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tv   Daybreak Asia  Bloomberg  July 17, 2016 7:00pm-9:01pm EDT

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♪ it is not :00 a.m. in sydney, australia, the first major open across the region. china june property prices later this morning. this is "daybreak asia". ♪ 6000 arrested, almost 300 killed, turkey's president promises a new era after the failed military karen. e for astors brac
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tumultuous session on the stock market. arehy china's fund managers loading up on short-term paper from the country's lenders. live in cleveland as the republican convention kicks off. donald trump looking to sell himself as the next u.s. president. >> coming to you live from bloomberg's asian and u.s. headquarters. 7:00 after a lot of questions as to how asia will react to the coup attempt in turkey. >> that's right. relatively unscathed so far, with the exception of the yen. we did see a rush to the safety haven there. new zealand kicking things off it comesooks flat when to stocks, but the kiwi dollar, we just got that cbi, slightly creeping up in terms of inflation.
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we are seeing a sharp drop in the currency. sydney futures pointing to a soft open, modest declines. we are also waiting for chinese property prices. to close markets, japan for marine day, also a public holiday in thailand, so no trading there. that is an early look at the region this morning, but investors waking up to a different world given what has happened in turkey. we did see a bit of a knee-jerk reaction on friday. be how important will wall street it set up for tomorrow morning. ,f you look at s&p futures futures opened at 6:00 p.m., and you can see that it looks like investors have pretty much shrugged off any kind of fears related to what happened in
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.urkey however, it is still early going in the trade, so we will see as we continue to watch the developments there. in the meantime, let's stay with turkey. turkey's government has been trying to reassure investors after that failed coup with the central bank promising unlimited liquidity. drop more than 4.5% on friday, but it is bouncing back. >> it does look like it. at last check, bouncing back 2% from its friday close. friday,ropped 4.6% on down by the most in more than eight years on friday as the lira had another two hours of trading to go before it closed when the coup happened. we saw an immediate reaction in the lira, making a bit of a
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recovery today, part relief rally, and some investors seeing a by opportunity there with the slump in the lira. lira --sachs sees the saying they are seeing it at around the same level in 12 months, but also say the risk to th eye and -- unchanged. level of political risk will likely remain elevated. that is a concern into the long-term. >> what have turkish authorities done to help soothe investors over the weekend? >> the central bank has offered unlimited liquidity and will
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support the layer by removing limits on foreign currency that commercial lenders need to use as collateral. oil and gasid the markets imports and exports have not been affected by the attempted coup. nott seems like there's much impact, regaining the losses we saw in the lira, but you mentioned perceptions of the elevated geopolitical risks. the situationhat has been recently. turkey has seen a pickup and foreign inflows. billion versus $3.2 billion in outflows a year before, so a stark difference there. on turkish five-year local bonds dropped more than any other emerging market economy.
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with this political uncertainty, all of that unraveling, all the efforts of the government they secrete perhaps fizzling out. >> could they drag down the rest of the whole asset class and the emerging markets space. first word news now. president obama has condemned the shooting death of three officers and baton rouge and wounding of three others as the act of a coward. louisiana police say a suspect has been killed. two weeks ago, baton rouge killed an african-american man, followed by the killing of another black man by minneapolis police and the murders of five dallas officers by a black gunmen. have made further arrests over the bastille day truck attack that killed 84 people. another 85 survivors are still
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in hospital, 18 with life-threatening injuries. 100 26 police and soldiers were on patrol in nice. the so-called islamic state claimed responsibility. the truckdriver driver headnote known links to extremists. japanese prime minister has outlined plans for what he calls a bold stimulus package, but questions remain about how it would be funded. the plan is expected to cost almost $100 billion. in an interview, it was ruled out issuing deficit bonds. >> we are preparing to accelerate abenomics to the next stage. there are many ways to fund the stimulus measures, but i want to clarify that issuing deficit-covering government bonds is not an option. global news 24 hours a day
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card by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. chinese fund managers are tightening risk controls by putting more money into bank certificates of deposit rather than riskier corporate debt. what more do we know on this? is guaranteesp that corporate's are not going , corporate defaults this year have tripled, ok? so fund managers and money market managers are looking at more less risky. certificates of deposit from banks seemingly less risky. general bart chart of the issuing of certificates of deposits, tripling from a year , $928 billion in the first
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half, more than all of last year. law from thew regulator and china that for bids money market managers from buying corporate debt rated below aa plus, but no such limit on cds, so they have been piling into the cds on the perception that they are perceived to be safer. corporate bond defaults have tripled this year. corporate's of old as well more than 3 billion yuan of planned bond sales. parking it in short-term paper right now. >> i don't get it, why aren't these smaller banks considered risky in this economy? >> you would think that. their nonperforming loans are rising. i will get to that in a minute. they also have a similar threat their corporate
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clients, but you have to keep in mind that there has not been a bank failure in china since 1998 . the banks are generally pretty sound and backed by the government. a senior analyst at china merchants holdings to say about why fund managers are looking at the certificates of deposit as less risky than corporate bonds. see banks astors the last entity that will default. as safe assidered policy banks financial bonds, which are omar is close to the sovereign. it is about these implicit guarantees. not necessarily being attached to the bank, that they are waning when it comes to corporate bonds. >> thank you. in the u.s., it is said to be one of the most-watched party conventions in years. republicans are gathering in cleveland to formally appoint donald trump is next presidential nominee.
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with hillary clinton leading in to new national polls, donald trump as to pull out all the stops to convince voters that he has what it takes to run the country. megan murphy is in cleveland, where things are just getting started. tell us first about the polls, what are they saying to us? how big of a lead does have a clinton actually have? >> we have seen a variety in the hering we have seen, from maintaining a five-point lead, showing it is within one-two points. a lot of debate is going on, the fbi report on the e-mail server controversy has played into those polls. donald trump needed to make that a moment in terms of closing the gap with her. he has been continually emphasizing that report and the criticism she received from the fbi director. recent polls show a five-point back -- cap.
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other polls have showed him further behind. he needs to make this cap right behind me starting tomorrow. picked his running mate on friday, hoping to close that gap, but some of the reactions have then mike pence who? there are not a lot of people who know who he is, so tell us about the choice of mike pence. pence who is almost emphasized by donald trump, spending 29 minutes talking about himself big -- before getting to the indiana governor. he is not a nationally known figure, but he is a stalwart conservative, advancing the case on not only less a government tea party style government, but also on the social end of things, issues like abortion, planned parenthood, gay marriage. the question of mike pence can -- can he bring in undecideds and voters on the fence.
