Return to Transcripts main page
First Move with Julia Chatterley
Protesters Took To The Streets Of Hong Kong Fighting Against A Highly Unpopular Bill That Would Allow People Arrested In Hong Kong To Be Extradited Back To Mainland China; Elon Musk Talks Up The Tesla Shares; Deep Trouble Over Deep Fakes, Mark Zuckerberg Himself Has Been Targeted. Aired: 9-10a ET
Aired June 12, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: This is CNN Breaking News.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Welcome to FIRST MOVE. We're kicking off today's show with breaking news out of Hong Kong
where protesters took to the streets fighting against a highly unpopular bill that would allow people arrested in Hong Kong to be extradited back to
mainland China.
Tens of thousands of protesters marched against that proposed law, bringing Hong Kong's financial districts to a standstill and forcing the legislature
there to postpone a planned debate on that bill.
Police, as you can see there, in pictures that were taken earlier, used tear gas, rubber bullets, water cannons and pepper spray to quell the
demonstrations. The first time in fact that rubber bullets have been used Hong Kong in decades. Police called today's protests, quote, "a riot
situation." It's no surprise, of course, as you can see, judging by those pictures that it did see and triggered some selling pressure in regional
stock markets."
Let me give you a look of what we saw over in the Asia session. Hong Kong's Hang Seng Index falling some 1.7 percent amid fears that investor
confidence could be dented and that businesses based or operating there could perhaps relocate in the future if they're worried about this -- the
law passing and what it means afterwards, barring costs spike, and the Hong Kong dollar rose to its highest level of the year.
What about here in the United States? Well, stocks -- except for a lower open after closing slightly lower on Tuesday, the Dow breaking a six-day
winning streak. We've also had U.S. inflation numbers released this morning, they were in line with estimates still and the year-on-year basis
below the Feds' target. Plenty more discussion on that later on in the show.
But for now I want to get straight over to Hong Kong for the latest there. Pro-democracy lawmakers lashed out at Hong Kong's Chief Executive during a
press conference a short while ago accusing Carrie Lam of selling out Hong Kong and treating its people like the enemy.
Matt Rivers joins us from near the Legislative Council Building where the debate was supposed to take place. Matt, great to have you with us. And
of course, we can still see crowds of people behind you actually, in those pictures, just describe what we saw over the past few hours and what's
going on right now.
MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT: Yes, well, Julia, this has been a day that started out with peaceful protests, those protests then
turned pretty violent. And now things have kind of calmed down again. The question is what happens as we go through the overnight hours?
It was this morning here in Hong Kong that legislators were set to take up the second reading, another round of debate on that extradition bill that
you were just talking about. But tens of thousands of protesters showed up as we expected, and legislators actually postponed that debate.
What happened around 3:30 to 4:00 in the afternoon here in Hong Kong, though is that things did turn violent. Protesters were throwing things
that police. Police started deploying tear gas canisters, they started using rubber bullets, and things escalated quite quickly. And that's where
we are right now.
So basically right down the road here behind me, there are thousands of people here. This is the heart of Hong Kong's financial district. This is
where embassies are. This is where major businesses are located and this road has been completely shut off by protesters.
Now, if we bring it back here, you can see that the cops right now actually just took a dinner break. They're pretty relaxed right now. And I think
the best way I would describe this is perhaps the eye of the storm, the calm before the storm, maybe because all of those people, thousands of
people that have been erecting barricades, makeshift barricades in the street with anything that they can find over the last maybe two hours or
so, you would imagine that the police are not going to let them stay there forever.
So for now, they are; maybe they're trying to wait them out, see if they'll disperse on their own. That's probably not going to happen. And so then
the question becomes, well, what happens next? When will police try and disperse them? How will they try and disperse them? And does that get
more violent? These are questions we don't know. But we might find out in the hours -- the answers, we will find out in the hours to come -- Julia.
CHATTERLEY: Matt, have you managed to speak to any of the security forces there? Are they giving you any indication of just how long they're willing
to allow people to remain there? And are you also seeing more people joining, because I assume in the past couple of hours people have left the
office, they've left work. And if they want to join these protests then they're doing so.
RIVERS: Yes, there's a couple -- there's two main protest sections, kind of both of them are in very important parts of central Hong Kong here. In
terms of the numbers growing. I don't think we're seeing that. I think the people that are there right now, they're pretty much there to stay. I
don't know how many will disperse over the next couple hours.
They don't seem to be growing. They don't seem to be joined by let's say your average white collar workers in his or her 40 or 50. These are
generally younger kids maybe 20 at max 30 years old, but there's certainly a younger crowd.
[09:05:05] RIVERS: In terms of how long police are going to let them stay there, that's anybody's guess at this point. They continually say they've
been as restrained as possible, as they put it throughout the day, there's certainly, you know, you could have differing opinions on that, whether
they needed to use tear gas or not.
But in terms of how long they're going to let them stay there. We don't know what I think though, the general consensus is that they don't want to
repeat it of 2014. You'll remember, that's when these streets -- some of these same streets in central Hong Kong were occupied during the last round
of protests for almost 80 days.
