♪

shery: you are watching "daybreak: asia," coming to you live from new york, sydney and annabelle: we are counting down to the opens in tokyo and seoul. haidi: australia just came online. the top stories this hour. asian stocks are said to see a weaker open with the dollar edging up, as the fed minutes show policymakers see rates stirring higher for some time. iran says explosions that killed him with a hundred people were punishment for its stance against israel, adding to fears of conflict. and new developments in japan's airport crash investigation suggesting the plane's pilot was not cleared to enter the runway. annabelle: we have the open of aussie stocks, trading fairly steady. futures have been indicating to a drop in the region which would follow what we had in the wall street session. still a pretty sour start after trading in 2024. the fed minutes really bring into that. the latest ones telling us that

policymakers essentially think rates will stay higher-for-longer. . working on a few more details on that, but it really did play out in the dynamics of the wall street session. in terms of the reaction in other asset classes, yields, a little changed. dollar strength for a fourth straight day. that has been playing into currency markets. the aussie dollar holding fairly steady yet again, trading volumes buying into the dynamics as well, given they are still very subdued for all vstoxx. -- a lot of traders still on the precipice. let's look at the rest of the region. we see kiwi stocks already trading online and they are in negative territory. japan futures we, have japanese equities returning from an extended break. suddenly want to be tracking. chip stocks, there is a potential for some sort of supply disruption from the recent earthquake. the japanese yen holding fairly

steady. it was earlier down 1% against the dollar, the dollar dynamic there. continuing to watch chinese equities, fairly steady. shery: we continue to see the strength of the dollar play out. we had four sessions of gains. that would be the longest run since november. futures coming online. we are seeing a bit of upside after we saw stocks falling in the new york session, the nasdaq 100 losing ground for a fourth consecutive session. those big tech names continuing to retreat in the new year. treasuries mixed. the 10-year yield ending the day near charlotte. the 2-year yield, though, climbing up. fomc minutes were taken a little bit as hawkish, we had seen fed officials remaining, continuing the conversation of keeping rate restrictive for some time, at the same time, of at the beginning of pete frates. and if they will begin cutting

into a 24. we had economic data showing a bit of downside -- u.s. factory activity shrinking. number of job openings also falling. the dollar continues to gain ground, regarding the disease disruptions in supply in -- we continue to see disruptions in supply in libya. where we can expect rates to go from here and what clues we got for the fomc minutes, let's bring in bloomberg's vonnie quinn with the latest on what was that by fed officials. what was your key takeaway? vonnie: no huge surprises. you outlined the major points. this was the power pivot that markets cheered that the federal done and indeed, the minutes seem to indicate that the fed is at or near the week of the rate michael -- the peak of the rate michael. forward guidance was indicate that the fed could increase, but it doesn't look like

participants are expecting an upside surprise. the data includes a data such as like that i and prices paid which showed a decline of more than expected. job applications were down 11% in the last week of the year. it appears that fed policy is working. don't forget, for the first time in more than three years, the fed's preferred underlying inflation gauge rose in november. it was below the 2% that the fed was looking for, for the first time in more than three years. so it has broad optimism according to these minutes, clear progress was one phrase, for example, the participant s noted. here is where it gets a little tricky. because they might all expect rates to be lower, but there is a vast disparity between who expects what, of course, we don't know who exactly is what particular dot on the dot plot, but eight officials the two quarter-point cuts.

11 c three or more. that is more in line with what the market is expecting -- 11 of them see three or more rate cuts. no indication if that will start in march or anything like that, participants seem to be very cheered about the outlook. also the staff projections show that they are even more so potentially cheered by the inflation outlook. >> what else was notable to you out of those december minutes? vonnie: the other thing that was really interesting was that there was a discussion about qt, quantitative tightening. it's been going on for 18 months. if you remember in the summer of the year before last, we got the idea that the fed would let $50 billion of treasuries and $30 billion of agency securities roll off the balance sheet.

it was an $8.7 trillion balance sheet. it's not about a $9.7 trillion and continuing to get smarter every month. people don't know when it will be done. if you like qt, there is a large amount of things that go into that factoring and it could be as soon as this year or middle of next year. but participants seemed to think that it's time to start talking about when they should start talking about it, in order to signal to the market when there will be a slowing as opposed to a complete stopping. so the market will get some notice of this. looks like participants want qt to slow before it stops, instead of just stopping out right. shery: vonnie quinn with the latest on the fed minutes. breaking news right now. tiktok is buying a $17.5 billion shopping business, according to people some of their with the matter speaking to bloomberg. tiktok is a need to grow the size of its u.s. e-commerce business ten-fold to as much as

event info $5 billion in merchandise sales this year. the 2024 goal for the u.s. version of the tiktok shop was discussed in internal meetings in recent weeks, according to these people. tiktok shop melds online entertainment with impulse buying. this, against the backdrop of ongoing u.s.-china geopolitical tensions. haidi: a lot of this is adding to uncertainty for the markets. we are counting down to japan's first trading day of the year and is not necessarily the most upbeat markets to be rejoining. our next guest says the japanese stocks remain interesting in 2024 and beyond. let's discuss where those opportunities lie, with eric lynch, managing director at scharf investments. happy new year. will it be another year of gains for japanese equities? of course it was already a banner year. where would you be looking to

capture more upside? eric: happy new year to you as well and thanks for having me. it was a good year in 2023 for japanese equities but keep in mind it, in a decade of lackluster returns, so the valuations for japanese securities are still only in the midteens, versus comparatively looking at the s&p 500 in the u.s. trading at 22x. so you have this big discount on names that are looking to grow their earnings based on a corporate governance story that is still intact -- of already margins of return on equity for japanese equities continue to glacially improve year-over-year. 10 years ago, they were in the low single-digit, 3%, 4%. now they are close to 8% or 9%. that underlines some earnings expansion even along with gdp growth which could be useful in a global slowing economy, continuing to become a global slowing economy in 2024.

haidi: a lot of this depends on where the fatheads. japan and the boj is the outlier, but for a lot of other economies, it will depend on which side the rate differential risk you end the following on. this chart takes a look at embedded market expectations. feds find future triggers expecting over five cuts in 2025 from the fed -- feds fund future traders. there is this narrative that they will keep pushing for more expectations on easing until the fed wishes to see. any pushback in the -- expectations on easing until the fed pushes back. to see any pushback on that? eric: great question. nobody truly knows the answer. looks like the market is anticipating that many cuts. it could happen, obviously. but if it does, you could have the risk-on rally that occurred

in q4 unwind. in december you did start seeing some rotation out of the magnificent seven into the average stocks out there, and the first two trading days of the year are again, this risk-off mentality. markets have priced in substantive rate cuts for 2024. haidi: i am glad that you mentioned the magnificent 7 because we talked until we have been breathless, about the lack of breadth in this market and how it has been focused on those seven stocks. if you are a bit more analytical, if you are more of a stock picker, you say they are average stocks -- you referred to them -- -- that have outperformed? eric: absolutely. obviously the mag were7 up 80% for 2023. guess what, they were only up 4% in the month of

