tv Bloomberg Markets Asia Bloomberg July 20, 2017 9:00pm-10:00pm EDT
♪ it is 11:00 a.m. in sydney. i'm haidi lun. , it's just gone 9:00 a.m. in hong kong and beijing. i am rishaad salamat coming to you from bloomberg's asia headquarters in hong kong. this is "bloomberg markets: asia." ♪ haidi: asia pacific markets , the dollar its lowest and was a year. rishaad: president xi turning his attention to the public
sector, state owned companies will be held accountable for debt. haidi: frankfurt is the brexit winner, deutsche bank and citibank the latest to confirm their move. rishaad: show us the money, any money. the cashless economy and a market worth trillions. it seems like all the event risk is behind us. forward to some people putting their feet up boj, allay, ecb, coming out with policy statements. conundrum presents a for mario draghi. despite being incredibly dovish after that ecb lack of action yesterday, we have a split on whether the ecb should be changing its quantitative easing language, deferring how and when on the next to towards
normalization later this sheer. index, a basket of currencies, back to levels before qe started, in fact, slightly higher. the conundrum is if you look at inflation, it has crept up to being higher than that. , and indeed,enign perhaps, that does portend, tell you some dovish this in the european central bank. again, it is the idea of how you interpret what mario draghi said. some said we will get tightening as soon as summer is over, others saying they would not talk about that until autumn. bulls areuro-yen living another day, clearly not anytime soon moving away from
, in facttary stance pushing back of that inflation target. we have the euro at that 23 month high, much more of a momentum trade, or the fear of missing out trade. let's get to the markets. china and hong kong setting up for the open in half an hour. it has been quite a week when it comes to asian markets. investors have putting their feet up after the rally this week that sent japanese shares and stocks in hong kong to a two-year high, but red for the most part across the region, the asx losing .6%. spot, a the only bright slight gain. , few data points in asia
taiwanese exports for june jumping 13%. this morning, the taiex down .3%, although the dollar is adding after falling for two days. korea's preliminary report on exports for july of 22% on year, but we do have the kospi losing points this morning, but easing the day's as telcos and utilities leave gains. the yuan resuming gains for a seventh day. for the about fomo aussie dollar and the euro, despite the drop, jeffries keeping the faith, saying it is likely to break 80, so by on the dip or you will miss out. haidi: i like that idea of the
fomo and momentum trade. you look at this one way trajectory when it comes to dollar weakness. thank you for that. let's get caught up with first word news with paul allen. the special counsel investigating ties between the trump campaign and russia to include business transactions. looking into russian purchases of apartments in trump buildings, the presidents involvement in a controversial development in york with russian associates, and the 2013 miss universe pageant in moscow. mr. trump can claim a win in his attempt to redraw the trade map. a deal comes weeks after china reopened its market to u.s. beef for the first time in more than a decade. approving more biotech products and increasing imports of american natural gas. the imf has agreed a new
conditional bail out for greece, bringing an end to two years of speculation over whether it will participate in a rescue program. the fund approved a loan as much as $1.8 billion. ,t grants a seal of approval but is expected to depend on those countries providing some debt relief. qatar has evidence the cyber attack that triggered the gulf diplomatic crisis came from or directly benefits the united arab emirates. security officials say they are investigating and show the state news agency was hacked in may. the washington post reported last weekend that the uae was behind the hacking and had planted a false story to justify the crisis. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. i am paul allen. haidi: rishaad: at the heart of the
global divergent story is the hilemption that w japan stands pat, the u.s. and the rest of the world will lead in the other direction. the ecb not rushing for the exit. is this a divergence still the driver in your opinion? that if you want to keep that story in place, you have to stretch the part that involves the ecb. the federal reserve has made it clear it wants to move towards that exit and may be hike rates one more time this year. the ecb as such a long way away from that. they are still purchasing bonds. ,fter listening to mario draghi you get the feeling he is in no hurry to take that step.
