tv Bloomberg Daybreak Asia Bloomberg March 27, 2017 7:00pm-9:01pm EDT
♪ >> while futures are suggesting a more positive today in the asia pacific, a proposed health bill selloff eased on wall street. >> a question of confidence in china. early data suggests strength but some observers see big problems ahead. >> and another official enters he rate detective. uncertainty might mean >> -- yes, just two hikes this
year. >> and queensland braces for cyclone debbie. expected to be one of the most violent cyclones in years. >> this is "bloomberg asia clfment i'm yvonne in hong kong. newnd i'm betty liu here in york. as you mentioned at the start, looks like asia is not going to carry over some of the declines we saw early on here but we have breaking news right now on south korea. g.d.p. urth quarter numbers. revised up from the prior reading. growth. in south korea year on year in the fourth quarter, 2.5%. that was also revised higher
from the prior reporting of 2.3%. we've seen so many things happening the -- from the impeachment of the president to hauled off to prison. let's look at how the day is shaping up. new zealand and australian market just opening up. pretty flat right now in new zealand. the index slightly a touch slower. affection sx 200 is pretty much flat. chicago opened up .18% higher. and yvonne, you're going to be ive at the queth credit sweist investment se asian
conference. >> a big interview coming up. lots to talk about. just not about brexit but we asked him about an exit strategy and any reports coming out on friday and after posting a second annual loss after this d.o.j. settlement, their capital buffers have fallen. we're going to talk to him about his options moving forward for 2017 as well as they actually raised their bonus pool by 6% in the midst of this. also at 8:40, we're going to be joined by jonte lore, the professor of economics at stanford university. we'll ask him about the taylor role and why he thinks the fed remains behind the curve. he is also one of the names that has been thrown around as a potential replacement to janet
yellen, if we do see donald trump pick a new chair in 2018. going to be a busy day out here. betty: another day and another warning for partners. -- is that the growing going to eventually derail the economy. tell us more about what hyman said today. >> hyman adding his voice to the list of people who have warned about china's debt. saying it's not sustainable. bloomberg intelligence has it at around 264% and hyman says that at some point that's simply going to unravel. take a listen. >> china is a mess and at some point it's going to blow up and they have a ton of debt, which is unsustainable but the money supply in china is 23 trillion. our money supply or deposits in banks is 13 trillion.
they have another 10 trillion dollars and it's something like 11%, so it's increased 2 trillion in the last past year. >> the data we've seen recently in the last few months for china has shown that growth there remains relatively robust. and yesterday, industrial profits were up more than 30% for january and february. hyman says ultimately there are deep structural flaws in china's economy that will offset those short-term gauges. e said yes, the economy is diverse fight. companies like alley babba and 10 cent but he said it's not enough. he said there are policies that are protective and ens already and said they echo from -- some of the policies we're seeing from frump and his america-first
policies. hyman also said there are massive pollution problems in china but says he sees it at very unlikely they'll be a .s.-china trailed war. betty: but other pressure facing china's economy is that shrinking labor force. >> that's right. we've had some data out from the chinese economy of social sciences and they're showing that in 2010 the labor -- cipation force was 70. 77%. it fell to 70.%. the impact of that is higher wages. it's one of the main complaints from companies here and that is squeezing growth. here are a couple of reasons we're seeing this lower participation rate. one of those is that simply this
there is this expansion of tertiary education here. more people going into universities. there's also a slower or lower participation rate amongst women and generally among all age groups there's less participation burr wang says that may not be a bad thing that, that there could be the start of a new group here that in the long term that could prove positive but in the short term we're likely to see wages continue to pick up and squeeze in growth as well. betty: thanks so much. let's get to the news with nene in new york. nene? >> good morning, yvonne. charles evans says uncertainty over inflation and federal spending saying two rate rises
-- rises could be enough. evans voted with his colleagues to raise rates march 15. >> to the extent that i gain more confidence in the forecast that i have, that would be, you know, a good indicator that i could perhaps support three. two might be the right number if there's a little bit more uncertainty. there are any >> an arrest warrant for its failed president saying it's reasonable to detain her because there's a risk she'll detroit -- destroy evidence. he seoul court will consider the charge on thursday. she denies the charge. chinese milk producer has spoken
for the first time since its shares collapsed on friday. they met 23 credit torreys the day before the crash and the recentlyal government asked them not to demand immediate repayment of loans. the company says it has been late in bank -- making some bank payments and its shares will be uspended in hong kong. saudi arabiaa is preparing for the flotation of what is considered to be the world east biggest offering. the kingdom plans to sell as much as five 5% next year in a bid that could value the business at $1 billion. the national cat man's beef association wants president to to persuade china
resume imports from the u.s. they haven't allowed american beach into the country since 2003. beijing lifmented the ban last year but the two sides have yet to agree to terms. more than 2,00 journalists in more than 120 countries. >> thank you so much. with the first word news. let's get to how the markets traded today and what it means for tomorrow. oliver is joining all the -- us. >> there we go. we have the fed coming out. people are looking at interest rates. i think today was a surprise move, the move in bonds. we went in speculately what was going to happen with the trump trailed after friday's failure to pass health care. we saw some off in the morning. then all that kind of revere versed and that happened as the
bond market strengthened. it kind of reversed some of those gains, pushed some of these low bonds, companies and sectors down. we had a little bit of strength on hospitals related to the health care bill not going through so there was some trump sort of affect there but it's going to be interesting to watch that happen if bonds continue to strengthen and we continue to see yields go down. that 10-year yield now at .37%. what does that mean for the dollar rally, does it come to an end? oliver: that's a good question. we're looking at basically three rate hikes throughout this year. language from some fed voters that perhaps two would be sufficient and some say four. i think it's important to the equity market. i want to bring up a chart with
financials. this is looking at the put to call skew within the s&p 500. in white and spy, the same thing for the blue line. when this line goes lower, it's more bullish. you can see that happened right after the election. but we've seen a slow climb up where the s.p.y. has gotten more bearish and yet this hasn't really happened with the banks. this is a part of the market that's been dragging on the s&p 500. something doesn't match up here. either options traders are going to have to get more bearish on banks or perhaps the street is really banking on higher interest rates and on donald trump's fiscal policy. >> olver, thank you so much. still ahead, some of those banks will be in the spotlight. their full year earnings coming
asia 6. i'm yvonne in hong kong. betty: and i'm bet yes lue in hong kong. bill brooks and pimco have made amends. a year after he was ousted prosecute the firm he co-founded. the two sides announced the agreement in a joint statement. gross stewed after he resigned and went to janice capital, contending he was pushed out by executives.
