Daybreak Weekend: US CPI, UK Real Estate, Asia Tech Earnings

Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Daybreak Weekend, 0:00:13.320 --> 0:00:15.280 our global look at the top stories in the coming 0:00:15.320 --> 0:00:17.919 week from our Daybreak anchors all around the world, and 0:00:18.000 --> 0:00:19.959 straight ahead on the program, we look ahead to some 0:00:20.079 --> 0:00:23.480 key inflation and retail sales data here in the US. 0:00:23.840 --> 0:00:25.599 I'm Tom Busby in New York. 0:00:25.840 --> 0:00:28.560 I'm Stephen Carolyn London for We're digging into the challenges 0:00:28.600 --> 0:00:32.120 facing commercial and residential real estate out of a major 0:00:32.200 --> 0:00:34.600 conference in the French Riviera. 0:00:34.000 --> 0:00:36.519 And I'm Brian Curtis in Hong Kong. We look ahead 0:00:36.520 --> 0:00:40.640 to earnings from China's contemporarate Apparax technology, number one in 0:00:40.680 --> 0:00:44.000 its industry. How is it doing in navigating China? 0:00:45.680 --> 0:00:49.680 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg. 0:00:49.720 --> 0:00:52.199 He Love on Free Own, New York, Bloomberg ninety nine 0:00:52.200 --> 0:00:55.600 to one, Washington, d C, Bloomberg one O six one, Boston, 0:00:55.680 --> 0:01:00.520 Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Serrius 0:01:00.600 --> 0:01:03.840 XM one nineteen and around the world on Bloomberg Radio 0:01:03.960 --> 0:01:06.280 dot com and via the Bloomberg Business App. 0:01:09.520 --> 0:01:11.280 Good day to you. I'm Tom Busby, and we begin 0:01:11.319 --> 0:01:15.440 today's program with inflation. We get key CPI data for 0:01:15.480 --> 0:01:18.920 the month of February this coming week, which could potentially 0:01:19.200 --> 0:01:22.399 influence what the FED does at its March meeting. Joining 0:01:22.520 --> 0:01:26.240 us now is Stuart Paul, Us, economist with Bloomberg Economics. 0:01:26.360 --> 0:01:27.280 Thank you for joining us. 0:01:27.400 --> 0:01:29.520 Thank you for having me. Tom. Yes, we are looking 0:01:29.520 --> 0:01:32.600 forward to getting our February CPI data, and we are 0:01:32.640 --> 0:01:34.679 also going to end up getting retail sales data for 0:01:34.680 --> 0:01:37.600 the month of February in this coming week. And our 0:01:37.680 --> 0:01:40.720 basic view is that bit of a resurgence in spending 0:01:41.080 --> 0:01:43.480 helped to create a bit of an inflationary impulse. We 0:01:43.560 --> 0:01:47.880 are expecting to see the headline CPI index increase zero 0:01:47.920 --> 0:01:50.480 point four percent month on month for the month of February. 0:01:50.800 --> 0:01:53.320 That's the same as what we saw in January, and 0:01:53.360 --> 0:01:57.560 that is a very hot print and definitely inconsistent with 0:01:57.560 --> 0:02:00.000 the Fed's two percent target. That's going to hold annual 0:02:00.240 --> 0:02:02.840 inflation at three point one percent. It's year over year 0:02:03.240 --> 0:02:06.480 core inflation. We're expecting to register zero point three percent 0:02:06.560 --> 0:02:09.560 month on month, allowing headline inflation to fall to three 0:02:09.600 --> 0:02:12.720 point seven percent year over year. We are expecting to 0:02:12.720 --> 0:02:16.480 see some disinflation and core goods, with use auto prices 0:02:16.520 --> 0:02:20.400 declining about two percent during the month, but consumers are 0:02:20.440 --> 0:02:23.600 still spending and that will support nominal retail sales growth 0:02:23.680 --> 0:02:24.240 during the month. 0:02:24.360 --> 0:02:27.320 All right, So one bright spot you mentioned was use 0:02:27.400 --> 0:02:32.720 cars a little lower. However, housing gasoline and food, I 0:02:32.760 --> 0:02:34.720 know they fluctuate, but they have been a little higher 0:02:34.720 --> 0:02:36.840 than usual. Is that kind of driving a lot of 0:02:36.840 --> 0:02:38.720 that inflationary pressure. 0:02:38.560 --> 0:02:41.720 That's right, So driving the headline really is gasoline prices. 0:02:41.840 --> 0:02:44.919 On a seasonally adjusted basis. We have gasoline prices rising 0:02:44.919 --> 0:02:48.160 about four percent during the month, so that's after accounting 0:02:48.240 --> 0:02:52.840 for the seasonal adjustment factor. Is that typically would account 0:02:53.040 --> 0:02:56.000 for the increase in gasoline prices In februaries people start 0:02:56.080 --> 0:02:58.320 driving once again as they clear snow off the streets, 0:02:58.320 --> 0:03:02.280 for example, so in some places, so not only is 0:03:02.400 --> 0:03:06.800 gasoline driving headline, inflation is also driving nominal retail sales. 0:03:07.000 --> 0:03:09.839 We are expecting to see retail sales growth about zero 0:03:09.919 --> 0:03:12.320 point eight percent month on month. A big part of 0:03:12.320 --> 0:03:14.320 that is gasoline, and we need to account for that. 0:03:14.639 --> 0:03:17.960 If we look at a narrower control group, however, which 0:03:18.000 --> 0:03:21.440 strips out autos, strips out gasoline, strips out building, materials 0:03:21.680 --> 0:03:24.880 and food services, which is very heavily influenced by foot traffic, 0:03:25.120 --> 0:03:28.280 which can be affected by weather, for example, as we 0:03:28.320 --> 0:03:31.000 saw in January, very affected by weather. If we focus 0:03:31.040 --> 0:03:33.480 on that control group, we have a much more modest 0:03:33.480 --> 0:03:36.280 growth of zero point two percent month on month in February. 0:03:36.400 --> 0:03:39.320 Well, are some of the retailers doing better? But then 0:03:39.680 --> 0:03:42.280 now January, we know that was a very rough month 0:03:42.320 --> 0:03:44.600 for retail sales. Could have been a hangover from the 0:03:44.680 --> 0:03:48.720 holiday season. But February you're expecting a little bump ahead, 0:03:48.840 --> 0:03:51.320 a little bump up, not a decline like we saw 0:03:51.320 --> 0:03:54.920 in January. Who are the winners in that besides gas stations. 0:03:55.400 --> 0:03:58.240 So if we look at credit card transaction data and 0:03:58.240 --> 0:04:01.080 we look at debit card transactions and just strictly count 0:04:01.120 --> 0:04:04.680 the number of swipes at credit card processing terminals at 0:04:04.720 --> 0:04:08.320 the point of sale, we do see big box retailers, 0:04:08.720 --> 0:04:12.440 We do see some just general merchandisers showing some of 0:04:12.480 --> 0:04:16.200 the most impressive growth month over month. But we need 0:04:16.240 --> 0:04:18.520 to be a bit cautious in how we read through 0:04:18.560 --> 0:04:22.080 from that one month of improved credit card transactions data 0:04:22.400 --> 0:04:24.680 and what that means for the broader economy. We are 0:04:24.760 --> 0:04:29.120 seeing some headcount reductions at retailers. That typically was something 0:04:29.120 --> 0:04:33.000 that was concentrated just in more high skilled services. But 0:04:33.080 --> 0:04:35.640 if it's making its way to retailers, that could be 0:04:35.760 --> 0:04:38.039 a signal of retailers feeling a little bit of the 0:04:38.040 --> 0:04:41.200 pain or anticipating a slow down and spending, which is 0:04:41.200 --> 0:04:43.120 actually what we expect throughout twenty twenty four. 0:04:43.279 --> 0:04:46.600 Well, let's go back to inflation. Just not even two 0:04:46.680 --> 0:04:49.520 years ago, the inflation rate was nine point one percent. 0:04:49.839 --> 0:04:52.160 Right now we're expecting a year of a year rate 0:04:52.200 --> 0:04:54.159 of about three point one percent. 