tv Trending Business Bloomberg February 25, 2016 9:00pm-10:01pm EST
sharp shares plunging after foxconn puts off signing its takeover. the taiwanese company says it needs new material information. ,eyond search, earnings baidu.ors welcome b let's have a look at what's going on. a toward time of it in shanghai. where making up some of that lost ground. looks like the pboc governor trying to shore confidence. looks like it's working slightly. shares up, but not nearly enough to recover what we saw yesterday when small cap and tech stocks plummeted. the shanghai composite fell 6%.
today, industrial metals rebounding, high-yielding currencies as well. take a look at the shanghai stocks, hang seng up 1.5%. fell, missing estimates. japan is racing losses this week. bullsf 1%, but even the are not very bullish on japanese stocks. in the first annual decline five years. earnings weaker than expected. citigroup, merrill lynch, all cut forecasts. city,target year in for 1500, but they still see rebound, 15% to 20% upside. austrian stocks flat now, recovering slightly. dollar-yen seeing weakness
belowength, so we did go 113 once again. take a look at the movers -- sorry about that. technical failures here on the touchscreen. this is what is going on with the movers. australia, will worth -- will i first half loss, naming a new ceo, shares of 3%. bhp falling 3%. complaint filed in u.s. district court, but goldman tsonga dividend cut means the spreads it should narrow and not widen. some pressures on the shares today.
stan fire resources falling on most 18%. resources falling almost a percent. attach a down 4.9%, a manufacturer of electric tools and equipment, cutting profit forecast by 70% to ¥2 billion, shares falling in tokyo. sharp, another down day, 14% down after foxconn delaying that takeover plan. been all about sharp the last few days. let's get some more. what has foxconn been saying here. ? the first sign of trouble came
hours after sharp said it is using foxconn's rescue bid over a rifle offer -- rival offer. paragraphleased one statement saying that new material information has arrived from sharp and requires time to discuss it before signing a final agreement. both companies are not saying what the new information is, but sources telling us the sticking point is over contingent inbilities, potential costs case of restructuring, laying off people, selling businesses. these liabilities could exceed ¥300 billion, but could be less. at this point, it's not clear how much of a sticking point this will be, whether it is foxconn or something that could derail the deal. under japanese accounting law, sharp is not required to disclose this kind of
information, but it is disconcerting this is coming out so late in the game. we will be looking to hear more from both companies today. rishaad: we haven't heard much. maybe we will see a rapprochement taking place. it is a lose-lose deal, and lucky to have been postponed. what are people saying to you about this overall? >> there is a lot of concern this might not necessarily be of victory for foxconn. it's not quite clear what around can do to turn sharp's lcd operations, their core business. some of the issues with sharp not being able to deliver to apple on time are actually structural, and it's not clear whether it is a cash infusion that sharp needs at this time. rishaad: thanks a lot for that.
let's turn to some other stories. at the pricelook of a house in china. rosalind: new home prices rose in half of the cities monitored. prices rose in 38 on a month to month basis. real estate investment is growing at thisand seven years in china. the government is working to support home sales. the prices of new homes rose faster in shanghai than beijing. new home sales rose 2.2% compared with 1% and beijing. existing home sales up 2.7% compared to the month earlier. in beijing, 2.3%. baidu move beyond search and advertising are paying off. revenue figures beat expectations at $2.9 billion in
the december quarter compared to a year earlier, 33%. grows, 56% of sales in the quarter up from 42% at your earlier. the company has been flying money in services like home delivery and online video. the three chinese internet companies are competing for business in the on demand economy, expected to grow at ¥7.2 trillion by 2017. has laid out its legal argument against the u.s. government. it says the justice department is overstepping its authority and that the case is not about the single iphone, but the wider "alications, fbi seeking dangerous pound at the congress and the american people have withheld." apple said it could come up with the software and four weeks.
