Bloomberg Markets: Asia 03/14/2024

It is almost 11 a.m. in Singapore, in Shanghai. Welcome to Bloomberg Markets Asia. I am Haslinda Amin. Here are the top stories. Caution in the markets with focus on next week's BOJ and fed meetings as investors await more U.S. price data in the market and watch after a small cap selloff brought the worst day in two years for the country's stocks. The regulator raising concerns about froth in some sectors. Also ahead, the fate of Tik Tok, An app used by 170 million Americans is now in the hands

of 100 senators. We discuss whether the push to ban it will be a major flashpoint between Beijing and Washington and to discuss it all. We have a great lineup of guests. Gene Munster, co-founder of Deep Water Asset Management and Thomas Taw from BlackRock, will be joining us very shortly. And later on, we'll have Bernstein Senior Analyst with his call on India's financial market. Let's do a check on how markets are faring along here in Singapore. With me in Avril, you get a sense that there is t

repidation ahead of that humungous week ahead. Yeah, it's all about the central banks. Next week, the Federal Reserve will get their DOT plots that could inform the amount of easing we're going to get from the US Fed, but also the DOJ. So ahead of all that, and of course those retail sales and the CPI numbers out of the US to get through later today, you can see there's not much appetite for risk in the equity space, particularly on the big front. Of course we are watching very closely those wag

e negotiations. So far they've come in strong. Workers have gotten those wage hikes that they won by the wrangle tomorrow. That's a big one to watch. We also had some dovish comments right from the BOJ governor, and that seemed to curtail some of the expectations of an imminent move from the BOJ and cap the gains on the yen. But as you know, we've seen not that much appetite for equities. Now that is what we're seeing, broad picture. But let's zoom in also on what we're seeing in China because w

e got some of those declines among the tech names. Those are the biggest drags today. But helping to support the CSI 300, the gains on those copper related stocks as the commodity surges. Remember, we're hearing those reports about how copper producers are mulling production cuts has and what a rally it is for those copper stocks. The other way as well is India Apparel. I mean, we saw that stunning sell off in small caps. I mean, we knew it was hot, but few expected the sell off. Yeah, it was ve

ry hot. If you take a look at how it's run up since March last year, it's had a phenomenal time. And we saw the small and mid-cap gauges for the BSE slumping more than 4% yesterday. This was the biggest decline in about two years. So with all this froth in the market, you can imagine why the regulators are flagging that overheating. They're telling money managers to limit their purchase. And given how a lot of this run up has been because of retail participation as sentiment turns. The concern h

ere is really that it could drag the broader markets. We saw the Sensex down more than 1% yesterday. Erasing the gains for the month has April. It's hot hot hot is the stellar equity rally in in India finally cracking? Oh is this a buying opportunity. Let's bring in Thomas Taw, head of API iShares investment strategy at BlackRock. Tom, what's your take? Is it now this morning? Well, I think there's there's clearly a disparity going on between small caps which have had such a huge run over the la

st year or so versus versus the large caps. You know in the in the Chinese New Year outlook that we did recently, we actually pulled India back to neutral just on some concerns around valuations and also some of the the drivers around retail investing. But I still think, you know, India long term good structural story, you know, it can't go up parabolic, parabolic forever. So I think, you know, maybe we need a little bit of a reset here. But I think still structurally the growth story, the demog

raphic story in India is very interesting. So I do think, you know, foreign investors will be continuing to buy Indian equities. We've actually seen quite a quite a bit of outflow year to date in Indian equities. And for us, actually, at the moment, we're looking more at India bonds than equities at this point, Tom, it's not just growth, it's 8% growth. So given the sell off that we're seeing, should you be buying the Deb, Oh, wait a little longer, that would be more correction to come? Well, I

think it depends obviously on your investment outlook. You know, most of our investors are very long term holders. You know, I think we could see a correction given where valuations are. But, you know, it's not that dissimilar to a lot of markets we're seeing at the moment. Valuations are getting stretched. As you said, 8% growth in India is very, very appealing. The long term structural drivers look very interesting. And also the earnings growth there has been very strong. So I do think, you kn

ow, any any decent sized correction, foreign investors will be moving back into into that market. You talked about liking Indian bonds right now. What are you liking? What should you be picking up? 7%? That's that's what I'm liking on the Indian government bonds. I mean, number one. Yeah, it's pretty simple. I mean, you're getting very good yield there. We've got this new inclusion process into the JP Morgan M index. Foreign investors are very underweight and also in terms of correlations with w

