December 4, 2025 • 25 mins
French President Emmanuel Macron pushed for more Chinese investment during a meeting with Chinese leader Xi Jinping, as Paris looks to rebalance its economic ties with Beijing and narrow a persistent trade gap. Macron said Europe, including France, needs a clearer framework to attract more Chinese direct investment. He warned that China's growing trade surplus with the rest of the world is becoming unsustainable, while investment flowing into Europe remains too low. We heard from Bloomberg China Correspondent Minmin Low.
Asian equities dropped in early trading following a lackluster session on Wall Street that weighed on tech stocks and bonds, with focus turning to the release of key US inflation data later on Friday. We get an outlook from Charu Chanana, Saxo Chief Investment Strategist. She spoke to Bloomberg's Avril Hong and Paul Allen.
And in the states, markets struggled to gain traction ahead of the Federal Reserve's meeting next week. We spoke to James Thorne, Chief Market Strategist at Wellington-Altus Private Wealth.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:11):
Welcome to the day Break Gasia podcast. I'm Doug Prisner.
We begin in China where French President Emmanuel Macron met
earlier with Chinese President Chi Jinping. Now this meeting took
place as Paris is trying to rebalance its economic ties
with Beijing. Here is Bloomberg China correspondent minmin Low.
Speaker 3 (00:30):
Just judging from the tone coming out of these state
media commentaries so far, it's been heavily covered in China
presidency calling the meeting candid and constructive and fruitful. There
has been a range of cooperative agreements signed covering areas
like natural resources, like agriculture, food, education, investments. I think
(00:51):
the key focus for Macron is really to deepen trade
and investment ties, where he called for more Chinese investment,
saying that needs to be a clearer framework framework to
attract Chinese investments. He also warned against supply chain disruption,
and that was likely a reference to China's disruption of
the rare of access for European countries, although some of
(01:14):
those restrictions had been lifted, but it spooked many European
partners about over reliance on China. He also urged China
to extend its domestic consumption, saying that the one of
the worst ways to deal with the trading balance is
to start a trade war. And I think a key
focus for him is to correct the trading balance, given
(01:34):
that Franz still has about fifteen billion dollars in goods
trade deficit in twenty twenty four.
Speaker 2 (01:40):
That was Bloomberg China correspondent min Min Low. Now today
across the Asia Pacific equity markets are somewhat mixed. A
key question looming is on FED policy, not just the
high probability of a rate cut next week, but the
Fed's outlook for next year. And that's where we begin
our conversation with Charu Chanaana Chief Investment just at Saxo.
(02:01):
She spoke with Bloomberg TV host April Hong and Paul Allen.
Speaker 4 (02:05):
Talk to us about why you saying maybe next year
will be even better for risk and Asia in particular.
Speaker 5 (02:12):
Absolutely.
Speaker 6 (02:13):
Okay, so let's take the broader picture. First, it does
seem like we're getting that rate cut from the Fed,
and then going into next year if at all, you know,
the probability seems to be getting higher for and hast
led fed and that does mean that we could get
some more rate cuts going into next year. I mean,
of course, the market's already looking at three rate cuts
(02:35):
for next year. I've seen predictions of about one hundred
basis points of rate cuts as well. It's about three
to four rate cuts next day looks very very likely.
And on top of that, of course, the tech volatility
has gone out, but that has not really kind of
questioned the kind of k pix that has been going
on in this AI theme. Right, if that continues, especially
(02:56):
from the big hyperscalers that do have the ability to
in some ways fund it as well, I do think,
of course the dispersion would continue and the broadening of
the AI team would continue in the US. But overall,
both of these macro dynamics are extremely positive for Asia
because if we do get that continued AIKPEX, the hardware
(03:18):
backbone off that AI cycle really rests in Asia, and
we've seen that theme play out in Taiwan and Korea.
Speaker 5 (03:26):
I think it could spread out to some of the other.
Speaker 6 (03:28):
Names as well, beyond the big names that have already
rallied quite strongly this year. Japan has been a huge
participation in Asia, and as I think with the volatility
in tech, as investors look to kind of shift away
from hype to the real fundamentals, I think the real
fundamentals are in Asia. When the US hyperscalers continue to
spend with really little insights into where they monetize it,
(03:53):
I think that spending continues to benefit Asia who do
continue to get strong order books on the back of
that spending. And then you club that with FED rate
cuts a softer dollar. Potentially all of those are very positive.
Speaker 4 (04:06):
For ratio on the FED rate cuts you say three
or four n year. How much does that matter whether
we see this first half or second half? And to
what extent is it realistic to expect very dubbish fed
under potentially a fair chair hazard. Yes, given he's one man,
there are other people on the board.
Speaker 6 (04:26):
Right exactly, and I think we will start to get
a reflection of that within this month as well as
to how divided the FED boat is getting. We've already
got some meetings we've seen that division play out, but
certainly I think this December meeting is even more important
because we still have a kind of a data blackout.
Even though the government shutdown is over, we haven't had
(04:47):
the most recent data for the FED to really judge where.
Speaker 5 (04:50):
Things are going.
Speaker 6 (04:51):
We've had obviously some political influence playing a part as well,
So the division is certainly getting much more starker within
the FED, and that will be a theme going into
next year as well. But I think within the first
half of the year, even if we do not substantially
get those rate cuts, certainly depending on where the labor
market is going, I think there is a chance that
(05:12):
we might get another one at the end of the
first quarter if the trend in the labor market sustains
to point towards more weakness. But I think the market
obviously reacts a little bit faster than the actual rate
cut itself, so I think that potential expectations of rate
cuts would also continue to support the markets.
