Daybreak Weekend: Housing Data, German Elections, Alibaba Earnings

Bloomberg Audio Studios, Podcasts, radio news. 0:00:10.039 --> 0:00:12.440 This is Bloomberg day Break Weekend, our global look at 0:00:12.440 --> 0:00:14.600 the top stories in the coming week from our Daybreak 0:00:14.600 --> 0:00:17.079 anchors all around the world. Straight Ahead on the program, 0:00:17.079 --> 0:00:20.119 a look ahead to some key housing data, plus a 0:00:20.160 --> 0:00:22.759 look ahead to corporate earnings from evmaker Rivian. 0:00:23.040 --> 0:00:25.800 I'm Tom Busby in New York. I'm Stephen and Carol 0:00:25.880 --> 0:00:28.600 in London. Borg counting down to a crucial election in 0:00:28.640 --> 0:00:30.760 Europe's biggest economy, Germany. 0:00:30.960 --> 0:00:35.120 I'm Doug Chrisner looking at upcoming earnings from China's Ali Baba, 0:00:35.159 --> 0:00:38.240 along with upcoming eco data out of South Korea. 0:00:38.400 --> 0:00:42.400 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:42.440 --> 0:00:46.160 eleven to three, Yeero, New York, Bloomberg ninety nine to one, Washington, DC, 0:00:46.640 --> 0:00:50.880 Bloomberg ninety two to nine, Boston, DAB, Digital Radio, London, 0:00:51.320 --> 0:00:54.520 Sirius XM one twenty one, and around the world on 0:00:54.600 --> 0:00:57.760 Bloomberg Radio, dot Com and the Bloomberg Business App. 0:01:02.160 --> 0:01:04.000 Good day to you. I'm Tom Busby, and we begin 0:01:04.080 --> 0:01:07.120 today's program with some key housing data out this week. 0:01:07.240 --> 0:01:10.920 January housing starts on Wednesday. Existing home sales for that 0:01:10.920 --> 0:01:13.640 same month on Friday Now for more on what do 0:01:13.640 --> 0:01:16.520 you expect and look at the housing sector right now, 0:01:17.000 --> 0:01:22.119 we're joined by Drew Redding, Bloomberg Intelligence, US home building analyst. Well, Drew, 0:01:22.880 --> 0:01:26.400 last month brought brutally cold temperatures across much of the US, 0:01:26.560 --> 0:01:30.759 those devastating wildfires in Los Angeles. Is there any good news, 0:01:30.800 --> 0:01:33.440 any green shoots we can look for in new home 0:01:33.480 --> 0:01:36.280 construction and existing home sales for January? 0:01:37.360 --> 0:01:39.280 Well, thanks for having me. It's a great question. There 0:01:39.319 --> 0:01:41.400 have been a lot of different forces at play. I 0:01:41.400 --> 0:01:44.760 think the market's looking for something about down seven percent 0:01:45.520 --> 0:01:47.440 for housing starts this month, and we think that that 0:01:47.480 --> 0:01:50.360 starts going to remain valuable for the next couple of months. 0:01:50.400 --> 0:01:53.720 And the reason is that the large public builders are 0:01:53.800 --> 0:01:58.320 matching production levels with demand. Given what's happened with rates, 0:01:58.760 --> 0:02:01.360 the expectation for volume growth just not as strong as 0:02:01.400 --> 0:02:03.240 it was a couple of months ago. And you know, 0:02:03.240 --> 0:02:06.160 when we looked at demand in January, it's actually weaker 0:02:06.200 --> 0:02:09.520 than the typical seasonal pattern you would see. So you know, 0:02:09.720 --> 0:02:11.960 we're seeing builders be a bit more cautious on a 0:02:11.960 --> 0:02:14.440 relative basis. We still think that the large public builders 0:02:14.440 --> 0:02:17.920 will see stronger growth compared to their smaller peers who 0:02:18.040 --> 0:02:20.680 continue to struggle with, you know, the availability and cost 0:02:20.720 --> 0:02:23.520 of growth capital. Because you have to remember a lot 0:02:23.560 --> 0:02:25.960 of time this group is looking to regional local banks 0:02:25.960 --> 0:02:29.280 for financing. In an environment where there's a lot more uncertainty, 0:02:29.280 --> 0:02:33.119 it's certainly tougher to get access to that. In terms 0:02:33.160 --> 0:02:36.639 of existing home sales, we think we're going to continue 0:02:36.639 --> 0:02:39.520 to see sales be pressured in the near term. You know, again, 0:02:39.560 --> 0:02:42.920 we've had rates back up where I think seven point 0:02:43.000 --> 0:02:46.720 one point five percent now, prices continue to rise across 0:02:46.800 --> 0:02:48.560 much of the country, and you know, there's just not 0:02:48.639 --> 0:02:50.160 a lot of urgency right now. 0:02:51.000 --> 0:02:53.640 And are these builders you're talking about also having problems 0:02:53.720 --> 0:02:56.280 or or fear of problems getting enough workers. I mean, 0:02:56.320 --> 0:02:59.000 I know skilled labor is hard to get, but any 0:02:59.040 --> 0:03:01.320 workers with the threat that's coming out of the White 0:03:01.320 --> 0:03:06.560 House and deportations. Also land, you know available land. Is 0:03:06.720 --> 0:03:09.000 are they not building spec houses? Is that sort of 0:03:09.000 --> 0:03:12.000 what you mean by you know, you know, just building 0:03:12.000 --> 0:03:12.520 on demand. 0:03:13.000 --> 0:03:15.360 Well, that's a great question on the labor front, because 0:03:15.960 --> 0:03:19.160 the inability of builders to get access to the trades 0:03:19.160 --> 0:03:21.680 has been an issue for much the last cycle. Now 0:03:21.760 --> 0:03:24.680 over the last several quarters, we've seen that improve. You know, 0:03:24.760 --> 0:03:26.760 part of the reason is because the last couple of 0:03:26.840 --> 0:03:29.959 years we've had the largest influx of immigration on record, 0:03:30.400 --> 0:03:32.960 we've also had slowing demand, so the trades have kind 0:03:32.960 --> 0:03:35.400 of been able to catch up with production. But you know, 0:03:35.440 --> 0:03:38.800 in terms of immigration policy, it's certainly a real threat 0:03:38.800 --> 0:03:41.560 to the construction industry. You know, of course, we still 0:03:41.600 --> 0:03:43.320 don't know exactly how this is going to play out, 0:03:43.840 --> 0:03:46.120 but it's not a secret that farm bar and workers 0:03:46.160 --> 0:03:50.160 representing a significant portion of the US construction industry. I 0:03:50.160 --> 0:03:53.800 think that the NHB estimates that it's about thirty three 0:03:53.880 --> 0:03:56.480 percent of the trades, but as you would expect that 0:03:56.640 --> 0:04:02.000 very significantly by market. So if you look at somewhere California, Texas, Nevada, 0:04:02.000 --> 0:04:05.080 and Florida, you're talking about closer to fifty percent of 0:04:05.160 --> 0:04:07.440 the workers being farm born, and there's some estimates out 0:04:07.440 --> 0:04:10.200 there that you know, about one and ten are undocumented. 0:04:10.280 --> 0:04:13.080 So wow. You know, like I said, it remains the 0:04:13.120 --> 0:04:15.480 spe seen how this play out, but we certainly think that, 0:04:15.600 --> 0:04:18.720 you know, builders could have an issue getting products built, 0:04:18.720 --> 0:04:21.599 and certainly we would expect to see COSS rise in 0:04:21.640 --> 0:04:24.120 the event of some type of you know, large scale 0:04:24.440 --> 0:04:25.800 deportation program. 