tv Bloomberg Markets Asia Bloomberg March 28, 2017 9:00pm-10:01pm EDT
♪ it is 9:00 in hong kong, midday in sydney, 9:00 p.m. in new york. i am haidi lun. rishaad: i am rishaad salamat coming to you from bloomberg's asian headquarters in hong kong. this is "bloomberg markets: asia." ♪ haidi: toshiba faces another is nucleareports unit is about to file for bankruptcy. rishaad: it is "b" day for britain. theresa may will trigger the brexit process and the coming
hours. haidi: tencent buys a 5% stake. rishaad: coming clean, president trump rolls back climate change, saying he is ending the war on coal. looking forward to 1:30 p.m. brussels time when the clock will start taking on britain leaving the european union when the british ambassador to the european union hands that letter signed by theresa may to donald tusk. that is the start of a two-year period of negotiation later today. haidi: that's right. two years of no doubt contentious negotiations. what will it mean for sterling? 1.36 for theey see pound, but a very big if counting down to that brexit trigger day.
we are 30 minutes away from the open in china and hong kong. we have had this risk on rally on the table with a blowout consumer confidence number out of the u.s. will that trickled through when it comes to the asian session. let's get it over to sophie to see how we are faring. sophie: we do have stocks outside japan advancing, building on gains for a second day, stocks in sydney leading gains come up .8%. kl adding to gains, and taiwan rising, snapping a three-day drop. resilience,howing but take a look at southeast asian currencies, not finding their footing. the malaysian ringgit down .1% against the dollar, and the tahi
baht slipping ahead of the rate decision out of bangkok this afternoon. let's look at the bonds and commodities space, some caution here. we do have the dollar extending its overnight gains, treasuries continuing to fall, aussie and kiwi bonds tracking those moves and u.s. notes, gold holding, higher by .2%, and wti topping $48 a barrel. citigroup saying the oil market will tighten in the second quarter and sees opec cuts extending into the second half of the year to support prices. we will take a look at the index to see how that is playing out in the equity space. energy producers climbing in a jet thanks to that advance and oil. utilities leading the charge.
this after one company was able to win a court ruling to restart two different reactors. that is giving a nice boost to stocks in that space. health care stocks on the decline along with property players in asia. just a taste of what is shaping up this morning, rish. rishaad: thank you for that. let's get to first word news headlines. paul allen. u.k. will trigger brexit in the next few hours, launching at least two years of negotiations with the european union. will start toes unravel when britain's ambassador to the eu hands over a letter from prime minister theresa may invoking article 50 of the lisbon treaty. that should happen around lunchtime in brussels, and theresa may will address the house of commons at the same time. president trump has issued an executive order rolling back is
predecessor's carbon cutting commitments, promising a new energy revolution and america's fossil fuel resources. obama made this a central issue of his second term. trump has called climate change a hoax and once to reorient policy to help u.s. oil and coal producers. we have already eliminated a devastating anti-coal regulation, but that was just the beginning. today i am taking bold action to follow through on my promise. my administration is putting an end to the war on coal. we will have clean coal, really clean coal. paul: elon musk one a vote of confidence from china with tencent buying a 5% stake in tesla 41 $.8 billion. the cash will be useful as tesla introduces the model three. tencent has been investing in technologies reshaping the auto industry, including right
hailing apps and artificial intelligence needed for cars. hong kong international construction investment management proposes to issue shares on a two for one basis, saying proceeds will be used to repay funds for purchasing land near hong kong's former airport and for funding future investment opportunities. has weakenede after crossing the queensland coast, but not before halting al output. bhp and glencore have suspended operations at a combined seven mines. 50 million tons of production is on hold, equivalent to 23% of output according to bloomberg calculations. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am paul allen. a look atet's take
toshiba shares on the way up by .5%, its westinghouse electric unit intends to file for bankruptcy -- its nuclear division, i should say. reports have been mounting the chapter 11 filing could come any time. let's get more from tokyo. who will be affected by this bankruptcy? who will be footing the bill essentially? >> well, that is the big question at the moment. when you have a bankruptcy, it is not easy, and when a nuclear company has a bankruptcy, there is a bit of follow involved. the two the company's everyone is looking at are the utilities that have purchased the westinghouse reactors in the united states. they could be facing billions of dollars if they have to over
