It's not I. I'm in Shanghai, Shenzhen and here in Hong Kong. You're watching the China show. We're live at Hong Kong Fintech Week, where AI and finance will be at the centre of discussions among policymakers and industry leaders. Good morning. And I'm David Ingress. We are counting down to the opening of these markets across Greater China. Let's get to your top stories today.
Stocks across the Asia Pacific starting off the week largely on the back foot, with tech stocks leading declines and growing concerns the AI rally may have gone too far. The China central bank and top regulators are reportedly set to start the week rather with a meeting discussing measures to maybe rescue a reversal of this long, record-long stock slump in the stock market. We'll be watching, of course, China's mega banks after they posted record profits, trading gains outweighing sluggish loan growth in a slowing economy. And coming up here on the show as well, we'll be speaking exclusively. You might know who he is. Howard Marks will be joining us later on and shows us his outlook on private markets, private credit and everything in between.
Oh, Dave, we've got no trading kicking off in November and what a month October was. It's really quite painful really to go over some of the metrics. But I think the worst month we've seen here in around ten years. The CSI 300, for instance, the steepest monthly decline we've seen going all the way back to 2016. The STAR 50 index, for instance, now at 50% off its June peak of this year, trillions of dollars in market cap erased along the way. And I think the question is really, where do we go from here? Because as you just said, we've got this possible meeting with regulators. We've already seen some policy action around rates, for instance, over the weekend as well. But you have global contagion in the mix, I think, plus economic weakness locally.
Yeah. Well, what a way to start the week, Bill, just highlighting all the negatives out there, which I guess a bit of a contrarian act means it. Yeah, it can only get better from here. Uh, but I think it was an aberration statistically, October specifically, of course, data point you just made on the CSI 300, the worst month going back to 2016. And I think it just goes to show why this meeting later today is going to be fairly consequential, based on some of these local reports, in what way they could come in and support the market or even send a stronger message on the optics side of things even further. Because apart from that, I mean, everything else is largely done.
Okay. Relatively, of course, due to the Chinese stock market, relative to the start of the session, we are actually doing okay right now. Taiwan is coming online 1.5%. It's worth pointing out this is how Korea started and then Korea is now doing this. We are now closing in on 1% gains. S&P futures, suffice to say, coming off that platform, that fairly little platform on Friday and the sell-off, does bode well for maybe some semblance of flipping the page. Please. Stability. As we go into the take of the Monday session, a couple of things that we are tracking here on your screens. So Kyocera, here is more a guidance story more than a macro market theme. SoftBank is down one and a half to 2.5%. We are coming up quite quickly, of course, on these two big names over in South Korea. Let's have a look at where we are in Bitcoin, of course, on the back of now new information on that hack over the weekend. US 10 and gold futures, we are coming off one-year lows as far as that is concerned. And of course the currency market story. You had a big dip, by the way, into late last week on the dollar. This is where we are across some of the currencies. Of course, Aussie very much in focus given, of course, that we are largely baked in as far as a hike is concerned there on in Oz. And of course all things lead to the Chinese markets today, everything from earnings to reports that we could get further state market supports. And we are called higher, quite noticeably in the early goings here. Now just on the back of the top stories across China. Right. So you have these. Yeah. This meeting we'll get to in a moment with the details on that. The point number one. Point number two, we now have a clearer and specific understanding on the shift to a lower policy rate, one and a quarter percent of the overnight. And of course, on the weekend too, we did get some economic numbers. And we will get, of course, later on today, some other PMI numbers. But yes, we did fall into a contraction on October PMI, which I guess underscores really that thesis that markets are dancing lower on as it pertains to the Chinese market. Anyway, let's bring in our team here. Min Min Liew, of course, our North Asia correspondent, and our Bloomberg Intelligence chief emerging markets FX strategist, Steven Chu. Okay. Why don't you get us started here? Reported meeting today. Who's going to be there and what's it going to be about?
So this is according to onshore media, Cailian Press, which is a very renowned financial media. They are saying that the PBOC, NFRA and CSRC, so basically all the financial regulators, are meeting with several banks to discuss what is speculated to be a set of tools to stabilize the stock market. And they will be studying how to improve the relending facility to support companies in stock buybacks, and separately also identify two, particularly two particular state-owned enterprises that could receive up to 100 billion yuan in bank loans to support their stock buybacks. And as you said, this is coming at a time when we've yet seen the selloff in Chinese stocks over the last few months, particularly in October. Right. So the market is really looking for some signal from the government as to whether or not and to what extent are they going to really come in to support the stock market, because so far, the national team coming to buy at market lows has not really been enough to really engineer a structural rebound here. And Huang Yi, one of our market strategists that we often interview, he was saying that the national team should announce that they will come in to prop up the market no matter what, instead of coming in quietly at the close, at market close, to buy the stock. So certainly this will be closely watched to see if there will be any market-moving lines coming out of it.