0:04:53.960 --> 0:04:56.839 Or three c three point one percent for the headline 0:04:56.839 --> 0:04:58.080 three point seven for core. 0:04:58.080 --> 0:05:00.880 So we're moving in the right direction. Last week, FED 0:05:00.960 --> 0:05:03.520 Chair Jerome pal and his semi annual testimony to Congress. 0:05:03.560 --> 0:05:06.240 He said that central bank no rush to start lowering rates, 0:05:06.440 --> 0:05:10.800 but he hinted that when policymakers feel inflation is under control, 0:05:11.160 --> 0:05:14.440 could happen later this year with no firm timetable. Is 0:05:14.480 --> 0:05:17.120 he being optimistic? Is he looking at the data? It's 0:05:17.120 --> 0:05:19.640 all data driven according to the Fed. Are we heading 0:05:19.640 --> 0:05:20.440 toward that now? 0:05:20.640 --> 0:05:24.200 I think we are. We're anticipating seeing headline inflation reaching 0:05:24.240 --> 0:05:27.039 about two point five percent year over year at the 0:05:27.160 --> 0:05:30.640 end of twenty twenty four, As headline inflation comes down, 0:05:31.240 --> 0:05:33.799 the balance of risks that the Fed has to weigh 0:05:33.880 --> 0:05:37.760 between achieving its maximum employment mandate and its price stability 0:05:37.839 --> 0:05:41.080 mandate come into better alignment. And so as we see 0:05:41.080 --> 0:05:44.360 the pace of hiring cooling, as we see the pace 0:05:44.360 --> 0:05:47.560 of inflation cooling, the Fed has to take its employment 0:05:47.720 --> 0:05:50.200 mandate a bit more seriously, has to put a bit 0:05:50.240 --> 0:05:52.520 more weight on it. And so we do expect the 0:05:52.560 --> 0:05:56.760 Fed to begin cutting rates this summer. Again, economic activity cooling, 0:05:57.040 --> 0:05:59.840 inflation cooling, and the labor market at cooling would allow 0:05:59.880 --> 0:06:01.200 for that pivot in policy. 0:06:01.560 --> 0:06:04.000 And the next FED meeting the nineteenth and twentieth of 0:06:04.040 --> 0:06:07.680 this month, So we should not expect any rate cut. 0:06:07.760 --> 0:06:10.440 But you think we'll get a little more clarity from 0:06:10.480 --> 0:06:12.000 the Fed about what they're thinking. 0:06:12.400 --> 0:06:14.200 I think that we'll get a little bit more clarity 0:06:14.279 --> 0:06:17.599 on the pace of quantitative tightening, for example. But I 0:06:17.640 --> 0:06:19.800 expect the Fed to actually maintain a bit of a 0:06:19.839 --> 0:06:23.480 hawkish tone in its policy statement. It did remove its 0:06:23.520 --> 0:06:28.080 quote unquote hawkish bias in its January policy statement, but 0:06:28.200 --> 0:06:31.440 I expect the Fed to use language that would prevent 0:06:31.520 --> 0:06:34.000 people from reading too deeply into the idea that rate 0:06:34.040 --> 0:06:36.719 cuts are imminent, or from expecting rate cuts to be 0:06:36.800 --> 0:06:41.159 imminent less financial market conditions start easing too swiftly, and 0:06:41.200 --> 0:06:44.680 the Fed would have to then treat loosening financial conditions, 0:06:45.120 --> 0:06:49.040 perhaps with more restricted policy or higher for longer policy. 0:06:49.120 --> 0:06:51.320 Oh boy, well we'll get ready for that. Well, our 0:06:51.320 --> 0:06:55.520 thanks to Stuart paul Us economists with Bloomberg Economics, turning 0:06:55.560 --> 0:06:58.280 now to too closely watched earnings reports that are out 0:06:58.279 --> 0:07:00.480 this week, which will offer investors a glie limps into 0:07:00.520 --> 0:07:04.560 the mania surrounding artificial intelligence technology and for more on 0:07:04.600 --> 0:07:07.920 what to expect from Oracle and Adobe. We welcome Bloomberg 0:07:07.960 --> 0:07:12.680 Intelligence technology analyst anarag Rana. Thank you for being here at. 0:07:12.800 --> 0:07:14.280 RAG Oh I'm happy to be here. 0:07:14.400 --> 0:07:17.360 Oh good. Well let's start with Adobe, which may be 0:07:17.360 --> 0:07:21.160 best known for its Photoshop editing software Acrobat Reader and 0:07:21.200 --> 0:07:23.960 its PDF but boy as it transformed itself into a 0:07:23.960 --> 0:07:28.720 cloud computing giant with its generative AI product Firefly. So 0:07:28.840 --> 0:07:31.280 what are you expecting to see in the first quarter 0:07:31.280 --> 0:07:33.600 earnings out on Wednesday? And why Yeah? 0:07:33.640 --> 0:07:35.840 So you know, when you look at somebody like Adobe 0:07:35.840 --> 0:07:40.280 that dominate the creative space with the Photoshop and other 0:07:40.360 --> 0:07:43.840 products that go into it. They also dominate the document 0:07:44.200 --> 0:07:48.120 cloud business or digital documents with PDF. So those are 0:07:48.160 --> 0:07:51.360 the two areas where we see strength going into the QUOTO. 0:07:51.440 --> 0:07:55.040 So document cloud, I think that's done very well. We 0:07:55.120 --> 0:07:59.040 continue to expect strong results on that segment. The big 0:07:59.080 --> 0:08:02.040 discussion is going to be on the creative part of 0:08:02.080 --> 0:08:05.800 it because there is a lot of chatter around what's 0:08:05.840 --> 0:08:09.320 going to happen to companies like Adobe when you have 0:08:09.440 --> 0:08:13.280 products that are you know, launched by companies like open Ai. 0:08:13.760 --> 0:08:17.559 So I would recommend if anybody hasn't seen the Open 0:08:17.600 --> 0:08:22.400 Eye's latest demo of their product called Sora, I would 0:08:22.400 --> 0:08:24.840 would recommend go to YouTube and check that out. It's 0:08:24.880 --> 0:08:29.560 a phenomenal product where you just write down the tex stuff. 0:08:29.920 --> 0:08:32.360 Let's say, you know, two armies fighting in a in 0:08:32.440 --> 0:08:35.520 a battlefield, it will create a video for you and 0:08:35.679 --> 0:08:37.760 that's done. I mean, you can use that. Now. There 0:08:37.800 --> 0:08:40.320 are a lot of concerns about privacy and copyright and 0:08:40.320 --> 0:08:42.280 other things, but we can you know, that's that could 0:08:42.280 --> 0:08:45.560 be settled later. But since that video was released, Adobe 0:08:45.640 --> 0:08:48.360 has been a lot under pressure. So I think on 0:08:48.400 --> 0:08:51.480 the conference call, we do expect management to talk a 0:08:51.520 --> 0:08:55.440 lot about what they're doing with their AI capabilities, et cetera. 0:08:55.960 --> 0:08:59.080 You mentioned Firefly. Firefly is an interesting product, but it's 0:08:59.160 --> 0:09:03.240 mostly to pictures, which is text to you can write 0:09:03.280 --> 0:09:05.480 down a text to say, you know, create a picture 0:09:05.520 --> 0:09:08.559 of a dog playing piano in the in a forest, 0:09:08.800 --> 0:09:11.280 and it'll create that for you. They have done a 0:09:11.280 --> 0:09:14.280 good job of, you know, rink fencing that issue by 0:09:14.360 --> 0:09:17.600 launching their own product, Firefly, And on top of that, 0:09:17.640 --> 0:09:22.200 they actually have agreements with the creative professionals who own 0:09:22.280 --> 0:09:25.440 a lot of those underlying pictures on which these models 0:09:25.480 --> 0:09:28.920 are trained. So they're basically telling companies you can use 0:09:28.960 --> 0:09:32.400 the pictures generated from our system and nobody's going to 0:09:32.440 --> 0:09:34.880 sue you for it because we have rink fenced it 0:09:34.920 --> 0:09:37.000 with copyright issues. So I think is going to be 0:09:37.040 --> 0:09:40.280 a lot of discussion on that topic. But i Adobe, 0:09:40.360 --> 0:09:42.800 in our view is on the right path of jen 0:09:42.880 --> 0:09:45.680 ai and over the next few years we should see 0:09:46.120 --> 0:09:48.000 significant improvement in their products. 