tv Trending Business Bloomberg August 30, 2016 9:00pm-10:01pm EDT
♪ >> it is wednesday come the 31st of august. i am angie lau. this is "trending business". ♪ angie: we will be live in singapore this hour. but first, here is what we are watching. japan at a one-month high and set to wipe out the losses for the month. will shopping, ever grande continue acquisitions despite debt that sword to $54 billion. apple, big bite, big tax bill
from the eu, saying it never had , sweetheart deal in ireland the effective rate .005%. you can follow me on twitter, and don't forget to include #trendingbusiness. japanese stocks outperforming the region. malaysia closed for a public holiday. singapore and taiwan coming online. latest here. we are seeing that solid session coming through , so aapan, up by .9% end august.tive i we did have production figures from japan missing the mark, down 3.8%.
it doesn't seem to have stopped the buyers. taiwan flat, some downward pressure in singapore. korea, some downward pressure, off by .1%. we had a solid session tuesday come through from the kospi as the won rallied against the dollar. industrial production out of south korea as well, up by 1.6% july year on year. australia hurt by the downturn in commodities. quite a bit of weakness from those energy players. the gold space also being sold off. new zealand down by a 10th of 1% gain.ersing that earlier it we will be watching out for those banking results, the reaction later this morning in
15-20 minutes. august, a great month for asian equities come up by almost 6%, but gold on track for a rare loss over august. it normally does well in this month, indian wedding season, buying in china in august, but , so certainly seeing it underperform its usual movement. a little to the upside in the early asian trade. angie: thank you so much. china's is on as biggest banks dispose of bad loans. ratio of its nonperforming loans fell for the first time in four years. is icbc getting a grip on nonperforming loans? both icbc and bank of china
say it is too early to say the corner, but it appears they do have a better grip on how to deal with these soured loans. icbc reporting its first a klein since 2012 and it's bad loan since 2012 inline its bad loan ratio. its ratio in the second quarter .alling to 1.55% icbc says it will join the government debt equity swap trial. the chairman sums up their situation this way. it is a race of nonperforming loan automation against nonperforming loan disposal, and he says the banks need to make sure they step up efforts to dispose of nonperforming loans. withe second quarter, icbc
a 1% rise in profits, while bank of china sought in -- saw net income rise. both results were better than forecasts. icbc shares in hong kong have then on a tear of late, rising 17 out of the last 21 trading sessions in hong kong this month. the stock is up 13.5% in august alone. hong kong shares up 8%, a lower nonperforming loan ratio, but is seeing pressure on the nonperforming bado and cannot conclude loans are at a turning point. angie: what about the bank's provisions for bad loans? are they setting enough aside to cover soured loans? they are not.k if
many analysts believe those ratios are artificially low as many new loan vehicles are off book. the total reported bad loans in china's banking system is already at an 11 year high. many say it warns regulators to keep its mandated 150% loan provision level and place. icbc and bank of china both dipped below that minimum level in the first quarter. icbc stay below that 150% level in the second quarter, but also sang banking regulators icbc'sand countercyclical approach, which means using more of the provisions the necessary when they need to use them. the concern is that if they burn through those provisions to quickly, the banks may need a recapitalization. icbc lowering its bad loan ratio in the first half to get that profit, but interestingly, bank of china posted better than expected earnings even as it
increased its nonperforming loan provisions in the second quarter. angie: thanks. we are taking a look at property developer evergrande, it's debt soared in the first half. even so, pressing ahead with spending plans. this is an interesting strategy. it is mired in debt, so it will ignore it. rosalind: it has fueled concerns about the company about it strategy of borrowing to expand. evergrande reported a 23% fall in the first half. excluding property, valuations, and currency losses. payments and marketing costs soared, spending $6 billion on purchases this year, and debt rose 28% to $57.1 billion. it will still want to buy
brokerages and trust companies and smaller developers. to its wants to add land banks. it has been amassing shares in china vanke. moody's reiterated its outlook. its shares have fallen 16% so far this year against an 11% increase in the hang seng properties index. evergrande seems to have not done badly. break apart its 45 billion target for presale contracts this year, and that role is one of the highest in china. you for that. in fact, we will check in on how chinese banks and evergrande open.
