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• 00:00You’re looking at live pictures now from the APEC leaders Summit in South Korea. We are live for you from going through South Korea this morning, 10 a.m. here in the city where Chinese President Xi Jinping is expected to speak later on. You’re watching the China show. I’m Yvonne Man. Good morning to all of you. I’m David Ingles here in Hong Kong. We’re also counting down to the final sessions of the week, Hong Kong, Shanghai and Shenzhen. Let’s hear your top stories today. Stocks across Asia-Pacific are set for a second week of gains, as you can see on the screen Right behind me here, you have trade optimism where Avon is following President Trump’s meeting with Chinese President Xi Jinping. But we had disappointing earnings out of China, could drag on sentiment yet be wide in focus this hour, reporting a 33% slide in profits that does industry Competition continues to heat up. But Apple shrugging off a slump in sales in China as it forecast a bumper holiday sales season led by the latest iPhones. All right. The focus now moves from booze on back to your go to South Korea Day this morning. Of course, as we mentioned, CCTV reporting this morning that Xi Jinping is expected to make that speech here at the leaders summit. And really, we’ll see what he has to say. Right. The whole theme of this leaders summit as the 21 leaders gather, is really going to be about economic cooperation in the face of a changing world order. And, you know, whether he mentions anything about what happened yesterday, where, you know, President Trump and she did try to dial down the temperature and really try to ease their ongoing trade war. Yeah, I mean, 12 out of ten, I believe, is how the US president rated that speech, ten being the best. And I think that really sets us up, I think nicely. When you look at risk assets, you’re looking at live pictures right now, I believe. There we go. That is the Chinese president, Xi Jinping, arriving among these this list, this long list of leaders, one by one, making their way into the venue. And, of course, we are expecting, based on what state media have reported in the last let’s call it, 30 minutes or so, a speech coming through out of the Chinese president today. We’ll keep an eye on that. In terms of the exact timings, we’re still trying to figure that out. But in any case, of course, lots of things to watch really. On the back of that meeting yesterday, Divine was covering. And if you think about it, this reset for about a year, we’ll talk again in about a year. Scott Best said in his interview with Fox News, talking about how in about a year’s time, they do expect to be back at the negotiating table to take stock of what they’ve done last 12 months or so. And what this really means for the further and longer term relationship between between the two things. But yeah, Yvonne, it’s been extremely busy where you are. Get us up to speed. What’s going on right now? Outside, outside the venue. Well, as you say. Right, President, she is very just shook hands with the South Korean president, Lee Jae Mun. And there’s going to be a lot of bilateral meetings happening here now that President Trump has gone back to the White House. It is the spotlight is back on the Chinese president here when it comes to diplomacy, sort of things. We talked about Takeuchi and Lee Jae Yong meeting yesterday. Takeuchi, now the newly elected prime minister of Japan, is expected to meet with Xi Jinping. She wanted a summit with the Chinese president here. Of course, there has been long talks about whether we do see some sort of try out between South Korea, Japan and China as well. And yeah, as you talk about this whole trade deal, one year truce certainly doesn’t show. And it’s hard to kind of say this is an inflection point in some ways. But yes, we did see both sides willing to dial down the temperature here. Let’s bring in our chief Asia correspondent, Stephen Engle. He joins us now from the outside of the APEC leaders summit venue on what’s really in store here today, Steve. And really, we’re still talking about what came out of these trade negotiations between Trump as well as yesterday on Twitter. Well, I agree with you that the focus now switches to Xi Jinping. So interestingly, we had Donald Trump for the first couple of days, then they met at the airport yesterday and he flew back to Washington. And then it was Xi Jinping’s turn to take his role here at APEC and also meet with the leaders as well, that Donald Trump, some of whom he met. Of course, he’s going to have a likely meeting today with Mark Carney, the prime minister of Canada. And you mentioned Cynthia Tucker from Japan also later today. But we will be watching and listening closely to Xi Jinping speech today. I expect it to be a similar type, a speech that he’s given in the past where it needs to be, you know, a rules based global order and multilateralism instead of unilateralism or bilateralism and promoting a rules based order for global trade. Whether he uses the word after 24 hours after meeting Donald Trump bullying, which is a common word that the Beijing authorities have used in a not so veiled reference to the United States. Will also be interesting to see what the springboard from that fairly cordial meeting with Xi Jinping with Donald Trump will be like going forward. You mentioned about this one year pause and then we’ll renegotiate every year is essentially what Donald Trump has been saying. He says it will be routinely extended this trade truce that they came to a meeting of the minds yesterday on. But it doesn’t resolve the long standing structural issues and the competitive nature of the two nations. So we’ll have to see every year we might be seeing what we had previously seen in past US and Chinese administrations, and that is sort of a strategic and economic dialogue held every year to get over some of those nitpicky issues that kind of build up and build up and become bigger issues over time. So I’d like to see how that, you know, transpires going forward. But one thing that is clear, Jamieson Greer, the US trade representative, fresh back from the Asia trip speaking on Fox News, was essentially saying, We’re not scrapping this investigation, which they launched a week ago into China’s compliance of the first trade deal from the first Trump administration. You know, we thought a lot of these issues would be tabled for a while, tabled for a year. But Jamison Greer says, no, we’re going to continue with this investigation because, again, China had committed to buying a significant amount of corn, a significant amount of soybeans that last time. But according to the corn and soybean associations, they fell far short of that commitment. Granted, the pandemic happened after that trade deal happened. So that kind of disrupted a lot of those commitments. Steve, we’ll be back with you later on. Of course, Stephen Engle outside a venue there where as you can see on your screens right now, some of the world leaders are already gathering there for this APEC leaders summit that’s about to begin. We understand from state media, just to reiterate that, that Chinese President Xi Jinping is set to speak today there at the summit. Okay. We will table that for now. It certainly provided a platform for risk assets to do quite well. Let me caveat that by also saying when you look at the US futures, for example, a lot of this is also down to the massive after hours move we’re seeing in the likes of Apple. So we are getting a decent run up into the weekend here. When you look at Asian stocks, two straight weeks, global stocks extending that by a week to three straight weeks. We’ll look at Bhiwadi a bit later on, of course, as we look ahead to these earnings and the earnings reaction there. In fact, later on, I’ll show you just what happened overnight and some of the listings there. Dollar is softer following that massive repricing around the Fed. We’re coming off the best day for the dollar in several weeks at 12, 17, 12, 18. We’re back to the highest levels there since July on the US dollar yields also, as you can see, have picked up from 24 hours back. We’ll talk about Japan in a moment because there’s a bit of a new ones here with the inflation print, which did come through a bit hotter than expected. So we’ve come off the 154 handle very quickly on metals. I won’t spend too much time on this, but this large industry group, the top industry group in China, effectively calling for a ceiling on capacity. Golden Dragon Index. A lot of the big tech plays overnight in focus. Massive move down in care Web Baidu. And as you can see why we did was off 4%. We’re looking at about a similar amount in terms of the indications going into the open today and a50 futures coming up on your screens. The opening bell 21 minutes away. We should be pointing slightly higher on 50 coming up. There we go, 2/10 of 1%. Right. What else to watch if only we bring it back in. So we have, of course, Chinese President Xi. He is set to speak. What else are you tracking, Yvonne? Yeah. So we’ll see how these the speech goes. CCTV say it’s Friday morning, so we’ll bring it to you once we hear more. And really what we’re talking about is the handover ceremony. Right? Because Apex does move to China next year. So that is kind of part of the theme here at APEC as well. You mentioned about Biden, it was a 33% hit or slump in quarterly profit. So it could be a big one there for the EV sector. And we’re watching, of course, this tech rout. As we’ve mentioned, we have some echo data coming out of China as well as in Hong Kong here today. We’re focusing on the Apple story here on the suppliers in particular, because it was the guidance, right, this blockbuster holiday season when it came to iPhone sales that really set the stock flying after hours as well. And still we’re still talking about some earnings a little bit later on here also. So certainly going to be a big one. Li Auto, Zhejiang Expressway, all reporting results today. We’re going on to back to live now ads. Of course, those live pictures certainly in just a moment. Want to bring that in. But David, let’s talk a bit more about earnings. Right. It’s still kind of a key thing here beyond just the geopolitics and what we’ve been dealing here in gold, you guys. Yeah. And they’ve been trying to balance really and just the finite amount of air time and space we have here in the show is just really been a challenge. And I think it’s a really that’s that’s a good problem to have that takes us back into in fact, I think I’m just looking back, we had my camera notes please and Apple. Thank you so much. I think I just pass it on there. So. Okay. We’ll talk about Apple here. So the actual results were okay. The guidance actually was the one that the market reacted to. We were up three or 4% in after hours session. Really good guidance as it pertains to this surge that they are expecting ahead of the holiday season. Addison Lee is with us right now, head of China Tech Telecom and software research at Jefferies. He joins us right now to talk us through these earnings. He, of course, has an underperform rating on Apple. They put that rating back, I think, about three or four weeks back up. Edison, good morning and thanks for our thanks for coming and thanks for coming on the