Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Daybreak GISIA podcast. I'm Doug Prisner. You can join Brian Curtis and myself for the stories, making news and moving markets in the APEC region. You can subscribe to the show anywhere you get your podcast and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app. Let's take a closer look now at the ten said story and also while we're add it, look ahead to the earnings from Ali Baba. Robert Lee is with us. He is Bloomberg Intelligence senior analyst, joining us from our studios in Hong Kong. Robert, thank you so much. Talk to me about the way in which you saw the ten cent results. What do we know now that we didn't before?

Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Daybreak GISIA podcast. I'm Doug Prisner. You can join Brian Curtis and myself for the stories, making news and moving markets in the APEC region. You can subscribe to the show anywhere you get your podcast and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app. Let's take a closer look now at the ten said story and also while we're add it, look ahead to the earnings from Ali Baba. Robert Lee is with us. He is Bloomberg Intelligence senior analyst, joining us from our studios in Hong Kong. Robert, thank you so much. Talk to me about the way in which you saw the ten cent results. What do we know now that we didn't before?

Okay, thanks for having me on. Good question. Expectations into ten Cents results were quite high. It was well known that their gaming business was seeing a renaissance, largely driven by you know, very stellar strength coming through one particularly particular title called d NF Mobile, and indeed that's what they delivered on so the gaming on the gaming front, they actually came in the head of expectations and that they adjusted operating income level they were seven percent head benefiting from a low attacks rate. Overall, they were close to twenty percent ahead at the bottom line, so these were very strong numbers. So whilst expectations were high, you know, they did smash on most metrics. I think the only area of potential medium term concern is their fintech business. Fintech which they're lumping with their cloud computing business. Cloud is quite small for them. By the way, did miss expectations on the top line for the second quarter on the row and there are you know, read a cross to the state of consumer health within the Chinese economy there. But again I think that was anticipated, well known and that business actually beat at the margin level due to a mixshift and with some cost cutting. So overall, you know, I think they were good numb.

Okay, thanks for having me on. Good question. Expectations into ten Cents results were quite high. It was well known that their gaming business was seeing a renaissance, largely driven by you know, very stellar strength coming through one particularly particular title called d NF Mobile, and indeed that's what they delivered on so the gaming on the gaming front, they actually came in the head of expectations and that they adjusted operating income level they were seven percent head benefiting from a low attacks rate. Overall, they were close to twenty percent ahead at the bottom line, so these were very strong numbers. So whilst expectations were high, you know, they did smash on most metrics. I think the only area of potential medium term concern is their fintech business. Fintech which they're lumping with their cloud computing business. Cloud is quite small for them. By the way, did miss expectations on the top line for the second quarter on the row and there are you know, read a cross to the state of consumer health within the Chinese economy there. But again I think that was anticipated, well known and that business actually beat at the margin level due to a mixshift and with some cost cutting. So overall, you know, I think they were good numb.

These days, when you talk about the cloud, you talk about artificial intelligence usually, is that the case with ten Cent?

These days, when you talk about the cloud, you talk about artificial intelligence usually, is that the case with ten Cent?

Now?

Now?

Yeah, I think compare and contrast with a lot of their local peers or even peers you know in the US or whatever parts of the world they've really been playing. I would describe it the long game in AI. It's been conspicuous. You know, the lack of comment on AI in their earnings release is really conspicuous compared to a lot of others. I mean, absolutely, they're investing in AI, They've got a cloud business. There's a lot of steady investment going on there, but their focus is more on areas they can generate a more immediate return. So I think actually that's to their benefit. And given the way we see that the whole AI and cloud story evolving at the moment, and particularly in China, there are price wars in both sectors, I might add, which some people may not be aware of. So I think in taking a sort of longer term view, in taking a sort of slow and steady pace and not being caught up with the hype and hyperbole, I think that really been to that benefit. And they're clearly delivering in the other coueries of the business.

Yeah, I think compare and contrast with a lot of their local peers or even peers you know in the US or whatever parts of the world they've really been playing. I would describe it the long game in AI. It's been conspicuous. You know, the lack of comment on AI in their earnings release is really conspicuous compared to a lot of others. I mean, absolutely, they're investing in AI, They've got a cloud business. There's a lot of steady investment going on there, but their focus is more on areas they can generate a more immediate return. So I think actually that's to their benefit. And given the way we see that the whole AI and cloud story evolving at the moment, and particularly in China, there are price wars in both sectors, I might add, which some people may not be aware of. So I think in taking a sort of longer term view, in taking a sort of slow and steady pace and not being caught up with the hype and hyperbole, I think that really been to that benefit. And they're clearly delivering in the other coueries of the business.

