Bloomberg Daybreak: Australia 04/23/2024

Bloomberg Daybreak: Australia 04/23/2024

Welcome to DAYBREAK Australia.
I’m Paul Allen in Sydney.
We’re counting down to Asia’s major
market opens.
And that of old rulers in Hong Kong.
The top stories this hour.
A stock rebound set to extend into Asia
as investors hope strong earnings can
quell worries over geopolitics and high
interest rates.
Treasuries waver ahead of a flurry of
bond auctions
by Time’s digging in for a legal battle
over us moves to force a tick tock sale.
The case shaping up as a test of resolve
for officials in Washington and Beijing.
Plus, how Tesla’s China price cuts could
wipe out its entire operating profit in
the world’s biggest EV market.
All right.
Right out of the gate.
We’ve got some breaking news for you out
of Australia.
It is due to Bank PMIERS.
That’s a partial reading for the month
of April.
We’re seeing a modest improvement here
in the composite number of 53.6.
That’s from the 53.3 that we had back in
March.
A reasonable rebound in manufacturing as
well, 49.9 just a shade below that
crucial 50 level.
And the PMI services, the read that’s
backing off of that, but still in
positive territory, 54.2.
We are, of course, counting down to the
major data event of the week here in
Australia.
That’s going to be Wednesday’s first
quarter CPI numbers that’s seen holding
steady at 3.4, but some encouraging
partial readings there from those due to
bank PMI.
As let’s take a look at how we’re
shaping up in terms of trading for this
Tuesday in the Asia Pacific.
As you can see there, we’ve got futures
pointing higher by about a quarter of 1%
for Australia.
And we did have a broad based rally on
the ASX on Monday, up 1%, pretty much
every sector apart from energy, was in
positive territory and it was a similar
story for the Nikkei and the cost be as
well, the cost be its it was almost up
by about one and a half per cent we
might see a bit more of the same today.
A Nikkei futures looking kind of flat at
the moment.
New Zealand showing a little bit of
softness off by a quarter of 1%, but it
was a pretty good day for equities in
the US.
We’ll get to that in a moment, but we’re
going to have a bit of data out later as
well.
PMIs for Japan are watching out for
those CPI, for Singapore for the month
of March.
That’s coming up too.
And of course there’s going to be a
flood of earnings out of the US and all.
Yeah, that’s right.
I mean, as you said, we did see us dogs
turning a little bit higher overnight.
But the sustainability of the rebound,
that’s really the key question here.
You’ve got U.S.
futures is coming online this morning,
fairly flat, in fact, a little movement
across the screen overall, but it is
that countdown to key numbers that are
coming out.
The Magnificent Seven very much in
focus.
We’ve got key numbers from that group of
stocks and the expectations as well.
Extremely high because at Bloomberg
Intelligence team seeing around a 40%
jump in earnings growth.
So whether they can deliver on that,
that’s really the key question.
And strategists are very much split on
the expectations for numbers.
Bonds wise, we actually saw them falling
oil as well, sort of slipping a little
bit higher this morning, but slipping
overnight.
It does seem that the the geopolitical
tensions, Middle Eastern risks, they do
seem a little bit contained for now.
And, Paul, that’s certainly playing into
that dynamics that we’ve seen not just
for crude, but also a gold in turn.
In.
Our next guest is cautious on both crude
prices and gold as well.
So let’s discuss this and more with
Chris Wisdom, a head of research at
Pepper Stone Group.
Chris, I’m just wondering if your
position on oil and gold is informed by
that sort of easing of the geopolitical
tension we’ve seen in the Middle East,
or is it something else?
Is it maybe a supply and demand dynamic
that you’re looking at?
Well, think in terms of the gold one.
I mean, it’s obviously had a significant
run, but 22% in recent months.
And, you know, some of the optionality
it got a little bit too stretched, which
seen, you know, in very, very short
dated calls.
Well, one week Coles and gold trading
about a three volt premium to puts put
sort of traditionally been a level where
sentiment got a little bit stretched a
lot of this the correlation we’ve been
seeing in gold had to do with what we’ve
been seeing in crude and of course so
people have been using this
predominately as a portfolio hedge
against geopolitical headlines.
It does seem now that Israel is firmly
focusing their attention on Hamas as
opposed to sort of Iran and the broader
region.
So I think people are seeing a very high
probability now that this is going to be
contained and which is rolling off a few
of those geopolitical hedges.
I think there’s probably some further
downside scope just from a positioning
perspective to get down into, say, 20 to
60, where I think you probably offer
some a chance to flip the positions and
look to go long.
But yeah, it’s a very extended
geopolitical hedge that’s coming through
markets.
We’ve seen them manage money
optionality.
As I say, I think there’s a little bit
more downside there.
