November 24, 2025 • 20 mins
US President Donald Trump and Chinese President Xi Jinping on Monday held their first talks since agreeing to a tariff truce last month, discussing trade, Taiwan and Russia's invasion of Ukraine. Trump said the telephone call was "very good" and that the leaders spoke about purchases of soybeans and other farm products as well as curbing shipments of illegal fentanyl. The US president said he agreed to visit Beijing in April, and that he had invited Xi for a state visit next year. "Our relationship with China is extremely strong!" Trump posted on social media. "There has been significant progress on both sides in keeping our agreements current and accurate. Now we can set our sights on the big picture." But the US president's readout of the call sidestepped one issue — the self-governing island of Taiwan — that was a central focus for Xi. The Chinese leader told Trump that the return of Taiwan to China is a key part of the post-World War II international order, according to a Chinese Foreign Ministry statement. Xi also said the two countries should keep the positive momentum generated during their meeting last month in South Korea and expand cooperation, the statement said.
There is a lot to be said about artificial intelligence. Nvidia reported earnings last week that beat analyst expectations. Also, the White House says President Trump is weighing whether to allow Nvidia Corp. to sell advanced artificial intelligence chips to China and will be the one to make a final decision on the matter. For more on the AI trade, we speak to Ritesh Ganeriwal, Syfe's Head of Investment and Advisory.
Plus: Investors are boosting bets on the Federal Reserve cutting rates next month. For more, we spoke to Rob Haworth, Senior Investment Strategy Director, U.S. Bank Asset Management Group.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak
Asia podcast. I'm Doug Krisner. Today Donald Trump and Shi
Jinping spoke for the first time since their tariff truth
last month. Now, the presidents discussed things like trade, Taiwan
(00:22):
and war in Ukraine. Trump also said that he has
agreed to visit Beijing in April, and Trump has invited
President Chief for a state visit to the US next year. Now,
the US and China are still negotiating over details on
how Beijing will free up sales of rare earth minerals.
The aim here is to agree on some type of
(00:42):
terms for general licenses by the end of the month.
For a closer look, I'm joined by Ritesh canary Wall.
He is managing director also the head of Investment and
Advisory at seiph Ratesh thank you so much for joining us.
I'm curious to begin with about how closely your monitoring
this back and forth between Presidents Trump and.
Speaker 2 (01:03):
She Pretty closely, Doug, and look, I think a few
months back we had come with the view that while
there is this rhetoric from the US and from Trump
in terms of taking a hard stance against China, but
the reality would be that Trump is a negotiator and
he will, at the end of the day make a deal.
(01:25):
And that's where we are progressing through with the recent
epic meeting as well as the call that happened overnight.
Speaker 1 (01:32):
What about the degree to which the US may allow
some of these more advanced semiconductors from in Vidio. There
were reports indicating that at the White House there's been
a conversation as to whether or not to allow in
Nvidia to begin selling the H two hundred ship to
the Chinese market.
Speaker 2 (01:51):
Yeah, I believe it is a sticking point, but at
the same time, US also needs rare earth from China,
and in general I see Trump as being much more
commercial in his dealings with China going forward. And you know,
it also comes back to the third point, which is,
(02:12):
if you don't supply the chips, China will obviously move
towards self sufficiency. So that's kind of like inevitable. So
why do you want to, you know, not have those
revenues accumulate. And there is, by the way, there is
revenue that the government collects as well when Nvidia exports
chips to China.
Speaker 1 (02:31):
Are you seeing any evidence that the Chinese chip manufacturers,
the chip designers are beginning to close the gap with Nvidia.
Speaker 2 (02:41):
Not yet, but I guess like compared to what happened
this year earlier, we saw the deep seek moment, so
you cannot never underestimate China from that perspective. So, yes,
if there is a risk to the market going forward,
this will be one of the bigger risks that I
see if China were to develop its own chips. But
(03:02):
you know, I was recently in South Korea. I visited
Esky Highnix, and the intricacy with which these chips are
designed is so so you know tough, it is not
so straightforward for you to just replicate it. So you know,
there are seven hundred steps in this process three months
to design a particular chip, which basically means that if
(03:23):
you were to achieve ninety plus percent accuracy, each step
needs to be ninety nine percent accurate. So it's not
as straightforward as it looks like. So I don't see
that happening anytime soon, in the next one year or so,
but yes, in the next five years, there will definitely
be a catch up.
