Asia Stocks Rally; China's Central Bank Promises More Support | Bloomberg: The China Show 8/16/2024
Half an hour away from the opens in Hong Kong, Shenzhen and Shanghai are watching the China show. I'm Yvonne Man with David in glass. Happy friday. Let's get to your top stories today. Stocks across the Asia Pacific gaining as bonds tumbling with strong U.S. retail sales and jobs numbers bolstering hopes of a soft landing. Now, that economic resilience also prompting traders to shred bets on big red cuts from the Fed. Now we're watching earnings reaction to
some of these big results out of Chinese tech. JD dot com jumping in New York as profit beating expectations but Alibaba revenue there missing estimates on weakness in its core e-commerce units plus China's central bank chief pledging further steps to support growth but warning not to expect anything drastic. All right. This will be a happy Friday if you're into risk here. Now, take a look at when it comes this
risk rally. It looks like we are set to continue what we saw in the U.S. after what we saw where there was a U.S. retail sales, Fred. Jobless claims, plus those Wal-Mart
earnings and the guidance from that company did seem to suggest that those recession fears in the U.S. are fading. So that certainly helped. You're seeing swaps pricing out, maybe less aggressive cuts from the Fed here as well, I think is less than a hundred for the year right now. And you're starting to hear more from
these Fed speakers that they're open to more rate cuts. Right. We heard from Bostic as well. I like the fact that he's open to that September rate cut. Now, zero eight, APAC shares are up about 1%. In fact, we're set to snap out of four weeks of losses there. You take a look at what's driving that here.
Taipei is up some 1% or close to 2% gains. You're watching TSMC fairs, but really you're seeing the Nikkei Cosby coming back from that holiday and really doing a catch up trade. There you go. Taiwan's semi is up some 2%. And we're watching very closely what happened. So after those that data that came out of the US, you basically saw stocks were bid up, bonds were sold off. In fact, the two year yield was up some 14 basis points or so and the yen weakened quite substantially.
Here. We're talking about 149 levels right now for that trade. And we're watching also what comes out with oil markets. We're still at 80 bucks. Iron ore recovering a bit here as well. Bitcoin also catching quite a bit here this morning. You take a look at how the Nasdaq Gold Dragon fared and we did actually see some upside there and maybe that will bode well for the tech space here today. But again, as Dave mentioned, that
Alibaba missed was certainly one that is going to be weighing on is tech here today, CSI 300, though it seemed like the data was enough yesterday day, whether it was retail sales. But that beat that narrower decline in home sales prices did ease some concerns out there in the economy. So maybe that led to that rally that we saw yesterday as well. We talked about those ETFs and maybe more signs of the national team stepping in also. Yeah, so the data and is about to say
maybe also some help from some of these state backed funds, because we did see and that's something we're tracking today, turn over in some of the CSI 300 tracker funds. We saw a pick up into into the Thursday session and certainly that went along with the price rally that we saw. So national team support, that is one of the items in our agenda today. Earnings we actually talked about there. So you have this sort of seesaw effect between where we probably will see Alibaba, but JD.com, of course, also to the upside there at 4% in terms of data, we're still waiting for the FDA numbers to come through out of the main lead. We are going to get some numbers coming
out of Hong Kong, GDP numbers, jobless, jobless numbers, the unemployment rate specifically. And at about the same time, we do get those numbers in Hong Kong. We are also expecting the results of this quarterly review on the Hang Seng index. Do we get additional representation from things like health care, for example? We'll talk about some of these predictions later on in the show. But back to, of course, the the Fed conversation. Yeah, and we did hear from the St Louis Fed President Alberto Gonzalez there saying that rate cuts are nearing as inflation does inch back towards that 2% target. From my perspective, the risk to both
sides of the mandate seem more balanced. Accordingly, the time may be nearing when an adjustment to moderate restrictive policy may be appropriate. Let's bring in our executive editor for Asia markets, Paul Dobson. And Paul, it just seems like right now, you know, the US data suggesting perhaps there is more of a consensus on a soft landing and you're hearing more Fed speak seem more warmed up to that rate cut in September. What were the main takeaways you think? Yeah, that's, that's right.
And I think the main takeaway is that the Fed can start to cut interest rates in September. And because it wants to, not because it has to, which I think is an important new ones to tease out a little bit. What do I mean exactly what what I'm trying to say is, you know, the Fed believes that interest rates are currently restrictive and once that in order to slow inflation, now is convinced after today, after this week's CPI and PTI numbers that inflation is under control, is slowing, is coming down, it has that window to be able to cut interest rates. At the same time, you know, a couple of weeks ago when we had that big flare up in markets, people were starting to express some concerns that the US was the economy. The growth was slowing too quickly, the
jobs data was starting to roll over and that the Fed would have to cut more aggressively because of a slowdown. That doesn't seem to be the case based on what we've seen from the retail sales and jobless claims numbers overnight. Rather, the economy is still cooling, but that they're not kind of heading for any sort of disastrous recession or anything like that. It means the Fed can do gradual interest rate cuts starting in September. And the market really likes that. And I think what we saw in the rate
pricing yesterday reflected that, where we had a rise in two year yields, we're still priced for a cut in September. But the idea that the Fed is going to do the equivalent of full cuts 100 basis points by the end of the year with only three meetings is starting to look a little bit less likely. Yeah. And Paul, what does that then mean for the path for global markets, which, you know, it wasn't too long ago, what, eight, eight days since early last week when we certainly had those gyrations in markets. Does this mean the path is clear for the bull market to resume? It certainly feels like that little episode was something of a bad dream, right, David? Everybody, everybody is back on the more positive path.