behind the fed. in fact, mario draghi said are from needing to question the idea of withdrawing stimulus, the euro area needs more monetary stimulus. said the last thing the european central bank wants to see is a tightening of financial conditions. he had a lot of reasons why he sounded like a ready dovish person on this ear it in fact, he is saying i am not ready to change the sense of where i am going, and that does not seem to be anywhere fast. >> unanimous in communicating no change to the forward guidance, unanimous inwere whenng no precise date for to discuss changes in the
future. it has become a global story. the central bank feel they took unprecedented steps to cut rates dramatically in the financial bonds, start buying ending up with huge balance sheets, then they look at their inflation picture and it does not seem conducive with starting to take steps, at least removing stimulus. area inflation, two key measures moving higher, moved back down. the ecb target is just under 2%, and they are further under 2% than they were. bundesbond the is the player that has made the most noise saying we should reduce bond purchases. the head of the bundesbank and
head of ecb council has been making this argument loud and clear, but mario draghi seeming to make a clear statement that he hears all that, but is not ready to go there yet. he just said he is not ready to talk about the signals about what he's going to go there. so mario draghi at jackson hole next month, maybe to deliver a signal been, but there are some doubts that might occur. haidi: may be a lesson learned in terms of how the markets reacted, detecting a more cautious mario draghi. we talk about this diversions-convergence story. when you look at asian central banks, there is a convergence where all countries, even japan amongst them, but generally in the region, central bankers are in no hurry to tighten. >> absolutely. it is interesting. this is a global trend.
mario draghi wants to see inflation rising. saying we mayare have stronger exports and good things happening, but we want to make sure that bears fruit. number two bank, if other countries have stronger growth not getting in inflation pick up come you don't have to worry about quickly raising rates, but the pboc for example trying to deleverage and pull excess liquidity out of the system, at the same time keeping their rates at record lows. the reserve bank of india seeing inflation slowing even though growth is strong. their door may be open to rate cuts. hsbc sees no central bank tightening until 2018. if you look at japan, maybe it tion thedetermina strategy is paying off.
>> there are some signs of inflation beginning to creep through, some green shoots, wages picking up, inflation expectations creeping higher. while not the 2% the boj is aiming for, we will see some increasing signs of inflation in the neck excitement 12 months. again, sitting tighten waiting for growth. ater, we will speak with noted monetary economist here in tokyo to talk about his view of the boj and how it fits into this global picture of central banks converging, diverging, and most of all what it means for japan moving ahead. rishaad: absolutely. great to get those insights. thank you so much for that. at a big weeklook of central banks.
haidi: this is "bloomberg markets: asia." haidi lun in sydney. rishaad: i am rishaad salamat in hong kong. markets paying attention to washington. the threat of and certainty there could be for investors. apec cios now is the it deutsche bank wealth management. we have something else to worry about it. tell us about it. >> at the beginning of this
year, we were concerned about political events that have not played out fortunately. the biggest focus on the second half will clearly be central banks in the wet mario draghi said. everybody is looking at jackson hole next month, and most likely in september when the ecb might finally announce what are their steps next year in terms of tapering. ithaad: people have called tightening. it isn't. it is normalizing. kuroda governor continuing his program. what do you make of the boj position? to tonerday, he tried down what he said before, but the euro still appreciated, and the main reason is he has not talked down the euro, which has happened in the past. you are right. we are not talking about a taper
tantrum we have seen four years , and theben bernanke ecb is clearly conscious about this, that they have to normalize this. 60 billion euros in bonds, there are not enough bonds around. enough inhere aren't japan either, and governor kuroda is continuing that. everyone talks about the law of diminishing returns. have we gone past the point of returns anymore? >> that's true. up to 10, most bonds year maturity were still in negative territory, so we have up, yields slightly moving but clearly from next year onwards they have to reduce, taper, and normalize their purchase program.
for us, it is not a big surprise. we are surprise how the euro reacted so sharply on these comments. rishaad: let's talk about euro -dollar, most are bullish. the fear of missing outcome of the momentum trade, everybody in that camp. is, perhaps go the other way? >> clearly after the u.s. election a lot of u.s. longs have been put up, and it is mostly concern and fear of the so most ofections, these traits have reversed and you are seeing the u.s. dollar positioning at the lowest level reversed9, so it has from a flow perspective. fundamentally if the fed will hike interest rates one more time this year, and then next year to-three times, and clearly
the ecb is not anywhere close to hiking interest rates, so the interest rate differential should seek the u.s. dollar. haidi: when you look at the u.s. dollar and what happens with u.s. treasury's, there is a sense that equity traders, fx traders, and bond traders are second-guessing whether janet yellen will do what she says she will do, or we get a dovish series of hikes and have a of the balance sheet. i think that is clearly what the markets are saying now, u.s. data weaker compared to european data, and especially on the inflation side am a but this is also true for europe as well, so that is what janet yellen has been saying. thatare quite surprised with almost full employment that inflation has not come in yet,