show. So just help us understand how are you thinking about Apple now following well for one year downgrade three weeks ago? And do these earnings make you change your mind in any way? ADDISON Well, I think that the iPhone sales are certainly better than expected, but I also think that it is driven mainly by very smart and aggressive pricing by Apple. So number one, on the pro max model, they have raised prices three years in a row, even though costs are rising. And I think that they’ve priced a base model pretty aggressively. This year was double the memory of charging you the same price. And that also allows them to get into government subsidy program in China. And that’s why that is driving pretty strong growth in China. But I think that going into next year, there will inevitably be more margin pressure because memory price is going through the roof. And I think Apple is moving to two nanometer as well next year. And that’s why I think that they have to raise price next year. Okay. What does it mean for demand? Well, I think with the price increases, you cannot be too aggressive in your demand forecast. If you look at the sales situation five from 17 this year, it actually tells you that demand for iPhones is actually price sensitive. Right. Because there are no brand new features that your existing iPhone cannot do. So that’s why if you’re price if you’re priced aggressively, there won’t be replacement demand. If you price at high, then the replacement demand may not materialize. How does that sort of get your take on Apple and China? I mean, 14 and a half billion last quarter in terms of revenue that was fell short of estimates here and really following some 3% or more. You know, it seems like they’re really kind of being, you know, competing and actually losing out a lot of competition locally there. When do you see Apple returning to growth in the mainland? Well, in fact, I’m not that worried about China because, as I said, they priced a base model of 17 more aggressively in China than outside of China. My estimate is that the price in China is actually at 10% lower than outside of China. And we have seen critical demand based on some data points that we spotted. And we think that fourth quarter they will actually get back to positive growth. But of course, as I said, if they are priced aggressively every year, there will be margin implication. So this year, I think it’s a very smart pricing strategy and there is government subsidy, which is actually helping iPhone sales in China. Alison, you’re one of the few in the street that actually has an underperform on the stock. I believe you’re just one of four. Can you tell us what you know? What what what’s behind that sort of call here right now? I know you mentioned that a lot of the optimism around iPhones is really in the price. What else do you think is the rest of the market missing? I think that the entire smartphone market is a very mature market and this replacement demand is price sensitive. And if there are no brand new features such as, hey, I can actually convince most of the consumers to buy a new phone right away, I think that that will eventually be slowed down and there will be eventually bottom pressure. As I said earlier, component costs are rising, particularly right now because of the memory pricing is rising. And that’s why if they raised the price to cover additional cost, that actually can impact demand unless there are brand new features. But at the moment, we are not really seeing brand new features driven by AI that is telling consumers that you need to buy a new phone because our existing phones would not have those functions. And that’s why that replacement cycle. I think that’s what the bullish investors or analysts are looking for, which is accelerate the replacement cycle. But so far what we are seeing is that it’s more price sensitive and the strong demand is actually driven by more aggressive pricing or disciplined pricing than new features. Yeah, clearly Edison’s thinner making the iPhone thinner is not not, not not enough as far as you’re concerned. Addison, if I could just ask you about, well, Chinese tech, if we could pivot our attention there. So I want to ask you about show me. So what’s happened with the stock and what do you think the market’s pricing in? Do you think this is just profit taking that’s taking place? Because I also believe I understand that you think the sell side might be a little bit too optimistic over the stock price. What’s your thinking on Show Me. I think that the smartphone business is under more structural pressure, mainly because, as I said, Apple is pricing to over 17 more aggressively, and that actually will make it harder for any Android brands to move upmarket. And then I think the majority of their sales outside of China on smartphones are still mid to low end. And that will also put them under more margin pressure when memory prices continue to go up. But we like the ecosystem a lot. We like the EV business, we also like the Iot business. And we think that they are probably the only consumer electronics player in the industry that can actually offer this unique ecosystem. And every item that they sell collects data that allows me to understand the consumer’s daily habits even more deeply than the lack of Apple. And that’s why we think that longer term, the ecosystem is still very unique. There is a lot of potential that shall be potentially we’ll be able to offer that allows them to continue to gain share and also increase their ESP. But it is true that in the short term there is more pressure, mainly because of rising component costs for the smartphone and also Apple becoming more aggressive and trying to defend market share in the lack of China. Addison, What we got here from Amberson was that when it came to these discussions around chips in the U.S.. BLACKWELL That A.I. processor line premier video was not discussed in China. That is still something that, you know, Chinese companies cannot get access to right now. Is there anything actionable on news like this? Should I be kind of looking still more on some of these homegrown chip makers? Are they likely to benefit from news like that? I think longer term, China definitely wants to be able to make its own chips. So I’m actually not sure about how much interest China has in buying the more advanced U.S. air chips. But of course, China is somewhat capacity constrained, grow on semiconductor, mainly because they are also restricted by the US on stepping up equipment, even though the two leaders did not really talk about chips yesterday. But I’m sure that is going to be part of the discussions over the next three months and there will be more details that the two teams will have to work on over the next three months. So that’s why I think yesterday the major announcement made by President Trump, I think is more on the key points he wants to advertise to the market. I think there are still a lot of work that needs to be done by the two teams on exactly how they can actually reconcile the differences and how they can best think, how they can actually move things forward. Otherwise, if there is no agreement or consensus on those differences, I think it’s difficult to have a sustainable trade deal. All right, Edison, thank you so much for the time, sir. Appreciate it as always. Talk again soon. Edison Lee, they’re head of China Tech Telecom and software at at Jeffries for us. Right. We’re just under 12 minutes to the opening bell. Shanghai, Shenzhen. And here in Hong Kong, the final session of the week is just ahead. A full preview of everything that’s in store today. You could fit everything in in shows today. Happy Friday to all of you. Good morning. This is the China show. Right. One stock in focus be wide. We’re almost at the brink of 100, but down three and a half percent. Bad earnings coming through 33%. We’ll talk more about this in a moment. Plus, of course, HSBC joins us in about an hour’s time to further unpack these earnings and what it really means for the stock price moving moving forward. Right. Let’s get it back directly on more broader markets right now. Given all the events this week, earnings, monetary policy meetings and, of course, geopolitics in Korea. Joining us this morning is Christie Todd, investment strategist at Franklin Templeton Institute. Kristie, good morning and thank you for coming on the show. The US president. I’m just reading the headline here from the left hailing this summit, a 12 out of ten. Does that mean we can relegate now geopolitical risk trade tensions further down that risk spectrum? I think that is. I would say that, you know, that is a Warren’s a discount to that to that rating. Right. The Didi Boston summit definitely did deliver some progress. And this was achieved, you know, in in terms of diffusing the global trade tensions. But I would say that to extend that to say that the geopolitical risk premium has declined significantly, I think that would be a bit far fetched at this juncture. And but there is a positive tone that is being built on the bilateral trade discussions. And it’s not just between U.S. and China, but also in early part of the week between U.S., Korea and even Japan. So we are definitely looking at, you know, these deals or frameworks being developed. Right. And overall, I think definitely what’s been achieved is a de-escalation of the global trade tension. Okay, So if that’s the case, can I continue to buy Chinese equities? What’s in store for the rest of the year? Well, for Chinese equities and I recall that we have this conversation sometime last year, and we’ve been constructive and bullish on Chinese equities since. And should we continue that level of optimism on Chinese equities? I think the answer is yes. Well, mainly because there is this policy support that is coming out from the fourth plenum, and this is about rebalancing growth. This is about attaining the quality of growth. And a lot of focus is increasingly on private consumption and investments. Yes, we have heard about this before, but I think there is a more targeted approach going ahead. And because this is the start of the next five year plan, the the GDP target of 4.5 to 5%, I think that will be implicitly the continued long term target. And in order to meet that objective, a lot of the policy measures have to deliver, have to start delivering. And we’re talking about, you know, private consumption measures. We’re talking about the development of tag on air space. So if you’re looking at where to invest in China, a few of the sectors that have recently caught investors attention is that, you know, there has been some kind of a shift in sentiment. I think investors are still adopting some cautious sentiment on China. But there has been a shift from, say, growth or the tech sector to the value of the dividend sectors. But having said that, I think that this is not something that will continue to persist in the concentration of one sector to it to another. But there is this theme that is, you know, we are definitely have been delivering that this basically that the market is broadening so the market’s broadening outside of the US, the markets broadening also within Asia and definitely within China. Yeah. More stocks in focus, Christy. We’ll have more with you in a couple of minutes or Christie