tv Bloomberg West Bloomberg May 30, 2016 11:00pm-12:01am EDT
with industrial production and job numbers. production fell more than expected on a weak export market. and a bit short in china. the last bearish bets were so high, that bull markets turned into a $5 trillion rout.; also, version australia chairs take off as they take the stage. it would take a look at why the billionaire founder is on a global buying spree. and i am keeping my eye on what's happening with your money this tuesday. it's the last trading day of may, and despite what will be a monthly loss, it is shaping up fairly decent, a fighting chance, across asia-pacific, especially midday. the markets that are lower are off the bottom. what do we have? china is the outperforming market -- 2%. shanghai composite, other
metrics, also showing very sharp gains. the index gaining the most since march. the story is coming down to speculation that the msci, the index compiler, will be including a shares in the reaching of these indices. they includewon't it? investors are choosing to focus looking at how these brokerages that financials trading on the chinese markets. currencies, the past four days, what's been happening in the next few days -- at the moment, trading sideways. traders are still trying to reprice the fed rate hike. dollar-yen in the meantime -- there we go, back above 1.11. call it flat. we have seen dollar strength for the most part in may, a rally into this morning. a bit weaker midmorning, and
some of these asian currencies are just getting traction. that takes into commodities. have a look at where we are. mostlyger picture is positive but oil prices are very much in focus ahead of the meeting. oil prices have rallied, the longest run of monthly gains in a half decade. certainly the question is the underlying economics. before i go, a very busy day for economic data. japan and south korean factory output, i won't give the details, but relatively popular for japan, discouraging. the key data point was building approval, surprising to the upside with signs of life. it's doing enough to lift the aussie dollar, rallying the most in four weeks of of $.72 usd. we are poised for monthly loss,
but still a decent session so far. >> thanks. version australia shares getting boosts in sydney this morning; currently, more than 7% higher. this is after the airline announced that china's hma would take a 13% stake. joining us in angus, live from sydney. who wins and who loses from this deal? angie.
+++ if you look at this airline, it is in the middle of a q and analysts are expecting it may need as much as $1 billion of further funding and here's h&m coming up with 150 and they can sign up for whatever they say. it's almost a blank check from one of their biggest shareholders. angie: yeah. not too shabby for version australia. but what about hma? it has been monetary recently. what else has the company been buying? >> that's right. this has been an incredible buying spree -- air france said yesterday it was in talks to company, its catering and just last month, hma bought a swiss in-flight catering company for $1.4 billion. hma has quite a lot of asset worldwide, so this is quite a small addition. you really have to ask -- is this a great return on your investment? virgin australia hasn't bunch, that hasn't
been a great investment for shareholders. angie: maybe things will turn around. at least that's the hope, investors buying in 7% higher. but what about virgin's biggest investor? they seem to be left out of the loop. >> that's right. this is fascinating. virgilmarch, you can see australia's biggest investor was 26%, saying they might sell that stake, and pooled its representatives in australia's board. but since then, virgin australia cut this deal with hma, didn't tell them because they were not on the board. this effectively removes one potential buyer, maybe one of the few buyers, for air new zealand, and about the shares directly from the airline. speculate that they are not very happy about this deal, and we aren't seeing anything about it today. angie: certainly cannibalized potential buyers for their deal. angus, thank you so much for that, live out of sydney for us.
we will be speaking to the man himself, virgin australia ceo, later on in this show. that interview is coming up in about 25 minutes, at 11:30 hong kong time. 1:34 you watching in sydney. stay tuned for that. let's take a look at some other stories making headlines right now. saysaft leasing company -- its hong kong ipo is nearly 40 times oversubscribed. the company is scheduled to debut on wednesday after losing more than $1 billion with an initial offering in asia's second-biggest ipo. malaysia's troubled investment fund has paid $35 billion on its debt. they had earlier vista to payments on other securities as they squabbled with the naboo dobby investment. the fund is being investigated around the world.