0:09:48.160 --> 0:09:51.360 And over those next few years is their main competition 0:09:51.520 --> 0:09:54.760 going to be the open ais and other AI startups 0:09:54.800 --> 0:09:55.319 of the world. 0:09:55.520 --> 0:09:57.960 It is a mix of open ai and other startups 0:09:57.960 --> 0:10:00.120 of the world. There is another startup in Australia that 0:10:00.200 --> 0:10:03.640 has been behind them called Canva. We just had their 0:10:03.679 --> 0:10:07.480 co founder on our podcast. That's a good product and 0:10:07.520 --> 0:10:10.080 also it's a slightly cheaper product. So it's going to 0:10:10.080 --> 0:10:12.040 be hard for Adobe over the next few years to 0:10:12.200 --> 0:10:16.080 put in new price increases through their ecosystem. They have 0:10:16.280 --> 0:10:19.120 been growing well with price increases over the last I 0:10:19.160 --> 0:10:21.040 would say, a couple of years, but I think it's 0:10:21.080 --> 0:10:22.520 going to be challenging going forward. 0:10:22.720 --> 0:10:22.960 Wow. 0:10:23.120 --> 0:10:26.240 Okay, Well, on Thursday we hear from the enterprise software 0:10:26.280 --> 0:10:29.360 giant Oracle what are you looking for in its Q 0:10:29.559 --> 0:10:30.200 three report. 0:10:31.120 --> 0:10:31.320 Yeah. 0:10:31.400 --> 0:10:34.440 Oracles actually a very interesting story because it has two 0:10:34.480 --> 0:10:38.800 big businesses. One is the application portfolio of software company 0:10:38.880 --> 0:10:42.560 or software products such as HR software, or customer relationship 0:10:42.640 --> 0:10:46.439 software or finance software. And the other part is the 0:10:46.480 --> 0:10:50.319 infrastructure business, which is their database business as well as 0:10:50.360 --> 0:10:53.040 they also do a bit of cloud computing. I think 0:10:53.080 --> 0:10:57.320 they given such strong demand for a cloud infrastructure to 0:10:57.440 --> 0:11:01.840 run these large language models, the biggest focus for everybody 0:11:01.920 --> 0:11:04.920 is going to be what happens in their Oracle cloud 0:11:04.960 --> 0:11:09.400 infrastructure numbers. I think last quarter investors were a little 0:11:09.440 --> 0:11:12.319 disappointed by the growth rata that and the company came 0:11:12.320 --> 0:11:14.320 out and said, well, listen, we don't have a problem 0:11:14.400 --> 0:11:17.439 with demand. The issue we are having is we don't 0:11:17.480 --> 0:11:20.839 have that much capacity to run that demand. Whether it's 0:11:20.880 --> 0:11:24.560 in the reason, could be the data center expansion is 0:11:24.559 --> 0:11:27.719 a bit slow, or they don't have enough chips from 0:11:27.800 --> 0:11:32.480 Nvidia to run those workloads. So I think then everything 0:11:32.559 --> 0:11:35.880 is going to rotate around what's the capacity right now 0:11:35.920 --> 0:11:38.880 for them to run that work But other than that, 0:11:38.960 --> 0:11:41.040 I think it should be a normal quarter for them. 0:11:41.559 --> 0:11:44.319 I'm not expecting any major surprises other than the topic 0:11:44.360 --> 0:11:44.960 we discussed. 0:11:45.320 --> 0:11:48.280 Well, you said that supply not demand may be an issue. 0:11:48.320 --> 0:11:52.320 Does that mean also businesses are still spending, still growing. 0:11:52.679 --> 0:11:55.440 Yeah, it's a very good question. I think by and large, 0:11:55.480 --> 0:11:59.360 businesses are stabilized in the downdraft of it spending that 0:11:59.400 --> 0:12:02.280 has been going on for two years, which means it's 0:12:02.280 --> 0:12:05.920 not getting worse, but it's also not getting faster at 0:12:05.960 --> 0:12:09.679 a quicker rate. The one area that's not you know, 0:12:09.720 --> 0:12:12.640 in that bucket is anything that's spent on AI. So 0:12:12.679 --> 0:12:15.160 they are spending a lot on AI, but they may 0:12:15.160 --> 0:12:17.360 not be spending on other areas such as you know, 0:12:17.480 --> 0:12:23.080 sales automation or marketing, advertising, et cetera. Those software products, 0:12:23.120 --> 0:12:25.520 but as far as AI products are concerned, there is 0:12:25.559 --> 0:12:26.920 a pickup and spending. 0:12:26.679 --> 0:12:28.559 Well, a lot to look forward to and our thanks 0:12:28.559 --> 0:12:32.559 to Bloomberg Intelligence technology analyst anurag Rana, and coming up 0:12:32.559 --> 0:12:35.280 on Bloomberg day Break weekend, we'll dig into the challenges 0:12:35.360 --> 0:12:39.160 facing commercial and residential real estate ahead of a major 0:12:39.240 --> 0:12:42.840 conference on the French Riviera. I'm Tom Busby and this 0:12:43.160 --> 0:12:56.800 is Bloomberg. This is Bloomberg day Break weekend, our global 0:12:56.840 --> 0:12:58.920 look ahead at the top stories for investors in the 0:12:58.920 --> 0:13:02.160 coming week. Tom Busby in New York. Up later in 0:13:02.200 --> 0:13:04.480 the program will look ahead to earnings from a couple 0:13:04.480 --> 0:13:08.160 of key tech manufacturers in Asia. But first, the real 0:13:08.280 --> 0:13:12.280 estate world, both commercial and residential, has been struggling under 0:13:12.320 --> 0:13:15.000 the weight of high interest rates, and the cracks are 0:13:15.040 --> 0:13:18.360 seeping into the financial world as well. Flexible working has 0:13:18.440 --> 0:13:21.760 changed demand for offices, while many European countries are struggling 0:13:22.080 --> 0:13:25.080 with a shortage of housing. All these issues and more 0:13:25.120 --> 0:13:27.280 will be in focus at a major real estate conference 0:13:27.280 --> 0:13:29.960 on the French Riviera in the coming days. For more, 0:13:30.080 --> 0:13:32.520 let's go to London and bring in Bloomberg Daybreak Europe 0:13:32.520 --> 0:13:35.040 anchor Stephen Carroll tom. 0:13:34.760 --> 0:13:38.280 It's a subject that has huge political and economic importance 0:13:38.440 --> 0:13:41.360 real estate. High interest rates have created cracks in the 0:13:41.360 --> 0:13:44.560 commercial property market that are now rippling into the financial world. 0:13:44.920 --> 0:13:48.120 Home Buyers are also dealing with higher borrowing costs, while 0:13:48.200 --> 0:13:50.840 at the same time facing a shortage of housing In 0:13:50.920 --> 0:13:53.880 many major cities in the UK. The latest data from 0:13:53.920 --> 0:13:57.559 morgus Lander Halifax shows a continuing small rebound in house 0:13:57.600 --> 0:14:00.439 prices despite higher rates. We spoke to Kim Kenny heard 0:14:00.440 --> 0:14:03.240 from Halifax about the risks that she sees in the 0:14:03.280 --> 0:14:04.199 market this year. 0:14:04.800 --> 0:14:08.440 I think mortgage rates clearly are focusing everybody's minds. We've 0:14:08.440 --> 0:14:12.560 seen real volatility in them, and we saw significant rate 0:14:12.679 --> 0:14:15.760 increases over the course of last year. We're starting to 0:14:15.760 --> 0:14:18.319 see that ease now and as we've said, there's bier 0:14:18.360 --> 0:14:21.960 confidence beginning to return. I think I would say, you know, 0:14:22.280 --> 0:14:25.720 more broadly, it's just we still remain in a fairly 0:14:25.960 --> 0:14:29.720 uncertain economic climate, so I think there are lots of 0:14:29.760 --> 0:14:31.920 things that we need to be thoughtful about. At the moment, 0:14:31.960 --> 0:14:37.160 we're seeing really good wage inflation, we're seeing low unemployment rates, 0:14:37.160 --> 0:14:39.320 and those are good indicators for us in terms of 0:14:39.360 --> 0:14:42.280 the long term performance of the market. But I think 0:14:42.360 --> 0:14:45.760 we've learnt over the last eighteen months or so that 0:14:45.800 --> 0:14:48.680 there is still uncertainty in the marketplace. So do you 0:14:48.720 --> 0:14:51.240 see the instability for the housing market in the next 0:14:51.240 --> 0:14:51.720 few months? 