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>> Welcome to the Daybreak Asia podcast.

I'm Doug Krizner. Crude oil prices are

plummeting after the US and Iran

extended a pause in their war. Axios was

reporting earlier the top US military

commander in the Middle East, this is

Admiral Brad Cooper, he recommended

stopping the bombing campaign around the

Strait of Hormuz because it's reached

the limit of its effectiveness. And at

the same time, the New York Times

reports President Trump's advisers are

concerned about shrinking inventory of

Patriot interceptors and other air

defenses. Although today, in an

interview with the Wall Street Journal,

President Trump did push back on that

notion. Over the weekend, incidentally,

the Islamic Republic signaled it was

refraining from any retaliatory attacks.

Certainly will be a busy week for

interest rate decisions from a few of

the key central banks in the world. It

will begin on Wednesday with the Fed, no

change in policy is expected even though

the Fed is confronting a resurgence in

price pressures. We'll also hear this

week from the Bank of Japan and the Bank

of England. And for a closer look, we

caught up with Diana Mousina. Diana is

deputy chief economist at AMP and she

spoke with Bloomberg TV host Heidi

Stroud-Watts.

>> Of course, the issue that sort of

pertains to the Fed but also pertains to

broader central banks globally.

This question as to whether, you know,

depending on what happens with the war,

we see oil prices now down again for the

last session or so.

Is [snorts] it likely that this

inflation, you know, proves to be, I

guess, transitory or does the Fed need

to guard against potential stickiness

here?

>> Morning, Heidi.

Look, I think for now the Fed can stand

on hold and it seems to be quite

comfortable with interest rates where

they are at the moment. I mean, there is

a bit of a range in what Fed

participants expect will happen to

interest rates and even market pricing

for the Fed is a little bit up and down.

On the one hand, you've got pretty good

labor market outcomes at the moment,

which suggests potentially upside

inflationary pressures. But, then on the

other hand, that labor market data has

also been a bit mixed in the past 6

months. We've had some periods where

it's been a little bit weak. So, I don't

really think that the Fed is in a rush

to raise interest rates. Inflation is

certainly not out of control,

particularly when we look at the Fed's

preferred inflation indicator, which is

the personal consumption deflator, which

has been running at a bit of a softer

rate compared to the headline consumer

price index data. So, I think for now,

the Fed's looks like it's pretty

comfortably on hold. Potentially, a rate

rise later this year, though, if oil

prices continue to rise and if the US

economy continues to track as strong as

it has been in the past two or three

months.

>> We have heard some voices of dissent,

though. And I guess given the more

recent backdrop and the resurgence in

oil prices, are we leaning more towards

hawkish commentary, at least?

>> Yeah, I'd probably say that that's my

bias right now. We've also seen more

news around

additional tariffs that the Trump

administration wants to impose, moving

away from the tariffs which expired

last week to new measures plus

potentially even additional rates that

are added on. It's really hard to

actually keep on top of all the

different tariff announcements that are

out there and all the carve outs that

are being discussed for different

industries as well. So, the risk to

inflation is certainly to the upside.

Definitely don't want to downplay that.

But, at the same time, I think the Fed

is sort of trying to finally balance

US growth not slowing too much if they

do raise rates because it's highly

likely US economic growth is

incredibly strong. Productivity is

definitely

solid, but other parts of the economy

are a little bit more mixed and consumer

spending

could take a hit as well from higher

gasoline prices down the track. So, they

would want to balance that quite finely,

I'd say.

>> There's a growing number of hawkish

Bank of Japan yen wages as well, right?

Given how much pressure we're seeing on

the yen, there's a growing cluster of

voices that say that Governor Ueda

should be doing something dramatic. Do

you think that's likely? And I suppose

the extension of that question is are

they missing an opportunity here for

shock and awe?

>> Yeah.

Yeah, it's it's it's um difficult for

the Bank of Japan. I mean, the I think

that they really want to see that

there's more sustainable increases to

wages growth, which they haven't really

had. We've definitely seen a bit of a

pick-up in wage outcomes, but given that

there's been years and decades really of

persistent low wages growth, I I think

that they would just want a bit more

evidence that actually wages going to be

sustainably higher over the next year.