0:04:25.920 --> 0:04:28.880 Wow, a lot of a lot of uncertainty. Well, right now, 0:04:28.920 --> 0:04:31.279 it's the middle of February, just ahead of the busy 0:04:31.320 --> 0:04:35.360 spring housing season. And speaking of uncertainty, you mentioned home 0:04:35.400 --> 0:04:38.119 prices at or near all time highs mortgage rates around 0:04:38.160 --> 0:04:41.880 seven percent, uh, the President's agenda. Where does the whole 0:04:42.000 --> 0:04:46.880 industry stand right now? The home builders and new home construction. 0:04:47.440 --> 0:04:50.360 Wells, we're still definitely dealing with the soft market. As 0:04:50.360 --> 0:04:54.640 you mentioned, affordability is near historically low levels, so we're 0:04:54.640 --> 0:04:57.120 seeing that that impacted demand side. We looked at some 0:04:57.160 --> 0:05:00.240 of the latest data for Redfin on the pending home 0:05:00.320 --> 0:05:03.040 sale side, and it's showing that from last month we're 0:05:03.040 --> 0:05:05.480 down about four percent, we're down about six percent from 0:05:05.560 --> 0:05:09.119 last year, and on an absolute basis pending sales, which 0:05:09.279 --> 0:05:13.719 are kind of a more current reflection of the demand 0:05:13.800 --> 0:05:16.640 environment because they're contract signings, we're at the lowest level 0:05:16.640 --> 0:05:20.480 on record. The data is also showing that we're starting 0:05:20.480 --> 0:05:24.159 to see more deals start to fall through, whether that's 0:05:24.200 --> 0:05:28.599 due to qualification issues or buyers getting cold feet, you know. 0:05:28.640 --> 0:05:30.960 Broadly speaking, we think, you know, on the existing home side, 0:05:31.000 --> 0:05:36.040 we're probably hovering around trough levels. The question is when 0:05:36.080 --> 0:05:38.760 does that start to turn. You know, we think we 0:05:38.839 --> 0:05:41.880 can finish the year in positive territory, but you have 0:05:41.920 --> 0:05:44.480 to remember that we're coming off the lowest level of 0:05:44.520 --> 0:05:48.520 volumes in multiple decades, so certainly still a challenging market, 0:05:48.680 --> 0:05:50.880 and we're seeing that in both the resale side and 0:05:50.920 --> 0:05:52.000 the new home sales side. 0:05:52.160 --> 0:05:54.800 Yeah, and another troubling stat you mentioned redfin They say 0:05:54.839 --> 0:05:57.799 more homes are now getting listed, many for the first time, 0:05:58.320 --> 0:06:02.800 but they're staying unsold for the longest stretch in five years. Again, 0:06:03.320 --> 0:06:06.479 the unaffordability of so many of these homes and a 0:06:06.520 --> 0:06:08.800 seven percent interest rate's like a one two punch. That's 0:06:09.400 --> 0:06:10.240 not helping at all. 0:06:10.600 --> 0:06:13.119 Yeah. I think the average time on market is getting 0:06:13.120 --> 0:06:16.279 close to two months, So, you know, the inventory dynamic 0:06:16.320 --> 0:06:19.440 has been something that has really supported the builders over 0:06:19.440 --> 0:06:21.400 the last couple of years. You've had a lack of 0:06:22.000 --> 0:06:25.000 for sale inventory in the resale market, which funneled demand 0:06:25.120 --> 0:06:28.360 towards the builders, who are then able to offer incentives 0:06:28.400 --> 0:06:30.839 and rate buydowns to make the payments look better. But 0:06:30.880 --> 0:06:33.680 now we're in a situation where that competitive environment is 0:06:33.720 --> 0:06:37.280 really starting to change with active listings across many of 0:06:37.320 --> 0:06:40.719 the key markets now well above twenty nineteen levels, and 0:06:40.880 --> 0:06:42.480 you know the ones that come to mind are in 0:06:42.520 --> 0:06:45.760 Florida and Texas. So builders are now having to face 0:06:45.880 --> 0:06:48.400 competition that they really haven't had the last couple of years, 0:06:48.400 --> 0:06:50.880 and we think that could put some pressure not only 0:06:50.960 --> 0:06:52.600 on volumes but also on pricing. 0:06:53.120 --> 0:06:53.280 Well. 0:06:53.360 --> 0:06:56.800 January housing starts out on Wednesday. Existing home sales for 0:06:56.920 --> 0:07:00.640 January out on Friday. Our thanks to Drew Reda, Bloomberg 0:07:00.720 --> 0:07:04.640 Intelligence US home Building analyst. We move now to earnings 0:07:04.680 --> 0:07:07.440 from high end EV maker Rivian, which reports its fourth 0:07:07.480 --> 0:07:11.120 quarter results this Thursday, as it readies big plans for 0:07:11.160 --> 0:07:13.040 the future. For more and what to expect, and a 0:07:13.080 --> 0:07:16.200 look at the broader ev auto sector. We're joined by 0:07:16.240 --> 0:07:21.360 Steve Mann, Bloomberg Intelligence Global Autos and Industrials Research Analysts. Steve, 0:07:21.680 --> 0:07:24.400 thank you so much for joining us. Thanks Well, let's 0:07:24.400 --> 0:07:28.040 begin with what you expect to see in this earnings report. 0:07:28.280 --> 0:07:30.720 What were sales like for Rivian? How did it do 0:07:30.840 --> 0:07:33.520 against Tesla, Lucid, GM, and Ford. 0:07:34.040 --> 0:07:39.640 Well, Rivian actually had better than expected sales in the 0:07:39.680 --> 0:07:44.120 fourth quarter, so we do expect the company to actually 0:07:44.640 --> 0:07:49.480 report positive gross margin in their auto business, and that's 0:07:49.560 --> 0:07:52.960 something they've promised for the last three quarters and I 0:07:52.960 --> 0:07:56.120 think they will be able to achieve that. They've done 0:07:56.120 --> 0:07:59.880 a lot of changes internally in their factories and their 0:08:00.000 --> 0:08:05.120 product to get there. So and lastly, hell on high water, 0:08:05.200 --> 0:08:09.200 they have to hit gross profit because you remember they 0:08:09.240 --> 0:08:13.760 do have a partnership, a joint venture with Volkswagen, and 0:08:14.320 --> 0:08:16.680 for the next billion dollars that they're going to get 0:08:16.680 --> 0:08:21.040 from Volkswagen, they have to hit that gross profit target. 0:08:21.720 --> 0:08:24.560 Now that is a big boost anyone would take the 0:08:24.560 --> 0:08:28.560 billion dollars from the world's second largest automaker. But it's 0:08:28.600 --> 0:08:30.840 also facing a lot of uncertainties, or at least the 0:08:30.880 --> 0:08:33.480 EV industry in the US with Donald Trump back in 0:08:33.520 --> 0:08:37.520 the White House. Yeah, not only the tariffs, but you know, 0:08:37.840 --> 0:08:41.440 he revoked the EV mandate of fifty percent cars sold 0:08:41.480 --> 0:08:44.720 by twenty thirty all evs, the federal tax credit up 0:08:44.760 --> 0:08:48.400 in the air emission standards I mean, is rivian, and 0:08:48.440 --> 0:08:51.960 the whole industry really facing more challenges than ever before. 