Tencent Earnings a Litmus Test for China's AI Sector — The China Show — 8/12/2026

[00:00:00] Speaker 1: 9 a.m. in Shanghai, Shenzhen, and here in Hong Kong, you're watching The China Show. I'm Yvonne Mann with David Inglis. [00:00:06] Speaker 2: Good morning. We're counting down to the open markets in greater China. Let's get to your top stories today. Asian stocks inching higher as traders await core U.S. inflation numbers. Oil prices also edging up, I should say, on fresh uncertainty over the flow of crude through the Strait of Hormuz. [00:00:22] Speaker 1: Tencent set to kick off China's tech earnings with investors looking for signs that the WeChat operator can balance returns with big spending on AI. [00:00:29] Speaker 2: Madness says its divorce from Meta is nearing completion and it'll start operating independently after Beijing blocked the takeover of the Chinese-founded startup. [00:00:39] Speaker 1: And South Korea prepares to pump more than $700 million into a new fund targeting AI and other strategic industries. We hear exclusively from the deputy innovation and growth minister. All right. We're back together once again. We're here. I know the viewers have been wondering where we've been all of August, really. It's summer. In July. [00:01:15] Speaker 2: It's summer. [00:01:16] Speaker 1: But what did we miss? I mean, it's been quiet for some ways. [00:01:19] Speaker 2: It's a good window to take your foot off the pedal somewhat. [00:01:24] Speaker 1: Yeah, I mean, because you still see when it comes to, I mean, oil is still a little bit volatile. You're starting to see a little bit more about, you know, still tech doing OK, given the read-through from the U.S. But I think all eyes are going to be on U.S. CPI later on today as well. [00:01:35] Speaker 2: That seems to be what markets are waiting for. You did see that swoon into the close in U.S. equity markets. And certainly we are looking at that. People want to try and figure out. We've gone from about a few weeks ago, how high inflation will be, to now it seems clearer that the path of inflation is headed down. So we'll get confirmation of that if, in fact, that is the case as we go into the thick of the Wednesday session. All things equal, I think we're doing well on equity markets right now, half of 1%. Of course, we're also going through a lot of earnings through mainland China, MSCI China, 90% of the index reports over the next three weeks. The biggest one, of course, is set to report today. [00:02:08] Speaker 1: Tencent, yeah. It's a big one, right, because we have Kendra Lau from Goldman Sachs coming through. And, you know, he's looking at everything, right? The 10 signals to suggest that maybe this whole hard AI tech trade is, you know, the momentum correction is almost near the end, right? Everything from market pricing, the leverage in the markets and all that. So I think it'll be key to see whether the earnings picture can really at least justify that maybe there's a bit more momentum behind the whole China China tech trade. But then there was a pretty big sell-off yesterday, too. [00:02:35] Speaker 2: There was a big one, yeah. K-Web was down, I think, 2%, 3%. In fact, over 3% overnight. And I think, to your point, Internet is one of the things that Goldman Sachs thinks you should get into. And, you know, he'll be coming on the show in about an hour's time to talk us through that. But, yes, we'll watch what happens there. Also, just to tell you about, so there is this big sell-off across sell-off was, let's see if that past tense going into the session today. Big news out of New Zealand where the, well, it does seem it is status quo. No change there as far as politics goes. A little bit of a swoon in the Kiwi dollar to the downside right now after we did here. Of course, that's no change. And as far as the, there were some corners we're expecting the prime minister maybe would resign. That's not the case. That's the state of play across the Kiwi dollar. It takes us into equity markets, which we discussed with U.S. futures. The look across the Asia-Pacific. You have Taiwan coming online and Korea's doing better than Moe's at 2% to the upside. Macro picture. The dollar, you have the U.S. 10-year yield. We discussed inflation. You have oil. We do have President Trump, in fact, speaking, I believe, still right now, discussing the prospects with Iran. The Strait of Hormuz. We will control Hormuz. It's one of the lines that's come through there so far. And that is fresh information. 90, let's call it 90 on Brent prices. Gold futures are, have been inching high and higher almost day to day. So yesterday was a soft session. But as you can see, we are closer to 4,500 than we are to 4,000 than compared to this time last week. We talked about the sell-off overnight. Here's how it looked. K-Web, the Golden Dragon Index. Tencent Music is one stock we're tracking today, given that 12% drop overnight. 850 futures coming up on your screens. You have a softer Hong Kong dollar, which has been inching very close now, close and close to the weekend of the band and dollar China on your screens. We call it for a muted open as we go into the Wednesday session here. [00:04:28] Speaker 1: Yeah, for more on what really is moving these markets, let's bring in our managing editor for Asia Equities, Lan Ting, too. Lan Ting, just walk us through what really happened yesterday. This big sell-off in China internet names and what we saw in the overnight session, too, on Wall Street. [00:04:43] Speaker 3: Yeah, it was really about AI earnings jitters, I should say. You guys flagged that Tencent is coming tonight and that's kicking off the internet names reporting season and we have JD.com tomorrow. We've got Baidu early next week and Alibaba and Meiton will be coming soon as well. And, you know, the Chinese hyperscalers have actually outperformed in the last four or five weeks or so. So this is probably where investors take some chip off the table and see how the earnings actually play out. And a few big things that people are watching out for. The one key thing is AI deployment. And second thing is the CapEx figures and whether that will be offset by the kind of monetization from all the AI deployment. So Tencent is a great example, right? We've got the work buddy gaining a lot of traction. So we'll see whether they'll actually say something about the deployment, the monetization of such an AI agent. And the good thing here is that the internet names valuations are still very depressed. If you look at Tencent, they're trading at around 12 times forward PE. That's not far from the lowest level of 11 times. So a lot of bad news has been priced in. [00:05:58] Speaker 2: Lian Tick, just to talk about, you mentioned AI, you know, that's really showed up in a rally before July, I should not. And a lot of the onshore listed hardware names, we know, of course, we've been, we've seen a, you know, technical bull market in a lot of the benchmarks related to that. This pullback we saw in, you know, leverage onshore. That being said, do things seem brighter for them to, I guess, bounce after the brutal sell-off? [00:06:25] Speaker 3: Yeah, definitely. I think there are three positive factors at play. One, as you mentioned, is the deleveraging, right? Star 50 down 26% last month alone. And according to our Bloomberg Intelligence folks, they're saying that the deleveraging that they saw onshore is nearing an end. So that does mean the positioning is a bit lighter. People have probably a little bit more room to add a bit of leverage or pile back into the market. And second thing is IPO pipeline. CXMT, a big one a few weeks ago, that was listed on Starboard. And the next one, Unitree, another significant deal in the robotics space will be listed in the Starboard as well. And CXMT is expected to be fast-tracked to be added to Star 50 index within a month. And similar thing may happen for Unitree as well. And these strategically important companies are likely to do well, I would say. So that's the second thing. The third thing is, according to Sokjeng, China's AI hyperscaler spending landscape is sort of where U.S. was in 2023, which means there is still a huge ramp up to go for China's hyperscalers to spend on AI. And who's going to benefit from that? It's the AI hardware names that are listed on Star 50. So things are looking pretty positive right now. [00:07:48] Speaker 2: Lian Ting, thank you. Lian Ting, too, they're our managing editor in Singapore for us for Asian Equities. Joining us also from Singapore right now is Christina Moon, portfolio manager at eSpring Investments. Christina, good morning. Thank you for coming in the show and to get us started today. I think you last came on, not mistaken, six weeks back, just when that deleveraging and that pullback in Asia was just about to get started. The reason I bring that up is because one of your conviction calls is all this vol has provided an opportunity to reposition, you say. Could you talk a little bit more about what you guys have done over the last few weeks? [00:08:25] Speaker 4: Yeah, I mean, that's actually a great thing to start off because July has been pretty eventful. We've seen quite a heavy sell-off across many of the tech-heavy markets. What I mean by repositioning or at least finding opportunities in the sell-off is really some of these themes or angles that perhaps we weren't able to participate in or as much before we were able to then pick up at much cheaper valuations. If we talk about China tech as an example, this year we saw many of these names run very hard and fast as well. So the pullback that we saw in July also allowed us to fish across the different parts of the supply chain. It's the same in Taiwan and Korea as well. So I think that's why the last month has actually been quite a good opportunity wise for active stock pickers in the market. [00:09:16] Speaker 1: What are some of the metrics that you look to see that maybe this deleveraging process is over, whether it's Korea, whether it's China? I think some have looked at things like earnings and fundamentals still look pretty OK. The leverage story seems to be like we've seen a bit more of a washout now, but what are the clear signs for you that things are looking a bit more stable than before? [00:09:43] Speaker 4: Sure. I mean, I would say valuations would be one key thing to look at. So seeing a lot of these a lot of these valuations come off from prior peaks also does build a bit of buffer in there. And then, of course, you have to anchor all of this to fundamentals. I think the earnings season that we've seen so far has provided some comfort, especially within the tech trade. I think one of the key things that the market was looking out for were the hyperscaler CapEx announcements just a few weeks back. I think at least that has allowed the market to breathe a bit of a sigh of relief, given that the numbers were a bit better than expected. Sure, some part of that could be inflation-related, but I think the fact that many of these higher component costs could have been absorbed also is a positive sign for the market. So a number of these things, I think, you've got valuations, you've got end supply chain outlooks, and you've got, I suppose, generally positive outlooks across several of the companies that have reported so far. I think these are a number of things that do allow a bottoming in the correction of the tech trade. [00:10:51] Speaker 2: So, all things equal, does this tech remain the highest exposure as a share of, you know, allocations? And, you know, what about other sectors that have actually done well recently? I mean, you've talked about materials for one. I think financials have also done very, very well. How do you look at the entire pie now, Christina? [00:11:13] Speaker 4: Yeah, I think touching on that is also a really important point because, you know, a lot of the investors' minds' focus lies in tech, but you can't possibly put all of your eggs in one basket. So, for me, even though having tech as a higher