tv Bloomberg Daybreak Asia Bloomberg August 24, 2017 7:00pm-9:00pm EDT
>> 7:00 a.m. here in hong kong. we are live. welcome to daybreak asia. we have the view from jackson hole. policymakers in wyoming. investors are watching for central bank policies. we inflation is not a crisis. and for bloomberg's global headquarters, i'm betty liu. profit falls in a record. they want to fly directly to london and new york. and the samsung boss awaiting a
corruption verdict. that verdict is going to be closely watched in south korea. markets are waiting with bated breath, on the fed speakers at jackson hole. be payingen will attention to tomorrow here in the u.s.. there were some jitters in the markets. ceilingk about the debt rattling investors. the dow off 30 points. off 1%.aq also s&p down 2/10 of 1%. the declines are there but not
as much as you might expect. most investors are on the sidelines awaiting janet yellen and her comment. >> yes. we are pushing pause. talku can say anything to down that rising euro. in asia, prettier than brawl -- wall street. we have rallied for eight of the past 10 sessions. it has been a decent two weeks but we are flat for stocks. the kiwi, two days of losses. spikes may continue to exit if we break below 72. we are just at a whisper from that now. and markets not going anywhere. we have been stuck in this tight range for three months. mostly we will see any kind of breakthrough. 79 for the aussie.
a key watcher is going to be oil prices. harvey,ct of hurricane could that actually disrupt the oil markets? and japan inflation numbers coming out this hour expecting to rise. equity market signaling some gains here. 109. thank you. first up president trump has run new republican leaders blaming them for a debt ceiling. it will now require cooperation
with the democrats. -- three other directors were forced to leave the board installing another person in his place. mumbai.ose 2% in they have been struggling with infighting. uber investor benchmark has asked a court to block travis kalanick from selling board seats. they say it is hindering the search for his successor as ceo. he accused him of duping the firm to win three additional board seats. the court filing claims his actions have caused potential ceo candidates to step away. and the trial of samsung de reaches aer
conclusion, denying corruption accused of funneling millions of dollars to a friend in return for government favors. his defense has been that he wasn't involved in decision-making. the case has not hurt the company. it launched the new galaxy s8 smartphone. global news 24 hours a day powered by 2700 journalists and analysts. this is bloomberg. >> expectations from market moving news out of the jackson hole. this year pretty low. with janet yellen and mario ,raghi expected to speak traders are watching closely. kathleen, a beautiful backdrop behind you. what is going to be the big
question banks are going to be asking? >> there are always a couple different levels. beautiful setting. some ways a secluded place for central bankers to gather. over the years, more and more focus. they have used this venue to send some kind of message. the topic of the conference is making global growth more dynamic. is sospoken part of that we can boost inflation because central bankers are having a hard time even with better growth. look at europe and japan. inflation just is not seem to cooperate. kaplan. to rob looking at this question of growth and inflation he sees
some risks there. is anbalization opportunity for the u.s. to grow faster. in light of these demographic trends. probably immigration in an appropriate way. it is probably an opportunity for the united states. trade is an opportunity. the biggest risk is we don't analyze the reason for slow growth as well as we should. we may be pick -- we pick policies that may be create lost opportunity. course, some of these risks he is talking about, demographics, there is nothing a central bank can do for an aging population. they can take steps to help offset it. core seems to be set. it is balance sheet reduction.
differenthi is in a position. even though they want to start normalizing, bear in mind this is a venue they know they have a chance to say something that could be something they want the markets to know. >> the topic of janet yellen's speech is unexpected. someone said it makes perfect sense. how is that? >> financial stability. was why?ion i got why don't we hear about the balance sheet or interest rates. janet yellen is sending a signal may be there is concern growing about excesses. chair,spoke with the fed he has been pounding the table about holding more capital.
about taking steps that will send us into another crisis as it did a few years ago. he says he is in agreement with the idea your -- low rates can be driving this. he says i don't know why she chose that topic but he thinks it is appropriate. some of these regulations should be rolled back at a time when the bank capital, which he is stride on this, it is not at a high level as it has been in the past and banks may want to roll it back. i think it is interesting to hear what janet yellen says when you think of it in that context. >> thank you. we are going to be back with you later. she is going to be joined by the global former bank of israel frank talking
about global monetary policy coming up in half an hour. now a closer look at how the markets reacted including volatile stock trading. sideline.staying on a the potential hurricane on the golf driving oil trades. direction. for we had swings between gains and losses. if you go to the final close the losers one out. it was close to unchanged. we had lower than average volume which indicates we are in the peak of the summer vacation. wall street takes those last two weeks of the month off. the market snapshot, yields rose. gold was slightly lower. and energy, a big focus. we saw oil fall that natural gas
futures soar. hurricane harvey now pointed at texas. that is bullish for some fuel suppliers for oil, it has depressed the bond price. demand is going to be down. let's look at the vix. we go into the bloomberg. overpeople have made money betting on the calm of the market. now we are seeing a surge in the total number of contracts, betting that volatility is low. the it will take off, and either side could win. that is going to be volatility and these contracts are continuing to be a hot vehicle to be in. economic data was not enough to move the market one way or the other. we had fresh data on the jobless rate.
