9 a.m. in Shanghai, Shenzhen and here in Hong Kong. You're watching the China Show. I'm Yvonne Man with David Ingles. Good morning. We are counting down to the open of markets in Greater China. Let's get to your top stories today. Asian stocks tracking a tech-led selloff in the U.S. is following reports that OpenAI's revenue is around $20 billion, below recent estimates. That's reviving concerns over the sustainability of this AI spending boom.
Yep. And that's sort of what Chinese techs are under pressure here again. Anthropic, a new AI model as well, beating MiniMax and Moonshot when it comes to pricing. The tech index now in oversold territory is down 40% over the past year. And we hear from Las Vegas Sands CEO Patrick Dumont about expansion plans in Asia and why the casino operator is shunning prediction markets, at least for now.
All right. Certainly we'll be digesting all of what was like, you know, the bad news. And it seems like investors are taking the chips off the table when it comes to this whole AI trade here, right? It's not just the OpenAI story and really the run rates that we're seeing when it comes to revenue and the like, according to our reporting and media reports out there. But yesterday, what we saw in the pure plays in China about the pricing and the competition that we're seeing from the U.S. as well, it's really going to be a big one. Weighs again today.
Yeah, I mean, they're all coming together. Yeah. Many of what people on. And so I want to say that the doomsayers, but some of them on the side of the conversation have been warning about for many weeks now, suddenly came together. And then you have this OpenAI story, right, this moving target, but from a lofty level. And then you have real rates and then Firmus also delayed. They're actually pulling their IPO, holding IPO, the Invisible Woman, of course, in Australia, and all of it coming together. And, you know, let's, let's, let's fight another day. Right. And this is what we're looking at here. And if you look at price direction and the fact that you don't have Korea and Taiwan today as a good proxy for the AI trade, it's, it's just, again, low volumes, low on price. And on top of that, as we went into the session, we go into the session today. Yeah. This massive selloff that we had in Singapore, which is one market we're looking at as well as we go into the open today. So Singapore actually had one of its worst days over the last two years yesterday because of the backstory that goes into the real yield story as well. So it's not a good day to be long risk assets. On top of all of that, there's this tech rout within the AI story in China that really accelerated into the close yesterday. We were down about 3% on the Hang Seng Tech Index. I think this is something we'll unpack even further later on. But yes, it's not, it's not kind for the bulls today.
Yeah. The recent Claude model, where they were able to bring down the cost per task to even beat some of these Chinese players out there right now, right? Which basically shows in some ways that the competitive edge that China may have had when it came to pricing is narrowing. Now, Robert Lee from Bloomberg Intelligence had a great piece in saying that, look, is this turning into more this? I was like, what happened in the solar panel industry where everything's very highly commoditized and the only way to differentiate is through price signal.
Yeah. And you look at where the, you know, the solar story is currently and, you know, you could take, you take the Chinese EV story. Look at where that, yes, it's playing off right now. So the, the margin story is really showing up even in the high-tech space. And we know that that's a China story isn't going to become a U.S. story anyway. We'll get into all of that in a moment here. But also just to tell you about the oil story, which is obviously leading to the macro challenges out there. So we are at 104. We are pulling back a little bit from the cut up on Brent that's coming up on your screens, but still 104, at 92 on your crude. Gold catching a slight bit as we go into the session today. And we talked about this, the Hang Seng Tech Index has really had a terrible last few weeks. In fact, right now you draw it from the peak last year, we're down 40% down from that peak. So you call it a double bear market if you want to, down about 3% into the close yesterday. And the visual iteration of this is this coming up on your screen. So yeah, I mean, let's see if technicals come in or we get some buying. Of course, because we are at a level of 2627 and a 14-day RSI that does indicate that you get, we'll get biased. But anyway, this is where we are. And it's not been, again, kind for the bulls here.
Yeah. Let's continue on our top story here this morning. Sources telling us that OpenAI is on track to generate annualized revenue of roughly $50 billion based on its current performance. And that's about 20 billion less than previous estimates. Let's get more now from our Bloomberg Intelligence global head of technology research, Mandeep Singh, and our managing editor for Asian equities. Mandeep, I'll start with you. 20 billion less than what was initially estimated. How significant is that? How concerned should we be?
