China Markets Rally, AI, and Geopolitics — Full Breakdown & Transcript

[00:00] Good morning, I'm Yvonne Mayer with David and Glenn. Good morning, we are counting down to the opening markets in Greater China. Our top stories today, we can stop to extend a record-breaking global rally as investors look past few political concerns.

[00:16] China in focus after the CSI 300's best start to the year since 2015. AI remains the top market theme. Nvidia boss Jensen Huang saying highly anticipated data center chips are nearing release this year.

[00:29] year. Also ahead, Nicolas Maduro and his wife plead not guilty to drug violence and weapons charges as his administration re-asserts itself in Venezuela. And South Korea hits the reset

[00:41] button on relations with China as their two leaders meet in Beijing.

[00:59] Welcome to the show, a quick classic market action, and we are, as you can see, slightly to the upside when you look at the U.S. futures, though, slightly to the downside. All that being said, it was a, well, is, let me use the present tense here,

[01:15] is still a terrific start to the year for risk assets, looking at how much these benchmarks can rally. The cost of it, understandably so, and there's a Hyundai story, by the way, which we'll get to later on as well. So, fantastic start to the year in the cost.

[01:29] In fact, at about this level, we're at about 4% from getting to a level which would be double the level just nine months ago. So, just imagine the rally. Taiwan coming alive within Taiwan, of course, is the Honghai story.

[01:42] There's a broader Nvidia story that was announced, and we'll get to all of that in a moment. Honghai out with fourth quarter sales. The after the close yesterday, 20-plus percent year-on-year jump. One and a half percent of the upside there.

[01:55] the dollar story two things right you have geopolitics and then you have the ISM numbers coming in at a four month low 14 month low rather and that's really what the markets paid attention to 1203 right now

[02:07] on the Bloomberg dollar index a glass of commodity markets with Brent edging higher as with the close and this is what we're doing of course Brent is concerned precious metals also seeing some consolidation but copper is separately still

[02:20] the story to watch 13,000 imports flows and concerns around supply coming through in the copper store. In fact, how is that playing out as far as the Shanghai contract is concerned?

[02:32] Flip the page. We have the contract coming through. A50 future, fantastic start to the year on the CSI 300. We're very near a four-year high. In fact, the Shanghai clock is also very near a 10-year high.

[02:45] So watch the milestones there. And that's $50 trying to go below that 7. Yeah, the key question is how much more appreciation can we see now that we are seeing, right, at top seven for China right now. And so there's really a big key scene here

[02:57] as we start to see more momentum coming back in this Chinese market. And at a time when you're talking about Venezuela, right, where just now we just saw a headline that there are maybe some blasts still around the presidential palace, markets are still taking it in stride right now.

[03:10] Yeah, there are lots of reasons that they are taking that one in stride, right? And I think when you look at the announcements coming through out of CES in Vegas, a lot of the announcements in China going into the year were... Baisho yesterday, right?

[03:22] Baisho, Baidu. In fact, when you look at what led the rally in the C-side for New Jersey, it's a chip for you, right? And I think we also had Premier Lee underscoring CCC report in New Jersey, underscoring the need and urging the need to upgrade robotics and AI.

[03:37] So those are the sort of sectors to watch going into the open today. Extremely heavy volumes in the onshore markets yesterday. Yeah, let's get back to CES, as you just mentioned, right? Because plenty of news coming through there already, where NVIDIA CEO Jensen Huang said the company's highly anticipated Rubin data center chips are nearing release,

[03:53] speaking at Las Vegas, said that customers will soon be able to try the new hardware and expect it to speed up AI development. This is the Vera CPU. It's got 88 CPU cores,

[04:05] and the CPU cores are designed to be multi-threaded. But the multi-threaded nature of Vera was designed so that each one of the 176 threads could get its full performance.

[04:17] So it's essentially as if there's 176 cores, but only 88 physical cores. So these cores were designed in using a technology called spatial multithreading. But the I.O. performance is incredible.

[04:33] All right, let's bring in our rumor tech co-anchor, Ed Ludlow. He is in Vegas. He was there at the keynote speech with Jensen Fong. Ed, fantastic. Thank you for joining us today.

[04:45] There's the technology and there's the timing. Let's start with the timing, interesting timing as we start up this new year. Yeah, I mean, there was a great deal of expectation about this keynote, but in all honesty, it kind of fell flat,

[04:58] because their confirmation that Vera Rubin systems will ship in the second half of 2026 is a repetition of what they said in November. But it was one news headline in a presentation that in all honesty kind of lacked a lot of news.

[05:12] It's important that we have confirmation that Vera Rubin is going into full production, because NVIDIA commits on an annual cadence to new generation technology. and if the other gigawatt of data center capacity that's based on Vera Rubin

[05:25] is capable of 10 times the throughput of the same gigawatt of capacity that has the prior generation Blackwell, but if you're a hyperscaler or an AI lab, it's going to cost you one-tenth of the Blackwell cost to generate a token.

[05:38] So it alters the economics of what's happening in AI. It gives the market confidence that they're moving to schedule to get it into the marketplace. Is there any sort of, I mean, obviously the market has continued to be so bullish on NVIDIA.

[05:55] We saw the stock move on just that headline alone that you mentioned, Ed. You know, where could we see some of the disappointment from this market then, if we get more details on this? Yeah, the bar is set very high in terms of what Jensen Wong does

[06:11] when he goes on stage and does a two-hour presentation. You know, in October in Washington, D.C., at their own event, he surprised everyone by almost giving financial guidance and saying over the next five financial quarters,

[06:24] they expected $500 billion of sales split across Blackwell and Rubin. And so the assumption was he would do something similar here at CES, and he didn't. But it's kind of a 48-hour extravaganza because the moment he was done with his keynote presentation,

[06:38] which kind of talked to all the big picture things he's always talked about, physical AI, the next phase of AI for NVIDIA. He then went and met with the analysts, and there were many more headlines than that we can get to them. Tomorrow he'll speak to the press, he'll come on Bloomberg television,

[06:51] and there'll be a lot more opportunities to ask, I guess, for granular detail, for more granular detail that the market wants to hear right now, which is basically what is the market for infrastructure like in 2026 and beyond.

[07:03] Yeah, a little forward to that interview, Ed. Lots of talk about when it comes to, of course, robotics, Shupan is driving as well with Jensen Huang. Ed Lutler there, a Bloomberg Tech co-anchor at the CES in Las Vegas. Of course, Ed is joined with

[07:16] our Asia team as well. Sherry as well as Bill are on the ground there in Las Vegas. And we'll bring you full coverage, of course, tomorrow. So, to everyone else watching, great to have you here today. This is, of course, your agenda. We talked about the Li and Xi meeting

[07:28] and really what came out in that second meeting between the two in about a month. And some of that is going to be a key focus here. We're still watching a lot of volatility that's picking up in Hong Kong. But, yeah, that rally in the Asia market yesterday was pretty nuts. Did you take a look at what happened?

[07:40] That's just the CSI 300. The China continues to turn quite well. Southbound flows were quite strong yesterday as well. We'll still watch that United States, given the strength that we've seen, see any sort of pushback from the PBOC.

[07:52] We'll see. We're watching some of these Korea ETFs as well. The leverage ones. The leverage ones in particular, just given the big moves we've seen in some of these big plays here yesterday. And, of course, sectors like metals, given the copper rally, gold, silver,

[08:06] We're still doing very well. Tech, of course, is still very much in focus today. Yeah, I think that we will see what the market makes of this, but the visit from Premier Lee reported by TCCD to the visiting BYD and Nadella

[08:18] and also underscored the need for an upgrade on robotics and the like. We'll see what the market makes of that. Of course, 6 cents to 1% to the off-site right now. In case you missed that, right? So, Yvonne just mentioned right now it was quite a crazy rally

[08:30] on the on-shore markets yesterday. Here's how we closed. 2% on the CSI for about half of 1% give or take from taking out the recent high, which takes us to the four-year high. IT, healthcare, and consumer staples,

[08:44] advocacy leading that rally quite substantially. Volumes are also on the heavier side of things to kick off this year. Joining us here instead to talk us through what happened and the outlook for 2026, how Hong's managing partner and CIO upload to his management.

[08:58] Nice to see you, and Happy New Year. Happy New Year to you. There's been a, not that it's happened only yesterday, but there's been a change in market leadership in the Chinese market. It's on shore that's been taken to helm. What do you think is going on there?

[09:10] Yeah, well, I think because last year, in 2025, Hong Kong has been doing substantially better than Asia. I think Asia only catch up after November 8th. And also right now, if you look at the leadership in the market,

[09:24] on one hand, it's the technology sector that is growing on full calendar. And then at the same time, I think the industrial metals are also growing very, very well as well. So I think many of the industrial names are essentially coming back.

[09:37] It's giving people a sense of cyclical upswing, even though the economic data is not showing it. So I think in the market, sentiment is back and people have the money to spend and so they're ready to get back to the market.

[09:49] And do we still need more of the fundamentals to improve for the story to continue? I think so. Well, I think right now the fundamentals are still quite weak. So we have already hit the peak of the cycle in third quarter 2025.

[10:05] I think people now are looking for policies. And I think in recent days, there's sort of a policy talk from the top, basically saying that we're going to support the property market all across and all that.