fell tosting home sales an 11 month low. that also interesting. the jobless rate for a year low. what is interesting, that the continuing jobs data shows tightening labor market which is what the fed wants to see. >> live from new york, thank you. and it is time to remove risk from your portfolios. we find out why. this is bloomberg. ♪
which you can only understand by looking at industries and talking to ceos. those are having an effect on inflation. >> the price of goods has been falling. maybe that is due to technology. services, you see those rates are actually staying 2% and higher. ,n the context of the economy you have to be careful getting too focused on a point estimate as opposed to the broader trends that you see. theree big names out speaking to us at the jackson hole symposium. investors are going to be following that news. that matters less to this person , and this guest we've got
active stock picker. essentiallyalk is noise to you in many ways. what i thought was interesting is, and the notes before the interview me you are looking for places where not only are you trying to make money but where you don't want to lose money either. is that something new for you? >> know. i have done this 25 years. >> as of late has that picked up? >> especially when people don't pay attention to risk, i pay attention to it. we have to wait risk and reward. >> a lot of people are weighing risk. they are looking at between passive and active investment. what are the risks people are not looking at when they do that? on the lowy focuses entry cost. it is cheap.
think about the high exit cost. as much flow seen going to pass it as today. who is going to be the buyer? who are you going to sell to. it is a house of cards. it is a ponzi scheme. when people try to get out, who are you going to redeem to? you are the market. people don't understand. you could be faced with redemption risk. the bid could widen so much that the way out, you could lose. entry cost is not the same as the exit cost. >> do you see that risk around the corner? >> you never know when it manifests. this is what happened in the late 1980's us -- 80's.
buying insurance cause the market to fall. investors, it was an asset class. now you see the redemptions building. when somebody sees with the smart money is doing, now it becomes an avalanche. what everybody tries to redeem, you never know what will spark this. >> let's talk about the specific stock sectors you are interested in. you like tech but you are not in the stocks. why is that? >> they feel overvalued. ast because you don't take valuation risk risk is risk. it doesn't mean you have reduced it. nokia, jimsoft, alto. much more reasonable valuations. similar growth rates. i don't have to pay up for them. there is a way to play tech
without owning saying. g. owning saying -- fan amazonow you don't own but you have looked at it. the market cap gap there has closed. it is more because alibaba has risen rather than amazon has fallen. what do you make of the closing of that gap? terrific isas a this model. the chinese have adopted e-commerce. you never have the same brick and mortar infrastructure that you have in america, which has a big legacy. i would say the market for alibaba is larger, way sooner than for amazon in the u.s. or abroad. that is the advantage.
space.ey dominate that i can understand the business model of alibaba. the reason why we have stayed away from owning that company even though we research it, the corporate governance risk. like the ownership structure and the transfer pricing potential. that source of risk, i need to get paid for it. until i don't, i won't own it. business.eat it has a challenged model. >> in your notes you said similar picture here when it comes to 10 sent, the stock darling for so many across the world. most say it is in their portfolio. you see that income and revenue growing. what are you seeing?
>> 10 sent a fantastic company. it has done very well. you also want to be careful. a company's best days are behind it rather than ahead of that. it is defendant not just on its messaging but video games. they can be hit or miss. while it is a hit, earnings are doing extremely well. what if you have a miss? that risk is not in these valuations. if i can get other stocks like china mobile, where people are worried about earnings risk, and getting a company with a very strong talent sheet, why would not go for that than chase with everybody else wants to head up? you don't have to pay the highest price. you can only make money if you bargain. you have to look elsewhere.
>> this is how i invest. >> we love hearing contrarian calls. let's talk about tech. what is another big conviction call? >> if you ask someone about investment ideas, very few people will say i will put money in cash. it is the most vilified as set out there. someday it will be a glorified asset. people don't even think of it as an asset class. the reason why you want to think about cash. lot and itet falls a is right for that correction the only asset class is cash. think about 2008 and 2002. the only person beside someone who can short who made out like a bandit in a falling market is warren buffett because he was
sitting on loads of cash. it's not just to have high cash but own cash-rich companies. you can own the stock and participate in the off cell of the business. discount or ignore the fundamentals of the equity rally as well. take a look at global growth. we see this recovery. earnings per share worldwide. we are near records and continue to rise. leg toot give an extra the equity rally which may mean we don't need that much money? >> there is always good news. whenever there is good news people can justify why the markets go up. my job is to think about what is a thing that can go wrong.
improving,gs keep balance sheets keep deteriorating and nobody is calling out these teams engaging in financial engineering through debt-financed growth or back shares. when you look at both of those things in conjunction, risk has gone up more than the return potential of the market. as a contrary or in investor who risk,to get paid to take i took it in japan in 2012. when you are paid to test risk -- take risk it is ok but when you are not you should stay away from it. great to have you here in the studio. one feature on the bloomberg we would like to bring to your attention, our interactive tv function. you can watch us live and see previous interviews, and dive
>> a check of the business headlines. soft inc. is spending again. the evaluation is said to have risen to $20 billion after the investment making it the fifth most valuable tech startup in the world. said to be exploring options that could range from spending off its virtual-reality arm to a full scale of the whole company. it is working with advisers on bringing in a strategic investor. payment processor
>> counting you down to the open stocks. havelizing a bit, we inflation numbers for the month of july. it looks like it was in line with estimates when it comes to core cpi. this is excluding fresh food for year on year rising 0.5%. edging higher from what we saw. , inchingcore cbi higher. we are seeing 0.1%.
the same story when it comes to japan. that positive output, we are going to see prices edge higher as well as food prices. possiblyding to that to that picture is the japanese yen. you can see unchanged reaction here. ofsaw a slight strengthening the yen ahead of these numbers the yen has been strengthening for the last several weeks. the decline in the u.s. dollar complicating matters for japan. holding steady. let's get to the first word news with courtney collins. theirst up, passing on benefits of higher energy prices. paying shareholders the entire half of the net income. it is worth $2 billion and raises expectations.