You were talking a moment ago about the weakness and the Chinese consumer. That really shouldn't come as much of a surprise, but I'm curious as to whether or not there are variations across different demographics. I mean, if I'm talking about gaming, I'm thinking in my own mind that you're looking a little bit at the younger crowd, and maybe they have a little bit more spending capacity. I don't know. I mean, is there some differentiation across the demographics.

You were talking a moment ago about the weakness and the Chinese consumer. That really shouldn't come as much of a surprise, but I'm curious as to whether or not there are variations across different demographics. I mean, if I'm talking about gaming, I'm thinking in my own mind that you're looking a little bit at the younger crowd, and maybe they have a little bit more spending capacity. I don't know. I mean, is there some differentiation across the demographics.

Again, we could talk about this for a long time. There are a few contradictory factors here, because I think it's well known the level of youth unemployment is in China is actually quite high. However, I think, you know, and as the father of a teenage son myself, I think he would spend his last dime on games. You know, games is probably the sole focus of his life at the moment. You know, he is dating that he's a bit ahead of his dating games. So once he discovers the other members of the opposite sex, perhaps things will change. But I think, yeah, gaming is a major pastime in China, as with much of Asia, and yes it is mainly a younger demographic, but there are the odd people sort of closer to our age that indulge in it as well. But the slowdown on the Chinese consumer side has been known for some time, and I think how Tencent compares or contrast with Ali Barbar is Ali Baba as far more exposed to big tick, the purchase of big ticket items, whereas a lot of Tencent's fintech business is more revolves around day to day spend, spending on lunches, coffees, taxes, that type of thing, and you might argue that's less discretioning nature, it's more essential and therefore should hold up a little bit better in relative terms in a consumer in a slow and consumer environment. So again, it doesn't make it immune from slow in consumer strength, but as I said, I think it makes it slightly more resilient. But from our point of view, the key thing is the margin on that side was ahead.

Again, we could talk about this for a long time. There are a few contradictory factors here, because I think it's well known the level of youth unemployment is in China is actually quite high. However, I think, you know, and as the father of a teenage son myself, I think he would spend his last dime on games. You know, games is probably the sole focus of his life at the moment. You know, he is dating that he's a bit ahead of his dating games. So once he discovers the other members of the opposite sex, perhaps things will change. But I think, yeah, gaming is a major pastime in China, as with much of Asia, and yes it is mainly a younger demographic, but there are the odd people sort of closer to our age that indulge in it as well. But the slowdown on the Chinese consumer side has been known for some time, and I think how Tencent compares or contrast with Ali Barbar is Ali Baba as far more exposed to big tick, the purchase of big ticket items, whereas a lot of Tencent's fintech business is more revolves around day to day spend, spending on lunches, coffees, taxes, that type of thing, and you might argue that's less discretioning nature, it's more essential and therefore should hold up a little bit better in relative terms in a consumer in a slow and consumer environment. So again, it doesn't make it immune from slow in consumer strength, but as I said, I think it makes it slightly more resilient. But from our point of view, the key thing is the margin on that side was ahead.

So I'm glad you brought up Ali Baba because tomorrow more in US before the Opening Bill, will get the numbers the ADRs will trade, I guess before the shares in Hong Kong. Is there anything that we should know about what Baba has been up to and what we may learn tomorrow?

So I'm glad you brought up Ali Baba because tomorrow more in US before the Opening Bill, will get the numbers the ADRs will trade, I guess before the shares in Hong Kong. Is there anything that we should know about what Baba has been up to and what we may learn tomorrow?

Okay, very briefly, I mean strategically, they were going to spin off their businesses a year ago that ended a one hundred and eighty degree about turn on that they have been putting huge effort into try and stabilize and regrow their market share, having come under you know, intense competition from low cost disruptors like Sheen and Timu. So absolutely, I would imagine we should see evidence of them, as I said, stabilizing or regaining some share, but at what cost to the margin. So I think that's the big risk point or danger point that people should focus on there. You know, it's it's intensely competitive, and again given the backdrop of slow and consumer growth, so there's a risk that they could miss on margin front. And also from their strategic point of view, they AI and cloud computing as the core drivers of their future growth. As I mentioned a moment ago, both those sectors are locked in pretty vicious price wars at the moment, so again there's a potential negative margin impact there.