[10:18] So I think people are actually looking forward to the delivery of the policies. I think there are two sides to the policy story. One is on the master front. One is specifically on specific sectors, right?

[10:30] So whether that's consumption, the extension of subsidies, or, you know, calls for financing for tech. Are there specific industries that stand out to you this year that might provide some help? I think, well, if you look at the five-year plan, you know, starting this year,

[10:45] basically, you know, top three sectors is on the list. The first one is technology. I think the second one is, you know, build up the comprehensive industrial system. And then the third one is consumption.

[10:57] I think people should look for clues from this five-year plan. Okay. In terms of AI, though, I mean, it seems like it's the shipmakers that started the year in a very, very strong way. Do I continue to focus on the hardware?

[11:11] I mean, or do I look at... Everyone's talking about 20, 20 things a year of adoption. Everyone else. Everyone else. I mean, where should I reach more towards? Or all of the above? No, I think all of the above. I think the advancement of the hardware actually brings forward the advancement in software as well.

[11:27] And I think a couple of days ago, DIGSTIC actually came out with a new paper showing a new way to train your models. It's reminiscent of last year this time. It's more or less the same. DIGSTIC came out with a new model that is showing huge potential for Chinese tech.

[11:44] And then everything rallied for three months. I think a similar episode is happening right now. So I think DITC is making breakthrough. Many other Chinese AI companies are making breakthrough as well.

[11:56] For example, 5G's listing is a semiconductor unit. I think late last year, Alibaba claimed that it made a breakthrough on its LRM models as well. So I think there's just so many things going on.

[12:10] And also if you look at the liquidity in the market, it's still positive. It's still rising. Therefore, I think it's conducive for risk-taking. You posted something on F

[12:22] a few days ago, which was, I think, your 2025 calls, and you had AI do a summary of it, right? I think we made a graphic of that. What did Haohong get right in 2025? I like how you prompted it.

[12:34] You said, famous economist Haohong. Humble brag there. Just in case there's any... I mean, there's a lot of Haohongs out there, but not any famous economists. Do you feel the same way

[12:46] about what you got right? How about the list? I think gold and silver is probably my most prominent call last year. I got it exactly right. And I think the trend is still continuing.

[12:58] So I think after consolidation, gold and silver could move substantially higher from here, even higher than last year. Chinese tech had a good year as well. You know, in terms of for the first three quarters, Chinese tech actually took the market leadership

[13:12] all the way until mid-October, then I think the rally sort of paused a little bit. The yuan, I think, is just phenomenal, right? So despite a background of the Second World War,

[13:26] I think the yuan actually did quite resilient last year and then starting to rise, you know, into this year. And I think the appreciation of the Chinese yuan exchange rate could go much further from here.

[13:38] And commodities in general is going through the roof as well. Do you foresee there going to be any pushback from the PBOC? At what point would they might start not liking or at least not tolerating this situation? I think, you know, PBOC has been, you know, making some sort of gesture that, you know,

[13:53] is not very tolerable or very fast reputate appreciation, you know, because that could sort of interfere with the policy, the monetary policy domestically and also sort of hold back some of the strength that the Chinese exporters have been enjoying in past years.

[14:08] But I think it's not entirely up to the PBOC anymore. So you can see probably the reference rate and the market rate should start to diverge. And also going into the new year, because the Chinese yen has been sort of undervalued for so long,

[14:23] for the past couple of years, the real effective exchange rate for the Chinese yen has actually depreciated almost 30%. So how could you explain in the background of very strong Chinese exports,

[14:36] ever rising Chinese place of trust and then China is actually depreciating in the past so I think that sort of laid out a good foundation for the yuan to appreciate this year

[14:48] anything to avoid? anything to avoid I think in the rising liquidity environment we love everything it's just a matter of who is rising more or less

[15:00] so I think we still like industrial commodities, gold and silver Chinese Peking and Chinese RMB. I think the trend that is starting late last year will continue well into this year.

[15:12] All right. Hao Hong. We'll have to put everything in for... Love everything. ...catchy people. See if you're right. Hao Hong there, managing partner and CIO of Lotus Asset Management.

[15:24] We are carrying down the Oprah trade in Shanghai, Shenzhen and Hong Kong. This is This Time Is Go. Happy Tuesday. Features are up this morning. Our state of Venezuela President Nicolas Maduro has faced a U.S. court along with his wife

[15:43] suing not guilty to narco-terrorism charges. There are periods before a New York judge does set off an extraordinary legal battle with major geopolitical ramifications. Let's get to our senior editor, Derek Waldo.

[15:56] He joins us from San Francisco here this evening. And Derek, just tell us what happened in court today. Well, it was a remarkable scene. Look, you know, Nicolas Maduro is one of the, I guess, most recognizable faces in world governance, certainly in Latin America.

[16:13] Stands, you know, six foot three inches tall. He is a clear head taller than all of the agents who were guarding him going through this process. Stands in a U.S. court, declares that he's innocent.

[16:27] He's not guilty. He says he's a decent man and still president of Venezuela, except that he had been kidnapped, his word kidnapped, from his home in Caracas.

[16:39] Now, you know, he certainly was taken from Venezuela by U.S. forces. He is now stripped of all of the sort of regalia of state, instead processed very much like anybody else would be, albeit with a ton more security presence.

[16:57] in a courtroom in New York facing these drugs-related charges that he had theoretically been facing for the United States for some great amount of time.

[17:11] It is one thing very much to say this world leader is involved in drugs trafficking and we don't like that and we'd like for things to be different. It is very much another thing for more than 100 special forces individuals

[17:25] and, you know, to sort of storm in, grab a world leader and present them to a United States court, you know, within a matter of a couple of days. This was a monumental operation.

[17:38] This is one of those, you know, sort of weekends that will remain in history. It will be something that everyone's going to be talking about for years, decades to come. I guess the framing of how that conversation evolves will also depend in parallel to what happens domestically in Venezuela.

[17:59] What's happening right now? What are we watching specifically there over, I would like to say, domestic affairs, but clearly that concept has been blurred somewhat. Yeah, well, David, I think the real question right now is sort of who's running Venezuela.

[18:14] And I say that in all of the possible ways to frame that. Literally, who is the person who's running? It's going to be someone who is an ally to Nicolas Maduro, who is now in that position, stepping up one rank to go.

[18:32] She was sworn in today. All of that is there. But Donald Trump has made very, very clear that in his mind, he is the ultimate person in charge of what's going on in Venezuela.

[18:44] Marco Rubio, the U.S. Secretary of State, who even when he was senator of Florida, was a very, very big Venezuela hawk, has been an incredibly influential person when it comes to U.S. policy on Latin America.

[19:00] He's going to be a point person for that relationship going forward. And so, you know, what does that look like, you know, sort of day on day? Now, that's one side.

[19:12] The other side is who pays to get, you know, Venezuela up and running. Trump has made clear that he sees American oil majors as the folks who will be going in to make those investments,

[19:27] potentially repaid by the United States in some form of way. You know, we're still waiting to see exactly what some of those companies, your Conoco, Co. with your ExxonMobiles and such, what their take on this is.

[19:42] But the U.S. Energy Secretary is going to be talking to some of them later this week. Derek, fantastic coverage so far. It's been busy, and no doubt it will continue to be. Derek, all the bank expenses, so forth, the senior editor, little latest, have taken place.

[19:57] Right. Now, just on that story of extension here, too, Bloomberg has been told that China's top financial regulator has asked the banks, the Chinese banks, to report their lending exposure to Venezuela after the U.S. ousted Nicolas Maduro.

[20:10] And of course, to say the regulator also urged banks to closely monitor Venezuela-related credits to assess potential risks to lenders. Of course, China has lent a backdrop here. It has lent billions of dollars to Venezuela over the years, mainly to support energy and infrastructure.

[20:27] process. Okay, as far as market reactions to that, we'll unpack most of the things. All things equal for pointing to the upside. 26.5, what a hacking index. The opening bell is under seven minutes away. This is the time to show.

[20:47] All right, Hangzang Free Market looking pretty good right now. We're up six-tenths of one percent. It continues to be an up-air story when it comes to the tech trade. Instead of We're watching, of course, agents' tax up 0.8% of 1%. Southbound flows we talked about were quite strong here.

[20:59] I think it's some of the highest levels we've seen since October. So that certainly is helping things here today. Eight shares are up 0.5% of 1%. We're still seeing a 698 handle for dollar-china. In terms of analyst actions, it's very much commodities-based, given what we heard from the call from Goldman.

[21:12] So given what we saw with aluminum prices, gold, and the like, we are seeing the likes of Chalco, eight and eight shares that have been cut to a sell. So at least still keeping that sell rating or cut to a sell rating.

[21:24] there, but price target at $9.10. So perhaps maybe things are now looking a little bit too heated there, according to Goldman. But yes, kind of cool, though, hasn't raised to a buy from Goldman Sachs. Anand Steel also has a cut to a sell.

[21:38] In terms of what to watch, twice shows that continues to be an ongoing positive story, given this whole AI video, a model that came out here. So we saw, what, double-digit gains yesterday.

