Fed's Warsh Says Inflation Mission Not Accomplished | The Asia Trade 7/15/2026

SHERY: THIS IS "THE ASIA TRADE," I’M SHERY AHN IN TOKYO. STOCKS SET FOR GAINS AS U.S. DATA EASES CONCERNS AND IMMINENT RATE HIKES BUT FED CHAIR KEVIN WARSH TELLS LAWMAKERS THE CENTRAL BANK HAS MORE WORK TO DO TO TAME PRICES. >> SOME MAY LOOK AT THIS MORNING’S DATA AND SAY MISSION ACCOMPLISHED, EVERYTHING IS SWELL. THAT’S NOT MY VIEW. SHERY: OLE HOLDING NEAR A ONE-MONTH HIGH AS PRESIDENT TRUMP DROPS PLANNED CARGO FEES IN THE STRAIT OF HORMUZ WHILE THE U.S. RESUMES ITS BLOCKADE OF SHIPPING. I.B.M. PLUNGES THE MOST SINCE 1968 ON A QUARTERLY SALES MISS BLAMED ON A.I. FUEL TO CHIP SHORTAGE. AVRIL: HERE’S THE SETUP FOR TRADING ACROSS ASIA. OF COURSE WE ARE FOCUSED ON HOW ENERGY PRICES REMAIN ELEVATED WITH THESE STRIKES RESUMING ON IRAN. AS THE U.S. HAS TOLD US, THOSE BLOCKADES ON IRANIAN PORTS ARE ALSO RESUMED, WE’RE LOOKING AT TROUBLES WITH CIVILIAN INFRASTRUCTURE IN NEW YORK. LOOK WHERE NEW YORK CRUDE IS POINT, NUDGING TOWARD THE HANDLE. WE’RE WATCHING FOR THE MARKET’S CONTINUED REACTION TO CHAIRMAN WARSH’S COMMENTS ON THE HILL. HE DOUBLED DOWN ON FIGHTING INFLATION BUT THE TAKEAWAY FROM MARKETS SEEMS TO BE THERE WAS A LACK OF FRESH HAWKISH SIGNAL FROM HIS TESTIMONY. WE HAD U.S. INFLATION BOTH ON THE HEADLINE AND CORE COMING IN LOWER THAN EXPECTED. THAT PLAYED OUT IN A MASSIVE REBOUND ON THE FRONT END, WE’RE LOOK AT THAT AS A GOOD SETUP FOR ASIA STOCKS, MAYBE TRACK WHAT WE SAW IN THE U.S. OVERNIGHT WHERE BANKING STOCKS RALLIED ON EARNINGS. ASIDE FROM THAT, WE SAW CHIP STOCKS RECOVER IN SEOUL YESTERDAY. S.K. HYNIX ALSO JUMP. NOW AT A PREMIUM, THESE AMPLE D.R.’S, TO THE KOREAN SHARES. WE’LL LOOK AT THAT ON THE SHOW BUT SHERY, THE FOCUS SON U.S. DATA AND ON WARSH AS WELL. SHERY: FED CHAIR WARSH DOUBLING DOWN ON THE COMMITMENT TO TACKLE INFLATION, SPEAKING BEFORE LAWMAKERS HE REPEATED A PROMISE TO TAME PRICE GROWTH EVEN AFTER U.S. C.P.I. FELL IN JUNE FOR THE FIRST TIME IN SIX YEARS. >> GET POLICY RIGHT AND I CAN ASSURE YOU WE WILL. INFLATION SURGE OF THE LAST FIVE YEARS WILL BE A THING OF THE PAST. THE MEMBERS OF OUR COMMITTEE HAVE NO TOLERANCE FOR PERSISTENTLY ELEVATED INFLATION. WE SHARE A RESOLUTION COMMITMENT TO ENSURE PRICE STABILITY. SHERY: FOR MORE, LET’S BRING IN OUR U.S. TREASURELY RY REPORTER DANIEL FLATLY, AND ANALYST MARC KROONFIELD ALSO JOINING US FROM SINGAPORE. DAN, LET ME START WITH YOU. WE WANT TO BREAK DOWN JUNE C.P.I. NUMBERS AND WHY CHAIRMAN WARSH DIDN’T BACK OFF FROM HIS HAWKISH TONE? >> IT’S A GREAT QUESTION. I THINK WE GOT CERTAINLY THE FIRST SUBSTANTIVE COMMENTS FROM CHAIR WARSH SINCE HE’S BEEN IN THAT POSITION. HE WAS ON CAPITOL HILL FOR SEVERAL HOURS TODAY AND WE HEARD A CLEAR MESSAGE WHICH IS THAT THE INFLATION FIGHT IS NOT OVER. OF COURSE HE DIDN’T LOCK HIMSELF INTO ANY PARTICULAR COURSE OF ACTION HERE AND WE KNOW THAT EVERYONE HAS BEEN LOOKING TO SEE OR SOME INDICATION OF WHETHER THERE MAY BE A RATE HIKE IN THE FUTURE. AND WE DIDN’T GET ANY INDICATION OF THAT NECESSARILY TODAY BUT WE ALSO HEARD FROM CHAIR WARSH THAT HE IS VERY MUCH FOCUSED ON THAT QUESTION OF PERSISTENT INFLATION. AS YOU MENTIONED WE DID GET A LITTLE BIT OF A COOLER PRINT TODAY. BUT HE SAID IN HIS WORDS, CHAIR WARSH’S WORDS, THAT IT’S NOT MISSION ACCOMPLISHED. SO WE’LL HAVE TO SEE WHERE THING GOES FROM HERE. AVRIL: ANY INDICATION OF WHAT CHAIRMAN WARSH IS WATCHING HERE IN ORDER TO PERHAPS SAY THAT INFLATION HAS TURNED THE CORNER? >> YEAH, IT’S INTERESTING, I MEAN WE HAVE A VERY NOISY ENVIRONMENT AS YOU MENTIONED EARLIER, WE DO HAVE THE RESUMPTION OF FIGHTING IN THE REGION AROUND IRAN AND THE STRAIT OF HORMUZ AND ONE OF THE REASONS THAT ECONOMISTS HAVE CITED FOR THE COOLER PRINT TODAY WAS ENERGY COSTS COMING OFF A LITTLE BIT AS THE RESULT OF THE CEASEFIRE THAT WE SAW IN RECENT WEEKS. OF COURSE THAT APPEARS TO BE OVER. WE DON’T KNOW HOW LONG THE FIGHTING WILL CONTINUE. PRESIDENT TRUMP HAS INDICATED THAT HE IS STILL WILLING TO TALK TO LEADERS IN IRAN AND CERTAINLY WE KNOW HEADING INTO THE MID TERMS, THE TRUMP ADMINISTRATION BROADLY WANTS TO GET THE ECONOMY IN A GOOD PLACE AND HAVING ELEVATED OIL PRICES AND FIGHTING IN THE MIDDLE EAST AND ALL OF THESE FACTORS IS NOT SOMETHING THAT THEY WANT TO SEE, CERTAINLY IN A PROLONGED -- AS A PROLONGED STATE OF AFFAIRS. SO I THINK THAT THAT’S ONE OF THE THINGS THAT CHAIR WARSH AND OTHERS ARE LOOKING AT IS, YOU KNOW IS THIS COOLING OFF A RESULT OF SOMETHING THAT’S TEMPORARY SITUATION? OR IS THIS SOMETHING THAT WE CAN SORT OF SEE AS A DOWNWARD TREND GOING FORWARD? SHERY: ESPECIALLY GIVEN THAT WE DO HAVE P.P.I. COMING UP THIS WEEK WHICH WILL POINT US IN THE DIRECTION OF P.C.E., RIGHT? WHEN IT COMES TO THE FEDERAL RESERVE WHAT SHOULD WE BE WATCHING OUT FOR IN THE NEXT FEW DAYS IN ORDER TO SORT OF ENGAGE WHERE CHAIRMAN WARSH IS HEADED AT A TIME WHEN HE’S ALSO MADE IT QUITE CLEAR HE DOESN’T NECESSARILY BELIEVE IN TELLING MARKS TOO MUCH? >> ABSOLUTELY. THAT’S A GREAT POINT. HE HAS SPOKEN IN RECENT DAYS AND AGAIN TODAY REITERATED THIS IDEA THAT THE FED WILL NOT BE ISSUING AS MUCH FORWARD GUIDANCE AS IT HAS IN THE PAST. THAT THEY WILL QUOTE -- CALL, QUOTE-UNQUOTE, BALLS AND STRIKE, IN A WAY HE FEELS WAS NOT DONE IN MORE RECENT TIMES. WE’LL HEAR AGAIN FROM HIM TOMORROW ON CAPITOL HILL. AND MOVING FORWARD WE’LL SEE SORT OF WHERE THINGS LAND. I THINK THAT HE IS SENSITIVE TO A CERTAIN EXTENT, ALTHOUGH HE OBVIOUSLY DEFENDED THE INDEPENDENCE OF THE FEDERAL RESERVE TODAY IN FEDERAL TESTIMONY, BUT PRESIDENT TRUMP IS INTERESTED IN LOWER INTEREST RATE, HE’S MADE NO SECRET OF THAT. SO THERE’S PRESSURE IF THE WHITE HOUSE THAT CHAIRMAN WARSH WILL HAVE TO CONTEND WITH. SHERY: THANK YOU. MARK, IT SEEMS LIKE THE MARKET REACTED MORE TO THE U.S. C.P.I. BECAUSE WARSH WAS MAYBE -- STUFF HAD BEEN PRICED. IN IS THE REBOUND SUSTAINABLE? MARK: YIELDS START TO COME BACK UP AGAIN BEFORE THE END OF BUSINESS LAST NIGHT. THERE SEEMS TO BE AN ADJUSTMENT RELATED TO DOMESTIC FUEL CHANGES. ALTHOUGH TREASURY YIELDS CAME OFF AT FIRST, SOME OF THEM WERE STARTING TO GO BACK UP, PARTICULARLY ON THE LONGER END OF THE CUSH. THE NET RESULT LAST NIGHT, THERE WAS QUITE A LOT OF CURVE STEEPEN, DRIVEN BY TWO-YEAR YIELDS MOSTLY. BECAUSE OF THAT YOU GET A MECHANICAL REACTION IN THE WAY FED PRODUCING GOES. THE JULY BETS ARE LINKED TO THE DROP IN THE TWO-YEAR YIELDS. THAT’S NOT SURPRISING. THAT’S TYPICALLY WHAT HAPPENS. IF THIS WEEK WE GET A PIECE OF DATA THAT GOES THE OTHER WAY, IT’LL GO THE OTHER WAY. IT DOESN’T REALLY TELL US VERY MUCH AT ALL. TRADERS ARE THINKING THERE COULD BE ONE HIKE BY THE END OF THE YEAR THE PEOPLE WHO ARE LOOKING FOR SUSTAINED INFLATION AND GENERALLY HIGHER TREASURY YIELDS WILL PROBABLY BE ENCOURAGED BY THE FACT THAT KEVIN WARSH SAID THE JOB IS NOT DONE YET. THEY’LL BE LOOKING FOR MORE INFORMATION. ANOTHER FED PEOPLE OVER THE LAST FEW DAYS HAVE SAID THEY’RE CONCERNED ABOUT THE STICKINESS OF INFLATION. SO HE HAS SAID BEFORE THAT HE’S HOPING FOR A GOOD, FRIENDLY, OPEN DISCUSSION WHEN THEY HAVE THEIR NEXT MEETING AND THAT LOOKS LIKE THAT’S WHAT HE’LL GET. SHERY: DOES THAT MEAN THE SPECTER OF MORE BOND VOLATILE? I THE TWO-YEAR YIELD MOVED 13 BASIS POINTS AT ONE POINT. IS THIS A SIGN OF THINGS TO COME? MARK: THE LESS INFORMATION YOU PROVIDE TO MARKET, THE MORE VOLATILITY YOU GET. A LOT OF PEOPLE HAVE DONE CALCULATION, BLOOMBERG HAS WRITTEN ABOUT IT THEMSELVES, A LOT OF FORWARD GUIDANCE OVER THE LAST DECADE OR SO HAS HELPED REDUCE VOLATILITY IN THE TREASURY BOND MARKET. YOU TAKE THAT AWAY, GO BACK TO THE DAYS OF ALAN GREENSPAN WHEN HE HARDLY GAVE ANYTHING AWAY, IN FARQUHAR, DID A GOOD IMPRESSION OF GREENSPAN LAST NIGHT. IF YOU GO BACK TO THAT YOU’LL GET MORE VOLATILITY IN THE BOND MARKET. THAT APPEARS TO BE WHERE WE’RE HEAD. SHERY: AT LEAST IN ASIA AND ASSETS, THE U.S. WILL CLEAR SOMETHING OUT OF THE WAY. NET-NET, WHERE ARE WE? MARK: OIL PRICES ARE FIRMER. WE HAVEN’T YET GOTTEN TO LEVELS THAT SCARE PEOPLE. IF WE GET $100 ON BRENT, WE’RE STILL $10 AWAY FROM THAT. IF WE GET TO THAT PEOPLE WILL BE SHOCKED, CONCERNED. WE HAVEN’T DONE THAT YET THOUGH THEY’VE PICKED UP FROM RECENT LOW LEVELS. THE SOX INDEX, PHILADELPHIA SOX INDEX ROSE LAST NIGHT. PEOPLE ARE BEGINNING TO SHAKE OFF SOME CONCERNS. KOSPI FUTURES HAD A VERY GOOD NIGHT. SO THINGS ARE STARTING TO GET BACK TO SOME KIND OF NORMALIZATION. THERE’S A LOT OF BLUSTER AND NOISE COMING OUT ABOUT THE STRAIT OF HORMUZ BUT UNDERNEATH IT ALL, SO FAR, I THINK PEOPLE ARE READING IT AS BEING NOT A MAJOR STEP UP FROM WHAT WE’VE SEEN BEFORE. THERE ISN’T ANYTHING DRAMATICALLY DIFFERENT. BUSINESS IS GOING ON. THE TECH SECTOR PREVIOUSLY WAS A BIT OF A SHELTER IN SOME OF THE NOISE IN THE REST OF THE MARKET. PEOPLE ARE LOOKING