Skip to main content

tv   Bloomberg Markets Asia  Bloomberg  August 15, 2017 9:00pm-10:00pm EDT

9:00 pm
♪ in theit is 11:00 a.m. here. -- here. rishaad: this is "bloomberg markets. ♪ >> there is blame on both sides. you look at both sides, i think there is blame on both sides. haidi: president trump fans the flames of division, repeating his view of the violence in charlottesville. rishaad: the imf raising its
9:01 pm
forecast. it will call -- come the cost of rising debt. haidi: later on, under pressure by the stock surge to develop big bets. rishaad: and stormy skies. for back-to-back annual loss. we're also talking about nafta and the renegotiation. i want to bring out chart 1358, which give some context. canada and the united states meet in washington for the first round of talks to renegotiate the deal. donald trump calls nafta the worst deal ever made and vowed to withdraw from it. mexico and canada want to agree to favorable terms with the u.s.. we're going to have a look at what might make for a new agreement, what would it look like? how will it affect global trade?
9:02 pm
we have some guests coming up. u.s. imports from china way exceeding those from mexico or canada. putting all of that into context. becauset is interesting we've have expectations that the rhetoric translate to a harsh stance from the trump administration, given lyrical pressure, perhaps there is -- political pressure, perhaps there is more of a need to talk out that stands from trump. it could be a lose lose situation for all parties if it does not go well. we are about 30 minutes out from the open of market in china and hong kong. we are coming online in malaysia. risksght for wall street, receding, but not a lot of inspiration to be found. >> it is looking like an
9:03 pm
extension when it comes to asian equities. the dollar downs -- gains for the third session, that is .utting pressure on asia we have a cost, leading gains of 6/10 of a percent. the korean yuan has fallen a quarter of 8%. president tells to avoid war at any cost in contrast to what trump has been saying. we have korean debt risk turning lower after spiking. traders are truly putting these concerns behind them. cross.he yen-yuan it did spike on august 9, but we did not see the rise above the jump that we saw in april. if you take a look at the degree of the correction from the may action we have gotten this year. not a muchar-yen is higher it could be favorable for
9:04 pm
the yuan against the yen. topics trading higher, the nikkei with gains and losses here. we are trading in a fairly tight averages.ing north korean risks have not been completely removed, putting a cap on stock prices. with energy leading gains of 1%, given the rebound we are seeing in oil prices. we are back above the $50 per barrel mark. one company is due to report interim results but they are pending on internal announcements. we are waiting on auto, cathay pacific and tencent. rishaad: we'll be talking about tencent and cafe in particular. -- and cathay in particular. now to first word headlines. >> president trump has again
9:05 pm
stoked the flames of charlottesville, blaming both sides or the violence over the weekend. he claims the actions of white -- that liberals violently attacked them. his initial reaction blamed many sides for the violence. >> that was a horrible day. i will tell you something. i washed those closely, much more closely than you watched it. you had a group on one side that was bad and a group on the other side that was also very violent. nobody wants to say that but i will say it right now. >> president trump also attacked business leaders, quitting his it -- business leaders who have quitted his advisory team.