conviction part of our strategies is important, I think what the last month has really shown us or has really come through is the importance of diversification. So, materials, for example, or industrials have been great, great areas to find truffles in. These tend to be, I suppose, less efficient sectors just because people don't look at them as much. But, I mean, there are quite a number of good drivers within there that could be positive as well. I mean, if you like AI, for example, many of the power names within industrials play into that, but perhaps don't get as much attention as the tech sector. Within materials, we saw quite a big sell-off as well. Well, actually, for the most part of this year, looking at evaluations within that space, and given the tightening in demand and supply as well going into the second half of this year, actually, the setup looked pretty good too. So, I think being able to position in different areas as well can help you right through some of these short-term sell-offs within tech. [00:12:25] Speaker 1: India was also your contrarian view as well. It was largely seen the narrative that this is the sort of non-AI alternative sort of play. Is that still the case for you? [00:12:38] Speaker 4: Yeah, actually, I would say even more so now. Again, if we take July as a good testing bid for balance within portfolios, India is one that actually held up reasonably well. If you looked at some of the numbers that we had seen come out of the previous quarter or even some of the monthly numbers in certain sectors, in consumer, for example, these held up much better than expected. And if you look at the market, it was a lot more resilient than some other parts that were selling off, some other parts of Asia that were selling off more heavily. So, again, bringing it back to that point about diversification, having some exposure, I would say, to some of these markets that are perhaps a bit less correlated to tech, will prove, I suppose, positive or beneficial for having a smoother ride? [00:13:29] Speaker 2: Will prove has a very strong future tense connotation. And I think the temptation there would be the testing of the patients, right? Because you give up, you know, you give up some performance currently in the hope that that will pay off. How strongly do you believe in, you know, in patients, Christina, I guess is my question. How do you look at that from a sort of convincing your clients that that is a good idea perspective? [00:13:53] Speaker 4: Yeah, I mean, the way we look at it would be how we think about consistency and returns over the longer term. I always like to position it from the perspective of being able to survive drawdowns. Again, July was a great example of many people who were very, very heavily into the tech trade, being concerned about being able to survive these drawdowns. And ultimately, when it comes to returns, the way that I would think about it would be, how do we manage to ensure that there is longevity and consistency in those returns? And ultimately, it comes back down to diversification of your exposure, as well as being able to pick very stock-specific angles that will be able to ride above a beta and generate alpha. [00:14:41] Speaker 1: We have inflation numbers out of the U.S. coming out. I'm just wondering, should we still be concerned about inflation here? Is it just the energy components or the energy side of things that you're worried about? What else should we be worried about when it comes to really the inflationary picture now? [00:14:59] Speaker 4: Yeah, I think inflation is something we need to bear in mind. You know, a lot of investors focus a lot on the energy side of things, all prices, et cetera. But one of the things that we should be perhaps looking out as well in the current earnings season is how that's flown through from a component perspective. And when I say component, I mean specifically within tech, because that will weigh on things like consumer electronics, the ability for the end consumer to absorb any inflation from a tech hardware space. I mean, we've seen memory prices shoot up a lot this year, and many investors have benefited from that as well. But ultimately, that will also flow through into handphone prices, laptop prices, and things like that. And we will have to see whether the market will be able to absorb these prices as well. So that's one of the other areas I would keep in mind. [00:15:53] Speaker 1: Christina, it's great to have you. Christina Wund there, Portfolio Manager at East Spring Investments, joining us out of Singapore this morning. Still ahead, China's AI race is, of course, in focus with Tencent said to report quarterly earnings. Investors looking for progress against big spending rivals Alibaba and ByteDance to revive that flagging stock price. Of course, we're cutting down the open of trade in Shanghai, Shenzhen, and Hong Kong. This is The China Show. [00:16:36] Speaker 2: Good morning and welcome back. You're watching The China Show. So a couple of minutes back, President Trump was just speaking, in fact, at Joint Base Andrews, talking about Iran, the state of affairs there. And he says that the U.S., in his words, totally controls the Strait of Hormuz. And that the situation in Iran is going fine. [00:16:54] Speaker 1: And earlier, we did hear from Pakistan's defense minister as well, saying that the U.S. and Iran are close to some sort of arrangement over the Strait of Hormuz. Let's bring in our Bloomberg managing editor, Jill Deeses. With the latest, what's going on? What's changed? [00:17:07] Speaker 5: Well, I mean, those comments that we just heard from Trump, total control over the Strait of Hormuz, that's very in line with a lot of repetitive comments that we've heard from the U.S. president. So it doesn't really seem like a whole lot of movement on that front. Now, on the Pakistan front, those comments from that defense minister, I would say they're relevant, if only because the interior minister of Pakistan has arrived in Tehran, going to Tehran to meet with his counterparts. So they have been, just like the Qataris, have been a mediator in this conflict, trying to reach a deal. Obviously, at this point, we don't have a whole lot of specifics about what that deal actually looks like. And so, you know, you kind of have to take the defense minister at his word there when he says that they're close to something. Although, again, I mean, as we've been talking about for months at this point, there's so many points of contention that do make it very difficult to see what even a temporary deal could look like. All that being said, there's a couple of other things we're looking out for aside from this. We've also got this potential Iran-Oman deal to sort of have some traffic move through the Strait of Hormuz. That's something that's been sort of a sticking point over the last week or so. Not entirely clear, you know, what that will look like if that ultimately comes to fruition. There were some talks just a few days ago about how that might require some tolls or compensation from certain nations if they wanted to pass through the straits. So not entirely a done deal there. All of this is just to say we haven't seen a ton of movement, still looking for some of those signs that maybe there's some kind of alleviation of some of those, you know, snarled shipping lanes in the Strait of Hormuz. But, again, not quite there yet. [00:18:38] Speaker 2: Yeah, well, it's so I'm a bit confused. I think many people are, too. It seems that the U.S. is not directly in public involved in negotiations with Iran. And, you know, you have Oman, as you point out, Pakistan's involved. Do we have a better idea of who is representing the side of the U.S. here? [00:18:53] Speaker 5: I mean, at this point, again, like you're talking about a lot of things that happen through mediators. So, again, you've got Pakistan, you've got Qatar that are pretty regularly the mediators in this conflict. That's one thing to kind of keep a look on. I would, though, point out that when it comes to these types of mediations, you know, with the lack of direct talks happening between those key representatives of the U.S. and Iran, you have a lot of things that sort of pass through couriers and that kind of thing. So, you know, this is not new to the world of conflict. This is something in negotiations that's been happening for decades. But I think, you know, in a conflict like this, when you've got the president of the United States saying, you know, at pretty much any opportunity, kind of giving his own sort of personal assessment or update on where things are, I think it kind of leads to this heightened environment where you're just waiting on pins and needles literally every single day, every single hour for some kind of development that at this point, again, has just not come. [00:19:41] Speaker 1: That's why we're still around $90 now for Brent. Last five sessions, I've certainly seen things pick up a bit. Jill Deases, thank you, our managing editor there on the latest when it comes to Iran. Your pre-market in Hong Kong is opening up here pretty soon. Of course, we're watching very closely ahead of those 10-cent earnings. Perhaps things might be a little bit more subdued here just given what we saw yesterday there, the sell-off that we saw yesterday when it came to HSTech. So certainly some jitters leading up to that big results from 10-cent. So certainly there's one thing to watch. 10-cent music, we said, had a pretty big, big drop yesterday overnight. [00:20:13] Speaker 2: Yeah, 11-12% overnight. And in the early goings of today that should be coming up on your screens very shortly, the stock is down 11.5% in your pre-markets on 10-cent music. And, of course, 10-cent reports later today. Lots more ahead, a full preview of the trading session. On the other side of this break. [00:20:52] Speaker 1: All right, slow news day. But then again, it is all about earnings the next 24 hours or so. 10-cent, as we talked about there, is set to report later on today. Of course, everything from CapEx, AI spend, also monetization side of things, deployment of AI. Of course, given the news with WorkBuddy is certainly going to be key in focus here today. We're also expecting earnings from Galaxy, CK infrastructure as well. Also watching the deleveraging side of things when it comes to China as well. 10-cent music is the big one here. We talked about that drop already. We're still in the window for credit data. And there is a CGB Hong Kong bond sale today. Dave? [00:21:26] Speaker 2: It's a 50-year, I believe, 50-year bond sale. 2076 bonds are being issued today. That's, of course, in mainland China. Let me just give you the exact details on that one. Yeah, so $252 on the coupon, $40 billion in RMB, that is today, 2076 bonds. Okay, we talked about 10-cent music coming up on your screens. Mood music is sour at the moment here, 11.5% to the downside there. On 10-cent music, we talked about some of the other earnings. In the early goings, 10-cent is coming up. Galaxy and CK Infra also coming up on your screens. And I think the point being on 10-cent, it is still making money. What's the guidance going to look like as far as the company goes? And some of the copper stocks, given where we are on copper prices. [00:22:05] Speaker 1: Yeah, I mean, we'll continue to watch, of course, the record pricing that we're seeing across the contracts in the L&B market, and certainly, so certainly that's one thing to watch. There you go. MMG is up another 5% here today, up around 14,155 levels for the copper price there. Certainly one thing to watch, of course, as Dave mentioned, is 10-cent music, right? So the price target cut by Citi, of course, on that softer second-half outlook. Investments, they say, is the key thing that is weighing on profits. [00:22:33] Speaker 2: Okay, so that looks to be the early drag across these markets. It was the biggest decliner on the Golden Dragon Index overnight. K-Web was down 3-4%, so we'll see whether this sell-off does