BACK AT WHAT WAS OUR EXPERIENCE IN MARCH, APRIL THAT KIND OF PERIOD, AND BEGINNING TO DRAW FROM THAT. THE WORLD WENT ON. PEOPLE CONTINUED TO MAKE MONEY. GENERALLY THE BIG TECH COMPANIES, PARTICULARLY THE A.I. STORIESER WERE LARGELY IMMUNE FROM WHAT WAS GOING ON IN THE REST OF THE WORLD. SHERY: SO WE MIGHT SEE A CONTINUATION OF THAT. MARK, THANK YOU SO MUCH. WE’LL TALK MORE ABOUT THE SO-CALLED BLUSTER AROUND THE STRAIT. PRESIDENT TRUMP BACKING AWAY FROM PLANS FOR TOLLS IN THE STRAIT OF HORMUZ EVEN AS THE U.S. RESUMES ITS NAVAL BLOCKADE. THE LATEST MIDDLE EAST DEVELOPMENTS COMING UP AFTER THE BREAK. THIS IS BLOOMBERG. >> WE HAVE SAUDI ARABIA, UAE, QATAR, BAHRAIN AND KUWAIT PRIMARILY AND THEN OTHERS. I SPOKE TO ALL OF THEM. AND THEY WOULD LOVE TO INVEST MORE MONEY INTO THE UNITED STATES IN RECORD AMOUNTS. AND THAT WOULD BE VERY ACCEPTABLE. THIS WAY, THERE IS NO FEE. SHERY: PRESIDENT TRUMP HIS DECISION TO DROP PLANS FOR FEES ON SHIPMENTS THROUGH THE STRAIT OF HORMUZ, SAYING GULF STATES PREMISED TO MAKE UP THE REVENUE WITH DIRECT INVESTMENTS. U.S. FORESTS -- FORCES LAUNCHED A NEW WAVE OF STRIKES ON IRAN. TRUMP IS THREATENING FURTHER ATTACKS UNLESS TEHRAN COMES TO THE NEGOTIATING TABLE. >> DO YOU ANTICIPATE THE STRIKES WERE SEEN AGAINST IRAN, ARE YOU CONSIDERING HITTING ENERGY TARGETS OR OTHER LOCATION? >> I WILL SAVE THE ENERGY TARGETS FOR LAST BUT ULTIMATELY WE WILL HIT ENERGY TARGETS, YES. WE WILL HIT THEM VERY HARD TONIGHT. WE WILL HAVE THEM VERY HARD TOMORROW NIGHT. WE WILL HIT THEM VERY HARD THE NIGHT AFTER AND NEXT WEEK IT GETS REALLY BAD FOR THEM BECAUSE NEXT WEEK COMES, THE POWER PLANTS. NEXT WEEK COMES THE BRIDGES. SHERY: LET'S BRING IN OUR POLITICS EDITOR. THE PRESIDENT, BACKING DOWN ON THE 20% FEE VERY QUICKLY. WHAT HAPPENED? ROMY: WHEN TRUMP PROPOSED THE 20% FEE YESTERDAY, THERE WERE NO DETAILS, NO INDICATIONS HE SPOKE TO ALLIES ABOUT IT. TODAY, TACO TUESDAY, HE SAID THERE WOULD BE NO FEE. THE BACK-AND-FORTH SHOWS US TWO THINGS. NUMBER ONE, THIS IS THE LATEST EXAMPLE OF TRUMP WHEN HE GETS FRUSTRATED, HE MAKES A SNAP DECISION AND THAT EITHER GETS IMPLEMENTED IN AN AD HOC FASHION, OR GETS REVERSED IN SOME WAY. AND THE FACT THAT TRUMP BACKTRACKED SHOWS WHAT A DIFFICULT POSITION IN THE UNITED STATES IS REALLY IN. IRAN HAS SHOWN THROUGH THIS CONFLICT THAT IT HAS EFFECTIVELY CONTROLLED THE STRAIT OF HORMUZ, THAT IT IS CONTROLLING A CRITICAL WATERWAY WHERE ABOUT A FIFTH OF THE WORLD'S OILS LIES GO THROUGH. THEY WILL NOT QUICKLY GIVE UP THIS LEVERAGE. SHERY: WE CONTINUE TO SEE CASUALTIES AND DEATHS WHEN IT COMES TO THESE VESSELS THAT ARE TRANSITING THE STRAIT OF HORMUZ. HOW DIFFICULT IS THE SITUATION? ROMY: WE ARE SEEING VERY LOW TRAFFIC. BEFORE THE U.S. BEGAN THE BLOCKADE TODAY, MUCH OF THE TRAFFIC WAS JUST IRAN LINKED SHIPS. WE SAW TWO UAE TANKERS UNDER ATTACK. TRAFFIC IS NOWHERE NEAR WHERE I WAS BEFORE THE CONFLICT STARTED IN FEBRUARY AND NOT CLOSE TO THE LEVELS AFTER THE CEASE-FIRE WHEN WE SAW TRAFFIC INCREASE. WE ARE IN A DIFFICULT POSITION BECAUSE IRAN HAS MADE IT CLEAR, NO MATTER WHAT KIND OF INTERIM PEACE DEAL COMES OUT OF THIS, THEY WANT TO HAVE SOME SORT OF CONTROL OVER THE STRAIT WITH SOME FEES OR REVENUE SHARING WITH OMAN. THEY WILL NOT GIVE UP THIS LEVERAGE THAT QUICKLY. SHERY: THANK YOU SO MUCH, ROMY, THE LATEST ON THE CONFLICT. AVRIL: FORMER U.S. AMBASSADOR NICHOLAS BURNS WARNS OF PROLONGED INSTABILITY IN THE STRAIT OF HORMUZ WITH LITTLE PROSPECT OF A NEAR-TERM RESOLUTION TO THE WAR. HE TOLD US ABOUT THE RISK OF WHAT HE DESCRIBES AS A DRAWNOUT CAT AND MOUSE CONFLICT. >> I THINK IT IS CRYSTAL CLEAR THAT THE CEASE-FIRE AGREEMENT HAS FALLEN APART. IT IS NOT BEING HONORED BY THE GOVERNMENT OF IRAN. THERE ARE SUBSTANTIAL DIFFERENCES BETWEEN THE U.S. AND IRAN ABOUT WHAT THE AGREEMENT SAID. THE IRANIANS BELIEVE THEY GET TO RUN THE STRAIT OF HORMUZ AND BE THE TOTAL KEEPER, ESTABLISH FEES. THERE ISN'T A GOVERNMENT IN THE WORLD THAT AGREES WITH THAT. I DON'T SEE ANY WAY PRESIDENT COULD EVER AGREE TO THAT. THAT WOULD MEAN IRAN EMERGES FROM THE WAR STRONGER IN THAT RESPECT THAN WHEN THE WAR BEGAN. IT WOULD INJURE THE GLOBAL ECONOMY, INSURANCE COMPANIES, SHIPPERS AND THE COMPANIES THAT DEPEND ON THE FREE FLOW OF COMMERCIAL TRAFFIC. I THINK THE PRESIDENT CANNOT AND WILL NOT GIVE IN,. . PRESIDENT COME ON THAT ISSUE I DON'T THINK THEY IRANIANS WILL GIVE IN. THIS LEADS INTO THE AUTUMN, WHERE THERE IS A BACK-AND-FORTH. THEY AGREE TO A CEASE-FIRE. THE CEASE-FIRE IS HONORED, THEN NOT HONORED. THEY EXCHANGE FIRE. THAT IS WHERE WE ARE BECAUSE THESE ARE HARD-BITTEN HIGHLY IDEOLOGICAL LEADERS IN IRAN WHO THINK THEY CAN PLAY US FOR TIME. THEY ARE TESTING US. IT IS IMPORTANT PRESIDENT TRUMP STANDS UP TO THEM IN THAT RESPECT AND NOT GIVE IN ON IRANIANS BECOMING THE TONY SOPRANO OF THE STATE OF HORMUZ -- THE STRAIT OF HORMUZ. >> WHAT COUNSEL WOULD YOU GIVE THEM ABOUT HOW TO MOVE FORWARD? IT SOUNDS LIKE YOU ARE ANTICIPATING A LONG PERIOD WHEN THINGS ARE EFFECTIVELY STUCK. >> I WISH PRESIDENT TRUMP AND HIS TEAM WELL. WE WANT THEM TO SUCCEED ON BEHALF OF THE UNITED STATES. I THINK THE ORIGINAL AGREEMENT WAS NOT WELL DONE. A LOT OF LOOPHOLES. THE IRANIANS ARE TRYING TO RACE THROUGH THE PULSE. YOU MAY NEED TO RENEGOTIATE THIS AND THIS WILL TAKE SUBSTANTIAL TIME. I DON'T THINK IT IS REASONABLE TO EXPECT THERE WILL BE A PERFECT DEAL AND -- ARRIVED AT AND IMPLEMENTED ANYTIME SOON. . I THINK WE WILL HAVE INSTABILITY IN TERMS OF SHIPPING FOR THE STRAIT, A LOW INTENSITY CONFLICT BETWEEN THE U.S. AND IRAN, MAJOR DISAGREEMENT ON THE FUTURE OF THE STRAIT. I SEE THIS GOING INTO THE AUTUMN. >> IS THIS A SURPRISE TO YOU? >> IT'S NOT. I WAS THE FIRST IRAN NUCLEAR NEGOTIATOR FOR PRESIDENT GEORGE W. BUSH 20 YEARS AGO. THEY HAVEN'T CHANGED. AVRIL: FORMER U.S. AMBASSADOR NICHOLAS BURNS SPEAKING WITH BLOOMBERG. WE HAVE MORE AHEAD ON THE ASIA TRADE. THIS IS BLOOMBERG. ♪ >> LOOKING FORWARD, WE KNOW THINGS RARELY MOVE IN A STRAIGHT LINE. WE CONTINUE TO SEE A RESILIENT ECONOMIC BACKDROP IN THE U.S., WHICH WILL DRIVE PERIODS OF DISRUPTION AND VOLATILITY ACROSS MARKETS. A FOCUS ON RISK MANAGEMENT REMAINS PARAMOUNT AS WE SUPPORT CLIENTS ACROSS A RANGE OF MARKET CONDITIONS, BUT IT'S ALSO CLEAR WE ARE SEEING BROAD-BASED MOMENTUM ACROSS THE FRANCHISE IN A STRONG ENVIRONMENT FOR CLIENT ACTIVITY. >> I CAN'T TELL YOU IT'S IMPOSSIBLE WE WOULD EXCEED 11%. WE AREN'T GOING TO BOX OURSELVES INTO THAT. WE SEE OPPORTUNITY TO TAKE ACTIONS ON THE OFFENSE, WHICH ARE AGREEABLE TO SHAREHOLDERS AND SUPPORT THE PATH TO OUR TARGETS. >> WE ARE IN A HEALTHY, EXUBERANT MARKET WITH HIGH PRICES AND HIGH VOLUMES. WE BENEFIT FROM THAT. WE DON'T KNOW HOW LONG IT WILL CONTINUE. COULD IT GET BETTER? IT COULD GET BETTER BUT HOW MUCH BETTER? AVRIL: SOME OF THE BIGGEST U.S. BANKS' CHIEFS AFTER SECOND-QUARTER RESULTS. LET'S BRING IN OUR SENIOR ANALYST. HOW SUSTAINABLE IS THIS, THESE STRONG TRADING RESULTS FOR THE BACK HALF OF THE YEAR? >> THAT WAS THE KEY QUESTION AFTER WE SAW THE ROBUST TRADING RESULTS IN THE SECOND QUARTER. THAT WAS A KEY QUESTION. BUT THERE WAS A LOT ABOUT THE PERFORMANCE AND THE SECOND QUARTER RELATED TO EVENTS LIKE THE SPACEX IPO, AI DRIVEN TRADING, SOME OF THAT COULD BE UNSUSTAINABLE. THERE IS STILL A FAIRLY CONSTRUCTIVE PRETTY BACKWARD DROP THAT COULD SUSTAIN RESULTS IN EQUITY TRADING FOR THE BACK HALF OF THE YEAR. SHERY: WE SAW CITY LAGGING. WHAT DROVE THE RELATIVE UNDERPERFORMANCE WHEN IT CAME TO THE EARNINGS BEAT? HERMAN: CITI REPORTED STRONG RESULTS, RETURN ON EQUITY, 13% WHICH MATCHED A STRONG RESULTS IN THE FIRST QUARTER DRIVEN BY TRADING INVESTMENT BANKING, STRONG SERVICES REVENUE. WHAT DROVE THE UNDERPERFORMANCE WAS THE COMMENTARY THAT WAS JUST BROADCAST WHERE JANE MENTIONED POTENTIALLY HIGHER EXPENSES IN THE BACK HALF OF THE YEAR, INCLUDING INVESTMENTS THAT HAVE SUSTAINED THE HIGHER RETURN LEVEL THEY EXPECT OVER THE SHORT TO MEDIUM TERM. THAT COULD REDUCE THE PROFITABILITY METRICS ON THE BACK HALF OF THE YEAR TO DRIVE OVERALL RETURNS TO THE 10, 11% RANGE RELATIVE TO THE FIRST HALF AT 13%. AVRIL: WE ALSO SEE HOW TRADERS ARE EXPECTING BY THE END OF THE YEAR, BETS HAVE DROPPED OFF FOLLOWING THE U.S. CPI PRINT. HOW IS THIS AFFECTING MARGIN NET INTEREST INCOME? HERMAN: THE BANKS ARE EXPECTING A HIGHER FOR LONGER INTEREST RATE BACKDROP. THAT IS SUPPORTING NET INTEREST INCOME AND MARGIN EXPECTATIONS FOR THE BANKS. J.P. MORGAN AND BANK OF AMERICA LIFTED NET INTEREST INCOME EXPECTATIONS FOR THE FULL YEAR. SOME IS DRIVEN BY THE HIGHER FOR LONGER BACKDROP. THE OTHER FACTOR IS BALANCE SHEETS GROWTH IN DEPOSITS AND LENDING. IN THE U.S. THERE IS STRONG DEMAND FROM A PARTICULARLY COMMERCIAL LENDING AND DEPOSITS HAVE HELD IN THEIR ESPECIALLY FOR BANK OF AMERICA AND J.P. MORGAN WERE THE SEA STRONG DEPOSIT ACTIVITY FROM CONSUMER FRANCHISES AND WHOLESALE CLIENTS. SHERY: AND ANOTHER STORY WE ARE FOLLOWING, WARREN BUFFETT PLEDGING TO COMPLETELY DISPOSE OF HIS ROUGHLY $140 BILLION STAKE IN BERKSHIRE HATHAWAY OVER THE NEXT EIGHT YEARS. HE ANNOUNCED A NEW ROUND OF DONATIONS TO CHARITIES TIED TO HIS FAMILY. HE PAUSED DONATIONS TO THE GATES FOUNDATION AFTER THE RELIEF OF DOCUMENTS -- RELEASE OF DOCUMENTS FUELING SCRUTINY OVER BILL GATES TIES TO JEFFREY EPSTEIN. BREAKING NEWS EARLIER TODAY WHEN IT CAME TO THE JOBLESS RATE IN SOUTH KOREA, FALLING TO 2.7%, PROPPED UP BY GOVERNMENT SUPPORT JOBS BUT WE DID SEE OF COURSE GIVING MORE IMPETUS TO THE BANK OF KOREA'S POLICIES THAT WE ARE EXPECTING WHEN THE DECISION COMES ON THURSDAY. THIS IS BLOOMBERG. ♪ SHERY: THIS IS WHAT FUTURES ARE POINTING TO IN A WEEK WHERE WHEN WE CAME IN ON MONDAY THERE WERE A NUMBER OF OVERHANGS FOR MARKET. YOU THINK ABOUT HOW THE U.S.