日本二季度GDP增速放缓至1.1%，央行加息预期升温

[music] Bloomberg Audio Studios podcasts radio news. [music] Welcome to the Daybreak Asia podcast. I'm Doug Krer. [music] We begin in Japan where economic growth unexpectedly slowed in the second quarter. Real GDP grew at an annual rate of just 1.1%. Now, much of that weakness reflects a slump in capital spending given the uncertainty stemming from the conflict in the Middle East. And that in turn could complicate efforts from the Bank of Japan to fine-tune communications as it weighs the timing of the next interest rate increase.

For more, we caught up with Homeman Lee. He is senior macro strategist at Lombard ODA. He spoke with Bloomberg TV host Paul Allen and Heidi Strad Watts. Paul started the conversation with a question on whether the Bank of Japan has now an excuse to keep doing nothing and if the carry trade is still alive and well. Well, we would uh push back a bit against the idea that 1.1% quote unquote is an anemic number for uh an economy like Japan that in fact the 2.0% 0% uh consensus uh might have might have been a little too aggressive especially in the quarter when we had the the full impact of energy market disruptions.

The bottom line is that we have a positive growth and it's entirely possible that given the history of revisions in the uh Japan's economic real GDP data after capex numbers come out from the ministry of finance you could actually see a bit of upgrade and this positive growth uh is good enough uh in our view for the bank of Japan to still consider some additional rate hikes and and if you look at the deflator series for the same release uh in fact it was above consensus right so we do have this underlying inflation uh and of course in the context of a fairly weak yen.

So, we still think it's quite likely for the Bank of Japan to actually try to lean against uh some aggressive carry trade by raising short-term rates and and also we don't rule out the possibility of uh the BOJ bringing forward uh their tightening plans uh for the remainder of the year and the joint intervention that you mentioned uh in fact raises the stake for the policy makers to consider that kind of a yen supporting measure in the remainder of the year.

All that said, you are overweight Japan. Are there any particular sectors that you're looking at or is it just all about the AI story right now?

Well, AI is certainly a key theme for the Japanese equity market, but also industrials and materials. Uh basically, you have the cyclical sector in the Japanese equity market, you know, firing on all cylinders. And that's actually quite uh uh uh uh normal to expect this kind of outcome uh in a global uh cyclical boom given the market's uh usual sensitivity and a high operating leverage. So um even if there is a bit of setback on rates front and the dollar yen front uh and certainly for the letter we don't expect a major appreciation from here even if the BOJ uh raises rates a bit uh given the ondemanding valuation and fairly uh good setup for the earnings outlook uh we think the the broad market will perform pretty well but if you really have to delve into the sectors financials some industrials and materials I think these sectors are quite nicely positioned for the remainder of the year and of course the AI theme.

Staying with the AI theme, I know that you're constructive when it comes to South Korea, when it comes to China as well as not underweight with the US. So, how are you kind of splitting where you see those opportunities? Because we've seen the disruptive force of China really continuing to make leaps and bounds. Is there better value there for the AI plays versus the sort of more western oriented markets? So uh we think the the debate uh in terms of the competition between the US tax stack and China tax stack will not be resolved uh in anytime soon uh simply because there is significant amount of uncertainty surrounding that debate. uh but uh given what has happened so far and the steady progress in technology that we see in the China tech stack we think it's worth having it as a hedge in the portfolio in a diversified portfolio setting uh having a bit of exposure to Chinese equities especially with this very cheap valuation of forward multiples around maybe uh slightly below 11 times for the offshore listings it's worth having it at least as a hatch uh so in case there are some unex expected a significant innovation and advancements in the China ecosystem.

You can benefit from that. For the US, our position is neutral. Uh you know the hyperscaler uh free cash flows and the financial financing debates. They're certainly not going away anytime soon, but the software sector is performing pretty well and we still like that sector. And finally for South Korea, memory still remains the bottleneck. Jeans paradox still valid for the dynamic between price and volume. So after with this uh coming down of volatility related to leverage positions among retail investors, we think it's actually worth having that exposure as one of the preferred uh exposures within the emerging market equity uh allocation.

Markets at this point are pretty happy to kind of shrug off the risks, right? Namely, the macro weakness that we're still expecting out of China. We've got the domestic activity numbers coming through uh this week as well as obviously the lack of resolution in the Middle East and what happens with oil prices. Are these sizable risks to the downside? I mean these are risk factors that we need to live with and of course we have to be vigilant about them.

But um it really comes down to the conviction about the how these risks uh will actually affect the markets for the remainder of the year. And if you think about the the the Middle East conflict, uh the rhythm of you know a sporadic flare offs followed by a period of calm uh you know that's basically been the situation for uh the the region and we still think there is a very strong political incentive for both sides to basically maintain that framework uh despite very harsh rhetoric.

And for the, you know, uh, the China data, we're going to get the July data and it's entirely possible that it's a bit of disappointment. But if you think about the fiscal policy and the underutilized resources that has to be implemented more aggressively for the remainder of the year, we still think we still think the likely outcome for Chinese economy for the remainder of the year is that of a rebound. And so that really leaves uh especially for the emerging markets and the broader risk uh uh asset class uh the key factor actually could be uh the fed policy but for that again there is a debate we're siding with the extended pause uh view here and if that if we are right uh in that prognosis then the the risk assets could actually you know continue to grind up for the remainder of the year and that's the reason why we maintain our pro- risk tilt in our portfolios.

That is home and Lee, senior macro strategist at Lombard ODA, speaking with Bloomberg TV host Paul Allen and Heidi Strad Watts, bringing you their conversation here on [music] the Daybreak Asia podcast. [music] Welcome back to the Daybreak Asia podcast. I'm Doug Krer. We turn next to AI in China. Alibaba's Quen has become the world's most downloaded family of open models. Over three billion downloads globally in the past 6 months.

And now the Chinese artificial intelligence firm ZAI is set to upgrade its flagship model within 2 weeks. So in rolling out the upgrade, ZAI would join a series of Chinese openweight offerings looking to out compete with US firms Anthropic and Open AI. That was the topic of conversation on Bloomberg TV's China show. Host David Inglace and Ivon Mann spoke with Bloomberg strategist Anthony Stevens and Bloomberg analyst Robert Lee.

Anthony, let's start with you on really what caught your eye with some of the headlines here.

Yeah. So, let's start with macro and kind of drill down, right? It's very interesting that Chin