tweet us your thoughts, including #trendingbusiness. some other stories we are watching today. apple, what a tax bill it is facing? david: it is a massive amount. in comparison to how much cash apple has, it's a must nothing. let's talk about this response from the company's massive tax bill. taxes, and it owes the company and ireland say they will fight the ruling. they say there was no special deal and the eu is using a completely made up number. tim cook had this to say. andy company in ireland across europe is suddenly at risk of being subjected to taxes under laws that never existed. the four letter is on the
website of the company. background here, on tuesday, the european commission says apple owes $14.5 billion in back taxes with interest. it claims ireland illegally slashed its corporate tax rate to 1%. and then further to .005%. for every million euro in profit, it paid 500 euros in taxes. this effective tax rate dropped .005% ino as little as 2014, which means that even less
was paid in taxes. per one million in profit. $50 for every $1 million in profit, imagine that. she added that allocated sales profits to an office with no employees, no premises, and no real activity, and only existed on paper. just over 5% of apple's cash on its balance sheet. that's why they are brushing this all for now. of's move to the troubles south korea's largest container shipping company, seventh a guest in the world. now filed for receivership after backers ,ejected the turnaround plan saying they were insufficient and hard to accept.
shares are still halted. it has been a painful grind lower. the stock at a six-year low there. the bigger issue is what happens next to the industry, not alone in this one. the global shipping industry based on estimates that the lose $5 billion this year as cargo rates remain depressed and there are too many ships chasing to few businesses. angie: thanks. and another story, wide chinese traders are betting $300 million on rising military pensions. that is bloomberg.com/asia. check it out. still ahead, we will take a look tencent's brand-new headquarters. we will discuss that and more with standard chartered.
angie: let's do a quick check of the markets. japan and korea, this is what they are looking like. japanese shares rising to a one-month high as the yen holds at its weakest level since july. you know what that means for exporters, shipping out, cheaper cost of goods, possibly higher demand. in the rest of their region, we are seeing losses and focusing on hanjin shipping for korea. the u.s. of a stronger emergi g economy giving emerging markets some issues. our next guest is gradually
increasing allocations in emerging markets assets. isn't that counter intuitive? you are growing emerging markets despite the impact with a fed rate hike? the bigger picture is interest rates will remain low, so we believe we could see a rate hike in december after the presidential election, and that is a short-term headwind for markets and emerging markets as well, but longer out, structurally growth is slow on labor markets and productivity, meaning interest rates will remain benign. tolerant of be inflation and that will support emerging markets. angie: that is a great point.
s will probably still be ub .50%? oil has been doing good this summer. as well, gold and the base. we are more convinced in gold doing well going forward, and oil. we have seen speculative positions built and commodities, so there are short-term risks of a further decline in base metals and iron ore prices, for instance, and oil prices, but over a longer term, the fundamentals are improving. we are seeing excess supply in timesl market dwindle and when it has gone into deficit. the key question for investors is that inventories are extremely high, so how much do they have to fall before oil can sustainably increase?
we think brighter times are ahead for the oil producers. ahead,brighter times i -- times ahead, a nice tailwind for emerging markets, but would you prefer in terms of strategy. multi-asset in towns -- terms of multi-asset income and interest rates remaining low. trying to hedge that out with global asset macro strategies. we are worried about the correlation between bonds and equities rising, and we feel that could happen again and we see a risk off environment. bonds aren't necessarily the usual hedge they would once be, so we prefer more absolute return strategies to offset potential volatility investors may feel from equities or an equity-bond allocation. angie: in asia, the biggest
emerging market is china. trying to write down debt as fast as they can, but really it is those nonperforming lows that are worrisome for investors. the you think this could be a headwind for chinese ability to control its economic terms? i think they still have good control of what the outcomes are from an economic perspective. whether that will be the case in two years, we can argue, but today they still have the power to drive growth stronger. we are not sure they want stronger growth. fiscal andhave that monetary flexibility if they want. developments in the banking sector will be absolutely critical to sentiment. at least banks are recognizing the nonperforming loan more and have started the process of writing it down, but we probably have a long way to go. angie: do you think the pboc
will have a handle on the yuan? we are seeing it stick to that 6.7 handle ahead of the g-20, but afterwards, is it anybody's game? >> i think the bottom line is we will see a stronger dollar and the chinese authorities wanting to weaken the currency on a trade weighted basis, so that means it will track higher as we go through this year and into next year. that is a way to increase some inflation in the economy and protect the downside from an economic perspective. there is a lot of concern from what that means with a presidential election perspective. --na has been meaning leaning against that when. they have been selling dollars to limit the pace of depreciation, so it is a red herring from our perspective.