Speaker 1 (03:36):
I'm sure Ritesh, you've been monitoring some of the recent
price section in the US equity market. There were a
lot of questions around the AI trade and whether or
not we need to really kind of think this aggressive
stance that many investors had taken on the success of
artificial intelligence. Valuations we know appear to be a little
(03:57):
stretched when you look at the entire kind of ecosystem
of artificial intelligence, whether we're talking about an sk heinez
a producer of those high bandwidth memory chips, or we're
talking about a company like in Nvidio, which is really
at the core manufacturing those GPUs. Give me your sense
of where we are right now in the evolution of
(04:18):
this AI trade, and whether or not there is a
risk maybe of they talk about a bubble, maybe there's
a risk that the market has in fact become a
little overextended.
Speaker 2 (04:28):
Yeah, Doug, this is the biggest question that everyone has,
and really there are some worrying signs. So far we
have seen anything that has the mention of AI kind
of like rallying through. I believe that is going to
change as we move forward. There are concerns around the
growing circularity of revenues, which is beginning to be an
(04:49):
emerging feature and was also there in the previous bubbles,
so you know, that is something that is worrying investors.
At the same time, the KEP expending continues to exceed expectations. Now.
So far, most of these KPEX spendings have been funded
through internal gash flows. As we move forward, as you know,
those cash flows are not sufficient and debt needs to
(05:11):
be raised. That's where you know, investors are also becoming
much more circumspect in terms of how much leverage are
these companies going to take. At the same time, I guess,
like you know, so far, most of the action has
been on the infrastructure side, right, like your semiconductors, hyperscalers,
data center operators and led by Nvidia as the kind
of like key enabler off sorts. I guess in general,
(05:35):
the scrutiny has increased, and what that means is selectivity
will be key, and investors have already rotated a way
to a certain extent from companies with elevated leverage, right
so Oracle, Core Weave as well as Meta. Where there
is operator operating margin, you know, earnings growth. These things
are you know, taking a hit, but they are also rewarding.
(05:56):
On the other hand, where there is a career clear
demonstration between kpix and revenues and monetization, which is where
you see Google and Amazon doing pretty well recently.
Speaker 1 (06:07):
So are you likely to stay with US trade for
a while longer and look at names across the Asia
specific maybe in the semiconductor space or in some other
aspect of the hardware space.
Speaker 2 (06:19):
Yeah, I think so. And look, I think at this
juncture everything from a k PX standpoint, yes it looks elevated.
But overall, the growth, the earnings growth is justifying. You know,
this capic and cap expend and when it comes to
something revolutionary, you have to be ahead of the game,
and you can't, you know, just miss that out. I
(06:41):
think the questions that will dominate conversations going forward is
how much of this kpix are you able to self fund?
How much is your AI linked revenue? What are the
kind of infra advantages that you have so you know,
think of Google and their TPUs et cetera. And how
much like you know, power and energy demand bottlenecks can
you whetherby so these are things that we will be
(07:02):
much more careful. And what that means is beyond the infrastructure.
Now you know that next phase will also be in
terms of the AI platforms and the AI enabled revenue
segment of the companies and how they are coming up
will be key. But in general, I think when it
comes to the Asia ecosystem that remains very strong because
you know Nvidia is leading the pack there and the
(07:23):
supply chain comes from Asia, so I see, you know
the positivity to continue.
Speaker 1 (07:29):
So when we talk about data centers, cloud providers that
have this AI component as a part of the services
that they provide. If you look to China and you
think of a name like Ali, Baba or ten Cent,
are there opportunities here that you think are still attractive
or are you still more focused on US based firms.
Speaker 2 (07:51):
There's definitely a lot of opportunities within China. I think
at this juncture, US firms are still not able to
access China the way DOMSI stick company could. And the
reality is when you look at returns this year, Alibaba
has doubled in its stock price this year. Overall, the
Chinese Hong Kong markets have given more than thirty percent returns. Similarly,
(08:14):
markets beyond the US, which is X developed x US
as well as em have all generated returns not of
thirty percent in US dollar terms, whereas you know, the
S and P five hundred returns is fourteen percent at
this juncture, so the bar for US returns have become
much higher. We are also in a US dollar weekening
cycle as interest rates continue to get cut, which basically
(08:37):
means that when it comes to invested positioning and asset allocation,
we do would want to have a more diversified allocation
as we move forward compared to a more dominant US
presence as it was the case previously.
Speaker 1 (08:50):
So give me some jurisdictions that you think are attractive
in the current environment. Japan, South Korea mentioned sk Heinez there,
what about Taiwan.