Well, it is significant in the sense that OpenAI had a Dev Day on September 29th and they mentioned, you know, the ARR was 70 billion. So it is a big deal that, you know, even if it's an accounting change in terms of, you know, showing net revenue versus gross revenue previously, why didn't they talk about it, you know, a week before? And I mean, to my mind, you know, if CapEx numbers are going up, which everyone thinks they are, you know, next year it's going to be 1.2, 1.3 trillion in hyperscale plus new cloud CapEx. The revenue for these frontier labs has to scale with the CapEx because they are the ones who are at the forefront of showing ROI. And if that doesn't scale up with CapEx, which it sounds like, you know, if it's a 20 billion shortfall, then I think there could be, you know, some anxiety around that. But if they were to revise these numbers, you know, the prior number before 70 billion was 40 billion. So how does that trajectory look like? That to me is the most important thing. If, if everything is getting revised to net number, what does the prior numbers look like? And I think that will, you know, help resolve some of the anxiety around this 20 billion gap here.
David here, just maybe trying to find a silver lining here. How much, I mean, we know, of course, a lot of them measure revenue in different ways. How much of this could be down to accounting?
Well, I mean, Anthropic, you know, gives us a gross number. And they went from 9 billion in ARR to close to 80 billion. Now, what these frontier labs do is they run their models on cloud providers like Amazon, Google or Microsoft. So in the case of OpenAI, their arrangement is such that Microsoft takes, you know, the cloud cost of running their models as well as a separate fee that, you know, they have to pay Microsoft. So if they're counting it as net, it makes sense that, you know, it's not 70, it's 50 billion. But like I said, the prior trajectory, they gave a $40 billion number back in July. And these companies have been adding, you know, 6 to 7 billion in revenue per month. So that's where the trajectory really matters. And what does the monthly net revenue look like? And I think we probably need some clarification from the company here.
Okay. Yeah. I'll bring you in. I mean, there's the competition seems to be heating up between U.S. and China when it comes to these AI models now, right? When the latest, when it came to Claude, this is, of course, the Haiku 5.5 model basically was showing that the pricing of this per task is lower than the likes of some of these Chinese pure plays, right? And then we saw MiniMax fall some 10% yesterday. What's in store for, for some of these Chinese AI plays today?
Yeah, I think things are not looking very good. The competition is obviously major news, but at the other side there is also all the negative news that was piling up overnight. OpenAI, as you guys mentioned, was one. There was a full month's news. And in addition to that, there was a lot of news about how a bunch of companies, including Tencent, looking for debt financing. And that's just now, you know, making investors worry whether the market actually has enough capital or appetite to fund those debt deals at increasingly higher borrowing costs. And, you know, when the company is venturing into debt, that could, you know, potentially lead to some kind of bubble. And now the question is, are we really in some kind of bubble? Obviously, noises are getting louder as well about that topic. So, you know, eventually if those companies cannot get all the funding that they need, that means they may spend less on CapEx. And overall, that doesn't bode well for even the hardware names that China or the rest of Asia are very proud of when it comes to this AI trade.
Yeah. Just for our viewers who might have missed that, you know, Tencent was said to be mulling here a $5 billion bond offering, which is what Nikita was alluding to just now. So Nikita, put everything together for us. The setup going into the open today, particularly against the backdrop of that selloff in Hong Kong yesterday across the tech names, is what's that setup looking like today?
Yeah, I think again, this one, I think Hong Kong in particular, I would say, you know, tech being one thing that is negative about Hong Kong is also very sensitive to U.S. rates. And Hong Kong is probably among the most sensitive markets to that because of the Hong Kong dollar peg. And Hong Kong also has a very big property market, which is again, very sensitive to U.S. rates. And there is another headwind, which is that cross-border investment policies from mainland is actually tightening. That is now contributing to tighter financial conditions for Hong Kong. So all of these things that are adding up are the reason why HSBC downgraded Hong Kong to neutral yesterday.
Nikita, I was going to get your take on the news that we saw when it came to Haiku, right? This is the Claude model that really is now being quite competitive in terms of pricing compared to even the likes of DeepSeek and some of these other China names right now. Robert Lee from your team has talked about how they think this whole AI race is becoming more like, resembling the solar panel industry where it's oversupplied, it's very commoditized, and the only way to differentiate is through pricing. Is this looking more like a race to the bottom now among these AI players?
So I would say, you know, it depends on the use case. In the case of coding agents, the frontier models have shown, you know, they can get a premium price for their tokens that they're generating. You know, we had the launch of Metal Muse and Instinct has gone wild since its launch. So these consumer agents don't use premium tokens. And that's where depending on the use case, you will see prices come down really hard for some of the tokens. And I think what Anthropic is doing is they will cater to all kinds of use cases where there is premium tokens required. People will pay up for that. Very high CoT could be used for a use case. You know, they will offer lower token pricing. And that's how the market is going to evolve because some use cases require a lot more reasoning, and you don't have open-weight models that are comparable in terms of quality. And, you know, in those type of cases they can still command a premium. But bottom line is they have to show revenue growth that scales with CapEx. And it will require a combination of both premium tokens as well as, you know, catering to some of the use cases that use commoditized tokens, which arguably was the opposite with the OpenAI story.