We're seeing gains in equities. We've recovered, you know, more than 50% of the losses that we saw since the peaks in July. We're only two and a bit percent away from a record high on the global index, again for stocks. And we're getting momentum. And what that can do is bring back in some of those momentum following funds, some of the commodity trading advisors or the volatility funds which would have pulled back during the flare up last week. So that will add cash, that will add flows and give the equity market more momentum, which can continue to push it higher, won't be necessarily, you know, a straight line up from here, but there's certainly a lot more positivity in the market as far as stocks are concerned. The bonds, you know, we're going to have a little bit of a reset higher in yields, but we have just come off a pretty aggressive rally and bonds are all still looking pretty positive now year to date.
And people are still, you know, if they see that the interest rate cuts are coming from the central banks. And remember, we had New Zealand already this week, we had Philippines already this week. We've had a call from the Bank of England earlier as well. So we're getting into that global cycle of lower interest rates.
Then that can also give bonds some support through the rest of the year too. Paul, thank you so much. Paul Dobson there in Singapore, our executive editor for Asian Markets. Let's turn our attention now to China and tech and earnings. And certainly the reaction will be very much in focus as things open in about 22 minutes from now. Baba and JD dot com reported results.
Bell is here with us, our tech reporter of course to talk us through and break the numbers down for us. Let's start things off with well from the alphabet to start with Ali Baba and also the most important I guess as well. But Alibaba, we saw the real focus on its e-commerce division and and we know that's facing dual pressures. Really.
You've not only got the weak Chinese consumer, but you've got the very tough competitive landscape within China. And Alibaba really struggled in the face of both of those because we saw the Commerce Division is shrinking For the first time in a year, there was anemic growth of around 4%, but profit was down 27%. And the company is what really taking a hit to margins because those shrank to around 15%, it was 18% a year earlier.
I mean, it seemed like when you look at the different business segments, there was a mixed trends that you're seeing, whether it's the cloud, whether it's e-commerce as well. Yeah, cloud was one of the bright spots really that that sort of had a pick up. We saw about 150% jump in profit. We saw growth around 6%. I think the question that a lot of
analysts have and that includes that Bloomberg intelligence team is the sustainability. How long can they continue to see that sort of growth coming through. Alibaba has pushed through some very aggressive cost cuts for this division in particular. They've slashed prices about maybe up to 55% or more than a. Different services. That's triggered a round of industry discounting that's come through. And actually, the Bloomberg intelligence
team is saying that Alibaba is going to start to lose that market share going into the next year to the likes of Huawei and other sort of more state backed cloud providers. JD.com, let's talk about that. I'm looking at the stock in the early goings. We are indicated substantially higher at this point.
Could change, but probably higher open for to stop it. Yeah, and it would really track what we had an 80 hours because we saw those gaining more than 4%. But certainly it does seem like JD.com is perhaps doing a better job of monetizing the different sales channels for its e-commerce platform. It also faces those same issues around competitive landscape with Chinese consumer. But they've had some pretty successful tactics perhaps so far.
One of the latest that they've just rolled out to consumers is what's called the JD Super 18. So Super 18 because it means that on the 18th of each month they're going to be basically offering products like Kweichow Moutai, Bulgari perfume for ¥18, a unit. It's extremely cheap, of course, but they're just trying to lure in more buyers. They need to be able to to not only monetize that that user traffic, but also to be able to benefit from those greater economies of scale. So something that analysts sort of flagged out of this. But yes. JD Don't comment. Better numbers really.
Annabel Thank you, Annabel. Julia there a recap of the tech earnings that we've had overnight. Still ahead on the China show, we're going to talk to some big earnings and also talk about some big trends in China. We're going to talk to the technology with the CEO of E! Carps and the challenges navigating U.S.
restrictions on China's tech ambitions. In the next hour, as every CEO will be with us to look at the performance of the logistics property sector in Hong Kong and the mainland. But ahead of that, we'll turn our attention back to earnings and markets and specific bottom up opportunities.
And we'll be joined by analysis, of course, from Vivian Lin, the first in the William Blair partner, then portfolio manager, looking ahead to the opening bell, the Friday session, what, just 18 minutes away. Futures are pointing slightly to the upside. You're watching the China show. Right. 15 minutes to the opening bell.
Welcome back, by the way. Happy Friday. You're watching the China show. Futures, as you can see, are slightly mixed at this point in time. We're looking, of course, at earnings reaction from Alibaba, JD.com and a few other big names are set to report earnings today. Let's get a sense of how the week has been in terms of earnings and I guess the outlook for the broader Chinese markets. Joining us now is Vivien Lin Thurston,
partner and PM at William Blair, joining us, of course, out of the United States, Vivien. Good morning for the Asia Pacific. I know you run two strategies, one growth and we'll talk about the other in a moment. But since you look at growth to wonder if you caught our previous segment, we just talked about some of the earnings tech earnings this week. What's your initial assessment of what you've seen so far this week as far as the guidance to. Absolutely. Yeah.
Thank you so much for having me here today. And we still see more earnings to come out for the China tech companies. But so far the big companies which have reported so far, I feel the results are pretty mixed. And to some extent, this kind of is
expected given that the macro and consumer backdrop in China remains very weak. And then precisely in the e-commerce space, the competition has also been pretty intense. So it's not surprising to see some of the biggest players in the e-commerce space is struggling. And especially the incumbent players tend to see more challenges and losing market share. So that's kind of what we're seeing so far. Yeah. Are there certain sectors that you're
looking at that might be maybe a little bit more shielded away from the macro weakness in the economy? What are some of the more resilient parts of the market that you're looking at? Absolutely, yeah. So outside of Internet, actually, we like a lot of industries with a strong growth coming from overseas markets and also still have very strong structural growth opportunities. So we think consumer, for example, we do like cosmetics and beauty sector, and that's a very structural, attractive growth story.
