the market believes that there are two bubbles and
they meet and burst at the same time, investment grade
credit spreads aren't going to be immune. I mean, they'll
(10:56):
be safer than every other part of credit, but I'm
I'm kind of looking for places to hide at the minute,
is how I describe things.
Speaker 5 (11:03):
Yeah, to your point, I mean, I think there's a
lot of concern around some of that investment great credit
that's price not that much above treasuries, But you actually
are being able to take on possibly some some significant
risks with the well.
Speaker 1 (11:15):
Fifty percent of the US hyperscala AI capex is actually
being financed in the US investment grade market.
Speaker 2 (11:22):
That is Amy Shea Patrick, head of Income Strategies at
Pendle Group, speaking with Bloomberg TV host Paul Allen and
Annabel droolers here on the Daybreak Asia podcast. Welcome back
to the Daybreak Asia podcast. I'm Doug Chrisner. US equities
(11:45):
moved higher on Thursday, and information tech led the way.
We had that strong outlook from industry giant Micron Technology
and that in turn boosted sentiment for all things related
to artificial intelligence. Micron shares were up by more than
ten percent. Joining US now is Keith Buchanan. He is
senior portfolio manager at Globalt. Keith is on the line
(12:06):
from Atlanta, Georgia. Keith, thank you for making time. How
would you view the information tech group right now?
Speaker 6 (12:14):
We still have exposure that we're looking at this market
as really starting late in the fall as to win
this handoff. What happened from really being able to bet
on the direction of the for the reserve, direction of
monetary policy globally to really getting back to earning visibility,
you know, business model certainty, balance sheet stability, those tried
(12:35):
and true metrics that really drive markets in the interim
after we're getting through the space that we've kind of
gone through the last couple of years. So Micron kind
of shows that story is still alive. But we still
believe in how the market has been training since November
in that the market is really starting to appreciate and
pivot towards names that throw off more cash, have more
(12:56):
ability for us earnings, have more control over the outcome
of earnings over the next twelve to twenty four months,
and that's where we've been positioning our clients to benefit
in twenty twenty six.
Speaker 2 (13:07):
Does that necessarily mean small cap?
Speaker 6 (13:11):
It doesn't necessarily mean small cap. We feel like a
small cap move is just to move and rates coming lower,
and that's probably going to be the case of the
next call it five or six months. But as we
get into this as a soft landing that we've been
anticipating for we as in the market's been anticipating for
at least two years now, and kind of prematurely at times.
(13:33):
Now that it comes into focus now that the outcome
of the outcomes of the Federal Reserve and the markets
just in general becomes more wide and widespread, and there
are more mistakes that can happen from this point forward,
And with that in mind, we're looking at the market
and getting to those names that have a little more
margin for error and aren't necessarily betting on one theme
(13:55):
when trade one source of funding in order to generate
cash flow and earnings that we feel like we'll drive
the market further than in twenty twenty six, So we're
more diverse that we've been in some time. We still
do have exposure to those names driving the AI trade,
but not necessarily all of our bets on one trade.
Speaker 2 (14:13):
So as a result of the last FED meeting, we
learned that policymakers in aggregate are expecting to make only
one more rate cut in the new year. But the
swaps market right now is still convinced that we've got
two rate cuts from the Fed happening in twenty twenty six.
Where are you right now in understanding what the Fed
is going to be challenged with in the new year.
Speaker 6 (14:36):
It's really interesting that you brought that up because you
see the dispersing around that normal is distribution being wide
and it's been in the past, the markets doesn't know,
and the different between that's now as people that don't
know and people that don't know they don't know and
coming into a new chairperson of the Federal Reserve. I
think the market is priced in that there will be
(14:56):
some leeway and perhaps even some consensus that can we
build early and maybe get one or two cuts in
the spring but then there are lots of question marks
about where inflation goes, where laborer is, and the light
cut of going in through the second half of next year.
We don't really veer away from that. That uncertainty is
what kind of drives us to more rational cash generation
(15:18):
as far as how we position our clients. And we
feel like that trade will can take hold early in
twenty twenty six in a way that it started to
in the last part of this year. So we know
that we don't know, and we embrace that as part
of our thesis that there are a lot of moving
parts from a monetary policy standpoint, and being with companies
(15:39):
that have balance tief'tability and don't have to really rely
on the capital markets as much and aren't as relying
on our rates going forward as a place we want
to be with our clients assets.
Speaker 2 (15:50):
Where does that leave you with regard to the bond market.