I don't think that the authorities here want to see that again. So how long they're willing to tolerate what's going on behind me is very much an
open question still.
CHATTERLEY: Matt, you and I have discussed over the last 24 hours when we were talking about this yesterday, do these protests make a difference? I
mean, the Chief Executive Carrie Lam accused of betraying Hong Kong here, but she's kind of caught between the devil and the deep here.
The protest is that people are worried about the implications of this bill and what it will mean for China's influence. The Chinese, of course,
pushing them to pass this law, what's her options here?
RIVERS: You put it well. I mean, she's stuck between a rock and a hard place. And there's a lot of people who would say that she didn't even
really need to push this law to this point that if she wanted to, she could have just extradited people to China. You know, she could have released
them anyway.
So there's a lot of people who are questioning her tactics here whether this was a good idea or not. But the fact is, we're here now, and so she
has to figure out what to do. She's shown no signs of backing down. If she did, she might look incredibly weak. But if she continues to push for
this law, and these people continue to have the momentum behind them, and it's unclear where this ultimately goes.
I think most people would say, it will eventually go the way the Hong Kong government leadership wants it to, that they can probably hold out longer
than these protesters can. But it certainly doesn't help Hong Kong's international image.
I mean right now, we're in the middle of skyscrapers. These are major multinational corporations that are based here. And those people are
looking down on these protests all day long. I mean, this would be like having a giant protest in the middle of Wall Street, like we saw, you know,
2010 and 2011. So this is not good for Hong Kong's image. Carrie Lam knows that. But you know, this is her reality now, and she's stuck with
it.
CHATTERLEY: Exactly what investors were looking at and the international community clearly watching this very closely, but it also has implications
for the relationship between the Hong Kong government and Mainland China, too. Matt Rivers. Great job. Thank you so much for that. We'll watch
this over the coming hours.
All right, let's get some more context. Joining me now from Hong Kong is David Zweig. He is a Professor at Hong Kong University of Science and
Technology, and the Director of its Center on China's Transnational Relations. Fantastic to have you with us, sir. Thank you so much for
joining us.
DAVID ZWEIG, PROFESSOR, HONG KONG UNIVERSITY OF SCIENCE AND TECHNOLOGY: Thank you, Julia.
CHATTERLEY: As Matt was explaining there, we're in a situation where the public are frightened, they're angry, they're out on the streets protesting
but Carrie Lam, the Chief Executive is caught between the Chinese government and her own people in Hong Kong. What does she do here the
best?
ZWEIG: Can I challenge that a little bit?
CHATTERLEY: Please.
ZWEIG: You know, I think this is a situation of her own making. I'm not an apologist for China, but there's no proof that China called her and said
do this. The stories around Hong Kong are much more that she got sympathetic to this young woman who was killed in Taiwan, or even that some
people have tried to set her up. But she's the one who made the decision, I think, to introduce the extradition bill, and Beijing has no choice but
to back her up.
And you know, I think that she's -- never underestimate the ability of the leaders of Hong Kong and we've seen it particularly with CH Tung 2003, CY
Leung in 2012 and 2014 during -- creating occupy, and then this. She really makes stupid decisions. And hers is a really stupid decision.
And if her job was to make Hong Kong economically viable after 2014 and resolve economic crises that people felt were at the core of this such as
housing, unemployment, retirement, all kinds of things even work on the greater Bay Area. The last thing I think that Beijing really wanted to see
was this kind of political crisis.
You know, the context is also that you've got the trade war with the United States and the United States could react. The United States could react to
this, Julia, with taking away the Hong Kong Policy Act.
The President with a pen can just end the privileges that Hong Kong has in its trading with the United States. So I don't see Beijing --
CHATTERLEY: Absolutely.
ZWEIG: I don't see Beijing starting this, but I would say that Beijing is a player in this in the sense that it's fear of Beijing that drives the
people of Hong Kong to take to the streets like this. Can we elaborate on that?
CHATTERLEY: If you're right, David. No, I understand exactly what you said, and I think your explanation is very important.
[09:10:10] CHATTERLEY: If what you said is correct then, Carrie LA MONICA: doesn't really have any choice here. Surely, if she is -- she has almost
forced the Chinese government at a very pivotal time, as you mentioned, to back her stance on this.
ZWEIG: Sure.
CHATTERLEY: If she backs down at this stage and says, "Look, this was a mistake, we will rethink this." Perhaps that's the only path forward, but
then she risks looking weak in front of the people that she has backed down.
ZWEIG: She's finished. I think she's finished anyway, Julia. I think that she'll never you know -- could she survived until the end of her term?
Maybe. But if we look at what happened to CH Tung, the first Chief Executive, CY Leung was not allowed to run again. She's not going to be
running for a second term because of the mismanagement of this.