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that is what people are not too sure about. donald trump these to grow his voters to have any chance of competing with her given how poorly he does among latinos, african-americans. a huges to turn out portion of the white vote and the undecided vote. it is unclear whether mike pence will turn the needle on that. security obviously will be tight, but what has the mood been like after these baton rouge shootings? deftly an issue. you can feel the edge in the city. we have talked to a lot of police who are not sure if they are well-equipped to handle something major. there is an open carry law with guns, so protesters will be allowed to have guns on them even when they are protesting. that is a big issue for the police. we expect a big biker presence here. there is no question the police are on edge, but they're doing everything they can to keep it secure. >> we hope it will be a safe convention. >> indeed, thank you so much.
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atwill be following events the republican convention this week on bloomberg. still ahead, britain does begin looking at options for its post brexit trade relations, starting with australia. >> up next, some of the important economic numbers coming up this week with tony nash from complete intelligence. this is bloomberg. ♪
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watching "daybreak asia". >> a quick check of the latest business flash headlines. yahoo! looking at job cuts after the sale of internet assets. analysts say the new owners could slash up to 3000 jobs due to redundant operations in human resources or marketing. yahoo! report second-quarter earnings on monday with revenue
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expected to drop 20%. >> devaluing the aussie dollar could he the best option to step the economy according to a veteran economist. he believes rate cuts will have a limited effect on the benchmark rate as it heads towards 1%. that is shared by the rba's next governor. is largelydollar irrelevant and a global context, so devaluing it would not stir opposition. positiveors turn more about the outlook for the world economy if gold is anything to go by. hedge funds and other speculators cut their bets on a gold rally for the first time in six weeks from a record high position last week. concerns over the brexit vote have ease while the u.s. economy has stayed strong, curbing the need for the refuge. >> time for a look at what is happening in asia. on tuesday, the imf releases its latest nap shot of how they
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think the economy will perform. earlier this year, forecast of to 3.5% andh rising 2017 and 3.2% this year. the new development bank is due to hold its meeting in shanghai on wednesday. it was established by the brics countries and is expected to contribute to infrastructure development. >> macau's latest visitor numbers on friday, gambling revenue hit a new low in the second quarter, but the mass-market segment remained steady and is positioned to grow with new resorts adding to the city's non-gaming attractions. takes placeeting next weekend, the third this year, while china holds presidency of the group. the meeting comes with a spotlight on central-bank actions in the face of global volatility.
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let's get more on what is ahead this week with tony nash, chief economist at complete intelligence joining us from singapore. gdp numbers on saturday, and property prices later today, does it show you -- 6.7 growth gdp in the second quarter, does that show you china will continue momentum into the second half? yeah, we thought for some time that china would really start to kick up in the third quarter this year. coming out of the national meetings in february, where quite a lot of stimulus was announced. we will start to see things move in the second quarter. we will start to see some change in pboc actions, moving away , but we think- they will move towards open market operations and midterm
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lending facilities. >> why is that? rrr is a broad-based stimulus measure. that it is not hit what it needs for some time. in february, they started looking at the midterm lending facility to allow banks to help companies. they started serving banks back then and looking at ways to ease corporate debt through these type of facilities, so it is a signal that the pboc is becoming more sophisticated in the way they are looking at markets and managing the economy. >> windy think we will get stimulus out of japan? think we will get stimulus out of japan? go big or goy is a home moment for japan. it was a real disappointment, voters coming out of the
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elections last week, 56% said they believe in abenomics, but with the stimulus package this small compared to what was expected, it really is a disappointment. they need to double down or triple down on abenomics. the inflation expectation down below 1% last year, and one of the big benchmarks of success for abenomics was a 2% cpi. >> europe is skeptical, why? we haven't really seen fiscal stimulus work in japan. and 2000s, we saw a lot of fiscal stimulus move out, but inevitably this stuff gets siphoned off into inefficient projects or it does not go where it is intended to go. the finance ministry is going to invest in things that look at
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productivity, things like total , that'sproductivity where it really needs to go, but those are longer-term investments. this is not a short-term activity. is a quick bump, it would be misplaced. issuehas the demographic that is not in your story, but they are eking out to gdp growth they're there should not be any. if they want to have long-term sustainable gdp growth, they have to invest in tfp. thean you mention what is one key figure to be watching this week? i would be watching indonesia, central-bank there. i don't think they will change. i think they will stand pat, but with global risks coming around, we have to look at current is like the dollar, the yen, and how that will affect emerging
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markets. i think it is a good indicator of where other markets may go. >> all right, we will leave it there. thank you so much. tony nash from complete intelligence. ahead, singapore bondholders bracing for defaults after to energy companies ask for an extension of repayments. we will have details next. this is bloomberg. ♪
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.> this is "daybreak asia" i am betty liu in new york. >> i am yvonne man in hong kong. singapore facing company dee defaults as to companies look to extend maturities hurt either global slowdown and weakness in the oil industry. how bad does this look right now? you have said, we've
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seen the first default in seven years. if you look at bloomberg data, you can expect 10 more this year alone. are singapore listed companies. cash flow remains tight, so they are looking to extend maturities are loose and covenants that require them to have a certain level of leverage. one company wants to extend the maturity of its notes due in october by as much as three years. that gives you a sense of how difficult it is for some companies. the oil related companies are most at risk. they have about $1 billion in singapore dollars maturing. almost 20% due by the end of this year. even though crude prices have recovered, bake energy companies to restart investment that keep oil services companies in business, so a difficult situation. >> week can expect some more pain. pain.can expect some more it looks like the wealthy
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bondholders are the ones getting burned by this fallout. why is that? >> you are spot on. boughtre private banks almost 45% of local currency notes in 2014. they were looking for yield. they are the largest investor group before the market started unraveling, so the rich bondholders invested in singapore bonds are feeling the most pain. some analysts say because this new market liquidity, many bonds find it difficult to get out of issue oflso the restructuring talks and legal fees on top of that. >> give us a sense of the credit quality in singapore. >> you know what? they have gotten much worse over the past five years. it is not looking good. >> thank you so much. much more ahead.
