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tv   Asia Edge  Bloomberg  March 6, 2016 10:00pm-11:01pm EST

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biggest in the quarter of a century co. >> coming up at this hour, positive on negative, the first central bank says below zero rate are working -- rates are working. certainty -- of they have been warned of certainty if it goes any lower. worries about whether the national finances can take the life in thenew diamond business. we are the hong kong international jewish show at this mondays edition of asia edge. stocks in asia are swinging between gains and losses. investors have a few things to rally around, a better u.s. employment scene, and every thing that is happening china as leaders gather for the end. chinese stocks are rising. this is the longest winning streak in five months. decliningaying is
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4/10 of a percent. after chinese policymakers announced measures to reach their growth target is here, the afx 400 is up highest level in months. a different story for japanese stocks, which fell in the morning session. today, they're down 4/10 of a percent. best three weeks since 2014. thursday, a big decision in new zealand, stocks are not doing too much. i will be back more with -- i will be back with more. has rejected china fears of a hard landing. rule number one with the there has been of a 6.5 percent growth this year,
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and those technologies are facing difficult times ahead. heidi is now with us. heidi? heidi: to put that in the context, there is still a very high growth target. the supply-side reforms would come at the expense of shorter-term growth. this .5 to 7% is the first actual growth rate we've had since 1995. in terms of the other targets that we have been watching out sincehe 3%, for the rough inflation is currently tracking at 1.5%, and a significant fiscal deficit. the money growth is higher this year, and this is a situation base ofe monetary growth is nominally higher.
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we are responding to targets, ises thet really ra liability for contingencies from the government. profitability and contingency when it comes to the government, going into soa dominated sectors, a listen to what we had to hear over the weekend. we will significantly relax restrictions on market such as television, transport, natural gas, and public utilities. privateencourage companies to increase investment and participate in reforms of state owned enterprises, private companies will enjoy the same as state-owned ones in terms of verification, financial, physical, and tax policies. >> what we looking out for? -- are we looking out for? overcapacity in the
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sectors, ranging from field to these- fuel to coal, zombie companies livedeal do with -- could be dealt with through bank restructuring. just how many jobs would be lost? we're estimating about 6 million people would be laid off over the next three years. can we get any of those details about how these supply-side reforms would be of limited? -- would be implemented? the state with subsidized the ods did -- thes sicilies. there is the potential for layoffs in that press conference that he gave today. rishaad: excellent for that. -- thanks a lot for that. george soros and the likes are
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saying they are seeing a hard landing in china right now. what about the responses to that? -- response is to that? of makers areicy responding and saying, if you are one of these bears betting a hard landing, this is rhetoric we have heard from chinese policymakers that came from the head of the top economic planner. hear what he had to say. >> we are certainly able to run china's economy within a reasonable range. we are fully confident about prospects. china's economy will never suffer a hardly -- hard landing. those protections will surely fail. fail.dictions will surely >> was to economists looking at
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china right now are seeing the rising level of debt. is in this new targets with more fiscal spending and monetary base growth expected. 350% of gdp has been growing incrementally, and quickly. we heard from the finance minister, who tried to calm doubts that government debt is only 40% of gdp, much lower than other countries. chance of increasing spending would be targeted on s,g infrastructure target across regional project which is calling unreasonable spending, but certainly bloomberg economists are saying that we continue to have this situation were structural reform lags and that goes up and growth continues to slow, beijing may , buthat 6.5% growth target in a deep structural hole by the end of the year. we had a talk yesterday about china's new five-year plan.