continue. Early going suggests it will. Eight-tenths of 1%. The opening bell is just over three minutes away. And, of course, we'll be back with the opening, including the big market moves across these markets. Good morning. You're watching The China Show. Welcome back. You're watching The China Show. As we count down to the open, it's quiet in the news front. We should be getting more and more in as far as the earnings stories go. And 10-cent, of course, is going to be the big one on deck today and, of course, ahead of the U.S. CPI numbers on the macro front. Apart from that, equity markets are actually doing okay outside of greater China. Korea's leadings. Pockets of Taiwan are also doing well. Volumes are still low amidst, of course, the lull of the summer months. [00:23:44] Speaker 1: Yeah, I mean, the CPI report could be front and sender. We're expecting what's 0.1% print in terms of prices. It doesn't seem much, but we were talking about negative prints just in the prior months. So certainly a lot of questions, given the Iran situation, is still sort of up in the air. And now they're saying that this U.S. CPI print is really going to determine a lot of the pricing when it comes to September's next FOMC meeting. Which is already, what, 50% odds? [00:24:07] Speaker 2: Yeah, it's about 50%. And then after we're done with this, we're going to look at the next CPI report. They're going to go, oh, that's going to be key for the September meeting. But that is to say, of course, it is a data-dependent Fed. And I think we have to get used to the fact that we are going to gain more insights from the data more than we are from guidance itself. Flat open, and I think that we were talking about this earlier on, the key theme across mainland markets as we go into the second, third week of this month, is how far along is the deleveraging process there onshore in terms of margin debt, because it has had some bearing on turnover and some of the big pullbacks we've seen in some of the big plays like IT, for example, like CETL. CX empties up 1.6%. Capricorn actually has done okay, but had a terrible July, of course, alongside other semi-names in the onshore markets. [00:24:53] Speaker 1: Yeah, and as Christina Woon from East Spring said, right, like we've seen some froth being taken off in the last couple of weeks. And maybe it's a time to reposition and get back to some of these names, because they're starting to see that the earnings picture continues to be quite strong here. They also talked about, you know, capital returns seems to be the next focus of some of these memory chip makers in particular, given the fact that they're obviously getting a lot of cash flow here. How they return that back to shareholders could be the next catalyst and maybe a floor for a lot of the memory space there right now. So there you go. That's what's going on. Capricorn Tech's up 1. We're still watching Shanghai crude, right? Following the price of rent here, we talked about how we've seen basically about a 12% pop in oil prices in the last five days or so. So we are continuing that here as, of course, we wait for any sort of clarity on the Iran situation here right now. But both sides still laying out that pretty hard line stance. You take a look at how Hong Kong is faring. Just given the sell-off that we saw yesterday on HS Tech and some of these large cap names, it looks like we are extending that sell-off here once again ahead of that Tencent earnings report, right? Tencent's down some two. We'll see what, right? The rest, they're kicking off the whole earnings season when it comes to the tech space, right? Because then you're going to have Baba, JD, Baidu, Meituan, and the like. So most of them are, in fact, heading lower here this morning. Baba is down by two. Offer M&B seems to be somewhat flat here right now, but we are seeing most of the sell-off here in the offshore markets here today. Certainly one thing to watch is we have Goldman Sachs' Kendra Lau on, and he's really, really tracking this whole correction cycle in particularly the AI hardware space in onshore markets. And he's saying, look, we might be close to the end of this correction. Take a look at Tencent Music here. That's the big one, as we talked about here. The pre-market was not looking pretty, and it follows ADR price lower, or 12% drop here at the get-go. And this is what, on the back of concerns about investments that is weighing on the profit outlook. So Citi slashes price target as well on that softer second half outlook there. So there you go. That's weighing on the stock heavily here today. CK Infrastructure Galaxy are also set to report here today, Dave. [00:26:55] Speaker 2: Okay. Yeah, which really sets us up nicely because we talked about this on Monday. That is, we are entering this very big window in terms of earnings. And I think we really kick things off today with the big one. Of course, China's biggest company by market cap. Okay, so where are we on the earnings story, right? Very, very, very big picture. We're looking at EPS. Earnings per share. Yellow is actual. The white line you see on your screens is projected. So the difference between, say, this point and this point is the actual earnings growth that people are expecting. I think the key point here is compared to the peak back in 2014, that's 12 years ago now, if you think about it. We're still about 18% lower on actual reported earnings. So the sort of earnings swoon we've seen in mainland China is something that we are continuing to see. We are, of course, that's a very, very different index, by the way, back in 2014, as far as MSCI China is concerned. The other thing we want to point out, though, as far as projected earnings is concerned, that is actually closer to its own respective, its own peak in 2018. That's about a 5% to 6% gap between that. One other thing I want to point out, though, and just want to make sure I'm not coming out of screen. Oh, thank you. Okay, there we go. Is that we've actually seen, while earnings expectations have actually been picking up consistently since 2024, actual reported earnings have actually hit a speed bump late last year and have seen this very slow drawdown going into where we are right now. So I think the question there is, flip the page, please. When you look at these earnings season coming up, 90% of earnings are coming through as well. Are expectations slightly too optimistic given what has been reported? And we'll really have to wait and see what these companies say, Yvonne, moving forward. [00:28:25] Speaker 1: Yeah, and Tencent could be that mistest, too, for the rest of China tech. Of course, they report earnings later on today. There's been some traction, right? When you talk about the AI workplace assistant, WorkBuddy now is one of the, in fact, the most popular AI workplace assistant in China. Investors will be watching to see where the product is getting traction and really helping Tencent close the gap with rivals in China's AI race. Let's bring in our stocks reporter for Asia, Jeanne Yu, for those of the preview. What is consensus for Tencent earnings looking like here? What are we watching out for later on today? [00:28:57] Speaker 6: Yeah, I think the consensus is still, I think most of the people we talk to expect like a revenue about like 10% growth from a year earlier for Tencent. And also revenue is going to be up like 5%. And for all the traditional and also the online gaming business, they're actually expecting in line with the market consensus, like no big surprise. So the only uncertain stuff, I think it's Tencent's comments and also, you know, all the updates from its AI agent initiatives. And that includes WorkBuddy, so which catches a lot of like social media buzz recently because it's getting more and more popular in China. And I think the total visits is actually, according to some data providers, is actually exceeds the apps developed by Alibaba and Biden combined. So that's actually giving investors some new narrative, like new arguments, like, okay, maybe there is a chance for them to actually close the gap because this stock has been seen as a laggard in the China's AI race for a long, long time. And you see the valuation actually is hovering around record low. So this is being mentioned when basically during my every conversation with analysts and investors, they will mention WorkBuddy. I think the second thing is actually like how they are going to like the path for them to roll out the wishing AI agents. It's a very costly measures for them because given the empire, like the wishing user is so big. So the cost to maintain that AI agent quality is is one of the concerns. So people are asking like whether they're going to going to raise their AI capex going forward because they need to put in so much resources to develop the AI agent within WeChat. The other thing I think is it's the Huen Yuan AI model. That model is actually it's not a large parameter model, unlike the one rolled out by Moonshot or Alibaba, which is targeting like a very large parameter, like high intelligence model. But Tencent has yet to roll out, yet to update its AI model. So that's one of the key focus, because if Tencent needs to win this AI race or change investors' narrative, it needs a very good AI model. So that's a key thing. [00:31:15] Speaker 2: OK, since you mentioned you've been talking to analysts and so Goldman Sachs will be coming on in about 30 minutes. And one of their recommendations is to scale into select eight share Internet names on the AI front. And I think we have seen that rotation away from hardware into platforms. Does that rotation continue? Will they be will they be correct, you think? [00:31:38] Speaker 6: Yeah, I think this rotation is actually a global thing. It's not just a China specific thing. Like if you look at the things in U.S., it's similar trend. But in China, it's very special because I think China's Internet company has been used as a place, you know, for people like a funding short for them to chase the rally in Korea and Taiwan earlier this year. And this is now reversing. So I think fund flow is going to help them. Their performance is going to is going to drive the rotation. That's a very big reason for that. The other thing I think is the valuation. Like if you look at the Chinese big Internet companies, they haven't been valued like an AI company at all like Tencent, like all the AI premium is not in their valuation at all. So I think valuation is one of the reason why, you know, people feel more confident about the rotation because it's just so cheap to ignore. And then I think the third reason is definitely the earnings. There were some chatters, you know, like actually the e-commerce is not as bad as people feared. And I think this earnings is going to be a key test for the sentiment, like whether that call is correct or not. Like if the e-commerce earnings from JD and Meituan, you know, later this week proved to be resilient. I think that's a good that's a good starting point for the rotation to continue. [00:32:55] Speaker 2: China's biggest company is 10% of the America's biggest company in terms of market cap, if you think about it. Right. Five plus trillion on Nvidia. Yeah. Ten cents, barely above half a half a half a trillion. Jeannie, fantastic context in size and scope there. Jeannie, you there are Asia stocks reporters. Speaking of that really gets us into this nice this next nice thing to this next segment here. Right. So Madness, that's the Chinese founded AI startup, says it will soon resume operating as an independent company. The latest step, of course, in efforts to unwind its purchase by Meta. Let's bring in Min Min Lo, our China correspondent, with the latest on this divorce and how final proceedings are at this point. [00:33:33] Speaker 7: Yeah, it's been a multi-month process right after Beijing ordered the unwinding of the deal back in April. So we reported that in May, Manus and Meta has already split themselves operationally and Manus is now sending a note to