1mdb has consistently denied any wrongdoing. goldman sachs now says it sees a 70% chance that msci will include mainland shares with its indexes in june. it stems their effort to curb trading halts. meanwhile, alibaba and others will have their full value added to the indices from the close on tuesday. the shares have been somewhat of a haven as they outperform the china index. china's equities are once again in the crosshairs of short-sellers. short interest in one of the biggest trappings of mainland stocks surged with low levels we have not seen since last year's market rout. haidi, here we go again. haidi: it is certainly fitting to look that way.
-- it is certainly starting to look that way. it is not that easy, given the clampdown that we had late last year as they tried to stop shortselling altogether on chinese stocks. , this is what it is showing up here, tracking domestic chinese stocks and surging, ticking up to 6.1% last week. you can go to top china on your bloomberg and there it is. this is the highest level it has been all year, the last time we were anywhere close was in july and august, the beginning of what was justified bearishness because we enter that market that turned into the $5 trillion rout. driving the pessimism. -- the question is what is driving the pessimism. that has been trading sideways all month, which most analysts
suspect is due to a support on msci on whether to include chinese indices into their global benchmark next month. in the meantime, there are storm clouds starting together, as you take a look at the yuan it is back in the spotlight, going for the sweet spot it has been sitting on; strong against the dollar, weakened against its basket of competing currencies. that is coming to an end over a new space of capital outflows. may, is worst% in month since its august evaluation here. certainly that was almost cluster five-year low yesterday; this will be further exacerbated by the highlights of the fed rate hike in june or july september. that is why they are setting it. potentially they are trying to take the pressure off ahead head
of that rate hike that could come through. ubs is saying they are piling it on in anticipation of a move from the u.s. central bank. investors are likely hedging of their positions using these etf to go short on china. china financial holdings are getting on even steeper declines as the u.s. continues to come under pressure. it is down 20% your today, still the worst-performing market. when you look at valuations they look overvalued given what corporate profits are setting out for china. angie: and of course we need to focus on the yuan. it is interesting that we have some insight now into how all that important to fixing is set. haidi: is interesting timing, and there is information coming china's-- this is largest financial conglomerate,
revealing detail about how they counted every morning and saying that essentially 14 contributors are taking into account over the movement in boston current use and also the dynamic supply and and thesethe market, contributors are essentially all market makers and they conduct a majority of the trades to shakeup market manipulation and then get rid of some of the highest and lowest. the pboc said just last week that it is trying to increase two-way flexibility with basic stability, making it more market-based while retaining the stability. that analysts we have spoken to, ing saying that despite all these efforts and these reforms, this mechanism is as much of a black box as ever. the bank of canada's haitian fx saying she stopped care about the fixed when there was a sharp devaluation. angie: thanks.
coming up, from silicon valley to hong kong, here from the founder of one company that has invested in more than 1500 startups across the globe. that's coming up after the break. and the matter of timing. janet yellen hasn't given much away, so we will be asking our next guest to read between the lines and pick a date. asia edge, coming up next. ♪
angie: 11:14. day other stories making headlines around the world. a series of bombings in baghdad has killed at least 24 people. it happened in a northern suburb where a suicide bomber crashed car into a checkpoint next to a shopping area, killing eight civilians and three soldiers. motorcycle exploded inside the city, killing three and wounding 10.
been held by the islamic state for two years. the parts in seoul say north korea tested a rocket that appears to have failed. the joint chiefs of staff say that the missile was filed around dawn but went wrong. it is estimated to have a range of 3000 kilometers, which would make quality potential target, but there are worries over accuracy. disney say it may take legal action against china's new park. city in theme there were characters in a park that did not represent the company. shanghai disney is set to open in two weeks time. -- boss has said powered by over 2400 journalists and 1150 bureaus around the
world, this is bloomberg news. angie: asian stocks are trending their worst monthly drop since the january rout thanks to global economic optimism despite a looming fed hike, that is this region really ready for tightening in the u.s.? joining us is mark mcfarland, asia's chief economist. are we ready? >> to make we are. -- i think we are. we had a meeting, if you remember, where they posted a rate hike in december -- i think it is pretty much factored in now. angie: capital flight is always a concern. we started when there was a temper tantrum, i guess, back in bernanke days. that certainly hasn't changed. >> i think the temper tantrum was slightly different in that really did catch everyone by surprise. i think the markets have had a long to digest what's coming and it hasn't had the same effect it did in 2013 of 2014.
