9:00 A.M. in Shanghai, Shenzhen, and here in Hong Kong. Minmin:
We are counting down to the opening of markets in Hong Kong, but mainland markets are shut. Asian stocks flat despite a market rally driving the S&P 500 to its first record close since August.
Bloomberg learns DeepSeek is nearing a $12 billion funding haul with Tencent and CATL backing the startup ahead of its planned IPO. Jamie Dimon weighs in, telling Bloomberg that risks have gone up tenfold due to Anthropic's Mythos model.
It's interesting, we are not quite getting those tailwinds from the U.S., right? You talk about the S&P's first record since August, talking about Nvidia coming back nearing that $6 trillion market cap. Maybe more of a muted start.
I think a lot of gains in the U.S. are driven by domestic names. Tech names have been doing very well. That market cap push higher, but in Asia, you are not really seeing that feed through, mainly because memory prices have been... at least eight of those big memory chip names have been moving. There's still strong demand for memory chips.
There is still a lot going on. As you say, the Stoxx did not do too well overnight, so maybe that's why we are seeing Korea and Taiwan not overperform. The Taiex versus the Kospi, that margin is about 23 percentage points last quarter, the widest margin we have seen since the turn of the century. Taiwan seems to be in favor, but not today. We are moderately lower here, but Samsung seems to stand out. Earnings coming out on Thursday could be quite pivotal on if we can continue with this AI rally. SK Hynix and LG Electronics are lower this morning. LG set to report about Apple and working together when it comes to some of these smart home products as well.
The BofA call: are the bubble risks forming? We are seeing records across the board in the U.S. Nvidia suddenly is back, but it's only a handful of stocks propelling the Nasdaq to those records. Take a look at what they have been tracking and that bubble risk indicator. The top four bubble-ish characteristic asset classes is the likes of U.S. tech, oil, healthcare, and — no surprise — Korean stocks.
Jim Polson was saying you have this triple whammy of higher yields, higher rates, and this is historically associated with a decline in the S&P. He is calling for a 20% decline in tech stocks, and if you look at the bond market, we are taking a bit of a pause. You see a selloff continue now that we have pulled back from Monday's highs when it comes to those yields, but, yes, if you look at what market pricing is showing us, if you look at bond futures and open interest, it is still showing very strong interest for shorting bond futures, and that's despite the comment from Scott Bessent that he wants to bend the curve, that this formula of higher growth and restraint spending will put a lid on government borrowing.
If he can do it or not is the big thing. Looking at the Hang Seng, there was a massive rally yesterday. We will see if we got another day of it. The Hong Kong dollar. Let's bring in our Asia managing editor. Does not seem like we are breaking here. We are getting close to those records. Tell us why.
It seems investors are making a conscious decision to ignore the rate volatility. The answer seems to lie in earnings. If you look at U.S. stocks, Bloomberg Intelligence expects third-quarter earnings to jump 35% for S&P 500 companies, and in particular for the tech sector. That expectation goes to a 66% jump, so that is a huge amount of increase expected. On top of that, Goldman Sachs said most of these companies will still beat the street consensus for their earnings. That's why you see the kind of relentless bid up for global stocks, but coming back to Asia, that picture is not as bright as the U.S., I would say. Upward revisions kind of sidelined a little bit, but there is one bright spot in Asia, which is Taiwan. You guys briefly touched upon that as well. Taiwan is seeing rapid earnings upgrades right now. It actually had overtaken Korea's upgrades in the third quarter, and that's why investors are favoring Taiwan as Asia's most favored market right now.
We did see a pause in the Treasury selloff a little bit, but are traders betting that the selloff is not over yet?
If you look at positioning, they are basically telling the story that people are heavily bearish toward U.S. Treasuries, with short positioning at very extreme levels. Even with a relatively soft set of jobs data last week, which stabilized markets somewhat, as you say, we are still seeing open interest for long-dated U.S. Treasury futures keeping going up, and that means fresh shorts are coming into the market. If you look at the options market, they are telling the same story. Investors are still paying a premium to protect against a continued rise in long-dated Treasury bond yields. The picture is again very clear, but there is a bit of stabilization. But if you look ahead at the positioning, traders are telling us they expect more pain ahead for bonds because there is that very dark backdrop of higher energy prices, higher government spending, and even higher corporate bond issuances, along with the higher rate expectations from the U.S.