users saying that they are about to go through this transition to resume operations independently. And during that process, they may have to delete some data. So they're asking users to back that up and restore it later. And as compensation for the service disruption, they will offer a welcome back offer. So it's been a very complicated journey for Manus, right? At one point, it was herited as one of these winners in the Chinese AI space, one of the first to get successfully acquired by a Silicon Valley company. But now it's a warning for other Chinese AI firms looking to sell their stake to a U.S. company or looking to transfer technology because you've got to see this in the context of everything that Beijing is doing policy-wise. It has been, for example, clamping down on Chinese tech firms like DeepSeek and Moonshot, receiving American capital without approval. It has been asking rich companies to maybe restructure their ownership structure and incorporate back in mainland China to qualify for IPOs in Hong Kong. So all of these show that national security is front and center. We are increasingly seeing very siloed ecosystems when it comes to tech in U.S. and China. [00:34:53] Speaker 1: OK, what's next then, now that they're getting close to this divorce? What should we look out for the company now? [00:34:58] Speaker 7: So the operational split is complete, but the financial split is a little bit complicated, right? Because whatever Meta paid for Manus has already been distributed to the venture capitalists. And we previously reported that Tencent is one of the companies that is leading a consortium to buy back the equity stake from Meta for the same price of at least $2 billion. The Meta's co-founders were said to be reportedly still seeking about a billion dollars in funds to potentially increase their own stake in the company. And they eventually may want to form a joint venture between the management team and their backers and eventually plan for a Hong Kong IPO. There's quite a bit of interest because the company has been growing rapidly under Meta. Its sources are saying that it's projected to hit about a billion dollars in revenue this year, which is almost a tenfold increase from last year. But of course, that projection could be under pressure because under Meta, it was able to access Meta's network of enterprise clients, which is going to lose. So a way to ramp up that revenue is also perhaps if it's able to plug into Tencent's ecosystem and be integrated into Tencent's platform, that could be a way for it to quickly recover new clients. [00:36:13] Speaker 1: All right. Thank you, Min Min Lo there. I'm trying to correspond to the latest when it comes to Manus. Coming up, how is the AI trade really going? You know, Korea versus Taiwan. There's always that long-going debate about where, you know, foreign money is really turning towards now. Seems like it's more out of Korea and into Taiwan as we seek a little bit more stability there. We have details coming up next. This is Bloomberg. [00:36:35] Speaker 2: All right. This constant conversation, this rotation between the wild days in Korea into perhaps the more stable embrace of Taiwan is really a reminder of how this transition from your roaring 20s into your 30s. And, you know, perhaps, you know, this feeling and longing of stability, given, of course, what was, what still is inside of you, but perhaps what lies ahead. [00:37:19] Speaker 1: Unless you're Ray Dalio in 3077. I was going to go ahead. [00:37:23] Speaker 2: Check that out. We're just constantly the average of a Korea for decades. Anyway, that's just to say Taiwan has now overtaken Korea, and that seems to be now consensus. Abhishek Vishnu is with us right now, Asia Equities Report, and joining us from Singapore to discuss this. Now, investors are now favoring Taiwan over Korea. Tell us why, Abhishek. [00:37:43] Speaker 8: Well, you know, Taiwan has been favored for a long time. And beyond the returns, if you look at the weightings, Taiwan is the biggest emerging market, you know, if you look at MSCI index weightings. So it has been a trade that has been tested and has given good returns. Now, what has happened recently is we have seen Korea getting, you know, hugely volatile because of leveraged ETFs. And that has really, you know, decreased the Sharpe ratio and increased the risk return kind of odds. While Taiwan actually has started offering a steadier, a more diversified, a more comprehensive earnings outlook. Just recently, last month, the earnings revisions of Taiwan, if you compare that with Korea over a month or a month, has overtaken Korea for the first time in nearly a year. So, that seems to be like a turning point at a time when Korea is facing leverage issues. Alongside, if you look at Taiwan, the retail investor bid is less levered to Korea. So, it's a less levered, more comprehensive, slightly better bet on earnings outlook. And, you know, world over, right now, quality is in vogue. Taiwan is a quality bet. Korea is a growth bet. So, you know, in that context, there is some money that is, you know, still going out of Korea. But there is a persuasive case that there is some rotation happening from Korea to Taiwan. You can see it in the recent, you know, foreign flows. Korea has continued to see outflows. In fact, I think the 12-month rolling flows or year-to-date flows of Korea are closer to the record highs. Record highs, yes. And then on Taiwan's side, you know, foreign funds have started coming back. So, whatever is trickling out, mechanical or fundamentally speaking from Korea, is finding its way into other parts of AI trades, more durable, with more durable earnings outlook. That's where, you know, Taiwan fits in. [00:39:43] Speaker 1: What about risks in the long term? I mean, what are people that you're talking to say is still the long-term risk when it comes to Taiwan? [00:39:54] Speaker 8: I mean, the only risk probably that market is not discounting right now would be twofold. One is obviously, you know, hyperscalers cut back their capex. But that's not a Taiwan-specific risk. That's a risk for the entire AI-led rally globally, not just in Taiwan, Korea or, you know, Asia or parts of the world. It's a global risk. And the second one is the market is probably not discounting the usual, you know, geopolitical risk that, you know, tensions between China and Taiwan have on Taiwanese equities. But then that has been a risk that has been in the backdrop for a decade or probably more than that. So that's a well-known, well-flagged fear. And China has been, you know, behaving maturely, you know, in and out, if you see in the context of the wars that are going around the world. So in that context, Taiwan sort of fits in nicely with durable earnings outlook, you know, great return on equity. And then if you compare even on the valuations front, there are some metrics where, you know, Korea and Taiwan are almost neck to neck. But then if you look from the investors' point of view, the low PEs of Korea right now are about peak memory. And the high PEs of Taiwan are about durability of logic chips. [00:41:08] Speaker 2: That's certainly come up, right? The E in Korea's PE could be an E bubble. That's a question. Abhishek, thank you so much. Abhishek Vishnoy there, our senior Asia equities reporter. You know, the two favorite, the two big ones in each market coming up on your screen, Samsung, SK, Hynek. So it's swinging one way, the opposite way today, contrary to that, the broader moves we've seen. Of course, just to mention, too, as we go into the session today, just look at the server names in Taiwan. Supermicro actually reported fantastic set of numbers, good guidance. And that's actually showing up in markets in the Asia-Pacific today. More on that in a moment. [00:41:44] Speaker 1: Yeah, there was Supermicro. There was also CoreWeave, right, in terms of big tech headlines that we're tracking for you. CoreWeave shares jumped in late trading as the AI spending frenzy spurs faster than anticipated sales growth. The company sees sales of $3.45 billion to $3.6 billion in the third quarter, which is above analysts' expectations. The provider of AI computing power says its backlog stood at $104 billion, suggesting AI demand remains strong. Supermicro computer shares also higher after the bell, the company forecasting quarterly revenue that beat even the highest analyst estimate. It also raised its full-year outlook, citing continued demand for AI infrastructure and its NVIDIA-powered servers. Apart from riding the AI boom, Supermicro has also been working to boost margins and cut costs. Bond traders have dialed back measures to credit risk tied to NVIDIA after the company said it would limit its exposure to a half-a-trillion-dollar financing plan. The yields on NVIDIA's 5.625% bonds maturing in 2056 slipped to 113 basis points above comparable Treasuries. The price of its credit default swaps also declined. All right, well, plenty more ahead. This is Bloomberg. This is Bloomberg. [00:42:57] Speaker 2: Welcome back. So earning season is in full swing, and here are some of the big results we've seen. And just recap some of these over in Oz, you have Commonwealth Bank there reporting stronger than expected annual profits. You have growth in mortgage and business lending helping offset some signs of a cooling housing market. Cash profit climbed 7% to $7.8 billion, that's U.S. dollars, here in the 12 months through June. Now, Australia's largest lender also raised its dividend while noting economic pressure from higher interest rates and also from inflation. Now, U.S.-listed shares of Singapore-based Sea surged after the company raised the full-year earnings guidance for its e-commerce arm. That's, of course, Shopee, to most folks who might not be familiar with the other company there. Now, the upgrade suggests that Shopee is holding off intense competition from rivals, including TikTok Shop, Lazada, and also Timu. The company also reported ad revenue up 70% in the second quarter. [00:44:16] Speaker 1: All right, we are checking one big lusting debut today in China, and this is Zhuhai GLE technology. So, they focus in terms of electronic components as well. So, everything about radio frequency, intelligent terminal chips. So, there you go. Don't know what that is. Don't know what that is, but yes, something in the supply chain, I'm guessing, right? Something to read out about. That's close to 200% gains in the first day of trade for Zhuhai GLE Tech. Other earnings to tell you about, right? Tencent Music is the big one here today. We saw double-digit drops at the open. We are extending that. Wow, I think that is around session lows here right now. We're down 13% for Tencent Music. It seemed like when it came to the investment side of things and how much they're spending, that was what really kind of weighed on the outlook, especially when it comes to profits and the like. So, that's why Citi cut their price target for the stock. Tencent is up next. There is some nerves leading up to this results season here on whether they can actually start narrowing the gap between AI rivals like Baba and the like. [00:45:16] Speaker 2: What the CapEx is going to look like as they roll out, I think one of the points that Jeannie Yu, who joined us earlier on from our reporter team, is watch for CapEx and what that tells you about how they plan to spend around rolling out their agents on WeChat, I think it's going to be, she says, fairly expensive. Expensive, expensive. But that is, of course, the CapEx story on the China side of things. Galaxy and CK Infra are rounding up the big names reporting results later today. Right, CSI 300 is actually up right now. So, after opening flat and lethargic, we have managed to eke out some gains on an index basis. We have a 50-year bond sale today, CGBs. Watch out for that. Apart from that, it's quite across these markets. We have plenty more ahead, though, on the way. Goldman Sachs joins us in a couple of minutes. This is The China Show. [00:46:14] Speaker 