Return to Transcripts main page
First Move with Julia Chatterley
Tesla Unveils Its Electric Truck; Skinny U.S.-China Deal Chance Is Looking Skinnier; Disney's "Frozen 2" Hits The Box Office. Aired 9-10a ET
Aired November 22, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:18]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange. I'm Julia Chatterley. This is FIRST MOVE and here is
your need to know.
Is it a bird? Is it a plane? Is it a tank? Tesla unveils its electric truck.
Trade deal latest. Skinny deal chance is looking skinnier.
And just not ready to let it go, Disney's "Frozen 2" hits the box office.
It's Friday. Let's make a move.
Welcome back to FIRST MOVE. After three days of U.S. impeachment hearings, I'll tell you what, one thing that looks pretty unimpeachable at this
moment is U.S. stocks.
We are trading right around record highs at this moment despite some conflicting reports on trade. Yes, I know you've heard it all before, but
President Xi of China reiterating overnight that China would like a deal, but isn't afraid to quote "fight back."
His Vice Premier Liu He has invited U.S. trade officials to China for fresh talks. Investors, I think hanging on to that in hopes of a deal despite
the fact that President Trump has cautioned; though he did say a few minutes ago, that a deal could be close, too. So news all over the place.
We have three weeks to go before fresh U.S. tariffs kick in on $160 billion worth of Chinese exports. So what was I saying? I was saying that the S&P
500 is around half a percent away from fresh record highs yet on the week.
We could actually see a pullback for the first time since October. What about what's going on in Europe? Two stocks holding in the green, but
fresh numbers show Eurozone manufacturing still contracting in November, but by less than last month. Services activity grew modestly though.
Step forward, fresh ECB head, Christine Lagarde making her first formal plea to European governments to boost fiscal stimulus, calling this
Europe's movement of opportunity.
I have to say they've skipped plenty of those over the past few years. But still.
What about Asian stocks? Well, mixed. China closing out the week a touch softer, but still up 15 percent year-to-date. Japan up 15 percent, too.
Records may not have been shattered overnight, but some windows definitely were.
Let's get to the drivers on this story because we begin with a smashing presentation from Tesla, the launch of its electric SUV. Shares are down
some four percent premarket. Clare Sebastian joins us on this story.
Fascinating. I mean, first we can talk about what it actually looks like because I described at the top, it's tough to get a sense of what this
vehicle actually is Clare, but then of course they said it was bulletproof and -- it doesn't look like it is. Talk us through the details.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia. It's probably a marriage, you could say of Tesla and SpaceX. It was that inevitable in the
mind and the vision of Elon Musk. That is perhaps true, but is it going to be a marriage that lasts? I think that's the big question.
This does not look like your traditional pickup. It was unveiled in California to great fanfare. They carried out a live test where they
smashed it with a sledgehammer. It's supposed to be made from the same alloy that they used to make rockets at SpaceX and it survived the
sledgehammer, but a little less successful when they tried testing the supposedly shatterproof windows. Take a look.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Well, maybe that was a little too hard.
(END VIDEO CLIP)
SEBASTIAN: Well, Musk did of course point out, Julia that the metal bull didn't go through. So if you were in the car, you probably would have been
fine.
But he had other big promises. He says this car can pull more than a Ford F-150, which is the top selling pickup in its class. He says it has the
performance of a sports car, the car kind of slides the ramps, the back edge of it slides back to reveal the bed. It has a built-in ramp and all
kinds of other features like storage.
I think the big question here is, will it be able to lure pickup drivers away from the brands they currently love? There's a lot of loyalty in that
class, and I think analysts are questioning that if you look at the stocks today.
CHATTERLEY: Yes, I mean, we have to look at this thing, the cost of this thing, the performance to your point, better sports car than a Porsche 911,
better hauling capacity than a Ford F-150. Even GMC though, Mary Barra said they're going to bring their own version, an electric version to
market I believe in 2021.
Production on this not expected to even begin for Tesla until the backend, I believe of 2021. The competition in this space is fierce. So when I
look at this thing, I imagine a contractor. Is he going to turn up to work in one of these?
[09:05:07]
SEBASTIAN: It's sort of hard to imagine, Julia, but I think if you look at the price tag, it starts at $39,900.00. They are trying to target the mass
market here. It's not like Rivian, which is a startup backed by Amazon and Ford, which is launching its own brand of electric truck that starts at
$69,000.00. So that's really kind of marketed as a luxury, a niche product.
This seems to be trying to target the mass market, but there's a lot of skepticism out there, not just because of the competition as you mentioned.
GM is promising to start production on their first electric truck at the end of 2021.
Well, actually, they are promising to bring it to market. That's the point at which Tesla is only going to start production they say on the cyber
truck. But also because, you know, this is as I said is the most lucrative area of the car market in the U.S., the top three selling cars so far this
year, according to Kelley Blue Book are the Ford F series, the Ram truck and the Chevy Silverado.