Our Bloomberg managing editor for Asia equities. This milestone we see with Nvidia is back on the verge of becoming the first company with a $6 trillion market cap after what was a disappointing start to the year. It is up 30% so far already, which is quite impressive if you think about how we ended the first quarter. The stock was down some 11% on the back of these investment concerns, on the back of if they were spending too much on AI. They were able to lay out a pretty robust outlook. That has propelled the stock higher.
It is remarkable that even at that pricing, it is still considered cheap. How strongly earnings outlook has been, and what is fueling that price higher is this news for SpaceX. It just goes to show you, right, that insatiable demand for chips to power their computing revolution. We are seeing that adding to the list of massive financing deals we have seen of late, not just in the U.S. but in China as well.
This is a big one from DeepSeek. But your team has reported DeepSeek is close to securing at least $12 billion in this latest funding round, blowing past its own capital-raising target ahead of an IPO planned for next year. It seems they were able to raise more than they thought.
That's right. They raised at least 80 billion yuan, soaring past their previous target and setting the stage for a potential IPO next year. Now Tencent and CATL, the battery pioneer, are some of the biggest investors in this round, and as the company signs its term sheets, the tally could reach up to 100 billion yuan in the end. DeepSeek is sitting at the center of a cohort of Chinese AI companies trying to race against U.S. rivals.
How important is the role that DeepSeek and its founder is playing?
DeepSeek is sitting right at the center, and right now, everyone is in war-chest-replenishing mode. We reported as well just yesterday that Moonshot is closing that pre-IPO round at a $50 billion valuation, and OpenAI raising there is a bit — $30 billion. So that's why DeepSeek needs this money, to attract the capital, the talent, but also the chips it needs to complete this race. The founder also has a role to play. He has had a strong year, and now, since he's obsessed with AGI, he has vowed that he still wants to keep the company's models as open-source.
They are also teaming up with the likes of Huawei. How do you see these two working together?
DeepSeek is planning to deploy at least 160,000 Huawei accelerators, building one of the largest data centers in Mongolia, and these two are forging into a new arena. They also released the software that helps program chips, so lots of new frontiers there.
I guess it builds onto the anticipation of this IPO happening early next year. Thank you. Certainly that will be a big thing to watch, not just the fundraising cycles of these AI companies, but really the investment in AI has been the topic at the summit now underway in Singapore. Also underway, Bitcoin's latest rally provides talks of maybe another bull market.
Let us bring in Haslinda Amin. Avril Hong is at the Milken Asia Summit. Tell us what's coming up.
Expect a lot of buzz. We're talking 25,000 participants, movers and shakers descending here in the Lion City, amid a lot of expectation. Yvonne mentioned we could see the end of the crypto freeze. Take a look at where it is trading right now. It is up about 40% just some three months ago, but the question remains, where it goes from here. Despite a president who is pro-crypto, we are seeing that regulation in the U.S. has been slow, but we are making progress, especially in Hong Kong as well as Singapore. We expect frameworks from licensing to come through, and that will help the explosion, perhaps, the growth of cryptocurrencies. We are speaking to a slew of movers and shakers. The likes of Coinbase, Dragonfly, and remember, now we have traditional finance pretty much in the loop. We are speaking to Franklin Templeton to see what it sees as prospects for the company going forward.
It seems very interesting. You guys certainly stole the spotlight from Hong Kong today.
When it comes to frameworks, guardrails, talk about artificial intelligence, and to some extent, there are concerns about privacy, including when you talk about wearable smart glasses. So we will be talking to a CEO of an AI-powered smart glasses company that is looking to increase its U.S. market share. What are some of the bottlenecks that he sees in the market, at a time where there are these concerns about AI and how it could affect privacy? You have the likes of Australia calling them pervert glasses. Aside from that, we are also continuing to talk trade. We have just heard from the Singapore foreign minister talking about the relationship between U.S. and China. The minister of international trade talked about how countries are looking for reliable partners, and with that in mind, Canada has a lot to offer. Those conversations taking place at this event in the Lion City.
Let's stay where you are because we are about to see the foreign minister of Singapore now speaking on stage. Let's listen in.
Adopt technologies and regulate them in a way that people can trust.
Struck on that word. Trust is the coin of the realm. At a time of great disruption, trust becomes even more valuable.
