tv Bloomberg Technology Bloomberg August 2, 2022 11:00pm-12:00am EDT
this award. i am grateful to you, madam president and to the people for their enduring friendship. there are many taiwan americans that are very excited by our business and when i came before in 99, i came with them and we learned a lot. that is what we came to do, to participate in the asian-pacific initiative in a way that is appropriate for taiwan to be successful. and to do so in a way that opens many more possibilities. we came here to listen, learn and what do you know? i got this beautiful, beautiful, beautiful award. thank you, madam president.
we are watching what nancy pelosi is saying here. all of this despite the warnings from china. let's bring in stephen engle with us in hong kong for his take on this. we are watching very closely what nancy pelosi has said. she has made it very clear here in terms of the fact that the u.s. solidarity with taiwan is crucial and saying that is a key region that she decided to visit taiwan. what are you seeing in terms of her speech and the economic consequences of some of the responses we have seen from china so far. >> as i expected, we many pleasantries. she received one of the highest honors to give out. she was very appreciative of that.
they should show sal -- solidarity. china is going to say they oppose this visit. essentially saying that china is warning that the president is pushing taiwan to a disastrous abyss. expected responses by china, expected comments by nancy pelosi. >> hold that thought. we will get back to sebastian there. she is going to talk to tsmc. what does that really represent
to you in terms of the wider context of the taiwanese semiconductor industry? >> i think it is amplifying the importance of the whole semiconductor supply chain to the u.s. and the global economy. we cannot emphasize more healthy taiwanese semiconductor industry is pretty critical to a lot of the u.s. tax. not even just tech but software, internet and even the carmakers. it controls like 60% and some of the high-end advanced technologies have dominated with
about 90% plus of the market share. they have increased their investments in the u.s. in recent years. i think the time between the u.s. and taiwan on the semiconductor part, it underscores an importance of this and how the u.s. government could value the contribution. -- contribution to the u.s.. >> if china decides to do more, they can do other things which make life difficult. companies like tsmc, what does that do to an industry that has had a lot of supply chain issues
but other supply chain issues going on the back burner? after covid, we endured covid and we saw such high demand, that is something that was just thrown off a cliff now. >> the internal semiconductor industry -- in terms of the material, in terms of the chemical, the equivalent, most of this actually originated in the u.s. and japan and europe and now taiwan as well. we don't expect much of the impact or the measures from china on the semiconductor part but in terms of the tech supply chain, there would be some lucidity because a lot of the downstream manufacturing likely apple iphone map assembly
manufacturing plants, even if those assemblers tried to move out of china in recent years, they still account for the manufacturers. that is where that will come from. course i also wanted to ask you what the potential impact to korea, korean chipmakers would be. quick i think in south korea, the trend is really in the memory. it is actually quit a complement to the strength in taiwan on the founder reside. there could be some competition
but i think there is more cooperation from the global supply chain perspective so this was proposed by the u.s. government for japan, south korea, taiwan, things like that. it is more of a collaboration between the four countries. i would see for supply chain competition. but i don't see much of a conflict here. >> i just want to jump in your really quick and ask you a question about how much of a game changer you think the congressional bill that passed supplying about $52 billion in incentives for domestic chipmaking in the united states, that is over five years. does that change the game much for tsmc and have it use its
plant that we are building in arizona and perhaps future plans on the same side? keep in mind, they have annual capex of about 44 billion in one year. the 52 billion to the whole industry over five years, does that change that equation for tsmc to request -- more from the united states? >> if you look at this subsidy for congress, they have been talking about it for two years or even longer. but i think they have already started to build a plant in the u.s. and arizona click long ago. they continue to execute that. regardless of whether the bill is passed or not. i think the map of the bill that test is positive because it can be legible for some kind of subsidy.