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the newly appointed prime minister of australia and the u.k. have had a chat about a post-brexit deal on trade. details live from sydney. this is bloomberg. ♪
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♪ betty: it is 7:30 p.m. sunday evening in new york where markets closed unchanged on friday. but seeing a little affected if you look at s&p futures by the coup attempt in turkey. looking up the skyline here in new york, really hot outside, yvonne. trying to beat the heat this weekend. yvonne: you beat us on the heat but we beat you on the humidity, here it 89% in hong kong. monday morning in hong kong, 30 minutes away from the first major market open in the region. i am yvonne man in hong kong. betty: i am betty liu in new
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york. we are watching "daybreak asia." yvonne: trade resumes following militaryed -- failed coup. before the close on friday, the lira went tumbling the most in eight years. the government led by type air -- 190 -- air to one civilians killed. 100 people were killed -- wounded. bonds will not be used to fund a new stimulus package. shinzo abe has called for a new bold plan worth $100 billion with questions remaining how it will be funded. they rolled out issuing new bonds. >> chinese fund managers are loading up on short-term pay to avoid the going risk of corporate default. lender saw $930 billion worth of certificates with deposit in the first half triple the amount
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from a year ago. the republican national convention begins on monday in cleveland after donald trump officially unveiled indiana governor mike pence as his running mate. he is expected to formally accept the nomination thursday night, u.s. time. his wife will speak on thursday and colony capital tom barrick. yvonne: kicking off their, let's see how the asian market is going. investors have been rattled by the developments out of turkey. here is david inglis. david: it is sort of goldilocks, not very bad, but these markets are not going to come grooming out of the gate. you look out of the futures of new zealand, the first market opened this monday, we are not getting any lead from there. we are basically flat coming out of wall street. a little lower, s&p futures a little higher. look at the nikkei contract,
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butn is good with thailand, people are getting exposures to free users. -- futures. a little bit of an upside. spyralia, you look at futures. the last quote was down 11 points. we could see some downside as far as australia is concerned. also looking forward to the happenings in south korea top of the hour as well. this is a massive amount of inflow friday. but if you look at the early indicators here, it does not the markets are very rattled, or will not go up at least following events in turkey and over the weekend. yvonne: what about inflow into asia? talk about that. david: i talked about south korea, but broadly speaking in asia, and absolute mountain of cash when into the markets especially across emerging markets here in asia. i will get to that point in just a moment.
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let me show you one developed market and has performed very well. this is something we will see a little treasure in the open of australia. we are back to the highest level so far here. if you think that has performed well, look at emerging markets. money went in emerging-market stocks, eds, you name it. at the moment, we are going for eight straight day. having said all of this, you want to look at all of these markets in asia, especially multiyeararkets as highs as far as evaluations are concerned. looking at this, maybe for the next catalyst to go up to you guys further. still a risk for data points we need to watch out or? we look ahead to the week. what sticks out for you. david: we have property prices coming out of china.
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that will be the main data point. it speaks not only just for the property markets in china. that is a very huge part of aggregate demand, that comes out in two hours from now. an hour before that, you have exports and medium-sized bonds coming out of australia. three things i am looking for today. yvonne: thank you so much. it has been a busy week for the results in the u.s., and we are expecting economic data. we have more from new york. reporter: the week ahead on wall street will be all about the question, where do stocks go from here? investors are weighing the potential for her their gains with stocks near record. we have corporate earnings expected to drop this quarter. we are seeing focus on the economic numbers and the profit be ats, there will question of where the momentum comes from. banks remain in the spotlight. goldman sachs, bank of america, morgan stanley all set to
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report. bank of america kicking things off on monday. the markets also get a double dose of u.s. housing news. we have figures on home sales starts innstruction june expected to hit the tape. economists surveyed say that will probably leave little changed from june. we are also monitoring headlines of their public in convention. delegates prepare to nominate their choice for president, donald trump. he is the presumptive nominee. other companies reporting earnings include halliburton, microsoft, general motors, and starbucks. su keenan, bloomberg news. yvonne: thank you. theresa may spoke at home with her australian counterpart to discuss bilateral free-trade deal as britain prepares to exit the eu. let's go over to paul allen in sydney. hurdlese still some big in the way of any potential deal. where the talking about this
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now? -- why are they talking about this now? legal forit is not britain to sign any trade deals. but they take a long time to put together, and nothing prevents britain and talking about trade deals. that is exactly what they have been doing. theresa may, the new prime minister, and malcolm turnbull, recently reelected of australia, spoke on the phone about trade deals and how this could cause discussions to be constructive. she said afterwards in an e-mail statement the british government is determined to make the success of brexit, and one of those ways will be striking trade deals with partners across the globe. betty: in some respects, the trade deal is nothing new. we are winding the clock back on this. a little bit. after britain joined the ecb in the 1970's, it had a profound effect on australia.
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butter exports does that -- declined by 90%, apple exports 86 runs in 1975, but a few years later, it was down. young lad in new zealand, i remember the profound impact the plunge the country into a recession, brought on a lot of pain for the reform. so it is welcome back, britain. betty: welcome back, britain. what happens next? how do we get things moving? reporter: malcolm turnbull observed they will not be out for several years, but he is eager to work on a new trade deal right away. at next time they meet in person, that will be at the g-20 in china in september. betty: one down possibly 11 more to go. thank you so much. joining us live from sydney. talking about china's property prices, it will give us indication on the health of the
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economy, when they come out and a couple of hours. the latest data shows growth studying on the back of an epic borrowing binge. let's bring in the executive editor for economic data. this is not a good sign. us, else can the data tell or what can it tell us? reporter: we had a lot of data of china out of friday. we did not just get aggregate financing. we got industrial production, retail sales. retail sales were ok. overall gdp was a touch of better than forecast. there is this sense that while china's growth has held off, it has largely, not entirely, but largely been financed by borrowing. yvonne: that does not seem like it could stop anytime soon. as that he and she goes, is that good enough for china? -- as study as she goes for china -- steady as she goes? dan: let's go back to january
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and february when the dominant commentary was there is some sort of apocalyptic hard landing coming for china. whatever the numbers, that clearly has not happened. in a market, in an investing environment, awash with brexit, attempted coups, if china's gdp lives to fight another day, maybe it is not a bad thing. yvonne: it is kind of ironic. we look at china as a bastion of instability a year ago, and now we are kind of saying, we had another economist saying, they might be kind of stable. looks like it is all sort of go for the second half. dan: they seem to have settled range. 6.5% to 7% growth it is down from 10%, but look, that is not a bad thing. everyone says it has slowed. also, the transition to a
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service and consumption-driven economy, which is what everyone said they wanted, that appears to be more or less on track. the number that stood out on friday among other things in the world was the increase in aggregate financing, lending, we will have to see how that plays out. betty: it absolutely doesn't. that is the big risk factor for china. but mentioning the consumption-driven economy, i believe some of the numbers show 70% of the expansion we saw in the last quarter came from consumption. that is good news, right? dan: it is the rebalancing that everyone from the imf to , apexus g-20, g7 governments said they wanted. it happened. what is the problem? betty: exactly. we havet note, because got to look at other parts of the world, particularly in
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turkey, do you expect in the of the weekend, to affect the global economy at all? dan: to affect the global economy, probably not. there is a sense that, we thought this era of coups in major european markets was behind us. there has not been a successful one since the 1920's. this is a surprise, but as the weekend ends and the trading day starts, there is no safer control. it is president erdogan's government. betty: we seem to be pointing back the clock on a lot of things on what happened here come a brexit, so many factors. thank you so much. executive editor for global economics. much more ahead. gold posted its first weekly drop since may.