Time will be staying with us. She’s, of course, with Franklin Templeton. We’ll be revisiting that, of course, in a couple of minutes at the open. Just very quickly, going into the open today, so pre-market to coming up within days. We’re in the thick of earnings season. B Bhiwadi is one of the names we’re tracking. The other one being China Vancouver, which reported a deeper loss. But in terms of BYU, there we go. A market reaction is one that is clearly to the downside. We’re down three and a half percent and that other stocks we’re tracking going into the open today. You have the idea, of course, coming up on your screens, you’ve seen a Costco shipping China. Vanco, I think give or take, we’re about 80 plus percent into the earnings season. MSCI China specifically, most have actually missed on revenue. And also as far as income go, it’s now the other side to that story is markets have actually been rather lenient. They’ve actually reacted more positively that negatively on the first day after their earnings release. We’ll have a look at the data in closer detail up yet banks as always. Anyway this is the back story Apple suppliers in focus following the guidance coming to out of Apple overnight futures are up after hours are up US futures are up bad. Yeah nothing much to tell you about as far as this is concerned. Also coming up, by the way, PMI numbers coming out of China in about just over 3 minutes from now. We’ll get to those numbers once they do break. Plus, of course, we also have some economic numbers coming out of Hong Kong. September retail sales plus GDP numbers are coming through as well. Here in Hong Kong. The opening bell is just over 3 minutes away. We are going into the weekend with some momentum across the Asia-Pacific. May be the same. Can’t be said when you look at these greater Chinese markets. Plenty more ahead here on the China show. Good morning. Welcome back. Happy Friday. You’re watching the Chinese show. What kind of market opens there in the mainland and here in Hong Kong. And certainly we are still waiting for the dust to settle on this whole trade deal between us and China. Seems like investors are putting back on the back of their minds here. Right now, we’re focusing a bit more on the earnings side of things by deriding in a free market is showing here. It could be a big of a drop here at the open. But certainly the focus here at API, really Dave, is going to be Xi Jinping the spotlight back of the Chinese president now that President Trump has returned to the White House and that speech, he’s going to have it any moment now, it seems. Yeah, we’ll wait for that, of course. And what he says and how he addresses, of course, given the theme, of course, there of sort of inclusive economic cooperation, given the changing world order, is certainly a really good context following also that reset in relations and that reset in economic dialogue over the next we’ll see you in 12 months, I guess is one thing. It does open up the door, though, to visits. Right. Donald Trump to China. And shortly after that, I believe this in terms of the sequence of events is perhaps the a visit of the Chinese president to the United States. All that is just to say we’re looking at markets right now, an uneventful open, a lot more pressure coming through in tech, which is really what the the price overnight did indicate, the likes of Alibaba and Baidu coming up shortly on your screens, perhaps following the move down in the US session overnight. The also the other story as well as be wide that’s going to be coming up on your screens very shortly on the back of those earnings release that’s come through and not a good set of results. Amendment will be joining us in a couple of minutes to all look at that. We’ve now taken out the 100 level and B, while we’re down about 5%. Yeah, market’s not taking this one. Not taking this one. Well, just very quickly, before we turn it over now to Amendment four, a breakdown of that if you’re looking at the PMI numbers. Yes. So we’re taking a look at when it comes to manufacturing. PMI, that was a miss at 49 for October. So, yes, that was for a 49.6 print. And this is showing another further softening of these numbers here and marking our seventh straight month where these PMI numbers have been in contraction. You’re seeing that quick whipsaw in the renminbi here, seeing a bit of weakness in the back of these numbers. But yes, there is a bit of caveat around it. But given the fact that this was, of course, during that national holiday. So seasonality is one thing of maybe why the numbers were a little bit weaker here. There was a bit of a holiday lull, also maybe some uncertainty around the threats of U.S. tariff escalation as well. So there you go, 49 when it comes to manufacturing PMI, when it comes to the non-manufacturing side of things, that was in line, we’re talking about 50.1. So still, when it comes to that expansion on the non-manufacturing side, Dave. Yeah. I mean, the currency is telling you already how bad this number is, right? We’re looking at some really visible weakness coming through in the Chinese currency. More context, What they want, they want us to think of at 49, it actually missed everything. It missed all the forecasts there. So seasonal adjustments being made, You would imagine, of course, that somehow that should have been taken into consideration when you look at these forecasts. But yeah, that that also just means to say it’s also more difficult to extrapolate a projection because of the seasonality factor, just to obviously split the difference anyway. Okay. Let’s turn our attention now to another one that perhaps also missing the mark here, which is earnings, and that is be wide, 33% down. That’s quarterly profit. That’s year in year. To be more specific, you had domestic competition. You also have a drop in revenue as well. Let’s bring in our China correspondent, M.E. Lowe, here in Hong Kong. And the stock price reaction is already quite telling on this one. Yeah, and it wasn’t that long ago that this company was making headlines for beating Tesla and sales. But now there is increasingly a lot of concern over its possible profitability because it’s down 33% this quarter. That follows from the second quarter, a decline of 3% in net income. And this time the sales was also down 3%, vehicle deliveries down 1.8%, and the company already cut its goal this year by about 16% in terms of vehicle sales. And the only bright spot now is the overseas push, because overseas sales was up 160%. And this company has been doing very well in the EU, In the UK, the EU, for example, it saw a five fold increase last month on year. It’s also just launched this mini car in Japan, the first one that it’s launched after, I think I believe its first product that its launch in Japan. And that’s a notoriously difficult market. And this mini car expected to do a little bit better from it than its previous products. But still the overseas sales are not enough to offset that margin pressure domestically because of the intense price competition. I might have trouble line. Yeah, maybe. Then what’s next, right? If even overseas expansion, I think because Joanna Chan told us, you know, it’s a pivotal year 2026 for that. Still not enough to offset what’s happening domestically. How can it recover from what’s going on domestically? Yes. So so overseas expansion is one pot is really doing very well in the developed markets like the EU and the UK. It’s also expanding into emerging markets like South Africa, heavy investments there to build out the infrastructure, the charging stations there. But domestically, quarter four is expected to look a little bit better because consumers are expected to front load any purchases to make use of any existing subsidies that could expire by next year, because we’re still not sure whether the Chinese government will renew those ¥300 billion subsidy program next year. So next year, 2026 sales is going to be under a lot of scrutiny. But one of the reasons why sales has been lagging in the third quarter, some analysts say, is because Buick has been focusing on destocking its current inventory as it looks towards new product launches in 2026. So any tech upgrade, new product mixes, those could be new catalysts for growth. Online. You guys now. All right. Admit that you’re a China correspondent there with a breakdown on the idea, of course, that we talk about. Those shares continue to be falling here this morning. We’re going continue the conversation around Bhiwadi. Coming up, we’ve got HSBC Global Research’s Eugen Ding joining us to explain why they’re still maintaining a buy rating for the stock did. Yeah and b b, why not buy it? Okay. Kirsty Tong is still with us, investment strategist at Franklin Templeton Institute Kristie. So the so we talked about the Apple story, Amazon decent earnings out of US tech. We have this fantastic piece that’s out on the Bloomberg today that talks about when you look at the Asia-Pacific, South Korea SK Hynix Samsung you look at Japan Adventist, you know the role of tech in investment strategy. How do we need to be looking at concentration risk in equity markets, Right? Oh, that’s a really interesting question. So one of the themes that we have mentioned, you know, that we think will play out across 2026 is essentially the theme of broadening. So we are not just saying that the concentration risk in the in the US, I think that is reflected with regards to the market cap of the seven that has shown some signs of broadening and and broadening will actually be positive for continued bullishness in the equity markets. And we think that applies as well across Asia Pacific and the broadening same extending from the US over to Asia. So if we are looking at I think you’ve seen the latest results out of China with regards to the IB makers, right? So you’re looking at some sectors that has, you know, done well in the past, but but needs, you know, a certain push, you know, booster to continue to do well but the underinvested sectors as you know if you’re looking at just China and even I think the concentration risk in South Korea is significant. Right. I think the huge outperformance in the Korean equity markets was up 70% year to date in the Class B is essentially a highlight highlighting debt concentration risk. And we do think that for the econ for the equity markets to continue to to to to some extent is strength that’s broadening a trend. Well emerging out of a just a concentration in some Solara as Hynix that will be a precursor to better performance or strength continues strength in the Korean equity markets. So in China in foreign investors are still underweight. Right. And we do think that, you know, there has been a lot more optimism that is been building not in the space because that’s essentially where the the involution or excess capacity and perhaps reduction in demand will will emerge as, you know, problems and potentially structural. But in terms of China, the high tech fuels that is around A.I., around robotics, biotechnology, automation that continues to show signs of growth and progress. And we are looking at two indicators going forward right along with the broadening theme. One is liquidity. So where the market’s liquid, again, where liquidity is actually flowing into this markets, we