ith with other bond markets and equities, it does give good diversification in the portfolio. So a couple of things under owned very strong yield and diversification play. So I think there's there's a lot to like there. Overall, the market's looking to the Fed and what's expected from the Fed and the messaging next week. How are you anticipating what are you anticipating? What are you hoping to hear? Well, it does seem that, you know, given some of the inflation data we've seen just this week, y

ou know, there is there is a pretty strong potential of the dot plot being moved to two rate cuts for this year, sort so 3 to 2, you know, what kind of impact will that have? You know, obviously, the Fed is not expected to cut at this particular time, but they will give some indication as to as to forward the forward look on on on their dot plot and on what the individual members expect. So, you know, we move to two then clearly that will have a little bit of an impact on markets. US dollar I th

ink will strengthen a little bit on the back of that. But you know as it is, we've already gone from 6 to 3 so 3 to 2, you know how much impact that will that will have? I'm not not exactly sure. You know, as I've been saying all year, I think the I think the the outlook now is more around volatility on equities and growth. You know, what's the actual impact, drawdown impact on growth both from from GDP and also from earnings versus rates and inflation volatility what we that we had last year. S

o that's kind of how I'm looking over the next couple of months. Are investors reassessing risk, Tom? Because when you take a look at gold, which traditionally is a haven play, it is at record highs. It is higher than what the dollar suggests it should be. How are you looking at risk right now? Yeah, I mean, there's a lot of disparities going on in the market. Right? On the on the one hand, you see global global growth slowing decelerating, exports coming down. You know, inflation still a little

bit sticky. And on the other hand, you have these kind of pockets which continue to move up, You know, mega caps open obviously is the big one. But India, as we mentioned earlier, Bitcoin gold. Gold is interesting. I mean, gold is something that we like along with commodities is kind of a as kind of a safe haven play. You know, if you look at the disparity between central bank buying of gold and ETF buying, there's there's a huge gap there. So, you know, I think I think at some point ETF invest

ors will actually come back into into gold markets. But you know I can I've liked gold all year and and I continue to like it into the future because there are there are risks in the market and you know I think investors need to need to have a very diversified playbook at this moment if there is one rotation to make, what would that be, Tom? Well, you know, it's obviously very hard to call. But in terms of the the Mega-cap U.S. equities, you know, we are talking about rotation there. You know, w

e're not saying get out of U.S. equities, but I think certainly there is there is a case to to take some rotation in those markets into some of the lower beta exposures or equal weighted type of exposures. I think, you know, if you look at the earnings, growth has been very, very strong, but projective earnings growth for some of those companies or those seven companies over the next year is around 30%. I think that's that's that's very optimistic. So, you know, I think particularly going into t

he second half of the year, of course, we have election risks. You know, will there be some kind of deregulation? We don't really know. But I think, you know, now is the time to start to start looking at possibly rotating some some of that portion of your portfolio away from away from some of those those tech names. Tom, hang tight, Thomas Tor BlackRock is sticking around. Oh. Still to come, a deep dive into India's financial sector with Bernstein. It says it's time to switch out of public to pr

ivate sector bank stocks. Plus, there's a battle raging in New Delhi about who invented and iconic dish. We'll dig deeper into the origins of the butter chicken later this hour. Keep it here with us. This is Mumbai. And. And welcome back. The fate of an app used by 170 million Americans is now in the hands of 100 senators. A bill passed by the House of Representatives would ban TikTok in the U.S. unless Bytedance sells a video sharing app. The measure now faces an uncertain fate in the Senate. S

o what are the possible ramifications? Gene Munster is co-founder and managing partner at Deep Water Asset Management. Gene, good to have you with us. We know that it's late where you are, 352 versus 65. What are you reading into that vote? You know, this is an 84% agreement from the members of the U.S. House, and that is unprecedented. And it is so unprecedented. It almost reads like a typo. And to answer your question, what we should read into that is that there is clear political momentum to

do something about tick tock in the US. And as you mentioned, is that the Senate and now goes to the Senate. It has been referred to as an uphill battle in the Senate and uphill in part because it's probably going to take somewhere between two and three months before the Senate actually takes a vote. If they do take a vote on this. As far as how that will play out is undetermined. I actually believe, just given the momentum coming out of the House, that this could get through the Senate. And if