came in at $2.4 billion. ahead of the one and a half billion. india intensifying scrutiny of chinese tech companies amid concerns the browse the -- browser is leaking data. indian cyberspace must be secured. two dozen companies were told to provide details of their safety and security practices. well as global names such as apple and samsung. india's top court says citizens have a fundamental right to privacy, derailing plans to use use -- theork to ruling will affect the program along with global corporations
working in india such as google, facebook, and uber. and at least 12 people were killed, that in the strongest storm to hit the area in five years creating torrential rain. to victims were in an underground garage. gamingn says growth revenue may be down. global news 24 hours a day powered by 2700 journalists and analysts in 120 countries. this is bloomberg. >> thank you. now the samsung empire billionaire is going to earn his -- learn his fate today. he may be sent to prison for 12 years. , tell mehe courthouse
or their protesters now outside? >> local media have been reporting they will start gathering closer to the time of the verdict being read this afternoon. we are expecting a panel of three judges to give that verdict. it will probably be just after markets close before we hear a verdict. has gripped the nation. not just because of the feeling of change, but because it involves one of korea's richest most powerful men and the wider scandal which has involved the former president and led to her ousting and impeachment. this case has wider implications. to give you some idea of how saw hundreds
coming down to the court early this week for the 30 seats available to get tickets to see the verdict happening later today. prosecutors are asking for a 12 year criminal sentence. this is the harshest that any prosecutor has asked for for a major civil leader. that may gave -- give the sense of the mood here. they say samsung gave millions to organizations controlled by a close friend for government upport which they say ended causing him to consolidate. he denies these charges including bribery, embezzlement and hiding assets. he did confirm that money was given to the organization but denied they were for political
favors. what happens next if we do see jay y. lee convicted? we saw record profits for samsung. is there a need for a plan b? what is the plan b? even if he is incarcerated the business is doing fine. they share price has been marching higher. just shotprice has ever higher. the wider implications that this case has for a conglomerate in the country in general. their top 10 in south korea, they basically own 27% of all business assets here. you can see that quite clearly. the wider implications, it sends
a message. they are serious about trying to reform. the mood is pushing for that as well. convicted, it sends a message to watch their step about what they are doing. we will come back to you in just a minute. we want to talk about the trial and its implications with author tony mitchell. we will talk more about what to expect coming up later on this afternoon in just half an hour on daybreak asia. >> we are back at jackson hole where we hear from someone who knows a thing or two about central banks. this is bloomberg.
let's get back to jackson hole the top central bankers are with mario draghi, scheduled to speak on friday. >> jacob frankel of the bank of israel, he is chairman of j.p. morgan chase international. perhaps today the most important thing i can tell you is he has been at the kansas city fed symposium for 33 years in a row. longe not been here that but it would not be jackson hole without you. >> i started in high school. >> that is my line. vast, so manythis cycles. quite 10 years. we are coming up on a decade
since the financial crisis started. banks with super aggressive rate cut's. here we are. they are having trouble. why? flex when the mega-crisis broke out, there was a consensus of what needs to be done. the central banks have lowered their interest rate to unprecedented low levels area the objective was to prevent a calamity. it was successful. interest rates remain low. now in 2017. imagine a single center banker who a decade ago believed when
we meet here in jackson hole in 2017 this would be the subject? interest rates will still be so low? quantitative easing would be so expansionary? longer thann much everyone expected. but there issful diminishing returns. , as the passage of time real interest rates became negative, practically all over the world. what and most central bankers not think that low interest rates, extraordinary tools, unemployment is falling. that inflation would be so stubbornly uncooperative? lower than central banks wanted to be? with a have expected that? >> they have not expected it and
it is still hard to manage. we need to remember, other things happen in the background while you were only watch in the inflation and saying we are still not there. consequencesgative are happening in the background. investors are looking for alternatives. they are chasing returns. and with it, high risk. insteadions buying back of investing in plants and equipment. there is a disconnect. there is a danger of the creation of bubbles. all in all, when we're sitting here we are puzzled about the low inflation but puzzled about the low productivity and subpar
growth. are they interrelated? is there a possibility low productivity is in part a consequence of the fed, that investments are being put the financial sector rather than the real economy? the interest sensitive sectors like housing has been encouraged productivityow sectors. i really want to say that inflation is not and should not be the only gauge for monetary policy. we will notld you be able to raise to 2%. nobody would say that. i would only say, i believe that is a good reason why the fed has
started in its normalization. i strongly encourage it. the fed has been so prudent for some many years. if it stops now and continues raising rates, dealing with the balance sheet, markets will see it as a positive signal. it could be that maybe we see little hints of this. some comments by fed officials. you kind of wonder is she going to have something to say along the line of rates too low for too long reaching for yields? it made not matter so much. maybe financial stability is what the fed has to safeguard by moving. jackson hole is the place that gives opportunity for a
reflective statement by leaders of the monetary policies of the world. releaset the place to an announcement like this. it is to provide us with a better understanding of the way the fed reflects. you cannot help but be impressed by the fact, how much broader that comes occasionally. we should not look at the data of yesterday to forecast the policy of tomorrow. it is the data of the entire range and the perspective should be a medium-term perspective. >> mario draghi, a very different point from the fed and
the u.s.? >> the central bank has a different challenge. are so different from each other, the real economies are so different, unemployment is 9.1%. hand, andthe one germany is on the other hand. europe, the challenge is in flexibility in economies, and overbearing monetary policy. it is not the monopoly of europe. the u.s. is the same. the fact is, if you want to promote investment productivity and growth, the solution is not in the hands of central bankers. policy that budget
here for 33 years in a row. the former governor of the bank of israel. jacob, you are concerned about being too long. -- too low for too long. do you agree or think they should? >> i believe they should raise rates. everyone expected it to happen. fors on the journey normalization. an excessively long delay. while we are keeping rates as low as they are there are issues in the financial markets and other distortions that get accumulated. the normalization is called for. improvingy is
significantly. markets have not been as well behaved as they have been recently. the duration of unemployment has declined. even inflation on a medium-term perspective is towards the target. i would not hesitate at all. hike.d put for a not a single move. we are talking about a journey. the journey is response -- restore normalization. this will be several hikes. this journey is going to be slow but consistent. there will be quite a few rate hikes. moderating in 2018. we should not wait much longer than 2017. >> what do you tell the people, go slowly? you may be right that we need to normalize, but guess what?