pimco will pay $11 million to settle the clay. uber self-driving cars have returned to public roads in the u.s. three days after a crash in arizona put the testing patter on hold. one of the volvos was involved in a high-impact crash on friday. police say the vehicle was not responsible and nobody was injured. and growing concerns about used car prices in the u.s. is seeing he's and its top investor carl icahn taking the biggest beating. hertz shares lost 20% last week. followed by warnings that the worst is yet to come. hertz is seep as being more exposed because its turnaround plans call for selling off an outsized numbers of aging cars. investors are assessing the
prospects of trump administration's growth policy. i want to bring in ted weiss berg, seaport securities presidents -- securities and you say stay long in the markets. why? >> first of all almost every mistake we've made for the last five or six years has been not what we've bought but what we've sold and i don't think that dynamic haze changed. the market up 2200 points since the election. yes, we've given back 500 or 00 points here but we know that trees don't grow to the sky but i think on balance, the under look guess so are good to at any opportunities as buying opportunities. >> what underpinnings? >> the still plus coming out of new fiscal policies from the trump administration. i know that everybody is
throwing out the baby with the bath water as we speak. >> health care was so hard to get, forget about anything else, right? >> i think that's not realistic. i think we're going to get something. between the prospect of lower taxes and repate race of all those trillions of dollars offshore, i don't see how i cannot help the u.s. economy. whether we get 100% 100% ore 50%, we're going to guilt something and it's a positive. >> you might be one of the few who's not as nervous. i want to show show this guys, let's pull this it. index.nteers the vix the blue line represents the 200 day moving average. and now it's crossing the 200
have day moving average and some analysts say that's technically significant, show that there's much more unsouthern te in the market. >> in the very short term perhaps they're right but if i look at that chart, i would say that every bounce up in the vix was a selling opportunity, not a buying opportunity. if you look at every chart of the vix, it's been basically straight down for the last six or seven years. that chart to me tells me that every time you get a pop in the vix, you don't want to buy it, you want to sell it. >> interesting, so you're not as -- you have the opposite view basically of what that shows here. >> it goes back to my first extent that -- comment that every mistake we've made over the past few years is not what
we've bought but basically selling. we're going to stay long and i do believe that the election -- leaving the personalities out of it -- that it was an absolute game changer as far as the u.s. economy and the market is concerned. betty: so what are you buying then? >> we're looking at this week in financials for example, as another buying opportunity in the financials. we've been long coming into the election. we've been long for a couple of years but in kind of pullback we find very interesting so we will probably add to those positions, including some insurance stocks. and the best trailed we've made, a case of being right for the wrong reasons, what i is -- which is probably how we've operated our entire lives in wall street. we started to buy into a bunch of big foreign companies that do business in the u.s. because we wanted to position our
portfolioings against a rising u.s. dollar. that hasn't turned out to be the days but -- case with you -- but we bought stocks like philips. a. bb, nestle. and they've turned out to be good trades because europe is where the value is at the moment. i think the it was amount case of being lucky, not smart and it doesn't matter how we get there as long as we get there. betty: as long as you get there? >> right, exactly. yvonne: ted, i want to get your take on where you think the 10--year-old -- yield is going to go. we haven't been able to stay above the ., a level that's been predicted since the bear market. are we heading up to 2.6% or 3%? >> we think interest rates are
going higher and it goes back to our feelings about what we think will come out of the government in sterms of fiscal stimulus. it was a couple of years ago that the fed were telling us they needed help from washington with fiscal stimulus. they never got it but i think they're about to get it. true, it's going to take six, 10, 12, maybe 15 months for this to filter through the system but our feelings are interest rates are on a trajectory of going higher and i suspect they'll go higher and steer than most eople think. yvonne: always gooed to have you. ted weissburg from seaport securities president. more to come. the latest with clean debbie bracing and hitting queensland.