And again, inflation is not

particularly high in Japan that it

concerns the

the Bank of Japan. It's it's definitely

increased, but it's not at levels where

they need to act quickly. Plus, they've

already raised interest rates. So,

I think the Bank of Japan is likely to

be on hold for the next few months until

we get more signs that inflation and

wages is is breaking out higher.

>> When it comes to Australia, there's no

central bank decision, but we do get a

key inflation data for June. What are

your expectations there, particularly

given the broader economic backdrop

isn't looking that great at the moment

and certainly the property market

continues to decline?

>> Yeah, it's putting the Reserve Bank in a

difficult position because GDP growth is

soft in Australia and it's likely to

weaken over the next few quarters, but

inflation is still too high and that's a

big problem. I think the Reserve Bank's

going to raise rates again and with this

week's inflation data, I mean this is

critical. The key measure that you need

to look at is the trimmed mean

indicator, which is the core measure of

inflation in Australia. We think it's

going to rise by 0.9%

over the quarter. I mean that's pretty

high when you annualize that,

it's like 3.6%,

but year-on-year we think the trimmed

means going to be at 3.8%.

So, that's way above the 2.5% that the

Reserve Bank is targeting and that

ultimately is what's driving our view

that we need to see another rate rise

from the Reserve Bank and we think that

we're going to get one in August and

then a follow-up again in November.

Despite the fact that we do have low GDP

growth right now, it hasn't stopped the

fact that inflation is too high. So, we

think that more rate rises are

unfortunately needed. Otherwise, we

could see a problem where inflation

continues to get out of hand.

>> Um just to finish up on the BOE, is

perhaps not time to go yet, but are we

expecting a hawkish hold there as well?

>> Uh well, it's it's been good to see the

inflation data soften a bit in the UK. I

think that there's just so many

political challenges right now that the

BOE probably just wants to stand pat.

There is no real need to raise rates

again in the near term given that

inflation has come down, but certainly

there is that risk. So, a hawkish hold,

I think as you said is probably the most

likely outcome.

>> That was Diana Mousina, deputy chief

economist at AMP, speaking with

Bloomberg TV host Heidi Stroud Watts,

bringing you their conversation here on

the Daybreak Asia podcast.

>> [music]

>> Welcome back to the Daybreak Asia

podcast. I'm Doug Krizner. In China, the

excitement over the IPO in memory chip

maker CXMT is setting outsized

expectations. This company is formally

known as ChangXin Memory Technologies

Corp and it's set to become the biggest

China-listed firm on its very first day

of trading after raising some $9.8

billion. That's where we begin our

conversation with Rolf Bulk. Rolf is

head of semiconductors and

infrastructure at Future Fund Equities.

He spoke with Bloomberg TV host Heidi

Stroud Watts.

>> Tell us about the implications and I

guess the the pressure for this debut to

be a success given how much it could

potentially add momentum for other

listings in the space.

>> Yes, hey Heidi. Thank you for having me.

Well, you know, CXMT is really listing

at a very opportunistic moment. The the

AI cycle is is booming and memory is key

in this, you know, prices for memory

chips are up several folds over the last

year and for CXMT, which does not

directly play into the sector, most of

the chips go into smartphones, PCs,

consumer goods, but they benefit from

this from this increase in pricing and

that has allowed them to grow their

revenues more than 700% year on year.

You know, they're on track to do 16

billion of revenue in the first half of

this year, potentially up to 50 billion

in the second half of or in the full

2026 year. And in that context, an IPO

with evaluation of around 86 billion is

is not that expensive, right? So, it is

a very attractive moment and I would

expect that IPO will be will be well

received.

>> You've also made the important point of

how much local governments have been

early backers and even post IPO, they're

going to hold what around a 30% post

listing

stake in CXMT. This in addition to the

fact that we've seen obviously the

national team come in and support uh

some of the companies in this space in

the broader public markets.

This is really going to kind of give

that floor, right? Because it'll be very

hard for companies like this to fail

with that element of official backing.

>> Yes, it's um it's absolutely an element

of CXMT's strategy. You know, this is a

national champion. And CXMT, while they

might not be on the entity list, they

are still severely constrained in the

tools that they can procure from Western

equipment making companies like Applied

Materials, Lam Research, and Tokyo

Electron. And um as such, CXMT is very

much relying on China building out its

domestic semiconductor value chain,

including all of the tools that are

required to manufacture those DRAM

chips. So, they are pivotal in this

ecosystem, but also heavily reliant on

it.