9:06 pm
ceos have gone out of the door. pressure, are other urged to quit the business prime -- business council. the president of iran is morning the country's nuclear program could be quickly ramped up if the u.s. continues its threat and sanctions. the comments are the most direct yet on critics of the 2015 deal struck with world powers. president trump has repeatedly said he wants to abandon the --ord and has new sanctions and congress passed new sanctions on iran earlier this month. capital management says management of chinese macro data says there is a risk of sharp declines over the next four months. stocks including fortescue steel expect a
9:07 pm
slowing property market to weigh on fundamentals. >> inr is too plentiful. since the discoveries in australia and his ilk, even without the currency changes. it makes production of iron ore cheaper. over time, chinese consumption off as ore will tell they use more scrap and still making. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ haidi: thanks. the international merger -- has increased its estimates for china's annual growth rates for 2020. it is warned that it would come at a cost of financial risk and rising debt. ,om, it is a mixed assessment isn't it? tom: they have upgraded their
9:08 pm
forecast to 6.4% annually between 2017 and 2020. as you say, there is a payoff. that is they are expecting 300% debt to gdp by 2022. in%, compared to 240 2% 2016. the upgraded the growth forecast to 6.4%. from has been progress china in terms of transitioning into the economy, they say. trying to take the sting out of the financial economy. trying to reduce the amount of credit and leverage in the corporate sector. what they want to see more of is letting companies, the zombie companies, hit the wall and go bankrupt. they want to see a change in capital allocation and say it to be a sweeping change. they say now is the time to push through these reforms, and that will help the risk in the
9:09 pm
medium-term. say itty congress, some will put the reforms on hold everything till that event is out of the way. occurred,else is been the chinese have now talked topped japan in -- u.s. treasuries treasuries. we have a chart that shows what has been going on since 2012, 5179. you will see that since 2012, it has been china at the top in terms of treasury holdings and japan was number two. in october of 2016, japan overtook china and held that position until june. china back on top, most analysts expect that to continue for the short to medium term because of the trade increasing between u.s. and china and demand for
9:10 pm
the treasuries. rishaad: the money supply data for china, what does that tell us about what is happening credit wise, the credit expansion in the country? tom: it is an important selection of data to monitor given the focus on the deleveraging campaign and that level. the broad money supply, the into supply number -- m2 supply number came in below estimates. they are still determined to take liquidity out of the system risk theinue to de financial sector in particular. suggestions they want the final some of the credit to the corporate, to the households. we have a chart that shows this over a longer time frame, aggregate financing and new loans. 1299.s g in 2009, thatkup
9:11 pm
continues until 2016 come early twice 17, and the trend is now downward. it may start to flatten out the next public months as we had toward the party congress, but it is expected to take down after the event. another thing to know, shadow banking rocked for the first time in nine months, seen as a positive. rishaad: thank you very much. still ahead, another loss looming for cathay. how it can get back on the top. haidi: up next, a new nafta, as talks kickoff in washington. what are the chances of president trump eating his way? this is bloomberg. ♪
9:12 pm
9:13 pm
♪ is "bloomberg markets: asia." rishaad: sparks could fly when
9:14 pm
the united states, canada and mexico meet in washington, d.c. to start renegotiation of the 23-year-old nafta trade. our guest is a former trade negotiator who worked on nafta during the george bush senior presidency. were also joined by a trade negotiator with the japanese foreign ministry and a professor at a university. research fellow at -- research fellow. what do you think will be the key sticking point of the -- the key start of the negotiations? >> first of all, i would like to mention that in light of a submission by usdr in july regarding the renegotiation of nafta, i think this guideline shows that the united states is going to make a kind of
9:15 pm
reasonable approach to the renegotiation or modernization of this 23-year-old agreement. campaign, the presidential campaign, mr. trump has been saying there would be additional 35% of duties on imports from mexico, or even eventual withdrawal from the nafta agreement, but none of rhetoric --ne hartline rhetoric -- hardline rhetoric has appeared. rather, it is to recapture what has been negotiated during the tpp agreement. since the united states has withdrawn from participation in the tpp, i think the renegotiation with canada and mexico has been largely designed to recapture or restore what the
9:16 pm
united states got through the tpp negotiations. digitaleas include trade, e-commerce, such things never appeared in the nafta text 23 years ago. get back whaty to they have previously obtained in the tpp negotiation. this is how i look at this starting of nafta renegotiation start -- renegotiations. is this going to be a real renegotiation? or is it going to be donald trump being seen to renegotiate with some added, up-to-date elements, or will it essentially all looker, warts and
9:17 pm
at the treaty? thatok, i certainly concur the tone of the guidance the u.s. administration provided to congress on their negotiating objectives was fairly moderate. i think we're looking at primarily an update and a modernization of the nafta agreement. however, i think it is important to keep in mind that there are a couple of contentious issues which could be quite difficult to resolve. for instance, the united states has indicated it would like to remove chapter 19 of nafta. chapter 19 allows companies to appeal trade sanctions to independent, binational panels rather than national courts. i can tell you from experience, this was extremely important to canada, and also very important to mexico, as well. the trump administration has indicated they would like to remove the provision from nafta.
