Israel Strikes Lebanon as US Prepares Fresh Iran Sanctions — The Asia Trade 8/17/2026

[00:00:00] Speaker 1: this is the asiatrade i'm hardy strad watts in sydney and i'm paul allen the top stories this [00:00:20] Speaker 2: hour asian markets set for a cautious start to the week with rate expectations in play for bond traders china's activity data up later expected to confirm the economy lost momentum last month [00:00:30] Speaker 1: as credit demand weakens tech and ai in focus as bloomberg learns that anthropic second quarter revenue surged above 11 billion dollars ahead of its potential mega ipo and fresh israeli strikes [00:00:41] Speaker 2: on lebanon set to further complicate stalled middle east talks as washington prepares a plan for [00:00:46] Speaker 1: economic isolation of iran let's get you straight to the setup when it comes to trading across asia this monday morning and it is geopolitics in the fray we had quite a bit of rhetoric in terms of what exactly is president trump and washington's plan when it comes to this next step with uh the war with iran right we are seeing a pretty steady picture when it comes to trading in oil prices in fact new york traded crude at the moment essentially flat we had brent crude last trading higher by about a quarter of one percent so steady as she goes despite fresh fighting in lebanon attacks on vessels in the strait of humus all of this a very muddied outlook to how we potentially get to the end of this conflict but take a look at what we're watching in terms of some of the other asset classes that will be in focus we do have a number of key cpi prints this week including for japan we'll be watching the yen 159.18 is where we're trading we did see the dollar really consolidating against some major pairs in the early part of the morning trade paul well let's set up the trading day with [00:01:42] Speaker 2: our team bloomberg mlife strategist mark cranfield joins us from singapore also markets reporter anthony stevens is in hong kong and mark one thing we didn't mention now there's going to be a very important bond auction in the u.s this week a 20-year note auction 16 billion following on from last year's interesting 10 and 30-year auctions what can we anticipate here bonds not offering that much of a cushion to markets at the moment [00:02:07] Speaker 3: it's going to be a very difficult auction to get off the ground last week the the 10 and the 30s they both came with the highest yields in many years a couple of decades in some cases so clearly there's not a great appetite for long-term bonds in the in the u.s market at all in fact that's globally the case really and then 20-year itself is a particularly unloved part of the curve it it falls between 20 and 30 which are the popular sectors so it's neither here nor there so typically it's always a bit of a struggle this week is going to be even more difficult just last week we had the the u.s budget deficit came in at over 400 billion dollars more than 25 percent worse than expected those those numbers are just unsustainable investors can see that you have a u.s government which is overspending even when the u.s economy is pretty strong if we were in a recession people might forgive those kind of numbers they might say they're pumping money to get the economy back on its feet that is not the case the u.s economy is doing fine and inflation is a bit sticky even though the numbers are coming in line the underlying core inflation is still around two and a half percent in the u.s which is way too high considering the time in the cycle investors can see all this they can see the fiscal in discipline they can see the core inflation is too high and they're probably thinking that the federal reserve made a huge mistake by lowering interest rates last year at the moment we're only pricing for about one interest rate hike this year that could easily shift depending on the data that comes out in the next couple of weeks clearly the situation is very nervous for long-term investors they do not see global central banks let alone the federal reserve doing anything to rein in long-term inflation so they're taking the job into their own hands they're pushing up the yield curve asking for a higher term premium and that's going to make this year this week's 20-year auction particularly difficult in the u.s [00:04:00] Speaker 1: anthony when it comes to the broader kind of risk and volatility gauges everything's feeling quite calm at the moment i'm going to touch wood because i feel like we shouldn't be saying that too loudly but what's the potential downside here is the sort of china macro picture we've talked a little bit about the credit numbers we know that the activity data this week probably won't be that good either is that a broader investor problem or is that really more of just a china macro problem [00:04:25] Speaker 4: you do see this like insulation of the tech trade from almost anything else that's going on right and that is the context of some of the headlines that you were mentioning right at the top of the show with regards to anthropic for example right those are insane numbers it's double last quarter already and then you had the 13f filings highlighting just how much money people like nvidia or google made in uh the spacex ipo or the cerebrus ipo so that kind of capital flywheel in the tech space is doing really well and it's quite insulated from broader macro concerns credit spreads in the us are also relatively uh you know tight and the bigs is relatively low so in terms of taking incremental tech risk there is not a lot of gremlins around but in terms of the broader macro picture yes the chinese story is a lot weaker than they than anticipated at the start of the year you know credit demand is quite bad retail sales are quite bad uh growth is quite bad outside the export and ai story so once again again even in china ai remains an idiosyncratic risk to the upside versus a kind of broadening out of the weakness on the downside in the rest of the economy and that's kind of similar to what you saw in the us as well you saw retail sales miss quite badly now wages are underneath uh co-cpi sorry cpi at a headline level so wages are your net net losing money every month and that's been going for a couple of months so this dispersion between the broader macro and the ai story is very very strong at the moment and investors are leaning into it they're putting all their chips on the table in ai and taking money [00:05:58] Speaker 2: off everything else um mark i want to get your view on that as well in terms of concentration risk [00:06:07] Speaker 3: how are we seeing this appear more broadly yeah i think you if you look for example you take the the euro swiss frank exchange rate it's usually a typical hedge when there's a macro event going on in the world we saw in march when the us iran war started as usual macro investors dived into euro swiss he's selling the euro buying the swiss frank it went down dramatically in line with equity markets that's massively rebounded now euro swiss he is sitting higher than it was at the beginning of the year that pretty much tells you as anthony is suggesting there is that people don't really want to hedge the risks of another major event in markets they've seen one big one this year they don't think there's going to be another one for a long time they're getting pretty comfortable they just want to throw money into the biggest parts of risk taking they can in the markets in the equity space whether it's tech ai related whether it's corporate bonds that for now they're not willing to bet a huge amount of money on the chances there's going to be another major event to derail that the vix index is also being distorted by the fact that there are a number of huge funds which are selling volatility as part of a strategy and selling that to clients if you have this continuous offer in the volatility space the vix is bound to stay low you can see that play out across markets whether it's in currencies whether it's in bonds equities as the whole gamut here volatility selling has become a core theme of investment strategies it needs a major blow up for that to change people don't think there's one on the horizon for now we could have this u.s iran tension going on indefinitely in a way that will suit markets they can they can deal with that if oil stays in an eighty hundred dollar range they can price that in that's not something they need to to put right in front of them they can still put it on the side and say okay we know oil prices are high we can deal with it let's focus on the earnings potential and the potential for another amazing ipo if anthropic can do a two trillion dollar ipo which is the the talk that some people had last week that would really galvanize markets over the next few weeks leading into the autumn so there are much more interesting things for people to focus on than the risk of another major event which may or may not happen it could be well off we're not going to price that in for now when there's money to be made in short term place it's just such an extraordinary situation [00:08:38] Speaker 1: right and you know anthony i think to mark's point looking at this story about how we're still seeing like significant amounts of covert shipments through the straight of hall moves that perhaps we're not talking about and that's why we're seeing this lid being kept on oil prices for now i wanted to ask you about the other side of the the inflation the reflation story though because we've got cpi prints coming out from japan canada and the uk after the the u.s readings last week and and chipflation it's going to be front and center right is this going to be something that thematically starts to dominate multiple economies as the ai trade continues it was interesting to read a lot of the analysis in [00:09:14] Speaker 4: the details of the weekend right and really depends on the weightage chips and kind of electronics make in the different cpi baskets in the u.s it's actually vanishingly small because it's offset by a price fall in for example software or gaming uh stuff like this so this the implication of semiconductor pricing really depends on what economy you're talking about and that's why japan is going to be maybe slightly different from the u.s where the basket rating is higher so that's an interesting way of looking at things also in terms of an inflationary impact from the ai space from the tech space you know the capital crowding out impact on term in terms of uh treasuries or interest rates from the ai capital raising is also interesting right you see the amount of money that even second tier players in the ai space are able to raise for example amd raised a bond that is pretty much the size of a treasury auction right and it tightened and the stock is higher so this demand for ai related credit for ai related deals for example the open router deal is rumored to be in the range of seven billion you know that kind of notion of going into ai versus going into traditional kind of risk assets or risk seeking assets is really putting pressure on stuff like treasuries putting pressure on kind of inflation linked uh assets right so this competition element to flows is also another important way of looking at the ai trade and how it impacts global rates and global inflation expectations [00:10:41] Speaker 2: all right bloomberg m live strategist mark cranfield and our markets reporter anthony stephens thank you both let's get to some other corporate stories that we're tracking