yvonne: this is "day break asia. i'm yvonne man in hong kong. betty: and i'm betty liu in new york. cyclone debbie is expected to hit in the next few hours. paul is there in sydni. how bad is this expected to be? >> it could be worse than cyclone assy back in 2011. cyclone debbie not as powerful but it covers a greater area. it's slowed down to just eight kilometers per hour so it will linger over the areas it's hitting and also likely to alive
-- arrive at the same time as the high tide. also, wind gusts to up to 250 kilometers per hour at its core. so far 25,000 residents of the town of my -- mckie told to evacuate. nd the town of bowen looks poised to take a direct hit and at is home to the avid point coal terminal. betty: i saw you mention about the coal. what are the mining companies doing in preparation for these violent storms? >> b.h.p. has suspended operations of one of its metallurgical coal mines. evolution has evacuated its mine. six years when cyclone josi hit, there were plenty of images of mines that were flooded by that
storm. this could be an impact on sugar crops. it's estimated that up to half of queensland's sugar plantations could be in the firing line of this cyclone and the harvest was due in just eight or nine weeks' time. yvonne: thank you very much, paul. we are counting down to the opens in japan and south korea. of course we heard the revised numbers from south korea a little bit better than examined so we'll see how that affects the poss -- kospi when it opens. right now japan is trading. gh kay futures up about -- knee kay futures up about .3%. the yen and dollar trading just about flat. yvonne? yvonne: yeah, we were heading close to sub .110 earlier in the
yvonne: :30 a.m. tuesday morning in hong kong. a pretty clear work as we start our tuesday morning. we're 30 minutes away from japan's first major markets opening. betty: that's right. red empire state building dominating the skyline. red an propoe for what we saw with the losses in the s&p and dow. i'm betty liu in new york. yvonne man -- yvonne: and i'm yvonne man in hong kong.
the economy strengthening further. sales manager sentiment and the contents of small and medium sized companies jumped to their high nest almost two years. a gauge of manufacturing activity based on satellite imaginary remains row best be -- robust. however, some say chinese rising debt levels are bound to affect the economy. there are fears that china's structural flaws will eventually overcome short term progress. hyman says the problem is that debt is growing faster than the economy. workers at a copper mine in chile are said to end their strikes this week after a six-week pay stoppage. negotiations between two sides failed and the miners will work
under existing contracts that. means b.h.p. will not have to offer a return to work bonus but will have to reopen talks next year. profits shifting quarter -- offshore to avoid test. the law will academic july 1 and is expected to rake in 100 million aussie dollars per year. offsetting a domestic income of more than 25 million. and south africa's financial credibility is under threat after the president offered the finance manager to cancel an investor road show in the u.k. and america. gordon was told to return after leaving for a week of meetings. the south african trip had official approval and he gave no reason for his decision. some of the world's top miners have halted production and
thousands have left their homes as a major storm bear down on queensland. cyclone debbie is bring winds of 250 kilometers per hour. debbie is examined to cross the coast as a category 4 storm with the risk of significant structural daniel. lobal news 24 hours a day. i'm nene melendez. this is bloomberg. betty: we are getting headlines on this southern american airlines tie. the companies say they plan on co-sharing aen agreement with american airlines and agree to issue eight shares to the american carrier. those shares are now going to start resume trading today in shanghai. china southern agreeing to a
co-share is aing plan with american airlines and issuing eight shares for that. we have more on that and the asian market. we're watching air care yes today. >> that's the case, betty and we'll be looking to southern china when the markets in china nd hong kong open at 9:30. so far, we did see that risk ease on wall street. we're seeing that play out no australia. 9%. 200 up about . we're seeing the aussie pick up a 10 of a percent earlier. as you can see, features are down 1.7%. we are expecting tech stocks following. u.s. pierce, not connected to trump fee.
but we are seeing demand for safe haven assets but gold for he most down .1% but it is pushing above its average price for the past 100 days and we are seeing oil hold losses. we are seeing stocks down the 110 of a% for a second day. we're seeing stocks and energy supporting gains here but the %.terial segment up on a 7.6 we're expecting zone debbie to hit australian coast there but minerers and meetals on the up 9% here. players down .
betty: sophie, thank you so much. the chicago fed prosecute charlie evans saying uncertainty over federal spending could mean now only two rate rises would be would be now nash enough this year. however, evans said it would -- he would support three stories if we gained forecast in the -- confidence in the forecast. >> many people like myself had lot confidence in the data. the december s.e.p. had a nice forecast and even rat satisfying that forecast made me feel better about going ahead with the rate increase in march. one of the largest concerns is whether inflation is going to get up to % nationally but i thought it was perfectly
acceptable to get one in march. >> we talking about looking at levels of innation verse a month to month or quarterfinal change? >> i'm looking at the incoming data, the growth rate, to see if it supports my g.d.p. forecast. you know the state of the labor market and everything else. i'm looking for both to come in an 4. kt . the unemployment rate is down to 4.7 skt with we're always looking for imboth. changes. i think resource slack has been reduced to the point where it's unclear this there is any slack. that's a requirement i think for incollation -- inflation to start going up more. >> is it going to start moving
up or as the move we've seen basically been energy case? >> that's a good questions. up.tion -- energy has moved in 2015 heldline inflation was held down considerably. now we've seen it come back up. core inflation is a much better measure of inflation. d it's moved up to 4.4% year on year to 1.7 president. it's still not up to -- yet but in this case, core not getting to 200 until 2018. so would that put your dog at the oher independence of the range. >> i would say that the range definitely i includes some forecasts that have inflations.
overshooting ever sight willly. mine is at 2%. >> again, that was exearlcommarl evans from the chicago sun. lets get more. >> a couple of points stood out talking hen he was specifically about in demraugsflaugs. we're getting close to the fed's ideas. i want to now g.t.e. 3476. the dual mandate. employment, he said it was unclear and if was any stack. 4.7%, that's good news but he's not so bullish on that core police station. x-food as well as sustainable.
