Bloomberg Audio Studios podcasts radio

news.

Welcome to the Daybreak Asia podcast.

I'm Doug Krer. We'll begin with crude

oil today which is moving higher for a

fifth straight session as the market

assesses the widening fallout from the

US Israeli war against Iran and the

combatants are vowing to press on. Now

we are learning that Kurdish Iranian

dissident groups based in northern Iraq

are preparing for a potential crossber

military operation in Iran. At the same

time today we're seeing a rebound in

equity markets across the Asia-Pacific

after an up arrow story for US stocks.

In South Korea for example a powerful

rebound is underway following

Wednesday's 12% selloff for the Cosby.

For a closer look now I'm joined by

Bloomberg's Leanting 2. Lean Ting is

managing editor for Asia Equities and

she joins us from our studios in

Singapore. Thank you for being here. Can

you help me understand what's going on

with the South Korean equity market

today?

>> The story about Korea basically is a

cautionary tale about leveraged bets uh

to buy into stocks. Yesterday we saw you

know the record sell off ever for Korean

stocks more than 12% drop and that was

really because the retail investors

leading into the war going into the war

they were just a wrongfooted right they

took out a record amount of debt uh and

uh they also put a lot of money into

brokerage accounts just sort of to get

ready to buy more Korean stocks. So a a

lot of that buying was really financed

by debt by margins. So that has caused a

lot of liquidation in a day when the

market plunged. So we see a lot of

technical reason behind that right force

liquidation a lot of gapping down and

that's a result of historic uh slump

that we saw yesterday. But today um I

think there was a lot of buy orders

leading into today's open. Again retail

investors even yesterday some of the uh

bravehearted were buying into long

leveraged ETFs. So there are a lot of

sort of uh still bullish people out

there looking to buy the dip. So today's

huge rebound is reflective of that. And

foreign investors yesterday I wanted to

highlight they were actually already

buyers. uh we saw at the end of day

about $1 billion of foreign inflow uh

into the market yesterday. So that kind

of inflow I think today is translating

into the the big jump up as well.

>> So when you look at the market internals

Leon Ting is it still technology related

and is that trade directly correlated

with artificial intelligence?

>> Yes, it's very much so. I think Korea,

you know, if you look at the overnight

trading in a Korea ETF in the US, there

was almost no sign that there was a big

crash in South Korea, you know, earlier

in the day. The EWI, I think that was a

ticker for the EyesShares uh Korea ETF.

It was it was up during the night and

there was still flows into it which

means um global investors not just the

Korean ones are still sort of very much

bullish about this Korea story about

memory chip shortage about how they are

being well positioned in this uh AI uh

supply chain. Um so that to me is quite

shocking right almost to global

investors nothing happened in Korea.

People continue to buy into this US ETF

of Korea. So, Leonting, we're getting

some headlines out of the National

People's Congress in China. The growth

target has been set in a range of

between 4 and a half to 5%. I think

that's the most modest we've seen in

about three decades. Some analysts were

saying earlier this is in effect an

admission that China's model, the

economic model that has powered the

country's rapid rise is now beginning to

show a little strain. How would you

describe what's emerging from the NPC?

Yeah, the growth target of between 4.5%

to 5% uh has been very well telegraphed.

So that bit of information is not a

surprise to market participants at all.

Xiinping's government has been talking

about how they wanted the quality of

growth, not just a pure number in the

GDP figure. So that's again well

understood by market participants. So

we've asked 10 people so far on what's

the takeaway. Everybody has said right

now they're not seeing market moving

news so far out of the MPC. The stuff

that came out including promotion of a

humanoid uh robot and also um the AI uh

AI related industry breakthroughs and

all that has been sort of reiteration of

what we heard before. And I think one

more thing to watch out for is the kind

of plans to boost consumption to lift

the proportion of consumption uh in

China's GDP that we haven't really seen

anything super concrete that has come

out of yet. But so far I think Chinese

market today is just being lifted along

with global markets. Uh Asia so far has

been the worst hit um in global stock

market since the war began. I think

China wasn't spared and today again it's

just a sort of the rising boat lifting

all tides.

>> You know, we know well that the story in

China lately in terms of prices has been

one of deflation. And so the government

set a CPI growth target for this year of

around 2%. How do you think they're

going to achieve that? Is that going to

come strictly from more government

spending?

>> There has been room for fiscal spending.

I think uh the deficit is still at

record high. That was the latest target

4%. Um but uh it is very very

challenging work to get CPI up um 2%.