bloomberg has learned that jane street posted roughly 15 billion dollars of losses in july the firm's first monthly slump in about a decade according to sources this was driven by wrong way bets in asian equity markets and its investment in ai focused hedge fund situational awareness however jane street has generated more than 40 billion dollars of net trading revenue so far this year that's more than it did in all of 2025. alibaba says its ai models have accumulated more than 3 billion global downloads in the past six months surpassing meta and google to become the world's number one ai model a company statement says q quen has open sourced more than 460 models and its ecosystem has spawned more than 300 000 derivatives a hugging face report says alibaba's ai models now have one of the largest foundations of the open weight ai ecosystem zai says its next generation ai model will deliver a major upgrade in coding capabilities as chinese developers race to challenge open ai and anthropic the company plans to release the model within two weeks and says benchmark scores show a significant improvement over its current system despite the announcement zai shares slid in hong kong on friday as investors took profits ahead of quarterly [00:12:08] Speaker 1: results still to come in this hour and deadly israeli strikes on lebanon set to further complicate deadlocked u.s iran negotiations we have the details next this is bloomberg [00:12:40] Speaker 2: lebanon has seen its deadliest day of israeli attacks in months heaping pressure on stalled u.s iran negotiations while washington prepares fresh sanctions for more let's bring in bloomberg senior editor wendy benjaminson wendy it's a big day uh the ceasefire expiring today i mean the question is now what for this u.s iran conflict [00:13:04] Speaker 5: yeah well you're you're right paul that the ceasefire is technically over on monday um the trouble is that trump and iran both sort of declared it dead a while back so it's a marker that we're watching but um i don't think it's actually going to change much right now we are in this weird stalemate paralysis where nothing is really moving iran and oman supposedly are talking about a deal to administer the strait of hormuz but iran says the u.s well the u.s isn't a party to those talks and iran says that it'll have nothing to do with how they relate to the united states the united states says they're not interested in talking that they're going to unleash undefined economic pressure uh tactics on iran treasury secretary scott bessen says he'll announce those this week um and so you're absolutely right um i mean we're in this weird sort of you know holding pattern but israel for its part um decided you know is still attacking iran's proxies like hezbollah while at the same time jared kushner the president's son-in-law is in egypt talking about gaza so there's a lot of related things going on but nothing toward ending the war or lowering gas [00:14:30] Speaker 1: prices around the world in the meantime what do we make of president trump's new strategy we heard about the sort of maximum pressure economic pressure strategy last week is still is this still kind of the way forward and is it likely to be effective given we know how willing this iranian regime is is [00:14:52] Speaker 5: is to just bunker down well you're absolutely right heidi i mean iran has proven not only in the last 47 years but across the centuries that they don't capitulate easily um and and you know they are not a democracy they're not answerable to the people of iran um so yes i mean the economy of iran is in rough shape they've got inflation around 77 i think was one of the latest figures um and you know things are bad and thousands of people have died um but they um but we don't really know how effective these measures will be scott besson said they will be you know the toughest the world has ever seen you know that sort of trumpian sort of hyperbole but there isn't a lot they can do one of the problems is that china buys 90 of iran's exports particularly oil and trump is meeting with xi jinping the chinese leader later this year and he doesn't really want anything to mess that up so iran is already weighted down with more than 2 000 sanctions on its institutions people things like that so they would have to turn to china um and sort of punish china for that but that's not really a sustainable strategy either because of the u.s's reliance on chinese exports and his meeting with xi jinping coming up so we're really sort of all mystified about what scott besant is going to pull out of his top hat [00:16:28] Speaker 1: point back senior editor mandy benjaminson there with the latest let's take a look at some of the other top global headlines that we're following this hour and a top u.s military commander has acknowledged that mental health is a valid concern aboard the uss abraham lincoln after an iran war deployment of more than 200 days admiral brad cooper visited the lincoln following reports about food shortages contaminated water and moldy conditions on board the former joint chiefs of staff chairman mike mullins is a problem problems have been aggravated by port call challenges those deployments are very [00:17:00] Speaker 6: very difficult historically we've been able to typically go to a go to a port to take a break do maintenance and then come back online even back in vietnam a time frame we did that the problem right now is in the aor the places we would do that bahrain in the theater bahrain or in the united arab america [00:17:23] Speaker 1: those are those are targeted right now president trump has directed the pentagon to substantially reduce joint military exercises with south korea while praising the north korean leader kim jong-un trump used social media to call the costly drills an inappropriate signal to north korea which he says is respectful towards the us he also mentioned that south korea is declining his request for support in the iran war rescue teams in indonesia are clearing landslides and reopening blocked roads after saturday's earthquake of flores island killed more than 50 people emergency response operations are expected to continue for up to three weeks as military aircraft dispatch aid to remote areas some residents took shelter in a local football stadium as aftershocks continued on sunday more ahead here on the asia trade this is bloomberg [00:18:18] Speaker 7: next week bloomberg is live at the jackson hall economic symposium tom keen and lisa abramowitz along with michael mckee will bring you news and interviews with fed leaders policy makers and economists shaping global monetary policy tune in for continuing coverage and a special episode of surveillance august 28th at 9 a.m including full coverage of kevin warsha's first speech to the conference the jackson hall economic symposium on bloomberg context changes everything [00:18:53] Speaker 2: here's a quick check of some key economic events to be watching out for this week today china's july activity data is due that's expected to confirm the economy lost momentum ahead of a politburo meeting that stopped short of introducing fresh stimulus japan's second quarter gdp numbers are also out today monday economists expect growth accelerated strengthening the case for another boj right rate hike bank indonesia is widely expected to keep rates unchanged on wednesday before investors turn their attention to the latest fed minutes for clues on the u.s policy outlook and japan's july inflation report rounds out the week that's expected to come in hotter than the [00:19:31] Speaker 1: previous print well china has delayed the release time for its july economic data from 10 a.m to 3 p.m local time instead president xi jinping will deliver a speech this morning at a ceremony marking the 100th anniversary of the former president xiang zemin's birth let's bring our china correspondent mimin lo who joins us in hong kong um yeah this is quite an unusual break from practice right does it give us any indication of what the data might look like we know that it's not likely to be impressive in any kind of [00:20:02] Speaker 8: significant way yeah we are expecting the data to confirm pretty lackluster growth in july particularly because of bad weather as well don't forget we had a couple of typhoons hitting china so that also affected things like shipping and construction so you look at the data breakdown at least from economics economists estimates we're looking at retail sales improving slightly from the previous month but that is the only metric that is seeing improvement according to forecast everything else whether it's industrial production fixed asset investment property investment and even surveyed jobless rate or all expecting to expected to deteriorate and fixed asset investment we did see for example government spending contracting in the first half it's expected to pick up in the second half though as the government continues to emphasize on these infrastructure investments particularly in the so-called six networks including things like data centers logistics telco systems for example uh but yes when it comes to private investment that remains pretty weak right especially if you consider the credit data that came out over the weekend showing that people uh that chinese residents were paying back uh close to 600 billion yuan so very weak credit data and that is also showing up in bond uh in bond yields as well which is hitting uh i think uh i think uh one year low at this point in time so overall not very positive uh when [00:21:31] Speaker 2: it comes to the data expectation i'm sure we'll all be very impressed by how unimpressive it is but uh delaying the release time of that economic data quite a break from recent practice really so can you tell us more about this ceremony marking zhang zemin's birth is this unusual [00:21:47] Speaker 8: it is not necessarily unusual because china has a practice of commemorating the 100th year birth anniversary of some of its key leaders so mao zedong had the ceremony deng Xiaoping also had one and zhang zemin since he is a major sort of leader the third generation leader of china he's also receiving a ceremony i would say though that this ceremony is a bit more low profile compared to the one that deng Xiaoping had because that was a month-long celebration that uh ended with that ceremony at the great hall of people and a former president hu jintao unveiled a statue of deng Xiaoping in his hometown in sechuan province but this celebration of jiang zemin's birth is so far quite low profile there has been some documentaries that has been aired on state media they are releasing uh for example uh jiang zemin themed coins and postage stamps and of course uh presidency will be giving the speech later and we already see some editorials coming out of state media like people's daily over the weekend really highlighting some of his key achievements but it's also a way to use the elderly the the party elders right to rally the the party together because the editorial also talked about how it's important to have the party at the center to have singing xi jinping thought uh on socialism as the guiding principle and using a quote from jiang zemin about his belief about how the party really needs to be the the center of leadership in china so it's really using this as a way to bolster president's leadership in the country as well [00:23:26] Speaker 2: all right bloomberg's china correspondent min min low there let's take a look at how we stand in terms of markets ahead of