tv Bloomberg West Bloomberg January 7, 2016 11:00pm-12:01am EST
should china have waited longer before ditching the safety valve? the man who invented the system says beijing got it wrong. an extraordinary week for global markets. europe and into asia and beyond. david: mid day and the way things look right now for equity markets here in asia it looks to have fizzled out at least in our time. you can see just about every single sector group.
on the way up. volumes of action picked up. it indicates that buyers are back to some extent. groups?-performing oil and gas. industrials as well. consumer services. china, the big winners here apart from every single sector on the way up. the steelmakers doing particularly well. we are looking at gains here on the order of eight to 10%. some of the bigger names. industrial metals. a local report that we might actually see some support within this beleaguered sector. a lot of people calling it
serious overcapacity issues for steel. finally, the chinese currency. it has been fairly stable. it has been quiet. this was the markets show pill. the offshore rate came awfully close to that record low. that is a today chart. here is your almost record low. around 659.ed you have got all the answers.
>> it is almost disappointing when china doesn't royal global markets. they decided to kind of common what they have done today is not with their stated objective was. this is pretty much in line with previous disclosures. inconsistent. one day they are setting up way off, the other day sending it back where it should be. it is becoming very difficult to predict what china is going to do next. rishaad: he very much defended beijing authorities when i said to get those special rights from the
imf, they were promising transparency and more. did they hoodwink the imf? >> that is a pretty strong word. what they have done is to, once they had this imf status which is largely symbolic. now they're back to focusing on their currency. i think the thing in china is that you have to be really concerned about what hellmann's elsewhere. they want to focus on themselves. i'll bear economy. what is good for their country. not necessarily what is good for global stability. rishaad: we will take another look at. david: this is where we closed
yesterday for the chinese currency. since then it has actually weekend from that level. what you see right now is a bit of strength coming from yesterday's close. overallns that narrative in the fx markets has really been this move back into riskier high-yield currencies. the dollar yen relationship is back above 118. that money is getting out of the japanese yen and getting into just about every other currency out there. i will take you through each one very quickly. the south korean currency is stronger.
the dollar is somewhat weaker. rupee by 4/10 of 1%. awfully close to a record low. there has been quite a move back into these riskier currencies. not just in southeast asia. look at the australian dollar, the new zealand dollar. for the first time there is some appetite for these high-yield currencies. rishaad: how does the chinese action affect the currencies that david has just been talking about? to then't want it pegged dollar. they want it pegged to a basket of currencies. robin: the impression is that they were trying to reassure the
market that the currency itself is not weakening. all of its decline is against the dollar, strengthening or stable against the other major currencies out there. however, i think the market has been largely ignoring the index. of pulltempt to kind the wool over people's eyes. the market seems to care about china's performance against the dollar. on august 11 of the world finally realized how important china is. how it can affect global markets. rishaad: look at janet yellen. she cited the reasons for not doing the rate hike in one of the most china. the first time it has happened, china flexing its economic muscles.
this huge powerhouse that can affect everything. we're seeing the yen rising today for the first time in five days. this also kind of illustrates how point that this is significant china is. safetyu have a flight to . it is a big development. rishaad: we'll be watching this in the years to come. let's have a look at what is going on with oil. intermediate rebounding. you can see it is that around 34 bucks. we have had warnings that oil dollars.headed for 30 talk
is that still possible? alexander: we are seeing a bit of a balance today in asian trading. think would be premature to draw a line under the drop in prices for oil. nomura has said that $30 a barrel is possible within the next 10 days. ubs said it could go even lower. the potential for a hard landing. what that means to the countries fuel demand. it is been importing record amounts of crude. it has been processing that and putting that into stockpiles. fundamentally, if demand for gasoline and for diesel is that they are, then somebody is going to have to give. that is the big concern for the oil markets. rishaad: how far is this a structural issue? are we at an inflection point?
alexander: it depends on how far prices fall. something has to give. they will get to a point where producers, the higher cost producers have to start cutting back production. opec has said it is determined not to do that. it will continue to pour oil into the market. higher cost producers at some point will have to accelerate production cuts. lead to a rebound in oil supplies. when that happens it remains to be seen. the consensus is that a level that prices are at a level where we have to see a reaction on the production side. that structural rebalancing in the market that may ultimately support prices. rishaad: thank you so much.