interestingly, feds funds futures fell just a little bit there. this is the world interest rate probably. basically what you're looking at is that fete food fwruches have fallen just a little bit. they've been hitting the 5% mark for the meeting coming enough june here and for all the other ones they've all fallen by a currentlyle of pampling appointments. but and raves in terms of being raid of any kind increase. talk about the volatility inindex, vix. always -- also talking about volume it that we hasn't hit since the collection and of course that technicality issue. so potentially moving into more volatile territory, especially -- and of course, donald trump's
approval rating with obamacare revision and all those regulations potentially coming into play here. something we have to look two -- to as the days continue to progress. evoon? yvonne: looking ahead at the u.k.'s divorce with the. up and the e.b.c. saying it's a good time to revise the banging -- lang -- banking lou law. >> just two gays away, 40 days was on away and danielle bloomberg division telling us t's the-time if make investments. she wants to oversee blanches -- branches of foreign legenders that try and get into the e.u.,
basically saying that she doesn't want any part of the. u. to make special ararments with some of these baurnings. on the whole, she is still positive, trying to put a face forward. she said she hopes european project won't be damaged and 's very sad news of the u.k. leaving the union. off of all, that it's interesting that we are now debutting this cool terminal. this is the measure of health of british economy. we are now at 30%. has been higher, such as 60 pre-brexit. over next months we'll see how the uth k. committee.
>> look, we're up now. >> in is a cool new tomorrowal in we'll want to keep an eye out for. yvonne: thank you so much. check that one out. here live at the credit suisse investment conference throughout the morning with some big have guests. at 9:40 honoring tong -- honoring tong style, we'll be talking with a periphery. d also, wrure agea group joining going to be us. >> certainly a lot great guest coming up. up next, china's big banks reported their earnings this week. e'll look how the fete fed may
yvonne: this is "blook bloomberg daybreak asia. i'm yvonne man in hong kong. betty: and i'm betty liu in new york. intel the going back to its roots as a maker of memory chips. it says the new product package will improve desktop performance in a way that users will notice and be willing to pay for. it says its new model can load programs from a standard hard drive 14 times faster than current models. qatar airways is pushing ahead for plans to operate in india. the c.e.o. says he's confident
qatar will be allowed to fully carry a demethic carrier and may -- a 24% stake in jet airway. and emirates may offer dubai ers laptops as the carrier looks for ways to soften the u.s. travel ban. bans passengers from carrying large laptops. the airline is monitoring its effects. >> we are not at this point in time contemplating major changes but i have to be quite honest -- if demand dimmings for reasons of issues that are being raced or whatever action the united states government takes, we will
have to adjust accordingly. that's just good business. yvonne: back on the banking sector. china's agriculture cultural bank reports the first of the big lenders delivering their earnings. let's talk to the chief china strategiest at b of course com international. someone who called the boom and bust in the market way back in 2015. boom and bust, people wonder about china, particularly the debt levels. how are you feeling about the debt levels this season for chinese banks? >> earnings are improving, especially in the last quarter of 2016, and also, the interest rate spread in some of the biggest -- bigger banks is interesting. i would say that earnings quality and growth -- growth is
improving. also going into 2017, earnings growth could pick frum 2016 as well. betty: if things are stainle but what would disrupt that? s the the trailed possibly petering out as it seems to be investors?s of > that is running into resistance because the u-curve originally was stiffening but now it's straightening out but also, if you notice that the interest rate level and liquidity conditions in china is actually tightening and that is as a result of the central bank tightening and also the result of a general interest rate increase globally. betty: ed hyman, one of the more
well known forecasters here in the u.s. has a much more pessimistic slew than you have on the chinese banking sector and i want to play to you what he said earlier. >> china is a mess. at some point it's going to blow up and they have a ton of debt, which is unsustainable, but the money supply in china is 23 trillion. our money supply or deposits in banks is 13 trillion. they have another 10 trillion dollars and it's up something like 11%. so it's increased 2 trillion in the past year. betty: so he's worried about the country's debt levels and that filters to the chinese and their debt levels. what's your reaction to that? >> in the longer run, i think it's a concern because that level has been so high now and also in an environment with interest rate increase.
when we're trading in chinese banks, we're dealing with quarterly results so i think on the quarterly shorter term basis, i'm a little bit more optimistic and also, if you look at china as a country as a whole, because the country has so much nets overseas, so on a country basis, the country is actually on the net equity positive basis so in the near term it's a little difficult to call it a banking crisis. i think in the longer term with rising debt level, it's definitely a concern. tty: what does this mean for loss provisions for the 2016 banks? more or less than 2016? >> thing 2017 low loss provisions could continue to improvement that's the trend already in 2007. because some of the big banks,
their main customers are s.o.e.'s and some of them are actually enjoying a bigger margin in the last quarter 2016. profitability is improving. i would say it's a trend to watch in 2017 because much of the earning improvement in the large s.o.e.'s will come through to bank balance sheets as well. but don't forget, the market is expecting this so even though we'll probably see a better earnings growth in again. , it's already expected in the market. betty: amid this liquidity squeeze we see in china, it's the small lenders that have struggled. reports that's -- last week they ad missed their sberbank obligations and china had to come to the rescue. do you see this as a contagion effect or are we overthinking
things? >> i think the p.b.o. is trying very hard to stabilize it but at the same time trying to give enough punishment for the smaller banks. i think we saw an episode in 2013 where we had a liquidity crisis and that created a huge destabilizing effect all right choins banking system. we have an important meeting coming up and there could be a leadership transition in some of the senior posts in the chinese government so it's very important. c i would say that the pbo would try very hard to stabilize the system. yvonne: always good to have your insights. coming up, we make sure to keep the day's stories up to date, of
the chapter 11 filing for westinghouse materializes. fully honor the debt with westinghouse. too big to fail for the japanese government. softbank potentially digging into the war chest again. in may be looking to invest up to $1.5 billion in a combined snap deal and put heart entity. honda saying it will invest in an alabama plant with the initial phase of the project to be completed by 2018. these are some of the stocks we are looking out for at the opening and japan. we have the china southern airlines story of course. this is some of what we are anticipating here. againrse we have seemed inching towards the 110 mark. we are expecting the nikkei opening higher above the 19,000
toshiba's u.s. unit, westinghouse. facing chapter 11 bankruptcy on tuesday. yvonne: this is the second hour of "daybreak asia." i am yvonne in hong kong, just past 11:00. just past 8:00 in new york. im am betty liu. we are watching if there's any carryover, which does not seem ,o be the case, in the u.s. winding down the reaction from the health care reform fallout. over in asia, certainly looking at many more local events happening, including the earnings season happening for chinese banks. absolutely. it seems that the market cinnamon -- sentiment is they are not buying the story that donald trump will make a far-reaching tax reform.
