‘Odd Lots’ Hosts Discuss Stock Rout, AI Boom Winners — The China Show 6/8/2026

[00:00:00] Speaker 1: 9am in Shanghai, Shenzhen, and here in Hong Kong, you're watching The China Show. I'm Yvonne Meng with Stephen Engel. We're cutting down the open of markets in greater China, our top stories. The tech route extends in Asia with Korea leading losses as chipmakers tumble, bets on a Fed rate hike after a strong U.S. job support also weighing on sentiment today. Amid that sell-off, NVIDIA SK Hynek sign a pact to advance next generation memory as Jensen Huang dines and deals in Seoul. Also ahead, oil rising on fresh tensions in the Middle East with Iran firing several rounds of missiles towards Israel. And you don't want to miss this. Bloomberg Oddlots' hosts Tracy Alloway and Joe Wiesenthal join us this hour to dig into the tech sell-off, AI, and their dream guest for their podcast. Yeah, it was supposed to be a special day, Steve, really, just talking about the big week that we're supposed to have here in Hong Kong. Bloomberg Invest is happening. We have Tracy, we have Joe set to come on set here. And certainly there's going to be a lot to talk about when you have oil prices higher, you have tech selling off and all colliding at once. [00:01:20] Speaker 2: I was hunkered down with all the storms that ran through Hong Kong and over the weekend, really seeing the news flow, obviously, even what's happening in Korea with new regulations there to stem the wands to climb. But again, missiles being fired again towards Israel by Iran. You have this, is this the point of culmination? That's the question about not only the war in Iran, but also, of course, with the AI bubble or not bubble, we'll have to see. Lots to talk about [00:01:45] Speaker 1: today. Yeah, so certainly there's one thing to watch very closely, right, where we are in this unwind of Korea and how that is going to fall out when it comes to China markets, right? Hong Kong might be under more pressure, so to speak, than domestically. We've seen that in the past as well, but we'll see. But the ADRs that we saw on Friday were not pretty, given what we saw with K-Web, the ETFs there. Let's take a look at how markets are looking at here right now with Taiwan opening up. The Kospi basically starting off the week, they're falling out of bed and in the toilet in some ways. We're down some 6% for the Kospi right now. Taiwan is feeling it as well. We're down more than 2,600 points at the get-go here. So the most popular sort of trades today continue to get hit. What was the trigger? I would say was possibly what we heard from that U.S. jobs report, right? The blowout number that we got was much bigger than the median estimates as well. So it seems to put to bed, Steve, the possibility of rate cuts this year. [00:02:38] Speaker 2: Well, I mean, the jobs report really indicates the economic resilience, but at the same time, it throws into question what is Mr. Warsh going to do in his first FOMC meeting. We already heard Donald Trump is saying there's no reason to raise interest rates. They actually should be cut. So he's, again, the similar trope that he has messaged. But again, we'll have to see. [00:02:56] Speaker 1: Especially when he's talking about a resilient U.S. economy, you have oil markets that are still quite elevated. We're talking about Brent and crude up 2% once again on more attacks that are happening between Iran and Israel over the weekend, although we're still sub 100, right? So that certainly is still maybe some relief there. But U.S. futures now are actually popping in the green. So maybe we've seen the worst of it. I don't know. It's too early to tell, I have to say. Look at Asia Pacific. We're down close to three here. And you take a look at how EMFX is, or just overall Asia FX, because dollar yen continues to see that pressure. We have seen that one rebound, though, on the back of what we heard from South Korean officials over the weekend. They're meeting with, of course, the BOK. They're talking about excessive one-sided moves to the yuan. That is a substantial rebound for the currency, at least here today. Renminbi at 678 levels. We'll see if that continues to be that anchor across the EMFX complex. But there you go. Dollar yen, we're back above 160 now. We have to keep in mind also, there is a massive earthquake that struck in Mindanao in the Philippines here, a magnitude of 8.2. So certainly that also continues to be felt. There's tsunami warnings across Japan and Taiwan and the like here this morning. So it's not just the earthquake that we're feeling across markets here today. And Treasuries, this is what we're looking at, right? So I think what we're watching out for is what happened in the short end post-jobs report, right? When you have one of the biggest moves we've seen for that two-year yield in about two weeks or so. Ten years at, what, 455? And it's a five-handle for your U.S. 30-year yield now. You have some of these Wall Street economists abandoning their rate cut calls, right? Goldman was the latest, saying, yeah, can't cut the Fed this year. BNP Paribas thinks three hikes starting from December. So certainly the rate hike calibrations continue here. And again, here's your market board for your pre-market in Hong Kong and China. Futures are doing this here right now. We talked about what we saw in the last trade on Friday, right? This was where we saw that bloodbath begin. Baidu was down some 9% in the U.S. Baaba was down close to four. So the K-web side of things, the ETFs, as well as the Nasdaq gold drag, falling substantially here today. Maybe a telling signal on what's to come. Let's bring in Sean Taylor, CIO and portfolio manager at Matthews Asia. He joins us here on set. Sean, how do I look at this right now? Is this the big unwind and the big correction? [00:05:12] Speaker 3: Well, in our opinion, no. It's a technical correction. And, you know, it could be extended depending on two factors. One is the other news around it that's coming out like, you know, what Stephen was saying in terms of the oil price. And two, how the retail investors in places like Career Act, because a lot of people have not got this trade from the beginning. They have been going in, you know, with leverage in the last few weeks. And that caused a huge rise in markets. So for professional investors, this is an opportunity, whether it's a day or a week away, to be increasing exposure to these areas where we know that earnings are continuing to go up. You don't think this is [00:05:54] Speaker 2: akin to the dot com bubble bursting. Obviously, it's too early to say that because it was a one day bloodbath essentially in the U.S. It's follow through in Asia. But again, I just came back from Taiwan and Computex. The amount of optimism is backed by full order books by many of these different parts suppliers, whether it's Delta, Advantech and others. So they are continuing to be bullish, even though Tyx, I understand the futures are down significantly. Is this a much more fundamental story this time around than it was dot com bubble? We think so. So both in Korea and Taiwan, [00:06:29] Speaker 3: you've got a demand supply gap. You're having the order books being incredibly strong. You know, we've got, you know, we've got earnings that are going towards 27, looking very strong. But markets have run hard. I mean, the difference, I think, with an AI, this AI, you know, bubble or pickup relative to the dot com is that dot com was not based on earnings. It was based on elevated PE. And so, you know, when you look at the AI now, the PEs are still low. So you've got to ask you a question. Is it structural? How many years is this growth going to come through? Or is it cyclical? And if it's structural, well, then some of these areas are worth double or triple because the earnings will come through. If it's structural, if it's cyclical, then we should be selling soon. And I think it's probably going to be somewhere in the [00:07:18] Speaker 1: middle. How do you stay invested then? Right. You talk about these leveraged ETFs. You talk about the options market where people are now shifting more about finding downside protection. How do you stay invested in this market like Korea without giving back a portion of your gains? Well, I think in some [00:07:33] Speaker 3: stocks you will give back some gains because you've had such a big run. Diversification is the only way. So for Korea, we've always, you know, we've been quite positive on Korea for a couple of years, but we've had a balance. We've liked some of the value up stocks that, you know, the financials, we like the industrials that have actually lagged behind the defense stocks, etc. And then the semis, obviously, and within that, you know, you've had rotation in the market. So, you know, everyone's been buying two stocks, but there are a number of, you know, we, we actually spoke before, Stephen, there are a number of companies that are seeing incredible order books, and those haven't been gone up as much. So it's about spreading it, a little bit of space, a little bit of power, you know, some, you know, AI PCs have only just started to be reflected in prices. So it's really looking along the chain and making sure you're diversified. The biggest worry I have as a CIO and a PM is that, you know, emerging markets was, oh, it's a diversification trade. Hey, you know, US isn't doing as well, let's buy Asia. But actually now it's a lever, this, this recent run has been a leverage trade on AI. And that's why we've always had to, particularly in our core strategies, have some balance, keep some financials in China, keep some industrials, have some stocks in other areas, because you know, this is going to happen. We're going to have weeks like this that, that, that, you know, that starts off fairly ugly. Well, when you saw the Philadelphia [00:08:56] Speaker 2: semiconductor index, the stocks down about 10% on Friday, I mean, there's a lot of indication that perhaps this is just profit taking right now after an incredible run up and also kind of adding to the cash war chest ahead of some pretty big IPOs, including one at the end of this week. [00:09:11] Speaker 3: Absolutely. And I think the problem is, is that a lot of people have really leveraged into a very, very narrow area. I mean, actually, EM, when people look at it is even narrower than the NASDAQ now. And, you know, the earnings, if you take the sort of equivalence on the mag seven, the earnings in the US, sorry, the earnings in Asia, you know, they've come through, they've, it's only really been four or five stocks. And so, you know, the rest has been left behind. So you have to have some sort of balance. But you know, if the rest of the world is, you know, if people are worried about rates in the US, if the oil price is going to go up, and we start to see some, that becomes growth sensitive, and we become the forecast start, I mean, I've seen a number of investment banks have changed their forecast till next year for the rate, for a rate cut. Yeah, we start worrying about the growth, then people start looking for those areas that are, we know where the growth is. And we know the growth is in AI and the supply chain. So at some stage, [00:10:04] Speaker 1: people will buy them back. When you look at it from a CIO perspective, what is the right hedge, right? I look at the US 30 year yield at 5%. Does that put gold aside in terms of being a good hedge? The duration certainly is still in question, the bond market now, too. [00:10:20] Speaker 3: So it's really interesting. You know, gold is probably taking a pause over the next few months. But the other commodities, I mean, are slightly out of sync with, well, and the share prices of commodity stocks with what's happening in AI. Because if we really do have, and we do believe it, or analysts believe it, that we have this demand supply gap, these commodities like copper and aluminum, et cetera, are going to go up a lot. And the stocks haven't gone up as much. And then particularly in China, where you've got some, I think some fairly world class commodity companies, they are being priced for, you know, really quite, quite badly. They're down 15% on the year, they've got like 9% yields. At some stage, they're going to be very good protection. The trouble is with the commodity side, you also have the growth angle. So you have the macro, which is like, well, if global growth is going to be a bit slower, then commodities get hit. And then you have the micro angle where the demand and supply is very strong. So the real, so I would hedge a little bit there, but you could be, it might have to be patient. The obvious area in Asia is to hedge with financials, whether it's Japanese financials, you know, Chinese financials. I mean, the Chinese going through a bit of a regulation issue. So I'd be more based on [00:11:33] Speaker 2: the more boring stocks. What about ASEAN and also India? You and I, before this, we talked a little bit about Indonesia. It's