tv Bloomberg Markets Asia BLOOMBERG June 27, 2017 9:00pm-10:01pm EDT
♪ it is 9:00 a.m. in hong kong, 9:00 p.m. in new york. i am haidi lun. rishaad: i am rishaad salamat coming to from bloomberg's asia headquarters right here in hong kong. this is "bloomberg markets: asia." haidi: asia pacific negative after wall street's the kleins. rishaad: a new cyber attack adding to concern, affecting companies and institutions from russia to the east coast of
america. takata shares collapsing after the daily limit was removed. rishaad: toshiba falling at its own hurdle, unable to finalize the sale of the chip unit right today's deadline. onare keeping an eye toshiba, looking ahead to reaction out of janet yellen what she has been saying and marriage draghi and that is how it is buying out when it comes to equities. looking at the markets themselves and etf's, i want to pull up a chart, #445, and this is the growth we have seen in the demand for these etf's, and now on pace to hit a record of $300 billion, topping 2015 and 2016 combined, growth driven by foreign buyers piling into these funds during the first half of
seeking out u.s. stocks in this rising interest rate environment, all of this down to goldman sachs and saying it is only the second time during the past eight quarters that foreign investors have been net buyers of u.s. equities. there you go. all of this very interesting as we have had a slew of central banks be that take away from janet yellen, valuations and asset prices looking expensive, giving investors some food for thought. not much has changed in terms of whether we expect the fed to change or fear from its rate it down dayory, but in asia after the selloff on wall street overnight. we do have southeast asia, singapore, malaysia coming online, so let's get it over to shery ahn.
did see wall street falling the most in the six weeks. we are tracking goes losses in asia as well. also, dollar weakness, a plunge did nothing,llen well mario draghi striking a hawkish town, so some pressure on asian currencies, including the yen, gaining .2%. that is pressuring equity markets, the nikkei falling .2%, the kospi falling by as much, the korean won the losing ground after four sessions of strength. one equity market that is interesting is the taiex coming back down .8%. a stellarhas had 27 yeargain of 14%, a
high, but now economists at bloomberg, nine out of 11 saying the taiex could be running out of steam, so ending around this level or lower. with a weaker dollar came to boost for the metals and oil, but oil a story i will get to later. steel gaining 2.7% in asian markets. we had some optimistic comments premier li ka-shing and china. the striking move in the dollar was against the euro, mario draghi more hawkish, and janet yellen not doing much to support the dollar. we saw the dollar fall to a yearly low, so a two-year low for the dxy. for the euro, the strength in the euro passing key resistant
levels. j.p. morgan and rbc saying there are many areas left for the year -dollar.ar -- euro we did try to pass the 113 level , and it finally went through post u.s. election high. , andext level would be 114 that we saw after brexit around june, and after that would be 117 around august 2015, so a few areas left only for the euro -dollar, while in commodities and oil, oil the longest run of gains in a while after api data showing u.s. stockpiles that expanded. rishaad: thank you for that. let's find out what is going on with first word news headlines. haslinda: a new cyber attack
hitting companies and institutions from europe to the u.s., accompanied by ransom demands. have inn 2000 entities hit from government systems in nuclearto the chernobyl facility. google's record 2.7 billion dollar fine in the eu could be just a fraction of the costs it may ultimately face for skewing search results in its favor. dent googlesill $90 billion cash pile, and the regulatory backlash targeting services, thus the chance of further penalties. weif we find noncompliance, are of course will have to prove it, even though you will have to
pay the penalty from day one of noncompliance, but let's see if we get there, because i see no reason why google should not comply. they have a very strong incentive. you have a strong company and we need to competition in the markets for shopping comparison. it needs mores time to reach final agreement on the sale of its chip is this business. it had wanted to sign today. western digital and kkr submitted final of this -- final bids. hong kong exchanges and clearing services can explain tuesday's sudden plunge in many small-cap shares, but david webb told bloomberg that it points to ongoing problems with regulatory .ystems,
were aed that companies complex web of cross shareholding. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: if you are a central-bank washer, then you will probably paying close attention today. mario draghi, mark carney, fed chair janet yellen herself, and of focus was the stability their respective financial systems and the ability to adapt. ramy inocencio innocence you is our central-bank washer today. we do love central-bank speak, so why don't we get started with the fed. >> we have been taking apart the fact that janet yellen's comments on asset in valuations
being richer than the average has brought impact to the markets, but aside from that, par 4 for the course as the captain of the fed ship, basically staying the course in terms of rate hikes. , one rate hike later this year, but when it comes to the situation with the financial system in the u.s., she said "it is much safer and much sounder." stressed the dodd-frank tests last week with all 34 banks passing, and she also said that there was some optimism looking to the future. let's go ahead and take a listen. >> will i say there will never, ever be another financial crisis , probably that would be going too far, but i do think we are much safer and i hope that it will not be an our lifetimes, and i don't believe it will be.