Speaker 6 (15:53):
Sure, we're looking at the long end as somewhat stubbornly
high coming into twenty twenty six. The short end and
a steepening is kind of in our base case for
what we expect going forward. We don't think that the
FED will we'll really dive into four or five or
six cuts into the latter part next year. We don't
(16:14):
feel like that's necessarily anything we want to bet on
at this point, but we do think the inflation being stickier,
perhaps even real growth being stickier than the market really
expects at this point, can have the long end higher
with the short end maybe perhaps a table over where
we are now, but a steepening effect away from what
(16:34):
consensus things is is kind of where we see things
playing out in twenty twenty six.
Speaker 2 (16:39):
So we remember well the month of November and a
lot of the questions around artificial intelligence, the whole AI trade.
There was a lot of volatility in the market, and
then when the dust settled, the move was higher. And
we're very near records right now. If you look at
the major benchmarks in the US, are you surprised that
we haven't seen a meaning full pulled back.
Speaker 6 (17:01):
Not necessarily. Look, the earnest picture is clear, there's there's
a significant I mean, the disproportionate level of cash flow
and earnings is that those names present to the marketplace
deserves a reward and the market's rewarded, and that that
I don't know if I can call it a dislocation,
but the difference between that those valuations and the rest
(17:21):
of the market have been warranted again because of the
way they've been able to execute, So that pullback necessarily
hasn't been anything that we're we're totally banking on again.
We're we're marketwaight a lot of those names that you
mentioned and marketing with the theme more specifically, but we
want to make sure we're diverse and have bets spread
across sectors and names that present that case. I present
(17:46):
a few minutes ago of ballance, but stability, earnings, visibility,
and that's where we want to make sure we have exposure.
We're not underweight those spaces because we see the vible case.
We're investing, you know, for twenty twenty six returns in
those names as well.
Speaker 2 (18:00):
There it's always a pleasure. Thanks very much, Keith Buchanan,
Senior portfolio manager at Globalt, joining from Atlanta, Georgia. 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
(18:21):
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.
Speaker 2 (00:11):
Welcome to the Daybreak Asia podcast. I'm Derek Krisner. We
begin today with TikTok. The company assigned a deal to
sell its US business to three American investors, Oracle, Silver Lake,
and MGX. We've also learned that US user data will
be stored locally in a system run by Oracle, and
TikTok's algorithm will be retrained on US user data to
(00:33):
ensure the content feed is free from outside manipulation. Here
is Bloomberg's Mike Shephard.
Speaker 3 (00:40):
The idea is that it would be a copy leased
from byte Dance, but then retrained to some degree or
another by Oracle and also walled off in a way.
They would create some sort of a security firewall or
barrier that would keep byte Dance from ever gaining access
to US data to the algorithm itself, out of concerns
(01:02):
that there could be some manipulation.
Speaker 2 (01:04):
That is Bloomberg's Mike Shepard. On Thursday, in the US,
the CPI report showed retail inflation cooled at a startling
clip last month. The so called core rate of CPI
increased at an annual rate of two point six percent
in November. That is the slowest pace since twenty twenty one.
But there's a caveat. Because of the government shutdown, the
(01:25):
BLS could not collect prices throughout October, and price sampling
in November started later than usual, and for that reason,
FED policymakers may be a little skeptical on the accuracy
of the CPI data. Markets, however, were undeterred. We had
a rally in both US stocks and bonds, and we
got some reaction from Amy Shea Patrick, head of income
(01:48):
Strategies at Pendle Group. She spoke with Bloomberg TV host
Paul Allen and Annabel Drulers.
Speaker 4 (01:54):
We've got that too ye yield now in the US
at a three months low, and even though that CPI
DOTA walls shut down impacted, it does suggest more easings coming.
I guess the question is when what's your timeline?
Speaker 5 (02:06):
Does it?
Speaker 1 (02:07):
Though? I had a question because I looked at the
Yel curve moves last night as well. And the reason
the Yel curve is important is because generally when the
market believes that the FED or any central bank is
in an easing cycle that has a lot more room
to run, then the curve is happy to Stephen. But
now when I look at the reaction in the US
curve relative to the downside surprise of last night, notwithstanding
(02:28):
some of the caveats around the data, I kind of
think the market already got there. The market already got
there in terms of for the way that US inflation
is turning out right now. I know all the other
data points that we've had, you know, around unemployment and
things like that. You know, we've got two plus cuts
baked in for the FED for next year, and the
market didn't really want to do more than that last night.
(02:49):
So I question, with the way that things currently are
shaping up in the US, where the more easings will
be necessary from the FED next year.
