Welcome to the Daybreak Asia podcast. I'm Doug Kirrer. Tech is once again dominating the conversation in markets, especially as it relates to AI. In Japan, shares in SoftBank are trading higher on word the company is studying potential acquisitions including the data center operator Switch. We are told SoftBank has held discussions with leadership at Switch and the company's been conducting some due diligence on Switch. State side, we had some tech weakness that seemed to be the blemish on an otherwise record setting session with the S&P and the Dow industrial average each closing at all-time highs. However, the NASDAQ comp was in retreat thanks to a drop in Oracle. Those shares were down nearly 11% on concern over Oracle's plans for vast capital outlays on AI infrastructure. For a closer look at the price action, I'm joined by Steven Shenfeld. He is the CEO of Market Vector Indexes. Stephen, thank you so much for making time to chat with me. What did you make of the price action today?
It was encouraging despite Oracle's drop and holding the NASDAQ back. I think there's definitely rotation. Value stocks are strong. Small cap is actually leading and we didn't have a record in NASDAQ but we did in the Dow and S&P. Also the transports are at new highs. They haven't been in almost two years. So it feels like a healthy market. The jitters are mostly in tech just like you just said with Broadcom. So are they justified though? I mean if you look at what Broadcom had to say, EPS for the quarter was above estimates for the latest quarter. However, the outlook for revenue where AI is concerned maybe did not meet the most lofty expectations. Do we need to discuss valuations here?
I think we can because tech is still priced to perfection and US and developed markets in general are very very highly valued historically, right? So the talking points I sent you tell the story. Even though emerging markets have had a good year, they're still dramatically cheaper than developed markets and US is really the tip of the spear of developed market valuations. So Stephen, if you're optimistic on the US equity market going into the new year, I'm curious about how much of that is predicated on much easier Fed policy. Just the other day, we had the Fed maintaining its outlook for just one rate cut in 2026. That despite the fact that the swaps market is sticking to the bet for two rate cuts in the new year. What is your view on the outlook for rates?
You know, I think there'll be a new Fed president and I think that will have some influence. The market reacted well to the, it was like a soft talkish kind of press conference by PAL. So I think the market will be okay with either. I think the fundamentals of earnings and that the US economy is not as weak as people feared even as recently as a month ago is what's holding up the market. You would not see small cap and value performing the way they are if that wasn't the case.
So you mentioned emerging markets a moment ago. What's your outlook for EM in 2026 broadly speaking?
So obviously emerging markets are heterogeneous. Different markets show greater or less potential but as a whole the valuations in emerging markets are really attractive. The forward PE is about half of the US and developed markets. The cyclically adjusted PE or CAPE is also in the 12 to 13 compared to 24-25 for developed markets. And then you look at some specific markets. Brazil has performed very well despite being hit with US tariffs. India is one of the few large emerging markets that is flat and I believe it has huge potential. Vietnam has had a great year almost up 50% but it has a structural change coming up next year, the potential to be graduated to emerging market status by the FTSE benchmark. Now the direction of EM as we know often comes down to the relative strength or weakness of the US dollar. Today it was a story of dollar weakness and the Bloomberg dollar spot index is on pace for its third weekly decline. If we can assume the dollar remains on the back foot, does that necessarily create more bullishness for you when it comes to EM?
Yeah that is the case. Emerging market performance is generally helped by a weaker dollar. As well as emerging market currencies in general have been strong this year. And we've had a role reversal. The fiscally responsible countries around the world in general are more emerging markets than developed markets. So it is the market speaking about the relative health of emerging markets in my opinion.
What's your biggest concern as we go into 2026?
To start, geopolitical concerns are not only not diminished but they've increased. We now have the possibility of a hot war in the Caribbean aside as well as continuation of the Ukraine Russia war. I do expect the Middle East to be somewhat attenuated compared to the last two years. I believe the ceasefire will hold, but trade tensions will continue to be a factor. The US and China are seeming to signal mutual understanding and accommodation. So that could be a positive. And it's a midterm election year. There's a lot of unpredictability about that and what the White House will do in order to try to maintain a Republican control of the House and Senate.