They are going to struggle in this class especially when the car looks so futuristic -- Julia.
CHATTERLEY: Yes, yes. To say the least. Yes, I'm not sure about these. Tech enthusiasts will be all over this, I'm just -- I'm just not sure about
anyone else.
Anyway, this time -- this time to think about this whole thing, I think perhaps. Clare Sebastian, thank you so much for that.
All right next driver, the White House toying, apparently with two scenarios to break the U.S. trade deal deadlock, a source telling CNN.
Christine Romans has all the details. What are the options here -- Christine.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS: Well the options get slimmer and slimmer here. Quite literally. First option, number one, a
person familiar with the talks tells me, the state of play tells me option number one is the President stays tough on China and implements new tariffs
in December and keeps all the old tariffs on.
And part of the thinking behind this and the President is well aware that stock markets are beautifully this year and are still up from the very
beginning when tariffs began, and the President well aware that each new round of tariffs has been absorbed by the sentiment on Wall Street.
So there's this idea that the U.S. economy is strong enough, the stock market is strong enough, quite frankly. There you see the markets since
the beginning of the trade war that the President could stand tough.
There are others who say, look, the President might be able to spin that and sell that to his electorate going into next year saying, look, there's
a lot of pressure from Wall Street, a lot of pressure from the globalists to try to do some kind of a skinny meaningless deal with the Chinese, but
no, President Trump stood his ground. And that politically, some are thinking might be good for him.
Now look, that next round of tariffs in December, there are economists who say you know with sub two percent GDP growth in this country, a big round
of tariffs that would be felt by the consumer would be a real risk to take.
This second option here is what this source told me is not a skinny deal anymore. It is an anorexic deal. A deal that benefits Wall Street by
allowing some access -- market access -- into the Chinese financial markets by Wall Street and maybe some soybean purchases in exchange for dropping
the September tariffs, ending the December tariffs and that's what China wants.
So the way this source set it up, it's almost this -- the Chinese, the globalist, and Wall Street bankers on one side and American workers and the
President on the other side trying to try to find out what's the middle ground.
CHATTERLEY: Where do the agricultural purchases come in on the increasingly skinny-skinny deal version --
ROMANS: They're in there.
CHATTERLEY: We're talking -- yes. Christine, go for it.
ROMANS: Yes, they are in there. But one thing that the Chinese have balked at is a specific number. You know, the President has said that the
Chinese agreed to $40 billion or $50 billion a year annual sales and the Chinese didn't want to be locked in we are told to a specific number.
So what could happen here is the Chinese either agree to a number or continue. They have been making some soybeans purchases as an act of
goodwill.
There's some kind of nuance between there where the Chinese make some promises on soybean purchases, but not necessarily a specific number.
You know, the fascinating thing about this to me, Julia, this is not the course correction the President set out for in the beginning, which is why
some people think that he might end up -- if you listened to him in Austin, Texas this week, he sounded irritated that the Chinese have been stepping
back.
They reneged in May. If they do only a tiny, tiny skinny deal or only agree to very slim soybean purchases, you know, could that really irritate
the President and the tariff man comes back?
I will say, anything could happen here. Honestly, anything could happen, but the time is running out. You're so right to point out we have three
weeks until that December deadline for more -- for more tariffs.
CHATTERLEY: And in the meantime, we are what? Half a percent of record highs and investors live in hope.
ROMANS: Yes, they do. They absolutely do.
CHATTERLEY: It is going to be an interesting few weeks.
ROMANS: Yes, it will.
CHATTERLEY: Christine Romans, thank you for that. All right, next driver. Microsoft getting the go-ahead to export software to China's Huawei after
the Commerce Department announced plans to grant licenses.
Hadas Gold is in London for us. Give us a sense here, Hadas, and great to have you with us -- what Microsoft is now allowed to do and whether we've
got any information about Google? About whether Alphabet will also be able to provide services because this is the real kicker for Huawei if they are
selling phones that don't have apps provided by Google here surely?
[09:10:20]
HADAS GOLD, CNN BUSINESS REPORTER: Hey, Julia, it's been a good week for Huawei, honestly. Earlier this week, they got an extension to that
exemption as part of the blacklist and now they're starting to get the news that these licenses are being extended to certain companies.
We know that about 300 license requests have gone to the Commerce Department. We don't know exactly how many have been granted.
But a big one, of course, is Microsoft that said that the company received a license to export mass market software to Huawei, so that's likely the
Windows operating system.
But one thing that we have not heard from, as you noted is Google and whether or not Huawei can have those Google Apps on their phones. Remember
that they had to pull their license from Huawei. This is a big issue for Huawei outside of China because can you sell smartphones to consumers, for
example, here in Europe without having those key apps like Google Maps or Google Mail on your phone?
I actually spoke earlier this week with Huawei's Senior Vice President for Global Affairs, Victor Zhang, who spoke about how they think they're being
treated by the U.S. They still think they're being treated unfairly, and whether they can move on without potentially having Google on their phones.