Yeah, the crude price, if we if we look
at that, I mean, we traded from 91 bucks
down to 85, 70 or so just holding the 50
day and Brent and yeah, if you look at
two term premiums they’ve sort of moved
in alignment and I just say there’s
probably a little bit more downside
there.
But certainly gold, you know, would be
looking for a better bid to come through
back in sort of 20 to 60.
Okay.
So does this mean
you’re looking at opportunities in
equities?
And I’m thinking, particularly as Bill
was mentioning, we are counting down to
some pretty big earnings in the US side,
changing some of your positions ahead of
that, especially in some of those big
tech names.
Not at the moment.
I don’t think we’re out of the woods
just yet.
You know, if we have a look at the price
action in S&P futures, for example, and
NASDAQ futures, we were S&P futures
trading down to the 50 day 100 day.
Sorry, bounced off that, but we just
couldn’t quite close above the Friday
high.
And that would have been a sort of a
signal for me that we could see further
positioning coming through.
Obviously, Tesla is very much in the
doghouse for seven days in a row.
I felt people just going to be selling
into any kind of strength there.
Nvidia is trading a little bit better.
Yeah, obviously Microsoft’s going to be
a really important one later in the
week, but I just think the price action
at the moment is pretty unconvincing at
this stage.
Yeah, well, I think sentiment has got a
little bit beaten out.
We’ve been oversold, but I was hoping
for a little bit more of a bounce from
some of the risk assets to give me that
sort of buy signal.
It hasn’t happened.
So yeah, just just to still a little bit
cautious and I still feel people are
probably going to sell into this rally
in the short term.
I really like that.
That turn of phrase that heads are in
the dog castle.
That’s absolutely true when you look at
the stock slide this year, but what will
come out of the earnings call tend to
make you turn a little bit more
positive, do you think?
Well, I’m going to be in.
I’m going to be looked at.
I’m going to be following the price
action.
If you if you start seeing some some
volume coming back into the name, you
know, then we can look at, you know,
looking for a counter move and perhaps
some of the shorts that have been coming
in there can push this higher.
And that’s what I’ll be looking at.
And obviously, look, looking at the
volume, I don’t think we’ve ever seen a
situation where the stock’s down eight
days in a row.
Yeah.
We’ve had for over occasions where it’s
been down seven days in a row and each
time it’s sat back.
But obviously we haven’t had this prior
to earnings.
That’s the key point of differential and
sentiment towards Tesla.
And the whole EV space is is shot to
pieces at the moment.
So I think there’s there’s opportunities
in heavy names, but probably not so much
in Tesla at the moment.
You know, people are looking at those
deliveries.
The reasons why some people bought into
Elon Musk’s reasons recently.
But I think when you when they cut 10%
of their workforce, I think most people
now realize that this is actually a
demand story and not just a supply issue
that’s coming through.
And yeah, so I feel so there’s there’s a
lot to play out in the stock and there’s
still some downside in the in the price.
I think any kind of short covering rally
from this
is an opportunity to to look to get
shorts into this.
I think there’s still a lot more
negativity to play out on the stock.
And Nvidia, as you mentioned, another
key earnings.
And really we’ve seen so much sort of a
focus on that and and concentration risk
perhaps in the market.
But what price action are you also going
to be monitoring there?
Well, I think the problem is in the
video, I mean, they don’t report until
until May.
But yeah, we need to get that back above
800 bucks and then you start seeing the
optionality coming through.
You know, the short position, some
dealers that they have to hedge when the
price goes up and, you know, obviously
that means buying the underlying, which
is perpetuates the price.
We haven’t seen that dynamic.
And yeah, it’s just works really well as
it’s just a pure momentum based and and
then some as you know is a stall or two
factor is is is underperforming at the
moment people want quality you know
defensive areas of the markets have been
outperforming and I still feel like
that’s a place that I think a lot of
people are wanting to gravitate towards
and know until we see momentum showing
momentum, then then I think NVIDIA is
that trading vehicle.
It just needs some more buying to come
through.
It needs to sort of trend a little bit
higher the rate of change to move
higher.
And then yeah, I think you can use it as
a momentum vehicle similar to what you’d
see in something like a Bitcoin for
example.
Everyone starts chasing it higher, but
you know, an actual catalyst so far for
NVIDIA from the earnings call isn’t
going to come for a for some time.
And so yeah, obviously watching the
chips, watching the semi’s, they’ve been
trading poorly but I think we need that
momentum to come in then I think you can
start chasing it again.
You mentioned Bitcoin and we just had
the halving, of course, taking place.
It seems to have gone off without a
hitch mostly, but post halving.
It does seem like the token is lacking a
big narrative perhaps.
What are you watching with that
cryptocurrency in particular?
Well, she said, look, it’s a slow moving
ship, obviously, and everyone’s done the
numbers.