0:08:52.600 --> 0:08:54.480 I think there's a lot of noise out there. I 0:08:54.480 --> 0:08:57.760 think there's going to be ups and downs in any 0:08:58.000 --> 0:09:02.160 any market, especially you know, auto market is not immune 0:09:02.200 --> 0:09:04.640 to that. I think, you know, there's a lot of 0:09:04.760 --> 0:09:08.400 risk in terms of concerns about auto sales if the 0:09:08.400 --> 0:09:12.520 seventy five hundred tax credit goes away. There's also tariffs, 0:09:12.559 --> 0:09:20.120 you know, the ux Mexico Canada tarriffs may make may 0:09:20.160 --> 0:09:22.800 come on online, the twenty five percent tariff, and that 0:09:22.840 --> 0:09:26.600 could impact the auto industry. I mean, I think the 0:09:26.960 --> 0:09:31.040 tariffs on the supply chain won't impact Revian that much. 0:09:31.120 --> 0:09:34.640 They've have been vertically integrating their process and some of 0:09:34.679 --> 0:09:37.280 the changes that made that they made in the middle 0:09:37.280 --> 0:09:41.520 of twenty twenty four really brings all out of production 0:09:41.840 --> 0:09:45.440 in house, so they may not get hit that much 0:09:45.600 --> 0:09:48.640 on tariff's. But the seventy five hundred elimination of the 0:09:48.640 --> 0:09:54.640 semi five hundred tax credit will probably temporary subdue h 0:09:54.840 --> 0:09:58.440 EV sales. You know, it does make EV's a little 0:09:58.440 --> 0:10:02.800 bit more expensive for the consumer, But look, Rivinan is 0:10:02.840 --> 0:10:07.160 going to launch a cheaper model later this year, uh 0:10:07.200 --> 0:10:11.560 and then a new and even cheaper model into in 0:10:11.640 --> 0:10:15.040 twenty twenty six that will expand their their their market 0:10:15.160 --> 0:10:19.199 and hopefully make their vehicles even more affordable for the 0:10:19.280 --> 0:10:20.040 average consumer. 0:10:20.320 --> 0:10:23.480 Well, speaking of expanding, I mean, Rivian is thinking big, 0:10:23.520 --> 0:10:26.160 not only these new models, not only the partnership with 0:10:26.160 --> 0:10:30.120 with Volkswagen, but in the last remaining days of the 0:10:30.160 --> 0:10:32.760 Biden administration, it secured a six point six billion dollar 0:10:32.880 --> 0:10:36.880 loan resuming work on a new assembly plant outside of Atlanta. 0:10:37.280 --> 0:10:39.720 I mean that's big. Thinking that is huge. 0:10:40.280 --> 0:10:44.559 I think it's really positive for for Rivian because you know, 0:10:44.679 --> 0:10:48.160 Rivian still not positive on the bottom line, so they 0:10:48.520 --> 0:10:51.720 you know, and they have negative cash flow. So to 0:10:51.800 --> 0:10:55.319 have that backstop, you know, for their new plant that 0:10:55.400 --> 0:10:58.600 it will be it's really positive. But look, I think 0:10:59.320 --> 0:11:03.680 it'll be a miss if Rivian decides to go ahead 0:11:03.720 --> 0:11:06.959 with the construction of that Georgia plant now, I think 0:11:07.320 --> 0:11:10.800 they're going to have to wait. They should wait. They 0:11:10.880 --> 0:11:15.240 have the R two smaller suv coming up cheaper, and 0:11:15.280 --> 0:11:18.000 then the R three and twenty twenty six. I think 0:11:18.080 --> 0:11:23.640 they should wait until gauge the customer demand for those 0:11:23.679 --> 0:11:27.640 two vehicles before they go ahead and starting building a 0:11:27.679 --> 0:11:31.200 new plant. I think, you know, if they do spend 0:11:31.200 --> 0:11:34.320 that capex now, it's going to be a higher cost 0:11:34.679 --> 0:11:37.200 for the automaker, at least on a per unit basis, 0:11:37.200 --> 0:11:40.720 and they don't need that right now. So it's great 0:11:40.720 --> 0:11:43.800 that they have the money, but I think it'll be uh, 0:11:44.360 --> 0:11:46.040 you know, I don't think the investors will look at 0:11:46.080 --> 0:11:48.080 this positively if they decide to build the plant. 0:11:48.120 --> 0:11:51.760 Now I see now, up until now, it's bread and 0:11:51.800 --> 0:11:54.840 butter from what I see, has been this deal to 0:11:54.880 --> 0:11:58.480 supply delivery trucks to Amazon. I mean tens of thousand 0:11:58.520 --> 0:12:00.800 that I see them everywhere here in New York. Now 0:12:00.840 --> 0:12:03.640 that deal has expired. So what does that mean for Rivian? 0:12:04.040 --> 0:12:07.880 Oh, it's really positive. It's it's a small business for 0:12:07.960 --> 0:12:11.200 them right now. It's it's kind of you know, the 0:12:11.200 --> 0:12:15.400 the impact to the bottom line it's immaterial, but the upside, 0:12:15.800 --> 0:12:19.920 you know, it's he's huge because you know what really 0:12:20.000 --> 0:12:24.239 makes sense for evs is these short hauled delivery trucks, 0:12:24.559 --> 0:12:26.600 right and you know they have to you know, they're 0:12:26.640 --> 0:12:29.240 selling to Amazon. But you know we've also heard that 0:12:29.240 --> 0:12:31.720 there they've been talking to AT and T, and AT 0:12:31.800 --> 0:12:37.160 and T are currently testing vehicles, their service vehicles from Rivian. 0:12:37.679 --> 0:12:41.760 So it opens up a door for a bigger market 0:12:41.880 --> 0:12:43.880 for for Rivian's technology. 0:12:44.040 --> 0:12:44.680 Well, that's great. 0:12:44.760 --> 0:12:47.600 Rivian Q four earnings out this Thursday, and our thanks 0:12:47.640 --> 0:12:52.280 to Steve Mann Bloomberg Intelligence, Global Autos and industrials research 0:12:52.480 --> 0:12:55.280 analyst coming up on Bloomberg day Break weekend to look 0:12:55.320 --> 0:12:59.040 ahead to the upcoming German elections. I'm Tom Busby and 0:12:59.200 --> 0:13:13.120 this is Blue. This is Bloomberg day Break weekend, our 0:13:13.160 --> 0:13:15.400 global look ahead at the top stories for investors in 0:13:15.440 --> 0:13:18.320 the coming week. I'm Tom Busby in New York. Up 0:13:18.400 --> 0:13:20.400 later in our program, we look ahead to earnings from 0:13:20.440 --> 0:13:24.680 China's biggest player in e commerce, but first German said 0:13:24.679 --> 0:13:27.160 to the polls this week, with issues like economic growth, 0:13:27.280 --> 0:13:32.240 domestic security, irregular migration, all on the ballot. Now for more, 0:13:32.320 --> 0:13:34.240 Let's go to London and bring in Bloomberg day Break 0:13:34.240 --> 0:13:36.240 Europe banker Stephen Carroll. 0:13:36.360 --> 0:13:39.480 Tom According to the latest polling, the conservative Friedrich Martz 0:13:39.520 --> 0:13:42.920 of the Christian Democratic Union is the front runner to 0:13:43.000 --> 0:13:46.520 emerge as the next leader of Germany. Time is fast 0:13:46.600 --> 0:13:49.840 running out for the incumbent Olaf Schultz and his Social 0:13:49.920 --> 0:13:54.200 Democrat party to close the gap between them and their opponents, 0:13:54.240 --> 0:13:58.040 currently about fourteen percentage points wide according to an average 0:13:58.040 --> 0:14:02.840 of recent polls. Maybe some indication or consensus about the 0:14:02.880 --> 0:14:07.880 expected results, the path to stability in Germany remains uncertain. 0:14:08.160 --> 0:14:11.200 The recent bad blood between the mainstream parties, which was 0:14:11.280 --> 0:14:14.959 on show during a televised debate during this campaign, has 0:14:14.960 --> 0:14:18.440 sparked concern that it might prove more difficult to negotiate 0:14:18.480 --> 0:14:22.240 a coalition agreement after the election, a process that can 0:14:22.320 --> 0:14:25.840 take several months. Navigating the uncertainty as an investor in 0:14:25.840 --> 0:14:28.240 Europe's largest economy is something that I've been discussing with 0:14:28.280 --> 0:14:32.120 Eliz Badoi, whose City Group's Global markets managing director and 0:14:32.200 --> 0:14:35.400 head of EMEA Research, who does see a potential upside 0:14:35.480 --> 0:14:38.640 to the results if all goes to plan German elections. 