Not on the overnight rate, which has long been speculated right now. What's the development been here? Because we've been waiting for this anyway. But is it the key level? What are we doing there?
Yeah, this is not entirely new, right? I was in Shanghai in June during the meeting when the PBOC governor announced they were starting to expand the use of this overnight reverse repo operation. So what they have announced now is that they are starting to conduct this operation daily, starting today, and it's going to be set at 1.25%. Now, this is not new because back in June, when they first deployed this tool, they did not reveal the rate, but it was 1.25% at the time. We reported that based on sources, many market participants are already aware of that. So I guess in that sense, it's highly anticipated, market reaction might be quite muted as a result of that, but it's still seen as a de facto rate cut, given that it's about 15 basis points below the seven-day reverse repo, which used to be the policy benchmark at that time. So because of that, Goldman Sachs is saying that it's unlikely we will see another rate cut on the back of this, even though the PBOC is very careful about framing this as a restructuring of their policy, not necessarily a rate cut here.
Stephen? Sure. Can I bring you in? What does this achieve? And is this a rate cut effectively? What's the major change here in your view?
Right. As Min Min has mentioned, 1.25 is highly anticipated, so it's not really a rate cut. But to be fair, what's interesting out of the announcement is if we look at the corridor, the overnight operation corridor, it used to be anchored around a seven-day. Okay. But this time they just shift it right away and around the overnight. So the floor of the corridor used to be 1.15%. Now it's 1%. So if you ask me, it's still a de facto easing to some extent. It wants to guide overnight rate stability towards that 1%. So it's still an easing if you ask me.
Okay. What happens with the seven-day now? Is this simply just cheaper funding on the extremely short? And how does this move, say, the current overall?
Right. The PBOC said that now it's going to be, obviously it's not going to be a fixed rate, just like what happened to the one-year MLF. Right. So it's fading off and now they're going to use it during important windows like the seasons, like the year and quarter. And so it's going to be like the 14-day repo. And even when you MLF, it will be used when needed, but on a daily basis. And most importantly, to know policy bias, they're going to use the overnight reverse repo from now on.
All right team, fantastic work. They're unpacking the story for us. It's really an extremely key nuance here. Uh, that was Min Min Liew and of course Steven Chu here. Okay. Let's get a sense of how this dovetails into the broader story across these markets. Bill. Yeah, take it away, Bill. Yeah. Well, I think exactly to your point, we can talk about how that state support could actually end up shaping investor sentiment ahead of the opens. We've got China, Hong Kong, in about 20 minutes from now. So let's bring in Bloomberg equity strategist Sunny Bang joining us from Sydney this morning. And Sunny, you just heard that detailing exactly what this policy support could look like, the impact it could have as well. But how are you thinking about it in terms of equity market performance today?
Yeah. I guess the equity market sentiment in Hong Kong and in China is quite bearish. So the setup is one where policy support is going to be welcomed. Ultimately, China is a liquidity surplus nation. You know, there is no necessarily liquidity tightness occurring through the financial system. But having said that as well, supporting equity markets, talking about buybacks, dividends, it will provide support and it will provide, I guess, sentiment improvement amongst investors domestically. And that's really at the moment what the regulators also need to achieve, just so that the sentiment and the investor outlook doesn't get so bearish when the negative starts to form itself in some kind of negative feedback loop. So I think some of that psychology needs to be broken today to get investors to look out into 2027 earnings for Chinese stocks.
Uh, yeah. Well, of course we've seen sort of some bright spots but at points of weakness as well. And I think one of the key themes of last week was around tech, specifically disappointments from the likes of Alphabet, for instance, Microsoft as well. And you saw that reaction in market sentiment as well. But today I'm here at the Fintech Week in Hong Kong. We've actually got John Lee just on the stage speaking behind me. But certainly one of the key questions we're going to have for our guest today is around China's AI bubble and whether it actually is a bubble, where we are in the cycle right now, is one of the questions I'll be putting to Fred, who, when he joins us in just a few minutes, the Primavera Capital founder. How are you thinking about earnings in China, specifically the stock?