december through the average stock on the s&p 500 index was only at 13% for 2023, but up 7% in december. so you have the average stock almost doubling the returns of the mag 7 in the month of december. you have a similar rotation out of tech in the first two days of the trading year. peter lynch was being interviewed a couple of months ago and he said, look, i think it's a bear market your average stock out there. we would agree as a stockpicking group that the average stock has been neglected, it has been huffing and puffing to catch up with the mag 7 seven in the past few years. there are a lot of interesting evaluations whether it is japan or in europe or in value stocks. a lot of lag there. there is a lot of opportunity to make money even if the market will be getting the fed rates and discount wrong and impacting the riskier long-duration

elements of the market. haidi: we're just showing a chart really encapsulating the frenzy across tech -- apple, microsoft, market caps had 13 digit gains, adding almost $1 trillion. i wonder if the likes of barclays who have soured on apple, they see a reversion. do you see a reversion? do you see more risks for that going forward? eric: definitely. it is a great company, but it doesn't mean it's a great stock. at 30x earnings, that is really double, more than double the tinier average. it is trading at around 10-15x for a decade and then it rebated coming into the pandemic. if you take the pandemic out, the output and income growth for apple in the last five years has only been in the low single

digits, because the vast majority of the profits come from the smartphone. because you have these $1000 average selling prices globally, they don't really take share. it's a great business, the persistent rate is really awesome, but they hover around 50% market share globally and they are not growing, because iphones -- smartphones really are not growing. it is immature -- it is a mature marketplace. so the consensus for apple earnings growth in 2024 and 2025 is only 3% and 4% respectively. so at 30 times earnings, the stock not growing that much, means there is a lot of risk to the downside. particularly regulatory risk. you so what happened in the settlement between google and the app store, the problems with apple and their apple watch and the oxygen reader. when you have a lot of money, $3 trillion market cap, you will get a lot of attention from

regulatory and taxing authorities worldwide so you better growth. the problem is, they are not growing. haidi: great to have you with us, eric lynch managing director at scharf investments. still ahead fears of a wider middle east conflict intensifies. a blast generation killing more -- in iran killing more than 100 people. more. this is bloomberg. ♪ hello, brent. hi? if you had to choose, would you watch paint dry or compare benefits plans?

compare benefits every time. come on, you know how complicated benefits can be. well, i run payroll with gusto. they make it easier to find benefits like medical, dental, and vision for my whole team. man, i think i'm going to need new glasses. don't worry. i've got you covered. yes! choose benefits without the mess. that's working with gusto. ameritrade is now part of schwab. bringing you an elevated experience, tailor-made for trader minds. go deeper with thinkorswim: our award-wining trading platforms. unlock support from the schwab trade desk, our team of passionate traders who live and breathe trading. and sharpen your skills with an immersive online education crafted just for traders. all so you can trade brilliantly.

thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh

haidi: almost 100 people are dead after blasts rocked central iran. tehran says the attacks were aimed at punishing its stance against israel. bloomberg's michael heath is here with us. we spoke about this yesterday obviously with the attack on beirut and now this. what do we know about responsibility, motivation? michael: well, the u.s. doesn't believe what israel says, that israel would be involved. you could argue they would say that, but it doesn't have the hallmarks of what israel tends to do if it does have offshore operations, they tend to be more precise, more targeted. this is quite -- it is women and children who were involved here. it seems a lot more like an isis

attack. iran was obviously one of the first countries to be involved in fighting isis in syria where it was backing president assad's regime. in terms of the instability it generates is a region, it just goes from bad to worse. it's one thing to have the assassination, the killing of the hamas operative, in beirut, with the hezbollah group there and potentially that opening a new front with israel. but in iran itself. iran is obviously involved with all these different groups around the region. it just adds to the instability of the tensions, definitely. haidi: at the next direction in the war in gaza, right, we have seen u.s. officials condemning

the suggestion of a relocation of palestinians. michael: again, we come back to this government in israel which is extremely right-wing, heavily religiously oriented, and which president netanyahu had to cobble together government and bring together groups that are normally part of an israeli administration. we have heard talk of relocating people in gaza. palestinians tend not to want to move -- i mean, they have been displaced a couple of times in wars over the years. so it's not something we want to move and it isn't something the international community wants any part of. it they israeli government has said this does not represent them. but it shows again, that you aren't to the moderate, sensible government it is well, you are doing with people with a pretty extreme background. so it's not a good situation in the middle east right now. everywhere you look, there seems to be problems popping up and

need issues that just cause more and more troubled -- new issues that just cause more and more trouble. u.s. has spoken against it and said they were not supported. israel does not control gaza and it would be up to the palestinians to move if they wanted to, which they don't want to. haidi: bloomberg michael heath with the latest in sydney. you can get a roundup of all the stories you need to know to get your day going on this edition of "daybreak." terminal subscribers, you can find it at dayb . also available on mobile, on the bloomberg anywhere app. you can also customize the settings as well for the news on the industries and assets that matter to you. this is bloomberg. ♪

vonnie: bloomberg has learned

that tiktok is aiming to grow the size of its e-commerce business ten-fold to as much as 19.5 within dollars in sales this year. that get the details from our tech reporter alex barinka. this company has been pressured by geopolitical tensions between washington and beijing, but how important has this e-commerce business become? alex: it is arguably according to our sources, is top priority not just for tiktok, but from bytedance. the business launched fully just before the holiday season and they have been throwing a lot of money, headcount and effort into the business. according to our sources, they are targeting the 17.5 billion dollar growth merchandise volume number, which means the value of products sold on the site which would be a pretty large increase from this past year when it was kind of in its infancy. for tiktok in terms of what is next for their business, growing the entertainment platform on top of the ads they sell, this is the next phase, particularly

for this gem of an e-commerce market here in the u.s. haidi: what about some of the regulatory and geopolitical concerns, particularly as we go into an election year in the u.s.? alex: i think for now, those concerns have actually calmed down potentially because of the election. a lot of young voters are on the app. we saw in the last midterm election in the u.s. a young democratic audience that was thought to be a big move by republicans in congress, that is precisely the type of audience that is found on tiktoks. it's been quiet, but it doesn't mean it will be continuing to be quiet in terms of legislation. if tiktok messes up or does something wrong, if there is controversy going into the season, republicans have been quick to use tiktok as a talking point. for now, things have been quiet, but there is absolutely no guarantee that they will continue to bezos tiktok continues to be a favored --

continue to do so as tiktok continues to be a favored punching bag/bloomberg's alex barinka en tiktok on tiktok and its emerging e-commerce business. other stories we are tracking, bloomberg has learned that some of the biggest hedge ended the year with double-digit gains in the challenging 2023 for investors. sources say citadel wellington find posted a 15% return. millennium management gained 10% permit multi-strategy funds averaged just under 5% growth through november according to pivotal path. for the second year, global banks made many underwriting bonds and underwriting bonds and underwriting loans for green projects, versus what they earned from fossil fuel activity. bloomberg data shows the world's top lenders generated $3 billion in fees last year from green deals. in comparison, they brought in less than $2.7 billion from fossil fuel productions.

the walt disney ceo is learning up allies as he seeks to stave off pressure from billionaire activist investor nelson peltz. one company will consult with disney on strategy. another hedge fund is also proposing three nominees to the disney board who will champion bob iger's strategy. bloomberg has learned that very gold spoke with investors to consider a possible takeover of the canadian copper producer. first quantum shares surged as much as 15% on the news. the company has lost half its value after the sudden closure of its mine in panama. the ceo mike bristow approached investors late last year. haidi: take a look at currencies . we are seeing upside in the bloomberg dollar index. 0.25%, inching higher against

its g10 fears after the biggest daily jump since march in the tuesday session. we did see that on account of treasuries steepening, the release of minutes from the federal reserve's december meeting adjusting that the narrative could be higher rates for longer. that is adding to more of that persistence of dollar strength. to that end, we are seeing the decline in the aussie dollar at 67.32. a bit of pull back as we have seen that exuberance of iron ore prices going higher, feeding into some china optimism and driving the aussie higher in the past few weeks. dollar-china pretty steady at

