China's BYD Slashes EV Price, China-European Union Trade Officials to Meet
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Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. On today's episode, we'll look in a moment at the state of U.S. trade talks, especially negotiations involving the European Union and also China. We begin, though, with the latest on the Chinese EV maker BYD. Its shares fell more than 8% in Hong Kong trading on Monday. The market was reacting to BYD's sweeping price cuts of as much as 34%.

The company is offering discounts on 22 of its electric and plug-in hybrid models sold in China until the end of June. Bloomberg's Asia transport reporter Danny Lee spoke with Bloomberg's Heidi Stroud-Watts. Question, how well placed is BYD to engage in a price war with the other Chinese EV makers?

Well, BYD has a first mover advantage by its sheer size dominating the marketplace and having a huge grip on sales in the world's biggest auto and EV market. And we saw BYD taking out the playbook once again to shake up the market.

and really slashed prices. Prices being cut by 34% over last week. And therefore, we saw that market reaction, a market reaction that saw BYD's own shares fall almost 9%, wiping off US$13 billion off its market cap. And the broader sector there also following as well. And it really adds to just fears across the sector of not just BYD's largesse, but the fact that they're all having to respond to BYD's price cuts across areas

entire lineup effectively or 22 models that BYD produces and when you look at kind of the health of the sector is at the back end of last year inventories of EVs rose to 57 days and that's quite a high in the most recent period so therefore it is going to be a challenge as automakers look to offload stock and to try and compete by having to cut prices.

Yeah. Danny, do we know who we expect to be kind of the hardest hit by this change? I mean, every automaker seems to be hit, no matter how big or how small. We've seen various rivals of BYD from Leap Motor to Geely all having to reflect and respond to its major competitor in following through with similar price cuts. Price cuts which are not necessarily as

large as BYD, but still the fact that this will eat into margins and as we've seen many automakers recover from a prior set of price wars over the recent period and recent years, this is a little bit of bad news for the industry as they've been trying to grapple with this transition and generally speaking have performed very well compared to peers outside of China. That is Bloomberg's Danny Lee.

In Beijing, the government is considering a new version of its Made in China 2025 campaign. We know the aim is to boost production of high-end technological goods and to prioritize technology. That would include chip-making equipment. Well, against that backdrop is the story on global trade and news today that the European Union has agreed to fast-track trade negotiations with the U.S. Here is Bloomberg's Min Min Lo.

Well, very little is being disclosed publicly for now, but we know that this is coming ahead of EU officials traveling to China in July, also ahead of that July 9th deadline when the U.S. is looking to potentially raise tariffs on EU goods from 20 to 50 percent. So it looks like this is an opportunity for both sides to find out what their stand is in terms of how they will deal with the U.S., and this is the

Thank you very much.

One of the trade representatives traveled to Beijing in March that was followed by a video call in April. And this time you have the Chinese Commerce Minister Wang Wentao traveling to Paris to meet with his European counterpart on the sidelines of the WTO meeting. So whether or not this will lead to some or at least pave the way for some sort of concrete deliverables,

in July when those EU officials travel to Beijing. That is something we want to look out for, whether they will continue to perhaps look into picking up discussion of an investment pact that had been put on hold for many years or perhaps lowering tariffs on Chinese EVs. These are, of course, things to look out for and whether they will look to deepen trade cooperation as well as both sides counter those impacts of US tariffs.

Yeah, and manufacturing strength remaining a theme in China as well. Tell us a little bit about this new version of the Made in China plan that Beijing is said to be preparing. Yeah, so China first introduced the Made in China plan in 2015. It was a 10-year plan that's supposed to sort of expire by 2025. And we understand that policymakers are now looking at a new iteration of this plan, a decade-long sort of blueprint to map out China's manufacturing capabilities over the next 10 years. And once again, it is...

It is expected to focus on high-tech manufacturing, especially things like chip-making gears, given those curbs from the US and how that has threatened China's national security. Here you can see in the pie chart that manufacturing has remained a pretty big part of China's share of GDP. And we understand from policymakers that they plan to keep that share of GDP contributed by manufacturing stable in the mid to long term. And again, this doesn't seem to address that

criticism from the US of the trade imbalance because that concentration in manufacturing has been one of the key drivers of that imbalance and this is despite as well Chinese policymakers acknowledging that they need to boost domestic consumption. We know there is this ongoing debate among policymakers as to whether to place a target on how much consumption should contribute as a share of GDP but according to sources

policymakers are still leaning against putting a target there because they're unsure whether they have enough policy tools to really ramp up consumption in a big way. That is Bloomberg's Min Min Lo speaking with Bloomberg's Paul Allen on the Daybreak Asia podcast.