not part of the AI play. Obviously, there's some new regulation on stemming or nationalizing, if you will, their key commodity exports. So very briefly. We're very nervous on [00:11:51] Speaker 3: Philippines, very, with the politics and the oil price, very nervous on, on Indonesia. We like Singapore. So in Asian, you know, in Asian portfolios, Singapore is doing very well. And also Vietnam, which, which, you know, not many people are investing. And there's some good opportunity, there's some good opportunities in industrials. India was still nervous because India is still expensive and the earnings are still coming down. And unfortunately for India, there's no real growth driver to change that. And, you know, that's, that, that, that, you know, that means that you're not going to just go and hide in India and the oil prices against India and so software. [00:12:29] Speaker 1: All right, Sean, thank you. Sean Taylor, CIO and portfolio manager at Matthews Asia. As we speak, we're seeing Japan now continue extending that sell off here. We're down some four percent. So tech has been leading that sell off as well with SoftBank down close to nine percent this morning. Coming up next, we got Joe, we got Tracy from the hit Bloomberg podcast. All lots joining this show discussing all things markets, tech, and of course, the Bloomberg Invest Summit happening in Hong Kong later on this week. Futures in China looking like this here right now. We continue to see here some pressure when it comes to Taiwan. KOSPI as well. We talked about trading halts there this morning. Taipei is down four and a half percent. KOSPI is down seven. We got plenty more to come. Stay with us here on this Monday. [00:13:10] Speaker 4: This is Bloomberg. In the longer run, this will prove to be a technical correction, albeit a scary one in a longer term bull market. And I think we laid that logic out pretty clearly in a report we did last week where the underlying fundamentals are still very, very strong. [00:13:46] Speaker 1: Tim Moe there, Goldman Sachs chief APEC equity strategist speaking to Asia trade when it comes to this stock tumble in Korea here. Goldman recently, though, still boosted their outlook when it comes to South Korean stocks. And in particular, we're actually hearing this morning the president, Lee J. Moon is speaking. I think he's marking his second year in office. So certainly he's talking a little bit more about this sort of AI boom and what's really kind of feeling this economy here. And they really talked about the growth benefits must not remain in selected groups, Steve, and to really unveil this big investment project for growth strategy and really talking about plans to use excess tax revenue from chips. So certainly that whole AI dividend debate coming back on. [00:14:28] Speaker 2: It absolutely is when there's been obviously some labor issues at Samsung. And those are some of the issues that were also being sort of raised again at TSMC, whether where's this profitability dividend, if you will. Right. So again, if this these comments from the Lee is also follows what we heard yesterday as far as there's going to be some firm measures to stem speculation in the one. Yeah, it's the perfect time to have [00:14:55] Speaker 1: some some guests from New York that are coming here in Hong Kong. Of course, we have, I mean, the NBA finals. I mean, you know, the Knicks taking game two again and then they all bring down the fire here in the the momentum from New York. We're joined by, of course, the Odd Lots co-hosts, Tracy Allaway and Joe Weisenhall. It's great to have you guys. How are you doing? On the program. We had to kind of in the midst of that first A block. It was so intense. And then we had to bring in the Odd Lots music to kind of calm us all down a little bit. [00:15:23] Speaker 2: But thanks for bringing the storm clouds. Yeah. Well, thank you. It's June in Hong Kong. Come on. [00:15:28] Speaker 5: Do you remember, Tracy? I remember. And it was often like this. So you can't blame us. [00:15:33] Speaker 1: Yeah. I mean, what do you make of these markets here right now? [00:15:37] Speaker 6: I mean, it's been a crazy up year. So you're going to have some crazy down days. I mean, we can come up with stories about various idiosyncratic reasons related to each stock or the Broadcom, you know, earnings last week, etc. And all that's true, I would say. But the bigger truth is that when you have unbelievably surreal moves like we've seen through 2026, where entire markets are moving like penny stocks, is it that weird to get a 80% down day or 4% move? Not really. I mean, that's just what you would expect in a market like this. [00:16:09] Speaker 5: It is strange, though, that the inflationary pressures in the U.S. economy were picking up for like weeks and weeks and weeks. And the market didn't really seem to care, which is unusual if you think that the market's being driven by big tech growth. And these companies are spending so much on CapEx. So any increase in their capital costs like should end up impacting them. But the market just saw through it for ages. Until now. [00:16:33] Speaker 6: Up until the payrolls report. Yeah. Maybe with the payrolls report is one of those things where some of the more doves could say, OK, yeah, inflation is gathering steam, but there's some softness on the labor market side. To the extent that that maybe was like a point in the doves quiver that sort of seems to be gone. I would say it's good news, right? I mean, the worst would be stagflation, just from an economic standpoint, where you have inflation accelerating and you don't have labor market gains. Now you have actually a lot of the labor market data is looking at least OK, if not accelerating. That's what the jobs report Friday seemed to indicate. So that's good. Again, though, it still feels to me like the big story is just the huge up move even more than the down move. And then you get this little decline. Interesting. I was walking through Colun yesterday. Yeah. And I walked in front of a retail brokerage and they were advertising various stocks and ETFs that you could buy. And it was really striking. It was just like all the same names. And there was a big sign about the SpaceX IPO coming up and the ARK space ETF and all this stuff. I was like, well, this mark, this rally, it sort of drove home for me for the first time how this rally is truly global in all the names that everybody's talking about everywhere around the world. How do you think of SpaceX? [00:17:47] Speaker 1: That's like the ex-SpaceX. But SpaceX is this week. I'm just given the I mean, I think Elon Musk really wants one of the biggest retail allocations ever really in this IPO, which is already the biggest [00:17:57] Speaker 2: ever. But we also have the news flow coming out saying Chinese and Hong Kong investors cannot participate in that. Right, right. And those aerospace stocks are also a big priority in Hong Kong. Yes, that's right. We had, you know, the financial secretary and his budget essentially talk about this Hong Kong stock exchange needs to carve out, you know, ways to get more Chinese aerospace companies listed here. But again, this is national security issues. And that's again where this whole bifurcation between China and the United States gets muddied by what is national security and what is not. Right. [00:18:31] Speaker 1: So, yeah. How do you think this flows are going to be this week, just given the whole SpaceX IPO? [00:18:37] Speaker 6: Now, how do you think this is going to play out? I do think this is kind of historic generally. I mean, obviously, it's historic just from a pure numbers standpoint. But I do think it's kind of a big deal. You know, look, we're going to have a handful of IPOs in 2026 that are going to come not necessarily into the index per se, because obviously there's questions about the timing of index inclusion. But if you just think sort of like from the broad market portfolio, they're going to be coming in as some of the biggest names ever, which we've never really had before. So you think even someone who never allocated directly to Nvidia, they would have caught the run from like when it was one of the smallest stocks in the S&P 500 to the biggest. Right. So we're going to be having these names come into the public that are near the biggest without the public investors having ever gotten any of the run up. That's different or at least interesting. And I don't think it'll like break markets per se, but like, it's interesting. I think it's worth bearing. And I think it's worth [00:19:32] Speaker 5: thinking through some of the implications. Well, S&P 500 ended up backing down from bending its rules. So that was an interesting decision and like highlights some of the differences between the big benchmark indices providers. But on the other hand, like so much of the market now is momentum driven. It just feels like once it gets going, it just like attracts more and more capital, like valuations don't seem to matter. It's just a sort of snowball effect. So on the other hand, you know, SpaceX coming into the market suddenly throws it open to a bunch more capital. Like you [00:20:04] Speaker 2: could see it build on momentum. And we'll see it in this part of the world, too, with the big chip makers coming, Kunbunshin, CXMT, names that maybe in New York haven't heard of in great detail. But again, [00:20:16] Speaker 6: there's some big ones coming down. We don't know anything about the companies in New York. We only know about the stocks. This is the key thing. What do these companies do? We don't know. We know there's something memory chip related. And so people buy them. And so we're going to have [00:20:27] Speaker 1: to learn here what they actually want. Yeah, we always joke about how we all need engineering degrees now, just to learn about the whole supply chain. It's not just the picks and shovels, it's the picks and shovels of the picks and shovels that we've been tracking here. [00:20:37] Speaker 6: That's really good. That's really good. I'm going to, I'm going to, I'm going to, I'm going to, [00:20:40] Speaker 2: I took it from an animal. Disprosium, terbium, and all the different, it's not just NAFTA, [00:20:46] Speaker 1: all these other things that we've been tracking as well. We're at plenty more, of course, with Tracy and Joe here in the next few minutes or so. We're going to talk a little bit more about why they're here. Obviously, it is Bloomberg Invest Hong Kong. They're going to be filming one of their episodes right on stage here. And they'll be speaking with the Baidu CFO as part of that upcoming podcast as well. So plenty of opportunities to talk about AI and the like. Steve and I, of course, will be there on the ground. David will be back for that as well this week. Pre-market for Hong Kong, looking not too good. We're down one and a half percent here. Futures are deep in the red here right now in China. 678 though, pretty steady still at least when it comes to the the renminbi. We've got plenty more ahead. This is Bloomberg. So I want to bring you the latest when it comes to the South Korean president, Lee Jae-moon is speaking there at a news conference marking his first year in office and really talking a little bit more about what we're seeing in the Korea side of things, right? Those ETFs in Hong Kong, there you go, falling some double digits once again. And this is really kind of the ETF market that has really kind of magnified a lot of the moves that we're seeing, the cost, just given what these leveraged retail investors are really buying up here right now and the need into chasing protection here. Wow, that things are falling. He's been talking about the inflation situation right now, right? So he's saying it's unlikely to escalate into an inflation crisis, he says, but he is, you know, government is working to minimize those inflationary pressures. And they're watching when it comes to, of course, this cracking down stock manipulation. Also, they talked about ways to boost the wand too. Yeah, that's right. I mean, look, [00:22:26] Speaker 2: Jensen Huang, the Gensanity has gone from Taiwan last week, where I was there, where all these stocks were up double digits. This week, it's going the opposite direction. I hate to make a parallel, but he did throw out the ball at the baseball game, the Doosan Bears, ushering in a bear market, perhaps, for Gensanity. Jensen Huang, of course, I'm talking about NVIDIA. All right. We'll have [00:22:48] Speaker 1: plenty more at home and talk a little more about, of course, Jensen Huang in Korea there, really the rock star status he brought there. We've got The Open coming up next. This is Bloomberg. [00:23:19] Speaker 2: And welcome back. You are watching The China Show. We're counting down to the open of markets. We are getting headlines about some retaliatory strikes from Israel's IDF saying they struck military targets in Iran. Explosions are being heard in the Iranian