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the screech was saying this beijing's targets were ambitious, but efforts to meet the might detract from reform. >> china wants to grow. despite all of the problems, they still have the ammunition to make it work. i am not too worried about overall growth. the forecast is 6.3 this year. -- 7% next year. the problem is not whether china is in for a hard landing, but are they tackling problems or pushing the problem along the way? the asia analytical md says there is only one surprise from the npc so far. >> there is nothing in the five-year plan that comes as a big surprise. there are really formalizing all of the things that we have been saying all along, but the one thing that did come across, watching the premier, is his
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masterly presentation of a slew of bad news. michael spencer says we may also see important reforms to monetary policy. >> our expectation is that reserves will decline at the rate that they have to the last 3-6 months. has been helpful talk that may be reserves could be higher, and i am much of that comes from. cut is in response to the last couple of months of reserve cut. -- reserve cuts. the balance sheet is growing quickly, and base money is shrinking. we do need to maintain liquidity. >> and that is word from china, or should we say asia. >> talk about your npc.ll mean takeout of the
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the word "develop" was spoken 300 times. >> is hard to see any new narrative of reform coming out of this weekend. toldwe essentially been over the weekend is we may have lowered our growth target, but to get to that point, they are more -- have to win lend more. this is a much less convincing story. this is more about relying on an old playbook. that might be a source of concern for some analysts. >> there kicking that deleveraging camp down the road. what does that mean for growth, will it be achieved? >> that is quite high growth and china isn't going into double digits anymore, but it is going at a healthy clip.
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it appears that is quite a strong country for growth. i think the message is that they are going to hit the 6.5%, but how, through healthy sustainable means, or debt? it is goingis that to be more boring, more binge we are going to shut down these wasteful companies that are not making a profit anymore, dragging on growth, because of the high leverage on balance sheet. the message from china is that they are going to avoid a hard landing, hit the 6.5% growth target, but the question is how? >> we just got the warning from moody's. they cut the outlook to negative, and there was questioning over whether the chinese leaders could actually stop the. -- stop this. the question is where is the
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impetus for reform. issues,arly unpopular session four popular issues -- ,articularly for popular issues there is a difficulty, but a longer-term gain. the balance is shifting towards a sugar hit in the near term, and you've got to ask, what is going to happen down the path for china? we have got to deal with these problems sooner rather than later. >> thank you so much. rishaad: a quick check now on some of the other stores today. turning to the telecom companies. business has been suspended in hong kong this morning following a reuters report saying u.s. authorities are set to impose restrictions on the company, and ge is hit with a live session ct said to have is violated --
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shock in the other direction in tokyo after report that the chief executive will resign it amid the foxconn takeover. denied this onan thursday. foxconn says no date has been set for signing the deal, but both signs are -- sides are preaching an agreement. -- reaching an agreement. businessman are et to be sentenced to death after being found guilty of fraud. the court found enough evidence to commit a billionaire and to others for embezzling money from national a raining oil -- iranian oil. he denies the charges. have a look at the story on her website.
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-- on the website. catch up with some of the interviews you may have missed on bloomberg today. ♪ >> getting more from the markets, japan trade is resuming at the bottom of the hour. however things looking? -- how are things looking? >> we are seeing crude oil expanding gains. $36 per barrel. that is after three weeks of gains. u.s. producers have now cap a cut thef actual -- number of actual rates below us. it is nearing $40 per barrel, and the seeing its longest winning streak since april of last year. eye on iron and four. futures have jumped. the sackw seeing around, and take a look, it is
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jumping 10%, which is also a daily limit. let me take you through the space, because i want to talk about some currencies being affected after china cut its economic growth. the us trillion dollars calling -- is falling 4/10 of a percent. fact, we'reth in seeing it trading at $74. they're feeling the downward pressure. we are expecting china's .eserves to come out any time of course, we're seeing analysts saying there is some stabilization now. >> later on this hour, loading up on loans, we take a look at by chineseoverseas
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companies and why they are raising concerns about debt. after a short break, beijing lays out a blueprint predict what it means for investors, we will hear from ubs wealth management next. ♪
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>> 11:17 in hong kong. these of the stories making headlines around the world. has threatened nuclear attack if the u.s. pushes ahead. the exercise of follows the latest nuclear weapons test and rocket launch. operations will run until the end of april. news says that if fighting breaks out, it will not be confined to the peninsula or the conventional. the search is on for one person missing from a capsized ferry. it is not clear what caused it to sink in what appeared to be
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called waters. emergency teams say forward killed and one remains accounted for -- unaccounted for. paid to theing inventor of e-mail, who has died at the age of 74. in 1971, he devised the application to send messages between computers using the @ sy mbol. the internet hall of fame inducted him in 2012, saying he changed the way people communicate. was a humble and modest man, though not a frequent checker of his own e-mail account. this is bloomberg news. story, theour top fte is in beijing right now. what do you expect from them?