Whatever happens, we intend to maintain our premium on trust, on not panicking. Certainly never confiscating wealth properly earned and managed. Not panicking in a crisis, and just keeping our heads and maintaining sanctity of contract and consistent application of laws, both domestic and international, and keeping sufficient level of transparency in our systems. In fact, we think this is an opportunity for us. For the crowd in this room, we look at managing assets and wealth. We are doing quite well, and it's not because we are the smartest or biggest or most powerful people in the room, but I would like to believe Singapore has a real trust premium, and we will double down on this.
Once people buy into that trust framework, how — or do you think the citizens are equipped to adapt — Minmin: We will leave you there, but Bloomberg subscribers find more on LIV Golf. A reminder that mainland China markets remain shut for the Golden Week. Today is the last day of that, but we are counting down to the opening trade in Hong Kong. This is 'The China Show.'
JPMorgan Chase CEO Jamie Dimon says cybersecurity remains his biggest concern as artificial intelligence creates new risks and vulnerabilities. Speaking exclusively with Bloomberg, he weighed in on the mounting investment needed to fuel the AI buildout.
This conference, there should be 20 people. Now 2,000 investors and companies around the world, and it is a positive sign of tech's ability to expand, not just Silicon Valley, but it's everywhere. That's a good sign. A lot of these companies, they are things that have helped mankind for thousands of years, but rates are going up. A lot of demand for capital. In my view, a little bit expected. It creates risk for all companies. Markets open and close, so there's no permanent state of affairs when it comes to markets.
We have all seen the increased competition for capital. Layering that on the capex spend, what is the potential biggest risk to that forecast? Is it physical buildout, monetization, the cost of capital, or is it something else?
It is all those things. When we mention the internet, in total it pays off, but there will be better models, changing schedules, lawsuits about data centers. Most of them will be built, and probably built where people want them as opposed to where people do not want them. They will be used. AI itself, I think, creates a lot of value, so I'm not really worried about it. But you do point out, there is a lot of additional borrowing. The government is borrowing two trillion dollars again, and this is a global phenomenon, not just the United States. Yet there is a supply and demand of capital. If you thought there was a savings glut years ago, and others not. It could be a good thing if rates are going up and capital used productively. The problem part is the government consumption. That is a whole different thing. Of course, government spending can drive inflation, so there can be a flip side of how this plays out.
You mentioned the politics of AI.
These are different issues. Data centers, build them where they are wanted. Half the new ones in America are in Texas and Virginia, and people do not want them there. You are not going to win. Of course, and a big company has to be a good community citizen, so I think a lot of these people are doing it, going into town and being part of the community to help the community get the rights. It's just things like that. That will be worked through. AI has these huge positive effects. I think it will cure a lot of diseases and make life unbelievable for people. The downside is obviously what you read about with the agents and Mythos and all these things, and that is a legitimate concern, a real thing. I'm not going to get hysterical over if it is existential or not. What we are doing is rolling up our sleeves and going to work to fix it. Banks have always had a system in place where they help each other. It is starting with 50 companies, starting in the U.S., across six industries: tech, financial services, water, transport. These industries that the government points to as a lifeline, but it should probably extend to healthcare, pharma, agriculture. Every industry is kind of critical, and we need to help smaller companies, too. It is a lot of work. We simply have to do it. AI created vulnerabilities we did not know about.
You have thought about cyber risks for a long time. I know that. Does AI make cyber systemic risks more likely?
Yeah. That's what I'm saying. Mythos, whatever you thought it was before — I said to my chairman cyber is our biggest risk, and they have not published yet, and I would say the threat went up when Mythos was published.
We are, of course, looking at Chinese mainland markets, still closed for a final day before reopening tomorrow. Futures are pointing higher, but you look at the Hang Seng, biotech also leading declines, 1.8% lower, erasing the gains we saw yesterday. Not much of a catalyst going on for what has been a standout sector so far this year. HSTECH also down 0.3%. Plenty more ahead. This is Bloomberg.
Hong Kong markets are looking like they're slipping. Futures pointing down, but the Hang Seng down by 0.5%, not really feeling the tailwinds from the U.S. tech rally. The biotech index really leading declines.
Even tech stocks, despite DeepSeek sources saying they are planning to raise at least $20 billion in this latest funding round, not enough to revive tech trading today. One bright spot in particular is still the optical stocks. We will have the open coming up next. This is Bloomberg.