Take a listen.
(BEGIN VIDEO CLIP)
VICTOR ZHANG, HUAWEI'S SENIOR VICE PRESIDENT FOR GLOBAL AFFAIRS, HUAWEI: Extension for the temporary general license to Huawei will not impact on
Huawei's business either. This decision made by the U.S. Department of Commerce does not have the -- change of Huawei's situation to be treated
continually unfair.
GOLD: What about in places like Europe? How have you seen consumers and retailers react to the news of not potentially being able to have Google on
the phones?
ZHANG: This will cause some inconvenience for the consumer without the Google applications. We are very open to working with Google. The working
relation with Google is very good. We have done very good cooperation in the past 30 years. And continually, we hope we can work with Google. We
are hoping.
GOLD: We're talking a lot here about trust. So let's flip this. Do you think that the Chinese government should also be trusting American tech
companies like, say a Google?
ZHANG: I think the trust -- that globalization is based on trust, so we can say over the past 30 years, so the digital sector, which Huawei worked
in has benefited from the globalization.
So I think that globalization open and cooperation is a major trends for the industry.
(END VIDEO CLIP)
GOLD: And Julia, for Huawei getting those Google Apps on their phones will be important for them because their overseas smartphone sales are going
down six percent; although overall, the company's business has been rather resilient and has rose -- it has risen 24 percent -- Julia.
CHATTERLEY: Yes, it's such a great point and I want to pick up on that point about trust here as well, because there's another angle here, and
that's the F.C.C., the regulators here. What's the risk that they wade in and say, look, we're not going to allow Federal funds to be used to buy
equipment from untrusted sources, because this is another potential kicker, too, surely?
GOLD: It is. And we will probably find out today because today, the Federal Communications Commission in the United States will be voting on
just that point, whether U.S. companies who have to use Federal funds.
So think of a lot of those sort of rural areas, places that need some help to get connectivity, whether they can purchase equipment from a company
that might pose a national security risk, like a Huawei or a ZTE. Because the issue, of course, is that they often sell their products cheaper than
these places might be able to get from other companies and that could pose a security risk.
Of course, Huawei wants to be able to sell these products. They say that they've had long standing relationships and they've posed no security
risks. But there is a lot of pushback from Washington.
A bipartisan group of senators have also this week written a letter to President Trump slamming a lot of these licenses that have been granted
thing that they need to be more careful with companies like Huawei and ZTE -- Julia.
CHATTERLEY: Yes, there's nothing uncomplicated about this situation and of course, it ties to a broader trade deal or not. Hadas Gold, thank you so
much for that.
All right next driver, a bumper deal in the brokerage market. There are reports that Charles Schwab is in talks to buy TD Ameritrade in a deal
worth some $26 billion. Paul La Monica is on this story.
Paul, I feel like you and I perhaps predicted this a few weeks ago when we saw Charles Schwab cut the brokerage commission to zero for online trades.
That created a tiering effect with some of the competitors. It pulled their competitors far more as they followed suit, and now they've
potentially come in to buy one of them. Interesting.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes. It's going to be very fascinating to see if this deal does happen. We're still waiting the
speculation of a deal, reports of it surfaced yesterday morning. Both Schwab and particularly TD Ameritrade, their shares surged on the news.
But here we are 24 hours later. Still no comment from either company about whether or not a deal is going to be coming.
[09:15:10]
LA MONICA: But you're right, Julia, a deal probably does make sense because now that Schwab and everyone else has gone to zero to contend with
the likes of Robinhood, and so many other popular trading apps that millennials love, there is going to be this pressure on profit because
they're giving up a pretty lucrative revenue stream by eliminating commissions.
So consolidation is probably necessary and I think Schwab and TD Ameritrade could be an interesting fit if they do actually merge.
SEBASTIAN: Interesting that you point out the share price reaction, admittedly, to some degree, they've been pummeled, so you might see a
positive reaction, but for both the acquirer and the acquired to rally is, is unusual at this point.
I just wonder whether the regulators are going to have a problem even with the growing competition like Robinhood, like lots of the robo advisors.
When you're talking about the number one and the number two in a sector talking about combining. Is that going to be a problem for the regulators?
LA MONICA: It potentially could be an issue. I think that regulators will look long and hard at a proposed Schwab-TD Ameritrade merger because it
would eliminate a big competitor in the online brokerage area.
But one of the counterpoints that obviously these companies probably would have is that, hey, we've cut commissions to zero. So it's not the classic
case of you have a merger and you have fewer entrant or fewer competitors. So now all of a sudden prices go up.
Everyone is going down. They're going to zero. The days of paying anything for commission are probably dead forever. So they're not going to
now turn around and say, hey, because we've got economies of scale, let's start charging five bucks per commission.
But it does beg the point of who is left competitively? You have Robinhood, we mentioned, E-Trade who might be the odd man out, so to speak.
