# AI CapEx, Japan Election, and Asian Market Rotation

**Podcast:** Bloomberg Daybreak: Asia Edition
**Published:** 2026-02-06

## Transcript

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Welcome to the Daybreak Asia Podcast.
I'm Doug Chrisner.
It was another day of heavy selling in U.S.
software stocks given worries over the impact of AI.
Today, Anthropic said its most powerful AI model can carry out detailed financial research and analysis, tasks that would normally take a person days to complete.
And then on top of that, after the bell, Amazon said it's intending to spend 200 billion dollars this year on data centers, semiconductors, and other equipment.
Thank you for being here.
If we can, let's start with South Korea, because the market seems to be in a bit of a sell-off right now, heading toward its first weekly loss this year, and it seems to be entirely related to this meltdown that we are seeing in tech stocks in the States, right?
Yeah, absolutely.
I mean, part of that story is that like you mentioned, there is that global sell-off in tech.
And yes, um, when it comes to the Cosby, um SK Heinex and Samsung together probably takes up about 50 percent or so of the market share.
So any kind of risk-off mood around the AI story will definitely impact um the uh South Korea's market compared to some of the other Asian markets.
So, but it's I think it's very important to also point out that the South Korean market has been very volatile.
If you look at just this week, I think uh on one of the days it was up some six percent, and Samsung was jumping 10% or so.
And then then you drop uh, you know, um as much as three percent or so today.
So it's just being a very volatile market.
And when it comes to the broader Asian market, we're talking about SMP down about 2% this week, but Asia is down about 1.6%.
So we're headed for its worst week since December.
While for the SMP is the worst, maybe since October, it depends on how we open on uh later today.
But overall, um, Asia is doing slightly better because um, first of all, we don't have as many software exposure compared to what we see uh in the US, for example.
It's a bit more hardware driven and more AI related, which um is actually supporting the the overall uh AI story in Asia.
And also when we talk about all these CapEx spending, in the end, a lot of that will trickle down into the supply chains in Asia.
So once that build out starts to happen with these big spending, uh Asia is likely to be a big beneficiary of that.
And again, we discussed about how uh we still have lower valuation here in Asia versus the US.
So I would say overall a bit more insulated from this big sell-off compared to what you saw, yeah, overnight in the U.S.
So Winnie, I saw the Taiwan Semi is planning to begin making some more advanced chips for AI.
The manufacturing will happen in Japan, but I'm curious as to what this means for for TSMC and Taipei.
Yeah, so it is a positive development because first of all, there's more demand and you're diversifying uh all these um geopolitical risks that we potentially expect if they focus too much on, for example, the US.
Obviously, there is a big commitment to investing more in the US, but just uh being able to kind of diversify that supply chain to other countries, especially Japan, which has been a big ally for Taiwan, is overall good for not just TFMC, but also the um semiconductor supply chain in Taiwan.
And I also just wanted to highlight that something very interesting recently has been happening is that because TSMC has been rising so much and that it is getting close to actually about 50% of its mark uh of the overall Taiwanese uh stock market, market cap.
So um some of the fund managers who are capped in terms of how much exposure they can have for TSMC had to kind of trim a bit of that exposure just because how much TSMC has been rising, and that they have been diversifying into some of the other um names in Taiwan along the supply chains.
So we're seeing that some smaller companies in Taiwan, specifically the memory chip companies have been doing very greatly uh this year.
It's jumped.
Some of the names I was checking just now, um, the names like PowerChip, um, names like Nanya, they are jumping some 50% or 40% just so far this year.
So it's interesting to see how this whole global memory crunch story is benefiting lots of the smaller Asian memory chip makers.
And they are kind of these hidden real winners in AI so far this year.
When you look at this this whole um AI CAP CAPEX and memory crunch story, versus um the companies that are really getting hit were the were the um old favorites of foreign investors, right?
We were talking about Nintendo, Sony, for example, that just had their earnings this week, but the highlight a lot of it was on that struggle with the memory crunch.
So that's why you saw Nintendo's shares down about 11% after earnings.
And also Sony had a bit of a jump in shares right after earnings because the results were actually positive.
But that memory um uh crunch actually kept the upside of stocks, and hence uh Sony actually wiped out all of its gains just yesterday.
So we're about a little more than a week away from the lunar new year holiday.
You are in Hong Kong, and I'm curious about what the betting is right now on the way in which consumers are going to engage during the lunar new year festivities.
Yeah, that's very interesting because yes, for sure, we are seeing more of that um kind of festive vibe coming up.
And in terms of investment, actually, when you look at yesterday's stock market, for example, the sector that's that was doing very well yesterday in the Hong Kong China market, is actually the consumer sector.
Like you mentioned, whether it's restaurant names, um, local cosmetics brands, or even Popmart actually jumped a lot as well.