[21:50] We're seeing another 2% gain. They're giving some of the overseas sort of popularity that we've seen in the U.S., in Korea as well. DOID Medea, Solitown, did visit both of these companies yesterday. And really talking about the urge for innovation, robotics and drones as well, as well as CCTV.

[22:06] The Open is up next. This is Bloomberg.

[22:21] Good morning, welcome back to watching the China Show. So we're going into the open today coming off the best start to the year onshore market I think in about 10 years or so.

[22:34] Couple of levels to watch 47 on the CSI 300 above that we back to the highest in about four years Shanghai Comp is also very near the recent high of 4029 above that we back to the highest in about four years Shanghai Comp is also very near the recent high of Above that we back to levels less than in 2015 Yeah 2015 So it brings us back to

[22:54] of course, the 10, 11-year highs here right now. Also watching Shanghai Composite as well, getting closer to those levels that we saw back, I want to say, about the same time. Yeah. $4,030 is the level to watch now, of course, for those levels.

[23:08] But yeah, just on the backup of Asia stocks already hitting those records and extending that record high once again. And it's really kind of bringing up a lot of, as even Hao Hong mentioned, some of the cyclical factors of this market in China as well.

[23:20] The PMI numbers that we got for December, we'll get a bit more of that because that came out during the holiday sort of. But maybe now there is some sense that maybe things are looking a little bit better. Is it a sign of a recovery? We'll see, right? But yes, what we are seeing right now as onshore markets

[23:34] They're looking a little bit flat, but you can see the black copper. There you go. This is, of course, the China futures there, which are continuing to follow what we saw, the L&E contract, which was 13,000 level, which had another record for that one. So we're seeing 3.5% gains for, of course, some of these Shanghai futures as well.

[23:49] But, yes, we talked about how the dominance of this market has tilted more towards the onshore market of late, right? So we are seeing, of course, yesterday a best start since 2015. So certainly there is momentum here right now.

[24:02] So, slow going so far, but Shenzhen is one to watch as Chimex continues to be. It's almost like quietly rallying, but yeah, in some ways we just overlook it somewhat. But it is doing quite well and sometimes even outperforming some other benchmarks out there.

[24:15] Look at how Hong Kong is doing as well. Obviously, we've been talking about the tech trade. That seems to be ongoing here once again. Look at H&S Tech. We're up 1% here. Apart from Alibaba and Xiaomi, we are seeing the likes of Tencent, Baidu, and Meituan are all gaining here this morning, right?

[24:31] We talked about Baidu. talking about their AI unit or chip unit about to get listed. We talk about Kuaishou and the double-digit games that we saw yesterday on their AI image model. Is it good or bad for celebrities?

[24:43] I don't know. I get so confused when I see it on social media, people posing with celebrities. And I'm like, is that AI? And most of the time it is. Love it or not, yeah, it's interesting.

[24:55] And so that's one thing to watch in this market, right? And how all of this, all of the above when it comes to the whole AI and how you position in China, whether it's the chip space or even just where AI can be applied to.

[25:07] So certainly that's what we're seeing. The sell-down flows, we're hoping to see another day of this, right? So the flows did hit the highest since October yesterday. And so we are seeing, it seems like, more in terms of momentum today in Hong Kong.

[25:20] Hang Seng is up six-tenths of one percent. In terms of what some of the top mainland tech movers are, we were focusing on the chip space yesterday, where we saw a lot of moves there. So, at Ed Micro, for example, we're still seeing some of that here today, but not as robust as yesterday.

[25:35] BYD Drillmakers as well, we did talk about Lee Chown, a premier, did visit BYD in the day at some of these companies and talked really about the whole innovation side of things, and robotics certainly gave a lot of attention there.

[25:47] So, you are seeing some of these stocks rallying on the back of that here today, with the likes of BYD up close to 1%, and copper stocks, right, given what we've seen in this copper rally. So, yes, there's a lot of issues or at least people concerned about what U.S. tariffs are going to look like.

[26:02] And I think the U.S. inventory is what's really kind of rousing a lot of the copper price now. So there you go. Jansky Copper up close to 4%. Yeah. Copper takes the gold today. Yeah. Speaking of something that's hot, we're looking at shares which have just been halted in the last few minutes.

[26:17] So we're looking at Japan here. This is Mitsubishi Pharma. So if you're not too familiar, you might be familiar with some of its products. This is a company that makes some of its hot patches. So shares were halted, initial spike, we understand based on our sources, let me just read it

[26:33] so I can be more precise here, that management is mulling a takeover bid to privatize the company. The deal could be worth 450 billion yen or in dollar terms, it's under $3 billion.

[26:50] That's what we understand so far. The buy proposal is set to be announced soon, but also according to people familiar with what is going on. Asking fans were halted, but I think the T-shirt has already had somewhat reaction to this breaking line that has come through so far.

[27:06] Okay, let's pivot back from Japan. And once this gets underway, if it gets underway, we'll revisit that, of course, back here. And also, that's been something that's been actually on the hotter side of things, I mean, as far as that concept. When you look at the 14-day RSI of Dollar China, onshore, offshore, we were trading at the 20th.

[27:22] So really to the downside, a lot of momentum there, both as you can see the spread between the two, and as you can see, absolute basis was back below the seventh handle on the Chinese currency.

[27:34] Let's bring in Becky Liu, head of China macro strategy at Standard Chartered. Happy New Year. Nice to see you. Happy New Year. We're wondering what's happening with the currency and why it's so strong, despite the weak cyclical backslide. Well, back in December, it was quite clearly seasonality. A lot of the Chinese exporters

[27:52] have been under-hatched and we know that they've got altogether more than one trillion of Chase corporates last year. But the conversion ratio has been the lowest since 2016. So many of these corporates were rushing to convert a bit more before year-end. But getting to January,

[28:07] we think the momentum is likely to be less strong, especially compared with December. Dollar CNY, Dollar CNA is likely to hover around 7% in the foreseeable future in early year.

[28:19] So first of all, it's a seasonality. We started to see a stronger dividend payment from some of the onshore companies that are listed in Hong Kong. At the same time, we are also seeing that fixed things started to see a slightly more weakening bias

[28:34] compared with the previous few weeks. At the same time, we also saw the United States media start to flag about this one-way appreciation back. The risk of one-way. So there's a bit more pushback already.

[28:46] Well, I think it's not yet to the level that they can't tolerate a bit more appreciation. Indeed, we believe that this year, Sinaloa will still likely to see some appreciation. One is that the case success is very structural.

[28:59] If you look at last year's export raise, three quarters are driven by industrial upgrade-related products. And at the same time, when China is having this renewed push to the internationalization,

[29:13] they will save their A-slide appreciation expectations from here. So recently, I think they just want to tame the speed of very fast pace of appreciation. So in general, we think appreciation expectation is going to be here to stay,

[29:26] but the actual pace of appreciation will likely to be quite modest and probably just follow that, follow what's rising value forward. Okay. A lot of what happened there is contingent on the macro,

[29:39] and I wonder, I think, if I can actually produce this, we have a chart that actually shows swaps. There are, I think we've seen this chart with you as well. So early signs that inflation will be, I wouldn't say coming back in a big way,

[29:52] but better than the last 12 months. What's your view on inflation and whether or not great markets are getting that control? So the biggest deflationary pressure is now behind us. So we have seen the TTI, TTI bouncing back from the lows.

[30:04] So if we take a look at this TTI deflation, the world is over, especially with the commodity prices rising, this anti-inflation preventing the corporates from selling below cost and so on.

[30:18] So TTI deflation is likely to narrow further from here. But if we look at the general inflation picture for China, it's not yet a year for inflation. It's the year of gradually moving away from deflation.

[30:32] So if we just look at that from a numbers perspective, in the last quarter, we had the worst GDP deflator since 1999 of more than minus 1%. This year, we are probably looking for GDP deflator returning to a level that's quite

[30:47] close to zero, but not yet zero. So it's at the end of this round of the deflationary cycle, but it's not yet time for inflation. The PMI numbers that we saw for December, I mean, all of a sudden we're back above 50 across the board.

[31:05] Is that a one-off, or do you see that maybe there is some signs of recovery now? The signs of recovery remains relatively modest in our view. We started to see a few things changing.

[31:17] One is that the government is putting a lot more focus in terms of investment. So reviving investment is one of the key agendas at the beginning of this year, especially across the board, like manufacturing investment, infrastructure investment,

[31:31] real estate investment were deeply in the negative territory since the second half of last year. But if you look at the first batch of special bond-related funds that are deployed for infrastructure investment,

[31:43] is almost doubling the amount versus the first quarter of last year. But aside from that, if we talk about consumption, et cetera, it doesn't look like the government's push is going to be as strong as last year.

[31:56] And again, if you look at the funds under the special CBB bonds for the so-called good subsidy, the amount that they gained for the first quarter of this year is more than 20% lower

[32:09] compared with the first quarter of last year. So, if we look at retail sales, the moment when you have all these direct subsidies fading largely in the second half of last year, retail sales came down quite immediately.

[32:21] So, we still think it's going to be a mother-son situation given the high base in the first and the second quarter of last year. It's not very easy to see a very rosy number for the first half of this year in our view, but it also means that quite a lot of the economic stimulus, especially Cisco funds

[32:37] expenditure will be front-loaded again. And do you think that's because the softer fiscal support? Is that because, is that a sign of confidence or is that a sign of fiscal constraint?