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how investors are viewing the haven commodity. this is bloomberg. ♪
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betty: you are watching daybreak asia. a quick check of the latest business flash headlines this morning, the italian government required jp morgan to work on a plan to help loans from lenders. $11 billion worth of public money could be used by nonperforming loans. the eu he opposed the plan because it does not want taxpayers bailing out banks before investors. jp morgan declined to comment. yvonne: citigroup is betting the fed will keep interest rates lower than expected. the net interest margin is a difference between what is based on loans and funds. the market will be 2.9% in the
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second half. faith -- five basis points below the previous forecast. citigroup critics 17% drop in the next quarter. betty: microsoft may not meet its goals to get windows 10 on devices in 10 years. there committed to the one billion goal come a but it will take longer to achieve. that is to a drop in the phone business. they had attracted 350 million active devices. yvonne: let's check on crude this morning. we are seeing right now unchanged at 45 .95 with u.s. futures. we saw oil holding on to last week's gains this the unrest we have seen in turkey. despite the unrest we have seen in turkey. we have a man live from singapore. great to have you. producer, a major oil
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but location wise, it is straddled the middle east and europe, so a crucial pipeline. is this development actually bullish for oil? reporter: i think it extended into this week, and clearly the coup gave it some traction. it could be positive for oil prices. it looks as though it has been a one-day event. control seems to have been brought back by the government. things are settling down. i guess oil prices are higher because of the broader uncertainty across the middle east, but at least from this particular event, is concerned, a bit of a shot in the pan. the two but did not happen, people are saying. when it comes to oil prices, there is a solid advance above the $50 mark for two months now. is it more of demand concerns or supply disruption?
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of thewe are seeing some supply disruption start to moderate. clearly nigeria is turning to pump again, canada, the wildfires there, clearly canada's production is certain to recover. as we come out of the back end of the driving season in the u.s., we are left with high stocks of gasoline. expect oil prices to slip back over the next three months, potentially back to $40. it has got a bit of a downside here. betty: let's turn to gold. gold has been a real winner. ever since brexit happened in late june, and continuing the rally. we have a chart showing investors are finally for the first time in six weeks, they are pulling back, they are cutting back on their gold holdings. either hedge funds they are looking at. -- these are hedge funds we are looking at. does that mean the rally and gold will come to an end?
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wayne: gold is trading two things, uncertainty, all that sort of type of approach. it is also trading interest rates in the u.s. the better u.s. data on friday clearly got people starting to think the fed would actually do this. -- hike this year. it would be a negative event for gold. if you look at the medium-term, we are still holding gold as an insurance asset, if you will. if there is anything you pick up in uncertainty with u.s. etc., evenr brexit, things in the middle east, you see people trust us back to gold -- trespass back to gold. if we moderate on the sixth to 12 month view, we think very well supported by negative rates in the u.s., even if the fed is
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behind the curve. rates will state negative for a while. betty: so when the fed has been pretty much a nonfactor in gold. so you are saying these two tracks are why we are seeing the rally. but whatever the fed does, it doesn't matter. wayne: what the fed does will matter in the short term. if they decide to move on rates in december like we think they will with ubs, yes, you will see a downside to gold in the short term. as markets readjust. we have to remember interest rates are only seeking the first hike in 2018 or late 2017. so there is a lot of repricing to go in the interest rate market. that will be short-term negatives for gold. nonetheless, the uncertainty in the world continues. that is what happens with china growing up in the second
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quarter, the u.s. election, and how the brexit negotiations continue. we think that uncertainty will hold the gold price higher to what ordinarily it would be. on a 12 month horizon, we see 1002 under $75. -- $1275. betty: we will talk more about other metals in the second half of the year. we will have more with the wealth management wayne worden. ♪
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♪ betty: you are watching "daybreak asia." i am betty liu. yvonne: i am yvonne man. we are minutes away from the open in japan, south korea, and australia. betty: let's go back to wayne worden. i'm going to pull up a chart for
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our viewers that shows think and the reality, -- rally -- that upws zinc and the rally, over 50% since earlier this year. some are saying this rally sets the tone for other metals, that in fact where zinc goes, other metals go. do you agree? wayne: i think it will be a mixed performance across the middle. generally, we expect the middle -- metals index to rise. and the data in china signals stability in china is good for metals. but like your earlier discussion eluded to, -- alluded to, china is becoming a consumer driven economy. we have seen the private side continued to sink while the public side is calling up the balance sheet. that tells us housing will
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continue to cool in china in the second half of the year. that is not great for copper and things like iron ore. on the consumer side, it is holding up very well. we can expect to see cyclical upturn in, consumption in the u.s. as well. this means it will improve across asia. that is good for nickel and think. . zinc they have supply side that are tighter than they were years ago. it is a mixed performance, but definitely zinc and nickel going to be out performers. yvonne: looking at your allocation, you have a 50% draft on palladium, 10% platinum, 10% gold. why no silver? it had quite a leg up against gold. wayne: we really like pgm because nobody else likes it. and we have seen improvement in
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the industrial economy over the second half. silver is very well loved. silver has had a much better rally them what gold has this year. largely because it was lagging goal during the periods of uncertainty. it is starting to catch up. having said that, positioning in so over, positioning of etf or other finance investors is sitting at record levels. even the volatility of silver, we actually prefer those more to the industrial cyclical upturns we are experiencing at the moment. that is why ptm is the favored. gold is more of a risk hedge, i few will. as we spoke about earlier. insurance intle that basket. yvonne: real quick in terms of iron ore, seeing china turn out a record amount of steel in june. what does that mean for prices? wayne: certainly prices have
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responded. nonetheless, we still think they attract lower into the fourth quarter. we will see the impact on iron ore prices, it should be there as a has been another years. expect prices to track down, a touch below at $50, sort of $45 a pound is he going to the fourth quarter of this year. yvonne: thank you so much. coming up from ubs wealth management, economies. betty: plenty more ahead on bloomberg television. on monday, tom shields is speaking exclusively to it imf management. don't miss that interview at 1:30 p.m. new york time, 6:30 in london. you have a lot ahead on this asian trading session as we kick off the week. yvonne: thanks for coming in on a sunday evening. we are going back on concerns over what happened in turkey. the yen is weakening.