Speaker 7 (05:33):
Charie, do you see dollar weakness becoming a major theme
in twenty twenty six as we see divergence between major
central banks, particularly the FED, And how's that informing your
investment strategy?
Speaker 6 (05:47):
It certainly seems like I mean, we've obviously seen a
lot of the dollar weakness this year as well, but
going into next year, I think it will be a
dual story of both yes, the FED rate cuts, but
also with those federates cuts, I think the fiscal situation
in the US will also continue to play a big part.
I think we might see, you know, this pivot towards
(06:09):
a much more fiscal spending, which could raise concerns for
the long end in the US, and that obviously again
points towards you know, the weaker dollar. We've seen global
central banks trying to obviously diversify their reserves as well
move away from the US dollar. So it does not
still spell the end of the US dollar to me,
(06:32):
because we know that you know, eighty eight percent of
FX transactions one side is still the US dollar even
within trade. I mean, of course we've got a little
bit more relevance for the Chinese renmen we in this region,
but I think globally again, US dollar continues to dominate
in a very significant manner, which is very difficult to
overtake by any other, you know, single currency, or even
(06:55):
for by goal for that matter.
Speaker 5 (06:56):
So I think the dominance really stays.
Speaker 6 (06:59):
But at the margin, these fiscal concerns also continue to
be a negative for the US all the next year.
Speaker 5 (07:05):
In addition to of course the FED rate cuts.
Speaker 7 (07:09):
Well, I know you say that while we're waiting on
these right cuts, while we're potentially waiting out and AI
polls as well, you like to look for assets that
pay you well during times of waiting. So can you
give us some ideas in that regard?
Speaker 6 (07:23):
Absolutely, I think with the yields you know going down
as well, especially on the short end, I think it
is really important for investors who have parked cash, you know,
I think to understand that one your heels are going down.
Plus two, I think we're also still in an environment
of sticky inflation, so that also continues to erode the
purchasing power for cash. So I think obviously it is
(07:46):
very important to understand where you can get some of
those better yields if you are an income seeking investor particularly,
and in that case, I think it is next year
could be a story where we see a lot of
these dividend plays, you know, like reads for example, you
know an income other income plays very much and focus
given of course, because of the volatility in EA, you
(08:08):
want a little bit of a defensive balance in your portfolios.
Because of high concentration of techniques even in indices, you
want to balance your portfolios with something more defensive, but
also because you know, there are income seeking investors who
want to continue to generate steady income.
Speaker 5 (08:22):
Also just quickly if you can.
Speaker 4 (08:27):
When it comes to currencies, what are you saying China
is thinking about guiding the vermintya because it seems to
make sense that it would be stronger. And then how
does that square with what India is thinking when it
comes to the currency.
Speaker 6 (08:41):
Yes, two very divergent parts there. Avivial certainly, I think.
So when we talk about China all year, we've seen
that intent from China that they do not mind a
stronger Chinese you man now right, it is a signal
for them of a stronger economy as well.
Speaker 5 (08:58):
And given that.
Speaker 6 (08:59):
You know, they do want to kind of, you know,
be structurally stronger, strategically independent from the global economy, I
think it was very important for them to continue to
show that strength. But of course the pace of appreciation
in the Chinese yuan has I think obviously given I
mean we got that signal yesterday that that's not something
(09:20):
they're comfortable with. So my sense is here that they
might slow down the pace of appreciation, but they're not going.
Speaker 5 (09:26):
To potentially reverse it at this point.
Speaker 6 (09:29):
Whereas when you talk about India, obviously it has been
you know, the Indian rupee has been extremely weak, and
that also comes from I would say a policy stance
or an intent to kind of be a bigger player
in the global export or the global trade arena. I
think the weaker rupee could help them there, and that
(09:50):
might be the intention behind it. But again I would
say that they might slow down the pace of the
fall of the rupee, but I don't potentially see them
reversing that trend.
Speaker 4 (10:00):
Okay, talking about trend reversals, the yen obviously this year
has been coming under a lot of pressure.
Speaker 5 (10:05):
What is twenty twenty six it is going to look like?
Speaker 4 (10:07):
I think part of the outrageous predictions that ZA actually
has is yes, whate hundred to the dollar.
Speaker 6 (10:12):
Yes, but just to put it right now in outrageous
predictions are not our baseline predictions.
Speaker 5 (10:18):
It's just something fun we.
Speaker 6 (10:19):
Like to do to obviously, you know, encourage some level
of debate. But also I think there is a clear
intent to try to look at some of the blind
spots in your portfolios. You know, certainly this is not
our BAUS case, and it's not like we are telling
our clients that you should premire for a dollar yen
going two hundred. But what we've come up with, like
as a set of ten predictions, which talk about the
(10:41):
risks that investors might have ignored. So we take the
trends that are on ready in place, and we take
them one or two steps further to really.
Speaker 5 (10:48):
Spark that thinking.
Speaker 6 (10:49):
You know, what if I'm exposed to this kind of
a risk in my portfolio, or what if I'm missing
this kind.
Speaker 5 (10:53):
Of an opportunity in my portfolio.