Speaker 2 (09:02):
Yeah, in general, we see selective opportunities across the EM
in Asia, particularly within em we believe Indian equities have
been showing so far lackluster returns. So while the overall
emerging markets are up thirty percent, India market is just
three percent up here to date. Obviously also impacted a
(09:25):
bit because of you know, the trade related rhetoric, But
when it comes to earnings growth that's picking up in
India as well as the domestic consumption story remains pretty solid.
And when it comes to you know, positioning within the
emerging markets. Then I would still have a much more
you know, allocation still in the tech sensitive equity market
(09:45):
across Korea, Taiwan and China, but I would also have
some balance of it with more domestic oriented markets like India,
Brazil and South Africa.
Speaker 1 (09:55):
Okay, Ries, We'll leave it there, Thank you so very much.
Ritesh Canary wall is managing director. He's also head of
Investment and Advisory at the firm Siphe joining us here
on the Daybreak Asia podcast. Welcome back to the Daybreak
Asia Podcast. I'm Doug Chrisner. US markets began a holiday
(10:18):
shortened week with greater conviction of a FED rate cut
in December, not surprising given some dubvish FED speak. Today
we had Governor Chris Waller indicating support for a rate
cut next month, and the head of the San Francisco Fed,
Mary Daily, told the Wall Street Journal she supports lowering
the policy rate due to a sudden deterioration in the
(10:39):
job market. Now. Right now, money markets are pricing in
a roughly seventy percent probability of a cut at the
next meeting. For a closer look, I'm joined by Rob Hayworth.
He is senior investment strategy director at US Bank Asset
Management Group. Rob is on the line from Seattle. Good
of you to make time to chat with me, Rob.
In recent weeks, we've seen the odds of FED rate
(11:02):
cut next month kind of fluctuate. There seems to have
been a growing divide that is dissipating at this moment.
What do you think is really driving the Fed's thinking
at this point in time.
Speaker 3 (11:14):
Well, I think the Fed, like the rest of us,
is really trying to incorporate the incoming data, particularly given
all the delayed data we had with the government, to
understand how the economy is really doing. And I think
the challenge we had after the jobs report on Thursday
was the job's report looked pretty good, and I think
that gave people a lot of concerns that the Fed
(11:34):
may not cut rates, And we certainly heard that from
a couple of the speakers, and we've seen speakers now
walk that back, and I think it's really solidifying the
market around. Yes, the Fed does want to take care
of the labor market. They'll pay attention to that, but
they do want to take care of the labor market,
and they're may be not as concerned about inflation, particularly
(11:55):
as we've seen oil prices take a little bit lower
here over the last month or so. So I think
it's a lot of confusion, much as we saw on
the dot plot out of the September meeting.
Speaker 1 (12:06):
How would you judge financial conditions right now? It seems
to me that there is still a lot of liquidity
in the system, perhaps one of the reasons that the
equity market has been able to put in these tremendous gains.
Speaker 3 (12:18):
Yeah, I think there is decent liquidity in this market,
but I know we've seen some tightness at the short
end of the funding market, particularly around repo rates and
things like that. So I think this is something where
the market today is maybe a little concerned as we
head into the end of FED quantitative tightening on December first,
(12:39):
and maybe things will get easier as we move beyond
that date, and that could actually provide a little more
of a holiday rally as we head into year end.
Speaker 1 (12:48):
Could this be viewed as kind of an insurance policy
against a lot more economic weakness? Are we on that
kind of fulcrum right now?
Speaker 3 (12:58):
I think that's certainly how we're hearing some of the
FED speakers look at. This is there's not enough reason
to not cut rates. There's certainly no reason to raise rates, right.
It's a matter of are they going to hold steady
or cut. There'll probably be some people unhappy with a cut.
There'll be some people unhappy if we don't get a cut.
There certainly may be another FED official who's unhappy if
(13:19):
we don't get a half point cut. So I'm not
sure everyone will get what they want out of the
December tenth FED meeting, but it does seem like there's
room for them to go ahead and cut rates and
not and provide that insurance to the market and the economy.
Speaker 1 (13:35):
I was struck by a note from the trading desk
today over at UBS Securities. The firm thinks the sellof
that we have seen lately in the US equity market
may have run its course, especially given what we're talking
about the expectation here that the FED will be lowering
interest rates. Is that the way you see it on
the equity side, that maybe we're in for a so
called Santa claus rally.