0:14:51.760 --> 0:14:53.720 Is that the prediction to the end of the year. 0:14:53.880 --> 0:14:56.280 As we're kind of facing into this year, I think, 0:14:56.280 --> 0:15:00.520 as we said, we think that house prices could by 0:15:00.600 --> 0:15:03.120 up to two percent. But clearly what we have seen 0:15:03.640 --> 0:15:07.600 in the last five months is consecutive growth, so that 0:15:07.680 --> 0:15:10.960 should be seen as a real positive and we hope 0:15:10.960 --> 0:15:13.600 that continues to grow and also that we can teach 0:15:13.640 --> 0:15:14.480 to see stability. 0:15:14.800 --> 0:15:17.320 So that's Kim Kennyhard from Halifax on the situation in 0:15:17.360 --> 0:15:19.960 the UK for home buyers from an investor's point of view. 0:15:19.960 --> 0:15:22.760 We've also been speaking to Michelle Scriminger, who is CEO 0:15:22.920 --> 0:15:26.080 of Legal and General Investment Management. She's been talking to 0:15:26.160 --> 0:15:29.160 us about the opportunities in the drive to build more 0:15:29.200 --> 0:15:32.080 homes in the UK, particularly affordable homes. 0:15:32.480 --> 0:15:35.440 We operate in different sectors of the market, so we 0:15:35.760 --> 0:15:39.000 are a house builder. We operate in the build to 0:15:39.040 --> 0:15:44.040 rent sector, we operate in the affordable homes sector. We 0:15:44.200 --> 0:15:49.840 also invest into commercial real estates on behalf of multiple investors. 0:15:50.240 --> 0:15:52.200 We also learned as part of what we do here 0:15:52.240 --> 0:15:54.640 in the UK. We're not just doing it in the UK. 0:15:55.320 --> 0:15:58.720 But I think what we definitely see is continuing to 0:15:58.720 --> 0:16:03.240 see opportunity and that for us is super important. And 0:16:03.320 --> 0:16:06.640 as the regulations are changing, so Solignty two is a 0:16:06.720 --> 0:16:09.720 very big thing for Legal in general, and the ability 0:16:09.760 --> 0:16:12.120 for us to be able to deploy more capital we 0:16:12.160 --> 0:16:15.240 want to unlock the capital to invest means that we're 0:16:15.280 --> 0:16:18.200 going to be continuing to do that around the UK. 0:16:18.840 --> 0:16:22.000 So we think there is opportunity. Of course, the rates 0:16:22.120 --> 0:16:24.480 environment is it part of that. So you know, as 0:16:24.600 --> 0:16:28.000 rates become more stable then I think that does start 0:16:28.040 --> 0:16:31.080 to make people more confident and let's point to that 0:16:31.120 --> 0:16:34.560 as a point of resilience here for the UK on 0:16:34.640 --> 0:16:38.480 which we can leverage. But individuals are still being impacted 0:16:38.480 --> 0:16:41.040 by those high rates in terms of mortgages and fixed 0:16:41.120 --> 0:16:44.240 rate mortgages are a challenge, so that there is a balance, 0:16:44.680 --> 0:16:48.320 but longer term we do see a lot of potential here. 0:16:48.800 --> 0:16:52.000 That was Michelle Scomjo, CEO of Legal and General Investment Management, 0:16:52.000 --> 0:16:54.880 speaking to Bloomberg's Caroline Hepger that all of these issues 0:16:54.920 --> 0:16:57.200 are in focus at the MIP and real Estate conference 0:16:57.200 --> 0:16:59.320 that's happening in can on the French Riviera in the 0:16:59.360 --> 0:17:01.800 coming days. Our real estate reporter Jack Sitters will be 0:17:01.840 --> 0:17:04.400 there and he's been telling us about the big subjects 0:17:04.480 --> 0:17:05.359 up for a discussion. 0:17:05.520 --> 0:17:08.520 I'm fascinated to get out there because I guess if 0:17:08.560 --> 0:17:11.159 we wind back twelve months, I was there in can 0:17:11.800 --> 0:17:14.240 and at the start of the week, Silicon Valley Bank 0:17:14.280 --> 0:17:17.040 had just gone, and I was anticipating, you know, talking 0:17:17.040 --> 0:17:18.439 to investors about that all week, And by the end 0:17:18.480 --> 0:17:20.399 of the week, Credits Fist has gone as well, and 0:17:20.480 --> 0:17:22.920 so it was just it was incredibly chaotic, but also 0:17:23.000 --> 0:17:26.200 incredibly interesting revealing to be there with all those investors 0:17:26.240 --> 0:17:27.639 and get to see the wides of people's eyes and 0:17:27.680 --> 0:17:30.480 sit down with them as this madness was unfolding. Here 0:17:30.520 --> 0:17:33.560 we are twelve months later, and although that US regional 0:17:33.600 --> 0:17:36.080 banking situation has maybe calmed down somewhat or bit we'll 0:17:36.080 --> 0:17:38.600 see what happens with New York Community Bank or but 0:17:39.080 --> 0:17:41.359 the issues haven't gone away for real estate, and if anything, 0:17:41.640 --> 0:17:43.760 they'd come to the form more. It's such a slow 0:17:43.920 --> 0:17:46.840 moving asset class. Prices take a long time to correct. 0:17:47.240 --> 0:17:49.800 That means issues with over indebtedness take a long time 0:17:49.840 --> 0:17:51.800 to emerge, and then banks maybe take even longer to 0:17:51.840 --> 0:17:54.040 actually do something about it. What are the issues, Well, 0:17:54.640 --> 0:17:57.639 it's how much distress is really out there, how a 0:17:57.760 --> 0:17:59.879 lender's going to respond, how tough are they going to 0:18:00.080 --> 0:18:02.720 get with borrowers? What's that going to mean in terms 0:18:02.760 --> 0:18:05.840 of forced asset sales? You know, are we seeing funds 0:18:05.880 --> 0:18:07.560 that are under pressure with people trying to pull their 0:18:07.600 --> 0:18:10.800 money out. So I'm anticipating, you know, the mood is 0:18:11.000 --> 0:18:13.840 likely to be as dour as real estate ever gets 0:18:13.960 --> 0:18:17.199 because I'm yet to meet anyone who property yeah, who 0:18:17.320 --> 0:18:20.680 isn't an internal optimist. So I'm definitely sure every broker 0:18:20.720 --> 0:18:22.639 I meet will tell me that we're right around the 0:18:22.680 --> 0:18:24.639 corner for good times and that you know, the market's 0:18:24.680 --> 0:18:26.480 going to bounce back, And to be fair to them, 0:18:26.880 --> 0:18:29.240 there is a good argument that maybe people like me 0:18:29.359 --> 0:18:32.720 will be focusing on some of the more painful distressed elements. 0:18:33.160 --> 0:18:36.600 That there's definitely this sense that with interest rates having 0:18:36.680 --> 0:18:39.320 peaked and cuts on the way, that there could be 0:18:39.440 --> 0:18:41.479 quite a big bounce back. So for those with capital 0:18:41.520 --> 0:18:43.359 to deploy, you know, they'll be out there looking to 0:18:43.440 --> 0:18:46.800 do deals they'll be excited to start deploying that capital. 0:18:46.600 --> 0:18:49.240 Because prices have come When you think about commercial estate, 0:18:49.320 --> 0:18:52.959 prices have come down significantly. I mean, where where are 0:18:53.040 --> 0:18:54.600 the bargains to be found for those. 0:18:54.480 --> 0:18:55.240 That do have the money? 