0:14:38.680 --> 0:14:42.640 On balance, there hasn't been as much focused globally on them, 0:14:42.640 --> 0:14:46.040 but obviously there are a positive catalyst for the first time. 0:14:46.080 --> 0:14:49.680 We could hear about the regulation, we could hear about 0:14:49.880 --> 0:14:54.440 boosting spending defense, depending on the outcome and the various 0:14:54.440 --> 0:14:57.160 coalition we might get. Now, of course there's always a 0:14:57.200 --> 0:15:01.880 risky selections that we get an extreme party blocking some 0:15:02.480 --> 0:15:05.080 of that, but I think on balance we think seventy 0:15:05.120 --> 0:15:08.360 five percent of the potential outcomes of market friendly. 0:15:08.440 --> 0:15:10.560 So that's one thing that with City. 0:15:10.360 --> 0:15:13.520 Groups, Ali's Badoye. They are speaking to myself and Valerie Titel. 0:15:13.880 --> 0:15:17.240 So what's in store for Germany over the final week 0:15:17.320 --> 0:15:20.440 of campaigning. I've been discussing this with our Germany correspondent 0:15:20.480 --> 0:15:21.160 to Oliver Krook. 0:15:21.440 --> 0:15:23.440 Yeah, listen, I think what is sort of most remarkable, 0:15:23.520 --> 0:15:25.560 the most remarkable future of this election campaign is that 0:15:25.640 --> 0:15:28.160 basically the polls have not moved a whole lot, no 0:15:28.280 --> 0:15:30.320 matter basically what has happened since the sort of snap 0:15:30.400 --> 0:15:33.080 election was called. It teams that basically everything is kept steady. 0:15:33.080 --> 0:15:35.440 And that's really in very sharp contrast to what we 0:15:35.480 --> 0:15:38.280 saw during the last federal election in twenty twenty one, 0:15:38.360 --> 0:15:41.520 where basically the CDU had been leading by like twenty 0:15:41.600 --> 0:15:44.120 three points, gave up that full lead and then was 0:15:44.200 --> 0:15:46.240 not in the government at all. So what we're seeing 0:15:46.280 --> 0:15:49.160 now is the CDU basically holding up at about thirty percent. 0:15:49.280 --> 0:15:51.800 Remember this is Angela Merkel's traditional party now headed by 0:15:51.880 --> 0:15:55.040 Frederick Mertz, with the AfD the Alternative for Deutschland, the 0:15:55.120 --> 0:15:57.480 far right party that wants to leave the Eurozone, very 0:15:57.520 --> 0:16:00.840 hard on immigration, they're twenty percent, and then ESPD, you know, 0:16:00.920 --> 0:16:03.760 the Chancellor's current party, the current Translort party, holding in 0:16:03.760 --> 0:16:06.400 about fifteen sixteen percent, and the Greens right after that. 0:16:06.800 --> 0:16:09.360 I mean, what I think is very sort of interesting though, 0:16:09.520 --> 0:16:12.200 is perhaps a different feature from this election from the others, 0:16:12.520 --> 0:16:14.240 is that all the people that you sort of speak to, 0:16:14.440 --> 0:16:16.000 many of the people that I speak to, when I 0:16:16.040 --> 0:16:18.120 ask them who they're voting for, most of them, I 0:16:18.160 --> 0:16:19.880 will have to say, will say they don't know who 0:16:19.880 --> 0:16:22.320 they're going to vote for. So basically they're considering are 0:16:22.320 --> 0:16:23.840 they going to vote with their conscience? Are they going 0:16:23.920 --> 0:16:25.920 to vote more tactically. This is going to be a 0:16:25.960 --> 0:16:27.880 sort of big question, and it's hard for me to say, 0:16:28.120 --> 0:16:30.240 because the polling is one thing. What people will actually 0:16:30.280 --> 0:16:31.960 do on the day of the election that could cause 0:16:32.000 --> 0:16:34.360 a real sort of discrepancy to what we've generally seen 0:16:34.440 --> 0:16:37.160 in German elections where the polling has been fairly accurate. 0:16:37.840 --> 0:16:41.960 What have been the key moments of the campaign so far? 0:16:42.880 --> 0:16:44.320 Yeah, I mean, I think that the sort of first 0:16:44.440 --> 0:16:47.560 key feature of this election campaign is just the presence 0:16:47.680 --> 0:16:50.160 of the AfD, the Alternative for Deutschland, as the sort 0:16:50.160 --> 0:16:52.920 of far right wing party, as a serious political presence. 0:16:52.960 --> 0:16:55.000 They hold, you know, basically a fifth of the vote 0:16:55.040 --> 0:16:58.160 in this election that has not happened since basically post 0:16:58.240 --> 0:17:01.240 war Germany, and they are in many ways setting the 0:17:01.320 --> 0:17:03.760 tone for a lot of the debate, certainly on immigration 0:17:04.400 --> 0:17:07.200 and some other economic policies as well. I mean, I 0:17:07.200 --> 0:17:09.560 think another sort of of the sort of key moments 0:17:09.720 --> 0:17:12.440 was basically the equestins around whether or not olaft Guilt 0:17:12.520 --> 0:17:15.480 would be the candidate for the SPD going into this election. 0:17:15.800 --> 0:17:19.360 He obviously was very damaged by basically his last term 0:17:19.400 --> 0:17:23.240 that was cut forward because this basically coalition couldn't get along, 0:17:23.280 --> 0:17:25.080 They couldn't figure out how to solve a lot of problems, 0:17:25.119 --> 0:17:27.240 and it eventually brought the government down, calling for an 0:17:27.280 --> 0:17:29.520 early election. And I think that the sort of final 0:17:29.680 --> 0:17:32.000 point that I think has really been significant here is 0:17:32.080 --> 0:17:35.080 basically the CDU and Frederick Mertz, the sort of center 0:17:35.160 --> 0:17:37.720 right party, voting for the very first time on this 0:17:37.880 --> 0:17:41.000 immigration bill in the same direction as the AfD, the 0:17:41.040 --> 0:17:44.200 alternative for Deutschel on that has never happened basically in 0:17:44.320 --> 0:17:47.320 post war Europe where you have a mainstream party voting 0:17:47.359 --> 0:17:49.200 with the AfD. He has said that this is not 0:17:49.359 --> 0:17:51.360 really amount to working with them. He has ruled out 0:17:51.359 --> 0:17:53.359 working in coalition with them. But for much of the 0:17:53.440 --> 0:17:56.600 political system here within Germany was seen as sort of 0:17:56.640 --> 0:17:59.560 breaking the far right firewall and really sort of sundering 0:17:59.680 --> 0:18:02.200 that that taboo, and for many people that made you 0:18:02.240 --> 0:18:06.440 know him potentially untorre strustworthy and ineligible to be the candidate. 0:18:06.560 --> 0:18:08.440 Others say that, you know, he's just being practical and 0:18:08.480 --> 0:18:12.000 he's dealing with an intensely fragmented political landscape here in Germany. 