I may just keep playing this forward, if in fact that does happen, then, of course, it goes to President Biden's desk and therefore it would likely get signed into action. But any good thriller, of course, does have a hangar here. And the hangar is the but. And that is related to what happens with the next presidential election. And so, again, we keep playing this forward. If president if the next president is Trump, he would likely do what he can to reverse all that is that happens and that get

s us back to this point. We're all kind of bringing this together with what my probabilities are. I think that there is a 25% chance that TikTok gets banned in the U.S., 25% chance a divestiture is forced and a 50% chance that nothing happens. That's a high chance of nothing happening. Jean, I'm just wondering if it does get sold. Who are the potential buyers? Well, it's a pretty short list. So let's first talk about what the valuation would be, is if you use a similar revenue multiple that meta

trader that it's about seven times revenue. And then you look at TikTok's US business, that implies a valuation of about 00 billion. And so that's real money. There is considerations around which companies can can get that money together. Those companies. Activision's former CEO is is talked about putting together a group. I think he has enough strength to do that. Of course, the the focus on matter that probably won't happen just because of regulatory. And then there is other could there be oth

er corporate buyers, too? I mean, the irony here is that the original potential buyer of of TikTok in the US, this is four years ago was Walmart. Walmart was the original one interested in this. And then that got blocked through some of Trump's actions at the time. And so it's going to have to be obviously a bigger buyer doesn't have to have issues related to regulation, and it's probably around that 00 billion valuation. And if I'm if I'm bytedance, then there is a threat of divestiture or get

banned, I probably take the 00 million and run. Gene, we know that China will be up in arms, no doubt. I'm just wondering your take on it, Should TikTok be banned? Well, this is one I want to respectfully pass on. I can say that I can just maybe speak for one piece of the conversation related to TikTok, the impact on teens in the youth Instagram. In the U.S., the average time spent is per day. Instagram is about 40 minutes, and it's about 70 minutes for Tik Tok. I mean, this is these products ar

e highly addictive. And so from my perspective, just step outside of the geopolitical ping pong match related to this and just say that I think that there needs to be better curbs in terms of some of the usage here. And again, I think that this ultimately does get through get through the Senate. By dawn's likely to to challenge this right on legal ground. What challenges do you think it will face, Jane? So in the Senate, the the reason why this has been referred to as an uphill battle, despite a

ll the momentum coming out of the House, is that the Senate, the senators are looking at this more of what is the government's role in terms of regulating business more broadly. And of course, the state of Montana has tried to put effectively a ban, and that was overturned in the courts. So there has been some precedence that the essentially these this is meddling in an area where lawmakers should. It's just not the Senate's job. There's other means, other governing bodies to regulate business.

And so I think that that's probably the piece. And then within that, of course, comes to free speech. So there's the side of the free speech piece, which would likely stand up. There is this side of the national security piece to that tick tock conversation. And that's where I think I think that this ultimately would grind through the courts is that the supporters of this bill, it's about the the national security side. Jeanne, we appreciate you being with us today. Gene Munster, deep water. Tha

nk you. And thank you so much for that. Let's bring back Thomas Taw, head of epic iShares investment strategy at BlackRock, for his take. Tom, I mean, just when Chinese tech stocks are beginning to rebound, I mean, how are you making sense of what's happening and the impact of it? I was panicking a bit because I know you're going to ask me about TikTok and I do not I don't actually have that up. But in terms of the view on on China Tech, you know, again, for us, the preference, if investors do w

ant to be in China at this point is for China offshore of China Tech. And the reason for that is because the short interest has been so high. And actually, what we saw last month in February was was the first time since July of last year foreign investors had actually moved back into China. You know, coming up with a coming up with with a view around Chinese equities is obviously very difficult. You know, there's a lot of upside risk, There's a lot of downside risk. But I think, you know, for us

, what we're talking to clients about is, you know, if you want to play this tactical rally that we're seeing at the moment and I think can continue, you you do want to be more in the offshore space in the super liquid type of ETFs, where you can kind of play that rotation quite, quite tactically. So I think for now, most investors would still be neutral. But, you know, given the amount of selling we've seen over the last few years, there is a lot of underweight in the market and a lot of short

interest, which, you know, I think is starting to get covered at the moment. The thing is, Tom CAC Telecom have have pretty much led the rally, CSI up 13% from that low that we saw in February. I mean, what do we do with tech now? Just sit on the sidelines, wait for clarity before maybe do a play on it again? Well, I think that's I think that's what has been happening. And, you know, over the last month, as I said, investors have moved back marginally. I think a little bit of it is a rotation aw