So you know, I think the best thing would be if she could somehow say, "Look, I really underestimated the anger and the hostility." But that's
hard for her to say, because she underestimated the anger and hostility at Beijing. And she can't say that Beijing's legal system doesn't work very
well. But that's what people in Hong Kong are most concerned about.
As you've heard, you know, you know that. It's the extradition meant to be put into the Chinese legal system. And while the Chinese legal system has
made significant improvements, it's not good enough and the courts are not independent enough for people in Hong Kong to feel that they want to go on
trial up there.
CHATTERLEY: Yes, it's 50 years of legal autonomy that there are people who are afraid and is under threat here. Professor, wait just a second, I just
want to just play some of the comments that the Hong Kong Chief Executive, Carrie Lam made earlier. She gave an interview to local media responding
to the protests, and her critics that accuse her of betrayal. Listen in.
(BEGIN VIDEO CLIP)
CARRIE LAM, CHIEF EXECUTIVE, HONG KONG (through translator): They say, I sold out Hong Kong. How could I? I was born here, and I grew up here with
everyone. The love I have for this place has led me to sacrifice a lot personally.
(END VIDEO CLIP)
CHATTERLEY: So David, to get back to what we were discussing there, the threat that China represents here, or doesn't represent in your mind, and
actually your suggestion that they just caught up in the mix.
ZWEIG: No, I don't say that they don't. Well, I wasn't saying that they don't represent the threat. What I was saying was, I don't think that this
is something ...
CHATTERLEY: But on this issue.
ZWEIG: ... they necessarily triggered. But go ahead on this issue.
CHATTERLEY: Yes, on this issue. I was going to ask if we're overestimating then the threat that China poses here?
ZWEIG: Well, you know, if you're -- there's a couple of ways that if you're an individual here in Hong Kong, I mean, the process, if you get --
you'll get a lawyer, I'm sure at some point who will describe, you know, what the process would be for the extradition and what would happen is
Beijing would then say to the courts in Hong Kong, that we think that this person is guilty of a crime.
And then the courts in Hong Kong or the judge in Hong Kong will look at the information sent down from Beijing, which people could say could be
doctored, right? And he will have to -- he or she will have to say, "Well, yes or no." If he says maybe, or yes, Carrie is the one who then has to
say, "Okay, send them up."
Now, people are very concerned that people who are politically active could be found guilty of economic crimes. There are businessmen down here who
are involved in politics, and they can be accused of a crime. Somehow they did something on the mainland.
We've had -- the booksellers have been sent up. Now, there's all kinds of things that you could accuse politically active people of, and then based
on that, the courts down here may have little choice and Carrie doesn't seem to be sort of game to stop them.
The other thing that comes along with this, though, also Julia, which I haven't heard mentioned, is, you know, there's a thing called Article 23,
which is a law that Hong Kong is supposed to pass, which involves four potential crimes for people in Hong Kong, and one of those is subversion.
And if you get caught, you know, judged to be guilty of subversion here, will the Beijing government then be able to say to the people, you know,
courts in Hong Kong? "Look, that person has been judged of subversion in Hong Kong. We want them up here." And then in fact, will that become a
way for people to be sent up to the mainland?
So, you know, Hong Kong people are very nervous about this. And I think that it's a real problem that Carrie couldn't understand that. And I think
it's a real deficiency in the ability of the Beijing government to understand the way that Hong Kong people feel -- their fears, their sense
of -- separate sense of identity, their mistrust. You know, they just don't understand it.
[09:15:02] ZWEIG: And I think Carrie somehow misjudged the fact that trying to do this was going to trigger such a strong explosion among the
Hong Kong people. And once the million came out, then in some way, she was silly to think that she could just ignore it, and that the young people
wouldn't take to the streets again.
CHATTERLEY: Right. Well, it looks like it's in everyone's interest here for her to make a graceful exit or at least step down or step away from the
situation especially can -- the question is, can he achieve that? Fantastic to chat with you, David Zweig.
ZWEIG: Well, it's really for the --
CHATTERLEY: Yes, it's a problem for everybody and for China at this moment, David, we have leave it there, though, I would keep you talking, if
I could. Thank you so much for joining us on the show.
ZWEIG: Okay. Thanks, cheers.
CHATTERLEY: All right.
ZWEIG: All right, bye-bye.
CHATTERLEY: Let's move on. I want to bring you up to speed with some of the other stories that are making headlines around the world. Boris
Johnson has officially launched his bid to become the next British Prime Minister. The Conservative leadership candidate is promising to unite the
country, deliver on Brexit, and defeat the opposition leader Jeremy Corbyn.
(BEGIN VIDEO CLIP)
BORIS JOHNSON, BRITISH CONSERVATIVE LEADERSHIP CANDIDATE: We can get Brexit done and we can win. We can unite our country and our society. And
that is why I'm standing to be leader of the Conservative Party and Prime Minister because this contest is not chiefly about any one person, or even
about the Conservative Party. It is the opening salvo in a battle to restore faith in our democracy.