But there's still Fidelity. And then the big banks on Wall Street-- JPMorgan Chase, Bank of America, Goldman Sachs via Marcus, they're all
going after the retail customer, too.
CHATTERLEY: That's such a great point, potentially less choice for consumers. But if they're not hurt by, in fact, these have gone down to
zero is a bolder argument to make to defend doing the deal. Such a great point, Paul La Monica.
LA MONICA: Yes, I think it's a similar argument to what the tech companies have, obviously. Amazon isn't hurting anyone by keeping prices low, but
they're killing competition.
CHATTERLEY: Couldn't agree more. Yes. Thank you for that. Paul La Monica. Great to have you with us. Making me smarter.
All right. Let me bring you up to speed now with some of the other stories we're following around the world.
We start in Washington in the Impeachment Inquiry into President Donald Trump. Democratic sources say Articles of Impeachment could be voted on by
Christmas.
Republicans are working with the White House on a strategy for a likely impeachment trial in the Senate. The hearings wrapped up on Thursday with
two final witnesses and a warning that Russia is exploiting the partisan divide in U.S. politics.
A defiant Benjamin Netanyahu rejecting calls to resign after Israel's Attorney General unveiled corruption charges against him in three separate
cases.
Mr. Netanyahu is Israel's first sitting leader to face criminal indictment. He has called the charges and attempted to coup.
Hong Kong's High Court says a controversial facemask ban can be enforced for the next seven days while an appeal against it is considered. That
comes the head of this weekend's District Council Elections. The new Police Commissioner is calling for calm during the vote. Several high
profile campaigners have been attacked in recent violent protests.
All right, we're going to take a quick break here on FIRST MOVE, but coming up, get ready for a great sag. Billionaire investor, Ray Dalio gives his
take on the global economy.
And shop until you drop. Southeast Asia's e-commerce giant, Lazada makes its FIRST MOVE. We've got the CEO coming up. Stay with CNN.
(COMMERCIAL BREAK) [09:22:11]
CHATTERLEY: Welcome back to FIRST MOVE live from the floor at the New York Stock Exchange as we head towards the final trading session of the week.
It does look like we're going to see a higher open for U.S. stock market this session wrapping up what's been a pretty choppy week after safer
trading for the U.S. majors.
The Dow and the S&P 500 falling for three straight sessions in a row, but a rally today could get us closer to break even for the week despite all the
latest trade uncertainties.
There's good and bad news. The good news is we're not heading towards a recession. The bad news is we could be calling it a great sag. That at
least is what billionaire investor, Ray Dalio sees happening and he has been speaking to our Kristie Lu Stout who joins us now.
Kristie, great to have you with us. My question then would be what does that means that the stock markets ultimately, but talk us through what is
the logic on this -- not a recession, but a sag.
KRISTIE LU STOUT, CNN INTERNATIONAL CORRESPONDENT: Yes, and we'll see if that terminology is going to catch on, right? At the sidelines of the new
economy forum in Beijing, I got the opportunity to sit down and talk with Ray Dalio, the billionaire hedge fund financier; the founder of Bridgewater
Associates, the biggest hedge fund in the world.
He is also known as the Steve Jobs of investing. He correctly predicted the 2008 financial recession and profited handsomely from it.
Ray Dalio is also a student of history. So I asked him, if the trends if the patterns are pointing to a recession happening now this year or next
year. Listen carefully to his response.
(BEGIN VIDEO CLIP)
RAY DALIO: FOUNDER, BRIDGEWATER ASSOCIATES: We're in a situation in which a lot of liabilities are coming at us, to some extent their debt, to some
extent their pension liabilities and healthcare liabilities. More liabilities than we can fund.
That would mean they will either be cut back and people who have those promises will not get those promises filled. I don't think that'll happen.
I think that's politically too difficult.
Or there will be more of the monetization of those deficits. In other words, the printing of money and that process for dealing with it.
So it's very much, as I say --
LU STOUT: That's just spinning wheels though.
DALIO: That's just the machine. That's just how the machine works.
LU STOUT: Yes.
DALIO: So I think we're more in a great sag. The impetus is for growth that began in 2008 and 2009 are largely behind us. The cutting of interest
rates, the cutting of corporate taxes, and so on. Those are behind us. And I think we're now in a period where we have a lot of these financial
assets, which are financial liabilities that are too big and they're going to then have to be dealt with, with deficits and monetization of monetary
policy.
LU STOUT: So it's not a recession. It's a great sag.
DALIO: That's what I would call it.
LU STOUT: We are in the midst of it right now.
DALIO: Yes, early stages, yes.
LU STOUT: Your firm made a lot of money in 2008 because you were able to position yourself in anticipation of the recession.
[09:25:10]
LU STOUT: In anticipation of the great sag, have you -- how have you positioned yourself to be able to ride this out?
DALIO: Well, I don't discuss a particular position for various reasons. But I would say what we have is a very, very highly diversified portfolio.
