tv Trending Business Bloomberg August 2, 2016 9:00pm-10:01pm EDT
♪ rishaad: it is wednesday, august the third. this is "trending business". i am rishaad salamat. ♪ rishaad: we will be visiting tokyo. this is a look at what we are watching. a global selloff rolls on, nikkei 225 second day of big losses. japan's new stimulus package, lukewarm reception. measures showing how distant the recovery remains.
china,ges facing provinces sliding into recession, others with double-digit growth. do follow me on twitter @rishaadtv, and please use #trendingbusiness. a look at markets, the followthrough out of wall street , biggest declines in three and a half weeks. shanghai and hong kong coming on stream in 30 minutes. malaysia and singapore doing so right now. this is a gut check. japan suffering more than others. david: leading the losses right now. it has to do with risk aversion, the biggest drop in a month. have a look at the markets in asia. market isutperforming down 5/10 of 1%, sharp declines.
nikkei 225, 1% drop, second straight day of declines. also a drop in commodity prices. weak dollar. can we get shares of noble group up? down 4.5% at the moment. the company saying they were not aware of what was behind the move in the drop. it fell the most since 2008. shares are still down. roughly down 20% over two days. let's talk about the japanese yen. have a look at the today chart, closer to the 100 level. retraced some of the strength. nothing new with the exception of comments on inflation, more
, negativef needed effects of a stronger yen likely to become more apparent. when you look at the diminishing , the laweffects of qe of diminishing marginal utility comes in. are we getting to the limits now? it will be interesting to see this next meeting. a lot of focus will be on the review ordered by the governor on the current stimulus package and what needs to be tweaked in september. have a look at this, hong kong opened after being shut for the storm yesterday, retail sales were out yesterday, and it wasn't good. over 8%, look at that.
growthr with china's gdp , one factor which has to the alsoown, the currency, and a shrinking financial services sector. rishaad: nice, david. governmente approving $270 billion stimulus package. andy sharp joins us from tokyo. markets, investors rather disappointed with all this. >> yes, indeed. it depends on what they are looking for. it is a big package on the trillion, but we see the actual real spending this fiscal year is only ¥4.5 trillion, $45 billion, some not that much money. also a lot of money on
infrastructure, not tackling structural reforms that many in japan say are needed. well, meeting with thatnor kuroda, i guess was trying to portray a sense of unity. did that have significance? >> yeah, that was interesting. this does not usually happen that the two of them meet often, but the finance minister was pretty rare. that theree saying has been a lot of jitteriness in the bond markets given that yields are still negative, rising rapidly at the moment, may be a lot of nerves, so some people are saying in the markets these markets down, especially bond markets. rishaad: a new lineup as well.
does that have any read through policy in the future? >> possibly, yes. he's keeping all the main players in position, the chief cabinet secretary, the finance minister, etc. he's made a couple of tweaks. backer of bold monetary easing is going to come into the cabinet for the first time. he is keen to push forward monetary policy, big friends advisors.inzo abe now he has been put in a formal cabinet position. another interesting person was the ruling ldp policy chief, now
the defense secretary. she is known to have a reputation of being a hawk in terms of diplomacy. known for saying nice things about china, so it will be interesting to see her, hawkish on foreign policy in the defense minister's role. thanks a lot for that. andy sharp from tokyo. honda surging in the session after u.s. sales smashed as to men's. estimates. what has given honda such a boost after what they have been going through? >> the big story for honda the last few years has been that takata has been an anchor around its neck. you really saw honda take all of the bad medicine at the end of
last fiscal year and book all of the costs they could expect out akata situation, get them out of the way, so a new start for honda. the currency being stronger was a head wind, and that income dropped slightly. earnings did beat estimates, , so you saw ame company putting that behind it and doing well in the u.s., china, where suv sales have been strong and honda has been faring quite well in suvs for some time in china, so to see them faring well as the rest of the industry plows into that segment, it was a strong indication of honda's performance the last quarter. rishaad: what about honda's rivals? how have they been faring? space you didhe
see honda beat estimates. you are seeing a slowdown in the market, where in the past we have been getting used to and spoiled by a substantial series of gains for the u.s. industry going on seven years. we are seeing a slowdown, but we did see honda beat estimates. we also sato your to beat estimates by a small margin. they were expected to drop by 3%, instead less than 1.5%. sold very well last month, up 19% for june. month of me, for the july. for nissan, you saw a continuation of this theme of suvs selling incredibly well. the rogue suv up by a third, so nissan sales were up 1.2% last month.