Okay, very briefly, I mean strategically, they were going to spin off their businesses a year ago that ended a one hundred and eighty degree about turn on that they have been putting huge effort into try and stabilize and regrow their market share, having come under you know, intense competition from low cost disruptors like Sheen and Timu. So absolutely, I would imagine we should see evidence of them, as I said, stabilizing or regaining some share, but at what cost to the margin. So I think that's the big risk point or danger point that people should focus on there. You know, it's it's intensely competitive, and again given the backdrop of slow and consumer growth, so there's a risk that they could miss on margin front. And also from their strategic point of view, they AI and cloud computing as the core drivers of their future growth. As I mentioned a moment ago, both those sectors are locked in pretty vicious price wars at the moment, so again there's a potential negative margin impact there.

It's very interesting because we were talking about kind of the e commerce side of the business. I'm equally curious about what's going on with digital media and entertainment at Ali Baba. Since we were talking kind of about the game market in China. Is the same trend going to show up when you're talking about kind of the pullback and spending, is it going to show up in digital media and entertainment as well?

It's very interesting because we were talking about kind of the e commerce side of the business. I'm equally curious about what's going on with digital media and entertainment at Ali Baba. Since we were talking kind of about the game market in China. Is the same trend going to show up when you're talking about kind of the pullback and spending, is it going to show up in digital media and entertainment as well?

So I guess again sort of focus more on the game front or even some of the streaming service. So there's a company called it which is essentially the Netflix of China. You may say, yes, but these en markets have built out very rapidly in the last ten to fifteen years, and there there are a sort of saturated point at the moment. So the growth out look with Annam isn't particularly you know, bullish, I would say, And again they are subject to slow in consumer So we are seeing heightened levels of competition in those sectors as companies fight it out again to either retain their market share or build market share, and I think, you know, to the detriment of margin again, So that's a trend we're seeing on that media and entertainment side as well. So I guess the question is, you know, where are real growth drivers in China at the moment. I think AI will ultimately evolve into one, but you know, given we're locked in a price or at the moment, no one's going to make profit this year or next in it.

So I guess again sort of focus more on the game front or even some of the streaming service. So there's a company called it which is essentially the Netflix of China. You may say, yes, but these en markets have built out very rapidly in the last ten to fifteen years, and there there are a sort of saturated point at the moment. So the growth out look with Annam isn't particularly you know, bullish, I would say, And again they are subject to slow in consumer So we are seeing heightened levels of competition in those sectors as companies fight it out again to either retain their market share or build market share, and I think, you know, to the detriment of margin again, So that's a trend we're seeing on that media and entertainment side as well. So I guess the question is, you know, where are real growth drivers in China at the moment. I think AI will ultimately evolve into one, but you know, given we're locked in a price or at the moment, no one's going to make profit this year or next in it.

Yeah, I don't know if you saw this in the US station, we learned that Michael Burry further increased his stake in Ali Baba while at the same time interestingly reducing his overall equity portfolio in half. That's quite a dramatic cut. Did that happen during Q two very quickly? Here, Robert, When we talked about ten Cent in the past and Ali Baba, there was always this looming cloud of a little bit more on the regulatory front. Is that dissipated completely very quickly?

Yeah, I don't know if you saw this in the US station, we learned that Michael Burry further increased his stake in Ali Baba while at the same time interestingly reducing his overall equity portfolio in half. That's quite a dramatic cut. Did that happen during Q two very quickly? Here, Robert, When we talked about ten Cent in the past and Ali Baba, there was always this looming cloud of a little bit more on the regulatory front. Is that dissipated completely very quickly?

Okay.

Okay.

Buzzword of the year has been new productive forces. The Chinese government looks to the tech sector as a major driver of future economic growth. Ali Baba and Tencent are the two largest companies with bi edance and Huawei's.

Buzzword of the year has been new productive forces. The Chinese government looks to the tech sector as a major driver of future economic growth. Ali Baba and Tencent are the two largest companies with bi edance and Huawei's.

Way as well.

Way as well.

They're stalwarts of the economy. There therefore need to be on good relations with them. Therefore, the regulatory environment and outlook is more stable and should remain that way.

They're stalwarts of the economy. There therefore need to be on good relations with them. Therefore, the regulatory environment and outlook is more stable and should remain that way.