Thank you so much. Now, fantastic conjecture from both of you. Mandeep Singh, there, our global head of tech research at Bloomberg Intelligence, and our managing editor for Asian equities. Looking at markets, 92 in Singapore for us now. One of the stories we just alluded to just now, and one of the reasons, other reasons that we are seeing this cloud just above us right now as we go into the open today and perhaps why we could see some more headwinds, you had for us, in case you haven't heard of that company, that's the Nvidia-backed data center firm. It's now postponing its planned IPO in Sydney, saying that it's now looking maybe at options in the private markets instead. Manuel Bajari, who leads our APAC deals team, joins us right now to help us understand what the company is now looking at and why it's looking at this.
Yes. Very dramatic turn of events. David and Yvonne kept us really busy the last few days, especially last night as we were scrambling to break news on it. So, yeah, definitely Firmus, you know, which obviously everybody out there which has some sort of knowledge in digital infra was questioning the track record, came down 11th hour. We throw in the plans for an IPO, which would have been, just very many would have been one of the biggest ever in Australia, period. And obviously, they didn't get enough traction with investors. And they had to pull it. So now the next steps. As you highlighted, they are looking into private markets to raise funds. I mean, just these companies, related companies had data centers. Among them, they require a huge amount of funding to keep going and to deploy and to build and operate these facilities. So just it's a lifeline. They either raise funds or it will be very, very hard for them to build out on their promises. So next steps will be how they manage to raise some funds in the private market. But also interestingly, what we are looking at is ripple effects these dramatic turn of events may have in the industry. There are other IPOs in the pipeline. Obviously, different track records and different quality of assets out there. But not only in capital markets, also in M&A. We've seen a lot of platforms coming to market and up for grabs.
Yeah. What does it mean for sentiment? Right. I mean, at this time, it's not just for Firmus. I mean, we talked about it, but at least delaying indefinitely. You've had Aura also postpone. I mean, like, there's been a few kind of big names have decided, you know, I'm just going to take a breather here before things settle down a bit. What does it tell you about this whole sentiment around the whole AI trade now?
Definitely, when you highlighted some examples, I would also perhaps have energy in the U.S. Yeah. It's another one that we've been tracking down quite closely. Yeah. It's quite dramatic, right? Because everything was like a party. Everybody was coming in and, you know, trying to monetize and make money out of these before the music stops, as they say. And now there is a turning point here. Everybody's watching closely. I think the bottom line is investors are becoming more discerning of the quality of assets and where to deploy capital into. And when you've got markets like Australia where, you know, regulatory scrutiny around data centers is increasing. And where you've got firms like Firmus, for instance, that don't have a track record in deploying, building out and operating. Investors are just questioning whether they want to invest into the future or they just want something more tangible in the present. So I think that's become a reality check for many in the industry.
All right. Well, thank you. Manuel Bajari there, who leads our APAC deals team. Coming up, we're speaking to the Nasdaq CEO. It's going to be a really good one with Adena Friedman, who's joining us there at Milken and really talking about what this means when it comes to the pipeline, what they're seeing over in the U.S. Meanwhile, we're tracking, of course, EU and China talks. China is defending its currency policy as talks with the EU get underway, with investors watching for any signs of progress in averting a full-blown trade war. We'll bring you the details coming up next.
Welcome back. You're watching the China Show. Some strings coming through. And the currency? The reference rate is out, bottom of the screen. The plot is a bit more complex and thicker today, as one could say, because we did get, and we'll get to this in a moment, this rare defense of the policy around the currency out of the central bank yesterday, really against the backdrop of not just fundamentals, but obviously politics, perhaps muddying the waters a little bit here today.
Yeah. Of course, ahead of those EU-China talks where the PBoC has now rejected claims that the renminbi is undervalued as trade talks with the EU begin. EU officials have increasingly blamed those trade imbalances on the exchange rate. Yet let's bring in our China correspondent here to talk us through this. Let's start with the statement which came out yesterday.
Well, it's not really a statement. It's a nine-page document really about its thesis on the market rate policy. But yeah, I mean, the timing is interesting, right? Because it is the day when it came out, on the day when EU and China heading into trade talks. And of course, the trade imbalance between EU and China has been in focus. And yes, if you look at the euro, it's actually fallen by 10% against the yuan since the January peak. And a part of it is because of also weak economic growth in the eurozone as well as France's fiscal problems, right? But to your point, you saw earlier the fix, the PBoC has been fixing a higher fix sometimes to slow down the growth of the yuan, right? So even if nominal rate goes up, there is the argument that given China's inflation is so low compared to the rest of the world, the real effective exchange rate is not appreciating as fast as it can be. And the EU is arguing that this is really boosting the competitiveness of Chinese exports.