Speaker 4 (02:56):
Well, that's an interesting point that you make, because it
was certainly a theme of twenty twenty five, the market
really getting ahead of itself in terms of what it
was expecting and then the FED not following through. Do
you see this happening again?
Speaker 1 (03:05):
Possibly? Right, So I would say that the two plus
cuts we have in the front of the curve is
broadly matching what the economic fundamentals should suggest. So you've
got inflation still coming down but still a little bit stubborn.
You know, the place inflation target is two percent, and
so where we are right now is not two percent. Obviously, unemployment, yes,
it's the labor markets loosening, but there is no unemployment
(03:28):
crisis that would suggest recession is around the corner. So
why would we have more than two cuts priced in? Well,
I think it's a little bit of what my colleagues
and I describe as the Trump tail trade. Right to
the extent that he hires somebody into the FED chair
role that is a bit of a yes man and
threatens FED independence. It's got to put some premium into that,
(03:48):
So there's a bit of that. And then to the
extent that Trump also manages to engage in large scale
tax cuts that would be you know, not all that
beneficial to the back end as well, but has an
anchor at the front because he is hider yes man.
Then maybe that keeps the front end down as well.
So I feel like that's the way the market's pricing
(04:09):
in that sort of Trump tail risk at the front
end of the curve is not entirely economic at this stage.
Speaker 5 (04:15):
What about what we're getting from other central banks, Because
one of the other key things we've been talking about
is central bank desynchronization that could have been anticipated for
next year? I mean we had the BOE for instance,
the ECB both maybe saying overnight we're done on the
easing front. Do you see then in light of your
views around the FED and it maybe not much as
easy as could have been anticipated. Are we're going to
(04:36):
be a little bit more synchronized perhaps then for twenty
twenty six.
Speaker 1 (04:41):
My social answer is I do think we're going to
be more synchronized, because there is nothing to suggest that
the world is all that desynchronized right now. There are
certain pockets of stories. You know, Europe will have more
physical stimulus next year, China question mark about which way
their stimulus is going to go. But overall, I do
think there will be more synchronization than what is currently
priced into markets. And for me, the biggest standout, and
(05:03):
we haven't touched on it yet, is the pricing for
the RBA. Yeah, in Australia, all right, so we are
essential bank where the market thinks that next year two
hikes is actually appropriate rather than any further cuts. And
again I look around at our economy and yes, where
this you know country that's further away and we've got
our own immigration dynamics, but there's nothing fundamentally or that
(05:23):
different economically about Australia that would mean that, you know,
inflation is somehow getting out of control here and only here.
Speaker 5 (05:31):
Yeah, because yesterday, for instance, we were talking about just
that the split that we're seeing from the from the
big four banks essentially on whether even February is appropriate
for the first hike. So are you sort of very
much staying away from that.
Speaker 1 (05:42):
Then I don't feel strong enough to put a trade
on for February at this stage. But I would argue that,
you know, the RBA is definitely waiting for the trimmean data.
I would argue that there's even further room to look
to wait a little bit longer some of the blips
that we've been seeing coming through our inflation data. When
(06:04):
I think about it, it's to do with the timing
of subsidies being coming off. But when I think about
the trends in wages that you see in Australia, you know,
the reason, as essential banker, you'd really worry about inflation
getting out of control again in your country is if
you see signs of any spiral happening right, whether it's
expectations into actual inflation, whether it's wage pressures into actual inflation.
(06:27):
None of these things are happening in Australia. So if
you even you know, do get a let's say one
percentrium mean course on quarter, there might still be room
to wait beyond that. If I had to put a
trade on, I would probably still lean against not February
the first hike, if indeed any hikes next year.
Speaker 4 (06:46):
A growth in Australia is pretty anemic though, I mean
it's not part of the RBA's mandate and it's mostly
being propped up by government spending. At the moment, would
that be a factor considering inflation? You know, as you say,
isn't out of control?
Speaker 1 (06:58):
Yeah? So right, growth is, it's anemic, but you know,
there are signs that the consumer is starting to spend
a little bit more. The huge problem in Australia seems
to be productivity, right, and I think the public spending
and the productivity that's hugely related because the public spending
in Australia has led to more of the employment growth
(07:19):
in Australia being in sectors that are productivity constrained by nature.
So you know, more healthcare workers because of NDIS things
like that, and as a result we're not seeing proper
investment in Australia into areas that can actually be far
more productive. Now on the other side of the pond,
in the US, they have been more productive. But is
that productivity story being now offset by the fact that
(07:42):
Trump's immigration policy is causing you know, the cheap and
perhaps undocumented labor that was propping up those products activity
numbers in the US to now shrink and reflect the
real productivity underlying.