9:18 pm
so while there will certainly be some what i would refer to as common sense updates and modernizations of nafta, and it will look in those respects a bit more like the transpacific partnership, there will be some meddlesome and difficult issues to resolve between the united states, canada and mexico. haidi: professor, i'm curious how useful or not useful is the fixation on the trade deficit? you can going into the negotiations focused on the trade gap is going to be a fruitful strategy for the u.s.? u.s.d.r.e the submission on the guidelines for the nafta renegotiation include access,t of market particularly in the agriculture sector. u.s. and canada, for instance,
9:19 pm
have been constantly disputing , or even poultry, those things. are also acts contentious area. areas, united states gives priority in terms of improvement of market access into the canadian and mexican markets. they have a view to reducing u.s. trade deficit with those partner countries. stephen, i'm wondering how the current domestic political climate and the pressures president trump is under, in addition to that we are going into a key political year in mexico with the present -- presidential elections, whether that will put added pressure and change the tone of the negotiations. stephen: i think it will certainly introduce a certain
9:20 pm
sense of urgency into concluding the negotiations. as you mentioned, in july of 2018, we got presidential elections and mexico, and later in the year, we have difficult and contentious u.s. midterm elections. from the perspective of trade negotiations, it can make things much more difficult. that's why there will be a very strong push to conclude these negotiations by the end of 2017 or early 2018 at the latest. that is a fairly ambitious timetable to get to, but at least potentially doable. haidi: hold that thought, we will get more and a little bit good -- a little bit more. this is bloomberg. ♪
9:21 pm
9:22 pm
9:23 pm
rishaad: we were discussing the renegotiation of nafta. have a former trade negotiator, and a research fellow. thank you very much for sticking around. -- stephen,out here you say chapter 19 will be a sticking point tell me something, as well. what is the endgame for actually this treaty in donald trump's eyes? is it essentially a real overhaul, as we have been talking about, ultimately? >> no, i don't think we are looking at a fundamental overhaul of the agreement. think it is interesting to note that both the commerce secretary and the u.s. trade representative have recently said that one of their cutting
9:24 pm
presidents for the renegotiation .s to first do no harm i think there is a recognition there is a core of a good agreement here. they will have to make enough modifications to be able to them in straight or claim they have "fixed" nafta, because everyone remembers -- yes? rishaad: fundamentally, he wants to reduce the trade deficit, that is at the core of this, but which supply chains -- interwoven as they are, it is a big ask, is it not? but it isndeed, useful to point out that although the guidance to congress indicated they wanted to reduce the trade deficit, it was completely ambiguous on how they intend to do that. let's face it, and discussion about the trade deficit in the context of the nafta region is a lot less relevant than trade
9:25 pm
deficits elsewhere. nafta trade accounts for about the percent of u.s. trade, that only about 13% of the deficit good the u.s. has services trade surpluses with canada and mexico. the typical mexican export coming into the united states consists of about 40% of inputed products from united states. the focus on deficit reduction in the nafta region is arguably less relevant than other parts of the world. professor, what are the major implications for asia? >> for asia, it is a litmus test to examine mr. trump's financial policy overall. japan, for instance, is very much interested in how this renegotiation will come out. the country which runs huge trade surplus with the
9:26 pm
united states. mr. trump is already repeatedly mentioned this and balance should be rectified. imbalance should be rectified. perhaps as early as this fall, there will be a second round of trade and economy talks between vice president pence and the vice premier to be held. in that light, japan is very closely looking into this negotiation due to start right now. much, bothk you so of you. withmer trade negotiator the japanese foreign ministry there, and also a professor at a university. also joining us, a research fellow at the heinrich foundation. looking ahead to the nafta negotiations. coming up, we will take a look
9:27 pm
at big tech earnings out of china. can tencent's results keep up with the rise in its stock price? a look at what to expect in the second quarter. this is bloomberg. ♪ got you outnumbered.
9:28 pm
the dinosaurs' extinction... don't listen to them. not appropriate. now i'm mashing these potatoes with my stick of butter... why don't you sit over here. find your awesome with the xfinity stream app. included with xfinity tv. more to stream to every screen.