-IRAN CONFLICT RESURFACED TO AN EXTENT THAT PROPPED UP OIL PRICING AND CAUSED MASSIVE CHANGES IN BONDS. NOW THE OVERHANG HAS BEEN REMOVED, A A BIT OF RISK COMING OFF ON FROM U.S. C.P.I., SO MASSIVE REPLACING CAME ON THE FRONT END OF TREASURIES. WE SAW A 13-BASIS POINT MOVE LOWER IN THE TWO-YEAR YIELD POLICY SENSITIVE PART OF THE CURVE. FANS OF THE 10-YEAR POINTING TO MAYBE A BIT FURTHER GAIN. AS OUR COLLEAGUE, MARC KROONFIELD, WAS HIGHLIGHTING EARLIER, THERE’S A BIT OF SKEPTICISM OUT THERE STILL ESPECIALLY WHEN YOU CONSIDER THESE TENSIONS BETWEEN THE U.S. AND IRAN. TRUMP IS NOW TALKING ABOUT THREATENING ABOUT STRIKES ON CIVILIAN INFRASTRUCTURE IN IRAN NEXT WEEK. WE’VE BEEN TALK ABOUT AS WELL MAYBE THIS IS PART OF THE STRATEGY TO ESCALATE THEN DE-ESCALATE TO GET WHAT HE WANTS AS FAR AS THE CONFLICT IS CONCERNED. AND THEN OF COURSE WHEN IT COMES TO TRADE OVERALL, WHERE THE MEMORY MAKERS ARE WHEN YOU LOOK AT HOW OVERNIGHT IN THE U.S. WE SAW A FURTHER GAIN IN THE S.K. HYNIX A.D.R. DRAGGING ALSO THAT RALLY LATE IN THE SESSION YESTERDAY IN SOUTH KOREA. SHERY? SHERY: AS YOU MENTIONED REALLY IT WAS THE REPRICING WHEN IT CAME TO MARKETS RIGHT AFTER THE COOLER THAN EXPECTED U.S. C.P.I. DATA FROM JUNE. AND THAT WAS SURPRISING BECAUSE DESPITE THE FACT THAT WE GOT A COOLER NUMBER OUT OF THE JUNE INFLATION DATA, WE DIDN’T NECESSARILY SEE A FED -- SEE FED CHAIRMAN WARSH AT HIS TESTIMONY CHANGE THE MORE HAWKISH TONE HE HAS ADOPTED LATELY. LET’S DISCUSS WHAT’S HAPPENING IN THE BROADER U.S. ECONOMY. JOINING US NOW IS CHRIS HODGE, CHIEF U.S. ECONOMIST AT TEXAS. GOOD TO HAVE YOU WITH US. IF THE BURDEN OF PROOF FOR KEVIN WARSH IS LOWER INFLATION, IN ORDER TO PERHAPS AVOID A RATE HIKE, ARE WE STARTING TO SEE THAT WITH THE JUNE C.P.I. NUMBERS? >> ABSOLUTELY. THIS IS THE FIRST BRICK IN THE DISINFLATIONARY WALL BUT THE BURDEN OF PROOF IS ON DISINFLATION FROM HERE ON OUT. WE’RE CAUTIOUSLY OPTIMISTIC THAT THIS IS THE FIRST OF ZELL WE’LL SEE BUT IT’S HARD TO SEE WHERE THE INFLATIONARY IMPULSE IS GOING TO COME FROM. SHERY: WHERE DID IT COME FROM IN JUNE AND COULD THAT REMAIN FOR THE REST OF THE YEAR? CHRIS: WELL, I MEAN, IT WAS NOTICEABLY ABSENT. I THINK IF YOU LOOK ACROSS COMPONENT, THE NEGATIVE READING FOR ENERGY IN THE HEADLINE, THAT WAS TO BE EXPECTED GIVEN THE MOVE IN OIL PRICES. BUT IF YOU LOOK AT CORE GOODS THAT WAS NEGATIVE, FOR HE SECOND CONSECUTIVE MONTH. THAT INDICATES THE TARIFF PASS THROUGH IS ALMOST COMPLETELY OVER. IF YOU LOOK AT HOUSING PRICES, THIS IS NOW MORE ALIGNING WITH REAL-TIME DATA THAT WE GET AND LOW HOUSEHOLD FORMATION IN THE U.S. AND AFFORDABILITY CONCERN, IT’S HARD TO SEE DEMAND IMPULSE COMING IF THE SECTOR AND SERVICE PRICES ARE LARGELY A FUNCTION OF WAGES, AND WAGE GROWTH HAS BEEN TEPID OVERALL, 3% 3:00 .5%. THAT PUTS WAGE GROWTH JUST AROUND TARGET INFLATION. WHAT STRUCK ME WAS THE BREADTH OF THE DISINFLATIONARY PRESSURES THAT WE SAW FROM THIS PRINT. SHERY: FED CHAIRMAN WARSH STILL THINKS THERE ARE INTERNAL DYNAMICS AT PLAY WHEN IT COMES TO PRICE PRESSURES ASIDE FROM SHOCKS LIKE THE MIDDLE EAST. WHAT COULD HE BE LOOKING AT AND WHAT DOES HE NEED TO SEE IN ORDER TO CHANGE HIS MIND WHEN IT COMES TO THE FED PATH? CHRIS: I THINK, YOU KNOW, IF YOU’RE LOOKING AT PRICE PRESSURE, YOU’RE LOOKING AT RESIDUAL EFFECTS FROM THE A.I. CAPEX BUILDOUT. SEMICONDUCTOR, FLASH DRIVES, MEMORY DRIVES. THIS IS CERTAINLY A CONCERN FOR THE FED. BUT I THINK, YOU KNOW, WITH THE BURDEN OF PROOF ON MULTIPLE CONSECUTIVE PRINTS BEING LOWER, THAT’S A IF YOU THINK OF NOT BEING A TARGET INFLATION IN OVER FIVE YEARS. I WAS IN ATTENDANCE WHEN GOVERNOR ALDER SPOKE YESTERDAY. AND HE ESSENTIALLY SAID THAT THE FED IS OUT OF EXCUSES FOR INFLATION. THAT WHETHER IT COMES FROM EXOGENOUS FACTORS OR INDODGES NOW FACTORS IT’S TIME FOR THE PRICE LEVEL TO COME BACK DOWN TO WHERE IT WAS BEFORE, TO THE FED’S 2% TARGET. THE FED WILL HAVE TO SEE MULTIPLE PRINTS BEFORE IT CHANGES ITS TUNE FROM HAWKISH TO NEUTRAL. SHERY: AND AT WHAT POINT CAN WE EXPECT POTENTIALLY HIGHER OIL PRICES, ESPECIALLY GIVEN THAT WE HAVE NO RESOLUTION TO THE U.S.-IRAN WAR, TO REVERSE ITS INFLATIONARY TREND AND ACTUALLY CONTRIBUTE AGAIN TO PRICE BOOST? CHRIS: THAT’S THE MAJOR QUESTION RIGHT NOW. EVEN -- THE OIL PRICE INCREASES WE’VE SEEN IN THE LAST 48 HOURS OR SO HASN’T GONE BACK UP TO LEVELS WE’VE SEEN IN MARCH AND APRIL. BUT THAT RISK IS STILL OUT THERE. SO I DO THINK IF WE START SEEING OIL PRICES DRIFT BACK UP TO, YOU KNOW, $85, $90, $100 A BARREL THAT WILL MAKE THE FED PAUSE. I WILL SAY THE PASS-THROUGH FROM HIGHER ENERGY PRICES TO CORE INFLATION, THAT WAS FAIRLY MUTED AS WELL. I THINK OVER THE LONGER TERM IT’S NOT MUCH OF AN ISSUE. BUT IT WILL CAUSE THE FED TO PAUSE ENOUGH TO NOT SHIFT TO THAT NEUTRAL OR DOVISH STANCE. SHERY: WHAT ARE YOU EXPECTING TO SEE IN P.P.I. NUMBERS THIS WEEK AS WELL? WE DO HAVE THE P.C.I. PASS THROUGH, WHEN IT COMES TO GETTING THAT INFLATION GAUGE DATA, WHAT ARE THE COMPONENTS YOU’LL BE WATCHING? CHRIS: YEAH, AIRFARE, PORTFOLIO MANAGEMENT, SOME COMPONENTS OF MEDICAL. THESE ARE THE ONES THAT WOULD PASS THROUGH TO CORE P.C.E. BUT I’M FAIRLY OPTIMIST TAKE WE’RE GOING TO GET A SOFT P.P.I. NUMBER AS WELL. EVEN IF WE GOT ONE THAT’S IN LINE WITH THE CONSENSUS OR EVEN A LITTLE BIT ABOVE, WE’RE STILL LOOKING AT A P.C.E. THAT’S GOING TO COME DOWN FROM WHERE IT WAS IN THE PRIOR MONTH AND BE ANOTHER BRICK IN THAT DISINFLATIONARY WALL WE ARE EXPECTING. SHERY: WHEN IT COMES TO ARTIFICIAL INTELLIGENCE AND THE TECHNOLOGICAL ADVANCES WE’RE SEEING RIGHT NOW, DO THEY HAVE ANY INFLATIONARY RESPECTS RIGHT NOW WITHOUT JUST LOOKING LONG TERM THAT COULD ADD TO THE OVERHEATING TREND OF AN ECONOMY? CHRIS: YEAH THAT IS A BIG PARADOX THAT’S FACING THE FED RIGHT NOW. CHAIR WARSH WAS VERY VOCAL ABOUT THE FACT THAT PRODUCTIVITY GAINS IN THE FUTURE WILL ALLOW PRICES TO EVENTUALLY COME DOWN. THAT WAS, YOU KNOW, WHEN HE WAS STILL A CANDIDATE TO BE FED CHAIR THAT WAS ONE OF THE THINGS THAT HE HARPED ON THE MOST. THE PROBLEM IS, IN THE, YOU KNOW, IN THE HERE AND NOW, IT IS PUTTING UPWARD PRESSURE ON CERTAIN COMPONENTS OF INFLATION. BUT I DON’T THINK IT’S ENOUGH TRUMP THE OTHER COMPONENTS WHERE WE ARE SEEING DISINFLATION OVERALL. SHERY: WE’VE SEEN ALSO THOUSANDS OF LAYOFFS BOTH IN THE TECH SECTOR AND FINANCIAL SECTOR BEING ATTRIBUTED TO CHANGES BECAUSE OF ARTIFICIAL INTELLIGENCE. DO YOU TAKE THAT INTO THE NET ACCOUNT AS WELL? CHRIS: I DO. I DO THINK THAT’S MORE OF A MICRO STORY THAN A MACRO STORY AT THIS POINT. I DO NOT THINK THAT THE DATA WE RECEIVED OVER THE LAST FOUR MONTHS IS NECESSARILY INDICATIVE OF THE HEALTH OF THE MARKET. PEOPLE ARE STILL VERY CONCERNED ABOUT FINDING A NEW JOB. THE AMOUNT OF TIME IT TAKES FOR SOMEBODY TO FIND A NEW JOB HAS CONTINUOUSLY GONE UP. SO I DON’T THINK LABOR DEMAND IS STRONG. I THINK A.I. IS PART OF THAT STORY. I THINK IT’S PART OF THAT STORY IN SPECIFIC SECTORS THAT HASN’T NECESSARILY BLED THROUGH TO THE REST OF THE ECONOMY. SHERY: FROM NOW WE’RE NOT NECESSARILY GOING TO SEE POTENTIALLY FED CHAIRMAN KEVIN WARSH BEING A LITTLE BIT, NOT AS FORWARD-LOOKING WHEN IT COMES TO FORWARD GUIDANCE AND NOT AS COMMUNICATIVE, WHERE WILL YOU TRY TO GET HIPTS ABOUT WHERE THE FED GOES FROM HERE? CHRIS: WHEREVER I CAN GET IT. AND WHEN THERE IS A VOID FOR COMMUNICATION, THAT’S GOING TO GET FILLED. IT’LL GET FILLED BY THE REGIONAL PRESIDENTS, IT’LL GET FILLED BY SOME OF THE OTHER GOVERNORS. I DO THINK IT WOULD BE HELPFUL FOR CHAIR WARSH, NOT NECESSARILY TO LAY OUT FORWARD GUIDANCE BECAUSE WE’RE NOT AT A TIME WHEN THE FED CAN OFFER FORWARD GUIDANCE. WE DON’T KNOW WHAT THE TRAJECTORY OF INFLATION WILL BE FOR SURE. FORWARD GUIDANCE ISN’T APPROPRIATE RIGHT NOW. WHAT IS APPROPRIATE IS FOR THE FED TO LAY OUT WHAT ITS PROPER REACTION FUNCTION. IS ONE OF THE THINGS IT IS LOOKING FOR TO ASSESS