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the lira gaining. through thebe seen region as we start off this monday morning and the trading week. whether you are watching bloomberg or on, this
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♪ >> the lira rain grains some coup,fter turkey's failed and erdogan promises a new era. convention kicks off and donald trump to sell himself as the next president. why china's fund managers are loading up on short-term paper from the country's lenders. >> welcome to "daybreak asia" live in hong kong and streaming.
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let's get straight to the markets in the asia-pacific. investors not as concerned about what happened in turkey overnight after the military coup has failed. are seeing the aussie stocks flat, shrugging off concerns. the aussie dollar extending gains to a fifth of 1%. in korea, the kospi just getting underway. japan is closed today for marine day. well,spi looking flat as but the korean currency seeing sizable moves, weakening. two closed markets, including japan as well as thailand. no trading there, but the yen weakening on the back foot of what happened in turkey overnight.
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it looks like the impact of that failed coup in turkey could be contained as president recep tayyip erdogan makes a show of strength. we are looking at all this. concerns fromthe investors are easing a bit. rosalind: for example, friday, the turkish lira fell. bounceback.eeing a at last look, just under 2%. it had fallen by the most in more than eight years on friday, so it is making a bit of a recovery. goldman sachs, its forecast for dollar, and0 to the 325 to the dollar in 12 months. it's previous forecast had been for 295 and 325 in 12 months.
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it's one year forecast is essentially the same. that is because of the immediate uncertainty sharply reduced and the chances of a renewed coup attempt are low. however, it does expect political risk to remain elevated. although the 12 month forecast is unchanged, it is in a weaker direction. from turkishasing authorities, trying to calm markets and investors. rosalind: they are saying they will offer unlimited liquidity to lenders and also said they will support the lira by removing limits that commercial lenders are allowed to use as collateral. the central bank had been butcted to cut on tuesday, that is now probably not going to happen given the political turmoil.
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operations will continue as normal when markets open on monday. the authorities have also said that gas and oil imports and exports as turkey is a main third affair are unaffected. >> it seems like back to business as usual. not much impact, but longer-term, what could really happen? could this be a test for investors when it comes to geopolitical uncertainty? haslind: certainly, turkey seen a pickup in inflows, $7.3 billion worth of money coming compared to assets outflows of 3.2 billion a year ago. the istanbul times on local bondsd dropped more than any other emerging market, and the
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five-year credit default swap fell to the lowest in a year last week. all this seems to be quite positive for the turkish con me -- economy, but could be on ifvel -- could be unraveled the turkish government does not divide stability. at the moment, the president it up, is talking showing he has control of the situation, but it remains to be seen whether there will be any more unrest and turmoil. >> thank you so much. how have these events in turkey affected investor sentiment? let's go to david. david: there is no cleared direction early. three markets open at the moment, japan is closed, as is thailand, so it doesn't get any more unexciting than what you
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are seeing right now. it is next. some of these assets that spiked right after news of events in turkey are retracing a little bit. little bitures up a as well, so no clear direction. again, the silver lining is that even send turkey don't seem to be leading to any sharp selloff across markets in the asia-pacific. is down to softness the fact that last week, monday through friday, gains every single day. the last time that happened was in april. just a few things, some of the risk indicators. atd lower after spiking 1340-1350 late friday into the weekend. oil also in focus given the fact that turkey is home to a lot of these pipelines, a major chokepoint in it comes to oil. ministry official
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said there is no disruption at the moment, tanker traffic, are normal,ws analyst don't see any significant impact to the oil price this week. in mind a said, keep lot of the oil does pass through these see ways across turkey. bp, which owns one of the pipelines, says flows remain uninterrupted. emerging markets is what you want to focus on this week read a mountain of cash flow to into that space, seven days since friday. will turkey a fact that index? very quickly, we do have two data points to take note of, china property prices and exports out of singapore. size bond auction there. fairly uneventful so far.
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yvonne: thank you so much. let's get to first word headlines. >> the latest first word headlines. has condemneda the shooting death of three officers in baton rouge and the wounding of three others as the act of a coward. louisiana police say the suspect has been killed. two weeks ago, baton rouge police killed an african american man, setting off protests. we as a nation have to be loud and clear that nothing justifies violence against law enforcement. attacks on police are an attack on all of bus. on all of us and the rule of law. police have made
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further arrests over the bastille day truck attack the killed 84 people. another 85 survivors are still in hospital, 18 with life-threatening injuries. 126 police and soldiers were on patrol. the so-called islamic state but theesponsibility, driver had no links to terrorist groups. loading up on short term paper. sold more than $930 billion of certificates from a year ago. demand for the perceived safety prompted by defaults. global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you.
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republicans gathering in cleveland. trump will have to pull out all the stops to convince voters. go to megan murphy and cleveland for us covering the republican convention. donald trump has this week. >> he certainly does. it is all starting here and tomorrow, and you can see crowds gathering tonight to check out the convention center, practicing all day, looking at where we are going to be broadcasting as well. weeks,had a tough few his rollout of mike pence went with headrly badly fakes and where we are going with this. he has not been able to get in front of the new story. -- he is behind.