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Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. In the currency markets today, the dollar is hovering near its lowest level in almost two years. Now, a portion of this move is tied to a stronger yen. Earlier, Bank of Japan Governor Kazuo Ueda said the BOJ will adjust easing if the economy improves as expected.

Even so, there is no escaping how volatile the dollar has been, largely the result of U.S. trade policy, and it's causing investors in Asia to look away from U.S. assets and examine opportunities in the region. My colleagues at Bloomberg Television caught up with Zhu He'an, CIO of Murray Asset Global Investments.

And here she is speaking with David Inglis and Yvonne Mann. You've kind of shifted more towards a domestic place right now. Tell us what you've been doing. We made the changes late last year and early this year. So there are two reasons. Of course, the uncertainty is regarding tariff.

weight on the attractiveness of the exporters. And secondly, if you just think about the last four to five years and actually consumption and domestic demand related stories have been very weak, much weaker than the other sectors like technology, industrials in China, also in India, which are the major countries in Asia.

So there are so many reasons for that. But the key point is from this year, I think from the government's perspective as well, these domestic demand sectors are becoming more important to boost the economy. So in China, for example, now we all know that for the last four to five years, export has been stronger than expected. So there's no kind of very –

big reason for them to aggressively boost domestic demand. But now they have to make the kind of more internal tool to have less dependence on the U.S. or other external demand. And also in India, as we saw from early this year, this finally after two terms of the Modi and finally this term, now they are shifting the focus to the domestic consumption from more investment-linked sectors.

So that's why, that's the kind of background why we shifted our focus to more domestic demand related sectors. - And how has that change worked out as far as performance goes? - Yeah, so maybe you saw there's some outperformers of BYD or Xiaomi or all the, yeah, those actually outperformed well, but in India still the recovery in consumption

has been much slower. But at least now we are seeing some signs of recovery. So, for example, over 90% of MSCI India index names, they already released their earnings. But over 58% of that, they beat the market consensus, which is much higher than the average level. And only 22% missed the earnings estimate.

And so even like earnings-wise, now we believe it's kind of going through the bottom now. And also from the inflationary pressure perspective as well, it's still continuing to go down. So that's why there will be no pressure from the RBI to cut the rates to boost the domestic demand.

So you think we bought them in India? Because the market actually led the rally after Liberation Day from Donald Trump. He was one of the best performers. And I'm wondering right now, from an earnings perspective, do you think they'll catch up?

It will be very gradual, I would say. I want to add, yeah, it's not going to be like a V-shaped recovery, but at least, you know, for the last three to four quarters, you know, this market has been underperforming while the other technology sectors or kind of manufacturing, AI, you know, that kind of sector is kind of outperforming. So, but if you just think about how underpenetrated so many sectors are in the

India still with a huge population. And then, you know, governments, they are very aggressive in boosting domestic demand as well. And also, tariff issue, the uncertainty is also less. So even though they are still trading at the premium compared to the other countries, but we have to have a long-term perspective to India. So actually, usually our perspective to India is much longer than the other, you know, the countries because, yeah, considering these kind of, you know, very positive fundamental reasons. Yeah.

You mentioned the shift to domestic. I looked at some of your top holdings, though. TSMC is still in there. And this is very much a very global sort of company as well. Yes. Having said that, we shifted our focus more to domestic demand ones. But still, we have a descent and then good exposure to some exporters, for example, in the technology sectors or industrials. So, for example, TSMC is one of the examples in Taiwan. We believe that they have a bargaining power there.

which is strong enough to pass on the the tariff cost to customers and even though it's still under pressure from uncertainties regarding the JV with Intel and also you know the AI demand or even there are so many uncertainties that still a tariff of course is going on but I think if you just consider their valuation which is only like a 14 times next year I think downside risk

is manageable. So for the next, you know, like one or two quarters until all the uncertainties become clearer, I think it will be, you know, range bound or under pressure, but we still think that the upside potential is higher than downside risks.

And then another example is also kind of transformer manufacturer in Korea as well. I was going to ask you about, since we're talking about tech, NVIDIA is reporting this this week. And so far, have you any key takeaways so far from the sort of the big tech earnings and what that means for TSMC or is the bet on TSMC something else?

So I also traveled to Taiwan last week, so Computex, you know, the conference as well. So I think that so far, I think the demand and all the tones of the companies on the AI demand is still quite strong and rosy. But still, we have to see the final numbers of COAs, you know, the expansion plan from TSMC. There are still like three or four key factors that we have to keep watching. So I think for the second half,

it is still possible that we are going to see some volatility in the second half, but at least in the first half, I think we still see the momentum to continue to be strong. We talked a little bit more about the domestic plays, and certainly one thing we're focused on is, of course, the consumption side of things in China. Is there still opportunities there?