that was short of the 3% estimate expected. hyundai kia also beating estimates. rishaad: thank you for that. nissan down 1.5%. some other stories, a roundup. the world's biggest refiner is following in the footsteps of its rival. tell us more. has reachednopec approval to sell half of one of its pipeline estimates. sinopec will retain a 50% interest in its china gas pipeline unit after the sale. company has told the hong kong stock exchange that they will use funds as a "platform to introduce capital publicly." there is no further information about the cell at this stage. sinopec has announced plans to s to boostscover
output by 2020. shares are up by 20% this year. a bitcoinreached at exchange. alling was halted with deposits and withdrawals stopped. the breach was limited to bitcoin wallets, with coins stolen from some users. the exchange may need to settle margin positions. bitcoin plunged after the hack was revealed. it is cooperative with all enforcement on the theft. wasapore's largest bank supporting holdings shortly -- the bank has confirmed in an e-mail statement. wiber was executing a restructuring plan to
reduce levels. that projectsberg were on track and had no overdue payments with the bank. singapore, looking like this, down by .5%. was suspended from trade a week ago. rishaad: coming up, the latest read on the health of the chinese economy. the service purchasing managers index is to be released. latest effortss have essentially failed to impress investors. ♪
the yen surging to a three-week high. worth $275package billion, 44 billion to be spent this fiscal year. hurting the economy in the longer term? great to see you. what was your reaction when it was announced? we knew what was going to happen, but we got the details, or did we? a bit too early to make an assessment. there are a lot of things that long-term structure, for example childcare and creating infrastructure for women to work in japan. curve.behind the average there are a lot of structural ,ssues, infrastructure
transport, all these things are something you would not get an answer to right away. at the same time, there is a lot of typical japanese political agenda that went on, which is throwing money in people's faces. i would give it a good point, but we have to wait and see the saturation level of this policy. is, when youthing look at the details, is it really helicopter money and all but name? i was calling it short takeoff and landing money. >> that is a very good expression. this time around, he has learned. knowsvery clear that he that the short-term solutions would not result in going anywhere. problems japan
faces are long-term, and he has to tackle them in that way. asre are voters out there well, so he continue to throw cash in their face. the base foundation of this policy this time around is much more focused on structural have maded he should made a selective choice. mind, someth that in willargued this money engender some structural reforms that japan desperately needs. what is your view on that? >> it's too early to give that kind of assessment. change our demographic problems, immigration policy. people are standing back, a difficult position that japan is
there are lots of infrastructure-type of policies announced. let's see if there is an actual connection with economic growth and rejuvenation of the region. i think it is too early to tell that it would be hindering those policies in the future. right now, there is such a big gap between market by ua should based on short-term -- market valuation based on a short-term view. there is a very big gap we are seeing right now in japan. rishaad: you want to be planning for the long-term and not listening to the market, i suppose, if you are prime minister. if you have this stated policy yen, but yen -- weak long-term, does it make a difference? a look at britain in the 1970's and what a difference that
perhaps made in the longer term. >> the real scenario of abenomics, which they succeeded on the first arrow, but that should have evoke to the are one exporters, who top of the pyramid, to start spending, and eventually to increase wages as well. that was the scenario. unfortunately, that has not worked yet. they have made a lot of earnings, but have not rejuvenated into the economy. thee are doubts about societal issues, social infrastructure problems, a lot of anxiety, and that is one of the reason why things have not rolled. this is another reason why i , they reallycs have to start tackling our long-term problems were the future. absolutely, abenomics, people said it is hot air, but it was a stated goal by the
prime minister. that is what he wanted. people are questioning whether he got it. do you think he gets it now? >> no, not now, certainly. tell, raising our 10%, theon tax fragility of japanese consumption behavior was weaker than anybody thought, which shows the anxiety of the japanese public and corporations. we are anforget uncertainty type of avoidance people. warding offstart our negativity and anxiety, and that much be addressed and longer-term policies, but again, he has to do something that a lot of japanese petitions have failed to do, that is implement these policies. rishaad: it is all very well to say that, but to relieve the