Robert, it's always a pleasure. Thanks for making time to chat with us here on debreak Asia. That is Robert Lee, a Bloomberg Intelligence senior analyst, joining us from Hong Kong. Looking at what we heard today from ten Cent and what we may hear tomorrow from Ali Baba. Let's bring in Kyu Jin, she's in Beijing. Good of you to join us, aren't you normally based in London?

Robert, it's always a pleasure. Thanks for making time to chat with us here on debreak Asia. That is Robert Lee, a Bloomberg Intelligence senior analyst, joining us from Hong Kong. Looking at what we heard today from ten Cent and what we may hear tomorrow from Ali Baba. Let's bring in Kyu Jin, she's in Beijing. Good of you to join us, aren't you normally based in London?

I am except for the summer holidays.

I am except for the summer holidays.

All right, are you having a good summer in China?

All right, are you having a good summer in China?

Very hot as you can imagine.

Very hot as you can imagine.

So what's your view on the economy? How well is it doing? Just anecdotally.

So what's your view on the economy? How well is it doing? Just anecdotally.

Anecdotally and whether it's in the data or anecdotes or micro level or macro level, it's all doing pretty pretty poorly compared to China's economic potential.

Anecdotally and whether it's in the data or anecdotes or micro level or macro level, it's all doing pretty pretty poorly compared to China's economic potential.

So you're based in London, and I'm sure you're being very good about keeping up with a lot of the economic indicators. Is it worse than you imagine?

So you're based in London, and I'm sure you're being very good about keeping up with a lot of the economic indicators. Is it worse than you imagine?

It is getting even worse than we had previous expected. And of course I speak frequently to policymakers and to entrepreneurs, and I spend a third of my time in China, so you.

It is getting even worse than we had previous expected. And of course I speak frequently to policymakers and to entrepreneurs, and I spend a third of my time in China, so you.

Feel that on the ground.

Feel that on the ground.

It's particularly frustrating, given that I still believe there are lots of things that can be done to save the economy, to put the economy on a very normal path, which is going to be pretty good, given that there's so much untapped potential. I mean, China's nowhere near done with economic reforms or economic growth, moving it along to the kind of more rich income status. I think the approximate factors which we talk about is really real estate dragging.

It's particularly frustrating, given that I still believe there are lots of things that can be done to save the economy, to put the economy on a very normal path, which is going to be pretty good, given that there's so much untapped potential. I mean, China's nowhere near done with economic reforms or economic growth, moving it along to the kind of more rich income status. I think the approximate factors which we talk about is really real estate dragging.

Down investment, dragging down confidence.

Down investment, dragging down confidence.

But I think there's also been a deeper issue at the heart of this, which is a shift away from economics as front and center objective into other issues like national security and social considerations.

But I think there's also been a deeper issue at the heart of this, which is a shift away from economics as front and center objective into other issues like national security and social considerations.

One of the things that I was just thinking about today this move on the part of the central bank to do what may have been called in the version that we got in the United States and in Europe, quantitative easing. How well is that working, or maybe why isn't it.

One of the things that I was just thinking about today this move on the part of the central bank to do what may have been called in the version that we got in the United States and in Europe, quantitative easing. How well is that working, or maybe why isn't it.

Well? If you look at the Chinese economy, it's not so the overall economy. That's to say, it's not as sensitive to interest rate cuts, and so there's room to cut, and you know you can do that further. But monetary policy has been less and less effective over the last few years, and part of the reason comes bound back to a fundamental institutional.

Well? If you look at the Chinese economy, it's not so the overall economy. That's to say, it's not as sensitive to interest rate cuts, and so there's room to cut, and you know you can do that further. But monetary policy has been less and less effective over the last few years, and part of the reason comes bound back to a fundamental institutional.

Constraint, which is the financial system.

Constraint, which is the financial system.

If you look at the structure of financial system, many institutions are state related, state bank dominant, and they prefer to land to state enterprises. So when you actually get to get the credit to where it's most needed, and the interest rate cuts, the real economy. That's to say, the private enterprise, small medium firms, their cost of capital is extremely high, so it doesn't really work for them, but they are the ones that need or are sensitive to these interest rate costs.

If you look at the structure of financial system, many institutions are state related, state bank dominant, and they prefer to land to state enterprises. So when you actually get to get the credit to where it's most needed, and the interest rate cuts, the real economy. That's to say, the private enterprise, small medium firms, their cost of capital is extremely high, so it doesn't really work for them, but they are the ones that need or are sensitive to these interest rate costs.