Part of it is because um there is a lot

of competition and uh a lot of sort of

glut of supply in all sorts of things

materials even services uh that we saw

in uh China. Uh part of it as you as we

reported is this you know even in the

tech space right food delivery war

that's been going on of course solar is

overs supplied um lithium is overs

supplied and uh latest over supply that

we're seeing is actually AI application

models every other tech company has a AI

model that they wanted to promote um and

that has really added pressure on all

these internet names stock names, I

should say, just because they're

spending so much to get user signups um

for their latest AI app. So, that's

really pressuring margins. Again, that

doesn't reflect well for their stocks in

the stock market um and overall for

economy. That just adds to challenge of

reaching that 2% CPI goal. I mentioned

the push higher for crude oil and when

you consider economies like South Korea,

like Japan that are heavy oil importers,

what is the sense of the risk of

inflation picking up as a result of

higher oil? Is that something that

people are talking about? Is there a

great deal of concern being expressed

along those lines?

>> Not really for China. Uh the interesting

thing about China is China's now ted at

the biggest beneficiary of this oil

crisis that we're seeing right now. Part

of it is because China gets its oil um

you know from Russia mainly right and

also it can still get from Iran, it can

still get from Venezuela. So China

actually has a lot of friends in the

global south to get oil supply from

these countries. Uh so that that sort of

spared China uh from buying you know the

the recently surged oil prices. Um, so

it's a very wellpositioned market when

it comes to energy supply right now.

>> So I mentioned the conflict with Iran

earlier. And another headline that has

emerged from the NPC is China's plan to

increase defense spending by 7%. That's

the slowest since about 2022. And I'm

curious as to whether anyone's surprised

by that number.

>> I would say yes. That's probably one

surprise that has come out of the MPC so

far. Um but there are people saying that

you know China yeah the official number

may be 7% but China has many other ways

to spend on defense. So the actual

number that may not be released to the

public could be a lot higher than that.

And of course for China defense is just

becoming increasingly important as we're

seeing what's going on in Iran. There's

a lot of concern about you know what's

going to happen to Taiwan in the next

couple of years uh before Xiinping steps

down. Um so I would say defense is of

critical importance uh and China really

you know will not uh that slip uh in

terms of the technological breakthrough

in the defense sector relative to the

rest of the world especially uh with the

US.

>> Leanting we'll leave it there. Always a

pleasure. Thank you so much. Bloomberg's

Leanting too. She is managing editor for

Asia Equities joining from our studios

in Singapore here on the Daybreak Asia

podcast.

Welcome back to the Daybreak Asia

podcast. I'm Doug Krer. Financial

markets are still facing tremendous

uncertainty as the conflict in Iran

enters its fifth day and it shows no

sign of abading. Thran is targeting

Israel and Gulf states. And at the same

time, Israeli and US forces have been

bombing targets in the Islamic Republic.

That would include the US sinking an

Iranian warship in international waters.

It was on Tuesday when Goldman Sachs CEO

David Solomon expressed surprise at what

he called the market's benign reaction.

On Wednesday, Solomon spoke with

Bloomberg's Heidi Straoud Watts in

Sydney.

>> Your team of strategists led by Peter

Oenheim is saying buy the dip. Do you

see complacency at the moment?

>> I I don't see I don't see complacency. I

just I think there's a lot of

uncertainty around the direction of the

conflict, how it'll be resolved, um you

know, what the offramps are. And you

know, I think it's fair to say when you

look at markets, market reactions have

been relatively benign. Um and I I

certainly could have seen over the last

couple of days, you know, a little bit

more volatility, but I I don't think

people are being complacent. I think

that market participants are looking and

trying to say, you know, how is this

going to play out? What's the endgame?

um you can see you know good scenarios

and more difficult scenarios and as they

have more information in the coming days

in the coming week or two you know I

think that will have an impact on risk

premiums I think at the moment what

market participants are really looking

at is is this going to translate through

to things that affect economic growth

and activity particularly energy supply

chains you know so far I think one of

the reasons why markets are reacting the

way they are is they're encouraged that

there's you know strong support for

trying to ensure that doesn't happen but

it's uncertain You don't know and um and

we'll see in the long run for portfolio

allocation and I know Peter Oppenheimer

Shahim Mosari needed a call for our

wealth clients. You know if you have

portfolio allocation there's nobody

that's saying you should change your

fundamental portfolio allocation because

of what's going on. But for traders and

day-to-day market participants that

think about risk premia you know every

single day. Obviously they're watching

very closely.