[32:49] We think in general, like when we look at the aggregate amount of fiscal expenditure, it's probably going to be kept at a similar pace of last year. One is that if you got TTI rebounding, you typically would get fiscal income slightly rebounding.

[33:04] So even if you keep the deficit the same, then your spending momentum would be the same as well. The key difference is that they are reallocating where they are using the funds. So they are slightly scaling back the direct subsidy to, for example, the purchase of home appliances.

[33:22] But on the other hand, they are strongly stepping up the investment into a number of areas, strongly stepping up the support to infrastructure investment. So they are reallocating the funds.

[33:34] The total amount might be quite similar, but of course they also have some fiscal constraints, especially reflected in the infrastructure investment on the back of the local government situation.

[33:46] So that's, again, like this year, we will start to see fund loading of debt swap bond issues to alleviate some of this pressure. But in general, we'll see China is entering a year of consolidation and transformation.

[33:59] The overall economic policy will remain expansionary, but the focus is more on structural reform and gaining long-term competitiveness instead of an emergency mode that they had last year.

[34:13] What are the breaks then? I mean, 2035 was a result of the yield curve actually steeper. Can you say steep? We think in the foreseeable future, probably even last through the entire third half, yield curve might stay quite steep.

[34:25] On one hand, China is still relatively reluctant to cut rates in an aggressive way. So if you look at the PDRC's Q4 monetary policy report, I think there's one interesting statement that the goal is now changing to maintain low financing costs

[34:41] instead of driving financing costs lower in the previous quarter. So it doesn't look like they're going to cut rates aggressively. and on the other hand there are quite a lot of technical factors supporting the yield on the back end of the curve.

[34:55] So on one hand we are still expecting strong special government bond issues those are ultra long dated like on average a 30 year plus of supply but on the other hand there's a lack of demand for long dated bonds at this stage

[35:08] especially when equity momentum is holding up and when this equity bond to equity rotation is still ongoing. So, so long as your non-bank FIs are not buying the banking of the CAF mine, they're relatively elevated.

[35:20] So, what's your number one trade this year, early on? Well, early on, I think we could still look at the front end of the China rates. I think at the very front end, we're still relatively comfortable,

[35:35] and especially market is completely pricing out rate cut expectations, then this would still be a bit extreme. For the CNY, I think I would wait until probably the second half of this year for the performance to gain momentum again.

[35:49] So in the first half, it's more about a range-bound situation. Becky. Great to have you, Becky. We're the head of China Macro Strategy at Stanchart. We're checking the paper here right now. So we're getting some comments from the VFC, the central bank governor, Eli Lemelano,

[36:03] and saying that, look, the VFC, maybe they're leaning towards one more rate cut. So that is what they're saying here. If we get off the fence, it's probably another rate cut, but that's probably about it.

[36:15] One more rate cut, according to LimitLaw there. That was, of course, back in December. We'll see what else. But they said there still is another rate cut on the table for February. That's the timing right now. Yeah. Coming off the inflation frame, which came off the top of this, which actually came in

[36:32] slightly above expectations. The PESA, I think it's 59.40, 59.14.3. I'm just looking at the specific level we're tracking, which would be 59.26 is the level you're tracking,

[36:46] to the upside, of course, of the PESA. Okay, another story out of the Philippines. This is B2B. This is perhaps more B2C here. There we go. So Jolity, I think shares are still halted in Manila.

[37:02] Let me just check very quickly. But yes, the spinoff of the international business and the plan is to lift shares in the U.S. That's what we know so far based on that announcement.

[37:16] Okay. Just ahead. Yeah. We're talking about China and South Korea. Yeah. I was thinking about chicken. Oh, fried chicken. And then you stopped me. Yeah. Stopped me thinking. There you go.

[37:28] Let's talk about China and South Korea relationship. The United States is reaffirming bilateral ties at their second meeting in two months. A look at their latest agreement tonight, Chris, with Bloomberg. China is ready to work with South Korea to stay firmly committed to friendly cooperation,

[38:01] uphold the principle of mutual benefit and win-win outcomes, and push forward the development of the China-South Korea Strategic Cooperative Partnership on a healthy trajectory, so as to promote the well-being of the two peoples

[38:14] and inject positive energy into regional and even global peace and development. It's only been two months, but I have that feeling that I'm meeting an old friend I haven't seen for a long time.

[38:27] It's quite cordial and heartwarming. For thousands of years, South Korea and China, as friendly neighbors have forged friendly relations. I am ready to follow the trend of the times and work together with President Lee to usher in a new chapter in the development of South Korea and China ties.

[38:46] The Chinese and South Korean presidents were speaking during their meeting yesterday. I was bringing our China correspondent, Min Min Lo. She goes with now. The tone certainly felt like it was pretty warm. What were some of the concrete outcomes that came out of this meeting?

[38:59] Yeah, it's been pretty positive. So the two sides signed at least 14 MOUs. And I think for South Korea in particular, the main concern is that the trade surplus of China has turned into a deficit since 2023

[39:11] because China has been ramping up its own domestic manufacturing. It's been getting harder for South Korean companies to compete in China. So President Lee Jong-il has been pushing for more trade, particularly in areas like AI, consumer goods, cultural goods as well.

[39:27] also decided examples of Korean beauty products, films, and games as potential areas for breakthroughs. And we know that China has played this informal ban on South Korean entertainment in China since the fat missile crisis in 2016, right?

[39:41] And the South Korean presidential aide said it could take a while more for China to lift that down, but they are quite hopeful that with trust building over the longer term, we could perhaps in the future see South Korean pop concerts returning to Beijing.

[39:55] and one of the other big breakthroughs as well is that the two leaders finally agreed to resume a ministerial level economic dialogue that has been pretty much frozen since the South China Sea crisis. So another good sign that they are perhaps turning over a new gate here.

[40:11] It's hard to look at this in a vacuum, right? Because the geopolitical backdrop between the U.S. and China and Korea, of course, is one of the allies in the U.S., India is the Pacific. How is that affecting this dialogue? Yeah, so obviously, Ingemyung has to really walk a very fine line because not just the U.S., they're balancing their relations with China and the U.S., but also Japan as well.

[40:32] And we know that the China-Japan tension that is brewing and presidency in some ways is hoarding friendlier relations with South Korea. And the economic concessions that we saw today perhaps also coming at the cost of, you know, the pressure from China calling on South Korea to, quote, stand on the right side of history.

[40:51] and Presidency pointing to their combined efforts during World War II fighting against Japanese militarism. So South Korean President Kim Jong-un, he did reassure that, you know, Korea will continue to adhere to the one-timer policy. But the other tricky issue is also North Korea,

[41:04] which by and large was suspected to be a ballistic missile ahead of the threat. And because this happened after President Trump seized Maduro, and some analysts are saying that this is just sending a message to North Korea

[41:16] that abandoning that new care program could be suicide. So, you know, South Korea is asking China's help to advance peace in the Korean Peninsula, but that path is going to become more and more difficult as North Korea, like you, will

[41:29] want to accelerate its nuclear program there. All right. Min Min, thank you. I'm Min Min Lo there, China correspondent, on the latest, of course, on this Li Xi meeting. And there's more coming up on the impact, of course, of President Li's visit to China.

[41:43] The Harvard University Asia Center's Xiong Hongli joining us in the next hour. Just a brief look at markets. The milestone, CSI 300, high since four years. Shanghai Comp highest in 10 years. Had about these levels.

[41:55] But anymore, I hope this is The China Show. Here's some of the stories that were falling for you today.

[42:07] The U.S. and over 100 countries have finalized an agreement exempting American companies from some foreign taxes. The deal excludes U.S.-based multinational firms from the 15% global minimum tax negotiated through the OECD

[42:22] and also effectively blocks other countries from imposing more levies on some foreign subsidiaries of U.S. multinationals. Saudi Arabia is paying the price of its flagship crew for Asia for a third month amid signs of oversupply in the market.

[42:37] State producer Saudi Aramco lowered the price of its Arab light gray to a 30-cent premium to the regional benchmark for February. It comes as OPEC Plus sticks with its trend to pause supply increases in the first quarter.

[42:50] Okay, speaking of oil, Latifah, as a jumping off point, we're going to look at the market market. So we're mixed, not quite the extreme moves that we had on Monday. So call it, I'll give you a big word, consolidation.

[43:02] There we go. Five and a half percent, 13.2 right now. I think we did close below. We crossed above 13. We closed below it into the close, but that's academic at this point.

[43:14] 13.2 right now on copper on the LME. CSI 300 within the sector is there. So we are building on the very strong part that we were yesterday. And within the IT index specifically,

[43:26] so we're up 2.3%, the biggest gain or suspended fly on the CSI 300 is stock advanced micro fabrication. Presumed trading on Jan 5, that's a semi-quake, if the name doesn't give it away.

[43:41] Industrial stocks are feeling some of the moves to the upside. And the benchmarks, let's have a look at that, about 24 minutes into the cash market session, we did hit some milestones here on the mainline benchmarks. So highest close since January 2022 for CSI 300.