but it looks like they are very determined to invest in the u.s.. you point out the numbers comparison. it is not big enough. i think taiwan is still home base. the u.s. will increase investment but going forward, i would say that taiwan was to be the majority but the u.s. part will increase but they are still not a major part of the total manufacturing. quick thank you so much for sticking around for us. you heard nancy pelosi's initial remarks. i think the key takeaway as we look back on what she mentioned is the fact that she has said that the trip was to make it
clear that the u.s. was not going to abandon taiwan. >> absolutely. there is nothing earth shattering or earthshaking from nancy pelosi's comments. full of pleasantries that she received that medal of honor award from the president. she did say what i expected her to say and that is that the united states stands by its commitment under the u.s. taiwan relations act to support taiwan despite the pressure it receives from mainland china. now they are behind closed doors. now they're getting to the meat and potatoes of the real discussions. perhaps they will talk more about the chip industry and the like and what the possible response from china is going to be and has been so far but at least publicly, it was full of pleasantries even though china's agency posted a number of comments while pelosi and taiwan
were speaking, condemning the visit as well as saying taiwan is pushing taiwan toward a dangerous abyss against similar kinds of verdicts coming from beijing. it is not pleased at all with this visit by nancy pelosi. especially considering that she is second in line to the presidency after the vice president and then the house speaker. >> there are pleasantries going on. what is the reaction from china thus far? how are people gauging that? >> there is the economic side and then there has been a few bands of various trade sand, industrial sand as well. fruit imports from taiwan and fish, fairly small response actually but there has also been some movement on trade with some
hundred taiwanese companies. we also saw news earlier that see atl perhaps because of this visit by pelosi, that is the big mainland chinese electric car battery maker. they will postpone a potential announcement in the united states so that is on the economic side. the military side, they have been very vociferous about saying they are going to continue with his military exercises. that they are going to have six exclusive zone surrounding the island of taiwan starting tomorrow where they will conduct military drills. they have already indicated that joint naval and air force divisions of the bla have begun military drills as a show of force. there has been live fire activity coming off the coast and directly across the taiwan strait from taiwan. some would call it saber rattling but it will continue.
back in 1995 when the first, right -- democratically elected president of taiwan went to the states, china had a similar type of response. they had military operations going on for several months. that did disrupt marine trade and shipping lanes and also, air travel. this could be an offshoot of this as well, going forward, depending on how long beijing wants to continue this kind of pressure, grace on tactics. worst case scenario would be some sort of direct military confrontation. >> let's show you what we have coming up later this hour. we will get chinese equities. they are in town. estate owned poverty developer asked why on earth does she. plus, more on the controversial trip to taiwan.
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>> this is bloomberg markets. we have three federal reserve officials and the one powerful message. just one priority remains to bringing down inflation and there is still a long way to go. the fed said they would pivot and start finding recession but what did they say exactly and why? it was really a statement of intent. >> in my view, that has not changed. the fed has had one single message. what has happened is people in the markets, investors, traders have decided the economy is slowing down, there will be a
recession. in fairness to many of those people, they have not been around long enough to look back to the 1970's and 1980's when they had to crush this. in terms of what they said and why, the president of the cleveland fed saying that there is more to be done, the economy isn't really in a recession. you need to bring down inflation so that is one set. then you have the president of the san francisco fed who is nowhere near being done with the inflation spike. we have made some progress. we have further to go. charlie evans is the president of the chicago fed. i like the fact that he answered the question by saying there could be 75 basis points into the september meeting. after that, he said we are going
to do 25 basis point hikes in november and december. that is what he predicted for a while. the whole idea of frontloading, making a difference and see what happens to inflation. there may be a couple more next year. that is the gist of it. and then there is what jim bullard said here in new york city today. >> yes. just how specific on what is needed in that inflation fight. there are members out there. >> i think i just summed it up for you. i think it is interesting that at one time, evans and nestor were both considered done and here they are, the hawkishness has really coalesced because i think the job is so clear. you don't have to think too hard about what you have to do. jim was speaking today and he said he thinks they are going to
actually have to get restrictive. but he too said we will start watching the data more and maybe inflation surprised me. it was worse than i thought in the second quarter. he may have to do a little bit more but he is also in the cap that maybe we will slow down. he is also insisting there won't be a recession. there is a very academic presentation about the fed having more credibility than they did when paul volcker stepped in and having to pull off that red hot inflation and because they have adequate ability. he still thinks that they can pull off a soft landing without the recession. >> kathleen hays with us in new york there. let's get more on market action with the director of asian equity research joining me now here. great to have you with us. we want to get your thoughts on what kathy mentioned.