I think the most important thing for individuals is to know when cash is zero interest rates, and close to zero, or maybe below and bond yields are
low and so on, and equities are priced because -- they're fully priced because of that. That diversification across countries and across asset
classes is an important thing.
LU STOUT: Yes. So you're going to ride this out, of course, and profit well.
DALIO: We hope. Well, we try.
(END VIDEO CLIP)
LU STOUT: All right, billionaire financier, Ray Dalio there. He does not want to use the word recession, but citing the Great Depression, he says we
are in the beginnings of what he calls the great sag.
He also believes that capitalism is broken. In fact, in a recent LinkedIn post that went viral, he said the world has gotten mad, and the system --
meaning capitalism is broken -- citing overzealous lending, rising piles of government debt, and the growing income inequality that has been plaguing
many corners of the world.
In fact, he said he is most worried about that. He cited growing income inequality, as well as populism as being behind the unrest that we've seen
in places like Chile and yes, here in Hong Kong.
He said, there's a lot of liquidity out there. The world is awash in money, but it is not trickling down to lower income targets because they
are just not credit worthy enough.
He says the system is broken. There needs to be a paradigm shift. Back to you.
CHATTERLEY: Yes, the question is, how do they go about addressing that? It's the very topic of conversation right now, but how to tackle it?
Kristie Lu Stout, thank you for that. Stay with us. The market open is next.
(COMMERCIAL BREAK)
[09:30:03]
CHATTERLEY: Welcome back to FIRST MOVE where U.S. stock markets are beginning this session with gains as anticipated. The Dow and the S&P 500
rising actually for the first time since Monday.
We had China's President Xi Jinping saying today he still wants to hammer out a trade agreement with the United States, though he did say he is not
afraid to, quote, "fight back."
President Trump also saying today after some mixed commentary over the last few days that a deal could be close, too. Yes, I can exhaust you with the
back and forth, so I will move on.
We're also wrapping up a big week for retail earnings, and ETF tracking the performance of the retail sector has actually fallen more than two and a
half percent this week. We've had some pretty mixed results.
Macy shares tumbled after they lowered their guidance, but target shares rose to record highs. Target in fact to raising its guidance this week, so
it's really a mixed bag.
Take a look at some of our Global Movers which are focusing in on these retail names. Shares of Gap trading higher right now earnings and sales
topped expectations. The company warned earlier this month that results could be weak. That's called expectation management. The CEO stepped down
due to Gap's under performance.
Shares of Nordstrom also trading higher. Profits beat estimates even though sales fell some two percent though as expected. Nordstrom shares
still down by around a quarter this year because of ongoing weak sales.
Tesla shares under a bit of pressure this morning, too. The company unveiled its first electric truck on Thursday, and as we were discussing
earlier on in the show, the reviews are mixed. It's set to go into production in late 2021.
The low point of the presentation was the glass that was claimed to be unbreakable, and it smashed. Oops. A bit of work to do there.
Let's talk to what's going on in the market. Joining us now, Kristina Hooper. She is Chief Global Market Strategist at Invesco. Great to have
you with us as always.
I always say this when you're on the show. You are our voice of calm and wisdom where the trade deal is concerned, and you've always kept this
degree of skepticism, I think about a trade deal here.
When you're looking at the noises that are being made here, what's your sense, a skinnier skinny deal? Is that what we're looking at, do you
think?
KRISTINA HOOPER, CHIEF GLOBAL MARKET STRATEGIST, INVESCO: I think there's certainly the potential for a Phase 1 deal, but I don't think it's going to
happen as quickly as markets would like it to.
CHATTERLEY: Yes.
HOOPER: I think that what we're hearing is that it is very difficult for the U.S. and China to even agree on what seem to be simple issues.
For example, what we're hearing is that China does not want to be held to a specific amount in terms of agriculture purchases. The U.S. really wanted
to have that in the Phase 1 deal.
And similarly, China would like to see more of a rollback of tariffs than what the U.S. is willing to give or at least willing to give at this
juncture. So it looks like it's going to take some time to even get a Phase 1 deal if we get one.
CHATTERLEY: You know, the way that you look at this as well, and this is, I think, very important to understand the leverage and the negotiations
here is what we're seeing in terms of Chinese data.
Destabilization to some degree in some of the survey data, the exports that were better than feared, particularly exports to other nations in Asia or
into Europe, for example. Do we think we've seen the worst in the Chinese data, too? Because this is also important for how China handles this
negotiation to.
HOOPER: I'm not sure we've seen the worst, but what I do believe is that China has a lot more dry powder in its arsenal, so that it can throw more
monetary stimulus at its economy and it can throw more fiscal stimulus at its economy.
So I'm very confident that it will be able to meet its GDP growth bogey for 2020 because it is willing to spend, to really avoid having to make any
kind of major concessions to the U.S.
CHATTERLEY: You know, we spent a lot of time here in the United States talking about the strength of the U.S. consumer or the relative strength.