definitely seeing a bit of a rebound here in asia with the dollar-yen stabilizing. with a couple of days here for asian investment. we will be joined by sco just minutes away. betty: let's get a quick check with sophie kamaruddin. markets open. sophie: here is the set up in asia. old fallinghave 1/10 of a percent. the yen slipping 1/10 of a percent there. we are seeing japanese stocks up about 9/10 of a percent and the rising.-5 here, we are seeing snap job .5%. we also seeing elsewhere in the and new zealand
bonds giving back monday gains. overall, equity investors recovering somewhat from monday's tells been. support coming through from banking and energy shares. we do have the material segment trading higher. taking a look at the nikkei 225, we do have energy stocks leading gains there with the advance of 1% here. quiet a nice open to be had for the nikkei 225 and gains across sectors. take a look at early movers, we electorate on the upcoming gains of over 2.5%. moving on to the cosby, financials down in the red. there are reports that there has been another missile test.
we will talk -- track markets for any potential reaction. this morning we did get fourth-quarter gdp growth coming in a little better than expected at 2.4% compared to the 2.2% estimated. we will be waiting to see what else could perhaps filter into market reaction in asia. betty: all right, thank you so much. now let's get to first word news with paul allen in sydney. presidentchicago fed says federal spending could mean to rate hike at -- hikes. however, he told bloomberg he would support three hikes if he gains confidence from the forecast. >> to the extent i gained more for cap -- more confidence from
the forecast i had, that would be a good indicator that could perhaps support three. two might be the right number. eddie myers concerns about whether or not we get that. off ands really go inflation gets up, we could hit for this year. paul: south korean prosecutors confirmed the request for an arrest warrant saying it is parknable to detain because she could destroy evidence. forcingccused of a big business to pay billions of dollars for government favors. some of the world's top miners called reduction and thousands of people have left their homes due to a major storm on the coast of queensland.
it could be the most part closest him to hit australia since 2011. debbie is expected to cross the coast with the risk of significant structural damage. china southern will return to trading in shanghai later after a three-day suspension. carrier has revealed more details about a deal with american airlines including introducing a co-sharing agreement. toy would release shares americans in a deal worth up to $2 million. on stocks closed 7/10 higher monday. global news, 24 hours a day, powered by more than 2600 journalists in more than 120 countries. i am paul allen. this is bloomberg. betty: we are watching shares of toshiba trading down about 710 that itsa report western unit, westinghouse, may file for the groep c as early as
today. a report calls the move imminent at $6 billion. exactly why were investors beforehand sharing this bankruptcy probability? > >> good morning. perhaps it is useful to back-checked to december went to sheila shocked us by saying it might be worth billions of dollars in afterwards the company let the market paying for pretty much a month and a half and shares dropped in half. 06.2ebruary, they say they billion dollars. owners have yet to sign off on the number and the cavity has never really given an projects could
result in such a large hole. expertsame time, the don't believe that is the end of the losses. there may be no and to the negative flow that these projects generate. you have to remember they are decades long projects. betty: indeed. as we mentioned at the top, a lot of reports suggesting cap bankruptcypter 11 filing. what about toshiba? >> there has been a steady drumbeat of stories. we know that westinghouse and the utility company have assembled teams of lawyers preparing for restructuring. toshiba has said the chapter 11 filing is an option but has given a suggestion that something is imminent. the company says they are
reevaluating the position of westinghouse's portfolio and is actually open to selling the business although it is not clear who the potential buyers might be as it is not likely to pass u.s. regulatory approval. korean utility emerge briefly as a potential purchaser. bankruptcy would be washing their hands clean of this unpromising business. betty: toshiba also planning to sell a stake in its memory flash business. be?much of a help will that what is the progress? >> that's right. the flash memory business is actually a very successful unit of toshiba, probably the most profitable one now. it is worth as much as $1 trillion and toshiba is looking to sell a majority stake of it.
already 10 billion in the works. eventually japanese funds as well as customers like apple and foxconn might step in. march 29 is the final deadline for the bid, so in the next three days, we should start seeing some numbers. betty: pablo, thank you so much in tokyo on toshiba's troubles. if on will be live from the asian investment conference in hong kong, where she is joined by credit suisse's ceo to discuss the cost-cutting plans and concerns on brexit. this is bloomberg. ♪
american airlines will pay almost 200 million dollars for a piece of the chinese carrier. 1.55can airlines paying hong kong dollars issuing eight h-shares for that. theres a flight premium that american airlines will be paying for those shares which 1.5 hong kong dollars, around 200 million u.s. dollars. it is the second day of the credit suisse asian investment conference where yvonne is standing by with us. right. yvonne: that's quiet a turnaround for credit suisse now in year two of its cost-cutting strategy. facingseeing some
cost-cutting. i am they pleased to be joined .ith the ceo of credit suisse let's talk about brexit. we are just about 24 hours away from the implementation of article 50. procedures will not begin until june. we still see a lack of clarity on the front. >> clearly it is a very large issue. credit suisse's relationship with london is white cold and large. by coincidence, we have a new luxembourg.,
the world. adjust.continually yvonne: talking about credit suisse, a lot of reports about your capital options and plants right now. working for the tell us about those plans moving forward? i considering are looking into selling stock? >> the first thing i would like funny way, it is a positive thing. when we started in october, 2015, we said we would need, overtime, nine to 11 billion of capital. the good news is we made a lot of progress since then.