Welcome back. You are watching 'The China Show,' and we are counting down to the open markets in Hong Kong. Finally, that cool breeze has returned to the city. It is October 7. We are finally getting to fall weather. Certainly that is something that is nice across these markets. Not the same sort of month. A lot of people complaining about low breadth when it comes to the rallies we are seeing. People may be still questioning if this is a bubble or not right now.
Yeah, it has been very U.S. domestic-driven. Hang Seng Tech today in pre-markets were already down, and tomorrow is a big day with market reopening, and we are also seeing headwinds when it comes to the EU and China as well. The Chinese government calling on France and Germany not to call for protectionist measures at every turn as we head into trade talks tomorrow. Taking a look at Hang Seng, down by 0.2%. Tech is not doing a lot here as well. Not a lot of catalysts for some of these Chinese tech shares, even despite fundraising deals we have seen so far. Take a look at some of these tech stocks, all in the red here. It looks like those fundraising targets that have been exceeded have not been enough to inject more optimism into the Chinese AI play here. Tencent set to be backing DeepSeek's funding round. We are looking ahead to those IPOs as well, and we are also checking biotech stocks in China. This has been one of the best-performing sectors of the year so far. If you look at GenScript, that is down by 16%, and perhaps just not a lot of catalysts going on this week, particularly with mainland China closed. Perhaps some profit-taking, though throughout the year, we have seen this bounty of outbound licenses from these Chinese biotech firms that have lifted the sector year to date. Today a bit of a down day for them.
It has been really surging, that stock, so we have come off of that pretty substantially today, but it has still been a pretty stellar stock. JPMorgan out with this call, saying when it comes to Chinese insurance company earnings, they may drop more than 50% from a year ago because of the volatility we see in local markets. They say maybe the declines in the stock could be a buying opportunity given, yes, once again, that dividend play. This was an upgrade from JPMorgan as well. This was the heavy truck company. They talked about what we have seen so far, this recent pullback in the stock, mainly driven by negative sentiment. When it comes to the fundamentals of this company, they say still looking pretty strong, and that's why they've upgraded price targets this morning.
Taiwan's benchmark stock index, meanwhile, has overtaken the Kospi as the world's best major performing equity markets this year, despite both being beneficiaries of the AI trade. For more, we are joined by our Asian equities reporter. Tell us what is going on in the Korea and Taiwan market. Why are we seeing these indices switch places?
It has been interesting to see how the top-performing global gains switched hands in the past few weeks. We now have the Taiex index up by about 72% so far this year versus Korea, up about 65%. The quarterly performance of Taiwan versus Korea, when you look at how much Taiwan has been outperforming, is actually at its biggest since the year 2000, and being driven by a couple of different factors. First, of course, investors rotating away from Korea. They are being burned out because of the volatility. They become more disengaged, and of course, the concerns when it comes to the peak of memory prices, and Korea is so concentrated with these names, and investors seeking other opportunities and finding names related to these bottlenecks. It is also showing up in the earnings revision. We're talking about an upgrade when it comes to earnings for Taiwan, first time outpacing that of South Korea on a quarterly basis since March last year. That earnings momentum and divergence driving performances here.
What makes Taiwan unique, do you think?
It is interesting because it's so diverse when it comes to what they can offer along the supply chain, the picks and shovels. The other day, we had a Bloomberg report about the billionaires behind the AI trade. One of them being a founder of a company that makes rail tracks for AI data centers, and the stock is up about 250% so far this year. So Taiwan has a lot of these companies that make these small components, materials that are just indispensable and so critical for the AI trade. And what's changing in the bigger picture is that the trend has been shifting away from the customer being just Nvidia to all these U.S. hyperscalers trying to build their own ecosystem. You have Meta. You have Google. For that to happen, you need everything from CPUs to cooling systems to all these networking, for example, and Taiwan has all these names. So that's kind of what is driving all the excitement around the Taiwanese names.
How much more upside are we looking at?
Of course there can be a bit of a slowdown given how much it has come up, but we just heard from SocGen the other day saying they still prefer Taiwan at this point over South Korea, but it's about how you can be more specific, focusing on the names that are exposed to corporate governance reform and even industrials, materials, while for Taiwan, they are looking at some of the names that see some sectoral re-rating. Remember the other days this week, we had a note from Bank of America saying there's more upside when it comes to the material for the circuit boards, and we see that the names they recommended, three of those names jumping by about 350% as well so far this year. When you see sell-side becoming more optimistic about those sectors in Taiwan, that's where we see further upside.
