>> welcome to "daybreak: australia." we are counting down to asia's major market opens. >> the top stories this hour -- asia stocks set to fall as data

spurs fears of a fed hold in december. the fcc opens the door for spot either etf's. >> rate rises still on track despite the economy slide. we get to april cpi numbers. >> plus hedge fund opportunities . we will get around of of some of the stock picks. haidi: looking pretty muted, tracking losses overnight, u.s. activity data, signaling the fed might keep rates on hold. bringing home the higher for longer narrative that has been a drumbeat of the past few sessions. we are seeing equity features across the board pointing lower to losses of more than 1% at the open. sidney futures down by more than 1%.

new zealand with losses of half a percent. we are getting april trade data today for new zealand, ahead of the budget at the end of the month. chicago nikkei futures softer despite the reassertion that policy normalization is on track despite the weakness we've had in the latest string of data. china futures looking pretty tepid. annabelle: a bit of a downbeat mood and it follows but we had with wall street overnight because it was the story of weakness creeping through. we had better u.s. data coming through and telling us the economy is remaining resilient. the fed is unlikely to cut rates until perhaps december this year. the s&p 500, we saw a creeping below the 5300 mark, futures fairly steady. treasury yields climbed. we had the dollar that moved as well and oil, gold, those

commodities priced in even though they've also retreated in the session. as always there is an out lighter -- outlier. let's look at nvidia, how much it surged on thursday. we had that bullish sales forecast, we've been talking about it since after hours yesterday. ai computing spending very strong, revenue about $28 billion for the quarter, the estimate had been 26.8. it is a company that continues to surprise to the upside. haidi: it's been a company that has been dominating the market narrative for so long, since the beginning of this bull run. our next guest says ai is a bubble and a revolution. george, another print, another impressive outlook when it comes to nvidia. when you talk about it being a bubble and a boom, how do you

separate the two parts of the narrative? george: wall street always talks out of both sides of its mouth and i am a wall streeter so i guess that's what i do. more seriously, over very short term, the focus on ai is almost maniacal. what is driving the market totally is nvidia ai and things related to ai and that maniacal focus usually ends badly. i think at some point in the next six months that will happen. ai is either revolutionary or evolutionary but it will not change the world overnight. most market pundits don't believe that. on the other hand, ai will do a great deal for productivity, for the creation of better jobs,

better lives for people over the longer term. you may see a near-term run-up and then a sharp drop in ai related stocks. over the next two or three years it's something very good for mankind with a bunch of caveats. haidi: across chips and generative ai names, it's pretty richly priced at the moment. what is your preferred way of investing in this while hedging what you see as the risk of this being at least partly a bubble? george: nvidia has a monopoly on the components of the chips driving ai. that won't last forever. capitalism doesn't let that exist in a monopolistic bubble for a long time. there's been a good deal of focus in the u.s. on utility stocks. utility stocks have to provide the power consumed in great

quality by generative ai companies. i think the way to approach ai is defined the suppliers to utilities. the utilities themselves don't build anything. they have to add a great deal of capacity but they won't tilde of the plant or equipment, they will contract to others to do it. the suppliers to the utilities in the u.s. and elsewhere in the world but i think are comparatively modestly priced that are the best way to be an investor, not a speculator in ai today. annabelle: we've had so much optimism, nvidia and outlier in that sense, up or than 100% this year. when you look at how investors are feeling in terms of the fear gauge, the vix at levels we haven't seen since before the pandemic, is it something

investors are missing about the market dynamics? george: the u.s. market and other markets, they haven't had major upsets to the upside or downside. a very smart, old investor once said watch the market when it doesn't move, it is a coiled spring ready to jump out and surprise people. i think the vix is a good way to invest as a hedge against a negative market surprise. the vix has often centered around 20, so if you can buy under 13 today and you have a hedge against a downside surprise in the market, it's a good way to take some chips and hedge your bet. don't be entirely out of the market but lower your risk on

the vix. annabelle: thinking of downside surprises, a lot of investors are thinking about fed rate cuts and they think it could repel stock prices upward. are they really thinking about rate cuts in the right way, why the fed would be cutting in the first place? george: looking for something that rhymes, for probably the last six months, we have been saying the fed would be here for a year, they would not raise rates, neither with they cut them for an extended period of time and we still think that. investors are looking for a fed rate cut as a way of signaling a believe that inflation is under control. the other possibility, and i think one that unfortunately has a high probability is the next fed rate cut indicates the belief by chairman powell and others that the u.s. economy and economies worldwide are weakening.