it was to strengthen capital position and legacy. when you look at the progress we have made, we have generated a lot of growth, higher margins, we reduced cost by 1.9 billion. we have continued on our targets. b structured at 1.2%. we ended 16 at 12.4. that is really much progress. -- leaders deuce the restructuring unit in one year. it has been a busy 12 months with a lot of progress. ipo was the capital backstop. we were clear about that in february, which has really helped us. now,in restructuring, and progress. that is all the data i can give you today. yvonne: are you talking to banks
about capital raising? >> we are considering options. a has been a lot of reporting in the media. we have been clear from february , when there were a lot of near results that it was an option. the pepper the ship -- preparation was continuing. yvonne: we did hear from david harrell, one of your top shareholders. it was interesting. he said, credit suisse does not exactly need to do a capital swiss unit.list its what do you think of a statement like that? do you think credit suisse has the strength to generate capital needs on its own to close that gap. >> we have made so much progress there are no serious investors that i don't think we need to raise capital -- risk capital. the same thing on the sales side.
not say credit suisse does the capital, and some say, credit suisse needs very large amounts, more than we would consider. it shows you this is a conflict decision which is why we are taking our time to make it. in any case, we have given a range of needs, the is reasonable, two to 4 billion in the near term. some good news that we have made so much progress at this point. yvonne: besides the ipo and capital raise, what other options are you going? -- exploring? >> you will allow me to reserve first.hat for my board trust me, we will update you. we know the market need the lender. we're working diligently. still: is the best case
taking this with unit public? if that is the case, when we decide? -- will you decide? >> we have set markets permitting. to reviewy prepare it. yvonne: what are the benefits of central bank listing? >> if you look at the swiss unit, the fact we have had to haveeady for review, we showed profit was at 9% this year. there has been a lot of energy and mobilization with the swiss unit. if you look at what the bank is doing, we have been restructuring market activities. we have almost finished that.
profitability was not expected by the market. gainedm, we have considerably. things are working very well. i want to get closer to the report we got on friday. increased for 2016. are you concerned with retaining talent? >> we had taken it down significantly the year before. it is reduced spaces. that is the first,. .econd, people work very hard in wealth management, we believe that we beat the competition.
gaining market share is across the board. our teams work very hard. producey deserve to good results. we cannot punish them for decisions that were made a long time ago. yvonne: you raise your bonus pool, but also saw a second annual loss. can you explain that dynamic chuckle -- dynamic? >> this is a turnaround which means there is a lot of legacy to deal with. we have made $4.2 billion in profit in 2015. the losses were counted great down to the goodwill of an acquisition made 15 years ago. same thing this year. $3.5 billion of profit. the losses are the result of cleaning out the restructuring unit. there is no way to deal with the
past without generating losses. there is no direct correlation with the work done by current teams. we pay on performance. cut losses by 36%. this year, results of better, so people get better bonuses. yvonne: in terms of the cost cutting schedule now, where do you see the bulk of the job losses? will be more towards the investment banking side, equities? >> we want to be efficient. the first year the bulk of the cuts came from global markets where we really were challenge. took the cost from $6 billion to $5.2 billion. are pricef the cuts
spread. it is position for survival. company if it does not every year improve efficiency, it is falling behind. where do think job cuts will fall? >> we are not looking at job cuts per se. have another year of cuts. we do about 4 million in total. we did to the first year, another one this year, and one the following year. hope was the toughest year in terms of cuts. a few more this year and a few more next year.
i'm not allowed to make profit forecasts, but we give you indications in january that were very positive. we are working very hard to be profitable. yvonne: let's focus on the business in asia. you had to revise your 2016 earnings to the downside. can you explain what happened there? >> we restrained are targets -- our targets. as we run the business and the new structure we have, we have management collected activities. a mouthful. basically what we call investment banking capital markets and finance lending.
we have rolled this together and it has been a huge success. market separated the activities, the global market division, and those are very market dependent. we have really new -- nailed the fine target. we have kept the target from 2015. yvonne: you have slashed a few andour market targets equity side in asia. does it say anything about the wider sector in asia? do you think asia is key to your strategy now? >> it is key to the world economy. we have always said that we are the developed approach. presence inssy world markets.