0:18:55.640 --> 0:18:55.840 Yeah? 0:18:55.880 --> 0:18:58.879 Absolutely, Well, I guess it's a global event, but I 0:18:58.920 --> 0:19:01.240 guess it's dominated by by European investors. So if we 0:19:01.359 --> 0:19:04.359 if talking about Europe, the UK is probably corrected the 0:19:04.440 --> 0:19:07.240 most and the most quickly, which is what we normally see, 0:19:07.280 --> 0:19:09.480 and it's to do with sort of nuances around valuation 0:19:09.560 --> 0:19:13.800 approaches and whatnot. So you know, London, for example, prices 0:19:13.840 --> 0:19:17.480 have come down sharply and the issue really is about 0:19:17.560 --> 0:19:20.960 availability that that bid ask spread has narrowed. What what 0:19:21.119 --> 0:19:23.000 often happens at the start of a correction as you 0:19:23.160 --> 0:19:25.040 just get this huge bid ask spread. As you know, 0:19:25.160 --> 0:19:27.879 nobody wants to sell at a discount. They've got their 0:19:27.920 --> 0:19:30.320 sort of backward looking book valuations, but buyers want to 0:19:30.320 --> 0:19:32.520 pay a price that reflects where the risk free rate 0:19:32.680 --> 0:19:35.600 is now. Anyway, that process has sort of been unfolding 0:19:35.640 --> 0:19:37.840 in the UK for the last well almost two years now. 0:19:38.480 --> 0:19:40.879 So yeah, so the conditions are there potentially for a 0:19:40.920 --> 0:19:43.000 bit of a bounce back in terms of activity. Debts 0:19:43.000 --> 0:19:44.600 may be a little bit more available than it was, 0:19:44.640 --> 0:19:46.440 it's a little bit less costly than it was, so 0:19:46.520 --> 0:19:48.320 it can be a creative for some buyers. And that's 0:19:48.320 --> 0:19:50.600 you know, that's so important in real estate. If we 0:19:50.640 --> 0:19:53.200 look across other markets, I'd say Germany is probably the 0:19:53.280 --> 0:19:55.960 other end, and that's the other really big market in 0:19:56.080 --> 0:19:58.360 Europe that is at the other end of the spectrum. 0:19:58.440 --> 0:20:01.360 It things are still really great, see their huge gap 0:20:01.440 --> 0:20:04.920 between buyers and sellers. But we are seeing you know, 0:20:05.080 --> 0:20:09.640 more insolvencies, there more administrations and that will inevitably force transactions. 0:20:10.000 --> 0:20:12.440 Does that mean that we will actually see more deals activity? 0:20:12.480 --> 0:20:14.080 Are we picking up off a base there? 0:20:14.480 --> 0:20:14.680 Yeah? 0:20:15.119 --> 0:20:16.480 Off a base is the phrase. 0:20:16.760 --> 0:20:18.280 It's the space if you keep looking down. 0:20:18.920 --> 0:20:19.120 Yeah. 0:20:19.160 --> 0:20:22.000 I mean we're talking about in almost every market at 0:20:22.080 --> 0:20:25.520 least the lowest transaction volumes since the global financial crisis. 0:20:25.560 --> 0:20:27.960 I mean, I think actually London recorded one quarter that 0:20:28.080 --> 0:20:30.920 was the lowest since about two thousand, So you know, 0:20:31.200 --> 0:20:33.000 it did get really quite extreme in the sort of 0:20:33.040 --> 0:20:35.639 aftermath of Russia Ukraine and as they say that bit 0:20:35.720 --> 0:20:38.400 are spread opening. But yes, it is coming back. We've 0:20:38.400 --> 0:20:41.080 seen volumes increase sort of quarter on quarter over the 0:20:41.160 --> 0:20:44.480 last few quarters. And again, you know, it's you always 0:20:44.520 --> 0:20:46.880 have to take a pinch of salt with the brokers 0:20:46.920 --> 0:20:49.040 who you know, whose bread and butter is transactions. They 0:20:49.119 --> 0:20:51.320 need those deals to make their fees. But if you 0:20:51.440 --> 0:20:53.440 talk to them, they and they are the closest to 0:20:53.520 --> 0:20:56.119 the market, they will tell you that, yes, it's going 0:20:56.200 --> 0:20:58.240 to be a quiet first half, but they can see 0:20:58.280 --> 0:21:01.480 the conditions there and their report boughting on potential sales. 0:21:01.520 --> 0:21:03.879 They try to persuade investors to come to market for 0:21:04.000 --> 0:21:05.879 the second half of the year and they see a 0:21:05.920 --> 0:21:06.520 bounce back there. 0:21:06.560 --> 0:21:08.879 Okay, so you're expecting a strong sales pitch at this 0:21:09.400 --> 0:21:12.320 event as ever. Yeah, and what about the question of 0:21:12.400 --> 0:21:15.359 demand post pandemic. We're shifting into sort of what looks 0:21:15.400 --> 0:21:17.600 like a more stable dynamic in terms of flexible working. 0:21:17.640 --> 0:21:20.399 When we think about demand for officers, how much is 0:21:20.440 --> 0:21:22.720 that playing into the picture given the kind of weak 0:21:22.760 --> 0:21:23.640 financial backdrop. 0:21:23.880 --> 0:21:26.480 It's a huge question for real estate, you know, offices 0:21:26.760 --> 0:21:30.040 being the biggest sort of asset class within commercial real estate. 0:21:30.560 --> 0:21:32.600 If you look at what happened to retail, which you know, 0:21:32.720 --> 0:21:34.720 probably twenty years ago, used to be the sort of 0:21:34.760 --> 0:21:37.720 glamour sector within commercial real estate, these huge shopping centers 0:21:37.800 --> 0:21:41.320 worth you know, potentially multi billions, totally upended by e commerce, 0:21:41.800 --> 0:21:44.960 huge amount of value destruction that's actually now finally found 0:21:45.000 --> 0:21:47.359 a floor, and you know, these those things as trading 0:21:47.480 --> 0:21:49.080 very cheaply, but at least the rents have kind of 0:21:49.160 --> 0:21:51.640 hit a bottom and they're starting to grow again. All 0:21:51.720 --> 0:21:53.480 sorts of concern about you know, we are we on 0:21:53.600 --> 0:21:55.879 the same journey now with office having been sort of 0:21:56.000 --> 0:21:59.360 disrupted by well, initially by we working before the pandemic 0:22:00.240 --> 0:22:01.879 in the way that we work and what people expect 0:22:01.920 --> 0:22:04.920 from an office, and then accelerated by the pandemic. I think, 0:22:05.240 --> 0:22:07.520 as ever, with these things, there's a lot of nuance required, 0:22:07.960 --> 0:22:09.960 the sense that you know, the good quality stuff in 0:22:10.000 --> 0:22:13.159 the best locations, the greenest stuff. There's still going to 0:22:13.160 --> 0:22:14.560 be a lot of demand for that, and actually there's 0:22:14.600 --> 0:22:17.439 more demand than there is availability because there hasn't been 0:22:17.520 --> 0:22:19.240 enough of it built. And I think that'll be another 0:22:19.280 --> 0:22:21.000 big theme at miip HIM, like the lack of construction 0:22:21.080 --> 0:22:23.879 that's been going on. But yeah, the older stuff, you know, 0:22:24.000 --> 0:22:27.240 your regional office buildings, your suburban office buildings, especially those 0:22:27.320 --> 0:22:29.960 that you know, maybe aren't the greenest, they probably don't 0:22:30.000 --> 0:22:31.840 have a viable future as an office, and then you're 0:22:31.840 --> 0:22:33.960 starting to think about, well do the economics actually work 0:22:34.040 --> 0:22:35.520 to turn them into something else? So these things just 0:22:35.600 --> 0:22:36.480 need to get bulldozed. 0:22:36.680 --> 0:22:38.800 Yeah, the couple of interesting points there. I mean that 0:22:39.119 --> 0:22:43.080 idea of making buildings greener essentially more energy Fishing is 0:22:43.200 --> 0:22:45.639 another big challenge facing the sector too, because there are 0:22:45.680 --> 0:22:48.520 building regulations that are affecting how the future life and 0:22:48.600 --> 0:22:50.359 also how the new projects are going to be shaped. 