Speaker 6 (10:55):
So, talking particularly about dollar yen, that is not a
trend reversal. For sure, that has been a t and
that's ongoing for some time. Right, we're still very close
to these record low levels, despite the fact that we
are expecting now the market is expecting now the boj
to high crates later this month, and that goes to
say a lot of things. One of course, that the
interest rate differential for Japanese bonds, which are obviously the
(11:19):
yields are rising but still so low that the interest
rate differential to the rest of the world are quite high,
and I think that continues to pressure the end. But
also the fiscal situation again very much what we talked
about for the US as well. Now we do have
an intent to be you know, fiscally more accommodative, even
more accommodative, i should say, in Japan, and that kind
(11:40):
of raises, you know, some concerns when you have two
thirty percent of you know, GDP debt, So I think
that kind of does raise some concerns. Again, it's not
something that will immediately come to them, because a lot
of debt is held by the BOJ itself in Japan,
but I think it's something that continues to concern investors.
And of course the carry trade itself remains quite attractive still.
(12:02):
But things really start to turn if we see FED
cutting aggressively next. Yeah, I don't think the buj's small
steps of rate hikes could really reverse the situation rapidly.
But if the FED really triggers like those hundred basis
points of rate cut and a very dabbash policy, we
could see dollar yet moving lower in that.
Speaker 2 (12:20):
That's Charu Chanana, chief investment strategist at Saxo, speaking with
Bloomberg TV host April Hong and Paul Allen here on
the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
I'm Doug Chrisner. Today, a bipartisan group of US senators
(12:44):
introduced a bill to block in Video from selling its
h two hundred and Blackwell chips to China.
Speaker 3 (12:50):
Now.
Speaker 2 (12:50):
The bill intends to codify existing US restrictions on exports
of advanced semiconductors to the Chinese market. It will also
halt export lice, instance, for sales of chips to adversaries
for at least thirty months. Here is Gene Monster. He
is co founder and managing partner of Deepwater Asset Management.
Speaker 8 (13:09):
If we don't sell those self some form of chips
to China, they'll just go and create their own and
we can benefit in the near term of having them
dependent on our platform. If you think of like Nvidia,
for example, it's.
Speaker 3 (13:21):
Not just the chip.
Speaker 8 (13:22):
They have a Kuda development platform, and so getting their
developers based on that does give the US some form
of leverage in terms of how the technology rolls out
in the years to come.
Speaker 2 (13:33):
Today's shares in Nvidia were a little changed in the
US session. Overall, the equity market state side struggle to
gain any traction in front of next week's FED decision.
Let's take a closer look with James Thorn. He is
chief market strategist at Wellington Altist Private Wealth. He joins
us from Toronto. Jim, thanks for being here. I think
it's fair to say that markets right now are largely
(13:56):
betting on the FED cutting interest rates next week by
twenty five bay points. But it's fair to point out
that policymakers have rarely been so divided if we focus
on the weakness in the labor market. Are you expecting
a cut?
Speaker 1 (14:10):
Yes, I am. I think the larger question is, you
know what is what economists would say is what's the
terminal rate or where does the FED stop cutting? Is
it going to be a two seventy five? Is it
going to be a three twenty five? But one thing
we know as investors is that you know in twenty
twenty six liquidity is coming into the market, which should
(14:32):
be good for risk assets.
Speaker 2 (14:34):
So as we know, some members of the FED have
highlighted the risk of sticky inflation. On Wednesday. Just the
other day, we learned from the ISM that prices of
services and materials on an annual basis are holding in
at around three percent, and some of the other inflation
readings that we have seen recently show inflation still above
the fed's two percent target. I'm wondering if that's a
(14:57):
concern for.
Speaker 1 (14:57):
You, you know, because I look at first, I recognize
that shelter is one of the driving components of CPI
and PCE, and we know that's lagged. And if we
put market based indicators into both of those variables, there
is no inflation problem. And then you know, service inflation
(15:20):
has always been sticky since I've been in the business
for thirty years, so you know, you know, what the
FED can do in terms of its monetary policy is
really affect the business the interst rate sensitive sectors of
the economy, and I agree with Secretary Present that, you know,
the interesst rate sensitive sector and the economy is in
(15:41):
a recession, specifically housing, and so they need to.
Speaker 2 (15:44):
Cut There's also been some debate as to whether or
not lower interest rates can have a meaningful impact on
improving the labor market. Maybe we need to consider some
of the other forces that have contributed to a restructuring
and I'm thinking of AI in particular. Perhaps the labor
market is not as sensitive to changes in rate policy
(16:04):
as it once was.
Speaker 1 (16:06):
That's a fair point, and you know, in these recoveries
where you know, technology recovery driven recoveries, labor lags. And
I think there is some conversations or some indication coming
under the FED that they indicate that the real risk
(16:28):
is in the labor market and we need to give
support to the interest rate sensitive sector and wait to
see if President Trump's supply side policies kick in and
all that investment that is supposedly coming in because of terrorists,
and if that happens. The interesting thing about it is
(16:49):
that we're not going to go back to you know,
secular stagnation and deflation. And the FED can be right
in basically saying that the neutral rate is somewhere around
two seventy five to three percent. But if they tightened
too much, as and they contracted the balance sheet too much,
as happened after the Second World War, you could get
(17:12):
a real gross scare in debt and deflation really come back.