[43:54] When it comes to Shanghai Composite, we're just a few, I think, percent or two away from hitting those 2015 highs as well. So certainly, we're getting a very good strong start to the year for Chinese equities already for 2026.

[44:08] Hang Seng is already up some 1%. So today, it's more, we both, you know, onshore and offshore are doing quite well here today as well. HS Tech is close to 2% gain here. Bonds are on offer. Dollar China is still on the stronger side at 698 levels as well.

[44:22] So one to watch very closely is the currency that continues to be a positive story. Yeah. So I'll put some data. This is Hong Kong PMI. We have a bill sale on the Chinese mainland. And I'd also pay attention to Southbound flows, which is 18 billion US,

[44:37] the Hong Kong dollar today, of course, is the highest level in terms of Southbound buying since October. You have to consider, of course, that there was a holiday, so there might have been a chance of demand there. Just want to watch for so largely positive on Southbound flows.

[44:49] The second hour of the China show is next. Last year, in 2025, Hong Kong has been doing substantially better than Asia.

[45:15] I think Asia will only catch up after November 8th. And also right now if you look at the leadership in the market right so on one hand it the technology sector that is growing on full and then at the same time I think the industrial metals also hold very very well as well So I think many of the industrial names are actually coming back it giving people a

[45:36] sense of cyclical upswing, even though the economic data has not shown it. But I think in the market the sentiment is back and people have the money to spend and so they're ready to get back to the market.

[45:48] we could still look at the front end of the China rate curve. I think at the very front end, we're still relatively comfortable, and especially market is completely pricing up rate cut expectations, and this would still be a bit extreme.

[46:02] For the CNY, I think I would wait until probably the second half of this year for the performance to gain momentum again. So in the first half, it's more about a range-bound situation.

[46:14] There we go. our guests from the previous hour giving us their take on markets and really where their conviction lies. So short end of the curve for Stanchart and really for Hao Hong. He says, look, given the liquidity, everything looks pretty

[46:27] good right now in the equity market, right? Except for the highest close in January 2022 for the CSI 300. Welcome back, of course, to the second hour. And certainly, when we talk about the momentum that we're seeing

[46:39] today, it's not just the Asia market today. It's actually both that we're seeing quite a lot of juice. Yes. And that's despite, I think there was some downgrade coming out of Goldman in the metals space. But, you know, today we're moving in things, right?

[46:51] We're moving in things. We're looking at positive flow still across the stock market. You are still getting a similar theme in the onshore markets, right? We have everything from precious metals that's showing up in the likes of Puget Mining.

[47:03] Some of the chip and semi-plays are leading this. Cobalt, of course, is more a material play, but that's nothing new, suffice to say. See you guys. 7.10% to 1%. At this level, we are set to close at highest in four years.

[47:19] Now, Hang Seng Index, we talked about that. Let's flip the page, please, and have a look at how else we're doing here. So we're looking at Hang Seng. There we go, 1.3% to the upside, 330 there. And so it's not just price. It's not just the fact that AI is still a theme, right?

[47:34] There are plenty of idiosyncratic reasons in news and announcements, announcements to come out of CES. perhaps this will be fueling Israel even further. In case you missed the last five or six days,

[47:47] it's just coming back, of course, everything from the DT publication to the Biden news, to the Kuaid show data yesterday. So we're up 1.3 on a high thing and that's going into the, yeah, 32 minutes into the cash market session here.

[48:01] But yeah, you know, the question that we've been posing, and I think we asked this to Ha Hong early on, right? The fact that we've seen a shift in market leadership in favor of onshore stock. The CSI 300, of course, had a really, really good start to the year.

[48:15] Yeah, so I'm going to start since 2015. And certainly, it's the name that you don't think of, right? Last year was all about Alibaba and all the big players within the tech space. But right now, we're talking about hardware was doing very well yesterday.

[48:29] The tech stocks in particular, onshore markets, were double-digit gains for some, not most of them. Right now, we are seeing when it comes to some of these tech behaviors are doing quite well here once again. And Shenzhen is still a little bit on fire here.

[48:41] But, yes, it certainly has been a strong start to 2026. And that is thanks, of course, to this rallying tech field. From Water Spring in Mannington, too, our managing editor for Asia Equities joining us from Singapore. On what really do you think is driving this optimism back on the mainland in Mannington?

[48:57] Yeah, I think mainly it is the dry powder that people have right now to put to use, and they chose the tech sector mainly. That's because a lot of people took profit towards the end of last year

[49:10] because of sort of a lot of uncertainties on the geopolitical front. And this year, if you look at investor sentiment globally, it has been quite upbeat. People are really putting money to use before and ask questions later.

[49:24] So the same thing is panning out in China. So if you look at overall trade volume, yesterday's trading session, Actually, we saw the highest volume in about three months, and the gains were also quite broad-based.

[49:38] If you look at the Shanghai Composite, more than 1,000 stocks were in the green, and today as well. So I think a lot of people are just rethinking the sort of sector allocation again, and the tech sector continues to be a winner.

[49:52] So South 50 is really an outstanding gainer because there's also a lot of listings coming up on this gauge. And if you look at some of those names, they are really market leaders, Changqing and also Yangzhi.

[50:09] Those are really two leading chip makers in China. Lianqi, it looks like the rally is broadening, and I wonder, to your point that people are rethinking their specific sector exposure to China,

[50:25] are there specific themes or stock stories that your team is focused on today as far as some of the big movers are concerned? Yeah, I think we are looking at the broader index level today, just because of the milestones

[50:40] that CSI and Shanghai Comp hit, as you guys mentioned earlier. I think these are not really fresh milestones, because we saw the milestones being reached in October, but at least gains have been reclaimed for now, and people are now looking ahead

[50:56] to what's on the horizon. I think the next catalyst would be the MPC, and that will be in March. And overall, I think the macroeconomic data point on the manufacturing front looked upbeat,

[51:09] and Xi Jinping also offered an upbeat assessment of China's economy in 2025. So both on the macro level and on the sector level, it seems nothing is going wrong right now.

[51:22] Ah, okay. Yeah, we could continue on this. That's like a positive note. Thank you so much. Our managing editor there for Asia Equity.

[51:35] I mean, how long to mention, right? With liquidity, you've just got to run everything. Buy everything. Looking at fundamentals, at some point, fundamentals will matter. They do matter, of course, but what is your starting point for 2026?

[51:48] Now, just to quote Bloomberg Economics, Changshu and her team, Beijing will be too front load stimulus measures this year to prop up growth now our team led by, there we go says that the government has restarted a subsidy program to energize

[52:01] consumption but only on a modest scale and it's likely to roll out more measures some of the consensus forecast right now in case you're curious what that looks like as far as the different metrics of the economy

[52:13] from growth, inflation retail sales, industrial production coming up on your screens and I think the The notes from Becky Leo, who joined us about 30 minutes back, was that there has been a shift in where the fiscal support is targeted,

[52:27] from things like appliances to more like infrastructure. So that's something to note, I guess, as we try and figure out which the big winners are. We'll be in the market this year. Yeah, let's hear your line, Exiton. She's a commenter at CLSA doing this now from California.

[52:40] Elisa, good to have you on the program. I mean, generally speaking, you take a look at how global growth fared for 2025. It held up reasonably well if you compare it to back to liberation days. But interestingly enough, when it comes to what you're projecting for China,

[52:54] it's for a growth moderation for 2026, I believe at a 4.4%, which is, of course, below the target. Tell us a little more about, you know, what sort of weakness that you're expecting from the Chinese economy this year.

[53:08] Yeah, I mean, so I think what is behind this sort of roughly 4.5% growth forecast you have for 2026 is an assumption around a couple of things that will be slightly different than 2025, right?

[53:22] So I think an important aspect of the assumption is how much do you assume for fiscal stimulus, for example, right? So right now our expectation is that the central government deficit for 2026 will remain around 4% of GDP,

[53:36] which is the same as it was in 2025, right? So technically, you're not getting, with that assumption, additional fiscal, should we say, impulse to growth in 2026.

[53:48] So that's one of the reasons why we have assumed a sort of moderation in growth for this year. Another thing is also some of that, you can say, front-loading that took place in 2025 of global trade ahead of imposition of U.S. tariffs.

[54:07] some of that was also in China's case you saw that in diversion of trade through other countries and diversification of trade in terms of exports to other countries and we just don't think that will be able to

[54:19] continue to the same extent in 2026. If there is, shall we say, more stimulus coming out of course than what we have currently assumed, then of course that's an upside to our forecast

[54:31] for growth this year. But we would need to see a step up in stimulus, especially on the fiscal front, to sort of see us moving closer to, should you say, a 5% target, if that's what they end up going with.

[54:46] Last, David here. So, I guess just to talk more broadly, because I think you alluded to some of the tailwinds that perhaps might not be as self-impressant this year, things like the front-loading of

[54:58] trade. Does that apply as well when you look at your projections for global growth, things like front-loading, AI CapEx. And if that is the case, if those tailwinds do fade somewhat,

[55:11] are there future, are there potential supports for growth that we could lean on, perhaps? I mean, so I think on that broad front, I mean, we think some of those pretty serious metrics that have driven the resilience in 2025

[55:24] are now in part or in the rear view. So one of the ones we talked about was front-loading a trade. In the case of US, for example, that there was also a front-loading of consumption and business spending

[55:38] ahead of the interdiction of tariffs. But as you also mentioned, a key driver of, say, the resilience we had elsewhere, but in the U.S. in particular, was, say, the front-loading we also had,

[55:52] or you could say the significant boost we had to AI-related capex spending. Nice on the U.S., of course, that had implications for investments for capex, but it also drove a lot of the exports out of Asia, right?