So, I mean, what's the key argument that China is making right now? I mean, as you mentioned, right, this is a sort of a rare defense that they've really kind of laid out here when it comes to the currency.
Yeah, a few things. One, they're saying that if you look at the FX market, the size of it has ballooned so much that it is impossible for any single central bank to dictate the underlying trend of a currency. I mean, just look at the attempt to intervene with the yen, right? And number two, they're also saying that one reason for China's export strength is its industrial policy and all the investments it's put in before. So all countries on both sides of the trade have to do their homework to fix the structural imbalances. And if you're facing a trade deficit, you've got to think about if you're under-investing. If you have very rigid regulatory policy, you're under-investing in innovation and digitization, or your savings rate is too low and you need to close that savings-investment gap. So it's saying that Europe, you need to fix all your problems and not blame it on China.
Um, yeah. Oh, you caught me right there. We're okay. So let's talk about the other things. So we have the currency obviously, which is perhaps part of the broader discussions. What else is on the table here?
Well, of course, we read all of this on the table. Whether China will extend the exemptions to the rest of export controls. And the EU is trying to fast-track or create a mechanism to fast-track applications of Chinese firms to enter the EU. But at the heart of it, going back to the trade imbalance, right, China, the EU wants China to lower trade barriers on all things. And this is where China has been arguing that there's a bit of a double standard here because they're saying, okay, if you want us to buy more goods, why are you being so restrictive on Chinese investments? Chinese companies have been blocked from investing in certain wind turbine projects and renewable energy projects, and Chinese medical devices have trouble getting government procurement, for example. So they are saying it goes two ways. And both sides have to take a step back. And it's the same thing. Why the EU wants China to roll back some restrictions on specific products like pork, dairy, brandy and these products restrictions. The tariffs came in in retaliation to those heavy tariffs. So again, it's sort of a tit-for-tat cycle that looks set to be escalating right now.
I think you are trying to correspond to them. And lo there, of course, as we get to those EU-China talks, your free market is opening up here and we are seeing some green when it comes to the Hang Seng here today. But certainly we are still nursing some of the losses that we saw yesterday. I'm tracking MiniMax here right now after what we saw. Right, 13% losses. We are still extending that loss here today when it comes to that stock. After what we heard from Claude here in terms of the pricing and the competition seems to be really heating up in the model space right now. We are seeing though HSI futures in the red this morning. Plenty more ahead. This is Bloomberg.
Another down day for some of the AI pure plays in China today. This on the back of what we heard in terms of Anthropic and its recent model and its pricing. So certainly the competition is heating up and we are seeing MiniMax once again lower by 1% after 13% losses yesterday, also down 2.5%. The internet platform set this time is also doing slightly better here today, but we are watching for some key levels right now in Hong Kong.
Yeah, so 24,000, and easy to remember this one because we are at about those nice round levels, 4,000 on Hang Seng Tech, 8,000 on the China index too. We are getting a bounce closer to, or in some cases just above those specific levels. We are outlining that for you. Coming up next, so far in the Hang Seng Tech, there are 24,000. And by the way, this is the low end of the recent range into high 20s on the Hang Seng index. And of course, 8,000 is the one to watch as we go into the session today. It's looking like, and by the way, it's a quiet day across the equity markets. You don't have Korea. You don't have Taiwan today. So volumes are light, priced slightly to the upside. The opening bell is coming up next.
Right. Welcome back. You're watching the China Show. So we're just wrapping up the, it is the first week actually of the fourth quarter, a truncated one of course, mainland because things just reopened yesterday, is a two days there. I think that the point is we've seen really better days here to Hang Seng Index. Yes. Up today, but really had a terrible session on Monday. So we'll see what the open looks like. Of course, the big theme that we woke up to this morning was the drop in tech overnight, right to the open, and the rethinking there of that run rate on annualized revenue, 20 billion short compared to the previous thinking.
Yeah. That 20 billion sort of gap certainly is worrying investors about, you know, where are we when it comes to this AI cycle. It's certainly, oh, there's half your face. Oh, there you go.
Well, yeah. Not quite that much of a drawdown. Yeah. But it's about 30%.
You know, it does question, right, the durability of this AI trade. Right. When you have a name like OpenAI talk about, you know, 20 billion less in terms of revenue. Now, 50 billion, still a sizable number. But, you know, certainly one thing to contend with here. And is it just, did it come down to accounting, as David mentioned. Right. You pair that with some of the news we got yesterday on the latest model when it came to Claude and how they've been able to bring down the pricing of some of these models here to even compete and be cheaper than the likes of DeepSeek. That's really derailed, of course, these pure plays like MiniMax here today. So sentiment, as we've been talking about, has not been good. And we are kicking off and wrapping up the trading week, I should say, on that negative note. CSI 300 is down about a third of 1%. And yes, no surprise, China Star 50 is leading lower here. Tech seems to be on offer once again.