the central banks created these balance sheets. if you just keep on a path like that you were going to unsettle the markets. that could cause the next crisis. >> on the contrary. the more you delay the more these -- this equilibrium you accommodate. ofody can accuse the fed being imprudent. the fed has been excessively prudent. i would not let those people who benefit from exceedingly low interest rates have the vote. we have to worry about the economy in the medium-term. the u.s. is the most important central bank in the world.
the skipper that needs to move our heavy tankard in the right way. >> look at the year row. the move up in the euro in the month of august has been the biggest august move ever. traders are saying it doesn't matter what mario draghi does because we know they are going to taper. isn't he in a tough spot? >> definitely mario draghi is in a tough spot. he is the right man in the right place. he has an extraordinary challenge. governments have not given him enough to support. the euro has changed direction in one way or another. we were talking about the opposite questions. let the exchange markets do what they need to be doing.
mistake.t is a one needs to do the economic policies as steady as you go. >> i just want to ask you about china. you talk about the importance of the chinese economy to the rest of the global landscape. we are seeing the economy doing much better. what are we looking out for. and ease of business conditions there. do they need to? todayna is a major player in the world economic system. china is an integral part of it. the volume of trade between china and the u.s. and europe taken together is only half of the volume of trade between china and the rest of asia. the center of gravity has moved
to asia. china is at the center of it. china has become the most important trading partner of most countries in the world. in this regard one should not will loosen or tighten, but how do we integrate china more into the economic system. the initiative china took is a very important initiative. the u.s. has made a dramatic error by not supporting it and joining it. the rest of the world recognizes the place of china in the world economy is central, infrastructure is good. the best prescription to spread knowledge to productivity him
innovation, and one country to the other is through the open market. you.ank really appreciate it. we will have to continue that part of the conversation next time when we have you. >> a lot more coming up on bloomberg television. they will follow what is going on at jackson lake launch. -- launch -- lodge. i'm going to send it back to betty liu in new york. >> we will continue with lots of great guests at jackson hole as we are getting ready for the markets. major market open after some tame cpi numbers from japan. ben you guys are going to asleep is when janet yellen and mario draghi are going to be changing the markets.
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kong, i am yvonne man. welcome to daybreak asia. the top story this friday, looking for clues, investors watching for big names out of jackson hole and the currency market may face some chops. jay y. lee accused of buying influence at the highest level. it is after 8:00 p.m. thursday. prices edging higher last month at 2% target, remaining a dream right now. qantas profits estimates, the false from that record we saw
alan joyce wants to flight direct to london and new york. ♪ yvonne: it will be quite a ride there, not just on qantas but on the markets tomorrow when janet yellen and mario draghi speak at jackson hole. it's interesting, we just had aerial investments. i thought i would bring up this charge to show what contrarians are saying about interest rates. can you believe in some are talking about not interest rate hikes that interest rate cuts? this chart shows you the market values of negative yielding bonds have risen the most since october. there is more and more chatter about -- chatter out there.
there should be hikes, but what about the cuts? yvonne: maybe they can be joining in on this party, which is an interesting proposition. also, amazon and the deflationary effects it could have on the economy in the u.s. it could be a headline topic for the fed, as well. we heard about this integration between whole foods and amazon overnight and it was interesting that they talk more about this price war we see among supermarkets and we are seeing for the first time, the rate of change when it comes to cost of food at home edging higher. there is a lot of talk about what effect amazon can have on inflation of prices moving forward if they are going to an flame this competition among some of the likes of walmart, whole foods, as well as all of these that have been expanding.