but we still think the fed will continue with their hiking program, and most likely by into this year or early next year they will also reduce their balance sheet, which from our perspective would add another type of tightening as well, so fore this would rather seek a strengthening of u.s. dollar, so 110 by june next year is more likely than 120. haidi: stay with us. his view on the politics of capitol hill, this latest story about the u.s. special counsel robert mueller expanding that probe into the president and what that does for markets and valuations at the moment. this is bloomberg. ♪
haidi: let's bring back the apec cio with deutsche bank wealth management. story, distraction, from trump's policy agenda. is there a sense markets are ignoring this, or have they priced in that there will not be in the progress when it comes to the reflationary, progrowth trump trade? >> if you look at euro-dollar, disappointment with the dollar weakening. you look atif equity markets, yes, it looks like the markets are in ignoring hit. .- it there has been a lot of positive , especially tax cut reforms. we are not expecting anything to happen before 2018, so if this
is coming at a later stage, then earnings revisions have to come down and can lead to some market correction, yes. haidi: what do you think is the biggest risk? dislocationl-bank or policy missteps? or are you looking at china given this tightening of financial systemic risk campaign is starting to heat up? is there a chance conditions in china could actually get more volatile? not rule this out, but when you talk about china, if i look at recent data, it looks stable, even though the government and pboc have delivered -- de-levered a lot. seen gdp figure slightly better than expected, but would not put too much on this. the growth has been broader,
retail sales, industrial production, so china is not a concern for us. it is the central banks, what they are saying, so hence, we are clearly looking from one central-bank event to another. when you talk about other potential risks, we are looking at another political election event, which means looking at italy, so we might see an election early next year. this can put some volatility back in the markets. rishaad: 22% up, emerging market stocks this year. amazing. think emerging markets, and here we distinguish between asia and the rest of emerging markets.
we think emerging markets can outperform developed markets because earnings growth and earnings revision are strong and on the upside, and this is the driver for further outperformance of emerging markets. surpriseone thing, one , one top investment theme and 20 seconds? at, iare still looking know it is boring, but looking at technology. we call it next generation technology. are longer-term themes, and one subsector we are looking very much at is cybersecurity, so everything which has to do with cybercrime, maybe attacks we have not heard about, i think this will be a longer-term theme, and why we think this to be is also quite good invested into is we don't have -- .ishaad: thank you
♪ rishaad: here we go. the hong kong observatory. now, dollar down to levels we have not seen for 12 months. robert mueller expanding his investigation into donald trump. continuingl equities make all-time highs. earnings season, 83% reporting so far have topped estimates. there we have it. hong kong, japan, two-year highs. i am rishaad salamat coming to you from bloomberg's asia
headquarters. haidi: i am haidi lun in sydney. is theer big story resilience of the aussie dollar, the fact of tightening for the they did notning want. up 10% so far this year was 6.5% against that trade weighted basket june alone, so one to watch out for. the shanghai, hong kong markets opening up. here is sophie. sophie: we have chinese stocks on the back foot, down .3%. hong kong managing gains, rattling for a 10th straight day. we do have the kospi swinging to gains in the morning session, but elsewhere, losses in sydney, taipei, and tokyo. we had the yuan fix slightly stronger. the yuan down .1% against the dollar.
i want to show you some stocks moving. , bydse stocks in hong kong electronics sees a substantial rise in first-half profit, popping almost 8%. sliding 5% after hitting the highest in the year on thursday, snapping a four-day rally. artificial intelligence related stocks in china, flipping the plan tohina has a develop that industry, aiming to grow the sector to $60 billion by 2025. developingnd by do core ai. i want to in the what is going the hang seng, utility
stocks leading the gains, up almost 3% today, industrials on with telcos, but i.t. stocks falling over .5% this morning, so a mixed picture when it comes to the session in hong kong, but the hang seng rowing for a 10th straight day. rishaad: nice one, sophie. we keep these two-year highs. thanks for that. let's move to sydney and get to first word news. says the united nations north korean crops have been harmed by drought. the fao says early season harvest are down 30%, with the famine risk to rise. the bank of korea will give an gdpmate of the north's later today, estimating the nuclear program has cost between one billion and $3 billion.
china's deleveraging campaign taking on its biggest target, the public sector. are focused on fighting abilities of banks and the private sector companies. now president xi jinping has made it clear that local authorities and bloated state owned companies must caught lowering. at last weekend's work conference, he said china should hold officials accountable. export orders exceeded forecasts as apple suppliers geared up for the new iphone. demand jumped 13% from a year ago, almost double the 7% in a bloomberg survey. the value of those orders rose to more than $40 billion, the highest of any june on record. the taiwan dollar remain strong, inflation tepid come and central-bank holding steady. success has made the cofounder of the second richest person in china. the stock has surged 50% in 2017 with profit topping estimates.
