tv Bloomberg Technology Bloomberg August 28, 2017 11:00pm-12:00am EDT
jumps again after profit triples. shares of 370% this year. giant,a creates a power combined assets total $270 billion. what's powering through today, north korea, and it is driving those safety haven plays, including gold. i want to dive into our bloomberg. 9456, and this is what we are talking about. let's do the elliott wave theory here. it is a little technical, but let's walk you through. what this elliott wave theory is that it looks at crowd factors inmoves and the extremism of investor psychology. the very optimistic compared to the very pessimistic. , onerday's moves for gold
point 5%, the biggest move in three months, moving above $1300 an ounce, gold trading at the highest level since the u.s. election. showing iskorea is showshe crowd psychology as does the elliott wave. that it could move to 1339. 1340 could be that next level according to that chart good not only at the highest level in volatility, but fo spiking again. up in the asian session, and this flight to quality being felt in the treasury market. tradingeeing treasuries in the asian session and very near the low of the year, 2.1%.
ant 2% really could be with grasp very, very soon. not to mention inflation expectations are low, so will the fed delay rate hikes? that is another factor investors are looking at. volatility in currency markets very high, short-term volatility on the korean won spiking again, catching up to those levels we saw earlier in the month when we had president trump talking about fire and fury against north korea, so currency moves key to watch. we are seeing upside for the dollar as well. throughout the rest of this july, theough mid- korean won has in fact underperformed it's a developed here's. -- peers.
take a look now at how markets are moving, and this has to do ,ith what north korea is doing firing that ballistic missile over japan. pi the biggest loser, the biggest fall in about two weeks. we are seeing the south korean bond the biggest loser among currency markets in asia. the japanese yen as a safety haven. it does not matter how counterintuitive that is. that is the strongest level in three months against the dollar. you are seeing gold gained ground and a mixed picture for commodity markets, although given that harvey is affecting the u.s., we are seeing crude rebound and extend gains.
yields in the sovereign debt market in asia losing ground as we see that flight to quality being played out in the asian market. it is devastating, tropical storm harvey, unleashing floods in houston. let's get more on that with first word news. tropical storm harvey has over texasw strength and neighboring states. the full extent of the damage want be known for weeks. the amount of rain measured in feet rather than inches. the texasppled energy home with a 10% of refining capacity shut down. secretary of state tillerson is eliminating special envoy positions to meet president trump's demand for deep budget cuts. he said many of the roles would these subsumed into other
agencies. positions under threat include envoys for climate change and the iran nuclear deal. tillerson said his plan would advance america's interests. the chief brexit negotiator has accused the u.k. of not being on britain tolled be more clear about its position. he spoke at the two sides opened a third round of talks in brussels. mountingsed his frustration at the slow progress made so far with a key eu leaders summit just weeks away. china has created the biggest power company on earth, approving the merger of a coal assetsith a generator, worth more than $270 billion and seen as an attempt to slim down china's bloated state owned sector. the company will be called national energy investment corp. and its capacity could put it
ahead. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. top story, north korea raising the stakes by firing a missile over japan. show korea has promised a of force in response. >> the government followed the missile from its launch and was completely aware of its trajectory. the safety of our people was the main concern. this act causes a serious and profound threat to the security of the region and we have lodged severeaint in the most language and asked the united nations to convene an emergency meeting of the security council to ask the international community to put pressure on a rita ceases provocation.
political reverberations and people shaken up today. our bloomberg asian editor is joining us now could what is the feeling in tokyo today? interesting. to some degree, it is almost business as usual because clearly japan as with other countries in the region have gotten used to provocations of north korea. in terms of the japanese you mentioned how the prime minister has been on tv and has spoken a president trump. we had the defense minister and foreign minister as well, so the government has been out trying to reassure people. in terms of japan in general, people are quite used to this , even though today's events are unprecedented. had three short
range missiles fired on saturday, i'm not surprised they about the latest developments, however, compared to previous launches, how did this latest missile fare. >> that is probably the key issue going forward. so far, we have heard from japan's defense minister zhang this would appear to be an intermediate range missile, and he said that it was similar to one fired on may 14, but that one was fired at a higher trajectory. this one was fired at a regular trajectory. looking in details, but that will be important in terms of building consensus politically going forward. turns out to be an icbm, that would have serious implications, but that does not seem to be the case of this point.