[56:04] So Taiwanese exports, for example, were held up by the strong AI cycle and so on, right? But as we look into the 2026, right, I would not say we are looking at a significant drop-off

[56:16] in AI-related CapEx, right? But we do see a moderation in the growth rate of AI-related CapEx, the increase we saw in 2024 and 2025, right?

[56:29] So the level effect is going to kick in. There will also now be more questions asked about, should we say, the commercial viability of some of these traffic investments and associated lending on that front, right? So that also, to some extent, might constrain the impetus to growth on that side.

[56:45] A final thing I would highlight that, in our view, is going to be a bit of a damper on growth in 2026 is, in 2025, we had, of course, relatively buoyant equity markets,

[56:59] and then that's the positive wealth effects for consumers, and it helped with raising capital for businesses. We don't have the same, shall we say, prospects, in our view, in terms of upside to equities.

[57:13] So we think the sort of wealth effects and the positive effects on growth on that side as well will also diminish. So we do see some softness in growth in the next few quarters on the back of this. For the U.S. specifically, we're looking at growth of 1.9% this year in 2026.

[57:30] It's a bit of a year of two halves. We stopped the first half, and then a somewhat stronger second half of the year as you start to see the last effect of Fed easing and fiscal stimulus. Yeah, it seems like we're starting to see at least some central banks in this part of the world

[57:46] being a bit more on the hawkish side, at least. But the Fed is still the key thing. where markets are still pricing in two rate cuts for 2026. Do you think they're pricing in too much? I mean, how far do you think the Fed can actually cut this year?

[57:59] That's in line with our forecast as well for the Fed two rate cuts, and we've had that for a while. Our view is that those two rate cuts would come in the first half of the year. That's more because we do see more of the softness and growth playing out

[58:14] in the first half of the year. And then if you go into the second half of the mentioned, and we do see a pickup in growth on the back of those, and monetary but also fiscal stimulus, right? So I think that's still realistic. But I do want to highlight that inflation risks in the U.S. are not gone.

[58:32] I think the latest inflation reading we got from the U.S. was biased by the government shutdown, and I think actually that inflation number was lower than, shall we say, the underlying inflation in reality was, right?

[58:47] So I think the Fed still has to contend with this persistence in inflation, right, and really have to move very cautiously. There's no way they're going to cut in January, for example, in our view.

[58:59] Market investors, economists last year, had somewhat a serious rethink over the concept of U.S. exceptionalism, whether that's on the equity market side or on the economy.

[59:12] I think you just laid out your projection for U.S. growth. So how do you think that broader story plays out in 2026? What happens to U.S. exceptionalism this year?

[59:24] Yeah, it's something we've looked a fair bit into, right? So, I mean, I think just a quick recap. I mean, for U.S. exceptionalism, of course, it's higher headline growth. It's stronger productivity growth that we've seen.

[59:37] Equity asset markets have also performed well. Some of the key drivers behind that has been strong productivity, as I mentioned, right? There's also been flexible labor and product markets, deep capital markets that provide significant amounts of risk capital, immigration, et cetera, right?

[59:57] So, of course, if you think about some of the new Trump policies that are coming in, right, I mean, more protection is not positive for growth. Then, of course, you have a tightening in immigration policies, which is also not, should we say, a positive for growth as well, right?

[1:00:12] issues around, so to say, through the net increase and pressures on central banks. So in terms of the efficient quality, there are also some concerns there, right? So we think those factors will be negative for the U.S. exceptionalism and will bruise it,

[1:00:29] but it will not end it, so to speak, right? So we also feel in the U.S. have a positive aspect that comes through from AI. and you can say AI investments and rollout has had more leeway to grow

[1:00:42] under the Trump administration. So we think potential growth will end up at around 2% still over the medium term. But these additional Trump policies that are bruising potential growth

[1:00:54] are sort of capping a potential upside to the exception. Right, fantastic. Happy New Year to you, sir, and your team. Life Assistant there, of course, Chief Economist of the USA, joining us on their expectations for the year.

[1:01:08] Right. Maybe Dr. Copper has something to tell you about that. It's $13,000. For the very first time, we'll have a deeper look at the thriving, really the scorching rally in copper.

[1:01:21] Coming up next is Bloomberg.

[1:01:34] The irony of looking down to see what's below ground, specifically to see what's going up.

[1:01:58] So the best performing commodity this year in granted has been, just to start, has been copper, right? We're up, let's call it, 6%, 7%. That's the L&E contract.

[1:02:10] You look at the top thing on the CME. Might be something different, but suffice to say, we've done well. 13,000 a ton for the very first time today. Martin Rich is with us, our metals and mining reporter,

[1:02:22] to tell us what is going on with copper, Martin. Why do we start off with the demand side? Because it seems to be the new component here. That's certainly one of the components

[1:02:35] there's really a lot going on in copper as you said it's a really powerful rally we've seen it's up now 20% just since the end of November so really powerful year end really powerful surge into this year

[1:02:49] we're now well above 13,000 a ton which is levels that were really sort of unthinkable even a few months ago So last year there was a lot of mine disruptions, which curtailed supply.

[1:03:04] There's a long-standing bullish narrative about copper because of its use in the energy transition and renewable energy and power grids. There's also a lot of positivity around copper used in data centres and associated infrastructure.

[1:03:21] So that added an extra buzz. But then you also have the prospect this year, sometime in the middle of this year, US President Donald Trump is expected to decide whether there should be import tariffs on refined copper.

[1:03:37] Traders are trying to get as much metal as they can to the US ahead of that decision. And that's just possibly going to starve the rest of the world of metal. So when you put all these things together, especially that kind of tariff decision, which is a big uncertainty,

[1:03:54] it is creating a lot of upward attention, drawing in a lot of bullish voices to copper. So it's a really momentum-driven trade at this point.

[1:04:09] Yeah, I mean, as you mentioned, $13,000 seemed almost unthinkable just a few months ago, but here we are. this US import rush seems to be driving a lot of the price action. What are the analysts telling you now on just how much more upside there is in copper moving forward?

[1:04:26] We've already, it's very early in the new year, so we haven't had a lot of fresh updates to price forecasts and so on. But I have to say, we've already smashed through most people's ideas of where prices were going to be at this point.

[1:04:42] So early in 2026. I would say that one of the risks is the tariff situation is fairly temporary. It's time limited.

[1:04:55] Globally, supply of copper is not that tight. It's just you've got this strange situation at the moment where inventories keep rising, keep going in the U.S., depriving the rest of the world of metal.

[1:05:10] And, you know, what people are doing is betting on the prices. at some point in the first half of this year peaking out before the tariffs are slammed on and that trade is shut. Another risk is that the AI trade in world equities also stalls,

[1:05:26] all that positivity about construction of data centres, infrastructure and so on. Copper's become quite heavily tied to that and if that pulls back, then copper might also.

[1:05:38] Yeah, so I think some of these analysts, they got to get going and maybe do an upgrade to forecast a little bit. Or get to work first. Yeah, it's only what, January 6th, right? Martin, thank you. Martin Ritchie, our metals and mining board. Well, David Ritchie has taken stock of the buck already.

[1:05:52] Yeah, yeah, for sure. Certainly one to watch. In terms of Asian markets and how the rest are doing, Martin, thank you. It's still doing quite well when it comes to, you can get like an Asian side. You go one and a half percent up now, close to 400 points up to there in the US. So, I think that's a good thing. Yeah, I think that's a good thing. Yeah, I think that's a good thing. Yeah, I think that's a good thing. Still doing quite well when it comes to the AT&T.

[1:06:04] We're at 1.5% up now, close to 400 points up here. They're at 26,743. CSI 300, we are on track, of course, to close at four-year highs, just around that 4,800 level as well.

[1:06:18] The Fed is still doing quite well. Costs be heading the opposite direction here today. This is Bloomberg.

[1:06:31] Some stories that we're tracking for you today. Tesla's China factory shipment fell 70%, 7% I should say, in 2025, despite a last-minute bump in December.

[1:06:44] Pre-lend data from China's Passenger Car Association showed the automaker shipped over 851,000 vehicles last year from the Shanghai plant. Tesla is struggling with a slowdown in global sales,

[1:06:56] losing its title as the world's largest EV maker to BYD. Hyundai Motor Stairs have given up urban games in Seoul after its Boston Dynamics unit unveiled the latest version of a humanoid robot designed to work in the carmaker's plant started in 2028.

[1:07:12] Hyundai initially planned to deploy its Atlas robot to handle highly repetitive tasks before plugging it into more complex assembly work by 2030. And we're going to hear more from Hyundai's robotics technicians later on this week.

[1:07:25] Their vice president and head of robotics joining us live from CES in Las Vegas on Thursday at the time on your screen. That's going to be part of a special edition of the Bloomberg Tech Asia this Wednesday at 8.30 a.m. in Hong Kong, Tuesday, 7.30 p.m.