byt has pushed his wealth up $10 billion to $30.7 billion. dalian wandaof delhi and fell with his company under scrutiny. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. rishaad: right, they need to get their debt load down. when it comes to getting around china's deleveraging drive, traders need to be creative. perpetual dollar bond sales have ballooned in popularity, especially state linked companies. let's try to make sense of it all. china is talking about soe's, and whysso eas
perpetual bonds. levels andalk about this and that, but chinese state-owned enterprises are the most in that it in the chinese economy. have 120% gdp in debt according to the government. wants to talk about deleveraging, it has to talk about state-owned enterprises reducing debt. the thing about perpetual bonds everything ind definitely, so not that different from stock. rishaad: you have to keep paying that money out, as you do dividends, but perpetual bond will let you vary. maneuver.n accounting it is a liability and will show up as debt. a perpetual bond is traded equity, same as preferred or common stock. it would be on your equity asset
balance sheet, so it will not show up in the macro statistics. that's why state owned enterprises stipulated that limit and will come to hong kong to issue perpetual bonds because it will not show up in statistics. haidi: one that you mentioned in your column is a property developer green town, $450 million perpetual has been well received. why do investors like this when in particular so much? town is a quasi-state owned enterprises paying 5.25% for the next three years with promising to redeem 100% principle back in three years. what is there not to like? this real estate developer has little credit the same duration
straight bond, the yield is a .ot lower here i haidi: this is like the cat and mouse game, the whack-a-mole when it comes to what the markets do. do we expect the new clampdown for the sector as well? >> i'm not sure. the government has to know about this. it is pretty obvious. perpetual bonds being treated as has the, so maybe it government's implicit blessing. i don't know. we will find out. haidi: yeah, we will find out reading the tea leaves. thank you for that. chinese insurers have outperform the hang seng index by 10% so far this month, and the result comes as china's top regulator continues to scrutinize life
insurance products of by companies from the likes of anba ng insurance. this doesn't seem to correlate, the government crackdown and outperformance. what is behind it? thet is because of expectation on the investment results for these chinese insurers. the bond yields on stock markets have been robust in terms of the first half, so there is expectation built into the earnings this year. the question is should investors be concerned about china's ongoing scrutiny of some of these insurance products? >> if you are talking about anbang, they are big fish in a big pond. china life is the largest insurance company in china, so even if some of the products are clamped down on, a lot of the other policies are still sold. rishaad: then we have to see how
investors leave in the story as well. ipo, ands year, an what is the investor reception likely to be? expectation is the benchmark will be on technology stocks. ratios,ompare the p/e players getpnc single digits or high teens, but maybe 30, 40, 50 times, so the likes of e-commerce players or internet giants. rishaad: that is all we have time for it. thank you. looking at insurers in china. coming up, what is next for the boj. we have analysis out of tokyo. that is on the way. you are watching bloomberg. ♪
♪ at some point, 117, when a team, when 20, the same problem that boj has had, but central banks begin to think about their own currencies, although they won't publicly admitted. the strong euro is not in the favor of mario draghi moving in a more dovish fashion. >> they are all delaying or pushing out or slow talking their next move, so whether the boj, the ecb, or the fed, you know, i think the message across the globe, stop, wait, and let's look for some inflation before taking that next step. >> i think the boj is far from that normalization.
they are sticking to the inflation target and not looking through the recent weakness. bank of the fed, the canada, and i would argue the ecb, not seeing inflation, but growth. we can take a few steps towards normalization. some comments from our guests on bloomberg about central-bank policy. let's get more on that and the boj in particular, pushing back its target for the sex time for inflation. the sixth time for inflation. kathleen hays is in tokyo. is there anything more governor kuroda can do? or is it an exercise in futility? we have a special guest who has some definite ideas about what can be done to help
governor kuroda win this fight to reinflate the japanese economy. emeritus, asor noted monetary economist and student of the boj in tokyo. it's great to have you on the show. thank you for joining us. let's start with the boj meeting yesterday. governor kuroda is saying we are not going to meet the 2% inflation target as soon as we thought. they pushed it out to fiscal year 2020, at least a small concession, but significant. what is the significance for the boj and where policy is heading? >> 2% inflation target is an important global standard established in global central banks as a result of a long history of monetary policy
management. it is the wisdom of long-term research, so we should stick to that. kurodafact that governor has admitted it will take longer , a realistic and necessary target, but is there a signal to tell us where the boj and governor kuroda are heading? itit is important to keep long. it is not a short-term target. we have already gotten out of deflation, but to keep the 2% inflation for long-term is important, so we have to make clear a short-term target and long-term target. , the boj,n't japan been able to achieve that inflation target yet? it is not money
enough. it is always in terms of a stockry base, not valuations. , somethingngly 3% like that, but in order to achieve the 2%, we need to 5% inse that at least terms of the money stock. yes, the money stock has 9%, but in japan, it is still very low. >> you think a lot of the way you can increase money supply, money stock, is that you need to get more money in the public's hands, and they will spend it and prices will rise. you think the banks are what is clogging this up here it reserves, bond buying, they are not translating that into actual money. >> exactly.