THE HEALTH OF THE LABOR MARKET AND THE TRAJECTORY FOR INFLATION. THAT WILL BE HELPFUL FOR MARKETS, AND I THINK IT WOULD BE HELPFUL FOR THE FED AS WELL. SHERY: CHRIS HODGE, GOOD TO HAVE YOU WITH US. WE HAVE MORE AHEAD ON THE ASIA TRADE. THIS IS BLOOMBERG. ♪ SHERY: I.B.H. SHARES FELL THE MOST SINCE AT LEAST JANUARY, 1968, WIPING OUT $69 BILLION OF MARKET CAP AFTER A PRELIMINARY SECOND QUARTER SALES FELL SHORT OF EXPECTATIONS. THE COMPANY BLAMES THE MISS ON CUSTOMERS SHIFTING SPENDING AMID A.I. FUEL SHORTAGES. LET’S BRING IN OUR TECH REPORTER. BRODY, THE FIRM BLAMED THIS ON THE CUSTOMERS SPENDING ON CHIPS AND SERVICE INSTEAD. WALK US THROUGH WHAT IT’S SAYING AND ARE THERE ANY IMPROVEMENTS IN I. -- THAT I.B.M. ITSELF CAN MAKE? >> THE BIG BACKGROUND HERE IS THAT HARDWARE COMPONENTS FOR A.I. HAVE GOTTEN VERY EXPENSIVE. A SLEW OF OTHER COMPANIES HAVE BECOME MORE COMPETITIVE TO G. IT’S DRIVING UP PRICES FOR THEM. WHAT I.B.M. SAYS HAPPENED IS THAT CUSTOMERS TRIED TO ACCELERATE THEIR PURCHASES OF THESE MEMORY CHIPS, AND THAT CAUSED THEM TO DIVERT SPENDING FROM I.B.M.’S HARDWARE SLUGSES. NOW, WHAT THE ANXIETY THIS REALLY HIT IS THE QUESTION OF ALL THE MONEY GETTING SPENT ON A.I., WHERE IS THAT COMING FROM? AND THE FEAR HAS BEEN THAT IT COMES AT THE EXPENSE OF THE TRADITIONAL LEADERS. THAT IT’S NOT ADDITIVE BUT THAT IT’S A ZERO SUM SPENDING POOL. SO I.B.M.’S RESULTS TODAY SEEM TO JUSTIFY THESE ANXIETIES. AVRIL: WHAT IMPLICATIONS DOES THIS HOLD FOR OTHER COMPANIES LIKE INCH B.M. NOW? BRODY: THE BIG DEBATE I’M SEEING OUT THERE IS, IS THIS A HARDWARE PROBLEM? ARE CUSTOMERS OF I.B.M. MAIN FRAME CIRCUMSTANCE LET’S UPDATE AND GO TO SOMETHING MORE MODERN? OR IS THIS A STORY ABOUT ALL TECH SPEND, ALL ENTERPRISE I.T. SPENDING IS GETTING DEPRIORITIZED BECAUSE CUSTOMERS ARE BUYING MORE A.I. HARDWARE. SO WE SAW A LOT OF SOFTWARE NAMES GO DOWN TODAY BECAUSE THE FEAR IS THAT, WELL, MAYBE YOU’RE NOT GOING TO BUY AS MUCH SALESFORCE LICENSES OR MICROSOFT OFFICE SEATS IF YOU’RE GOING OUT AND TRYING TO FROM CURE -- PROCURE A BUNCH OF MEMORY CHIPS. THAT’S WHAT THE ANXIETY. IS IT’S UNCLEAR TO WHAT EXTENTS THIS AN I.B.M. STORY OR IS THIS A SECTOR-WIDE SHERY: BRODY JOINING US WITH THE LATEST ON IBM. WE WILL BE WATCHING THEIR TECH YEARS IN THE ASIAN SESSION AS WELL WHEN IT COMES TO THE KOSPI, WHICH AGAIN AROUND IN THE PREVIOUS SESSION. WE SAW STRENGTH FOR THE KOREAN WON AS WE GET EXPECTATIONS OF MORE INFLOWS TO COME INTO THE SOUTH KOREAN ECONOMY FROM SK HYNIX ADR. WE HAVE SEEN THE VOLATILITY ON SK HYNIX FOR THE LAST FEW DAYS. TALKING ABOUT A JUMP OF 27% ON ADRS, FALLING 9% ON MONDAY BUT THEY ADR PREMIUMS FROM SK HYNIX ADRS, TO WHAT WE ARE SEEING IN SOUTH KOREA SHARES, SURPASSED 50% SO THAT IS A HUGE GAP FROM WHAT WE SAW BEFORE THE ROUND 3%. LET'S TALK ABOUT THE ASIAN EQUITY SPACE AND WHAT TO EXPECT IN TODAY'S TRADING SESSION. WINNIE HSU JOINS US FOR A PREVIEW OF THE MARKET OPEN. I WAS TALKING ABOUT VOLATILITY NOT ONLY FOR SK HYNIX AND SAMSUNG BUT THE BROADER KOSPI SPACE. WINNIE: EXACTLY. TODAY AS YOU MENTIONED WE ARE SEEING SLIGHTLY A BIT OF AN UPSIDE COMING THROUGH BECAUSE OF THE OVERALL MACROENVIRONMENT LOOKING GOOD AND THE ADR JUMP. I THINK LOTS OF TRADERS ARE SCRATCHING THEIR HEAD WHY THE ADRS HAVE JUMPED SO MUCH, A 27% AND THE PREMIUM WIDENING TO 50%. WE HAVE HEARD A COUPLE THINGS. POTENTIALLY, BECAUSE OF HOW OPTIONS HAVE STARTED TRADING TUESDAY AND WE ARE SEEING CALL OPTIONS COMING THROUGH, WHICH MEANS THE UNDERLYING DEALERS WILL HAVE TO BUY MORE OF THESE UNDERLYING ADRS TO HEDGE THEIR POSITIONS. THAT IS DRIVING LOTS OF VOLATILITY AND BUYING. ALSO, WE ARE HEARING TARGET PRICE UPGRADES FROM THE LIKES OF BARCLAYS, CITING THAT THEY ARE EXPECTING THE VALUATION GAP TO NARROW WITH MACRON AND THE MEMORY SHORTAGE TO CONTINUE FURTHER. ANOTHER POTENTIAL FACTOR IS HOW OVERALL, INVESTORS APPETITE FOR ADRS IS VERY STRONG ESPECIALLY IN THE U.S. WITH HIGH LIQUIDITY AND FLEXIBILITY. THEY ARE SEEING MORE BUYING OPPORTUNITIES AFTER HOW THESE ADRS HAVE SLUMPED 9% THE DAY BEFORE AND SOME HEDGE FUNDS ARE LIKING THESE PAIR TRADES TOO LONG. SK HYNIX, TO SHORT MICRON. INTO TODAY'S SESSION WE WILL LIKELY SEE IF THE OVERALL SENTIMENT WILL SUPPORT SK HYNIX FURTHER OR IF WE ARE GOING TO SEE THE DYNAMIC BETWEEN RETAIL INVESTORS AND FOREIGN INVESTORS. AVRIL: WHERE DOES THIS LEAVE THE REST OF THE MARKET, NOT PART OF THE MEMORY TRADE, WHETHER THERE IS HOPES OF ROTATION COMING FOR VALUE AS WELL? WINNIE: FOR NOW, THERE IS TALK WHEN IT COMES TO THE ROTATION. WE ARE STILL SEEING IN THE SHORT TERM, INVESTORS ARE ROTATING OUT OF THE MORE CROWDED TRADES WITH SAMSUNG AND SK HYNIX, WHICH HAVE RALLIED, INCLUDING A JAPANESE COMPANY AS WELL. MORE APPETITE IS TURNING TOWARDS THE UNDERPERFORMERS LIKE CHINESE INTERNET NAMES, INDIA'S BANKS AND SOME OF THE SOUTHEAST ASIAN COUNTRIES. NOW, THEY ARE LOOKING FOR MORE VALUE TO COME BUT INTERESTINGLY, WHEN WE GO BACK TO WHAT'S GOING ON IN THE SOUTH KOREAN MARKET, WE TALKED ABOUT HOW INVESTORS ARE MORE INTERESTED IN THE ADR LISTING IN SK HYNIX BUT YESTERDAY, WE HEARD THERE IS POTENTIALLY EARLY DISCUSSION WITH, BETWEEN SAMSUNG AND THE BANKS TO POTENTIALLY CONSIDER A LISTING OF THEIR ADRS. IT IS STILL AT THE VERY EARLY STAGE AND THEY ARE CONSIDERING THAT BECAUSE OF THE SUCCESSFUL ADR LISTING BY SK HYNIX BUT THIS MORNING WE DID HEAR THAT THE COMPANY SAID THEY ARE ACTUALLY NOT REVIEWING THAT POSSIBILITY JUST YET. IT REALLY GOES TO SHOW HOW OVERALL, THE APPETITE FOR THE MEMORY CHIP, THE MEMORY SPACE AND THE AI DEMAND REMAINS QUITE INTACT. SHERY: LET'S STAY ON THESE TECH STORIES BECAUSE CHINESE AI START UP DEEPSEEK IS SAID TO BE LAYING THE GROUNDWORK FOR AN IPO AS WELL WITH A DIAMOND -- A FINDING POSSIBLE. THE COMPANY IS WORKING WITH ACCOUNTING FIRMS AND TARGETING A MARKET DEBUT AROUND LATE 202027. WE ARE TOLD DEEPSEEK IS SEEKING FRESH PRIVATE FUNDING AHEAD OF THE OPERATION -- THE OFFERING. CHINESE MEMORY CHIP MAKER IS SET FOR ONE OF THE BIGGEST LISTING ON STAR MARKET. THE WORLD'S FOURTH LARGEST DRAM PRODUCER PRAISED THE OFFERING AT 866 YUAN PER SHARE AS BEIJING PUSHES TO BUILD A DOMESTIC AI CHIP SUPPLY CHAIN AND CHALLENGE SAMSUNG AND SK HYNIX. LIFTING THE CURTAIN ON OPENAI'S MOVE INTO CONSUMER DEVICES. IT IS PLANNING A MOBILE SCREEN FREE SMART SPEAKER TO BE A NEW TYPE OF HOME COMPUTER. IT WILL CONTROL SMART HOME APPLIANCES, PLAY MEDIA, ANSWER QUESTIONS AND TAP INTO CAPABILITIES OFFERED BY CHATGPT. GET MORE ON THE BIGGEST STORIES INTACT, BLOOMBERG VIDEO HAVE. CHECK OUT PAST EPISODES OF SHOWS ON BLOOMBERG.COM/VIDEOS. THIS IS BLOOMBERG. ♪ SHERY: MACHINE ORDERS FROM THE MONTH OF JUNE IN JAPAN, COMING IN OF A CONTRACTION OF 12.4% WHEN IT COMES TO THE LATEST IN JAPAN. WE ARE TALKING ABOUT MORE THAN 12 PERCENT CONTRACTION FOR THE MONTH OF MAY. THIS IS A BIGGER CONTRACTION THAN THE OR PERCENT THAT WE HAD SEEN ECONOMISTS EXPECTING. IT IS A CONTRACTION FROM GAINS IN THE PREVIOUS MONTH. WHEN IT COMES TO YOUR ON YOUR NUMBERS, CONTRACTION OF 1.9% WHICH IS ALSO A CONTRACTION AFTER EXPANSION IN THE PREVIOUS MONTH AND EXPECTATIONS THAT IT WOULD ACTUALLY GROW IN THE DOUBLE DIGITS. SO WE ARE SEEING A LITTLE MORE OF THAT SENTIMENT DAMPENING WHEN IT COMES TO THE CORPORATE SECTOR. AVRIL: IT IS INTERESTING, WHEN YOU PUT THIS TOGETHER WITH WHAT IBM SHOWED US OVERNIGHT. IN TERMS OF ITS MARKET CAP REALLY BEING RAISED AND HOW IT SAW CUSTOMERS DIVERTING SPENDING TOWARDS CHIPS AND SERVERS. HOW DOES THAT SAP THE SPENDING THAT COMES TYPICALLY FOR IBM HARDWARE? WE ARE WATCHING THE SESSION TODAY, SOME OF THESE I.T. RELATED STOCKS, SOFTWARE STOCKS AS WELL. HOW DOES THAT ALSO OFFSET SOME OF THE RECOVERY WE MIGHT BE SEEING FOR THE MEMORY TRADE FOLLOWING YESTERDAY AND WHAT WE SAW ON THE REBOUND IN SELF KOREA, WHICH EXTENDED -- SOUTH KOREA WHICH EXTENDED INTO THE SK HYNIX ADRS, LOOKING AT THE MASSIVE PREMIUM WE SAW OVERNIGHT. PUT THAT TOGETHER WITH THE MACRO BACKDROP FOR THE U.S. CPI COMING IN SOFTER THAN EXPECTED. THAT GOES TO SHOW, MAYBE THIS IS A SIGN OF BOND MARKET VOLATILITY THAT COULD COME BECAUSE YOU LOOK AT THE FRONT AND AND HOW THE TWO YEAR MOVE, THE 13 BASIS POINTS DOWN WAS THE LARGEST, DEEPEST MOVE SINCE THE MONTH OF AUGUST LAST YEAR. AT A TIME WHEN KEVIN WARSH IS TELLING US DON'T EXPECT GUIDANCE , HE DOUBLED DOWN ON ALL THE TALK ABOUT FIGHTING AND ELATION. NOT MISSION ACCOMPLISHED YET, HE SAID. TAKE A LOOK AT THE FRONT END OF THE DEVELOPED MARKET DEBT MARKETS. YOU ARE LOOKING AT THE THREE YEAR YIELD LOWER IN AUSTRALIA AND NEW ZEALAND. MAYBE A BIT OF STABILITY OFF THE BACK OF THE U.S. CPI PRINT THAT IS SHOWING READJUSTMENT IN MARKETS. SHERY: WHICH WE SAW IN THE U.S. DOLLAR AS WELL BECAUSE OF THOSE NUMBERS. THE DOLLAR FALLING, IT PAIRED LOSSES AFTER CHAIRMAN WARSH REITERATED PRICE