>> What about for people that run big major

global banks like yours? Right. Do you

worry about the lack of predictability

when it comes to policy, when it comes

to how this potentially ends and when it

ends? What's going on with your Middle

East operations, for example?

>> I I I worry about a lot of things. We

run a big global business. We have an

extraordinary team. And, you know, I

think one of the things that we have to

accept is the world is a very

complicated place. There's always a lot

of uncertainty. There's always a lot of

nuance. Um but we have you know base

beliefs and how economies will perform

how the world will evolve and you know

we operate around that but we always are

prepared to risk manage and think about

downside risks and I think one of the

things you have to do when you run a big

large financial institution is that when

you know facts change or risks come up

you've always got to be prepared to

pivot to shift to derisk and you know we

run our business you know that way

always we run a big balance sheet and we

you know we think about that every day

but there's there's nothing while these

are very very significant events and I

don't want to diminish them in any

stretch. You know, we've operated the

firm through lots of very significant

events year in year out and that's

that's part of what we do.

>> Is it business as normal then for say

your offices in Saudi Arabia? Is there

still travel going on? What's the

communication with clients?

>> That's that is complex. We have we've

got a significant number of people um in

um you know in those Middle East

countries and obviously first and

foremost we're concerned with their

safety um and you know we're trying to

do everything we can to support them and

their families. I would not say you know

it's business as usual in those markets.

you know, all those markets for all

businesses, you know, are operating work

from home and and you know, stay safe as

a first priority. And so, we'll just

have to watch closely, you know, how

things play out and um, you know, we're

very very focused on making sure our

people and their families are safe and

sound. And at the moment, that's our

primary focus in that part of the world.

>> Do you think there is a bit of an

existential cloud over Dubai as a

financial center now? Well, you know, I

do think safety and security, you know,

matters and I I I wouldn't say I I think

it's a little bit premature to talk

about existential clouds. Um, but, you

know, if you're living and operating in

a place and you didn't anticipate this,

um, it's quite scary and it's quite

unsettling. Um, and so, as I said, our

primary focus is on the safety and

security of our people there and we're

we're working very hard to make sure

that we're protecting them and their

families.

>> It's not as though the background prior

to this conflict was was crystal clear,

right? We just came off really trying to

work out what the AI scare trade was

going to be like. Do you still think

that when it comes to that narrative of

sustainability of, you know, I know

Jamie Diamond said there's some players

doing dumb things, for example, is that

does that still have further to go?

>> Um, I'm I'm not sure I understood the

question exactly. Are you you talking

about kind of AI investment, you know,

growth? Look, AI is a fabulous fabulous

incredible technology that is going to

drive massive productivity gains through

society. There's a lot of capital being

deployed to grow AI capabilities around

the world. Some of that capital is going

to get reasonable returns. Some of that

capital is not. They're going to be

winners. They're going to be losers as

within any technology super cycle. I

think we're early in that process. But I

think it's exciting and I actually look

at the glass being half full. It doesn't

mean that there won't be, you know,

capital that's burned, companies that

don't work out, but I think overall the

benefits to enterprise productivity, you

know, the economy broadly as this

technology gets developed and deployed

is going to be quite exciting. And I'm

looking at the optimism of, you know,

what's ahead from all of this and of

course trying to manage the risk and

downside and speed bumps that will

inevitably come along the way.

>> I like that earlier said, you know, in

your job you worry about a lot of

things, right? Trade, tariffs, US policy

is obviously one of them. I think this

is the first time we've spoken to you

since the Supreme Court passed down

their judgment. Does the further lack of

predictability on trade policy? Is that

also a concern when it comes to business

sentiment? When it comes to your views

on how the US economy is going to cope?

>> I you know I think uncertainty does

affect business sentiment broadly. But I

just say I don't think that I don't

think that at the moment US trade policy

is that uncertain. I you know I think

this administration has been clear about

how they intend to drive a trade policy.

I think the Supreme Court decision

affects a uh certain discharge of

tariffs into the economy, but there's

certainly other avenues for the

president. I think the president's made

quite clear, you know, how he thinks

about tariff and trade. And I think

while this administration is in place,

that is going to be a construct that we

have to operate in. Of course, if there

could be more there could be more

certainty around exactly how that looks.

And I think the important thing is how

it will look in longer perpetuity. You

know, of course the market would

appreciate that, but I think the market

operates knowing that there's a level

uncertainty around trade and trade

policy that that we just have to adapt

to and we have to live with.