cities of Tabriz and Isfahan. This according to a number of different media reports, but also the IDF, the Israeli Defense Forces, has put out an alert, a text alert a short while ago, and I'm quoting the Israeli Air Force struck military targets belonging to the Iranian terror regimes in western and central Iran. I'm quoting, of course, not adding any commentary there. But of course, this follows Iran firing several rounds of missiles overnight towards Israel, which says it intercepted all the missiles and there were no casualties. But again, a threat again, Yvonne, to the fragile truce that's been going on for about a [00:24:07] Speaker 1: month now. Yep. So as we heard of these new lines that are crossing your terminal here right now, you continue to see that spike up in oil prices. So Brent is now up some 4% here. So we're really kind of inching back closer to that $100 barrel mark when it comes to these latest headlines, when it comes to strikes between Israel as well and Iran over the weekend. So you pair that with what's going on with this tech sell off across the world and you see what's going on in onshore markets here right now. Your market open is not looking pretty. We're down 2% for the CSI 300 and the Shanghai Composite. Shenzhen, of course, which hosts a lot of those big tech names, is falling close to 3% here today. And there you go. Capricon Tech, right? Take a look at some of these semiconductors in China are also falling against this backdrop of what the Samsung SK Hynix's are doing and TSMC's here today. So Capricon Tech is down close to 5%. It is mostly a CRF, right? Even the consumption space, C-A-T-L-A shares, of course, that is the battery maker is also seeing the pressure. So what has won out even on the onshore markets is now losing out here today. And there you go. We're back to 97 levels for Brent here. Hong Kong is looking like this here today. Obviously, there has been some pressure on HSTech of late. There was a little bit of optimism given what we heard when it came to, of course, Tencent and really how they're incorporating AI into WeChat. Obviously, all these big chip maker IPOs that are coming through. But today, it's a different story, right? It's just mostly like catching a falling knife at this point. Baidu, we were down 9% on Friday on the ADRs. We're down another 6% here today. Xiaomi, BABA, Tencent are all falling substantially. HSBC, so we continue to watch what goes on with the financials given what we talked about last week, right, about these cross-border curbs on mainland investors and where they can invest and the like. And that continues, despite most of the sell sides saying this sell-off has been overblown, Steve. [00:25:56] Speaker 2: Yeah, and it's going to be a common theme for Bloomberg Invest. There are events this week, obviously, how far and how deep are these regulatory crackdowns going to be and go on the tracking of the source of wealth for many of these banks' wealth management clients, obviously, that they've been clamoring for. And again, is this going to cut off the tap? Obviously, the Chinese officials do not want to see further capital outflows at a time when their economy is struggling to look at some of the things that they're going to see on solid footing. [00:26:26] Speaker 1: Yep. So oil, we have that, of course, and we have oil continue to fall with what we're seeing here. But it's interesting, with oil markets higher, some of these oil majors are actually heading lower here this morning. But we'll see how this all plays up for the rest of the session. Chips are doing this here right now, SMIC, Huahong, some of these local chip makers. Yeah, we're seeing some pretty painful moves here right now. Huahong sent me down some five more threads, also down a similar measure. And we're watching, of course, these sort of leveraged single stock ETFs linked to Korea, of course, in Hong Kong. And there you go. You are seeing substantial losses there, double-digit losses there for both of those ETFs here right now. Philippine markets are also opening up here this morning. Of course, we continue to talk about the roiling of EMFX. Sean Taylor was saying how he was concerned about ASEAN, whether it was Indonesia, even when it comes to the Philippines, even India markets that just continue to struggle. And let's take a look at how the Philippines is doing here, because that dollar strength certainly has led to a lot of concerns about what happens with the peso. There you go. We're weakening substantially there by about a third of one percent. We're hovering around that 62 handle once again for a dollar peso, and the P comp is lower by about one [00:27:31] Speaker 2: percent. Yeah, I mean, it's a big week. It's a huge week. I mean, obviously, with South Korea talking about, you know, making some moves against speculators in the Korean won, which is down some seven percent against the dollar. So far this year, we've already seen Philippines and Indonesia intervene in recent weeks. So yeah, it's definitely a trend we need to watch as the Japanese yen as well weakening past 160 again. Yeah. And then there's your week ahead, right? [00:27:57] Speaker 1: So Wednesday would be quite interesting with those U.S. CPI numbers. And you know, now that bond traders seem to be really kind of pricing out the possibility of any rate cuts this year. So I think they're pricing in a rate hike by December now after that blowout jobs report on Friday. Of course, we have Bloomberg Invest. We have the SpaceX IPO. We have the NBA Finals. We got the World Cup. I mean, you got to pick your bet of really what you want to talk about, right? Which one [00:28:21] Speaker 2: should we prioritize? Which one? Maybe the second one. NBA Finals? No. Maybe the second one. I think we're all going to be involved with that one quite heavily. Yes, we're going to be watching inflation in the U.S. Yes, Friday. We're going to be watching that space IPO, SpaceX IPO, as well as pricing later this week. And the World Cup. Is that in America? Do we play soccer? Yeah, they do. Do we play football? [00:28:41] Speaker 1: Yeah, we play soccer. It's called soccer there. But yes, Joe and Tracy, you know, obviously, you guys are here for the event. And we were really excited to talk about, you know, the whole story about Hong Kong was that it's back. Yeah. We've come back from COVID. I mean, [00:28:56] Speaker 5: Tracy, you were here. Yeah, it feels better than when I left, for sure. I left in early 2022 and the COVID restrictions were still in full force. And then I was talking with someone last night and they said it got really bad last year. Is that right? That was like the bottom of it, [00:29:11] Speaker 2: you think? And now we're coming back. Yeah. I mean, Hong Kong always bounces back. Okay. I'm not, you know, plugging a similar line from the government, but they do. But there's a bit of a reinvest, reimagination of Hong Kong right now, especially what's helped is the the IPOs in Hong Kong. There's been an absolute lengthy pipeline of new listings. And again, it plays into that whole AI story. Again, how long is that pipeline? Pretty long. How long are these gains going to be happening? First day gains. [00:29:40] Speaker 1: And I think Hong Kong has really kind of changed its identity in some ways, right? You know, I think maybe a decade ago was more about, you know, how to get the gateway into China. How do you get your money into China? It's almost like the other way, right? We are helping these Chinese companies in some ways, fundraise. Yeah. And really tap into international capital. And they've really kind of leveraged that with the enormous amount of pipeline that we see in Hong Kong as well, with a lot of these tech companies planning to list here as well. But we have seen of late some, some going on short. And the big [00:30:11] Speaker 2: theme, and I go to China about every two weeks, I'm spending all my time there. The go abroad theme [00:30:16] Speaker 6: is huge. It's a big momentum. This is the thing. So look, obviously, I don't have the experience that Tracy has of living here. But everyone I've talked to says the really big difference is exactly what you said, or a number of people I've talked to is how frequently people cross the border back and forth, like for shopping and stuff like that. Like that was like, you know, like several years ago, like the idea of just going back and forth, I guess, was just not as common. But like, the daily life integration from based on the people I talked to feels like a real change since at least the [00:30:46] Speaker 2: last time I was here. Well, Hong Kong is not the shopping Mecca that it used to be. People go across [00:30:51] Speaker 6: the border. Everyone just like so much cheaper. So just go across the border and buy stuff. I mean, [00:30:57] Speaker 1: you talk about cross the border. I think the latest crackdown when it comes to cross border investments. Obviously, we saw it first when we broke that story a few weeks ago when it came to the brokerages. Yeah. And now there's concerns that this could really hit the banks and the bankers as well. And given the fact that Hong Kong just recently narrowly, you know, topped out from Switzerland, right, as being that offshore wealth hub, according to BCG. So a lot of questions to ask, of course, our guests at Bloomberg Investancy. Where's the money coming from? That's what China [00:31:25] Speaker 2: wants to know. Yeah. And the banks, you know, have they done their due diligence enough? Have they put [00:31:31] Speaker 5: in their checks and balances? Isn't there a knock on effect on the insurers as well? Because they sell, I remember they sell so many, like all the ads walking around used to be for these like insurance [00:31:41] Speaker 1: products. It's the regulations you read, according to some of our bi analysts, Stephen Lam, is that it's not really it's more about securities. But there is this sort of concern that a lot of mainland investors or people come to Hong Kong to buy these insurance products. So now that there is concern about [00:31:57] Speaker 2: possible curves. They can cash them out and they can get into the stock market. They're seeing it. They're seeing it. These new listings are not necessarily on the southbound connect program, where investors in China can invest in them. So they they have to wait a while until they're added to the indices here and they can add to the connect program. But again, they seeing the wealth being created here on those big listings. But they how do they get their money into China? And that's why we had that crackdown on a number of different brokerages down in southern China who were illicitly who basically were working without license to do so. Because, you know, the mainland investors can only take out 50,000 US dollars a year per person. So the authorities are saying there might have been some forgery in documents, some malfeasance there. So they're cracking down on that now. [00:32:42] Speaker 1: Julie Ren had a really good column, our Bloomberg Opinion columnist this weekend, about cross-border wealth. I think BCG cited, when it comes to Hong Kong, rose 10 percent to nearly three trillion dollars now. And a big portion of that, nearly 60 percent, came from, of course, the mainland flows. So this is going to be a very big test case for Hong Kong, what these cross-border curbs mean for themselves as a financial hub in some ways. Because I think the standard SOP has been for these private bankers is that they go to China, they network, they meet, and they build these relationships with clients there. But the clients have to come to Hong Kong to set up that account. [00:33:18] Speaker 6: Uh-huh. That's a relationship business, as many of our banker guests on the podcast like to say. [00:33:25] Speaker 2: Yeah, it raises a lot of questions about the ability to onboard new clients. If they have to basically have a paper trail of where that wealth came from, It makes sense. Sometimes maybe a little bit difficult for some of these ultra high wealth net individuals. Yeah. [00:33:40] Speaker 1: You guys are going to be speaking with the Baidu CFO. Yeah. I'm wondering how you guys are preparing for that one. I guess we'll ask him about the share price. [00:33:45] Speaker 6: Let's go about the share price. [00:33:47] Speaker 5: That'll be the first question. [00:33:48] Speaker 6: I mean, the thing that strikes me is very interesting. And then this goes obviously back to the AI conversation is, you know, in the US, obviously, we have a number of players who are pouring unbelievable amounts of AI and money in some capacity. [00:34:02] Speaker 1: Yeah. [00:34:02] Speaker 6: Right. But it's so funny when I read about the Chinese companies, because the range of companies that have some model out, right, is so much vaster than what we have in the United States. Right. So we have, it's like basically anthropic and open AI. And then the one real public company that has a very advanced