Yeah. I mean, that's an interesting point on the China bubble. It's definitely from a valuation point of view, many of the Chinese consumer internet businesses definitely do not feel like a bubble. Valuations are quite attractive. But there's probably more time required to explain to the market how they're using AI in their businesses and how that's going to lead to better growth or market share gains. And then on the hardware side, you know, with the company's results that came out on Friday, I mean, sevenfold surge in profit, you can clearly see that the hardware names in China are benefiting from the big boom that is occurring in the domestic AI space. But generally speaking, what we have in the US with Anthropic and OpenAI, with the markets questioning how fast revenue is growing or not growing in China, the Chinese labs need to move quicker towards monetizing. So DeepSeek's developments to start bringing a more agentic workflow to data, it's going to be taken positively. And I think now you need to see many of these AI labs move quicker towards monetization. And therefore the Chinese AI ecosystem can build on top of that.
How important Nvidia's numbers is going to be for sentiment this week?
I mean, it is the bellwether of the group. But really the markets want to understand more around the funding concerns. You know, Nvidia has been too big to fail, but it's been a liquidity support provider to the ecosystem, particularly the neoclouds. So I think clarity on the earnings call in terms of where Nvidia sort of feels in terms of like how durable are these neoclouds, do they need liquidity injections? I think if Nvidia can explain to the market that these neoclouds have strong outlooks and the cash flows will be able to fund growth, that will be taken very positively. And at the same token, I think, you know, the market's looking for now the growth, you know, with what's happening with Google and concerns around core search or with Amazon core e-commerce potentially slowing down, markets getting very nervous whether these CapEx numbers can continue to go higher into next year. So I think Nvidia obviously has a lot of look-through on that front. And a lot of these orders that Nvidia gets is well in advance. So any commentary around that will be also taken quite well.
On this sunny day, David here. A50 futures in China are punching substantially higher. Let's call it 1%. US futures, we don't normally see these types of gains for this time of the session. Mike McKee sent us a story out on the Bloomberg. You might have seen it talking about how, you know, this buy the dip, regardless of what happens with the midterms, there will be clearing events that do open the opportunity for investors to build exposure. How do we know, what would you use as a gauge to know whether these clearing events are clear of these clearing events?
Yeah. I mean, I did see that story. And I guess the midterms is an anxiety moment for investors. We don't know what we don't know. But once we go through those events, we kind of get on with business. And statistically, when you look back since 1950, US equity markets anyway have done quite well six months and 12 months after the midterm elections, like on the day, on one. So it does historically act as a bit of a clearing benchmark. And I think secondly, a lot of the focus of markets has been Federal Reserve liquidity and the level of interest rates. So if we get more clarity that yields have potentially made a high or top for the short term, that might provide a bit of that confidence for equity investors to get back in. And we also know with the month of October, both in Asia and in the US, there's been obviously a lot of de-risking. So positioning is a lot cleaner heading into some of these key macro events.
Sunny skies ahead. Sunny. Fantastic. Our equity strategist there, Sunny Bang. Yeah. Helping us underscore that at some point, the clouds will clear. Okay. Checking the weather today. Yeah, it's somewhat a mix between the two. What was fairly clear, though, are the headwinds and this sort of cloudy outlook we're looking at as far as the Chinese economy is concerned. In fact, the leading indicator for October just out in terms of the economic numbers. So 49.3, as you can see, that's clearly in contraction and quite a step down from the prior month. Well, we'll see what the other metrics hold over the course of the next one hour or so. Coming up as well, just coming down to the open markets here, as you can see. Futures are pointing to a solid start to the trading day and trading week. This is the China show.
Right. Welcome back. We're approaching the Monday open. And as you can see we're just off highs ever so slightly but still set for a solid start. You do have the midterms of course as we just showed you coming up. Let's call it midweek here for the Asia Pacific. What is preoccupying the mind space for most Chinese investors is the idea of perhaps more state support, whether that's for the market or whether that's you are getting more liquidity on the short end for Chinese markets. So we are set for a decent start to the week. Now Bella, just to further the conversation here around the big picture. You of course spoke with Foxconn. Tell us about how that went. Key takeaways for you there.