0:22:50.600 --> 0:22:50.800 Yeah. 0:22:50.840 --> 0:22:53.240 Absolutely, and and again that'll be a big theme at 0:22:53.280 --> 0:22:55.880 mip HIM. It's an interesting event because it always attracts 0:22:55.920 --> 0:22:58.760 a lot of politicians, a lot of policymakers, and to 0:22:58.880 --> 0:23:02.000 some degree they are not necessarily the main event. The 0:23:02.080 --> 0:23:05.080 reason everybody goes there isn't the thing works, is because 0:23:05.080 --> 0:23:07.600 it attracts the investors. So you've got all the biggest 0:23:07.640 --> 0:23:10.040 sovereigns will be there, all the biggest private equity firms, 0:23:10.400 --> 0:23:13.160 and if they're there, then their brokers are there, their 0:23:13.200 --> 0:23:15.560 bankers are there, and then the developers are there, and 0:23:15.960 --> 0:23:20.399 you know there's this ecosystem, this chain, and the politicians 0:23:20.440 --> 0:23:22.280 as well. They're there because they want to attract these 0:23:22.320 --> 0:23:24.400 people to come and invest in their cities. This time 0:23:24.480 --> 0:23:27.280 there may be to a greater extent some of the 0:23:27.600 --> 0:23:31.000 investors listening quite carefully to what the policymakers have got 0:23:31.040 --> 0:23:33.200 to say around some of these sustainability issues, because it 0:23:33.280 --> 0:23:36.879 is going to be potentially a huge influence on you know, 0:23:37.040 --> 0:23:40.280 things like that office market. How stringent are these rules 0:23:40.359 --> 0:23:42.000 going to be in you know, in the UK they 0:23:42.280 --> 0:23:44.720 just talk of offices not being allowed to be rented 0:23:44.760 --> 0:23:47.560 out unless they're what's called EPC A or B by 0:23:47.640 --> 0:23:50.000 twenty thirty. You know, you're talking about the majority of 0:23:50.080 --> 0:23:53.000 the office market being illegal to rent in six years 0:23:53.080 --> 0:23:55.280 time if that were to actually come in, So they 0:23:55.320 --> 0:23:57.560 will have a huge impact on the market. So I 0:23:57.680 --> 0:23:59.360 think there'll be maybe a bit more of a two 0:23:59.359 --> 0:24:00.720 way dialogue. It sometimes is. 0:24:00.920 --> 0:24:03.199 What about the question of housing? Of course, not as 0:24:03.359 --> 0:24:06.560 much of concern around building as there is around commercial 0:24:06.640 --> 0:24:09.760 real estate, but still a sector that there's a lot 0:24:09.800 --> 0:24:12.760 of political and policy kind of perspectives We had. 0:24:12.720 --> 0:24:15.000 On Yeah, absolutely, and you know, someone who's been going 0:24:15.040 --> 0:24:18.600 to mip him for ten fifteen years now, it's interesting 0:24:18.720 --> 0:24:23.040 how much more prominent housing is at the event. It's 0:24:23.080 --> 0:24:24.920 a huge part of it now, and I guess there's 0:24:24.920 --> 0:24:27.480 a couple of dynamics there. One, you've got the fact 0:24:27.520 --> 0:24:31.359 that really across Europe there's almost no city that doesn't 0:24:31.400 --> 0:24:34.439 have a shortage of good quality housing, and they're all 0:24:34.480 --> 0:24:37.359 grappling with it in different ways. Some places it's planning, 0:24:37.480 --> 0:24:39.840 some places it's rent control that are barriers, and so 0:24:40.000 --> 0:24:42.560 that's lots of issues there to be grappled with by 0:24:42.600 --> 0:24:45.399 policymakers and by potential investors. The other thing is that 0:24:45.760 --> 0:24:47.920 you know, we talked about the kind of obsolescence in 0:24:48.040 --> 0:24:50.879 shopping centers and maybe what's happening now to offices. What 0:24:51.000 --> 0:24:53.840 you've seen investors do is that money that maybe they 0:24:53.920 --> 0:24:56.120 used to invest in retail or they used to invest 0:24:56.160 --> 0:24:58.200 in offices, and now increasingly they want to invest it 0:24:58.280 --> 0:25:02.240 in living very broad so that can be rental apartments, 0:25:02.280 --> 0:25:04.600 it can be senior housing, nursing homes, whatever you like, 0:25:04.720 --> 0:25:08.399 but living broadly. The difficulty that they have is actually 0:25:08.440 --> 0:25:11.200 deploying that capital because there isn't the existing stock to 0:25:11.240 --> 0:25:13.840 go and buy it and building it is very difficult 0:25:13.840 --> 0:25:16.679 because the rules wherever you look in Europe are complicated 0:25:16.720 --> 0:25:19.760 and they make it hard. So again that's a huge focus. 0:25:19.920 --> 0:25:22.119 All this money that wants to get into European housing 0:25:22.200 --> 0:25:24.800 of various forms, but so many barriers to it. 0:25:25.200 --> 0:25:28.560 Thanks to Bloomberg's real estate reporter jacket sitters. I'm Stephen 0:25:28.600 --> 0:25:30.960 Caroll in London. You can catch us every weekday morning 0:25:31.000 --> 0:25:33.440 here for Bloomberg Daybreak Europe, but getting at six am 0:25:33.560 --> 0:25:34.359 in London and. 0:25:34.560 --> 0:25:37.520 One am on Wall Streets. Tom, Thank you, Steven. And 0:25:37.600 --> 0:25:39.879 coming up on Bloomberg day Break weekend and look ahead 0:25:39.920 --> 0:25:43.680 to earnings from a couple of key technology manufacturers in 0:25:43.800 --> 0:25:58.720 Asian I'm Tom Busby, and this is Bloomberg. I'm Tom 0:25:58.800 --> 0:26:00.800 Busby in New York with your global look ahead at 0:26:00.800 --> 0:26:03.720 the top stories for investors in the coming week. This week, 0:26:03.840 --> 0:26:06.840 two big companies will be reporting earnings. We'll take a 0:26:06.880 --> 0:26:09.359 look at how the EV market is performing through the 0:26:09.440 --> 0:26:13.920 lens of previewing battery maker Catl's earnings. But first we'll 0:26:13.960 --> 0:26:16.600 talk about one of the major Apple suppliers, Han Hi, 0:26:17.119 --> 0:26:20.000 also known as Fox KHN. For more, let's get to 0:26:20.040 --> 0:26:22.600 Bloomberg day Break Asia co host Doug Krisner. 0:26:23.040 --> 0:26:23.240 Tom. 0:26:23.320 --> 0:26:25.760 In the coming week, we'll get fourth quarter earnings from 0:26:25.800 --> 0:26:30.240 the world's largest contract electronics maker, Han high precision industry. 0:26:30.520 --> 0:26:33.320 This company is known internationally as fox KHN. It's a 0:26:33.480 --> 0:26:37.680 major assembler of iPhones and other Apple devices. In fact, 0:26:38.000 --> 0:26:40.520 Fox Cohn gets more than half its revenue from Apple. 0:26:40.920 --> 0:26:43.879 To help us preview the Fox Cohn earnings, I'm joined 0:26:44.200 --> 0:26:48.480 from Taipei by Jane Lanhi Lee, Bloomberg Tech reporter. Jane, 0:26:48.520 --> 0:26:51.200 thanks for being with us. So we know already that 0:26:51.440 --> 0:26:53.639 fourth quarter revenue was down by nearly five and a 0:26:53.680 --> 0:26:56.960 half percent. And I saw that figure and I'm wondering 0:26:57.240 --> 0:27:00.000 how much of it reflects the challenges that Apple is faced. 