the open this monday we are anticipating uh somewhat modest or softer open the yen still hovering just below that 160 level not a lot of change there for the euro or the dollar we do have a very interesting 20-year bond auction coming up this week as well out of the us more ahead on the asia trade this is bloomberg well we're keeping a close eye on the middle east again today i mean nominally an important day the ceasefire between the us and iran does expire although what does it even mean at this point um and we have ceasefire by any other name pretty much i mean israel has wasted no time and you see the pictures on your screen they're already renewing its attacks on lebanon but it's interesting what's happening in the strait of hormuz as well oil somehow getting through um there is a dark fleet people are finding workarounds through pipelines other methods as well but on the weekend also we had president trump saying he would declare the strait of hormuz territory of the us and iran just [00:24:43] Speaker 1: calls that a fanciful delusion uh you know it's quite interesting when you take a look at the dynamics in the oil market because i know that we've been questioning why has the pass through to inflation why have oil prices more or less kind of held steady right and part of it is going to be what china is doing or not doing we know that they're buying probably a share of iranian oil that's helping iran certainly but also that they've cut over the last couple of months their usual oil imports by as much as half or even more so there is that sort of demand destruction side of the story and you can see brent crude at the last trade up by just about three tenths of one percent we're pretty flat in new york traded crude session at the moment and uh muted muted start to trading as we head into the new [00:25:23] Speaker 2: week well a lot of economies of course exposed to these high energy prices and our next guest leads the central bank of sri lanka which kept interest rates unchanged last month as renewed tensions between the u.s and iran cast uncertainty over the global economic outlook the central bank had surprise markets with a significant rate hike in may aimed at cooling credit growth governor nandala where a singer is part of a sri lankan delegation visiting australia this week to attract investors and joins us now right here in sydney um governor welcome thank you so much for your time i do want to start with the oil price issue can you talk to us about how vulnerable sri lanka is to these energy [00:26:01] Speaker 9: shocks yeah of course sri lanka is uh exposed to this especially because we are net energy importing country we only have renewable energy like hydro wind and solar so that's dependent on uh thermal power is high and for transport and so as a result we have seen inflation was running around two percent somewhere until march april and all of a sudden with the government policy of cost recovery pricing domestic pricing inflation shot up to from two percent to five percent and now close to seven percent which is upper band of house and the bank target limit so there's it clearly says energy is an important component energy and transport has a very high weight in the consumer basket as a result always is vulnerable and basically exposed to high energy and transport prices you have earlier declared that the accommodative [00:26:57] Speaker 2: policy is over what kind of oil price do you need to see to give you some confidence that inflation is [00:27:03] Speaker 9: coming under control what we have predicted is that our baseline scenario is that if oil prices remaining around 80 dollars a barrel for next for this end of the towards this year and next then we can manage the situation so if there are any surprises then obviously we have a challenge so what we see current prediction of around 80 percent now is moving around that level if it remains that level i think we can manage inflation we are expecting inflation to come down around our target level of five percent in [00:27:35] Speaker 1: so it was end of this year and early next year do you think that's an optimistic uh view because we had june 6.8 percent july was 7.3 percent five percent ish is the target do you think policy is restrictive [00:27:48] Speaker 9: enough at this point yeah because you know look at our tightening in may it's very proactive and sharp and we did that because we saw inflation was coming up moving around seven percent for a couple of months this year especially towards the end of this month end of this year so that was a proactive measure for us to contain one is the again inflation expectation second we saw down the credit growth this was expanding rapidly and also to have any undue pass through through persistent inflation uh from current high levels as a result of oil prices so for that although these things are tightening in our view was very proactive and good enough measure that's why last time we did not revise the the interest rate uh the last cycle but we are very closely monitoring situation uh we are we have predictions says it is gone down five percent so that i think we we think we have sufficient time and we also see as a result credit growth is now slowing down and also currency is now fairly stable and gradually appreciating from the pressure we had in april and may as a result of very high oil imports and as a result now we are seeing a stabilizing situation as a result of partly the monopolis measures that we had in may and also some of the measures brought in by the government to curtail certain imports political imports they have a surcharge imports and they have loan 12 ratios imposed by the central bank as a macapoodness one measure now those police are now working as we can see now and going forward what about the growth outlook any risks if you look at the slunk has been growing around five percent from third consecutive year after the crisis so we're very steady stable growth around five percent even q2 we see can we be growing around five percent there could be some slowdown in the second half but still it could be around between four to five percent because the slowdown is expected because the tight moderate conditions uh as well as the high prices this will have some impact on the growth but it won't be very adverse because now things are settling down the we think this year second now may be around four to five percent it will come back to more potential growth about five percent next year onwards well you're [00:30:12] Speaker 2: here in australia for the invest sri lanka events events here in sydney and melbourne also what's your message to investors here why should they be putting money into sri lanka i think when you look at the [00:30:22] Speaker 9: situation now clearly after the crisis economy is recovering nicely around five percent is a very good growth and going forward also the uncertainty and vulnerability that we saw and we have been able to manage the middle east situation and also we had the internal deep the cyclone had an impact small impact with without with all this kind of external shocks we have been able to manage the situation well so going forward now it is a good time the second is recovering and now moving to high growth path so for anyone to benefit for the future steady growth that we are seeing over last three years and next couple of years this is a time for anyone come to sri lanka and with currency stable and there's reasonable food and macro macro policy even fiscal policy much more prudence now as a result the private sector growth backed by private investors are now we can see the realization there's time for sri lanka in one to [00:31:18] Speaker 1: in sri lanka now how's um how is sri lanka navigating the imf program given just a degree and magnitude of [00:31:25] Speaker 9: of global uncertainty at the moment if you look at the program we have been successfully completed the fourth and fifth through together in in first quarter now this next preview is some may in november december and we're expecting that course to be completed and then next year we will be completing four-year excellent fund facility fully completed program uh by the second half of next year so it's going well and i'm first recognized it's one of the case studies that sri lanka is one of the countries the imf backing and support has come out extremely well for stability and also with important growth [00:32:04] Speaker 1: really great to have you with us we appreciate your time and best of luck with this trip in australia nandala we're thinking who's a sri lankan central bank governor here in sydney with us much more to come here on the asia trade this is bloomberg [00:32:37] Speaker 2: japanese markets will open at the top of the next hour we're looking at some modest upside for futures at the moment last week was a pretty good one for the nikai better by 4.6 percent uh the yen though continues to be a point of focus 159 20 was the last trade there um we will get gdp numbers out for the second quarter today the first quarter showed stronger real wages quite a lot of resilience in the japanese economy but um still bank of japan not doing anything really let's uh get to our chief asia fx and rates correspondent ruth carson uh so ruth the yen carry trades are alive and well despite the threat of intervention in japan what's the what is positioning data telling us at the moment about the interest in these risky strategies [00:33:25] Speaker 10: yeah absolutely definitely alive and well in a 9.5 trillion dollar a day foreign exchange market the yen remains very popular to sell not just among hedge funds or leveraged investors but also asset managers through to your mom and pops in japan positioning data um for last week from the cftc shows that after the big intervention the joint intervention that we saw a couple of weeks ago um you know positions are still net short the yen in other words investors are still continuing to sell the yen borrow the yen to invest in higher yielding assets and that includes treasuries through to you know your brazilian bonds and all that um just shy of 60 000 contracts uh net short on the yen so again this does put pressure on japan's currency [00:34:18] Speaker 1: and where are we seeing the most enticing returns for hedge funds [00:34:23] Speaker 10: yeah absolutely so remember it is a risky strategy it thrives in low vol environments but when investors take a look at their books and look at rate differentials they still matter they're still juicy carry so for example if someone was to sell the yen against the brazilian real you get about 15 percent return this year that's fantastic um and i know that hedge funds that i've spoken with are also interested in currency that a norwegian crown or the um aussie dollar where you sell the yen against these currencies so you get more than 10 this year so very easy pickings there as long as [00:34:59] Speaker 1: volatility stays low bloomberg chief asia fx and rates correspondent ruth carlson there in singapore well shareholder activists who've raked in profits in japan over the past few years are moving into a more challenging phase now they tangle with less compliant targets and more skeptical government stances let's talk more about this with jamie house who's the ceo and ceo at sentient capital it's a japan focused shareholder activist a fund manager jamie really great to have you with us and to be fair um it feels like there's a lot more sort of activism when it comes to pressuring the boj at the moment then perhaps