So, you've highlighted a few of the risks and given those risks, maybe you could address some of the more defensive or perhaps hedging strategies that you're using right now.
Sure. As a global index provider, we encourage investors to use our indexes and make their own decisions. But what we really strive to do is create asset class choices for our investors. So, for example, gold and gold mining stocks as well as silver and silver mining stocks have been an excellent hedge this year. I do think the trends in metals and now copper is coming up are going to continue to be of value. In contrast, crypto has not added value to anyone's portfolios this year. It could be a good time to allocate just a few percentage to diversified crypto. And then finally, emerging markets broadly defined are definitely a hedge against debt and potential overvaluation in developed markets.
Steve, we'll leave it there. Thank you so much. Steven Shenfeld is the CEO at Market Vectors Indexes, joining us here on the Daybreak Asia podcast.
Welcome back to the Daybreak Asia podcast. I'm Doug Kirrer. Uber is looking for some new avenues of growth in the Asia-Pacific, especially in Japan and Hong Kong, and the focus of the strategy will involve self-driving cars. Uber CEO Dara Khosrowshahi is in the region. He spoke with Bloomberg's Annabelle Drooers.
It's been a very busy week for you. You've been Japan, Korea, Taiwan, Hong Kong. What's been the sort of standout so far? The key takeaways?
The key takeaways for us is growth. The APAC market and in particular the North Asia markets as well. They are huge growth markets for us. And if you look for example in the ride share business, over 30% of our global first trips coming into the category come from the APAC region. The area is growing very quickly including taxi as well which is actually one of our newest products on the platform. So for me coming here, seeing the teams, meeting with local business people and regulators, and talking about how we can be part of the future growth of the region is really what my agenda is.
Early this year you also put out a statement on the robo taxi push as well. The Middle East and Asia were the markets for 2025 to launch and we've seen that initial deployment in the Middle East already. What's happening on the Asia side?
Lots of discussions on the Asia side. I think what's really important is to set up a regulatory framework to go forward. For example, Hong Kong has various trials and pilots going on and in many other markets. We're talking to regulators about how we can be a part of shaping ride share and autonomous ride share going forward. The technology is absolutely getting there. The robot driver doesn't get tired, doesn't get distracted. And we very much look forward to working with various authorities to introduce ride share into the markets. We're now live in four markets now as we speak in the US and in the Middle East and I expect to be in 10 plus markets by next year and we want those markets to be in the Asia Pacific region as well.
Where then in Asia do you think is the most likely place?
We'll see. I think that certainly Japan has great potential. They are behind on their regulation, but I think that they also understand that with an aging population there's a real need for transportation not just in the large cities but in the rural areas. For example, I experienced that personally going to Kaga city where we have communal ride share and took a ride share trip and understood what the needs are there. So we're talking with various regulatory authorities. I think Japan is going to be part of it. I certainly hope that Hong Kong is going to be a part of it. Australia, where we were just talking about, is a huge market for us. So we're having those dialogues and I think that the picture will shape up over the next two years because the technology is definitely getting there.
Speaking of Hong Kong, because we do see the trials that are underway and they're being conducted by Baidu's Apollo Go program. Would you be looking to work with them on that or are you working with them on that?
Baidu is a partner of ours. We partner with Baidu. We're in New Wide for example in Abu Dhabi and expanding there. Pony is another partner of ours. So we absolutely expect to be on the road with all three of them. When you look at Chinese autonomous technology and the development there, they are one of the leaders on a global basis. And for us, we want to partner with the whole autonomous ecosystem to bring this technology to reality.
Just to clarify, you're expecting to ramp up the markets that you're in to 10 autonomous driving markets, 10 plus?