So one thing we're watching very closely though is the China bank story. Morgan Stanley coming out with a pretty interesting sort of note about raising the price targets of some of these banks and basically saying some of the macro concerns about the economy and the like are a bit overdone. They're expecting a quicker than expected sort of recovery when it comes to net interest margins and the like. You are seeing the likes of Bank of China up close to 2% here right now. Hong Kong is looking like this, right. So David talked about those key levels to watch when it comes to Asia's tech and HSTECH. Looks like we bounce off that key threshold of 8,000 for the Asian market, 4,000 as well for tech. So at least Hong Kong doing a little bit better. Even financials seem to be doing better after what we mentioned about yesterday. Right. Even the Singapore banks were feeling the effects of this euro crisis is happening also when it comes to that rising yields environment for the boards. And check how the Asia pure plays are doing, right. The MiniMax, the Group, who's in the like that continues to be a negative story. So a 1% losses. Their MiniMax was down 13% yesterday. So we're just extending that sell-off here. But at least you're seeing a bit of a bright spot with Baba as well as SenseTime here right now. Hong Kong-listed chip stocks is also one thing we're watching out for here. This morning there was a call when it came to SMIC. I see they're all over here this morning. Obviously, what we're seeing when it comes to this Anthropic release and this low-cost model was a mean, of course, for the supply chain, might mean something that, you know, that we have to pace the frontier, but also pace the revenue and profit delivery and the returns. Right.
That certainly is the narrative here today. Shenzhen Gold, another one there, a JP Morgan downgrade on the stock. So they're downgrading it from neutral to underweight. They say when it comes to production reduction, that's really what they're expecting here right now for the miner. We're down or up about 1.5% right now, David. Production.
Production reduction sounds like a 90s hip-hop song, isn't it? Right. Anyway. Okay, I'm speaking up. Okay. So that's what's happening right now. And I think let's take a step back because I think we've, this is something we've talked about already, this drop that we're seeing across the tech space, right, on the Hang Seng Tech Index. And I think one of the big stories we were talking about this time yesterday was this major overhaul in this index. It's a tech index, but it's mostly in the name when you look at the constituents here. So things like EVs are in here, they haven't done very well. Platform companies are no longer considered cutting-edge tech. Right. And you know, a lot of these factors really leading to what you're seeing right now. So this is basically a chart that shows you how much the drawdown has been from a recent peak, in this case the peak last year, we're down 40%. So more than a third. And you just juxtapose that with what we're seeing in the likes of other tech benchmarks, right. What Nasdaq costs me. And it's, it's night. It's night and day. It's almost like as we flip the page, right. Investors are trying to relitigate what it means to be a Chinese tech lei and how long you need to be on that. So since inception, about just over six years ago. So July of 2020 was when the Hang Seng tech gauge was introduced. And this major overhaul, by the way, to actually weeks would then make it from 30 to 50 stocks. It really hasn't done well. Right? So we're down 40% on price. We're doing slightly better, relatively speaking. We're down about 37% on total return when you factor in things like buybacks and dividends. So that translates to about an annualized return of -7%. It's not something you think of during the era when you have tech giving you a negative annualized return in terms of up and down quarters, as you can see, obviously, because it's been challenged, we've had certainly more down quarters than we have up. So let's, let's see what the future holds. But certainly the bar is low for US dollar performance. So we'll see what happens with this one coming through.
Okay. Just ahead, a lot of bets perhaps will have to do with how the economy picks up too. And you had the Golden Week, of course. We're coming out of that, a mixed picture for retailers. Goldman Sachs actually has a really fantastic pulse check on the Chinese consumer. We'll unpack that report with Michelle Chang coming up next.
All right. We got a little bit more data out of China after that week-long holiday. So according to state media on how the Golden Week really stacked up, you know, there was some official numbers that did show some growth. You take a look when it comes to average sales and service sectors, for example, that was close to 20%. Tourism, sightseeing was also up 27% from a year ago. Catering services, sports services as well, was actually a bit better, right? So certainly there are signs of growth. There are that again, you look at some of the really smaller, earlier indications from box office, from spending that seem to be still a little bit unexciting. But Shinhwa also says for the first six days of the holiday, foot traffic and revenue at 78 major shopping streets and districts monitored by China's commerce ministry also rose, well, 2.5% and close to 5%, respectively, when it comes to revenue. So there you go.