japanese people of their anxiety is much easier said than done, but if he manages it, you want them spending, don't you? that is crucial here. >> it goes back to the structure of japanese corporations. this in your to system is still very much intact, especially larger companies. for that reason, the jobs are not there and there is a lot of uncertainty avoidance if we see the economy going south, and that results in people not spending at all and corporations being conservative. in order to bring about changes, we need structural transition. i'm not saying japan should be the united states. god, no, but we do need to introduce liberal policies such as meritocracy into our system. rishaad: right, the olympic
games in the early 1960's did engender that, welcoming a new japan to the world. can the tokyo olympics in 2020 do the same if played right? or if japan right is put into a corner. the thing about japan is we are not put to the corner. we are still living a fairly good life here. things aren't as bad as that they could buy many, so that feeling to make' that transitional change could that is another big psychological problem we have. -- transitional change. that is another big psychological problem we have. rishaad: great to talk to you. right, got to take a break. the opposite way of the central
♪ rishaad: you are back with "trending business". all four of australian banks have held off on passing along the rate cut, instead raising rates for some savers. ask why the banks are doing this. they have their shareholders interests at heart, looking to protect profits with net margin at the lowest and eight years. they have much stricter regulatory requirements on the amount of capital they hold. normally you get pounded when the reserve bank cuts the cash
rate, but if you have a term deposit, eight months with the national australian rank, you will get an extra 85 basis points. this will save the banks around $300 million. that's defeating the purpose of this policy. discretionaryan consumer spending has gone out the window, but it will help fear stokingices, the red-hot housing market, particularly in melbourne. rba's fearsse the about that. we will see how many japanese housewives take up the opportunity. rishaad: that is something we will take up as well. we could see another cut as well? the national australia bank
recently. this is coming out of last week's meeting. board members seeing economic expansion, but risks to the downside. traders expecting the boj to buy. honda shares jumping 6% after a surprise sales surge in the united states. reinforcing concerns the market may have peaked with last year's record in the u.s. toyota sol sales fall. nissan, chrysler, small gains there. kongarket open and hong and shanghai, and this is a single or pattern when it comes to the asia-pacific. losses deepening across the asia-pacific.
china opening up, manila opening, session lows. ,hen you tally all of this up if things don't change, you are looking at the day for asian stocks sense brexit -- since brexit. the fixingengthen the most since june 23. have a look at these small adjustment. a little bit stronger there, .3 9% was the adjustment in the fixing. -- .39% was the adjustment in the fixing. when you look at comments coming , a planning agency in china saying that the central bank should cut rates and the reserve rate requirement when appropriate.
they are also injecting liquidity into the system, 55 billion renminbi through seven day reverse repos. hong kong, retail sales out. let's have a look at early movers. sinopec down. hsbc out with numbers today. ell.pec looking to s hoping to hold 50% of that venture. the value of sale was not provided. dongfeng motor getting a downgrade. some of these companies that run
massive malls, commercial falling in hong kong, more than expected, retail sales falling 8.9% in june. across thed news region. china as a diverting economic fortunes are ever more of use with data showing some provinces and recession, others racking up double-digit growth. let's have a look at the winners and losers first, yeah? tom: absolutely. at the top of the pile of the losers is a northeastern chinese province. old economy is dependent on economy sectors, heavy manufacturing and coal. another province knocked a few
points of gdp growth, 80% dependent on coal. ,ut of the 31 chinese provinces 15 saw growth rates increase. you only need to look at one municipality with more than 10% growth. versions, andto it seems to be leading to a divergent policy as well from the central bank and government. the pboc, the last time i cut rates was october last year. instead, it seems to be pumping money into policy banks, which channels the funds into state sanctioned projects. fiscal spending from the government seems to be taking a targeted approach, targeting provinces where private investment has slowed and pumping money into infrastructure, particularly
roads, railways, bridges, and telecoms. rishaad: tell me about the role the china corporate's are playing. on an awful lot of cash, aren't they? tom: they are. the government was hoping they would play a greater role. china corporates are sitting on $1.2 trillion worth of cash. bigger than the increase in europe and japan and the u.s. a lot of it is down to a lack of confidence as the economy slows in this sub 7% gdp new normal for china. corporates sector, sitting on the sidelines, reflected in the fixed asset investment, 3% this year versus a pickup of 10% last year, so the corporates are staying on the sidelines, proving a dilemma and frustrating the government,
which once to see more stimulus, growth, an, but also shareholders, who don't want to who want to see an increase in dividends and share live experts spirit so we are seeing a divergence. and china are starting to raise money, let alone sitting on cash piles. we've seen 17 defaults this year, largely in the large economy sectors. therds the second half of year, there will be $450 billion , ath of law and maturities record, so refinancing is also a concern, another reason why these corporate's are holding onto their cash piles, but we are talking about divergence and divided fortunes between the
corporations. athaad: we will take a look isna as the latest default causing concerns. investors are seemingly losing faith. >> this is an agreement called keep well, traditionally provided to support offshore units. it is essentially a commitment to maintain offshore units solvency, but not a guarantee. offshore unite misses a bond payment, investors cannot sue the parent company and the mess to the same with local investors can. rishaad: we talk about these defaults, but why is this one
and concern in particular? ischina city construction the first to default with the keep well structure. are $76 billion in keep well bonds out there. the defaults will be a test case for investors to see how this restructuring will play out. rishaad: it questions these keep well agreements, doesn't it? lead to more selective investments by investors, investors being more cautious towards such bonds. that means that investors may prefer bonds with sounder companies with credit fundamentals and history of heymans. rishaad: taking you to some of the other stories, singapore warning the united states that its credibility is on the line for tpp, the prime minister
saying washington's reputation could be at risk if the deal fails to go through. byhas yet to be ratified most member nations. is a good thing and needs to continue. it is good not just for the region, where millions depend upon it, but then if it's the united states tremendously because they are securing peace and stability in the asia-pacific, which otherwise could be a troublesome part of the world. rishaad: reports from seoul, korea hasng north launched another ballistic missile. the chief of staff saying the rocket was fired from the eastern peninsula. that is the latest launch after u.s.yang was angered by plans to deploy a missile defense system and south korea next year. a seriesna launching
of live fire exercises in the east china sea, heightening tensions with neighbors. beijing says the drills are aimed at improving intensity, precision, and speed of warfare. this comes after china's claim to most of the south china sea was invalidated. hsbc said to report second-quarter earnings. where having a look at the implications of brexit. what should we be expecting here? >> we are getting results at noon hong kong time. we are expecting a positive set , some disappointment in the recent quarter. if you want to look at consensus estimates on your bloomberg, go to the hsbc stock code. it will bring up this.
we are looking at $4.5 billion in the second quarter, operating profit. billion, so14 falling from 14.9 7 billion the same time last year. net income, 3.5 billion, also coming down from that $4.25 billion last year. says capital markets and the rate environment look increasingly challenging for hsbc. they will be scrutinizing progress on cost cuts targeted by it next year and that $290 billion reduction of risk assets. targeturn on equity above 10%, depending squarely on these cost cuts and whether we see an acceleration in revenue growth. analysts are looking at growth at well.
hsbc's aggressive dividend policy could be put on the line as a result of brexit. don't expect them to promise full-year dividends today. the operating environment has been complicated id events in europe and the u.k., but look at this chart --, located by events in europe and the u.k., but take a look at this chart. thatchart really shows hsbc is head and shoulders above the other banks focused on europe. asia making up the largest share of profits for this lender. we had that initial drop in the immediate aftermath, but hsbc has rebounded quite nicely, outperforming the lloyds, rbs, and barclays. the ratio of sterling denominated revenue, the latter outweighing the former, so the
drop in the pound could boost profit at hsbc. rishaad: this is the first time that hsbc's hong kong share price actually come in better than estimates. better, that's right, than the consensus one year target. months,first time in 14 but still down 18% year to date. again, this is due to the asian exposure factor. the recovery is in stark contrast to last year, hsbc suffering double-digit declines. fronts, we have seen something of a stabilization so far this year, but can they hang on to this momentum. the bank has significant presence and hong kong, and the economy here has not been that rosie, morgan stanley citing
weakness in hong kong as a reason why earnings today will disappoint. the other thing to look for is how the banks plan to further expansion in china, the opening up of the bond market, key developments to making up the slowdown in retail commercial loan growth and hong kong. rishaad: thank you for that. up next, china services managers index out after hitting an 11 month high in june. can this rebound go on? we are getting the numbers. ♪
below 50 contraction, above 50 expansion. the composite emi takes into pmiunt manufacturing -- takes into account manufacturing. that is what we have at the moment. a mixed picture when it comes to the chinese economy. our next guest says chinese growth will be challenged in the second half and beijing may have fiscal policy. serviced look at the data with more interest than we do given the nonmanufacturing economy is bigger than the manufacturing one. >> how services as holding up and doing well has been a key part of china story. the problem is that there is less data available. ,ishaad: we got a story today
one chinese province is in a recession, where as the others are growing as much as 10% to is -- as much asem 10%. is that a problem? >> until recently, it didn't matter all that much where you looked. these things were moving broadly along the same lines. two things have happened and nowadays we look differently at well-to-do service oriented provinces and those heavily affected by the slump in heavy industry. rishaad: it is the china rest belt, isn't it? -- rust belt, isn't it? a lot of money has been spent to keep the chinese economy going, fiscal stimulus, monetary stimulus, is there a time when
you call it a day? it has implications on the terms certainly. >> china can keep this going for a few more years if they want to, but the pace at which credit is expanding and china is not sustainable, so something has to give at some point. we think it would make sense for the government to start to target more moderate rates of economic growth, because that would allow them to rein in the credit growth. we have not seen signs they want to. there has been speculation on the ground, but no signs at the moment. ashaad: there comes moment when this becomes counterproductive and they are mortgaging their future effectively. >> that's right. they need to go back to the drawing board for the next five years. we have these growth targets up to 2020. rishaad: the other aspect has been this lack of desire for
, sitting on a lot of cash, one point $2 trillion, and not spending it. that is not a mark of endorsement for the economy, is it? >> the average private manufacturer is looking at the future, which includes profits still under pressure, uncertain sales prospects, so that is where we see the biggest weakness in investment numbers. and for structure and investments are doing ok, but on the private side, there is little appetite for investment. rishaad: what picture of the chinese economy can you draw looking ahead for the next year and after that? i am still not as bearish as some people are about china's economy. i think there is still organic growth or something like 5% or 5.5%, which would still make china one of the best performers.
the problem is the government once more and is not going to accept these more moderate rates, and that means we policy. to worry about so i think the chinese government will have to accept that china is going through a tough time. rishaad: it has to as it develops. it has to slow down. it can't grow 6.5% forever. 6.5% now is better than 12% growth before. >> it is a slow process. it is only two years ago that china targeted 8%. there is some progress in terms of how they adjust to this, but i think there is more room to go in this adjustment to the new normal. estate: what about real development, housing, one of the key drivers on the private side? >> housing was an important part
of china's growth in the first half, however as we have been saying for quite some time, china is still sitting on a huge amount of unsold housing must so premature,t crea that construction spur. propertyty is too many developers have unsold inventory , so housing will not be a major driver of growth in the second half of next year. rishaad: thank you so much for coming on. next, blink and you miss it, instagram interesting a new feature. how it has been received online. this is bloomberg. ♪
how it could be copying a rival. we are talking about snapchat. juliette: they say imitation is the highest form of flattery. instagram owned by facebook. they have been unsuccessful going against snapchat. they have launched this new feature called stories. people can post photos or videos aken throughout their day and slideshow form just like snapchat stories and they vanish and 24 hours, also like snapchat stories. instagram is also calling its product stories. there has been comment from facebook and instagram ceo mark zuckerberg this is the new way forward in terms of how social media is going forward and this is putting us at the center. mark zuckerberg saying people are already creating and sharing
more video. snapchat, but to no comment at this stage. there has been an interesting reaction on twitter. surprisingly, a lot of sarcasm as well. user saying no other mobile app has stories that disappear after 24 hours, quite sarcastic. one fan saying this will make this, so why would they keep two apps. they say instagram could overtake snapchat. there's a lot of thought and the social media world that them to copy one
♪ >> from our studios in new york city, this is "charlie rose." charlie: we begin this evening with politics. republican nominee donald trump suggested the u.s. should accept russia's annexation of crimea if it would lead with a better -- to a better relationship with moscow. obamauns counter to the administration. it is now believed the russian government was responsible for the theft of e-mails from the dnc, and hacking into other campaign computer systems.