Alibaba Singles Day, we've just about seen all of the numbers now, $38 billion equivalent worth of spending. What does that tell you about the
strength and the resilience of the Chinese consumer, too?
HOOPER: It's clear that the Chinese economy might be under some pressure, but it is not under dramatic pressure. The kind of spending we're seeing
coming from consumers suggest that it is a fairly solid economic environment in China.
CHATTERLEY: So you would take -- you would see that as the sort of key takeaway from Alibaba's numbers here on Singles Day, too?
HOOPER: Oh, absolutely. I think that that that really speaks to the resilience of the Chinese economy and the emerging power of the consumer as
an important driver of the economy.
CHATTERLEY: Yes, micro and macro here key. Okay. The market has remained very sensitive. I mean, we've seen the President saying perhaps they won't
do a deal or that they're losing patience with China. Then in the last few hours, he said look, perhaps, a deal is closed.
If we do see a market pullback as a result of broader concerns that we aren't going to get a Phase 1 deal as quickly as hoped, is that a buying
opportunity? And if so, where?
HOOPER: Absolutely. I do think it's a buying opportunity because we have to keep in mind, there's a critical factor supporting the stock market, and
that is Fed accommodation.
Jay Powell came out a few weeks ago in the press conference following the last FOMC meeting and made it clear that there's a very high bar for the
Fed to raise rates in 2020.
And so that suggests a very accommodative environment, one that's supportive for stocks. So if we do see any kind of short term drop as a
result of disappointing trade news, then I think that represents a good buying opportunity for investors that have a long enough time horizon.
CHATTERLEY: What kind of sectors should they be focusing on, and perhaps more importantly, sectors avoiding?
HOOPER: Well, I think it makes sense to take something of a barbell approach. For the full year of 2020, we're likely to see secular growth
outperforming and that drives us to areas like technology. I still find technology very attractive, even though we continue to see strong
performance there.
However, this is an environment where we expect to see continued financial repression rates that are going to be low. So it's going to be critical to
derive yield from all different kinds of asset classes including stocks, and so higher yielding -- higher dividend yielding stocks include
utilities, telecom and REITs.
REITs are an important, almost an alternative asset class and represent the potential for solid returns. So again, something of a barbell approach
where we get some growth and some more value higher yielding parts of the market.
CHATTERLEY: Yes, make sense to me. Kristina Hooper from Invesco, thank you so much for joining us on FIRST MOVE and Happy Friday.
HOOPER: You too, Julia. Good to see.
CHATTERLEY: All right. Good to see you, too. All right. We're going to take a break here. But speaking of Singles Day and Alibaba, we actually
caught up with Alibaba's Southeast Asia chief when I was at Singapore last week, the CEO of Lazada -- how the company is dominating the e-commerce
market and focusing on growth. That's after this. Stay with us.
(COMMERCIAL BREAK)
[09:40:33]
CHATTERLEY: Welcome to FIRST MOVE. Now, if you're watching us from Southeast Asia, you'll know Lazada is a significant force in e-commerce.
The marketplace, which is owned by Alibaba enjoys a fast growing middle class base to consumers.
Lazada says it has seen over a hundred percent growth in orders over four consecutive quarters, over 15 million active consumers every year across
Southeast Asia and has on sale over 200 million product listings. And that's just a start. Listen in.
(BEGIN VIDEOTAPE)
PIERRE POIGNANT, CEO, LAZADA: I think we had an amazing 11/11 Singles Day. We recorded 10 million actually shoppers that came and new shoppers that
came to the platform. We had a double number of sellers who sold products on Lazada.
But also most importantly a lot of our strategy materialized. You know, we were focusing a lot on innovation for shopping, for shop attainment and we
had -- a lot of these came together. We brought in games to the market, a Super Show, live streaming and just on the lead up to the day, 1.1 million
shoppers connected to the app to watch our "Guess It King" show.
CHATTERLEY: Yes. I watched this which is quite fascinating. You had you had bands battling over Instagram as well which was generating a lot of --
I think all the hype and a lot of excitement ahead of time and this -- also vouchers in stores, so you were doing a lot of a lot, kind of cross product
selling, but also PR as well and that caught on.
POIGNANT: Exactly. I think it's the nature of shopping in the region.
CHATTERLEY: Yes.
POIGNANT: A lot of our consumers, they don't come to Lazada just to click, buy and that's it. No, they come because they want to -- for the
experience before shopping, during shopping or even after shopping, connecting with sellers, connecting with other shoppers, connecting with
the community. So that's what we are trying to do online basically.
CHATTERLEY: You don't break out numbers and as you've said, and you've said it many times, you know, its early days, three percent e-commerce
penetration in this region in Southeast Asia. So there's plenty of growth opportunity here.
But how important is Singles Day relative to the rest of the year in terms of purchases and people interacting with the site?
POIGNANT: So I think we -- why do we do these campaigns? It's less about the sales number, more about the engagement we can have. The engagement
with our shoppers. The engagement with our sellers. This is the day where we showcase to our sellers how shopping can be online in the future.