[1:07:41] If you're watching from New York, subscribe to Cinefunction TV, go or watch live on Bloomberg.com. Very, very quickly, there's a deal that's through Cafe Pacific, Air China reducing its stake. Solar is getting a heap more of that.

[1:07:54] It's playing out across the stock of Cafe Pacific. We're down about 2% on here. So we'll have plenty more ahead here on the China Show.

[1:08:12] 11 a in Tokyo Japanese markets are heading into that lunch break And yeah there seems to be still an up story for Japan here today Korea is doing the opposite thing. But the one thing to watch the next hour is, of course, the all-important 10-year bond auction happening there in the JVB market.

[1:08:28] Right now, we are seeing yields heading lower by one basis point, but 211 or so. So we'll see what the demand picture looks like here, of course. But, yeah, it's definitely still doing quite well at the top. It's not performing today up by about 1.3%.

[1:08:40] Yes. There's one specific stop that we were tracking there that was halted, of course, following that report. Here's some Mixed Food Pharma, right? Big spike on the back of their Bloomberg report. The pink patches.

[1:08:52] The pink patch. Yes. Hot patches for the pain. For the pain. There we go. I actually have one. Right on your back right now. Right now on my back. Yeah. What an endorsement. Yeah. It certainly helps.

[1:09:04] we've been complaining how cold it is here it's 10 degrees in Hong Kong and we all we know that doesn't sound like a lot like Celsius or something it is it's freezing and minimum

[1:09:16] of Celsius too it is it's one of those weeks where it feels a lot the ski jackets are out let's put it that way ski boots and everything else unnecessarily so including the gym selfies but don't get me started

[1:09:28] okay any gym artists so Javon is doing okay Asia is doing okay still 6 cents of 1%. Korea, though, the clear wind coming from that specific market has gone away at least for today. It's the Asia market in China between the heavy lifting,

[1:09:41] precious metals, materials, not so much tech, although tech is still up. Asia Pacific, ex-Japan is up 3 cents of 1%. So, yes, lots of reasons

[1:09:53] to buy into this momentum still here. Yep, and we'll talk a little more about the geopolitics as well, with Chinese Presidents Xi Jinping and South Korean leader Li Jinyuan have reaffirmed their bilateral relationship in that meeting.

[1:10:06] Of course, the two leaders have met about twice, I think, in a month already. It seems to count apex that meeting that happened late last year. So it's a sign that both sides are working to stabilize relations amid geopolitical tensions.

[1:10:18] Let's bring in our China correspondent, Minlej, this year right now. We talked about the tone was obviously very warm, but what really came out of this meeting? Yeah, definitely business and commerce was the focus here because President Lee brought

[1:10:30] within the delegation of about 200 business leaders, including the heads of SK Group, of Samsung and Hyundai as well. They were all there. And of course, President Lee Jae-myung has been wanting to turn around this trade deficit in South Korea that began in about 2023 or so.

[1:10:46] The concern is that that deficit could remain entrenched as China beefed out its own advanced manufacturing. So he's looking to expand trade, especially in areas like AI, like consumer goods, like cultural goods as well.

[1:11:00] So he cited the example of Korean beauty products, films, and games as potential areas for breakthroughs. And again, we know that China has played that informal ban on Korean entertainment since the Fed missile crisis in 2016.

[1:11:14] This is something that they hope will be lifted in the future. They're hopeful that with trust being rebuilt over time, we could soon see K-pop concerts in Beijing again. But have a listen to what he said when he met with President Xi.

[1:11:27] It's only been two months, but I have that feeling that I'm meeting an old friend I haven't seen for a long time. It's quite cordial and heartwarming. For thousands of years, South Korea and China, as friendly neighbors, have forged friendly relations.

[1:11:44] I am ready to follow the trend of the times and work together with President Xi to usher in a new chapter in the development of South Korea and China ties. so he is hoping to start a new era of south korea china relations uh so 2026 could be the year where

[1:12:01] we see this reset but we'll have to see whether the durability of some of those um outcomes uh would would maintain after this as you know i think this applies any year anyway but it's a very complicated geopolitical backdrop right now are we talking about the big stories of

[1:12:16] venezuela the u.s and china that doesn't seem to be affecting or could be affecting really and pushing these two closer together. Yeah, so we'll have to see how President Lee Dae-myung handles an expected bilateral meeting

[1:12:28] that he will have with the Japanese Prime Minister Takeuchi sometime in January as well, because China certainly will be watching that very closely. China on this trip had already warned South Korea that they need to stand on the right side of history,

[1:12:41] especially amid this tension with Japan. And President Lee Dae-myung assured China that they were going to stick with the one-China policy, But also, you know, Lee Jae-myung has been one of those presidents that was really trying to balance the relations with U.S. and China as well, more so than his previous president, Yoon Suk-yool.

[1:13:00] And I think it will be key to watch what President Trump does as well, how he responds to this closer tie between China and South Korea. because we know South Korea, for example, has been pushing back a little bit against that investment plan.

[1:13:13] Some of the details are a little bit vague and they were trying to support the one which traders have perhaps reacted to by viewing this investment plan as being too oversized from South Korea.

[1:13:25] Yeah, and it's interesting, right? I remember when we were doing APEC, the one thing was that he gifted him a Xiaomi phone. And there was this whole quick moment about, oh, yeah, it's a line secure. And they joked about it. Yeah, it's a bit of a banter there.

[1:13:37] You can check the security brass doors and whatnot. You remember that moment, right? There's a post that President Lee's made of him actually using that Xiaomi phone. He took a selfie during the second, which I thought was quite cute, continuation of that as well.

[1:13:53] But yeah, certainly, as you say, the optics were very, very warm and fuzzy, it seems. There are kind of correspondence in the low. I was wondering, did they use the same phone, I guess? Yes. It was the same exact phone.

[1:14:05] I think they mentioned it was the same phone that was gifted to him. in South Korea, they used it to take a photo. We need to see that. We need to see that selfie. There's a Samsung leader there. Huh? Yeah. Did you see these quickly-fixing SIM cards?

[1:14:18] The car before that moment. One can have more than one phone. Yeah, okay. Well, thank you so much, Nindenda. Of course, we'll talk a little more about this. From Harvard University, Asia Center, South Korea scholar,

[1:14:30] Siong-Hyo-Ning, joining us from Boston. Siong-Hyo, it's great to have you. Yeah, we talk about, you know, all these fuzzy moments, and it seems like people are almost calling it a reset of Sino-Korea relations.

[1:14:42] Can we call it that? Well, you know, the optics that you just mentioned from the summit between South Korea and President Xi Jinping were intentionally wrong. But do not make mistakes.

[1:14:55] This is for geopolitical alignment. It's about managing South Korea's many tensions with China. Now the way I see it, Lee Jae-min just executed a high wire act of what we South Koreans call

[1:15:09] pragmatism, diplomacy. He is not pivoting away from Washington, his military allies, where Lee is securing a flow for the South Korean-China bilateral economic relationship.

[1:15:24] Because the geopolitical scene lowers with President Trump's scheduled visit to Beijing in April, what South Korea fears is that with Trump and Xi set to negotiate a so-called grand bargain in April, South Korea fears that being treated as a bargaining chip or

[1:15:40] side dish on the menu by locking in a mooded event with Xi Jinping right now, Lee Jae-myung has preemptively defined South Korea's stakes before the superpowers cut a deal over his

[1:15:54] that this was a defensive diplomacy summit meeting to ensure Seoul remains a player, not a geopolitical pawn. So let's talk about what happens now.

[1:16:08] Okay, so let's call it reset. Let's look at specifically what type of specific commercial upside there is for businesses. And, of course, we had a whole flurry of businessmen that, of course, come along when we see these trips.

[1:16:26] So specifically, what points of contact do you think we will see improvement on between the two? So we are looking at, he's still in China and he's heading into Shanghai.

[1:16:38] And we are already looking at about 15 agreements. And they have agreed to cooperate on civil economy. You know, South Korea and China, they both have aging demographics, renewable energy,

[1:16:52] especially the resumption of cultural exchanges, K-pop, K-drama. This is Lee Jae-myung getting assurance that the next time there is a political tension between South Korea and China, China won't recognize trade against South Korean companies like they did in the past.

[1:17:09] You know, the status quo that your China correspondent just mentioned. The economic takeaway is that this is not necessarily about economic cooperation expansion, but stabilization.

[1:17:24] It's interesting, right, because the way that they kind of framed it, I think it showed that there was almost like a cost. That, you know, given what he mentioned there about, you know, if you go on the right side of history,

[1:17:40] I think that was the line that he mentioned to President Lee on this cooperation. How do you see South Korea really managing that relationship while not trying to pivot away from the U.S.?

[1:17:53] It's interesting that you caught up, you know, he's thinking you're right, it's pretty obvious to South Korea. What he said was stand firmly on the right side of history and make accurate strategy choices.

[1:18:06] This phrasing is a direct reference to the U.S.-China rivalry that South Korea is dealing with or coping with. These counter-movements to observe this pressure without conceding South Korea's alliance with the United States.