And and we all know that, you know,
Bitcoin’s price in the three prior
halvings didn’t do a huge amount over
the the month afterwards.
Not a lot of supply does come out of the
market.
And we know that that’s the issue.
But of course, we’ve got to focus on
demand.
I think in the short term, yeah, we will
chase the price if it starts going
higher.
I think the a lot of FOMO capital comes
in, but I think yeah, we watching these
ETF flows really very, very, very
sharply and there’s been a decent
correlation between the performance of
Bitcoin and you know the percentage of
inflows that you’re seeing into the sort
of ten ETF ETF flows, ex grayscale,
which is obviously seen some big
outflows.
But
I think on Friday we did see a little
bit of buying a start coming back into
the ETF.
We’ll be watching that one very closely.
If we do start seeing some flows coming
through, then I think this idea of
demand picking up again could be quite
an interesting one.
So yeah, well supply does come out of
the bitcoin scene or the ecosystem,
certainly from the miners.
It’s the demand side of the equation,
which I think really we’ve got to be
focused on what’s going to be the big,
big kicker from that.
I think in the short term, you know,
it’s going to be around the ETF flows
that I think are driving that price
action.
But I’m encouraged by what I’ve seen in
the last 48 hours, and I’ve also been
quite encouraged by what I’ve seen from
the Bitcoin miners who obviously are
obviously a negative effect affected by
the rewards that they’re going to get
the Bitcoin subsidy.
And if you have a look at the price
action overnight, riot absolutely
smashed it last night about 20%.
Yeah, that the whole mining scene the
listed miners had well over six to
double digit percentage moves.
So pretty encouraged by what I saw there
as well.
Yeah.
That question of whether we’re going to
see Bitcoin mining consolidation.
But that was Chris Weston, head of
research at Pappas Stone Group.
Thanks very much for your time this
morning.
And as we’re discussing with Chris
there, the big focus on Tesla numbers
said to report first quarter earnings
later Tuesday.
Investors really watching margins
guidance as well.
J.
L Warren Capital shares their outlook
amid an EV price war later in the hour.
But first, tick tock.
Bracing for a court battle as US
lawmakers move closer to a sale or ban
order for the Chinese owned app.
Details next.
This is Bloomberg.
Spring season is here.
I think we’re all asking the same
question just how much earnings growth
you’re expecting.
Bloomberg is first to break the numbers.
EYLEA just coming out right now.
We have take a numbers shares of
Pinterest lucid group coming out with
its earnings all eyes right now on
nvidia.
A lot still to come with the smartest
insights.
How much better could profit and revenue
have been better than what the street
was expecting saying in line with
estimates.
We will have full and instant analysis.
Continuing coverage on Bloomberg Context
changes everything.
Tick tock.
Chinese parent company Bytedance has
made it clear it has no intention of
selling the short video app that says
the US Government moves ahead with its
threat to shut down the platform if it’s
not divested.
For more, let’s bring in tech reporter
Alex Brinker and Alex.
Tik Tok has a lot of reasons to fight,
but also it’s made it clear that it is
not going to be backing down quietly.
Absolutely.
And this bill is looking like it’s
inevitable that it becomes law.
The Senate is meant to take up this bill
as soon as tomorrow.
But certainly this week, President Joe
Biden said he would sign it into law as
soon as it passes both chambers.
So the fast track to reality is kicked
off facing this divestiture ban
legislation is here.
Now, bytedance to talk to Chinese parent
company, the company that the U.S.
government has taken issue with has also
expected that it’s going to fight this
tooth and nail through the U.S.
legal system.
If this bill goes into law with the
current language, Bytedance would have
nine months with the potential three
month extension to divest the app.
But that seems to be an action that
would be the case of last resort for
Bytedance who does intend to draw this
out and wage a legal battle that could
last more than a year, according to
people familiar with the matter.
Alex, what’s the plan here?
Is it to weather the storm and hope for
a better administration somewhere down
the track?
And also, in terms of what’s worse.
Is it a ban or is it divestment?
Well, if you do the math here on that
timeline that they would have let’s say
it passes this week, then that would put
us right around January, which is
inauguration time here in the US as it
is a presidential election year.
So certainly we’ve seen tick tock in the
past try to kind of lean into the idea
of patience and looking for a more
amenable administration.
Donald Trump has changed his tune on
Tick Tock, the man who was the first
president to try to ban the app by
executive order is now saying that it
should, in fact, stay here in the U.S..
So at the moment, if this bill does get
signed into law, Bloomberg intelligence
puts that a 90% chance of happening,
then that might be their best recourse
is wait for an administration if Donald
Trump gets voted in, who is either going
to drag out enforcement or might be a
little bit more amenable while they do
try to fight this on both First
Amendment arguments and otherwise in the
American judicial system?
Ali says the risk of this has a domino
effect as well.
I mean, are there.