think that this market will do well. So definitely where interest rates are being reduced and we seen this happening globally, this markets will continue to be fed with a lot of liquidity and earnings. So earnings is the other important driver for these markets to continue to attract capital. And we do think that, you know, this earnings season, as we have seen in the US, is pretty good. I think 85% of those that have reported earnings thus far has shown know beat expectations. And we like to see that happening across Asia Pacific as well, be it in Korea or increasingly in Japan and also, you know, in in China and some of the Asian counters. Yeah. Chris, you mentioned about the Fed in the face of all this. I think the market up until maybe this week thought we were going to see rate cuts in December. I think Jay Powell really kind of poured cold water on that and this latest FOMC decision, how should I be looking at that? Is that going to be a tailwind that basically has now have to be reduced in this market? Because I think we saw overnight markets react to that. Right. And the Fed has definitely raised the probability that the October cut yesterday was going to be the last for the year. And that’s not being priced in yet by markets, but potentially markets could start to price in the other extreme as well, that this could well be the last cut in the whole cycle. So after all, I think it could be justified that inflation environment is still around 3%, so it’s still elevated. And at the same time, I think, you know, Fed Chairman Powell shows that, you know, there are two dissenters as well. So the Fed is getting more and more divisive in terms of a policy direction. So we’ve seen that, you know, the December rate cut, expectations being tapered to around 60% or so from above 80%. And I think going forward, we could potentially still continue to see debt markets priced out, expectations of more rate cuts. And in that effect, is that going to be a huge negative driver for for the U.S. equities markets? Now the Fed is not cutting, also suggests that the economy is not tanking. So I think we’re looking at the economy is still showing signs of resilience and which also means that, you know, if you look a little lower at the companies and companies performance, we want to see all these air and the CapEx spending into these sectors being delivered as productivity gains or as savings in companies that are deploying this air and automation. And so that will help to improve company’s bottom line as well. So I think that is the offsetting factor which a lot of investors are definitely looking beyond what the Fed policy will do. So the economy is resilient. Company earnings will still continue to deliver and we’ll start to see the productivity gains from the deployment and from the return in all of these CapEx is showing up. So I think that will be supportive of risk assets. All right. So bullish. Thank you so much, Christine Time. Happy Friday. Have a good weekend ahead. Happy Friday. That Franklin Templeton Institute, right? We’ll take a short break. Time for a stretch to stretch your legs, what have you. Whatever floats your boat. We’ll be back in a couple of minutes. Welcome back to the show and some other headlines that we’re tracking for you this morning. Changing memory technology says that it has begun mass producing an advanced type of chip for mobile devices. It’s become the first Chinese company to compete in a field dominated by foreign players like Samsung. The company says it started shipping the advanced chips to unnamed clients. Bloomberg has learned that Germany is considering using public funds to pay Deutsche Telekom and other operators to replace FireWire equipment. Sources say the cost could exceed $2.3 billion, and this also means public funds will be used to upgrade Germany’s digital infrastructure, which lags behind many other European countries. Right. Let’s talk about the concentration risk. Right. The role of the dominance to be let me rephrase that. The dominance of tech in this rally, in this frenzy over artificial intelligence has really helped Asian stocks really perform. I mean, just look at Korea, for example. It’s also transforming, by the way, the markets here in the region in a way that actually has fund managers racing to keep up. Quite a dilemma there. When you have mandates that limit you to a certain degree, to a certain stocks. When you she was here with us, our Asia equities reporter to talk us through her piece for today. Concentration risk in Asian markets. How do we need to be looking at this? Yeah, exactly. It is that big change I think this year that’s changing the market quite a bit. So you look at different angles. This is right because for example, for the TAIEX, we have the TSMC approaching 45% of the whole index and then Samsung plus SK, Hynix, about 30% of overall coffee and also Nikkei 2 to 5. Now you have Aventis, right, taking the top number one weighting of the entire index. So it seems like really we are seeing this tech dominance in Asia, which doesn’t usually is the case. So it was usually a bit more traditional, but it’s now more tech dominant. And we are seeing that investors are really changing their approach for Leos and changing their strategies around. This is interesting. Yeah. What kind of issues does it create for for fund managers? What do you hear and how are they navigating all this now? Yeah, exactly. So especially for the investors that are investing against the benchmark of Asia ex-Japan. So for example, they have right now with the benchmark TSMC already crossing that 10% level. So right now TSMC accounts for about 12%. So you have a lot of funds having that cap of limiting their individual stock exposure to less than 10%. So that means that they actually need to find other opportunities to make sure that they don’t underperform these benchmarks. So some of the examples that we are hearing is that, one, you pick some of the comp, the ones that have these competitive moats, whether it’s Tencent, Foxconn industrials. So investors piling into these names or they’re looking for opportunities along TSMC supply chain. So some of these Taiwanese tech names are also benefiting from that kind of shift. So for these investors with that cap, you are seeing that kind of rotation and for investors that are benchmarking towards, for example, the MSCI Asia, then you have TSMC or other companies slightly less than 10% on the benchmark. So these fund managers are really just rushing to add further tech exposure to match the benchmarks gains. Are we expecting this trend to continue for the time being? I think that’s really the narrative, especially when you see all these surprise earnings right at Ventas. Like I think they lifted their earnings outlook and also saying that they are expecting this boom to last for multiyear and also Samsung. SK Hynix also surprise the upside. So these are the the new or fresh catalysts that are pushing for tech to really continue its rally in Asia. But also beyond that, when we spoke to when you the other day from Bank of America, she was also telling us that this is a multiyear theme and that China, Japan and India actually provides more diversification opportunities. So even when we have tech dominance in Asia, it’s still less of a risk compared to the US. There we go. This is our this is a job, a our version of weight shaming. Look at TSMC as we know, which is pointing out. Right. We’re nearing 50%. TSMC is waiting on the index. The rest, a couple of hundred more are the other side of that fantastic piece. Wendy, thank you so much. We need you there on the latest. You can read, by the way, the take today. There we go on your screens on the Bloomberg terminal. That’s also on Bloomberg dot com. Plenty more ahead. Right. Welcome back. So in case you missed this, we we did just get the the latest official PMI numbers a few minutes back, and it’s the manufacturing gauge, actually. So a streak of below 50 is number one. And number two is when you look at the forecast, the estimates at 49.6, that’s the median. If you look at a low and that’s actually even higher than the actual numbers. So this one actually missed just about everything, but also seasonal with golden week. So you do have that somewhat of an aberration there. But does this actually indicate that the October activity numbers, which should be in a couple of weeks to two weeks or so, might also be on the softer side of things? The currency certainly adjusted once we did get that print coming through. Okay, that’s the number for now. We will just have a look at earnings, too. So you have the likes of well, not abide by the Bob. And by the way, we’re just really on the tax base as well. We are getting some pressure there. But it is one to watch given the reaction that we’re seeing or allergic reaction to the earnings. We were down as much as 6% at one point. So you had a 33% drop in net income, a lot less, but still a drop in revenue. And we’re going up against the possibility possibility because of we don’t know what what will happen to the subsidies next year. But HSBC will be joining us in about 40 minutes from now. They do see the possibility of a demand cliff going into next year around the subsidies conversation on EVs. Right. But when you look at the overseas market, so their preference is actually if you if you go with OEMs, pick the OEMs with a big presence outside, be white is a very good example of that. But if you had to pick within the supply chain, within the auto sector, it’s OEM. Well, it’s not. It’s suppliers over OEMs anyway. I’m not going to say enough, say more. And still the thunder of opting you chant. He’ll be joining us in about 40 minutes. Now the other things worth noting is we’re looking at the banks. Can I also ask my producers to bring up the summary of this earnings season so far? It would be good to touch on that as well. Yeah, nothing happened in the back to change the place. William Yeah, with earnings as well yesterday. And of course the day before we did get earnings coming through out of large amounts. Yeah, nothing much here. Okay. What else do we talk about. Is it on there. Let me, I can bring on in Iran what’s going on and what’s going on where you are. Yeah. You have all the leaders. Go ahead. Go ahead. Yes. Yeah. You know, we’re still waiting for when President Xi oversighted to make that speech. CCTV says somewhere Friday morning. Our schedules suggest that in the later afternoon that we’re going to have this handover ceremony. So we’re still kind of figuring out the timing of this. But you talked about some of the key bailouts that Xi Jinping had is a pretty busy day of diplomacy after, of course, this big trade deal with the US was at least finalized in some way yesterday in Busan. So. Right. So she’s meeting with Carney, also meeting with Takeuchi later on today. And as well, she’s going to meet with Lee Jae Gun, the South Korean president, on Saturday as well. So still looking at a bit more. A busy day when it comes to the Chinese president here today. But yeah, you mentioned that PMI number. I think it’s the longest streak of declines we’ve seen for that PMI number of manufacturing sizes in almost a decade. Right. It begs the question whether we’re going to see a bit more stimulus come through from policymakers the next