Single digits? Yeah. Unexciting. Yes. The folks at Goldman have put out their unexciting demand. Although I think when you look at some certainly bright spots there across that market, there are some surprises. And some of the numbers, of course, may have been influenced because you do have, of course, this specific year you had Mid-Autumn. Of course it's close. And I think you have that sort of positive aberration that, you know, if you were, if you are strategic enough with your leaves, you would have had a very long holiday. Clearly, we were not. Anyway, let's bring in Michelle Chang, co-head of Asia consumer research at Goldman Sachs. They just have this report out on the pulse check at the Chinese consumer. Very nice to see you.
Good morning. Yeah. Hi. Thank you for having me back again.
Okay. Well, how unexciting was it?
Yeah. Honestly, I think it's a bit hard to explain the data this time because, as you know, Mid-Autumn Festival this year is earlier in September. So on the one side, probably some of the consumption already took place in September. So like when we talk to some sportswear companies, they actually see July was very bad. But August, September. So there are some improvement. But on the other side, if you took three more days off, you will have a very long holidays. Yeah. So for this data is a little bit hard to interpret. But aggregate wise, I think it's still not too exciting if we combine really the recent few months trend. Single-digit growth from different sources is slightly better than only like a 0 to 1% retail sales growth in July, August. And consumers still spend a little bit more during the holidays. But you can see they are still very rational spending. For example, like Hainan, traffic is up 14%. But the sales is also only up like three, 4%. So the per is Bendis actually. And clearly, oil price is very high. Airfare is high. So consumers domestically, the traffic is only like a 0 to 1%. So consumers choose to travel by railway, other travel methodology rather than took the air flight or even drove by themselves. So you can still see that they, they want to go out, but very cautious in spending.
What about units in terms of volumes? Because we know inflation isn't as quick in the last few years compared to the previous decade. Right. So that might be, is that why we're getting not as robust growth rates are pick up year in year because the prices are just steady.
Mhm. True. On the one side, if we compare early of the year, honestly, pricing trend has been excited. It's especially you do have this inflation risk kicking in. So if you recall, first half around Chinese New Year, we, we mentioned that holiday sales was much better, even a high base. But after our Chinese New Year, things are slowing down. So far, from the pricing perspective, like 80, promotion activity is still very intense, and we are about to enter another very important holiday season and Singles' Day. I think people are still very worried about the promotion activity. So on the one side, it's slow. The company, to something they still want to be shares or the drive, the sales skills. So pricing is not active. So even looking ahead of what we learn from the earlier Rizal season is that people start to worry, but companies start to worry about inflation rates more rather than just oil. But El Nino is a very, getting more, more and more like a topical. So inflation risk is there. But I think pricing strategy wise, most of the company is still very disciplined out raise the price, but they still work on a lot of things on how to optimize the cost structures to maintain the profitability.
So what stood out to you as something of a surprise and anything turn out better than you thought?
Yeah. So some positive, some negative. So positive surprise. One is all about travel. So domestic traffic is only 0 to 1% for outbound traffic, 6 to 7%. And in Hong Kong, you feel a lot of people here. Hong Kong, my call 9% to 11%. So outbound, especially the short haul, is, has been very popular and some experience, experience spending. So but it's also very diverged within the entertainment part. You can see box office revenue was very bad, but that's no big blockbuster movies. That could explain the reason. But if we look at sports events or cultural events, the data seems to be still very good. So that's the bright side. But on the negative side, like spirits are low based last year about our channel still suggest probably 10, 15% decline from Mid-Autumn Festival to Golden Week. And also premium consumptions also start to show slow down. Few quarters ago actually premium consumption was a pricey, but we start to see our premium consumption also getting slower. So and a gold to our consumption. But it's basically the high base. Last year, the fourth quarter, we had a very high, a very big rally on the gold price. Oh, gold jewelry was good, but this is so what.
Okay. Can you define with what premium consumption?
So basically, like some leading shopping malls, they come that to the luxury shopping malls performance during holiday was lower than the average shopping mall traffic and performance.
Okay. In terms of message for investors, what's, what's the best way to express, you know, the trends that we're seeing among consumers in travel now?
Yeah. So on the one side, we all know that consumption has been slower. But and also I think every time people try to hope for easy base will play out. Actually last year they can have or we did had the easy base. But so far, like retail sales are everywhere. Most of the companies seem to us like hovering at around flat, small positives, no negative. So I think it's sector wise, it's a bit slow. But on the company level we still see some iRobot trend. And also something we learned in the past few months is it's even more diverged. So still, some companies, they are gaining shares in the tough base and they still deliver. But for some companies, especially a smaller players, they probably had fewer bullets they can play out. Yeah. So if you look at the fund, the companies level, even the tough sector, actually market leaders still perform much better. But of course, I think the from the sector perspective, we like some sectors are either they have a secret opportunity, for example, like why Google's domestic business is smaller, it's more stabilized, but they have going global story. And also you have restaurants, the sector. It's slow, but you have market leaders. They are gaining shares. Yeah. And also out of theory, they have cyclical. Right. So we do still have some sectors are delivering relatively decent growth with a good return.