STABILITY. WE WILL CONTINUE TO WATCH THE OTHER SIDE BECAUSE THE YEN IS HOLDING AT A 40 YEAR LOW AGAINST THE U.S. DOLLAR. THE OFFSHORE YUAN ALSO HOLDING STEADY. BUT THEY EURO HAS BEEN HAMMERED BY THE STRENGTH OF THE U.S. DOLLAR IN RECENT WEEKS. WATCHING EMERGING MARKET CURRENCIES, TAKING A PLUNGE AFTER WE SAW THAT MORE HAWKISH TONE COMING FROM THE FED CHAIR. THE MARKET OPENS IN SYDNEY, SEOUL AND TOKYO OUR NEXT. THIS IS BLOOMBERG. ♪ AVRIL: THIS IS ASIA TRADE WE’RE COUNTING DOWN TO MAJOR -- SHERY: WE ARE COUNT DO YOU THINK TO MAJOR MARKET OPENS. SOME RELIEF COMING FROM COOLER U.S. C.P.I. AVRIL: WHICH IS INTERESTING GIVING WARSH’S TESTIMONY ON THE HILL. HE SOUNDED REALLY DETERMINED ABOUT FIGHTING INFLATION. HOW THEY’RE NOT MISSION ACCOMPLISHED YET SYSTEM OF MAYBE THAT REFLECTED IN THE SKEPTICISM, THE PEARING BACK OF THE REBOUND WE SAW IN TREASURIES TO SOME EXTENT, SHERY. SHERY: YEAH. ALSO THE U.S. DOLLAR AND OF COURSE THAT PRESSURE ON ALL ASIAN CURRENCIES AT THE MOMENT. NOT SURPRISING GIVEN OF COURSE THAT WE HAVE SEEN THE JAPANESE YEN, FOR EXAMPLE, ALREADY TRADING AT THE 40-YEAR LOW AGAINST THE GREENBACK. WE HAVE SEEN THE UPSIDE MORE BROADLY WITH NIKKEI STOCKS RISING BECAUSE WE’RE NOW BACK AGAIN FOCUSED ON THE GREAT REPATRIATION TRADE HERE IN JAPAN. THE FINANCE MINISTER COMING OUT AND TALKING ABOUT ADDING J.G.B.’S INTO INDIVIDUAL INVESTMENT ACCOUNTS THAT ARE TAX FREE OR EVEN BEING ABLE TO ADJUST ALLOCATIONS FROM THE GOVERNMENT PENSION FUND. THERE’S A LOT OF SPECULATION ABOUT WHAT HAPPENS IF ALL THOSE FLOWS COME BACK TO THE JAPANESE MARKETS. IN THE MEANTIME WE ARE SEEING THE NIKKEI GAINING AGAIN TODAY WITH THE T OF COURSE PIX UP .7%. J.G.B. HOLDING AT THE 267 LEVEL. WE HAVE A STRONG, SOLID AUCTION COMING FROM THE 20-YEAR J.B. AUCTION. WE DO HAVE A MORE JGB OPTIONS TO WATCH OUT FOR NEXT YEAR. TAKE A LOOK AT HOW SOUTH KOREA COMING ONLINE, WATCHING THE A.I. TRADE, THE TECH TRADE. A LOT OF VOLATILITY IN THIS MARKET. A LITTLE DIVERGENCE WITH THE KOSPI AND KOREAN WON AS WELL. A LITTLE MORE STRENGTH IN THE CREE YAP WON. WE HAVE SEEN IT PASS THE 1,500 LEVEL. THAT SPECULATION THAT WE ARE GOING TO SEE THOSE FLOWS FROM THE S.K. HYNIX A.D.R.’S THAT CAN BE INVESTED INTO THE SOUTH KOREAN ECONOMY. BUT S.K. HYNIX REALLY WHEN IT COMES TO A.D.R.’S, WE’RE NOW SEEING THE PREMIUM OVERSOLD SHARES WHEN LAST WEEK THEY WERE 3%. AVRIL: TALK ABOUT THE GEOPOLITICAL RISK PREMIUM AS WELL WHEN IT COMES TO TENSIONS BETWEEN THE U.S. AND IRAN RESURFACING. WE’RE HEARING THE INTERIOR MINISTRY OF BAHRAIN SAID THE SIREN HAS BEEN SOUNDED, TELLING CITIZENS AND RESIDENTS TO REMAIN CALM AND ALSO TO HEAD TO THE NEAREST SAFE PLACE. AS WE WATCH THE CONFLICT AND THE IMPACT THAT IT’S HAD ON OIL PRICES, TAKE A LOOK AT WHERE BRENT IS IN THE EARLY GOINGS OF THE ASIA SESSION. SITTING ABOVE THE 85 HANDLE. DOES THAT CAP SOME OF WHAT WE SAW IN TERMS OF REACTION FROM TREASURIES FOLLOWING ON FROM THE U.S. C.P.I. ON A DAY WHERE I GUESS INVESTORS ALSO WEIGHING OUT COMMENTS FROM KEVIN WARSH. LET’S BRING IN MARK FRANKLIN, HEAD OF ASIA MANAGEMENT. THERE’S A LOT GOING ON. WHAT’S TOP OVERMANNED FOR YOU? MARK: THERE IS A LOT GOING ON. I THINK THE OUTLOOK IS COMPLEX. WE’RE LOOKING AT THE INFLATION DUE TO CONFLICTS IN THE MIDDLE EAST. THE INFLATION DATA YESTERDAY WASN’T JUST OIL PRICES. THERE WERE SIGNS OF DISINFLATION UNDER THE HOOD. THAT’S LIKELY TO PERSIST. FROM A HEADLINE POINT OF VIEW WE’RE LIKELY TO SEE VOLATILITY WHICH MAKES IT DIFFICULT TO ESTABLISH A TREND. WITH RESPECT TO EQUITIES WE’VE SEEN ROTATIONAL FORCES WITHIN MARKETS BUT WE’RE APPROACHING EARNINGS SEASON NOW AND YOU’RE LUCKILY TO SEE THE MARKET FOCUS ON THOSE BUSINESSES AND SECTORS CONTINUING TO DEMONSTRATE ABOVE MARKET GROWTH POTENTIAL. SHERY: DOES THAT MEAN VALUE TRADES COULD BENEFIT IN THE BACK HALF? MARC: WE HAVE SEEN VALUE CYCLICALS AS THE STEAM WAS LET OUT OF THE TECH SECTOR TO SOME EXTEND. BUT WHEN YOU SAW PROFIT TAKING. HEALTH CARE STARTING TO COOL OFF A BY. YOU MAY SEE A REVERSION BACK TOWARD THE YEAR-TO-DATE WINNERS, PARTICULARLY IF THEY’RE CATALIZED BY ABOVE AVERAGE EXPECTATIONS IN THE EARNINGS SEASON. BUT THE BAR IS QUITE HIGH. SHERY: SO MAYBE THE MOMENTUM, MAYBE FOR MEMORY THAT CAN STILL BE SUSTAINED, THERE’S A CHANCE THEY REGAIN THEIR VIGOR THAT WE SAW IN THE FIRST HALF. HOW INTACT DO THE FUNDAMENTALS LOOK TO YOU? MARC: THEY LOOK VERY STRONG. MARKETS TEND TO PRICE IN AHEAD OF INFLECTION POINTS AND CYCLE. WHAT YOU’RE SEEING IS A STRONG COOLING OFF. THERE WAS A LOT OF SPECULATIVE FROTH THAT BUILT UP A LOT OF RETAIL INVESTORS. THAT’S COOLING OFF A LITTLE BIT. MARKETS KICKING IN THERE THE EARNINGS OUTLOOK LOOKS ROBUST. MANY OF THESE COMPANIES ARE HIGHLIGHTING THAT THE SUPPLY CRUNCH WILL EXTEND WELL INTO 2028. AT SOME POINT THE MARKET WILL ATTEMPT TO COOL THE PEAK IN THE CYCLE IN TERMS OF THE DELTA PACE OF GROWTH. FOR THE TIME BEING WE THINK THAT’S NOT HERE JUST YET. THAT DOESN’T MEAN YOU’RE NOT GOING TO SEE VOLATILITY AND EQUITY MARKET PERFORMANCE. A LOT OF RUN-UP AND FROTH BUILT IN. AVRIL: THAT VOLATILE IS DRAWING SCRUTINY AT LEAST FOR THE LIKES OF KOREA. HOW MUCH OF THAT ARE YOU COUNTING AS RISK FOR THAT MARKET? MARC: I THINK IT’S COME AFTER THE HORSE HAS BOLTED. IT’S CLEAR THERE WAS A BUILDUP OF MARGIN BY RETAIL FINANCIAL INVESTORS. IT’S ONLY WHEN MARKETS STARRED TO COME DOWN BY HIGH SINGLE DIGIT MOVES ON INDIVIDUAL DAYS WAS THERE A DIFFERENT APPROACH. I THINK THE REALITY IS THAT THESE THINGS NEED TO BE ADDRESSED WELL AHEAD OF TIME AND WITH THE EVENT OF SINGLE STOCK E.T.F.’S THAT’S ANOTHER SIGN OF EXUBERANCE. TO CALL IT IRRATIONAL EXUBERANCE A HARD CALL. SHERY: AND A SIGN OF THE TIMES, FOLLOWING ON FROM THE A.D.R. RALLY. THERE WAS THAT PREMIUM THAT CAME BACK FOR THE A.D.R.’S VERSUS WHAT WE SAW IN THE SEOUL SHARES. WHAT’S YOUR SENSE OF, WHEN YOU LOOK AT THE S.K. HYNIX, MEMORYMAKER, MAYBE REPATRIATING SOME OF THEIR FUNDS BACK TO SOUTH KOREA, DOES IT GIVE YOU A SENSE OF HOW THE KOREAN WON ALSO COULD BENEFIT? ESPECIALLY WE SEE THE DOLLAR SLIPPING IN SUCH A MANNER? MARC: THERE’S A BENEFIT IN HAVING A DIVERSIFIED CURRENCY EXPOSURE ON THE BALANCE SHEET FOR THESE COMPANIES. A LOT OF THEIR REVENUES ARE DENOMINATED IN U.S. DOLLARS ANYWAY. THEY’RE REPATRIATING THOSE, PRICED IN U.S. DOLLARS. IT’S NOT A GIVEN THEY’LL BE AUTOMATICALLY REPATRIATING THOSE CASH BALANCES BACK INTO KOREAN WON UNLESS THERE’S PRESSURE THE GOVERNMENT TO DO SO BECAUSE OF COURSE CORPORATE EARNINGS IS A BIG DRIVER OF FOREIGN CURRENCY FLOATS. UP UNTIL RECENTLY THE KOREAN WON HAS SEEN QUITE A DEGREE OF WEAKNESS WHICH FACTORED INTO INFLATION. YOU MAY SEE POLITICAL PRESSURE TO REPATRIATE BUT FROM A PURELY CORPORATE INCENTIVIZATION, THERE’S A BENEFIT TO REFEIGNING THOSE BALANCES. AVRIL: FOR SOUTH KOREA, WHAT WAS INTERESTING IS HOW FOREIGNERS WERE SITTING OUT AND AT SOME POINT LAST WEEK LOOKS LIKE THE SELLS AMONG FOREIGNERS EASED OFF A LITTLE BIT. HOW ARE FOREIGN INVESTORS VIEWING SOUTH KOREA RIGHT NOW? MARC: THE OBSERVATION WAS THAT MANY FORM INVESTORS THAT WERE LATCHING ONTO THIS RELATIVELY EARLY WERE SELLING INTO THE STRENGTH. IT’S NOT TO SAY THEY WERE SITTING IT OUT. WHAT THEY WERE DOING AS THE POSITION SIZES IN THEIR PORTFOLIOS GREW AGGRESSIVELY BECAUSE OF RELATIVE OUT-PERFORMANCE IT WAS ABOUT MANAGING RISK AGAINST BENCHMARKS. WITH RESPECT TO FOREIGN INVESTOR APPETITE TOWARD KOREA, LAST RECOGNITION THAT VOLATILITY BEING HEIGHTENED IS PROBABLY HERE TO STAY FOR A WHILE. BUT THE ISSUE IS THERE’S AN ABSENSE OF ALTERNATIVE OPPORTUNITIES WITHIN ASIA BEYOND THE MARKET. IF YOU LOOK AT HONG KONG, CHINA, INDIA, THEY’VE LAGGED SIGNIFICANTLY. BUT THERE’S PERHAPS A LACK OFCY DERNABLE CATALYST. SO IN THE ABSENCE OF ALTERNATIVE HOME FOR THAT YOU MAY SEE FOREIGN INVESTORS STEP BACK IN IF THE FALLBACK CONTINUES. SHERY: WHAT ABOUT JAPAN? MARC: IT’S HAD A GREAT RUN IN TERMS OF PERFORMANCE. THEY’RE PROBABLY AT THE UPPER END OF HISTORICAL TRADING RANGES BUT FOR SOME GOOD REASON, YOU’VE GOT A FISCAL BACKDROP THAT’S CONDUCIVE TOWARD REFLATIONNARY POLICY AND GOOD FOR THE CORPORATE EARNINGS BACKDROP. THE CURRENCY IS COMPETITIVE. THAT HELPS EXPORTERS. I THINK IN ADDITION TO THAT YOU’VE GOT BOTTOM UP CATALYSTS IMPROVING RETURN POLICIES. SOME OF THAT IS BAKED INTO THE PRICE. AS LONG AS JAPANESE CORPORATE EARNINGS REVISIONS ARE FARING WELL AGAINST BROADER GLOBAL EQUITY MARKETS THERE’LL BE A BIT FROM FOREIGN INVESTORS. I WOULD SAY THE LOW-HANGING FRUIT IN TERMS OF THAT VALUATION, MULTIPLE REBATING HAS PLAYED OUT. NOW IT’S ABOUT FUNDAMENTALS DRIVING FUTURE RETURNS. SHERY: WHAT ABOUT THE COMMENTS IN THE PAST WEEK, THE IDEA THAT MAYBE THEY’LL FOCUS MORE WITH THESE JAPANESE ASSETS, MAYBE THAT MANES REPATRIATION OF FUNDS AS WELL. I MEAN, DOES THAT MOVE THE NEEDLE THEN? MARC: THEY’VE ATTEMPTED