We are expecting record profits. Is this enough to revive the stock in Korea?
That is very questionable. Investors are not sure about that right now because we saw what happened to Micron. Similar moves. You report outstanding results, but investors are not as impressed when it comes to betting further on the stock. This time around, what is important is for them to see the durability of the earnings going forward, especially when we are seeing many of the notes pointing to a slowdown in the appreciation of memory prices going forward. If Samsung is able to continue that momentum into next year and into the coming quarters, will be something key to watch, and then their buyback plans is another thing to watch as they wrap up their current buyback plan.
We are keeping an eye out when it comes to oil prices after Iran stepped up attacks in the Strait of Hormuz in recent days, just at a time when analysts were starting to see when it comes to flows around these key areas, it is actually climbing back toward pre-war levels as well. But why is oil markets still about $100?
Perhaps overshadowed by the increased pace of vessels. China's independent oil refiners are turning to Iraqi crude as a U.S. blockade chokes off supplies from Iran, while competition from state-owned rivals makes Russian oil too expensive. At least 50 tankers are bottlenecked along the nation's coast. Could you tell us, what does it tell us right now about the level of oil and intrigue that China has?
Right, so we do understand that it has been widely agreed on that China is still sitting on a vast cushion of oil inventories, but throughout this war, we have seen that the Chinese government has been pretty judicious with it, and we have not seen a huge drawdown on a significant level. Right now, China is sitting on over a billion barrels of oil, and it would seem it would take a few more hurdles for them to be able to tap on this in a huge way, which is why when we look at the smaller groups of, like, the Chinese independent refiners, in the past couple of months, they are essentially being forced into the supply space. Reason being that the crude feedstock around the world, prices have been skyrocketing. These refiners, which have typically been the most price-sensitive of groups within China, they have been tending to an unlikely alternative, which is Iraqi crude, and that's also a function of how the oil market is functioning right now. With your Middle Eastern marketers and sellers such as Iraq putting a lot of effort into channeling oil out of the Gulf and marketing them toward the usual customers, right now Iraqi crude is essentially cheaper than the other alternatives that these primary refiners are used to. This includes Russian oil, which Chinese state-owned players have been sweeping up the last couple of months. These hint at a sign of how the Chinese are treating crude procurement as a whole during this crisis, rather than tapping on the convenient vessel of their oil inventories.
Help us understand a little bit. You are hearing reports when it comes to oil and gas flows are looking pretty steady. That has picked up since the start of the summer. Why do you think we are still hovering around $100 oil right now?
So let's explain the first part of the question, which is why oil is still continuously coming up. Middle Eastern producers in the past couple of months have adjusted to the new normal. It has been the norm for them. Of course, if you look at other supplies of oil, for instance, for China, who used to be largely reliant on Iranian crude, all these millions of barrels of oil have been left up behind the U.S. naval blockade, so there is a huge gap that they have to fill. And these refiners, like I mentioned earlier, had been coming back in force to purchase mainstream crude grades, like Iraqi crude, which used to be available for the wider market. Even though oil is still flowing out of the Strait of Hormuz, essentially the available supplies have kind of shrunk, and there are more purchases piling in on the same few grades because the other available crude grades have effectively been blocked by the U.S. naval blockade, which was reinstated in July.
Thank you. Coming up, we want to head back to Singapore. We will be joined by crypto venture fund Dragonfly as Bitcoin holds above $100,000. More next. This is Bloomberg.
Of course, we are talking about Token2049, a good chance to look back on the quarter when it comes to Bitcoin prices. It actually stood out to be quite a standout if you look at this rebound we saw in the third quarter. We are talking about some 40% gains, basically the highest quarterly gain we have seen since, of course, get this — that U.S. presidential election outcome when Trump secured his second term. Certainly this crypto-friendly president, there has been a lot of anticipation that he was going to really help the whole digital assets sort of game, but, yes, we have seen a bit of a rally, but then again, we are not far from the peaks we saw, that slump we saw that started maybe the end of October last year. We were at 126,000 at one point. At one point we dropped to 50-something thousand. It seems like we keep hitting our head across the ceiling of $87,000. As you talk about Treasury yields, that is weighing when it comes to these speculative assets as well, but it brings the question on what is the next bet when it comes to the crypto world?