Speaker 6 (07:55):
In the US as well?
Speaker 5 (07:56):
What about the speaking of the currency, I mean one
and c P will been watching is the Japanese yen
versus that you aren't as well? And what are you
thinking about about the Chinese economy and as well what
do you want signaling? But also the outlook for stimulus.
Speaker 1 (08:10):
The Chinese economy has been really interesting this year, and
especially when you put it against for example, how the
MSCI China Index has been doing this year. So this
year's been another year of a lot of hope about
what Beijing will do for the Chinese economy in the
wake of the property bubble bursting, and yet a lot
of talk, not a lot of stimulus yet the equity
(08:31):
market has actually done pretty well in China this year,
so I think it's a tale of two halves. The
equaity market is probably a reflection of this is what
happens to markets when expectations are so dire, when so
many people have given up on a growth story. You
don't need a lot of stability. You don't even need
growth for the equity market to be able to perform.
But on the actual policy side of things, I mean,
(08:52):
I've wanted again and again to have a trade on
where you bet that yields will rise in China, But
I still think it's too soon for that trade. You know,
every time we've had some momentum in Chinese government bondy
old selling off it, you know, some policy disappointment comes through.
I think that ultimately, for Beijing, what they need to
(09:13):
come to sort of grips with is how much of
a fiscal lever they're willing to pull without it affecting
the property market, which obviously they don't want to again,
such that they can convince Chinese consumers, who are the
real weapon here in terms of the next part of
the Chinese growth story, to take over that mantle from
public to private and move forward. They're no, Beijing is
(09:36):
nowhere near comfortable in engaging in that sort of helicopter
money stimulus might view.
Speaker 5 (09:41):
Okay, So if you're not, if you're not not quite
having enough conviction around Chinese and also around Australia disminishing
there with the RBA, what is your strongest conviction call
for next year?
Speaker 1 (09:52):
Then? Oh uh, it's I'm actually a little bit worried
for next year and I'm I'm not sure what is
going to be the best way to express it. So normally,
whenever you guys have asked me that question, and I've
not had strong views on equities, I've not had strong
views on China, I've not had strong views on bonds,
I've kind of gone, oh, investment grade credit is where
you should park your money because a bit of floating
(10:14):
rate credit nicer crawl down the curve. That's a great
way to you know, just sleep at night and make money.
Now I feel like that story could have a couple
of wobbles in twenty twenty six, main reasons being not
that defaults are going up wildly, but what is going
to happen with the valuations baked into AI or the
(10:34):
hope of the AI capex that is happening right now,
what is funding that AI capex, and then all the
worries behind private credit as well. So this idea that
there are potentially two bubbles, I don't know if they're
really bubbles, to be honest, but if there are two bubbles,
and the market believes that there are two bubbles and
they meet and burst at the same time, investment grade
credit spreads aren't going to be immune. I mean, they'll
(10:56):
be safer than every other part of credit, but I'm
I'm kind of looking for places to hide at the minute,
is how I describe things.
Speaker 5 (11:03):
Yeah, to your point, I mean, I think there's a
lot of concern around some of that investment great credit
that's price not that much above treasuries, But you actually
are being able to take on possibly some some significant
risks with the well.
Speaker 1 (11:15):
Fifty percent of the US hyperscala AI capex is actually
being financed in the US investment grade market.
Speaker 2 (11:22):
That is Amy Shea Patrick, head of Income Strategies at
Pendle Group, speaking with Bloomberg TV host Paul Allen and
Annabel droolers here on the Daybreak Asia podcast. Welcome back
to the Daybreak Asia podcast. I'm Doug Chrisner. US equities
(11:45):
moved higher on Thursday, and information tech led the way.
We had that strong outlook from industry giant Micron Technology
and that in turn boosted sentiment for all things related
to artificial intelligence. Micron shares were up by more than
ten percent. Joining US now is Keith Buchanan. He is
senior portfolio manager at Globalt. Keith is on the line
(12:06):
from Atlanta, Georgia. Keith, thank you for making time. How
would you view the information tech group right now?
Speaker 6 (12:14):
We still have exposure that we're looking at this market
as really starting late in the fall as to win
this handoff. What happened from really being able to bet
on the direction of the for the reserve, direction of
monetary policy globally to really getting back to earning visibility,
you know, business model certainty, balance sheet stability, those tried
(12:35):
and true metrics that really drive markets in the interim
after we're getting through the space that we've kind of
gone through the last couple of years. So Micron kind
of shows that story is still alive. But we still
believe in how the market has been training since November
in that the market is really starting to appreciate and
pivot towards names that throw off more cash, have more
(12:56):
ability for us earnings, have more control over the outcome
of earnings over the next twelve to twenty four months,
and that's where we've been positioning our clients to benefit
in twenty twenty six.