Yeah, it was a great interview. We had actually with the chairman Young Liu, on Friday afternoon and coming in a great moment as well, because we heard these rumors that maybe Sam Altman was in Taipei. And I started off by asking Chairman Young, you had met with him. What was the shape of that meeting? Because of course, these two companies signed an MoU last year, but a lot of details yet to be hashed out in terms of how this partnership is going to shape essentially that it's going to be taking. But just take a listen.
Was the capital investment, all this CapEx, their spending is for a reason because they have that demand they want to meet. But the demand is so strong. That's why they need to put a lot of capital in order to fulfill that demand. It's not the investment, the capital investment is for something. The demand that is in there is imaginary, is not real. But for this demand, I think it's real and just too big. Too big. So that, yeah, they had to spend a lot of CapEx in order to keep up with the demand. I think that's a good problem.
So what does it mean for your own CapEx then?
I think we have a very similar problem. We have to go get enough money to keep up with the demand. I think in the whole industry, we're all facing similar problems. Because this time this new industry is coming so big and so fast, so that the whole industry all have the same problem. But the problem is not, this is not fake. That demand, this is not imaginary demand. This is real. So that's a good problem as far as we're able to keep up with the demand that we'll make, we'll make money.
That was the Foxconn chair with Annabelle there. Of course. That was Young Liu, right? As we go into the open today, Hang Seng, I think the story really across Chinese markets is just really more in the onshore markets, given all the news flow on the weekends and really the price divergence we're seeing here with a flat Hang Seng but 1% gains on the A50 tells you everything you need to know about the story this Monday. Lots more ahead. This is the China show.
Oh, Dave, it's a really busy week for events in Hong Kong. But today of course, is the Hong Kong Fintech Week, Stop Me Out festival also kicking off. Thousands of attendees are here going to be really hearing on a range of different topics. So that's fintech of course, but not so much crypto. You're not going to really see the crypto bros down here. It's that focus on things like what asset tokenization, blockchain technology, and that's the first time we've ever seen robotics being showcased here today as well, plus a focus on the AI boom and the market trading that we're seeing as well. We've got Fred Hu joining us, for instance, just in a few minutes from now. Lots of questions. What exactly is happening in Chinese equities and what is he making as well of the support that we're starting to see.
Yeah. Where it maybe matters the most in as far as headlines and what's really most visible to the public markets. Right. And I think when you look at pricing as we go into the open today, it does seem that we are going to get that market response here. This is a Hong Kong story. Half of 1%, of course, some of the details coming through here out of open market operations, quite some sizable numbers. We will try and have a closer look at the significance of this. We're looking at banks today really good earnings, 10%, let's call it that on average in terms of growth. So that then furthers the dividend story, the bullishness story there around the banks. But of course the counterweight there is of course lower and lower rates. And we'll see how those two things collide. Macau casino, it's also I believe was a 10% pop there. And as far as revenues were concerned, stocks also very much in focus today. But on top of all that, the underpinnings really is the massive story in the onshore markets where the CSI 300 is set to open amid some tailwinds from news flow over the weekend and set to open after the worst month in ten years. The opening bell is coming up next. This is the time of year. Good morning.
Welcome back. You're watching the China show and we're counting down to the open of markets this morning. David, I think you can see here we're setting the stage for a modest move higher it seems at this point in time. But coming off what has been a truly terrible month for equities in China, not only do you have that local economic weakness, you've got that global backdrop of concerns around the AI boom. Now you've got regulators that are stepping up their support. It seems the question is how effective is that actually going to be?
Yeah. And I think based on the reporting, I mean, you certainly have the, you know, the specific bodies and entities that need to be at that meeting and we'll see what comes off that as well. I think we had this conversation last week with Morgan Stanley and Laura Wang and her team, and I think that's going to be the most critical leading indicator is really how vocal, visible and how strong the public messaging is coming through out of Chinese authorities in terms of the national team's state support. We are looking at an initial pop as we go into the open in the opening minutes. We're looking at, let's call it, about 1% on the very tech heavy benchmarks, like China index and STAR 50 less. So when you look at the broader benchmarks, which as I speak, are actually losing quite a bit of momentum. Anyway, let's give it some time. Flip the page, please, and have a look at where we are as far as the Hang Seng and Hang Seng index is concerned. Of course, the headwinds here is that drop that we had on Wall Street with the chips index of course, falling quite substantially. But I think the support we're getting today is in the form of US futures punching higher and also the likes of Korea also seeing a bit of a reversal as we go into the session there as well.