>> so not in our lifetimes for financial crisis. correct, bute is there is one nagging question and a lot of people looking at inflation and unemployment. the question is what has happened to the phillips curve. 92, i love this title, because this is not supposed to happen. the blue line is unemployment at 4.3%. if that falls, inflation is supposed to rise, the white line is not rising. the question is when is that going to change. janet yellen said she was optimistic and thinks inflation will eventually kick in, but did not give any details. rishaad: let's have a look at what else, a busy week. mark carney a change in words and action. >> that's right. let's look at what is happening first with mario draghi.
there are two words that stuck out, one was persistence, the other prudence, persistence in the current policy, but prudence in terms of the ability to change it. >> we can be confident that our policy is working and it's all effects on inflation will rationally materialize. for that, our policy needs to be persistent, and we need to be prudent in how we adjust its parameters to improve economic conditions. >> that prudence and possible movement is found in the possible balance, possible unwind of the balance sheet, #8489. take a look at the white line. the balance sheet of the ecb, 4.1 trillion euros, but unicredit says mario draghi may have shown his hand and made the
first step towards less accommodation. unicredit saying a tapering announcement might come as soon as september 7, the euro rising the most on mario draghi's remarks. switching to the bank of england, some change of action. says he wants to raise the capital requirement for british banks. is that heng here will increase that by 11.4 billion pounds and raise the capital buffer to 0.5%, and if all things stay the same looking ahead to november, that offer increase will rise to 1%. he said the outcome of brexit is uncertain, so he will be watching that closely. nice one. still ahead, hong kong marking 20 years since the return to chinese rule. we hear about the changing landscape in the financial sector. ♪ assessing toshiba's
rishaad: i am rishaad salamat in hong kong. haidi: i am haidi lun in sydney. the latest this is flash headlines. launching a new highly encrypted phone. bloomberg the company will continue to set aside 10% of its annual revenue for research and development. china remains the toughest market because barriers to entry are so low. >> china being the most competitive market, and it is important for us, so now we will display the security phone at
the congress in shanghai, and we will demonstrate the leading encryption technology in all four layers, the chip, the hardware layer, system, and thingsm layer, so those will differentiate us in the business and public service sectors. hua hia, allows better quality photography and dark places and goes on sale in europe at $500. prices for north america are yet to be set. a $21 and nestlé planning billion share buyback and looking for acquisitions days after daniel lowe's third point called for a shakeup.
