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>> Welcome to the Daybreak Asia podcast.

I'm Doug Krizner. Semiconductor shares

rebounded in the US. We had the

Philadelphia Semiconductor Index jumping

more than 5% on Tuesday. Now, sentiment

was supported by strong chip export data

from both South Korea and Taiwan. And

then on top of that, TSMC reportedly

spoke with clients about price increases

of as much as 10% in 2027.

The Nikkei reports these increases would

cover the cost of rising manufacturing

materials.

The term chipflation comes to mind. So,

this morning in Seoul, you've got a

rally in both SK Hynix and Samsung

helping to send the Kospi higher,

extending Tuesday's rally. For a closer

look at the price action, let's bring in

Bloomberg's Winnie So. Winnie is one of

our Asia equities reporters, and she

joins us from our studios in Hong Kong.

Thank you for being here. It's always a

pleasure. I was struck when I was

reading the M Live blog today on the

Bloomberg that strategist Garfield

Reynolds was talking about the

volatility in the Kospi. He was

framing it in terms of gyrations in the

South Korean equity market. And he made

the point

by saying basically they've become a

feature rather than a bug. And I'm

wondering whether you feel that

investors need to

have a sense of calm before they return

to the market.

Wouldn't appear to be that way today

because I mean, we've got a pretty

strong rally underway.

>> Yeah, on a day like this, you would

think that they would jump right back in

because that's what the price action is

showing. And we even got another sidecar

today. And guess what? This is the 39th

sidecar we've had so far this year. So,

it really goes to show how volatile this

market has been. And actually, when I've

been talking to the long-term investors,

you would think that these kinds of

volatility don't really matter to them

too much because they look very

long-term. But surprisingly, I'm really

seeing and hearing investors sentiment

turning quite a bit because of this

extreme volatility. I was just talking

to East Spring yesterday. Um the fund

manager there told me that the one when

you look at the one-year return and this

month has just been terrible in terms of

performance, and they don't want that

volatility anymore if they can just in

fact get the chip exposure through

Taiwanese stocks. So, that's what he's

doing. He is in fact trimming a bit more

Korea and buying Taiwanese stocks, and

he just prefer to stay on the sidelines

until all these leveraged um and these

volatility is being washed out

furthermore. And when I talked to

Fidelity as well, they I was asking them

how they are kind of managing this type

of volatility, right? They mentioned two

things that was quite interesting. One

is that they have smaller sizes of their

um

their trades because volatility has

really spiked up about three times or so

since December. That means from a um

the risk management perspective, they

actually have to trim their positions

smaller to a third to um balance that

risk um risk um

exposure. And then they also need to

manage their margin of safety to have it

bigger. In the past, it might be 15%

drawdown, then you buy the dip. But

because it swings so much, the drawdown

now is about maybe 25% when they

actually see um a good

a good entry point to buy the dip. So, I

I find that quite interesting as

sentiment kind of sours about the

overall outlook for South Korea.

>> So, the story on the chips is basically

a story about artificial intelligence.

We know that, and we've been talking on

the podcast here in the last few days

about Moonshots Kimik 3 AI model and the

impact that it's having on market

psychology. One of the things that I

understand reading a bit about Kimik 3

is that it requires a substantial

capacity of high-bandwidth memory. Now,

we know that SK Hynix plays in that

space primarily, Samsung a little bit,

not as much as SK Hynix. And then we

have this Chinese firm,

Changxin Memory Technologies, which is a

big memory producer on the mainland, and

I guess

Changxin is ready to do an IPO here

before the end of the month, is that

right?

>> Yeah, that's a really exciting one that

we're watching, right? We're expecting

it to

IPO on Monday, in fact.