director james comey told lawmakers he does not think it's a good idea to have places immune to search warrant's he says the fbi it would be remiss if they did not try everything to access the smartphone. he also says any court decision would be appealed by the losing side. >> this is the hardest question i've seen in government, and it were a car negotiation in conversation, but i am keen to keep the bureau out of the policymaking business. a look at the's other stories we are watching. back to you. rishaad: getting back to shanghai and the people's bank of china. the chinese sang economy remains strong. talking about that, saying the u.s. dollar is the most important currency out there. interest rate policy as well, policymakers have the room and tools to act on growth good making the comments ahead of that g-20 meeting in the city. we are in the chinese commercial capital. what else did he have to say? there, on your point
some of the people i talked to, the game changer for the pboc is if the fed does sit still and signals it will not move, because that will it alleviate upward pressure on the dollar. the other side of that trade is a weaker renminbi. when it comes to the fx reserves, people panicking and drawing down. those are liabilities. he put that in the context and says with capital outflows you have to draw down on reserves. there's a small part which is speculative outflows. the objective of the central bank is to get ahead of that and for it very expensive
people looking to short the currency and make them think twice. how do they do that? listen to what arthur had to say. >> at the current rate of reserve loss, about a year. they have a year left where they can keep intervening at this pace before they had a level of reserves they would -- don't want to go below. the key is to establish credibility of the new exchange rate regime within the next one-two quarters. if they can do that, that will take some of the speculative capital outflows out of the situation. just to add some meat to what he said, were looking for a more -- a clear message from the pboc. what he pointed out would be the best example of that. with atral bank comes up targeted range for that exchange rate basket, and once that has
been established, that will to a large extent turn off speculators looking to short the currency. back to you. rishaad: thanks, david. as david mentioned, loads of big-name guests there. we will hear from the president and chief operating officer of goldman sachs, gary cohen. stay tuned for that exclusive interview. central bankers gather for that g-20 shanghai. we had over and talk to an advisor to the central bank. "trending business" back in a couple of minutes. ♪
defense system and south korea threatens the country's security. he told the think tank that the radar could reach far into china's interior. areu.s. and south korea discussing the deployment after north korea's recent market launch -- recent rocket launch. iranians vote on friday in the first parliamentary elections since the lifting of sanctions. the parliament has limited powers, that can approve or block initiatives from the president's office. the hard-line guardian council has allowed few moderates and reformers on the ballots, leading opposition groups to call the elections a sham. fifa chooses its next president. the final candidates making final pitches. all committed to restoring reputation and credibility. more than 200 international --sepp blatter's presidency was
cut short by corruption scandals. powered by over 2400 journalists and 150 bureaus around the world, this is bloomberg news. rishaad: back to shanghai. g-20 meeting beginning there. we've been hearing from the pboc governor saying the chinese economy remains strong. he has room to move in order to boost growth. what to expect next? david is in and shanghai with our next guest. take it away. >> thanks. just to continue on your point. a member of the monetary policy committee of the pboc and professor at taking university. thank you for joining us. is thet pressing matter currency. we've heard a lot about stability.
what sense do you get this means we will get more intervention in the currency? does it mean policymakers will let the markets determine what that rate should be? >> we are in transition at the moment. the official term for the policy withe is a managed float reference to a basket. the direction of change is very clear. the market forces will play a greater role in determining the level of the rate, but at the moment it is still managed, which means that from time to time the authorities will still play a role setting that rate. in terms of direction, as i said, the market forces will play greater roles. >> what would you say to those who think that there is still room for the renminbi to weaken because of the capital outflows? >> that is one way of looking at it. if you look at it broadly, whether the currency will weaken or strengthen, it depends on
whether there is more money out or in. , think we saw some money out that's a fact. at the same time, we should realize that if you look around the world, which economy is stronger in relative terms? if you want to put your money, which is the best place? the chinese economy is slowing, but still growing a close to 7%. return, i think diversification is good, but china is still growing relatively strong, and that's what authorities continue to say that there is no basis for vebstantially -- substanti devaluation. >> one of the tricks is convincing speculators looking to short the currency that the trade will not work because there is no basis. strong current accounts, 7% but how does the pboc
and prove that mechanism of telling these people? >> the pboc has done a number of things the last couple of months. the first thing which makes a quite useful purpose is the introduction of a basket as a reference to the currency. i think that eased some fear in the markets. at the same time, the officials coming out more regularly, frequently, talking to the market about their thinking, about the fundamentals of the economy, and we saw the governor talking more frequently. that i think should make it very clear where the policymakers think that rate is going and where the fundamentals deciding how much movement is likely. >> there has been talk about, and i want to get your thoughts on this, about getting rid of that dollar-yuan fixing.