company last completed a repurchase in 2013 and mark schneider said the buyback was a lower priority than reinvesting in paying dividends. called on nestlé to sell its 23% stake in l'oreal and take on more debt. rishaad: headlines at the moment, and the yuan fix taking place, strengthening the fixing by one third of 1%, the most they have done since june the first. 6.8053.rence rate is ,hen it rains, it pours toshiba's president apologizing to shareholders after the company admitted it had not reached an agreement on selling its memory chip unit. a oasis guest runs management, which has had some success pushing for better governance at japanese companies. he is with me now. on top ofe story
this, these allegations of price fixing in the u.s. really, what is going on here? >> this is really not helpful. toshiba had opportunities to fix the problems, but this is really disappointing to shareholders. rishaad: it looks like we would get this deal done with this partnership. be anyd not seem to rush, but toshiba wanted to get this done quickly, so this is not a done deal yet? >> toshiba has to get this done this year. the question is will they take the highest price are what is most appropriate for them are the japanese government? there are players, kkr that has submitted a new deal with western digital, broadcom, and the preferred bidder. look, shareholders want them to
get a deal done. they want the deal done at the best price. rishaad: looming large is, well, perhaps a delisting. we have seen the company will be moving on to the tier two bank of the index, which means the howe price will get hit, so bad would it be if this company was delisted, and what you auditg about a possible of this company and getting this earnings report released. >> they need to get qualified or unqualified auditing by august 10. if they don't get that done, than they do get delisted. if they get delisted, something like 40%, 50% of the shares gets sold, so good for price, bad for individual shareholders, and the real debate is whether
pricewaterhousecoopers will give them a qualified opinion. quarter, theyd have not given an opinion on their financials. debate aboutn a whether they can sign off on the 2016 financials, so that debate continues to go on. the government is involved now. today scandal does not help. rishaad: these are just ask nations, but -- just accusations, but it does not help. delisting,f all, the they need to release audited financial statements this year, but they can't have two years of losses, so one option that is not open is restating 2016, because that would make them two years in the red, and that is also grounds for delisting. a lot of headlines about
western digital and the issues they are creating with legal action, but they are not the problem, right? what is the actual delay? are they trying to get the financial things in order and so on and so forth? insiders.not we don't have any nonpublic information. they are clearly trying to get the deal done. western digital has been a spanner in the works, deciding -- toshiba has a deal with western digital and they have threatened lawsuits to prevent the sale, so there are a lot of moving parts. this is a big, complicated -- haidi: this is a distraction and they should just sell to get out of the way? >> i think that the lawsuits are a distraction, but i'm not counsel to toshiba. toshiba's counsel has publicly said as much.
western digital is just trying to get a leg up in the negotiations. i do believe they are trying to sell it. we are eager to see a deal done. haidi: for all of the government scandals plaguing toshiba, this is a broader japan inc. story, isn't it? policy? punitive actions? voting against directors? >> corporate governance needs to be improved. that is a comment upon shareholders to stand up this week. shareholders need to vote for better corporate governance. shareholders need to put forward proxies. corporate's need to understand they need to treat minorities better. employees need to stand up and somethingare doing wrong, it is better for the company and the long run to stand up now and admit to it and stand up now and say look, let's improve ourselves.
voting against all directors amid repeated scandals. what gives at the end of the day? what changing horses right now, probably a terrible thing to be doing? >> you can vote against the directors. i don't think that will pass. butink that is a sentiment, will not pass. toshiba needs to focus. it is not a bad idea. they have already changed horses once in terms of the ceo. they need to get this done. they have massive issues to deal with, so you are right. changing leadership is not the best idea in the next two months. rishaad: in 10 seconds or less, when this company be around in a year? >> toshiba will be around, will it be listed as the question. rishaad: will it be called toshiba elevators? >> maybe toshiba nuclear.
rishaad: there we go. , we start theur trading day in hong kong. counting down to that. .4%.remarket off by languishingti still , $44 a barrel. cyber attack reaching asia, stocks likely to be flat today. we have this enigma network roiling markets with sudden losses of 90%. i am rishaad salamat coming to you from bloomberg's asia headquarters. haidi: i am haidi lun here in sydney.