coming weeks or months. Yeah. Yeah. I mean, we’ll see. We’ll see. I think given the fact that, you know, maybe slightly getting a better picture in exports because of the tariff conversation. Will unpack all of those themes the next hour of the China show is just ahead. Welcome back to the China show. Here’s a look at the site a half hour into the session. And yes, when it comes to China and the US really dialing down the temperature and trying to ease trade tensions, it looks like that story. We look past that here right now and we are seeing that a little bit of downside when it comes to Chinese equities here this morning. Shares saying downside about 4/10 of 1%. I think earnings has been certainly one disappointment there. You look at things like the big ideas, like the liquor maker’s like kweichow moutai. We are here this morning as well. We are seeing some decent misses when it comes to the earnings picture in China. Dave. Yeah, I think it really sums up I think very I think quite accurately what we’ve seen so far. When you look at the earnings picture, MSCI China is about 80% in give or take. And I think most about 60% have actually missed the mark where we have data, of course, to compare the actual to the estimates and I think slightly less about 50, just over 50% have missed on on the top line. So when you look at the underlying state of the economy, it’s really does underscore the challenges there. You have 40 now which missed every single forecast. The benchmarks are coming up. What is coming up, bottom up, the screens just to underscore as well, some of the pressure we’re seeing now. This doesn’t also captured the entire picture as it pertains to equity markets in the region today. Right. Because on top of all of this, you have the Apple story and the after hours move there and the lift that’s actually giving. Can we look at Chinese benchmarks, please? That’s actually giving to us futures, For example, we get we’ll get into the other sort of non China related themes in a moment. There’s also a Japanese interesting Japanese story today with the two year auction, I believe, and dollar yen, which was above 154 or below that following the inflation print, which it says effectively clears the path for a rate hike at the next next meeting. So week is coming through, although we’re coming off lows a little bit on each step. We were down over 1% a few minutes ago. Right. Just in case we’re looking at support level one that has held on MSCI China. Bottom of the screens, 8770 is the 50 day, which at one point last few weeks or so, there was it was at risk of a firm break of that level. We did manage to close above that. And the last four instances we’ve tested that has proved to be fairly resilient. So catch me when I fall. Catch you. I will. When you fall. If you fall. Okay. One, let me bring you back in. Thank you very much. Yes. I always hope you can catch me when I fall to David. So that’s how we’ve got each other, right? When you take a look at these equity markets as well. And what’s really supportive is certainly one thing is that, you know, we have seen at least both sides, the U.S. and China here in South Korea have worked to at least de-escalate the latest flare up in trade tensions. Right. You talk about, you know, the fact that the U.S. was able to kind of resume the flow of rare earths soybeans. On the flipside, China able to actually bring down tariff levels, at least the U.S. was able to bring down tariff levels to 47% for China. That should still keep the manufacturing base in China, relatively speaking, competitive to this part of the world. So certainly there are some tangibles here. Morgan Stanley is coming out with that latest note saying it’s a truce, but not quite a treaty here, because given that there was no sort of joint readout and nothing kind of was signed, there is still some vulnerabilities that things could fall apart. Right. Let’s get to our chief political correspondent, David Engel. He is joining us now live outside a leaders summit here in Jeonju. As we kick off and countdown, of course, to that speech from Xi Jinping. Steve, what’s on tap today? Well, it wasn’t really. Well, first of all, let me talk about yesterday. Just picking up on what you just said. It really wasn’t a trade treaty, was it? It was a trade agreement between Donald Trump and Xi Jinping based on the framework agreement that the two sides and the negotiators finally came to agreement on after five sessions of meetings, whether it’s in London, Geneva and then Kuala Lumpur. So the the big question now is what is going to be the follow through? Because we’ve been down this road before. We’ve seen progress only to backslide because of various issues that do crop up, whether it be economic or geopolitical. So, again, it’s good that they’re going to revisit this. That’s what Donald Trump says. We have a deal. Now, every year we’ll renegotiate. The deal routinely extended is how he put it. But already we are hearing from the U.S. Trade representative, Jamison Greer, speaking on Fox Business, essentially saying that, you know, we’re still going ahead with that investigation, launched a little bit about a week ago into China’s compliance in the first trade deal where the US Corn Association and the Soybean Association say China fell well short of its pledges to buy about $80 billion worth of American ag products between 2020 and 2021. Granted, the pandemic happened, the world shut down. So there is a bit of a path on that front. But again, we have to see the follow through from the United States and also follow through from China. Now spinning forward to today. Donald Trump back in D.C. It’s Xi Jinping stage right now. He’s going to be meeting with Mark Carney of Canada, meeting with Cineteca of Japan. He’ll be giving a speech we’re hearing at some point this today. So it will be his opportunity to kind of give what I expect to be a similar type of speech, and that is, you know, supporting the multilateral approach to global trade. Yvonne. Steve, let me let Steve, let me step in here because I just want to ask you to what your sense of the next 12 months. Right. So it seems will be operating on the sort of 12 month, you know, forward 12 month window where there’s going to be a reset? Can we at least assume that the temperature has been brought down enough that the next 12 months will be at least better and more predictable than the last 12 months? Absolutely. The temperature has been brought down, but it’s like a fever. It could spike upwards pretty quickly depending on what happens. Right. Or what does not happen. Meaning if there is not compliance or perceived non compliance on these agreements. Right. So there’s going to be sticking points. Even Xi Jinping mentioned that when you have the two worlds, the world’s two biggest economies, the world’s two biggest superpower, there’s going they’re not always going to see eye to eye. There will be friction from time to time. The key, though, is to use this as a springboard to make sure that that friction does not turn into an outright fracas. Right. So, again, it doesn’t necessarily mean there is peace between the two countries. It means there is a prolonged truce that they need to have continual dialogue and continual back channel discussions. I think that is going to be key. Keep in mind, we have five meetings behind the scenes with the negotiators, whether it was Scott Bessant in Hurley Fung, Lee Chang, Gong of the Chinese, and also Jamison Greer. Howard Lutnick was involved. They got this a meeting yesterday, Don, after five meetings, previous administrations of the United States and previous presidents of China had ascribed to strategic economic dialogues held every year to smooth out these issues. They scrapped that in the last decade. So, you know, there are proponents who say we need this constant dialogue. Yes. Xi Jinping, Donald Trump had three phone calls in the last six months. They had multiple letters written to each other. They have constant contact. That’s what Xi Jinping says. But it was not enough, obviously, over the last six months to diffuse what was tit for tat retaliation on each other’s moves. Yeah, that is a good point there, Steve. At least you know there are too willing to me, right? We talked about April potentially there where I know Trump is going to visit Xi Jinping in China, followed by President Xi visiting the U.S. So certainly that means the exchange could continue, maybe well on to at least a year. We’ll see what happens, what comes next after that. Our chief political correspondent Stephen Engle there joining us there outside a leaders summit here and Georgia. We’ve got more ahead coming up. This is a China show. All right. We’re joining you live from Yeong Drew here, of course, as we’re expected to hear from President Xi later on today as well. And certainly coming on the back of what has been talked about as a pretty successful discussions between Presidents Trump and Xi. Let’s bring in our next guest, Jonathan Martin, who is the Michael H. Armacost chair in foreign policy studies at the Brookings Institute. He’s also a former China director at the U.S. National Security Council. Jonathan, it’s great to have you on the program. You know, obviously we talk about the politics aside, we to take a look at when it comes to the optics, right? Everything seems quite positive and flattery is certainly helps in all these discussions. I’m just wondering beyond just the optics. How long can this day time between U.S. and China last? I think that this is likely to prove pretty ephemeral. I think there was some ambiguity in terms of the agreement. Right. Like even with the railroad that control said that they were ordered previously that they would not be making sales for U.S. defense industry, for instance. Right. And I think we’ve seen this play out in previous iterations of the trade negotiation. Right. Where the deal kind of marks the beginning of the actual negotiations of the two sides have a contest over what was actually encompassed in the negotiation. Right. So I think that that is probably likely to be the story here again as well. It seems like with China, by holding off on rare earths and holding off on buying U.S. soybeans, they were able to at least bring down effective tariffs as well as relaxed export curbs from the U.S.. Who do you think at the end of the day came out stronger in these trade talks? I think definitely China. I mean, they conceded very little. And I think what those those rarer export controls signified in the run up to this meeting is that Xi Jinping, the past year, reacting to U.S. policy initiatives, was really shifting from playing defense to playing offense. Right. And I think what was key was for him and from Beijing’s perspective, where the Trump administration is to mollify Beijing over the previous six months. Relation and apparently a correct one that he could make this move with him not with impunity, but that it would be useful for extracting concessions from the state. Played his hand quite well going into this round of. Jonathan David here. I think we’re going to work out your audio. I think we’re looking at some issues there with with with Jonathan’s idea. We’ll try and sort that for you and we’ll try and get him back once we’re able to work out some of the tech cobwebs there and