And once you get those expectations going the other way,
it's really hard to put the genie back in the bottle.
Speaker 2 (17:25):
So I'm speaking to you from Toronto. Maybe we can
talk a little bit about the trade relationship between the
US and Canada. Today, President Trump signaled the US could
withdraw entirely from the us MCA and renegotiate large parts
of that trade accord with both Canada and Mexico sometime
next year. Jim, I'm wondering from your point of view,
(17:47):
does the USMCA need to be restructured.
Speaker 1 (17:50):
Yeah, it has to be restructured, yes, And you know,
let's be honest the you know, and this is how
I frame it is that, you know, irrespective of President Trump,
because interest payments on debt in the United States are
greater than military expenditures, we have to or the Americans
(18:10):
have to adjust. So let's realize that and figure out
what we're going to do. And so when you think
about it, what Canada has to do is they have
to basically start exporting their one you know, competitive advantage, right,
which is natural resources. And so those areas of the
(18:32):
economy that were protected under the USMCA, for example, autos. Really,
you know, we have to be honest with ourselves and
to say that Canada doesn't really have a competitive advantage there, right,
I mean in Ontario where I live in Toronto, right
with Premier Doug Ford, I'm sorry, you know, electricity prices
(18:53):
in Ontario are too high. So you know, Canada has
needs to do the structural adjustment, just like the United States.
So I think we have to be honest and see
how is Canada in the United States going to create
a relationship where they both can be stronger. And I
really think that Prime Minister Carney and President Trump in
(19:16):
his cabinet understand that. So to me, it's not as
as scary as some people would bring up.
Speaker 2 (19:22):
You mentioned natural resources, and in Canada, I think of
the energy complex being a big part of that story.
So when we consider the hunger that we have now
for power, in particular to drive some of these AI
data centers, this seems to represent a big opportunity for Canada.
The question is whether there will be cooperation.
Speaker 1 (19:42):
Yes, and I think the only thing that needs has
to happen is it takes time. Right Canada has you know,
I lived in the States for twenty five years. Canada
has neglected its core competency, which is now to resources.
So you just don't open a mine, just don't build
a pipeline, You just don't build a nuclear reactor. You know, Doug,
(20:04):
Back in the fifties and sixties, Canada was a world
leader in nuclear power. And nuclear technology. So it just
takes time. And yes, so and I agree with Prime
Minister Carneia on this. You know, pipelines are boring because
really what Canada needs to do is stop exporting its
natural resources and start processing it and using those natural
(20:26):
resources to create a diversified economy, which would mean AI
and I think that's the next step. So we need time.
But at the same point in time, Look, I mean
and Canada and the United States, it's we're family. We fight,
but at the same point in time, we will grow
(20:48):
together in this new environment. And Canada can really help
by bringing resources and critical materials and energy and natural
resource to the forefront. So I am very constructive on
what's going forward. And you know, as Prime Minister Carney
(21:09):
said it, the Council and Foreign Relations we have to adjust.
We're dealing with the reckoning and so but that takes time.
But you know, if you understand that there's lots of
opportunities all over the place to take advantage of that.
Speaker 2 (21:21):
What about the processing of rare earth minerals. This is
an industry that China really dominates. And can you imagine
a world where Canada steps up and begins developing a
more robust infrastructure for processing rare earths.
Speaker 1 (21:38):
Yes, when you think about the problem that Canadians have
had in the past, it's been that they do not
want to process natural resources because of the pollution. And
I really think that Canada really needs to have an
honest conversation with themselves. You know, let's talk about the
tanker ban on the on the west coast of uh Canada.
(22:04):
Yet you know, tankers flow freely on the east coast.
Think about all the pipelines that we've had. So I
think what's happened is we've had a decade of what
I would call virtue ce doing that has really cost
Canada standard of living. And so we're in the early
phases of shifting. And what I would say to you
(22:25):
is is Mark Kearney is a very smart man. He
is a you know, a world class central banker. But
don't forget he you know, cut his teeth in the
private sector with Goldman Sachs and and later on in Brookfield.
So he understands it. But it's you know, it's one
thing for you and I to talk about it, but
he's got to play the political battlefield up in Canada
(22:47):
to get everything going and he only has a minority
government right now, so I think he he has a
handle on what's happening, but he's got to move a
lot of the chess pieces and so it's going to
take time. But power is going to go south. You know,
we're going to have a few industries that are going
(23:09):
to get hard because they were protected by USMCA. But
when you have an economy that is resource rich, you know,
in the long run, we're going to be okay. So
Canada has what the world wants. We've just got to
get our act together and start getting it to the
world market and moving forward with long duration infrastructure projects
(23:34):
and saying to the world's the global capital markets, you know,
we're open for business and the rules aren't going to change.
Speaker 2 (23:43):
So we've talked a little bit about the relationship between
Canada and the US, and we're well aware of the
tension between China and the US. So I'm wondering whether
you see opportunities for Canada to strengthen its relationship with China.
Speaker 1 (23:57):
I think the two countries will co exis, but I
don't think there will be significant strengthening. I think the
Teutonic plates that are happening right now is negotiations between
President Trump and mister Putin and also mister she I
(24:18):
really think that the powers to be are going to
come to some agreement, a peace dividend, as you will say,
I will call it, so that we can get a
period of time where we can all grow out of
this debt mess that we're in. So no, but I
would honest, but I want to say, look, if you know,
(24:44):
with Premier Smith and Alberta, we build the pipeline to
the West coast and we ship you know, oil to
China or to Asia. I think there is going to
be a global trading relationship, but I don't think it's
going to be anything more than that.