construction of these units, and that could really hurt their stock prices will as their future growth prospects and could actually bring them under according to some analysts that i have spoken with. reactor, youuclear could look at it as a much more complicated iphone in that it has a complicated supply chain. there are many companies involved in building a nuclear reactor and providing parts, everyone from the concrete to the valve manufacturer. it will have reverberations across the united states and abroad. something, this is taking a heavy toll on the company share price. you can see when these problems falling offsaw this the cliff kind of moment for the toshiba price. essentially the market cap went
write-down toon $8 billion. we are trading at a $.3 billion at the moment. -- 8.3 billion dollars. this is an issue that has to be sorted out if the share price will recover. is there anybody who is positioned. what everyone is looking at and searching for. who could purchase this very radioactive company. onceit goes bankrupt and it has been restructured, it will be much more attractive. there are a few companies that come to mind. one of them is korea electric, tepco. uae have sold reactors to and our competitive on the world stage, and the reactors are an of a design that
westinghouse purchased in the early 2000's, so perhaps a technologyip and from westinghouse could help them as they export reactors. bether potential buyer could china. china's state-owned nuclear enterprises are pushing to build reactors around the world, pakistan, argentina, and the u.k. come a so having andinghouse will help them up their prestige on the world stage. china,s one thing, but there could be some safety issues that the japanese government has well is perhaps the trump administration might think about before that sale goes through. those of the two big names that have been floated out there. stephen, broadly speaking in terms of the nuclear power industry, quite startling the way that japanese nuclear power generation has plummeted. u.s. new to power
generation is the yellow line, pretty stable, but that decline when it comes to japanese nuclear power generation since the middle of 2012 -- what is the outlook now, particularly in light of these troubles we are seeing? japan, theclear in fukushima disaster in 2011, and public opposition to nuclear has pushed it down. the japanese government is hoping to get the number around to where it was in 2011 by 2030. japan is the outlier. maybe germany and taiwan, there have been countries and governments that have pushed a result to get rid of nuclear power, but if you look at china, korea, india, south africa, parts of the middle east, there is a strong growth for nuclear in the future. what is happening is we are moving away from these private companies.
you are seeing they are putting on these massive losses that they can hold up in this capitalist system we live in, where as the big winners it seems are the ones backed by the , china russia state-owned nuclear enterprises, tepco.a's a maybe what we will see is move away from the private industry of nuclear to the state owned industry of nuclear going forward just because of how expensive it will be. what does that mean for the industry exactly? the jury is still out on that, but it will change the way the nuclear projects of finance and negotiated in the future. haidi: thank you so much for that analysis. energy reported there in tokyo. we are still waiting to hear confirmation on these reports that westinghouse electric intends to file for bankruptcy, perhaps today.
haidi: i am haidi lun in sydney. this is "bloomberg markets: asia." rishaad: i am rishaad salamat in hong kong. nuclear power scoring a win in japan, a judge ruling against the ban on starting to reactors. the government sees nuclear as an essential part of its economic plan, but opposition is strong. hasi: china's top chipmaker
pledged as much as $22 billion. the group says two thirds is coming from the chinese development bank. the rest is from a national fund intended to drive advances in semiconductors. estimatedpending an 150 billion dollars over 10 years to become a world leader in chip design and manufacturing. has won praise from president trump after announcing a $1.2 billion investment in three michigan factories, going towards engine manufacturing plants for the ranger and bronco models. the dollar posting its biggest gain since early march after stanley fischer said to bring more rate hike seem appropriate.
our next guest says emerging markets and asian currencies are looking interesting. thank you for coming in. i think what he said when asked whether two more rate hikes would be appropriate, sounds about right. we probably should not dwell on too much with these guys say. >> you are seeing the yield curve flattening out the backend. markets are starting to price those hikes in in the front end of the yield curve, but the bond market still not confident. data, noteeing soft coming through the hard data. is down tow much asset allocations, shifting towards equities rather than bonds? a steeper yield curve would be indicative of optimistic numbers coming through right now. maybe the optimism is all in the equity market? >> i think that's right.