let's start with what we are seeing in market action. things are more sanguine even though we have nancy pelosi in taiwan. she has made it clear that the u.s. is trying to stand with taiwan. >> yes. i think the markets are a lot more relaxed because we did not see an explosion or whatever. i think in reality, so far we mainly just speak. >> we are watching very closely. does this change the outlook or what kind of reliance you could see from china on some of these chipmakers? >>, think that has changed. china has mentioned it would like to develop its own industry and reduce reliance on wherever they think there are risks. i don't think that changes
china's game plan at all. i think there is no choice but to rely upon this going forward because it does have this technology advantage. >> the thing is how does this all really play out with regards to your strategy and how you're looking at what is happening fundamentally, on a macro level and indeed a micro-one? chrysler looking at where the valuations are at the moment. the market is relatively cheap compared to fair value estimates. asian markets are currently trading at a 16% discount to our fair value estimate so we do think there is opportunity out there.
particularly in the sectors that have sold down the most. that would still be technology and consumer discretionary. we think it factors in the potential down -- downturn of global growth as well. >> when we look at these, they have been under such pressure. the likes of alibaba, you are turning more positive there. >> yes, we are. when we look at inflation slow down, but we do like in terms of the chinese names is there is some abatement in the regulatory risk. it seems to be positive overall. there seems to be more games announced. there is reducing the value and the strong cash flows that they have. that is the reason why we saw it
in tencent and alibaba. >> stick with us. we do want to get to our greater china executive editor for his take on what we heard from nancy pelosi in taiwan. those initial remarks and what the outcome is likely to be from the beijing side. >> the thing that speaker pelosi has said that sticks out most at this point is that the u.s. will not abandon taiwan. i think that sort of underlines the importance of her trip. there has been increased concern in the u.s., especially that china might take some steps into encouraging -- into taiwanese territory in terms of needing to strengthen
to make this visit. >> give us a sense of the mood there. there is a sense of disappointment that so far, the measures that beijing has come up with are not going far enough to satisfy some people in some quarters. >> prior to ms. pelosi's visit, china did a lot to try and i would say discourage the visit from happening. that included a lot of commentary on chinese social media from people like the former editor of the global times. saying things that were like po jets could escort her plane, stop her from landing. that sort of elevated the expectation of what kind of response we might see. that did not happen. we did get a very strong response from china. they are going to be holding drills and encircling taiwan. there are missile tests that are supposed to happen.
but at the same time, domestically in china, the reaction that the government took fell short of what some expectations had gone to in terms of social media. >> we wanted to ask you the impact of the broader security in the region. we are waiting to hear updates coming through from australia and other nations in the asian pacific. what are you expecting here? >> i think the relationship between the u.s. and china is very arguably the most important in the world at this moment and it has taken a turn for the worse. what used to be a conflict over trade and technology is becoming more and more so one that is a military competition in some ways. we have jets, missiles, carrier groups around the region navigating. i would expect the united states would take some sort of military action in response to that.
it is becoming a much more dangerous situation. especially for the neighbors in the region. malaysia, singapore, australia, korea. i think the concern if not expressed publicly i would think would be expressed privately to washington over the next few days. >> great to have you here in beijing. just noting from one of our early gains across hong kong and chinese equities being erased as nancy pelosi speaks in taipei. they may have preferred some sounds from pelosi but we are just getting back to some of your topics we have seen. we did see an underperformance in china in july but you're still kinda positive here on property. >> i am not sure if we are positive of all property stocks. we think there needs to be more. there needs to be confident and
then needs to be done in order to support the homebuyer to come back. to prevent things from worsening. we do need to see support for the financial sector in terms of enabling the real estate companies to go back and on some funding and there needs to be support for the consolidation that we anticipate. where we are positive is we expect some of the hong kong real estate companies. >> properties mainly because of the fact that we think the covid lockdowns in hong kong are the the worst behind us. as hong kong reopens, which i think it will have to, that is where we see the retail space, the office-based coming back.