And just kind of to your point about the

benefits to these companies. So,

interestingly, when you look at the

initial reaction when we got this news

on the Moonshot

AI development, markets actually plunged

because the concern back then was

if we have cheaper, more efficient

Chinese AI models, what does that mean

for the massive spending of these US

hyperscalers and if that's justified or

not, if the demand for the

these advanced chips will remain solid

or not. But then, as people really

digest that information, as you

mentioned, and that's probably also tied

to the recent the past few days how chip

stocks are coming back, is that in the

end it benefits the overall demand if we

see that these cheaper models are being

implemented. That actually means more

adoption across the industry, and that

would require more chips. So, that's the

good part, and CXMT is such an

interesting case because it is the

world's fourth biggest DRAM company and

and

it the IPO would actually make it

China's second biggest IPO ever and the

biggest of Asia since 2022. So, all eyes

are on that because it really is in the

center of this tech rivalry between the

US and China. But, interestingly,

foreign investors, they don't have much

access to this IPO because um it's

listed on the mainland and they won't be

able to buy until um this stock is

available through the stock connect. So,

we're seeing foreign investors buying up

these different proxies to get exposure

to this IPO, whether it's buying Chinese

banks that are investors um of these

IPOs or even some of the hardware names

names of CXMT suppliers, for example,

and we really saw these stocks rallied

in the past few months. So, you can

already sense that excitement around

this IPO that is being very much over

subscribed as well.

>> Before I let you go, I have to ask about

some news regarding a potential

expansion plans on the part of uh SK

Hynix. We know that since the Biden

administration in the US, there's been

an effort to try to reshore American

semiconductor manufacturing or reshore

semiconductor manufacturing,

I guess it you have to go back a long

time before uh American firms were

actually building chips in the US.

We know that there was the CHIPS Act.

The Trump administration has kind of

leaned into that as well, requiring

companies like SK Hynix and Samsung

commit to building US facilities. And

there was a report that SK Hynix was

planning to acquire a facility owned by

Intel. Do you have any information on

that?

>> Yeah, that came out this morning and you

know, it was quite interesting the local

report saying that

um SK Hynix considering acquiring the

Ohio plant um of Intel. And

in fact, we actually just heard that SK

Hynix denied that their plan they have

that plan to acquire. But, what this can

potentially mean is that um

it will do two things. First, it will

help SK Hynix handle that pressure from

the US, as you just mentioned, to invest

further in um the country, and also um

help SK Hynix to expand capacity further

given how um the markets are also

expecting them to expand their supply

given the constraints that we are seeing

right now.

SK Hynix did still have this plan of

being able to manufacture these memory

chips in the US in the next within the

next 5 years. So, we will still be very

closely monitoring to see how other

plans they have um to expand further in

the US. But, this could actually be

interesting as well just because the

Intel Ohio plant is actually one of the

newest plants that Intel has, and it the

operations were in fact postponed to

2030 or so just because Intel has been

struggling to secure its clients. So,

this big manufacturing plant could have

really brought a lot of capacity for SK

Hynix and its plan to develop further in

the US.

>> And as long as we're talking about

Intel, the stock rallied by more than 8

and 1/2% in the US session on Tuesday on

plans

to cut more jobs, curiously.

Winnie, thank you so very much. It's

always a pleasure. Bloomberg's Winnie

Su, who is one of our Asia equities

reporters, joining from Hong Kong here

on the Daybreak Asia podcast. [music]

Welcome to the Daybreak Asia podcast.

I'm [music] Doug Krizner. Stocks in both

Tokyo and Seoul are higher thanks to a

rebound among chip makers. The

positivity on the outlook for AI is

offsetting concern over rising oil

prices due to an escalation in the

conflict between the US and Iran. And

that is where we begin our conversation

with Kyle Rodda. Kyle is senior market

analyst at capital.com and he spoke with

Bloomberg TV host Sherry Ann and Heidi

Stroud Watts.

>> What's more compelling to you? Investors

are really

led to sort of try and ignore the

geopolitics of the situation, but does

that come into play when these Fed

expectations really start to change?

>> I think so. I mean, it's a matter of

urgency and rate of change when it comes

to rates, I think. This sort of energy

story, I think the underlying inflation

pressures are still strong and that, you

know, the combination of fairly loose

fiscal settings as well as this AI

investment boom and sort of pressure

that's putting on fiscal resources right

around the global economy is going to

mean that underlying inflation pressures

are going to persist and that the Fed

will eventually have to tweak rates

somewhere down the line, probably more

calibration hikes. But, like I said,

this situation in the Middle East and

the rapid rise we've seen once again in

oil suggests that there are going to be

those supply-side factors coming through

from a higher energy um energy prices

across the globe, which will sort of

create that urgency for the Fed to tweak

a little bit sooner rather than later.