Is there a real risk if there's going to be a protracted problem with deflation and the type of situation that it will be extremely difficult from which to emerge.

Is there a real risk if there's going to be a protracted problem with deflation and the type of situation that it will be extremely difficult from which to emerge.

Well, Currently the deflation is primarily driven by food prices to a certain extent, and we're not seeing the kind of the repeated patterns of ultimate deflationary trends quite some yet. Yes, if this prolongs, prolongs for a more period of time, longer period of time, then there could be an overall level of deflation, which the government is trying to counter. If you look at more specifically the service sector that's actually doing pretty okay, there's a greater demand in services. If you look at the recent performance of the Chinese economy, whatever has to do with outward oriented economic sectors like exports, like manufacturing, like high tech, it's doing okay. Wherever it's related to internal demand issues, it's much much weaker. I wouldn't worry about deflation just yet. But again, a longer and more sustained period of time that becomes a real problem.

Well, Currently the deflation is primarily driven by food prices to a certain extent, and we're not seeing the kind of the repeated patterns of ultimate deflationary trends quite some yet. Yes, if this prolongs, prolongs for a more period of time, longer period of time, then there could be an overall level of deflation, which the government is trying to counter. If you look at more specifically the service sector that's actually doing pretty okay, there's a greater demand in services. If you look at the recent performance of the Chinese economy, whatever has to do with outward oriented economic sectors like exports, like manufacturing, like high tech, it's doing okay. Wherever it's related to internal demand issues, it's much much weaker. I wouldn't worry about deflation just yet. But again, a longer and more sustained period of time that becomes a real problem.

Should we be concerned about a lost generation of young people in China?

Should we be concerned about a lost generation of young people in China?

Possibly, but I would say that that's also global phenomenon as well. The high unemployment rate currently is still a cyclical, potentially a cyclical phenomenon. I think that if you look at the number of jobs that are available, there are still many, many jobs available in manufacturing, something like twenty five million until twenty twenty five, hundreds of thousands of talent gap in semiconductors. But there's really a skill education mismatch. These young children our study a lot, their parents spend a lot of money financing their education. They can't find the jobs they want because structure of the economy is not geared towards them. To open up the service sectors promote vocational training education, and I think we can avoid that.

Possibly, but I would say that that's also global phenomenon as well. The high unemployment rate currently is still a cyclical, potentially a cyclical phenomenon. I think that if you look at the number of jobs that are available, there are still many, many jobs available in manufacturing, something like twenty five million until twenty twenty five, hundreds of thousands of talent gap in semiconductors. But there's really a skill education mismatch. These young children our study a lot, their parents spend a lot of money financing their education. They can't find the jobs they want because structure of the economy is not geared towards them. To open up the service sectors promote vocational training education, and I think we can avoid that.

You were talking a moment ago about the government spending heavily on kind of military hardware and the like. I know you're an economist by training, but to what extent is geopolitics now becoming a factor, not just in terms of building up military hardware, but in the possibility that we could be looking at or China could be looking at some new tariffs from the US.

You were talking a moment ago about the government spending heavily on kind of military hardware and the like. I know you're an economist by training, but to what extent is geopolitics now becoming a factor, not just in terms of building up military hardware, but in the possibility that we could be looking at or China could be looking at some new tariffs from the US.

All of that, Joe political ships have really shaped the direction of the Chinese economy, focusing on high tech. And this is not just the military aspect of it, but also the pursuit of technological independence because there's an existential fear not only the Chinese government also Chinese enterprises that they will be cut off from the critical components that are needed, that they need, and so there's been a focus on a high tech and innovation. Of course that is not big enough despite its success in China to offset the real estate downball and of course.

All of that, Joe political ships have really shaped the direction of the Chinese economy, focusing on high tech. And this is not just the military aspect of it, but also the pursuit of technological independence because there's an existential fear not only the Chinese government also Chinese enterprises that they will be cut off from the critical components that are needed, that they need, and so there's been a focus on a high tech and innovation. Of course that is not big enough despite its success in China to offset the real estate downball and of course.

Terrafs that's going to be a looming theme.

Terrafs that's going to be a looming theme.

But we're seeing lots of trade organization from dam to Mexico and other potential places to counter some of.