And in addition, we also like some high end manufacturing industries, whether some semi driven companies, they also benefit from the recent I kind of a catalyst and we also like power equipment companies. Given that China is on this very favorable space to continue to upgrade the power grid and also continue to improve their domestically supplied power equipment products. So those are a few examples. And there is also another example is the appliances. And that's also a pretty good story as of now, given the strong overseas growth. And also just outside of that, I think
the supply chain, we still see some bright spots, even though overall the end market in terms of the OEM remains pretty challenging given the competition. But there are still good players along that supply chain can do better. Right. I can make a I want to ask you a follow on the supply chain, because the and I'm wondering whether you're concerned about, you know, this fierce price competition on the final product front. Are you starting to see that filter through in any way into into the supply chain at all? Yes, I think we have seen that impact towards more midstream and upstream kind of suppliers. So battery supplier is one good example, even though it is much more consolidated industry.
And also you have very strong leading players both in terms of technology and also scale, but they are not immune from the market side of the pricing impact. I know you've also been looking at some of these, you know, these companies in China. So these are particular that have really done a lot of dividend plays or like buybacks and the like, which has been a consistent theme. But we've heard from a lot of our trying
to guess. I'm just wondering how how resilient do you think those dividend plays are going to be or those dividends going to be, given that a one of these as those we've been talking about, are the telcos, the banks and are quite cyclical industries? Yeah, that's a very good topic. I would say on the positive side, I do see some positive development amongst Chinese companies, including a slew of companies that they start to care more about total shareholder return. So you think about dividend payment or share buyback that are two typical ways for the Western companies to enhance total shareholder returns, especially if they have a very strong cash balance or balance sheet. So that's a very good sign, I would say. Now, more and more Chinese companies are doing that. So from the structural perspective, I think that's a positive support for the dividend plays. As you mentioned earlier, by the end of
the day is a total shareholder return and that's what we are looking for as well. But on a not so positive side, I do feel the case for dividend yield play in China also is a reflection of current deflation environment of the economy. So when the economy is not growing, people start to look for yield. And in the fixed income side or now on the equity side. So this a play before and many different cycles of different economies in the world.
And more importantly is that in Japan back to 1980s and in the 2000, two decades of no growth and deflation, you see dividend yield play become very much center of the of the equity investment focus. So I do think as of now, a lot of those high dividend yield plays in China have been beat up quite a bit because of this. Yeah, So I think we tend to be more selective.
Yeah. In addition to look for high dividend yield, we also will focus on the fundamentals, the earnings outlook and all that. Okay, Vivian, you also run the other strategy, which is correct me if I'm wrong, AMC's China Strategy. What are your current overweight in terms of the sectors and themes that you're looking at as far as the outlook for that strategy is concerned? And I'm curious because you also run China.
Do you notice a difference in these two strategies? Almost completely uncorrelated at this point in time? Yeah. So the m x, China, both our strategy and also US asset class, I think has gained some traction in recent years as both because of the geopolitical risk concerns relate to China and also now because of pretty weak Chinese equity performance. So for us, we continue to like India in the IMX, China aside. So India has been a very strong stories in the last few years, a post-COVID. They not only recovered very strongly, also they are on this path to push forward more the Making India effort and also infrastructure growth, CapEx spending. So under the Modi government now, he's going to start the third term, his vision in transforming India to a more kind of advanced infrastructure, more manufacturing driven, more export present kind of economy is continue to play.
So we like this theme in India and as a result, India consumption also benefit because the trickle down to employment and also income. And the other thing we like quite a bit in China is a AI driven theme and definitely a lot of Taiwanese companies or even Korean companies who are the leading suppliers in the global semiconductor industry and then also benefit from the reason I was. I was going to ask you about that. Did anything last week change your mind on these stocks at all, just given the whiplash that we're seeing on big tech overall? Yeah. I would say from the fundamental so it doesn't change our view because we still see on a fundamental level, those companies are very well positioned and we we are still probably in the early innings of this technology advancement. It's very common when you see such a disruptive industry or technology come through.
It's never linear. So you will have this bumps in the road and that's kind of their last standing. But from the stock perspective, yeah, we are very cognizant about the volatility and part of it also because all those stocks have run up so slow, so much yet today and therefore a certain consolidation is also expected. And for us, we continue to focus on bottom up the best positioned companies and which has the strong kind of product offering strong technologies, very niche, dominant positioning. So those will continue to prevail. Yeah. Vivienne, it's great to have you. Have a great weekend.
Vivien Lynne Thurston there, partner and PM and William Blair joining us out of Chicago. Just take a look. When it comes to some of these tech stocks in the pre-market in Hong Kong opening up and you're starting to see that earnings reaction coming out for the likes of Baba, JD and Li-ning. Interestingly enough, Alibaba is up some 2% despite that sort of wobbly trade that we saw in the 80 hours. JD.com, obviously give them that beat when it comes to earnings season with Li
Ning, we're seeing gains of more than 6%. Plenty more ahead. This is Bloomberg. Right. Welcome back. Greater Chinese equity markets are poised for a weekly gain. Hong Kong is up on two straight weeks. Mainland China actually is managing to snap out of I think it was three weeks of losses.