the dollar yen relationship is up. we are looking ahead to this afternoon's business in hong kong. we do see advancing equities and shanghai. how have you been looking at all this? what have you been seeing? andrew: the large institutions have seen this as a buying opportunity. if you hit valuations we have had a lot of orders that have sat there and prices that have been away from the market for some time. the people who are real value players see this as an opportunity to acquire the stocks. rishaad: for the long run that is exactly what you are doing. fools rush in, but we don't know
if this is a bargain. you're probably adding to what you already have and averaging down. keeping withare the companies that they know and say trust and they like. prompted all this selling in the first place was the yuan and the concerns about valuation. rishaad: is the retail investor that sophisticated in china? about: people are worried the fact that the market has these overhangs. people not allowed to sell shares. ban to bepecting that lifted at the end of the week. nobody was quite sure how they were going to do it. people knew there were a lot of shares that were potentially out there and they want to get ahead of that. you don't know how we people
within that locker. are going to be forced sellers as opposed to just wanting to sell. the margin trading to a large extent, we saw a big pool of that earlier in the year. after the midyear crash. we haven't seen it pick up any great extent. people are aware that a lot of the stakeholders have been curtailed and what they are allowed to do. rishaad: is there any connection between what happened in the stock market and the economic reality in china? andrew: there is always a link there. 80 to 85% of the trading that we see in china is retail. these aren't people that read the latest macro reports from brokerage houses. they are reading in the press.
coal beingsteel and pursued in the market. going to visit a coal mine. the country should be supporting these core industries, he said. rishaad: it all really kicked off with what has been happening with the currency itself. as the currency declines, people are defending the authorities. china is moving toward having itself paid to a basket of currencies. others are saying why didn't they tell everybody that? where's the transparency that they promised to the imf? like every other country, china is going to do what is best for china. they need to get the supporters going again. the easiest way to do that is to
devalue the currency. you want to reform your economy but they are large and historic industries. they employ a lot of people. you're not going to reform it in a way to puts those people out of work. the service sector has to provide jobs to take up the slack. this takes time. and the rest of the global economy is not really firing on all cylinders. i devalue the currency right now and i'm a big oil importer, it will not hurt as much as when oil was $100. they can still keep importing ore, all the things they will need over the next 20 years as they grow their economy. rishaad: the move to the downside for the
dramaticnot been that has it? andrew: people are concerned that there was going to be another big hike. they are aware of the international consequences. going forward they will have to be more transparent. maybe not overly transparent because that has got as many risks as has the other way. china historically always liked to change its interest rates on the weekend when nobody can do anything about it. they are changing that policy as well. so they are learning or they are adapting. rishaad: downgrade for the commodity trader noble. ♪
back to the asian markets. tumbling chipming prices as the reason that its profit missed the estimates. zeb: the profit missed the target by a considerable margin. the company has had eight challenging year as many smartphone makers have. it is seeing its business fundamentally challenged by falling chip prices and falling display prices the semiconductor market is a big component of the overall company. the customers that it serves with its chips has weighed on its own business. the smartphone business has been challenged by apple as well is chinese companies. that has depressed margins.
its newest devices haven't fared as well as some of its previous devices. as six has been outpaced by apple and some of those chinese companies. rishaad: management doesn't really like to stick its head above the parapet does it? the company is not particularly enamored by its prospects. the competitive landscape in 2016 will be challenging. is company's vice chairman preaching the need for software to be the focus. he says the competition landscape is changing to software and platforms. we need to build a new system. they have replaced the head of
the phone operation with the head of their mobile payment and security platform business. they are clearly interested in the software elements. the platforms that will deliver growth through the years. rishaad: the last time i checked on this company was down by almost 5%. noble group. it has got more bad news heaped on it. at risk foris further downgrade. the bad news doesn't stop. haslinda: this is the second downgrade, first movies now s&p. the short-term financing is no longer strong enough to sustain
noble's investment grade. the cut is no surprise. investor reaction is also no surprise. down as much as 10% in earlier trading. a seven-year low for the stock. take note, $.12 on the dollar over the last two days. the lowest on record. it has gone from junk to r withsed, on pa venezuela. it is now the riskiest company in all of asia. the commodities slumped and anda's market turmoil consistent attacks on iceberg, all of these have hurt the company. the shares keep falling. down about 18% for the week. losing two thirds of its value last year. it is just getting more and more
china's efforts to restore calm to the market showed as the yuan stabilized. treasuries and the yen falling as the demand for havens eased. market recovery coming after china abandoned its experiment with circuit breakers. some say they should've waited longer before ditching the safety valve. the man who is credited with inventing the system says beijing got it wrong. let's get straight to the market action. david: finally some sense of calm. we not exactly seeing a broad-based rally but certainly looking much better than what we saw earlier in the week. regional benchmarks are slightly higher. go all the way back to monday, we are still down about 5%. we are the lunch break here in hong kong.
these three main benchmarks. seng 20,000 shares traded so far. the nikkei is up slightly. it is getting captured because we're seeing losses from fast-moving retail investment. kospi index is up about 1/5 of 1%. jakarta and the philippines are on their way down. volumes of actually picked up today. they has been picking up successively over the past few days. average,to the 10 day
things have really stabilized. the buyers are returning to the market. impressive considering how sharp the drop has been. a lot of this will depend on the afternoon session in shanghai. moment it is behaving the offshore and the on share rate. back a bitare coming after falling to an 11 year low yesterday. movement upward in west texas intermediate. it is not the best but we will take it. rishaad: look at what is going on in these markets.