6.80ted to weaken through in the next few months and then we can further. is the risks of the u.s. economy, the election, the fed rate hike, so what do you do as an investor? a lot of people are piling into the cyclical trades. what about you? >> for the moment, we have had a strong summer post-brexit vote. we are still cautious on a 12-month time horizon. profit margins in the states are falling. we are expecting wage pressures to pick up, exacerbating that trend in the states. from that perspective, the fundamentals don't seem to be too compelling. valuations are not cheap at all in the states. that within ane equity allocation, we should be overweight u.s. equities, but are underweight global equities, so fairly cautious stance on a 12-month view.
people mighterm, get better very wishes to buy equities and bonds over the next few months. angie: thank you for that. a quick check of the latest business flash headlines. the prosecutor looking at bhp's disaster in brazil is expected to propose charges by september. the investigation is a result of lead toce and could charges of involuntary negligence. 19 people were killed when the dam collapse. bhp says it has never put production ahead of safety. halfng 11% in the first due to china's general slowdown and bad beer drinking whether, net income for the second biggest brewer was $150 million. the china summer was cooler than usual and the worst flood since 1998.
new products and growing international resins are making competition fears. south korea offered reasons for optimism, smashing expectations in july. industrial reduction rose 1.4% on the month. industrial production rose 1.6% year on year. next, we are watching how icbc and bank of china trade in premarket after their latest earnings. this is bloomberg. ♪
point 2%. its debt soared in the first half, but still open to buying brokerage and trust companies, pushing ahead with spending plans. icbc looking like it could fall by .8%. it rose 1% yesterday. it is dumping its that debt faster than created. the bank of china looking like it will add to yesterday's gain after it set aside further positions for bad loans. a quick look at the casinos. macau singh's gdp shrink from a seeing its gdp shrink from a year earlier. angie: thank you for watching that for us. coming up, the mystery over china's oil toward. oard. a deeper look into that story next. this is bloomberg. ♪
to pay $14.5 billion in back taxes to dublin. it is the largest penalty so far in the crackdown on tax avoidance. is one of more than 700 companies with a presence in ireland. , so called mom and pop investors in singapore facing losses as the losses from bond defaults spread. failures in the broader market are stoking speculation of non-payments. singapore's individual investors have not suffered a default since lehman brothers collapse in 2008. the markettoring open in shanghai and hong kong. how is it looking? juliette: a mixed picture. , so a flat weakness start on the shanghai markets. some weakness in hong kong.
we thought weet, might see some upside, but down .1%. we did have a look at the banking stocks in china. ,vergrande has had a big drop the biggest since june 24. postedperty developer results that show its debt soared. singapore is underperforming, down .3%. korea almost%, and giving up everything again yesterday, although industrial production rose by 1.6% year on year in july. the nikkei two like it will round out very nicely, up .7%. the yen unchanged, but holding is a jump forh
japanese equities, which underperformed yesterday, but adding to solid gains on monday, so looking like a fairly solid move for august regionally. before today's trade, the regional index up by 5.8%. some downside in australia, off by 1%, quite a lot of gold players under pressure. energy players also being sold off. some of those companies coming through with earnings quite good. looking good, up high over 6%. southern cro looking solid. new zealand flat, a positive session. the key we should actually outperform the aussie dollar in its correlation to each other and also in correlation to the greenback. i want to show you some other
stocks we are watching. there has been a call for morgan stanley in terms of the big banks in australia. rating up,isen, the but they have downgraded cba. new crest mining and response to that weaker price, gold looking like a rare lost for august, futures down 3% for the month. angie: thanks. bored -- shipping's bored filesing's for receivership. let's bring in david for more on the story. david: thanks. i will talkand about this chart after that. again, we are looking at the bored voting to file forecourt receivership for the company. we saw it coming yesterday.