This is the day where you know, small sellers suddenly can recall 20 to 30 extra sales and he starts to dream about the future. He starts to dream
about when the e-commerce penetration will not be like three to five percent, but like 30 percent, like in China, and then we imagine together
what the future of online shopping will be.
CHATTERLEY: So this is not just about selling to consumers at a time when we're worried about slowing growth around the world. This is also about
allowing local businesses to sell within their country, but also cross borders.
POIGNANT: Yes, I mean, you're right to point that out. And when we look at numbers, numbers are something, but we have to also look at the impact
on our economy. And e-commerce enables our sellers to access much broader market.
You have a seller from Bandung. In traditional commerce, you only sell to customer around the city. And then you have to go through distributors and
lose that connection.
The e-commerce, you can access shoppers from all the countries, from all Indonesia on day one on Lazada. In your shop online, you get hundreds of
customers.
But then it's also not only about the country, it's about cross border. For example, during the 11-11, we introduced the APEs, to the Chinese
consumers and the brand that is an air care brand registered 40X daily sales.
CHATTERLEY: Wow. Forty times the daily sales as a result of being on the platform using the platform to access consumers. Who was buying?
POIGNANT: So I think China is the largest retail domestic market in the world. So I think, through --
CHATTERLEY: You've got pretty good place.
POIGNANT: Yes, so through the mall, you have access to more than 700 million consumers. So quite a lot of people would be interested in cross
border products.
CHATTERLEY: Wow. I mean, that must be one happy seller.
POIGNANT: Yes.
CHATTERLEY: You've not caught up with him yet, but when you do --
POIGNANT: No, I will --
CHATTERLEY: There is going to be a handshake there or two. That's an interesting point though. And we've not talked about that. If we look
more broadly and it's not just about 11-11, but more broadly, is it about customers in this region in Southeast Asia?
[09:45:08]
CHATTERLEY: Or is the lion's share of the people that are buying from sellers in this region coming from China?
POIGNANT: And also I think, what we see is mostly the sellers are from, you know, one country and they sell to consumer in one country that's --
you know, the bulk of what we do.
But I see -- we also see demand for product from around the world from this region. And we also have a strong demand of sellers that want access new
markets.
CHATTERLEY: Of course.
POIGNANT: So I think that's the power of being part of the leave or buy economy. We are not only Lazada, we are part of the dream of Jack Ma which
is to create an economy of two billion consumers that can buy from sellers around the world and create a platform so that sellers around the world can
access two billion consumers.
And we are the flagship platform of Alibaba in some stage and we follow that dream.
(END VIDEOTAPE)
CHATTERLEY: E-commerce penetration in this region is incredibly small. So we talked about some of the headwinds to growth on this in the region,
things like inefficient logistics industry, a fragmented retail landscape, 64 million small and medium sized enterprises; never mind 240 different
languages.
What about low credit card take up, too? Lazada tells me 91 percent of people in the region don't own a credit card. With most first time buyers
still relying on cash payments and cash-on-delivery. Listen in.
(BEGIN VIDEO CLIP)
POIGNANT: I think we have some room to go here. Seventy percent of the population in Southeast Asia is underbanked. So we actually have turned
that into an advantage for us because on the back of a logistics network, we offer the widest cash-on-delivery network to our consumers.
Eighty three percent of the consumer for their first purchase use cash-on- delivery.
CHATTERLEY: Yes.
POIGNANT: Once we have got them in, we try to turn them into an online payment user. We work this with Alipay and financial. We have launched
together wallets in five or six markets. And we are actively growing the shelf of wallets.
For example in Malaysia, I can also give you an example, more than one shopper out of three during 11-11 event Singles Day bought using their own
wallet.
CHATTERLEY: Really?
POIGNANT: Yes.
CHATTERLEY: Wow. And how do you see that ratio increasing over the next two, five years, let's say?
POIGNANT: I think why do we do this? We do this to make the payment experience seamless. So it's not about, you know, our wallet per se. It's
about the payment experience on Lazada.
So as long as you know the ecosystem works together, then I'm very happy. So that is more important.
CHATTERLEY: I mean, but you're challenging the banks in that regard for the payment system. I mean, as you say, it's about the experience. It's
not about that. But you know, my eyes light up when you're saying one out of every three is using some form of wallet provided by you guys. I mean,
that's incredibly powerful for other purchases that they make outside of your system.
POIGNANT: Obviously, if we talk about wallet, you can imagine the future with online credit and all of this. So that's one of the reason why we are
focusing on this is because we believe this is going to play a very important role.
But at the same time, we indeed want the overall ecosystem to improve and we want, you know, banks to have much faster transfer from consumer to
online shoppers, for example.
CHATTERLEY: But I mean, we're already seeing and if we look at China as an example here with the likes of Alipay and WeChat Pay, I mean, their system
of e-payments is incredibly advanced at this stage. Do you see again that kind of adoption spreading across Southeast Asia because again, it is more
complicated?