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he will be trying to get his message out there, introduces family, introduced himself to the american people, and we will see if he can make the stick with polls showing hillary clinton with a five-point lead. >> it seems like there was a lot whether he was trying to backtrack on his pick and before he officially made that announcement. what has the reaction didn't to his choice? -- reaction has been to his choice? rings this a plan, which is something donald trump is not great at, even in this announcement on friday. donald trump engaged in a 29 minute rambling speech, and mike pence delivering a disciplined and core message. they will be looking for him to be a safe and secure pair of hands who will not screwup on the campaign trail and be able to be on message and be disciplined and say, he has picked me.
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this is the way he would govern if he wins. he picks people who know what they are doing. he has a long track record and that's what he will be therefore on the ticket, but donald trump is very difficult to control. be biggest thing we will watching next week is whether he can rein it in, continue to appear presidential, or whether he will continue to go off piece. when he goes off, he's difficult terrain back in. >> we see that cap between -- gap between clinton and trump. security will be tight. what is the mood like after that baton rouge shootings? >> the mood has been edgy all week. police go on bicycle patrols, get standing ovations from the crowds, huge support for the police, but there's no question that today was disruptive when the officers were killed in baton rouge, and
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there is a sense that they have been given all the tools. there is an open carry law here. that has been a big source of controversy. aat everyone is hoping for is safe convention, a convention that is not marred by the acts of violence we have seen across america continually over the past six months. clampill be looking to down on that and are doing everything they can to ensure that it is a safe and productive convention for cleveland and america as well. will be following those events at the republican convention all this week on bloomberg. why one banknd out is betting on emerging markets and the eurozone for the best return. its head of global asset allocation is next. this is bloomberg. ♪
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>> welcome back. you are watching "daybreak asia" .
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of headlines. yahoo! looking at job cuts after the sale of internet assets. analysts say the new owners cut 3000 jobss -- in human resources and marketing. yahoo! report second-quarter earnings on monday. devaluing the aussie dollar could be the rba's best option to stoke the economy according to a veteran economist. he believes rate cuts will have limited affect as all strays benchmark rate heads towards 1%, a view also shale -- shared by rba's next governor. investors have turned more positive of the outlook for the world economy if it gold is anything to go by. hedge funds and other
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speculators cut their bets for the first time in six weeks from a record high position last week over concerns. has stayedonomy strong, curbing the need for precious metals as a refuge. might next guest says markets are beset by worried and profile of hissk portfolio. let's get to the views of alain bokobza live from sydney. he is head of global asset allocation for societe generale. good these developments in turkey drag the entire asset class of emerging markets down? what is your take on that? it were to do so, not for very long. a more positive outlook for emerging market investment, turkey, south africa, two countries in which
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recent political developments were not going in the right direction. we are not anticipating what happened this weekend, but overall i would say south africa of turkey, but the rest emerging markets -- from some hikes with no hikes at all expected. right, but 2016 has come to be the year of political risks. we saw what happened in nice, turkey the latest incident. do you think markets are learning more about how to price in this geopolitical risk? risk isnk geopolitical unfortunately not only a european theme. europe, the u.s., some
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terrorist attacks, and in some asian countries political instability, so overall it is not only a european theme. we need to live with it in the background. , what happened recently tothe united kingdom, is what we understand and economic event with huge political implications for the rest of europe. it is interesting to get your take. when you mention the fed, we might not be seeing any hikes this year. do you switch out of stocks as well as high-yield? why the disconnect there? we started thee
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u.s. equity index , an all-time high, the optimism on the u.s. as high , and that is 60% of global equity investment. one -- i think it will be more and more difficult. my camp is we should overall not need to aggressive on the equity class and start re-allocating japanurope and maybe into on the eve of policy reflation. that might be a good marker to hedge -- market to hedge into. >> you are switching more toward sovereign bonds and the yen.
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we see these dueling global and domestic forces, especially in treasuries. we have these global uncertainties out there, so we see treasuries bouncing back as far as yields are concerned. how do you balance all of this when it comes to the bond market and harness this volatility? things -- overall a portfolios.or asset in japan, negative yields. globally, you have something like $10 billion of negative yielding securities, so these becauseing into u.s. you have yield. the nominal yields remain a key
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feature. even though yields can go higher from low levels, i think the hassury market asset virtues into global diversified portfolios. one quick last question. we have seen a lot of inflows in this part of the world in asia. will that continue now that china seems to be on a firmer footing? think we have been living, last year, china changed the guaranteed regime. you have so many fears on everything going back had into china. hardre anticipating a landing in december last year, and so policymakers have gone into reflation policy using the fiscal policy in order to ease these risks back to reasonable
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levels. is gone.ter we should be careful that the top targets for china policymakers in beijing is not to boost growth to infinite betweenmay be to stay 6.5% and 7%, so we should switch to the following chapter, which is supply-side policy and going away from overcapacity. china. pessimistic about i would be very careful about the banking sector, fully loaded with nonperforming loans. will be transferred into losses, so we are negative on the china banking sector going forward. >> right, we will leave it there. alain bokobza from societe generale. exxon mobil has made a superior bid for inter-oil.
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they have entered into this arrangement with exxon. inter-oil must also provide a minimum of three days to submit a revised offer. the company saying they are totally aware of these developments and are in an active dialogue. --agement is prejudice and i is presently considering their position. exxon mobil making a superior bid for inter-oil. coming up next, the yen has gone from best performer to july's worst. we will have more on those currency swings in your fx next. this is bloomberg. ♪
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is monday, july 18, these are your fx headlines. encouraging from a risk appetite standpoint, moving back from safety.
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moving into the aussie dollar, recoupa managing to losses following one of its worst days on record. to the here and now, the kiwi de la rue first thing early gains. all itsdollar reversing early gains. cpi rose .4%, looking for .5%. as a result, the probability of a rate cut next month increased from 62% before the data came out to 72% haste on overnight index swaps. -- based on overnight index swaps. of our favorite chart so far. it shows the one day change. we are looking at dollar-lira.
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taking you back to 2006, there is the expiry or drop if you are looking at it in lira terms. of to levels those of the stories driving your forex markets. >> singapore's energy sector.