model is Google. Yeah. And then you read about like every random Chinese company. It's like, oh, yeah, we have an AI model out too. And so like, and of course, so much more of it is open source. So like, A, trying to understand, like, why do we need like so many different models? And then B, what exactly is the investment rationale? Or how do you think about, you know, what is the question for a CFO? How do you think about allocating capital to those investments when there's already a hundred different open source Chinese models and so forth? Like those are, I'm really curious about sort of the investment rationale, given the plethora of options already available. [00:34:57] Speaker 2: Yvonne, is this where we open up the conversation to the toilets and the lab-grown diamonds? [00:35:01] Speaker 1: I think we can, right? Because you talk about even toilet makers like Toto that are really pivoting the business into ceramics to try to kind of take part in this whole AI supply chain. [00:35:12] Speaker 5: Well, Toto at least has like a legitimate thing that is useful for chip making. In the U.S. we had Allbirds, remember? Oh, yes. Allbirds announced that it was going to become an AI company. [00:35:24] Speaker 6: That is really where it's like, okay, this is like crypto. But, you know, like whenever we're going to buy some crypto miners and it's like suddenly, okay, we're going to buy some GPUs. But I think the Toto thing is very interesting to me because it's like, you could imagine, and I'm not predicting this so that I don't want to get, I don't want to, I don't want Bloomberg to get a call from the IR department or something like that. But you could imagine, right? Let's say you have a company and they have one specific raw material or component that has a lot of high value in AI. Maybe the raw component is also used in toilets. Yeah. And at some point they realize, you know what, why are we still making toilets when the margins on this business are so much higher? And that is a real, that part is a real phenomenon. Not necessarily with the toilets per se, but think about like, just going back to the core, like an Nvidia or something. Why still invest in the gaming business when a GPU is obviously so much more valuable in a data center or something like that. And I do think that we're seeing this quite a bit with electrical turbines from a company like Caterpillar cooling systems and so forth. These companies that had multiple lines, and then you have this one buyer on the margins are going to be so high and demand and elastic because of the existential threat of we just have to build, build, build. Why even allocate to these legacy lines at all? I think it's going to be a really interesting question. [00:36:44] Speaker 5: But this is the story, right? Like AI basically eating the economy and financial markets with it. Like we had a great live show in New York a couple of weeks ago. We had Torsten Slock from Apollo. And he went through these charts basically showing how much of the market, both in debt and equity, is now AI. Something like 50% of new investment grade bonds sold so far this year are tied to AI. And of course, as we all know, like 40% of the S&P 500 is now big tech. Yeah. And so he was making the point that like in the past, when we talked about diversification, we used to talk about 60, 40 stocks, right? Or you try to get an array of equity exposure. And now the big factor you have to watch out for is AI. And it's in everything. And it's really hard to avoid. [00:37:30] Speaker 6: I was just going to say, imagine the person who thinks it's like, you know what? I want to have my AI allocation and my non-AI allocation. It's like, oh, I got this toilet company and my non-allocation. And they're like, no, even that's an AI company now. I wish we were a podcast. [00:37:42] Speaker 2: We wouldn't need to go to break. [00:37:43] Speaker 1: Yeah, we almost have to. We have to go to break. But we've got to go to break. I mean, we're going to keep continuing to check markets here in the face of all this sell-off that we're seeing. Yeah. And this week, you know, Joe and Tracy, perfect timing. They're going to be taking over the Hong Kong newsletter as well. That's our insider's guide to the money and people shaking up the finance hub. That's out every Thursday. You can sign by scanning, of course, a QR code on your screen or through the website, blooper.com. I forgot we've got to write that. Yeah, you've got to get working and thinking about what to talk about. There's news on Iran. [00:38:10] Speaker 2: Yeah, let me just recap some of the headlines. We're seeing Israeli defense forces retaliating for those Iranian missile attack overnight. Blast heard now in the Iranian city of Karaj, west of Tehran. IDF confirming they have struck military targets in Iran. They struck targets belonging to Iran. Explosions heard in other cities, including Tabriz and Isfahan. We will be keeping you up to date throughout the morning. [00:38:36] Speaker 1: Yep. And we're continuing to track this tsunami warnings. And, of course, this earthquake in the Philippines. So this is the southern island of Mindanao, which did trigger tsunami warnings and damaging buildings. We have heard from the Philippines government saying no deaths or injuries reported from this earthquake so far. So we'll bring you the latest once we know more. Keep it here on Bloomberg. Ah, just a typical night in Korea, right? There you go. This is over the weekend. Jun Sun-won, the NVIDIA CEO, enjoying that Korea barbecue and drinks with execs from SK Group. Including SK Heineck's CEO, Kwak No Jung. What the interesting part about this, Steve, when I looked at the pictures. I mean, this happens all the time in Taiwan, I feel, when Jen Sanity gets to Taipei, goes to the night markets and stuff. Tech titans in Korea, they don't do this. [00:39:46] Speaker 2: They don't do that. [00:39:47] Speaker 1: They don't drink beer and have Korean barbecue. [00:39:50] Speaker 2: Unless Jensen Hong is there, right? So maybe this will be the beginning of a trend as they're drinking SOMAC together, that soju and beer. You remember that fondly. [00:39:58] Speaker 1: Brings me back to my college days. [00:39:59] Speaker 2: Soju bombs there. But, you know, again, I was in Computex last week, and the same thing happened. The Jen Sanity happened, and they alerted all the media, show up at this restaurant at a certain time. You can barely get to the front of the line to see it. But, obviously, our cameraman was pretty good. [00:40:14] Speaker 1: I go to Taiwan a lot, and they have a whole tour. Yeah. The Jen Sanhwong tour of where to go eat. He had tofu desserts here. He had this here. So it's a whole foodie thing, which, Joe, I think you might want to like, actually. [00:40:26] Speaker 6: You remember, like, in the early 2010s, Mark Zuckerberg did his American tour. He did, like, oh, I need a barbecue and stuff like that. And so it's very interesting to see the, like, the new version of this is not Zuckerberg with Jensen, but doing all the same, like, everyday stuff in Asia. Very, like, history rhymes type of thing. Especially when he started jujitsu. [00:40:44] Speaker 5: Do we know if he actually has good taste in food? Like, has anyone been to the restaurants and, like... [00:40:49] Speaker 2: That's a subjective question. [00:40:51] Speaker 5: Well, I'm curious, right? Which is it, though? I think they plan it for him. The best of the best of each city. All right. Then maybe a Jensen tour. Yeah. That makes sense. [00:40:59] Speaker 1: Yeah. It's a good one. [00:41:00] Speaker 2: Wasn't it the last time it was Korean fried chicken that they were eating, right? So that created a big boom. [00:41:05] Speaker 1: The fried chicken stocks went up as soon as they started having beer there. It was a great... It was during APEC when we were there. [00:41:10] Speaker 6: That's right. Taiwanese fried chicken. There's a great spot here. I forget which one, but it's on... Oh, I know. ...this week. I know it. I forget the name of the one, but... Something daddy. Yeah, it's one of the ones I have to hit during the week that I'm here. It's the typical street food. Yeah, yeah. [00:41:24] Speaker 1: Yeah, fried chicken places. But Korean market, it's interesting, right? You square all those pictures, and then there's this big, you know, multi-year partnership with, you know, SK Hynix and NVIDIA, SK Telecom and NVIDIA, but coming in against a backdrop of these stocks falling quite a bit. Yeah. This unwind that we're seeing. I mean, obviously it was parabolic on the way up, but seeing that, you know, what we're seeing here right now, and I know, Tracy, you've been talking about the ETF market and what's going on there as well. [00:41:50] Speaker 5: So the longer prices go up, the more you get stuff sort of built on top of those prices. Dean Kernett had a great line, which is like price begets behavior, right? Like investors start coming in, and so you get these single stock ETFs offering like two times leverage on SK Hynix or Samsung or something like that. They've gotten really, really popular and really, really big. So the SK Hynix one is like $11 billion in size now. And what that means is they can't do all of their hedging just with swaps, with counterparties. They have to go into the options market and buy options. We think there is some speculation over this. And so when the stock is going up, they have to buy to hedge their exposure. And so you get this added upwards lift. But when the stock starts going down, they have to sell into that weakness. And then you get even more volatility in the stock and, you know, even sharper drops. And I think that's kind of what we're seeing right now. So this is the point. Like the longer you see this kind of action in the market, the more superstructure gets imposed on it that ends up having an impact on the underlying share price itself. [00:43:00] Speaker 2: Yeah, you know, the one big theme we were talking about in Taiwan was about how SK Hynix and Micron joining the club like Samsung of the trillion dollar valuation club. And then Jensen Huang talking up as well was at Marvell. Yeah, it will be the next one. So you kind of felt the frothiness in the market. And one thing Renee Haas at Arm Holdings told me in an interview last week is that there needs to be better coordination and discussion among the chip, the memory chip makers. Because there's only really three, Micron, SK Hynix and Samsung that are supplying the high bandwidth memory, right? Yeah. I'm not saying he's not saying either a cartel. But again, there needs to be better coordination. [00:43:38] Speaker 6: I think one of the things we learned too during the post-COVID period is that order books can sometimes be misleading because companies overorder and they're like, oh, there's a shortage right now. And so they're going to double their order, triple their order going out many years. And I'm not saying like it's all going to like evaporate. I have no idea. I'm kind of skeptical, in fact. But I do think like we don't really know what any sort of backlogs mean with any of these companies because when there's a shortage, you're compelled to overorder. And someone's like, oh, my God, I've got three years of backlog. You see it in the data center companies, et cetera. But this is what we call the bullwhip effect a few years ago when we were trying to understand supply chains post-COVID. [00:44:17] Speaker 2: And every parts supplier that I talk to, whether it's Advantech or Delta Electronics, doing all the, not the small, they're actually big, the cooling hardware or whatever, or edge AI, they all say their order books are full for next year. For years, right? For years. [00:44:32] Speaker 6: And it's price incentive because those pieces are going to be a very small part of the data center. So if they jack them up 3x, what is it? How much difference does it really make? [00:44:42] Speaker 5: Well, I always thought they were price insensitive, but I saw someone talking about potential demand destruction in memory now because like prices are getting so insane. And like tech companies are creative, right? Like maybe they will find a way around it. [00:44:54] Speaker 6: That's true. Yeah. [00:44:55] Speaker 1: At least for now. I mean, when you take a look at what markets are doing, I mean, you have the AI story. And I think even inflation is not really changing, you know, hyperscalers and how they're spending. [00:45:04] Speaker 6: We have to watch. We have to look at the. We have to stay up late to watch the inflation. The number is here. Yeah. [00:45:09] Speaker 1: You got to wake up at like. [00:45:11] Speaker 6: You can find it on the. [00:45:14] Speaker 1: It's OK. You don't have to stay up. Maybe for the Fed. But no. But yeah, no. [00:45:18] Speaker 2: Oh, that's tough. [00:45:19] Speaker 1: Yeah. We usually. I mean, it happens in the middle of the night. [00:45:21] Speaker 2: But, you know, we don't