TO OBVIOUSLY DIRECTLY INTERVENE IN CURRENCY MARK ES AYE FEW TIMES IN THE THE LAST FEW MONTHS. WHILE THEY’VE HAD AN INITIAL IMPACT THE TRENDS HAVE RE-ESTABLISHED THEMSELVES AND THE YEN RESUMED ITS WEAKENING PATH AGAINST THE DOLLAR. WHAT THEY’RE ATTEMPTING TO DO IS STABILIZE THE CURRENCY, BECAUSE THEY RECOGNIZE IT HAS AN IMPACT ON REAL WAGE GROWTH, PERCEPTION AROUND PURCHASING POWER FOR THE CONSUMER. ONE OF THE THINGS YOU’RE LIKELY TO SEE IS A RE-APPRAISAL OVER THE EX-DON’T WHICH POLICYMAKERS NEED TO SUPPORT DOMESTIC ASSETS. IT’S MORE LIKELY TO BE FOCUSED ON J.G.B.’S. HELPS STABILIZE THE CURRENCY. HELPS STABILIZE PERCEPTIONS AROUND THE BOND MARKET. IT’S NOT THE CASE THAT DOMESTIC BENEFICIALARIES WILL BE THE PRIME BENEFICIARIES. BUT THE GOVERNMENT IS HELL-PENT ON A FISCAL STIMULUS PACKAGE. THAT’S SNAG FOREIGN INVESTORS ALSO HAVE WEIGH UP IN TERMS OF FISCAL SUSTAINABILITY. SHERY: ARE YOU EXPECTING STIMULUS FROM CHINESE POLICYMAKER? WE EXPECT THE CHINESE DATA TO POINT TO MAYBE FURTHER SOFTNESS. WHAT DOES THAT MEAN FOR ASSET WHICH IS SEEM TO BE TRADING AWAY FROM THE MACRO BACKDROP? MARC: IF YOU’RE A TRADER IN MAINLAND CHINA AND YOU SEE STIMULUS AND DON’T HAVE MANY WAYS TO TAKE YOUR CAPITAL OVERSEAS YOU’RE MORE LIKELY TO LEAN TOWARD BONDS. THAT’S WHY I THINK BOND YIELDS HAVE CONTINUED TO BE RELATIVELY COMPRESS AND THE CURRENCY HAS PERFORMED WELL. AS WE APPROACH 2027, A WOMEN BOLL I THINK AREA FOR THE C.C. PERFORM, YOU’LL SEE THEM TRYING TO DRIVE THAT CYCLICALLY. BUT THERE’S STALE CERTAIN DEGREE OF RETICENCE TO STIMULATE THE ECONOMY IN A BROAD-BASED WAY. THAT DEVOLVING ECONOMICKING DECISION MAKING POWER TO HOUSEHOLDS WHERE THERE’S A FORCE TOWARD CENTRALIZATION AND MORE STATE-DRIVEN INITIATIVES ECONOMICALLY. SHERY: MARC, WE HAVE TO LEAVE IT THERE FOR TODAY. GREAT TO HAVE YOU IN THE STUDIO. MARC FRANKLIN, WE HAVE MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. ♪ PRESIDENT TRUMP: YOU HAVE SAUDI ARABIA, U.A.E., QATAR, BAHRAIN, AND KUWAIT, YOU KNOW, PRIMARILY, AND THEN OTHERS. I SPOKE TO ALL OF THEM. AND THEY WOULD LOVE TO INVEST MORE MONEY IN THE UNITED STATES AT RECORD AMOUNTS. AND THAT WOULD BE VERY ACCEPTABLE. AND THIS WAY THERE’S NO FEE. SHERY: PRESIDENT TRUMP DISCUSSING HIS DECISION TO DROP PLANS FOR FEES ON SHIPMENTS THROUGH THE STRAIT OF HORMUZ SAYING GULF STATES HAVE PROMISED TO MAKE UP THE REVENUE WITH DIRECT INVESTMENTS. MEANWHILE, U.S. FORCES HAVE RE-IMPOSED A NAVAL BLOCKADE AND LAUNCHED A NEW WAVE OF STRIKES ON IRAN. TRUMP IS ALSO THREATENING FURTHER ATTACKS IN COMING DAYS UNLESS TEHRAN COMES TO THE NEGOTIATING TABLE. >> DO YOU ANTICIPATE THAT THE STRIKES WERE -- WE’RE SEEING THIS WEEK AGAINST IRAN WILL EXPAND? ARE YOU CONSIDERING HITTING ENERGY TARGETS OR OTHER LOCATIONS? PRESIDENT TRUMP: I’LL SAVE THE ENERGY TARGETS FOR LAST BUT ULTIMATELY WE’LL HIT ENERGY TARGETS, YEAH. WE’RE GOING TO HIT THEM VERY HARD TONIGHT. WE’RE GOING TO HIT THEM VERY HARD TOMORROW NIGHT. WE’RE GOING TO HIT THEM VERY NIGHT THE NIGHT AFTER. AND THEN NEXT WEEK IT GETS REALLY BAD FOR THEM BECAUSE NEXT WEEK COMES THE POWER PLANTS. NEXT WEEK COMES THE BRIDGES. SHERY: LET’S BRING IN OUR GOVERNMENT EDITOR, JOHN HERSKOVITZ. THE CROPPING OF THAT FEE, THAT WAS FAST. TACO TUESDAY IS BACK. WHAT HAPPENED? >> TRUMP SAID HE HEARD FROM MEMBERS OF THE GULF STATES WHO AGREED TO THIS INVESTMENT. ONE OF THE GULF STATES IS QUESTIONING WHETHER THIS ACTUALLY HAPPENED. THE IDEA OF THE IDEA OF IMPOSING FEES RAN COUNTER TO INTERNATIONAL LAW. IT WAS AMERICA'S ALLIES AND ENEMIES THAT WERE OPPOSED TO THIS. IT MEANT A HIGHER COST FOR OIL. THERE WAS A LOT OF PUSHBACK AND WE SAW THE ENERGY MARKETS, GOING UP INCREDIBLY. SHERY: TOPPING $85 PER BARREL NOW. THE RISKS, WE DON'T KNOW WHERE WE ARE AT WITH THE NEGOTIATIONS. JON: WE HAVE SEEN ECONOMIC PRESSURE ESCALATES OF THE NAVAL BLOCKADE IS BACK. WE HAD THE REMOVAL OF THE WAIVERS ON IRANIAN OIL A WEEK OR SO AGO. AND WE ARE PROBABLY GOING TO SEE AN ESCALATION OF THE MILITARY FROM FROM THE U.S. AND PROBABLY IRAN AS WELL. WE DON'T KNOW HOW THAT PLAYS OUT BUT THE RISKS ARE INCREASING. THE RISKS TO SHIPPING AND ENERGY SUPPLIES ARE GOING UP. AND WE DON'T SEE A WAY OUT OF THIS. SHERY: WE CONTINUE TO SEE CASUALTIES AND EVEN DEATHS IN THE STRAIT OF HORMUZ. WHAT DO WE KNOW ABOUT THE POTENTIAL POLITICAL RAMIFICATIONS FOR PRESIDENT TRUMP? COMING INTO THE CONVERSATION I CALL THAT THE TACO AIDE. JON: THE RISKS KEEP GOING UP FOR TRUMP. THE NOVEMBER MIDTERMS, THE REPUBLICAN IS FACING A SERIOUS CHALLENGE. THE WAY THINGS ARE GOING, GAS PRICES ARE SET TO BE ELEVATED AT THAT TIME. THE WAR IS STILL SET TO BE GOING ON AT THAT TIME. HE MAY HAVE TO GO BACK TO CONGRESS TO SEE ABOUT THE WAR POWERS. THE POLITICAL RAMIFICATIONS AT HOME ARE GOING UP AND THE INTERNATIONAL RAMIFICATIONS, ALLIES WERE NOT ON BOARD WITH THIS AND THESE ABRUPT CHANGES FROM 20% FEES TO DROPPING IT, HOW DO YOU KEEP ALLIES ON BOARD WHEN THEY DON'T KNOW THE POLICY DAY TODAY? JON: -- SHERY: THANK YOU SO MUCH. FOR MORE ON THE STATUS OF THE STRAIT OF HORMUZ LET'S BRING IN NICHOLAS. LOOKING AT THE BRENT CURVE, ALL THE WAY OUT UNTIL THE JANUARY CONTRACT NEXT YEAR IS ABOVE $80. WHAT IS THE RISK FOR MARKETS? >> IT IS CLEAR PEOPLE ARE WORRIED THE CRISIS WILL BE PROLONGED. MAYBE TWO WEEKS AGO, IT SEEMED LIKE WE WERE FINALLY WORKING OUR WAY THROUGH. PEOPLE WERE TALKING, NEGOTIATIONS WERE HAPPENING AND THAT HAS BEEN BLOWN OFF THE TABLE BY THE STRIKES. TWO TANKERS HAVE BEEN HIT BY IRAN. THE LATEST REPORTING HAS SHOWN THE TANKERS WERE TRAVELING THROUGH THE STRAIT. THIS MEANS IN A WAY, THE DARK ROUTE, COMPANIES LIKE ADNOC MOVING THROUGH TANKERS, THAT WAS A MAIN WAY THE CRUDE WAS GETTING TO GLOBAL MARKETS. IF IRAN SIGNALS, WE KNOW WHAT WE ARE -- WE KNOW WHAT YOU ARE DOING AND WE CAN HIT YOU, SHIPOWNERS AND CAPTAINS WILL THINK TWICE BEFORE MOVING ENERGY THROUGH THE STRAIT. AVRIL: WE GET A SENSE OF HOW ASIAN BUYERS ARE GETTING SUPPLY FROM THE U.S.. HOW MUCH IS THAT HELPING US AT THIS MICRON? -- WITH THE SUPPLY CRUNCH? NICHOLAS: THOSE ARE MORE ON THE CONVERSATION STAGE. AFTER THE DISCUSSION ABOUT THE 20% FEE ON HORMUZ TRANSIT, THERE WERE CONVERSATIONS OPENED ABOUT WHETHER, IF THIS MAKES CRUDE COMING OUT OF THE MIDDLE EAST TOO PRICEY, WHAT ALTERNATIVES DO WE HAVE? ONE THING OUR REPORTING SHOWS IS WHILE THE CONVERSATIONS ARE INITIAL, IT IS CLEAR THE OFFICE -- THE OFFERS ARE WIDE. WE HAVE SEEN U.S. CRUDE SERVICE THE SUPPLY OF LAPSED RESORT -- LAST RESORT. I COULD SEE MANY -- THE U.S. POTENTIALLY BEING THE BIG GLIMMER IF THINGS GO SOUTH AGAIN IN THE STRAIT. AVRIL: I SUPPOSE IT DOESN'T SURPRISE US JUST AS QUICKLY AS THE 20 PERCENT FEE WAS FLOATED, IT WAS BACKED OFF AGAIN. NICHOLAS: IT BECAME CLEAR YESTERDAY THAT A LOT OF PEOPLE FOUND THIS MEASURE OUT OF NOWHERE. IT WAS CLEAR IT WAS IMPRACTICAL, HARD TO IMPLEMENT. THAT IS WHAT A LOT OF EXPERTS TALKED ABOUT. . IN SOME WAYS I WONDER IF THIS WAS A WAY, THIS WAS A WAY FOR TRUMP JUST TO TAKE A STEP BACK ON A POLICY THAT WOULD ALIENATE HIS GULF ALLIES. THESE WERE THE STATES AROUND THE GULF WHO ARE PETITIONING HIM TO WALK THIS BACK. AVRIL: NICHOLAS, THANK YOU SO MUCH. WE HAVE MORE AHEAD ON THE ASIA TRADE. THIS IS BLOOMBERG. ♪ SHERY: KOREAN EQUITIES SURGING TODAY. THE BEST DAY IN ABOUT A MONTH FOR THE KOSPI WITH THE LIKES OF TECH, THE ENERGY SECTOR, INDUSTRIALS GAINING GROUND. THE ENERGY SECTOR COMPANIES, SURPRISING GIVEN WE SEE BRENT PRICES ABOVE $85 PER BARREL ON THE ONGOING CONFLICT BETWEEN IRAN AND THE U.S.. BUT IT REALLY HAS TO DO WITH THE VOLATILITY AROUND THE TECH SECTOR, ESPECIALLY WHEN IT COMES TO SK HYNIX STOCKS. THE ADRS WITH A PREMIUM OF OVER 50% TO SEOUL SHARES BUT THERE IS LOTS OF EXPECTATION THAT THE ADR FLOWS COULD FLOW INTO THE SOUTH KOREAN ECONOMY SO THAT IS GIVING THE KOREAN WON A BIT OF A BOOST. TRADING BELOW THE 1500 LEVEL. WE HAVE SEEN DATA POINTING TO PERHAPS MORE TIGHTENING FROM THE BANK OF KOREA, THE JOBLESS RATE FALLING TO 2.7 PERCENT BUT PROPPED UP BY GOVERNMENT SUPPORT JOBS. WE HAVE SEEN THIS OVERSEE -- OVERHEATING OR CONCERNS OF OVERHEATING IN THE SOUTH KOREAN ECONOMY GIVEN WHAT IS HAPPENING IN THE SEMICONDUCTOR SPACE. LET'S BRING IN GARFIELD REYNOLDS WHO LEADS OUR COVERAGE. THERE IS INCREDIBLE STRENGTH WHEN IT COMES TO THE SOUTH KOREAN MARKET BUT ALSO A LOT OF VOLATILITY. GARFIELD: THE VOLATILITY OUTWEIGHS THE STRENGTH FOR NOW. EVEN WITH WHAT IS GOING ON THIS MORNING, THE KOSPI REMAINS WELL BELOW THE HIGHS WE SAW EARLIER THIS YEAR. OF COURSE, IT IS VERY STRONGLY UP OVER THE COURSE OF THE YEAR. SO THAT AGAIN HIGHLIGHTS THE VOLATILITY AND ALSO, WE ARE GETTING ANOTHER DEMONSTRATION OF HOW AT THE MOMENT, SOUTH KOREAN STOCKS ARE ESSENTIALLY 1.5 COMPANIES, SK HYNIX AND SAMSUNG TO A LESSER EXTENT, THAT ARE REALLY JUST ABOUT EVERYTHING FOR