Um and of course, this comes with a high

degree of uncertainty, too, because we

are obviously well aware that with the

push of a truce uh you know, social

posts, you know, the oil price could

conceivably go back down to to sort of

$70 in the in the space of you know,

fairly quick succession.

Uh it or or or

you know, in in the space of a few

weeks. Um you know, whereas if things

escalate, things could get much worse

and again, that kind of rate volatility

will pick up even further. So, you know,

effectively, like I said, you know, this

this is kind of marring the market.

Obviously, it hasn't manifested too much

in equity volatility

>> [snorts]

>> recently. But if things continue to

grind higher here for oil, the story for

the Fed will be that it will have to

hike interest rates sooner rather than

later, and that won't be obviously a

positive thing for equities.

>> The volatility is is firmly in the AI

chip maker space, right? Is this just

the way it is going forward? Because

even if we are kind of set for a higher

day today, those gains have not been so

readily translated over the last few

weeks.

>> I think everyone's waiting for earning

season and basically tech earnings,

which we're going to start to get. And I

think, you know, maybe the rally that

we've seen in the last 24 hours or so on

Wall Street has been very much the

market's front running that. I do see a

lot of similarities to where we were at

this point in the last quarter, which is

to say that we were sort of marred by

geopolitical risk and interest rate

uncertainty. But then it was these

extraordinary profits from the

hyperscalers in particular that really

fed this narrative that monetization was

happening, that the investment boom

would continue because there'd be sort

of great free cash flow to sort of pump

back into capital expenditure. And we

saw everything rise from, you know,

semis because obviously the expectation

that flowed into sort of chip demand as

as

amongst other things as well,

along with of course, you know, those

hyperscalers, those who are sort of at

the front line of benefiting from the

the artificial intelligence technology

themselves. So,

my view is that, you know, we're likely

to see another earnings period where

we're going to get some solid results

from the tech giants that what we've

seen in the semis and what we've seen in

the tech space probably just a little

bit of con- solidation and a little bit

of turn.

But you know, obviously what will be

critical will be actually reacting to

the results. My bias is that those

results will be solid and you know, set

this sort of

trends higher once again.

But you know, we'll just sort of have to

wait and see. Fortunately, you know,

we've got that sort of data now, the

earnings data that the markets have been

looking for over the last few weeks,

which has meant that, you know,

effectively we've been waiting for that

that catalyst to either to push higher

or or or move lower if, you know,

earnings happen to to disappoint.

>> Especially given that more than 90% of

S&P 500 companies have beaten profits so

far, right? But at the same time that

the ones that missed actually were

heavily punished. What are the

ramifications and implications for the

Asian markets? When we're seeing already

so much volatility right now, the Korea

exchange activating the sidecar to halt

the Cosby program buying. I mean, it's

been up and down, up and down for this

market.

>> Yeah, I mean, you know, clearly there's

been some knock-on effects I think from

some of the interventions that policy

makers in South Korea have made to try

and control what has been pretty much a

wild and unruly market in South Korea.

And of course, you know, a part of that

is, you know, to do with chip demand and

the kind of choppiness that we've seen

bleed through from Wall Street trade

where some, you know, semiconductor

stocks have basically sort of pulled

back and blown off some frost. Um, and

that's, you know, hit SK Hynix, that's

hit Samsung and all those sort of big

names. You know, the other side of this

though with obviously South Korea is

that's just such a heavily retail driven

market now.

Policy makers are realizing the systemic

risk uh, associated uh, with having such

a highly leveraged, highly retail

dominated market. Not just to um, it's

equity markets and and financial system,

but also obviously financial markets

around the world because they were sort

of, you know, potentially dictating even

some forced selling in some other um, in

in assets in in other markets to

obviously cover losses in the in the in

the in the stocks that were, you know,

sustaining losses in in the South Korean

market. So, I think if anything, what we

can say about the Asian region if we do

get some of these solid if we do get

solid results from some of these tech

companies that will boost that AI

narrative once again and starts taking

that fear away of basically, you know,

peaking the AI investment and sort of

peak monetization, peak profits, is it

will take some of the pressure off

policy makers. It takes some pressure

off the market and ease some of those

technical pressures as well. Uh, so

that, you know, things can basically get

going again. Um, you know, stability can

return to obviously that very volatile

pocket of global markets.