just to refocus everybody's attention on the basket. is that something being considered? >> the authorities already said quite explicitly after introduction of the basket. going forward, setting up parity will also take into consideration the reference of the basket, meaning fixing to the dollar at the beginning of the day will become less important. other factors, bilateral exchange rate, will play a role. >> the governor gave an appearance earlier. should we expect more appearances from the pboc governor? would it help? >> i think it would help. governor always had media, a discussion sent a comforting message to the market. i can't say personally whether
or not the governor himself will talk more, but government officials, pboc officials, and policy makers, certainly they will talk a lot more. they will communicate to the market. sides.have been on both on the monetary policy committee of the pboc. what is one thing you want to get out there that is the most misunderstood thing about the chinese economy? >> the economy is slowing, but the economy is not as bad as it looks. what is happening is new and old , oldtries at the moment industries are labor intensive, manufacturing, heavy industry, which have been driving china's growth, now losing out, but the new economies are not strong enough to drive chinese growth.
the problem, the mistake, we often make is that when we look at china, investors only focus on the traditional industries, and these are insignificant. we often ignore what is happening and other parts of the economy, upgrading of the manufacturing, the services sector, innovation. these are all happening. that is why come some should -- why consumption is rising. despite the economy has been slowing, the labor market remains robust. we should take a much more balanced view. very quickly, my last question, 20 seconds, let's put a floor on fear. what is the worst case 2-3 years? >> in terms of growth? >> do we get growth at 5%? >> growth can slow a bit further, although we are seeing some signs of stabilization. i think we are going to see some
rise and financial risks, and potentially even some unemployment and local areas, but in the macro picture, it remains robust. the one thing i think are important is the government's balance sheet is still very strong. >> on that optimistic note, let us leave it there. back to you. you very much. coming up, macau's gamble to shift away from gambling seems to be playing off. we are tracking the numbers. that is next. ♪
, what is intelligence the scorecard looking like? we have companies such as generating the least revenue drop, so best. wynn, on then bottom. it is all about this issue of driving towards the mass-market, from a gaming and non-gaming basis. you look at galaxy, we've gone from $450 million to $540 -- 580 million dollars, so a nice sequential improvement since they opened their resort last may. the same thing happening with melco crown.
rishaad: what is this divergence. when is the turnaround? -- diversionion rest on new resorts, mass-market , non-gaming as well. and that is what these two have. sands sits in the middle of the strip and will come on later. rishaad: you are saying you have to go through sands to get anywhere. >> you really have to do. not there yet, but will be in june. revenue will probably be a positive print, the first time -- where we we were have had year-on-your growth. we will see increment a better revenue in february than january because of chinese new year. looking at the easy comparisons and new resorts, it could be an interesting catalyst, positive numbers out of macau. rishaad: we have to take a break
♪ rishaad: a look at our top bankes, the central governor of the people's bank of china speaking right now, saying china still has the tools to keep its economy on track. that was the message coming from zhou xiaochuan, seeking to calm fears as the g-20 meeting gets underway. the sense of optimism filtering through the markets, asian-pacific stocks rallying, back to back weekly gains.
strong gains in japan dragging the benchmark higher. third straight day of declines for the again. , foxconnres plunging said it was postponing the deal to what it calls new material information. under the terms of the agreement, foxconn would by $4.3 billion of additional shares, giving it two thirds of the company. business taking a break in tokyo, but what is going on in the asia-pacific. yvonne: we could be inning the week on a good note. the second straight weekly gain on the benchmark, looking good. stocks up to the governor of the pboc zhou confidenceshoring up after the worst fall and a month yesterday on the shanghai composite, more than 6%. , up 1.8%.