sleep. [00:45:24] Speaker 6: We start the day at the end of the day. We start the day at the end of the day. [00:45:25] Speaker 1: I remember it well. [00:45:26] Speaker 6: And then you get angry calls, right, from editors in New York asking, where are you on this story? Yeah. [00:45:33] Speaker 1: It's two in the morning. And President Trump used to tweet usually in the middle of the night. So we were the first to kind of feel the market reaction. That's your time zone. Oh, we have a ghost in the machine. Yeah. Someone has been missing from all this, of course, is David, who's actually on a train, on a plane back from Europe. He feels a bit left out. He wanted to ask you guys a question. [00:45:54] Speaker 2: Talk about never sleeping, right? [00:45:55] Speaker 1: Because you guys are obviously, you know, talking to Baidu, you know, when it comes to guests on the show, I mean, you've had so many over the last decade. Who's the one that you haven't gotten yet? Whether dead or alive, he says, who's the unicorn guest? [00:46:08] Speaker 5: I mean, there's a whole bunch. But since we're in Asia and since we should be aiming big, I'm going to say Jensen. Yeah. But also, I can go even bigger than that. Xi Jinping. Xi Jinping. No, sorry. [00:46:18] Speaker 6: That's our wish list. That's just my bucket list. He said dead. So I would add Herman Melville to that because having read Moby Dick last year, he would have been the best Odd Lots guest ever because he goes into such tremendous enthusiasm and detail. [00:46:33] Speaker 5: Joe managed to turn every episode last year into a discourse on the whale industry of the 19th century. Wow. [00:46:40] Speaker 6: So Xi Jinping and Herman Melville, if you're listening, those are the two answers to David. [00:46:47] Speaker 1: We'll bring all four of us back. Fat Daddy, by the way, was going to tell you about that chicken shop. The chicken shop. Yeah. All right. Thank you. Tracy, Joe, it's a pleasure to have you guys here. Of course, the Odd Lots co-hosts, they're going to be here all week. Make sure to check them out here. Of course, there's going to be trivia night for them here on Thursday. They'll be quizzing the audience on everything from freight to financial markets with prizes awarded to those winning teams. They're also going to be, of course, at the Bloomberg Invest event. [00:47:14] Speaker 2: Let's do the mashup next year in a restaurant. [00:47:17] Speaker 1: Yeah, over fried chicken. Why not? [00:47:19] Speaker 6: Let's do the tour. [00:47:20] Speaker 1: Yeah. Another check of the markets here. Continue to follow the sell-off here across Asia. Yeah. Plenty of red on the screen. This is The China Show. Welcome back to The China Show. This Monday morning is looking a bit dicey here. We take a look at what the tech sell-off is doing and really bringing down the likes of Shenzhen here. The China's is down close to 2%. But you take a look at the rest of the region, and it looks even uglier, right? And given what we've seen in the KOSPI in just the last couple hours or so, it continues to be an unwind. And, of course, the semiconductor names here this morning. That big trigger we talked about was, of course, that job support out of the U.S., which was a blowout number. And the resilience that we're still seeing in the labor market continue to reinforce that maybe the Fed may not be able to cut rates this year. [00:48:24] Speaker 2: They may hike? [00:48:25] Speaker 1: They may have to hike. A rate hike has been priced for the end of the year, December now. And, you know, Wall Street is basically now really changing things and really abandoning that rate cut calls. As we count down, of course, we're in a blackout period for the Fed. But, yes, Kevin Warsh, first meeting, June 17th. [00:48:42] Speaker 2: I think this was pretty much predicted, though, you know, following the bloodbath on Wall Street overnight, NASDAQ 100 down 5 percent, S&B down 2.6. The Sox Philadelphia Semiconductor Index was down 10 percent. So this is that reaction to that sell-off. How long and how deep does this go? So far, most of our guests this morning, well, our main one at the beginning of the last hour, seems still pretty bullish in the structural soundness of the AI infrastructure. [00:49:06] Speaker 1: Technical correction, according to Sean Taylor from Matthews Asia, right? And he says, look, there's still reasons to be, you know, find Korea attractive, whether it's other parts of the non-AI side of things. But certainly there's one thing to watch, right? We were actually hearing from the President Lee in a press briefing here this morning and talking about the stock market itself. He says Korea stock market's still undervalued, according to him. Keep in mind, he had a target of 5,000 just when he started and took office. So we're now getting close to that, what, close to 8,000 level when it comes to that benchmark here as well. But yes. [00:49:41] Speaker 2: And Xi has left for North Korea. [00:49:42] Speaker 1: Ah, so that's been confirmed, right? So certainly it has been obviously a whirlwind when it comes to the amount of people that have visited the President in China. Now he heads to Pyongyang. So certainly a lot of questions. Is this a friendship building sort of trip or maybe more about leverage? [00:49:57] Speaker 2: His first visit to Pyongyang since 2019 and his first, can you believe this, overseas trip in 2026. Wow. So everyone was coming to Beijing. Now he is making his first trip. Very close by, though. [00:50:09] Speaker 1: Yeah, we're checking when it comes to EMFX, in particular with Indonesia markets coming online. Oof, we're starting to see the JCI falling some 4% at the get-go in Jakarta. So we're continuing to watch what goes on when it comes to currency side of things. 160 for dollar yen. That doesn't bode well for the rest of the FX complex in Asia. At least the Korean yuan is rebounding, right? After we heard from South Korean officials about how they're going to do something to really try to stem the outflows when it comes to the yuan as well. But look at the ringgit. Look at what it comes to, if we can bring up the rupiah here this morning, we are seeing the rupiah once again fall to a record low. [00:50:46] Speaker 2: Yeah. So the targeted measures, they were sort of telegraphed yesterday by the Koreans. A series of targeted measures to work off that pressure on the yuan after it slid to its weakest level since 2009, obviously. So we'll have to see what those targeted measures are going to be. We've already seen the Indonesia and Philippines intervene in their currency markets. [00:51:08] Speaker 1: Yep. So then there you go. What does it leave for commodities? Obviously, we've been talking about, there you go, 18,116 for dollar rupiah here this morning. The stocks are down close to three. The commodity side of things. So gold, obviously, when you have the U.S. 30-year yield at around 5% levels, you know, that really kind of limits or at least reduces the exposure or at least the interest into the gold side of things. We're down still about a tenth of 1% for gold. Brent markets are still elevated. We're at 96 for Brent. WTI's at 93. Given the latest news of, you know, fresh strikes between Israel and Iran this morning as well. But keep in mind, we're still below that $100 barrel level. Bitcoin, though, gosh, we briefly broke below 16,000, I think, over the weekend. So certainly we're seeing a bit of a bounce back. But, yes, it's been a whirlwind, a roller coaster there. [00:51:59] Speaker 2: Let's bring in our markets reporter, Anthony Stephens. Obviously, we're watching the reaction on the markets today. How do you read what you see? What are the numbers telling you about the depth and breadth of this? [00:52:11] Speaker 7: The sell-off seems to be in reverse order of positioning, right? What people are long the most is getting hit the most, whether that's in Korea, whether that's in Taiwan, whether that's in Japan. And you're seeing defensive names, which nobody's owned pretty much the whole of 2026, bouncing very hard. This leaves China in a very interesting place because China's banks and consumer sector have been under-owned, and they are showing resilience while tech is getting sold off. But the key question here is how much pain can retail take in Taiwan and Korea? These are two markets where retail participation has been very high and very successful. So they have some cushion to reload if they feel like it. But can they take this level of pain on back-to-back days? Now, you can also see policymakers focus on retail by back-to-back commentary from Trump talking about good jobs should mean good markets. And now you have the comments from the Koreans as well. So this is a very unusual situation where participation in the AI team, governments have pushed retail to participate in stock markets, right? And now they want to help them navigate this turbulence. Now, how much of that retail believes in the coming days will be key to this rally sustaining? [00:53:16] Speaker 1: What happens with SpaceX list this week? What do you think flows are going to go? [00:53:21] Speaker 7: So it's a very interesting IPO, first of all, right? Because 30% retail allocation is pretty big for a huge IPO. And it's already being over-allocated, apparently. And then retail are also stretching their limits by perhaps placing multiple orders. So you're hearing a bit of back and forth between Morgan Stanley and some of the wealth managers. So clearly there's a lot of retail demand for this. Now, when you see the pain in the listed equities and the prospect of gains here, retail is going to shift accordingly, right? And this is going to be one of the most important IPOs of the year for that reason. Elon Musk has a very good track record in helping his retail friends make money when they do back him. So there is definitely that narrative. [00:54:00] Speaker 1: Where do we leave China, where does it leave China right now when, yeah, entre markets, I mean, you talked about there's a bit more cushion for this market, right? [00:54:08] Speaker 7: China's safe haven status seems to be boasted by today's price action as well, right? Like, you know, overnight, the China A50 futures were not even down a percent. Now they're down around a percent. The Chinex has bounced off the lows. And kind of more interesting for me is some of these new HSTech entries are up 3% to 4%. There is still some buying demand for AI plays in China, you know, if the flow dynamic is supportive, unlike in the rest of the region. One thing I just want to touch on, genuinely emerging markets in Asia, they are struggling. The kind of countries that do not have tech, they are in a very bad place because they're selling off despite no one owning them. That is a very dangerous and boring sign. Indonesia is at the lows of the year and keeps going lower. India, Malaysia, these kind of names where they need the Iran conflict to be out of the way to have any chance in bouncing. [00:54:56] Speaker 1: Anthony, thank you. Anthony Stevens there, our Bloomberg Markets reporter. Joining us now is Sylvia Shang, Asia lead portfolio manager for multi-asset solutions at J.P. Morgan Asset Management. I saw that you're still overweight, Korea. What are clients asking you now about this market? [00:55:12] Speaker 8: Yes, so we are overweight, Korea is part of our EM overweight. Clearly, there were a lot of questions about because just how fast the market has been going up. So worries about whether we do for a technical pullback. I guess we are seeing that right now, just the extent of the market concentration. Also, we have seen a lot of retail participation in the market as well. But I think fundamentally, when we look at the outlook for some of the large stocks in there, we're still seeing kind of demand for compute, much up-pacing supply of compute. And we still feel there is a lot of runway for AI capex as well. [00:55:54] Speaker 2: We still feel like we're still moving in the global economy and not just speculative into AI. [00:55:58] Speaker 8: Yeah, we do think when we look at AI, when we look at kind of the utilization rate of chips, it's still very high. So we do think it's different when we talk about the dot-com bubble, where a lot of fiber optics wasn't used. And when we look at this sort of investment into a major technology kind of change, usually it's seven, eight years. We still feel we're in the early innings of this. [00:56:21] Speaker 1: OK, how do you stomach this, though, when I'm talking about 6% losses in the cost rate? It's not even a rare occurrence anymore. I mean, do you have to just get even more granular in the supply chain? Like, is it just the picks and shovels or what else? How far down the supply chain of AI do you have to go now? [00:56:38] Speaker 8: So we do believe that we need more diversified exposure across the AI value chain, not just the hyperscalers, not just the semis, maybe also the AI enablers as well. So just to diversify across