0:18:12.800 --> 0:18:15.520 This concept of the firewall is really central to the 0:18:15.600 --> 0:18:19.159 political conversations happening in Germany. And as you say that 0:18:19.400 --> 0:18:22.840 moment with the CDU putting forward this motion the Bundestag 0:18:22.960 --> 0:18:27.479 that you know, although condemning the AfD in the motion itself, 0:18:27.560 --> 0:18:31.880 did ultimately end up using some of their votes. How 0:18:32.760 --> 0:18:37.119 thinking about what happens post the election, how intact is 0:18:37.280 --> 0:18:40.800 that firewall now? Is there a chance that any of 0:18:40.960 --> 0:18:45.120 these center parties could end up doing work with the AfD? 0:18:46.240 --> 0:18:47.879 Listen, I think I don't think that there's going to 0:18:47.920 --> 0:18:49.240 be anything that they're going to be able to do 0:18:49.280 --> 0:18:52.800 in terms of formal coalitions. But again, I mean, Frederick 0:18:52.840 --> 0:18:54.480 Mertz was testing the water and at the end of 0:18:54.520 --> 0:18:56.720 the day, what he is dealing with is a real 0:18:56.800 --> 0:18:59.320 political problem within Germany, which is the fact that you 0:18:59.400 --> 0:19:02.399 basically have this massive fragmentation, you have basically, you know, 0:19:02.520 --> 0:19:04.240 As you get closer to the election, you know more 0:19:04.280 --> 0:19:06.159 and more of this vote being sort of spread across 0:19:06.480 --> 0:19:09.080 several different parties who have very very different, sort of 0:19:09.160 --> 0:19:11.320 out of different sort of views of the world and 0:19:11.440 --> 0:19:13.960 how to deal with problems within Germany. And the reality 0:19:14.000 --> 0:19:16.200 situation is they're very unwilling to compromise it. 0:19:16.480 --> 0:19:17.320 And this is the issue. 0:19:17.320 --> 0:19:19.119 So you have the CDU basically won't compromise on the 0:19:19.160 --> 0:19:21.680 debt break, the SPD, won't cut social benefits, the Greens 0:19:21.680 --> 0:19:24.040 shut down nuclear power in the middle of an energy crisis. 0:19:24.240 --> 0:19:26.240 This is not a sort of situation in which the 0:19:26.320 --> 0:19:29.080 mainstream parties are able seemingly to get along and make 0:19:29.160 --> 0:19:31.080 some sort of sacrifices in order to get things done 0:19:31.119 --> 0:19:33.040 in Germany. And that is exactly the fact that the 0:19:33.119 --> 0:19:36.560 AfD is exploiting, saying basically, the mainstream parties have failed you. 0:19:38.280 --> 0:19:41.840 Let's think about what happens on Sunday, the twenty third 0:19:42.240 --> 0:19:45.000 of February, when we will get polling day, but also 0:19:45.040 --> 0:19:47.280 when we will get the results of this election. Talk 0:19:47.400 --> 0:19:50.440 us through what happens when the results start to come 0:19:50.520 --> 0:19:53.280 in at polls close at six pm local time, will 0:19:53.280 --> 0:19:57.320 get exits polls almost immediately on that what happens next? 0:19:57.960 --> 0:19:59.960 Yeah, so that's what happens basically six pm. 0:20:00.119 --> 0:20:01.800 You get these exit polls, You get sort of sentiment 0:20:01.880 --> 0:20:04.120 from people being pulled, that walked outside of the polling station, 0:20:04.240 --> 0:20:06.040 from the TV stations. That tends to give you a 0:20:06.080 --> 0:20:09.280 pretty good steer on when things sort of how things 0:20:09.320 --> 0:20:11.399 will pan out, and basically within the hour you have 0:20:11.480 --> 0:20:13.920 a pretty good idea of what the outcome of the 0:20:14.040 --> 0:20:15.879 election is going to be. So the main thing to 0:20:15.960 --> 0:20:18.199 look forward here too is if you actually don't get 0:20:18.240 --> 0:20:20.240 a huge sort of move in, what the sort of 0:20:20.280 --> 0:20:22.639 pulling for the main parties are Actually what's going to 0:20:22.680 --> 0:20:24.640 be most important are the parties that got the least 0:20:24.720 --> 0:20:27.120 number of votes, Because for every party that gets under 0:20:27.240 --> 0:20:29.640 five percent of the vote, they basically get knocked out 0:20:29.640 --> 0:20:32.639 of the Bundestag, and that basically rewrites the whole arithmetic 0:20:33.000 --> 0:20:35.320 of what more than half of the parliament will look like. 0:20:35.400 --> 0:20:37.800 So let's say three parties get knocked out, then suddenly 0:20:37.880 --> 0:20:40.040 that's twelve percent of the vote that's no longer part 0:20:40.200 --> 0:20:42.560 of the party. That means that potentially you could get 0:20:42.560 --> 0:20:44.960 a coalition with two parties where previously you will have 0:20:45.119 --> 0:20:46.720 needed three. So this is going to be some of 0:20:46.720 --> 0:20:48.520 the sort of nitty gritty that we get into on 0:20:48.560 --> 0:20:51.560 the election night and really talk about and looking at 0:20:51.600 --> 0:20:53.680 basically what this next government's going to look forward. But 0:20:53.720 --> 0:20:55.159 I also think that there's going to be sort of 0:20:55.200 --> 0:20:57.600 this dawning reality that a certain point that these mainstream 0:20:57.920 --> 0:21:01.040 parties within Germany will have to learn to commise otherwise 0:21:01.119 --> 0:21:03.119 the next election is going to be a very different one. 0:21:03.160 --> 0:21:04.920 And I think that there are some ways in which 0:21:04.960 --> 0:21:07.760 the AfD has grasped in ways that many other parties 0:21:08.040 --> 0:21:10.840 in Germany have not grasped, the sort of new politics 0:21:10.920 --> 0:21:11.879 of twenty twenty. 0:21:11.640 --> 0:21:19.120 Five in that complicated negotiation that will happen after the election. 0:21:19.880 --> 0:21:23.760 Germany is used to having coalitions in government. It's also 0:21:23.840 --> 0:21:26.840 had a coalition of those two traditional centrist parties, the 0:21:27.000 --> 0:21:31.200 SPD and the CDUCSU as well in the past. Who 0:21:31.280 --> 0:21:34.360 are the other candidates that could be in focus form 0:21:34.440 --> 0:21:37.280 of thinking about potential coalition building? What are the parties 0:21:37.320 --> 0:21:38.159 should we be watching? 0:21:38.920 --> 0:21:39.520 Yeah, so listen. 0:21:39.560 --> 0:21:41.520 I think it's interesting that there's basically only been one 0:21:41.600 --> 0:21:44.000 absolute majority in Germany since the end of the Second 0:21:44.040 --> 0:21:46.000 World War. I mean, this is basically a nation that 0:21:46.080 --> 0:21:48.960 really is built on building coalitions. I think that the 0:21:49.000 --> 0:21:50.560 other parties that you're going to have to pay attention 0:21:50.640 --> 0:21:52.480 to are the Greens. They're the ones who are likely 0:21:52.560 --> 0:21:55.400 to come into to the sort of fourth place potentially, 0:21:55.640 --> 0:21:58.000 So there could be a scenario in which the CDU 0:21:58.320 --> 0:22:00.919 actually would prefer to work with the Greens over the SPD, 0:22:01.040 --> 0:22:03.280 though they may be slightly farther on some issues. There's 0:22:03.280 --> 0:22:05.240 a lot of bad blood right now between the SPD 0:22:05.400 --> 0:22:07.800 and the CDU, so that is going to be absolutely key. 0:22:08.000 --> 0:22:10.359 I mean, there's the FDP, the Liberals, who are basically 0:22:10.520 --> 0:22:13.439 natural sort of mates for the CDU and the center right. 