Speaker 2 (25:03):
Okay, Chim, well leave it there. Always a pleasure, Thank
you so very much. James Thorn is the chief market
Strategist at Wellington Altis Private Wealth. Joining from Toronto, Canada.
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
(25:26):
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 Risner,
and this is Bloomberg
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:11):
Welcome to the day Break Gasia podcast. I'm Doug Prisner.
We begin in China where French President Emmanuel Macron met
earlier with Chinese President Chi Jinping. Now this meeting took
place as Paris is trying to rebalance its economic ties
with Beijing. Here is Bloomberg China correspondent minmin Low.
Speaker 3 (00:30):
Just judging from the tone coming out of these state
media commentaries so far, it's been heavily covered in China
presidency calling the meeting candid and constructive and fruitful. There
has been a range of cooperative agreements signed covering areas
like natural resources, like agriculture, food, education, investments. I think
(00:51):
the key focus for Macron is really to deepen trade
and investment ties, where he called for more Chinese investment,
saying that needs to be a clearer framework framework to
attract Chinese investments. He also warned against supply chain disruption,
and that was likely a reference to China's disruption of
the rare of access for European countries, although some of
(01:14):
those restrictions had been lifted, but it spooked many European
partners about over reliance on China. He also urged China
to extend its domestic consumption, saying that the one of
the worst ways to deal with the trading balance is
to start a trade war. And I think a key
focus for him is to correct the trading balance, given
(01:34):
that Franz still has about fifteen billion dollars in goods
trade deficit in twenty twenty four.
Speaker 2 (01:40):
That was Bloomberg China correspondent min Min Low. Now today
across the Asia Pacific equity markets are somewhat mixed. A
key question looming is on FED policy, not just the
high probability of a rate cut next week, but the
Fed's outlook for next year. And that's where we begin
our conversation with Charu Chanaana Chief Investment just at Saxo.
(02:01):
She spoke with Bloomberg TV host April Hong and Paul Allen.
Speaker 4 (02:05):
Talk to us about why you saying maybe next year
will be even better for risk and Asia in particular.
Speaker 5 (02:12):
Absolutely.
Speaker 6 (02:13):
Okay, so let's take the broader picture. First, it does
seem like we're getting that rate cut from the Fed,
and then going into next year if at all, you know,
the probability seems to be getting higher for and hast
led fed and that does mean that we could get
some more rate cuts going into next year. I mean,
of course, the market's already looking at three rate cuts
(02:35):
for next year. I've seen predictions of about one hundred
basis points of rate cuts as well. It's about three
to four rate cuts next day looks very very likely.
And on top of that, of course, the tech volatility
has gone out, but that has not really kind of
questioned the kind of k pix that has been going
on in this AI theme. Right, if that continues, especially
(02:56):
from the big hyperscalers that do have the ability to
in some ways fund it as well, I do think,
of course the dispersion would continue and the broadening of
the AI team would continue in the US. But overall,
both of these macro dynamics are extremely positive for Asia
because if we do get that continued AIKPEX, the hardware
(03:18):
backbone off that AI cycle really rests in Asia, and
we've seen that theme play out in Taiwan and Korea.
Speaker 5 (03:26):
I think it could spread out to some of the other.
Speaker 6 (03:28):
Names as well, beyond the big names that have already
rallied quite strongly this year. Japan has been a huge
participation in Asia, and as I think with the volatility
in tech, as investors look to kind of shift away
from hype to the real fundamentals, I think the real
fundamentals are in Asia. When the US hyperscalers continue to
spend with really little insights into where they monetize it,
(03:53):
I think that spending continues to benefit Asia who do
continue to get strong order books on the back of
that spending. And then you club that with FED rate
cuts a softer dollar. Potentially all of those are very positive.
Speaker 4 (04:06):
For ratio on the FED rate cuts you say three
or four n year. How much does that matter whether
we see this first half or second half? And to
what extent is it realistic to expect very dubbish fed
under potentially a fair chair hazard. Yes, given he's one man,
there are other people on the board.
Speaker 6 (04:26):
Right exactly, and I think we will start to get
a reflection of that within this month as well as
to how divided the FED boat is getting. We've already
got some meetings we've seen that division play out, but
certainly I think this December meeting is even more important
because we still have a kind of a data blackout.
Even though the government shutdown is over, we haven't had
(04:47):
the most recent data for the FED to really judge where.
Speaker 5 (04:50):
Things are going.
Speaker 6 (04:51):
We've had obviously some political influence playing a part as well,
So the division is certainly getting much more starker within
the FED, and that will be a theme going into
next year as well. But I think within the first
half of the year, even if we do not substantially
get those rate cuts, certainly depending on where the labor
market is going, I think there is a chance that
(05:12):
we might get another one at the end of the
first quarter if the trend in the labor market sustains
to point towards more weakness. But I think the market
obviously reacts a little bit faster than the actual rate
cut itself, so I think that potential expectations of rate
cuts would also continue to support the markets.
Speaker 7 (05:33):
Charie, do you see dollar weakness becoming a major theme
in twenty twenty six as we see divergence between major
central banks, particularly the FED, And how's that informing your
investment strategy?