Speaker 2 (13:07):
Does that necessarily mean small cap?
Speaker 6 (13:11):
It doesn't necessarily mean small cap. We feel like a
small cap move is just to move and rates coming lower,
and that's probably going to be the case of the
next call it five or six months. But as we
get into this as a soft landing that we've been
anticipating for we as in the market's been anticipating for
at least two years now, and kind of prematurely at times.
(13:33):
Now that it comes into focus now that the outcome
of the outcomes of the Federal Reserve and the markets
just in general becomes more wide and widespread, and there
are more mistakes that can happen from this point forward,
And with that in mind, we're looking at the market
and getting to those names that have a little more
margin for error and aren't necessarily betting on one theme
(13:55):
when trade one source of funding in order to generate
cash flow and earnings that we feel like we'll drive
the market further than in twenty twenty six, So we're
more diverse that we've been in some time. We still
do have exposure to those names driving the AI trade,
but not necessarily all of our bets on one trade.
Speaker 2 (14:13):
So as a result of the last FED meeting, we
learned that policymakers in aggregate are expecting to make only
one more rate cut in the new year. But the
swaps market right now is still convinced that we've got
two rate cuts from the Fed happening in twenty twenty six.
Where are you right now in understanding what the Fed
is going to be challenged with in the new year.
Speaker 6 (14:36):
It's really interesting that you brought that up because you
see the dispersing around that normal is distribution being wide
and it's been in the past, the markets doesn't know,
and the different between that's now as people that don't
know and people that don't know they don't know and
coming into a new chairperson of the Federal Reserve. I
think the market is priced in that there will be
(14:56):
some leeway and perhaps even some consensus that can we
build early and maybe get one or two cuts in
the spring but then there are lots of question marks
about where inflation goes, where laborer is, and the light
cut of going in through the second half of next year.
We don't really veer away from that. That uncertainty is
what kind of drives us to more rational cash generation
(15:18):
as far as how we position our clients. And we
feel like that trade will can take hold early in
twenty twenty six in a way that it started to
in the last part of this year. So we know
that we don't know, and we embrace that as part
of our thesis that there are a lot of moving
parts from a monetary policy standpoint, and being with companies
(15:39):
that have balance tief'tability and don't have to really rely
on the capital markets as much and aren't as relying
on our rates going forward as a place we want
to be with our clients assets.
Speaker 2 (15:50):
Where does that leave you with regard to the bond market.
Speaker 6 (15:53):
Sure, we're looking at the long end as somewhat stubbornly
high coming into twenty twenty six. The short end and
a steepening is kind of in our base case for
what we expect going forward. We don't think that the
FED will we'll really dive into four or five or
six cuts into the latter part next year. We don't
(16:14):
feel like that's necessarily anything we want to bet on
at this point, but we do think the inflation being stickier,
perhaps even real growth being stickier than the market really
expects at this point, can have the long end higher
with the short end maybe perhaps a table over where
we are now, but a steepening effect away from what
(16:34):
consensus things is is kind of where we see things
playing out in twenty twenty six.
Speaker 2 (16:39):
So we remember well the month of November and a
lot of the questions around artificial intelligence, the whole AI trade.
There was a lot of volatility in the market, and
then when the dust settled, the move was higher. And
we're very near records right now. If you look at
the major benchmarks in the US, are you surprised that
we haven't seen a meaning full pulled back.
Speaker 6 (17:01):
Not necessarily. Look, the earnest picture is clear, there's there's
a significant I mean, the disproportionate level of cash flow
and earnings is that those names present to the marketplace
deserves a reward and the market's rewarded, and that that
I don't know if I can call it a dislocation,
but the difference between that those valuations and the rest
(17:21):
of the market have been warranted again because of the
way they've been able to execute, So that pullback necessarily
hasn't been anything that we're we're totally banking on again.
We're we're marketwaight a lot of those names that you
mentioned and marketing with the theme more specifically, but we
want to make sure we're diverse and have bets spread
across sectors and names that present that case. I present
(17:46):
a few minutes ago of ballance, but stability, earnings, visibility,
and that's where we want to make sure we have exposure.
We're not underweight those spaces because we see the vible case.
We're investing, you know, for twenty twenty six returns in
those names as well.
Speaker 2 (18:00):
There it's always a pleasure. Thanks very much, Keith Buchanan,
Senior portfolio manager at Globalt, joining from Atlanta, Georgia. 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
(18:21):
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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