Speaker 3 (13:56):
I think we certainly could be, particularly if the market
really believes the FED is going to cut rates now,
maybe they won't stay here at seventy seventy five percent. Odds,
we have a lot more FED speaking to go before
we get to that meeting, and I think that's where
the market is really focused at this point is how
is the FED interpreting the incoming data more so than
what is the incoming data? Knowing that even the retail
(14:18):
sales report we get tomorrow, the producer price index report
we get tomorrow are all are all very lagged at
this point. I think the good news for US is
when we look at high frequency data like the weekly
retail sales numbers, those are holding in pretty well. So
that debt tells us that the market will have some
good news or decent news from the economy looking at
(14:40):
the high frequency data, and maybe they'll even get a
little help from the Fed.
Speaker 1 (14:43):
It's hard to ignore the price action in bitcoin lately.
I think since October A, bitcoin is down by more
than thirty percent. This has been a wild year for
gold and bitcoin. If you look at year today, gold
I think is up more than fifty percent. Bitcoin is
down roughly seven percent year today. When you look at bitcoin,
(15:04):
is it a reliable indicator of the appetite for risk?
How would you judge this?
Speaker 2 (15:10):
Yeah?
Speaker 3 (15:10):
I mean, we don't spend too much time looking at it,
but I think certainly is coinciding with some risk off
sentiment as we look at the market right and it
is perhaps just a little more volatile than we look
at the market, whereas gold has been that diversifying asset
class that's been a little more contrary to the market,
and I think that's why we've seen such strong performance
as people been looking for diversification from the equity market,
(15:33):
maybe looking to gold. We'll see if it can really
get restarted. As we look into year end, we're still
really more growth oriented and growth constructive on this market.
So we'd still tilt towards equities relative fixed income and
other asset classes at this point because it seems like
the economy is able to plug along, particularly as we
(15:54):
look at getting the government reopened. That means people got repaid,
there's more money in their pocketbooks, and as we look
into April next year, there's another round of stimulus coming
from the One Big Beautiful Bill Act as consumers will
get some tax relief later in twenty twenty six.
Speaker 1 (16:12):
So Rob, if your focus is on growth, I'm curious
when it comes to the AI theme whether or not
you're adding to names like Nvidia or Alphabet or even Microsoft.
Speaker 3 (16:23):
Yeah, our focus has been I think the challenge for
the market is so many people are already so invested
in that trade that we'd look more towards adding diversification
if you're already fully invested there, So getting more globally oriented,
looking not just at the US equity market, but getting
outside the US. As we see good returns coming for
(16:45):
emerging markets, particularly those that are technology oriented around Asia,
and then even we're seeing decent returns in Europe and Japan,
we'd look there as well, So we'd look for more
global diversification. That said, we'd still make sure people are
fully invested to at least to index weights in those
artificial intelligence teams, because as we look at earning season
(17:08):
and the conclusion of earning season, that is a key
driver for growth into twenty twenty six for the US market,
and we think there's room for that trade to still run.
Speaker 1 (17:16):
So markets like Taiwan, maybe Hong Kong, maybe in North Asia,
South Korea, Japan. Is that about right?
Speaker 2 (17:25):
Yeah?
Speaker 3 (17:25):
Absolutely, Asia is well positioned given kind of the strength
and tech globally.
Speaker 1 (17:31):
Is that more on the semiconductor side, or are you
looking at a kind of a broader story when it
comes to tech.
Speaker 3 (17:38):
We think the story has to be broader because it's
not just chips that are in demand. To make artificial
intelligence work, right, we really need to be able to
store and process that data, protect that data. So that
takes you into cybersecurity, That takes you into the hyperscalers
who are going to provide right, who are going to
provide some analysis around that data as well, And then
(17:58):
it takes you into the energy component, right, the infrastructure
just to power these data centers and to power these models,
before you even get to the next wave, which we
think has to be the usage of AI for other applications.
We're starting to see some of that in healthcare here
in the US. We're seeing better performance here in the
US for healthcare, and some of that we think is
(18:20):
because it's AI application driven. So I think there's a
large infrastructure around artificial intelligence that needs to be a
pay paid attention to, and then we need to look
at that next phase of who's benefiting from the use
of artificial intelligence.
Speaker 1 (18:35):
So stateside, we obviously have the Thanksgiving holiday on Thursday,
markets will be closed The next day, of course, is
Black Friday, which is I guess you could call it
the unofficial start of the holiday shopping season. At one
time it may have been the official start. Where are
you right now in understanding the strength of the American
consumer and what are we likely to see in this
(18:58):
holiday period in terms of retail sales.