Where does it leave FMV names? Because you mentioned, you know, for you to stand out, you need to have a going global theme. So, you know, just like as an example, Haidilun, for example, some of the bubble tea names, where do these stack within your year?
So that's a great point. If we compare this cushion, that reverse is stable with MB. These cushions are easier to have some going global story. So why goes even apparels or the toy companies, bubble teas in between. Yeah. We are actually seeing more companies are opening stores in the US, in Korea, in ASEAN countries. But overall, FMB companies probably still more domestic driven and even more pricing driven. So the domestic economy and inflation I think is still the critical catalysts for the FMB companies.
I want to get your call in. That was a big one this week. I mean, your initiating has a buy right now. You are seeing that earnings are going to rebound. And what, what are you seeing in terms of the turnaround of this company? I mean, the earnings were pretty bad when they reported here.
Yeah. So I guess on the one side, one is it's actually fitting to a theme we like a lot, going global. This is actually the one of the early names. They prove they are going global stories. But of course, I think on the other side, there are a lot of the trade tensions pressures. And they are not alone. Actually, if we look at the aggregate overseas revenues momentum across all the consumer company we cover, past one year was very tough. You have tariff, tariff impact not only on apparel, she's actually on a lot of companies. And there's a wall, inflation pressures. But if a companies are they really have a strong advantage, strength, supply chain management, quicker response to market. And all we know, we think, oh well, the Chinese companies are stress is really light on the supply chain management. So for those companies not only only she made she's also a very good example. If you Nancy, they actually can still benefit from the longer term price back to you if you, if they are really strong in the supply chain management.
Michelle, it's great to have you, Michelle Chang, their co-head of the Asia Consumer research at Goldman Sachs. We're tracking some more news when it comes to OpenAI. So our team has been talking to their sources. This is interesting. Right. So OpenAI is now expecting to reach or exceed 70 billion in annualized revenue by the end of the year, and their talking is driven largely by growth in its enterprise business. Now, earlier, there was the concern of the 50 billion. So what we're hearing from our sources is that it was roughly 50 billion at the end of September. The figure represents a projection of yearly sales based on a shorter period. So we might just be like a timing thing here, but I think we're trying to get a bit more clarity on whether, you know, where is there actually a gap from initial estimates or not, but they're still expecting and it's targeting that 70 billion and more when it comes to annualized revenue. But it does seem that the more optimistic figure at fine, you have a few more months to get to that number. There's a condition that's also attached to that in terms of the growth in the enterprise business. So I think the point being was certainly in a much better position now than we were an hour back. But are we simply just back to two days ago? And as far as how good things can actually be. But as you can see, markets of course are, you know, repricing is moving target. We're up now 3/10 of 1% on the Nasdaq contract. Lots more ahead. This is the China Show.
There has been no company in the United States unfortunately that has used this system more than Microsoft. Thanks to an ongoing investigation, we have decided to suspend the Perm program for Microsoft, which means they will no longer be able to apply. Uh, they're the deal. They would no longer be able to take those 81 BEs and apply for permanent resident status within the United States of America.
That was U.S. Vice President JD Vance singling out Microsoft as the Trump administration suspends major companies on a U.S. worker visa program. That's been a crucial talent pipeline for Silicon Valley and Wall Street. Now, several of the firms targeted were either based in India or have large operations there. For more on this story, let's bring in Swati Pandya, who leads our South Asia economics and government coverage. Big one, this one. Swati, what is likely the impact going to be with on India specifically?
Um, yeah, there has been a big overhang for India's outsourcing industry. And this further adds to the disruption. Over the past few years, Indian tech companies have tried to reduce their reliance on H-1B visas. This announcement from JD Vance affects one form of one particular pathway. And Indian companies have been trying to reduce reliance by hiring more people locally in the US and automating more work as well as just believing that immigration policies are going to become stricter and not easier. So companies have been prepared, have been prepared. And there was a statement from Nasscom, which represents Indian tech firms, overnight. And they did specify that this affects one form of one particular pathway. And that, you know, companies while this is not a good outcome, companies have been prepared.
Yeah. I mean, we're just going to watch what happens with Infosys, Tata, Wipro, the like, at the open today. What does this mean for broader US-India relations, Swati? Because, I mean, it's been months now that the two nations have been trying to negotiate some sort of deal.