(END VIDEO CLIP)
CHATTERLEY: All right, we're going to take a quick break here on FIRST MOVE. But still to come, electric surge. Elon Musk talks up the Tesla
shares and deep trouble over deep fakes. Now Mark Zuckerberg himself has been targeted. All that to come and we'll get back to Hong Kong Of course
for the latest there. Stay with us. You're watching FIRST MOVE.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Let me give you a look at what we're seeing in the market for U.S. stocks. We do remain on target for a
lower open. As you can see that's a look at the picture here for the futures. The main averages finished pretty flat on Tuesday though tilted
to the downside, better put some context on this.
[09:20:06 ] CHATTERLEY: Still posting solid gains for the month. All of them up by around five percent. We've had U.S. inflation numbers out this
morning, and we can call them investor friendly, I think.
We saw prices rising just 0.1 percent in May as energy prices came under pressure. CPI or core prices now up from 1.8 percent, year-over-year. So
below that two percent Fed target.
The number arguably gives the Fed to increase flexibility to cut rates, if it believes a so-called insurance rate cut is needed soon. We'll talk this
through with a Krishna Memani of Invesco after the market open.
But now I want to bring you up to speed with some individual stocks that we're watching premarket.
Tesla, gaining almost three percent at this moment. This after an upbeat forecast from its CEO, Elon Musk said, quote, "Absolutely not in response
to concerns that there is a broader demand problem at Tesla." He also said the company has quote, "a decent shot" at a record quarter on every level.
Peter Valdes-Dapena has more. Well, Peter, didn't we see a 31 percent drop in demand in the first quarter. So if you want to break some records,
you've got some pretty stiff competition to beat in terms of a pickup in demand here.
PETER VALDES-DAPENA, CNN BUSINESS SENIOR AUTO WRITER: Yes, he's got quite a pendulum to swing back the other way. Of course, he's always said that
it's really a supply problem and a logistics problems building and delivering the cars. Once they get that set, he says the demand for the
car is there and it is selling relatively well, certainly according to -- compared to electric cars, it's selling still quite well. These days, I
see a number of them on the road myself around here in New York.
And one thing he is really pushing on for consumers is to remind them about the self-driving car plans Tesla has that we would make these cars through
an over the air update capable, he says of autonomous driving sometime next year. So he is saying that would be another reason to buy their cars.
CHATTERLEY: He spent a lot of time talking about the things though, as you point out that aren't material and we didn't get any numbers as far as the
belief that he can break records across the board here.
Again, are we getting distracted by things like autonomous vehicle technology, when actually simply, investors just want to see them coming up
with a good take, quarter by quarter?
VALDES-DAPENA: Yes, I think investors would really like to hear him say, look, you know -- the demand is strong, we could demonstrate that. We've
got all the logistic problems. They want to see what's up with the factory in China. Yes, I don't think investors are really into this whole
autonomous -- most of them. Some of them are very excited about the autonomous driving thing.
I think for the most part, you're right, people just want to see it. Look, let's just get the basics worked out right now. Get the cars built,
delivered and really see for sure where the customer demand is, even as incentives for the cars are beginning to drop down. That's where the
concern is. Incentives from the government tax breaks are in the diminishing phase now, so these cars really have to stand on their own.
CHATTERLEY: Yes, all the technology is very exciting, but you've got to show that you can sell the cars first. Peter Valdes-Dapena, thank you so
much for that.
All right, let's move on. Facebook's policy on fake videos has been put to the test after so called deep fake video of the company's CEO Mark
Zuckerberg was posted on Instagram. Watch this.
(BEGIN VIDEO CLIP)
MARK ZUCKERBERG, DEEP FAKE VIDEO: Imagine this for a second, one man with total control of billions of people's stolen data, all their secrets, their
lives, their futures. I owe it all to Spectre. Spectre showed me that whoever controls the data, controls the future.
(END VIDEO CLIP)
CHATTERLEY: Last month, Facebook refused to take down a doctored video of Democratic House Speaker Nancy Pelosi, Donie O'Sullivan joins me now.
Donie, wow, and awkward is all I can say when you refuse to take something down like that and then your own CEO appears. The voice wasn't quite
right, but this is pretty good.
DONIE O'SULLIVAN, CNN BUSINESS REPORTER: Yes, absolutely. And this video, the deep fake video of Mark Zuckerberg had not gone viral on Instagram or
on Facebook. The artist who made the video created it as a test of Facebook's policies.
They wanted to see, you know, you won't take down a video of Nancy Pelosi, but will you take down a video of your own CEO who appears to say something
that he never actually said.
Facebook told us last night that they are not taking down the video. But some might say it's easy for them to say it in this instance where it's
sort of clearly a fake. But if it's a video, you know, where he's potentially being shown to speak at an investor meeting or an internal
Facebook meeting, you could imagine the situation might be a little different.
CHATTERLEY: You know, how they decide to treat this fake video of their own CEO is going to set a huge precedent I think for handling these going
forward. You also got hold of some deep fakes related to presidential candidates. I mean, this is mind blowing. Talk me through what you
discovered and how on Earth we tackle this going into the 2020 elections. This is a whole new complication.