Speaker 3 (19:02):
Yeah, it's very interesting. I'm sure like you, you've received a
number of emails already advertising Black Friday and holiday sales
right now ready to go, So retailers are not waiting
on this at all. I think what we're seeing is
we're seeing a little bit of concern that the lower
end consumer is maybe challenged. They're certainly paying attention to
(19:25):
what they're spending, reducing their basket size a little bit
in current spending, but the high end consumer is still
doing okay. I think the thing we're looking at for
this holiday season is probably more about unique products and
experiences more than it has been just more goods. So
(19:46):
this holiday season we think could be okay, but it's
going to be a different sort of holiday season where
people are looking more at the quality of what they're
getting or the uniqueness of what they're getting, rather than
getting more of everything.
Speaker 1 (19:58):
Okay, Rob, believe it. They're good toime. Enjoy the holiday.
Rob Hayworth. There. He is Senior Investment Strategy Director at
us Bank Asset Management Group. Joining from Seattle 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 in
(20:22):
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 Prisner,
and this is Bloomberg
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak
Asia podcast. I'm Doug Krisner. Today Donald Trump and Shi
Jinping spoke for the first time since their tariff truth
last month. Now, the presidents discussed things like trade, Taiwan
(00:22):
and war in Ukraine. Trump also said that he has
agreed to visit Beijing in April, and Trump has invited
President Chief for a state visit to the US next year. Now,
the US and China are still negotiating over details on
how Beijing will free up sales of rare earth minerals.
The aim here is to agree on some type of
(00:42):
terms for general licenses by the end of the month.
For a closer look, I'm joined by Ritesh canary Wall.
He is managing director also the head of Investment and
Advisory at seiph Ratesh thank you so much for joining us.
I'm curious to begin with about how closely your monitoring
this back and forth between Presidents Trump and.
Speaker 2 (01:03):
She Pretty closely, Doug, and look, I think a few
months back we had come with the view that while
there is this rhetoric from the US and from Trump
in terms of taking a hard stance against China, but
the reality would be that Trump is a negotiator and
he will, at the end of the day make a deal.
(01:25):
And that's where we are progressing through with the recent
epic meeting as well as the call that happened overnight.
Speaker 1 (01:32):
What about the degree to which the US may allow
some of these more advanced semiconductors from in Vidio. There
were reports indicating that at the White House there's been
a conversation as to whether or not to allow in
Nvidia to begin selling the H two hundred ship to
the Chinese market.
Speaker 2 (01:51):
Yeah, I believe it is a sticking point, but at
the same time, US also needs rare earth from China,
and in general I see Trump as being much more
commercial in his dealings with China going forward. And you know,
it also comes back to the third point, which is,
(02:12):
if you don't supply the chips, China will obviously move
towards self sufficiency. So that's kind of like inevitable. So
why do you want to, you know, not have those
revenues accumulate. And there is, by the way, there is
revenue that the government collects as well when Nvidia exports
chips to China.
Speaker 1 (02:31):
Are you seeing any evidence that the Chinese chip manufacturers,
the chip designers are beginning to close the gap with Nvidia.
Speaker 2 (02:41):
Not yet, but I guess like compared to what happened
this year earlier, we saw the deep seek moment, so
you cannot never underestimate China from that perspective. So, yes,
if there is a risk to the market going forward,
this will be one of the bigger risks that I
see if China were to develop its own chips. But
(03:02):
you know, I was recently in South Korea. I visited
Esky Highnix, and the intricacy with which these chips are
designed is so so you know tough, it is not
so straightforward for you to just replicate it. So you know,
there are seven hundred steps in this process three months
to design a particular chip, which basically means that if
(03:23):
you were to achieve ninety plus percent accuracy, each step
needs to be ninety nine percent accurate. So it's not
as straightforward as it looks like. So I don't see
that happening anytime soon, in the next one year or so,
but yes, in the next five years, there will definitely
be a catch up.
Speaker 1 (03:36):
I'm sure Ritesh, you've been monitoring some of the recent
price section in the US equity market. There were a
lot of questions around the AI trade and whether or
not we need to really kind of think this aggressive
stance that many investors had taken on the success of
artificial intelligence. Valuations we know appear to be a little
(03:57):
stretched when you look at the entire kind of ecosystem
of artificial intelligence, whether we're talking about an sk heinez
a producer of those high bandwidth memory chips, or we're
talking about a company like in Nvidio, which is really
at the core manufacturing those GPUs. Give me your sense
of where we are right now in the evolution of
(04:18):
this AI trade, and whether or not there is a
risk maybe of they talk about a bubble, maybe there's
a risk that the market has in fact become a
little overextended.