Not really hitting the levels of euphoria we saw last year. 'Insight' anchor Haslinda Amin is standing by with our next guest.
Good to have you with us. What happened to the one million?
I don't know who is saying that. I think it's clear that was an outlandish position. Now that some of the craziness has drained out of the market — if you remember earlier this year, gold was going crazy. Then you had memory stocks going crazy. Now I think retail attention is starting to pick up again. We are seeing retail signs of interest. Some of the apps in the App Store getting interest. These are some conventional signs of retail paying attention to crypto again. People kind of forgot the industry even existed. Retail is cyclical, and the time it's not here, it is on institutions and hedge funds to keep up demand and be the last buyer of resort for asset prices.
Retail may be returning, but capital is going to AI. Not long ago, we were talking about possibly the extinction of crypto venture capital. Is it getting extinct?
No, I think it is evolving. If you rewind the clock back to 2021, 2022, there were a lot more VCs who raised the money that they were going to deploy into crypto venture. What we saw was that most VCs really had no business managing capital. The idea was that anybody could do this. You just have to sling some money around and everything goes up automatically, and we are in a very different world now. We are in a regime where there's not that many players that are really institutional quality that can really add value to these projects. Most of the easy money in crypto is gone now. That said, there are amazing businesses in this industry, so there are things like Polymarket, companies like Ramp which are growing stablecoins. These companies are growing at rates similar to what you see in the ad industry.
They may be growing, but capital is going the opposite direction. What would it take?
I think the reality is that it is a big world. A lot of the biggest institutional investors in the world are still investing in some of these companies. They have had the likes of, if it is JPMorgan, or we had ICONIQ as an investor into Ramp. These are very large pools of capital. Self-large pools of capital are still here, and then you have public companies and names like MicroStrategy. They are still taking Wall Street capital.
I want to put it out there that you have been a backer of Polymarket before it was a thing. Let's talk about the prediction market. We are talking what? $200 billion in prediction markets right now? The target's $1 trillion. Is that realistic?
I think it's clear that if you look at quarter-over-quarter growth, these things are growing at massive rates, and it's clear the market is not saturated. Both Polymarket and Kalshi have been in the U.S. market, but the concept is global. People are wanting to bet on the most important questions of the day, and also using the information that is coming out of prediction markets to make other decisions. That product is a global product. Everybody in the world that is looking at prediction markets understands what is happening with interest rates, with respect to the AI capex buildout, with respect to the war in Iran. All these questions now have become... if I want to know something, I don't just look at the news or talking heads on screens. Obviously, shows like this have their value.
But it is a much more quantitative input. We talk all the time about these large hedge funds and market makers, they use Polymarket and Kalshi as input into how they make their decisions. They could have their own independent forecast, but what the market tells them, they will always find more trustworthy.
Yet, at the same time, it is seeing lots of lawsuits.
These lawsuits are mostly the states in the U.S. suing against these prediction markets, saying that you are saying you are just federally regulated and you do not need to get licenses in the states. We disagree. Unsurprisingly, if they have to get state-by-state licenses, they have to pay state taxes. This is a fight about taxation, not a fight about whether prediction markets have a right to exist. If they have to get these state-by-state gambling licenses to offer sports in these different states, that is legal. You just have to get a license and pay taxes. This will probably end up going to the Supreme Court. My guess is next year, and this will be a big fight, but at the end, these businesses will exist.
It will exist and there will be growth, and there will be copycats. You say 90% of them will fail. Why?
Most likely. The reality is that right now everybody is talking about Polymarket and Kalshi. They have this kind of rizz, as the kids call it.
It means these brands, relative to the old brands, they connect more with consumers. They are younger, they are cooler. They have these celebrity endorsements. Polymarket itself has become — talking about Kleenex or 'I will Google it' — it's one of these things that has become a verb. All these different companies will launch their own prediction markets, but I don't think they will get the traction you will see in Polymarket. There might be a CME market on this or that, but most people, most consumers, most institutions will think to themselves, Polymarket is where I will go.
I'm going to get you to look into the crystal ball because you were right heading on Polymarket. What is next?