CSI 300 yesterday. We had some decent data and you had some signs that this pick up in turnover on some of these ETFs that might indicate some support from the national team. We're watching this closely, of course, as we move into the open today. Yeah, it's interesting just how much I think by crunched some numbers. I think they spent about $66 billion this year. The national team so called out this
according to what they've been tracking. But then again, we're still talking about the CSI 300. It's still lower by 3% this month. So not really quite working. But then again today, we got earnings to
deal with and certainly this rally is playing on Hong Kong to. Welcome back. You're watching the China show that opens in Hong Kong. And, of course, in China today. And it looks like we are in Hong Kong, at least, joining in on this first rally where basically on a two week run when it comes to gains on the Hang Seng and share markets, CSI 300 also set to snap out of a fourth four weeks of losses, I believe. So certainly things are looking a little bit better. That data yesterday maybe suggest things
are turning around slightly when it comes to the data. Yeah, and also some indications from the PBOC see that. And I think we'll get more clarity on that. This interview, of course, that Pangong Shum did with state media and how he clarified both ways. Don't expect anything drastic as far as tightening or or stimulus goes. So that takes us into the bond market rally where I think we are entering week number six or we are about to clock in six weeks of gains on the Bloomberg China Treasury and Policy Bank bond index. In case you're you want to be pedantic
about this ten year yield, as you can see, is now back below 2.2%. So we're looking at a mixed open across some of the big names on the Chinese markets, flat open. Iron ore, though, seeing a bit of a rebound today following what's been, well, several weeks of weakness. Copper is also seeing some gains of the 2% there and some of your rebar futures also about 1% in the in the early goings right in Hong Kong. The story is all about. Yeah, well, you have data coming through today, GDP and jobless numbers. We have a revamp in the index or let's
see what the revamp looks like following the quarterly review. That should be out later today. And also the earnings. The 10th set up 1% earnings out two days ago. Reaction yesterday. Alibaba managing to shrug off the cobwebs really from the session overnight, up 2.2%.
Next on your screens is JD com and that's about to show you a decent gain and also Li ning on the back of this earnings beat 6% give or take for both NTR and Sands China are some of the names that are set to report earnings later today. Now let's get to what about sorry MCI reported yesterday about no worries. Let's get to one of our kind of top stories here today as well. The PBOC, the chief, has pledged further steps to support his nation's economic recovery, while cautioning that it won't be adopting, quote, drastic measures. For more, let's get to our China correspondent, Ben Miller. She joins us now.
Is there anything new in this interview from the governor? He is rather cryptic comments from him because he didn't really clarify. He said, yes, there will be steps taken in accordance with the state council, but he didn't really elaborate on what those steps would be. He did say, though, that there must be policy patience, that there shouldn't be any drastic tightening or drastic easing. But at this point, really, the economy doesn't need further tightening given the not very inspiring data yesterday. Yes, there was improvement in retail sales, but it was from a very low base in June. And then you had the unexpected decline in fixed asset investment as well.
He iterated that the PBOC is shifting away from these quantitative targets like the and yesterday we saw the PBOC delaying the announcement of the rate to August 26. All Bloomberg economics team believes that there will be one more rate cut in the fourth quarter. But increasingly after the data yesterday, more economists are expecting that maybe the PBOC could cut 20, maybe 30 basis points by the end of the year, especially because markets are now pricing in more cuts from the Fed.
But of course, it depends on where the economy goes as well. The rest of this year. Pun also talked about the need to promote price recovery, and that shows that, yes, the government is acknowledging this persistent deflationary pressure in the economy that is causing companies to pull back investment. We saw that very weak credit growth data recently. He also touched on the property sector, but again, didn't allude to any new measures. He simply reiterated the existing ¥300 billion in re lending facility and talked about how interest rates are already low. The down payment rates are already at
record lows at 15%. But then again, that lending facility seeing the take up rate of only 4% so far. So banks are still very reluctant to be exposed to the property sector.
Ben, thank you so much. And lo, there are china correspondent. Let's pivot now and have a look back at earnings tech, the auto sector because the next company, of course, we're talking about here will be certainly has a focus and that overlap between those three big things we're talking about e cards a Chinese auto tech company backed by Juliette Saly said of course, in the US, as you can see, up 11% overnight. It supplies software to carmakers and also develops its own chips and technology with ambitions, of course, to take on big names in the sector such as Qualcomm and also in video. Let's bring in the chairman and CEO of the company.
So you, Shen, joining us exclusively this morning from Shanghai. Good morning, Mr. Shen, and thank you for for making time for us today. You know, we we talk about your company
and your tech. And the more I read up about the company, the more invidious name keeps coming up. And I'm wonder if you could clarify then for us what of your technologies are your chips directly? We didn't really at this point in time. Okay, So that's a very interesting topic.
So I would like to create five here. So we are not cheap company. We are a system company. So we are providing computer technology system to OEM and the computing for digital copy system and the computing for ADAS system. That's all what we are focusing on, of course, in China regarding the China national strategy.
So we invested the company is solving. So we are doing the ICI design. So that's a very to be for China's drive. So we are doing the similar and so we'll see R&D we Xinjiang team and build a computing baseline and the foundation all our portfolio.
So that's kind of what we are doing. Of course, in global market also we are very close partner with Qualcomm and we are providing our Qualcomm technology platform as well for Global. Yeah. So that's what we are doing right now. Okay.
Yeah. You mention your partnership with Qualcomm. I'm just wondering, the U.S. is considering restricting Chinese made software technology, which may actually impact some of the future expansion, I'm guessing, of e-commerce with your US based customers. How are you going to overcome that? Okay. Good question. So actually, five years ago, we built our R&D team in Guttenberg in Sweden. I also we built a legal entity called E. S Sweden.