And that is with expectation that people are going to spend more into this lunar new year.
And that is also part of, again, we are going back to the tech sell-off story, but that um rotation out of tech, right?
So we are seeing rotation away from um the growth stocks, whether it's due to the worries around AI or due to kind of just global yields um very high right now, so higher funding costs, and rotating into these value-driven names.
So a lot of that are in the consumer sector.
So it's kind of um two factors in play.
One of that, like the global sell-off going on and the rotation into defensive names.
And yes, like you said, the lunar new year definitely also provided um another new catalyst for this sector.
So we've talked a lot about tech stocks in Asia.
I'm curious as to how some of let's call them the old economy stocks are performing in Hong Kong.
I'm thinking of property, even some of the the banks.
How are they holding up?
Yeah, so that is actually a very interesting trend that we've recently um observed over the past few months because yes, HS Tech specifically, the Hang Sang uh tech index is actually close to a bear level at this point, so down about 20 percent since its October high because of the global sell-off, because of kind of lack of catalyst when it comes to news around Deepseek, for example.
But on the other hand, when you look look at uh Hang Sen's property index or the Financial Index, they're up some 10% in the past three months.
And that is again part of rotation, but they have their own factors.
When it comes to property, we actually saw home prices uh jumped, I believe 3.5% um year over year, and that is actually the first increase in um four years.
So the data came out earlier uh last last week.
So that basically gave a brighter outlook when it comes to the housing market for Hong Kong.
Um and beyond that, when it comes to the financial sector, because of these IPO pipelines that we've been talking about, it actually provides a more vibrant um capital market um view um when it comes to Hong Kong's banking sector as well.
So lots of bets on that.
But because also of this whole uh global geopolitical tension.
People do prefer um higher yield stocks.
So a lot of that is also in these uh sectors.
So quite an interesting um dynamic that we're seeing playing out that um the old economy names like you mentioned are actually black back in play in Hong Kong.
It's very interesting.
Winnie, thank you so very much.
Uh Bloomberg's Winnie Sue.
She is Asia Equities Reporter joining from Hong Kong here on the Daybreak Age podcast.
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Welcome back to the Daybreak Asia Podcast.
I'm Doug Chrisner.
It's only been three months since Sanae Takeichi was elected as Japan's first female premier, and now she's on the verge of a snap election.
It's been called for Sunday, February 8th.
This may be an attempt to convert her strong approval ratings into a clear mandate for a new ruling coalition.
Victory, needless to say, may provide her public support for a spending and investment plan for economic growth.
For a closer look, I'm joined by Bloomberg Sakura Murakami.
She covers the economies of Japan and South Korea for Bloomberg News.
Sakura joins us from our studios in Tokyo.
Thank you for being here.
Can you add to anything that I said previously in terms of trying to create a bit of context for this election?
Yeah, so Takaichi became Prime Minister last uh October, and she's enjoyed like very strong personal popularity throughout her three, four months in office now.
The thing is, she doesn't have a majority in either chamber of the parliament.
And so she's seen a lot of difficulty pushing through her policies.
She has a razor-thin majority in the lower house, but you know, if one person falls ill and can't turn up to vote, she loses that majority.
So, in order to consolidate her power, in order to push through some of the more, I guess, controversial or like bigger policies that she's trying to push through, she's called a snap election.
It came as a surprise.
No one was really expecting it.
But she's really banking on her personal popularity to translate that into votes and actually consolidate her power in the lower house and um as pre as the prime minister as well.
So we're very aware of the problem with inflation in Japan, and I'm sure that households across the country have been feeling the pinch.
Is that a big part of her agenda here dealing with higher prices?
Yes, definitely.
So through her initial months as prime minister, she's consistently said that her top priority is the cost of living crisis, lowering prices for the average household.
And in polls, you know, that that is the top concern for voters.
So when she called the SNAP election, she said we're going to look into cutting the sales tax on food for two years.
This was kind of a big deal for her party because her party has always been against cutting taxes.
The thing is, um, she's kind of toned that down during the campaign.
In the initial days of the campaign, she was, you know, like touting it as like one of the main policies of the LDP, the ruling LDP, but she's not brought that up as much.
There are probably several reasons for that, but one of them is that all of the parties are now campaigning on a sales tax cut to varying degrees.
If anything, Takaichi's policies are more fiscally responsible because the sales tax cut would only be for two years compared to forever.
Whether you think the behavior of the bond market recently probably had a little bit of impact on her approach or her way of thinking, is that possible?
That is possible.
She's also come under fire recently for how do I say this?
Suggesting that the weak yen is good for Japan, for example.
Well, she didn't say it as clearly, but she's having to play this sort of uh this balancing act with stocks, with the bond market, and with the yen.
And it's a very delicate balancing act for her.
It seems like the markets are concerned about, you know, they they're wondering about her fiscal responsibility.