Speaker 6 (05:47):
It certainly seems like I mean, we've obviously seen a
lot of the dollar weakness this year as well, but
going into next year, I think it will be a
dual story of both yes, the FED rate cuts, but
also with those federates cuts, I think the fiscal situation
in the US will also continue to play a big part.
I think we might see, you know, this pivot towards
(06:09):
a much more fiscal spending, which could raise concerns for
the long end in the US, and that obviously again
points towards you know, the weaker dollar. We've seen global
central banks trying to obviously diversify their reserves as well
move away from the US dollar. So it does not
still spell the end of the US dollar to me,
(06:32):
because we know that you know, eighty eight percent of
FX transactions one side is still the US dollar even
within trade. I mean, of course we've got a little
bit more relevance for the Chinese renmen we in this region,
but I think globally again, US dollar continues to dominate
in a very significant manner, which is very difficult to
overtake by any other, you know, single currency, or even
(06:55):
for by goal for that matter.
Speaker 5 (06:56):
So I think the dominance really stays.
Speaker 6 (06:59):
But at the margin, these fiscal concerns also continue to
be a negative for the US all the next year.
Speaker 5 (07:05):
In addition to of course the FED rate cuts.
Speaker 7 (07:09):
Well, I know you say that while we're waiting on
these right cuts, while we're potentially waiting out and AI
polls as well, you like to look for assets that
pay you well during times of waiting. So can you
give us some ideas in that regard?
Speaker 6 (07:23):
Absolutely, I think with the yields you know going down
as well, especially on the short end, I think it
is really important for investors who have parked cash, you know,
I think to understand that one your heels are going down.
Plus two, I think we're also still in an environment
of sticky inflation, so that also continues to erode the
purchasing power for cash. So I think obviously it is
(07:46):
very important to understand where you can get some of
those better yields if you are an income seeking investor particularly,
and in that case, I think it is next year
could be a story where we see a lot of
these dividend plays, you know, like reads for example, you
know an income other income plays very much and focus
given of course, because of the volatility in EA, you
(08:08):
want a little bit of a defensive balance in your portfolios.
Because of high concentration of techniques even in indices, you
want to balance your portfolios with something more defensive, but
also because you know, there are income seeking investors who
want to continue to generate steady income.
Speaker 5 (08:22):
Also just quickly if you can.
Speaker 4 (08:27):
When it comes to currencies, what are you saying China
is thinking about guiding the vermintya because it seems to
make sense that it would be stronger. And then how
does that square with what India is thinking when it
comes to the currency.
Speaker 6 (08:41):
Yes, two very divergent parts there. Avivial certainly, I think.
So when we talk about China all year, we've seen
that intent from China that they do not mind a
stronger Chinese you man now right, it is a signal
for them of a stronger economy as well.
Speaker 5 (08:58):
And given that.
Speaker 6 (08:59):
You know, they do want to kind of, you know,
be structurally stronger, strategically independent from the global economy, I
think it was very important for them to continue to
show that strength. But of course the pace of appreciation
in the Chinese yuan has I think obviously given I
mean we got that signal yesterday that that's not something
(09:20):
they're comfortable with. So my sense is here that they
might slow down the pace of appreciation, but they're not going.
Speaker 5 (09:26):
To potentially reverse it at this point.
Speaker 6 (09:29):
Whereas when you talk about India, obviously it has been
you know, the Indian rupee has been extremely weak, and
that also comes from I would say a policy stance
or an intent to kind of be a bigger player
in the global export or the global trade arena. I
think the weaker rupee could help them there, and that
(09:50):
might be the intention behind it. But again I would
say that they might slow down the pace of the
fall of the rupee, but I don't potentially see them
reversing that trend.
Speaker 4 (10:00):
Okay, talking about trend reversals, the yen obviously this year
has been coming under a lot of pressure.
Speaker 5 (10:05):
What is twenty twenty six it is going to look like?
Speaker 4 (10:07):
I think part of the outrageous predictions that ZA actually
has is yes, whate hundred to the dollar.
Speaker 6 (10:12):
Yes, but just to put it right now in outrageous
predictions are not our baseline predictions.
Speaker 5 (10:18):
It's just something fun we.
Speaker 6 (10:19):
Like to do to obviously, you know, encourage some level
of debate. But also I think there is a clear
intent to try to look at some of the blind
spots in your portfolios. You know, certainly this is not
our BAUS case, and it's not like we are telling
our clients that you should premire for a dollar yen
going two hundred. But what we've come up with, like
as a set of ten predictions, which talk about the
(10:41):
risks that investors might have ignored. So we take the
trends that are on ready in place, and we take
them one or two steps further to really.
Speaker 5 (10:48):
Spark that thinking.
Speaker 6 (10:49):
You know, what if I'm exposed to this kind of
a risk in my portfolio, or what if I'm missing
this kind.
Speaker 5 (10:53):
Of an opportunity in my portfolio.
Speaker 6 (10:55):
So, talking particularly about dollar yen, that is not a
trend reversal. For sure, that has been a t and
that's ongoing for some time. Right, we're still very close
to these record low levels, despite the fact that we
are expecting now the market is expecting now the boj
to high crates later this month, and that goes to
say a lot of things. One of course, that the
interest rate differential for Japanese bonds, which are obviously the
(11:19):
yields are rising but still so low that the interest
rate differential to the rest of the world are quite high,
and I think that continues to pressure the end. But
also the fiscal situation again very much what we talked
about for the US as well. Now we do have
an intent to be you know, fiscally more accommodative, even
more accommodative, i should say, in Japan, and that kind
(11:40):
of raises, you know, some concerns when you have two
thirty percent of you know, GDP debt, So I think
that kind of does raise some concerns. Again, it's not
something that will immediately come to them, because a lot
of debt is held by the BOJ itself in Japan,
but I think it's something that continues to concern investors.