AB So five years ago we started a software database over the year from zero. And we we very closely collaboration with Volvo CAR. Also we made a SRT actually, which is the year of car last year successfully launched 77 countries including American market. So we 40 compliance American requirement
American standard. To my point of view, we are going to be the international company. Even we started off on China market, but we have to fulfill a global standard of each market, including comprise. Right. Who would you then consider given those
ambitions to become overseas and to get more of your revenues from overseas? Who would you consider currently your biggest your biggest competitor, local or international? Okay, so I still see the global competitor in quite important for us because the auto industry, you have to be, you know, the international player, your customer has to be the global OEM. Otherwise you're not you're not you cannot make your company bigger. Right. So all our main competitors do is from like Aptiv and LG. Denzil.
That's tradition global to what they are still very big. Also, they are still very big profitable company. But of course like still like big tech giant, like a media and Qualcomm we we need to partner with and of course they want to do more things. So that's why we need a balancing you know the tech giant and also tradition tailwind. So that's my view. How do you looking at the industry overall? Mean it seems like every demand is slowing globally. Now you have big companies, big carmakers like GM, Volkswagen better, you know, walking back away from their electrification plans also.
What is the future outlook look like? Yeah. So in the future train a very very astute very. Understand the market needs. So EV growth is slowing down and and most of global OEM is considering slowing down the new average restaurant age. I think that's fine because we are we are providing computer technology. We are providing intelligent software to OEMs, not only TV but also combustion and.
So we still can provider to our cloud technology because they have to make car to be the intelligent. Right. So that's why we need to closely collaboration with global OEMs to provide a core technology to them and to to support the global shipping. So that's all of you. Okay. I was hoping we could talk about financials. You guys reported a 30% jump in revenue you guys reported last week. I think this is for the second quarter, 1.3 billion renminbi.
I want to ask you how you guys are tracking now for this current quarter. We're halfway through the third quarter. I think last year, your revenues I'm just looking at my screens here for third quarter revenues are 2023 1.08
billion. Are you on track to be 1.08 billion in this current quarter? Yeah, of course. I want to say we have very strong confidence on gross TV. Honestly, we already keep like three years, 30% year to year course. So also we have confidence in future. We still keep this kind of growth rate year to year. So that's why I sold Quora.
And even these core for we still very strong confidence on that. On growth. Okay, So let's let's put a number to that full year revenue. Do you think you get to 6 billion renminbi in 2024? I think so. Okay, Sarah, when do you start making money? Because I think you're still looking at losses.
Okay. So our revenue growth of our house, also our gross margin is okay. And so, of course, we are losing money, but you can say you're already seeing our benefit, our burn rate and the control over the control and improve very much. Okay. So that's why we have confidence profitable very soon.
So and also because, you know, people are, you know, although business, you need to take a very long time designing and of course, you need to have long, very long, hard, you know, lifecycle business. So that's why we already had a very strong and a solid pipeline next three years. So that's why we strong confidence to profitable very soon and our growth still keep faster growth, growth speed and also always a good margin. How do you look at the competition
domestically in China? We've seen obviously a very violent sort of price war going on. Know earnings from some of these carmakers locally are getting squeezed, are getting hit, I should say. Do you feel it across the supply chain like, you know, does Xrx feel it? Are you feeling squeezed and more pressured from these car makers here right now in domestic market? So very clear. Australia is around. The good customer for us. So everybody understand we started from
G.D. because of for my co-founder, Eric, the owner of GTI. But also we start to the European ecosystem, the domestic market as well. So this year, for the course, the fourth quarter, we announced a strong partnership with the FTA group.
So we are in full speed R&D with the very, very close the R&D team for the new generation and all models. So every deal will provide us a very significant contribution from finance and for strategic view next 2 to 3 years. Also, we will announce of couple potential partnership very soon.
That's two months, three months because we already had a very strong, you know, R&D achievements in China because we are super strong here. So we have confidence that we can attract the good customer for beyond the ecosystem in domestic market. Okay. Well, since you mentioned I need to ask you then you said you're about to announce a new partnership these next two months. Can you give us a give us a tease, give us a clue of what announcements are about to come. Who are the partners here? You mean in domestic market or global? Well, you mentioned you mentioned that in the next two months you're about to announce new partnerships. And I'm wondering if you could tell us who they are.
Our, of course, cannot sell to you right now, but you'll see very soon, because that is the potential business opportunity, not not only the partnership. Yes. All right. Very nice. Giving us guessing. So it was great to have you on.
Thank you so much. You're just there. Chairman and CEO of Xrx joining us live out of Shanghai. Now, if you are a subscriber, you can catch up with all of our interviews by using our interactive function TV. Go join the conversation because instant
messages or even questions to our team and guests. While those interviews are going on as well, check it out at TV. Go. This is Bloomberg. All right. Welcome back to the China show. Look at a live shot of Hong Kong just a few minutes into the session here. And there you go. We're still punching higher by about one
and a half percent. We're up 250 points on the Hang Seng here, really propelled by some of these tech names here this morning. Even Alibaba, despite what we saw on the air, is being brief and ending up flat after those mixed earnings is actually catching a bit here this morning.
And it's our favorite time of the year, Dave, the Hang Seng. Why? Oh, this is the quarterly review. They've had more stocks pertaining to the health care and b, tax areas and logistics sectors in an upcoming review coming up.
And that's after including only one extra firm in may. Let's get to some Asia equities reporter joining us now. Yeah. So what are some of the names being floated by analysts? Yeah, so the gauge is about 80, 82 constituents right now. And the whole purpose of the compiler is
to expand it to a 100 member. And they're doing it gradually. When we look back to February, actually they left the index unchanged. And so this previous quarter review, what they did, they added just one firm body electric. So a lot of the analysts are actually saying that this time around we might be seeing more of the new joiners coming in. And just like you said, health care could be the sector because they are the only sector that's underrepresented among the gauge as other names are Beijing and Innovent.