we are parsing some of the fed speak and other central bank remarks coming through overnight. not moving the needle when it comes to expectations of where the fed goes with its tightening regime, but talking about the market valuations being high. the other thing is the imf overnight, which in the report downgrading u.s. growth expectations, and specifically a trump expectations of reflation trade and fiscal stimulus. china ate markets in the open feeling that downward pressure, the shanghai composite losing .4%. this comes after three days of gains. at the open, all sectors in the red with tech and financials leading the declines. it is a similar move for the
hang seng index, the lowest since june 23. what happen with hong kong stocks yesterday at the close what 17 firms lost 40% of their close,rice just near the a market value of more than $6 billion. traders suggesting this was due to some links with the companies underbrokerage which is , solatory investigations the hang seng index was resilient, although now losing ground, but a broader market move. enterprise, growth , theprise, these markets stock markets index saw it plunged to the lowest level since august 2015. the growth enterprise market index here you can see it as
opposed to the broader hang seng thex from the start of year, and this dramatic move we saw yesterday at the close, we will see if those 17 stocks that plunged about 40% in the last session continue to fall throughout the day. another interesting move out of the pboc was the support that some traders say was given to the onshore and offshore yuan. at the close yesterday right before 4:00, the offshore yuan started to strengthen, and now stabilization and consolidation around those levels, but bb h market saying the pboc may have asianened by having its bank selloff dollars in hong kong. a lot of analysts betting for a stronger onshore yuan fixing because of inflows, including
the bond connect. people are expecting it to start around july 3, guys. for that.hanks a lot lines through from toshiba as we wait for this memory chip business being sold off. we will not have it today, as was hoped by toshiba. western digital is a partner in that should business, saying western digital is according to toshiba management unfairly obstructing the sale of that memory chip business. just seeing what else is happening at the moment, march next year apparently being, well, time to take a look at what is going on, a deadline now saying they hope to close this chip deal by march of next year. they were hoping to do it today, so this is all really in play still. right, politics trumping, well, some policy. that is what some people are
saying about obama care. who knew? president's agenda hit another speed trump with republicans postponing a vote on a new health care bill. at least five gop member said they would block debate on the bill which was drafted in secret by mitch mcconnell. the delay is another setback on the republican seven-year campaign to repeal and replace the 2010 of affordable care act. >> we will talk and we will see what we can do. we are getting very close, but for the country, we have to have health care, and it can't be obamacare, which is melting down. the other side is saying all sorts of things before they even knew what the bill was. its will be great, if we get done, and if we don't get it done, it will be something we will not like, and that is ok. the imf cut its outlook for the u.s. economy,
ending the assumption that president trump's tax cut and infrastructure plans would spur growth. the fund now sees expansion of 2.1% come a down from 2.3%, and cut next year as well. u.s. willid the struggle to hit that 3% growth target in the face of full employment, but low productivity. indicationn gave no that her plan for tightening had changed, while technology and some asset prices have become "rich." she said it is appropriate to raise rates very gradually and the plans for reducing the balance sheet are well understood. unemploymentcing falling, but inflation remaining sluggish. president has hinted at how he may gradually unwind the bank stimulus program. mario draghi repeated his mantra that patience is required and that he will be prudent in
withdrawing support. observers say he has set the stage for winding back asset purchases, with the ecb becoming much less accommodative in 2018. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. than $6 billion in fight was wiped off in hong kong on tuesday with small-cap companies inexplicably tumbling. richard frost joins us now. richard, it is an enigma wrapped in a mistry. tell us about it. you read david webb's posting on this last month, where he identified 50 companies you did not want to own in hong kong. complicateded the cross shareholding. complexity.w the
this is how detailed this diagram is. you probably can't see it very well, if i can bring it up. it looks like a circuit board, doesn't it? this is the relationship. >> it is a truly marvelous piece of work. it really does show how interconnected a collection of that people did not think connected were. what the actual trigger was, people talked about margin calls and other things, but once the selling began, it cascaded through a number of these stocks, and most of the biggest recliners -- decliners were on his list. one was a brokerage which directly or indirectly had shareholdings in these companies. they put out a statement today saying it did in fact sell at near the bottom of the market