yvonne: anecdotally and selfishly as a parent of two teenage boys, i am quite happy if those prices go lower. yvonne: they did not talk about how much of the food cuts will be, but a long way from where i was in college. once a couple months as a luxury trip. betty: in the meantime, let's get to first word news. haslinda: japanese inflation inched higher in july. core prices rising higher than 1% earlier. inflation lags behind the rise in economic growth at the bank of japan struggles to spare significant price increases. the doj has pushed back the projected the state of 2% objective six pints -- six times. google is targeting more precisely. it is not removing them come up
it is adding warnings and disabling advertising around them. google outlined the move in june and it comes with debate about extremism and free speech. citizens have a fundamental right to privacy, potentially derailing the government's plan to use a biomedical network from mobile phones to income filing. supreme court ruled that privacy is guaranteed under the constitution. will affect the program and global corporations working in india, such as google, facebook, apple, and uber. slow play $1 billion profits, beating estimates from its previous records, qantas will buy back shares. the overall capacity was up 3%. qantas is challenging playmakers
to develop aircraft that can flight to new york or london from sydney nonstop by 2022. we talked to the ceo of qantas himself in less than 30 minutes. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am haslinda ammann, this is bloomberg. yvonne: thanks to the equity markets and the ford jackson hole, folks are sticking with the holding pattern. asia has been resilient in the midst of all of this drama coming out of washington. we could be ending the week on a positive note. betty: resilience but with white volume. we have to keep that in mind when it comes to the lay of the land. asia stocks looking mixed. up attempt of a
percent and aussie bonds are tracking treasuries lower here, just ahead of jackson hole. we have had quite a number of different views when it comes to whether or not there should be a rate hike this year. equities have been trading at a tight range ahead of this central bank gathering. in the currency space, you have the dollar and euro in a holding pattern here. keep in mind, if yellen turns out to be more hawkish, it can pose a risk for short dollar positions. out the kiwi dollar extending its losses, set for its worst week since april. the buzz for general elections tends to be tough and a hassle on the kiwi dollar, the aussie dollar also on the back foot and some weakness coming through in the one. we have seen resilience for this 11.28,y, now trading at but it is still gaining 3% there, iron ore extending gains
that we saw on thursday and oil prices are now recovering from the loss we saw overnight. ,his is hurricane harvey approaching the finance hub in the texas coast, concerning it might hurt demand for refineries racist. prices -- crude i want to take a closer look at what is moving on the topics coming getting about 1/10 of a percent, snapping the drop we saw here yesterday. we had inflation data out this morning showing cbi remaining in the doldrums, but it is higher than it has been for the seventh straight month. today,rs are getting hit but health care, energy stocks are helping to keep the topics afloat. ahead of the main event in seoul, check out what is moving on the cost be here. we have healthier stocks in pole
positions along with property shares. telco falling 1% here, the benchmark getting its strengths for the fourth straight. board to show you samsung's shares, it is rising for a fourth straight day, the ongoing trial has not railed the share prices rise this year, it is up about 32% so far in 2017. mentioned ite just will deliver the verdict later isay and whether the samsung guilty of corruption, jay y. lee of buying influence at the highest levels of government, the widespread government led to the -- it has had only a limited impact and itsng share prices business but as we have been
talking about, this has wider indications. >> that is right. it brought down the former resident and the successor. the successor came in campaigning and promising reform and increasing jobs in seoul, which has been a problem for the economy. he sees the two things as coming together. if you look at 82.74, the chart in a bloomberg, the career discount, this compares the cost mscith the profits and the asia index. some say the table dominance and concerns have that shareholder value and it has cozy ties between conglomerates and the government has basically stocks cheaper than their peers. a growthin blames strategy for high on implement and low wage growth. he wants to change that.
that is part of the effects that can happen depending on what happens as a result of this trial that has been going on for the last few months in south korea. yvonne: we have heard all this before. what is different in moon jae-in's administration in terms of taking on this effort? he has two pro-reformist in his government, and one of them is the head of the fed chair commission and he has been dubbed the sniper for his decades long activism in trying to reform changes in the civil system. the managingier to partner at petrol capital management and he is saying, all of these moves and installations of high-level executives sends a message.
this is what he had to say. take a listen. >> the trial alone cannot single-handedly affect the stock market. trial helps this improve the corporate government that will be form eventually, it will take time. case, whatever the outcome will be, is essentially sending a message that the government serious about change. that this case is just one case. the sbc is the one pushing the changes and they will be ongoing regardless of the outcome of this case. because of the campaign of moon jae-in and the figures in these key positions. they are hoping the result will the societydemand and south korea have viewed their demands for reform and that has been somewhat priced in. if jay y. lee is cushioned on
all charges, prosecutors will appeal and are can be an impact on the cost be perhaps in the next trading session. back to you. we have more on samsung in a moment. we will meet the author of samsung electronics. that is coming up next. yvonne: later we will dig deeper into the latest qantas results from ceo alan joyce. you'll be joining us in a half hour. you do not want to miss that interview. lots of big lance ahead. -- lots of big plans ahead. this is bloomberg. ♪
of the stock prices. it is really more commentary on south korea. i thought i would bring up this chart. thank goodness it does not have an impact on samsung itself 45,ause look at chart 44 which shows you how stocks are reliant on samsung's performance. at the costrket cap be is at 18%, not quite near the high several months ago of 20%, so it has lost a little bit of bluster to other factors, including the note seven debacle area still a huge -- debacle. still a huge percentage of the market cap. you can see that it is not an impact on the business. do asking the international investor community who jay y. lee is, they would be like, who? they are not associating him
with the company to much of it in my be original headline, but look at my chart here. where the money is going and most of the time you cables overs prefer the small-cap stocks that show here in blue. it is interesting, alongside of those, we see selling when it --es to foreign dollars foreign buyers. over efforts by moon jae-in to try and boost private-sector jobs. he wants to break the influence on conglomerates. we are seeing a little bit of buying into the small caps of late. we saw the fastest pace of buying just last month. we are seeing things shift here in the korean markets, where money and cash will be allocated. let's bring in our next guest, he has written the book on samsung literally. toni michelle.