ay from India back into China. But I think a lot of it is really just given the risks, the upside and the risks to the downside. You know, investors don't want to be too massively underweight at this point, particularly with what's happening in the US and then going into elections and all these kind of things that are happening in the market. You know, I think investors want to sort of cover some of those shorts and be relatively neutral. I'm not seeing a lot of investors going massively long Ch

ina at this point. But I think, you know, given what's happened the last few years and the valuations and all these kind of things, you know, I think being underweight is becoming a little bit more of a little bit more of a risk. You've referenced the elections several times now. How big a political risk is that for for the markets? The answer is I don't really know. But you know, what I do know is, you know, four years ago, that's all anyone was talking about. And markets were starting to prepa

re for volatility. And, you know, we saw rotations into different sectors and that kind of thing. And health care was was was a big part of that. And this year, I haven't really seen anyone particularly talking about it from a from an asset allocation perspective. You know, again, I'm not an expert, but if if Trump does get back into office, then you will start to see these geopolitical tensions started to flare up again. And the talks about tariffs increasing and what that will mean for Asian e

conomies, I think will I think will will increase. But, you know, again, I'm not a not a politics expert, but I certainly see that in the second half of the year. More focus going into that. I appreciate that view, Tom. Now, Japan, I mean, how much upside can there be for the Nikkei to 25? We're seeing the yen strengthening and some expecting the yen to strengthen further. That may put a lid on where it goes from here. Yeah, I mean, I expect the JPY to strengthen further. I've been saying that s

ince we were at 150, which is basically, you know, it's not a particularly complex formula, but, you know, the Fed, whether it's going to be two, three, five, four rate cuts, the Fed are going to be cutting rates. Pretty much every other economy in Asia is going to be cutting rates and the BOJ are going to be raising rates, whether that's, you know, next week or in April or in June at given, you know, the mass depreciation that we saw in JPY. When we start to see that carry trade really narrow,

I think investors will will start to buy JPY again. And that's why we've been talking about like, look, you know, I think if you look at investing Japan into into phases, I think phase one, we're kind of getting to the end of that now, which is investors were underweight for many, many years. We saw a lot of structural reforms coming through. Investors have moved. Foreign investors have moved back in. At phase two is about, you know, can you buy Japan in JPY? Can you buy active funds? Can you bu

y certain sectors? And phase two is really, I think, going to have to be driven more by that 7 trillion USD that's sitting in currency and cash deposits in Japan. So I think it's going to be more of a domestically driven story. And I think if we do start to see pullbacks, I think foreign investors will continue to buy it because, you know, in terms of the index weighting, it's going to continue to go up. So for passive investors, they're actually going to need to to continue buying Japanese equi

ties. But I think that phase one is kind of coming to the end. And I think, you know, now we look at phase two. Tom, great to get your thoughts today, Tom, A store like Rock. Thank you so much for your insights. Let's do a check on a couple of mine is on the back of the rally, which we saw overnight. Also on expectations that perhaps China may be putting a lid on its output. Among Chinese smelters, we have MGI up more than 7% gains, too, for the other players in Asia, including Jiangxi Copper, c

urrently up by about 7%. Plenty more ahead. Keep it here with us. This is Mumbai. Now Apple's main iPhone maker, Hon Hai, is reporting fourth quarter earnings later Thursday. The company is on track to report its second straight quarter of strong profit growth due to rising demand for hardware. Growth in that segment will probably offset weakness in iPhone demand, particularly in China. Apple also said this month sales in China fell by 24% over the first six weeks of this year. Let's do a check

on how hon. Hai is shaping up ahead of those earnings numbers. Foxconn also in a focus on pretty much unchanged. Foxconn down about six and a half percent. That industrial falling about after that fourth quarter earnings was a must. It is weighing on that struggle. Also keeping an eye on Korean shipbuilders rallying as much as 16%. That's on the back of President Joe Biden pledging to review China's industry subsidies. We have Hyundai heavy jumping, as much as 11% currently up well, slightly mor

e than that. Also gains for Hyundai in Metro, currently higher by more than 5%. Plenty more ahead. Keep it here with us. This is Bloomberg and. And welcome back. China markets just having to launch. And you know what? It is hard to sustain recent gains. CSI 300 index under pressure, down about a 10th of 1%. You know, we had country got in missing that payment. We had bank downgraded to junk property market concerns still at the forefront. Keep a watch on MLF tomorrow set to stay pat. But if ther