usually the yield curve is the lead indicator. rishaad: that has change that game, hasn't it? away from moved quantitative easing in the balance sheet world to the macro world, where yield is a more important indicator than in the past with the qt world. -- qe world. i want to bring up one of your contrarian calls. with a will continue to topple over or have had some life brief -- back into the trade. much it has how underperformed. do you see this feeding through, particular signs of demand start to lapse from china? import prices are starting to fall over. is that going to be a global story or excluding u.s. story?
,> the measures in place particularly housing side, trying to slow the growth come and the construction did not come through strongly. it was more in the prices. if these commodities are coming off, it's not telling you that china is strong. on top of that is india, still going to this de-monetization, not coming up in official statistics because most of the money is in the shadow economy. those two economies together were driving global growth. this year, the impact of china and india will have a bigger impact on the rest of the world rather than inside those countries, which are probably going through a slowdown. haidi: we know already we should be bracing for surprises to come off -- for prices to come off in the second half, but is it weird to you we are still talking about the reflation trade where are the signs that it is
starting to fade? ists think the reflation are focusing on inside the u.s. and the rest the world does not have an impact. from my perspective, i think that is misplaced. again, we are still focused on the soft data and have not seen the hard data. i think the rest of the world will have an impact, and if we are talking about bonds in the shape of the yield curve, if the yield curve is flattening on the back income it's telling you there is not a lot of inflation coming through, and that is linked back to commodities in the so there is a base effect. commodities will tend to roll over and accelerate on the back after the year, which means inflation is not running out of control. that is positive for bonds. longer dated bonds will have a better time of it in the second half of year, why so? >> animal spirits.
everyone is focused on the reflation trade. getting out of bonds, getting into equities. they have been underweight equities for a long time and probably are trying to get back to a neutral level, particularly from a household perspective. that means bonds will be selling off. in the second half of the year once there is a realization that inflation has rolled over and this is just headline numbers, then it is the time to get back into bonds. rishaad: where is the most juice , emerging markets, wherever? >> the u.s. dollar has cap ped out. we are in this big them abroad dollar range from 2015-2016, are we getting back into their and can we go back to the bottom of the range? which means you have to start looking at emerging-market currencies and are they likely to balance in this range, 5% to 7% appreciation across the board.
emerging markets bonds in local currencies look interesting. rishaad: what about the renminbi ? people were saying it will have seven in front of it, but we are pretty much where we were. >> this is the out of the box call that the renminbi rallies. trump is a great trader, china is a great trader they will come together at the table. trump will say we will put protectionism measures up, china will say how about the currency. you could see a strong renminbi this year. that is the out of the box call. onhaad: we will take you up that and have you along later this year and find out if that does happen. thank you very much indeed. coming up, agricultural bank posting a surprise profit as bad loans fell. the trading day gets underway. ♪
rishaad: counting down to the start of the trading day in hong kong and shanghai. let's look at the premarket session, up .5%. go.e we the index when it comes to futures says we will have some moved to the upside. hk cim.k to watch is at the moment it is a unit of money through a share sale, the stock up 2% so far in that premarket. the company planning to use proceeds to improve its financial position to repay loans and finance future investment. i'm looking at these
banks. expectedtter than start to earnings season for china's big five lenders. coming through with a surprise profit gain for the , cost falling, the bad loan ratio declining, and that offset a decline in net interest margins to 2.25%. rival bank ofer communications posing 1% increase in 2016, income better than what the markets were looking for. both of these banks have traded nicely in the h-share market. we are expecting these vendors as a whole to report a deceleration when it comes to profit growth. trump up, president
kong.d: 9:29 a.m. in hong we are counting down to the start of the trading day. i am rishaad salamat coming to you live from bloomberg's asia headquarters. haidi: i'm haidi lun in sydney. rish, i really love this chart. talking about chinese shares and having their best start to the 2006, the i believe strongest start. it is interesting, these comments coming from one of our regular guests saying this rally is not just another false start. there is confidence, stability,
corporate fundamentals when it comes to chinese companies is good, a non-hysterical rally playing out, which is not always given when it comes the chinese markets. rishaad: once bitten, twice shy is often what happens there as well. tencent moving 1.8% high when it comes to the premarket. this company takes a 5% stake in tesla, extraordinary hope built into the share price. uber had a pop higher as well. here is sophie kamaruddin. and haidi you discussed, chinese markets having a good start to the year, and regulators not wanting to rock the boat too much, steering , them course for the yuan onshore weaker after the pboc fix, the daily rate weaker than yesterday back to the 6.89 level.