>> china has profound challenges on demographics and unfilled incomes option in the economy. there is still an export, savings-driven economy. but on the other hand china is 1.4 million people -- billion people. it's a key factor in global economic health. haidi: morgan stanley executive chairman and mr ceo james gorman on china's economic challenges. shery: of termism, though, is returning to the chinese tech sector, signs are growing that beijing is trying to contain the damage from harshly to regulations. that includes the reporters removal -- reported removal of the certain official, let's bring in owner is constructive on the sector's credit outlook, is only nothing, senior credit analyst at creditsights. great to have you. zerlina zeng, is this removal

sort of an indication that perhaps we could see a change coming from beijing? >> thanks for having me. the draft regulations were quite a surprise for the market in terms of the timing because if you remember back in mid-december, the top authorities already said they wanted to contain the type of restrictive economic and industrial policies to support economic growth. that is why the equity market reacted very negatively to the draft regulations. include look at some of the details, it is indeed some of the measures that would restrict the new games' ability to monetize some of their in-app games. but then after the market reaction, we saw some soft earnie by the gaming regulators -- softening by the gaming regulators. they came out with word that

top-four authorities are still supportive of industry. so overall we think the top authorities as well as different gaming regulators are supportive of the healthy development of the sector. shery: and yet the draft rules were pretty vague, right, which actually led to more concerns of what that could mean, especially if you are putting caps on the time that adult players can actually spend on these games. what are you expecting to see when the rules actually get consolidated in order for market sentiment to improve? zerlina: i think some of the measures are extremely restrictive for the development of the sector. as you said, if you look at some of the measures, they limit top ups. there would also be a limit not only for minors, but also for adults in terms of top ups. these measures, if implemented, could be detrimental to new game launchers. for the established and larger

ones, we see the impact of being less negative because they already have quite a large and established existing player base and they already comply with a lot of the new game regulations. there is still room for the gaming regulator to have a consultation with industrial players and the baseline expectation here is that the final version would be softer compared with the original preliminary draft. shery: is that why you are positive on building more positions in the likes of tencent, alibaba and some other names like meituan 30? zerlina: yes. one reason is we still think the tech regulation domestically in china is still very supportive. this is going to be a positive catalyst for the tech industry into the new year. the second reason is, we think the credit profiles of internet platforms, giving companies as well as some of the hardware

companies are going to improve in 2024. we also think the technical is very supportive. different from the equity, the new supply in the bond market has been very limited. the asian primary dollar bond market. as a result, investors have to hold onto some of the high-quality investment-grade names, and china tech is one of these market segments. shery: on top of some of those cops on the gaming time for adults,, there were also other features in the draft rule, including lowering the monetization. is that going to be a problem for some of these names trying to make money out of these games? zerlina: yes. i think market reaction was negative, and this is another biggest reasons, because some of the clauses restrict or limit n-app monetization for categories such as multiplayer, online role-playing as well as relation games.

but we think the large players like tencent and netease are less affected because they have less exposure to these gimmick categories. shery: there is a clear reason why beijing wants to really regulate the space, right, whether it is trying to increase diversity in the gaming sector or just trying to make these companies, especially tech giants in the industry, adhere to fair practices. tell us what needs to be done by regulators to really improve the fairness in this sector? zerlina: there are a few areas of regulatory focus of the past two years, one being antitrust, antimonopoly related regulation. that is why you are seeing it in the m&a space domestically, it has come down quite a bit. they are no longer allowing large players to acquire smaller ones, and to some extent, we think this curbs innovation in the chinese technology sector. the second one is data and

consumer privacy protection. as a result, you are seeing large players such as tencent, alibaba njd increasing their compliance or internal operation standards, in order to better protect and store and process data. the third one is minor protection. this targeting of the gaming sector. so far, i think the large players have been in strict compliance with these rules. they also increase their collaboration with a lot of policy think tanks as well as the government. over all there is a change of attitudes, a few years back, large tech companies were pretty much going against the regulation, trying to fight with the regulatory norms so they could better develop their topline growth, but now, they are in more harmony and in more compliance with regulatory measures and a lot of the vaguely tory proposals.

shery: zerlina zeng, senior credit analyst at creditsights. good to have you with us, with your outlook for the given sector in china for 2024. we continue to see those very challenging headlines when it comes to the broader economy. wages offered to workers in major cities declining by the most on record. data from online recruitment platforms showing that average salaries for new hires in the fourth quarter fell 1.3%. that is the biggest drop since at least 2016, which underscores this deflationary pressure and sluggish consumer confidence. it was a third straight quarter of the clients, the longest run since -- third straight quarter of the clients, longest run since -- it was the third straight quarter of declines. how are we setting up for the open? annabelle: a lot of weakness across the board. the china story is playing into it considering the health of the

economy, very slow to respond to any policy moves. but it is also reflecting the latest fed minutes which tells us rate are likely to stay higher-for-longer. so investors are starting to pier their bets on how starting to p -- to pare their bets on how aggressive the g10 central banks will be aggressive. we are seeing it reflected in treating so far. japan is the key market towatching the session. it has been on an extended break. it is coming online in the next hour. the singapore nikkei futures contract is more liquid. losses of 7% to 10% at the start of trade. u.s. futures fairly steady. vstoxx half an hour into the session are under pressure. a note of interest is in the energy space. take a look at what is the lone bright spot.

we'll wti gaining more than 3% in the prior session. it is advancing further as we come online today as well. there are supply disruptions in libya. that is playing into a permit also, increased tensions in the middle east. opec+ saying it is committed to stabilizing prices and that is leading to energy gains. that is the real point of rightness so far, in the session. haidi: morgan stanley's executive chairman and former ceo says the u.s. financial system is in good health, despite several lenders collapsing last year. james gorman also said proposed new banking regulations are too harsh and unlikely to change before being put in place. >> there have been thousands of comments put into the various regulatory bodies led by the fed . it was a proposal that i would, say, was extremely aggressive and set a marker.

it will not go through in that form. if it did, it would have very negative consequences for corporate lending across this country. it is not going to help the economy grow. >> if the republicans take the white house in 2024, whether donald trump or another contender, do you expect the title revelatory environment will unwind? >> it is too hard to predict. i think you see the pendulums swing. we swung to regulation and to an excessive proposal. i think it will swing back, heading back to more balanced regulation. that's where it should be. i am about balance, the banking system shouldn't be too regulated. on the other hand, a few overregulated and you acquire capital standards that are so high that banks are uninvestable, that doesn't serve communities. you need prosperous, thriving banks to provide lending products for small businesses and consumers.