stronger yen definitely hurts the japanese corporate profits and hinder the effort by the boj to raise its inflation, so the impact through yen is real. some consumer is concerned, but i don't think it plays into consumer confidence. >> north korea is wired in a way people don't understand. pain thatbsorb our economies can't imagine. it is hard for them to deal with growth and prosperity, but they can handle sanctions and isolation, so what i am anticipating is that even if china implements these sanctions, north korea will keep their missile and nuclear programs going full speed ahead. about that economic impact and reverberations when it comes to north korea, firing
that missile over japan. for more on that strategy, robert kelly helps us to get in the minds of north korea. give us a sense of why they are doing this. launch over japan was the signal that north korea japan,etaliate against as well as the south koreans and americans. it has been well known a long time that north korea could do a great deal of damage to south korea, and this is north korea's way of saying we can also hit japan. way for the north to toeaten the japanese convince the south koreans and american not to attack north korea over the nuclear program. >> we thought potentially there could be close to doors discussions between the u.s. and north korea going on. happened, is this
that an indication there is nothing behind the scenes going on at the moment? >> it is possible, but i don't think so. it was close, you would not know about it. i think it is likely, but i korea access an integrated actor. missile launches is the way various release compete against each other. there is no breakthrough that anyone can see, so threatening japan along the way is in the context of the current exercises at the time when people are worried about america striking north korea. i don't see any reason why these two things can't be happening at the same time. >> we often talk about nuclear programs as threats, but they also act as great deterrence.
in a way, north korea is basically saying if you attack us, we will go full throttle. when it comes to conventional weapons, south korea is a chess piece easily taken by north korea, but what i don't understand is why retaliate with japan? is this trying to draw in the u.s. to come in closer to take it out? >> i think to spread the damage around. the more north korea looks like damage, lashot of out and hit all kinds of people who have nothing to do with the conflict, the more dangerous and risky it becomes to strike north korea. it's primary way of preventing that strike is to damage the reason locally.
also, a missile threat to japan and a nuclear missile threat for the continental united states, north korea's best option to change, that is what is at stake, showing you can do that to the japanese. >> i keep hearing that the u.s. wants to ring north korea to the negotiating table. talks inthe six-party beijing. back then, the thought was we will only give you high-level talks with washington if you come forward and engage with us. changed?dynamic is the u.s. more willing to talk to pyongyang than it was 10 years ago? >> i think that willingness is the same. the big issue is there is a strong belief in the u.s. government that the north koreans are not that serious about it.
i think the collapse of the deal in 2012 sent a real signal to the americans, the north koreans started backtracking within a month, and that convinced the obama administration to walk away. that is what the donald trump people are saying to. to be some kind of concession by the north koreans, otherwise we are stuck in a stalemate. >> you have to understand the ultimate in game for korea. realwe understood the endgame, reunification, movement of forces out of south korea? >> it is simply the survival of north korea. i am skeptical that north korea could reunify the pencil on its own terms. i think it would be a huge leap
to try to absorb south korea, so if north korea just wants to , then it needs nuclear weapons to do that. it would be great to have reunification, but i don't think that is realistic. it is more just hanging on and the nuclear weapons are a great shield. >> what is next from the international community and the united states? >> the international community, more u.n. sanctions. china has not done enough to pressure the north koreans, and that is what we are hoping for, but that track is more or less exhausted. we should continue to try, but we will not strike north korea. locally, the issue in the future is missile defense. missilelipping in a -missile arms race.