I think a lot more will happen on the institutional side. Today, these are mostly consumer brands. It is mostly retail coming in, and institutions are playing somewhat, but mostly providing liquidity. I think more and more institutions are going to provide ways to hedge out some of those idiosyncratic risks they have in their own markets. Today, there's not that much hedging activity going on. That's going to change very soon.
We have to leave it there. By the way, I feel so overdressed compared to you. If you did not know, he was a former pro poker player turned venture capitalist.
Wow, thank you so much. Take a look at how markets are doing right now. The Nikkei and Kospi are both seeing downside here. Taipei Taiex just keeping its head above water right now. This is Bloomberg.
Benchmarks are doing this in Hong Kong. We are seeing a bit of a pullback when it comes to Hong Kong, HSTECH meeting. Seems like we are being dragged down by 4%, led by the likes of GenScript, down 15% right now. That drug optimism when it comes to AI, that seems to be seeing a bit of a pause this morning. A lot more in the next hour. You are watching 'The China Show.'
Welcome back to 'The China Show.' Here's a look at the HSI half-hour into the session. Hang Seng is now down by half a percent here. Not much in the way of catalysts driving markets today. You add to that some headwinds when it comes to China-EU relations. The Hang Seng Tech is down by 1%. Not feeling the tailwinds that are coming from the tech rally in the U.S. That's not really feeding through into Asia. Biotech is leading losses today. Down by 3.5% today.
When there's not much news triggering the selloff, perhaps it is profit-taking, how much the sector has really stood out when it comes to biotech and pharma. Certainly a bit of a breather today. Interesting that the Hang Seng rallied 1% yesterday. We are not seeing that much momentum behind this whole AI trade in China. Look at some of the HSTECH losers right now. Once again, the big AI players. Even when it comes to Lenovo. Much bigger moves to the downside when it comes to MiniMax, Zhipu AI, despite what our Bloomberg sources have been reporting when it comes to DeepSeek and the latest funding round, which was quite successful ahead of the planned IPO. So where is the conviction? Still, we are watching very closely how these Asian benchmarks are still near records when it comes to the Nasdaq. S&P had its worst record since August, but we are not seeing that except for Taiwan. Still. Taking stock today showed investor preference lines in Taipei, given the diversity in Indonesian assets. We will see if there is any.
Market reaction overnight there. They reiterated the emerging-market status on the back, avoiding the downgrade that was the concern from the market there. What comes next is the MSCI review next month. Minmin:
So we are seeing the Indonesian benchmarks slightly higher today. Meanwhile, tech has been taking a backseat today, and markets. Industrials are rallying, denting the benchmark and causing dispersion. Anthony?
It's been an interesting session. We've seen some good news in tech being sold very hard. That follows on from the U.S. session where we did see semiconductors pull back to make way for a domestic AI story around power and energy and hyperscalers. That doesn't help Asia. Really big moves on names that had pretty decent numbers. Taiwan slid down. That stands out against a flat market. Disco in Japan down 7.1%. That stands out against a relatively flat market. Reporting decent numbers is not good anymore. People are taking money off the table now that they have some proof. We continue to see downside in the memory space. LG Electronics also selling off. Some of its contract wins are out of the way. You can see who is benefiting. It's not a very big part of Asian indices anymore. The industrials space is back in a big way. We have the heavy industrials moving in both Korea and Japan. Finally, we have the nuclear component of the Chinese market demonstrating well after the nuclear rally in the U.S. That is coalescing as a theme across the AI ecosystem, that AI will be powered increasingly with nuclear deployment, which is getting cheaper and easier to do.
This downed-out underperformer following off a weak session in the U.S. S&P on Friday. There's a lot of volatility into that news. There's also a lot of back-and-forth around the situation in Russia. That's impacting a lot of pharmaceutical sentiment. To see some massive moves on the AI innovators in China. Double-figure moves. Not much corporate news all day. It's really a repricing of how much innovation will be allowed in the pharmaceutical sector using AI, with the pandemic concerns around in the world.
Thank you. That was our Bloomberg markets reporter, Anthony Stephens. Let's bring in David Savage. We were just looking at some of the heavy losses in tech names and a chef. Why are we seeing such a disconnect between the U.S. tech sector and what's happening here?