1: Welcome back to The China Show. Yeah, it's sunny skies here. It's still hot. It's still hot. It's still summer. First day of school for a lot of people out there. So, certainly, it's a big day. But certainly, when it comes to markets, I think there's just two things we're watching out for here today. U.S. CPI and then 10-cent earnings are going to be front and center in the next few hours or so. So, there is a bit of jitters leading up to those 10-cent earnings. There are some questions about the deployment of AI. WorkBuddy certainly is the big thing that's making the social media rounds as well. How does that translate on the earnings side is certainly one question that I think the street is really looking forward to, Dave. [00:46:57] Speaker 2: The stock is trading at about 12-times earnings ahead of that. [00:47:00] Speaker 1: It's not an AI play. [00:47:01] Speaker 2: Not AI play, right? I think Jeannie was pointing that out. It's priced at half a trillion, Invit's price at five trillion, right? So, just a gap between. Not that those are apples to apples, but just to show you the difference between China's biggest company and the U.S.'s biggest company by market cap. Quite a gap there. Anyway, we're down about 2% on that. Xiaomi's down about 1%. Within this, of course, we're looking at. We have been looking at 10-cent music. Not on your screens, but we should be. That is the underperformer today, 13% to the downside on earnings. Nikkei topics. KOSPI's coming up. KOSPI is, there we go, 3.6%, the outperformer. Today, within Taiwan, of course, there's the super micro subplot that's playing out in that market. We'll get to that in a moment here. U.S. futures head of inflation numbers coming through later today. The session overnight was one where you started good, and then we lost the momentum into the close in S&P. So we are, right now, still finding direction, like most of us in our 20s. Most of us now in our 40s still actually have that problem. You have oil prices coming up on your screens. Only for you. Copper. I'm still very lost, actually. I might not find clear direction, actually, which is fine, because I have very low expectations of my life anyway. Oh, come on. Gold is trading at about 4,400 an ounce. We are giving up after we did touch 4,400. But, yeah, copper price. I mean, that's something that I think lots of people have been talking about. There's return of materials. [00:48:30] Speaker 1: Return of materials. This U.S. inflation print might be something that's moving, of course, the gold price leading up to that data. So certainly it's one thing to watch. Let's bring in our Bloomberg Markets reporter, Anthony Stevens. How are you assessing the tech trade across the region today, especially when it comes to Korea? Do you think we found a floor? [00:48:46] Speaker 9: Yeah, we finally have got some good leads out of the U.S., Supermicro, Kobe, unanimously positive in terms of the AI build-out, right? And that's going into some lighter positioning in Korea. You saw the volatility come off really sharply. The foreigners have sold all what they bought into the big pop. So the positioning is really clean now. And the retail has pretty much given up, right? And that's set the stage now for the fundamentals to play out without any interruption from kind of these leverage bets and all this noise, right? And the fundamentals are getting stronger. You get very strong leads on memory from the Taiwanese players. You have cash returns in focus into the third quarter. And you're going to have Samsung making progress on like one nanometer kind of lithography over yesterday's kind of conferences. So there's a lot pushing. Samsung is a big, like huge kind of company. driver for this index. Hynix had been doing the heavy lifting in the early part of the ramp. But the fact that Samsung is leading now is probably a better sign for Korea, given it's bigger and slower. And for Samsung to be up 5% today is really quite something. So keep an eye on Korea on the way up now as a more gradual pace of grains. [00:49:54] Speaker 2: I think you have a very nice chart on that, the ratio between Samsung and SK Hynix. Talk to us about Taiwan, but please don't mention TSMC. Try and do that for us. [00:50:03] Speaker 9: And I think the Taiwan retailers called it out of the park. Their margin balances didn't drop at all. What they are buying is the stuff that is not TSMC. They are quite knowledgeable as a population. They've done it really well in terms of identifying server bottleneck plays, server manufacturing plays, substrates. All this stuff is strong again today. They had a cracking earnings season. I can't remember a Taiwanese company of any major import that missed. Almost all of them are rewarded with limit up or close to limit up moves. So there is a lot of fundamental kind of pressure in Taiwan under the TSMC hood that's doing really well here. [00:50:38] Speaker 1: There is this whole HSTech review that's in focus. I know you've been kind of talking about how important this could be, right? This revamp from, is it 30 to 50 stocks you're looking into? [00:50:48] Speaker 9: Yeah. And it speaks to the importance of passive flows as well, right? Like, say, you touched on, you know, how the difference between the U.S. biggest company and China's biggest company, right? And a big reason for that is all the pool of money sloshing around there. And Hong Kong wants to attract this money. But the current construction of the HSTech excludes so many of these new listings. And it's a very arduous process to get into the listing. And then you are capped at 10% anyway. So, you know, that long process has to be kind of moderated here a little bit. So the few things that they're doing is they're removing what the definition of HSTech is. Because, quite frankly, they've lost control of it. In the consultation paper, they say, like, it's very hard to keep track, essentially. Whatever is innovative and fast-growing is HSTech, right? Because you can't keep track. The second thing is they're going to carve out fast-growing companies from market cap. So it's not just going to be market cap. 30 are going to be market cap. And the remaining are going to be super-fast-growing companies. So it speaks to being a potentially very exciting index in the future. Now, the important tough part here is implementation. That's why they've launched a consultation paper to see whether the street has any execution doubts. Because, you know, you have to go out and buy some of these less-liquid VP companies to execute this. So will this get done? It's by the end of September. We find out. And then it's eligible for trading by the end of the year. [00:52:06] Speaker 2: Anthony, fantastic. Anthony Stephens, there are markets reporters there. Just to add to the complication, right? The HKX is getting into the index business. And they have, of course, the HKX Tech 100, which is somewhat of a similar play there. Okay. Earlier on, we heard this time in the last hour, Christina Woon from eSpring Investments, PM there, on her take on some of the things we just talked about with Anthony on Chinese tech stocks. Have a look. [00:52:31] Speaker 4: China tech is an example. This year, we saw many of these names run very hard and fast as well. So the pullback that we saw in July also allowed us to fish across the different parts of the supply chain. It's the same in Taiwan and Korea as well. So I think that's why the last month has actually been quite a good opportunity-wise for active stock pickers in the market. [00:52:57] Speaker 1: Yeah, she's been fishing, she says, across the AI supply chain. Materials are also the truffles that she has. I loved all the... [00:53:03] Speaker 2: Yeah, a bit of an ag. [00:53:04] Speaker 1: I didn't give her credit for all those analogies earlier. But yeah, shout out to Christina on that here today. Let's see if Kindra Lau has been fishing. She's China equity strategist at Goldman Sachs. Your report that came out this week about where we are in this whole correction cycle when it comes to AI hardware tech. Where do you think we are now? [00:53:22] Speaker 10: Well, in the report, we looked at a wide spectrum of market indicators, risk appetite proxies, trading signals, including market breadth, concentration risk, leverage, retail sentiment, flows. And we came to a conclusion that from a maturity of the correction cycle standpoint, we think we are getting to the tail end of the cycle. And we are very close to a new equilibrium in terms of supply and demand. And given our view that the fundamental story remains quite intact for the hot tech story in China. So we think, well, yeah, I think we're still positive on the AI tech story fundamentally. [00:54:05] Speaker 2: Yeah, the 10 indicators. Is it useful to look at what's going on in China domestically relative to the deleveraging we're seeing in some other parts of the Asia-Pacific? Is that a useful sort of exercise to determine how long the deleveraging could go, for example? [00:54:19] Speaker 10: Yeah, obviously, we look at Korea as an example as well. So Anthony talked about positioning is now cleaner than before, right? So if you look at the margin financing balance or the leveraged ETFs of the AUM, right? At the peak, we were at about $53 billion US dollars for Korea leveraged ETFs, but now we're down to 20. And similarly, we've seen some deleveraging taking place in Chinese Asia as well. So margin financing balance, you track every day. So at the peak, we were at about $3.1 trillion RMB. Margin debt, right? Yeah, and we are now down to $2.6. [00:54:53] Speaker 1: So what do you think is going to be the driver then? Is it less so much about leverage? Is it going to be more about earnings, fundamentals? [00:54:59] Speaker 10: Earnings will be the key. [00:55:00] Speaker 1: Okay. [00:55:00] Speaker 10: Now, Tencent is going to report today, and then more tech companies will report in the remainder of the week and next week as well. If you record about a month ago, we recommend investors to start shifting or rotating into the Hong Kong mega cap internet names. At that point, the thesis was, okay, these guys were significant laggards, right? They underperformed hot tech cohorts by a significant margin. On top of that, valuations were close to cycle troughs. So at that point, we felt like a lot of bad news and concerns were already in the price. Importantly, it's our expectation that the earnings momentum for the internet sector will start to improve in the second quarter and third quarter resource season. So I think, Yvonne, to your question, I think earnings will be the key. So the outperformance for the internet sector in July was mainly driven by valuation recovery. But now I think we're at a point where we should start to focus on earnings again. [00:56:00] Speaker 2: Okay. And so lean into that is what you're saying? So you called that about last month. [00:56:05] Speaker 10: Do you think that's scaling into it? [00:56:06] Speaker 2: Scaling into it. And do you think that that should continue going into the next few months? [00:56:10] Speaker 10: I think directionally, we still like that trade. But just to clarify, we still like the AI hot tech trade, right? So we think this should be a part of your core portfolio, core holdings in your portfolio. But I think one lesson that we all learned in the July drawdown is that you don't want to put all your eggs in one basket, right? So I think diversification remains the key. So that's why in the report, we recommend a few ways for investors to trade for diversification as well as idiosyncratic opportunities within the Chinese AI ecosystem. Sure. [00:56:42] Speaker 1: Yeah. Tell us a little bit more about the diversification part. Because you mentioned about looking for uncorrelated assets from the AI ecosystem in China. What are those sort of assets you think that are not connected in some way to the AI story? [00:56:55] Speaker 10: Well, the hardware trade, I think, is very correlated in terms of the global