great to have you here. a big, historic day for south korea. is the trout going to be a fair one or a show trial -- trial going to be a fair one or a show trial? guest: it will be a little bit of both. the whole attention of the nation is on the trial and the consumption is tilt. the actual -- guilt. the actual evidence is less clear. it took behind closed doors. if you believe there is a cozy relationship between the table and government, it is a fair trial. if you believe it is never cozy and the relationship between intense, their idea question whether it is a fair trial or not. this was a man who is
groomed to be the leader of one of the largest conglomerates in the world. given what you know of his company, can we be so hands off over some of the business operations between samsung? he has talked about only focusing on samsung electronics, or was he a mastermind behind all of this? again, it is a bit of both. samsung group is so complex that no one person could possibly know everything going on everywhere. has gotics in itself very fine professional managers who are really giving the best jay y. lee would tend to follow. the issue comes up on you have decisions,r capital where you really want somebody at the top to take
responsibility. betty: regardless of what happens in this trial, where the verdict is going to go, i think lee's reputation as a leader has been damaged quite substantially. can it still be business as usual or do you think these problems are going to start to creep up within the corporation three or four years down the line? guest: we have to wait for the trial verdict first and whether it is for 12 years or less, it will be an appeal and there will be an appeal on an appeal. jay y is certainly not the first stable leader to be in this situation. most of the heads of the big conglomerates have done time in jail and somehow they have survived. i think samsung is in better shape to survive because it has a decentralized structure in
actually doing business. betty: throughout the trial, we defenseom jay y. lee's about how little he knew about the business. he was just a figurehead, barely knew anything about the operations of the business units. that seems to be very credible likely -- itwhat seems credible when you talk to the analysts. that is likely the role he played. how worrying is that? guest: that is the good question. know more than he is saying at the trial, the you is, you delegate when are the head of such a big organization. given a very hard time by the president, he came back and went into the future
planning section and said, i don't know what's going on. just make them happy. it seems to be his basic defense. samsung there are other executives on trial at the same time and some of those new all the details. we will see whether the court scrimmage between jay y and the other executives. betty: do you think this is unique, that kind of position jay y held and what he claims is the non-knowledge of the workings of his own conglomerate? do you think that is pretty tables?of the other guest: jay y is in a different head and so onhe because his father had worked his way into knowing everything. but even so, the style of samsung has always been to leave minor decisions to other people
and to concentrate on the big issues. and i is quite different. -- hyundai is quite different. he is much more hands on. yvonne: if j white is convicted, how does this affect her hays -- trial?hays' guest: it's important he is convicted so that they can go after ark her hays. -- parker hays. she can expect to have a long sentence, whether it's how much time she spent in jail on pastor records. difficult to tell. great to hear your perspective on all of this. the struggle of leadership and
the electronics industry. one feature on the bloomberg we would like to bring to your attention is on tv . you will be able to watch us live and see previous interviews and that is into the bloomberg functions we talk about and also become part of the conversation. it's for bloomberg since cap is only, check it out at tv . this is bloomberg. ♪
earlier shareholders cash out. prices surge over a dispute over western digital over a chip. fell to the lowest in six months and shares rally. we are seeing shares off one third of a percent. there is a deal on the chip sale at the end of the month. toshiba eases the cash to put its books in order. -- uses the cash to put its books in order. target further debt reduction. the third biggest and gas to sugar refuse to pay dividends as it revealed net debt of $2.9 billion. 6.6 two years ago. santos' share prices have been lagging. -- yvonne: air asia
revenue jumped, however net operating profits fell to $880,000 compared to $2.4 million in 2016. it was the gains against a loss last time around, the asia -- costarline warns nominated in dollars. we will talk more about that with air asia x ceo ben ishmael at 11:40 a.m. in hong kong or 11: 40 in new york. betty: qantas is flying high after eating estimates, he wants wantsght even further, he plane makers to make it happen. he joins us next. this is bloomberg. ♪
♪ friday, i'm yvonne man in hong kong. betty: i'm betty liu in new york and you are watching daybreak asia. let's it to first word news with haslinda amin. -- is linda on month. mann.slinda ami haslinda: credit that's on a stronger euro and weaker dollar provide unusual liquidity to see the market vulnerable to some phonetic moves. -- gatherrs rather
and say weaker inflation will dominate this decision. >> we saw a puzzle of white is it rising, now it's, why is it falling? it would be nutty for them to raise interest rates. reaches ae trial conclusion later friday with jay y. lee denying corruption. he is accused of funneling millions of dollars to a friend in return for government favors. his defense has been that he was not involved in decision-making at samsung. the case has not had the company since lee's arrest, it has record profits and launched a new galaxy s smartphone. energyefits of higher prices, paying shareholders its entire net income, worth $2 billion and raises expectations of more of rewards.
also be estimates, coming in at $2.4 billion for ahead of a projected $1.5 billion. itsstruggle for a sees founders three getting control. ousted ceo with one of the directors to resign. andhas gross more than 2% they have been struggling with infighting and fighting changes in the tech industry it helps to create. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. on, this is amin bloomberg. pretty much treading water here ahead of what will happen in jackson hole in a couple hours time in wyoming. look at the latest with sophie kamaruddin. ophie: they are looking at
central bankers to provide their wisdom. aussie stocks are leading their jobs want tenths of a percent and then shares went other directions. the yen is holding steady. the cost be is marginally lower here with consumer stocks leading the slide. netmarble leaving losses in seoul after it rose record high on thursday. samsung is gaining ever so slightly, but we have the one not eating a four day vice. the brazilian is being tested but you are seeing weakness across the board when it comes to the currency space, although the euro and the dollar are holding steady and the yen at 1.09 spot. check out what is going on with the kiwi, extending its worst weekly drop since april ahead of course given the election we have had in september.