e is a cut, no matter how small, it could just provide that much needed boost. CSI 300 index. As we said in negative territory. Let's flip the page here where we are in terms of Japan, it is coming back from lunch. Big week for the BOJ next week. Every long it's here with more April. Yeah, I mean it's really a matter of will it or won't it move next week isn't it. And that imminent move seems to be what markets are betting on especially as we get, you know, those wage negotiations this week. The

y've been coming in strong yesterday. We'll have to get through Ringo tomorrow. Local media reports also spurring speculation. And then today we get this report about how BOJ officials are mulling scrapping ETF purchases if their inflation target is met. So all in that seems to be causing that move in the market. But think about it as well. We got those dovish comments from the BOJ governor just yesterday, wants more comprehensive data and the mixed signals I think shows us how the BOJ maybe has

a communications issue ahead of it in the meeting next week. And why would investors take that risk ahead of all that? So that's why we're seeing the pressure on the Nikkei today and that's playing out among tech shares as well, tracking what we're seeing globally, what we saw in the US overnight and indeed in China as well. But helping to cap some of the losses. We're seeing the copper mining related stocks jumping along with their Asian peers as the price of the commodities surges is really a

bout how China smelters are set to be modeling those production costs. Let's get the board take you to cross acid in Japan just very quickly as well. We're seeing the yen gains reversed, probably because of those dovish comments from the BOJ governor. And don't forget, we have a 20 year auction to get through shortly. So bonds coming under pressure in Japan as well us. All right, Errol, thank you. You talked about the yen. It is struggling to hold its ground against the USD as momentum fades aft

er a strong US CPI highlighted risks for the Fed next week. Let's dive into the latest signals for the BOJ with our line strategist Mark Cranfield. Mark, of course we have not just the yen, the JGBs but Treasuries all waiting in a way for communication from the Fed, from the BOJ. But this is a BOJ that's been pretty misleading and there have been a few slip ups in the past from the BOJ. The most recent one was in October and the new governor, relatively new governor as he was. Mr. later said tha

t he didn't think it was necessary for the market to go to 1% for GDP yield. So of course the traders took it as a challenge and they drove it was exactly in that direction. So he has to be very careful what he says, especially during the press conference next week. So the statement itself will contain some information, but traders will be watching very closely the forward guidance that he provides in the press conference and how he delivers it will help the market go in a certain direction. It

will touch on the 20 year auction. I mean, this is a part of the market that's pretty much unloved. What are we expecting? Well, the it's going to be a tricky one because not only because the BOJ is so close, but the last one was almost a perfect auction. We had a very big bid cover, very tight tail, all the ingredients that will tell you that it was a very solid auction. That was just a month ago. Conditions have changed so much. And now you've got a situation where especially Japanese life ins

urers who tend to like the slightly longer they prefer 30 and 40 year, but they may go for some of these 20 years, but the absolute yield looks a little bit low. So this is going to be a very tricky auction. Should we be concerned that the market has been so orderly? It's almost like the market's bracing for perfection, yet there are risks out there. I mean, how do we look at this? Yeah, and it's not just the Japanese bonds. It's the whole G10 complex, even Treasuries we've seen before, where th

ey've been wobbles in the Japanese market. When it's become a little bit disorderly there, it just breaks the rest of the G10 world. And treasuries have been relatively calm just recently, so it wouldn't take much. If we get miscommunications. People are not quite sure what the BOJ really wants next week and the outlook looks a little bit murky. We could easily see a tailspin there and it just spreads across the whole. G10 will give us insights on the possible winners and losers. KKR weighed in

saying, you know what, the move, the pivot by the BOJ would be good for real estate, for instance. I mean, that's been a sector which has been ignored for a very long time. How often have we seen stories saying that New York, London, Sydney, Tokyo, not so much Tokyo, but Singapore and Hong Kong up in places and Japan gets left behind, finally is coming back into the picture in a big name like that will obviously support it, but also. Financials, of course, Japanese financials. They like it when

the Japanese yield curve goes higher, they can charge more to their clients, bigger margins. So they're an obvious winner of the insurance companies as well. For a long time of struggle to make returns in Japan, they will surely enjoy higher rates. On the flip side, maybe some of it won't be quite so happy as anybody in the tourism sector, because if the yen does strengthen, maybe not quite so many tourists coming to Japan. All right, Mark, thank you so much for that. Of course, real estate, a g