[1:18:20] South Korea is definitely watching the tightrope between U.S. and China. And Lee Jae-min's formula, the way I understand it, is dignified pragmatism, respecting the one-China policy verbally, as he did in his interview with CCTV,

[1:18:36] but demanding practical guarantees for South Korean economic survival in exchange. It is not about choosing side. It's about choosing survivor.

[1:18:49] Okay. Well, this is going to be a long-drawn-out process. It's going to take years. And I think one of the arguments you're making, sir, is we are at the beginning of the year where South Korea will need

[1:19:01] or can't stop riding in two boats, right? And I wonder, and I'm just going to use Venezuela as an example, not specifically because of this, but events in Latin America recently have highlighted that the U.S. is trying to cement its influence in its part of the world,

[1:19:18] in its neighborhood, right, its sphere of influence. And I can't help but think whether or not that could apply to U.S. allies in the Asia-Pacific that somehow, you know, through the passage of time,

[1:19:31] will slowly start to fall under the Chinese fear of influence. I don't want to be, you know, so diplomatic, but I want to avoid hypothetical questions. But Lee is, the way I see it so far is that

[1:19:44] Lee is not necessarily pivoting away from Washington and aligning with China. He's securing the funds to stay in Washington's camp. Lee Jae-min knows that South Korea can only be a robust security partner to the United States

[1:20:01] if the South Korean economy is not bleeding out from Chinese coercion. He didn't go to Beijing to change sides. He went to stop the bleeding so Seoul can remain as a capable ally of the United States.

[1:20:16] And Trump values an ally that is resourceful, and Lee is doing exactly like that. There are reasons why Korea is an ally of the U.S.

[1:20:33] Perhaps the reasons change because of the passage of time, I guess, just to reference that again. In your view, why do you think Korea should remain or remains a U.S.?

[1:20:45] What is the upside for Korea in terms of remaining an ally of the United States? I think South Korea is aiming for the future global economic trend, particularly AI and also super-powered quantum computing.

[1:21:03] And they think that this is the future of the global economy, including the United States and South Korea as well. And the original technology, the technology is all from the United States.

[1:21:17] and the South Korean political elites they see this as a very important foundational bedrock that South Korea could secure so that South Korea could survive and also prosper in the future economy

[1:21:30] amid the recent years of economic slump that South Korea has experienced. Thank you so much for the time there. That was Harvard University Asia Center

[1:21:42] South Korea scholar Sung Jong Lee joining us out of Boston In fact, we were just talking, Siobhan and myself, just before the interview started there, the selfie, of course, that took place.

[1:21:55] And I think we had some pictures, not just of, I believe, not just of the pictures of the selfie, but the selfie itself. And this is the post. There we go. This is the post. I was going to say that there's a selfie later, of course. Yeah. Pictures of the selfie and then the selfie itself included there.

[1:22:11] Yeah. There you go. Very cute. That's a nice picture. Yeah, it's cute. All right. Coming up. We're talking about Venezuela now. Nicolas Maduro declares himself innocent of U.S. narco-terrorism charges in his first court appearance.

[1:22:24] We have details coming up. This is Bloomberg. Outside Venezuelan President Nicolas Maduro has faced a U.S. court

[1:22:36] along with his wife, pleading not guilty to narco-terrorism charges. Their appearance sets off an extraordinary legal battle with major geopolitical ramifications. Bloomberg's Miles Miller reports from New York.

[1:22:50] Venezuelan President Nicolas Maduro pleaded not guilty Monday in federal court in New York to charges that could keep him behind bars for the rest of his life. When he walked into the courtroom, he wished people Happy New Year, and at one point, someone screamed at him, and he had a loud outburst saying he was kidnapped.

[1:23:06] He and his wife sat wearing headphones and jail garb to listen to translation as Judge Alvin Hauerstein read the charges against him. When asked to enter a plea, Maduro said through an interpreter,

[1:23:18] I am innocent, I am not guilty, I am a decent man, I am president of my country. There are four counts against him, including narco-terrorism conspiracy, cocaine importation conspiracy, and weapons charges.

[1:23:31] His wife faces three counts. If convicted, he's looking at life in prison. Starting in 2000, he allegedly moved loads under protection of Venezuelan law enforcement and became foreign minister in 2006.

[1:23:43] starting to sell diplomatic passports to traffickers. When they needed to move money back from Mexico, prosecutors said he arranged for government planes to fly under diplomatic cover,

[1:23:55] meaning that no one was checking what was on board. The indictment says he and his wife ran armed guard escorts to protect cocaine shipments. They maintained state-sponsored gangs, prosecutors say, to facilitate the operation.

[1:24:08] And when people didn't pay or threaten the business, they ordered kidnappings, beatings, and murders. And this is a massive scale. By 2020, the State Department estimated 200 to 250 tons of cocaine per year were moving through Venezuela.

[1:24:24] Also charged is their son, Venezuela's interior minister, and a gang leader, Maduro, represented by Barry Pollack, the same lawyer who represented Julian Assange. The judge in this case ordered Maduro and his wife held without bail.

[1:24:38] trial won't happen until 2027. They'll return to court on March 17th. At the courthouse in lower Manhattan, I'm Miles Miller, Bloomberg News.

[1:24:50] Meanwhile, Bloomberg's been told that China's top financial regulator has asked banks to report their lending exposure to Venezuela. This after, of course, the U.S. ousted Nicolas Maduro. Sources say the regulator has also urged banks to closely monitor

[1:25:05] Venezuela-related credit, assess, of course, potential risks to lenders. China has lent billions of dollars to Venezuela over the years, mainly to support energy and infrastructure projects. Former U.S. Commerce Secretary Wilbur Ross says China and Russia have benefited by getting cheap Venezuelan oil.

[1:25:22] He tells exclusively that President Trump's vision for a U.S.-led revival of Venezuela's oil industry will be a long, complex, and costly undertaking. Well, there's a lot that needs to be done. In terms of laws, Venezuela has the weakest

[1:25:41] property rights laws in the whole world. So that has to be fixed so that you have some assurance of private sector continuing ownership. But I think realistically, companies going

[1:25:56] in now in a relatively complex situation are probably going to want guarantees against expropriation. And that's not unusual. The U.S. and multinational entities often give expatriation and foreign exchange guarantees.

[1:26:19] Now, the debt structure is mind-bogglingly complicated. They have about $160 billion of debt altogether, counting expatriation claims, counting funded

[1:26:35] debt, counting debt for oil, counting everything. Those bonds have been trading in the high teens, low 20s. They could probably be restructured in the 30 to 40 cents on the dollar.

[1:26:50] So in the overall context, that's not a very big number. And one of the few good things is that the IMF has no exposure to Venezuela.

[1:27:05] And IMF is entitled to lend up to $50 billion. So they could very well be a source of some funding. If I can just jump in on that point before we continue over,

[1:27:18] because some of the exposure we do understand comes from China and debt owed to Chinese banks, for example. If there is a restructuring of debt in the country, do you expect the U.S. to exert force of who gets priority in the capital stack?

[1:27:33] Does it change where back payments and different restructuring comes from, just given the geopolitics of the moment between the U.S. and China? Right. Well, both the Chinese and the Russians had made loans to Venezuela that are payable, at least partly, in oil, but oil at very, very advantageous prices to them.

[1:27:58] So they are part of the problem in that they're getting oil very cheaply out of Venezuela in return for debts that otherwise are never going to be paid.

[1:28:11] Now the oil that comes out of Venezuela is mostly what we call heavy oil, and that requires a slightly different refining process from the American shale oil, which is mostly light oil.

[1:28:30] Both China and India have very strong facilities for processing heavy oil because a lot of the Iranian oil that they have been getting also is heavy.

[1:28:47] And that was the former U.S. Commerce Secretary, Wilbur Ross, speaking with our colleague there, of course, Danny Berger. Now, if you want to re-watch that whole interview or some of the other segments you might have missed, the function you run on your terminal is TV.

[1:29:01] We'll take a short break. We will see you on the other side of it. This is the news. We're looking at shares of Zoliby in Manila have resumed trade after I think being halted

[1:29:27] for a few minutes, well, academically. We're up now 7%. That's on the back of this plan on the part of the company to spin off its international business and listed in the U.S. Mind you, it's early 2026 and the timing for that is late 2027.

[1:29:46] So that's still going to be quite a bit ago. What the ticker should be? Oh, yeah. D-E-S-J-J-O-Y. I say, oh, T-Joy? Yeah. Chicken Joy? That'd be good.

[1:29:59] T-Happiness. All right. What's our name of the montage? Chris T. Chris T. Chris T. Oh, I like that name. All right. Give us your input here, everyone. Montage Tech. This is the one.

[1:30:11] They're rising down after a city has initiated a buy on, of course, the AI hopes. They're saying that, really, the Chinese semiconductor names to gain exposure to the global data center expansion.

[1:30:23] It's a rare opportunity, they're calling it. So they're 3% up for that. And Poplight. Yes. Yeah, you take the story. I don't want to do it. Oh, that's interesting. I love 2%. So what is the only thing? And look, the sales potential may be underestimated in North America.

[1:30:38] What? Maybe they're still buying them up in the U.S. But I think a lot of the stronger drivers are going to be non-Labubu products, they think. So, not just Labubu. That's great.

[1:30:50] That's impressive. See you later.