one of the largest companies that tumbled yesterday. haidi: if you take a look at what these companies have in common, looking at extreme volatility and market misconduct , this is them it problem with hong kong and the mainland, this murky governance and interconnectedness of some of these companies and not really knowing what is going on. mainland, at least bute is a 10% daily limit, it is a funny market hong kong. it does seem like cracks are growing in terms of these wrenching declines. we still haven't got over that collapse a couple of years ago, but at the same time, the market is an open and transparent one. high,ng seng is near its and to some credit the hong kong exchange has unveiled a proposal
to try to revamp the micro cap board where these issues are taking place. right, and there are activists calls for more reforms , just not a lot of response in terms of what they will actually do. case with is the others. sometimes the investigation here will be after a huge declines, and while that may solve some of comfort tois of no investors who have seen their shareholdings evaporate. that's right. thank you so much. kong killedas hong the filthy habit. how the city is no longer the the she option for ex-pat traders that it was 20 years ago. this is bloomberg. ♪
rishaad: i am rishaad salamat in hong kong. haidi: let's get a quick check of the business flash headlines more bad headlines for toshiba, being sued along with nec for fixing the price of lithium-ion batteries. kmart and sears say the pair operated a textbook cartel, engaging in a conspiracy to fix and maintain prices from the beginning of 2000 through the end of may 2011 three the case is being heard in oakland, california. taking a look at how shares are faring in tokyo, a lot of news flow plaguing toshiba today, up .7%. plunging after
the daily limit was removed in .okyo, 67% down extending a 31% tumble on tuesday. received the first day request from a bankruptcy court in delaware that gives it permission to pay staff and vendors, shareholders attacking the board for the biggest postwar manufacturing bankruptcy and the largest product recall ever. >> there was not enough of an explanation from management up until now. they were quite eloquent at the shareholders meeting. i wonder why they could not have explain much earlier the situation to shareholders and media like they did today. it's toppedook says 2 billion greater monthly users. in 2000 was founded four and reach one billion in october 2012, signing up 600,000 users each day since then.
facebook says it is concentrating on creating virtual communities and working harder to reduce violent, hateful, and misleading content. well, to decade since the handover, and things have dramatically changed in hong kong. gone are the days of failed in london, try hong kong. more, andrew sullivan can share his story. you arrived here -- tell us the story, andrew. >> i arrived here to get into the finance industry, but i was a chartered surveyor. most of the stocks on the hong kong exchange where manufacturing and property or retail and property, so it was a popular sector. rishaad: how have things evolved in finance? even then, it was not that easy to get a job in finance. >> persistence paid off more
than anything else here it one of the things still truth is people are willing to give new entrance an opportunity in hong kong. the labor laws are such that obviously if it does not work out, you can get rid of people quickly as well, but it does mean people are more willing to give that first opportunity, and does not fite cv 100%, people are willing to be flexible, and that is a key thing of still doing business in hong kong. doing business in hong kong and being in the industry you are in, and you have dealt with stocks and network,ow, the enigma would this have existed 20 years ago? do you think governance has gotten more slack? has anything changed in your view to allow such a system across holdings and inflated values to transpire? stillhink it probably existed but was not quite so
well reported as it is now. are getting better information, highlighting or exposing some of these areas, also used to be certain shareholders who had controlling interests and they could manipulate those almost at will, so it has not changed. the difference is that it still happens, that it is getting clamped down on slowly due to mainly good reporting. are the biggest risks for hong kong in maintaining its status as a financial hub? is it these issues we keep coming back to, its perceived independence or lack of independence from beijing? >> the strength of hong kong will remain, the fact we having this law, and if you are doing business, that is important. the law we see practice on the mainland is still, one day you could get one decision, and on
the same case you could get a totally different decision the next day. that will not encourage outward investors looking to invest in china, so that is one thing good for hong kong, but maintaining its standards of reporting and knowing that the stock market is being properly regulated are again important factors for people investing in hong kong. haidi: is the perceived rule of something, you know, you can rely on given that you have headlines of people that can just be abducted and taken across the border? as we get this greater interconnectedness with the bond connect and the stock connect, that will only grow deeper and the exposure will be more as we get into the next 20 years. do you think there are more risks than potential opportunities? >> certain the from a company's point of view, having english control the contracts you