the austrian stocks doing better today, up to tens of 1%. nikkei 225 making a rebound, looking good, up 1% as we enter into that lunch break. inflation numbers out from january, flat. the new cpi putting food and energy, positive momentum, but some indications that the stronger labor market conditions, to be rise in inflation, and tokyo cpi data, that outlook there may put the pboc j on hold -- p boj on hold. -- p boj on hold. the p boj could do more. or waiting for wage discussions in april. some big movers in hong kong, property developers, prices came not ashtly better --
good as the previous month, but stabilization on all fronts. stocks rising today. energy stocks as well looking good. oil stabilizing overnight. today, but settling. some other earnings, galaxy entertainment, 2.5%. those gambling numbers and macau, shares up. , ckiswaps on the hang seng added. china resources to be removed. losses and gains today on that front. when it comes to the currency, monthsthe most volatile , impliedomes to fx
volatility for the yen, pound, all high recently. high-yielding currencies on a strengthening. the yuan as well. the new zealand dollar, a surprise trade surplus, small one, but better than expected. economists were expecting a deficit. was exports that drove those numbers. the new zealand dollar rising .5% today. eyes of the financial world are fixed on shanghai today, where china is about to hold its first g-20 meeting. the pboc governor having a big morning, moving to shore up faith in what is the world's second-biggest economy. david is in shanghai. you have a special guest there, but tell us what the mood is like first. seet is very interesting to
global policymakers in one place. it is also interesting to see them at the "scene of the crime." i am joking obviously. china is a source of a lot of concern. the volatility in fx markets, yield curve flattening. to get a better sense of where we are, i'm joined by a special guest, gary cohn, president and ceo of goldman sachs. thank you for joining us. ,oing into these meetings expectations are especially high that china comes out and clarifies the message, what they want to do with the currency, growth. why do they have to do that? if the pboc mandate is domestic, why do they need to bother? expectations are always high
going into g-20 meetings, imf meetings, world bank meetings. the reality is messages are never that clear. the one thing i would do is temper expectations if something major comes out of this weekend's meeting with that the bige of fundamentals that is driving market volatility today outside of liquidity is what is going on with global growth. china is clearly at the center of one of the questions of where is global growth going to come from. we have all seen china slowdown from a double-digit plus growth economy when they were going through their big capital expenditure environment, and we seen them drop into the mid-single digits growth environment. whether it is 5, 6, 7, none of us know, but we know they are transitioning from a capital expenditure environment to an operational expenditure environment, meaning the economy is driven by consumer spending p it was that mean?
consumer spending is consumer discretion are spending. the world is trying to figure out if china has been able to transform the 350 million, 400 million people, they have moved from rural china into urban china. have they been able transition them to become real consumers? if they have, at what rate are they consuming and what economic growth is that creating? that is a big mystery to the markets right now. >> that is a very slow process. , you couldn from 12% see it coming. why are people panicking? is there a need to panic? >> first of all, this has all been highly telegraphed by the chinese government. 20-30 yearsg about of policy, building infrastructure, inhabiting the cities, creating consumption, so none of this comes as a surprise whatsoever. ofs is happening on top
unfortunately a slowdown in many of the other developed economies around the world. it may be just bad luck. it may be bad timing, but the reality is that we need a strong growing economy in the world to drag the other economies along with it. we have relied upon china for so long to be the big growing economy out there that without china growing in double digits or high single digits, the world is unsure where to rely upon for growth. >> short-term, the focus is on central banks. ,he governor went quiet suddenly made an appearance, a few times this morning, what you make of that? beenthink we have all telling the chinese that more communication, clear communication, would be helpful for the market. hopefully the chinese are trying whatre clearly communicate
their initiatives are going to be, what the policies are going to be. if he is just appearing for the sake of appearing, that's not helpful. if he is appearing with a stick tobout policy, the policy, and actually do something, that will be hopeful. look, this will take time. time will tell what will happen in the chinese policy. >> within the context of what the fed does best or what they don't do well, what do you think the pboc can learn from it? there's a difference tween coming out and having a clear message are putting yourself in a corner in a situation where if things change your shooting yourself in the foot. >> this is a tough economic environment for everyone. the chinese are in a tough position because are not getting help from the rest of the world. the world right now is looking for what are this diminutive measures that the chinese can use, or what are they prepared to do if growth slows down. it's no different that people
are looking at mario draghi in he ecb, where he has said will do whatever it takes. no different than looking at the fed, what is that cause -- what is fed policy going to look like and a slowing economy, and what tools? will the fed use janet yellen talked about negative interest rates. it's hard for me to fathom we talked about negative interest rates in the united states, but this is what the world is trying to figure out, the markets are trying to figure out, what tools the china have at its disposal. >> even perhaps for them, some time to figure this out. my last question on china before we go to a break, what is the one thing your clients ask you? >> growth, growth, growth. the factors driving the market out of china is growth. clients, myd to my clients have china growth in their model anywhere from mid to high 7% to 0%, even some clients with negative growth.