Could the US also be looking to ban
other Chinese tech platforms?
I think a team move, for instance, sort
of seen as an Amazon competitor that’s
had a lot of success in the US comes to
mind.
Yeah, and any kind of connection to
China has been one that has gotten
intense scrutiny.
The way this legislation is written is
about about basically social media
companies who are owned or majority
owned by a foreign entity.
So that scrutiny around that Chinese
ownership has come into play because
U.S.
lawmakers are worried that because of
the regulations in China and how they
can request data from companies in that
domicile, that there could be some kind
of risk to Americans.
So there are certainly a number of
companies.
T-Mo is a great one that comes to mind
that might be concerned not only from
what the precedent could be set from
this current legislation, but also
certainly how other countries might
react.
You have America, who is the home to the
biggest social media companies that
aren’t tech talk now be saying, Hey,
look, this needs to be a company that’s
not owned by one of our foreign
adversaries and potentially a company
that owned by instead American
investors.
Alex Batons also are fighting a battle
on two fronts across the Atlantic.
There’s trouble in the EU as well.
What’s going on there?
Staring down the barrel of a fine,
right?
They are.
And it’s not the first time.
This is actually the second kind of
major moment.
Tick Tock.
Lt was an app that was launched in both
France and Spain within the EU bloc.
It rewards users.
The report points system and the EU
regulator opened a new probe on Monday
into whether Bytedance violated its
content law because they’re worried that
this point system might have an
addictive effect on users.
They have 24 hours to deliver a risk
assessment.
So we should see potentially some news
on this in the coming days, but it’s not
the first time the EU has gotten
involved.
The EU has previously announced an
investigation under the Digital Services
Act around the app’s addictive design
around screen time limits, privacy
settings, age verification.
So all that to say Tik Tok is waging
battles not just on the American front,
but certainly in other domiciles where
there are either privacy legislation
already in place or similar concerns
about its ownership and its connection
to the Chinese government.
All right, Tech reporter Alex Brink of
there on the difficulties currently
being faced by Bytedance and Tik Tok.
And on the topic of difficulties, we’ve
been hearing plenty about them from
Tesla.
Let’s take a look at how Tesla closed in
the US.
Not another great day for that stock as
we await what is expected to be a fairly
brutal earnings report.
We’ll get more on that in just a moment.
But it’s an ebbing tide that sinks all
boats in the space.
We’ve got vinfast down by about three
and a half percent as well.
Worth noting, though, the performance of
General Motors and Ford, the internal
combustion engine, not quite ready to
join the horse and the steam engine on
history’s scrap heap still seems to be a
place for conventional powered vehicles
as well.
Both those stocks, GM and Ford, also
going to be reporting earnings this
week, having a pretty good day.
Ford up by more than 6%.
Well, for more on the Tesla story, let’s
bring in our global business editor,
Peter Vercoe.
And, Peter, we are eagerly counting down
to this Tesla earnings report.
It’s going to be a very, very
interesting day.
What are analysts looking for?
Yeah, obviously there’s expectations
that earnings are going to fall.
We’ve already seen that big 8.5% drop in
vehicle deliveries in the first quarter
year on year.
So the numbers aren’t expected to be
good.
But I think what investors and analysts
are looking for is be on the numbers
this time and they’re really looking for
some coherent strategy from Tesla and
whether Musk is going to take the
concerns seriously.
We’ve seen in these previous earnings
calls it Musk can be kind of flippant or
disinterested.
He can sort of be dismissive of
questions, sort of treat the whole thing
as a chore.
He’d rather be doing something else.
And I think in previous times, investors
have sort of excuse that a little bit
when Tesla’s flying, you know, sales up
50/% year on year, the stock surging to
record highs, that sort of stuff.
This time it’s a bit different.
I think there’s going to be a real focus
on on Tesla and on Musk in particular to
outline that coherent strategy.
As long time Tesla watcher Dan, I said
who’s going to be the adult in the room
this time?
We saw that chaos continue on Monday in
the US when Tesla dismissed its about 40
employees in its marketing team that was
only formed about a year ago.
And then Musk this year work on X.
He’s formerly Twitter saying the ads
were too generic and they could have
been any car.
So we just seem to be getting like these
shift in strategy made at the whims of
Musk, who we know is a pretty mercurial
character at best
that he had seemed to now stake the the
company’s growth outlook on a robotaxi
that he says will be unveiled in August.
So there really need to be clarity on
that and whether that’s going to come at
the expense of what was widely
anticipated to be a more affordable mass
market car around the $25,000 mark.
And we know that Tesla hasn’t nailed
full self-driving or autonomous driving
yet.
What it calls full self-driving still
needs constant human supervision.
Peter, we’ve seen Tesla resorting to
sort of a familiar strategy, and that’s
price cuts to try and boost sales.