>> we are less than a year away from bank failures to the extent that there is still fragility in the financial system. what are they? >> i don't think there were a spate of failures. there were three banks that got it wrong. i have said that publicly. they made the wrong choices. it wasn't complicated. they got washed up and cleaned up and folded into other banks and you move on. you keep telling me you are having a banking crisis -- no, we are not. we had a crisis for three banks it was a crisis for their shareholders and employees, not for the market. the core banking system is in good health. >> is not just the banking system, if you think of the hedge fund industry, regulators are also concerned about some fragility there. it wasn't too long ago that morgan stanley lost $1 billion in the collapse of archegos. do you think there need to be more safeguards in the banking system? >> honestly, there are too many participants in the nonbank system to say yes or no.

you would have to go subset by suspect. are we talking about payments? private credit? go through each of the pieces of it. there are always risks when dealing with leverage in a financial system, but if you don't have damage, you don't have lending. it's a balance. there is a balance solution to both of these debates and he confided with thoughtful discussion with regulators. >> the cost of leverage is higher today than it was a couple of years ago. where do you think interest rates go headed into the end-of-the-year, and what do you think market starts to look like in 2024? >> they go down. >> how far down? >> no idea. unlikely the fed would cut rates this year, but inflation has moved down pretty materially quickly. it has now become likely. so the first half of the year, i suspect nothing. second-half of the year, they could move a couple of times. but the key point is, we started this journey with inflation at 10%, rates at zero, unemployment

at 3.5%. my objective was to get esther 4 % inflation,, 4% rates, 4% unemployment. we are at 3.5% unemployment, so rates will come down. >> do you think the economy is in the all clear when it looked like a hard landing? do you think the economy will survive this year in good shape? >> the economy is fine. [laughs] i mean, there is this obsession with the word recession. . they come and go when you have imbalances between unemployment rates and economic growth. so the economy is doing fine, i personally think it is unlikely we will have a recession, very unlikely to have a hard landing. but we will see. but the odds are clearly in favor of a soft landing. i think the fed has done a great jobm that was, of course, morgan stanley's executive chairman and former ceo james gorman, speaking with sonali basak.

plenty more to come here on "daybreak: asia." this is bloomberg. ♪

when you automate sales tax with avalara, you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh haidi: we are learning more about the events that led to tuesday's collision between two

planes are tokyo's another airport. air traffic control transcripts appear to show that the japanese coast guard plane didn't have permission to take off before entering a rotary where the larger jet had been cleared to land. joining us from tokyo is our guest. the details of this latest development, what do we know so far? erica: hi, haidi. we now have a transcript of communications before the crash and it suggests that the coast guard airplane did not have permission to take off and was asked to hold this for entering the runway. a japan airlines passenger jet, on the other hand, was cleared to land. crews seem to have acknowledged the instruction to taxi and to hold important. officials from the coast guard yesterday refrained from commenting further on how the miscommunication happened as they are still investigating the details.

this morning actually, japan airlines said it expects to book about 15 million yen charge over the incident. they are still assessing the impact on earnings. shery: shery: the coast guard plane was on a mission to deliver supplies to earthquake- stricken areas. how are the rescue efforts shaping up? > it has been more than two days since the first earthquake happened and still, intensive rescue work is underway under rain and cold weather. more than 30,000 people at evacuation centers waiting to get back home or moving into temporary shelters. 30,000 households without power, quite a few who still don't have access to water or mobile services. kishida yesterday that he doubled the number of rescue crews to speed up operations,

and also assured everyone that the incident at hundred the airport has not affected rescue work and aid operations for the earthquake zone. shery: bloomberg's erica yokoyama there, from tokyo. we actually want to take you to the tokyo stock exchange. it is the first trading day when it comes to japanese markets, but at the same time, there is remembrance and respect being paid for the earthquake victims, a minute of silence being carried out. there will be no typical gong and bellringing which we are used to seeing at the start of every year. let's discuss what has been happening in japanese markets. we have seen a phenomenal 2023 and unaccountable rally for japanese stocks. for more on the outlook for japanese markets, let's bring in mliv strategist mark cranfield. . we have seen such a rally that

there has been concern that perhaps that would be it, especially when you have the boj moving into opposite direction and you have them trying to normalize rate. what is the consensus right now on where the japanese markets are headed in 2024? mark: i think in terms of equity market, people are still quite positive on that. some of the significant changes which happened in 2023 will continue. we have seen much better governance for japanese companies, encouragement to boost dividends, all those factors will continue. that is giving foreign investors such as warren buffett -- one of the reasons why they were so keen to come into the japanese market and other foreigners have allowed him as well. in the year and relatively unique level, that is attractive for people -- and the yen at a relatively weak level, that is attractive for people to put money in. nobody is expecting them to raise interest rates at the

magnitude we saw from the federal reserve and other regional central banks. so it's not going to create a huge head to japanese markets. and they have been preparing themselves for a long time. it's almost a year since we had the new governor in the bank of japan and the messaging has been pretty much along the lines of, "get ready for a change." when it does happen, it's more likely to be at least at the second quarter of this year. still something for the future, but a nonfactor, people have had time to price -- known factor, people have had time to price that in. people are ready for a coming stronger yen, they know the policy will tighten slightly, if conditions in japan are still healthy. no reason to expect the japanese equities cannot perform well this year. haidi: we have had expectations being ruined for traders betting on the yen strength but if you look at the fundamentals

structurally, do we see the worst of the weakness over for the yen, if we assume that whether it be in the next month or in six months' time, the boj will have to move in one direction? mark: the story for the yen is very much a two sided thing. a big part of that is what happens with the federal reserve in the united states. when considering the direction of any major currency, the factors from the u.s. side are very important as well. of course what the bank of japan dies will impact the currency. but the plays in the market have more to do with how quickly will u.s. interest rates come down. some people had interpreted the fed minutes as meaning there will be no rate cut in march which the market was starting to get excited about. looks as though that could be delayed. but there is still a lot of data to come before the fed -- they have a meeting this month which, of course, they are unlikely to move. but we will get cpi data next

week and more, pce core data which was the big one that gave jerome powell the reason to sound more dovish last time. people could quickly shrugged this off and we could be back to the same situation where we expect early rate cuts from the federal reserve. that would help to support the yen. on the flipside it's almost a bonus for traders that the bank of japan will be heading toward the tightening policy. if we get the higher wage growth that we expect in japan this year, the bank of japan can keep their path, so can the fed, and the yen will be the beneficiary of both sides of that story. shery: bloomberg's mliv energy east mark cranfield. -- bloomberg's mliv strategist, mark cranfield. 10 minutes away from the open of the japanese markets, first trading day of 2024. we just heard from the

japanese exchange group ceo. this is bloomberg. ♪ high taxes can erode returns quickly, so you need a tax-optimized portfolio. at creative planning, our money managers and specialists work together to make sure your portfolio and wealth are managed in a tax-efficient manner. it's what you keep that really matters. why not give your wealth a second look? book your free meeting today at creativeplanning.com. creative planning -- a richer way to wealth.

♪ (upbeat music) ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) -awww. -awww. -awww. -nope. ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. haidi: we are seeing the reopening of japanese market regarding the freight in this new year. -- returning the fray in this new year. the japan exchange group ceo's

address, and we have seen the cancellation of the gong ceremony which is typical during the opening of the new year, out of respect of the tragedies in japan starting with the new year's day earthquake and, of course, the ilyushin disaster at haneda airport. the investigation is still undergo. the tokyo stock exchange managing executive is present there as well. it comes on the back of a stellar year for the japanese stock market. it has been the market darling. a few more challenges ahead, according to a lot of strategists that we talk to, but potentially still further upside for japanese equities. we have the opening in tokyo so with opening in korea, next.

c'mon, we're right there. c'mon baby. it's the only we need. go, go, go, go! ah! touchdown baby! -touchdown! are your neighbors watching the same game? yeah, my 5g home internet delays the game a bit. but you get used to it. try these. they're noise cancelling earmuffs. i stole them from an airport. it's always something with you, man. great! solid! -greek salad? exactly! don't delay the game with t-mobile 5g home internet. catch it on the xfinity 10g network.