south korea begins to deploy more missile detection technology, and north korea builds missiles, so an arms race. >> there is the potential a miscalculation could backfire. andk you for joining us giving us your thoughts on the latest north korean missile launches. >> coming up, details on how chinese property group evergrand e managed a 250% jump in first-half profit. this is bloomberg. ♪
real estate editor is here with the story. let's talk about this company. was targeted by short-sellers earlier this year, so what is the story? is among the most high flying of chinese developers, and that is saying something in a sector that has been on a roll. a point at which short-sellers came in and started taking bearish positions on the stock, but it has been a bad debt with shares up almost 400% this year. the short-sellers have really been in a bad position. they had a legy to stand on at the time. there was criticism of a huge debt pile. 70% down. how significant is this effort to bring its debt down? traditionally been
china's most indebted developer. so a high leverage, high debt strategy for evergrande is significant in its evolution as a more stable company. in mind that a lot of expansion has been fueled by its debt. they have been very active with acquisitions, acquiring land bank, said that has put them in a strong position. want toe hearing they build theme parks in china. home sales in china have an at the slowest pace in two years, so what is the broader outlook? >> chinese regulators and leaders seem determined to and thatny disruption, will be pronounced ahead of the party congress meetings later this year.
with developers such as evergrande and its rivals who have been very active in consolidating and acquiring weaker rivals and assets from weaker rivals, it puts them in a strong position to be able to weather any downturn or slow down in the property market. .> it is not just evergrande it is happening across china specifically. thank you for joining us. >> let's get a quick check of the best/headlines. companyof li ka-shing $1.2 billion tax bill. hutchinson telecommunications international says it continues to dispute the validity of the tax charges. analysts see it as a test case that could influence future foreign investment in india.
>> restructuring proposals for four lotte units. it will end merger plans to convert to a holding company. s achieve the necessary quorum to approve the proposals. >> qatar sovereign rating has littlet saying it sees progress. the world's largest exporter of liquefied natural gas was put on watch in june after countries cut diplomatic and transport ties. fitch says international mediation efforts of not shown significant progress. >> let's check in on trading across the region. arrows as we can see it, except the shanghai
composite, but red arrows for north, asx 200 down 1% as three of fires that missile across japan's bow. >> we are seeing the risk off sentiment spread across the region. you can also see the hang seng indexes now in the red, down .5%. that after reaching the highest level since 2015. we saw five consecutive sessions of gains for the index, but the regional benchmark is down about .4%. butt of downside pressure, the shanghai composite seems to be fluctuating between gains and losses. safe havens such as gold gaining ground. now $1316 an ounce. >> it is the yen as well.
♪ it is 11:29 a.m. in singapore. these are the latest first word news headlines. the japanese prime minister says he and president trump have agreed to increase pressure on north korea after its latest missile launch. the two leaders spoke after a missile flew over japan and landed in the acidic. said it was an unprecedented, grave, and serious threat, and called on china and russia to play a role. the south korean president has ordered a show of response, telling the military to conduct bombing drills.
pacific rimom 11 countries are meeting in sydney to revise the tpp. the talks are aimed to reach an overall agreement to be signed in november. president trump pulled the u.s. out of the pack soon after taking office, saying his favors first policy one-on-one deals rather than multinational agreement such as tpp. president trump preparing for one of his most important sales pitches, getting voters fired up about rewriting the tax code. however, there is precious little to sell at the moment. basic questions about changes and tax brackets and levels have yet to be addressed. steven mnuchin predicted the bill would be passed by august. to he won't commit completing it by the end of this year. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> a check on the markets, risk
off this session. set for then stocks first monthly drop in 2017, and korean asset during the brunt of today's selloff. the kospi set to lose over 1% this as the won drops by the most in two weeks. korean bonds are on the back foot. the yenr winners are and gold, although gold is starting to pick up more favor versus the yen when it comes to the safe haven play. it has been a day of swings for the yuan, but the onshore and offshore rate trading at highs not seen since june 2016. commodity markets unfazed, copper rallying along with other base metals. we do have oil rebounding while gasoline futures are pricing for a sixth day.
the shanghai composite is slightly higher, treading water at december 2015 highs. leadingroducers material stocks higher. one minor is set to report results today. stocks moving on the h-share index after a slew of results. almost 4% higher, the most since february, since an upgrade after the jump in net income. sincelling the most january. it expects profit to drop. on the hind saying -- hang seng, the tech rally selling as tencent is living. it is off saving -- offsetting the rise and casino stocks. today, aac is tumbling as much as 5% of the biggest drop in a month. senge hind saying -- hang
looking to snap a five day advance. overall a risk obsession in asia. a macro day.s on the micro story is north korea firing that missile over japan. saying to china and russia to step in, urging the united nations to hold an emergency meeting. pressure those saying that sanctions -- this just crossing the bloomberg terminal, russia saying sanctions are no longer useful against north korea. the russian deputy foreign minister on sanctions here. his sanctions are no longer useful, is a military incursion or action the next step? that is fodder to absorb. >> we don't want to get there. we don't want to start talking about military action just yet. it is a tricky situation.