But we're seeing lots of trade organization from dam to Mexico and other potential places to counter some of.

That trade tension.

That trade tension.

Great conversation, Thank you so much, Kayu Jin from Beijing joining us here. We'll have to have you back for some more conversation. And her book is The New China Playbook. It's a worthwhile read. You can get that at your local bookstore. Jamie Bathmurray is chief financial officer at Creative Planning, joining us from Kansas City. So are you a Chiefs fan, I would I would hope, I would imagine that the answer is yes, right.

Great conversation, Thank you so much, Kayu Jin from Beijing joining us here. We'll have to have you back for some more conversation. And her book is The New China Playbook. It's a worthwhile read. You can get that at your local bookstore. Jamie Bathmurray is chief financial officer at Creative Planning, joining us from Kansas City. So are you a Chiefs fan, I would I would hope, I would imagine that the answer is yes, right.

Oh, absolutely, born and raised, lived all over the world, lived in Asia. But being a NC Chiefs fan hearing the Taylor swift is juicing the revenue by thirty percent, yet you have to love it.

Oh, absolutely, born and raised, lived all over the world, lived in Asia. But being a NC Chiefs fan hearing the Taylor swift is juicing the revenue by thirty percent, yet you have to love it.

Yeah, that's right. So when you look at the equity trade right now, what's going to juice the returns for the equity market?

Yeah, that's right. So when you look at the equity trade right now, what's going to juice the returns for the equity market?

Yeah, I mean what typically juices the returns?

Yeah, I mean what typically juices the returns?

I mean keeping calm and carrying on and taking advantage of volatility brought on by others in their panic selling. I mean specifically in the Asian markets. Obviously the dislocation that occurred last Monday in the carry trade, the yin carry trade, and really, you know what happened then is what's kind of at the core of our overall investment philosophy, that the traders, the short term traders, are punished, but long term investors can actually benefit from it, using to volatility to actually rebalance move money from more conservative assets into aggressive assets, not making a specific market call, but just that redeployment from a conservative bucket to an aggressive bucket. When markets have these occasional dislocations like this that we haven't seen in several years. It usually works out in the short run, and it always works out in the long run. And again we're happy to report that it did work out in the short run here and we had four of the best trading days of the year right on the heels of the volatility. So the hot dot is it's always keeping calm and carrying on when others are dislocated because of fear greed.

I mean keeping calm and carrying on and taking advantage of volatility brought on by others in their panic selling. I mean specifically in the Asian markets. Obviously the dislocation that occurred last Monday in the carry trade, the yin carry trade, and really, you know what happened then is what's kind of at the core of our overall investment philosophy, that the traders, the short term traders, are punished, but long term investors can actually benefit from it, using to volatility to actually rebalance move money from more conservative assets into aggressive assets, not making a specific market call, but just that redeployment from a conservative bucket to an aggressive bucket. When markets have these occasional dislocations like this that we haven't seen in several years. It usually works out in the short run, and it always works out in the long run. And again we're happy to report that it did work out in the short run here and we had four of the best trading days of the year right on the heels of the volatility. So the hot dot is it's always keeping calm and carrying on when others are dislocated because of fear greed.

We heard from a former BOJ member in the last week. He was saying that the BOJ is probably not going to be able to move until next March. So if you accept that notion, give mere sense of how well the Japanese economy is performing right now and whether or not there's a risk that things deteriorate.

We heard from a former BOJ member in the last week. He was saying that the BOJ is probably not going to be able to move until next March. So if you accept that notion, give mere sense of how well the Japanese economy is performing right now and whether or not there's a risk that things deteriorate.

Yeah, I mean being you know, the very you know, a localized issue became a very global macro issue. So it's kind of forcing the bo j's hand as they were finally kind of making an adjustment of this zero bound or negative bound interest rate environment that they've been they've been in for for decades. You know, it's kind of going against the grain of global central banks. You know, the need to you know, reduce interest rates, but now that kind of been forced to be put on hold. So yes, it's really really it can be a challenge. It could still out the economy more after we finally see momentum and in seeing kind growth and especially growth in that the equity markets that we hadn't seen in quite some time.

Yeah, I mean being you know, the very you know, a localized issue became a very global macro issue. So it's kind of forcing the bo j's hand as they were finally kind of making an adjustment of this zero bound or negative bound interest rate environment that they've been they've been in for for decades. You know, it's kind of going against the grain of global central banks. You know, the need to you know, reduce interest rates, but now that kind of been forced to be put on hold. So yes, it's really really it can be a challenge. It could still out the economy more after we finally see momentum and in seeing kind growth and especially growth in that the equity markets that we hadn't seen in quite some time.