Speaker 2 (04:28):
Yeah, Doug, this is the biggest question that everyone has,
and really there are some worrying signs. So far we
have seen anything that has the mention of AI kind
of like rallying through. I believe that is going to
change as we move forward. There are concerns around the
growing circularity of revenues, which is beginning to be an
(04:49):
emerging feature and was also there in the previous bubbles,
so you know, that is something that is worrying investors.
At the same time, the KEP expending continues to exceed expectations. Now.
So far, most of these KPEX spendings have been funded
through internal gash flows. As we move forward, as you know,
those cash flows are not sufficient and debt needs to
(05:11):
be raised. That's where you know, investors are also becoming
much more circumspect in terms of how much leverage are
these companies going to take. At the same time, I guess,
like you know, so far, most of the action has
been on the infrastructure side, right, like your semiconductors, hyperscalers,
data center operators and led by Nvidia as the kind
of like key enabler off sorts. I guess in general,
(05:35):
the scrutiny has increased, and what that means is selectivity
will be key, and investors have already rotated a way
to a certain extent from companies with elevated leverage, right
so Oracle, Core Weave as well as Meta. Where there
is operator operating margin, you know, earnings growth. These things
are you know, taking a hit, but they are also rewarding.
(05:56):
On the other hand, where there is a career clear
demonstration between kpix and revenues and monetization, which is where
you see Google and Amazon doing pretty well recently.
Speaker 1 (06:07):
So are you likely to stay with US trade for
a while longer and look at names across the Asia
specific maybe in the semiconductor space or in some other
aspect of the hardware space.
Speaker 2 (06:19):
Yeah, I think so. And look, I think at this
juncture everything from a k PX standpoint, yes it looks elevated.
But overall, the growth, the earnings growth is justifying. You know,
this capic and cap expend and when it comes to
something revolutionary, you have to be ahead of the game,
and you can't, you know, just miss that out. I
(06:41):
think the questions that will dominate conversations going forward is
how much of this kpix are you able to self fund?
How much is your AI linked revenue? What are the
kind of infra advantages that you have so you know,
think of Google and their TPUs et cetera. And how
much like you know, power and energy demand bottlenecks can
you whetherby so these are things that we will be
(07:02):
much more careful. And what that means is beyond the infrastructure.
Now you know that next phase will also be in
terms of the AI platforms and the AI enabled revenue
segment of the companies and how they are coming up
will be key. But in general, I think when it
comes to the Asia ecosystem that remains very strong because
you know Nvidia is leading the pack there and the
(07:23):
supply chain comes from Asia, so I see, you know
the positivity to continue.
Speaker 1 (07:29):
So when we talk about data centers, cloud providers that
have this AI component as a part of the services
that they provide. If you look to China and you
think of a name like Ali, Baba or ten Cent,
are there opportunities here that you think are still attractive
or are you still more focused on US based firms.
Speaker 2 (07:51):
There's definitely a lot of opportunities within China. I think
at this juncture, US firms are still not able to
access China the way DOMSI stick company could. And the
reality is when you look at returns this year, Alibaba
has doubled in its stock price this year. Overall, the
Chinese Hong Kong markets have given more than thirty percent returns. Similarly,
(08:14):
markets beyond the US, which is X developed x US
as well as em have all generated returns not of
thirty percent in US dollar terms, whereas you know, the
S and P five hundred returns is fourteen percent at
this juncture, so the bar for US returns have become
much higher. We are also in a US dollar weekening
cycle as interest rates continue to get cut, which basically
(08:37):
means that when it comes to invested positioning and asset allocation,
we do would want to have a more diversified allocation
as we move forward compared to a more dominant US
presence as it was the case previously.
Speaker 1 (08:50):
So give me some jurisdictions that you think are attractive
in the current environment. Japan, South Korea mentioned sk Heinez there,
what about Taiwan.
Speaker 2 (09:02):
Yeah, in general, we see selective opportunities across the EM
in Asia, particularly within em we believe Indian equities have
been showing so far lackluster returns. So while the overall
emerging markets are up thirty percent, India market is just
three percent up here to date. Obviously also impacted a
(09:25):
bit because of you know, the trade related rhetoric, But
when it comes to earnings growth that's picking up in
India as well as the domestic consumption story remains pretty solid.
And when it comes to you know, positioning within the
emerging markets. Then I would still have a much more
you know, allocation still in the tech sensitive equity market
(09:45):
across Korea, Taiwan and China, but I would also have
some balance of it with more domestic oriented markets like India,
Brazil and South Africa.
Speaker 1 (09:55):
Okay, Ries, We'll leave it there, Thank you so very much.