These are the companies that have the largest weightings in the industry group. We also have COSCO shipping from the shipping company and S&P that does chip packaging. So various industry that we're seeing. We're seeing this at a time when Hang Seng index has lost three, four, four years of losses and it's fluctuating now, especially after the earnings season. There's a little bit of optimism going on here. So it will be interesting to see that after 530 today.
Yes. Okay. So 80 to 82 members, what else are we looking at today on your team? Yeah. So the national team, so called, came in and bought about $66 billion worth of ETFs this year alone. And that's not been enough to boost the entire onshore stocks. We have been seeing that because of the economic doldrums that we've been seeing, but it's still a big number. And so they're trying to keep away from a huge decline and that we have seen in losses in the onshore stocks.
But that's in contrast with the HCI, which is a gauge that tracks the Chinese stocks listed in Hong Kong. So we can see that investor appetite there. The difference between onshore and offshore market, of course, the key stocks are the tech earnings today. So following the dot com and Baba, we're going to be watching those and also Galaxy Entertainment in the casino space. Yeah, there we go. Set to reports.
Yeah. Lots to watch out for today. Even though it's Friday, we still have a full trading, almost a full trading day ahead. Certainly cha our Asia equities reporting staying in Hong Kong at about the same time we get the the the changes to the index. We'll be getting some data coming
through which we'll talk about. But yesterday we did get some prelim numbers coming through from the tourism board in terms of the visitors coming through. So arrival is up over 50% in the first seven months of this year. If you compare that to the same period
last year, we welcomed 25 million tourists here in Hong Kong with more than 19 million of them coming from mainland China. Now for the month of July alone, Hong Kong saw nearly 4 million arrivals, marking a 10% increase from the same period last year. Yeah, and also we're expecting some numbers and data out of Hong Kong later on today. So we're talking about second quarter
GDP numbers. We have unemployment data for July. We're likely to see I think the was for a 3.3% year on year of a seasonally adjusted. We're talking quarter on quarter only a 0.4% print. And I think Bloomberg has been talking about this the you know, Hong Kong's growth and the outlook there.
We're not even close to really reaching back to those pre-pandemic levels just yet. No, not just yet. I mean, even the I think just the context for the the visitor arrivals numbers, while we are up over 50% from last year, we haven't quite gotten to the point where we, you know, the arrivals numbers that we had pre-pandemic. Right. Not to even mention the spending per GDP like unemployment rate. It's also coming out today. 3% is what we are expecting there. And you can get an insider's guide to the money and people shaking of the finance hub in our Hong Kong edition newsletter did check out the one yesterday. You can sign up through the website bloomberg.com slash newsletters.
Well, Indonesia is getting a new capital city, moving its administrative headquarters to Nusantara from Jakarta. The inauguration is scheduled for Saturday after President Joko Widodo is final state of the nation address later today. Bloomberg's Avril Hong takes a look at the new city's progress. Carved out of the jungles of Borneo,
Indonesia's future capital, Nusantara. It's located around 1200 kilometres from the current capital, Jakarta. An ambitious project spearheaded by Indonesian President Joko Widodo. It's funded by a mix of government and
private spending. Construction for the massive project began in 2022 at an estimated cost of $35 billion, with reports of massive cost overruns. The aim to build a futuristic green city in place of overcrowded Jakarta, a capital that's rapidly sinking into the sea. About 40% of Jakarta sits below sea level and its coastal areas are under constant threat of flooding.
This causes about $6 million of losses each year. Productivity losses from traffic gridlock are estimated at $7 billion a year. Though it's being inaugurated this month. NUSANTARA is not scheduled for completion until 2045. Satellite images in the past few years show the development of the area, but on the ground, missed deadlines and sudden resignations of top officials plagued the project. During a recent trip to Nusantara, Jokowi stressed that building a new capital is not a job that takes one or two years.
Legacy Need. We came here to check the latest progress of the Abu Kota Nusantara, especially the construction of the palace. I see everything is still in process. President elect Prabowo Subianto has pledged to continue development of the city. Yet his manifesto makes clear he'll
focus on his own policies, casting some doubt on Jokowi's legacy project even as he prepares for his final stage of the nation. Errol Hong, Bloomberg News, Singapore. Yeah. And part of that speech as well is going to be, you know, laying out the budget plans for for 2025. And it's interesting, you know, we have
a traders guide out there talking about what parts of the market might actually benefit. So there's they're looking at things like mineral refining, health, consumer stocks. I mean, obviously the materials space given this move to new Centara and you know, Indonesia for the most part, if you take out the last ten years or so, has really outperformed much of the region in Southeast Asia.
And really we've seen about, what, a 45% climb since Jokowi became president. It's been it's been consistent. It's certainly been one of, if not the structural pick from the strategist when you know, you know, when we ask about Southeast Asia, this is the one market that they keep talking about on the back of things that Yvonne was mentioning to things like minerals, for example, the down streaming of certain of these things.
So certainly something to watch, of course. Speaking of Southeast Asia, very briefly, one market that opened up this hour is the Philippines post, the rate cut yesterday, and another one is being flagged by the central bank governor for the year. The market is up the most in about five weeks. The currency is reacting to that, poised for the biggest drop in about two months. Yeah, you're starting to hear more from these central bankers, more comfortable with these cuts, Right? We heard that from some of these Fed speakers overnight.