corporate japan how do you define that the stage that we're in [00:35:38] Speaker 11: so we've really seen three phases of shareholder activism in japan the first one was early 2000s where you saw players like the mutakami funds come out steel partners went into the market a lot of hostile takeovers kind of almost corporate raider type activity there's a big backlash against that and then with our binomics starting back in 2013 we saw the second wave of shareholder activism come into the market which is really about engagement um the government pushing the corporate governance code and the stewardship code to make domestic asset managers engage more and foreign shareholder activists having a sort of constructive approach um from about 2021 2022 we've entered into the third phase which has then been supported by uh the ministry of economy trade industry's takeover guidelines and the tokyo stock exchange becoming one of the biggest activists in the market and i mean pressure on the boj yeah that seems to be the uh the currency markets putting pressure on the boj boj to raise rates the short end we've seen the long bonds close the gap but the yen's just fundamentally extremely cheap you only have to visit tokyo and eat out at a lovely restaurant for dinner and compare the bill to what you get in sydney to understand just how cheap the yen is always tempting us with a good time every time [00:36:51] Speaker 1: we do a yen check right but um where's the pushback coming from is there a sense that maybe activism at least in a short term has reached a bit of a peak are we hearing a bit more from companies now [00:37:03] Speaker 11: i kind of reject that framing there has been some uh mild reforms at the government level but really that's just bringing japan into line with how western markets operate so for just to set the scene in japan right now a shareholder can basically propose anything they want to at a company's annual general meeting they can direct a company to fire the cfo or fire the lunch lady if they want to and one of the reforms being suggested is maybe shareholders shouldn't be able to propose resolutions around company operations that they should be limited to resolutions that change the board is that reducing some rights for shareholders yes but in practical terms those resolutions never pass anyway 99 of shareholder resolutions proposed at agms are voted down that's not to say they're not effective uh often what happens is an activist will propose a increase in the dividend or a share buyback the company will oppose that resolution shareholders won't vote for it or you know only a third of shareholders or something will vote for it but then after you know a decent face saving interval the company will often do a lot of a lot of what has been asked of them so shareholders have had activists have had a lot of success in japan there's a lot of money in the space now as you sort of alluded to before the targets are getting a little bit more challenging particularly at the larger end it's less obvious value but still compared to other markets like the us which is still the biggest market for activism globally the opportunity in japan is you know very early innings so how do you [00:38:39] Speaker 2: identify activist targets and have the reforms change the way that you identify them so the recent reforms [00:38:46] Speaker 11: have not changed anything for us like there's no practical effect of any of the recent headlines in the news at all we take quite a different approach um the established activists have been around a long time have raised a lot of money they're limited now to looking at much larger companies we're looking at the small end where you can still find companies that have cash real estate investment securities worth a lot more than the company's current market valuation so effectively you get the business for free so we're identifying the cheapest companies companies with hidden real estate on the books at historical costs so they might have built a factory in central tokyo a hundred years ago and that land is now zoned residential but they're still operating this factory there and they've never redeveloped it so so examples like that um and then we're looking for businesses with reasonable quality um and reasonably stable cash flows and really just that big undervaluation is key for us and some initial signs of improving corporate governance are good as well has the company increased their dividend done a share buyback increase the independence of the board um but the real opportunity is you're buying something that is today worth a lot less uh in the public market than what it would sell for in the private market so you know roughly what a private equity buyer would pay for this company and there's just this massive discount because management does not focus on shareholder value well stocks held by activists have underperformed [00:40:10] Speaker 2: the broader topics in 2026 um that's after four years of our performance however what's the reason for [00:40:16] Speaker 11: this is it the ai boom or is it something else look i saw that i saw that stat that you quoted in the article and it's a reasonable attempt to quantify activist performance we looked at 300 stocks held by activists what i would say is it's absolutely impossible to accurately calculate activist performance from publicly available data you have no idea um anything where that's not a public position will not be caught there there's some massive public positions that won't be caught for example elliot's position in daikin is under the five percent threshold no one knows exactly how much they hold um so start off there's issues with that data and saying that they underperformed but even on your data uh you're saying it implies that activists delivered a 12 performance in the first seven months of the year um that's pretty good and activists are not holding the stocks that are driving the market which have been the mega banks ai focused stocks i would expect activist performance to be relatively uncorrelated to the broader market because they are targeting uh inefficient older world companies um so you'd expect the returns to come through year after year after year even if the [00:41:21] Speaker 1: market is down jamie really great to have you with us jamie house is the ceo and ceo at sinjin capital you can catch japan ahead every monday at 8 40 am if you're watching in tokyo subscribers can watch live on the terminal using the tv go function this is bloomberg we do have some breaking data when it comes to second quarter japan gdp numbers coming through uh 1.1 on an annualized basis that is much less than expectations of two percent there let's break that down a little bit uh we've got net imports adding half a percentage point to that quarter on quarter number there that was slightly better than expected uh 0.3 quarter on quarter is the growth also missing expectations of half a percent there private consumption was unchanged nominal gdp rose 1.2 that was in line with expectations on a quarter on quarter basis we saw a contraction in business spending of over one percent the estimate was for a gain of half a percent there so that's quite an interesting read when it comes to what we're seeing with the growth picture given that of course the pressure continues uh to build for the bank of japan to be uh a little bit more active there we've seen the yen essentially unwinding around half of those gains that we've seen since that surprise intervention but the gdp numbers uh really bucking expectations we had been expecting a bit more robustness in that pace of growth in the second quarter strengthening the case for the boj to hike early that could potentially change the picture let's check in on some of the stocks to [00:43:02] Speaker 2: watch when trade opens shortly in australia national australia bank's third quarter profits climbed as lending to businesses across the country expanded unordered cash earnings coming in at 1.3 billion us dollars in the three months to june 30. a2 milks new zealand shares have tumbled after a full year net profit fell 44 percent the company also warning of a sluggish second half as it struggles to win back chinese infant formula customers due to supply chain issues and blue scope steel has raised its underlying ebit guidance for the first half to 960 million australian dollars and is expected to issue a special dividend in the second half australia and new zealand equities reporter karmali argana joins us now with more so karmali we're a few weeks deep now into earnings season in australia are there any themes [00:43:48] Speaker 12: emerging so far yes so we're about a fifth of the way in uh we're already starting to see a bit of read through about the uh the strength of the domestic economy and the local consumer last year last week we had cba's full year earnings and we've also got quarterlies from westpac aanz and nab as you mentioned this morning a big focus of the commentary there is the strength of the housing market uh all of those banks have reported declined in their mortgage applications so that's really starting to come through um we're going to get some more read through about the domestic consumer as we get more earnings we had a2 milk blue scope coming through this morning key takeaways yes so unlike the banks a2 milk and blue scope they their fortunes are more tied to the the global economic outlook uh as paul mentioned a2 milk uh earnings that were a bit of a disappointment uh uh guidance for the 2027 fiscal year is a bit weaker than expected uh due to some of those issues with supply chains blue scope that's been in the news in the first half of the year because of an mma uh takeover that's sort of fallen through for now but the read through from analysts so far seems to be positive uh guidance for the next fiscal year is positive that seems to be mainly driven by its u.s steel making business uh whilst the australia [00:45:03] Speaker 2: business seems to be a bit mixed we've got a couple of heavyweights this week as well of course bhp [00:45:08] Speaker 12: out to santos as well what can we expect from these results bhp will be a big focus for us um copper is going to be a big thing to watch in terms of their earnings now bhp and its peers rio tinto fortescue have rallied a lot this year because of the strength in copper prices as we look to the ai build out and demand for that but if you look at the last quarterly results that bhp reported they've actually had a bit of softening in their copper volume so that will definitely be a big focus uh santos will also be something to watch it's benefited a lot from the higher oil prices from the iran war we need to be watching if those uh oil prices are feeding through into earnings bloomberg's australia and new zealand [00:45:48] Speaker 1: equities reporter kameli agana there lots more earnings coverage out of australia this week as we just spoke about we have uh blue scope steel ceo tanya archibald joining the china show a little bit later to talk through those latest results tomorrow on insight we'll be speaking with the bhp ceo brandon craig on the outlook for the mining giant let's take you through what we're expecting as we get the market open in just a few minutes time here in australia and across in japan as well of course this is a picture as we look at a bit of downside for sydney futures about a quarter of one percent lower there watching the oil price as well holding on to gains but really pretty muted trading as we continue to watch for any