Ritesh Canary wall is managing director. He's also head of
Investment and Advisory at the firm Siphe joining us here
on the Daybreak Asia podcast. Welcome back to the Daybreak
Asia Podcast. I'm Doug Chrisner. US markets began a holiday
(10:18):
shortened week with greater conviction of a FED rate cut
in December, not surprising given some dubvish FED speak. Today
we had Governor Chris Waller indicating support for a rate
cut next month, and the head of the San Francisco Fed,
Mary Daily, told the Wall Street Journal she supports lowering
the policy rate due to a sudden deterioration in the
(10:39):
job market. Now. Right now, money markets are pricing in
a roughly seventy percent probability of a cut at the
next meeting. For a closer look, I'm joined by Rob Hayworth.
He is senior investment strategy director at US Bank Asset
Management Group. Rob is on the line from Seattle. Good
of you to make time to chat with me, Rob.
In recent weeks, we've seen the odds of FED rate
(11:02):
cut next month kind of fluctuate. There seems to have
been a growing divide that is dissipating at this moment.
What do you think is really driving the Fed's thinking
at this point in time.
Speaker 3 (11:14):
Well, I think the Fed, like the rest of us,
is really trying to incorporate the incoming data, particularly given
all the delayed data we had with the government, to
understand how the economy is really doing. And I think
the challenge we had after the jobs report on Thursday
was the job's report looked pretty good, and I think
that gave people a lot of concerns that the Fed
(11:34):
may not cut rates, And we certainly heard that from
a couple of the speakers, and we've seen speakers now
walk that back, and I think it's really solidifying the
market around. Yes, the Fed does want to take care
of the labor market. They'll pay attention to that, but
they do want to take care of the labor market,
and they're may be not as concerned about inflation, particularly
(11:55):
as we've seen oil prices take a little bit lower
here over the last month or so. So I think
it's a lot of confusion, much as we saw on
the dot plot out of the September meeting.
Speaker 1 (12:06):
How would you judge financial conditions right now? It seems
to me that there is still a lot of liquidity
in the system, perhaps one of the reasons that the
equity market has been able to put in these tremendous gains.
Speaker 3 (12:18):
Yeah, I think there is decent liquidity in this market,
but I know we've seen some tightness at the short
end of the funding market, particularly around repo rates and
things like that. So I think this is something where
the market today is maybe a little concerned as we
head into the end of FED quantitative tightening on December first,
(12:39):
and maybe things will get easier as we move beyond
that date, and that could actually provide a little more
of a holiday rally as we head into year end.
Speaker 1 (12:48):
Could this be viewed as kind of an insurance policy
against a lot more economic weakness? Are we on that
kind of fulcrum right now?
Speaker 3 (12:58):
I think that's certainly how we're hearing some of the
FED speakers look at. This is there's not enough reason
to not cut rates. There's certainly no reason to raise rates, right.
It's a matter of are they going to hold steady
or cut. There'll probably be some people unhappy with a cut.
There'll be some people unhappy if we don't get a cut.
There certainly may be another FED official who's unhappy if
(13:19):
we don't get a half point cut. So I'm not
sure everyone will get what they want out of the
December tenth FED meeting, but it does seem like there's
room for them to go ahead and cut rates and
not and provide that insurance to the market and the economy.
Speaker 1 (13:35):
I was struck by a note from the trading desk
today over at UBS Securities. The firm thinks the sellof
that we have seen lately in the US equity market
may have run its course, especially given what we're talking
about the expectation here that the FED will be lowering
interest rates. Is that the way you see it on
the equity side, that maybe we're in for a so
called Santa claus rally.
Speaker 3 (13:56):
I think we certainly could be, particularly if the market
really believes the FED is going to cut rates now,
maybe they won't stay here at seventy seventy five percent. Odds,
we have a lot more FED speaking to go before
we get to that meeting, and I think that's where
the market is really focused at this point is how
is the FED interpreting the incoming data more so than
what is the incoming data? Knowing that even the retail
(14:18):
sales report we get tomorrow, the producer price index report
we get tomorrow are all are all very lagged at
this point. I think the good news for US is
when we look at high frequency data like the weekly
retail sales numbers, those are holding in pretty well. So
that debt tells us that the market will have some
good news or decent news from the economy looking at
(14:40):
the high frequency data, and maybe they'll even get a
little help from the Fed.
Speaker 1 (14:43):
It's hard to ignore the price action in bitcoin lately.
I think since October A, bitcoin is down by more
than thirty percent. This has been a wild year for
gold and bitcoin. If you look at year today, gold
I think is up more than fifty percent. Bitcoin is
down roughly seven percent year today. When you look at bitcoin,
(15:04):
is it a reliable indicator of the appetite for risk?