if economies are weakening, earnings going down, our rate cut will create a market downturn, not upturned. if the motivation is we think the economic cycle is turning week, the fed cut won't be good thing for equity investors. haidi: i want to get your views on china, what you say is to significant market to not be investable but it's not your preferred pic when it comes to emerging markets. how do you never gate that? george: with trepidation. [laughter] you've got me at the intersection of a communist ruled country, a capitalist group of companies and culture that are very strong and attractive, and a risk in actually a military or very destructive context.

how do you put those three things together and come up with a rational means of investing? i think to us at least as outsiders, have a stake in china through an index, maybe a 3% equity portfolio, but no lower than that. i think it's impossible for anyone, much less the united states, to predict what's going to happen between those three often conflicting elements that relate to china. haidi: george, always great to have you with us. you can get around up of stories on the terminal and the bloomberg anywhere app. you can customize it for the news and asset classes you care about. this is bloomberg. ♪

annabelle: the chinese premier heads to south korea for a summit with leaders of japan and south korea, the first trilateral talks about five years. we are joined by our correspondent. we know this is a chance for regional neighbors to manage their relationships, especially when you've got the backdrop of tensions between china and the

u.s. what is on the agenda? >> there is a lot to talk about. this summit hasn't been held since 2019 and that's partly because of the pandemic but also partly because of resistance from beijing. it's been watching growing relations between korea, the u.s. and japan. the reason for the increased urgency to meet now is korea, u.s. and japan held their own trilateral summit in august of last year and that sent alarm bells ringing in beijing. those three countries committed to reaffirm their economic and security cooperation. so the premier will use the trip to shore up beijing's own security. military security and economic security. we know washington has been courting korea and japan to expand the export -- expand curbs on the export of

chipmaking to china. there's a lot at stake not just for china but also korea and japan because korea is the largest provider of chips to china. japan is the largest provider of silicon wafer's to china. they have some companies without -- with a huge presence in china. washington is said to be pushing to richard -- reach an agreement with korea before the g7 summit. then japan and korea may have another trilateral summit with the u.s. in july. haidi: complexity on just about every front because of china's also the biggest in a factor of north korea and has militarily been very present across the region. how do those issues get dealt with? minmin: military is a big deal as well, we see japan, korea and

u.s. strengthening the mechanism, holding joint drills where north korea has a territorial dispute. north korea is always a concern, especially for south korea. it's a nuclear missile program and allegations of the weapons for aid exchange with moscow for the war in ukraine. they have denied this. but they might push russia to rein pyongyang in. they are looking to have a joint declaration detailing some outcomes. we could get people to people extent just, dealing with infectious diseases, climate change and investment. annabelle: quite high hopes from

the korean side as they are expressing hope perhaps this could serve as a turning point and this sort of three-way cooperation could be a full normalization of relations again. is that realistic? minmin: since they last met in 2019, so much has changed and you feel this shifting of the geopolitical dynamics. let's pull out a chart of the trade numbers. china is still largest trading partner for both korea and japan. but if you look at new investments, that is dropping from both korea and japan in recent times and korea's exports to the u.s. overtook its exports to china for the first time in over two decades. it feels like the ground is shifting under beijing's feet and there's a lot for these countries to navigate. at the same time, korea and japan are likely to not want to antagonize china, they are their closest neighbor.