developments of what happens with the official uh expiry of that ceasefire but also increased hostilities between israel and lebanon as well uh nikko futures a little bit of upside about three tenths of one percent and we're seeing some positivity when it comes to trading in u.s futures market opens in sydney and tokyo are next this is bloomberg this is the asia trade we're counting down to asia's major market opens and striking sense of a lack of volatility particularly when you take a look at how this ai trade ai financing just continues to barrel on right at a time where we're still contending with some of the downside issues the fact that we're seeing these pressures in the long end of the bond market the fact that we're seeing still the official expiry of the ceasefire not that it really means anything at this point given how fractured the relationship has become between the us and iran but we've got now tensions between israel and lebanon flaring up again markets seem quite sanguine at this point well i think they're used [00:47:50] Speaker 2: to this kind of thing by now you know you didn't even mention on the list president trump saying yeah we're not sure about military drills with south korea anymore and north korea is behaving itself no exactly [00:48:02] Speaker 1: oh what a what a what a what a way to start the week right but let's get you to the market start to the week as we come online we do have a little bit of upside here uh with japanese markets up by just about a tenth of one percent but i will point out some interesting implications for the bank of japan given we just had a pretty sizable miss on that second quarter gdp number that economic growth picture clearly taking a hit as we have the impact of the middle east conflict continue to drag on uh gdp the uh annualized number 1.1 percent of the second quarter missing expectations of around two percent also slower than the revised 1.9 percent in the previous quarter uh so a miss on just about every front uh another third consecutive expansion had been uh expected there but uh certainly not to that degree really looking at the fact that we've seen the economy suffer from the conflict in the middle east as products made with petroleum for example we also saw some disruption to supply chains so all of that is going to play out the big question with yen at 159 what are the implications for the bank of japan [00:49:04] Speaker 2: um yeah and implications for other developed uh economies as well because of the u.s who of course was deeply involved in that defense of the end a couple of weeks ago and there's a photo opportunity for anyone who's interested in new york this week the debt clock for the united states is about to tick past 40 trillion dollars now we see yields rising here we had that 30-year auction last week uh which uh delivered the highest yields in 25 years there's a 20-year auction this week which is traditionally a tricky one 16 billion dollars worth of debt up for sale an estimated yield of 5.27 and that would be the highest since that 20-year note got reintroduced back in 2020. take a look at crude prices as well well they're not moving much because as we were discussing earlier the world seems to have got kind of used to the situation uh the iran u.s ceasefire nominally expires today but let's be honest it's really been dead for quite some time hasn't it all right joining us now is home and lee senior macro strategist at lombard odia home and thank you so much as always for your time today and i do want to start with that japan story uh we just got that second quarter gdp data uh anemic would be perhaps the best word if i was to choose one to describe it does this give you a bit of confidence and ongoing yen weakness on the assumption the bank of japan's now got an excuse to keep doing nothing there's the carry trade alive and [00:50:22] Speaker 13: well well we would uh push back a bit against the idea that 1.1 percent quote on quarter is an anemic number for uh an economy like japan that in fact that the 2.0 percent uh consensus uh might have might have been a little too aggressive especially in the quarter when we had the the full impact of energy market disruptions the bottom line is that we have a positive growth and it's entirely possible that given the history of revisions in the uh japan's economic real gdp data after capex numbers come out from the ministry of finance you could actually see a bit of upgrade and this positive growth uh is good enough in our view for the bank of japan to still consider some additional rate hikes and and if you look at the deflator series for the same release uh in fact it was above consensus right so we do have this underlying inflation uh and of course in the context of a fairly weak yen so we still think it's quite quite likely for the bank of japan to actually try to lean against uh some aggressive carry trade by raising short-term rates and and also we don't rule out the possibility of the boj bringing forward uh their tightening plans uh for the remainder of the year and the joint intervention that you mentioned in fact raises a stake for the policy makers to consider that kind of a yen supporting measure in the [00:51:52] Speaker 2: remainder of the year all that said you are uh overweight japan are there any particular sectors that you're looking at or is it just all about the ai story right now [00:52:05] Speaker 13: well ai is certainly a key theme for the japanese equity market but also industrials materials uh basically you have the cyclical sector in the japanese equity market you know firing on all cylinders and that's actually quite uh uh uh normal to expect this kind of outcome uh in a global uh cyclical boom given the market's uh a usual sensitivity and a high operating leverage so um even if there is a bit of setback on rates front and the dollar yen front uh and certainly for the latter we don't expect a major appreciation from here even if the boj raises rates a bit given the undemanding valuation and fairly a good setup for the earnings outlook we think the the broad market will perform pretty well but if you really have to delve into the sectors financials some industrials and materials i think these sectors are quite nicely positioned uh for the remainder of the year and of course the ai theme [00:53:09] Speaker 1: i'm staying with the ai theme i know that you're constructive when it comes to south korea when it comes to china as well as not underweight with the us so how are you kind of splitting where you see those opportunities because we've seen the disruptive force of china really continuing to make leaps and bounds is there better value there for the ai plays versus the sort of more western oriented markets [00:53:36] Speaker 13: so uh we think the debate in terms of the competition between the u.s tech stack and china tech stack will not be resolved uh in any time soon simply because there is significant amount of uncertainty surrounding that debate but given what has happened so far and the steady progress in technology that we see in the china tech stack we think it's worth having it as a hedge in the portfolio in a diversified portfolio setting having a bit of exposure to chinese equities especially with this very cheap valuation of forward multiple run maybe slightly below 11 times for the offshore listings it's worth having it at least as a hedge so in case there are some unexpected significant innovation and advancements in the china ecosystem you can benefit from that for the u.s our position is neutral uh in the hyperscaler free cash flows and financial financing debates they're certainly not going away anytime soon but the software sector is performing pretty well and we still like that sector and finally for south korea memory still remains the bottleneck jevons paradox still valid for the dynamic between price and volume so after with this uh coming down of volatility related to leverage positions among retail investors we think it's actually worth having that exposure as one of the preferred uh exposures within the emerging market equity uh allocation [00:55:10] Speaker 1: markets at this point are pretty happy to kind of shrug off the risks right namely the macro weakness that we're still expecting out of china we've got the domestic activity numbers coming through uh this week as well as obviously the lack of resolution in the middle east and what happens with oil prices are these sizeable risks to the downside [00:55:33] Speaker 13: these are risk factors that we need to live with and of course we have to be vigilant about them but um it really comes down to the conviction about the how these risks uh will actually affect the markets for the remainder of the year and if you think about the the middle east conflict uh the rhythm of you know a sporadic flare-offs followed by a period of calm uh you know that's basically been the situation for uh the the region and we still think there is a very strong a political incentive for both sides to basically maintain that framework despite very harsh rhetoric and for the you know uh the china data we're going to get the july data and it's entirely possible that it's a bit of disappointment but if you think about the fiscal policy and the underutilized resources that has to be implemented more aggressively for the remainder of the year we still think we still think the likely outcome for chinese economy for the remainder of the year is that of a rebound and so that really leaves uh especially for the emerging markets and the broader risk asset class uh the key factor actually could be uh the fed policy but for that again there is a debate we're siding with the extended pause uh view here and if if we are right uh in that prognosis then the the risk assets could actually you know continue to grind up for the remainder of the year and that's the reason why we maintain our pro-risk tilt in our portfolios [00:57:09] Speaker 1: home and lee always great to have you with us senior macro strategist at lombard odia let's take a look at some of the stocks that we are watching at the moment particularly when it comes to the earnings related names here in australia nab the third quarter profit climbing business credit growth remains robust across the business units that we're watching at the moment we are seeing downside though uh ceo andrew irvine says the slowing housing market is threatening to eat into profitability uh we're also watching a2milk's full year net profit tumbling 44 flagging a sluggish second half as it struggles to win back chinese infant formula customers due to supply chain issues blue scope steel is the other one that's a major today raising its underlying ebit gardens for the first half a year to 960 million aussie dollars forecasting a special dividend of 70 cents per share in the second half we've got plenty more earnings coverage out of australia this [00:57:58] Speaker 2: week blue scope steel ceo tanya archibald's going to join the china show later to discuss the company's latest results and tomorrow on insights we'll speak with bhp ceo brandon craig about the outlook for the mining giant more ahead on the asia trade this is bloomberg [00:58:27] Speaker 7: the jackson hall economic symposium tom keen and lisa abramowitz along with michael mckee will bring you news and interviews with fed leaders policy makers and economists shaping global monetary policy tune in for continuing coverage and a special episode of surveillance august 28th at 9 a.m including full coverage of kevin warsh's first speech to the