some of the gremlins and hopefully they stay on the sidelines. Before we before we get to that, though, and bring him back on was quite timely as well. We are getting some lines coming to. Let me just bring up my my headlines here as far as this meeting, the APEC leaders summit is concerned. So we are hearing from Xinhua official media reporting the Chinese president, in what context and whether he’s speaking in a speech or to leaders is unclear. But some of the lines coming through here talking about how the Chinese president is calling to safeguard multilateral trading system, she is calling to build open regional economic environment and also to be promoting investment and liberalise investments, of course, a more inclusive trade conversation. He’s also calling an effort to jointly keep that supply chain stable. Okay, that’s a bit more pronounced than directed given the recent news flow, but so far that’s all we know so far. We’ll get you more details. Once we have more information coming through. We’ll take a short break and we’ll see you on the other side of it. This is the China show. All right. We continue to get some lines crossing here from President Xi Jinping, according to Xinhua, where he is addressing AIPAC. And this is what we’re seeing so far. So jointly maintain the stability of supply chains and is urging deeper cooperation in the financial field, but are really calling a joint to sort of collaboration to keep industrial supply chains stable and smooth and to promote digitalization and the greening of trade as well. So really kind of honing in, as Dave mentioned, this whole theme of inclusive development here and really trying to not to close the door to the outside world, but only open and it’s still wider. I think it’s a message to the world that, you know, China is still open for business and still wanting to do more. Of course, in terms of deals here, this on the back of what we heard from this trade truce between the U.S. and China, at least when it came to rare earths, that they are at least suspending the export of curbs of those critical minerals here for at least a year. And that was really what led to a lot of concerns around supply chains, the possible disruptions on that, given that these predominantly are going to everything from EVs and high tech technology. So certainly they’re sending a message that there’s nothing to worry about and really reassuring the APEC leaders out there Hear this as we continue to see more from that speech. We’ll get a bit more once we do see it here. Still with us as Jonathan Zane, who’s a michael H. Armacost chair in Foreign Policy Studies at the Brookings Institution, also former China director at the U. As National Security Council, John, that hopefully we fixed all the tech sort of glitches and the like here. I want to get your take on when it came to wood chips and really we didn’t get much clarity on really what the U.S. approach is when it comes to chip exports. What do you think is going to be the strategy way of war from the US? Because it seems like Maxwell Blackwill, I should say, was not in these talks. How much more clarity can we get on that front? Yeah, and I think what’s really striking from President Trump’s comments on the plane is how much ambiguity he left about this right when he was asked on Air Force One about this. He said, well, that’s between Jensen Huang and the Chinese companies, and we’re just the referee. You know, my my sense is maybe that he was considering actually moving forward with some kind of deal and may have gotten walked back from it. But it’s unclear and it seems like he left the door, if not wide open, then at least ajar to this possibility. But and I think what Beijing has done effectively in these discussions is after the Trump administration rolled back the export controls on the h-20, instead of taking up the Trump administration and the video on that offer, what Beijing did instead was squeeze in a video. And I think this is very much one of their tactics, that they don’t punish their enemies necessarily. They punish their friends. And what this has led to is the video lobbying very hard for an additional rollback of export controls on their on their access. Jonathan David here. I want to get your sense. So what? It’s so I was trying to I was trying to think this through this morning because there was so many details that came out in terms of what, quote unquote, was was achieved. And, you know, not to take anything away from it was it was there was some progress on many multiple specific issues. But I just had a look at that same list. And it seems as if both sides simply took back their initial threats to each other. And some of them, I guess they they really hard in their positions ahead of these talks and simply remove those those barriers. And I wonder, is are either is either side actually better off net net or are we simply back to square one, let’s call it 12 months ago? Yeah, I think that’s right. I think this is back to status quo ante. This is like World War One style fighting, right where there’s advancement and then you just revert back to your trenches. Right. And I think well, I think for Beijing in particular, that’s a win, because they did not want a trade war in the first place. Right. So and I think their their game in this is to play for time as much as possible. Right. So a turn to a status quo ante may not be totally comfortable for them, but I think it’s far more preferable. But I think what they’ve effectively done as part of their negotiating tactics is orchestrate a game of whack a mole for the Trump administration. Right. So the the really meaty and substantive trade and macroeconomic concerns that ostensibly animated the trade war in the first place, none of those have really been addressed in so far as I can tell in these negotiations. Instead, what the negotiations have centered on are these relatively narrow sectoral concerns or even specific terms like tax rates or we’re talking about soybeans and we’re talking about chips, rather than talking about the trade imbalances that President Trump seems so preoccupied with at the outset of his administration. John. And we were able to see that China using these sort of sweeping curbs on on rare earths, that they were able to at least put a cap on export curbs on the U.S.. I mean, this is as we start to see China, you know, try to at least develop itself into this sort of tech industrial superpower. Are we likely to see more examples of China really changing the rules on trade as it becomes more of a sophisticated manufacturer? Oh, I think so. I think so. I think this is the center of the wedge, and I think it’s a reflection of the industrial might that they have developed in recent years. But they have this chokehold in the first place. But I don’t know if it broke up earlier, but I think politically and diplomatically, I think what we saw in the past month is that Xi Jinping, after spending most of the past year reacting to U.S. policy initiatives, was really shifting from playing defense to playing offense and trying to take the initiative and shape and control the tempo and tenor of the bilateral relationship. And I think if that is the case, I think that we will likely see more of these kind of bold moves in the coming year, especially because my understanding is that the Trump administration is not yet done with the tariffs and trade measures that it wants to roll out, that there will still be additional trade investigations and sectoral tariffs will very likely be coming down the pike in the coming year, which will give Beijing plenty of pretext to make more big moves like this or a rollback. The agreements that they that they reached just yesterday. You know, the one thing that I think Trump didn’t really budge on, or at least that wasn’t discussed, was Taiwan. And Trump mentioned that Taiwan was not even brought to the table this time around. Why do you think there was a bit of hesitation on the Chinese side this time around on this? I think it’s twofold. One possibility that I’ve heard is that China, instead of wanting to go shady over this, wants to take a principled position and say, this is not negotiable, this is our position and we’re not going to make it part of a trade discussion or some other kind of negotiation. So that’s one possibility. I think what’s more likely, though, is that I don’t think that they trust that Trump will will actually stick to any kind of change and ready to anchor verbiage on the Taiwan issue, even if they push flags. Right. I mean, the changes that we’re talking about for you know, for those of us who are kind of watchers and for the region are quite significant. But the difference between not supporting Taiwan’s independence versus opposing it, which is the change that Beijing was pushing for, you know, that that subtlety can be can be lost on any senior leader. And I think there is concern that even if Trump utter the words that they wanted him to, that it wouldn’t necessarily result in the kind of policy changes that they would necessarily want to see and to. Well, speaking of that, Jonathan, was there anything you think not announced publicly that actually could have been discussed privately among the two sides that might have material consequence in terms of just forming the next 12 months? What do you think? What are the sort of known unknowns at this point to the public? Yeah, I mean, a couple of the known unknowns. I was a little surprised, frankly, that Tick tock did not come up during this conversation, especially since they have been such a point of focus previously. And I think more broadly, getting to how to this idea of how Beijing has orchestrated this game of whack a mole for for the United States. You know, it’s a relatively truncated conversation. A lot of the strategic issues that have been a source of tension and conflict, not just Taiwan, but also South China Sea. China’s broader posture in the Indo-Pacific region, those don’t seem to have really come up either in these conversations as well. So compared to other bilateral engagements, especially at this level, the seems feels like a pretty truncated conversation overall. And I think it’s reflective of the administration’s approach to China, which is really, really suffered to some degree of trade myopia. Right? To the extent that they’re focused on China, they’re really focused first and foremost on trade issues, tech issues and maybe some some other adjacent issues as well. Rather, what was also not discussed, it seems, was was oil. Despite these new sanctions from the U.S. on Russia, should we expect the U.S. to be a bit more loose when it comes to enforcing these new sanctions on Russia when it comes to China? It’s possible. I mean, I do think it’s notable that President Trump said that they did talk about talk about Ukraine and that he claimed that Trump said. Trump said that she had had made positive remarks on this. But, you know, Beijing is very much part of the problem rather than the solution here. So I think that is if there is not kind of uniform imposition of sanctions, Beijing will see that as getting off the hook for their support, their extensive support for Moscow’s war against Ukraine. Jonathan, thank you so much, sir, for the time Jonathan said there. Michael H. Armacost, the chair of Foreign Policy Studies at the Brookings Institution here, is he was also a former director of for China at the US National Security Council. Just before we just take a short break, we’ll just take you to this note coming out of Morgan Stanley on this very topic. So good, but not maybe good Enough is enough, though, with what’s happened there to maybe put some slight upside and risk to their forecast for next year. But of course, some of the thorny issues will persist. This is former. 