angie: where is that money going to go or stay? >> we think it will stay because the reason for the fed raising interest rate is because growth's getting better. it's not necessarily because of the inflation problem as it was in previous cycles. if you get the growth, you get capital flows coming back which leads to higher kurds even better returns for investors. angie: but that's the thing. it's growth in the u.s., but that is enough to lift the global economy? we are seeing that growth translate here. >> the weakness is europe. as au think about europe retail space for asia next sports there's a lot of weakness in europe and that is one of the reasons why asia has failed. but ultimately the u.s. consumer has always been a major driver and the chinath, market is nowhere near as bad as people have made out. those two factors should ultimately lead to much better
things.if you were a betting man angie: -- angie: if you were a betting man. [laughter] angie: where do you think the fed will go in june or july? >> it is our view that gdp will probably move in july. i think the data isn't there yet foraging move, in july is probably the more likely. anytime after that is too close to the u.s. elections. angie: and china itself has indicated that it would prefer -- and white is a need more time? >> i think there is a little bit of anxiety in market over what's happening with the currency policy in beijing. if you look at the movements of the dollar recently you will see it moving higher. it doesn't really want to have the dollar moving too quickly, in case there is a confusion in the markets about what it policy is. to your original
premise, that this is a good thing, the fed is raising rates because the economy is better -- europe, japan as well, they are looking at not only stimulus but negative rates and extending even deeper. >> i think japan is probably passed the point where monetary policy makes a real difference. if you look at the statements by governor kuroda, he is looking for fiscal stimulus, at the government after the elections come through because that is all they have left. angie: i guess we're probably going to get that as a response to the earthquake. and also word now that likely we are going to see a reprieve and not get the sales tax hike. >> it is tough because they do need it. they have a long-term budgetary problem is debt problem they need to finance in this
population is getting very rapidly older did you have a q1 surprised that there's not much in the numbers that is encouraging. the likelihood is that it will probably not change the tax rate even though they need to. angie: yeah. ultimately, what are we going to see in terms of central banks around the world in response to the gradual rise -- which in this day and age is very hawkish? we are going to see that -- what you think the response is going to the. i think the likelihood is that you probably won't get too much further stimulus from other central banks, hoping that the pickup in u.s. growth helps them rather than men trying to depreciate their way out of problems. the likelihood is that you will get less of that policy divergence of people have been talking about because ultimately that would lead to a strong
dollar and a selloff in commodity prices which as you will remember as its own problems in a high-yield market. angie: it certainly does. let's see what happens if we get there again. stick around; we have a lot more to talk about. coming up next, we will hear from the former energy adviser to the prime minister on why he thinks there will be no action of the opec meeting this week. stay with us. ♪
>> it would be great as a higher oil prices, $55, $60 by the end of the year, but it is very near term, we have about 1.6 million barrels of oil off the market because of exactly what you mentioned -- nigeria, canada, iraq and columbia. there is a lot of oil off the market, which come back quickly. if they do it will be a fullback of the price temporarily. we are heading toward a balanced by the end of the year. rishaad: you are looking at $50, in range of the moment. we are getting this canadian oil back. iran is wrapping up production. is there a situation like the start of this year where supply outweighs demand?