>> Hey, Kyle, at At some relief could be

the fact that pharma stocks are really

not doing much despite the fact that

this morning we got President Trump

talking about generic drugs and taxing

them by 100% or so from August 2028. Um

it seems that the markets have already

priced in any trade volatility, right? I

mean, we'll continue to get these

headlines around new tariffs. But at the

same time, what are the implications if

we actually do get supply chain

disruptions because of these tariffs and

there are implications with higher oil

from the Iran war for the Federal

Reserve?

>> I think there is a possibility that the

markets have taken their eyes off the

ball because there's only so much, at

least from a narrative point of view,

that traders can focus on at any given

point in time. And I think there has

been instances over the last couple of

years where,

you know, it might the shoe might be on

the other foot. We've been sort of

dominated by, you know, trade

uncertainty and fears about tariffs and

things of that nature and then being

blindsided by geopolitical risk or

vice versa, what we're seeing now where,

you know, there is clearly still the

intention from the Trump administration

to try and push forward with its trade

agenda even though, obviously, pretty

much, you know, President Trump's whole

second term now has been dominated, or

at least I should say the last 6 months

of Trump's second term now has basically

been dominated by foreign policy, in

particular this war that's been started

in the Middle East. So, I think in fact

the markets aren't discounting this

fully that, you know, perhaps the Trump

administration will try and, you know,

more or less,

you know, fight a war on two fronts, a

trade war and a hot war.

And, you know, when it comes to the

former, that could mean higher tariffs,

more trade uncertainty, um another sort

of miniature supply shock, which has

been characteristic of Trump's, you

know,

economic philosophy for a long time,

certainly his second term, and could be

something that is, you know, maybe a bit

of a gray swan for the markets. So,

something definitely to watch out for

because again, I don't think the markets

are really paying much attention to it.

Perhaps I you could again argue a little

bit complacent when it comes to trade,

US trade policy.

>> Carl, when it comes to China markets,

the national team is back, it seems.

Given the view on China stocks was

becoming more constructive in recent

weeks and months anyway, does this just

add to that support?

>> I think it does. I mean, and it shows

you, you know, two things that we're in

a era of huge economic competition

because of what's going on with

artificial intelligence and there's the

commercial

imperatives to try and make sure that,

you know, every industry and every every

business is moving forward to try and

find ways to monetize this particular

technology and grow in that is a

interest aligned for business interests

as well as political interests in pretty

much every economy around the world. But

the flip side of it is the strategic

interests obviously in trying to protect

these industries and make sure that

effectively

financial markets and financial

conditions and asset prices are well

enough supported to make sure that

firms do remain in a position where they

can sort of, you know, try and achieve

their economic objectives again because

they more or less align with those sort

of strategic imperatives of trying to

make sure they don't get left behind in

this artificial intelligence arms race.

So, the fact that, you know, we've had

over the last couple of days Chinese

authorities stepping in to try and

support asset prices more broadly,

financial kitchen conditions as a way of

boosting sentiment,

you know, boosting economic activity,

you know, boosting, you know, the the

asset values of some of these companies

that are going to be important to, you

know, the Chinese economy in the future

as well as, you know, obviously the sort

of Kim Jong-un breakthrough is this sort

of deep seek moment means that I think

there's the potential we could see this

sort of valuation gap that has been

pretty persistent for a little while in

US markets compared to certainly Chinese

markets and those sensitive to China

close up a little bit. So, I think it's

a fairly positive signal signal

especially considering, you know,

valuations in China again relative to US

peers have been so depressed.

>> That was Kyle Rodda, senior market

analyst at capital.com speaking with

Bloomberg TV host Heidi Stroud-Watts and

Sherry Ann bringing you their

conversation here on the Daybreak Asia

podcast.

Thanks for listening to today's episode

of the Bloomberg Daybreak Asia edition

podcast. Each weekday [music] we look at

the stories shaping markets, finance,

and geopolitics in the Asia Pacific. You

can find us on Apple, Spotify, the

Bloomberg podcast [music] YouTube

channel, or anywhere else you listen.

Join us again tomorrow for insight on

the market moves from Hong Kong to

Singapore and Australia. I'm Doug

[music] Krizner, and this is Bloomberg.