beta, right? So you mentioned about Korea. So you can apply the same logic behind, I mean, in Chinese AI hot tech trade. So in terms of correlation, you can find quite negative correlation between the hot tech trades and the soft tech trade in Hong Kong. That's why a month ago, we recommend people to start to shift a little bit of exposures to the internet sector in Hong Kong. Besides that, the other, I would say, quite interesting observation is that within the Chinese AI ecosystem, you can see the divide between AI exporters, which are the ones that are more exposed to external demand, US AI capex boom, and the local players, right? Which basically serve the local Chinese demand in the Chinese market. And in the past two months, exporters have underperformed domestic oriented players by up to 20%. So I think this is another way for you to diversify your portfolio and try to find some alpha within the AI ecosystem. [00:57:59] Speaker 2: Yeah, I think there was one big name that actually listed in Hong Kong recently on that note, right? Some of the AI exporters. But let's just get to get into, because part of what you're also saying is alpha in the IPO market and cash returns. What do you mean by that? [00:58:12] Speaker 10: Well, obviously, the IPO market... [00:58:14] Speaker 2: Get an allocation? [00:58:15] Speaker 10: Yeah, just participate, engage in the market. So I'm sure we all know that the IPO market is very active in Hong Kong. We forecast another 30 billion US dollars of primary capital fundraising for the rest of the year. So it's going to be very active, very busy for all of us. But if you look at the actual realized returns for all the new IPOs, more than 100 IPOs have made their debuts in Hong Kong year-to-day, the average one-month post-listing return was about 30%. [00:58:45] Speaker 2: Okay, plus 30%. And this is all, everyone that's listed within the last 12 months? Yeah. Okay. [00:58:51] Speaker 1: I want to ask about other sectors that have actually done well, right? I mean, biotech in China has been outperforming the last couple, I think, three months or so. What do you think... What are your thoughts on this sector? What do you think is driving that trade right now? [00:59:04] Speaker 10: I think that plays into the diversification point that we talk about, right? In the highly volatile market or highly correlated in terms of asset class returns and type of environment, I think people are definitely looking for some idiosyncratic opportunities. And I think healthcare would fit that category. [00:59:23] Speaker 1: Is that going to be the same for financials, too? Because they've also done well. [00:59:26] Speaker 10: Financials have done well, yeah. Well, financials did well, right, in July. Some of the Chinese banks made their all-time highs in July, too, right? So I think diversification is a big part of it. And also, you can apply the AI story to healthcare, too, right? So I think this is a way for investors to maintain some exposures to AI without exposing too much to the AI beta. [00:59:45] Speaker 2: Sure. Are you getting, when you speak to clients, I guess a good gauge of sentiment is if the sole topic is AI, are you getting queries in other sectors like this, income, for example? What else are people asking you about recently? [01:00:01] Speaker 10: David, lucky or not, I think our conversations with investors globally suggest that investors right now are taking a very binary approach to think about the investable universe is either AI or non-AI. [01:00:13] Speaker 9: Oh, okay. [01:00:14] Speaker 10: So in the non-AI category, obviously, people try to look for some uncoordinated opportunities and erosyncratic opportunities. And healthcare, obviously, has come up a lot in our conversation. Some of the consumer-related equities has come up, too, but not as frequent as the healthcare theme. Okay. [01:00:35] Speaker 1: Is there opportunities in the consumer space, you still think? [01:00:38] Speaker 10: I think it's more alpha than beta, I think, given the fact that consumption trend as a whole remains quite soft in China. So we think that the recovery in the property market later this year could help, but maybe we're too early to take the consumer beta in the equity market for now. [01:00:55] Speaker 2: Okay. Kindred Lau there with the 10 indicators and signals and market pricing risk appetite to tell you how far along we are in this deleveraging cycle. Fantastic. Thank you so much, Derek, Chief China Equity Strategist at Goldman Sachs. Well, you know, AI will be the key focus for Tencent earnings out later today, a couple of hours. Its work buddy assistant is making an impact, but investors will be looking for further progress in the race against startups and big spending rivals. A fuller preview of the earnings coming through the next few hours with Bloomberg Intelligence that comes up in a couple of minutes. Stay with us for that. This is The China Show. All right. We've been talking about earnings a lot. Here's more. The muted look across earnings. Relatively speaking, yellow line is actual EPS on MSCI China. And certainly compared to previous peaks in previous years, we're still off the peak. It's about 18% on the latest actual EPS compared to the peak back in 2014. But you do notice, of course, on the silver lining side of this is earnings expectations have really picked up, which is the white line. And that gap has really opened up between what is and what could be, I think, is one way to put that. 90% of MSCI China reports over the next three weeks. [01:02:25] Speaker 1: Yeah, Tencent is going to be the first one. And really that kind of litmus test of how China tech is going to perform today, right? And AI, as we've been talking about, is going to be the big focus on, you know, are they seeing more traction when it comes to the deployment of AI? Certainly, we talked about WorkBuddy and what's going on there. Also, you know, are they willing or are they able to actually spend more in terms of the CapEx side of things to really compete with the rivals, with the deep pockets, right? The Babas of the world. And so a lot to unpack there. Let's bring in Bloomberg Intelligence. They say that Tencent's annual earnings growth likely slowed in the second quarter due to rising AI investment costs. Senior analyst Robert Lee joins us now. Why do you think the main reasons behind this slowing earnings growth for Tencent? Is it all on investments? [01:03:07] Speaker 11: Yes, I think that's one of the main reasons. And if you cast your mind back to the Q4 results, was that January or February, they announced the doubling of their AI investment spend this year. To some degree, playing catch up on competitors like Alibaba, which have been more on the front foot. So that is obviously going to be a margin drag this year, but that is well known and factored into consensus. Then the second issue is the games business over the last 18 months or so has been incredibly strong, both domestically and internationally. Now, with a higher base effect following a very strong year last year for their international business, we're going to see a slowdown. So that was previously driven by companies like Supercell, which are behind games like Brawl Stars. So that's a bit of a base effect. And again, slower top line growth than that. And then finally, their cloud business. I think they've cleared out a lot of their formerly loss making accounts. So that business is likely to be experiencing good top line growth. But as we've seen in Alibaba and others, the margin really isn't there. So I would say that's actually dilutive to their overall margin. And that is a lesser effect, but a third impact. So if you look at consensus numbers, I think the bottom line growth is going to slow to high single digits. You know, as usual, Tencent plays, you know, is a very conservative company. It's got a fantastic track record in terms of, well, there's no formal guidance, but in terms of delivering. So, you know, realistically, could they do low double digit? Yes. But compared to previous years where this business has been growing in the mid to high teens or even before that in the 20% range, this is a significant slowdown. But I think there's, you know, don't panic, no reason to be concerned. It's an investment phase, but it remains to be seen when that payoff comes. [01:04:53] Speaker 2: Yeah, it's tricky because they used to do, relatively speaking, very, very well, right? In the heyday, let's put it that way, before the AI story. But, you know, certainly AI has now taken up a lot of the mind space. And I wonder, is that just something for us to feel good about the company? Or are we actually looking at AI as a profit drive? Is that more a sentiment indicator than it is an actual fundamental driver? [01:05:16] Speaker 11: I think so. And that's true for the whole sector, really. Because, again, I would struggle to name any company within a China tech context that is really delivering substantial, you know, incremental upside at the bottom line as a result of their AI. You know, I would say as a generalization, AI at the moment is depressing margins within the sector because of the heavy investment costs, rising agentic A use. Because these services, tokens are priced as a loss leading service. So, again, that's another drag. And in terms of top line growth within the sector as a whole, we are seeing a little bit of growth coming through, particularly in the cloud sector. But, again, like Alibaba, the margins are dilutive to, you know, to the group. But going back to Tencent, yeah, I think the focus of tonight will be on their forthcoming AI agent, the integration of AI agent functionality into WeChat, or WeChat. So that should drive sentiment. But whether that is enough to drive the stock price remains to be seen because I very much doubt it's going to drive incremental upside to consensus earnings estimates. And also, you know, the backdrop of, you know, rising yields on the U.S., you know, potential strengthening U.S. dollar is not really conducive to a sort of bullish outlook for tech in general. But we will see. [01:06:31] Speaker 1: Yeah, we were talking about the valuation of Tencent. It just seems like it is not being reflected as an AI trade in any way, right? How do you think Tencent can sustainably compete within this whole AI race with companies like the PurePlay, Zhipu, Moonshot, that are grabbing a lot of the headlines now? [01:06:47] Speaker 11: Okay, I would say there's a broad parallel with what has gone on in the U.S. In the early stages of this AI boom, Apple came in for a lot of criticism and being behind the curve and not having a cloud business and really not being at the forefront of the AI wave. But consequently, you know, we've seen, you know, the big companies have yet to deliver significant upside as a result of their investments. And actually, Apple has looked at very differently these days. And whether that was by design or by accident, you know, they're licensing in the technology. They're focusing more to utilize AI to augment their existing platform. And the parallel was with Tencent because until Q1 of this or Q1, the first quarter this year, they were very much focused on using AI to drive internal synergies. Therefore, unlike Alibaba, we're less focused on external markets where they're effectively subsidizing China's national AI rollout. So I took that as a big positive. But, yeah, they're a little bit behind the curve. I think they've been very upfront about that. And as a result, they're doubling their AI spend. Whether, again, I don't think we're going to see any meaningful bottom line return on that investment, certainly not over the next 12 months and maybe longer. And last thing on Jupiter, Minimax, don't forget, in years gone by and still to some greater extent, they operate as a sort of quasi VC. They have stakes in most of these startups. So I think that's important to remember. And also versus Jupiter, Minimax, Tencent has got vast resources, financial developer. It's