- after military service, you bring a lot back to civilian life. leadership skills. technical ability. and a drive to serve in new ways. syracuse university's d'aniello institute for veterans and military families has empowered more than 200,000 veterans to serve their communities and their careers. from professional certifications, to job training, to help navigating programs and services, we give veterans access to support from anywhere in the world.

vonnie: this is "daybreak: asia we are down to the market opened. in japan and south korea and we are watching as the japanese finance minister is giving the opening address as we are headed towards the first trading date in japan for 2024. what a 2023 it has been for the japanese market rally, haidi. . the nikkei 225 and the topix touching 30 year highs. haidi: yes, really the market darling in this order the world, over a few concerns of where policies might go next. of course we are starting the outline from the bank of japan to start at some point normalizing rates, and what an impact that will have on the yen. that is having an impact on trading as we go into this new year. annabelle: corporate governance reforms are another key focus. we have the restart of treating here in japan as they come in line for equities in 2024.

it is that move we are seeing to the downside coming through. taking a look at what we had seen indicated in nikkei futures, it's a drop of as much as 1.8%. we will see how that unfolds in the early minutes of trade. the key thing to note for japanese market, a couple of different factors. domestically, it has been a very tumultuous and tragic start to the new year in the country, given that between disastrous, the airline jet crash adding to the total from the earthquake claiming north of 70 -- claiming north of 70. externally, there is also the fed story. we had the fed meeting minutes overnight unless officials are likely to want to keep rates higher-for-longer, something that has been priced into the dynamic on wall street and has been felt in asia so far this year as well. the nikkei, you can see the drop of 1.2% as we come online this morning. the japanese holding fairly steady, former against the

greenback still trading at the 143 mark. bonds little unchanged. you can see the opening ceremony still taking place. a bit down back in respect of those victims from the earthquake. certainly something we will be tracking throughout the day. we also have the start of trading for korea. at the start of the day, the focus is on the tech sector. we have seen the nasdaq losing ground for the fourth straight session. it is more sensitive to the tech play. the kospi is down 0.9%. weakness in the korean won against the greenback which had been firmer for another session overnight. in the aussie session, tech stocks are under pressure. we have seen that leading the decline so far for the asx 200. but trading volumes are still about half of where they would be typically on a 20 day moving

average basis. yields little changed. you're watching the moves, double d is still extending its advance, it gained as much as 3.3% in the prior session -- wti still extending its advance. rising tensions in the middle east, opec as well really committed to stabilizing prices, that has put bulls back in the market. energy names in australia are in the green so far. shery: really interesting. the narrative oversupply in the market continues, but those risks are overshadowing some of that market supply, let's bring in on the fast who says, the market is geopolitics. not interest rates or a recession. joining us is victor rishaad -- vikas pershad, analyst at m&g

investments. we are focused on where the feds and the boj goes from here. is your rationale here that the direction seems to be clear whether it is monetary policy or economic activity? vikas: good morning. wonderful to be on an happy new year new year to all of you. i think if we look back over the last three or four years, there has been talk about interest rates, recessions, what will happen. and we have been aware of all those things. our focus has been on repairing for the future where we can't quantify things. geopolitics, if you look at the last three or four years, covid and the conflict around the world, that has more of an impact on inflationary -- more impact of inflation -- on inflation and on supply chains than the moves in interest rates. that is why we continue to focus, largely also because that is where companies are focused and that is what they are preparing for. it has direct ramifications for

markets and it also leads to opportunities. there are opportunities opening up as a result of all of this, as well. shery: as we talk about opportunities, at least for today's session, we are seeing the huge downside for the nikkei in the first trading session of the japanese equity markets. how are you quantifying the risks coming from the boj, and are there opportunities in the chinese market, especially after the huge rally in 2023? vikas: yes. answer your second question, japan is a market we have looked for a number of years and we like it even more as a result of the change we have seen. . we have seen public pressure from the tokyo stock exchange for underperforming companies that led to a huge rally in value names relative to growth means last year. the corporate governance reforms started over a decade ago, those continued to hit their mark now. and we see that happening across sectors and across market caps and that will continue.

we are still in the early stages of what we think is a long-term equity appreciation cycle in japan. we have the potential of high single-digit, perhaps even 10% earnings returns. and then you have the additional fill in from buybacks and from higher dividends, so we think japan is well-placed. shery: what about the risks from the boj? vikas: there are risks and there are opportunities as well. you look at financials, there are some banks that are more sensitive and will benefit depending on what the boj does. in a hike scenario, we got a preview of that in december of 2022 when there was the increase in rates, and small caps in particular were hurt for a little while. but then that opened up dislocations were reacted and we were well-positioned for the next year. i think that probably happens again. shery: many japanese companies not to mention other asian companies as well, are very much exposed to the chinese market which has, of course, been a

pressure in 2023. what are we expecting their outlook to be in 2024? vikas: i am glad you asked. if we look back over the last 12 months and think about some of the surprises for us as a team, that continued weakness in multiple markets in china was one of them. when you look across sectors, that is one market they highlighted as being very weak still, and some of them highlighted that that is continuing to weaken. companies and markets are prepared for it and they are extrapolating that. at some point some of these markets could turn -- look at factory automation, for one. semiconductors for another. there are pockets of demand and construction equipment companies, and japanese companies are well exposed to that. there has been some strength there. perhaps in the letter half of

the year we start to see a turnaround, but we are prepared for a continuation. vonnie: looking at your top conviction calls, you have domestic brands in china as one of them. why? vikas: based on the evidence that receipt see. you look at whether it isqsr chains, coffee shops, retail, apparel, there is a lot going on in china on the ground that we don't really see if you are focused on the megacap tech names and never realistic names. in aggregate, yes, the consumer is in a more challenging place to than he or she was 20 years ago. but we are aware of that. we look at things from the bottom up level and that market structure. that is where we see opportunities. opportunities in china, we also see them in the automotive sector, in the automotive supply chain, factory automation and

semiconductors. when we look at china, we see a market where there is a lot to of performance opportunities, but also absolute outperformance. we presume that will continue this year. shery: battop down issue that you -- talk about it that top-down issue you talk about in china has been a key point. a lot of that investment has gone to india, is valuation going to start being a problem for indian equities in 2024? vikas: when he asked me this a few months back, i thought the answer was, probably. in some sectors, the answer now is yes. many parts of the market in india has moved from being pricey to outright expensive. what we are taught as investors is that share prices follow earnings. you look at i.t. services, you look at consumer staples sectors in india, in the last year, earnings estimates have not gone up that much, most of them have moved up materially. those are two sectors where we