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they say that they are not scored how hard landing, but they are quite forceful about it. >> i think if you look at the empty seat-- rishaad: what is the definition of our landing? >> growth below half a percent. we actually think it is a very remote probability to have a hard landing at this stage. we believe it is below 10%. looking overall, there is no major surprise, you didn't expect any major surprise, maybe there is more of a but they want to target and to grow and have total financial growth. >> it seems like the big headline was the expense of reform. what does this mean for the overcapacity issue? is this going to get worse before it gets better? >> the growth target depends on if they can shift the target
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base. basically, can they use the other side? it will be tough to figure that out, and it'll probably take longer than expected. they've actually had capacity cuts in november and december. they are moving 25% up, and these guys are coming back. these guys are not totally closed down, they are just shutting down production. they are actually coming back on the market. t -- thereill is still huge overcapacity to address. have they got the stomach to employ millions of people, or can they find alternative arms of employment? -- forms of employment? >> they are managing the slowdown very well.
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this rebalancing of the economy started last year, three or four years ago, and now it is more painful because they're seeing negative investment growth. there is higher risk that might -- that we might see something go wrong, and that manages very well. over monthsag it and years, that could actually lead to a rebalancing, and i youk we can see that if look at employment growth and job creation, it is heading in the right direction. the demographics are changing, they don't need as much new chops going forward as they have in the past. angie: so should we be looking more to social services? the government is obviously trying to do reforms, and with
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the yen, as well, there is not much clarity. >> i would disagree. a lot of hedge funds are basically taking a short position within cnh and cny. we're actually stronger today than the beginning of the year. the fears are misplaced. we have actually regained control of the currency, which was lost at the beginning of the year, creating problems for the european market. now they are fairly on top of things, and the market seems to understand that they are managing against the baskets. it is not just a one-way trade, but a two-way trade. the fear for now has been taken away from the market, and are still a few investors at a 30%
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evaluation. at the moment, cnh is improving. angie: coming up, when it is positive to go negative, my the experts welcome decision by some central banks to bring rates below zero. asia edge, back in two minutes. ♪
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>> negative interest rates is good policy according to the bank of international settlements. a central bank for central banks, says that it is not clear how long such rates will remain effective. what this means for the global economy? so far, the rate has been beneficial. >> it is like the industry
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association backing the industry represents. this is the central bank, the overarching central-bank. they have done an objective study that looks at how these negative rates, which we see in places like japan and switzerland, are impacting the economy. that ity have found is is not as dire as the banks would like you to believe. europe,re falling in i'm concerned that it will impact profitability, and there is a clear link here between the two. a study shows negative policy toes are not transmitted money market rates, in the same way as positive rates, and that means the market does not necessarily interpret it friendly, at least for the time being. this is something they think will continue to work, and is a matter of how low you can go, really.
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the key variable is how long this goes. for prolonged amount of time, this could have a profound impact. >> get the latest on japan's reopening, after the break.
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>> you're watching "asia edge", the top stories. emerging market currencies and oil advance. chinese equities extending their gains, japanese shares have capped their best day in three weeks. that kozo takahashi will resign over the foxconn
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takeover deal. foxconn said no final date had been set for signing off. both sides working hard to reach agreement. company zte suspended as authorities set to impose restrictions. ztereport alleges that violated u.s. export controls on iran, shares down 20% this year. the latest on the markets. japan coming back from the lunch break. not have a nice morning session, falling for tens of 1%. we are seeing it come back from negative break, but in territory all morning, so we may not see a big change. falling 6/10 of 1%. one variable and tokyo could be the boj governor expected to
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speak in tokyo. stocks led at what producers,s, power railways stocks, feeling downward pressure. gained 3% a after announcing a stock split. this is a story and australia where the asx 200 seeing the biggest gain in more than two months, energy producers there leading the gains with a rebound and oil, crude extending gates -- gains about $36 a barrel, crude approaching $40 a barrel. and woodsideinto all gaining. in china, it's all about the national people's congress. we have a lot coming out of there.