this tends to be of rough patch for the kiwi dollar historically speaking. taking a look at what is moving in tokyo, we have family market leading gains, jumping most in a year and we have seen docking update pickup a 40% stake. operators haven't grappling with foring spending and sales stores opened more than a year. they dropped in a seventh straight month in july. in sydney, we have super retail leading gains after results that saw sales going across leisure and sports segments and the asx is looking to drop for a third day this week. i want to show you qantas shares after its results. shares are snapping its four-day rise, but qantas is the second best performer on a six 200 this year and it has out past over
global airlines, jumping 74% so far in 2017. you can see that on this chart, the line in blue there. betty: perhaps selling on the news after the earnings report. let's stay on qantas as she mentioned. profit of $1.1 billion, eating estimates, it from its previous record, the airline announced a plan to buy back to $94 million of shares and perhaps nonstop direct on a four hour flights to sydney and london and new york. joining us is ceo alan joyce. great to have you back on our program. we will get to this sexy news headline about the direct flight to new york and london in a moment but i wanted to talk to you about the international
business first. the second half revenue was down about 2%. what is going on with the international side? were seeing a lot of capacity being added in the first half of the financial year, which the present yield some risk. that moderated in the second half and we are seeing the trend continuing. what is great to see is that the international business had the second-best result in its history. it's great to see it is outperforming all of its peers singapore,on, virgin. what we are seeing is significant benefits to come from the entry of the 787 in october of this year and we will start new routes like kurt to london direct. approving see margins -- improving on the back of
those expansions? we will have still the first half of this financial year with pressure we have solved in the second half of last financial year and we don't get the benefits of the 787 coming in until cap dear year 2018 -- calendar year 2018. as i alluded to earlier, everybody likes these headlines about the world's longest flight from sydney to london and new york. you have challenged boeing and airbus to build an airplane that can handle 20 plus airtime. i know you will sell that. what has boeing and airbus said to you about that? guest: both boeing and airbus have an aircraft that they are , which doesn'tld
quite get there, but we liked working with them as we have done in the past. our speciality and flight planning and our speciality in long routes. we are hoping to get the manufacturers to produce that aircraft. can i say, from a consumer point of view, this would be fantastic. it will be faster from a trip from sydney or melbourne to london. things can go wrong in a stop and it allows you to have better sleep on board and to pay more attention to the movies. we have seen every time qantas has added these new longer routes, like perth, london, the reaction has been phenomenal. we know consumers will love it and they want to fight direct and we want to give them the opportunity essentially to fly anywhere in the world direct from sydney, melbourne, and brisbane. betty: you have to give them a
lot of legroom a lot of nice, comfortable seats, and a lot of entertainment for a flight like that. more partnerships with american and emirates if you are flying direct everywhere now? guest: we do. emirates, weth will probably end up flying direct into two or three quarts three ports in europe, maybe somewhere in germany. 40 destinations aseurope, still using dubai a hub will be important. similar with american airlines, their hubs in dallas and l.a., we get a huge connectivity to 160 destinations. that will continue. for the big volume markets to new york, maybe two cargo, maybe places like vancouver, they will about direct services in your
♪ betty: this is daybreak asia, i'm betty liu in new york. yvonne: i am yvonne man in hong kong. during our conversation is alan joyce, ceo of qantas to talk more about this. i want to talk about the international side of things and china, in particular, one of your they just markets. you have just started budget airlines announcing this route. industrial hub is one of the first year cities in china, but where is the potential in that market? that market has huge potential.
if you look at the total chinese visitors around the globe, it is over 120 million, australian gives 1.2% of that. if you do any surveys in china, australia comes out as the number one destination that people want to go to, so we have seen real massive growth in the last few years and we do believe that if you go forward the next decade, we could see that market growing to 5 million tourists. it is big growth. not only do you get the benefit of international visitors coming eastith our partner china and our own operations, when they get to australia, they typically make domestic trips and because we are the largest carrier in the domestic market, we benefit disproportionately to the traveler as well. storys is a great growth for the future and something we
are focused on participating in. you focus on hong kong and china with the jets start. india has a lot of private airlines. are you seeing more bright spots in the region now? yes, and if i go back 10 years, qantas had around one third of its capacity directed to europe internationally, one third to asia, and one third essentially to the americas. today, it is less than 8% to europe, over 50% into asia and the rest to the rest of the world. ist rebalancing and growth seen as a bigger operation in apan than ever before and bigger operation in south east asia, or operation into china, and more partnerships in the region. we served in get with our partnership airways. the growth we will see in asia is a great opportunity for the group and we see the asia-pacific market will be
bigger than europe and north america by 2034 in all goingtions and it we are to participate in that. we are lucky and we will benefit from the region we are in. and with the operations we have with just our and qantas. betty: getting back to earnings really quick, alan, another big news about the buyback of 373 million australian dollars. should investors expect more of your surplus capital to be returned right now or is this more of a one-off given your stock is already near record highs already? guest: absolutely, our financial framework has been very clear. we said we have a range we are comfortable with our debt between $4.8 billion and $4.6 billion, it has come down from that. clear oning expenditure over the next two years and we say any surplus
cash above that will be distributed to shareholders and we have $500 million because we have included frank dividends as well as the buyback. as the business continues to perform this way, any surplus cash we generate about our capital expenditure will be reach suited back to shareholders. -- will be redistributed back to shareholders. betty: i wanted to ask you this question. there has been so many image u.s.ems in the u.s. right airlines, passengers being dragged off, terrible service. you can't help us going through headlines, even for qantas, passengers are ultra hyper aware of how they are being treated and putting that out on social media. i'm curious what you are doing about that, if anything? we have invested in the last few years a lot of money in
the training of our staff, in the arctic that we offer, and we have seen our customer satisfaction ratings read record levels for qantas and jets start. today's announcement has a lot of investment for our customers. we are enhancing the business class, premium economy, first class, and the economy, we have made investments about opening more lounges, revamping our melbourne lounge, we have a london lounge opening this year, and a perth lounge on top of brisbane that opened up. and we have free high-speed wi-fi. network come we can have an entire aircraft simultaneously streaming netflix. and it's free to our customers. we have never had says election as high as there is and with the products we are expecting, we think it will go higher.