But how much further can it continue to
do that?
I mean, there’s some reporting out.
For instance, Evercore ISI is saying
that price cuts in China, for instance,
could cost that the entirety of its
operating profit there.
Yeah, that was a really interesting
report that came out yesterday after the
we saw the latest round of price cuts on
the weekend.
And it does seem to have been Tesla’s
strategy, you know, sales down, cut
prices sales down, cut prices.
But what’s really happening now, you
know, particularly in China, it’s faced
with this whole suite of new competitors
from, you know, Bhiwadi to even Zhao
Mei, which has unveiled its first EVA.
And these are cars that Chinese
consumers want.
They’re across all price points.
They’re really sort of tech heavy.
And also the cool gadgets like, you
know, convert into beds, they roll out
kitchens and all this kind of stuff.
And Tesla really does relies on its
Model three and its model Y for the bulk
of its sales, not just in China but
globally.
And without, say, that mass market
so-called model two $25,000 car, how are
they going to fill that growth hole?
They can’t just keep cutting prices.
That was our global business editor,
Peter Vercoe.
As we look ahead to those very crucial
earnings, and I’ll actually have more
analysis on them coming up this hour on
the outlook for the firm in China in
Focus with the CEO of JL Warren Capital.
That’s just ahead.
You’re watching DAYBREAK, Australia.
Here’s the latest in geopolitics.
The Israeli military intelligence chief
has quit for failing to prevent the
October seven invasion by Hamas.
Aharon Halevy is the first senior
Israeli official to step down over the
assault that killed about 1200 people.
He accepted blame shortly after the
Hamas attacks, but stayed in his role as
Israel launched its war in Gaza.
The EU has agreed to impose new
sanctions on Iran over its attack on
Israel.
The deal will further expand
restrictions already imposed for
supplying Russia with drones.
The measures also target weapons
transfers to Iranian proxies in the
Middle East, including Hezbollah.
Countries including Germany and Sweden.
Pushing to add Iran’s Islamic
Revolutionary Guard Corps to the EU’s
terrorism list, President Biden has told
his Ukrainian counterpart the US will
move quickly to deliver weapons if the
Senate votes this week to approve an aid
package.
In a phone call, Biden told Vladimir
Zelensky the US aims to swiftly ship the
battlefield and air defence equipment.
Meanwhile, the UK is sending more
missiles to Ukraine, including long
range guided weapons and a package worth
$620 million.
All right.
We have plenty more to come on DAYBREAK,
Australia.
Stay with us.
This is Bloomberg.
This is DAYBREAK.
Asia just taking a quick check on what
we’re seeing in the Boeing space this
morning.
A little bit of a retreat for yields and
the antipodean so very much tracking
what came through with treasuries
overnight in the session.
It is that changing expectation around
tensions in the Middle East.
They do appear contained for now.
And also bond traders are looking ahead
to a record auction for signals perhaps
that 5% yield is the peak.
But certainly that is going to be a
really a key test and a very tricky,
tricky week as well, because we’re
looking at the market absorbing nearly
eight, $185 billion a calendar of two,
five and seven year note sales.
So certainly selling could be tracking
very closely here for.
Well, let’s take a look at some of the
morning calls ahead of the Asia trading
day.
BlackRock’s Rick Reid says bond
investors are facing a painful run up in
yields may soon find relief.
The firm’s CIO of Global fixed income
sees two rate cuts by the Fed this year.
As inflation moderates in the months
ahead.
For now, he says, BlackRock has cut its
own interest rate exposure, weighting
investments more towards shorter
maturities.
I think the beauty of this for calling
for an investor going into it is we’re
trying to we’re you know, we’re trying
to manage our interest rate exposure and
in if if we think, you know, which I
think will be the case this year, we’re
going to get to a place where the data
and we anticipate the data improving.
And I do think over the next month or
so, you’re going to get better inflation
data.
Meanwhile, JPMorgan’s Marco Colonna says
the three week rout in US equities, it’s
not done yet.
The bank’s chief market strategist says
rising bond yields, elevated oil prices
and high stock market concentration are
among a lengthy list of reasons.
Which adds he’s concerned about
complacency in equity valuations,
inflation, a further repricing of right
kind of expectations and overall rosy
profit outlooks.
And ahead of this week’s earnings, UBS
Group’s Jonathan Golub is cutting their
sector recommendation on the Big Six
tech stocks from neutral to neutral from
overweight.
Golub says earnings momentum is turning
negative after a surge in profit growth.
UBS calculates that growth in earnings
per share of the Big Six is expected to
slow down to 42% in the first quarter,
and that’s down from 68% growth in the
previous period.
Bell.
Oh, Paul, of course, focus on earnings
kicking off with Tesla and taking a look
at this chart here.
The slide that we’ve seen in Tesla stock
over the past five sessions are down
nearly 10%.