execute and operate is still a crucial thing, and that really is the mainstay of why people come to hong kong to raise money. until suchontinue time as beijing actually possibly takes up the idea of an independent judiciary, and the hong kong royal society have been to shanghai and beijing promoting this, and there are steps in that direction, but until they have a common law where you know you can take a reasonably same judgment today as yesterday, then hong kong still has a good place in the finance industry. rishaad: how do things change? we also have more mandarin speakers. recruitment agents say that banks and insurers want people is speak mandarin, but there also this perceived notion that these people are necessary, but sometimes people who have talent are being overlooked by
sometimes a requirement for men drink which quite often times they don't need. >> that is right. trading desks, we have tried to hire cantonese speakers to speak to cantonese clients, mandarin speakers to speak demand or in clients, and westerners to speak to western clients, and we get the whole range here. increasingly, you find when you go to shenzhen, shanghai, beijing, you find the people you meet there are keener to practice their english than they are to suffer my bad mandarin. it is the international language. you see how many parents want to have their kids taught in english, and it lays down the benchmark. rishaad: right, what about the erosion of the basic law, for instance? you seen any changes with regard to the finance industry,
which 20 years ago perhaps -- >> not so much the finance industry, but people are aware -- insidiousd u.s. change that is happening, and that is more from young people educated overseas, have seen real democracy at work, and wonder why they can't have it at home. rishaad: what about the political tensions and the societal tensions as well? how much is that being manifested in some sense wages falling? ex-pats don't get the same packages they used to, for instance. as a is no longer seen hardship market by any means, but we are seeing wages in the finance industry, the general to keep fixedeen costs low and payout discretionary bonuses. that got upset after they financial crisis, but that trend
is coming back. i think generally speaking that there are a lot of people who want to get into the finance industry, and that is keeping the wages lower than they should he, but good companies will always pay good staff what they ae really worth, and it is matter of realizing and understanding the continuity of staff, hong kong has a terrible reputation of people changing jobs every 2-3 years for more money, and increasingly as we coming intoike that the industry, people will realize that it is worth paying their staff better, and the whole lifestyle of how treating their staff will benefit the industry. rishaad: andrew sullivan, independent analyst. checking tickets, hollywood auditing china's box office sales for the first time. details on the way. this is bloomberg. ♪
top studioswood's auditing china's box office figures for the first time, concerns ticket sales have been reported in accurately. results could come as soon as the third quarter. we are used to do business when it comes to economic data out of china, but hollywood also feeling the doubt. they certainly are. this has brewing for quite some time. the first promise of an audit came in 2015 through an agreement that was between a u.s. film lobby and chinese onlyials, and we are n sing it now come to fruition. this comes after the government already made stricter laws regarding the reporting of box
office figures. when they did so, they did their own audit and found at least 300 examples of where ticket revenue have been reported in accurately , so this is the studios getting their foot in. another point is this comes on the 2015 wtoof agreement on access to china's film market. that is up for renewal this yeae , sorry, in the coming year. so they are preparing for that and setting the stage for that. renegotiateable to the revenue sharing agreement. at present, a certain number of hollywood films are allowed into china on a revenue-sharing basis. the studios get 25% of the ticket revenue. if they can show that has been inflated or figures depressed, they may use that as one point to negotiate for a higher revenue sharing percentage, which they do get in many other
markets. haidi: right, so what is likely to happen if there are scrapped and season that they find? >> when the government found discrepancies in its own audit, they punished the exhibitors. in those cases, there were fines and suspensions of operations. in this case, i have to think the most likely outcome would the that the exhibitors have to repay the studios given that the audit shows these numbers, if it can be proven that there was some fraud there. i think they will have to repay the studios. more importantly is the bigger picture, where it would give the studio some leverage in renegotiating these agreements. another point of that wto agreement was that it is not necessarily a limit, but a guideline to how many thumbs can be imported. they would like to see that
♪ announcer: from our studios in new york city, this is "charlie rose." charlie: we begin this evening with the supreme court. the justices agreed to uphold a limited version of president trump's travel ban from earlier this year. the order prevents travelers from six primarily muslim countries to enter the united states. however, the court issued leeway for foreign nationals who can claim a bona fide relationship with a person or entity in the united states. the case will be heard when they reconvene in october. joining me from washington is adam liptak, supreme court reporter for "the new york times."