on top of the loyalty you are trying to build up among your customers, have to talk about your frequent flyer program, one of the more profitable units of the business. you have this ambitious plan to double the profit by 2022. how do you plan to do that? guest: well, we have 12 million frequent flyers in australia, one in every two households is a member of our program and we are continuing watching new partners which enhances the programs. we are continually watching products. we have had health insurance, life insurance, recently we launched a qantas credit card, and the response to all of these products have been overwhelmingly positive and these posix -- these products have been making money is day one. we know have 70% market share of
foreign currency business in australia, second-largest, and we make tens of millions out of that business because of the loyalty of our customers and the products we offer and there is a lot more to come and we can continue to grow that business 10% averagend growth per year until 2022. that is our target and that's what we believe we will get to. obviously you are on this earnings right right now, the second highest results of your history of qantas right now. what could derail all this and what is the biggest risk for the business right now? is it going to be more competition from chinese carriers, for example? middle east carriers, or rising fuel costs? what is the biggest headwind for you moving forward? guest: one of the things we think is our business is different from a lot of airlines around the world because we have structural advantages where --
advantages. institution.stic it has been consistent for over seven years. if anything, it has been improving. you mentioned a loyalty scheme that has been approved -- improving. we think they give you a very solid base for your earnings to go forward and in our international business, we are making sure we are robust to manage the volatility that is typically been out there by having a transformation program that is taking a $50 million in cost out of the business. and potentially these super long-range aircrafts. we are seeing that business outperform its competitors in , all ofon, singapore the competitors in this area. we are confident we have a robust business and we are
focused on continuing to our transformation. we have our target in the pipeline and we will continue to do that to her maintain -- to maintain the robustness. yvonne: always great to have you. alan joyce, ceo speaking from the carrier headquarters of qantas. going,need to keep this go to tv on your terminal, also on your mobile. you can customize your settings and you only get the news and stuff you care about. check it out. this is bloomberg. ♪
♪ betty: let's get back to our top story, jackson hole talks making president esther george its host. central bank can start winding down the balance sheet and raise rates once more this year. , wall balance sheet street is betting it is september you will announce it. any reason it would be wrong, from your point of view? >> i've been in favor of doing this for some time and i think the estimates suggest the economy is in a good place to begin doing that every i look forward to the discussion in september about that opportunity. >> you have any estimate of the impact of financial markets from that, particularly yields and
whether or not it will amount to a defective tightening? >> i have seen various estimates and it's hard to know because we don't have experienced doing this. you would expect because of the duration of these assets, as you shrink these balance sheet, i hope it gets reflected in the yield curve. >> how sensitive leiby to market reactions about the tapering process? >> we are always taking that into account whether it alters the path of policy brings a different discussion. >> do you think asset prices deflate as you shrink the balance sheet and the weight it inflated when you blew it up? >> i have heard various views on that too and i wish i had experienced to draw on here. what i know is, the aim is to boost asset values. we have seen that. whether that ends up having a symmetric reaction on the other side, i think we have to wait and see.
i think again, the very gradual approach is being taken there, gives the committee time and it has given market time to understand whether market she is headed. have told thing you investors is how big the market she will be and that will depend on what monetary halsey system you end up using. are you in favor of staying with the current system with interest on excess reserves or would you go back to setting up the fed funds target? >> it is a feeling go back because we know how that looks but we are where we are today and it makes sense to judge as we move forward how we see the economy unfold. what you don't know is that you can get hit with a shot at any time you have another set of decisions to make. the ultimate operating framework is not something the committee has opined on yet. it has talked about it, there has been analysis underway, but i/o oer,we have to use
the reverse repo tools as part of how to begin normalize policy. >> as part of the reasoning for white you want to do these now and why you want to continue raising rates, is it because you need cushion and tools to the economy turned down? -- turn down? >> they'll be attractive have you look at the next downturn, but that is not my primary motivation. you want to make sure the economy is going to benefit in the ability to grow in a sustained fashion. the motivation is, where is unemployment? how is inflation performing? and you need to have interest rates reflect that. that is my motivation, whether it gives us all the motivation we need. ourne: we will continue conversation about global monetary policy with markets coming up next.
the focus on jackson hole, a lot of talk from the currency traders here, no news is good news. they will be hanging on every word janet yellen says. what sort of picture is being painted how are they seeing their respective economies? merrill lynch will be along to have a look at that and done the line, those inflation numbers intrigued.n from was they are calling it the -- that is a look at what is coming up. atty: we will see you again little bit. standby for bloomberg markets. this is bloomberg. ♪
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♪ rishaad: 9:00 a.m. in hong kong. i am rishaad salamat. ,e are looking for clues investors watching jackson hole, and the currency markets face chop. lee accused of buying influence at the highest level. we are waiting for the verdict. haidi: i am haidi lun in sydney. qantas beating estimates, but falling from a record. flying direct to london and new york. this is "bloomberg markets: asia." ♪