0:27:00.400 --> 0:27:04.960 Oh, it absolutely reflects Apple's challenges. Fox Con makes about 0:27:05.119 --> 0:27:09.399 seventy percent of the iPhones for Apple. A lot of 0:27:09.480 --> 0:27:13.600 that is manufactured in China, and if China sales aren't 0:27:13.600 --> 0:27:18.160 doing well for Apple, then that'll reflect immediately for fox 0:27:18.240 --> 0:27:21.800 Con as well. And the problem we're going to see 0:27:21.920 --> 0:27:26.440 going forward is that Apple iPhone sales we reported last 0:27:26.520 --> 0:27:30.760 week dropped twenty four percent in the first six weeks 0:27:30.880 --> 0:27:34.399 of this year, and that's according to Counterpoint Research, and 0:27:34.520 --> 0:27:38.840 that already puts Apple behind Vivo, that's the number one 0:27:39.000 --> 0:27:42.280 selling brand in the first six weeks of this year. Huawei, 0:27:42.720 --> 0:27:45.880 which is considered China's tech champion, and they came out 0:27:45.920 --> 0:27:49.560 with a new phone, the May sixty pro late last year, 0:27:49.920 --> 0:27:55.879 and that has been selling gangbusters because there's a wave 0:27:56.000 --> 0:28:01.480 of patriotic buying. And then Honor, which is Huawei's previous brand, 0:28:01.480 --> 0:28:04.320 which kind of split off, and then Apple now which 0:28:04.440 --> 0:28:07.159 used to be the top selling brand in China is 0:28:07.320 --> 0:28:10.640 in fourth place. That will have an impact on fox 0:28:10.760 --> 0:28:14.720 con sales. And during the earnings call on the fourteenth, 0:28:15.119 --> 0:28:18.600 investors and analysts are going to be focusing on outlook 0:28:18.680 --> 0:28:22.080 figures and outlooks or a color coming from the company 0:28:22.280 --> 0:28:24.200 on how much of an impact that's going to have. 0:28:24.480 --> 0:28:26.320 So we know that Apple is facing a lot of 0:28:26.440 --> 0:28:29.200 challenges as you just said, in terms of the China market, 0:28:29.240 --> 0:28:31.000 and we know at the same time that the company 0:28:31.080 --> 0:28:34.639 is moving to try to set up manufacturing operations in India. 0:28:35.000 --> 0:28:38.440 Is this something that fox Con is involved with the 0:28:38.680 --> 0:28:39.680 Indian facilities? 0:28:40.000 --> 0:28:40.120 Oh? 0:28:40.240 --> 0:28:45.480 Absolutely. Fox Con has been announcing almost every week or 0:28:45.560 --> 0:28:49.120 every other week. I'm sitting here picking up announcements on 0:28:49.280 --> 0:28:54.160 the Taiwan Stock Exchange about hundreds of millions of dollars 0:28:54.240 --> 0:28:58.080 that fox Con is moving to India to get those facilities. 0:28:58.200 --> 0:28:58.440 Going. 0:28:58.960 --> 0:29:03.440 Bloomberg report did late last year that fox Cohn has 0:29:03.520 --> 0:29:08.040 won approval to invest up to two point six billion 0:29:08.240 --> 0:29:14.120 dollars in India. That hasn't yet shown up in a 0:29:14.200 --> 0:29:19.440 reduction of investments in China, but going forward, the percentage 0:29:19.680 --> 0:29:24.160 of Apple products that fox Con manufacturers outside of China 0:29:24.640 --> 0:29:25.640 will grow for sure. 0:29:25.920 --> 0:29:27.960 Do you think fox Con right now is beginning to 0:29:28.040 --> 0:29:31.400 sense the need for greater diversification. I know they're involved 0:29:31.440 --> 0:29:35.880 in the production of other electronic components and the networking 0:29:35.960 --> 0:29:38.960 equipment as well. Are they moving more aggressively to try 0:29:39.000 --> 0:29:43.200 to diversify away from being so reliant on Apple? 0:29:43.440 --> 0:29:43.600 Well? 0:29:43.640 --> 0:29:47.080 I mean that two point six billion dollar India investment 0:29:47.200 --> 0:29:51.040 is already a clear signal that it is diversifying. Fox 0:29:51.160 --> 0:29:56.680 Con is the top electronics company in Taiwan. There are 0:29:56.760 --> 0:30:01.959 other major Taiwanese contract MANUFAC, and all of them are 0:30:02.040 --> 0:30:06.760 in fact diversifying away from China. The Taiwanese government is 0:30:06.880 --> 0:30:10.720 supporting that as well. So there are places like in 0:30:10.800 --> 0:30:16.920 addition to India, Thailand and Vietnam, other Southeast Asian countries 0:30:17.080 --> 0:30:22.960 are seeing an influx of investments, and Bloomberg last year 0:30:23.080 --> 0:30:26.680 also sort of graft out the move of suppliers, and 0:30:26.800 --> 0:30:31.200 there's a clear increase in Apple suppliers in Southeast Asia. 0:30:31.480 --> 0:30:35.000 Well, wasn't Fox Cohn involved in developing electric vehicles? If 0:30:35.040 --> 0:30:37.160 that's the case, are we likely to get an update 0:30:37.720 --> 0:30:42.480 on that movement sometime during the course of this analyst 0:30:42.560 --> 0:30:43.480 call on the fourteenth. 0:30:43.720 --> 0:30:47.120 It's possible. There's a lot of interest in Fox Cohn's 0:30:47.440 --> 0:30:52.120 electric vehicle business. In fact, some analysts say Fox Cohn 0:30:52.640 --> 0:30:55.600 is trying to reposition itself as an EV company going 0:30:55.760 --> 0:31:00.760 forward as it diversifies away from just being the iPhone maker. 0:31:00.880 --> 0:31:02.920 But you know, the iPhone still make up for a 0:31:03.000 --> 0:31:06.280 big chunk of its sales and EV really it's in 0:31:06.360 --> 0:31:10.960 its infancy and there have been several missteps in the 0:31:11.080 --> 0:31:15.280 last year or two as it tried to get its 0:31:15.320 --> 0:31:19.040 EV business going. So that's still a big question mark 0:31:19.320 --> 0:31:23.280 and we'll have to see this year if it gets 0:31:23.320 --> 0:31:25.920 any big business. I'm keeping an eye on the US 0:31:26.000 --> 0:31:28.160 to see if there are any US brands that might 0:31:28.280 --> 0:31:32.360 decide to manufacture evs with fox Conn. Investors will definitely 0:31:32.400 --> 0:31:33.200 be looking out for that. 0:31:33.600 --> 0:31:35.840 Jane, thank you so much for helping us preview their 0:31:35.840 --> 0:31:39.320 earnings from Fox Cohn. Jane Lonhie Lee is Bloomberg Tech 0:31:39.360 --> 0:31:42.360 reporter joining from TYPEI. Now let's get to the other 0:31:42.600 --> 0:31:45.160 co host of Daybreak Asia, Brian Curtis. 0:31:45.360 --> 0:31:49.680 Doug Contemporary Amparex Technology or CATL, is set to deliver 0:31:49.840 --> 0:31:53.360 fourth quarter results in the coming week. Bloomberg Intelligence expects 0:31:53.440 --> 0:31:57.120 to see solid revenues and cost control at the battery maker, 0:31:57.520 --> 0:32:00.520 and it says that will offset lower battery price and 0:32:00.720 --> 0:32:04.680 the slowing Chinese economy. Putting it all together, BI suggests 0:32:04.720 --> 0:32:08.600 that the company will deliver resilient results. Now, of course, 0:32:08.680 --> 0:32:11.520 when we look at catl's business, a lot of other 0:32:11.640 --> 0:32:15.080 issues come to mind. The health of the EV industry 0:32:15.320 --> 0:32:20.240 in China, stiff competition among EV makers, there US China relations, 0:32:20.400 --> 0:32:25.480 EU China relations, carbon reduction targets, as well as industrial 0:32:25.640 --> 0:32:29.400 overcapacity in China, and even mandates for the use of 0:32:29.480 --> 0:32:32.920 electric heavy duty trucks. Well, to unpack all of this, 0:32:33.240 --> 0:32:36.560 we have Bloomberg's transport reporter Danny Lee with us here 0:32:37.040 --> 0:32:40.120 in our studios in Hong Kong. So, Danny, how is 0:32:40.200 --> 0:32:43.800 CATL managing through these many crosswinds that we have at 0:32:43.800 --> 0:32:44.680 the moment in China. 0:32:45.080 --> 0:32:47.440 Well, what we're going to see in its upcoming fourth 0:32:47.560 --> 0:32:51.160 quarter full year results is not just resilient sets of results, 0:32:51.320 --> 0:32:53.800 but one that could also be a record on the 0:32:53.960 --> 0:32:57.200 net income line. Particularly when it comes to the full year, 0:32:57.320 --> 0:33:01.680 it's very robust, as they have before the gain from 0:33:01.720 --> 0:33:04.720 the benefits of the past three quarters, but even on 0:33:04.880 --> 0:33:07.520 the fourth quarter, at the final quarter of the it's 0:33:07.560 --> 0:33:10.160 looking very very strong and they've given a wide margin 0:33:10.280 --> 0:33:13.920 for potentially what could be a record quarter ultimately. And 0:33:14.080 --> 0:33:19.560 so despite the falling prices of lithium and nickel, for example, 0:33:19.680 --> 0:33:23.240 these raw material prices actually are a good thing for 0:33:23.480 --> 0:33:27.320 someone like CATL as they can become even more price 0:33:27.400 --> 0:33:30.840 competitive on its batteries and also just to sell at 0:33:31.040 --> 0:33:32.520 much lower price and. 0:33:32.560 --> 0:33:35.440 Not only a leader in China, but maintaining a top 0:33:35.520 --> 0:33:38.920 position really in the global market. In the month of January. 