Okay. Let's flip the page please. The DeepSeek story, dropping this coding agent that goes into the Anthropic story which obviously opens up a number, a set of multiple doors, two that I will not walk in because that's going to take us some time, but we will in fact revisit these two stories in a moment here. Tech space on your screens doing mixed, slightly better. It's worth keeping in mind as you flip the page. Please. Hong Kong did very well on Friday relative to just a sell that we had across the region. SMIC, 13% jump in revenue. Stock is up 1% where we still have a 40 handle on that stock. Chinese banks coming up on your screens. This is a very decent set of numbers. More than decent. Let's call it 10% pop in revenue, fastest pace of profit growth. Putting that into context that we haven't seen really in years here. So anyway, this is something we will get into. In fact, right now when we have this outperformance by the way, in Chinese shares. Right. Whether that's on total return because of the dividend or in price itself, it's beating tech by about 100%, right? In fact, if you compare this to the Nasdaq, you take it back to 2024, you would have done actually better investing money in Chinese financials on price relative to if you had left that money sort of in a passive vehicle that tracks the Nasdaq. So suffice to say, this is really one very bright spot in this Chinese market. To help us unpack the significance of these earnings, Francis Chan out of Bloomberg Intelligence is here with me here on set to talk us through this. So good set of numbers for the third quarter.
Yes. Okay. Uh, you don't seem entirely convinced. Well, uh, that's too tough to have. Games. Uh, um. Early today, we do understand that could be a shift of the LPR benchmark rate. Mhm. Right. And in fact, uh, the policy has already saying that we're going to rely on some banks, has already got some pilot lending programs based on the, uh, overnight reverse repo rate instead of the, uh, traditional, uh, lending benchmark rate. Mhm. So, uh, that as a new pressure may persist, uh, although, uh, on a year-on-year basis, we still see, uh, stabilization, uh, for the big four banks, for instance, in their interest margins. Uh, and, uh, about the, uh, bond investments, bond gains, uh, we are still, uh, seeing the bottom of the Chinese, uh, Treasury bond yield. So we really don't know whether, uh, there will be more and more, uh, gains, trading gains or, uh, unrealized, realized, uh, investment gains following through the income statement. So those you can take it as persistent through 2027.
Okay, well that's a bonus though, right? The core business is still the banking business. Yep. So talk us through this. Some things like provisioning for non-performing loans. What's leading to this profit gain? If you strip out the balance sheet gains we're seeing in the fixed income exposure.
Yep. You can take a look of the credit costs in the third quarter. Okay. For the big four banks, only ICBC has the lowest pace of making provisions. In fact, for China Construction, Bank of China, they still keep a pace of over 20% increase on the new basis. And for Agricultural Bank, in fact, it was like better than pace with a slower pace of credit costs increase in the first half. But that bounced back in third quarter to 27%. So we're looking at, for instance, the special mention loan balance that could have been higher for some of the banks. Obviously, the household loans, it's like a fairly well-known issue that mortgage non-performing loans on this low rise, and on them that there are other categories like credit cards, personal business loans, and some consumption loans. We all know that those are not doing very well. And that's a quality on the incremental basis.
Okay. And so, can we still trust the dividend story? Will that continue?
Well, we are not seeing a big jump in payout ratio. Okay. So they are maintaining the more or less same payout throughout the past five years or so. So, you know, by the token, I don't think that will be an issue.
Great. Francis. Thank you. Thank you. Francis Chan there, of course, out of Bloomberg Intelligence. From here in our set here in Hong Kong, we'll take you straight back. And by the way, you might have noticed Yvonne is not here on set. She is at the Women's Chief Executive Summit taking place. This is her panel there on your screens. If I can make things. There is Teresa Tsai, of course, out of SBP, Elisa Wood out of KKR partner there, and of course, Filippo Gori and JP Morgan. Let's, why don't we listen in?
I lead our global private equity evergreen business for the firm. And I'm...
I'm Teresa from Santa Barbara Pharma. It's so nice to be here. It's so nice seeing you again. Thanks for inviting me. And we're a Chinese pharmaceutical company, and we just transitioned from like the largest generics business to now an innovative business. And in the next ten years, we hope to become a global pharmaceutical company. Thank you.