She has consistently said we need to invest more, we need to spend more, but be fiscal, fiscally irresponsible at the same time.
Whether how she intends to pay for, for example, the sales tax cut, that's not clear yet, though.
Um, so we'll just have to see if she wins the election and what the plan is after she wins the election.
So, what do you think the risk is of Takeichi miscalculating and ending up in a situation similar to what we saw with UK Prime Minister Liz Truss?
The thing with Takaichi is that she has consistently, um, although the messaging might have gotten lost at times, especially because with such like a huge policy like cutting the sales tax on food for two years, um, she has been very, very careful about trying to put out the message that she will be fiscally irresponsible.
The problem with that messaging is that she hasn't actually clarified where the funding will come from.
So, you know, it's vague at this point on the point of how she's going to be fiscally irresponsible.
But that being said, the sales tax cut is nowhere near as big as um Liz Truss's plan.
You know, experts are saying we're not gonna see a Liz Truss style kind of downfall.
Um Takaichi knows what she's doing, she understands the messaging.
You know, she's a pretty savvy politician.
And from what I can tell, the sales tax cut policy is really for the campaign for the election.
That messaging could change after she wins or if she wins.
And she's already starting to tone down the wording there.
She's already starting to say, oh, you know, we're going to accelerate the conversation on cutting the sales tax.
You know, she's not pledging the sales tax cut immediately already.
So a Liz Trust style meltdown is probably not on the books.
What about her comments on Taiwan and the way in which uh leadership in Beijing was a little aggravated by those remarks.
Help me understand the extent to which she is committed to spending more on defense and whether the story on Taiwan is a part of that strategy.
So Takaichi's already pledged to accelerate defense spending.
She wants to spend more on um defense in general, and that's all part of her plan for a more assertive, more bold, more a stronger Japan, basically.
That definitely is exemplified in um her remarks on Taiwan back in November.
Her stance of not taking back those comments kind of makes sense in the context of things.
The government did say it doesn't indicate a change in uh the government's position on Taiwan at all, so there's no need to take back the comments.
But it has come across as the kind of strong leadership style that um the Japanese people might be able maybe might expect from her if she wins a mandate in the following election.
It kind of is a taster of what we can expect in terms of the relationship between Japan and China as well.
So that's kind of all that all kind of fits into her style of being a strong leader and putting Japan back on the international scene as well.
So I mentioned her strong approval ratings.
What do we know about the distribution of her support demographically?
I mean, I'm thinking in particular of young people in Japan.
Does she have a strong following, strong support?
Yeah, definitely.
She's she's very personable in a way that we haven't seen in recent um Japanese prime ministers.
She's very popular among the younger generations.
In polls, uh, I think back I think last year, uh, there were some polls that showed like almost a 90% approval rating among people who are um on the on the younger side.
So very, very popular.
Um there's, I think part of that comes from her ability to connect with an online audience.
She's very active on X in a way that um her predecessors haven't been.
Um she, you know, she's personable, she talks about dyeing her hair.
She has these handbags and um, you know, pens, and it's you know, it's uh you she has a strong fan base basically.
Her messaging is also very clear and straightforward.
Unlike unlike previous uh prime ministers who uh sometimes, you know, waffled on or uh what they were trying to do, what they were trying to say wasn't very clear.
So she's very forthright, very direct, and uh that has a massive appeal uh among younger generations and uh yeah, basically people under 60.
From what I understand, another issue that Japanese citizenry have been dealing with lately is this idea of immigration.
And is do you think that's going to have a meaningful impact in in the election results that we're about to see?
Yes, most probably.
All of the parties now have kind of shifted towards this this kind of narrative of like we need to do something about immigration.
We we need to kind of tighten the rules aro around immigration to varying degrees depending on the party.
But um one of the parties that the polls also predict will do quite well in this election is San Saito, which is a pretty fringe for now, um, right wing party, and they have constantly campaigned on, you know, uh very sort of uh having harsh rules, oh, very strict rules against um immigrants.
One thing to note though is that overall Japan understands that it's one of the biggest issues it faces is uh declining population and demographic change too, right?
Yes, demographic change, declining population, and just like the shrinking workforce, basically.
And there is a tone of reality around the fact that, you know, there is this understanding that Japan is probably going to have to rely on immigrants to solve this issue.
So the kind of discussion around it is like how can we be opened to immigrants who are going to be able to integrate into Japanese society really well, but um crack down on immigrants who uh I guess won't contribute to the economy as much.
Thank you so much, Sakura, for helping us set up the election this Sunday.
The SNAP election called by Prime Minister Takeichi.
Sakura Murakami covers the economies of Japan and South Korea for Bloomberg News, joining from our studios in Tokyo here on the Daybreak Asia podcast.
Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition Podcast.
Each weekday we look at the story 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 Chrisner, and this is Bloomberg.