How would you judge this?
Speaker 2 (15:10):
Yeah?
Speaker 3 (15:10):
I mean, we don't spend too much time looking at it,
but I think certainly is coinciding with some risk off
sentiment as we look at the market right and it
is perhaps just a little more volatile than we look
at the market, whereas gold has been that diversifying asset
class that's been a little more contrary to the market,
and I think that's why we've seen such strong performance
as people been looking for diversification from the equity market,
(15:33):
maybe looking to gold. We'll see if it can really
get restarted. As we look into year end, we're still
really more growth oriented and growth constructive on this market.
So we'd still tilt towards equities relative fixed income and
other asset classes at this point because it seems like
the economy is able to plug along, particularly as we
(15:54):
look at getting the government reopened. That means people got repaid,
there's more money in their pocketbooks, and as we look
into April next year, there's another round of stimulus coming
from the One Big Beautiful Bill Act as consumers will
get some tax relief later in twenty twenty six.
Speaker 1 (16:12):
So Rob, if your focus is on growth, I'm curious
when it comes to the AI theme whether or not
you're adding to names like Nvidia or Alphabet or even Microsoft.
Speaker 3 (16:23):
Yeah, our focus has been I think the challenge for
the market is so many people are already so invested
in that trade that we'd look more towards adding diversification
if you're already fully invested there, So getting more globally oriented,
looking not just at the US equity market, but getting
outside the US. As we see good returns coming for
(16:45):
emerging markets, particularly those that are technology oriented around Asia,
and then even we're seeing decent returns in Europe and Japan,
we'd look there as well, So we'd look for more
global diversification. That said, we'd still make sure people are
fully invested to at least to index weights in those
artificial intelligence teams, because as we look at earning season
(17:08):
and the conclusion of earning season, that is a key
driver for growth into twenty twenty six for the US market,
and we think there's room for that trade to still run.
Speaker 1 (17:16):
So markets like Taiwan, maybe Hong Kong, maybe in North Asia,
South Korea, Japan. Is that about right?
Speaker 2 (17:25):
Yeah?
Speaker 3 (17:25):
Absolutely, Asia is well positioned given kind of the strength
and tech globally.
Speaker 1 (17:31):
Is that more on the semiconductor side, or are you
looking at a kind of a broader story when it
comes to tech.
Speaker 3 (17:38):
We think the story has to be broader because it's
not just chips that are in demand. To make artificial
intelligence work, right, we really need to be able to
store and process that data, protect that data. So that
takes you into cybersecurity, That takes you into the hyperscalers
who are going to provide right, who are going to
provide some analysis around that data as well, And then
(17:58):
it takes you into the energy component, right, the infrastructure
just to power these data centers and to power these models,
before you even get to the next wave, which we
think has to be the usage of AI for other applications.
We're starting to see some of that in healthcare here
in the US. We're seeing better performance here in the
US for healthcare, and some of that we think is
(18:20):
because it's AI application driven. So I think there's a
large infrastructure around artificial intelligence that needs to be a
pay paid attention to, and then we need to look
at that next phase of who's benefiting from the use
of artificial intelligence.
Speaker 1 (18:35):
So stateside, we obviously have the Thanksgiving holiday on Thursday,
markets will be closed The next day, of course, is
Black Friday, which is I guess you could call it
the unofficial start of the holiday shopping season. At one
time it may have been the official start. Where are
you right now in understanding the strength of the American
consumer and what are we likely to see in this
(18:58):
holiday period in terms of retail sales.
Speaker 3 (19:02):
Yeah, it's very interesting. I'm sure like you, you've received a
number of emails already advertising Black Friday and holiday sales
right now ready to go, So retailers are not waiting
on this at all. I think what we're seeing is
we're seeing a little bit of concern that the lower
end consumer is maybe challenged. They're certainly paying attention to
(19:25):
what they're spending, reducing their basket size a little bit
in current spending, but the high end consumer is still
doing okay. I think the thing we're looking at for
this holiday season is probably more about unique products and
experiences more than it has been just more goods. So
(19:46):
this holiday season we think could be okay, but it's
going to be a different sort of holiday season where
people are looking more at the quality of what they're
getting or the uniqueness of what they're getting, rather than
getting more of everything.
Speaker 1 (19:58):
Okay, Rob, believe it. They're good toime. Enjoy the holiday.
Rob Hayworth. There. He is Senior Investment Strategy Director at
us Bank Asset Management Group. Joining from Seattle 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 in
(20:22):
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 Prisner,
and this is Bloomberg
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