they have a saying, your teeth will be cold if your lips die. haidi: our china correspondent. hsbc says there's a of certainty is weighing on the minds of investors. we were told exclusively how they plan to navigate unpredictable environment. >> clearly we are in a period of rising tariffs, rising quotas, don't know what the chinese response will be to the latest tariffs put on by the u.s.. trade liberalism is in a different phase than in the past. think we have to accept that and our companies have to accept that. we are there to provide that advice. we are the largest trade bank in the world, we have abilities to really help companies manage trade wherever they may be. if a client is exporting from china, as an example, and wants

to move that production capacity outside of china, we can help. we are the largest foreign bank in india, significant in vietnam and very big in mexico. we are there to help them navigate through unpredictability. i think that will happen regardless of what happens with the elections. we will have more tariffs, more quotas going forward. >> if i said what is the biggest lever for the business in the near term, will it be rate cuts from the fed or clarity in politics on a tariffs? >> i think it's both. you need predict ability, companies need predictability to make investments. will we haven't had is that predict ability, lots of discussion on interest rates, lots of discussion on when and how much and now you have quota uncertainties. policy needs to be predictable. if there's a rate cut, fine.

if not, there's a question of how companies react? how do they build their businesses to exist in the right environment, higher than the last 15 years, but i would argue the last 15 years have been an abnormal environment. they can adjuster a production, and how they run their companies and i think they will do better but they need policy predictability. >> here in lies the point for the commercial bank, many people say a great deal of refinancing on the retail private side. our corporates holding back on doing m&a and capital markets as a result of uncertainty? >> last year was certainly a reflection of the uncertainty but we have jumped over it. today, capital markets are on fire. $750 billion investment grade, spreads are the tightest in a long time.

even the equity market, we have seen a lot more ipo's led by the tech sector of course. i feel it is trading nicely now, more activity. that sense of predictability is coming back. annabelle: that was the hsbc ceo with manus cranny. we will have more ahead on "daybreak: australia." this is bloomberg. ♪

annabelle: we are taking a look at this token, it's made wild swings in anticipation of how the sec was approaching these spot either applicants. they've signed off on some

proposals for venues to lift products tied to the cryptocurrency. michael, this is not a full approval, we want to make that clear about what has changed and how is it possibly opening the door? michael: it's not a full approval, it's a big step toward approval. there are basically two departments in the sec that need to sign off on a new exchange traded fund. one decides whether it meets the requirements for the stock exchange to list the product. new york stock exchange, nasdaq, they have applied to list the products. that was approved today, one piece of the approval process. the other is documents known as s1, the registration document for the prospectus for the funds that lay out how they will the

assets, who will take custody of the underlying assets. all manner of nitty-gritty details like that. that approval comes from a different section of the sec, they've not approved the s1 yet. it's anyone's guess when that will happen. many experts think a matter of weeks perhaps. the approval of the other set of documents to list this on the changes signals that the other part of the sec will approve the prospectuses as well. which is a dramatic reversal and sentiment. as far as we could go, many issuers said we don't think they will get approved because the sec has not been very inquisitive and asking for

changes to these applications or sort of testing some of the assumptions in the documents to basically give the issuers guidance they need to get approval. it was a flurry in the week so far that has led to these approvals we are talking about. haidi: the other hot button topic is removal of sticking plans for these funds. is this seen as a short-term downside or net positive for the industry? michael: it's a really interesting question. for the industry, the actual cryptocurrency industry, they are happy these funds will not be staking their tokens. if you are the equivalent of

what is a bitcoin miners, what they do is stake some ether to lock up on the blockchain so it is ensured that they have skin in the game and they validate transactions, they are doing everything right. if they don't do it right, that stake is taken away or at least some of it. the big question around staking is the validator to do that earn rewards from the blockchain so if you provide either -- ether to be stakes, you earn a yield on it, about 3% or 4%. the regulator raises the question, this looks more like a security than bit come -- bitcoin where you don't earn a yield. it's not 100% clear what the sec