[09:25:16] O'SULLIVAN: Absolutely. So you could see how the Zuckerberg deep fake could potentially in the future cause trouble for corporations.
But also here in the U.S., the U.S. Intelligence community has told Congress that they are quite concerned by this new technology, it could be
used in future disinformation campaigns against the United States.
I want to show you a deep fake video of President Donald Trump's face being mapped onto Alec Baldwin as he plays him on "Saturday Night Live." Have a
look.
(BEGIN VIDEO CLIP)
ALEC BALDWIN, PLAYING DONALD TRUMP, SATURDAY NIGHT LIVE: Last year, Obama stole my microphone and gave it to Kenya. They took my microphone to Kenya
and they broke it. And now it's broken. And it ended up picking up somebody sniffing here. I think it's her sniffs. She's been sniffing all
night. Testing, testing, gina, gina.
(END VIDEO CLIP)
O'SULLIVAN: So there you can see the video on the left is the deep fake where they've taken Trump's actual face and put it on to Alec Baldwin. And
now this was made by a team of researchers in California. They're making this so they can test a detection system which they plan to build in
advance of the 2020 election, which they hope will be able to detect any deep fakes of candidates. We spoke to one of the people behind that
program, Hany Farid.
(BEGIN VIDEO CLIP)
O'SULLIVAN: What is Trump style?
HANY FARID, PROFESSOR, UC BERKELEY: Trump's style is very consistent. He basically -- he doesn't actually move very much. His eye movements, his
eyebrows are extremely static, he tends not to move his head a lot. This is the only part of his face that really moves a lot right here.
We are going to track the facial expressions and the head movements. The laser beams coming out of the eyes are showing you where the eyes are
looking. The red dots that you see are showing me how is the mouth moving? How are the eyebrows moving? By the end of this calendar year, that is the
goal is that we will have most if not all of the candidates fingerprinted.
(END VIDEO CLIP)
O'SULLIVAN: So you can see there that people are trying to get ahead of this problem. It was clear in 2016 with Russian trolls and bots and all
the misinformation that America was not prepared for what was coming. Experts say that this could be the new wave of this information. And
people like Hany Farid are trying to prepare us for it.
CHATTERLEY: It's frighteningly easy to achieve. I think that's my observation and actually frighteningly difficult to distinguish. Wow,
Donie, great job. Great reporting. Thank you for that, Donie O'Sullivan. All right, we're going to take a quick break here. "You are selling out
Hong Kong." That's the message from thousands of protesters. We will back in Hong Kong watching for the latest there and of course, the market open
in a couple of minutes' time. Stay with us. You're watching CNN.
(COMMERCIAL BREAK)
[09:31:01] CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange, a colorful backdrop there for the opening bell just a few
moments ago though. Not good in terms of direction here. We were expecting a lower open for stocks today and that's what we've got.
The June rally, some five percent gains month-to-date taking a bit of a breather here. It seems tech, as you can see under the most pressure here,
but we're just talking two tenths of one percent. What else this morning? Well, we've got an investor friendly reading on inflation today.
U.S. CPI numbers posting the smallest monthly gain since January of this year, very much tied to what we've seen in energy prices of course and the
pullback there and it's not stopping anytime soon, it seems.
Oil having a pretty rough session as you can see. Brent and WTI are both down around two percent on renewed oversupply concerns. We've got industry
numbers on inventories this morning rising in an unexpectedly high level last week. Official U.S. numbers are going to be out in around an hour's
time.
All right, let's return now to Hong Kong and the breaking news that you saw over there in the last few hours. Well, local hospitals now say at least
22 people have been injured during mass demonstrations against a controversial extradition bill.
If passed, as we've described earlier on the show, it would allow criminal suspects to be tried in mainland China. Heavily armed police have been
firing tear gas, water cannons and pepper spray to disperse the ground of protesters. Hong Kong leader Carrie Lam has spoken to local media
responding to the protests and also her critics.
(BEGIN VIDEO CLIP)
LAM (through translator): They say I sold out Hong Kong. How could I? I was born here and I grew up here with everyone. The love I have for this
place has led me to sacrifice a lot personally.
(END VIDEO CLIP)
CHATTERLEY: Ivan Watson is in Hong Kong for us. Ivan, the backdrop behind you seems a lot calmer than we saw a few hours ago. But still plenty of
protesters there. And the security force is still in attendance, too. Talk us through what you're seeing.
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, I mean, there's a bit of a lull here in this part of Hong Kong. But yes, as you can see,
there's still thousands of protesters behind here, defiant demonstrators manning this kind of makeshift barricades that they've established.
The tear gas that we saw on this very boulevard not long ago, has subsided for now. And now you actually have riot police, so just a short distance
away who are -- it's been a long day of back and forth here and of kind of engaging and in some times, some occasions violently engaging with the
demonstrators.
But as you can see, the tensions for the moment have calmed down just a little bit. But the standoff is still here. And that fundamental question
of what the city authorities are going to do, what the demonstrators are going to do is still up very much in the air.