Yep. Excited to hear about your overseas expansion plans as well. So, as of course, we just highlighted here about this is a big week, not just for Hong Kong, but really for financial markets where you talk about all this AI fundraising seems to be coming to a head when it comes to what markets are reacting to. Earnings have also been quite volatile when it comes to these AI players out there. And really, where is that ROI in the hundreds of billions of dollars that we're seeing being deployed and investments into this evolution? And then you add that to the political backdrop, which is the US midterms that are happening as well this week. So certainly there's a lot to contend with. And I'm pleased to have, of course, everyone from different facets of the financial industry and of course, as from Teresa's view from the pharma sector as well. Lisa, I'll start with you. I mean, you said show me the exits, right? I mean, this has been a record year for KKR when it comes to assets and asset sales. How is 2027 shaping up to be?
You know, this is an interesting year, but I think it's actually no different than many other periods of time, right? If you think about the way we're looking at the global economy, you often hear the market talk about it as a K shape. And a lot of the press actually writes about the bad part of the K. But if you're in the top part of the K, which is where you can get deals done, you can buy good companies, you can sell businesses that have value inherent in them, you're actually doing really, really well. And as you just mentioned, it is a record year for a firm like ours. We manage, you know, about $850 billion around the world, and not all of the world looks the same. Right? We live in very asynchronous times. So this is a market where I think it's more about the who versus the what. Right. This is a playbook today that has fundamentally changed over the last couple of decades. You know, if you think about what the 80s and the 90s were all about, it was about buy low, sell high. Hold it long enough. Put enough financial engineering in the deal. Enough. Get in the deal. And you would kind of make money regardless of what you actually did with the company. That is not what today looks like. You've got to be extremely local. You've got to have a global playbook. You have to be cycle tested, and it's all about what you do with the businesses that we're buying. So can you effectuate deals in this environment? Absolutely. But you've got to bring resources that don't look like probably the resources you use 20, 30 years ago. This is all about operational expertise. This is all about making sure you can buy good and make great and really grow that bottom line. And can you then exit as you were referencing? We just released a white paper that was called Show Me the Exit. The answer is yes. If you're buying these businesses that folks want to own. And now what does that look like? It means that you're doing public to privates, taking on loved business.
Welcome back to the China Show. And here to discuss China's economy and private equity opportunities, we're joined exclusively at Hong Kong Fintech Week by Fred Hu. He's founder, chairman and CEO of Primavera Capital. So Fred, great to have you back with us again. And I think we can get started with really what's been a terrible month for Chinese equities and a lot of bearish sentiment. You're obviously on the ground a lot on the mainland. And what's the sense that you're getting from investors? Is this an opportunity or is this a reason to just sort of stay away?
Well, it could be both. You know, in the short term it is the uncertainty and the worry and fear. So there's some kind of concern about the AI equity market boom, like what we've seen many in the US market. But those are key differences in China. You know, the economy has a mix of, you know, has some clear bright spots, right? You know, the manufacturing efficiency, productivity, the strength in exports. And also China, unlike most of the major economies in terms of the energy, you know, resilience amid all the geopolitical turmoil. But these are distinct new strengths, you know, for the economy. But on the other hand, you know, consumer sentiments are still not where they should be. Yeah. There's still a lot of unknowns and uncertainty in terms of real, you know, middle class Chinese consumers willing to spend on goods and services. You know, so that there could be, you know, a drag for economic growth. China, in other words, could have been much stronger than, you know, the latest numbers would tell us. You know, so it's a mixed bag. So a lot of these big overhang for equity market.
I think about China's role in the AI play globally. And it really is more on sort of the infrastructure side. Different optical fiber technologies, for instance, you know, that is what it's supplying into the chain. But AI infrastructure has been really under pressure as well. So where do you see as the best opportunities, public or private right now?
Well, so it has been overall in AI, China clearly one of the leaders, second only after the US as the leader. But the Chinese are really neck and neck behind us. And you know, so there's a lot of frontier labs. So, you know, AI adoption, diffusion, physical AI and so on. So in terms of AI, you know, we have seen, you know, clear distinction between what's happening in the US and what's happening in China, right? US clearly there's a massive CapEx. Yeah. Capital inflow into AI build out by, you know, we're talking hundreds of billions and billions of dollars. China is also a big investor in AI, but the magnitude, you know, is nowhere close to what the US. So it isn't, you know, this one. I don't think there's any legitimate concern that AI capex that may be so overdone.
Okay. Uh, excess. Okay, so that's concerning the movement. So concerns that we would see around circular financing, for instance, in the States. You don't think that they apply?