But the losses this year, totaling more
than 40% of a drop.
The maker, of course, we know, is set to
report its first quarter earnings and
price cuts.
Very much the focus as well, the
ramifications of those.
And we had more being announced over the
weekend in countries including in China,
where everybody is of course are also
awaiting a stimulus program that could
encourage or include incentives that aim
to encourage businesses and households
to adopt cleaner technologies.
So let’s discuss more of this with Joan
Huang Li.
She’s founder and CEO at J.L.
Warren Capital.
And I’m interested for your views, John
hang we can get to to Beijing’s sort of
trading plan in just a moment.
But these price cuts in China, are they
going to be something that’s really
substantial enough to try and boost
demand there?
In the case of Tesla, probably not,
because I think the core issue was
Tesla.
Not selling well in China is its aging
lock design.
Tesla has not had a new product for the
last three or four years.
Model three came to the market in 2017,
Model Y 2020.
But meanwhile there’s many, many made in
China home grown brands.
Ladies, that has been show me and a
while ago a few months ago while we car
and before that BYOB a number of models
and Z GV Z cars had a few successful
models all targeting at a price range of
at around a 250,000 renminbi.
So this price range has become extremely
competitive and the Tesla is not able to
launch any new product in the last few
years.
Definitely slowed down its momentum in
China.
Yeah, I was actually in China, mainland
China over the weekend and I was just
astonished at the number of different EV
makes over there on mainland China.
But the price cuts there.
Do you think Tesla is sort of shooting
itself in the foot?
Well, I mean, it doesn’t really have
alternatives
because everyone else is cutting price.
And in fact, Tesla has been doing
promotion consistently over the past six
months, either through the insurance
rebate or zero financing.
And they actually raised their model Y
price by a couple of thousand dollars, a
couple of thousand renminbi, effectively
on April 1st, but then only two weeks
later it slashed price again.
So, I mean, you see this as a general
pattern, not just in China, but also in
the US as well.
Not only just hardware software as well.
At best, the subscription was $199 a few
weeks ago and adoption was poor, so they
immediately cut the price by half.
So I think this is going to be a really
tough year for Tesla.
I mean, I think the problem can be just
the total addressable market isn’t as
big as people had thought.
It does really well in particular
markets like California and like China,
where there’s a lot of administrative
incentives.
But when that slows, where the
competition catches up, the momentum
just automatically very naturally comes
from.
John, hang on your analysis.
You point to an oversupply of vehicles
that are coming out of Tesla’s
Gigafactory in Shanghai.
Even with price cuts, is China’s market
able to soak all that up or are there
other markets in the region that might
have to do that?
I think when Elon Musk decided to build
and expand GFC outside of Shanghai in
2018, you had this in mind that that
made in China.
Cars can be exported to a certain
markets, particularly in Europe.
But over the past five years we see
escalation in geopolitics, cancer.
So and
obviously U.S.
the access to US market is is not
possible and potentially in the future
in the market is not quite possible.
And then right now, Europe is the
largest export destination for made in
China cars, but that can change going
forward.
The with the tariffs or
maybe some outright ban in the future if
the geopolitics continue to escalate.
So it is it’s possible that we see this
oversupply is not at its worst.
The it could go from bad to worse in the
next couple of years.
So right now, 50% of the cars made in
China are for domestic deliveries and
50% were exported away in 2023.
But the European market is muted as
well.
So
that’s why we see 25% year over year
decline in the JF three production.
And right now they are making about 2000
cars a day versus its capacity at 3000
cars a day.
So it’s at about like a 65% utilization
for capacity utilization.
So that’s going to be it’s going to do
some damage to its gross margin.
Well, I’ve been hearing from Elon Musk
over the past few days is increasingly
going all in on full self-driving, on
robo taxis as well.
But in terms of China, what’s the
consumer demand like for those sorts of
products and what’s the regulatory
environment like as well?
I think ABC is primarily a U.S.
story because that requires to access to
a map data and map data in China.
I mean, I believe they use a Baidu map,
but they have access to Baidu map, but
they don’t have access to it.
But they left behind a map.
So that’s a handicap to number one.
Number two, all the data cannot leave.
I’m sure data cannot leave China.
So they have to process and trend that
they are unsure.
But obviously, you know, the and vedere
GP hardware software are have just
export ban leaving USA.
So that’s a handicap handicap number
two.
So I think FSD is not a China centric
story.
I don’t think a consumer demand bad, not
especially where you have to pay 8000
U.S.
dollars for that subscription.
So and on the U.S.
side that if you read the stories out
there and there are lots of them and
lots of those stories are detailing
their journey on a Tesla drive using
FSD are very accurate and very good, the
both a positive and negative.
So the picture is rather mixed.