0:22:13.520 --> 0:22:16.480 You know, they're sort of into sort of fiscal disciplines, deregulation, 0:22:16.800 --> 0:22:20.080 a little bit more progressive socially, but they're not really 0:22:20.080 --> 0:22:22.000 going to be They're gonna be potentially a marginal player. 0:22:22.000 --> 0:22:24.000 They could maybe be a third party within that. But 0:22:24.040 --> 0:22:26.159 I think the big concern here, Steven is that basically 0:22:26.240 --> 0:22:28.320 you get a situation in Germany where you don't have 0:22:28.440 --> 0:22:32.520 a decisive outcome and you just have general European limping 0:22:33.119 --> 0:22:35.920 in terms of political progress economic progress at a time 0:22:36.160 --> 0:22:38.680 when the United States is really sprinting ahead and basically 0:22:38.760 --> 0:22:41.760 leaving everyone behind and saying basically, you need to sort 0:22:41.760 --> 0:22:43.720 of walk to the beat of our drum, and really 0:22:43.760 --> 0:22:46.639 what you need are stronger European nations, particularly when you 0:22:46.720 --> 0:22:49.240 need to sort of bring the European project closer together 0:22:49.320 --> 0:22:51.560 in order to compete with the likes of Donald Trump 0:22:51.640 --> 0:22:52.400 and of course China. 0:22:52.760 --> 0:22:55.199 Yeah, because of course whoever is chancellor in Germany will 0:22:55.240 --> 0:22:57.919 also play a key part in the decision making process 0:22:58.000 --> 0:23:01.000 that happens in Brussels as well. A word on the 0:23:01.119 --> 0:23:03.879 economy and all of this, Oliver, you know, two years 0:23:03.920 --> 0:23:07.280 of negative growth in Germany. How central has that issue 0:23:07.359 --> 0:23:08.320 been to the campaign? 0:23:09.119 --> 0:23:12.200 Listen, I think it's basically the fundamental issue. I don't 0:23:12.240 --> 0:23:14.160 know that it's the one that's grabbing the most headlines. 0:23:14.200 --> 0:23:16.080 But again we're just to put into context what we're 0:23:16.080 --> 0:23:18.280 talking about here in Germany. It's a statistic that I 0:23:18.320 --> 0:23:21.359 think bears mentioning and repeating and repeating. We are looking 0:23:21.440 --> 0:23:24.680 potentially here, particularly with if we get tariffs on German 0:23:24.760 --> 0:23:27.800 industry from the Trump administration, that would almost guarantee another 0:23:27.920 --> 0:23:30.560 year of contraction in twenty twenty five. That would mean 0:23:30.760 --> 0:23:33.920 three years of consecutive contraction. That has not happened since 0:23:34.000 --> 0:23:36.440 the Berlin wallfell in nineteen eighty nine. This is a 0:23:36.560 --> 0:23:39.280 very difficult period for the German economy and that is 0:23:39.320 --> 0:23:41.600 what's behind so much of what is going on here. 0:23:41.880 --> 0:23:43.600 And I think that it is partially also why there 0:23:43.640 --> 0:23:46.120 is so much vulnerability within the German society, why there's 0:23:46.119 --> 0:23:48.440 so much vulnerability of feeling around that, and of course 0:23:48.560 --> 0:23:50.920 often the impulse towards that is to be very concerned 0:23:51.400 --> 0:23:53.440 with how much money you're spending, yes, but also on 0:23:53.520 --> 0:23:56.399 immigration and partially what is driving the conversation around that. 0:23:56.800 --> 0:23:58.720 And I think that that is basically and there's no 0:23:58.800 --> 0:24:01.399 way of ignoring that in a Nathan that has been very, 0:24:01.520 --> 0:24:03.520 very wealthy for a very very long period of time 0:24:03.560 --> 0:24:06.639 and whose economic model is now basically failing and is 0:24:06.680 --> 0:24:09.600 only going to catch increasing headwinds. The question is going 0:24:09.640 --> 0:24:12.760 to be in this election it do sort of people realize, 0:24:12.760 --> 0:24:15.240 do the politicians realize the scale of what's going on, 0:24:15.359 --> 0:24:17.520 and are they willing to take very sort of potentially 0:24:17.640 --> 0:24:20.960 deep cuts to the welfare state, potentially look at taking 0:24:21.640 --> 0:24:25.000 debt and breaking the debt break and looking to basically 0:24:25.080 --> 0:24:27.399 boost the economy in that way, And that honestly I 0:24:27.440 --> 0:24:28.960 don't know the answer to that question. It may not 0:24:29.080 --> 0:24:31.360 be bad enough quite yet for the Germans to take 0:24:31.359 --> 0:24:34.159 those steps that many think are absolutely necessary in order 0:24:34.160 --> 0:24:36.159 for Germany to stay relevant into the twenty per century. 0:24:36.640 --> 0:24:39.480 My thanks to Bloomberg's Oliver Crook speaking to us from Munich. 0:24:39.520 --> 0:24:42.320 Well have full coverage of the upcoming German elections on 0:24:42.400 --> 0:24:45.439 Bloomberg Radio. I'm Stephen Carolyn London. You can catch us 0:24:45.520 --> 0:24:48.200 every weekday morning here for Bloomberg Daybreak here at beginning 0:24:48.200 --> 0:24:50.920 out six am in London and one am on Wall 0:24:51.000 --> 0:24:52.919 Stras Tom, thank you, Steven. 0:24:52.960 --> 0:24:55.000 And coming up on Bloomberg day Break Weekend, we look 0:24:55.040 --> 0:24:58.959 ahead to earnings from an e commerce giant. I'm Tom Busby, 0:24:59.160 --> 0:25:12.680 and this is Bloomberg. This is Bloomberg day Break Weekend, 0:25:12.760 --> 0:25:15.040 our global look ahead at the top stories for investors 0:25:15.160 --> 0:25:17.600 in the coming week. I'm Tom Busby in New York. 0:25:18.119 --> 0:25:21.560 Earnings out this week from China's biggest player in e commerce, 0:25:21.720 --> 0:25:25.400 Ali Baba. Let's get to Daybreak Asia podcast host Doug 0:25:25.520 --> 0:25:27.320 Krisner for a preview. 0:25:27.320 --> 0:25:30.080 To Ali Baba. Stock has been on a tear lately, 0:25:30.320 --> 0:25:33.240 so farthes here. Baba's Hong Kong listed shares are up 0:25:33.320 --> 0:25:36.680 more than forty percent. So what's driving this price action? 0:25:37.040 --> 0:25:39.920 Let's find out. I'm joined by Bloomberg's Katherine Lim. She 0:25:40.200 --> 0:25:43.800 is a senior consumer and Technology analyst for Bloomberg Intelligence, 0:25:44.080 --> 0:25:46.920 joining us from Singapore. Catherine, thank you so much for 0:25:47.000 --> 0:25:49.720 making time to chat with us. Let's talk first about 0:25:49.760 --> 0:25:52.520 the macro story in China, because I know that Ali 0:25:52.640 --> 0:25:56.320 Baba derives so much of its business from the domestic 0:25:56.440 --> 0:25:59.000 consumer in China. What's happening right now. 0:25:59.200 --> 0:26:04.160 With the Chinese right, you know, on the Chinese consumption side, 0:26:04.359 --> 0:26:07.480 as we step out of the Lunar New Year holidays, 0:26:07.960 --> 0:26:13.800 which likely stimulated retail sales in January because of the 0:26:13.880 --> 0:26:18.280 big festival itself. I do think that with the recent 0:26:18.880 --> 0:26:23.119 consumption stimulus that Beijing has been putting in taking a 0:26:23.240 --> 0:26:28.159 step back with seeing them offering literally cash handouts, you know, 0:26:28.520 --> 0:26:32.399 shopping vouchers to the consumers ahead of the Lunar New 0:26:32.440 --> 0:26:35.879 Yr holidays. We're gonna need to see whether that is 0:26:36.000 --> 0:26:40.040 going to hold up after the holidays itself, and how 0:26:40.160 --> 0:26:43.960 much of these hooks are we still gonna get from 0:26:44.080 --> 0:26:47.159 the central government through the rest of the year. But 0:26:47.320 --> 0:26:50.679 I think we should be you know, on a trajectory 0:26:50.840 --> 0:26:56.320 whereby consumption sentiment in general have stabilized. Doug, you've actually mentioned, 0:26:56.400 --> 0:27:00.239 you know, the markets in general, equity markets, they are up. 0:27:00.359 --> 0:27:04.720 In general, sentiment has recovered from the rock bottom that 0:27:04.880 --> 0:27:08.480 we've seen last year. So I would say that things 0:27:08.560 --> 0:27:12.040 should stabilize this year from a buying sentiment perspective. 