actually, arabian productions are at pre-sanction levels, and one of the reasons they notice any pullback in price is because other oil is off-line. the demand is so strong that i think most people underestimated. demand growth is 1.5 million barrels per day, which is twice as high as it was in 2014. almost as high as it was last year. the chinese slowdown in the economy hasn't done much -- almost 400,000 barrels per day. the demand is strong and supply in the u.s. is falling -- lots of oil is going off-line because of its short-term accidents or political issues. the market is pretty tight. rishaad: at what point does shale make an impact? $50 --ink once we reach
and we are almost there -- anywhere between 45 to 55 shares begin to come in, but they won't gush in a million barrels per day. what we must see our trips and drops -- they won't be coming back in a wave. if the price is go to $200, then yes, they will rush in. but in this range of pricing, it will be coming in slowly, in measured ways. the founder and chairman of energy analyst. let's check in on markets. let's head over to sydney, where it is a bit of a foggy day in sydney harbour. it is down one third of 1%, and we are seeing asian stocks on the last trading day of the month -- the biggest monthly drop since january, gains the central business district and
>> asian stocks are paring their worst monthly loss since february. the dollar continues to dominate the end after the threat of higher u.s. interest rates. there was missed economic data adding to hopes that the japanese government will delay a sales tax price. shares in shanghai are headed for their biggest gain since march. aldman sachs and since he's 20% chance that msci will increase mainland shares to its indexes, up from 50-50 last month. value will cut their full from the close on tuesday. your postings had been something
of the haven, outperforming the shanghai composite. virgin australia shares are higher after china's group says to increase to% 20%. they run more than a dozen carriers in singapore airlines says they are cutting their stake in response. back in march air new zealand said it may sell its entire holding. , powered the headlines by 2400 journalists in 150 bureaus around the world. let's get the latest on the markets -- china is leading the way. it's a rare occasion that the morning session in china -- it is rare that we see the index up by this much. we are looking about 6% in the morning session, every single sector group is higher and if
you dig deeper we are looking at the brokerages leading the gains. there is speculation in the market that at some point with msci rejects, they might just include eight shares and that will of course trigger a lot of you couldtions -- argue both sides. there is an argument to be made that it is time to include them in at the same time some analysts still call this market broken. .ut it might not in any case it is fairly clear looking at how the market is buying up this index -- it is clear where the emphasis is. hr is looking like this. you look across a lot of these indices in asia and certainly we
hit multiweek lows yesterday -- we are still seeing declines but at the moment, despite what seems to be a monthly loss, it is still shaping up to be a fairly decent shape up. angie: let's check in on virgin australia shares right now, after china's largest private airline operator agreed to buy 13% stake. it squared off its earlier gains and is leading. let's get more on the deal with virgin us trillion, ceo john borghetti. thanks for joining us/ y h iwhy hna? >> i think they are a perfect partner. it opens up china for us -- china is of course the biggest source of inbound tourists for australia and has been growing
at a fast rate. it is now over one million that come to china every year, growing at a rate of 18%, as it has been. it's a very important market for us and they are an important and good partner. angie: so then why is singapore airline sharing at stake? -- sharing its stake? >> singapore airlines, a very important parlor as well, and we enjoyed strong relationship with them, but with the placement of genetic, it will drop a percent -- just a bright byproduct of the mathematics. angie: air new zealand was left out of the talk. why did you not let them know?
>> we did lock them out. it was a decision that the board took -- it was a good aoposition with access to large market, but in new zealand i am not on the board. soy reside some months ago clearly they weren't privy to the decision. angie: any interest in and air new zealand stake? >> sorry, what do you mean? that --ell, it seems they did express of march that they wanted to sell their stake in virgin australia and that seems to have brought in age in a on its own. a the onlyn is hn interested party, or are there other people interested in the air new zealand stake? >> ok.