POIGNANT: Yes, it's -- I think Southeast Asia is not like -- it is not one region.
CHATTERLEY: No.
POIGNANT: It is six different markets --
CHATTERLEY: And languages.
POIGNANT: And languages. So I think, I foresee quite different evolution in this market with regards to payments, but the same as logistics or even
consumer habits.
So what we work on is how do we actually localize our platform and offering to each of these markets.
(END VIDEO CLIP)
CHATTERLEY: As you probably understood now, Pierre is French. I also talked to him about what it's like to be a Western executive in charge of a
Southeast Asian company with a Chinese owner. It is an interesting one. Listen in.
(BEGIN VIDEO CLIP)
POIGNANT: I mean, for me, it's -- personally, it is very natural. To tell you a little bit more about myself, I'm actually married to a Singaporean
lady with whom I met more than 20 years ago while studying and we moved into this region more than 10 years ago.
We have -- my kids are both Singaporean and French for that matter. So we live in that environment.
[09:50:00]
POIGNANT: And so for me it feels very, very natural. And also, Southeast Asia is one of the most diverse and open region in the world. And I think
many parts of the world should learn on how these communities live together in Southeast Asia.
(END VIDEO CLIP)
CHATTERLEY: That makes sense. The CEO of Lazada there.
All right, up next with Disney's "Frozen" poised to set the box-office on fire this weekend, we take a look at the fairytale year for the House of
Mouse. That's coming up. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE with a look at today's "Boardroom Brief."
Victoria's Secret will not hold its iconic fashion show this year. It's seen failing ratings and growing criticism lately with some people calling
it sexist and anti-feminist. Parent company, L Brand says the marketing of Victoria's Secret needs to evolve.
British band, Coldplay says it will not tour for the next year or two to find a way to do it without harming the environment. Ahead of the launch
of a new album, "Everyday Life," front act, Chris Martin says the dream is to have a solar powered concept free of single use plastic and they have to
swim there as well.
Now from Coldplay to "Frozen." Disney releases the highly anticipated sequel to its 2013 hit today. The company expects "Frozen 2" to rake in
$100 million this weekend, the highest ever for Disney's animation studio.
The company has already had a blockbuster year with stock prices up more than 30 percent year-to-date, very far from frozen, it seems.
Frank Pallotta has more on this front. Frank, it was what? The first one grossed more than $1.2 billion worldwide at the box office. You have seen
"Frozen 2." What do you make of it and maybe with that number?
FRANK PALLOTTA, CNN MEDIA REPORTER: I thought it was -- yes, I think it has a good shot. I mean it's a solid sequel. The biggest question is
going to be -- remember, you said it made $1.2 billion. It's bigger than that.
It's spawned merchandising. It has spawned theme park rides, a Broadway show, and of course, "Let It Go" and a hit soundtrack. But that was six
years ago.
Those seven-year-old little girls in their Princess Anna and Queen Elsa outfits are now a little bit older. They might have outgrown not just
their outfits, but the brand itself.
But Disney is very -- Disney is very hopeful on this this weekend. It looks to be another big hit. It has the potential to be the company's
sixth billion-dollar hit this year.
CHATTERLEY: You know, I got into a Lyft this past week and there was a little girl in there and she smiled to me. She was wearing a blue dress
and I said, oh, you're very pretty. And she said, my name is Elsa, and I kind of clucked. I was like -- so I do think it's valid for a whole
generation, six years on for a new set here.
But your point is, it's not quite as good as number one. The sequels are never as good as the first ones.
PALLOTTA: I didn't say that. I said it's solid. I said it's very, very good. It's just it's very hard to compare it to the original. The
original was this kind of lightning in a bottle type of situation.
[09:55:08]
PALLOTTA: I don't even think Disney at that point ever expected "Frozen" to take off the way it is, and this is kind of a return to Arundel, return
to these characters, and for people who kind of have grown with "Frozen" over these last six years it's a return to that beloved story. It's just
about trying to figure out if it can kind of fit in all of these years later.
I think it will. I think it's going to be a big hit for Disney, and it's surprising because it's kind of like one of its dark horses. We've been
talking a lot about Marvel. We've been talking a lot about Pixar. We have Star Wars coming out for Disney next month.
"Frozen" has kind of flown under the radar, especially considering that over that last six years, Disney has focused more on streaming than
anything else.
CHATTERLEY: I can't believe it's been six years. I still sing "Let It Go." I still know all the words. We will see. Frank Pallotta, I'm going
to go and see it this weekend, anyway. We shall see. We'll come back to this. Thank you so much for that.
All right. So that just about wraps up the show. I'm Julia Chatterley. You can listen to our podcast, too, cnn.com/podcast if you missed the show,
but for now, you've been watching FIRST MOVE, time to go make yours. Have a great Friday.
(COMMERCIAL BREAK)
END