0:27:12.200 --> 0:27:14.760 So that's on the business to consumer side. What is 0:27:14.840 --> 0:27:17.359 happening on the B to B side in China? Is 0:27:17.720 --> 0:27:20.080 Ali Baba doing a lot of business on that front? 0:27:20.880 --> 0:27:24.600 Oh yes, absolutely. You know, there b to be a platform, 0:27:24.680 --> 0:27:27.119 whether it's one six eight eight dot com as it 0:27:27.280 --> 0:27:30.920 is known or Alibaba dot Com that targets more of 0:27:30.960 --> 0:27:34.359 the businesses overseas. You know, they have and continue to 0:27:34.480 --> 0:27:39.960 be the gateway for businesses into the factories within China. 0:27:40.720 --> 0:27:45.199 So you know, the transactions are actually still ongoing now. 0:27:45.280 --> 0:27:47.600 Of course, you know, with the rumblings that we have 0:27:47.720 --> 0:27:51.360 seen in the recent you know, two weeks with regards 0:27:51.720 --> 0:27:55.200 to tariff on made in China, you know goods itself. 0:27:55.760 --> 0:27:59.320 What I would say is that this is not totally unexpected. 0:27:59.720 --> 0:28:03.960 There will be neartom disruptions to logistics, to supply chain, 0:28:04.480 --> 0:28:09.480 but there are solutions being put in place by platforms 0:28:09.720 --> 0:28:13.240 like ali Baba, as well as businesses itself to try 0:28:13.320 --> 0:28:16.040 to mitigate and operate in this new environment. 0:28:16.240 --> 0:28:18.760 I'm so glad you brought up the idea of tariffs 0:28:18.800 --> 0:28:23.520 here because I'm also curious about Alibaba's overseas e commerce business, 0:28:23.640 --> 0:28:26.080 particularly in the United States. What do we know about 0:28:26.119 --> 0:28:27.080 what's happening. 0:28:27.359 --> 0:28:31.880 Right you know, they have light PDDs to move been 0:28:32.680 --> 0:28:39.400 looking to diversified outside of China into new markets including US, 0:28:39.880 --> 0:28:44.440 and US tends to be a attractive market for most 0:28:44.480 --> 0:28:47.280 of the e commerce players for region that it is 0:28:47.360 --> 0:28:51.760 a more homogeneous market and there is demand for a 0:28:51.880 --> 0:28:55.640 variety of products out there, which again the Chinese e 0:28:55.760 --> 0:28:59.160 commerce platforms they do have an advantage because they are 0:28:59.240 --> 0:29:02.520 so much closer to factories and the source of these goods. 0:29:03.200 --> 0:29:07.280 So they have also been selling more into US, but 0:29:07.760 --> 0:29:10.520 on a less aggressive basis, if I can put it 0:29:10.680 --> 0:29:11.120 this way. 0:29:11.520 --> 0:29:15.400 Now, the day goes by when we're not discussing artificial intelligence, 0:29:15.520 --> 0:29:17.960 and I know that Ali Baba has a big business 0:29:18.320 --> 0:29:21.280 in terms of cloud computing. How well is that performing 0:29:21.400 --> 0:29:21.720 right now? 0:29:22.160 --> 0:29:25.520 Well, do you know what cloud computing? The revenue, the 0:29:25.640 --> 0:29:30.200 profitability of this business for Ali Baba, it's actually been 0:29:30.320 --> 0:29:33.080 on the up trend for the last two quarters or 0:29:33.120 --> 0:29:35.680 the first half of their physical year. So do you 0:29:35.760 --> 0:29:39.360 know the company had expressed that they were fairly confident 0:29:39.960 --> 0:29:45.320 in driving a double digit cloud revenue growth ahead, and 0:29:45.440 --> 0:29:48.080 I do think that the latest development of you know, 0:29:48.240 --> 0:29:51.600 as they tied up with Apple, hopefully we get confirmation 0:29:52.000 --> 0:29:56.120 of that from the company themselves, definitely is icing on 0:29:56.200 --> 0:30:00.000 the cake for this trajectory. Again, depending on how much 0:30:00.000 --> 0:30:04.280 which they are sinking into R and D infrastructure. I 0:30:04.320 --> 0:30:07.520 will not be surprised if we get you know, upfront 0:30:07.840 --> 0:30:11.720 investment out lays over the next twelve months. But I 0:30:11.840 --> 0:30:14.840 do think that this will and can potentially set a 0:30:14.960 --> 0:30:17.600 very strong foundation for their growth ahead. 0:30:17.880 --> 0:30:20.920 The issue of cap X has been so important when 0:30:20.960 --> 0:30:23.280 we're looking at what's happening in the AI industry in 0:30:23.320 --> 0:30:26.040 the United States and whether or not we're going to 0:30:26.120 --> 0:30:29.720 see at some point a meaningful return on investment. But 0:30:29.840 --> 0:30:33.160 you mentioned Apple there working perhaps with Ali Baba to 0:30:33.320 --> 0:30:35.800 roll out some AI features in China. Do we know 0:30:36.080 --> 0:30:38.640 much about what's happening? I think this story was first 0:30:38.720 --> 0:30:41.360 reported last week by the Information. 0:30:41.480 --> 0:30:44.720 Yes, do you know what not at this juncture company 0:30:44.800 --> 0:30:46.840 has been in blackout, and I'm quite sure you know, 0:30:46.960 --> 0:30:50.560 that will be something that will that questions will be 0:30:50.720 --> 0:30:53.040 raised around it to the best of the ability that 0:30:53.120 --> 0:30:57.600 a company can share what they're working with Apple about. 0:30:58.280 --> 0:31:01.400 But again, you know, taking a step back on the 0:31:01.480 --> 0:31:04.640 developments on Capex, let's not forget that this is a 0:31:04.720 --> 0:31:09.400 company that has committed to share buybacks as well as 0:31:09.600 --> 0:31:13.040 you know, they also started paying out dividends the last 0:31:13.120 --> 0:31:17.440 physical year. So as the Capex demand increases on the 0:31:17.520 --> 0:31:20.720 cloud front as well as logistics, let's not forget that. 0:31:21.320 --> 0:31:25.000 Let's see how they will look to actually maintain this 0:31:25.240 --> 0:31:29.000 commitment to actually try and improve shareholder's new you know, 0:31:29.120 --> 0:31:29.959 in the next one year. 0:31:30.360 --> 0:31:33.160 Catherine, thank you so much for helping us understand more 0:31:33.240 --> 0:31:36.160 about what's happening with Ali Baba as we look to 0:31:36.240 --> 0:31:38.800 the company's earnings report in the week ahead. She is 0:31:38.920 --> 0:31:43.320 Katherine Lim, senior Consumer and Technology analyst for Bloomberg Intelligence, 0:31:43.840 --> 0:31:47.360 joining us from Singapore. We go next to South Korea, 0:31:47.560 --> 0:31:50.680 where we'll get a report this week on consumer confidence. 