it is not restricted anymore by reserves, but a lot of , on theses, controls regulation changes have made a restriction on the reserves -- not reserves, the loans. risk control is very tight, including corporations, the tightening regulation has a big impact on the monetary policy. >> you think this monetary forcy, super stimulative decades has a lot to do with solving japan's debt problem, high debt to gdp ratio. from thatke it problem, to the other problems? >> that is why to percent
inflation is important -- 2% inflation is important in japan. if we keep the 2% inflation, the national debt becomes half. >> it is cut in half? >> cut in half. >> you are inflating it away is what you are saying? >> slow, only 2%. >> everybody pays a higher price and everybody shares the same burden. is it japanlem keeps buying bonds at this rate, the boj, they will own all the government bonds and one person i spoke with who works at the boj so the government bond market would disappear in japan when that happens. thatat a risk, problem, governor kuroda is playing to one side right now? >> it is important to buy the
government bonds, it is not necessary. it is more important to keep in the society and economy, so maybe the banks not fromy the assets the financial institutions that is important. -- from the financial institutions. that is important. >> five years, 10 years, 20 years? rates are very low, so if it is too fast, it causes problems to increase the interest rate, so we should make to reach 2% inflation.
it need not be achieved within , but in two years, it should be ok. is notovernor kuroda reappointed, who would you like to see appointed head of the boj? >> i have no idea. >> do think you might get reappointed? >> of course. >> you think he will? >> yeah. ,> 2% inflation in two years may governor kuroda will get to keep his seat. thank you so much. >> thank you so much. i'm going to send it back to you, rish. will take it from there. kathleen hays in tokyo. cash is no longer king and china, the potential of qr codes in developing markets. that is next. this is bloomberg. ♪
♪ haidi: qr codes are becoming increasingly popular as a former de-payment in developing markets. in china, five point $5 trillion of electronic transactions were made last year. our bloomberg columnist is here with more. qr codes have been around a while, so why wouldn't consumers prefer newer tech like apple pay? >> there are a couple of reasons. if you are in a developing country, an iphone is quite expensive, so the technology used in an iphone to make payment near field is not that widely available. qr codes can be read on feature phones and lesser smartphones, so that is one big advantage. the flip side our the merchants.
if they want to use apple pay, they have to purchase expensive terminals, samsung pay, purchase terminals. with the qr code come all you have to do is printed out and put it up at the register and somebody with a qr code enabled phone can scan it and make a terminalspayment from us of tho big reasons this is happening so quickly and china and starting to happen elsewhere in the developed world. rishaad: one of the things i is youbout this job learn something new everyday. qr code means quick response code. i did not know that we chat is a chinese social media app. >> what is interesting is this takeover of chinese eat payments ,y qr code started with wechat
but the chinese credit card released inve just combination with mastercard, asa, and american express global standard for a qr code. there are two big deficiencies with qr codes. one, a little insecure, and two, different credit card companies come he can't send money between them. consortiumhis global to adopt it, so that will go abroad and you will see credit card companies globally adopt the chinese standards for qr codes. mastercard has a program in nigeria where you have 100,000 small traders using qr codes through their system, and that system will be in large part taste on the china is systems. india is hopping on board, so growth will be huge. rishaad: how far away are we
from a cashless society? >> it depends on where you are. in china, it may feel like you are in one. i was just up there. as i noted in the piece, i was seeing subway buskers excepting qr codes. coins in have to carry your pocket, just scan your phone. rishaad: amazing stuff. thank you for that. a quick look at what is going on market wise. just under half an hour of trading in hong kong. prices, look at these there we go, hang seng flat, shanghai composite as ever ucking the trend. .2%.okyo market off by a little tepid with event risks behind coming out putting their
announcer: from our studios in new york city, this is "charlie rose." charlie: mohammad javad zarif is here. he has served as iran's minister of foreign affairs since 2015. on monday, president trump certified iran was in compliance with the joint comprehensive plan of action, but on tuesday, the administration announced new sanctions, saying the united states will continue to aggressively target iran's malign activity, including their support of state