the different parts of AI, obviously, when we're investing into EM, volatility does come to it, but it is about to kind of have that diversification as well. [00:57:01] Speaker 2: Yeah. Is this the call then to diversify portfolios beyond even the smaller AI players to more defensive stocks that we're seeing? When you have a bloodbath like that, you have obvious rotations into defensive stocks. But again, does there need to be a broadening beyond AI? [00:57:19] Speaker 8: So currently, when we look at our equity overweight, it's relatively diversified. So we are overweight, US, EM, as well as Japan. So we do have themes that's not particularly AI related. If we look at Japan overweight, it is really driven more by the recovery of the economy, reflationary dynamics, and also the structural support coming from corporate governance reforms as well. [00:57:42] Speaker 1: So what about when it comes to portfolio construction? I mean, it is 60-40. I mean, that really largely hasn't worked if you take a look at this boom in AI. But what works in terms of what the mix should be across assets now when you talk to clients? [00:57:57] Speaker 8: So when we look at a balanced portfolio, obviously, it doesn't do us well when we have inflationary concerns. I guess that's one of the things that came out of the whole Iran conflict, which is still not resolved yet. But we do think longer term, when you think about the correlation between stocks and bonds, we're not really expecting them to move really positive. But we do think this relationship is likely to be more unstable because of volatility, inflation. Obviously, there are other assets you need to think about, maybe gold, other real assets, really to give you more diversification in this environment. [00:58:32] Speaker 2: And what's your views on EM? I mean, there's different parts of EM. There's some EM that is very highly attached to the AI story. But a country, as Anthony was talking about, like Indonesia, which is not, sure, they have raw materials and this and that, but that has regulatory uncertainty completely engulfing the news flow right there because of the supposed nationalization of the export of those key raw materials. [00:58:56] Speaker 8: Yeah. So when we look at EM exposure, obviously, we do have those more kind of AI exposed names, kind of Korea, Taiwan. But we also think we do have exposure to markets that have already lagged so far, India, China. And also, we do think if we have a resolution of this U.S.-Iran conflict, if we have some sort of ceasefire, that should also help to support the market as well. [00:59:21] Speaker 1: People keep asking about oil. We're three months into this war, and we're still talking about a fifth of the world's oil that's been basically essentially shut in some ways. Why do you think oil markets are still below $100 right now? And can it stay that way? [00:59:35] Speaker 8: Yeah. So I think the stability of the oil price is definitely one of the surprising things we have seen so far. But I think it's partly because we've seen supply actually coming up from other parts of the world, not just from kind of the Gulf countries. We're also seeing kind of U.S. increasing supply. And also, we are seeing a level of demand destruction as well. China has been importing less. They are utilizing their reserves. I think that's helping to calm the market. But we shouldn't forget, we are moving closer and closer to the inventory operational stress levels, even though that date continues to be moved back. But I think that is a looming concern that we need to be worried about as well. [01:00:14] Speaker 2: You mentioned gold just a minute or so ago, but you believe that that still can play a strategic asset allocation in portfolios right now at the levels that they are above $4,000? [01:00:24] Speaker 8: Yeah. Yeah, so we do think that's more strategic asset allocation. Clearly, near term, it hasn't worked as well because it is trading more with the risk assets. And also, it's negatively correlated to yields, the U.S. dollar, and the oil price. But we do think when we have a ceasefire, that is likely to rally as well. [01:00:42] Speaker 2: So you're maintaining your pro-risk tilt in your portfolio. [01:00:45] Speaker 8: Yes, we are. That's really driven by fundamentals. We think global growth is still trending around trend levels that we think that's still likely to support risk assets in this environment. [01:00:56] Speaker 1: Even high-yield credit, I see, in the U.S., I mean, spreads there are pretty tight already. You think they can tighten further? [01:01:04] Speaker 8: No, I don't think there's much room for them to tighten further, but just because we don't think there's much for South U.S. going into a recession, so we're still happy to clip the coupon right now. [01:01:14] Speaker 2: All right. Sylvia, thanks so much for joining us on a very interesting Monday morning. Sylvia Scheng, Asia Lead Portfolio Manager for Multi-Asset Solutions at J.P. Morgan Asset Management. All right. Well, still ahead, which camera are we on? There we are. There are three. Israel says it hit military targets in Iran after a barrage of missile fire, despite President Trump urging Benjamin Netanyahu not to retaliate. Details are going to come up, and we'll give you an update on that. This is Bloomberg. [01:01:45] Speaker 1: All right. We're tracking EM here this morning, and we continue to see Jakarta under quite a bit of pressure here this morning. The JCI is down close to 4 percent, and it is a new record low when it comes to the rupiah at 18,134. We have talked about when it comes to this economy, they have intervened and tried to at least stem the losses here, but it's not really helping, at least today. Also, we talk about that JCI. We're at now the lowest levels we've seen in about, what, five and a half years or so. So, yeah, continue to not see too much light up in sight when it comes to Indonesia in particular. Israel, though, we've been talking about what's been going on there. They say it has struck what it calls military targets in Iran after the Islamic Republic earlier launched missiles towards Israel. Iranian media are reporting explosions heard in Tehran and other cities. President Trump spoke several hours ago by phone with Israeli Prime Minister Benjamin Netanyahu, urging him not to retaliate against the Iranian attacks. Let's bring in our Bloomberg managing editor, Jill Deezis, for the latest here right now. We seem to be seeing more of an escalation now between Israel and Iran. [01:03:03] Speaker 9: That's right, Yvonne. And I think that, you know, we're still, this is still a very fresh line, still trying to get more on, you know, exactly the targets that Israel struck here. But ultimately does raise a lot of very serious questions about the state of the ceasefire, about the state of those ongoing negotiations. I mean, as you just said, Axios reporting that Trump had just spoken with Netanyahu, you know, overnight, essentially, saying do not retaliate against these earlier strikes from Tehran. Obviously, now we are seeing that military action coming from Israel, the IDF saying that they've struck these targets. Now, again, still waiting to see what the scope of the damage ultimately looks like, whether or not there's any kind of a response from Iran. We have seen just some confirmation of these strikes sort of trickle out from state-affiliated media within Iran. But ultimately, yes, very serious questions about what this actually means for the ceasefire, because as we have been reporting, you know, this is so much of what the ongoing U.S.-Iran relationship was going to look like, what that potential truce, longer-lasting peace deal could look like, was about Israel's involvement here. [01:04:05] Speaker 2: Well, what does this say about Trump-Netanyahu relationship? If Trump is telling him, don't retaliate, but Israel defense forces are going ahead with that regardless, threatening, as you say, imperiling that fragile truce of 100 days or of a month. [01:04:20] Speaker 9: Yes, that's right, Stephen. Look, I think at this point, we still don't have a ton of details on how exactly, you know, this might have been orchestrated by Israel, what exactly they struck. I do think that the significance of the targets is important here. But yes, I think that from the surface, certainly does not look like Trump is getting his way if he's, you know, reaching out to Netanyahu. I mean, you know, he had some pretty strong comments overnight just about how, you know, Trump feels he should be in control of the situation here. He calls the shots, I believe he calls the shots, I believe he was saying. So this, you know, I think does raise a lot of questions about whether or not those deals are ultimately, you know, imperiled here. But again, just really points to the fragility of this ceasefire. This is, you know, some of the most violent escalation in attacks that we've seen since that initial U.S.-Iran truce was ultimately announced in April. So we'll have to see more details again on what exactly these targets were and how that kind of plays into some of these negotiations. [01:05:19] Speaker 2: And again, we don't know the level of damage or casualties in Iran. And also the Israelis are saying they intercepted all those Iranian missiles that were coming to Israel, right? Yes, yes, that's right. No casualties. Yes. Okay. Jill Deesis, Bloomberg's managing editor, thanks so much for keeping us up to date. Let's pivot over here to Min Min Lo. Chinese President Xi Jinping is heading to North Korea today for his first trip there in seven years. What's on tap for this Xi-Kim meeting? [01:05:48] Speaker 10: Yes, President Xi is probably one of the least well-traveled global leaders out there when it comes to major powers. But I guess you could see this as maybe a return trip, if you will. Steve, you and I were there during the military parade last year when Kim visited. So there is a lot of questions about why now, right? Why take this trip seven years after the last trip to North Korea? And some political watchers are saying maybe it's also because of the heightened sense of threats in the region, in the neighborhood, right? You look at Japan and the Philippines combining forces when it comes to their military cooperation. You look at how North Korea is also leaning more closer to Moscow as well, particularly after attending the military parade last year in Beijing. We know North Korea has been supplying troops to Russia as well during the war. So I guess this is a time for President Xi to really show his face, reassert his authority and his influence over the region. And of course, this is coming as North Korea has been flexing its muscle, right, when it comes to nuclear power. Just a few days ago, before Xi's arrival, state media has been publishing photos of this new enriched uranium processing plant, touting a doubling of the production capacity. So key to watch will be what is President Xi's response to that? How much does he, you know, push back on this denuclearization effort? [01:07:08] Speaker 1: Yeah. In terms of deliberals, what can we expect from this trip? [01:07:12] Speaker 10: Yeah. So I guess we can maybe take a hint from what President Xi has written in his op-ed, which was published on North Korean state media. He said that he's calling for the military of both sides to have more exchanges. He's calling for more dialogue, more coordination, but he also used that op-ed to really paint a picture of the world order that he wants to see, right? So a more equal and multilateral world order calling for North Korea and China to jointly oppose hegemonism. So, again, this is an opportunity for President Kim to really burnish his image as this statesman, but also for China to show the world that it's one of the few major powers out there to have access to all sides, right, at a time when President Trump has been alienating many of his allies with the tariff war. [01:07:55] Speaker 1: Min Lo, our China correspondent there, of course, of Xi Jinping's trip to Pyongyang. Of course, as subscribers, you can also turn to the terminal for more on this. T-Live Go is your function for the latest updates, post-commentary, and analysis from our expert editors. Markets are in the red here this morning, particularly your GMM function. That is the day to kind of bring it up on TV because we continue to see a bit of a bloodbath here, particularly how Taiwan, the Tyaxe, the Nikkei, and South Korea, the Kospi, are lower by about 4% to 5%, right? And that is, you know, where we're seeing most of that pressure. CSI 300 is actually, relatively speaking, doing not as badly, but we're still down about 1.5%. But dollar continues to rain high across these Asia FX currencies here. Look at the rupiah. We're talking about another record low. Taiwan dollar, ringgit continue to see selling pressure here. With the flip side, though, Korean won, at least, seems to have reached some sort of floor after