the big news was the banks gave up on the company and took a look at the restructuring plan and said it will not be enough to turn around the company. it was phrased as hard to accept lender for the company. it was told the plans are not enough. the bored met early this morning in asia and decided to file cord receivership. ,n the bigger issues at hand have a look at this chart behind me. the share price of hanjin shipping and white. blue, multiple measures of the costs to ship things around. that is they stunned data from the shanghai shipping exchange, tracking rates across 14 shipping lanes. containerized of
movements. you see a correlation between those two as well. globally speaking, we are looking at the industry. , could bee estimate facing $5 billion of losses this year, which is why you aderstand that hanjin is korean problem. is pushing for more consolidation in the industry because there is so much over capacity. there are too many vessels chasing too few businesses. we will get you updated when shares resume trading. halted at the moment at a six-year low. angie: thanks. china's famously difficult to read despite our attempts to do so, and that includes its oil stockpiles. , buts been hoarding crude
it is not clear what the government plans to do. our bloomberg energy reporter joins us from singapore. what we know about this huge hoard? >> we don't know a lot. the chinese government has put out statements over the years. in 2009, they said they are planning on building a strategic reserve equipment to 100 days worth of imports. since then, they have only updated intermittently. last year was the most recent 1, one. we don't know how much more they will continue to buy. that is a big deal for the oil market. china has become one of the biggest oil buyers in the world, so if there demand stops overnight because they have filled these reserves, it can
cause ripples throughout the entire market. angie: how are analysts trying to fill in the blanks then? >> analysts are doing a lot of things. ony are building up sources the grounds at the storage tanks in china. they are diving deep into government data, but even the smartest analysts in the world, they are looking at the stuffing coming up with different answers. jp morgan things that china is almost done buying oil for its reserves and that almost one million barrels a day of oil demand might just fall off the table completely in a matter of months. inergy aspects look at the same data and said that most of the buying china is doing is going to the domestic market and only a portion is going to strategic reserves and so there is a lot of more space develop and so
buying will continue throughout the year. then for will be tough everybody to figure out how this will affect the overall market. >> absolutely. as i said, china has become such an important player. crude is been hammered this year, down in the 20's earlier this year, and it's recovered to this range we are at now in part because of global supply disruptions, but also a lot of buying from places like china. if oil is going to get out of this rut and run backup to areas where producers want to see it, you will have to have continued and theemand from china strategic petroleum reserve question will be a big part of that going forward. angie: great point. thank you for that. checking in on some other stories. president has called for greater effort on reforms to meet the government's timetable. -- the president
wants china to focus on changes and the mechanisms needed to make them happen. china announced an ambitious plan to give market forces a greater role in the economy. progress has been uneven with slow reform of bloated state owned companies. stanley fischer says negative rates are not on the table in the u.s., but they do seem to be working in other countries. speaking on bloomberg television, he said america is fortunate that it is not an a position to where it may have to consider going negative. he also said decisions made by other central banks does impact the u.s.. >> the world is becoming increasingly interconnected, particularly the capital markets of the world, so what we do affects many other countries. that was always so. it is also true that what they do affects us, so we are dealing
with the interconnectedness and we are probably the most important of the central banks. will review a. hike in test worker visa fees after india raise concerns. the government said the decision to raise these are charges could damage relations. india meanwhile is considering a , allowingncy visa people who invest $1.5 million to live in india for 10 years. retail investors in singapore are facing losses as the bond fallout spreads beyond the millionaire class. at new issues targeted individuals this year have dropped below par as failures in the broader market increased fears of nonpayment. that is a headache. let's get to our southeast asia correspondent. a lot of mom and pops worried
right now. doit always comes down to religions. retail investors tend to be less informed when making investments. mom and pops, companies with weaker credit profiles, analysts say the bonds they bought without impartial analysis. all four issues, singapore dollar to nominate in notes, they have dropped below par. the companies face possible default. i want to show you this bloomberg chart. it shows a slowing singapore economy. in seven years, not surprising given the malaise in europe, japan, and china. backdrop against which the bond fallout is happening. everyone is hurt. we are talking about retail investors.
we have not seen such a fallout since 2008. angie: what has the response been from the regulator? are there enough safeguards even? is the sense out there. the regulator and banks say there are enough safeguards in place to prevent uninformed investors from being exposed to higher risk products. the focus they say has always been investor protection, especially retail investors. they say information disclosure requirements in singapore are rigorous and requires issuers to give timely and relevant disclosures. the four retail security sold this year are listed on the singapore exchange. we are all of that, seeing rising risks in the bond market. this, individual investors will have to take responsibility for their own decisions.
angie: the latest business flash headlines. dell and emc clear the last major hurdle in their merger. they received regulatory close the dealll on september 7. the combined company will operate under the name dell technology. the transport ministry found more models had inflated ratings. thet of nine fell short of
advertise figures by more than 4% on average. willatest overstatement cost mitsubishi motors, $7 million. the company admitted rigging since 1991. we have been using the figures from the tests, but we are now changing to the average data to be more fair. we have asked the development department to use the new system. it is most important to tackle the issue, but i don't believe i should take management responsibility. china will build a new , thelant in south africa biggest auto investment in four decades. beijing automotive international will spend $750 million on a facility in port elizabeth, which will have a capacity of 100,000 cars a year by 2027. south africa's carmaking industry has been among the bright spots in the economy.