conference the jackson hall economic symposium on bloomberg context changes everything [00:59:03] Speaker 2: we're keeping an eye on risk assets after lebanon had its deadliest day of israeli attacks and months the escalation heaping pressure on stalled u.s iran negotiations while washington prepares fresh sanctions against tehran for more let's get to bloomberg's john herskowitz so john the u.s says it plans to roll out an economic isolation plan for iran this week what details do we know [00:59:27] Speaker 14: yeah so far the u.s hasn't given any details of what would be in the plan now this comes as iran is already facing a naval blockade it has about two thousand or more sanctions on it so the economic pressure is there and the key for this plan is whether it actually goes after the people who help finance iran's trade and buy its oil and the biggest purchaser of iran's oil is china if the u.s tries to target chinese banks that help finance iran the u.s risks trade conflict economic conflict and political conflict with beijing and this could also increase oil prices and make the global economy more difficult so we have to see whether the plan is going to actually target those who do the trade or if it's just going to be something for show something that lists hundreds of shell companies and tankers a really impressive list with a lot of names that doesn't really affect those who do trade so we haven't seen it it's supposed to come this week and the key is how much it affects china or how much it just affects a long list of shell companies and tankers john in the meantime we're [01:00:39] Speaker 1: seeing the proxy fighting resume again with israel strikes on lebanon how does this play into the [01:00:44] Speaker 14: further complicating the situation sure we've seen the deadliest fighting in lebanon in months i think 11 people were killed including a senior hezbollah commander this is periphery to the overall deal with between the u.s and iran this is something that's key for iran seeing a ceasefire here as part of the overseas overall ceasefire so if these tensions flare up it makes it more difficult for a broader deal to go forward trump's son-in-law jared kushner has held talks i believe he's going to talk in israel this week but this is mostly focused on gaza and hamas so um i'm sure hezbollah is going to come up and lebanon will come up but it's just it's another uh it's another point of friction for the overall situation so it's flared up and it's making things more difficult [01:01:39] Speaker 2: um john president trump also scolded south korea for not helping the us denuclearize iran also called for curtailing military drills with south korea what would the impact of this move be [01:01:52] Speaker 14: yeah it's it really it really affects the u.s's ability to provide security in the region the u.s and south korea have been having military drills for decades 70 years since the end of the uh korean war um these drills help prepare the u.s in the event of an attack from north korea um and trump has often gone after the cost during his first administration he curtailed these drills to help his nuclear talks with uh with north korea didn't help with the nuclear talks but the the drills cost i think the estimates had at the time were between 10 and 20 million dollars but the thing is these are essential for getting the u.s and south korea on the same page in the event of a north korean attack north korea has hundreds or more or maybe thousands of missiles artillery shells that it can pour into south korea u.s troops usually deploy to south korea on one year rotations so having these drills is essential for u.s military preparedness and knowledge up and down the chain of command and in the event of any contingency with north korea so really important for the region and these have been a cornerstone of [01:03:09] Speaker 2: the security arrangement with south korea for decades all right bloomberg's john husk of it's there well middle eastern oil producers continue to press ahead with shuttling large volumes of crude out of the persian gulf helping keep a lid on prices even as the iran war drags on for more bloomberg's dan murtar joins us so dan how is this working how is oil making it through this well dual blockade [01:03:38] Speaker 15: what's happening is oil tankers are staying darker for longer and by that i mean they have these ais uh sponsors on their ships that they kind of track uh through you know geocoding where exactly they are that that helps in normal times for navigation it's important for insurance but in these times they're turning those transponders off and we're they're just disappearing off of the satellite maps then they'll show up 10 days later you know we don't know if they've gone back and forth across or moves you know four times since then shuttling little bits of oil out to to ships that are waiting on the outside and so there's this big gap in knowledge for traders uh and buyers and sellers on exactly how much is making it through people have been estimating about 4 million barrels a day you know only a fifth of what had been going through before the war uh last week the u.s energy secretary chris wright said it was 9 million barrels a day had been going through that week and so we're trying to recalibrate and trying to figure out what is going on in this dark space where there's there's no data and these uh these ships are shuttling oil across dan there's so much to unpick here because i'm i'm [01:04:49] Speaker 1: also quite curious as to what's going on with what china is doing right i was looking at the data that they've been really drastically cutting their all imports over the past few months so there's demand destruction there do we know what's happening with that and also how much they might be buying from iran [01:05:06] Speaker 15: oil yeah you know china is uh is still a a buyer of iranian oil the big state-owned companies stay away from it because they don't want the secondary sanctions but uh but you know the uh teapot refineries in shandong have always been uh iran's sort of buyer of last resort they'll they'll buy iranian crude whenever prices are low enough um you know right now what's happening in china is a couple of different things one is they've drastically changed their stockpiling uh they used to be buying one to two million barrels a day above what they needed just to put in stockpiles they've stopped doing that with these higher prices and it looks like they're also pulling out from at least commercial stockpiles and so eating into some of the uh commercial tanks if not yet the strategic tanks that they've built up over the past decades and so that's allowed them to to reduce buying and then there's also just demand destruction on the ground here we've seen an uptick in purchases of electric trucks evs have been huge for the last couple of years uh there's you know when oil and gas gasoline prices and diesel prices get higher chinese consumers have the ability for a bit more demand flexibility than a lot of uh countries that are just basically stuck with uh with gasoline and so we've seen you know petrochemical firms have stopped buying we've seen a little bit of demand destruction on the road and so they're they've really dramatically reduced by millions of barrels a day how much [01:06:25] Speaker 1: they're importing one of them i'll talk there with the latest uh let's take a look at another story that we're following when it comes to the geopolitical space and a top u.s military commander has acknowledged that mental health is a valid concern aboard the uss abraham lincoln after an iran war deployment of more than 200 days admiral brad cooper visited the lincoln following reports about food shortages contaminated water and moldy conditions on board former joint chiefs of staff chairman mike mullen says problems have been aggravated by port call challenges those deployments are very very [01:06:59] Speaker 6: difficult historically we've been able to typically go to a go to a port to take a break uh do maintenance and then come back online even back in vietnam uh time frame we did that the problem right now is in the aor the places we would do that bahrain in the theater bahrain or in the united arab emirates those are [01:07:22] Speaker 1: those are targeted right now more ahead here on the asia trade this is bloomberg well australia's richest person gina reinhardt has revealed almost 1.4 billion dollars stake in spacex making the rocket maker her largest investment bloomberg for global business reporter angus whitley joins us now with more so tell us more because uh along with gina of course a lot of retail investors in australia have exposure to spacex it's not been the investment that they probably [01:08:01] Speaker 16: had been hoping for at debut that's right it was a hotly contested ipo wasn't it huge demand for those shares and we knew that gina reinhardt had been allocated uh some of those shares we didn't know quite how much so that was what came out over the weekend in a regulatory filing she had eight million spacex shares currently worth just over one billion us dollars and you're right first few days of that listing they they saw it didn't they then they've gone below the offer price they're round about the offer price or just over at the moment so i think the significance of that state was that it's now her single biggest position or at least hancock prospecting single biggest position which is her investment vehicle and outside of her iron ore assets of course and previously that was um mp materials which is uh u.s rare earth producer so it highlights her commitment to that company and also we knew that she was a fan of elon musk she'd previously made that no secret but she doubled down on that at the weekend her company releasing a statement describing musk as a an exceptional and brilliant person uh who who can use science for the betterment of mankind so um not holding back in that regard i think the other couple of things that were interesting from this filing uh was that reinhardt doubled her exposure in sort of small stakes but necessarily still significant so she doubled her holding in trump's technology company uh trump media and technology group and i would group that that exposure in a sort of handful of small stakes that are run by famous billionaires so equally fox corp she bought more shares in fox corp she also owns stakes in tesla meta and amazon you know all significant companies that are run by [01:09:47] Speaker 2: billionaires yeah so a lot of interesting reading in that disclosure does it tell us anything about her investing preferences and perhaps even gina reinhardt's political leanings well you could argue i suppose [01:10:00] Speaker 16: that you know you can make your own conclusions about what it means to buy more shares in trump's technology group and um elon musk political uh allegiances are you know world document as well i think one thing that's clear is beyond all the fanfare of buying a stake in elon musk spacex and making that your single biggest exposure is also she's evidently quite a a measured investor as well for instance her company bought more shares in etfs and the her second biggest holding is a is a nasdaq um 100 sort of tracking etf and that there are that's worth almost a billion us dollars and there's a couple of other big etfs that track the s p 500 so it's quite a measured portfolio but broadly speaking this is still five or six billion us she is australia's richest person she's worth more than 32 