9:29 pm
♪ rishaad: it is 9:39 in hong kong. we are looking at u.s. july retail sales, coming in twice forecast, 26% up. did not do much for retailers in the u.s.. coming up, we get clues to the rates. donald trump is doubling down and blaming both sides for the balance -- the violence in virginia. china is top dog again when it comes to the u.s. treasury moment -- treasury market. we will look at tencent earnings later. right, tencent, alibaba later this week, they
9:30 pm
will give us an indication as to whether the rise in the share prices, trading higher, whether it has been justified, if the risk has paid off. the balances on sheet. get the fed rate hike before the end of the year. but go over to sophie. >> kicking it off with hong kong, hang seng. stocks, energy and utilities are leading the drop. energy shares are down. given the earnings, let's shut cathay arecent and faring. tencent has outpaced apple. alibaba reports later this week. china unicom is scheduled to
9:31 pm
report, but it has suspended trading in hong kong pending an insight announcement. autoan see, we have geely up. for the homes income you have in terms of what is -- we hung saying, you have a mixed bag. let's refresh that quickly. auto movingy slightly. let's look at what is going on this country. the profit fell 60%. the company says intensifying competition in china and sluggish corian vehicle market korean market is to blame. asian markets very much looking next. chinese stocks open lower after a two-day race. csi falling a second straight day.
9:32 pm
currency is under pressure as the dollar gains for a third day. down tothe yuan sliding the sixth spot. thank you so much. let's have a look at what is going on when it comes to the first word news headlines. is lifting -- its growth forecast for china, despite that it would come at writing debt. the expanded a rising at 6.4% annually this year through 2020, compared to a 6% estimate a year ago. household and government debt will rise to almost 300% of gdp by 2022, from 24 2% last year. the assets of the government are very strong.
9:33 pm
while it might be a disadvantage in attrition and growth, in a crisis, debt comes in handily overall. that is an advantage china has over the historical experiences elsewhere. >> china has reclaimed its crown as the top foreign owner of treasuries, including holdings for a fifth straight month. they rose to $1.15 trillion in june, up from $44 billion a month ago. faulty second place, having overtaken china in october. the two countries account for more than a third of foreign ownership of bonds. a new report shows u.k. inflation weakened unexpectedly in july, making it tougher for mark carney to champion rate increases. prices rose 2.6% last month, loose -- less than the 2.7% forecast good -- forecast.
9:34 pm
's, told the rate hike was drowned out by news of brexit. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tencent is out with its technical earnings a little late. it is under pressure to justify its willingness stocks surge and deliver on some of its big bets. china is watching this. what are we looking for in these results out later today? >> the expectations are still revenue, ittencent is that 48%, 25% -- 40%. the company this size, they are expected to grow at this speed. it is remarkable. a lot of it is the expectation it will able to continue to deliver on mobile gains.
9:35 pm
the of not really started monetizing their advertisement business on we chat. it is only compared with 14% of revenue, compared with facebook's 98%. that's where the growth expectation is coming from. rishaad: 70% of your today at the moment. -- 70% up year-to-date at the moment. will there be a drag on earnings? seeing some of that thing reflected in the sale price. a lot of investors think is already at a very high multiple level right now. trading at 56 times, compared with other stocks trading at a lower valuation. that's why were seeing the selloff. haidi: a lot of focus on if there are bets on investments paying off. tencent is looking at uber. why would they be doing that?
9:36 pm
sources are telling our colleagues in the u.s. that foreign investors, including softbank, are looking to invest as much as $7 billion in uber. an importanteing backer, they would naturally be interested as an investor in uber. it lines up. haidi: i suppose if you are bearish onre is -- how far the run-up have been for these chinese textile -- tech stocks, you're looking at government policy potentially coming into play. that was interesting, we saw the crackdown on tencent's games him and it was a crackdown on baidu. , on do this quite often now a quarterly basis. there was not much movement in the share price.
9:37 pm
baidu shot up. i think a lot of it is priced into the stocks. haidi: thank you so much. our tech reporter in hong kong. china's largest sportswear company touched an all-time high on tuesday after posting record first half earnings. correspondent had exclusive access to the chairman to find out how he plans to take on global rivals. they are on a roll thinks to endorsements like with klay golden state the warriors. thompson's signature shoes have as much as tripled since they were released. it is part of a strategy to nike. -- two challenge
9:38 pm
>> our target is to grow retail sales from 30 billion now to 100 billion by 2025. which means if revenue grows 50% over the next eight years, we can achieve that gold. >> a decade after listing in hong kong, the shares are at or near a record high. they sort of more than fivefold. it has been a steady climb compared to the precipitous drop losts main competitor, who two thirds of its -- two thirds over the same. . not repeatey will past mistakes of its rivals up to the beijing winter games. >> the u.s. and chinese markets have sales of about 300 million sports shoes.