ood hedge against inflation. And line strategist Mark Cranfield, we thank you so much for your insights. Now to Chinese markets and a bull rally in tech stocks fueling a debate about whether we're finally seeing a bottom from all. Let's bring in Bloomberg intelligence senior alleged Robert Lea. Rob, as a rally in china tech add risk given the latest news on tick tock. Okay, Good question. I think, you know, any rally we're seeing in Chinese stocks at the moment really reflects the very low expec

tations and the relative underperformance of the China market versus most over markets globally and certainly versus NASDAQ. So I think that's more domestically focused and domestically driven. Whereas the tick tock news that's making the headlines today is more about the overseas operation of Bytedance, which is still a major Chinese corporation. But the uncertainty there reflects that overseas and US operations only. So I think the read across to China itself is fairly limited. If you had to m

ake a bet, pick a winner, would that be Baidu? I mean, we saw how the Chinese premier made a visit to its office in Beijing. Is that a good sign? I think it's a potential endorsed endorsement and recognition of their position as a leading Chinese AI company. But based on our fundamental analysis, their AI business is losing money and will remain loss making through this year. So whilst it's nice to have a, you know, very senior politician recognise that that's a strength of their IP from our poi

nt of view, are they going to monetise that and at what point are they going to drive into profit? And based on our numbers and our analysis, we don't see that happening on a reasonable time frame. So I'm afraid whilst I'd love to give a positive answer there, I think, you know, Baidu is going to continue to struggle operationally. So which ones might do well? Rob, sorry to put you on the spot right now, but which Chinese tech companies might just do well? Okay, it's all relative. So I think the

re are very few Chinese tech companies out there that can match the sort of growth projections of the Magnificent Seven. But I think on a relative basis and also factoring in the much lower market expectations and market valuations, the really a country like Tencent's, Tencent is a relatively broadly spread business which has a degree of defensiveness across its business operations in contrast to the likes of Alibaba, whose business is really being undercut by low cost rivals. Tencent's a busine

ss that can grow its earnings in free cash flow, you know, easily in the 10 to 15% range over the next 2 to 3 years. So I think the question for investors is, you know, that's a relatively solid outlook for a very large tech business. Is that truly reflected in the market price and market expectations? And we've recently added it to our focus list as an idea on that front. So we think there's a mismatch in expectations there. And Rob, we're awaiting earnings from Hon. Hai. This is against the ba

ckdrop of the weakness in in China for Apple. I'm just wondering how much of an impact might that have on on her house numbers? Yeah, absolutely. It's all about Apple because Apple accounts for over half their revenues. So in brief, the company will report weak numbers for 2023, but that's known and arguably priced in 2023 was weak for them because of destocking in the mainstream smartphone and PC market. But that's played through that's known going into this year. It's a much better outlook acr

oss their core markets as growth resumes. However, this apple overhanging Apple uncertainty is going to impact them. So we did see reports a couple of weeks ago about Apple's smartphone shipments in China being down something like 24% in the first six weeks of the year. It remains to be seen, you know, is well, first of all, is that true? Because it's a rumor or speculative, I should say. Secondly, you know, if we are seeing continued weakness on the apple front, to what extent will that impact

Hon. Hai over the coming year? I think the longer term outlook from Hon Hai does look more interesting as the company diversifies into EVs and also tries to vertically integrate into components. But those are longer term drivers for it. The focus is all going to be on Apple. Good stuff, Rob. Thank you. Bloomberg Intelligence Senior Analyst Robert Lea joining us from Hong Kong. Well, coming up, Bernstein tells us why they think it's time to switch back to India's private sector bank stocks. More

on the outlook coming up. This is Bloomberg and. I still think, you know, India, long term good structural story. You know, it can't go up parabolic, parabolic forever. So I think, you know, maybe we need a little bit of a reset here. But I think still structurally the growth story, the demographic story in India is very interesting. So I do think, you know, foreign investors will be continuing to buy Indian equities. We've actually seen quite a quite a bit of outflow year to date in Indian equi

ties. And for us, actually, at the moment, we're looking more at India bonds than equities at this point. And Mike Brooks, APAC, iShares Investment Strategy head, Thomas Taw. Now welcome back to Bloomberg Markets Asia. You're watching India focus. Let's take a look where India is shaping up in terms of its play today. 4 minutes to that trading day. We're seeing India continue to be under a lot of pressure. Of course, we saw a correction just yesterday, Sensex index pointing to a lower open, down