the pboc skipping open market operations for a fourth day and mid what it calls appropriate liquidity. take a look at the open in shanghai, marginal gains come up .1 percent. stocks in hong kong up .4%, rising for a second day, and chinese h-shares advancing, up .5%. let's look at stocks in focus today following the earnings reports we got on tuesday. osun, shareswith f looking to rise over 1% after net profit soared to a record in 2016. the company also announced a reshuffle at the top with the current ceo to be replaced. cim climbing about 2%, snapping a three-day drop as it plans to raise one point two been dollars in a share sale to
fund land acquisitions in hong kong. fung falling. bloomberg intelligence expects operating and profit fell to a new low. rising after posting a surprise gain in profits. let's get a quick check on tencent on the screen to we are 1.4%. it again so much fornk you that. sophie kamaruddin there. the countdown begins in europe. let's get over to sydney and find out what is happening with paul allen. paul: mohamed el-erian says the slow but steady recovery could be a risk of political leaders fail to take control from monetary policy makers. transitiont if the
is not made, central banks will become less effective at suppressing volatility and promoting growth. the equity rally spurred by president trump has faded and with its longest losing streak since 2011. >> politics will contaminate economics even more, than markets will have to ask themselves, does it make sense where valuations are given the economic and political background? the important thing is that the road we have been on the new normal is coming to an end because it is being eaten up by its own contradictions. wells fargo has reached a $110 million settlement with customers over its fake account scandal. the deal announced covers dozens of lawsuits across the u.s.. separately, a regulator has criticized the bank for an "an extensive and pervasive pattern of discriminatory and illegal business practices spanning years."
turkey's government has criticized the arrest of the senior executive at one of its largest state-owned banks. he is charged with conspiring to ebay trade sanctions on iran. he is accused of conspiring with an iranian-turkish trader to move hundreds of maine's of doll -- hundreds of millions of dollars through the u.s. financial system. at a disservice to a border city in china. the carrier already flies to beijing, shanghai, and vladivostok. it made headlines in 2015 when the airline rating agency awarded it one star, the only carrier in the world at that level. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg.
rishaad: tesla has won a vote of confidence with tencent buying a stake. tom mackenzie is following that. how significant is this for elon musk and indeed for tesla, i guess? tom: it is seen as a win for tesla because tesla is burning through cash to get to the point where it rolls out its mass-market model three, this electric sedan that they want to roll out this year. it is a costly exercise. then there are the potential synergies that come along with the tencent investment. the investment was about $1.8 billion. for tencent, they have invested in a number of different technologies that are changing the auto industry, artificial intelligence, the didi investment, and the mapping, so
that is something they have invested in, so it fits in nicely for tencent and its portfolio. investors are cheering this. ,esla's share price popped 3% near that intraday record high. tencent shares have been up on the news as well, so people looking at potential synergies, and this cash injection as it looks to roll up his mass-market model three. you mentioned synergies, what could this investment mean for tesla's push into the ever lucrative chinese market? tom: that is a key question obviously. a is seen certainly as potential opportunity for tencent to open the doors here. tesla has gained traction in china. about $1revenue at billion. in terms of branding, you have users. and its wechat
they have 850 million users, so in terms of the branding clout that tencent rings potentially to tesla and its image and how they can roll out their sales here, that is huge. in the first two months of this year according to research, some number crunching from auto experts, tesla sold 1300 vehicles in the first two months, four times what it sold last year, so people looking for the potential synergies. we heard elon musk tweeting that he is grateful for this deal we are waiting to get more details on what that may mean, but clearly the model three if it does get rolled out this year and how much traction they get in china with that new model of tesla. certainly a crucial market for tesla. tom mackenzie there for us in beijing. president trump talked up the return of american jobs after signing an executive order