are underweight positioning at the start of the year. we have reallocated capital to other parts of the market. defense is one area, health care, pharmaceuticals and hospitals. we have exposure to financials as well. but clearly, more parts of the indian market are outright expensive today than they were six months ago in the initial part of the rally. shery: vikas pershad, good to have you back, asia equities portal your manager at m&g investments, with his calls for 2024. the nikkei is seeing its worst day since october. what are some of the big movers, belle? annabelle: pretty much every single sector so far is in the red this morning. it's not been a great start to japan either in terms of the disasters we have seen facing the country there, of course there was the earthquake on the first day of the new year, in magnitude 7.6 in the country's

northwest. a lot of coverage of the human toll from that disaster. but in terms of the market disruption being felt this morning with the resumption of trade. this is an area that has a lot of different semiconductor, chemicals, steel companies. a lot of them have manufacturing bases in that region and they are affected as well. the fifth-largest company listed on the topix index is one of them. it is slumping here, down 5%. you are seeing other companies behind me, some of the most frequently cited companies in media coverage since the earthquake happened. let's change on because, not only the earthquakes, but also we have the coverage of the japan airlines flight colliding with a coast guard playing at tokyo's canada airport. we are keeping a track on those airline stocks linked to that,

likewise under pressure. but broadly every single sector so far barring energy, is in negative territory. continuing what has been a difficult start to the year. fears of a wider middle east conflict also weighing into the picture intensifying after a bomb blast in iran killed over 100 people. we have details on that, next. this is bloomberg. ♪

haidi: take a look at how we are trading at the moment. it's another risk-off date as we head into the start of trading in 15 minutes or so as you get that returned her trading from japan markets. -- return to her trading from japan markets. the only outperformance is in the energy sector, up 0.9%. we see oro rising -- oro rising for another secondary. another attack on the container in the red sea, those blasts in iran, increased middle east

tensions. we have seen some pretty robust gains when it comes to iron ore even early into this new year on these perhaps elevated expectations that the chinese government will bolster economic stimulus after president xi's televised address pledging to strengthen the economy. almost 100 people are dead after blasts rocked central iran. tehran says the attacks were aimed at punishing it for its stance against israel, adding to risks of ever-widening broader regional conflict. bloomberg's michael heath is with us. details in the past few days really elevating those risks. what do we know about these explosions? michael: it's a real shock, haidi, because it's not often that you see these events in iran. the u.s. said, obviously, it had nothing to do with it, it

doesn't expect israel had anything to do with it and that seemed to -- given that states usually target individuals. this was carnage basically. a terrorist attack, it looks like. there have been reports that it may be isis or another terrorist groups. iran does have enemies on that front there obviously, in syria during the civil war. iran is saying that it is because of the situation in gaza, as a probably would. but it seems highly unlikely that a state was involved in that. but still unclear at this point. shery: we continue to see houthi militants increasing their attacks on the red sea, another indication that the conflict is escalating in the region. michael: yes. shery, they are like mushrooms, these issues popping up. whether it is the missiles being fired at boats from yemen, or

these terroristic attack in iran, or the assassination of the senior hamas leader in beirut. 2024 has started not in a peaceful fashion, it seems to be escalating. there isn't a lot of advantage either from the western side or the u.s. died or iran, in escalating this. most of the big guys, the major powers, they would rather see this contained today israel and hamas, because there is so much at stake. the potential for escalation is very, very high and no one knows what will happen there. there isn't a lot to be gained from that. certainly the chance for accidental or something else being triggered here is very, very high. it's quite an intense situation. haidi: in a lot of ways, we are seeing that dislocation between

israel, even between is really voices, the u.s. government. we are now hearing comments about, what one would less human error forced relocation -- what one would assume is forced resettlement. michael: there has been talk about forced resettlement of people in gaza. there is an argument for that. you can't do these things, you certainly can't do them in the 21st century. . it's a very right wing, very religious government. some of the ministers there have a history of choroid inflammatory remarks and we are seeing this again. it was condemned by the u.s. and the ministers were actually named, which is very unusual for the state department on the front. yes, the israeli government does into itself a lot of favors in terms of garnering support for international opinion. they seem to be almost aiming for a siege mentality where they

turn against the u.s. and it is israel against the world. really sort of biblical stuff that you hear from them. really out of step with the western world these days. haidi: michael heath there with the latest. you can get a ramp-up up of those stories that you need to know to get your day going on this edition of "daybreak." terminal subscribers, go to dayb . as well as on the bloomberg anywhere app. you can also customize the settings as well for the news on the industries and assets that matter to you. this is bloomberg. ♪

hey you, with the small business... ...whoa... you've got all kinds of bright ideas, that your customers need to know about. constant contact makes it easy. with everything from managing your social posts, and events, to email and sms marketing. constant contact delivers all the tools you need to help your business grow. get started today at constantcontact.com constant contact. helping the small stand tall.

and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com thanks to avalara, we can calculate sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh >> first of the year, i expect nothing. second half of the year, they could move a couple of times. we started with inflation at &, rates at zero, unemployment at 3.5%. my objective was to get us to four-person inflation, 4% rates,

4% unemployment. we are at 3% inflation, 3.5% rates, 3.5% unemployment. so rates will come down. shery: morgan stanley executive chairman and former ceo james gorman speaking exclusively to bloomberg. take a look at how equities are trading in the asian session, really trying to figure out where the fed goes from here. a mixed picture in the new york session with the 10-year yield ending near session lows. will continue to see downward pressure on yields in the asian session. we got the fed minutes that were taking a bit as hawkish because federal reserve officials continue to emphasize that rates would remain restrictive for some time. but at the same time, we had slowing economic activity in the data, u.s. factory output stock in contraction territory for the 13th consecutive month. that would be the longest stretch of shrinking activity

since the.com bubble burst. not to mention the number of job openings also fell slightly in november. so you have yields coming down. the 2-year yield slightly higher in the new york session, now at about 4.32. some of the biggest hedge funds closed out 2023 with double-digit gains. sources telling bloomberg that the main fund at ken griffin's citadel posted returns better than 15%. millennium management gained about 10% as well. bloomberg su keenan joins us with the latest. i was looking at the ritz trading session today, still very volatile. it was a very volatile 2023. how did these firms do? su: double-digit returns is impressive when you consider there was a war in the fall, there was a collapse or turmoil in regional banking in this ring, and central banks were raising rates around the world. so citadel hedge fund now based out of miami, all their funds returned about 10% the flagship

multi-strategy fund, the wellington, exceeding 15%. discovery capital urged 48%, 1.5 billion dollar fund, also known as one of the tiger cubs, rob citrone, the hedge fund manager had previously worked for julian robert and. they manage those returns through a number of long bets on u.s. stocks, sovereign bonds in latin america, also some long short bets on financial stocks, interestingly enough. and then you have millennium management gaining 10%. you may recall, 2022 was a strong year for hedge funds. lola told trading of 2023, though, put many hedge funds at a disadvantage to the broader market, check out how the nasdaq 100 did, better than 50%. it's best year since 1999.