Yes, it's been since February. They have been in talks and just, I think a couple of months ago, India's commerce minister had said and, and the US ambassador to India also had said that 99% of the deal is done and only 1% was remaining. But now it looks like the talks have plateaued and a deal is not in the offing. This is another area of concern for India. For us, there are concerns about market access for U.S. companies into India. For India, immigration is a concern. So it just looks like this is another wrinkle in the relationship between India and us and puts another question mark on whether a trade deal would go ahead.
So how do you think you, Swati Pandya there, who leads our South Asia economics and government coverage. Okay, let's have a look at markets and where we are about 24 minutes into the cash market session. And of course, the big news just in the last few minutes was the, was it a clarification or maybe more context? I think it's a better way to state that, coming through out of OpenAI based on our reporting. So the 70 billion annualized revenue went effectively, I'm just simplifying this. Can you go back to OpenAI NASDAQ, please? Went from 70B down to 50B. And that was what caused this rupture across tech stocks as we go into the session today. And then now the figure is effectively back to 70 billion with conditions. And of course, there's also a timing adjustment there. But in any case, we are in slightly, slightly better footing right now than we were about an hour back. But the question is, are we any better situation than two days back, which was really where we were with that 70 billion figure. Southbound coming through on your screens. We just showed you that. Show it again, please, very quickly. And you have shown me MiniMax and all of the rest of the OpenAI, the pure play AI names across the Chinese markets, which, by the way, have seen substantial losses. We're now seeing a bounce there across those names. Lots more ahead. This is the China Show.
Welcome back to the China Show. We are seeing sentiment improve this a bit here. Okay, so some news when it came to OpenAI according to our team and their sources about where, where the revenue and where they're going to be ending up at the end of the year. Seems like, according to our reporting, they've clarified that they are aiming, are still expecting that annualized revenue could hit 70 billion by the end of the year. Right. And that, that 50 billion number that people are concerned about a few hours ago may have been something that by September. So there's a few more, I guess, months of clarity, but not much has changed. Just a little bit of a clarity, I guess you could say. But that's actually helped with this rebound that we're seeing across Asia tech today and Nasdaq futures.
Yeah. Because, you know, this time in the last hour we were just going through the reasons and many reasons and consistent reasons why markets were selling off. Right. And I think any, anything that is incrementally better is certainly going to help. Plus the fact that we are coming into today oversold territory on many of these Hong Kong benchmarks were up there 2%, as you can see on your screens. Let's flip the page, please, on the Nikkei and the topics. And I think also, yes, the equity markets overnight did not give us any sort of runway to the upside. But perhaps on the macro side of things, things were relatively stable overnight, which was perhaps why, of course, we were doing slightly better, but not slightly worse. On the Nikkei, CSI 300 down about one.
So we're now down two straight days from that. Reopened China is down a further 2%. We are, of course, shut on Korea and Taiwan. Just in terms of market reaction that we've seen so far on this clarification or context coming through, coming out of our reporting. Up, there we go. So we're now in the green near session highs last we checked. And some of the big names in Japan, SoftBank, just a proxy of this story coming up on your screens, should also be doing slightly better. There we go, a little bit off lows for the day. Still down to about, let's call it 4% from the cash markets reopened today.
Yeah, it could be a happy Friday for those on Wall Street waking up. Um, that maybe there's a little bit better news than before. For more on how early Asia is doing and what they're watching, out to us. Our Asia Equities reporter, Wendy Shu, on what the team is focused on today.
Yeah, well, as you mentioned, I think what we're seeing right now, a bit of a reversal, right? Yes, there is a bit of clarity, but what it really just tells us is that people are now paying very close attention on these numbers, on if these companies can really be profitable or not, or on the sustainability of this whole AI investment. So, um, while overall today we're actually seeing MSCI Asia pretty flat, fluctuating a bit on these news. On the dark side of things, I guess, is these AI-related news. But bright side of things, you're actually seeing techs doing quite well, perhaps also supported by the lower yields. We have oil also coming back down a little bit. But Hong Kong, um, today is rebounding after having been sold off down about 3% yesterday.
Right. But when you look at the broader mainland Chinese market, actually still under quite some pressure. We're watching some of the milestones. You have CSI 300 about 5% away from bear market. Then you have STAR 50 also about 8% away from erasing all the gains that we see so far this year. So when it comes to China, still that lack of catalysts, the disappointment around stimulus, and of course, more restrictions when it comes to some of these AI names are still quite concerning for investors.
I don't mean to put you on the spot here. So you mentioned Asia Pacific, we're up to 20% year to date. Yes. What does market breadth look like though?