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are some of the stocks you have to watch, because the housing minister has said china will increase housing supply, not to mention another official said the shanghai property market was overheated. puly real estate losing 9/10 of a percent. china's national people congress has said growth will be the party over the next five years, but do the delegates agree? this is one of the rare occasions that foreign journalists are allowed to report from tiananmen square, 10 days of pageantry known as the national people's congress.
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representatives from the military, cultural spheres, ethnic minority groups, all descending on the nation's capital to discuss the next five years development plan. as avent is known rubberstamp parliament, so we spoke with some delegates to see what they hope to achieve. >> i hope china can build a modern, prosperous society by 2020. i hope our people can live happily. should solidify our work while maintaining reform and opening up, adhering to the four comprehensives put forth by the party. that is the key for a reform. in particular, that is something we should do in the new normal phase. we are looking forward to seeing how supply-side reforms will be carried out. >> i hope hong kong can make use of its advantages and caring out the 13th five-year plan. i hope to take this message back to hong kong. how myally want to know
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hometown can take advantage of the policies under the 13th five-year plan. >> china's state-owned enterprises loading up on record overseas loans as moody's warns ballooning debt is straining countries finances. $50 billion in such financing for its buyout. mchina's loan tell us about the debt problems. a $50y are taking on billion loan, the biggest offshore loan to fund m&a. quite a few state owned enterprises taking on loans to buy overseas assets. enterprises is barring at least 1.4 billion euros to buy a german company.
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the state owned enterprises ,ector taking loans for m&a exceeding last year's total, which was a record. >> we heard last week that graded the down outlook on 38 state owned enterprises. cited the height debt levels for the state owned enterprises sector when they revised to a negative outlook. they said the highest state owned enterprises sector leverage will create a further slow down for china's economy come a because more funds will be diverted to servicing debt. some of the state owned enterprises are too focused on overseas expansion right now, not paying attention to their balance sheet, which could mean risk afford that investors down the road. >> that's a big concern many
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people have coming out of the npc.\ do we any clarity on how the government will be dealing with zombie enterprises? weekend, they reiterated their commitment to cut overcapacity in the coal and steel sectors. it also said they will reform zombie companies proactively and prudently, but economists are saying it is important, but the progress might be slow because of the potential risks to social stability. >> that pace of reforms is the question. thank you so much. tracking,ies we are shanghai's senior official says the property market is overheated. the party chief says he will strengthen housing regulations without giving details. residential home prices in china top-tier cities have surged.