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it is a 30 a.m. in singapore, half an hour away from the open of trading there. a.m. in singapore, half an hour away from the open of trading there. the lira has regained half its losses following the military coup. it happened just before the close on friday, sending the currency tumbling the most in eight years. the government led by recep tayyip erdogan recep tayyip erdogan says 6000 people have been arrested. some 1400 people were wounded. japan's top government spokesman says bonds will not be used to fund a new stimulus package.
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calledme minister has for a ball plan worth up to $100 billion, though questions remain over how it would be funded after it was rolled out issuing bonds. >> we are preparing to it accelerate abenomics to the next stage. there are many ways to fund its stimulus measures, but i want to clarify that issuing deficit-covering government bonds is not an option. the republican national convention begins on monday in cleveland after donald trump officially unveiled indiana governor mike pence as his running mate. the presumptive candidate will formally accept the nomination thursday night. also to speak on thursday, along with paypal cofounder and tom barrick. global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries. this is bloomberg.
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breaking news out of singapore. falling-oil exports 2.3% year on year. -- actually,s slightly better than expected because the estimate was for a 3% the klein, so easing a bit. 13% at exports falling 12.9%. asia pacific, japan close, the yen weakening, pretty much risk on, but the kospi shares down a fifth of 1%, but ozzie and new zealand stock seeing gains. cpi figureland missed estimates lightly at 0.4% rise in inflation quarter on quarter and year on year, so that did weigh on the kiwi dollar falling initially. our top story,on
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which is the situation in turkey. the government of recep tayyip erdogan saying 6000 people arrested after the attempted takeover. let's go live to istanbul. can you tell is what is the latest so far? >> a new turkey, that's what president erdogan is promising after the failed coup attempt on friday. thousands of people took to the streets for a third night in support of resident erdogan, ,aving -- president erdogan waving their turkish flags. urged the to extradite the imam that he says is behind the failed attempt. has been accusing him of trying to topple his government. said, 6000 people have been arrested over the weekend,
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mostly army officials and judges who had links to the movement. we have had reports of 300 deaths since friday's failed coup attempt. now we are getting a chance to see an investor reaction to this failed coup attempt. areeems like investors shrugging off some of the losses we saw on friday. the lira is strengthening against the dollar after nosediving to an eight-you're low on friday when we heard of the army intervention. when markets opened later this somethinge could see in foreign funds. turkey is heavily dependent on foreign funds. even though last week, an extremely solid week, up 6%, as investors bet more stimulus would boost risk assets like
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turkey. after it events over the weekend, investors could be nervous. so far this year, is stengel it is up 15% and the yield -- is stengel is up 50% and the yield on bonds has dropped the most in emerging markets after brazil. >> what is next on president erdogan's agenda. what can it changes could we see to turkey's political landscape now? >> ever since president erdogan after beingin 2014 prime minister for more than a decade, he has wanted to change turkey's constitution. however he has never been able to get enough votes in parliament. traditionally the president is more a ceremonial role rather than the center of power. he has neverd, been able to get enough votes in parliament.
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foiled coupnce the attempt, this could be a game changer. snapuld call for elections, hoping the ruling party would get a majority in parliament and change the constitution or he could call for a referendum as people rally he high and him. change in the political outlook in turkey. thank you so much. on some other news, the kiwi dollar dropped after weaker than expected es the oddsncreas of a rate hike. see thenomists now central bank governor responding to persistently weak price growth by cutting the cash-based to 2% on august 11. oil producers expecting a third year of low prices, with a drillers increasing bets on
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falling crude by 29%. crude has declined more than 10% since hitting a 2016 peak in june, stoking fears of a second-half slump. that has drillers raising cash by selling stocks and fresh hedges. shares and samsung heavy have jumped in seoul, korea after the company is close to winning a $2.5 billion deal for its offshore lng facility. 4.9%tock jumped as much as to the highest since may 2. let's head to china, because fund managers are tightening risk controls, but putting more money into bank certificates of deposit rather than riskier corporate debt. what is going on here? depositertificates of are perceived to be less risky
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than corporate debt. we saw the corporate on the false tripling -- bond defaults tripling this year. there has been some excess cash and they have been going into the certificates of deposit. issuance has tripled from a year ago, selling 6.2 trillion yuan in the first half, more than all of last year. there was a new law coming out in february that money market funds were not allowed to buy corporate debt that was poorly rated below aa plus, but there is no restriction on cds. also, i want to give you some numbers that kind of tell you why banks have also been issuing more cds. three-month yields issued by aaa issuers have tumbled 44 basis points in 2016. the shanghai interbank rate is
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two point 88%, basically smaller banks issuing certificates of deposit to fund their operations rather than getting from the interbank process. >> aren't these small banks quite risky? they get settled by these loans that corporate clients default. >> right, if you have a slowing economy and corporate defaulting, you have the banks potentially at greater risk, the nonperforming loans are going to go up. those implicit guarantees that have long been in the chinese economy for corporations and banks is waning with the corporations, not necessarily with the banks. banks are pretty solid. there has not been a bank failure in china since 1998. from one senior analyst, investors see banks as the last type of entity that will default. safe asconsidered as
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financial bonds, which are all close to the sovereign. that says it right there. >> interesting take here. how bad is the china situation now? >> it is probably worse than reported. the cbron friday from see, climbing to 1.81%, nonperforming ratio of outstanding debt credit as of june 30. risks, industry bad loan coverage race year we can does it well. that is a measure of a bank ability to absorb soured credit. that might mean more triple are to cover the potential of bad debts. of 15ld also, nine respondents in a bloomberg survey predicted a government-funded recapitalization like we had more than a decade ago, so the banks will have to be put in
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place within a couple of years. >> thank you so much. let's talk about singapore. we may see more companies their default as they struggle to meet the terms of their debt. oil and gas companies have sought to extend maturities. let's get to our southeast asia correspondent. taking a look at all this, how bad does it look right now? >> to companies like you said have already default it. expect 10 more for the rest of the year, that's what we are gathering. these are singapore listed companies. here, so theyight are looking to extend maturities or lose and covenants that require them to have a certain level of leverage. most atted companies risk, about $1 billion of bonds , almost through 2018
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20% due by year end. we have seen crude oil prices recover. the big thing is that energy companies have yet to start reinvesting. it willat happens, remain challenging for oil services companies. that is what we are seeing right now. >> it also looks like wealthy singapore bondholders are the ones getting burnt by this fallout. why is that? >> you bet. singapore private banks bought almost 45% of local currency notes in 2014. they were looking for yield, and that is not paying off. they are the largest investor group. they are the ones feeling the pain. it is tricky say to get out because there is no liquidity in the secondary markets. way, we have seen a
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doubling of wealthy people in singapore over the last seven years, helping to grow not just the private banking sector, but also the bond market in the lion city. give us a sense of the credit quality of singapore then. have we seen a drop in quality? we have. if we go with bloomberg data, the average credit quality of companies has dropped over the past five years. the ratio of operating earnings too expensive stands at 2.2 times. it was more than seven times before. look at the debt to equity ratio, on average rising to 43% from 15% five years ago, so debt has escalated. the quality of debt has deteriorated. not a pretty picture here in singapore. no, not really.