well, i think there are two different things. firstly, the air new zealand stake and what happens to it is entirely up to air new zealand. we don't have say or control and that stake. in terms of how many people have discussed the issue about china -- obviously are not going to talk about who we talked to and don't talk to but what i can tell you is that the proposition in partnership makes absolute is the proposition that the board has endorsed it consequently we consummate it today. angie: have you heard from your other partner, what they had to say about it? >> yes, certainly. on thely, with singapore board already, they are both hna. supportive of each an
they are all very good partners. angie: all right. a lot of new cash, fresh funds from virgin australia. morgan stanley recently said you needed a further $700 million aud. what this injection, what does it enable you to do in terms of future strategy? well, there are two things to separate. the first is that the company has been going through a review for quite a few weeks and months and the outcome of that capital review is not yet public. when we do decide on it obviously that will be communicated. quite separately to that, we have a situation where we have a strategic investor that comes
with a very important strategic alliance to the largest inbound marketing australia. the two should not be confused. apparently, as you saw from the press release, they said that whatever the outcome of the capital review is they will support it. angie: what does a future version australia-hna deal, now that we have a big stake in this, talking about the china rise of tourists, what kind of rout can we see? what kind of changes can we see as a result of this? >> yeah. so what you will see is a very similar alliance and structure ,o that we had in singapore where we will cochair on each
other's domestic legwork and jointly we will court the subject of regulatory approval. see is a virgin australia plane operating to china, the destinations we have not announced but clearly some of the more prominent destinations like beijing will feature. angie: how does this set you up against qantas and this increase in competition for passengers and increasingly crowded skies? well, i think it sets us up very well. we have a very strong partner in hna. they have partners in hong kong and china, and they have interest in nine or 10 airlines domestically. it is a huge distribution
network and it will set us up well to compete. it's a good thing for australian tourism, for competition, and certainly for australian aviation in particular. thank you very much for joining us today on this latest deal. thanks so much for that, life out of sydney. coming up, india's finance minister insists that poor performance doesn't mean a slowdown is on the way. our exclusive interview, next. ♪
not a sign that investors have lost confidence. >> i don't think that will be a very accurate analysis. until august last year, the rupee almost kept pace with the dollar. that is only august last year when there was a lot of instability in the chinese currency that we were also impacted. since then, after the initial shocks, we have been reasonably range bound. of course the strength of the rupee depends on the strength of how much foreign investment we are able to get into the country at self, which has been reasonably large and therefore the reserve bank has been watching the situation and has been maintaining a balance between a reasonable strong inee and a realistic rupee
which we can continue in the current export environment and global trade is not doing well anywhere in the world. there is a lack of confidence there with people having gone to the r.b.i., working together. tell us something -- how close is your relationship? will he be reappointed in september? well, i have repeatedly said that these are areas where we comment to the media. as a government, we have always regarded the r.b.i. as an important institution and they have a very good level of dialogue and we continue to discuss all situations and decide areas that fall within our jurisdictions. i don't think the government have any issues with each other.
they are working quite closely and we have the monetary policy implementedst year, some major reforms this year and hopefully by the end of this year the monetary policy committee will come into effect. that was the indian finance minister speaking to rishaad salamat. the search continues for ages and search silicon valley. could hong kong be a contender? we will take you back to the conference, where yvonne man is standing by. some people know with figure two about startups here. yvonne: that's true. our next guest is the owner of one of the most renowned start of investment firms, living up to his name and backing hundreds of start of the year.
joining me now is the founding partner of his own startup. great to have you here. we have been talking about this global funding chill. asia in particular sort of saw this slow down. >> maybe in a few places. yvonne: what do you see as the reason behind this? >> well, i think there are a few factors in the u.s. where there .as a lot of capital in china it was exasperated even everybody wasnk really hoping for the next and i think with the public stock market coming down. other parts of asia are still pretty active.
we are seeing a lot of activity in asia and india as well. there are a lot of investors slowing their investments. >> i think it is to their benefit to say it is is kind of a self-serving story. we're not planning to know down at all we will do six or 700 this year and there are certainly places where valuation is changing that there are a tremendous amount of town center only growing internationally in emerging markets. 50%,e penetration, above you are going to see an explosion of opportunity. yvonne: investors are not as easily convinced anymore. what do you look for in a startup? is it all about performance now? >> it is pretty basic. we look at companies we think
have a good chance to make money and scale up. we are mostly focus on transactional stories. we are definitely seeing more education, probably health care as well. i don't know. there are a lot of people who get excited about the new technology. i frankly think the stories will take a little bit of time, but there are a lot of things that provide great solutions for people that are good opportunities to make money. in your eyes, is there any type of tech bubble that could be moving here? >> i think a lot of that has taken care of itself. there will still be a lot of investors who want to get into it and there will be competition for resources. we are investors of the earliest ages so i don't think there is
.s much going on definitely in the unicorn market valuations were cut in half or where they were last year, so that is going to slow down the activity a little bit, but they are still great companies producing great goods and services. yvonne: your business model has been seen -- >> like to think of it as a quantitative approach. i think the rest of the markets are the ones who are gambling. there are very few companies that become unicorns, probably only one or 2% get to the unicorn. when you only have portfolios with 20 to 40, you are betting. when you have a portfolio 500 it is a little more predictable and you will attorney to 5% or 10%. yvonne: i appreciate your insight. joining us from 500 startups.