They have shown that they are very much opposed to this controversial extradition law that the leader of the city government has stood behind.
She has defended it saying, "Hey, it closes legal loopholes for criminals for fugitives." Whereas the demonstrators here fear it could expose them
to the very opaque, sometimes very capricious judicial system not far away in mainland China.
And the local authorities essentially disregarded this massive protest, the likes of which I've never seen in this city on Sunday, where according to
some estimates, one in seven people from this city's population were out in the streets peacefully opposing the extradition law. Well, look what's
happened just a few days later. Tear gas, barricades, and in the short term, the demonstrators have succeeded in forcing lawmakers to postpone
today's planned debate on this very controversial law.
[09:35:21] WATSON: This has been a mass show of distrust for the city government, and by extension, the central government in mainland China.
CHATTERLEY: Ivan, we just heard some comments that from Carrie Lam, of course, the Chief Executive saying, look, we're standing firm, and we're
going to push this through. What are the protesters saying to you? You called it a standoff earlier, are they saying to you that they're going to
continue to come out and protest so long as this bill remains an option here and an option for the law to be passed here? I just -- I struggle to
see how this ends at this stage.
WATSON: None of us really know, and the scenes are very reminiscent of the standoff, the Occupy Movement that we saw in these same streets nearly five
years ago during the so-called Umbrella Movement, and that lasted for nearly 80 days, until it petered out.
We don't know what will happen this time around. Some of the protesters are people who were children five years ago and have told me they were too
young to come out and protest five years ago. Others are veterans of that previous period. There is no one leader of this opposition movement. We
saw a rather unprecedented coalition of opposition in Sunday's peaceful protest, religious groups, business interests, labor unions and students.
Today has mostly been younger people. But we've also seen some protesters come after they finished their day's work and joined into this protest
movement. But where will it go? Many of the demonstrators we've talked to have said that they realize that in the end of the day, they probably will
not win. After all, this is a city of seven million people facing off against the might of Communist China, the world's second biggest economy,
and a government that abuses human rights at a level on the other side of the internal border that Hong Kong has never really seen before.
CHATTERLEY: Ivan Watson in Hong Kong. Thank you so much for joining us on that. All right, joining me now Krishna Memani. He is the CIO of OFI at
Invesco. Great to have you with us, Krishna.
KRISHNA MEMANI, OFI CIO, INVESCO: Pleasure.
CHATTERLEY: I want to talk to you about this because we've been debating on the show the importance of Hong Kong as a conduit for financial flows in
China. When you see this kind of behavior in a metropolis like Hong Kong, it makes investors nervous.
MEMANI: Oh, of course. This is very disconcerting, for sure. You know, our hope is that there's patience and and a little bit of understanding on
both sides. And this doesn't escalate to a much higher level. Having said that, I think, it's also worthwhile noting that -- you know, Hong Kong is
part of China and the likelihood that it kind of gets to a different level in terms of what laws they can pass, it's very difficult to see how all of
that happens.
CHATTERLEY: We've got some lively debate on the show, some back and forth over whether or not China actually wanted to see this law passed in the
first place. It could extradite if it wants to anyways, you said Hong Kong is part of China, even if there is a semi-autonomous legal system in
operation there.
The timing for China, given the tensions with the United States right now is awkward quite frankly.
MEMANI: It's very awkward for sure. Again, I think the impact of all of that on Asian equities, Chinese equities, and EM equities is definitely,
definitely negative. Having said that, I think there's a way to get out of all of this, and I'm sure they will find a way. And at the end of the day,
what would matter for investors far more is whether we can reach a deal with the United States on the trade front or not.
CHATTERLEY: Yes.
MEMANI: At the end of the day, that is really the most important issue facing the global economy. Our hope is that at some point, we will reach
some sort of a settlement, whether that is the G-20 meeting or down the road remains to be seen.
At the moment, though, we know what the impact of the trade tension is, you know, it's roughly let's say three tenths to a half percentage point off of
U.S. GDP, which is not a good thing, but not the end of the world either. It's not catastrophically bad and the U.S. economy is slowing. It just
slows itself some more.
The impetus for the Fed to act in this scenario increases meaningfully, so they will take concrete action and hopefully relatively soon to calm things
down.
CHATTERLEY: You think they'll cut rates?
MEMANI: They will cut rates, whether that isn't -- I don't think it's in June or July, probably later in the year, but they probably won't cut rates
as much as the market may be expecting. So the market is thinking of free rate cuts and I don't think three in 2019 is really on the card.
[09:40:08] MEMANI: By the end of 2020 that may indeed come out, but not in 2019.
CHATTERLEY: If the market doesn't get what it wants though, even in July, fine June perhaps is a little bit early, but if the Fed don't decide to cut
rates in July, are we going to have some kind of a broader tantrum or always communicating that the Fed stands ready and if Jay Powell stands up
there and says, "Look, you know, we've got this under control, and we'll watch very closely," is that going to be enough?