declawing obama era environmental regulations. ramy inocencio will take us through what happened in washington. ramy: it is an interesting juxtaposition. this was donald trump signing this executive action at the epa while said action actually got's many environmental protections that the obama era try to install and to install into the american fabric. now we are seeing this being reversed. donald trump today saying he wants to push ahead with a new energy revolution come up with the interesting part is that he is using old energy, coal and oil. take a listen to what he has to say. it is all about the jobs. told me about the attacks on their jobs and livelihoods, the efforts to shut down their minds, their communities, and the very way of life. i made them this promise, we will put our miners back to
work. it is all about jobs, jobs, jobs. that is the concern of the president and the parties priority. the barack obama and democrats, one of their biggest parties was climate and health care in addition to jobs, but with donald trump and the gop, it is definitely, definitely jobs over climate. let's look at what is happening inside the executive action that mr. trump did sign today. and the the near term far term. let's look at the near term first. one of the things that could be rolled back is a consideration of the fact that climate change in environmental reviews at the federal level. or of them is a moratorium the ending of the sale of rights to extract coal from federal land come and that thing at the bottom of your screen, the metric called the social cost of carbon, a government estimate put into place during the obama era that estimates how much of
an economic loss the u.s. economy would involve if more carbon greenhouse gases were actually emitted. that is the near term. let's look at the longer term evolve.ld the biggest thing is the clean power plan, cutting greenhouse gases from electricity producers. there is the possible rescission of federal requirements for hydraulic fracturing, as well as methane emissions coming from wells the deal with oil and gas. this is all that is possible right now. it has not come to for wishon, but one thing i have been hearing from analysts and critics is that all of this is going to go to the courts. rishaad: this president's executive order is in large part in attempt to revive the coal industry and create jobs. the point is can he succeed? ramy: he thinks he can come up
with the jury is out. i spoke with one of our bloomberg intelligence analysts and washington, d.c., and he is our senior energy policy analysts, and he thinks that while donald trump signs this, it may not actually help to reboot america's coal industry. the reason for this is in the bloomberg terminal #7227. the white line is the price of natural gas over the past 10 years. the price of coal over the past 10 years, well, you can see it is higher. natural gas has fallen from its high by 59%. you can see the difference in terms of what needs to happen for coal to become competitive. a lot of critics say it would not become competitive and natural gas will stay cheaper. interestingly we do have an article out of the bloomberg that's talking about what is
arrival bank also posted earnings that beat estimates. profit wasina says down 51% as soaring finance costs overshadowed record sales, de profit falling 51%. this month, they launched the biggest u.s. dollar bond offering in asia since 2014. haidi: amazon has won the race .com, beating off a bit of $850 million. amazon has yet to disclose the terms of the deal. the middle east has like behind the rest of the world when it comes to e-commerce, but shopping is picking up in middle
eastern countries. been waiting for this story to come to fruition, westinghouse filing for bankruptcy because the toshiba board has approved that come at this coming from the nikkei news agency. we have not independently verify this. this is the nuclear unit that has been weighing on toshiba, cost write-downs of over $6 billion. as soon as we get details, we will bring it to you. let's look at the msci china cage come up 14%, the strongest start in a decade. our next guest remains positive on china. now. with me i want to talk about a chart which shows how win the yield curve steepen's, essentially that is -- there we go, that presages a neck would you rally.