the s&p 500 also up some 24%. so when we talk about volatility, interesting that discovery capital, which surged 48% this year, was down 29% in 2022. so from year-to-year, these funds really struggle to get consistent performance. meanwhile, the benchmarks had again, a stellar year. haidi: we are seeing many indications that some retail investors missed out on last year's rally. su: that is according to bank of america, their research shows that hedge funds where the net buyers of stocks in all of last year. every time the market surged higher, hedge funds adjusted and went in, while a lot of mom-and-pop investors were concerned about what we're seeing early this year, the s&p 500 fully back, the nasdaq 100 fully back as they come off nine weeks of consecutive gains. that, according to bank of america's little data, caused

retail investors to flee u.s. equities last year. early last year morgan stanley's mike wilson, a widely followed bearish analyst, was predicting a market downturn. predictions of a severe downturn never really materialized, but again, there were many followers of his analysis. the market did see great gains. hedge funds appeared to have been the smart money in the past year plowing cash into stocks as the market continue to soar. hyvee. haidi: bloomberg's su keenan. some of the other stories we are tracking -- for the second year in a row, global banks made more money selling bonds and underwriting green projects than they did in fossil fuel activity. they generated about $3 billion in fees last year from green deals. . by comparison, they brought in less than $2.7 from fossil fuel transactions.

take a look at how we are setting up when it comes to the european trading session. not a great lead from the u.s. subsequently a bit of downside so far, in the asian session. the outlier in terms of performance this morning has been the energy sector. energy stocks, crude continues to edge higher on some of these geopolitical and supply concerns. we'll european stocks dropping on wednesday. a bit more upside, stoxx 50 futures and german docs futures looking flat at this point -- german dax futures looking flat at this point. it's a start to the new year for risk assets. plenty more to come here for

shery: we are getting some breaking numbers out of japan. the final pmi manufacturing

number coming in at 47.9, which is again in contraction territory. it has been below that 50 threshold since june of last year. it has become a little bit better since the preliminary numbers but still, we are talking about that 47.9 level, still in contractionary territory. and perhaps a reflection of what we have seen in 2023 when it comes to factory numbers out of asia. haidi: yeah. we are also getting the numbers when it comes to hong kong and singapore. hong kong pmi for december, 51.3, that is quite a good improvement from 50.1 which was just barely buy a whisker in expansionary territory the index rising to the highest reading since april 2023. output rising to 51 from under 50 in november, the highest since june 2023. and seeing the reversal of that contraction trend.

new orders seeing again. at the june 2023 read higher. when it comes to singapore we are seeing 55.7. that is also a rise from 55.8 that we saw in the previous reading. and we see really these expectations that singapore's economy continue to get into the end of 2023 with strong momentum. annabelle: that's right. the focus this morning on the session coming into how markets are faring given we have the resumption of trade in japan. it has not been a great start to the year. discussing the earthquake death toll and the jet crash that happened, in the market reaction. we need to take note of that this morning, given stocks are back online. we are seeing companies that have manufacturing bases or distribution channels going through that earthquake center around the region really being affected.

they have a manufacturing base in the northwest, sliding this morning. some names that have been cited in articles on coverage of the earthquake have been mostly under pressure. but broadly it is not a very great start to the year for japanese trading. if you change on where the pressure is most being felt it is in the tech sector. it follows while straight -- it follows the wall street trading. a lot of investors are actually optimistic on the outlook for semiconductor names, but still seeing some big jobs across the board. generally in the session it is japanese equities that are leading the drop so far. if you take a look at the sectors that are most under pressure, you can see the names in the chip sector are feeding into the broader loss for the i.t. sector. it is leading the loss so far. just one scepter in the green -- one sector into green.

oil price gains. wti still advancing somewhat after a 3.3% rise in the prior session. it is supply disruptions that are bringing those bulls back into the market. haidi: u.s. and european banks are -- on a scale rarely seen. subsidiaries once seen as key for expansion are now operating more independently, in some cases less competitively. adam haigh joins us now with more. obviously a lot when it comes to the political situation, the risk assessment in china is driving a lot of this. adam: indeed. but a little historical context. if you just go back to 2020, a lot of these foreign banks were positioning in china to really open up and expand their businesses. not too long ago they were set up to expand there. and the idea they could have

full control the joint ventures there was very much the situation. and in a very short space of time, a lot moved in the other way that make it increasingly difficult. really, that is what this story highlights, just how difficult it is getting now. for example, now because of the new regulations, top executives when they fly in from the states into china are almost having to sit in separate areas of the office and separate meetings. a lot of the date of course, as we have been reporting extensively, is now having to be pretty much ring fenced and operated as a separate entity. so that means the transfer of data around the world for these global businesses is incredibly cumbersome, expensive, slow, and all of these things make it very difficult and increasingly costly to run a global operation as all these banks are in, -- banks are, in china.

the ongoing day-to-day running of operations now is clearly just getting that much harder. and of course we have seen also not just in banks, but also in the broader financial space, for example in quantitive hedge funds, that are seeing increasing regulatory burden, especially in that data space, making it hard and quite cumbersome and now increasingly costly to do business there. lots of detail in this story which shows not just the political upheaval and tensions between the u.s. and china, but the way the regulations are making it very difficult to operate his global banks. shery: you keep emphasizing costly, expensive. so basically it will become more difficult and more costly and expensive to the business in china, right, for these overseas firms in the years and months ahead. is it worth the trouble? adam: well, of course many of

these banks think it's absolutely worth the trouble. it is not worth dwelling on why they think that because the opportunity set to grow your business in china is vast. so the reasons are clear as to why you would want to grow your business there. but the question is how far they are willing to go in the next few years when clearly just in the space of two or three years, operating your business there has become so much harder. there is a kind of a thorn in the story that we finish with, that maybe it is not worth it for some organizations. so, that might be something to watch in the future if a full withdrawal happens from some of these global players. but for now, many are prepared to accept these higher costs, these higher levels of risks, given such a growth opportunity story that is still there in

china, despite the slowdown in the economy. shery: you can actually read that big tech story on the terminal and bloomberg.com. the reason i was asking why, is it worth it, is because it has been a rocky 2023 for china. beijing still struggling to reverse that slide in the property sector and boost its economy. adam was just telling us about how these business people still think there is value in doing business in china. and morgan stanley's executive chairman, former ceo, acknowledges that. he says it remains a key driver of global economic health. james gorman telling us exclusively where he sees the biggest risks for china's leaders. james: i think china has profound challenges on demographics, in terms of building a consumption economy. they are still in export,

savings-driven economy. on the other hand, china is 1.4 billion people, second largest economy in the world in gdp. it's a key factor in global economic health. haidi: chinese president xi jinping is also looking to woo foreign capital while reshaping china's business environment. but beijing's mixed messages are leaving investors more cautious. let's bring in zhi xiaojia. really great to have you with us. we are going into the new year with the same problems and a lot of them are longer-term structural problems for the chinese economy. we have seen a few policy overtures already. he funding injection when it comes to lending banks, for example. are we going to see any big shift in policy to try and support the economy? xiaojia: thank you. i definitely see that chinese

policymakers are showing a stronger willingness to put their policy measures of the bit easier in order to boost confidence, in order to stabilize the economy, as well as a continued slide in the property sector. most recently we have seen the pboc has injected a very significant amount of r&b, 350 billion in psl, to support the construction in the housing sector. i think that is a positive development. i also think in the near term we are going to see more of that, more of policy easing measures, for example from the pboc. it is quite likely they are going to lower their policy rate after the recent deposit rate cut from chinese banks.