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new home prices in shanghai jumped 2.2% in january from the previous month. xiaomi says it has no current plans to go public. -- playedy was bowing at $45 billion following a funding round to help it secure more than $1 billion from investors. is not onys an ipo the agenda for the "time being." shorthells -- shares fell last year, but plans to introduce a high end device. money managers shifted and time to reap the biggest weekly advance in five years, prices rebounded 18% since january when futures were trading at the lowest since 2009. optimism running after mine owners announced cutbacks to help erode the global glut. investors also betting that a stabilizing global economy will lift the man. china's slowdown on the
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falling commodity prices have taken their toll on a straighter, but there are signs demand is coming back. talking with the minister for resources and energy earlier, and he tells us where the bright spots are. an increase in prices in recent days, for example around iron ore, but what has been the major factor in the lower prices across the resources and energy spaces has been the increase in supply, not as much as the changes in the demand, so eventually demand will increase and meet up with supply. that is the result of what we with growing demographics in the region, urbanization, population growth, more people in the middle class. about the chinese economy, for example, 6.8% growth in 2015 is equivalent to growth of about -- china
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continues to grow strongly, i'll be at off a bigger base. when you look at india, 300 million people without access to electricity or little access to electricity, and hundreds of millions of people moving from the regions into the cities, so india will be a key source of increase in demand as well countries in southeast asia like vietnam, like the philippines, like indonesia and the like. we are pretty up the. -- upbeat. rishaad: how much do you lay this on the doorstep of the big mining conglomerates? iron or, for example, production has been ramped up, creating a supply glut, forcing prices down. in a funny sort of way, these mining companies have been cutting their own noses to spite their face. -- despite their face. >> this is a free market, so we
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have not sought to intervene. you are right. there has been a massive increase in supply capacity of iron ore. australia is producing three times as much iron ore today as it was a decade ago. this is a result of greater investment when we saw higher prices and encouraged that investment, but also greater automation and productivity. tintoies like bhp and rio are at the forefront of innovation in this sector. remotely running trains and drilling equipment and trucks from a perth headquarters 1500 kilometers away from the mining itself. advancementszing and innovation boosting production and supply capacity. the minister for resources and new g to us exclusively from melbourne. whatg up, japanese shares,
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is the government doing to boost confidence? that and more win back in two. edge"
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>> it is 11:43 a.m. in hong kong. these of the stories making headlines. the man who found debris for 370 spotted a 40 square centimeter square of metal in almost exactly the same spot where he found another piece in july. the new part is similar but look smaller and the barnacles. the agency leading the search is "highly likely" the plan will be found by july. a woman's body found in an elevator in a chinese city after power supply cut eyman and screws. ony cut the electricity
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january 30, but did not return to fix the elevator and tilt march 1. the 43-year-old woman lived alone and starved to death in the elevator. people have been accused of manslaughter. a hong kong publisher critical of china has returned to the city, having set to met the police and asked to drop inquiries into his disappearance. he has declined to provide any details about what happened. another man returned to hong kong on friday. they have been investigated by chinese authorities. powered by over 2400 journalists and 150 bureaus around the world, this is bloomberg news. rishaad: right, joining me now, a breaking story about china planning a crackdown on loans for down payment, so people can buy property and furnish it. lenders.l bar
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this is just coming through. will -- banks will refuse mortgages if they detect that loans are being used for down payments. >> if you look at the housing , probably overheating in shanghai, huge demand there. there is a serious downturn, still. >> exactly. they want to manage the risk of the balance sheet of the bank and support the property market, because it is an important part of the economy. they actually think china will only go 6.2 percent, below the official target. the adjustment process takes longer than expected. >> how long do you think it will take? they said they were going to do this push for urbanization , housing for migrant workers. that will take some time to see that shift and reduction in inventory. one the biger
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concerns of the homebuilders, the supply is tight, so that could start new projects. up cities, demand has picked . tier three cities, demand is lacking. wants to increase over the long-term. that is deftly one of the keys they have to get right. it is a tough reform and cost money, that's why it moves slowly. it is one of the key reforms. >> do think the bond market and china could suffer? we're seeing this cycle back to property after the boom in stocks and bonds are, now back to property. >> it is one of the risks. the bond market is still working quite well at this stage. up toried to open it international investors, one of the key steps they have to take. it is the same on the equity
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side, so working very hard to have the inclusion of asia into the msci, and doing the right steps to attract international investors, but certainly a risk if this housing boom in to one is continuing, less money available for the fixed income markets. >> so many chinese hold their wealth and property or stocks related to asset classes. are there any troubled spots with the housing market that investors should be steering clear of? what about all these other places where there are millions of people? >> the investment cycle is not over yet. that's why we think growth will be below the target for this year, and even for next year. the property inventories adjustment cycle last another 12-18 months, one of the key
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risks for the economy. at the financial markets and equity markets, a lot of this risk is priced in, so we are overweight china. we think it is a good trade for the next six months. i don't know if it is a good trade for the next 2-3 years, because there is risks. the government wants to support growth. they are doing it. the hard landing fears are misplaced probably. the equity markets are moving up. >> were seeing a property boom in japan with the olympics. japan declining today, but we saw a recent rally. where do you see equities they're going? are you still neutral? >> we were overweight, but cut it back to neutral. we are underweight the japanese yen versus the u.s. dollar. the boj meeting is coming up.