9:39 pm
but there is so much room to grow. less capabley hit companies but i don't think it will be a problem for us because we have a comprehensive management system to prevent it. >> that includes distribution changes, more online sales and customization for the more discerning customer. 's e-commerce sales of a growing over 100% each year. we estimate online sales will account for 15% of total sales each year, and by 2020, e-commerce will contribute 25% to 40% of total sales. >> with increasing costs in china, traditional practices are changing. workers on this assembly line make about 15 pairs of shoes per day. upstairs, they make 80 with more automation. you can see the trend. fewer employees will be needed. >> intelligence manufacturing is
9:40 pm
unstoppable. it is a universal trend to replace human labor with automation. we will increase our investment in intelligent manufacturing in our factories and reduce human later. -- human labor. its cash for,th they will now embark on making a bigger footprint of ron. -- footprint abroad. rishaad: we will have more of the exclusive interview with the chairman in the next hour. we talk about china's capital and debt controls and buying an nba team. cathay pacific has expectations of activex annual losses. numbers.xamine the this is bloomberg.
9:41 pm
9:42 pm
♪ withad: you are back
9:43 pm
"bloomberg markets" as we check in with the business headlines is look at apple, selling almost $2 billion of bonds in canada and is paying for buybacks and dividends. a spread of about 80 basis points above the benchmark yield. it would be apple's canadian bond sale and the single largest tranche that i a foreign issuer in four dollars. haidi: goldman sachs is upping its game to lure top talent. they want to compete with tech leaders. works.es are under bank engineers were asked what they could do to make them happier at work. air berlin has filed for insolvency after its leading
9:44 pm
shareholder withdrew support. the carrier got more than $3 billion for the losses in three years, but will get help from a government loan. thousands of jobs were at risk, weeks before the german election. it is a second failure of the carrier after it had to pull the program -- pull the plug on air it tell you -- air italia. kong's flagship carrier has faced competition from other airlines. >> let's take a look at the --the financial analysis function. the green bars are annual income. you can see the loss. all of this is important because cathay pacific is expected to report a loss of 1.2 billion hong kong dollars, 150 million
9:45 pm
u.s. dollars for the first half of 2017. if so, that would set the flagship carrier on a glide path to its first back-to-back annual losses ever in its 70 year history. watch the numbers when they come out. next, let's go to the share price. this is 6756. the airline share price is in blue. it is up about 14% year-to-date, and despite the 2016 loss. and the expected loss for the first half of this year. all of this is a bit confounding against the sea of red. these red bars are the so-called from analyst recommendations. a 2017,ey are near still 55% of the 21 analysts -- watch how they call change. this year, but
9:46 pm
they fall flat compared to other chinese competitors. this is 181. the purple line is cathay pacific share price on a normalized basis from april of 2016. it is down 14% since then. air china in yellow is up about 32%. china southern is in blue. it is up about 26%. china eastern in white up about 4%. these airlines offer cheaper, international flights that bypass hong kong altogether. those are the three charts you need to know as we had toward cathay pacific earnings later today. discuss that with our senior analyst. fundamentally, is this a structural problem cathay faces, or cyclical? carriers eating
9:47 pm
away at the business model. has gotten growth out of the mainland china cities, but it is a different secondary market, a lot less premium, heavily subsidize roots and low yielding traffic. there is a lot of bit of new development in terms of gulf carriers, maybe not as aggressive in northeast asia as they pour forecast to be, and this may be more cyclical. cathay pacific is dependent on premium traffic. the u.s. and u.k. are the pre--- the critical markets. what is the split for you? will: there is a strong impact from china. rishaad: we have a cost-cutting program and hundreds of jobs, i think 600 plus. is that enough? this is a restructuring as
9:48 pm
lowering cost, but the bigger challenges revenue challenge. while the restructuring program aims to reduce cost, caps on as aggressively as some people want, but we don't know the full internal estimate. there deftly trying to get yield overcapacityust as lesson, there has been significant overcapacity in recent years and that has drained yield. not charging for baggage that looking at new services for passengers. rishaad: at least one publication describe it as a flawed model in a changing world. if you were the chief executive, what would you do? will: rebuild confidence with the staff. i think the fuel hedging was a significant mistake in how staff would comprehend that. i think it is too late of white was done and what the losses are. if you take out the fuel hedging losses, and this is a superficial comparison, the airline performance is not that bad concerning -- considering