about 3/10 of 1%. Nifty Futures down about 2/10 of 1%. Now, a correction in India's small cap stocks is souring risk appetite on the broader market. The index has lost over $40 billion in market value in less than two weeks after authorities flight risks of overheating. Let's discuss this and more with Pranav Gundlapalle, Senior Analyst at Bernstein. Pranav, good to have you with us. How were you assessing the sell off that we saw? Anyone who seemed to think this was in a way overdue because I

think the midcaps and the Smallcaps had run up a fair bit with almost 50% of them creating a little 48 speed. And I think the only thing which held off the sell off previously was just a strong backlog which just blew into the shops that sell off. But I think this is a normal correction and just brings back the large gaps in smallcaps up to some of the range, I think get run up a bit more than what the fundamentals required. Something to help the correction. That's right. But the correction is a

lso driven by the clampdown we've seen from Sebi. Is the clampdown justified? Should it be expanded or not? So I think it's it's more of action to protect a full set of new investors who've come in. So I think it's more from the perspective of protecting the new investors, plus ensuring that doesn't create a ripple effect onto the broader markets as well. So I think it's more a proactive step that we had done, and I think that was just a trigger that was required. Otherwise the macro was prevent

ing a major sell off and this was just about to go for a correction that was anyway due to have. Are you looking at possible opportunities. What are you advising clients to do? Should they be looking at smaller private plays in terms of banks? What are you looking at in terms of opportunities? Oh, we think the large caps is where things look most attractive. I think we've held that views inside of the up that the larger names, especially in the banking sector, are looking a lot more attractive v

ersus the smaller names. I think large cap banks is large. Three or four private sector banks is really where we would advise private investors to be at this point in time. And in terms of shadow lenders, are they an attractive investment? Recently, we've seen how CB clamped down on shadow banking. They are concerns in that particular sector. I think there again, the concern from the regulator, both RBI and others, is around the new type of lending lending models that have emerged. You know, an

abnormal pace of growth in certain segments is what is coming under scanner. I think at an aggregate level, the credit growth has been fairly healthy in the sector. We are not concerned either the overall credit or even within consumer. I think an aggregate level, we are still in a very, very healthy pace of growth. Nothing excessive that you see. The clamp clampdown we think is more a pre-emptive step to make sure that the due process is being followed. There is no risky segments that are being

onboarded. I don't see that as any indicator of the overall consumer lending segment in the country. So I think we are we remain positive on the consumer lending segments as well. But for NBFCs that have seen a much faster than usual growth, I think there's probably some amount of a slowdown which is going to kick in as we as we go forward. My credit growth slowed down a moderate given regulatory actions recently. Is that something we might expect? Yes, On the consumer side, I think we definite

ly are expecting a slowdown in growth, adding that part has been communicated by the regulators and also the actions being taken are driving the banks and NBFCs to that. So what the increase in risk with the clampdown on certain types of loans which were seen as unhealthy, are growing too fast, will all result in a slowdown in consumer credit. So I think that that is something that's already priced in. I think the overall banking credit also is probably a couple of percentage points higher than

what most would have expected a year ago, and that has been largely led by consumer growth and that will moderate by hopefully the commercial credit or the corporate credit will pick up, especially the CapEx cycle kicking in to keep the overall credit growth still in that mid-teens range for the banking sector as well as the abuses season. You are saying that it is time to get back into India's private banks versus public banks. Within that sector, which ones would offer the best value? It was,

you know, within the private sector banks be like HDFC at this point in time, just given that the core of the franchise remains intact in terms of a deposit gathering ability, plus this stellar underwriting track record coupled with valuations that got extremely attractive. HDFC remains a topic, and I think there's a broader call for us from us to shift from the public to the private sector banks. I think most all the three or four large private sector banks look attractive at this point in time