SOUTH KOREAN EQUITIES. THAT IS PART OF THE VOLATILITY AND THAT IS A BIG PART OF WHAT IS LEADING TO GAINS TODAY. AVRIL: I SUPPOSE A FEATURE, NOT A BUG. WHAT ABOUT WHAT THIS MEANS FOR THE KOREAN WON? THERE IS A SENSE OF MAY BE, THERE IS A REPATRIATION OF FUNDS LEADING TO DEMAND FOR THE LOCAL CURRENCY. GARFIELD: THAT IS ONE THING THAT HAS GONE ON, THAT HAS BEEN HELPING WITH THE KOREAN WON. THERE IS THE LIKELIHOOD THE BOK WILL HIKE AS WAS FLAGGED EARLIER . THERE IS A BROADER PICTURE GOING ON AS WELL. ONE THING THAT WEIGHED ON THE WON OVER THIS YEAR WAS AS YOU HAVE EXTREME GAINS FOR SK HYNIX AND SAMSUNG, FOREIGN INVESTORS WILL BE ENFORCED TO SELL OUT OF SOME OF THEIR HOLDINGS BECAUSE THEY WERE BUMPING UP AGAINST SINGLE STOCK LIMITS WITH THE CONCENTRATION THAT WAS GOING ON IN THE KOREAN INDEX. NOW THAT FOREIGNERS CAN BUY SK HYNIX AND LOOK POTENTIALLY FORWARD TO BUYING SAMSUNG OUTSIDE OF KOREA, THAT MAY ACTUALLY HELP REMOVE SOME OF THE STRUCTURAL SET UP THAT WAS DRIVING AT LEAST SOME OF THE MASSIVE REPATRIATION. WE HAVE ALSO HAD A BIG CLIMB DOWN IN THE SHARES, WHICH MEANS THAT WILL BE A POSITIONING SET UP. WE COULD RETURN TO A MORE NORMAL DYNAMIC WHERE YOU CAN HAVE THE WON GAINING AT THE SAME TIME AS SOUTH KOREAN SHARES ARE GAINING, WHEREAS FOR MUCH OF THE YEAR THEY WERE GOING IN OPPOSITE DIRECTIONS. SHERY: BEFORE WE LET YOU GO, THIS WHOLE PENSION BUYING SPECULATION TALKING ABOUT REPATRIATION OF FUNDS. IT'S A BIG STORY AND JAPAN. GARFIELD: A VERY BIG STORY. IT'S ALSO, PART OF WHAT IS GOING ON IS ALSO NOT JUST THE DIRECT REPATRIATION BUT EFFORTS TO ENCOURAGE RETAIL INVESTORS AND INSTITUTIONS TO BE MORE BUYERS, TO BUY EXISTING INFLOWS. SO IT IS A STEALTH REPATRIATION, THE ALLOCATIONS TO JAPANESE GOVERNMENT BONDS ARE BEING, WERE BIASED TOWARDS GROWING ANYWAY WITH YIELDS HIGHER. NOW, THE GOVERNMENT IS ACTING TO REINFORCE THAT, SO THAT COULD LEAD TO A FLATTER CURVE AS THOSE HIGH LONGER AND JAPANESE YIELDS ATTRACT MORE BUYERS THERE. THAT WOULD BE BETTER FOR THE YEN BY AT LEAST LIMITING SOME OF THE OUTFLOWS THAT WOULD NORMALLY HAPPEN. IT MIGHT ALSO BE BETTER FOR THE STABILITY OF JAPANESE FINANCIAL MARKETS. AVRIL: THANK YOU SO MUCH. WE WILL SEE WHETHER THAT PANS OUT. BLOOMBERG'S GARFIELD REYNOLDS THERE. LET'S TAKE A LOOK AT HOW FUTURES ARE FARING IN THE EARLY GOINGS. THE MACRO BACKDROP, LOOKING AT WHAT CAME OUT OF THE U.S., IMPROVE A FAIR BIT. EURO STOXX 50 FUTURES LOOKING AT DECLINES ON A DAY WHEN INVESTORS ARE CONTENDING WITH HOW THE DOLLAR HAS SLIPPED A FAIR BIT. SO EURO-DOLLAR IS CLIMBING JUST A LITTLE. WE HAVE MORE AHEAD ON THE ASIA TRADE. THIS IS BLOOMBERG. ♪ WE HAVE MORE AHEAD ON THE ASIA TRADE. THIS IS BLOOMBERG. ♪ LET'S TAKE A LOOK AT HOW THE BENCH MARKETS ARE FARING. HALF AN HOUR INTO THE TRADING DAY. OF COURSE, WE ALREADY SAW THE KOSPI SURGING UPWARDS OF 7%. THERE IS A LOT OF VOLATILITY THERE. DRIVEN BY THESE LEVERAGED ETF'S. OPTIONS OUT OF THE U.S. AS WELL, WE HAVE LEARNED, BEGAN TRADING THIS WEEK. LOOK AT HOW THE RISK APPETITES, GIVEN THE U.S. CPI NUMBERS. PERHAPS ALSO HELPING THE MACRO BACKDROP. A BIT OF A TECH REBOUND ALSO. THE FORECAST IN A BLOOMBERG SURVEY, LET'S DISCUSS THE BROADER OUTLOOK FOR THE CHINESE ECONOMY WITH OUR ASIA ECONOMIST AT FIDELITY INTERNATIONAL. PEYTON, WE ARE EXPECTING A SLOWING. WHAT DOES THAT MEAN FOR THE BACK HALF OF THE YEAR? PEIQIAN: WE EXPECT A SLOW DOWN, AS WE HAVE OBSERVED IN DATA FROM APRIL AND MAY. PART OF THAT WAS HIT BY THE IRAN CONFLICT AND THE SUBSEQUENT SHORTAGES THE VARIOUS INPUT. AS WELL, THE DOMESTIC DEMAND SEEMS TO HAVE SOFTENED A LITTLE ON THE BACK OF A SOMEWHAT CONSERVATIVE FISCAL SAT SECOND QUARTER. ALL IN ALL WE WILL EXPECT SOME SOFTNESS IN DATA. THE KEY IS, DOES THAT -- WHERE DOES THAT TRIGGER REACTION FUNCTION FROM POLICYMAKERS? SHERY: A LOT OF ECONOMISTS OR CHINA OBSERVERS HAVE SAID TO KEEP YOUR EXPECTATIONS ON STIMULUS LOW. PEIQIAN: OVERALL IF YOU LOOK AT CHINA'S GROWTH EVEN THOUGH WE ARE EXPECTING A SLOW DOWN TO A 4%-5% ANCHOR, REMEMBER WE HAVE LOWERED GDP AND GROWTH EXPECTATION FOR THIS YEAR TO PAVE WAY FOR A HIGHER QUALITY OF GROWTH. LOOKING AT THE SHAPE OF CHINESE GROWTH, IT IS CURRENTLY RUNNING ON TWO SPEEDS. K-SHAPED GROWTH IS EVERYWHERE. IT IS A REPRESENTATION OF THE CHARACTERISTICS OF CHINA'S TRANSITION. WE DO SEE THE HIGH-SPEED GROWTH IN THE EXPORT SECTOR YESTERDAY AS WELL AS THE TECH MANUFACTURING SECTOR THAT HAS BEEN RUNNING ON HIGHER SPEED. PERHAPS STOCKS ARE MIXED. THE POLICYMAKERS HAVE HESITATED TO RULE OUT ANY FORM OF BROAD STIMULUS. THAT DOES NOT MEAN CHINA DOES NOT NEED HELP. WE HAVE THE LOWER GEAR OF THE ECONOMY UNDER TRANSITION. WE DID SEE SOME SLOWDOWNS, ESPECIALLY IN RETAIL SALES FOR WE ARE EXPECTING A WEEK NUMBER TODAY AGAIN MAINLY DRIVEN BY A SLOWDOWN OF GOODS CONSUMPTION. AS STIMULUS HAS BEEN SUBSIDING EARLIER THIS YEAR. WITH THAT IN MIND, COMING AND DO INJECT SOME SORT OF TARGETED STIMULUS TO SUPPORT THE WEAKER SIDE OF THE ECONOMY. >> THERE SEEMS TO BE RUMBLINGS ABOUT A CONSUMPTION SUPPORT PLAN. HOW MUCH WEIGHT OR YOU PUTTING ON THAT? PEIQIAN: WE HEARD SOME FOLLOW-UPS FOR THE FIVE-YEAR PLAN IN TERMS OF IMPLEMENTATION. KEY HEADLINE NUMBERS SUGGEST ABOUT 3.7 PERCENT OF NOMINAL RETAIL SALES GROWTH PLANNED IN THE NEXT FEW YEARS. THAT'S NOT AMBITIOUS, IN MY VIEW. IT IS STILL ALONG THE SIDE OF EXCEPTING A SLOWER GROWTH TRAJECTORY WHILE MAKING A SECTOR OF THE ECONOMY IN A BETTER SHAPE. IN TERMS OF CONSUMPTION, MORE PARTICULARLY, THE POLICY STATEMENT, WE SHOULD PAY MORE ATTENTION TOWARDS CONCERN FOR -- SERVICES CONSUMPTION ALTOGETHER. IT USED TO BE THE CASE THAT GOODS CONSUMPTION WERE TAKING A HEAVY WEIGHT. IT APPEARS TO BE MORE CYCLICAL COMING IN AND OUT WITH POLICY STIMULUS. NOW, WE AREN'T SEEING THAT TRANSITION MORE TOWARDS AN INSTITUTIONALIZED FRAMEWORK TO AROUND CONSUMPTION AND DOMESTIC CONSUMPTION. TO BE THE BACKBONE OF THE ECONOMY, TO SUPPORT THE PRODUCTS OR THE YIELD DIVIDENDS FROM TECH AND INNOVATION. AVRIL: AFTER THE NUMBERS YESTERDAY DO YOU GET A SENSE EVEN THAT COULD BE VULNERABLE TO THE GLOBAL CAPEX CYCLE AND WHAT AI RELATED INVESTMENTS LOOK LIKE IN THE NEXT COUPLE YEARS? PEIQIAN: THERE ARE DEFINITELY SOME CYCLICAL ELEMENTS OF THAT BUT I WANT TO DISSECT YESTERDAY'S TRADE DATA INTO THREE BROADER PERSPECTIVES, TO LOOK AT CHINA'S EXTERNAL OUTPERFORMERS IN A BROADER VIEW. FIRST, THE AI PART. WE DID SEE EXPONENTIAL GROWTH IN AI IMPORT AND EXPORT. THAT REFLECTS HOW DEEPLY ENTRENCHED AS THE AI PHENOMENON HAS BEEN. CHINA IS ALSO DEEPLY INTEGRATED IN THIS SUPPLY CHAIN. GIVEN THE CYCLICAL ELEMENTS OF THAT COMING TO THE NEXT QUARTER'S, IF THERE IS ANY RISK I AM SURE CHINA WILL BE AFFECTED AS WELL, BUT THAT'S NOT THE BIG PICTURE. WE SAW ANOTHER ASPECT OF CHINA'S OUTPERFORMANCE THAT COMES FROM THE COMPETITIVENESS OF THE SUPPLY CHAIN WITH REGARD TO GREEN TECH AND TRANSPORTATION. IF WE SAW EV EXPORTS, ALSO CONTINUOUSLY OUTPERFORMING, TO ME, THAT REFLECTS UPGRADING CHINA'S MANUFACTURING SUPPLY CHAIN AND THE DEMAND FOR ENERGY RESILIENCE AND ENERGY SECURITY IS ALSO SUPPORTING, FROM A STRUCTURAL PERSPECTIVE, CHINA'S GREEN TECH EXPORTS. THE THIRD POINT IS THAT THE EASING OF U.S. CHINA TRADE TENSIONS THAT PEOPLE HAVE ALWAYS OVERLOOKED. IF WE LOOK AT CHINESE EXPORTS BY COUNTRY, LOW-END PRODUCT CONSUMER GOODS TO THE U.S. HAVE BEEN RECOVERED SOMEWHAT AFTER THE TRADE TRUCE WITH THE U.S.. AVRIL: SOME SECTORS YOU TALKED ABOUT ARE FACING OVERSUPPLY OR OVERCAPACITY. IS THAT A HEADWIND? PEIQIAN: THAT WILL ALWAYS BE A HEADWIND. WE THINK THAT WITH MORE TRADE FRICTION WITH THE ECONOMIES BECAUSE OF RISING EXPORT SIMILARITY, THE RISING COMPETITIVENESS OF CHINA. WE ARE NOT OPTIMISTIC, PER SE, ABOUT THE UPCOMING RELATIONSHIP BETWEEN CHINA AND EUROPE, CHINA AND JAPAN COME MORE BROADLY, WITH THE COMPETITIVE INDUSTRIAL PACK. BUT I THINK, THAT HAVING BEEN SAID, CHINA'S EXPORTS OF ELECTRIC VEHICLES WILL PROBABLY CONTINUE TO PUSH THROUGH TO A WIDER MARKET. AND OF COURSE, WITH SOME FRICTION FROM MARKET COMPETITION, CHINA WILL PROBABLY STILL SALES THROUGH WITH SOME RESILIENCE GOING FORWARD. AVRIL: THE LATEST FLAREUP IN THE STRAIT OF HORMUZ. HOW BAD DOES THAT LOOK FOR CHINA? IT WAS RESILIENT EVEN IN THE WORST PARTS OF THE CONFLICT. PEIQIAN: THIS IS THE MESSY CASE FOR THE RESOLUTION. IN OUR BASE CASE WE ALWAYS THINK THE STRAIT OF HORMUZ SITUATION WILL BE MESSY, NOT A STRAIGHT LINE. NOW WE SEE FLAREUPS THAT WE ARE WORRIED ABOUT. EARLIER THIS YEAR WE SAW CHINA SHOWING RESILIENCE. THIS IS A COMBINATION OF SOME DEMAND DESTRUCTION, SOFTER DEMAND, ESPECIALLY IN THE REFINERY SECTOR, AS WELL AS ITS BUFFERS AND INVENTORY. INVENTORIES ARE NOT INFINITE. WE THINK THE RISK IS ACCUMULATING AS WE MOVE FORWARD WITH MORE CLOSURES AND DISRUPTIONS. WE CAN SEE CHINA IS NOW RUNNING ON BUFFERS. BUT THE CLOCK IS