0:31:51.000 --> 0:31:52.560 We thought it would be a good time to take 0:31:52.600 --> 0:31:55.200 a look at what's happening in the broader economy in 0:31:55.360 --> 0:31:58.440 South Korea, and for that we'll bring in Bloomberg Sam 0:31:58.560 --> 0:32:02.280 Kim Sam cover the economies of South Korea and Japan 0:32:02.520 --> 0:32:05.719 from our bureau in Seoul. Sam, it's always a pleasure. 0:32:05.840 --> 0:32:08.600 Can you give me an understanding of what's been happening 0:32:08.920 --> 0:32:11.400 with consumers broadly speaking in South Korea? 0:32:11.920 --> 0:32:16.680 Yeah, consumer inflation is generally seen as stable right now 0:32:16.800 --> 0:32:19.440 in South Korea, although it did pick up a little 0:32:19.480 --> 0:32:23.840 bit last month. That's because of higher energy and food prices. 0:32:24.320 --> 0:32:29.320 What happened was the Lunar New Year holiday when families 0:32:29.400 --> 0:32:33.360 gather and they travel out of town. That happened in 0:32:33.560 --> 0:32:37.520 January this year, whereas last year it happened in February. 0:32:37.920 --> 0:32:39.760 So we do get a little bit of year on 0:32:39.840 --> 0:32:43.200 year pickup in inflation, and that's a good reason for 0:32:43.320 --> 0:32:46.240 the Central bank here to kind of downplay the importance 0:32:46.320 --> 0:32:50.560 of that pickup. And we're kind of expecting that the 0:32:50.720 --> 0:32:55.560 Bank of Korea is going to continue to move its 0:32:55.800 --> 0:33:01.160 rate down in order to ease the expenses interest expenses 0:33:01.240 --> 0:33:05.400 for consumers. But at the same time, there are clear 0:33:05.560 --> 0:33:09.960 signs that consumers are not feeling very happy because of 0:33:10.120 --> 0:33:13.040 the political turmo that's been disrupting a lot of you know, 0:33:13.360 --> 0:33:17.200 the political processes here, and there was a plane crash 0:33:17.440 --> 0:33:20.920 in December that really hurt the consumer confidence. And then 0:33:21.240 --> 0:33:23.760 of course we have the Trump effect. There's a lot 0:33:23.800 --> 0:33:26.600 of people who are concerned about what that person is 0:33:26.680 --> 0:33:29.560 going to do in terms of tariffs on a country 0:33:29.720 --> 0:33:33.360 like South Korea which is very, very rely on exports 0:33:33.400 --> 0:33:33.840 for growth. 0:33:34.200 --> 0:33:34.920 Before we get to. 0:33:34.960 --> 0:33:37.760 The tariff part of the story, I'm curious to get 0:33:37.840 --> 0:33:40.320 back to the consumer. You and I have spoken in 0:33:40.400 --> 0:33:42.480 the past about the degree to which the Bank of 0:33:42.560 --> 0:33:46.800 Korea was concerned about elevated property prices. What's the story 0:33:46.840 --> 0:33:49.000 on the real estate market in South Korea right now. 0:33:49.520 --> 0:33:52.000 What happened last year was the Bank of Korea, which 0:33:52.040 --> 0:33:56.600 is the central bank in South Korea, basically maintain its 0:33:56.920 --> 0:34:03.400 interest rate at higher than use level for an extended 0:34:03.440 --> 0:34:06.720 period of time, longer than people thought they would keep 0:34:06.760 --> 0:34:11.040 it there, and that's really helped tempt down the household 0:34:11.080 --> 0:34:16.840 that increases, which are usually correlated with the housing prices. 0:34:17.520 --> 0:34:21.360 So from late last year, we've been seeing the apartment 0:34:21.480 --> 0:34:26.360 and housing market prices more or less behaving, you know, 0:34:26.600 --> 0:34:31.359 staying a little bit under pressure, not going up too high. 0:34:32.160 --> 0:34:36.480 So there's a lot of concerns surrounding the housing market 0:34:36.719 --> 0:34:41.200 have come down so far, and that's what to allow 0:34:41.400 --> 0:34:43.800 the back of Korea to shift their focus. 0:34:44.280 --> 0:34:46.480 So let's take a closer look now at the export 0:34:46.600 --> 0:34:49.560 part of the economy and the degree to which US 0:34:49.680 --> 0:34:52.520 tariffs may negatively impact that. I think it was in 0:34:52.600 --> 0:34:55.919 the last week that South Korea's top economic think tank 0:34:56.360 --> 0:34:58.920 cut the growth forecast for South Korea for the second 0:34:58.960 --> 0:35:01.839 time in four months. How much of that is due 0:35:02.400 --> 0:35:06.879 to the story on exports and the expectation that US 0:35:06.960 --> 0:35:09.560 tariffs will curtail export activity. 0:35:10.560 --> 0:35:15.440 The biggest part of South Care's exports is semiconductors, and 0:35:15.600 --> 0:35:20.799 those semiconductors are produced by companies like Samsung Electronics and Eskaehis. 0:35:21.440 --> 0:35:26.200 That semiconductor rally that South Korea enjoy last year is 0:35:26.320 --> 0:35:30.040 starting to cool now from late last year, we've been 0:35:30.120 --> 0:35:34.560 seeing the export growth numbers for semiconductors starting to go 0:35:34.800 --> 0:35:38.600 down to the single digit levels. You're on your own basis, 0:35:39.680 --> 0:35:42.960 So a lot of people are expecting, given that the 0:35:43.120 --> 0:35:48.800 chip industry has this notorious women bus cycle, Korean economy 0:35:48.880 --> 0:35:52.239 is going to start to suffer because cheap exports are 0:35:52.280 --> 0:35:55.200 going to start to soften. That's at least the expectation 0:35:55.360 --> 0:35:59.520 of many economists and semiconductor watchers here. And it is 0:35:59.560 --> 0:36:04.320 particular concerning given that the US government under Trump is 0:36:04.560 --> 0:36:08.719 likely to impose tariffs on countries not just South Korea, 0:36:08.800 --> 0:36:12.680 but based all around the world. And what happens because 0:36:12.719 --> 0:36:15.960 of that would be South Korea not being able to 0:36:16.440 --> 0:36:19.800 sort of export enough to not just the US but 0:36:19.920 --> 0:36:22.600 other countries that are impacted by the terrorists. 0:36:22.840 --> 0:36:25.319 Sam, We're looking forward to learning a little bit more 0:36:25.400 --> 0:36:29.200 about how the South Korean consumer is performing when we 0:36:29.400 --> 0:36:32.520 look at the data on consumer confidence that's due in 0:36:32.560 --> 0:36:35.920 the week ahead Bloomberg. Sam Kim covers the economies of 0:36:36.000 --> 0:36:39.520 South Korea and Japan from our bureau in Seoul, and 0:36:39.600 --> 0:36:41.960 I'm Doug Chrisner. You can catch us weekdays for the 0:36:41.960 --> 0:36:47.479 Bloomberg Daybreak Asia podcast. It's available wherever you get your podcast. Tom. 0:36:48.040 --> 0:36:50.239 Thank you Doug. And that does it for this edition 0:36:50.280 --> 0:36:53.160 of Bloomberg day Break Weekend. Join us again Monday morning 0:36:53.200 --> 0:36:55.200 at five am Wall Street Time for the latest on 0:36:55.360 --> 0:36:57.879 markets overseas and the news you need to start your day. 0:36:58.400 --> 0:36:59.280 I'm Tom Busby. 0:36:59.560 --> 0:37:00.239 Stay with us. 0:37:00.400 --> 0:37:03.440 Top stories and global business headlines are coming up right now.