this is according to people familiar with the matter who do not want to be identified. these moves have not actually been formally disclosed. we are talking about state-controlled funds. they have been intervening test their support for chinese stocks today. following the markets slide that we saw on thursday. these funds have been approached by private companies and also are purchasing shares of companies that have been waiting on the market itself to help to stabilize things. bloomberg has been trying to get hold of the china securities regulatory commission that we have not been able to get a response from them. state-controlled funds are out there buying shares.
we also had china removing these so-called circuit breakers. it is still left to investors facing weighted number of restrictions out there. seene: you will continue to retail investors try to exit the markets and the government to try to buy and support stocks. expect more choppiness is what most analysts are saying. with or without a market circuit breaker, you can see the china markets are capable of having plenty of volatility as we have seen. some say the suspension could be seen as a more constructive way of alleviating the market itssure but the flip-flop of from the government and the
securities regulators could be seen as more chaos. do they know what they're doing? the inventor the system said that china got it all wrong. nicholas brady. these restrictions, there are still plenty of them out there. the 10% daily limit on the single stock moves. yout plus one rule where can't buy and sell stocks in one day. sharedis ban on the sales for major stakeholders buying is minimal and foreign investors see somewhat less activity. in the shanghai and hong kong markets. rishaad: what are people saying about this rebound? does it have legs?
yvonne: this analyst wrote a note saying we could still see some room to go down. the circuit breaker suspension doesn't really reverse the kleins that we have seen. it just decelerates the pace for further declines. he still thinks stocks could become cheaper. 2009 is the level he sees for the shanghai composite. aps is a top hedge fund, they came out and said china should have waited to suspend the trading calls. they should've let the retail investor really digest of system and learn a little bit more from toand possibly deal with it alleviate this irrational behavior that we have seen this week. rishaad: thank you very much.
china has been top of the list for our guests tonight. it is time to get out of town. liu: at the end of the data you want to make an investment in china or not. there are still undervalued stocks. this is speculation. you just take a wait-and-see attitude. you don't need to feel surprise or panic or make so much of it. a lot of commentators claim they are shocked about this. that is what i think. rishaad: silver crest asset management is saying china's policymakers are losing credibility. patrick: the first concern is currency. they seem to be inclined to a currency devaluation.
think this will help the chinese economy. it could cause some serious headwinds for american growth. by sending all these mixed messages about the stock market and what therency exchange rate should be, chinese policymakers have really undercut their credibility. rishaad: a lot of this noise is also coming from the foreign exchanges. she expects the volatility, more volatility this year. there's little question where the dollar is going. we have been forecasting 7.5 in 2017. it will not be a straight line. no exchange rates moved in that direction. the danger of what is happening in the last few days is that investors trade is turning into a one way bit.
no policy maker wants to be in that situation. rishaad: that is the word on china. in these troubled times, it is often a haven. gold. is there a flight to quality? juliet: yes we always see the gold price rally what we see fear driving equities and other commodities. we have seen the bloomberg mining index fall to its lowest level in 10 years. but gold is now at $1100 an ounce, a two-month high. we have heard from billionaire investor george soros. he has a big stake in gold. he says what we're seeing is a
crisis. of the 2008ed crisis. as we see investors bailout of the oil price and a lot of those other commodities, the gold price continues to be an outperforming issue. they expect the metals outperform as well. some of the guild producers and american cruisers worse trading. there has been quite a good rally globally. we have seen quite a big rally coming through.
we have been seeing a lot of it in south africa. rand has had a big plunge against the u.s. dollar. if we look at the african gold mining index, is very early on in the year it has actually rallied to more than 20% this year. its biggest start since 1999. as the rand has continued to fall, boosting the profits of gold producers. harmony gold which gets 95% of its gold from south africa is up sharply. the canadian gold prices have done incredibly well. some of those stocks up by more than 10%. even as we see the world mining
index tumbled. some huge gains coming through in these massive gold producers. rishaad: some of the other stories we are looking out for you at them moment. pushingague baseball into china. they signed a three-year deal to license games to the chinese network. china will have exclusive rights to a hundred games including the world series. priorities, two cultivating new markets and to delivering games digitally. apple's five most senior executives all learned about $25 million except tim cook. he took home a mere $10 million. the senior executives received their full reward for exceeding
sales and profit targets. stock thatstricted he has been given that is worth almost $65 million. saudi arabia is considering its own big bang. an initialdering public offering for aramco. now controlling more than 1/10 of the global oil market. they would likely top apple as the biggest listed company in the world. would help to promote transparency and counter corruption. a decision is expected within the next few months. longerchina have waited before throwing out those circuit breakers? more on the market drama when we return. ♪
rishaad: back with asia edge. chinese controlled the funds did intervene to support the stock market. yvonne: this could be the reason why we are seeing such gyrations in the stock market today. nearly 20 directional changes if you counted. more than three hours of trading. according to people familiar with the matter. china intervened to shore up the slipping stock market after that $1 trillion rout. to support equities and bonds. shares in financial companies. and other companies that are heavily weighted in the stock market indices. the market is rallying by almost 3% right now.