angie: welcome back. joining me now, we have mark mcfarlane, asia chief economist at udp. good morning. china -- fixing or broken? [laughter] >> you can't be broken. you still have your currency. i think they are allowing the renminbi to move along with the dollar. i don't think there's too much else going on. a lot of people are looking for something, but in reality, if you look at the trend of the
dollar going up and down, you can see dollar has removed the -- earlier, i think there is an element of that, which is probably why they are looking for smaller movement in the fed and were telegraphed one, priced and by the time it happens. the fixing rate is moving very slowly, this is not like brazil. does it even matter? haidi: it is another five-year low, but it's the optics of it when it comes to china, isn't it? >> i have said this a number of times -- if you look at the real exchange rate, the chinese currency is very strong. if you look at the bas numbers, it's probably the strongest currency measured on their metrics. there is quite a lot of room for the renminbi to fall from a high level. david: you make the giant chasm league and extrapolate to how
much this will re-stoke possible outflows, and what will that do to the potential domino effect? >> i think the issue -- one of the things that will give us a a lot of this has been repayment of bonds issued a couple years ago. is not necessarily a capital flight -- there's an element of repaying -- david: so well is fairly strong -- >> yeah. you had that going on at the same time as the change in the currency policy. tos quite difficult disentangle everything going on i think renminbi, but there's a long-term issue which is quite important. as interest rates fall in china, and as the population starts to get older, we have to start doing what australia did in 2000, to open up the saving markets to overseas investment. they need to allow the currency to find its own level, and
ultimately, that will mean the currency will fall. david: what they do now if they just throw on capital controls. >> i think the key point is that if you have capital controls, the only way you can have a crisis in your country is a banking crisis. if you don't have capital controls, then it can become a much bigger crisis. capital controls secure your economy. angie: but you have to choose between a rock and a hard place, you would choose -- >> eulogies capital controls, because it gives you only one trigger. haidi: so why are win would china change anything? >> i think you will see them open up slowly. if you want -- haidi: they say one thing and do another. >> most countries do. think you can clearly see
that there is a need for a much more internalization -- internationalization. that pension requirement means you will ultimately see weaker currencies but in the short-term it is interesting because if you look at the strong value of the renminbi on a trade weighted basis -- you want cheaper imports and commodities rather than having an export laden economy. they are the good place at the moment. angie: how long can the last? in the sense that we have a stronger against the dollar, weaker against the basket, and goldman saying that it's not going to last with further downward pressure, particularly as the fed begins to move. it's just going to be this slow -- >> right. two issues here.
there's the interest rate you ever fear. if that is raising rates slowly and growth is accelerating that there really isn't too much of a problem. if the growth this week and there's an inflation problem as rates go of quickly, you will see the remaining selling off. our view is that you'll probably get the first of those, even nine pats for interest rates, one or two. angie: mark mcfarlane, good to see you. we are grateful. ubt, chief economist of asia. bloomberg markets and middle east coming up at the top of the hour.manus cranny is standing by in to buy -- what you have? manus: we have one of the biggest telecom players in thailand. and we willn in, get to grips with what's going on with one of the most demanding markets in the middle east in terms of data, what's
going on in that world, how does this man see vision 2030? ceo. the we also caught up with the uae , 50 was old and passe and 60 is the new 50 in terms of oil markets. the saudis have arrived in vienna. this opec meeting is one with a bit of slacker in change. there is a new man in town and he is going to put his stamp all over this meeting. we also catch up with the latest changes on netanyahu's government. what does it really mean for the middle east politics? that's a state of play. a lot of telecoms, oil, looking forward to it. angie: and we are, too, of course. thanks for that. we are watching for it. that's it for us on this edition of "asia edge." a lot more coming up in the
juliet: -- manus: oil is headed for its longest stretch of monthly gains in five years driven by output from saudi arabia and canada. hsbc starting a debt management office in starting the kingdom's first management sale. manus: united arab emirates is growth will beat the forecast this year and we will hear from the economy minister.