got the scope to integrate AI into Weixin. You know, this massive user system, huge base. So I think in the long run, it is the big tech platforms like Tencent, which are a much better place to win out in China's AI ecosystem. [01:08:38] Speaker 2: OK, it's one for any type of bull out there, isn't it? Almost like a self-bank vision fund, if you think about it. Rob, thank you so much. Robert Lee there, our senior analyst for Bloomberg Intelligence on sort of the many things that we can get into when you get to the Tencent story. By the way, for our subscribers here, you can check out your terminal for more on the earnings coming through. That should be late afternoon, early evening. If you're watching out of the Asia-Pacific, more generally, of course, I am aware that there are a lot of time zones here. T.L.I.V. Go on your Bloomberg terminal. All right, just very quickly, two stocks we're tracking. One is LG Electronics, and you probably see why it's garnering attention here. Morgan Stanley upgrading here. The company is quite a sizable move. This should be the biggest jump since early June. It takes you back about seven weeks in terms of the share price. The other stock we're tracking is Rakuten going into the Japanese lunch break. We're down substantially as much, well as much as 10% at one point. We're now down much more than that on the back of a smaller than expected profits for the second quarter. Lots more ahead. This is Bloomberg. [01:10:04] Speaker 1: 11.29 a.m. in Tokyo. Japanese markets are going into that lunch break in just a moment. We're seeing, yeah, moderate gains across the board when it comes to the Nikkei and topics here this morning. There was this Reuters report that we're watching very closely as well about the Japanese cabinet reshuffle. That likely may happen in mid-September or later, according to their sources here. So certainly that's one thing to watch. Also one thing to watch, dollar-yen getting pretty close to 160 once again. [01:10:43] Speaker 2: It's retraced almost halfway back, the drop from the intervention, which I guess goes to show it does buy you time, right? But markets will continue to push that. Okay, that's the story, I guess. We'll just have to just wait and see. A lot, by the way, will depend on where the exchange rate goes this time tomorrow, depending on the U.S. CPI print later today. The Asia-Pacific, we're doing okay, half of 1%. A lot of that is Korea. Some of that is in Taiwan. Japan is obviously also doing some bits when you look at some parts of that market. But yeah, Korea is just really gaining ground today. Again, 2% on the IT index, which is the first row left side of your screens as far as that goes. And yeah, so we've been talking about this, right? So we're looking at everything from macro, which has been on the softer side of things in China, to earnings. And how that is playing out is when you look at, say, an industry like car makers, for example, and I think some of the shipments that we've seen there coming through out of the auto space. [01:11:38] Speaker 1: Yeah, when you take it domestically, it's very different from what the export side of things looks like. When you take a look at some of these auto papers exports, surge 88% in July, with 41% of vehicles produced in China now being shipped abroad. Now, BYD was the biggest exporter of NEVs during that month. Let's bring in Linda Liu, our China automotive reporter. She joins us now from Beijing. Let's talk about what's happening domestically first, and what's really causing this sort of persistent sales slumps, it seems, in China. [01:12:11] Speaker 12: The domestic car market is facing a lot of challenges right now. The surge in oil prices during the Iran war has also hit demand in China towards gasoline vehicles. So you're seeing the whole market being dragged down by the slump in internal combustion engine cars, which fell by something like 40% in the month of July. And demand is also pretty weak for EVs and hybrids due to a scaling back of subsidies by the Chinese government. So their sales also slipped a little bit compared to last year. So essentially, these two different categories are facing prolonged weak demand this year. And so the challenges for these domestic car makers will persist for a while. [01:13:05] Speaker 2: Well, at some point, the overseas arm of these companies will be big enough to offset what we're seeing at home. I guess clearly not the case just yet. But are we seeing that move in that direction, Linda? Can the surge in exports help offset the weakness at home? [01:13:24] Speaker 12: That is definitely the trend we're seeing right now in the market. Exports and overseas sales have been a lifeline for a company like BYD. If you're just looking at their July sales, they grew it by more than 20% compared to last year. And a lot of that growth came from exports and sales overseas, which more than doubled. If you look at just their deliveries in the domestic China market, it actually fell compared to last year. So you're really seeing BYD relying on their exports for growth. So exports right now is still less than half of BYD's deliveries. But their CEO Wang Chuanfu said that in the future, it's very likely that the portion of exports will grow to more than half of what BYD's overall sales will be. If you look at another company like Cherry, China's largest car exporter, their overseas sales now make up nearly three quarters of what they sell. So the bigger companies that have gone overseas earlier is really accelerating this push to prioritize their overseas sales over their home markets. [01:14:35] Speaker 2: And has it become political? I know this is business and commercial, but it's plausible to see that happen, Linda. How will car exports impact geopolitics between China and its trading partners? [01:14:49] Speaker 12: Yeah, we're seeing the tensions ramp up even more as customers essentially all over the globe turn to Chinese EVs and hybrids to essentially address this challenge of surging oil prices. So in the European Union, the exports of hybrids from China have grown a lot because hybrids right now still enjoy a loophole where they don't have a tariff like what is being levied on EVs from China right now. So there are reports of the EU considering also introducing an import tax on hybrids. And there's also key markets like Mexico and Turkey that are essentially in the very tense trade negotiations and tit for tat with China right now because there's also surging exports to those markets. And to essentially try to protect domestic industries as well as attracting more investments. They've started to really raise these trade barriers higher against Chinese exports such as cars. So right now, I think the Chinese car makers will really have to consider how they can manage this geopolitical tension at a time when overseas markets are so important for them. [01:16:11] Speaker 2: Linda, thank you so much. Linda Liu there, our China automotive reporter in Beijing for us. Now, in some news out of China, just to sort of further the corporate overlay here, Xi'an is reportedly planning to take investor orders for its Hong Kong IP as soon as next week. That's according to the South China Morning Post, which is citing anonymous sources saying that the fast fashion retailer may seek evaluation of 35 billion US dollars. Now, the report also says the company is aiming to complete the process by the end of this month. Now, the Shenzhen Exchange has reportedly introduced indices for robotics, photovoltaic and smart driving stocks here. The China Securities Journal says that they actually track the 50 most valuable companies with strong liquidity in each industry. Now, the report says it's a bid to actually better facilitate investor access to industries that are actually part of the country's economic transformation. Meanwhile, you have the People's Daily posting a Global Times editorial on how Chinese investors are actually now moving away from Western benchmarks in humanoid robots. And the piece says China no longer accepts valuations set by others, but is beginning to define the value of the tech itself. Now, this certainly comes, and you might have seen the story about Unitary and people scrambling for allocation, massively oversubscribed their robotics. Officially, of course, opened its subscriptions for that IPO this week. Now, the company saw massive demand from retail investors and sold 40 million shares at about 150 renminbi agents. Wow. [01:17:47] Speaker 1: It's very interesting, too, because when you take a look at that whole Hang Seng tech review, and they're looking at an overhaul of adding 30, well, 30 to 50. [01:17:56] Speaker 2: Yeah. [01:17:57] Speaker 1: So adding 20 more. 20 more. And really, what they're looking at is industries like robotics, right? So that's the one thing to watch there when it comes to that review. Let's turn it back to South Korea, because certainly there seems to be a little bit more stability in this market. But the country is looking to deploy over $700 million of fresh capital into a new sovereign wealth fund next year, targeting AI and other strategic industries. The Deputy Minister for Innovation and Growth, Min Kyong Sol, told us exclusively about the government's latest push to get an edge in high-tech sectors. [01:18:33] Speaker 13: The Korean government, particularly recently, has been actively considering various ways to enhance international competitiveness and raise the declining potential growth rate through active investments in key high-tech strategic industries. Internationally, as recently discussed, we are pursuing active investment in regional areas, including the Honnam region, for three major mega-projects. Along with this, as a new initiative, we are actively pushing forward to establish a sovereign wealth fund, which we refer to as a strategic sovereign wealth fund, to actively lead investments in high-tech strategic industries. Through this, we aim to actively foster potential growth and proactively fulfill a role in responding to future challenges, such as population decline and increasing fiscal demands of various forms. Internationally, we understand that various types of investors, including sovereign wealth funds, PFs, and sovereign wealth funds in general, are considering investments in Korea. To serve as an anchor investor to attract investment into Korea and co-invest alongside these key international global investors, we are pushing for the establishment of this sovereign wealth fund. [01:19:52] Speaker 14: How much deployment are we talking about, for example, in a year out of this 20 trillion won? [01:20:00] Speaker 13: For next year, while exact details are difficult to specify, we estimate the investment amount could range from roughly 600 billion South Korean won on the lower end to over 1 trillion South Korean won on the higher end. [01:20:14] Speaker 14: Korea operates multiple state investments when it comes to these innovation technology sectors. So, how do you make sure that this new account doesn't overlap with other projects? Yes, you have raised a very important question. [01:20:34] Speaker 13: It is true that various funds led by government agencies are currently operating, and we are actively seeking ways to differentiate from those. For example, the National Growth Fund, which has been operating and investing since last year, aims to invest around 150 trillion Korean won. Its main focus is centered on loans or indirect investments through funds. In contrast, when we speak of the sovereign wealth fund, we plan to invest primarily with long-term patient capital and directly make equity investments rather than simple indirect investments, which differentiates it. Rather than solely focusing on differentiation, we are also actively considering co-investing together. If necessary, we use the term relay investment, where we actively consider taking over positions when major public funds seek to exit. [01:21:27] Speaker 14: Does that mean that it would actually include the