thinks of ether if it is or isn't a security. they do not want etf to stick the either. haidi: just a note, hong kong could allow ether staking. more ahead. this is bloomberg. ♪

than what had been predicted by economists in the survey of 2.4%, the closely tracked metric, of course, is the core reading, and that's come in at 2.2. so again, a slowdown from the month prior could be that we're seeing increases for food and hotel prices. our bloomberg economics team is saying they think business is becoming more reluctant to raise prices because they are already aware consumers are dealing with a crisis in cost-of-living. will this shake the boj resolve? that's a key question not only for fx markets as well. haidi: let's bring out michael wilson. pretty much in line with expectations when it comes to cpi numbers. there's been concern across the economy more generally. two fx traders feel this way?

>> i think they do, a little caught between whether they pull the trigger in july or october for a 10 basis point hike. i suppose the director's put july also table and puts october and focus. some of the numbers we are seeing,. there's a lot of -- we are seeing, there's a lot of narrative. a defensive measure as well. you could argue that or they to pull the trigger, it probably speaks more to covert support than necessitating any deliberate slowing of the economy. the economy doesn't have any

real momentum to speak of. by kicking the can down the road to october. the latest backlash, the scenario hasn't changed. i do wonder what it would take for him to dial back, he seems to be single minded with purpose, he wants to get the market use to rate hikes, a tightening cycle as it were. i think until they pull the trigger, from what i'm hearing out of tokyo, telling clients to buy dollar-yen on the dip.

there is still a rate cut priced in for the fed. if that comes up for debate and gets priced out into the next year, we will be testing at 160 level without much trouble. if it grinds up, you may or may not see any intervention. the fundamentals are for dollar-yen to grow higher. the inflation data is not doing ministry of finance any help at all. annabelle: what's more important for the japanese yen, perhaps a 10 basis point hike or the fed? michael: if the rate cut is pushed out into first quarter next year, it's a massive or a

for the people in tokyo. 10 basis points when the 10 year spread, the tightening is occurring but the stronger narrative between the two is still the strong u.s. economy. the pmi last night was pretty strong, that prompted him to come out and say he's not seeing the numbers at all. you get the feeling they are trying to massage the market to wait longer for rate cuts from the fed, which will push up dollar-yen. 10 basis from the boj every three or four months won't scratch the paperwork much. haidi: real estate consultants

see luxury home prices soaring in some asian cities and driving global gains. we are looking at prime properties seeing double digit increases in some cities, bucking and downward trend elsewhere. hi borrowing costs are hampering some markets. in new zealand, and almost 8 million dollar luxury home has been on the market for 18 months despite significant interest from international buyers. an agent said they would have sold it 10 times over were it not for a ban on foreigners buying real estate. gorgeous property and a big problem. >> absolutely. it's a stunning property but it's been hanging around on the market for 18 months and the main reason is the foreign buyer ban. it was brought on in 2018 and of

the time there was a sentiment that foreign property buyers were pushing up the price of houses. it was stopping average kiwis from buying. at the time there wasn't much data to prove this there was a general feeling this was happening so the ban was brought in. the current government before it came into power pledged it would get rid of the ban and allow foreigners to buy with a tax, but that was scuppered. one thing worth bearing in mind with this property, one of the things that makes it exceptional is it sits on a lot of land that is considered sensitive land and the rules for a foreigner buying it is stricter than normal and

only new zealanders can buy it. haidi: let's get more information on new zealand's property market and the impact. let's bring in our guest. i have to ask the impact on your business and the volume of interest you are getting. >> certainly nationally it had an impact and we would share the sentiment that this isn't having an impact on the average kiwi being able to afford a home. some areas of the country have bucked the trend by how strong the markets are. but there are parcels of land like the one you mentioned, the audience is very narrow.