a very welle thought out, very rational, answer for why they have that growth in their model. that is the single factor that is driving more market participants to take a view on china, but not only china come on the rest of the world. they factor china as one of the major economies, which it is, one of the great economies, and if china growth slows down or speeds up or is at a certain level, that will have effects for all the other markets. let's continue the conversation after the break and perhaps expand beyond china and what it means for your clients, the u.s. economy as well. i will be back after a very short break. stay with us. more after the break with gary cohn, president and ceo of goldman sachs. "trending business" ♪
back. you are watching "trending business". -- you are watching "trending business". welcome back. global recession, bets are higher, chances are higher, that we may into that. to continue our conversation. i'm joined by gary cohn, president and ceo of goldman sachs. we were talking about china. let's talk about the u.s. there is a tendency to get lost in the noise, so many metrics to use to measure what is happening in the u.s., but the heart of your business is there. what is the sense you get? >> we run a global business. half of our business is u.s., half global. the u.s. is still important to us. the u.s. is interesting right now. it is confusing. a lot of the metrics are starting to point more negatively, and there is talk
about recession in the united states. ,egative rates, slowing economy all of those issues that the rest of the world is facing now. the u.s. is better than people may feel. the u.s. consumer is still very, very strong. the fact we have had this $140tic price cut in oil, to $30, transferring directly to the pump. consumers in the united states are seeing that in disposable income. consumers are pretty good at spending their disposable income. sales look at the numbers, not necessarily in that day to day retail sales numbers, but the durable good sales numbers, we have seen the retail consumer spending money selectively, which is strong enough to keep the economy going. look, i'm not expecting runaway growth, but i'm not expecting recession. when i look a growth, i'm the
lower end of growth, 1.5% to 2% range, and a lot of it depends on the strength of the dollar. right now the u.s. has been one of the few countries that has been willing to have a relatively strong currency. if we continue to have a strong currency, i think that will take growth lower. if our currency falls more in line with other currencies, we could surprise and be at the higher end of the spectrum with growth. >> we saw the dollar drive you up last year. do you think these are sustainable levels? all depends on monetary policy could this a lot going on with federal bank policy. the g-20 meeting here, one of the big topics i would be talking about is more coordination of global monetary policy. we have global problems with growth. we can't fix these with local monetary policy.
we have to talk about monetary policy more globally today than we ever have. >> does it still work, monetary policy? with perhapsing the exception of the fed, boj, fed, ecb, but 6-7 years of rates at these levels. what have we achieved? >> that is my point. we have been 5-7 years, even longer if you look at japan, relatively low to 0% interest rates with growth to prove -- with little growth to prove ford animals no inflation. how effective has this monetary policy been. monetarywhat this policy has been effective at initially is countries trying to use lower interest rates through lower the currency to try and grow their economy at the expense of another economy. happened is every other central bank has been lowered their interest rates to not allow their economy to be the victim of someone else's growth.