>> there is a long history of management. >> what about this whole debacle with the property side of things in china? now, with what has been going on in the streets, people refusing to pay for houses that have not been built and not have been billed for years. having these boycotts and other sanctions but on banks. how worried are you about the banking system? >> we did an exercise looking at the risk. we feel that most of the larger banks and the banking system at large are strong enough because while we are seeing pockets of delays in some projects, that is not completely widespread enough to dampen or bring the financial crisis to china. we may see an increase in the provision by half of 1%.
so there is some dampening sectors in terms of asset quality but not enough to belly up the system. we are probably a little bit less worried. we do want to see more measures made to re-instill confidence. >> that will allow us to talk a little bit about the biggest headwinds the chinese economy faces. that is covid lockdowns. that is something you are watching no doubt with a lot of interest. >> at the end of the day, what we are seeing is with the latest policies that were announced at the end of june, the policies are a little bit more contained in that sense. although the 85 variants good increase the number of cases. we are hoping to see your impact
from the lockdowns we saw in different quarters. rather than an entire neighborhood being locked down, we may just see one building locked down. i think that would be a lot more manageable. we have noticed the subway ridership for shanghai and beijing are rebounding still. despite the fact that there have been cases from time to time. >> what about in terms of reopening which is much further ahead than what we are seeing in china and hong kong. is that all being priced in or are there opportunities to be had here? >> there are select opportunities. there are some things we still like here in singapore. the commercial trust that we like. i think all of those things have been slow down because of the interest rate hikes we have been seeing. i think if we look ahead to
where the values are in terms of the reversions we are seeing, we do feel there is still opportunity. >> what you absolutely stay away from right now? lorraine: what we would stay away from is those companies in the state that have not had any home listing back. that will be challenging to resolve. there is a real dampener there. it will take some time for those companies to come back. we do like this biotech company but in the sink move and shift it's auditing to u.s., that is
from business primarily in the states, it is going to be difficult not to see these companies facing some to listing pressure. >> thank you for coming in. the director of asian equity research in singapore. let's go to new york and get the first word news with vonnie quinn. >> nancy pelosi has reaffirmed your support for taiwan despite fresh threats of reaction from china. the visit showed staunch international support for the island. >> today, our delegation is very proud, we came to taiwan to say we will not abandon our commitment to taiwan and we are proud of our enduring friendship. >> china has imposed economic
restrictions on taiwan following nancy pelosi's visit. it is withholding some sand exports and some fish and food from the island. they spent military drills. the island won't bow to pressure from beijing. >> pacing deliberately heightened military threats, taiwan will not back down. we will firmly uphold our nation positive sovereignty and continue to tow the line of consent for democracy. click federal reserve officials say they want to see strong evidence on a downward path. the fed president all hinted the fed still has a ways to go. all of those consumer prices rising 9.1% in june. that may be necessary to control inflation. >> we don't talk about recession per se. it is already growing above
trend. i forecast for this year is it will be growing below trend but that is necessary in order to get price increases, inflation under control. >> shanghai has posted no new covid cases for a third straight day. the longest stretch of zero infection since district ended last month. the residents are still required to take frequent tests. local government will conduct mass testing in five of its 16 districts this week. global news, 24 hours a day on air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn, this is bloomberg. >> let's check in on some of the airlines we are watching in the asian session because china has warned airlines to avoid areas near taiwan as it is conducting military exercises in response to nancy pelosi's visit to the