billion us [01:10:55] Speaker 2: so still a small chunk of for fortune all right good context uh that's bloomberg's global business reporter angus whitley there let's take a look at uh us cross asset at the moment not a lot of change in the us dollar right now nasdaq futures uh better by about a fifth of one percent and on the tech front uh we've just had the news that alphabet is considering its first australian dollar bond as the uh as its debt for ai starts to pile up uh the u.s firm may sell those notes across four maturities including as long as 20 years this is according to an email statement from australia new zealand banking group which is one of the four big banks in this part of the world so alphabet hiring banks for what would be a debut offering of those aussie dollar bonds we have more ahead on the asia trade this is bloomberg we've got some breaking news out of singapore it is non-oil domestic exports and a pretty chunky increase here a rising 24.2 percent on year that was a little bit slower than the expected 26 and a half percent when we break it out though electronics exports a big spike as you might expect up 112 percent on year and that was an acceleration of the more than doubling that we saw back in june top markets for those exports the us china south korea and taiwan non-oil related re-exports meanwhile also saw a very big jump and it was computer peripherals and parts of pcs that saw the biggest increase there 262.4 percent so another big spike in singaporean non-domestic oil exports heidi yeah uh we're also watching what's [01:12:52] Speaker 1: going on in japan because that second quarter gdp number was a bit of a surprise certainly unexpected we saw capital spending shrinking that was a big part of the story as we saw uh the three months through to june coming through with a disappointing growth number the uncertainties in the middle east uh some of the disruptions on the supply chain front the cost of petroleum and oil related products as well 1.1 was that annualized basis for real gdp growth expectations were around two percent uh and to that point a capex deepening to 1.2 as a decline private consumption also flat so that missed the estimate for a more modest increase so whether or not this kind of weighs into what the bank of japan does or when it finally does it uh is the big question 159 is where we're trading when it comes to dollar yen at the moment and a bit of upside for equities in japan at this point uh for more let's bring our japan economy and government editor paul jackson so paul i mean it's still growth it's still 1.1 growth right so does this move the needle when it comes to what the bank of japan would be thinking [01:13:58] Speaker 17: uh well does it mean that they're going to delay their their rate hike i don't think so i don't think it's a weak enough result for that but it is a little concerning i think this 1.1 figure kind of overstates the amount of growth it's kind of helped by a slightly distorted trade figure that is mainly a factor of lower imports through the middle east tensions and that's one of the main factors lifting the growth uh this time around if you look at the other figures that are key to the kind of domestic uh growth story uh then uh the figures are are you know a lot less uh flattering uh little concerning we've got flat consumption that's the um uh private consumption that's the weakest figure in a couple of years and and it kind of speaks to uh the people still struggling with inflation having difficulty uh dealing with these uh price increases this is one of the key things that prime minister atakaichi needs to remedy to get her approval ratings back on track after she's been seen spending too much time on on pet policies we do have this uh sales uh tax cut coming up but that's not going to take an impact until next april so there's kind of quite a quite a gap there also we're seeing firms actually cutting back on spending they were supposed to increase after cutting back in in the previous quarter so that's another another cause for uh concern those uh capital spending figures from firms do tend to get revised quite a bit so um maybe we shouldn't place uh too much emphasis on that but i think certainly that private consumption figure uh is alarming for [01:15:42] Speaker 2: policy makers going forward we haven't seen a great deal of reaction in the yen in fact it's got a little bit stronger so what's the direction of travel for the currency now if the bank of japan continues to delay its tightening are we potentially going to see some more intervention to keep a lid on the [01:16:00] Speaker 17: currency well you know i think they will have to go go ahead with this uh early term rate hike i mean you've had joint intervention with the us that's really ramped up expectations uh both here and stateside that there's going to be some kind of uh rate hikes uh we've got 80 percent um in markets if you look at overnight swaps uh pricing in of of of of a rate hike in september i think it's gonna be very difficult to kind of turn back the optics and wait till december at this point and and like you said right from the top it's still growth still over one percent so it's not going to turn the needle on that [01:16:42] Speaker 1: of linberg japan economy and government editor paul jackson joining us now is ten wang who's a chief apac economist at vanguard and really great to have you with us so what do you think are these numbers weak enough to kind of cast doubt over at least the timing for the bank of japan [01:16:59] Speaker 18: um heidi um thanks for having me and paul um i think when we look at the economic growth number i think there are two things i want to highlight one uh at one point one percent this is actually uh about potential growth right for japan so you know i think recently we saw boj revised the output gap data and was showing that the japanese economy the upper gap it has remained positive ever since 2022 so this actually uh continue to you know make the output gap larger and that will continue to exert inflation pressure um and second i want to highlight in the you know gdp report is that gdp deflator right actually uh increased further compared to um the first quarter and now 2.6 percent um so i think that that actually shows you uh inflation pressure is really building up in the economy um frankly speaking i think for boj at this moment uh the rate hike is not just an inflation consideration it's actually more than that it's a policy credibility right you have an economy grow um you know about potential up positive inflation above target and risk on the upside and plus the government is actually going to announce more fiscal um you know support um to the economy um i think the question is for boj instead of creating more inflation now the question is can they actually manage um the [01:18:21] Speaker 1: consequence yeah a couple of things to pick out of those numbers that i thought was interesting consumer spending private consumption was quite weak and capital spending and investment was quite weak as well what does this tell you about sentiment and i guess how much that impacts the desire to [01:18:37] Speaker 18: obviously get the virtuous cycle going yeah i think you know from a consumer side i i think you know you know japanese consumer has been you know always cautious you know especially given this higher um food prices energy prices um actually real wage growths only turned positive right you know uh this year so i think it's some of the question um caution in there i think is understandable but put it down the road i think um you know when um real wage growth start to you know continue to remain in the positive side i think consumers should feel more confident um you know especially also with this kind of wealth effect uh given the equity market uh performance on the uh you know uh corporate side i think um if you we look at the tank on survey right the outlook is definitely positive right boj tank on survey was showing that capex one is rising at a double digit pace um when facing this kind of a structural labor shortage corporate have to you know make more investment um labor saving investment um so i think you know it's just matter of time uh when we look forward i think corporate investment should be able to pick up um you know further down the road and plus there's fiscal stimulus right uh you know consumption tax cut that is going to help consumption and then strategic investment as promised by the government um they are also going to you know uh support domestic demand as well so i'm not pessimistic i i think you know japanese economy should continue to grow and uh you know [01:20:08] Speaker 2: well supported by domestic demand uh jam we've also got some data coming out of china today of course industrial production retail numbers as well and in terms of the retail sales i mean there's a lot of ai spending a lot of investment happening in china at the moment but it doesn't seem to be really passing through in terms of uh inflation uh better wages increased demand uh what's going to break the chinese consumer out of their pessimist pessimistic attitude [01:20:38] Speaker 18: yeah i i think paul when you look at the you know uh the chinese economy obviously the ai you know advanced manufacturing including a lot of the bridge transition right related to production they are the bright spot of the of the economy but they are just uh number one they are too small right you know to lift up the the whole uh economy right uh when you think about the size of the housing uh sector right and and others and the second is also that those kind of advanced manufacturing is very capital intensive where they don't create a lot of jobs um right you know to lift up the consumption so you know when you look at the consumers i think there's still a lot of uh precocious city incentive right you know uh social welfare network um need to be continued to be improved um they also consumers also need to be more confident about the job outlook and also income growth and also you know housing market need to stabilize for people to feel that you know um there's no longer negative wealth in fact um so i think there's a lot um you know to be done before consumers feel confident to start to spend more yeah it's not just the consumer [01:21:44] Speaker 2: as well we've got very weak uh credit demand out of china also we do have a chart on the bloomberg terminal that illustrates this uh how long do you see this state of affairs enduring [01:21:56] Speaker 18: yeah i think when you look at the credit demand um you know it's pretty weak right you know the weak tsf total social financing was actually um pretty you know holding up well largely because of the government bond insurance right so um but on the other hand when you look at the private side you know new long creation for both household and also corporate actually uh contracted right so i think that's basically telling you how weak the private sector confidence and demand is at this moment um i think for the you know chinese economy where so in the second half um there are two things you know one can the government actually accelerate the deployment of the uh fiscal support right they they have a lot of fiscal space um but then the question is can they actually accelerate the implementation and the second one is also whether exports can hold up um because this is really the primary growth driver um but tree tension is likely to accelerate not just with the us but with a lot of other uh economy as well so