>> -- and equity rally. is onedifference between of the surest indicators of growth picking up. it has worked repeatedly in the equity market. when the equity curve cheapens, the market performs. four toseen that on five occasions in china. in india, you'll find a similar trend, two or three times. rishaad: a flattening yield curve tends to show that the economy is sound as well. let's bring up the indian one as well. a flattening or downward sloping yield curve has macro economics 101 would tell you that it is basically indicating a decline in inflation and a decline in growth projections.
over the last 8-9 months, these are one of the strongest trend changes we have seen in asian macroeconomics. reflation is one of the biggest trend change offense we have seen. it has become visible over the past 3-4 months. 7%, and korea it is 5%. there are very important implications for equity markets, and sectors which tend to benefit from a reflation trend. rishaad: i'm going to play devil's advocate here, it is bloody obvious, isn't it? the yield curve starts to steepen and money leads the bond market and trust of find a home somewhere. >> these are two sides of the same coin, the yield curve
steepening means yields are theining, and therefore implication for growth also translates into a larger preference for equities on the part of the retail investors, so it is a double positive whammy for equity markets, and it is clear. that even for developed markets this year. again to play devil's advocate, use say that you are positive when it comes to china, constructive when it comes to china-hong kong as well, but it is not good when things like this can happen on a supposedly more developed markets like hong kong, does that not cause some concern for investors? aboutould not talk specific stocks, but the problem arising from a large amount of
debt on the balance sheet of some companies would clearly the an impediment to investing, and when we talk about reflation there areies, perhaps companies we would like to stay away from. there are companies in asia that have dedicated as much of 80% of bitda for interest payments. therefore, highly leverage companies and particularly those which have a large amount of foreign currency, u.s. dollar debt, those are to be avoided. that is one way you can mitigate the risk in and investing in or purging markets in asia. -- in emerging markets in asia. haidi: this is a large component of chinese leverage the a-shares in terms of how leverage the balance sheets could be.
>> these companies exist in the so-called old china, chinese industrials, property, materials, so those are not the stocks we are playing. when we talk about being overweight in china come it is essentially and that the cost of sounding like a broken record, we are focused on new china or change in china, the beneficiaries of changing consumer preferences, so education, health care, outbound tourism, or even the chinese new energy. likelyre the beneficiaries apart from the usual chinese i.t. companies. we have to be selective. great to have those insights, sticking on message when it comes to buy put in china. coming up, the race towards greener energy is heating up. we take a look at china's drive
trump'srom president support for the coal industry to china, the world's largest coal producer. it is trying to get cleaner when it comes to coal technology. we reported on one state owned generator. >> china feels this is one answer to its pollution problem, new powerplant that the industry calls a clean coal burner, spewing less toxins than the older generators now shut down in beijing. this plant was opened in november. it invited bloomberg for an our.usive tpou china is moving to more renewable forms of power generation, but bloomberg
intelligence as coal accounts for 75% of china's energy mix, down from 84% a decade ago, but the move to renewables takes time. >> coal should retain its dominance. and has rich in coal less gas and oil, and secondly, it is a fact that there are many poor people in china. coal is energy for poor people. >> we are building new coal-fired power plants that are cleaner than the average coal fire power plants that operates in many developed economies. >> it doesn't measure co2 emissions on site, but we could see what they call the emissions of sulfur dioxide and nitrous oxide that they say thanks to a scrubbing process are about 10 times less than a traditional thermal coal plant. the government gets the data real-time and can punish the plant if emissions get too high.
burning cleaner coal does have its costs. $1is spending more than billion installing the clean coal tech at a time when the coal industry is in crisis. >> there is overcapacity in power generation, the utilization rates are down 50% to 60%. this is an industry with extraordinarily high fixed costs. there are huge losses. >> the world coal association once the world to use more, but it argues that president's plan for reviving the u.s. coal industry can lead to cleaner solutions. >> we believe president trump will be looking at this talk knowledge -- this technology for deployment in the u.s.. it doesn't hurt either when the weather does its part for a clear blue sky day. coming up, britain will
♪ >> from our studios in new york city, this is "charlie rose." charlie: we begin with politics. president trump is trying to bounce back from recent setbacks last week perpetrated by his efforts to repeal and replace the affordable care act. doubts are rising about the president's ability to achieve progress on other aspects of an ambitious agenda as the white house begins turning its attention to tax reform. joining me is robert costa of "the washington post." on friday, he received a phone call from the president breaking news that a vote on the gop health care bill would not proceed. i am pleased to have robert co