authorities have talked about excessive moves and tried to stem, of course, the route when it comes to the Korean won. And Brent markets, right, were still around $93, $94, given the tension between Israel and Iran. And bonds continue to sell off across the curve here. Take a look at what we saw with that U.S. blowout job support. That's what's roiling the bond market once again. We've got plenty more to come. This is Bloomberg. [01:09:09] Speaker 2: And welcome back to The China Show. Here are some of the corporate stories we're following. OpenAI is reportedly planning a major platform overhaul ahead of its IPO as it steps up competition with rivals, including Anthropic. The Financial Times says it wants to turn ChatGPT into a comprehensive super app that would incorporate functions built by partners such as Canva and Booking.com, as well as coding tools, including its software writing product, Codex. Well, the International Air Transport Association, or IATA, says the airline industry will suffer a sharp profit drop this year. It sees net profit of around $23 billion compared with $45 billion last year. IATA Director General Willie Walsh telling us the industry expects its fuel bill this year to jump almost 40%. [01:10:16] Speaker 11: Because the real impact of the increase in the fuel price didn't really hit until April. So the first quarter was good, demand was good, and I think airlines were looking forward to another good year. But obviously, with the significant impact to disruption in the Gulf and the very significant impact on oil prices, we're now forecasting lower growth. Principally, as a result of the negative impact on the Gulf, and then, you know, much higher costs for the industry, fuel bill will be about $100 billion US dollars higher. [01:10:55] Speaker 1: And we just got some breaking news when it comes to, of course, the AI fundraising story. And this time when we're talking about Moonshot, Steve, of course, this is the developer of the Kimmy chatbot, where they're seeking as much as $2 billion in this new funding round that would value the startup at get this $30 billion. That's according to, of course, what we're hearing here this morning. [01:11:17] Speaker 2: What a time. Yes. Now, obviously, not necessarily, I'm saying the air is out of the bubble, but an interesting time to have this valuation of $30 billion. All right. This is Bloomberg. We'll be right back. [01:11:43] Speaker 4: In the longer run, this will prove to be a technical correction, albeit a scary one, in a longer-term bull market. And I think we laid that logic out pretty clearly in a report we did last week, where the underlying fundamentals are still very, very strong. [01:12:01] Speaker 3: This is an opportunity, whether it's a day or a week away, to be increasing exposure to these areas where we know the earnings are continuing to go up. [01:12:13] Speaker 1: All right. That was, of course, Tim Moe and Sean Taylor there speaking, of course, what goes on across this sell-off here, where you take a little more Japanese markets are going, heading into that lunch break. Yeah, they're going to need a break to digest what's been going on. We're down close to 4%. On the Nikkei 225, SoftBank has been a big drag on that market here this morning as well. And, yeah, we're back to above 160 for dollar yen. [01:12:35] Speaker 2: We should take notes from Jensen and all the Korean executives and have some SOMAC. [01:12:39] Speaker 1: Oh, we might need it for today at 10.30 in the morning, Steve. Gosh, you're putting ideas in my head. JJB yields are also four basis points higher in the 10 years. So, yeah, there's more, I guess, concerns in the bond market that perhaps the Fed might not be able to cut rates this year. Of course, you have, like, the Goldman, the latest there, to change their attack and say, look, yeah, we're ruling that out now, that possibility. Asian markets or the rest of markets are doing this here right now, continue to see a lot of pressure when it comes to Taiwan, when it comes to Korea here this morning. KOSPI is down close to 5. We're continuing to watch what goes on with the EM complex with Indonesia as well. Record lows when it comes to that currency here this morning. And we're watching still KOSPI, right? Take a look at a two-day chart and really continues to show the unwind that we're seeing across some of these semiconductor names. That stop market optimism there is finally giving way to some growing caution. Let's bring in our Asia Equities reporter, Winnie Hsu. She's with us here right now. You know, is it just buckle up? Are we bracing for more declines? [01:13:38] Speaker 12: Yeah, for now, that's what we're hearing. Lots of this cautious optimism in the market right now. So the question really is, now that we're seeing KOSPI down about 8% earlier today and a bit of losses pairing right now. So it's that force between selling and also how much of a dip buying that we're going to expect. So interesting, last week I was just in Singapore talking to all these, you know, hedge funds and investors. And they are saying that in order to protect themselves, they're actually adding, they're trimming their upside exposure, but actually to fund their downside puts. So I'm glad that I guess that strategy really played out for them today because we still want to be riding that momentum right now, tech momentum. But just in case the momentum is too strong, they are still looking for more of these protections going forward. [01:14:31] Speaker 2: Anthony Stevens made a good point earlier is like saying a lot of these authorities in Korea, in China, elsewhere, kind of wanting or in Taiwan, actually Taiwan and Korea. They want the retail investors to kind of jump on board. And then now you're hearing President Lee in Korea actually say this is a market that's undervalued. Undervalued, right? So there's there's sort of hedging their bets as well. But what are the big risk factors that we should be watching that this is not necessarily an undervalued market? [01:15:00] Speaker 12: Yeah. So right now, the structure of the Cosby is just it's very, very leveraged. So we're looking at very high volatility. And on top of that, obviously, you have these macro risks, whether it's today's geopolitical tensions with higher oil prices weighing on South Korea being a big oil importer. And plus, we just talked about how there is expectation for the Fed to potentially raise rates. But specifically to South Korea, I think another key risk that people have started to realize, especially during conversations last week, is that gap or that divergence between the won and the stocks. Obviously, today we see a bit of a rebound in the won because of how authorities are stepping in to stem that weakness. But there seems to be a negative cycle of foreigners forced being forced to sell Korean stocks, leading to a net outflow of some 76 billion U.S. dollars out of South Korean market so far this year weighing on the won. And then that weakness of the won is also making investors more hesitant to put more money in the South Korean stock market. So that is a key risk that investors are flagging these days. [01:16:12] Speaker 2: All right. Asia Equities reporter Winnie Hsu, thanks so much for keeping us up to date. Well, the South Korean won has outperformed, as we just talked about, other emerging Asian currencies on Monday, after authorities took steps to boost the currency, which fell to the lowest since 2009 last week. For more, let's bring in emerging markets and macro strategist, Marcus Wong. So, how are you? Hey, Marcus, how do you see what just Winnie just talked about, the dynamic between the one-day sell-off that we're seeing in Korea on equities versus how that reflects into the won? [01:16:50] Speaker 13: Well, she's right to say, you know, that, you know, in the sense that won has been normally in emerging Asia. Of course, you know, you have the high-yield net-importing currencies like Indonesian rupee, rupee, Felipe Peso being public. But, you know, you know, maybe back a month or two months ago, people were expecting won to be one of the better insulated currencies and this is essentially because, you know, the robust AI boom was supposed to insulate the net-all-importing economy, which is also South Korea. But instead, we saw, you know, huge foreign equity outflows as a result. And again, you know, it's a lot partially due to what investors call, you know, portfolio rebalancing that has led to these equity outflows. But today, you know, we've seen the won actually outperform all peers because Korean authorities have come in more forcefully. They've said that they will investigate offshore trading of the won and they will also, you know, look into practices by exporters and importers in Korea and whether they have taken, you know, whether they've, you know, taken, whether they've, you know, used the weaker won to their advantage. So basically, the Korean authorities are looking into this. But, you know, as we've seen with, you know, all these measures, you know, announced by different authorities, at most, you know, they can see a partial rebound on the day, a partial pairing of losses. But this does not, you know, change the overall trajectory of the currency. You know, just to flag, you know, like just even on Friday, we saw the RBI announce some measures basically to encourage further foreign investment into its bonds, as well also, you know, reduction of capital gains tax on trading of some of its securities. So basically, intervention is the name of the game. You know, Indonesia, India, South Korea today, they've all come in to basically stamp these losses that we've seen, you know. But, you know, end of day, you know, if you know there's a public CPI figure coming in this week, if it's hotter than expected, the dollar could rebound even further. We could still see further pressure on the won as well as a lot of these emerging Asian currencies as a result. [01:18:43] Speaker 1: Yeah, as you mentioned with Indonesia, right, it's still one of the worst performers out there. You mentioned there were some reassurances over the weekend, but we're still seeing record lows when it comes to the rupiah. And analysts are calling in the next two weeks are quite critical. There's a BI, I believe, meeting. They're also talking a little bit about the MSCI review. What needs to happen to reassure this market and bring back confidence? [01:19:10] Speaker 13: Well, you know, yes, you know, Bank Indonesia and Indonesian authorities have thrown in a whole plethora of measures. I think that it's a fair comment to make, you know, everything from trying to height rates to selling more SRBIs. But at the end of the day, what analysts keep coming back to us to say that what Indonesia needs is policy credibility. It needs measures from the government to show that they are, you know, that the fiscal deficit of 3%, is it achievable, is it not? If it's not achievable, what measures are they taking? Currently, it is lacking so far. And what we've seen measures from authorities so far is trying to tinkering at the edges, tinkering at the corner, trying to, you know, I guess, defend the idea as best as they can. So, short and long of it, you're right to say the next two weeks will be important. You know, again, there are rising bets for Bank Indonesia to possibly hike again by 50 basis points to defend the rupiah. But at least don't see it as actually, you know, seeing a durable turnaround as a result. And as you're right to say, also, the MSCI frontier, MSCI, you know, classification is going to be very important for investors moving forward. But again, all in all, Bank Indonesia has done a lot of measures, and they will probably announce more measures moving forward. But what investors want to see, essentially, is policy credibility from the government. [01:20:31] Speaker 1: That's right. Marcus, thank you. Marcus Wong, there are Bloomberg Emerging Markets and Macro Strategists. I'm sure you've been busy. We'll let you go, sir. I'll look at Asian markets as, of course, go into a commercial break here. And we continue to see quite a bit of red on your screen. As Winnie mentioned, though, we have come off when it comes to the cost fee, though. We're still down about 4.5% or more. We're also checking when it comes to everything from risk assets, right? Gold, oil, Bitcoin, after we did see over the weekend, Bitcoin briefly touched below that 60,000 handle. We're back above 63,000 here right now. But gold continues to see some pressure and $96 for Brent. This is Bloomberg. Well, there's been a flood of new shares from companies looking to fund their AI ambitions. It's raising questions about whether enough buyers are available to soak them all up. We can talk about the big one this week, which is, of course, SpaceX and Thropic as well. Open AI in the coming months could add close to $4 trillion in market capitalization to U.S. exchanges. And really what we've been tracking about here