Yes, I think that we have to keep the long-term perspective to consumption opportunities. So because compared to the other sectors, consumption and consumers' mindset and behaviors, patterns, actually the changes are much slower.

So now, again, for the last four to five years, it has been very weak. And then now we are going through the inflection phase, I would say. It's not an inflection point. So, yeah, because of the governments, they need to put lots of efforts to restore the confidence. But luckily this time, you know, the very friendly gesture to private companies early this year in China.

Actually, it's very helpful and very meaningful for consumption as well because now I think the burden to hire more people or improve the income growth, that kind of burden can be shared by private companies, which is great.

cash reach tech companies, for example. So I think the government at the same time, they can just take care of the risks coming from property or local government debt issues. So now I think it's step by step. They are going to do more and more. But the thing is now because of the...

the delayed negotiations, the tariff negotiations between China and the U.S., I think that implementation of this very aggressive stimulus plan in China is also being delayed. So I think in terms of timing, initially we thought maybe at the end of the first half or early second half, but it's kind of pushing back in terms of timing. That's interesting the way you phrase it. I'm sorry to interrupt. For a long time we talk about how China is using its banks effectively

in terms of national service, right, to help boost the economy. To some extent, like what you're saying, correct me if I'm wrong, is that they're outsourcing some of the subsidies for consumption to the private companies themselves. That comes at a cost of margin, and I think the question I have is the...

Are you concerned about margin pressure? It's not the margin pressure. The reason that the private companies, they didn't really hire the people or they didn't really spend on capex is because of lack of confidence also. Because if you remember in 2021, the big regulatory crackdown,

on private sector as well. So now they are, they kind of, you know, the negative things are being restored. So that's why I think that they want to invest a little more and then more and then they want to hire more people. And especially in our tech sector, they need more younger people. And then now the unemployment issue is actually more material in, in,

youth, you know, the sector. So that's why I think the kind of the positive, you know, virtuous cycle is going to be created from what we saw early this year. So I think it's going to be very gradual again in the consumption story is always, yeah, yeah. But the direction wise, I think it's going to be different from what we have seen for the last four to five years.

What is the playbook then? I know you're looking at tourism, you're looking at cosmetics in these domestic plays. Why these sectors? First of all, I think the people tend to spend more on experiences rather than goods.

So the tourism is one of them. And also, cosmetic is a good spot. Actually, they want to take care of their beauty or inner beauty or health. So we have more exposures to healthcare and or kind of the consumer services in China, in Korea, and also in India, across Asia. Just a hard pivot here. The other thing I want to ask you is, how has this melt-up in treasury yields affected what you do?

So I believe the impact, of course, you know, usually the general impact on equity is negative. But I think from our Asian, I mean, the investors in Asia perspective, I think it will be less than we saw in the past because now very unusual divergence between the treasury yield and U.S. dollar. So that's why I think because of that, I think the central banks in emerging Asian countries, they have less pressure on

when they cut the rates to the boost, the domestic demand, because now their currency is relatively strengthening. So that's actually less negative than we used to see in the past. That's what I can say. And for the dollar, is the path of least resistance still for the dollar to go lower? I'm sorry? Is the path of least resistance for the dollar still to go lower?

It really depends on the further progress in the tariff and all the policies from the U.S. But I think that is very hard to predict, but at least this time, so many people in the government and central banks, they find that it was trigger for them to think about, oh, I need some other alternatives.

So trend-wise, unless we are going to see very swift the conclusion of the tariff and then they are going to do more market-friendly policies like tax cuts or deregulations, because those three needs to be more balanced. So now, although the timing of those market-friendly ones are being pushed back,

But at least, you know, they have to do it considering the midterm election next year. So it really depends on how fast they are going to conclude the tariff, and then they move on to the more positive ones. Have you seen in your strategies inflows of AUM and funds because of this, you know, U.S. exceptionalism fading away? And actually the other question there is do you see a catalyst that might –

spur a reversal in those flows back into the U.S. at some point this year. But our investors, finally, they think about the non-U.S. assets. So many people, they are getting out of the U.S., you know,

So that's why I think the inflow wise, so far it was not very, very material, but I got lots of requests from our clients and our investors that they are more interested in China or other non-U.S. assets, including equities. Okay, fantastic. Thank you so much. It was great there with Juhi on there. We covered everything. CIO of Mirai Asset Global Investments.

Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the stories shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Krisner, and this is Bloomberg.

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