But I just think it’s too early to ask
people to pay for a product that
requires steel, requires, you know, a
pretty frequent human intervention and
still requires hands on the wheel.
But most importantly, I don’t believe
that there’s a demand for, you know,
autonomous driving for a short commute
of roughly an average of 20 minutes each
way from home to work.
I mean, I just don’t think the demand is
there even in the U.S..
And Jin Hong.
I’m interested what you’re seeing more
broadly in terms of luxury demand in
China.
We have seen sort of a pickup perhaps,
but but spending levels do seem to be a
little bit lower still.
Yeah, consumption.
Consumption dipped again after the
Chinese New Year in the middle of
February.
We are pretty diligent with our store
surveys and what we see is the first two
months of the year,
the consumption kind of came back a
little bit, but then immediately after
the Chinese New Year gift again, you
know, obviously each brand has its own
stories.
They are tier one luxury brands such as
and the Louis, the Paul and the Chanel.
They can now up or down the supply to
manipulate the demand.
Then the the outcome, the financial
outcome.
But when it comes to sort of a secondary
luxury brands such as Gucci, it’s a
little bit tough because in the case of
Gucci specifically, they have this like
a change of designer and and the new
designer is supposed to launch its debut
that’s going to hit the stores globally
in Q2 and Q3.
But in a down market, when the economy
is weak, what we see is the
receptiveness and the you know, the
reception of newness is rather muted.
So in a tough economy, people embrace or
clinked towards the old design, the logo
and the leather fashion that preserves
value as opposed to the fresh new
design.
So I think that’s the having the brand
that needs to embrace in the next few
quarters.
All right.
John Hinckley, founder and CEO of Jail
Worm Capital.
Thank you so much for joining us with
your insights.
Still to come, US climate adviser John
Podesta weighs in on China’s
overcapacity and green tech.
A look at how trade tensions are playing
into the energy transition up next.
This is Bloomberg.
The senior White House climate adviser
says the US needs to ramp up the speed
and scale of its shift away from fossil
fuels.
Speaking at the Bloomberg NRF summit,
New York, John Podesta also joined the
chorus of complaint coming from
Washington about China’s overcapacity.
Concerned about overcapacity in China,
across the
so-called green technologies, batteries,
electric vehicles, the solar supply
chain there, the
particularly the shift of the economic
focus of the of Beijing has been on
trying to get out of the stagnation they
were in by over and investing in
capacity in some of these technologies.
But that is not good for the United
States.
It’s not good for workers and it’s not
good for the world because we need a
level competitive playing field across
the globe so that everybody has a fair
chance to compete, build the products
that are necessary.
I think American auto companies and and
auto workers can compete with anybody
across the globe.
So we’re going to do what we need to do
to protect the investments we’re making
as we’re decarbonizing.
You know, the first goal we have is to
cut our emissions in half by 2030.
That’s what the IRA was all about.
It was to invest in these new
technologies to spur innovation.
And we’re not going to let those be
undercut by unfair trade practices.
But do tariffs hurt climate change in
the sense that you wake up every day and
you think about decarbonizing?
What we need to do is to have a system
that’s and I think, by the way, I you
know, I’m now traveling around the world
and people
were first critical of the IRA.
And I think what’s happened,
particularly with our with our partners
and allies in Europe, in Japan, in Korea
and in other places is they’ve responded
by saying, you know, this investment led
strategy is a smart strategy.
It helps us spread the benefits of green
energy across communities.
You know, we’ve been very mindful of
trying to ensure that every community,
including traditional energy
communities, feel the positive effects
of the investments that we’re making.
We’re seeing the emissions profile and
emissions reductions happening, and we
need to protect that overall effort and
we’ll do what we need to do to do that.
That was the White House senior climate
adviser John Podesta with Bloomberg’s
Annmarie Horden and staying on those
efforts to reduce emissions.
Bloomberg and its latest annual
assessment shows that G20 countries have
made limited progress on
decarbonisation, improving their average
score from last year by just one
percentage point.
That’s finding worries among consumers,
industry and investors.
Let’s bring in BNSF head of API
research, Ali Zaidi for more.
And Ali,
why is it that the scores aren’t
improving so much?
So one of the main challenges is is
policy uncertainty.
Even the Inflation Reduction Act, which
is now seen as a success.
If you look at the process to getting
that act passed, it created a lot of
policy uncertainty throughout our
process.
So overall, over the last couple of
years, we have seen our policies around
decarbonization face a lot of
uncertainties and in some cases we have
seen actually G-20 members roll back
initial measures that they have put in
place in parallel.
We have not seen G-20 members fulfill
their commitments to reduce incentives
for fossil fuels annually.
G-20 members are still spend hundreds of
billions of dollars subsidizing fossil
fuels, which is, of course, not helping
with emission reduction.
Of the Asia-Pacific.
Members of the G20 are largely clustered
around the middle of this ranking.