in this part of the world, Steve, is really that Bloomberg scoop that we got at the end of last week about how China and Hong Kong investors might not be able to get their hands on the SpaceX idea. [01:21:54] Speaker 2: And again, it comes back into something that we've been discussing for the last year and a half, and that is national security, well, longer than a year and a half. But since the Trump administration, obviously, a lot of things have been talking about the bifurcation between what is national security and what is not national security. Well, clearly, SpaceX is a priority on the national security front. And we talked about this earlier as well. You know, Paul Chan, the financial secretary in his budget address earlier this year, talked about how the Hong Kong Stock Exchange here in Hong Kong needs to facilitate as well the burgeoning Chinese space exploration stocks for the Hong Kong EX. So, yes, it's clearly been lumped into that national security basket. [01:22:37] Speaker 1: Yeah, let's take a little bit more, right? Because what we've learned over the weekend with Bloomberg has learned these underwriters on the SpaceX IPO have been told not to accept orders from investors in Hong Kong and China because of national security concerns. Let's bring in Menyel Belgori. He leads our APAC deals coverage and joins us now on what we know so far leading up to this IPO. [01:22:58] Speaker 14: Yes, Yvonne, I mean, a lot of banks are spending time. Investors are really eager and keen to get their hands onto the IPO. But the problem is China and Hong Kong seem to be excluded for now. You know, the lead banks on the IPO have given clear orders like, you know, they shouldn't be any of the banks in the syndication and be taking orders from investors in China and Hong Kong. And, Stephen, you were discussing, it is true, it's related to national security concerns, especially in critical areas of technology. We mentioned in the story ITR-related items. So, I mean, clearly satellites, AI, you know, it's critical on that front. [01:23:43] Speaker 2: We'll get pricing later this week. Does the market sell-off impact that at all? How do you see it? Or is demand going to be just gangbusters? As some, a number of fund managers have probably cashed up right now after the sell-off on Friday. [01:23:56] Speaker 14: For sure, Stephen. I mean, with IPOs, you never know until the last minute, right? So, they can pull it and, you know, wait until the next window. I mean, this one is huge. So, for sure, they will want a good deal. There is plenty of demand. I mean, it's a deal that has been talked about for a long time. And, obviously, there is a lot of excitement. But, at the same time, the market needs to be there to absorb all this capital and all this paper. So, let's see how the week goes. It's towards the back end of the week. But, definitely, this volatility doesn't help, for sure. [01:24:32] Speaker 1: You've been covering deals for a while. Has something like this happened before? Where a subset of investors have been barred from investing into a sensitive IPO? [01:24:42] Speaker 14: Well, we've seen, Yvonne, all kinds of twists and turns and kind of, like, nitty-gritty details affecting deals, both IPOs and M&A. But, I think you're right. I mean, when we look at other deals, say, tech startups that grew really quickly and became very popular in the U.S., we believe, you know, from recollection that Chinese investors were always kind of, you know, invited to participate. And, they always found a way, either through special vehicles or offshore funds or so. This one seems a new twist in that kind of, like, restriction type of or geopolitical standoff. So, yes, we've seen all kinds of restrictions. Yeah. But, I think this one is a high-profile one, for sure. [01:25:31] Speaker 2: Manuel Begory, who leads our APAC deals coverage. Thanks so much for joining us on SpaceX coming up Friday. In other news, Hong Kong has implemented new guidelines for banks to ensure the account opening process is compliant and orderly, quote-unquote. It follows Beijing's crackdown on legal cross-border trading. The Hong Kong Monetary Authority, or HKMA, says the rules are similar to new regulatory requirements for brokers managing the accounts of mainland Chinese customers. Well, AXA's Greater China CEO says firms must stay compliant as Beijing tightens scrutiny on cross-border capital flows. But, Sally Wan told us Hong Kong will remain a major offshore wealth hub with growing demand from ultra-high net worth clients. [01:26:16] Speaker 15: In Hong Kong, we are already managing 2.9 trillion U.S. dollars offshore wealth today. And, I think there are many ways of compliance opening accounts, compliance trading, and very compliance insurance purchasing. So, therefore, I think we need to be understanding that the compliance way of trading in Hong Kong is still here. And, also, this segment is growing. The wealth, many of the wealth is already offshore, and many of them is diversified in different regions. So, we need to understand that in Hong Kong, we need to have this platform, and we are international financial center, where we have a very good foundation for asset management and wealth management. Together with insurance solution, it is very, very good for the ultra-high net worth segments, or even the high net worth segments, to continue to grow in this area. [01:27:13] Speaker 16: There is a lot of risk, though, particularly on the concern that in the coming months, we may see more reach from Beijing in terms of tightening these rules. Is that something that your compliance teams are working towards? [01:27:27] Speaker 15: We are always working with very compliance and way of insurance selling and insurance purchasing in Hong Kong. I think we need to be conscious that there's still a big protection gap in this segment. So, for the wealth that is already in Hong Kong, we need to penetrate more on the insurance gap. And, at the same time, we need to make sure that we are compliance in every way with the authorities. [01:27:58] Speaker 1: And that was Axel Greater China's CEO, Sally Wan, speaking exclusively to Heidi Strau-Watts there. And, of course, the China Show will be live at Bloomberg Invest Hong Kong this Wednesday. Stay tuned for conversations with Hong Kong Financial Secretary Paul Chan, Hong Kong Exchange's CEO Bonnie Chan, and the CFOs of Baidu and Lenovo. [01:28:20] Speaker 17: SK Hynix has been NVIDIA's largest memory partner. SK Hynix will continue to be NVIDIA's largest memory partner. It's more than two, and we have the opportunity to keep extending. We already procure, and we buy from SK Hynix, already billions and billions of dollars each year, and it's going to grow. It's going to grow substantially. With respect to the stock price, everybody should be very excited. They can now buy stock at a cheaper price. And it's absolutely true that the future of AI is very bright. It is completely, it is a foregone conclusion that AI will be infrastructure for the world. [01:29:19] Speaker 1: There you go. NVIDIA CEO Jensen Huang speaking to the media there and saying, yeah, buy on this dip here. It's a good opportunity. [01:29:26] Speaker 2: Dollar cost averaging here. [01:29:28] Speaker 1: Well, this is, of course, after NVIDIA and SK Hynix agreed to partner on designing future generations of memory chips for AI. So, with this new Vera Rubin chip there, they talked about that partnership with SK Hynix. SK Telecom also came up with some deals with NVIDIA. So, yeah, it's interesting how much, you know, Korean fried chicken, some barbecue, and some soju and beer can do. [01:29:49] Speaker 2: You know, I did a story on it last week. It's like Jensen Huang talks. He moves the market. He talked up Arm Holdings. Stock went up 16%. Marvell. Marvell went up 33%, the most in 26 years, when he called Marvell the next trillion-dollar-valued company. A little bit more difficult time now with a backdrop of a big global sell-off right now, talking up Korean. But he is still talking up his partners, as, again, he is now announcing last week in Taiwan that Vera Rubin, the next architecture, the next platform, CPU and GPU, Vera being the CPU, and Rubin being the GPU, is now in full production. And he's going to be tapping his partners in Korea. [01:30:32] Speaker 1: Perhaps that's why SK Telecom is up some 5%, right? They announced to build the AI cloud in South Korea with NVIDIA's DSX platform. So, that's bucking the trend here. But Samsung Electronics continue to see that pressure here today. Hynex, though, not as bad. We're lower by about 1.5% or so. [01:30:51] Speaker 2: Could have been worse, right? Yeah. And that's what we're going to be looking at throughout this day, whether they're going to be pairing some of those losses over the course of the morning. Because, again, the question now is how deep and how wide is this sell-off? [01:31:04] Speaker 1: How deep is your love for AI? Oh, you went there. You got me there, Steve. Yes. All right, SK Hynex. Why are we showing this again? Yes, there you go. We're lower by 1.5%. In terms of some of the losers on the HSI, I mean, it still seems to be remaining some of these big Internet platforms. You know, when you take a look at when it comes to BABA, Baidu, we're watching Lenovo as well, which, you know, we continue to talk about the re-rating there. There's going to be a lot of questions to ask Winston Chang at Bloomberg Invest when he speaks on stage. But there you go. Lenovo actually has rebounded by about 1% here. But you're still seeing some big losses when it comes to Baidu, BABA, and Sunny Optical here this morning. You take a look at Zhipu, though. Take a look at this one. I mean, there are some bright spots, right? We talk about the rotation. But then we take a look at some of these, you know, AI pure plays. You have Zhipu. You have Shanghai Beer and Tech. These were two of six that were set to join the Stock Connect. So at least there's plenty of reasons to be optimistic there today. So, yes. So parts of the AI trade are still doing quite well here. You zoom out and look at GMM, though. It's, you know, the headlines don't look good from where you look, right? So whether it's Japan, whether it's Taiwan, whether it's Korea, you're still seeing substantial pressure there. EM, like, you know, like Indonesia, continues to see. Jakarta's down some two here. So the dollar is still looking stronger against most Asian currencies, with the exception of Luan, given what we heard from officials there. But, yes, what else are you tracking right now, Steve? [01:32:32] Speaker 2: Well, I'm still tracking Jensenity. Yeah. That's in South Korea. He's putting a brave face. Jensen Luan putting a brave face to this market. Sell-off saying it's a great buying opportunity, obviously, that had been getting quite frothy. And just that dinner that they had, the barbecue dinner, with the heads of SK Group, LG, and Naver. And guess who picked up the bill? Was it Jensen Huang who picked up the bill? It didn't, right? It was Naver. The youngest in the group. Youngest in the group. Naver. [01:33:01] Speaker 1: He had the digital payment. [01:33:02] Speaker 2: Yeah, the digital payment. [01:33:02] Speaker 1: He had the digital payment, yeah. Easiest way to pay. So, yeah, there was that. I mean, certainly, it made all these tech titans in Korea be like, oh, God, I've got to deal with all this press and this rock star status that Jensen brings with him. [01:33:16] Speaker 2: It is not something the average Korean executive, chairman, CEO, COO, CIO does. They are not that media-friendly like Jensen Huang has created, sort of an industry of going out and walking amongst the people. [01:33:32] Speaker 1: Yeah. So, that was a sight to see. Yeah. And really, you know, where you're seeing this whole supply chain in Asia and where these partnerships with NVIDIA continue to lie and be strong. On a day when we are continuing to see quite a bit of pressure here, obviously, when it comes to the week ahead, you have inflation numbers of the U.S. That could be the next catalyst in these bond markets here, just given what we've been seeing, this repricing of possible even rate hikes from the Fed as early as the year-end as well. [01:33:59] Speaker 2: That's right. I mean, again, just back to Jensen, he's a good salesman. He is. When the market's down, you've got to sell, right? [01:34:06] Speaker 1: We're still tracking what's going on in Iran, right? Oh, yes. So, in the last couple of minutes, we're hearing from the Israeli Defense Force about identified launch of a missile from Yemen towards Israel. So, even this morning, we're still feeling the effects of this Iran war and continued strikes between Iran and Israel. [01:34:24] Speaker 2: And this is what we'll be talking about as well the rest of this week, about the sell-off and also whether this is a breaking, essentially, of that fragile truth. [01:34:32] Speaker 1: That's it for us here on The China Show.