island. we saw an official notice late on tuesday. this according to carriers have received the message and we are seeing a little bit of weakness coming through in some of these green airways and then china airlines is down by about one point 54%. you're watching some reaction to shipping stocks. >> absolutely. this is a huge amount of traffic. it has some of the biggest ships in the world. the difference between a ship and a boat is that ships carry boats and boats don't carry ships. there you go. >> i apparently got some of those airlines mixed up. i am very sorry about that. that is a taiwanese carrier we were talking about. bloomberg has learned that they are pushing back on announcing plans for a north american ship factory. as is between beijing and washington escalate, we will
the tower semiconductor focuses on the aisle. that is what we have just now with regards to taiwanese access. the trip was to prove to the people that the u.s. would not abandon the island. >> cattell has decided to push back, announcing a multibillion-dollar north american plant due to tensions raised by nancy pelosi's trip to taiwan. emma o'brien joins us from sydney. this is quit a huge announcement. just tell us the reaction we are seeing. >> what we're hearing is that cat a was intended to make an
announcement as soon as september so next month about where they decided to build this all important north american plant but given the tensions between the u.s. and china, the fact that nobody really knows where they might go, they have hit the pause button and won't be making that announcement anytime soon. they were looking into about three sites. two were in mexico. one summer in the united states. it was not 100% clear where they were thinking or where they might eventually settle but it is a $5 billion project in terms of the investment. >> ultimately, when we look at what they are doing, you can't really throw politics out of the window. >> what is interesting is it is just this company management
being cautious. and wanting to see how this week plays out, whether it intensifies and becomes a very landmark moment where relations ships for the worst permanently or if it sort of fades away. then they can circle back on what they are doing. that seems to be what is happening here. i guess with china and chinese companies, there is always this sector of have they been told to do this? is beijing guiding this? that is something we don't know. >> it is interesting when we look at bloomberg intelligence reacting to this. they are saying that this decision won't hurt cattle itself. but they are saying it is something taking investors at least by surprise. you think we could see more potential announcements like this from other companies. >> yes. see a.c.l. was quit unusual when it was a chinese company when it
was looking at investing in the u.s.. we have seen a lot of that tail off as tensions have risen with the trade war and then the virus and then a lot of things coming to the floor once the biden administration came into government. so they were somewhat unusual but there are multiple of chinese companies that are in the u.s. and you have to look at tesla, a big client. china has this said to be its biggest producing factory in jane hi. -- shanghai. could there be sanctions against not just u.s. government officials but the u.s. company. you have nervous markets and nervous and best. >> all right managing editor
with us in sydney. taiwan foreign ministry commenting on china in terms of what we have seen in terms of reaction to nancy pelosi's a trip to taiwan and the foreign ministry is saying that china provocative acts actually challenge the national order. they are commenting on china briefing. saying that china had -- china has messed with the status quo. they said they actually warned airlines to avoid areas near taiwan where they are conducting military exercises so we are getting the reaction from taiwan that says they are sabotaging the status quo in the taiwan state. >> absolutely. that is what is grabbing people's attention. waiting for nancy pelosi to start out this news conference in taipei. let's get to your business flash news.
luber surging the most in 2020. customers kept handling rides in ordering takeout food all in the face of quickening u.s. inflation. the second quarter revenue doubling to more than $8 billion in the second order. shares are still down 30% since the start of the year. >> while trips were up 24% which is really healthy growth, gross booking happen faster than that. i think the good news for us is that surge levels are actually coming down. hca's are coming down so as the marketplace becomes more balanced, we actually see strength in terms of trip growth going forward. >> let's stay with earnings. we have strong u.s. sales helping starbucks offset lower traffic in china. this is coming at $8.1 billion. just a bit above estimates.
volumes did fall back. china sales are dropping 44%. you can bet what happens there. covid rules restricting demand. airbnb shares out after the company missed estimates on booking after high expectations from the end of the pandemic restrictions fueled travel demand. all mental company announcing that the second-quarter rose 25%. missing estimates of 106 million . airbnb is forecasting a record in the third quarter. a sharp fall in profit amid unrealized losses. this is the largest lenders in japan saying their profits fell 70% to $869 million. there we go.