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we think they will do more. they have to do more. they will go more negative interest rates. we think the currency has to weaken. rishaad: many economists are they gohen and not if further into negative terrain. when they did it, we saw a massive yeley with the yen -- a massive rally with the yen coming up, totally counterintuitive. look at the japanese yen, yes, negative interest rate cuts, the yen weakened quite a lot, but then you got comments out of the u.s., strong u.s. dollar, strong economy. we took our growth targets down from 2.8% to 1.5% because of the stronger u.s. dollar, the
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commodity complex starting to affect growth, and the market has not anticipated that. we saw the rally in the japanese yen, but at this level we think it is an interesting trade to be short japanese yen. we also see the u.s. economy is target isr growth only 1.5%, but we don't think it will fall into recession. jobs, a surgeon jobs, hiring, wage growth negative. what does that mean for march? , it is stillse june. we do not think the rate hike will happen in march. you have the wealth effect from the equity market rebounding, but it has impacted the basic consumer sentiment. we also see the lending standards because of this
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volatility and the credit spreads are moving up. despite theghtening fed not acting so far, so we think in march they will stay on hold. they still sound a bit hawkish. probably come in the second half of 2016. rishaad: with the job creation, you're meant to get some wage inflation, aren't you? kind of counterintuitive again. the economy does not seem to be working properly anywhere these days. >> we had some wage growth last year, so it is one month where we see declining wage growth. we don't read too much into it. we see inflation is coming back. inflation is slowly moving up. one of the big sectors that was driving growth, responsible for some growth in the lower paying
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jobs, was the commodity sector, and now with the crunch in oil dollar -- strong u.s. don't forget that if you are a producer of oil and energy in brazil, the costs have dropped so much because of the currency. it did not happen for the u.s. producers, so they are pushed out of the market and a probably slows down the economy a bit. >> you can talk about the strong dollar. do you think the economy is resilient enough to whether through? >> yes, but it seems they cannot afford to have a much stronger dollar. we saw some verbal intervention from fed members, one of the key reasons we think the fed is on hold this month. they basically have to see an increase in profit margins. rishaad: thank you very much. coming up, the million-dollar sparkle.
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win "asia edge" returns. ♪
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,ishaad: back with "asia edge" the man behind the most expensive piece of lingerie in the world. he says the dimon industry -- diamond industry is under pressure. brawl priced at $11 at $11 -- bra priced million. i would not want to wear that. ♪ >> the diamond and jewelry industry goes through different cycles impacted by the economy. in the last two years, it has been difficult. i think it will remain difficult this year. it is the first time we are
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going to a global slowdown where there is not one market that is thriving for jewelry. has china's slowdown affected the industry? >> we are seeing a polarization where volume is happening at lower price points. the in between is where people are having difficulties. >> how much am i holding now? >> you are holding $13 million in your hands. oh, my goodness. what is the difference between a good long-term investment and one that is not so much? >> you want to go for the rarest possible gyms. a colorless, the best possible grade, free of inclusions. mother nature produces diamonds, but very few are pure. compared to one next to it, although smaller, there is a int of yellow, and therefore more common.
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i would clearly go for the 50 caret. i know you cater to middle eastern royalty, but given the plunge and oil, how has their purchasing behaviors change? >> people realize the markets are changing, that oil prices may stay low for a while, and therefore people will come back to different asset classes. i think this is one of the best asset classes you can invest in. why? small, portable, high-value. >> i know you make these s fortional fantasy bra victoria's secret. who buys them? >> we sold one. it is more of a collectors item. in general, we make them for beauty, for the show, and we keep them. still inrom 2015 is
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our possession, and will probably keep it in the museum long-term. rishaad: that is it for this edition of powered by over 2400 journalists and 150 bureaus around the world, this is bloomberg news. yvonne:
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