And of course the carry trade itself remains quite attractive still.
(12:02):
But things really start to turn if we see FED
cutting aggressively next. Yeah, I don't think the buj's small
steps of rate hikes could really reverse the situation rapidly.
But if the FED really triggers like those hundred basis
points of rate cut and a very dabbash policy, we
could see dollar yet moving lower in that.
Speaker 2 (12:20):
That's Charu Chanana, chief investment strategist at Saxo, speaking with
Bloomberg TV host April Hong and Paul Allen here on
the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
I'm Doug Chrisner. Today, a bipartisan group of US senators
(12:44):
introduced a bill to block in Video from selling its
h two hundred and Blackwell chips to China.
Speaker 3 (12:50):
Now.
Speaker 2 (12:50):
The bill intends to codify existing US restrictions on exports
of advanced semiconductors to the Chinese market. It will also
halt export lice, instance, for sales of chips to adversaries
for at least thirty months. Here is Gene Monster. He
is co founder and managing partner of Deepwater Asset Management.
Speaker 8 (13:09):
If we don't sell those self some form of chips
to China, they'll just go and create their own and
we can benefit in the near term of having them
dependent on our platform. If you think of like Nvidia,
for example, it's.
Speaker 3 (13:21):
Not just the chip.
Speaker 8 (13:22):
They have a Kuda development platform, and so getting their
developers based on that does give the US some form
of leverage in terms of how the technology rolls out
in the years to come.
Speaker 2 (13:33):
Today's shares in Nvidia were a little changed in the
US session. Overall, the equity market state side struggle to
gain any traction in front of next week's FED decision.
Let's take a closer look with James Thorn. He is
chief market strategist at Wellington Altist Private Wealth. He joins
us from Toronto. Jim, thanks for being here. I think
it's fair to say that markets right now are largely
(13:56):
betting on the FED cutting interest rates next week by
twenty five bay points. But it's fair to point out
that policymakers have rarely been so divided if we focus
on the weakness in the labor market. Are you expecting
a cut?
Speaker 1 (14:10):
Yes, I am. I think the larger question is, you
know what is what economists would say is what's the
terminal rate or where does the FED stop cutting? Is
it going to be a two seventy five? Is it
going to be a three twenty five? But one thing
we know as investors is that you know in twenty
twenty six liquidity is coming into the market, which should
(14:32):
be good for risk assets.
Speaker 2 (14:34):
So as we know, some members of the FED have
highlighted the risk of sticky inflation. On Wednesday. Just the
other day, we learned from the ISM that prices of
services and materials on an annual basis are holding in
at around three percent, and some of the other inflation
readings that we have seen recently show inflation still above
the fed's two percent target. I'm wondering if that's a
(14:57):
concern for.
Speaker 1 (14:57):
You, you know, because I look at first, I recognize
that shelter is one of the driving components of CPI
and PCE, and we know that's lagged. And if we
put market based indicators into both of those variables, there
is no inflation problem. And then you know, service inflation
(15:20):
has always been sticky since I've been in the business
for thirty years, so you know, you know, what the
FED can do in terms of its monetary policy is
really affect the business the interst rate sensitive sectors of
the economy, and I agree with Secretary Present that, you know,
the interesst rate sensitive sector and the economy is in
(15:41):
a recession, specifically housing, and so they need to.
Speaker 2 (15:44):
Cut There's also been some debate as to whether or
not lower interest rates can have a meaningful impact on
improving the labor market. Maybe we need to consider some
of the other forces that have contributed to a restructuring
and I'm thinking of AI in particular. Perhaps the labor
market is not as sensitive to changes in rate policy
(16:04):
as it once was.
Speaker 1 (16:06):
That's a fair point, and you know, in these recoveries
where you know, technology recovery driven recoveries, labor lags. And
I think there is some conversations or some indication coming
under the FED that they indicate that the real risk
(16:28):
is in the labor market and we need to give
support to the interest rate sensitive sector and wait to
see if President Trump's supply side policies kick in and
all that investment that is supposedly coming in because of terrorists,
and if that happens. The interesting thing about it is
(16:49):
that we're not going to go back to you know,
secular stagnation and deflation. And the FED can be right
in basically saying that the neutral rate is somewhere around
two seventy five to three percent. But if they tightened
too much, as and they contracted the balance sheet too much,
as happened after the Second World War, you could get
(17:12):
a real gross scare in debt and deflation really come back.
And once you get those expectations going the other way,
it's really hard to put the genie back in the bottle.
Speaker 2 (17:25):
So I'm speaking to you from Toronto. Maybe we can
talk a little bit about the trade relationship between the
US and Canada. Today, President Trump signaled the US could
withdraw entirely from the us MCA and renegotiate large parts
of that trade accord with both Canada and Mexico sometime
next year. Jim, I'm wondering from your point of view,
(17:47):
does the USMCA need to be restructured.