. And given that, you know, there is the overall healthy credit growth plus a reasonably benign operating environment, we think that the large private sector banks look attractive within the HDFC, as I call it. Before we let you go, for now, the big question in India right now is when the RBI will start cutting rates. I mean, what's your own assumption? Sea otters on Tuesdays will have a shallow summer to the later part of this year after the elections. Maybe somewhere in the September to Decemb

er period. But it would be a rate less 25 basis points, which will not have a major impact on the banking markets. For now. Thank you so much for your time today, Pranav. Good luck. Our Bernstein with his insights on the Indian market and the clampdown that we've seen from Savvy as well as the RBI. Let's do a check on Indian markets. Been trading for about 3 minutes right now under pressure, continuing to be under pressure. Given what we saw yesterday. There's a lot of froth, they say, in the ma

rket and we're seeing some consolidation, that consolidation persisting. Today, Sensex index currently down 3/10 of 1%. The other benchmarks also in negative territory. We continue to track the Indian rupee, 80 to 83 versus the USD. Now still to come, we think a teeth into a lawsuit of one of India's most famous dishes. The battle over butter chicken is next. Keep it here with us. This is Bloomberg. Well, Asia under pressure. It is a big week ahead. We have on Thursday, triple witching on Friday

. Also the Fed next week, not to mention the DOJ. Talk about trepidation, talk about nerves. And it is reflected in the markets today. The Hang Seng partly down by 7/10 of 1%. The Nikkei also in negative territory. The Sensex, astounding loss which we saw yesterday, down 3/10 of 1%. The massive retreat in small caps in particular, we've been talking about froth and a hot market. Now sentiment is being impacted as well. Now let's stay with India. It is in the grips of a spicy court battle over, w

ell, butter chicken. For weeks, two popular restaurants have been fighting it out in Delhi High Court over who can call themselves the inventor of the dish, with neither side showing any sign of chickening out. India court reporter Shruti Mahajan joins us with all the juicy details. Shruti, good to have you with us. What is this fight about? Thank you. This fight essentially is between two restaurants, both of whom claim that they're chefs were the ones who invented this dish butter chicken, whi

ch is popular world over. To be sure, this lawsuit was filed in January, and this month we are expecting a small development in procedural aspects in the court. But at the heart of this lawsuit is the claim that, oh, which restaurant actually has a claim over the time of inventor of butter chicken. We have Mortimer Halal Deluxe on one side, which was established post partition back in the 1940s, whereas on the other hand, we have a fairly new restaurant to which it was established in 2019. Morti

mer Hill Once they are gone, guns the new restaurant to stop claiming that that restaurant has legacy over by the chicken's invention. So this is exactly at the heart of the court, the courtroom battle that we are seeing right now. We know that food fights are pretty common. I mean, even Singapore and Malaysia fight over who actually is the inventor of chicken rice. But, you know, the big question really is why this fight make its way to the courts? So my colleague Kai Schulze and I, when we wer

e reporting on the story, what we discovered was people in the area are extremely passionate about their food. So any kind of legacy or reputation or goodwill that is associated with a restaurant, it goes a long way in bringing in business. So if one restaurant claims to be the inventor of butter chicken and at the same time a conflict, a contrary claim is made by another restaurant, it also it also poses a threat of business being lost at the hands of the other restaurant. So this is where the

entire picture comes into place. We also have seen a lot of restaurants claiming that they have no other branches, just so that they don't lose our customers who may be customers to restaurants who may be using false indicators of being branches of a popular restaurant. So legacy, reputation and goodwill, which brings in businesses basically at the heart of why these food fights happen. Fascinating story, Shruti. Thank you. India court reporter Shruti Mahajan in New Delhi. Watch this space and s

ee how it works out. Plays out in the courts. Let's take you back to market and see how markets are doing right now. We know that there's a lot of trepidation ahead of that big week. We're keeping tabs on a couple of miners in particular. What a run for them falling. They're obviously high after copper surged to 11 month high. That's the potential of capacity cuts at China's smelters. And that's playing out in what we're seeing right now. Jiangxi Copper Valley up by more than 5%. Yinchuan Group

International also surging higher by almost 10% right now. Let's a look where we are in terms of the broader market markets looking ahead to lots of data and meetings on Thursday, triple witching on Friday, and S&P, of course, keeping a watch on the Fed and the Nikkei keeping a watch on the DOJ. OJ futures pointing to a flat open 5237. We have to year yield stretching it for 63 and the dollar at 1229. Of course we've been talking about that strong dollar impacting Asian currencies. Lots to diges

t in the coming week. And of course here in Asia, it is pretty flat at this point in time, tilting towards negative territory. Take a look where we are in terms of the Nikkei to 25. It is currently down about a 10th of 1%. China also under pressure at down by about a 10th of 1%. That is it from Bloomberg Markets, Asia, DAYBREAK, Middle East and Africa is next. Keep it here with us. This is Bloomberg.