the u.s. equity market is very strong. yvonne: is your view different now than it was in 2015? alwayslieve your view is changing, i hope so. macro or micro terms, you know it has not changed. there is still plenty of room in developing markets, which we are capturing. here, the 20are anniversary of our conference in asia. yvonne: just about 30 seconds left. i want to get your take in terms of wealth management. what gets you most excited here? >> all i do when i. -- when i am here is meeting clients. our fantastic people creating value and wealth in asian economies. yvonne: really great to have you. thank you for joining us. that was the credit suisse ceo
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xfinity. the future of awesome. yvonne: this is daybreak asia. betty: i am betty lou here in your. you are watching daybreak asia. let's get to the first word news with paul allen. paul. early factory data from china shows the economy strengthening further. of view shared by smaller the mistake businesses and global finance. the confidence of small and medium-sized companies jumped higher for the first time in two years. the gauge of manufacturing activity remains equally robust. agrees, not everyone
that the economy is improving. showserg intelligence players that china will -- sparking fears that china will overcome the progress. >> they have china debt that is unsustainable. the money supply in china is 23 million. in banks, 13 trillion. have another $10 trillion. so, thing, $2 trillion in the last year. paul: president trump is being urged to bring of experts when he meets china's leader for the first time. the national cattle and beef association once him to persuade the china leader to resume
imports from the u.s. yearng lifted a ban last but the two sides have yet to agree to terms. some of the world's top miners have halted production and thousands of people have left their homes as a major storm bears down on the state of queensland. the cyclone is bringing winds of 250 kilometers per hour. debbie is expected to cross the closed as a category four storm with the risk of significant structural damage. australia has passed a bill to prevent multinational companies from shipping profits offshore. the law will taken from to life .ne -- july 1 the tax will apply to multinationals that have a global income of more than one billion aussie dollar's.
global news, 24 hours a day, powered by more than 2600 journalists in more than 120 countries. i am paul allen. this is bloomberg. tied to see how the asian markets are doing on this tuesday morning. we see a little rebound here. sophie: broadly speaking, we are seeing asian stocks taking up. we focus on one equity in particular. over in tokyo. the stock is falling for a second day and the high trading volume is losing for a second day. a look at how the stock has fallen for this month. shares would be sold at a nearly 2.9% discount to monday's closing price. in 2015 whend back
the fund was sold back then. been outpacing the retail index to date. fors the biggest decline are the day. yvonne: thank you so much. look at some of the winners and losers there in asia. leasingiggest aircraft firm has reported earnings, beating forecast for last year. joining what is already a highly competitive aircraft market in asia. joining us now, the managing director, robert martin. thank you so much for joining us here on daybreak asia. there are a lot of new players coming into the space. how do you stay ahead of the game? >> good morning.
our business is all about two things. money and aircraft and the price of those two things. to be competitive in the market, it is important that you are able to access funding at cheap long-term rates and keep buying gear aircraft in book -- bulk. betty: that is absolutely right. you mentioned low borrowing costs. that could likely go up and up given that the fed is on a wrist tightening cycle. will you be able to handle that. what is your view on that? >> yes. we are fairly unique in the market in that roughly half is on a floating rate basis. on the fixed rate site, we make of andat we have as wide access as possible to keep ourselves competitive. betty: usa you will be able to
keep your yield despite rising rates? >> that is correct. if you look at what happened last year, that is exactly what happened. we maintained a net yield. betty: is that still the case if we see a rate hiking cycle that is much faster than some expect? >> yes, we have been through a number of cycles per you may remember in previous cycles seeing the floating-rate side move up quiet quickly. we are prepared to deal with that is that happens. yvonne: given that -- betty: isen that borrowing costs relatively low, will you get your debt level higher see you will have more leverage to grow faster and get the return on equities higher? >> yes. if you look at what has happened over the last year, we did ipo last year. i'd debt to equity at the moment
is probably at a low of 2.6 to one. we will bring leverage up between now and 2018 to about 3.5 to four. toty: you want to be that capitalize on some lower rates? >> the key is finding the right deals to give you the right risk adjustment. as you mentioned, we have a very competitive market. it is not just growing the deals, but the deals they give you the best long-term profitability. betty: how has life been since the ipo? >> very busy. obviously getting used to the amount of filings. listing a company takes time. at the same time, business growth. peoplepetus of putting to work. all in all, a busy time for us. betty: it shortly is --
certainly is busy and gives you this extra liquidity and currency i which you could possibly make some deals. are you in the market right now working to grow through m&a? >> we are not growing m&a. orders andng purchase lease deals. are you basically saying that m&a right now seems fully priced or even overpriced at this point? >> i would not say it is overpriced at this moment. we are moving up the prices -- pricing. i think it is fair to say we are more than half of the curve now. buy 2 you are on past to million or more airplanes. the majority of yours are narrow by -- bodied aircrafts.
are you looking to expand into more wider bodied and has? -- aircrafts? >> yes. about 30% of our portfolio is invested in wider bodied aircrafts. we tend to buy directly from airlines. demand for is the your operations? what kind of demand are using in the region right now? -- are you seeing in the region right now? >> we have about 6% global growth in past years. .bout 5% trend growth in asia-pacific, but growth of the middle class. restrictions being dropped for visas as well. positively, we are optimistic about the asia-pacific growth. betty: robert, thank you so
yvonne: this is daybreak asia. im yvonne in hong kong. betty: for a moment there, yvonne could not hear you. a quick check of the business flash headlines. workers at bhp copper mine in strikeent to and there this week. staff will return to work on thursday after a six-week pay stoppage. the miners will work under a contract meeting bhp will not have to return -- pay a return
to work bonus. chinese milk producer has spoken out since the first time stocks collapsed on friday. they met creditors the day before the crash. the government asked them to not release and immediate payment of loads. they say they have been late in making some bank payments and shares will remain suspended in hong kong. send a text that they happen invited to invest in saudi aramco in what could be the biggest ever public offering. closelan to forge relationships with buyers and locking in future plans for oil. the ipo could value the business at $2 trillion. trillion. let's head back to the credit suisse asia investment conference where yvonne is standing by with john taylor.