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thank you so much live from singapore. coming up, the newly appointed prime minister's of australia and the u.k. have a chat about a post-brexit deal. we will have details live. this is bloomberg. ♪
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>> welcome back. you are watching "daybreak asia" . a quick check of headlines, the italian government has higher jp morgan to work on a plan to buy troubled loans from its lenders. newspaper says $11 billion worth of public money could be used to buy nonperforming loans. the eu may oppose the plan because it does not want taxpayers bailing out banks. j.p. morgan has declined to comment. citigroup has said they will keep low interest rates for longer than previously expected, reducing its forecast for net interest margins, the difference between what it makes on loans
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and makes on funds. citibank reported a 17% drop in its net income last quarter. says it may not reach its goal to get windows 10 on one billion devices within two years. the company says it it it is still committed to the one billion goal, but it will take longer to achieve because of the dramatic reduction of its windows phone business. 350software has attracted million monthly active devices. at what wer a look are watching in asia this week. on tuesday, the imf releases its latest nap shot. earlier this year, its macroeconomic forecast saw global growth of 3.2%, rising to 3.5% in 2017. christine lagarde says there is little hope the forecast will be revised up, and a new
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development bank is due to hold its first general meeting in shanghai on wednesday. st was established by the bric countries and will contribute to infrastructure development, making clean energy a focus. gambling revenue hit a new low in macau for the second quarter. the mass-market segment remain steady. adding tos non-gaming attractions. placeing of g-20 takes next weekend, the third such gathering this year while china holds presidency. the meeting comes with a spotlight on central-bank actions in the face of global volatility. a busy week for corporate results in the u.s.. we are expecting economic data as well. su keenan has more from new york. >> the week ahead on wall street will be all about where do stocks go from here.
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investors weighing the potential for further gains with stocks trading near records, also corporate earnings expected to drop this quarter. there will be a focus on the economic numbers and the profit reports, and a question of where the momentum comes from. thanks remain in the spotlight with all set to report. bank of america kicks things off on monday. news,le boost of housing home sales and new construction surge in june expected to hit the tape. said bets onrveyed housing starts will be little changed in june. wall street also monitoring headlines out of the republican convention as delegates prepare to nominate their choice for trump.nt, donald he is the presumptive nominee. other companies reporting earnings include halliburton, general motors, and starbucks.
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theresa may spoke to malcolm turnbull over the weekend to discuss a bilateral free trade deal as britain prepares to leave the eu. let's get over to paul allen in sydney. is this premature? there are still some significant legal herders -- hurdles, right? those is that britain is not allowed to sign trade deals while they are out of the eu. malcolm turnbull and theresa may having a phone conversation on saturday. the australian prime minister described it as very constructive. theresa may said later that she is determined that britain will ,ake a success out of brexit and one of the key parts of that plan is to strike trade deals with partners across the globe. >> in some respects, a trade
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deal would be going back to the history books, right? remember when i was just a little boy when britain joined, meaning terrible times in this part of the world. exports plunged 90%, a similar story for other soft commodities as well. ands like abandonment betrayal got kicked around in this part of the world, so a free-trade deal would be something of a renaissance of that old arrangement. can they really do to get things moving then? paul: it takes a long time for get putade deals to together. the one between australia and china took about 10 years. malcolm turnbull saying that even though britain won't be out of the eu for several years, they need to get working on these new arrangements quickly.
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malcolm turnbull and theresa may will meet in china in september on the sidelines. you so much. up next, the pokémon go affect on nintendo shares. this is bloomberg. ♪
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>> a quick check of the markets. , japanese in tokyo
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markets closed for marine day. over theeakening turkish developments. concerns have eased a bit. china waiting for that property prices at the bottom of the hour. flat, and singapore starts trading in 15 minutes, futures pointing to a higher open. has not only left its mark on the world, but also the market. it seems like pokémon go, the maker nintendo has made history. juliette: absolutely. have a look at this chart. nintendo has in fact become the most traded japanese stock in
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any one day this century. the game maker traded $4.5 billion worth of shares on friday alone. that is the biggest daily turnover for any company on the topix.-- launch of pokémon go, we sought nintendo shares rise by 71%, so no surprise there, the biggest weekly gain ever. we have seen nintendo shares rise as well today, up by 10% at the moment. certainly it has been a very solid rise coming through for 71% over that gain of the course of last week. what does that mean for nintendo's market cap? oftendo now has a market cap $37.3 billion, more than doubled
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since its last earnings report when it had a market cap of $17 billion. nintendo has overtaken all of these companies in terms of its market cap. itr the course of last week, overtook hilton, ebay, tesla. technicals are showing signs that nintendo is overbought, a ,elative strength index of 70 but that does not seem to be deterring investors. kong don't have it in hong yet. to get toorying not hyped over it, but i still want to see what the buzz is about. thank you so much. is up next.siness" china property prices
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climbed 42.1% in the first half, still strong, but at a slower pace after shanghai and shenzhen officials clamped down on the overheated market. the question is whether that will continue and if they will be able to keep a control on that while maintaining that nascent recovery. we will also get the latest from turkey as thousands were injured, hundreds killed, and thousands more arrested as turkey's erdogan says it is a gift from god. it is having an impact on oil. all this more, "trending business" is next. ♪
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♪ it is monday, the 18th of july. i am angie lau. this is "trending business". ♪ angie: we will be live istanbul, singapore, and sydney. the turkish lira looking like this. regained half its plunge from friday when the attempt to -- to erdogan president topple president erdogan began.


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