>> I wanted to get a bit more on why you're

here, for example, in beautiful Sydney.

Do times like this of of increased

global uncertainty. Does that make a a

relatively more idiosyncratic market

like Australia more interesting?

>> Well, Australia's always been an

interesting market. We have 400 people

here. There are a lot of very very

important, you know, companies in

Australia. We have a good wealth

business in Australia. Um, you know,

Australia is an important market and an

important economy, not just for the

world, but also for Goldman Sachs. You

know, any market, any economy that's

important is important for Goldman Sachs

given our global footprint. I try to get

here about once a year. Um I try to do

it around an event like this. So we've

got a lot of our clients brought

together first of all for this

conference. Um but this has always been

you know this has always been an

important market an important economy

for Goldman Sachs and you know I I think

that's consistent you know in in any

environment. So I was here the same week

last week and I'm excited to be back

again this year.

>> What else are you excited about around

the region? I know as a house view is

very bullish on China. It's of course

National People's Congress week as well.

What's your feel about that market given

some of the crosswinds on trade, on

tech, on ge geopolitics?

>> Yeah, China's China's one of the largest

China is one of the largest economies in

the world. It's going to continue to be

one of the largest economies in the

world. You know, at the moment, I'm very

focused on the bilateral relationship

between the US and China. I'm looking

forward to President Trump's visit with

President Xi. It's planned for later

this month, the beginning of April.

It'll be interesting to see what comes

out of that and you know whether or not

China and the US can make more progress

you know on their bilateral

relationship. I think that's important

for growth in the world and I think it's

important for both the US and China and

I think at the moment that's fragile and

so I'm very curious to see you know how

that progresses. In the meantime Chinese

markets have done very well in the last

12 months. That's increased capital

flows you know into the region. We

obviously participate in that, but we're

going to watch those bilateral meetings

and progress in the bilateral

relationship very closely.

>> What would you like to come out in terms

of deliverables from

>> I'd like to see, you know, more

certainty and clarity around um how the

bilateral relationship will work going

forward. I think there are things that

the US wants and things that China

wants. I'd like more clarity around what

that's going to look like, you know, not

just in 2026, but you know, over the

coming years. And I think that's still

relatively uncertain.

>> What are we not talking about enough? Um

I know we've talked a little bit about

private credit. You don't think it's

sort of a systemic risk at this point?

>> Um I I think credit formation

um around the world is really correlated

to you know economic growth and economic

activity.

I do think that we've gone if I just

look at the US market which is obviously

you know a very when you talk about

private credit a very very large market

in the context of private credit we've

gone a long time without a credit cycle.

We've gone a long time without a

recession. I do think when you have

these longdated cycles, there are

variety of things that happen. One,

credit spreads narrow. Two, lending

standards, people have more capital to

play. They get aggressive. Lending

standards deteriorate a little bit. Due

diligence standards deteriorate. And so,

we're watching very closely to see if

there's been a little bit too much

aggression, frothiness in those markets.

But fundamentally when you look at the

underlying credit portfolios

particularly below investment grade

credit while there have been a bunch of

idiosyncratic events where there have

been problems the broad portfolios are

performing reasonably well. Why are they

performing reasonably well? Because the

economy is doing fine and it's very hard

to have broad underperformance in a

broad diversified credit portfolio if

the economy is doing well. When we do

have a slowdown in the economy you will

see it. I think because of the length of

the cycle, you probably will find places

where the losses are higher than people

expect. We're very very focused on back

leverage and things that could affect or

amplify in a more difficult economic

environment, you know, credit

deployment. But at the moment, when you

look broadly across portfolios, we're

not seeing things that are super

concerning. That's a completely

different issue than retail

participation and retail investors

wanting liquidity from what are

fundamentally illquid products. And so

that's getting a lot of attention, but

that's different than the underlying

credit portfolios. But I do think that

when there is a slowdown in the economy

or we do get to a place where we have uh

you know a recession, you're you're

going to see losses in credit portfolios

and you know those losses could be

meaningful. But you know we'll watch

that closely while the economy is

chugging along. You know that's that's

not the primary focus. That was Goldman

Sachs CEO David Solomon speaking with

Bloomberg's Heidi Strad Watts at the

Goldman Sachs Australia Week

Alternatives and Macro Summit, 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, we look at the

stories shaping markets, finance, 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 Krer, and this is Bloomberg.