11:29 a.m. in Tokyo. Japanese markets are hanging out. Lunch break here right now and we are talking a little bit more about, well, equity markets are doing quite well. Nikkei is up 1.2%. You’re still seeing some strength crossing to the Japanese currency, one 5375. But still, you know, we’re still kind of digesting all the lines that we got from the BOJ, of course, this week as well. Those Tokyo CPI numbers certainly as one thing to watch here this morning. Overall, consumer prices were higher than expected, their 2.8% year on year Dave. Yeah, we’ll get the view from how that actually changes, if not cements or even solidifies the view on a Biogen, that hike that’s coming out of Bloomberg Economics in a moment. But just very quickly, so what’s that done to the yen trade? So first the market had to react and reprice on a more of slightly more hawkish Fed. So we’re coming off really one of the strongest days for the US dollar in several weeks. The Bloomberg dollar index case in point, strongest in about three months that it took Japan to above 154. And then we got that CPI print, which then took it a little bit below 150 for JGBs. Also in focus because we do have the two year auction, I believe, in about an hour or so. And let’s look at the curve and we’re slightly yeah, we’re pretty much down, but not by a lot across the JGB curve there if on. All right. Our team at Bloomberg Economics has been reacting, of course, to that hot Tokyo CPI print. They’re saying that rating really puts the DOJ on course for an early rate hike. We also did hear from BOJ governor Kazuo, who weighed on Thursday following the decision to keep rates on hold in the authoritarian we held today. As we want to see more data on domestic wage setting behaviors. While uncertainty remains high in overseas economies. If we’re convinced we’ll adjust rates regardless of the political situation. Let’s bring in Charlie Chamorro from the economics. He joins us live from our Tokyo studios here this morning. Taro tells it more about your take on the data. I mean, this was a surprisingly hot inflation print column, right? Today’s Tokyo CPI for October, which is an early indicator for national gains. So this is very important. This is actually hot like it’s it’s jumped from 2.4 to 2.8. Of course, it’s partly half of it. It’s more than half of it is driven by Tokyo metropolitan government policy to stop the waiver for their water charges, which is indifferent to the national cases. But still, I think the reading is very hot compared to the broader market expectations, particularly for services inflation. There are inflation acceleration in certain labour intensive services such as hotel fees, as well as some leisure activities reflecting a recovery in consumer spending as well as what what captured my eyes was the rebound in goods inflation such as home appliances such as the refrigerator, which which was in deflationary trend because of reflecting the recent strengthening of of the yen entering this year. But probably it’s picking up again because of the latest weakening of the yen. So it’s the I guess to your point there, it’s the inflation that matters, not so much the water, you know, water build adjustments or hotel prices. So what does it mean for the BOJ? What stood out to you from the meeting yesterday in the press briefing? Of course, the hotter inflation, I think, raised the odds for the BOJ’s rate hike in December. In my point of view, it’s a matter of timing that inflation is hot and I think markets agree with that. So the the what to watch is whether the BOJ is going to hike in December or later in January. And but at the same time, today’s data doesn’t lock in the December hike because the edge of the inflation jump is centered around volatile hotel fees as well as some home appliances. That doesn’t mean the BOJ can confirm the underlying inflation is picking up and weather is still cautious on the timing of the rate hike because the lesson from last August market jolt is the reminder that the Bank of Japan is still a major central bank in the world and its rate hike could trigger jittery markets. So therefore they also need to navigate the domestic political situation, particularly when the stimulus prime minister is now in the office. So therefore, I think the BOJ will hike either in December or January when markets and Japanese political and inflation data are conducive. Takemura our senior Japan economist in Tokyo for us at Bloomberg Economics there. Just to pivot the conversation, sir, from Japan, we’re looking at earnings specifically we’re looking at BYU and some of the automakers. So we’re down about four. We were down as much as six or over 6% at one point. And in fact, we were trading at about nine, I think it was 98. So we’re back above, which is strange for me to say, a back above the centennial level here on the share price. Our next guest actually maintains a buy rating on the stock, does see a recovery underway that positions BYU for a stronger quarter ahead. Joining us here on set is du Chien is head of China Auto Research at HSBC Global Research. Very nice to see you here. Thank you, David. So what worries you about these earnings and what does it worry you? Yeah, sure. So, first of all, is a recovery quarter or transition quarter. Oh, so we already know like quote unquote, our perspective, the volume even down a little bit. But we do demonstrate a strong earnings resilience supported by the price discipline and OpEx efficiency. And I got to say, the company is geared for a much stronger fourth quarter and 2026 and six is actually the real story here. So we’re in a first quarter BE why are you going to push the Super E platform where they’re going to lead the technology innovation and also followed by a portfolio portfolio model cycle refresh and also they have a. Very strong global reach where the pricing environment is much more favorable, so does the margin. Additionally, last but not the least, I would say the wide conservative accounting treatment is a hidden asset which allowed there being accelerating depreciation, so which allowed them more earnings flexibility in the coming two years. That’s that that’s cute when they do that Right. It’s not very obvious in the financial performance. Okay. What so 2026 is the year to watch what happens if we don’t get more subsidies? Yeah, I would say broadly, that’s why the OEM sector has been weak lately because we’re now sitting out the fourth quarter peak season. But everyone knows this because partly because of the front loading sales, because the subsidy is going to phase out by the end of the year. And also the the the EV tax exemption going to be halved starting from the beginning of the next. So we are getting the hits is probably followed by a first quarter demand demand cliff. So we are going through with this this kind of cyclicality so but that’s also create a very favorable if any better sell done that should create a good entry opportunity for lira stock like beauty. What about when it comes to the overseas expansion? It seems like there’s it’s going to be a pretty pivotal year next year, 2026. You can they’re talking about ramping up operations in Brazil, Indonesia, Hungary and the like. I mean, how likely do you think that’s going to offset what we’re seeing domestically in China? Yeah, sure. So I was a domestic in a home market, and we do see it might reclaim part of the domestic market share back next year because they are going to have a platform refresh. Usually big idea has been leading the technology innovation, which will give them more pricing power and a content competitiveness in the domestic market. So once they started to refresh the portfolio, we do see the domestic market, they will be reclaiming the market share and for the oversea it will stay solid. They are shooting towards 1.6 million next year from a base of 0.92.., but around 2.9 million this year. So of a not to a low base. They are still going to sustain strong growth since there have been localized localized in their global plans which will support their product pipeline and also brand presence in a broader global market. And I would stress the global pricing and margin environment is much more favorable. So we would say a strong pillar from the oversea also to support and provide a buffer for the domestic market. Yeah, I want to keep positive as was sort of the improvement that we’re seeing in gross margins. Right. I think some of the cost reductions in the second quarter certainly help with that. We’re talking about what, 17.6% for gross margins. Now, are we likely to see it basically stay around the high teens? What’s your expectation? Yes, I would say starting from fourth quarter and into next year, would we expect the margin to continue to improve? I mean, the major factor we’re watching in the fourth quarter versus the quarter would be a much, much, much improved economic scale. Let’s say volume. We forecast the fourth quarter volume versus third quarter will be quote unquote, a growth will be more than 30%. So a significant economic scale and also a better product mix with a support on the margin side. The let’s I want to broaden the view across the sector because you covered not just the OEMs, right? So if you had to pick, are you do you prefer OEMs or do you prefer something down the supply chain like big suppliers, for example? What’s a more risk reward? What’s better for investors? Yep, For the current quarter, we would say quality supplier, especially the supplier names with more global exposure such as Catl, such as if we are glass. So from a earnings perspective, we know OEM is sitting on the fourth quarter cyclical peak and next the first quarter next year is going to be more volatility being seen in earnings over there. So I would say, you know, in the current quarter and potentially next quarter, we would see a supplier in relative terms among the auto universe better position than the OEM in general. The it seems that both beaten both on the OEM and supplier side, one of the criteria using is really overseas market exposure. Is that a good barometer in terms of being able to pick at least the near-term winners? I would say in a general sense it is because generally, no matter who is OEM or the suppliers, obviously exposure do speak for better margin and a pricing moment. So generally, obviously, business is carries higher weight in terms of the profit contribution than the volume or the revenue share. But I think there’s a but coming, it looks like you’re going to. Okay, what’s that? What’s the qualifier that if there’s a domestic market. What’s the what’s what are the theme, the key the key drivers there, domestically speaking, domestic speaking. I would say it’s about whether you have the key differentiation, let’s say in China, you have a new product cycle. If you have a technology