But even with the governor of the BSP says, you know, there is more reason for this easing, they are less concerned about inflation and they say there's more confident the inflation numbers coming down then the GDP numbers going up right now. So growth certainly is a key concern now to get cuts are coming. A lot of earnings to tell you about. Susan. We have an hour left, of course, in a
China show. Plenty more ahead. This is Bloomberg. Welcome back to the China show. Here's a look at the CSI 300 just a half hour into the session. And right now, we're taking a look at overall. Asia is doing pretty well here today. Asia Pacific is up 1.7%. And we're set to really snap out of a
four week, four weeks of of a skid. So certainly that helps with sentiment. Obviously, we saw from the U.S. data overnight. So Wal-Mart earnings that really helping to suggest that maybe the U.S.
is not seeing a recession anytime soon here. And there you go. CSI 300 also having a good week as well, David. Yeah, And that takes us into I think I think to your point, right, we're doing very well because of, I think, two other markets to tell you about. You know, the Philippines is post rate cut out. You know, the confidence that central
bankers are getting to even guide for future rate cuts. And then in Japan, I mean, just to show you how volatile this market is, you know, the market is up 3% and this is the best day and I think two days. So I think we've seen a similar move very recently on this market itself, 1.7% to the upside. S&P futures, as you can see, were set to snap a four week skid. Also something that's taken place this recently, I would say the last two weeks or so is this breakout in treasuries to our point on this pivot towards a more dovish stance of central bank? And we'll talk about that later.
We're also watching the weather in Japan. Heavy and heavy rain, storm warning over in Tokyo. We'll get you an update. We understand hundreds of domestic
flights have already been cancelled. We'll get you an update on that. Chip stocks to the point we were making earlier. That's the you know, that that misbehaving market that we had last two Mondays ago is maybe a just a a nightmare we can all forget.
As you can see, chip stocks are bid up substantially and the rally in treasuries very quickly. Have a look at where we are. So the Bloomberg Treasury index, total return for the first time since inflation became the rat poison of bond markets over two years ago is now finally trading back above the 200 week moving average. And momentum is certainly undecided. The bulls, as we mentioned about Masala, this is the St Louis Fed president talking about the Fed cuts are coming or at least nearing there. You had Bostic this week say look, I can back maybe a September cut now as well as the Fed speak is getting a little bit more dovish as well and really kind of coinciding with what the market is pricing in.
Let's bring in Mark Greenfield, my strategist, joining us now from Singapore. Mark, I know the traders have been whipped around with this US data. I think we have one more jobs report before that September meeting and then we have Jackson Hole next week. I mean, is there more sort of website to come? Oh, plenty. And we're getting used to these daily
moves around major events. And it's not just those that you mentioned. We still got a pesky report to get through. We've got you. As you said, you want more jobs, one more CPI.
Jerome Powell setting up the the outlook from Jackson Hole. And that's in addition to anything that may come out of left field or from European or Japanese data that may confuse the picture as well. So traders are getting used to bigger swings on specific days around us data. We had another one last night with the jobless claims and the retail sales.
So that's that's the way it's going to be. And it is not too surprising when you consider how much is priced into the US curve when people are looking for rate cuts basically all the way through to the end of next year. That's an awful lot of weight is being put into where markets are going. And so you're bound to get volatility as people pare back their positions around that. But overall, if you look at the pricing in terms of derivatives markets, traders are still very convinced that the Federal Reserve, not only is it going to cut rates in September, but it will be following up with several more after that. Well, Jackson Hole is coming up next week. You know, and Chair Powell better signal
that we had cuts are coming in September. Otherwise we'll get in the market. Another market meltdown up. Mark Paul Dobson, our colleague, made a very good point in the last hour that now markets seem to be. Well, the reason markets are doing well is because it seems the Fed will cut because they can cut and not simply because they need to cut. How much are expectations weighed now on
Jackson Hole next week? Mr. Dobson's a very smart chap. Yes, he is. Certainly Jerome Powell is in a position where he himself appears to have been very dovish, probably one of the most dovish within the FOMC this year, if you think back to the first quarter of the year. Had there been a window, Jerome Powell
would have probably on his own cut interest rates in the first quarter of the year, But he couldn't persuade the rest of the FOMC that it was the right thing to do. And of course, then the CPI data went higher and it was probably just as real that they didn't move. But certainly he doesn't need any more convincing. That's the way that investors are reading it.
Eight. He will probably tread fairly carefully in what he says a Jackson hole. He will want to set the conditions that, yes, traders have got it right. We are going to cut in September, but we are only going to do the 25 basis points. It's not going to be any bigger than that. But he will probably try to avoid giving too much guidance on where they are going from there. It may appear to be not as dovish as
what some of the pricing in the market appears to be. But all along there's been this fight between where the traders see the data and where the Fed speaker sees the data. And you can see there's still a little bit of disagreement among folks because they're not united in all saying that rates need to come down dramatically. Yes, a little rate cut. Maybe we go in a pause after that. So he'll want to leave things in
balance. But the traders will be looking very, very closely at the data, especially the next jobs report. It was a real shock to everybody that the unemployment rate jumped to 4.3%. If it doesn't come down, then traders will feel they are absolutely right to be pricing for multiple rate cuts. Even this year, even though the only one traders are convinced is going to be at least three. And the jobs report will be the one that really decides for them whether they're on the right path or not. Mark, thank you so much.
My kind feel there in Singapore for us. Turn from macro now let's look at micro in earnings so Alibaba jd.com positive reaction to both though there's a difference between the texture of the results here. Bob is up 3% JD dot com tracking the move overnight up 7%. Catherine Lim here with us on set, our senior analyst for Bloomberg Intelligence. I understand you were up late listening to the earnings call. Yeah, let us in.