biggest auto market in the world, and a magnet for manufacturers. among them, audi, the best-selling luxury brand on the mainland. let's discuss the outlook for cars in china with audi boardmember for sales. sales, andchina auto they seem very mediocre, slowing down, as china itself slows down. how is audi planning to keep its position? high the past, we saw growth rates for china, 20%, 30%, 40%. we always talked about normalization of the market. we see 5% to 10% growth rate. it is a perfect market for audi. units.ar, 570,000
5% to 10% growth is a wonderful start. toie: how does it compare the rest of the global markets. ? >> china is a stable growth market, but look to the premium car business nationwide. 85% is represented by north america, europe, and china. if you cover these three market areas, you're talking about 85% of sales, and china is quite stable. the north american market is quite stable. weope is growing because have a growth story in the southern part of europe, italy, spain, where we see double-digit growth rates. angie: you are a sales and marketing guru on audi's bored, but the headwinds have been great, especially after that diesel scandal that cost
operating profit in 2015 to drop 6.1%, do you think a chinese consider will punish audi for that? how are you trying to overcome it? audi be honest, the brown -- brand audi, the only growing brand is audi in the u.s. you see the diesel story impacting short-term, but overall, it is not impacted by the diesel story. angie: do you think the consumer has forgotten? >> not really. they trust audi. i met in november when the story came up last year some u.s. customers and they said, i am happy with my car. i really love my car. i believe you will fix it.
so they really trust the brand. this is an important message. this is why we don't see the impact. not on the sales boy them, but has a cost you more on the marketing side? we did not change the marketing campaigns or strategy overall, but for sure we had some customer packages, but this is not a huge amount. i have to ask you about this new program you launch today's ago in hong kong, audi at home. what is it? >> it is quite simple. you are living in a condominium and don't have your own car. you are using an audi because you can book it with your smartphone. four hours,, whatever time, you can choose a sports car -- angie: are you getting into the rental market? >> we call this a mobility solution.
in a market like hong kong, you who only live in the city less than 30 days, but they still have to pay for their cars. the market is asking for shared service solutions. audi at home is one of these mobility solutions. only for usage of the car. angie: 200 hong kong dollars an hour? that's about $30. field,car is always service, clean. it is a really premium service. angie: i will have to check it out. >> you have to check it out. angie: i will check it out. peter from audi talking about audi at home and more. coming up, inspiring innovation, why tencent is spending $500
angie: welcome back. you are watching "trending business". i am angie lau. tencent is hoping its new headquarters will inspire innovation. they are testing its platform for the so-called internet of things, holographic tour guides, climate control, and alerts for the best parking spots. our bloomberg technology reporter joins us now. y's interviewed the compan designer. what is so special about this building. >> they are using the building as the giant data testing lab for the next generation of internet connected devices,
facial recognition tech elegy on your doors, smart parking maps that will point you to the best parking spaces on your wechat app. angie: you don't have to circle around and around looking for spots? exactly, and also a 24 hour monitoring feed of all the energy, electricity, and water consumed in that building, so very eco-friendly. to standardize these guideline procedure so they can export it as a product if other companies in the future wanted. smart cities are trying to use this strategy. this could be a readily available solution. angie: who makes the decision here? a tencent does not have top-down culture. they have a mixture of management, staff, and
specialists in architecture, and when they have decisions, they do it as a group discussion. the founder and chairman of tencent was involved in the project. he handpicked of the ergonomic chairs for the staff, so they did have a lot of interaction with him as well. angie: interesting. thank you for that. smart building and 10 some. tencent is not the only tech titan with new headquarters. apple showed pictures of a new facility under construction, expected to be completed by the end of this year. facebook moved into its frank gehry designed headquarters. next hour of "trending business", we will speak to a guest who says china's income
♪ >> from our studios in new york, this is "charlie rose." charlie: you have every honor that a man could have. you've got, oscars? george: no. -- noe: no oscar he oscar? charlie: why would they give you this award? george: i don't have a lot. i have the irving fall berger award, and i get a lot of little awards. i have two