>> they're not going to say that publicly. >> no, but that in essence is what has happened. lower interest rates, no higher growth, no inflation. our historicok, policies are not working. why is that? it's relatively simple. if you look at what has happened over the last couple of decades, the amount of transparency we have an markets and the amount of fungibility we have an markets is extraordinary. almost every investor in the cand on their mobile device real-time see the price of every asset in the world and trade every asset in the world. the extent that one currency as high relative to another currency, they can trade. they can arbitrage that out. the market has become so effective, arbitrage and out the
slight differences is taking away the effectiveness of local monetary policy, and we need much more global approach. >> what does that do then for the fed? we can talk about the effectiveness to a certain extent of monetary policy. about moment, people talk -- does the fed need to counter this aggressive policy from all the other central banks? maybe even reverse course? >> it's an interesting discussion. and china are the two countries left that have allowed their currency to be relatively strong versus the other countries. that is a tough position to be in. where the value of your currency is being dictated by the actions of others, not by your actions. that theomething chinese are contemplating, and something the fed has to contemplate. when ay in a position
currency that is at the right level for the economic growth and potential economic growth for the united states? that is something the pboc is looking at as well. >> i know you can't talk details and deals, but looking at the pipeline that is there, what does it tell you as far as growth is concerned? what our clients looking at? are they rolling over death, expanding, sitting on cash? >> it is our job to be in front of our clients advising them on what we think the economic outlook is going to become and therefore what we think the opportunities for them will be based on what we believe the economic outlook will be. if you look at 2015, it was a year where we were advising clients there were not looking for a notice economic growth, looking for currency devaluations more than revaluation's, looking for tougher economic scenarios, and
a lot of our kleins reacted to that. lower interest rates makes the cost of debt cheaper. we are closely talking to clients about their debt capital structure. should they be refinancing, calling older debt and replacing it with newer debt, what does their capital structure look like? that is an obvious thing to be talking to clients about. when you talk to corporate clients, you talk about what their business looks like in a more recessionary environment. if there is not global gdp growth, had you grow your business? this has been a big corporate topic for the last decade, how can i grow my business without topline revenue growth. what we have seen is a robust merger activity based on economies of scale and cost savings, where you put companies together, and the reason these companies make enormous since being merged is they can they can cut out
duplicated expenses and deliver savings to the shareholder. get rid of all the duplicated expenses you have and to similar companies, put them together, and return this expenses. if you look at the merger cycle, we have had a record merger cycle in 2015, the vast majority of mergers were driven by cost synergies, not growth outlook. i think he was a 2016 look very similar to that. in our asset management business, a very important business to us, growing business to us, it is tougher and tougher to run your portfolio and a zero to negative and just write world. it is tougher to run your portfolio and i dashed in a low liquidity -- in a low liquidity environment. they outsource those activities to us. >> we have run out of time. great talking to you, gary. regardless of the situation, how challenging it is, there is
legal arguments against the u.s. government demands to unlock an iphone. they say the government is overstepping its authority, seeking an "dangerous power that the congress and the american people have withheld." >> apple is fighting this because what the fbi is doing is a dangerous power grab and excessive overreach. and tech giants have worked. they have worked when they fired appropriate court orders. in this particular case, the fbi made a mistake in how they handled the phone. they locked themselves out and are using this case as an end run to break apple. a big allegation against the fbi. at the end of the day, it is a
terrorist investigation. isis is growing. saying that smart phone users like me and you are they ones who are in danger here? >> what the fbi has asked the court to do is force apple to write an update, a patch that will let the fbi break into this handset that they themselves locked themselves out of. don't think the judge understands the technical or financial ramifications of forcing apple to write this custom patch, because it won't be a one time. aple would have to build secure facility and write a new government operating system that would allow them to break into phones, and it will be just one phone. as we know from history, after 9/11, the patriot act was passed to fight terrorism, but if you look at the data from 18 months ago, in over 99% of the cases, the patriot act was used to go
against drug criminals, not terrorists. what i think the fbi is doing in this case -- from their perspective, they are right. they want to break into this phone because their primary mission is to prosecute criminals and safeguard the country. what the not looking at, i think, is the overall long-term consequences of this. they are putting the entire american tech industry at risk. rishaad: that's it for this week's "trending business". stay tuned for the friday edition of "asia edge". ♪
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