So so yeah, these.

So so yeah, these.

Macro concerns are are kind of forcing their hand, pushing them into a corner that would lead to further deterioration in the overall market.

Macro concerns are are kind of forcing their hand, pushing them into a corner that would lead to further deterioration in the overall market.

And the number of conversations that I've had on this program with guests that know Japan very well point to the problems in China and they make that connection as long as China remains weak, Japan is going to be hurt by that. Would you agree with that? Imagine you would.

And the number of conversations that I've had on this program with guests that know Japan very well point to the problems in China and they make that connection as long as China remains weak, Japan is going to be hurt by that. Would you agree with that? Imagine you would.

To an extent.

To an extent.

Yes, But you know, again again speaking for our particular client base, you know, we manage approximately three hundred and fifty billion dollars in assets, and everything we do is driven by the historical, empirical data and academic research, and so we want that global presence. We're actually encouraging clients to stay in the international markets, stay in the emerging markets. You're not running from them, not not chasing the hot dots of domestic technology. And yes, well while mainland China's suffering some policies, you know, the policies that could be you know, argued as non growth oriented, they're not the alpha dog they were before. I mean you factoring kind of you know, the em world is kind of becoming more more ulti pooler. And yes, you know mainland Chine dominated just a few years ago, but you know, India's caught up, got on parody, Taiwan's caught up, gotten parody, and so you know, a really healthy kind of diversification play within that. And so hopefully even though mainland China's set version in Japan being so close to the world's second largest economy, I feel like the flows to other markets kind of within that segment or at least comfort with our investors, and we're encouraging them to maintain or extend those positions. We'll hopefully be seeing as the positive and not nearly a dependent at mainland China as it has been on the path. And again, just the overall dynamic of emerging market indexes in those other markets catching up. I think his testament to hopefully be able to reduce that overall dependence.

Yes, But you know, again again speaking for our particular client base, you know, we manage approximately three hundred and fifty billion dollars in assets, and everything we do is driven by the historical, empirical data and academic research, and so we want that global presence. We're actually encouraging clients to stay in the international markets, stay in the emerging markets. You're not running from them, not not chasing the hot dots of domestic technology. And yes, well while mainland China's suffering some policies, you know, the policies that could be you know, argued as non growth oriented, they're not the alpha dog they were before. I mean you factoring kind of you know, the em world is kind of becoming more more ulti pooler. And yes, you know mainland Chine dominated just a few years ago, but you know, India's caught up, got on parody, Taiwan's caught up, gotten parody, and so you know, a really healthy kind of diversification play within that. And so hopefully even though mainland China's set version in Japan being so close to the world's second largest economy, I feel like the flows to other markets kind of within that segment or at least comfort with our investors, and we're encouraging them to maintain or extend those positions. We'll hopefully be seeing as the positive and not nearly a dependent at mainland China as it has been on the path. And again, just the overall dynamic of emerging market indexes in those other markets catching up. I think his testament to hopefully be able to reduce that overall dependence.

So away from EM, how are you feeling about the US And if you could talk to me about the proportion of EM relative to let's say, US domestic equities, I mean, what's the balance for you right now?

So away from EM, how are you feeling about the US And if you could talk to me about the proportion of EM relative to let's say, US domestic equities, I mean, what's the balance for you right now?

Yeah, I mean we, as I mentioned, we let the historical, empirical data and academic research try to drive all of our decision making in the public markets. Really just trying to avoid you know, that hot dot chasing.

Yeah, I mean we, as I mentioned, we let the historical, empirical data and academic research try to drive all of our decision making in the public markets. Really just trying to avoid you know, that hot dot chasing.

You know, it's like.

You know, it's like.

That that that that friend that's always wearing the hottest trends or you know, working at you know, you know, the the hot store of the buckles, you know, and you know that late nineties had frosted tips hair and then constantly changing. Well, you're just chasing the trend of the moment, and you're probably losing out on the accreted value of prudence over long run. And so we're telling our clients stick with it. Yes, it has been the decade of large cap domestic US growth, but again, success is measured in decades, not a ten year period, not a five year period.