that's right. of course we have heard of john taylor before, investor of economics. he has been with the top names thrown around here as a potential said replacement for janet yellen is a replacement -- if a replacement is in fact chosen in 2018. good to have you. are those conversations on par for 2018? what can you tell us? >> not much. everybody is talking about it. have said before that if you were chair of the federal reserve, you would pursue tighter monetary policy. you have said before there's only so much you can do to help parts of the economy. what can you actually see out of a trump administration in the midst of this political gridlock in washington? reform is onn --
the agenda. maybe monetary reform, budgets out there. there is a lot going on. there is a lot of agreement on what the tax reform marginal rates will be. of a hurdle ish it on the tax reforms? >> tax reform is always difficult. our different interests that have to be considered. there's more agreement between congress and the president than it has been in a long time. there is a difference that is a promising one. yvonne: what do you think of the jump in mr. should economic policies so far? approacherican first -- >> just beginning.
i focus a lot on the regulation issues. somexecutive orders back regulations. the cost could be more than the benefit. ask,rade issues, you really front and center on many things. some negotiations on how to redo or renegotiate nafta is in question now. we do not know. i think the emphasis here is to make the trade agreements that are. yvonne: what we still do not know is what president trump nts. -- wa does he want higher rates? want a moreou strategic said, not necessarily clear tobut make it the people.
i think recently janet yellen and stanley fischer talks more about that. there is a sense that they get back to normal, normalization, and the policy can operate in the way it has in the past. yvonne: you are known for the taylor rule. it shows the fed is behind the curve quiet at this. even if you take a look at the target. why do you think there continues to be such a divergence of the views. the interest rate will be around 3% when they finish this. that is a change. they do not want to do it rapidly, which i agree, it should be more strategic. they know they need to be normalizing the forecast. it may be different when they get closer. yvonne: it seems we got a big ramp-up in expectations for
march in the matter of just a couple of weeks. hearing,ems we are after the blackout sergei period, some are saying that is still some certainty. some say we could see four. where are you on the spectrum? >> they have indicated we could have four during the year. as long as they continue with it -- remember last year they said they would do three or four, but they did only one. muchnk, don't talk too about it. need to benot that much discussion. yvonne: you mentioned before, it might not have just been the data that ramped up expectations
from march. what was the key? >> we do not know for sure, but the sense that they need to get moving. moving this year, i think makes sense to them. the data that came in those four or five days when it went from a probability of 40 to over 80 -- not really sure what exactly motivated it, but that's what i would say got it started. we will be speaking more with him after the break. ♪
betty: this is daybreak asia. i'm betty liu in new york. i am yvonne man in hong kong. let's get to the conversation with john taylor, professor of economics at stanford university. i want to take a look at inflation at the moment. the fed seems to be comfortable at the level it is right now. number of 9%e ecb in january. if you look at the inflation outlook, we see breaking even, wage pressures seeming advance, but quiet timid. if we see these in check, where do see the inflation pressures?
>> the fed has always be concerned about inflation. their job is to keep inflation around 2%, so they are doing that. also, policy normalizing is the right thing to do because it will make sure the inflationary pressures do not build up. inflation is close to two. as you mentioned, it is close to curv. it does not have to be fast, bute timely. yvonne: is there room to overshoot? >> it has always been symmetric. it cannot be to exactly. average is meant to be symmetric. it has always been that way. i do not think it means that when it goes above two, they will take action. yvonne: in terms of fiscal stimulus, we are seeing unemployment around 4.6%-four .7%. where exactly are we be fleeting
then?lating growth or inflation? >> we can get an increase in growth, which has been very low in the u.s., the lowest recovery from a sort of recession like the one we had. productivity growth can come from tax reform come of regulatory reform. it is not really a fiscal stimulus in the sense of the word like to thousand nine. is that is successful, the economy will grow more rapidly. yvonne: do you see the growth that some are optimistically forecasting right now? >> i wish. we miss all of those 3%-4% in the recovery. spurts.e get some it remains to be seen.
thatolicies will lead in direction. that is what i would advocate. we do think growth will be higher. that is what history tells us. it is hard to pinpoint how much. yvonne: you mention it is time for the fed to move in march. we had early rumblings saying we could be seeing something late 2017, but most pushing it to a 2018 story. what with that process look like without triggering technical financial conditions? >> i think if they do it gradually, strategically, it should be no problem. originally, it was kind of a shock and the markets were all moved around. as soon as they became strategic about it, reducing the size of the purchase, it was no problem. if there are surprises or something erotic, that will not be good.
they might begin before the end of the year. yvonne: what could be a surprise? i think if there is a change in the state of the economy with the interest rate already very low, they may have to return to .he policies that could prevent them from and they could be in better shape to deal with these surprises. they can respond to crises in advance much easier than if you're stuck in a very low rate. yvonne: john, a pleasure to have you in hong kong. john taylor, economics professor from stanford university. betty: great discussion there between you and john. that is almost it here for us on daybreak asia. a quick check of what is coming up in the next few hours on
bloomberg markets as we watch the hong kong and china markets opening up. what are you watching? thei: starting off with weather. debbie, the worst cyclone to hit australia in six years, going into the coast of queensland. we have seen some potential economic impact, shutting down gold operations, and shutting down some popular tourist destinations. an impact on the commodity prices and insurance as well. ag bank and the bank of communications to watch. out of all of the five vendors, ag bank has a tighter squeeze when it comes to margins.
we will take a look at how the second have played out for the big banks, in particular when it comes to loads coming through from sme in robo parts of china coming under a lot of pressure. also, back at the asia investment conference for credit with a recent retiree from the atlanta fed. we will be asking if the fed got it right and what lies ahead for monetary policy in the u.s. a lot to talk about in the next few hours with rish and i. this is bloomberg. ♪