MEMANI: So I think what is going to happen in our view is that data is going to start improving in the second half.
CHATTERLEY: Right.
MEMANI: And in that context, then the power can come out and articulate as to why they are not doing it and the markets will buy it. I think if the
data doesn't recover, and he doesn't do anything, then it's a totally different ball game altogether.
CHATTERLEY: I mean, there's so many potential conflicts and the timing here. We've discussed this week on FIRST MOVE, it's very tricky with the
G-20, and the hopes for the President's meeting there and then the timing of the Fed. What are investors asking you at this moment, and are they
still saying to you, "We want to put money to work here. We want to invest in these markets." And are you still saying, look, we've been telling you
for a while. Our medium term call is we like EM, stick with it.
MEMANI: Yes. So I think investors are very worried for sure. And trade is the top of the list. Having said that, I think if you look at the
market action, they recognize that the underlying strength in the economy is still decent.
CHATTERLEY: Do they or do they just think Jay Powell is going to ride to the rescue?
MEMANI: Well, so I think it's a combination of the two, you know, it's first and foremost that we are not getting into a recessionary environment.
So growth is slowing down for sure, but it's moderating. And in that environment, if you have good policy action from the Fed, that definitely
helps risky assets, equities in particular to go up.
What is most important for emerging markets is China's stimulating its economy, that's coming and the dollar not appreciating. I think if the Fed
cuts, then the dollar stops appreciating, and I think that combination can help the EM in a meaningful way.
CHATTERLEY: What happens if the Chinese yuan depreciates?
MEMANI: Well, so that's a very interesting question. I think that the appreciation of the Chinese yuan is effectively China making the trade
tension a world's problem rather than just a Chinese.
CHATTERLEY: Yes, exporting the problem.
MEMANI: Exporting the problem to the rest of the EM. I think from a political standpoint, it doesn't get them what they need, which is
resolving this issue and resolving this issue relatively quickly.
So I think for now, they're probably not going to depreciate the yuan, but it's a decision that they have to make. If they do that, then again, we
are in a different playing field altogether.
CHATTERLEY: Yes, it's an interesting time, that's for sure. Krishan Memani, fantastic to have you on the show.
MEMANI: Thank you.
CHATTERLEY: The Chief Investment Officer of OFI at Invesco. All right, we're going to take a quick break, but up next, Elon Musk gives Tesla
shares an electric jolt. Can he deliver on his promises though? We'll discuss. Stay with us.
(COMMERCIAL BREAK)
[09:46:18] CHATTERLEY: Welcome back to FIRST MOVE, a decent shot at a record quarter. That was the upbeat forecast from the Tesla CEO who also
made it clear he didn't want to rehash the challenges of the past year. But are Tesla's woes really behind it?
Joining me is a woman who says they very much are, at least for the long term. Tasha Keeney is an analyst at ARK Invest, one of the most bullish
supporters of Tesla out there. The firm has a $6,000.00 five-year target for the stock. That's the best case scenario. Let's be clear on that.
$4,000.00 to $6,000.00. Tasha, great to have you with us.
TASHA KEENEY, ANALYST, ARK INVEST: Good See, Julia.
CHATTERLEY: Okay. Anything in this shareholder meeting that you want to flag or should we move on and talk about other things? Because I always
think there's a short term long term bull-bear disconnect.
KEENEY: Right. Yes, you know, I don't think too much came that too much - - that too much exciting news came out of this meeting. I think investors are happy with it. You know, we've seen the stock up today. Musk talked a
lot about this demand problem. He says there's no demand problem, which is certainly what we see happening, but not too much new, no.
CHATTERLEY: So you've had some pretty fierce pushback from bears of Tesla, and I call it my marmite stock. You either love this, or you or you hate
this stock. You released your model and said, "Guys, if you want to see what our assumptions are, and have a play with the model, you go for it."
Was that good in hindsight or was that a waste of time? Because the critics was still attacking?
KEENEY: You know, at ARK, we try to be as transparent as possible. We publish all of our research online. And, you know, even the sell side, we
released a model that's dynamic. And really no one does that. So we were happy to pioneer that. We got a lot of pushback. You know, there's always
a lot of critics for Tesla. And really, that's actually what we want. Because we want to make sure that our assumptions are correct.
CHATTERLEY: Robust.
KEENEY: We want to battle test them. And we actually got some good feedback on the model. So I think we're -- you know, we would do it again.
CHATTERLEY: I want to go to the demand question here because just to look at your bear case here. Right now for the global EV market, the electric
vehicle market, Tesla has a 17 percent market share. You say okay, you know, worst case will take that right down to six percent market share.
Talk me through some of your assumptions on how you then translate to a share price over the coming years, because I think this is important when
we're worried about demand.
KEENEY: Yes. So I think one of the biggest differentiators with how we see the future going for Tesla, and what the bear see is we think the
electric vehicle market will surprise. So we're estimating that there will be 26 million EV sold globally in 2023.