0:33:39.080 --> 0:33:42.080 Just looking over some research from sn Research out of 0:33:42.160 --> 0:33:46.360 South Korea, CATL with roughly forty percent share of the 0:33:46.440 --> 0:33:52.320 worldwide battery market in January. It supplies automakers like Tesla, BMW, Mercedes, 0:33:52.400 --> 0:33:57.160 Benz and Volkswagen. The number two is BYD. It's a 0:33:57.320 --> 0:34:01.480 big competitor and obviously a big make of evs. But 0:34:01.600 --> 0:34:05.280 let's talk about catl's position vis a v competitors and 0:34:05.320 --> 0:34:08.040 whether or not we might seach some sort of consolidation coming. 0:34:08.320 --> 0:34:11.040 There is a question and that always has been in 0:34:11.120 --> 0:34:14.719 the recent years over consolidation not just amongst battery makers, 0:34:14.760 --> 0:34:18.520 but even across the auto space, across the whole brands 0:34:18.560 --> 0:34:21.800 which have launched running out of money. But when it 0:34:21.840 --> 0:34:25.399 comes to the battery space, you see this concentration even 0:34:25.440 --> 0:34:29.000 amongst the top two c ATO and BYD, and therefore 0:34:29.440 --> 0:34:33.200 it's very hard for other suppliers to really gain ground, 0:34:33.320 --> 0:34:36.080 gain market share. And so when you have someone who's 0:34:36.280 --> 0:34:40.239 financially strong and as robust as c ATO in particular, 0:34:40.560 --> 0:34:44.200 they can use their financial muscle to squeeze margins and 0:34:44.360 --> 0:34:48.239 squeeze suppliers on costs and also just to get that 0:34:48.520 --> 0:34:52.000 edge over other smaller supplies who cannot be as financially 0:34:52.520 --> 0:34:53.800 flex as c ATL. 0:34:54.280 --> 0:34:57.320 Is it generally considered to be a really well managed company. 0:34:57.640 --> 0:35:00.440 It is, indeed, and when you look at what it 0:35:00.520 --> 0:35:02.960 has been doing to lay the groundwork, it has made 0:35:03.080 --> 0:35:07.440 long term bets, even during this period of instability and 0:35:07.480 --> 0:35:11.239 weakness in the EV market where clearly not many people 0:35:11.600 --> 0:35:15.280 are confident about the near term demand. But Ultimately, they've 0:35:15.320 --> 0:35:18.560 made bets, they've invested, and they've put themselves in a 0:35:18.600 --> 0:35:23.040 position where they've conquered China, just like byd has in 0:35:23.120 --> 0:35:26.719 the battery space for cars. They are now pushing very 0:35:26.800 --> 0:35:29.239 much abroad. But clearly there are headwinds when it comes 0:35:29.280 --> 0:35:32.600 to its reputation and how it's perceived and how it 0:35:32.760 --> 0:35:35.359 wants to be a supplier across the world. 0:35:36.080 --> 0:35:39.239 It does actually seem Danny that the glide path for 0:35:39.520 --> 0:35:42.560 c ATL globally, while as you said, fraught with some 0:35:42.640 --> 0:35:47.440 difficulties over geopolitics, so it's pretty good because the pricing 0:35:47.560 --> 0:35:50.839 is not quite so competitive elsewhere as. 0:35:50.760 --> 0:35:53.400 It is in China, right, Yeah, absolutely, I mean with 0:35:54.000 --> 0:35:57.120 China and with someone like c ATL, they really have 0:35:57.600 --> 0:35:59.920 a lot of advantages when it comes to being able 0:36:00.080 --> 0:36:03.840 to sell batteries at much lower prices, and thanks to 0:36:04.040 --> 0:36:07.480 the falling prices of raw materials, they can continue to 0:36:07.640 --> 0:36:10.920 lower its prices. And when you do have other battery 0:36:10.960 --> 0:36:14.120 players around the world who are still just starting up 0:36:14.280 --> 0:36:17.120 or they've still got higher costs that they need to 0:36:17.280 --> 0:36:19.239 factor in, so there's not a lot of room to 0:36:19.320 --> 0:36:21.719 maneuver for competitors, and for someone like c ATL, this 0:36:22.000 --> 0:36:24.480 is their moment to say going for the kill rather, 0:36:24.680 --> 0:36:28.400 but they really are able to show their dominance and 0:36:28.520 --> 0:36:31.880 show not just their dominance, but how good their products are, 0:36:31.960 --> 0:36:34.200 because what we have seen over the past couple of 0:36:34.320 --> 0:36:38.479 years is then putting out even better performing products, which 0:36:38.760 --> 0:36:42.879 whether they be faster charging or have longer range, these 0:36:42.960 --> 0:36:45.600 are things which gives them an edge on all fronts 0:36:45.719 --> 0:36:47.160 frankly compared to its piers. 0:36:47.640 --> 0:36:50.600 So you talked about the input materials being down and 0:36:50.680 --> 0:36:54.840 that leads to the ability to lower battery prices. What 0:36:54.920 --> 0:36:57.680 are some of the key factors behind this fall in 0:36:58.040 --> 0:36:58.759 battery price? 0:36:59.120 --> 0:37:01.120 It is a good question, and I think it's just 0:37:01.600 --> 0:37:06.080 we've seen with the speculation and the rush for these 0:37:06.200 --> 0:37:09.680 raw materials over the years, it has really helped push 0:37:09.800 --> 0:37:13.320 up prices. And again when you see the concern about 0:37:13.440 --> 0:37:16.879 the long term supply that's all being locked into over 0:37:16.960 --> 0:37:20.040 recent years, that has helped push up prices. And we've 0:37:20.080 --> 0:37:24.200 seen the general demand for electric vehicles come down and 0:37:24.280 --> 0:37:28.279 so therefore naturally prices for the raw materials that also 0:37:28.440 --> 0:37:31.759 coming down. But we haven't really seen a flaw yet 0:37:31.960 --> 0:37:35.520 in the price, you know, pulling back from near record levels. 0:37:35.640 --> 0:37:39.040 But ultimately what we are seeing is the supply chain 0:37:39.160 --> 0:37:42.280 for evs being laid out nicely, and we are seeing 0:37:42.600 --> 0:37:46.000 more sales. Still growth, but maybe not as good as 0:37:46.040 --> 0:37:48.160 it once was, but we are least seeing a normalization, 0:37:48.280 --> 0:37:52.160 which is I guess good for everyone from companies to consumers. 0:37:52.520 --> 0:37:55.000 All Right, Danny, thanks so much for joining us. Bloomberg's 0:37:55.040 --> 0:37:58.120 transport reporter Danny Lee with us here in our Hong 0:37:58.200 --> 0:38:01.279 Kong studios. I'm Brian Curtis along with Doug Krisner. You 0:38:01.360 --> 0:38:04.680 can catch us every weekday here for Bloomberg day Break Asia, 0:38:05.000 --> 0:38:07.600 beginning at eight am in Hong Kong and eight pm 0:38:07.840 --> 0:38:08.560 on Wall Street. 0:38:09.040 --> 0:38:11.920 Tom, thank you, Brian. That does it for this edition 0:38:11.960 --> 0:38:14.719 of Bloomberg day Break Weekend. Join us again Monday morning 0:38:14.760 --> 0:38:16.600 at five am Wall Street time for the latest on 0:38:16.719 --> 0:38:19.680 markets overseas and the news you need to start your day. 0:38:20.239 --> 0:38:22.920 I'm Tom Buzzby. Stay with us. Top stories and global 0:38:22.960 --> 0:38:25.000 business headlines are coming up right now.