9:49 pm
the competition. rebuild the product and really let them be the premium airline it was a few years ago. haidi: you have talked about the idea of the journey of urgency that faces -- is it just the case the given the situation they are in, that they will also be on -- always be on the back foot? will: it will not be an easy tenure for the chairman. in the long-term, i think he came in the give a need to change their business model. it is very much now about the tyranny of urgency, rebuild cost base and we built stability. any toward the end of his time, they can look at new developments for the new business model. haidi: how do they fix china? is it inevitable? is it the right thing to do to see more control -- cede control to air china? i don't necessarily
9:50 pm
subscribe to the idea that air china is snapping on cathay pacific heels. there are some significant development in air china their restructuring and development of other airlines in the domestic --ket, it is playing in planning for a second beijing airport. i think if they wanted to take over cathay pacific, it would be a huge distraction. stay with us, we will get more with will, an analyst. taking a look at what else we have ahead, looking ahead to the cathay pacific earnings and major earnings out of tencent. this is bloomberg. ♪
9:51 pm
9:52 pm
♪ let's take another look at the cathay pacific earnings
9:53 pm
we are expecting with our analyst in hong kong. picking up on where we left the conversation, you don't subscribe to the narrative that air china is an inevitable thing when it comes to cathay pacific. clearly something needs to change in the way they deal with air china, as you have increased relationships between the other carriers and american counterparts. mainland china is such a big market, and the difference between hong kong and beijing is significant, a bigger challenge is shanghai. i think when talking about china, this is not the sole market for cathay pacific. southeast asia is a huge market, especially connecting to america. there is a lot of strength in southeast asia, and a lot of
9:54 pm
asian airlines, especially in mainland china, are having difficulty to extend their network. thay also has a big stake in air china. there has also been talk about merging the three big chinese airlines together. was talkhink there about air china and china but now withining, the allocation of airlines in the second beijing airport, it doesn't look like that will proceed. rishaad: lester, the second half was weaker than the first half. we are getting first-half results today. maybe it could revert to type and we could get a better second half? will: it will be heavily dependent on premium traffic. there has been a lot of weight from foreign-exchange, from yields. and new taxes for outbound traffic in hong kong.
9:55 pm
rishaad: this is not a company which is done very well in this practice. will: they have a financial balance sheet out for years, they have only two years hedging now, and will increase the ban so it is not as risky. rishaad: let's not forget, we talk about passengers, but cargo was in the doldrums and has come back pretty spectacularly. what you think? will: it has, and i think the benefit is while there is a yield game, there is a load factor gain in the last 5-7 years. cargo has taken out cost, i think it is a good combination of performance. rishaad: what do they do next? they've been consolidating operations in cargo in hong kong have a not? that should bear fruit down the line, but it is not quite a done deal. will: the history of them
9:56 pm
consulting there position in they are growing the passenger business, passenger aircraft can carry cargo in the belly of the aircraft. , singaporell airlines or cathay? will: cathay. i think singapore is more challenged by the government. i think in hong kong, there is a view to protect cathay pacific more. rishaad: a pleasure having you on the program. will horton looking at those cathay pacific results, which should be out around noon beijing time. -- a lostng an annual there. looking ahead on the show, we will be talking about lgt bankxchange with
9:57 pm
strategist. he will discuss the impact of north korea tensions on currencies. this is bloomberg. ♪
9:58 pm
9:59 pm
10:00 pm
♪ announcer: from our studios in new york city, this is "charlie rose." charlie: we begin tonight with president trump's condemnation of hate groups, including white supremacists and neo-nazis in remarks from the white house. his comments, followed bipartisan criticism he did not specifically denounce extremists in violence from a rally in charlottesville, virginia. president trump as i said on : saturday, we condemn in the strongest possible terms this egregious display of hatred, bigotry, and violence. it has no place in america.

4 Views

info Stream Only

Uploaded by TV Archive on