seeks in shanghai increasing foreign exchange purchases. this is according to the shanghai securities news report. there was little changed today after that interest rate was cut yesterday. are seeing some intervention here possibly according to our sources to try to bring up shares. but a lot of fluctuations, swinging between gains and losses. rishaad: let's get back to andrew sullivan. true, that we have state intervention in the markets and supporting some of these financial companies, what
sort of message does that send out? andrew: they are trying to manage the whole situation. to whatt dissimilar taiwan used to do 10 years ago. at some point the market has got to come and find its own level. at the moment they are not securely happy with that. you must bear in mind that this datand we have the ppi coming out. rishaad: it can't be happy if you invested your pension and one of these funds and they are at the beck and call of whatever the authorities want to do. bigew: it is one of the problems with all government run pension funds. in china are relatively young. you are probably fortunate in some respects. they are looking at it for the long term. an aginghe problem of
population and fewer contributions to pension funds going forward. it is the same kind of problem we have seen in europe. rishaad: this doesn't get rid of that whole moral hazard it anyway. ok theyst in you think will come in source out at the end of the day. shirt. going to lose my andrew: the government is trying to educate people that if you take risks, there is the potential to lose your shirt as you put it. a lot of these almost ponzi type , investing in property was going to be a great idea. any bond defaults but we have had some pretty close calls on that. china is trying to educate its population but also trying to educate them to provide for
their own pensions. rishaad: this is the first week of the year. let us hope to god it doesn't continue like this. what do you see for the rest of this year? the economic fundamentals. i haven't even had a chance to talk about nonfarm payrolls. how important will that be? how important is china to janet yellen? andrew: it is all very closely linked. we're hoping for a reasonable jobs number that supports the federal reserve's action in raising rates and maybe sets us up for a new rate rise. that year classically we are looking at a low point in
the cycle. themn china, we are seeing looking at the government to try to reinflate the economy. we will trouble we see oil sales coming back. rishaad: so this is the bottom of the cycle? andrew: i believe so. we are a turnaround in the united states. the federal reserve raised rates. a chickenbe a bit of and egg situation. the matter how you do it, there could have been in underway with hindsight. we'll have that luxury. the chinese government is going to try to reinflate and get the cycle going again. we will see the automobiles pickup. we will see the steel industry pickup. support the coal industry. try to get the company moving again. rishaad: change.
nowhere androads to the bridges over nothing are probably a thing of the past. the infrastructure of railroads and things like that that are actually moving things around and moving people around, that is a different story. they will have to pay on health care and education. all of these sectors will start coming in again. rishaad: thank you for sticking around with us today. up, investors are looking ahead to that u.s. a jobs number for some reassurance. will they get it? we have a preview. ♪
some of the headlines around the world. south korea is marketing kim jong-un's birthday today by turning up the volume on their propaganda and music in response to the north's claimed hydrogen bomb test this week. is failed to bring north meeting.any it is thought to irritate the north korean leader. iran and saudi arabia have turned up their war of words. they said it had been thenerately target but they said missiles landed nearby. no visible damage to the embassy buildings. no recent attacks in the area. football boss has abandoned his run for the presidency of fifa. he will concentrate on clearing his name.
investigated for a $2 million cash payment without a formal contract. oh any wrongdoing. effectively i will withdraw from the presidency. i don't have the means to fight on equal terms with the other candidates. i have not been given the chance to play the game. i withdraw. rishaad: it is been a roller coaster ride certainly. that has added even more weight to the jobs report that is coming out from the united states a little bit later on today. brendan: on friday morning in washington dc the markets will get one more piece of news. nonfarm payrolls. looking back at december. here is what we should get. median of has a 200,000 additions.
spoke to ethan harris of bank of america. he said look to the weather. warm weather causes people to go out looking for work. december was one of the warmest december's on record. he said look for more service jobs. this has been a service job recovery, not a manufacturing recovery. could be a continuation of a longer trend with mediocre gdp growth but strong job growth. the fed has been taking a hard look at productivity. --will be hard to survive surprise the fed with one number. any single month can be an outlier. below 150,000 is going to be one more piece of bad news to chew on. rishaad: that is it for this particular
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