that is your business flash news. >> looking ahead, investors will be watching in india today. the federal cabinet scheduled to meet later today. the ratesetting panel will also meet to review its monetary policy stance before making the decision on friday. we are expecting earnings. looking like we will have a pretty flat move there coming through on the nifty on the open. we are also looking to some of these indian markets getting back what they lost so far this year. >> also checking in with what is going on with the routine. it is pretty much flat there for the syntax and the nifty. three stocks on the way up. just turning positive there as well. also looking at what is
happening with regards to the indian currency, it is vital as it has been a big headwind. a headache for the central bank, the reserve bank of india does make decisions on the interest rates and the rupee at 76. that is the nifty year to date. we have managed to erase losses we had been suffering there. there we go. this is bloomberg. ♪
>> you are watching bloomberg markets: asia. we are looking at the reaction to nancy pelosi a trip to taiwan. they're down for a third session. we are seeing weakness in the taiwan dollar. some gains coming through in european future as well china's markets are fairly flat. not really reacting too much there. we have heard from taiwan and the last few moment or so. they are monitoring the situation closely in the taiwan strait. let's bring back what chief north asian correspondent, stephen engle said and we can recap what we are from nancy pelosi about 30 minute to go. >> i sure they have retired behind closed doors right now. nancy pelosi as well at the
present to put more meat on the bones of those pleasantries they exchanged within the last hour. essentially pelosi is saying her visit was meant to show solidarity with taiwan as well as reaffirm washington's commitment to taiwan under the 1979 u.s. taiwan relations act. and that her visit would show confirmation that the u.s. will still back taiwan despite what we have seen his rising pressure coming from mainland china. speaking of that rising pressure, china is out with fresh warnings. while those two people were talking in taipei, in addition to already announced increases in military drills. the board -- devised foreign minister says england is pushing taiwan toward what he called a dangerous abyss. china also morning global airlines to avoid flying through
the danger zone. these are the six exclusion zones that china has announced they will be encircling the island of taiwan with six exclusion zones starting at midday, tomorrow, thursday. that will go through midday on sunday. this will be after close is scheduled to leave but they will conduct military exercises. they have also talked about live fire exercises coming through or todd -- through or across the taiwan strait. all of this as a show of disapproval, anger if you will at pelosi's visit. >> there is a body of thought suggesting this we actually have had out of beijing does not go far enough. >> how far do you want them to go? i'm not saying you but a fairly
muted response if you want to call it that leads to market is taking a sigh of relief because you have to think about what the worst case scenario would have been and we heard in the run-up to this visit or there's rumors visited by nancy pelosi that the pla would not sit idly by. so far, they have. there has not been any direct confrontation with nancy pelosi flying in late last night, arriving just after 10:00 p.m. under the cover of darkness as well as a bit of a roundabout route. we have a chart to show how nancy pelosi's plane avoided the line that china claims to have sovereignty over, that part of the south china sea as well as the taiwan strait. her plane avoided those potential hotspots and went
through borneo end of the eastern coast of the philippines arriving in taiwan just in case. >> john was telling us earlier that this is very much exacerbating the u.s. and china tensions. do you see what we saw as some of the economical moves from china? i guess we are all looking at what else could happen here. >> i think there is likely to be more economic measures. i think some of the moves they have announced have been fairly tame if you look at the broader scheme of things and a bit of rhetoric that has been coming out of beijing. they are essentially banning taiwanese exports to china, taiwanese citrus fruit as well as some forms of fish. they will also ban the export from china to taiwan, natural
sand. this is used partly in semiconductors but again, as a guess we have on earlier was saying, just like china did back in 2007 when they banned the export of that sand to taiwan, taiwan goes to other suppliers. they did -- they have gone to philippines before. the bigger question is how long will these exclusion zones last around taiwan and the so-called gray zone tactics that china will employ to further isolate taiwan after this visit by pelosi? they will likely go to greater extremes to diplomatically and economically try to isolate taiwan as a result of this trip. >> let's take a look at the medium-term here with regards to this trip itself. at the same time, you have perhaps the biggest year of political conflict going on in eastern europe right now with a china which has really been seen
as a putative ally of moscow but could this turn china into a true ally? of moscow? >> there is no limit relationship according to xi jinping with moscow but we need to take a step back because most military analysts would say that moscow attacking ukraine is a far different kettle of fish then in beijing and the pla readying and executing an invasion of an island like taiwan. it is perhaps far more strategic to the united states than ukraine. all of that as well as that
buffer. that between china and the united states, obviously. i think most analysts are saying china might talk tough militarily but right now, their best strategy to further isolate would be the gray area tactics, gray zone tactics and that is choking off some of those supply chains or those waterways that will impact the supply chains. this is working them not apply in these six exclusive zones. it really does around taiwan.