i think that could partly help to help the credit expansion as well as to lower the cost for the chinese private sector. haidi: of course debt remains a perennial issue but i wonder given how stretched the broader economy is, whether this is going to be the year where we see more challenges. we have this report that the local government financing vehicles will have to pay a record $651 billion of maturing local bonds this year. how does this play out? xiaojia: i think at the fiscal level i think the government this year have to show more of a responsibility when it comes to stabilizing the economy. and for the local government, they will have to get more support from beijing, for example, to get refinancing

going, relatively high cost debt with lower cost ones through the really -- refinancing and the issuance of those local government bond issuance to replacing those local government debts as well as getting some other support. for example, still a reasonable amount of the local government bond issuance to continue to oil the local economy, to local physical expansion as well as to support the local infrastructure. i think this year while the chinese policymakers will continue to introduce incremental policy easing to stabilize growth, it is also a very important task for beijing to manage such risk related to property as well as to the local government. haidi: how difficult will it be -- or first, i should ask, do

you think the chinese economy, the private sector confidence slump, are these already signs of a pretty deep deflationary cycle? and if so, how hard will it be to be able to reverse that negative demand cycle if confidence is already taking such a hit? xiaojia: i think indeed, cpi has already been in deflation and ppi has been deflation and is quite likely for china, the gdp deflator will be in outright negative territory as well. so this is definitely a telltale sign the consumption demand and in general the domestic demand within the private sector are quite sluggish. but it will take some time for the private sector and the chinese households to regain

confidence. certainly i think there is room for policymakers to introduce more matches from the monetary side, fiscal side, as well as for the business environment. what they can do to put top aussie pledges with working level policy execution together to make a coherent push to revise -- revive consumption demand and revive confidence in the private sector. i think that is very important. haidi: how do you view household confidence of the moment? given how closely tied the property sector is tied to household wealth, do you think at some point direct payments to households might be an option? xiaojia: i think for example, if you look at consumption behaviors, if you look at the

recent new year holiday spending, they are holding up ok. also rising in the sigel digits compared to 2019 -- in the single digits compared to 2019. there is distress for many reasons but partly because of the mismatch of labor demand and supply. property is not helping. it is suppressing consumption demand especially for the middle class and the higher income class. if we look at the property sector, it is continuing to struggle. but we are not seeing a very sharp slump in the property sector and not a huge stress in the household balance sheet. so i think this is some of the risk chinese policymakers, beijing, definitely need to tackle and put more map -- put more effort in.

that said, i think such risk is manageable if the chinese policymakers would continue to introduce more policy easing measures to stabilize the overall sentiment. haidi: xiaojia zhi, the chief china economist joining us there. much more to come here on daybreak. this is bloomberg. ♪

fresh, warm hot dogs! when i'm not selling hot dogs, i invest in a fund that advances innovations like robotics. fresh, warm hot dogs, straight out of my torso! one for you, one for you. oh, you're a messy one. cool, right? so cool. anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. hot dogs! fresh, warm hot dogs! before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

shery: broad downside across asian equity markets and you can see the nikkei is down 1.7%, being led lower by information technology and material stocks. one sector in the green not only in the japanese market but around asia is the energy sector. perhaps not surprising given we are seeing some upside in oil prices. we have seen supply disruptions in libya, not to mention escalating tensions in the middle east. opec coming out talking about stabilizing prices. it's leading to those gains on wti around $73 a barrel at the moment, which of course is offsetting some of those oversupply concerns. but broadly speaking, asian

equity investors may be able to expect a boost this year, especially when it comes to interest rates cuts and a weaker dollar that could lead to more upside. the ultimate determination of where asian stocks go from here though could be china and the region's performance. for more, let's bring in ishika tomorrow cory. -- ishika mookerjee e.g. it might not look that great for the rest of 2024. ishika: hey. last year was fantastic for most asian external markets. this year it is starting off to be with a bit of a risk off sentiment across the region. you can expect the region to get

a boost overall as the fed starts easing up on its monetary policy stance and that will help weaken the dollar and give local currencies a boost in emerging markets. china continues to do really badly. it had a record third year of losses for the csi 300 last year. that was the main pull on the index last year which is why it underperformed the world gauge by 11 percentage points. if we do not see a reversal in the china trade this year it looks like that would be another cause for underperformance for yet another year. haidi: we have had an eight year winning run when it comes to india. valuations are expensive. do we see further upside? ishika: i think the biggest bet on india for many foreign

investors is the idea that it is not china. as china's economy continues to struggle and the property sector continues to be a drag, we are not really seeing a way out of it. india is emerging as a completely contrasting picture for investors. it is clocking growth of more than 6%, bagging all these high-profile contracts from the likes of foxconn. prime minister modi is really giving the overall infrastructure of the country a big boost and that is really helping with government spending across the board. so, india is seeming to be on a multiyear bull run, which had has already been on. it does not look like that is going to stop anytime soon, even with benchmark gauges at record levels. shery: asia, clergy -- ishika mookerjee there.

plenty more to come. this is bloomberg. ♪

shery: bloomberg has learned that bytedance's tiktok is aiming to grow the size of its u.s. e-commerce business tenfold to as much as $17.5 billion in

merchandise sales this year. let's get the details from alex five rank a. we know this comes with tensions between beijing and washington but how important is this business for tiktok? alex: it is a top priority all the way up to the executive level at tiktok and bytedance. this is a massive opportunity for them. they have obviously established themselves globally as a social media platform where people spend a lot of time and that comes with potentially ad dollars. particularly tackling the u.s. market, which is a massive commerce market for them, is the kind of next unlock in terms of revenue. for tiktok and tiktok shop here in america, being able to nail this and get folks buying is a top priority not only financially but strategically

for tiktok and their parent company. haidi: shery mentioned some regulatory and geopolitical tensions overlay these companies. is 2024 going to be more or less challenging going into the u.s. presidential election? alex: i was in the room earlier this year in d.c. when congress brought the tiktok ceo in and basically grilled him for hours. so in the absence of another grilling in congress this year is kind of a question mark. because it could be one where tiktok continues to fly under the radar like they have ever since that congressional hearing. you have not heard a lot of call for legislation as they are focused more on the geopolitical issues in ukraine and israel and the election. but with the election year comes a lot of talk on social media as campaigns get underway. tiktok comes a focus and draws the ire of particularly the republican party, but even the democratic party through the

election season, then those calls for a ban could be loud again. none of the four bills have moved forward. there is still a national security review going on. all of those are under the water for now, but as we know with social media in this industry when there is an election season there is always room for drama, and tiktok is probably at the top of the list for potentials in the next. haidi: alex barinka with the latest on tiktok. that is it for daybreak asia. our markets coverage continues as a look ahead to the start of trading in hong kong, shanghai, and shenzhen. bloomberg markets the china ope. this is bloomberg. ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) -awww. -awww. -awww. -nope.

( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, d grow. constant contact. helping the small stand tall. was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com sales tax automatically. avalarahhhhhh what if tax rates change? ahhhhhh filing sales tax returns? ahhhhhh business license guidance? ahhhhhh -cross-border sales? -ahhhhhh -item classification? -ahhhhhh does it connect with acc...? ahhhhhh ahhhhhh ahhhhhh

hi, i'm janice, and i lost 172 pounds on golo. ahhhhhh when i was a teenager i had some severe trauma in my life and i turned to food for comfort. i had a doctor tell me that if i didn't change my life, i wasn't gonna live much longer. once i saw golo was working, i felt this rush, i just had to keep going. a lot of people think no pain no gain, but with golo it is so easy. my life is so much different now that i've lost all this weight. when i look in the mirror i don't even recognize myself.

david: