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tv   Trending Business  Bloomberg  August 22, 2016 9:00pm-10:01pm EDT

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♪ rishaad: it is tuesday, the 23rd of august. this is "trending business." i am rishaad salamat. let's take you to singapore, shanghai, kuala lumpur, and melbourne. equities declining in early trading. hitting the bottom line.
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96% in the last quarter. and the dangers lurking in the shadows. described as a mirage built up on risks. follow me on twitter. hashtag there as well. let's take a look at what is going on market-wise. a lot of fed talk going on. all of that muddying the waters. >> it is a lack of clarity. some people have pointed out this was a clear lack of agreement on where we go from here. will that lead to thinner liquidity when it comes to markets. of course, just because there is no one trading potentially.
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the story across markets, stocks are mixed. dollar is lower. oil is on the way down as well. the rest of the commodities space is fairly mixed. you are looking at some of these emerging-market stocks and they are saying overweight equities in the emerging market space. singapore, watch out for inflation data, which comes out in about one hour's time. deflation is continuing. talk in the currency markets. have a look at this reversal. this time yesterday, everything else was falling against the u.s. dollar. that quickly dissipated and then we are getting back more on the dollar index. we talked about the japanese
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yen. black -- back closer to 100. the last 10-15 minutes, just about at this level. i think it was morgan stanley that came out and fixed the dollar. .47 yen stronger at about 116. keep in mind the low we hit five or six days ago was 99.54. that could trigger some more stop losses. let's move things along and have a look at the consumer reports. spike.llar, interesting the dollar has fallen. 73 u.s. cents. have a look at this. they talked about the need to cut more. this is the case they are making here. the current interest rate trajectory or track.
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balance is a number of risks. we're talking about a cut with 36 basis points. , have a look at what they are seeing with the risks involved. the current output and the battle of risks warrant one nor the other. a position of rapid easing. in other words, multiple rapid rate cuts could fuel further risk. in the case of new zealand, it is described here as seriously overheated. more evidence china might be racking up more threats to the financial system. with thengle is here story. what is going on here? >> let's figure this one out. the best-performing bank in
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china surrounds beijing. it is one of china's five worst-performing provincial isnomies and its home-base known more for the earthquake 40 years ago last month that killed 200,000 people. today, it is looking like a ghost town with half-built buildings. steel plants have laid off tens of thousands of workers. lendermall, medium-sized has recorded the fastest growth of china's 156 financial institutions and the lowest level of bad loans. go figure. the ratio at the bank, just .06 %. 436% in the past couple of years and assets have
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soared almost 400% since the beginning of 2014. how have they done it? it is largely driven by shadow lending. a ubs analyst said traditional lending makes up less than a quarter of the bank assets and just a marginal proportion of credit risks. many small lenders in china are offering these off-loan book vehicles like wealth management products to boost lending without facing requirements to bolster capital. it is a way to get around the strict industry mandates. commerzbank called it a mirage built upon risks, making it hard to assess the true asset quality.
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moody's says this form of shadow lending is so widespread in china that in a survey of 26 lenders, they have quadrupled the use of products since 2012. heldmf says chinese banks $2.3 trillion of shadow credit products at the end of last year. that could pose significant risks to the chinese financial system. thanks a we will have a detailed look at the banking system in china later in the program. we do want your opinions and thoughts. petron taking a big hit from week oil prices. profit dropping 96% in the second quarter. any light at the end of the tunnel? >> no light at the end of the tunnel. they are looking at a gloomy outlook well into 2017 because of growing inventory and slow demand. for example, with brent crude oil prices averaging $27 a barrel in the second quarter, petrona is sticking to its assumption. they are not optimistic at all.
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rishaad: what are they going to do to break even, i suppose? >> they were talking about being more efficient operationally and looking at about 20 billion ringgit in spending cuts and operational expenditure in 2016 alone. that does not mean they are not still expending. they have this big project happening in the southern part of malaysia. petronas is a state oil company. what does it mean for the malaysian states' finances then? givingonas has been
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26-29,000,000,000 ringgit annually to the government in some form of royalties. that would be cut to 16 billion ringgit this year. they have no idea what the payout will be next year. the government is planning its revenue. they have cemented a consumption tax last year and that means they have enough revenue to make up for the difference. thanks. of course, petronas has been hit by the low oil prices. let's have a look at that story and some of the others we are watching. >> the pesky low oil prices causing issues once again. the oil company focused on papua new guinea. output increased. but that was not enough to offset the drop in energy prices. lower than came in $38average estimate of
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million. look at how the shares are performing right now. down about .8% in sydney. china national chemical corporation has got the green light from u.s. authorities for its takeover of syngenta. the review by the committee on foreign investment in the u.s. was seen as the biggest regulatory challenge for the throat -- the $43 billion purchase. it does not still need to be passed by global antitrust authorities. it would help make them into an agricultural giant. it jumped as much as 13% on the news. proposalonaire's dilute minority shareholders
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while splitting control for the largest owners according to a proxy advisor. shares of more than 19% year to date. its cement and chemical unit was announced on august 11. according to institutional advisory services, the deal, which would create a $9 billion, or -- $9 billion conglomerate. now we are tracking how a new batch of e-mails is adding to hillary clinton's woes. go fever. is it still going strong or is the enthusiasm fading? more on that coming up.
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plus, searching for clues. what are investors expecting from jackson hole this week? ♪
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rishaad: let's get straight to the business headlines. the first half however, it was below estimates. it was created by the combination of csi and cnr to compete with siemens. china is the biggest high-speed railway network in the world. take has a deal worth $114 million. it has been in the pipeline for a while now. they will pay the rest to shareholders with a special dividend. an 18th-century london coffeehouse says it will keep its headquarters in london. blackrock betting on emerging markets.
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it's is the world's biggest emerging asset manager. inpoints to an improvement fundamentals and the stability of the dollar. about a month ago, blackrock seeing more room for inflows. indices set to rise for a third straight month. is easing concerns on the pace of the federal reserve rate hikes. we are having a look at that now as well. seeing asian markets mixed. a bit of pressure on oil. the dollar snapping a two-day bounce. let's get to george. great to see you. let's start off with the fed. a lot of people speaking out of school. a lot of noise coming from and even nonvoting members permit it has created a lot of confusion. janet yellen, she needs to rein
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things in, to a certain extent, doesn't she? george: spot on. this is her opportunity to rein officials' ts fed hinking, whether they are on the committee or not. you can take the rule of thumb that this is a coordinated .esponse there is a possibility that september is on. being the chair starts thinking this is a definitive approach to what will happen going forward. you can take the dovish view of
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a rate hike. september should be off the table. given these comments in the past creates a, it really little bit of confusion. they are either trying to increase the possibility of a slight hawkish overlay going into september, but at the end of the day, it comes down to the chair. the chair is a dove. the consistency with the dove would be that december would be the early possibility. the market would be in a slight holding pattern going into this week as we approach jackson hole. this is her opportunity, one would think, to nip it in the bud and give us a definitive roadmap as to how you do a dovish rate hike. rishaad: could a dovish rate hike be just going 25 or 50 paces and being done with it as a precautionary measure? george: i think so. one thing that the chair has been good at is communicating there is a structurally lower rate cycle ahead. many people have gone over. i think that has been communicated time and time again. it sounds like an oxymoron, but
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you cannot have a dovish rate hike. i think that narrative has been quite clear. again, this is a definitive statement from the chair. one would think that she would not disappoint. september, the margin was put on the table in the past week. one would think that a dovish rate hike is the -- consistent with december as an early possibility of the rate hike. it is about time the narrative became clear because markets are not really , ifentrating on the basics you will, the fundamentals. the thing being, it would also give them time to look at what is really going on with the economy and put some of these demons to rest. george: exactly. for obvious reasons, monetary policy globally is distorting markets.
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obviously distort markets. that is why they engage with markets. we know that the data is reasonable. been even better historically. the point is, there is enough to make the rate hike data dependent. it comes down to, where do you take profit? do you start selling utilities or infrastructure as a bond proxy or do you hold onto those if they are going to delay the rate hike cycle going forward? at the end of the day, monetary , they do distort markets. if you want to exaggerate the final point, look at the bank of japan. it has effectively got strong get, thetrongly correlation over the past month or so. they are really distorting the equity market as they intended to do to begin with. were going to talk about your free investment themes. that is one of them. you are also seeing the shift from developed markets to
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emerging markets. these are the plays you are making in your research. george: exactly. bond proxy is now taking profit. emerging markets, they are the beneficiaries. i think there is enough conducive monetary policy. that started in china last year. it has different permutations.
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emerging markets aims should be what you're looking for. if you do not want to buy emerging markets, by companies that have earnings from emerging markets as a proxy. those are the things to highlight on a three-month and six-month view. rishaad: i hate to talk about basics and valuations.
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valuations on the major indices are looking very top he -- toppy, wouldn't you agree? i guess the value is in this part of the world, the
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asia-pacific. george: spot on. valuations are not cheap. you look at the sectors and some of the banks in north america from a price perspective, traveling higher. that is why the emerging markets theme is coming on. emerging markets in asia is the theme. not emerging markets in eastern europe or the middle east.
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it is specifically emerging markets in asia. it seems to be a risk-reward
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trade-off. notwithstanding, aussie equities are ab
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details on their deal with syngenta. ♪ rishaad: you are back with "trending business." looking at china's national chemical corporation, winning
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u.s. approval for its $43 billion takeover. that was the biggest realtor a hurdle. jonathan brown has been following this right from the
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get go. how far is it from completion? >> syngenta said they are confident they will get a deal done by the end of the year. approval was the key obstacle to .lear six years is a bit of a black box as far as anyone is concerned. ,or this deal to get done everybody needed approval out of the way. that has been achieved now. what do we know about the u.s. worries about cam china? >> not too much. know is that they asked for a we filing earlier in the year, in june. they wanted to have an in-depth look at this. security is key.
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this was an opportunity for the many agencies that make up the process to have an in-depth look at food security as far as china and coming out into the world. rishaad: tell us about washington's attitude to investment in china. it is an uncomfortable relationship when it comes to this.
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>> it really is. perhaps agrochemicals is ok. technology, in some sense, is not. we have seen semiconductor deals, led lighting deals. food security seems to be ok. may be getting the green light. that is the feeling, anyway. >> it is what everyone was worried about. rishaad: thank you. here is a little food for thought. approach on novel bottles of sunscreen. it claims it smells like chicken.
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success andwas a supplies ran out a few hours after it appeared on its website. in june, kfc hired george hamilton to portray colonel sanders and commercials. there you go. still ahead, blue skies. we are looking at china's drastic measures to clear the air before g-20 leaders arrive
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on a day when we get up and going in hong kong. looking at the shanghai open as well. mostly declining in the session thus far. ♪ rishaad: most asia-pacific shares declining in early trading. the oil dropping and the dollar first time in three sessions that has happened. investors weighing hawkish comments from the fed suggesting u.s. borrowing costs could be on the up. petronas reported a 96% drop in
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profit from last quarter. revenue dropping some 21%. malaysia's state-owned energy giant described the first half as being difficult. syngenta in new york. clearing
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one of the biggest regulatory hurdles. they approved the $43 billion acquisition but said they are still subject to antitrust reviews. the deal has been criticized by lawmakers but is expected to go through by years end. in shanghai, it is not looking that great, is it? >> of course, we don't really have a choice. have a look at how we are opening up. we have been testing these recent highs in hong kong.
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, a littleo last year bit more expensive. still trading below the value of net assets here. down about a quarter of 1%. s&p global ratings reaffirming rating for hong kong. the outlook remains negative here. has physical reserves and above average economic growth. -- get inflation, well over 2%. moment, japan still weighed down by the stronger japanese yen. about morgan stanley. city with one is fixed income close to 100. i think it is 113 was that level. was 99.54 fourit or five trading days back. note to clients. we are talking about the taiwan dollar and the south korean won.
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no longer overbought, looking at some of their charts. they could see the taiwan dollar rising ahead of the meeting at hole.n looke i go, let's have a at the one trading data we are getting in china. again, we are looking at an absolute surge out of the gates.
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i will not tell you what it does. remembergle one that i has gone bursting out of the gates. which indicates we are getting renewed interest back to the markets. evidence is growing the shadow banking maybe the biggest threat to china's financial system. bank in onete-owned of the most depressed areas of the country. >> as you just pointed out, what is interesting about the bank is
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the disconnect between the poor local economy and the outstanding performance of the bank. assets have been tearing away. it has a tiny proportion of that luck. 06%. the local economy is just not great. rishaad: that is not where the money is at the moment.
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zone, in this industrial it is largely a ghost town. maybe one day, that will be a great development. so far, it is behind schedule. does not seem to be working. if you have a bank that is highly exposed to that, the local economy, which is just not great, and has fantastic performance, he would go -- rishaad: exactly. alarm bells go off and it is a tiny bank. the question is, why should we care about this? emblematic of deeper
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issues because this shadow banking story keeps coming up? >> with the small banks, what we know is what the analysts tell us. it is not going to be icbc. these smaller banks have taken on more risks and have gone into shadow banking. is the potential for liquidity shocks and investors to lose confidence.
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having said that, we are in a financial system which remains largely closed. the government can intervene whenever it wants. it is kind of like shadow banking is the key area to be concerned about. also, the government has a lot of capabilities to deal with it. rishaad: and the banks hoping it
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becomes this dynamic once again where they have them backstopping a lot of other things. it becomes problematic. should people be concerned about
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this? we have a lot of other issues with wealth management is yielding double digits. people are going, it is so opaque. >> these small banks are into
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these wealth management products. i think it is the phenomenal growth which is one of the issues. and then the interconnections of
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wmp's,buying each other's which does not seem like a good idea. rishaad: thank you for coming. let's have a look at what else china next month. it is the g-20. preparations could affect the oil price. hundreds in the area have been ordered to curb reductions.
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blue skies when world leaders arrive from major summits in the countries it could have widespread implications. dan has been crunching the numbers. what is china doing ahead of this meeting here as well? >> like you said, they are going to cities like shanghai that are on the delta. they are telling companies, you have to curb output or shut down. the one hand, going to help reduce the particulates in the air and make a blue sky leaders. it is also going to reduce energy demand on the ground. rishaad: what impact could it have on oil? as much as 200, 250,000 barrels. >> not a small impact at all. between the g-20 shutdown and month,g earlier this energy aspects set at 250,000 a refineries along the delta are going to be processing less oil during the summit. maybe 400,000 barrels a day of less oil. and also, all the factory shutdowns means less trucks rolling in and out. all of that combined really puts a dent in oil demand at the world's largest energy consumer
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this quarter. rishaad: we have had many meetings before. famous blue skies for those summits. are they all precedents or's this time different. -- or is this time different? >> there are precedents. last year, there were measures put in place for track and field.
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