That that that that friend that's always wearing the hottest trends or you know, working at you know, you know, the the hot store of the buckles, you know, and you know that late nineties had frosted tips hair and then constantly changing. Well, you're just chasing the trend of the moment, and you're probably losing out on the accreted value of prudence over long run. And so we're telling our clients stick with it. Yes, it has been the decade of large cap domestic US growth, but again, success is measured in decades, not a ten year period, not a five year period.

And I'm shorter than that, and you know, you only have to step back to.

And I'm shorter than that, and you know, you only have to step back to.

The decade before you kind of the first decade of the New millennium where for an entire ten year period, the S and P five hundred was down about ten percent, you know, large cap growth. Domestic US large cap growth was down a full thirty three percent. Yeah, well, emerging markets was up almost two hundred percent. Small caps are up one hundred percent. So you have to keep calm, you know, not chase the hot dot, and make sure you have a globally diversified portfolio based upon global market capitalization.

The decade before you kind of the first decade of the New millennium where for an entire ten year period, the S and P five hundred was down about ten percent, you know, large cap growth. Domestic US large cap growth was down a full thirty three percent. Yeah, well, emerging markets was up almost two hundred percent. Small caps are up one hundred percent. So you have to keep calm, you know, not chase the hot dot, and make sure you have a globally diversified portfolio based upon global market capitalization.

But to be fair, everyone has their own individual time horizons, and we may not have ten years. I may need to capture, you know, a return let's say in half that period of time. Let's say I'm looking at five years out before. You know, is a part of my calculus in decision making when you consider the AI trade. I mean, that's really been a big part of the narrative here in the States for much of twenty twenty four. Is this something that you still think and in terms of the way that you analyze trends and look at the fundamentals, all the research that you bring to the table, do you still buy into AI?

But to be fair, everyone has their own individual time horizons, and we may not have ten years. I may need to capture, you know, a return let's say in half that period of time. Let's say I'm looking at five years out before. You know, is a part of my calculus in decision making when you consider the AI trade. I mean, that's really been a big part of the narrative here in the States for much of twenty twenty four. Is this something that you still think and in terms of the way that you analyze trends and look at the fundamentals, all the research that you bring to the table, do you still buy into AI?

Well, again, the trends, like those hot dots they come and go. What's vogue today is out of fashion tomorrow.

Well, again, the trends, like those hot dots they come and go. What's vogue today is out of fashion tomorrow.

You know. Well, when disco was hot and it was you know, the eighties and it was ground you know, listening to the pearl jam.

You know. Well, when disco was hot and it was you know, the eighties and it was ground you know, listening to the pearl jam.

Moving on from there, and so the hot dot is always changing.

Moving on from there, and so the hot dot is always changing.

So you just can't get you cannot get married to whatever the hot dot of the moment is. Yes, you participate in it, but you don't you're not beholden to the individual names. You know, just right before we came on, you guys were referencing Cisco's earnings. Well, Cisco is still essentially seventy percent below it's it's it's market peak during the last technology bubble we had, but the overall markets are up hundreds of percents over that time. And so you ride the waves of the momentum. Yes, you know, you know, is will AI you know, materially move move the economy the world forward maybe regardless, you know it, just just as the Internet, you know again, eventually moved the world forward. But there were these moments where it was challenged at the time period and not getting focused on the individual names will win out one hundred percent of time over long run.

So you just can't get you cannot get married to whatever the hot dot of the moment is. Yes, you participate in it, but you don't you're not beholden to the individual names. You know, just right before we came on, you guys were referencing Cisco's earnings. Well, Cisco is still essentially seventy percent below it's it's it's market peak during the last technology bubble we had, but the overall markets are up hundreds of percents over that time. And so you ride the waves of the momentum. Yes, you know, you know, is will AI you know, materially move move the economy the world forward maybe regardless, you know it, just just as the Internet, you know again, eventually moved the world forward. But there were these moments where it was challenged at the time period and not getting focused on the individual names will win out one hundred percent of time over long run.

We'll leave it there, Jamie, always a pleasure. Thanks for joining us. Jamie Batmar, who is a Chief investment officer at Creative Planning, joining us from Kansas City. This has been the Bloomberg Daybreak Asia podcast, bringing you the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.

We'll leave it there, Jamie, always a pleasure. Thanks for joining us. Jamie Batmar, who is a Chief investment officer at Creative Planning, joining us from Kansas City. This has been the Bloomberg Daybreak Asia podcast, bringing you the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.