No, not at all. Not only.
Okay. So I take a look at the performance of, say, Zhipu, GPU or MiniMax, for instance, in public markets have had a huge sell off in the last few weeks. Yeah. DeepSeek, though, is another name. And they just closed their latest funding round and it was one of the largest ever we've seen for a startup in China, I think around 15 billion USD. Yeah. Do you think that that validates China's role on the AI stage globally, or do you see DeepSeek as being a bit of an outlier?
No, I think DeepSeek and Zhipu and DataMoonshot, you know, China has, you know, obviously don't forget that Alibaba and finance by China has actually half a dozen, you know, leading frontier AI labs. You know, I wouldn't use the public market performance as the barometer of how well they are doing. You know, bear in mind, these are really with these super young companies. All right, you know, you know, idealize the world. I would prefer them to be private much longer, but when the technology is more mature, the business model is more mature. But right now, they are in the public market. And so they have to endure the short term. You know, what I did here and all that. Right? So, you know, that's what they were saying, but as in what they're ready for long term investments. Look at this. You know, the capability of the, this is your team. You know how good they are at execution, you know, in terms of how sound, sustainable business model in terms of commercialization.
So for a company like Moonshot, for instance, that's looking to come to Hong Kong to list, you would advise them to delay any sort of trading debut here for a while?
You know, you know, I did as the would that. I think all of these companies are so young, but they are not quite ready, you know, to withstand, you know, the ups and downs of public market scrutiny and volatility and all those factors.
Um, you know, for global LPs then, and I'm thinking particularly about US and European institutions, out of your conversations, how do you get that sense of that thinking about China exposure right now then? Who, as a general, as you know, what happened the last couple of years?
You know, I think most institutional exposure to China has been way below where they should be. So I think last a year or two, I've seen increasing interest in, you know, coming to China to really check out the industries, on the companies and what's happening on the ground. So generally, people I say, hey, you know, there's a lot of excitement, you know, exciting stuff going on in China. Maybe it's time to re-engage and maybe to deploy capital in the.
By the way, we did report at Bloomberg early this year in February that Primavera was looking to raise for a new fund. The previous one was at $4 billion. I'm wondering the status of that and how that raise is going so far.
You know, we're kind of coming specifically, but generally, you know, we haven't been doing fundraising and, you know, like our counterparts in the US market. So now we see increasing attractive opportunities in the private markets. So, you know, obviously we would like to be in a position to capture those opportunities.
And where's the interest coming from? Mostly, if you could maybe share a geography, for instance, or a type of element?
You know, as I said, you know, obviously from within Asia-Pacific region, including China and also Middle East and European and actually surprising, you know, from a lot of America as well.
Okay, okay. I want to talk more generally about the sort of backdrop. Obviously this morning we're coming into news that we could have this meeting between regulators. And you've seen, for instance, the national team stepping in to try and prop up sentiment. What do you make of the policy response so far, and how long do you see this selloff lasting essentially?
Well, you know, first of all, I think people need to step back to have the big picture, you know, not to overreact to short term. What a video started off, you know, in state, I think policy makers should really focus on improving strength and the economic fundamentals to create an environment where you must have, you know, have confidence to deploy a long term capital in the Chinese market. Number one. Number two, you know, the Chinese economy has a lot of bright spots. Okay. But the one still, I would say with weakness, is that under suicide? Yeah. I think that's where the government into focus their energy and intention. You know, the reality is China has a lot of policy tools at its disposal. For example there's no inflation appreciate it. So that should give a lot of room for central bank, you know, to take much of both the actions than what we have seen. You know, on the fiscal side, you know, again, there's a lot of room to maneuver as well. So, you know, it was I think it I do, you know, the economy, you know, if they can really also have more balanced, you know, economic growth, they have a more sustainable that will provide a more passive backdrop, you know, for the equity market.
I know this is sort of the perennial question, but we've seen this China consumer weakness for so long and domestic economy malaise. Can any of this really be solved without the property overhang also being fixed?
Great question. So perhaps there has been a serious drag, but you know that now, you know, the problems have been, I would say, more under control, you know, because there's been a number of years of downward adjustment, I would have the highest life. So the is also much less invasive in there. So the given to Holohan has also become less this year. So, you know, I think, you know, if the government use this opportunity to do more on the monetary and the fiscal, fine, but to support the consumer spending, you know, I think China would have like this 3 or 5 years will have very strong economic outlook.