edge, that will be the key differentiation. Yeah. Okay. I know we talked about this before, this anti involution conversation, and it’s down to at least as far as the OEM are concerned, almost self-policing. Are you seeing any signs of price? This price pressure is starting to go away, price competition starting to abate. Yeah, great question. I know. So I think we will need to demonstrate very strong price discipline since the anti-evolution. But I think we do see like from industry perspective, many laggards has been refreshed a new model at a very relatively low price. So they have been gaining market share from a shorter period of time. So we do see the consolidation is taking a pass. That’s the what we’ve been observing in the past a quarter. So it’s basically reversing the overall consolidation trend that we’ve been talking about. But starting from next year, we do see the trend of probably reverse back on track to the industry ultimately is still due for a thorough consolidation. So because be why are you going to have the new platform and they can refresh their portfolio where they can reset the pricing. So I think the dynamic would change, although currently it’s a still lagging nurturing. Consolidation is a still taking a pulse, but we do believe that is going to reverse starting from next year. And, you know, I know the assumption is the the end of subsidies this year is that is that base case? Is there any indication that we could get some version of that extended into or introduce reintroduced next year? What’s that? What are some of the scenarios for gaming out? Sure. So, so far, we don’t have the clarification. And I would say if I’m the policymaker, I wouldn’t tell you until the end of the year. If I tell you it’s going to extended, you will not buy. So, so far, we don’t have it. But let’s say usually by the end of the year or early next, we will get more visibility. So far, the industry or the sales channel, the OEM is still building the base case, the subsidy going to phase out. So I’m going to push the sales by the end of the year as much as possible. Fantastic. Thank you so much. It’s always great to see you and speak with you. Great insights there out of HSBC. That’s dig you Chander, head of China Auto Research at HSBC Global Global Research. Okay, Yvonne, I believe we have some breaking news right now. What? It’s. Yeah, Why do you take over? What do we know and what are we seeing here? Okay. We are just getting some lines, of course, from the Federal Aviation Administration. In the US, they’re issuing a ground stop at the Newark Liberty Airport. They’re on staffing. So this has been something that we’ve been tracking all week here. They’re issuing that ground stop citing staffing issues. So we’ll see. We hear a bit more. I mean, yesterday they were already talking about average delays of 40 minutes due to some of the staffing issues. So certainly that’s one thing to watch here and that’s happening in Newark here this morning. We’ve got plenty more ahead. This is Bloomberg. Right. Welcome back. You watching the China show? It’s time for our Trending in China segment. We’re looking at some of what is really making headlines across Chinese media and national newspapers, sparking conversation. When you look at parts of social media, some state media, and certainly the big story, of course, this week was a big meeting. And you have state media portraying the meeting between the two presidents as vital for steering relations between the two large economies since beginning in mainland China. Correspondent On what the tone is like when you look across this sort of broad spectrum of media. Yeah, I would say it is mildly positive, but there has been a flurry of these state media editorials across the different platforms from Xinhua to Global Times, the China Daily and People’s Daily. And the theme here, they are all quoting heavily from Presidency’s remarks of President Trump, saying that China and U.S. should be friends and partners, that they can uplift each other and that China’s growth and development actually is compatible with the magazine. Right to Make America Great Again. And the Global Times in particular is saying that there has been views from Washington that is, you know, creating a lot of fallacies about China, talking about how China’s growth is over and that China is seeking to replace us as a hegemony, that these are you know, the articles are saying that these are not true and calling for U.S. and China to maintain that stable relations. And I want to read you this quote from People’s Daily. It says that if both sides faithfully implement the key consensus based on mutual respect, then they can steadily reduce areas of disagreement. And why this is important is because I think the big fear now for Beijing is now that the as like cool down the temperature between C and Trump, the concern is that President Trump and his administration might come out with unilateral actions that is beyond the scope of what was discussed and that comes out of the left view for them, because we have seen this pattern of tension, escalation and de-escalation. I think China wants to avoid that. One of the reasons that they don’t like speaking to the Trump administration is that they feel like they can’t trust their words and how credible they are right in keeping to their commitments. So a lot of the articles are talking about fulfilling and following through on these consensus that we doing the Trump C meeting to ensure that the path remains stable and they continue to have a a slow and steady path to the to the right direction. All right, Thank you. China correspondent Edmund Lowe there. What’s trending when it comes to local media there and how they are phrasing, of course, what happened here in Bouchard yesterday. Let’s get to some big corporate stories now. Changing memory technologies as one thing that we’re watching out for when it comes to its latest champ. They’ve begun mass producing an advanced type of semiconductor for mobile devices. Now it’s become the first Chinese company to complete in a field dominated by foreign players like Samsung. The company says it started shipping the advanced chips to unnamed clients. Bloomberg has learned that Germany is considering using public funds to pay Deutsche Telekom and other operators to replace Huawei equipment. Sources say the cost could exceed $2.3 billion. This also means public funds will be used to upgrade Germany’s digital infrastructure, which lags behind many other European countries. Write for our clients. If you want to rewatch our show, you can go to your TV, if I’m sure TV go on your Bloomberg terminal to be part of the conversation. Send us instant messages. If you don’t want a reality show. Well, that’s that that’s that’s on you really flat in our head. That’s just one word. All right. Check out earnings this morning as well. Amazon shares soared in late trade after its cloud unit posted the strongest growth rate in almost three years. Third quarter revenue jumped 20% on year to $33 billion. Investor expectations for the cloud business were relatively low after the company had warned of constraints in getting new data centers online. Oil giant Shell has been estimates on profit and maintain share buybacks while paying down debt, showing its resilience to weaker oil prices. The third quarter performance was helped by stronger oil and gas trading. A vital part of the business has struggled earlier in the year amid geopolitical volatility. Chinese solar giant long and green energy and narrow losses in the third quarter, helped by Beijing’s campaign to curb cutthroat competition in the industrial sector. They reported a net loss of $117 million and says cost reduction measures helped lower manufacturing costs and shrink impairment losses. All right. Let’s take you straight back now from a while, in some ways from the sun to our coverage on the ground at the APEC summit. And of course, it’s been a manic week in bonds been tossed all over the place. She made her way from Hong Kong, scrambled into where she is right now, middle of the night, got woken up and said, hey, we’re headed to Bouchon. And then she’s now back to where she is right now. And we’re just about wrapping up the show. Heard her work’s not done because a lot more ahead, right? We still have a speech, I believe, from the Chinese president, still set to speak. Is my understanding. Our understanding, Jane Fraser City is also set to speak, among others. And I think in video, as Jensen Huang is also making make, it seems like anything he touches and talks about just seems to be turning into gold here. Yvonne. Oh, man. Yeah. I mean, before we get to the fried chicken, I want to talk about what people are likely going to ask him right later on, because right now, the whole issue of Blackwell Chip’s right. The fact that President Trump said he was going to discuss it with Xi and then the ends that that wasn’t discussed after this meeting about it, he really kind of put the onus back on a video saying it’s up to you to discuss with the Chinese on allowing access of video chips to the mainland. Other products besides. BLACKWELL Right. So certainly there’s a lot of uncertainty about what this means when it comes to chip exports from the U.S. And I think a lot of questions going to be getting his reaction to the fact that Blackwell was not discussed. I think he really has to lobby a long time for that to be part of the discussions getting. I’ve got to talk about, you know, anything he touches, Right. Anything from chips to even fried chicken. Right. If you take a look at what happened yesterday, I was watching that local media during that buster boots on, by the way, while we were coming back from these trade talks. He was in Seoul where basically the three big tech giants you’re talking about, Samsung’s Jihye Lee, they’re Hyundai. That’s the big leader there. And then Jensen Huang in the middle, they made it. Not quite. Yeah, of course going to get chicken and beer in Seoul right while you’re there and this little outing itself wasn’t able to actually move markets. Right. It’s not even the place they went to. That place is not even listed. Kombu Chicken, which I believe was also made viral when there was a mention a Netflix Netflix show as well. But even just enough to send the rivals surging as much as 20% today after these photos of these three big CEOs had a bit of a gathering here and went viral on social media. I love it. You’re absolutely right. So there we go. On your screen screens, market reaction to the partaking of that, the fried bird. We also talked about Hyundai, Right. That’s also coming up, but also actually catching a very strong bid on the back of, again, Jensen Huang and the Hyundai Store in a tie up there. It’s rare that you see can they up this much but yes, here here we are as far as that’s concerned. So in the influence coming through and really coming out of in video, you can really also make, given that sort of analogy with all these deals that are really boosting the valuations of Asia. And it’s just a very strange way to end the show, talking about how it’s all too permeating in the form of extremely crispy fried chicken and a cold beer. Happy Friday to all of you. We’ll see you all on Monday.

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