Anthony covered it well. We have had some good news even today. You are seeing a bit of profit-taking on that. In fact, some of the U.S. tech leads for Asia in particular weren't as favorable. U.S. memory stocks did sell off overnight. That translated into a weaker open for the Kospi as well. The broader trend is pretty favorable for Asia. The trend in the U.S. is a broadening of the tech rally, the chip rally, and a narrowing of the next game. If we take the stocks index, 100% trading over their 50-day moving average. Only 30% for the broader S&P and even less for U.S. small caps. We are seeing markets are assigning premium to these faster-growing, higher-margin businesses, and Asia, particularly Japan and South Korea, those markets stand to gain if the trend continues.
The Bank of America report around these bubble-like characteristics. They are seeing it when it comes to oil and health care, and Korea as well. They say low breadth is basically like the initial catalyst for things being in a bubble. What do you make of that? Should we worry about concentration of risk once again?
I think so. It tells you where risk might be, but it's not going to be the catalyst. I don't think breadth will be sufficiently narrow to the point where the trade breaks. Overnight, utility stocks, which have been really weak in the U.S., were the best-performing sector. The relief was mainly because we saw the deal between Google parent and Constellation Energy. Again, even there, the trade is still based on this AI momentum. It's the reality that markets are dealing with. Certainly, whether we look at sector returns or factor returns, all roads lead to the AI trade.
David Savage, thank you. DeepSeek is close to securing at least $12 billion in its latest funding round. Really, it was surpassing what the company itself had expected, given the insatiable demand there has been. Key backers: CATL, Tencent, the like, ahead of the next year. The CEO has thoughts on this. There's a shift within the company that was averse when it came to external financing, but now it seems they are leaning into it. What do you make of that?
In the early days of DeepSeek, post-inception, it was set up on altruistic motives. Famously, the CEO was quoted as saying there were three no's for the company: no to an IPO, no to external financing, and they are there to help proliferate technology within the domestic market in China in line with the government's strategy and policy. Commercialization was the third no. It wasn't something they were seeking. They were a nonprofit-seeking company. I think reality has bitten. The cost of developing AI is extremely high, as we've seen, not just from the side but the ongoing energy-related costs from AI use. DeepSeek and its founder do have a profitable hedge fund behind them. Again, they've had to come to the external market and seek financing. One other subsidiary point: it was reported that they had lost a number of engineers over the last year. It's an incredibly competitive market for talent. Therefore, you need to make sure that your staff are well paid and rewarded with stock options. Going down the IPO route is another reason for doing that. You can put an external valuation on the company.
Given that they are taking external financing now, how are they going to balance the conflict of interest between keeping shareholders and the company happy? Commercialization is the last goal.
That's an excellent question. The founder is really a tech guy. He's a developer through and through. Not only the leading AI model company within China, but on a global basis. Even two days ago, we were talking here about China narrowing the performance gap to a record low of 3%, led by DeepSeek. Their primary focus remains on technology to support the national strategy to proliferate the technology within China, within every province, within every industry. From an economic standpoint, it's great. Then they have to marry that with profit-seeking motives. Shareholders want a return at the end of the day. It's a difficult balancing act, I think. A fine line that they will have to tread.
OK. The IPO. Everyone has been anticipating this one. Do you foresee a lot of investor interest?
There has to be. As you said in your prelude, the amount of money they raised exceeded expectations. They are the leading player in China AI. Domestically, if you put your money in one name, that's great. However, let's just look at our friends at MiniMax. IPO'd in the Hong Kong market in January, and the stock price went up nine times. These were fantastically performing stocks, how you sold in May or June. Since then, the stock price is down close to 70%. I think one huge thing they need to focus on is building up a high-quality institutional shareholder base. As we appreciate in this part of Asia, there's a lot of retail investor interest. Nothing wrong with that. Retail investors tend to be a little bit more fickle than their institutional counterparts.
Thank you so much. That was Robert Lea. Still ahead, physical AI and extended reality technology. Smart glasses. This is the CEO of Samsung — of VITA. This is Bloomberg.
More now from the Milken Institute in Singapore. Smart glasses. Our next guest makes extended reality and augmented reality smart glasses. They've been talking about how big the market really can be. Fourth among the world here. They follow the likes of Ray-Ban and Meta. That was the one that they dominate in this space as well. Xiaomi is in the top as well, 2.5%. In a market that is very exciting, enticement, or also raising privacy concerns.
A lot of attention from policymakers. I've been reading about how the students use these glasses.