possibility that given the funding is going to flow into stocks initially for this entity, that you could see actually buying, say, chip makers like Samsung, SK Hynix, or contributing to projects that some of these companies are involved in? [01:21:46] Speaker 13: Rather than investing in large enterprises like Samsung or SK, our interest lies in companies beyond the very early startup stage, what is typically referred to as Series B. Series B refers to companies whose business models have been somewhat validated and are at a stage ready to scale up. Among such companies, we are considering relay investments to support them in early-stage funds linked to public institutions' exit. As for companies like Samsung and SK, rather than government investment, we understand that many international firms are already interested in them, and the government currently has no plans to directly invest in large conglomerates like Samsung or SK through the sovereign wealth fund. [01:22:34] Speaker 1: And that was the South Korean Deputy Minister for Innovation and Growth, Min Kyung Seol, speaking exclusively to our very own Sherry Ahn. KOSPI is up some four this morning. This is Bloomberg. [01:22:59] Speaker ?: KOSPI is up some four this morning. [01:23:09] Speaker 2: Right. Welcome back. Let's talk about planes and high energy prices, and certainly the latter. An elevated jet fuel has really become a major financial challenge for a lot of carriers here in the Asia-Pacific, with certainly the impact ranging from sharp profit declines to outright losses in some cases. Now, the industry body representing carriers across the region says while passenger traffic is actually holding up quite well, airlines are still finding it difficult to offset rising costs. [01:23:38] Speaker 15: Well, you see fuel surge charges supplying and fares have generally have gone up, but by and large, I would say most carriers are quite glad to see actually demand still being holding off pretty well, holding up pretty well. We just, you know, come off the summer period right now, and I think bookings are still holding up quite well, which is a good relief. But still, nonetheless, all these fare increases, fuel surge charges that we're seeing, they're really not sufficient to offset the increasing costs, which is why you see from the April to June set of results that are coming out from various carriers reporting. Many of them, you know, would reflect that cost. On the top line side, revenues are still holding, which is a reflection, of course, of the, you know, strength in bookings. But as far as costs are concerned, that's still a headwind. [01:24:27] Speaker 16: Does a strength in bookings tell you that the average traveller is actually quite resilient to higher prices? Does that mean prices might stay high? [01:24:37] Speaker 15: It may hold at these levels, I would say, but I think airlines are very sensitive, of course, to, you know, how bookings are coming through. And coming off this particular summer, I think what's important is looking ahead into towards the end of the year and see how bookings are actually coming through. The other potential risk, of course, is, you know, whether customers are going to get used to these levels or are they going to come off? And then the other ugly risk that, you know, people are concerned about is whether there's inflation also going to be kicking in and that might impact, obviously, the degree of bookings. [01:25:11] Speaker 16: The flip side of that resilience is I do wonder if you're seeing any indications of unfair pricing or price gouging over the past six months? [01:25:19] Speaker 15: I wouldn't say so. I think if you would see, if you see that happening, I think prices, obviously, you know, are very, very sensitive and they would adjust very quickly. At this point, you know, from what are my observations around the region, that hasn't really been the case. [01:25:35] Speaker 16: The recent half-year traffic stats actually show a dip in passages overall of just over 1% year on year. For the next six months, the rest of the year, what's your outlook? [01:25:45] Speaker 15: I would say we are a little bit tentative, meaning to say, I mean, the first two to three months, July, August, being the summer, I think we're going to have a decent set of top-line revenues coming through. But I think the risk is obviously coming off that from the final quarter of the year. I suspect that might be some headwinds that we would see as far as demand also. Cost, I suspect, it's really hard to tell, you know, given the changes in condition. But of course, we all want to see a better relief coming out from the Strait of Hormuz, where fuel prices maybe can ease off. I mean, it is still high. I think nonetheless, airlines are pretty much prepared. Some airlines are hedging, and even if they're hedging, I think their prices have already gone up. And those that are not, you know, just completely exposed, that continues to be a risk for airlines operating into the end of the year. So they have done some adjustments. Some airlines have started to rationalize some capacity, maybe, you know, cutting some flights from six flights a day to, you know, two or three flights a day, as far as short-haul frequencies are concerned. Some have cut back on some capacity to some degree, but I think it's a different strategy for a different carrier. [01:26:57] Speaker 1: And that was the AAPA Director General, Wong Hong, speaking to Heidi there, really about maybe because of what we've been seeing with jet fuel prices, tickets and ticket pricing might still be pretty elevated. Yesterday, it was interesting, too, when we talked about with the Hong Kong and Shanghai Hotel CEO, Benjamin Buschel, they obviously operate the Peninsula Hotels, very iconic. I can say, look, they still think luxury travel is still quite resilient. And as opposed to, you know, what they're seeing when it comes to inbound travel into China, he's seeing signs of maybe even international travelers are coming back. Here's more of what he had to say. [01:27:31] Speaker 17: There's no doubt that the outbound travel coming from China has been a little bit more muted over the past few years. We're definitely seeing a reversal of that trend, particularly in North Asia. That's something we're seeing now, you know, in Japan. We're seeing it, of course, in our success in Hong Kong. I'm hearing cases that we're not yet there, but I'm hearing also Korea is benefiting a lot from the resurgence of travel from mainland China. [01:28:04] Speaker 1: Sorry, I meant outbound travel. So outbound travel is still a bit muted. But inbound travel, they're saying, from foreign travelers is starting to pick up a little bit now, too. So it's quite interesting how things have changed a little bit. [01:28:15] Speaker 2: Yeah, a lot of what they've done in terms of sort of visa-free access, I think the soft power influence you're seeing in social media and really highlighting the, you know. [01:28:25] Speaker 1: The China maxing. [01:28:25] Speaker 2: The China maxing across China. I mean, you know, everywhere I look, it's almost 1 in 10 is almost about Chongqing, for example, or Chengdu, right? [01:28:34] Speaker 1: Lijiang. I get a lot of friends going to Lijiang over the summer as well. [01:28:39] Speaker 2: Shangri-La, right? Yes, yes, yes, yes, yes. There we go. You know, I'm like, Lijiang. Yes, well, that takes us nicely into this next segment, which, when you look at domestic spending in China, might still be sluggish. But this really push, this push to lure more foreign visitors into mainland China appears to be paying off, right? First half of this year, 18 million people, 1-8, arrived from visa-free countries to the point we just made. They're pushing overall arrivals up by 20%. Min Min Lo is here with us with the numbers to talk us through this recovery in inbound tourism. [01:29:08] Speaker 7: Yeah, it's really taken about five, six years to recover to above pre-pandemic levels. So that's quite significant. And it's partly because of the concerted effort by the government, right? Since 2023, they have introduced visa-free policies to 50 countries. And there is a concerted effort by all the different local governments across China as well. Some of them have increased their tourism budget. They're providing incentives for travel agencies if they offer, say, foreign language tour guides. And even, for example, yeah, a lot of government policies. And then when you talk about the global geopolitical context as well, people's views towards China has become more favorable, according to Pew Research, right? Especially in most of the countries that they have surveyed. And it's coming against the backdrop of this worsening view towards the U.S. So perhaps people are a little bit more open to travel to China. And the other reason you talk about airlines earlier, the Iran war has, in fact, caused more passengers to switch to Chinese airlines because they're avoiding transiting in the Middle East. So why not transit in Beijing or Shanghai instead? And many of these Chinese airlines are a lot cheaper. So that's another reason why people are traveling to China as well. [01:30:21] Speaker 1: I was looking at the story and really they broke it down by the visitors that go to Beijing, right? It's interesting, right? The change from 2019 to now, the biggest tourist origins was Russia, Vietnam and Mongolia. It's quite interesting, the mix there. But tell us more. I mean, what does it mean for growth? You know, does it have a big impact? [01:30:39] Speaker 7: Yeah. And speaking of the mix, what's interesting is who is not coming to China? No surprise, the Japanese. And the U.S. Yes. [01:30:47] Speaker 2: It's probably the weak yen. [01:30:50] Speaker 7: And the whole Takaiichi issue. But yeah, in terms of concrete impact, yes, we're seeing tourism levels going above pre-pandemic levels. But then according to Chinese media, it's still just about half a percent of the GDP. And that still really pales in comparison to very mature tourist destinations like Spain or Thailand, where you're getting 8 percent of the GDP coming from tourism. Per capita spending is still lagging as well. It's about 40 percent of what travelers to the U.S. spend, for example. But there are still some pretty intangible ROI because, you know, we were showing the pictures just now, Nanjing Silu, Walking Street in Shanghai. We spoke to some of the shops there and they tell us that, for example, in peak hours, 70 percent of the footfall are foreign tourists. And for Minnesota, one of the shops there, their overseas receipts are surpassing their domestic sales now. So for many of these companies, you know, when the travelers come, they experience the new products, new Chinese experiences. They go back home. They may continue to buy through e-commerce channels. So it's laying the path for these companies to expand overseas in the future as well. [01:31:59] Speaker 1: All right. Min Min, thank you. Min Min Lo there, our China correspondent. Of course, you can rewatch that hit. And of course, all the interviews that we've been tracking and talking to people on our video hub. Subscribers can explore our live streams, news and interviews there. Check it out at Bloomberg.com forward slash videos. [01:32:14] Speaker 2: OK, Korea has given us something to talk about today. What's rather actually when you look at across these markets, not really a lot. Korea is like, as you can see on price, it's now at session highs. You are getting Samsung up by seven and a half SK Hynix. Yeah, we're still trying to ascertain, really, to give you an elucidation of what's happening there. But so far, not a lot of details, just speculation for now. [01:32:52] Speaker 1: Yeah, but certainly there is a bit more bright spots coming back in Korea in some ways. You see how Samsung, SK Hynix, I think the U.S. hyperscaler's earnings picture has been getting more clarity on what the memory space is going to look like in the back half of this year. This is Bloomberg.