if you if china economy only rely on exports that growth model is unsustainable i wanted to ask about the impact of [01:23:06] Speaker 1: obviously what is you know the expansive ai space in china at the moment do we continue to see that k-shaped recovery or do you anticipate a point where uh that side of inflation as well as the trickle-down impact of the ai space starts to have an impact on the broader economy by extension do you also see that inflation factor in across the rest of the region because i know for example with the uk cpi numbers we're expecting to see that chip chip inflation impact come through [01:23:36] Speaker 18: yeah i think when we look at the ai investment um you know i look at both chinese economy and um you know americans right how much they spend on ai you know the spending from china on ai is actually much less compared to you know what we saw in the us right i think part of that is a lot of the existing infrastructure right china has a lot of power network infrastructure equal digital system uh you know there so they don't need to spend so much on that on the other hand china's uh you know ai model is also much more efficient right compared to the us so i think the absolute amount of ai investment both by private sector and public sector you know coming together is actually not um you know as large as what we saw in the us um and the second one is um you know how do we think that's um you know generating inflation pressure or deflation pressure i think in the near term you could see some inflation pressure right you know uh there's more demand for ai related products um that actually is going to spill over to some consumer goods you know like um uh you know higher demand for chips um and then um you know iphone uh for example right you know cell phone uh price could go up but on the other hand i think if we look into the more median to long term china has a remarkable remarkable capability to produce uh everything you know almost everything cheaper um with you know quality good enough for mass production and adoption so from a longer perspective i think china is still you know going to um you know export um disinflation or you know deflation actually uh to the rest of the world all right uh chanwang chief apac economist at [01:25:19] Speaker 2: vanguard thanks so much for your time today we have more ahead on the asia trade this is bloomberg [01:25:41] Speaker 1: we'll rescue teams in indonesia are clearing landslides and reopening blocked roads as the death toll from a powerful earthquake in the east of the country climbs to 53. you're taking a look at live pictures at the moment showing just the extent of the destruction at the mangarai regency in east anusa tangara province our chief asia correspondent rosalyn matherson joins us now with more so rosalyn what do we know in terms of the extent of the damage and how rescue efforts rescue and recovery [01:26:11] Speaker 19: efforts might be underway at the moment well as you were saying this was an earthquake 7.7 magnitude which struck off the island of flores on saturday we did have aftershocks recorded on sunday there was a tsunami warning that was later lifted but as that footage is showing you've also had damage to property you've had landslides that have cut off roads we know that at least 50 people have lost their lives and local officials are saying that the recovery efforts here are going to take at least two to three weeks it's in a very remote part of indonesia in the far east uh the government federally is going to send in aid they're sending in that by military aircraft they're also sending in military personnel to help but jakarta the capital of indonesia is a thousand miles from where this earthquake hit which gives you a sense of just how big this country is and very disaster prone of course indonesia sits on the ring of fire which is this series of of the borders of tectonic plates and that makes it very prone to things like earthquakes to volcanic eruptions which we do see happen from time to time in indonesia as well also very prone to things like flooding and forest fires so again another challenge for the government here in terms of disaster relief and long-term resilience for indonesia in the face of these challenges but this particular disaster there's weeks of effort here that's going to have to [01:27:39] Speaker 2: come in terms of rebuilding and recovery and rosin terms of long-term resilience and rebuild and recovery as you say indonesia no stranger to severe earthquakes but so much of these these death tolls are caused by collapsed buildings buildings that simply can't withstand the intensity of the [01:27:58] Speaker 19: shaking or what's the path ahead well that's a big question for indonesia we saw in fact quite severe flooding um late last year in sumatra for example that caused landslides a lot of damage and again not just uh to land but also to structures and internet is quite quick to get disaster relief in in these cases often using the military often using the police as well to facilitate moving stuff by aircraft helicopter and plane as well but the question is what do you do to go beyond that in terms of long-term resilience there are questions still about the sumatra floods and whether deforestation for example contributed to that whether land management contributed to that the use of land and land permits that were granted in that area so there are fundamental questions around land management as well as structural management resilience of buildings and those are questions you know for the indonesian government in all of this because again we see quite quick responses in the minute but in an area that's very prone to disasters that you know some questions that will probably come again about what are the [01:29:07] Speaker 2: long-term plans here for resiliency all right bloomberg chief asia correspondent rosalyn matheson there we have more ahead on the asia trade this is bloomberg [01:29:31] Speaker 1: we are looking ahead to another busy week when it comes to chinese tech earnings this time investors will be looking for updates on ai spending of course profitability from alibaba baidu and question after rising investment costs weighed on 10 cent shares last week analysts are expecting alibaba to post its fastest revenue growth in two years that'll be helped along by stronger cloud and ai demand baidu's earnings are expected to fall though to a six-year low as ai competition pressures its advertising business xiaomi is another one we haven't mentioned yet but that is one to watch analysts are expecting earnings growth to slow as investors scrutinize profitability in its ev business as well as the smartphone margins well as earnings keep coming through thick and fast here in asia we'll also be speaking a little bit later this week to the hkx ceo bonnie chan the aia cfo garth jones will be along with us as well as andrew fung who's a henderson land cfo chinese and taiwanese markets will [01:30:26] Speaker 2: be pricing further progress on the tech front when trading begins later anthony stevens is back with us for a preview so anthony alibaba jipu both making waves with their new models can you tell us a bit [01:30:36] Speaker 4: more about china's progress on llms well it's interesting to see alibaba you know top the list in terms of building the framework for open weight models so it's the most downloaded open weight model now pulling ahead of the american competition quite significantly and that kind of headline did raise the adars overnight adias are trading at a pretty healthy premium coming into today's session and that just highlights the progress that china has made on the open weight way of doing ai these models are getting more adopted in the us even as they are obviously very popular in china so that's something to watch on z.ai's front they position their latest model update as making progress on cyber security which is obviously becoming a much bigger part of the decision making calculus going forward how safe are these models to release into the world and it's very interesting to see a chinese player address that of course you must remember that the chinese open weight model was actually used to rein in some of the open ai kind of models that went a little bit haywire and resulted in a cyber attack so this space is very rapidly evolving and it'll be interesting to see how china's llm's progress now in putting this in the macro context right you saw china's new loans slow sharply again so the credit demand for china for anything outside ai is quite constrained and that's why you're seeing this huge demand for anything ai with related to new listings or new debt or even post earnings is such a big focus because that's literally the only thing in china that is posting strong growth and is attracting capital [01:32:10] Speaker 1: taiwan posted gdp numbers uh taiwan dollars rallying finally ahead of export data this week as well so the growth search in taiwan how are we expecting that to play out in stocks [01:32:23] Speaker 4: yeah it's it's the other shoe on the on the foot right away from the llm's it's taiwan is producing literally everything that goes into the ai supply chain and that's starting to show through in fx uh in fx strength now fx has been weak uh on the way up because foreigners were selling taiwan because they had too much tsmc and too much media tech and that foreign selling in equities has abated somewhat so foreigners have been uh wallad buyers last week and that helped to push the taiwan dollar stronger and taiwan dollar is on the 50-day moving average now uh risk reversals and forward points are indicating further strength and taiwan's export numbers come out later in the week which are looking to be a 50 plus growth number which is just incredible right and over the weekend and into the weekend they they guided their gdp higher to a double figure uh gdp growth which is an incredible number for developed economy so in terms of a macro economic picture taiwan is in a very healthy place they're thinking about increasing their minimum wage which is nice to see on the broadening out of the economy and then in the micro underneath tsmc taiwan is giving birth to some real superstars you're seeing multiple names in the twsc below the tsmc waiting which are up 300 400 500 percent uh year to date so people are really busy chasing alpha in taiwan and we're probably going to see more of that today as the japanese players in these spaces are quite strong today while tsmc has pretty muted leads coming into [01:33:50] Speaker 1: today's session let's take a look at what we're watching when it comes to uh the start of trading in greater china today uh the lead through from the us on friday we had the nasdaq golden dragon index rising over half a percent on friday despite an overall fall in broader markets of course we are as we mentioned looking at a lot of the tech and ai names to look for the pressure on ai spending and the return on profitability as well defense stocks could also be in focus uh given that president trump said that he directed the pentagon to substantially reduce those joint military exercises with south korea we're also seeing japan's defense minister visiting a controversial shrine as well so watching for some of those dear political uh implications there renewables are another sector to focus after a report that they're accelerating uh new rules governing a reuse of wind and solar in china that is it for the asia trade our markets coverage continues the charter show is next