So what’s driving the scores for Japan,
Korea, Australia, India and Indonesia as
well?
So indeed, as you pointed out, if you
look at the APEX members of G20,
compared to the European members, they
do relatively worse.
Part of this is a reflection that
European members have had longer
consistence measures towards
decarbonisation, particularly when it
comes to their power sectors.
So on average they score better on that
front.
They also all have the European members
have very stringent robust carbon
pricing mechanism in place across Asia
Pacific, while markets such as China and
South Korea do have national emission
trading schemes, still they have a lower
level of carbon pricing in these
countries is not enough to drive
decarbonisation overall.
Among the pack members, we see Japan and
Korea do relatively better, partly
because they have policies across all
sectors.
So not just for air power and road
transport, but looking at areas such as
industry as well as circular economy.
But still, overall, when we compare them
to European members, they’re lagging
behind.
And so how would a pack countries then
lift their scores in turn?
What are the best sort of policies to do
that?
So there are two fundamental areas.
One, clean power is really important.
And while you’ve seen improvements,
particularly in markets such as China
and India, still the power market design
of a poor countries compared to European
members is not in a way that provides
incentives for acceleration of
renewables deployment, where those
market designs have improved, for
example, China, India, as well as
Australia.
We have seen deployment accelerate.
But if you look at, for example, Japan
and Korea, if you’ve seen annual
renewable deployment actually decelerate
in recent years because of the lack of
the right policy market design.
The other area, as I mentioned earlier,
is around carbon pricing.
So when we look at the level of pricing
of emissions today across the regions,
the pricing levels are simply too low or
actually non-existent without pricing
the emissions.
We will not see an accelerated trend
towards decarbonisation, particularly in
hard to abate sectors.
All right.
Bloomberg NF, head of APAC Research.
He is not either.
Still to come, fresh signs of stress
emerging in Korea’s shadow banking
sector.
Why it’s being seen as a weak link in a
$63 trillion chain.
That story up next.
This is bloomberg
one.
South Korea is emerging as a weak link
in the world of shadow banking, with its
real estate exposure quadrupling over
the past decade to more than $670
billion.
For more, let’s bring in our Asia credit
editor, Finbarr Flynn.
And, Finbarr, this is something that
certainly spooking a lot of global
investors.
But what’s the problem of the stress in
Korea?
Exactly.
Good morning.
Yes, indeed.
And so the root problem goes back to
that flush of cheap cash that was around
the globe after the global financial
crisis.
So in in Korea, as in many other parts
of the world.
And low interest rates near zero or
less.
And that cash had to go somewhere.
And it went in in Korea in many
respects, in these more riskier projects
in and outside of Seoul.
And it’s come a little bit undone as
rates in Korea, like much of the world,
have gone up.
So as serious are these issues and what
are the market participants expecting
here?
So to date, the government has done a
pretty good job of keeping stuff intact.
And but the worry is that in the second
half, now that elections are out of the
way, that we’ll have to take a stricter
sort of stance on all of these issues.
So the baseline is that people are
hoping expecting a soft landing, but the
seriousness of the situation can’t be
underestimated because this could force
the Bank of Korea to cut its rates more
than it would wish, and it could also
impinge on growth in the second half.
So we have to keep an eye out.
We’ve seen policymakers managing to sort
of stem the contagion risk so far.
But would this be the case this time
around?
And if not, what are the sort of
milestones to look out for in
particular?
So we have one coming up.
Actually this month, a company called
Taking a surprise Market at the end of
last year when it said it had to
restructure its debt.
So there’s a vote at the end of this
month for banks, including a KDB, a
state lender, to sign off to actually
give their approval to this
restructuring.
And our reporting has shown that 50% of
the debt on iTunes books there may be
converted into equity in a huge equity
for debt swap,
but we need to keep an eye on that
because all to the plan, to be honest.
All right, Finbarr, thanks for joining
us.
That’s Asia credit editor Finbarr Flynn
there.
Okay.
Here are some of the stocks that we’re
going to be watching when trade opens in
Korea, Japan and Australia just a few
minutes away now.
And keep an eye on Asian Tesla supplies.
Of course.
The EV maker is set to report its first
quarter results after cutting the price
of its cars in key markets, including
China.
Woodside Energy’s going to be in focus
as well and this is after one of
Australia’s largest pension funds Aware
super voted against its climate plan and
re-election of chairman Richard Goyder.
Aussie miners might move as well.
Gold taking a tumble haven, demand
easing along with easing tensions in the
Middle East.
Those market opens in Sydney, Seoul and
Tokyo next.
This is Bloomberg.

Paul Allen in Sydney and Annabelle Droulers in Hong Kong drive to the Asia, Australia and New Zealand market opens while wrapping the biggest stories of the previous day on Wall Street.
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