What was a what did they talk about? Start with Alibaba. Well, that's what that was a lot going on 24 hours China retail sales Baba JD dot com meetings reporting as we speak right now. But you know what really tech coming out of Alibaba's results I know the focus is on China slowed down by what's new right there are positives in this results I mean look at their cloud business great growth and profitability and they are very confident about getting to that double digit top line growth in the second half of the fiscal year. And notwithstanding, look at today, are local services losses narrowing? And of course, you know, it is actually a good sign that they are focusing on efficiency with got me to on coming up with results in about two weeks time so let's hear from that on so I think you know Alibaba there wasn't really anything you know fundamentally getting worse for the company, which is a good thing. Yeah. And we have to actually just see how they deliver over the next few quarters. Can you tell us a bit more about cloud? It seems like there was growth picking up there given the strong demand for air to air.
Yes. Well, they've spent a lot of time talking about the Olympics itself. And really, I think what stood out really was that, you know, there is actually very strong demand for their products and services. And the company is now seeing an overwhelming demand and they're trying to actually come up with more solutions.
So, you know, a good problem to have, if you ask me, and hopefully that translate into the numbers for them. JD.com specifically, because I know that there's an overlap there with Alibaba because that's they they share one of their businesses. Any specifics on JD dot com so obviously JD.com is more focused on China without that overseas angle itself.
They've done well to you know the growth has also slowed down for the retail sites too just a 1% do you know for the r1p3b businesses But you know, going into the second half of the year, I think at this rate, they do continue to actually see the need to actually pushed out some of the lower priced products itself because consumers are getting to know more budget conscious. So we got to actually see how that comes in, particularly you know, in the likes of PD, etc., as they continue to actually try to retain their market share. Li Ning reported about, I think I'm not mistaken, just very weak.
About 2 hours back I was looking at my terminal you guys have really put out how quick are you? I, I reaction to this. Yeah. So what's your takeaway for for for the shares are up 6%. I think so management. Yeah management is you know giving that spiel right now.
But it was a great set of numbers in a sense that you know, they are it was very strong margins that they've delivered. They have actually hiked dividend payout and actually giving you more as dividends, even as earnings comes true. So I think that really allays the fears that, you know, things will deteriorate for them in second half even if sales doesn't match up. But earnings wise, the company is
comfortably comfortable to actually keep it as it is and continue to actually beat operating efficiency. So I don't know how you're still so energetic after the night that you had, but thank you for bringing that in a good way. In a great way. Maybe it's just pure adrenaline. Right this way.
Possible. Gather alone. Thank you so much. So glad to have you here in Hong Kong this week, our Bloomberg intelligence analysts gathered.
Linda, let's talk about what we've been seeing, these Chinese markets. Right. So China's efforts to prop up its stock market seems to be doing little to bleed the stemming. All of someone wanted to show us this chart yet don't clean out the volumes, though. That's important. There we go. All right.
Equities still remain under pressure even after a $66 billion buying spree from the so-called national team. Let's get in here. Bloomberg Intelligence ETF analyst Rebecca said there was more on this. So has this sort of state buying spree had any effect? So in some ways, yes. But on others from an investor sentiment, no. So we expect that the national team can
purchase as much as $100 billion worth of ETFs this year. And to your point, they've bought $66 billion year to date. So this is an enormous amount to put this into perspective, for all of the flows in mainland China for 2023 is roughly at 70 billion. So the national team has purchased the equivalent to all of the flows in mainland China for 2023. But what we found is that it hasn't really boosted the investor sentiment. It's kept the market from dropping, but
it hasn't really boasted investor sentiment. And so what we've seen is actually the contrary. In February and May I think we saw some outflows. And so overall the national team is accounting for a large portion of the China market and we expect that by year end they could hold as much as 25 to 30% of the entire ETF market of mainland China.
It sounds like the BOJ. But that's a different topic. That's a different. What patterns have we seen in history as far as the Chinese story is concerned? So the Chinese has really come in when the purchase really occurs two times, one when there's only large political backing. So for instance, last month when the plenum occurred at the National Congress meeting, when they meet or when the market drops. So we found that, for instance, when the
CSI 300 goes below 3300, they'll intervene and support the market. And so they're really replicating what Bank of Japan did, because Bank of Japan did very similar things with the Nikkei and topics when it dropped below a certain point in the afternoon, they would come in and purchase. And so in terms of pattern we've seen similar to what the Bank of Japan has done. But I think the difference is that Bank
of Japan holds roughly 75 to 80% of the ETF market in Japan. And the national team of China only holds roughly 25 to 30%. And so they're starting from a much lower base. But the difference is the national team is purchasing at a much quicker rate. And so they really only started purchasing ETF last year. They did a little bit in 2015 and then sold it.
But thing is, the Bank of Japan started buying ETFs in 2010. So it took them 14 years to amass this 80% of the market. And now we could see the national team buying as much as 25, 30%, all in one year. So very, very, very fast speed.
Rebecca great stuff And take us in there for Bloomberg intelligence or ETF analyst and coming up here why as of rights is seeing geopolitical risk clouding its business outlook. We have the CEO, Hubert CAC joining us next. This is Bloomberg. Right. Welcome back to watching the China show. S.F. Read Saskatoon your screens here. One and a half percent to the upside coming off. I think it was also a very good day yesterday on the stock so the company out with some earnings coming through. Logistics focus of course if the if the
name is familiar to you real estate investment trust you're listed in in the city did post results. Joining us, of course to talk us through of course these results today is Uber of course but the company as well CEO. Good morning and nice to see you. And take us through how was how was the last six months? It's been quite a bit in one simple what has been to
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