TICKING FOR CHINA AS WELL. IF THE DISRUPTION WILL LAST LONGER, WE DO THINK THAT CHINA WILL CONTINUE TO DRAW DOWN RESERVES AT THIS POINT OF TIME WHILE REMAINING A SENSITIVE MARGIN BUYER OF CRUDE OIL AND INTO THE MARKET WHEREVER PRICE SEEMS TO BE APPROPRIATE FOR THEM. AND I WOULD ALSO LIKE TO FLAG THAT THERE ARE LNG ASPECTS. AND OTHER KEY STRATEGIC TEMPLATES LIKE HELIUM OR KEY PRODUCTS FROM THE MANUFACTURING SECTORS. WE DO THINK CHINA WILL REMAIN A LITTLE CAUTIOUS AS WELL, AS THE DISRUPTION HAPPENS. BUT IT IS OVERALL MANAGING WITH CAUTION AS A BASE CASE. AVRIL: GREAT TO GET YOUR ANONYMOUS -- ANALYSIS. MORE AHEAD ON THE ASIAN TRADE. THIS IS BLOOMBERG. AVRIL: TALKING ALL THINGS AI, CHINA'S LARGEST MEMORY CHIPMAKERS SEE XMT IS SEEKING TO RAISE A NEAR RECORD AMOUNT IN ITS UPCOMING SHANGHAI STAR POURED IPO'S SEEKING TO RAISE CAPITAL AMID THE AI SPENDING BOOM GLOBALLY. OUR CHIEF NORTH AGE CORRESPONDENT STEPHEN ENGLE JOINED US FROM HONG KONG. WHAT DO WE KNOW ABOUT THE SIZE AND SCOPE OF THE OFFERING? STEPHEN: IT WILL BE PRETTY BIG. LAST FRIDAY I WAS TALKING ABOUT THIS. WE WERE TALKING ABOUT AN IPO UPWARDS OF $4.3 BILLION U.S.. NOW WE ARE TALKING ABOUT, BASED ON THE PRICING AND SIZE OF THE OFFERING, WHETHER THEY EXERCISE THE OVERALLOTMENT OPTION, WE COULD BE TALKING ABOUT AN IPO UPWARDS OF $9.8 BILLION. THAT WOULD BE CHINA'S BIGGEST IPO DATING BACK TO ADD THE BANK IN 2010. IT WOULD ALSO BE ASIA'S SECOND BIGGEST IPO FOLLOWING LG ENERGYSOLUTIONS IN 2022 WHICH RAISED UPWARDS OF $10.8 BILLION SO, THIS WILL BE A PRETTY BIG OFFERING. WHEN IT HITS THE STAR BOARD IN SHANGHAI. $9.8 BILLION. THIS WILL BE A BIG TEST FOR BEIJING. IT'S PUSHING COMPANIES LIKE THIS ONE TO AND CATL WE ALL KNOW WE ARE LEAD INVESTORS IN THIS BIG $7 BILLION FINANCING REALM. SO, THIS, ACCORDING TO SOURCES, WOULD BE NOT ONLY AN IPO BY THE END OF THE YEAR, BUT THE NAMESAKE, THE AUTONOMOUS MOMENT, WHEN ARE THEY GOING TO START MAKING MONEY FOR INVESTORS? AVRIL: THANKS FOR KEEPING TABS ON ALL OF THIS. SHE'S NORTH ASIA CORRESPONDENT STEPHEN ENGLE. INTERESTED IN THE IMPACT ON THE BROADER MARKET, PULL BACK FROM JUNE HIGHS. MEANTIME, ANALYSTS ARE SAYING A SELLOFF IN CHINESE AI STOCKS IS A TEMPORARY SETBACK RATHER THAN A LASTING SECTOR ROTATION. FOR MORE, LET'S BRING IN REPORTER WINNIE HSU. IS IT ROTATION OR MAY BE CAUTION AHEAD OF THE IPO? WINNIE: YEAH. GOOD MORNING, AVRIL. IT IS A BIT OF THE CAUTION AHEAD OF THE IPO. YOU JUST DISCUSSED THAT WITH STEVE, THE MARKED ASSIGNMENT AHEAD OF THE -- EXCITEMENT AHEAD OF THE IPO, WHICH WILL HAVE ITS SHARE OF FRICTION FROM TOMORROW. WE LEARNED IT LIKELY IS GOING TO RAISE THAT 9.8 BILLION DOLLARS, DOUBLING WHAT WAS INITIALLY ESTIMATED. SO BASED ON WHAT WE'VE SEEN DEVIOUSLY IN THE IPO'S WE'VE LEARNED, LAST YEAR, FOR EXAMPLE, WHEN WE SAW THE LIKES OF META X AND OTHERS HAVING THEIR PERSPECTIVE UPDATE, AND UNTIL THE DAY VIEW, ACTUALLY WE SAW SHARES FALLING BECAUSE OF SOME PROFIT TAKING AFTER SUCH A STRONG RALLY INTO THE NEWS. SO MOST LIKELY THIS TIME AROUND, WE ARE ALSO EXPLAINING A SIMILAR PASSION, BECAUSE ONE YOU JUST MENTIONED HAS REALLY RALLIED IN THE PAST THREE MONTHS ON EXPECTATIONS FOR THIS IPO AND THE LISTING. SO, RIGHT NOW, A BIT OF A CAUTION BEFORE THE REAL DEBUT ACTUALLY HAPPENS. AVRIL: WHAT ARE WE SEEING AN INVESTOR POSITIONING AHEAD OF THE IPO? WINNIE: YEAH. WHEN I SPOKE TO INVESTORS TODAY, FOR NOW THEY SEEM TO BE EXPECTING THE OVERSUBSCRIPTION AND OVERALLOTMENT, DRIVEN BY THE EXCITEMENT FOR THIS MEGA MEMORY CHIP MAKER, BUT INTERESTINGLY, THE PROBLEM HERE IS THAT INVESTORS DON'T REALLY HAVE ACCESS TO THESE MAINLAND IPO'S, UNTIL A FEW MONTHS LATER, WHEN THEY HAVE ACCESS ON THE STOCK CONNECT. WHAT WE ARE HEARING RIGHT NOW IS THEY ARE SEEKING PROXIES, SO, FOR EXAMPLE, THE LIKE OF BANKS, WHICH ARE SPONSORS AND INVESTORS OF THESE IPO'S. WE SAW THESE STOCKS RALLY AND BECAUSE OF SUCH EXPECTATIONS, AND ALSO INVESTORS LIKE THE SUPPLY CHAIN AS WELL. WE ARE HEARING THAT THEY ARE EXPECTING THE FUNDS RAISED TO BE DEPLOYED INTO THE CAPEX, HENCE BENEFITING THE MEMORY SECTOR IN CHINA, AND HENCE THE SUPPLIERS OF TX MD, -- C MXT AND OTHERS JUMPED ALONG WITH SOME OTHER SUPPLIERS AS WELL, SO LOTS OF INTEREST AS INVESTORS SEEK EXPOSURE TO THIS IPO, WHILE THEY DON'T HAVE A DIRECT ACCESS. AVRIL: SO INTERESTING. WINNIE, THANK YOU SO MUCH, BLOOMBERG'S ASIA EQUITIES REPORTER, WINNIE HSU. WE HAVE MORE AHEAD ON "THE ASIA TRADE." THIS IS BLOOMBERG. ♪ AVRIL: TOP CORPORATE STORIES WE ARE TRACKING THEM A WARREN BUFFETT HAS PLEDGED TO CONTINUE TO DISPOSE OF HIS $140 BILLION STAKE IN BERKSHIRE HATHAWAY OVER THE NEXT EIGHT YEARS. HE HAS ANNOUNCED A NEW ROUND OF DONATIONS TO CHARITIES, BUT POSITIVE FOUNDATIONS DONATIONS -- BUT POSITIVE DONATIONS TO THE GATES FOUNDATION, REIGNITING SCRUTINY OF BILL GATES' TIES TO THE LATE SEX OFFENDER JEFFREY EPSTEIN. A BLOOMBERG'S HAS LIFTED THE CURTAIN ON OPENAI'S MARCH INTO CONSUMER DEVICES. SOURCES SAY IT IS PLANNING A MOBILE SMART SPEAKER, DESIGNED TO BE A NEW TYPE OF HOME COMPUTER FOR THE AI ERA. IT WILL HELP CONTROL SMART APPLIANCES, ANSWER QUESTIONS, TAP INTO THE RANGE OF CAPABILITIES OFFERED BY CHATGPT. ONE OF INDIA'S MOST SUCCESSFUL TECH ENTREPRENEURS IS SENT TO LODGING OF HEALTH TRACKING DEVICE AFTER STEPPING AWAY FROM THE EMPIRE THE LEAD FOR 18 YEARS. BLOOMBERG'S HASLINDA AMEN SPOKE TO HIM EXCLUSIVELY FOR AN UPCOMING EPISODE. DEEPINDER: WE HAVE FEATURES COMING UP WHICH WILL LEAVE IT TO BECOME A MEDICAL DEVICE, SO THOSE FEATURES WILL GO TO THE REVENUE GROWTH. HASLINDA: IS THERE A TIMEFRAME, YOU THINK, THAT WILL BE READY FOR THE MARKETS? DEEPINDER: WE ARE NOT WORKING ON A TIMELINE. HASLINDA: 24 MONTHS, 36 MONTHS? DEEPINDER: IT'S NOT THAT LONG. I DON'T HAVE THAT MUCH PATIENCE. MAYBE SIX TO 12 MONTHS. EVERY TIME I SAY IT IS LIKE SIX TO 12 MONTHS, WE REDISCOVER SOMETHING NEW, RICHER INSIDE THE SIGNAL, AND WE JUST WANT TO MAKE IT PERFECT BEFORE WE LAUNCH. HASLINDA: YOU ALSO HAVE AEROSPACE. WHAT IS THAT ABOUT? DEEPINDER: L.A.T. AEROSPACE IS A PARTNER. HASLINDA: WHAT ARE YOU TRYING TO SOLVE? DEEPINDER: I'M TRYING TO SOLVE FOR THE HYPER DENSE CITIES WE ALL LIVE IN. THERE ARE JUST TOO MANY PEOPLE, AND IT IS TOO CROWDED. WHY DO I LIVE HERE? REASON I LIVE HERE IS WE HAVE SO MANY PEOPLE IN THE OFFICE EVERY SINGLE DAY, BUT THIS MAKES THE CITIES CROWD, POLLUTED, AND SO ON. THE OTHER THING IS OUR GOOGLE AREAS DON'T GROW AS MUCH BECAUSE NOBODY WANTS TO SET OF FACTORIES THERE, BECAUSE IT IS SO HARD FOR CEO'S TO GO THERE. DECONGESTANT THE CITIES, DISTRIBUTE WEALTH AND WORK MORE ACROSS THE COUNTRY, SO ALL OF IT DEVELOPS AT THE SAME PACE AS THE CITIES ARE DOING. THAT'S WHAT I WANT TO DO. HASLINDA: WHAT WOULD IT TAKE FOR THAT TO BE A REALITY? IT IS NOT JUST ABOUT PUTTING $205 MILLION INTO THAT PROJECT. WHAT ELSE FOR IT TO BE REAL? DEEPINDER: FOR THAT TO HAPPEN, MY IDEA OF THE ANSWER IS THAT WE NEED SHORT TAKEOFF AND LANDING PLANS, EITHER RUNNING AT SUPERCHEAP COSTS. HASLINDA: SUPERCHEAP IS? DEEPINDER: MAYBE TWICE, THAT IS THE AMOUNT OF THE PRICE OF THESE THINGS. YOU SHOULD BE ABLE TO, LIKE, TAKE STOCK AND SO MANY DIFFERENT CITIES, TOWNS, VILLAGES, HYPER DENSE FLIGHT NETWORK. IT'S ALMOST LIKE QUICK COMMERCE INTO AVIATION. THAT IS WHAT WE WOULD WANT TO BUILD. IT'S A REALLY HARD PROJECT. I HAVE 1% EXPECTATION IT WILL WORK. WE CAN GET THE ENGINEERING DONE, BUT EVEN THAT IS HARD. IT IS VERY, VERY HARD. BUT THEN ALSO FINDING REAL ESTATE, AIRLINES, FROM BUILDING PLANS, TECH, HAVING EVERYTHING ON YOUR OWN. HASLINDA: AND YOU GET CONGESTED IN THE AIR. DEEPINDER: I DON'T THINK THERE IS SUCH A THING AS CONGESTED IN THE AIR. IT'S A BIG WHITE SPACE. IT'S A BUILDING OUT OF A SYSTEM, AND I THINK EVERYTHING CAN HAPPEN. AVRIL: CATCH MORE FROM THIS CONVERSATION BETWEEN THE TWO LATER ON "INSIGHT WITH HASLINDA AMEN." WE ALSO -- "INSIGHTS WITH HASLINDA AMIN." SPAIN IS HEADING TO THE WORLD FINAL SINCE WINNING THE TOURNAMENT IN 2010 AFTER A COMFORTABLE 2-0 VICTORY OVER FRANCE. SCORING WITH A FIRST-HALF BILL TO BEFORE PEDRO FUELED THE WIN BEFORE THE HOUR MARK. IT WAS A DISAPPOINTING MATCH FOR FRANCE. SPAIN WILL NOW MEET ENGLAND OR ARGENTINA IN SUNDAY'S FINAL. A QUICK CHECK OF CHINA'S MARKET IS WELCOME ON A DAY WHEN YOU LOOK AT JAPAN AND SOUTH KOREA. THERE IS THE FOLLOW-THROUGH ON THE CHIP STOCK RALLY, MAYBE SOME OF THE IPO STOCKS, UNDER PRESSURE OR WHAT WE GOT OUT OF IDEA. WE ARE COUNTING DOWN AS WELL TO THE DATA OUT OF CHINA, OFF THE TOP OF THE TEN-HOUR. . WE ARE WATCHING OUT FOR POTENTIAL REACTION WHEN IT COMES TO DEVELOPMENTS RELATED TO, MAYBE EVEN SEEING A DEEPSEEK IPO AT SOME POINT. THAT IS IT FOR "THE ASIA TRADE." OUR MARKET COVERAGE CONTINUES, AND WE LOOK FORWARD TO THE STOCK TRADE IN HONG KONG, SHANGHAI, SHENZHEN. "THE CHINA SHOW" IS NEXT. THIS IS BLOOMBERG. ♪