>> It's interesting you talk about the

constraints, right? Because we're also

following the reporting about Deep Seek

suspending the second fundraising round.

Uh there are some controversy and

frustration from its founder about these

online reports about comments that he

made about where China sits in AI

competition versus the US.

You talk about the self-sufficiency

drive. How far along do you think is

China realistically?

>> Well, they're making great strides.

China in some categories, for instance,

in in model development, you named Deep

Seek,

um

Moon Shot AI, those companies are doing

very well. However, at the end of the

day, this entire AI build-out depends on

the infrastructure that is put in the

ground, in the actual data centers,

and in the fabs that that manufacture

the chips that go into those data

centers.

And there, um China is making is making

very good headway in some areas, like

etch and deposition, which are two types

of techniques that you need to

manufacture chips. But in others, like

lithography,

they are still they are still um nowhere

to be found, frankly. And um and heavy

heavily reliant on imports from ASML,

which is a Dutch company. And this is

really a key area on which China

continues to be dependent on Western

sources with with very little

alternative. And this is something they

need to navigate over the coming years.

And um and it's it's an uncertainty that

that the entire Chinese ecosystem will

continue to face.

>> The reliance on Nvidia, the sort of lag

when it comes to technological

sophistication, is at the core of these

comments that have been attributed um to

the Deep Seek founder, right? We

haven't, you know, managed to have have

them independently verified at this

point, of course, but

do you think this kind of commentary

makes it difficult for a company like

Deep Seek? Or

particularly when we know that the state

has such a heavy involvement when it

comes to supporting and building out

these broader AI ambitions?

>> It it is a real challenge, yes,

absolutely. At the end of the day, if

your your Western competitors have

access to these

to these latest chips, which which um

run at a few a few times higher

performance than the alternatives that

you as a Chinese company have access to,

you're in a very challenging situation.

That said, the Chinese domestic market

is very large.

And um and that market in its own, I

think, will will prove to be a very um

profitable market for companies such as

Deep Seek. But in the long term, if they

want to compete globally, they will need

access to chips that are comparable

to an Nvidia, to an AMD, and so on. And

in order to do that, if they are

restricted from buying the chips, they

need to manufacture them themselves. And

that is where CXMT comes in. And um and

companies such as SMIC are also very

important.

>> When you talk about the sector outlook

for China, how quickly does that gap

close, particularly when it comes to

NAND versus DRAM?

>> Yeah, so NAND um company called YMTC is

well advanced in NANDs. And actually, I

would say that they are not far behind

the Samsung, SK Hynix, and Micron.

Now, they they they produce chips that

are around 300 layers in height, which

is comparable to what Western Western

incumbents manufacture. Now, CXMT, they

are still around two to three

generations behind.

They can still likely manufacture um or

design

one more generation from where they

currently stand, but at that point, they

run into a bottleneck, which is EUV. EUV

is a type of lithography that you

require for the most advanced DRAM

chips.

And China cannot buy those EUV tools.

They are they are they are banned from

importing them. And that is a real

bottleneck that they need to that they

need to navigate in the coming years.

And I think it will be challenging. So,

likely, CXMT will continue to lag its

global peers. But in a market that is so

supply-constrained like memory is today,

that does not matter that much. Uh they

still do 70% operating margins. They

still grow their revenues a fewfold

year-on-year. So, it is only when the

market dynamic turns, when we exit the

supply-constrained market, that that

competitive disadvantage can become a a

real issue. But that likely won't happen

for another few years, given the given

the tight memory market that we see

today. And that is why investors are so

excited about this IPO.

>> That was Ralph Block, head of

semiconductors and infrastructure at

Futurum Equities, speaking with

Bloomberg TV host Heidi Stroud Watts,

bringing you their conversation here on

the Daybreak Asia podcast.

Thanks for listening to today's episode

of the Bloomberg Daybreak [music]

Asia edition podcast. Each weekday we

look at the stories shaping markets,

finance, [music]

and geopolitics in the Asia-Pacific. You

can find us on Apple, Spotify, the

Bloomberg podcast 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 Krizner, and this is

Bloomberg.

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