annabelle: what makes this property so special? >> i think the images speak hugely about how picturesque it is but it sits on a large parcel of land and that draws it into further consideration. a lot of the time, somebody is looking for a in new zealand, they are drawn to the great outdoors and the remoteness. this is a property that would appear to be ideal for a foreign buyer. but the sensitivity around the land itself. ainsley: the queenstown lakes district, what is so special about it and what appeals to foreign buyers? ether queenstown is -- >>

queenstown is wonderful all year round. there's an immense amount of cycling trails, and wonderful ski season, deep lakes and it is incredibly picturesque. there is something for everybody but in particular those drawn to the great outdoors it is a special place. annabelle: do you find with these -- haidi: you find with these restrictions you have less volumes of properties available? >> one of the problems with restrictions around foreign buyers, it limits the audience. if we look at the other end of the equation, is often driven by developers being confident there is a wide audience to sell to. we've seen developers becoming more tentative in terms of what suppliers they would be able to bring to the market. it is a bit of chicken and egg

scenario. we see it restricting supply in some respects. any residential property is limited at present and it is a narrower market to sell products. haidi: is there some hope that under the current or new government there could be a loosening of restrictions? the budget is coming up at the end of the month. do you have a conscious -- cautious expectation these policies might change? myles: we think there's a good argument they should, there's a conversation to be had around whether there is a threshold at which a change could take place. not have any great effect on grassroots house affordability but necessary foreign investment into the country into our

property market so we remain optimistic. ainsley: the general new zealand property market at the moment is pretty subdued. how is it in queenstown? is it holding up better? myles: largely queenstown has bucked the trend. it's very much a post-covid market we are seeing. traditionally in the past, it's a holiday home or luxury type property is the first ago and what we are finding now is people are identifying they can live in remote or picturesque part of the world. that has helped queenstown buck the trend. we've seen pockets of activity.

the midrange of the property mac -- market, interest rates are key. ainsley: lastly, do you a final message to the government on the foreign buyer ban? myles: i personally have sold to offshore people who have been wonderful investments, quite often they end up moving to a country and the kids go to a local school and they become part of the community. it's a wonderful way to introduce people to the country. also i think there is a broader equation to be discussed in and around confidence, looking to bring on board further housing suppliers to the country.

a wider audience would give developers more confidence. in a few years time, we might land in where we've seen in the past, there's another supply of houses in new zealand. the government should look closely at the listing of foreign buyer restrictions which could aid some of the supply equation. haidi: ainsley thompson on that story. morehead on "daybreak: australia ." this is bloomberg. ♪

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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 annabelle: hedge funds at the hong kong investment leaders conference have been zooming in on japanese and south korean companies but our next guest shifted attention to australia and proposed a sure idea instead. with us is lloyd moffat. i was there yesterday listening to your presentation and i know you follow an unconventional approach to identifying these opportunities. why did you hone in on this particular stock? >> i suppose it was organically

being in the market with parents looking to retire at the moment, we stumbled on this one. i suppose it's being willing to take a non-consensus view and not let the market drive your research direction. annabelle: this company doesn't have any sort of analyst coverage? lloyd: it does, it's a consensus by seven or eight houses. annabelle: why are they saying buy. your presentation says there's enormous downside potential. lloyd: what's the upside to putting a cell on a company? it's an easier story to sell them aright? annabelle: what is it that you pinpointed -- there were a number of different things, but if you had to pull out the top two or three different factors, what really stood out when you

thought this is a real warning bell? lloyd: i suppose what precipitated this was an overall slowdown across the market. that's across the overall housing market. when the market is strong, the rising tide raises all ships. when is not that strong, underlying growth, this company in particular, which has a unique structure in terms of fees they charge for customers or residents, that makes them an outlier and somewhat weaker than competitors. annabelle: so people understand more about this stock, how i understood it is if you are elderly and looking to go into not a retirement home like end-of-life home, but the step beforehand, you would pay a pretty sizable fee to get a house for this and then you have to pay ongoing rates that are pretty pricey because you are