Speaker 1 (17:50):
Yeah, it has to be restructured, yes, And you know,
let's be honest the you know, and this is how
I frame it is that, you know, irrespective of President Trump,
because interest payments on debt in the United States are
greater than military expenditures, we have to or the Americans
(18:10):
have to adjust. So let's realize that and figure out
what we're going to do. And so when you think
about it, what Canada has to do is they have
to basically start exporting their one you know, competitive advantage, right,
which is natural resources. And so those areas of the
(18:32):
economy that were protected under the USMCA, for example, autos. Really,
you know, we have to be honest with ourselves and
to say that Canada doesn't really have a competitive advantage there, right,
I mean in Ontario where I live in Toronto, right
with Premier Doug Ford, I'm sorry, you know, electricity prices
(18:53):
in Ontario are too high. So you know, Canada has
needs to do the structural adjustment, just like the United States.
So I think we have to be honest and see
how is Canada in the United States going to create
a relationship where they both can be stronger. And I
really think that Prime Minister Carney and President Trump in
(19:16):
his cabinet understand that. So to me, it's not as
as scary as some people would bring up.
Speaker 2 (19:22):
You mentioned natural resources, and in Canada, I think of
the energy complex being a big part of that story.
So when we consider the hunger that we have now
for power, in particular to drive some of these AI
data centers, this seems to represent a big opportunity for Canada.
The question is whether there will be cooperation.
Speaker 1 (19:42):
Yes, and I think the only thing that needs has
to happen is it takes time. Right Canada has you know,
I lived in the States for twenty five years. Canada
has neglected its core competency, which is now to resources.
So you just don't open a mine, just don't build
a pipeline, You just don't build a nuclear reactor. You know, Doug,
(20:04):
Back in the fifties and sixties, Canada was a world
leader in nuclear power. And nuclear technology. So it just
takes time. And yes, so and I agree with Prime
Minister Carneia on this. You know, pipelines are boring because
really what Canada needs to do is stop exporting its
natural resources and start processing it and using those natural
(20:26):
resources to create a diversified economy, which would mean AI
and I think that's the next step. So we need time.
But at the same point in time, Look, I mean
and Canada and the United States, it's we're family. We fight,
but at the same point in time, we will grow
(20:48):
together in this new environment. And Canada can really help
by bringing resources and critical materials and energy and natural
resource to the forefront. So I am very constructive on
what's going forward. And you know, as Prime Minister Carney
(21:09):
said it, the Council and Foreign Relations we have to adjust.
We're dealing with the reckoning and so but that takes time.
But you know, if you understand that there's lots of
opportunities all over the place to take advantage of that.
Speaker 2 (21:21):
What about the processing of rare earth minerals. This is
an industry that China really dominates. And can you imagine
a world where Canada steps up and begins developing a
more robust infrastructure for processing rare earths.
Speaker 1 (21:38):
Yes, when you think about the problem that Canadians have
had in the past, it's been that they do not
want to process natural resources because of the pollution. And
I really think that Canada really needs to have an
honest conversation with themselves. You know, let's talk about the
tanker ban on the on the west coast of uh Canada.
(22:04):
Yet you know, tankers flow freely on the east coast.
Think about all the pipelines that we've had. So I
think what's happened is we've had a decade of what
I would call virtue ce doing that has really cost
Canada standard of living. And so we're in the early
phases of shifting. And what I would say to you
(22:25):
is is Mark Kearney is a very smart man. He
is a you know, a world class central banker. But
don't forget he you know, cut his teeth in the
private sector with Goldman Sachs and and later on in Brookfield.
So he understands it. But it's you know, it's one
thing for you and I to talk about it, but
he's got to play the political battlefield up in Canada
(22:47):
to get everything going and he only has a minority
government right now, so I think he he has a
handle on what's happening, but he's got to move a
lot of the chess pieces and so it's going to
take time. But power is going to go south. You know,
we're going to have a few industries that are going
(23:09):
to get hard because they were protected by USMCA. But
when you have an economy that is resource rich, you know,
in the long run, we're going to be okay. So
Canada has what the world wants. We've just got to
get our act together and start getting it to the
world market and moving forward with long duration infrastructure projects
(23:34):
and saying to the world's the global capital markets, you know,
we're open for business and the rules aren't going to change.
Speaker 2 (23:43):
So we've talked a little bit about the relationship between
Canada and the US, and we're well aware of the
tension between China and the US. So I'm wondering whether
you see opportunities for Canada to strengthen its relationship with China.
Speaker 1 (23:57):
I think the two countries will co exis, but I
don't think there will be significant strengthening. I think the
Teutonic plates that are happening right now is negotiations between
President Trump and mister Putin and also mister she I
(24:18):
really think that the powers to be are going to
come to some agreement, a peace dividend, as you will say,
I will call it, so that we can get a
period of time where we can all grow out of
this debt mess that we're in. So no, but I
would honest, but I want to say, look, if you know,
(24:44):
with Premier Smith and Alberta, we build the pipeline to
the West coast and we ship you know, oil to
China or to Asia. I think there is going to
be a global trading relationship, but I don't think it's
going to be anything more than that.
Speaker 2 (25:03):
Okay, Chim, well leave it there. Always a pleasure, Thank
you so very much. James Thorn is the chief market
Strategist at Wellington Altis Private Wealth. Joining from Toronto, Canada.
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
(25:26):
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 Risner,
and this is Bloomberg
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