So in our bear case, we actually take their market share down by two thirds from what it is today, and it's because EVs will just be such a large
market, and this is really because battery cost declines. Batteries are declining in such a way that in the next five years, NICE will become more
expensive than an electric car on a like for like basis. And that's what's going to drive demand.
CHATTERLEY: So everyone who says, "Look, there's other cars coming on," they're going to face competition, you're going, "Yes, we get it. We're
going to take the market share that we anticipate down to six percent. We're incorporating the loss of tax credits, the increased competition,"
all that's encompassed in your model.
KEENEY: Yes, actually, this is not accounting for tax credit. So actually, if credits were to happen, that would help Tesla, it could be
even higher or help other companies. We don't model subsidies.
CHATTERLEY: The other big question, I think, is the autonomous technology and some other car companies saying, "Look, he's being too aggressive on
these estimates of how quickly this will come on." I think one of the things that confuses me is you estimate regulators require one billion to
10 billion miles of data to prove that the system has a lower hour than humans in order to get regulators comfortable with it.
I mean, that's a huge range of assumptions between one billion and 10 billion miles of data and is that actually on real roads or is it on
highways because the conditions are so different?
[09:50:10] KEENEY: Yes. So we think this is -- it is an important distinction to say that this is real road data. And just the fact that we
think it'll be in the billions means that Tesla is really one of the only companies that's uniquely set up to provide that data.
Every other company that's testing autonomous cars is testing it in specific areas, they have maybe hundreds of test cars at best.
CHATTERLEY: Not even Waymo?
KEENEY: Waymo has hundreds of cars on the road. I mean, they actually probably have the largest test fleet, but it's nothing compared to Tesla's
customer fleet, which was hundreds of thousands.
CHATTERLEY: So it's the combination of having cars out there, and also having the technology here that matters.
KEENEY: Exactly.
CHATTERLEY: Is there anything that could derail all the critics, all the criticisms, the short term woes that car analysts have and I know you guys
look at this as technology analysts, and it's far broader and more encompassing. Is there anything that Elon Musk or Tesla could do that
would change your mind?
KEENEY: You know, certainly, if Musk left the company before they reached full autonomy, we'd take that into consideration. We think it's important
that he stays at the helm for them to get there.
I think in general, the timing of when sort of these break points happen are very hard to predict. So let's say you know, they're six months late
on feature complete for autopilot, what they say they need to get to have all the autonomous features ready. That's why we look out over five years,
because even if we're off by 20 percent, if the market is large enough, it's still worth investing in today.
CHATTERLEY: Yes. It won't stop the critics, but it's great to have the conversation. Tasha Keeney, brilliant to have you on. Thank you so much,
and we'll get you back.
All right, up next. Phone signals -- will the U.K. allow Huawei into its 5G network? Well, we'll speak to the man making the call, after this.
Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Boris Johnson considered the front runner to replace British Prime Minister Theresa May launched his
campaign with a promise to deliver Brexit by Halloween at any cost.
The question of what the cost will be is haunting some people in Britain's growing tech sector in particular, which has been gathering for U.K. Tech
Week. We can join Anna Stewart with more, oh, Anna, Boris Johnson's leadership campaign and their approach of the U.K. of Huawei. You've got
90 seconds. You go for it, my friend.
ANNA STEWART, CNN REPORTER: Ninety seconds? Dear me, Julia. Right. Well, Huawei is obviously a big focus here because frankly, artificial
intelligence will rely so heavily on 5G rolling out and that is under risk because of the government not yet making a decision about Huawei, will it
be allowed to be part of the infrastructure of the future 5G network? Won't it? They are making that decision. It is likely to get delayed
until Theresa May's successor.
On the one hand, you've got the mobile operators who would like a decision quickly that also probably like to use Huawei because it is already in
their infrastructure. On the other, the pressure from the United States and that's where I started.
[09:55:05] STEWART: I asked the Minister who heads up this department who will also make this decision how much Donald Trump's urging of allies to
ban Huawei is weighing on this decision. Take a listen.
(BEGIN VIDEO CLIP)
JEREMY WRIGHT, BRITISH DIGITAL, CULTURE, MEDIA AND SPORTS SECRETARY: The telecom system is hugely interconnected. So you can find Huawei equipment
with a large number of American components. So decisions made in the U.S. administration, of course have to be factored in and we're doing that, but
it will take time I think to make sure that we've got our judgments right before we make an announcement, but I'm absolutely conscious that the
sector wants to know what it should be doing. So we'll do that as soon as we can.
(END VIDEO CLIP)
CHATTERLEY: Anna Stewart, there is no time for Boris Johnson, but fascinating to watch on Huawei. Anyway, and we've got plenty of weeks I
fear to talk about Boris Johnson. Thank you so much for that.
Anna Stewart there. All right, the market is under a bit pressure this morning. I'll be back in what? A couple of hours' time to bring you the
latest, but for now, you've been watching FIRST MOVE.
Stay with CNN for our breaking news coverage of the protests in Hong Kong.
(COMMERCIAL BREAK)
[10:00:00]