getting features or facilities through the house and block it is on. then you pay a hefty exit fee. lloyd: it's a lot of money for a house you don't own. you are paying an amount comparable to a home to than pay ongoing lease of the land the home sits on. this is all based on legislation that was drawn up or intended for care of on -- caravan parks and holiday homes. there's a set time for which these homes are supposed to be moved. they certainly don't seem that way now. annabelle: you're not getting high-quality property, and you are buying the least, not the property itself. lloyd: you are not getting the land, yes. annabelle: one thing that stood out to me in your presentation,

i was a bit unsure. you were saying you felt like there would be a lot of people across straley who would say hang on, my parents are not moving into that sort of place. how many people do you think go through and look at the numbers the way you did to know this is a really bad investment? lloyd: i suppose that comment with regard to what would you choose for your parents was really looking at this on an economic basis versus alternatives. not so much the lindley's model, which seemingly has efficacy. -- the lend lease model, which seemingly has efficacy. it seems to have a place in the market. it's really just a somewhat objective analysis of the economics of this business versus competitors, which are increasing in size.

you got some big names coming in and wanting to get a slice of the market. when competition increases, when the value proposition of your product is weakening versus the others, it doesn't tend to bode well for your growth and earnings. when you have a business model that relies -- as the company has said, on being able to rapidly recycle working capital and your working capital blows out, it is a real issue in terms of how much equity you need to execute. haidi: i wonder if you can tell me, whether it be across some other opportunities and ideas around investing in australia or more broadly and other asian markets, are there other compelling narratives or companies you are eyeing at the moment? lloyd: i suppose from an owner or shareholder perspective, this is probably the only way you could lose money in the

australian property market. [laughter] there's not really a one-size-fits-all answer to that. there's big flows in and out of markets like china and india. that doesn't tend to be where we look, to be honest. it's somewhat top-down agnostic. i think southeast asia is really challenging in the sense that even if there is an interesting opportunity, you need capital coming in to reprice and buy a name for that sort of arbitrage to close. i think probably north asia is where things are interesting now on both the long and short side.

haidi: before we let you go, china obviously provides a wealth of investing ideas, per geely for those who are a little bolder and might take a chance to do grassroots research. is that a market you would want to have any exposure to or even just intellectual investment into in terms of doing analysis? lloyd: i think for some people, that is absolutely the case. we really try to stick to markets where we have some sort of analytical edge, or markets we know well. china is not one of those. similar to japan, to be honest. two big -- too big, far, the difference in language. annabelle: that is lloyd moffat.

we are reaching out to livestock communities for the response on the short. there are six buys and three holds. we are down nearly 30% for the company. more ahead on "daybreak: australia." this is bloomberg. ♪ the future is not just going to happen. you have to make it. and if you want a successful business, all it takes is an idea, and now becomes the future where you grew a dream into a reality. the all new godaddy airo. put your business online in minutes with the power of ai.

haidi: taking a look at the end,

we had cpi numbers coming in more and less with -- more or less in line with expectations but the broader trend seems to be calling. it's above the price target, really feeling concerns the element of cost pushing inflationary pressures may be here to say food prices with fusion -- if you strip out fresh food rose above the 2% inflation target. this is bloomberg. ♪

people couldn't see my potential. so i had to show them. i've run this place for 20 years, but i still need to prove that i'm more than what you see on paper. today i'm the ceo of my own company.

it's the way my mind works. i have a very mechanical brain. why are we not rethinking this? i am more... i'm more than who i am on paper.

>> this is daybreak asia and we are counting down to asia's major market opens and u.s. economic data looking to cast a shadow across the region and

also numbers that came out of japan around inflation to watch as well. haidi: potentially pushback from the video j -- from the bank of japan and weakness in the yen but nvidia excitement is still there but we are seeing a return to reality when it comes to seeing central banks led by the fed staying higher for longer and what does it mean to sustain the momentum of the rally. annabelle: set a high for longer will play into the direction of the japanese yen. michael wilson saying everything is converging for further yen weakness, trading around the 157 bark today and we had japan inflation numbers out earlier calling for [indiscernible] still above the price target of 2% but we see