we saw the security council sanctions being implemented this month. most severehe sanctions, and yet north korea continues to provocation, which is impacting the markets, volatility on rise, the chart 9468 showing you the volatility higher thane kospi the nikkei and hang seng index. on friday, they were around the same level. jumping come of the six-month average has stayed elevated, although volatility levels globally and equity markets have been low. i we going to approach the level we saw a earlier in the month after president trump's comments on fire and fury? we are already seeing movements on vix futures. futures also gaining ground. ,hey reached the highest level
the closing level on august 8, which was right after president trump's fire and fury comment. where will the market volatility go from here? will it last. that is the key question given global volatility not that long lasting in the recent spat with north korea earlier this year. >> that's right. the latest missile does, as south korea -- our korean economy editor joins us from seoul, korea. what is the discussion around defense allocations and south korea? >> the south korean government released its budget proposal for next year. it plans to increase defense spending by 3%, the biggest gains since 2009. it also compares with the 4% gain we saw in the previous term. the south korean government
plans to invest more in upgrading the country's weapons systems so i can better prepare against north korea's nuclear and missile threats. the government also was to create welfare benefits for south korean soldiers. we are seeinging defense stocks gaining more than 13% in trading right now. give us the highlights of the government proposal for next year. it seems to focus on these welfare benefits. overall, the budget for next 7.1% spending rise, the biggest fries since 2009 when there was a global financial crisis. the biggest boost will go into welfare benefits. the welfare benefits will account for more than one third of the country's total budget. this is in line with the initiative to ease overhaul inequality and south korean society. >> what are the chances of this
getting approved? >> the government will submit this to the parliament on september 1, but getting the budget approved has been a difficult issue here because there are many political parties. we expect to see the same repeated this year as the president's ruling party only holds 40% of the seats, so it might get approved close to the deadline and a maybe some adjustments to the details. that.nk you so much for this breaking across the bloomberg terminal, toshiba and western digital signing that deal. deal -- chip this deal is worth $18 billion. western digital will contribute, but the deal could be in september. >> we have seen toshiba stock falling in the session.
we have seen a lot of controversy over the stock itself. will it get delisted from the stock market? that is another key question. we will keep you updated on toshiba. let's turn to china. it is creating the world's largest energy company, merging the top coal miner with one of the largest power generators. tom mackenzie joins us now from beijing. what are the details of this new deal? tom: it is big. it is very big. of china's merger number one coal producer with one of their top power generators. and will rename this entity call it the national energy investment corporation. in terms of the size, i'll break down the details. , $271 billion worth of total assets. the company would generate
revenues that would put it in second place in terms of power companies. of storage capacity, it would be the number one power company, 225 gigawatts of installed capacity, taking it spain, so itor will be a huge company. it was signed off on monday by the authorities in beijing, the merger, and it signals what analysts say could be a new direction for state-owned enterprise reform, so cutting down some of these bloated state enterprises. the suggestion is we will have companies within certain sectors that are going to be merged, synthesizing, and trying to find some efficiencies there, and this is an example in terms of ahead. mergers going there is an expectation we will get more state-owned enterprises teaming up. exactly part of the mandate for xi jinping when it comes to overcapacity.
this does really feel like this is what they are trying to achieve with the merger. absolutely. we've been talking about the sme reform agenda for some time. there has been a lot of skepticism, but people do believe it will pick up pace after the party congress at the end of this year. clearly this is a move in that direction. it is about trying to create efficiencies and reduce the number of state-owned enterprises as well. in terms of this particular of its capacity comes from coal powered stations, and the other company has new, clean energy assets. they can benefit from each other. the infrastructure is significant, railroads, ports,
and harbors, but what we have not heard details on his what will happen to some of their units. they both have listed units. parts ofmay be other the business that could be spun off or they see staff numbers reduced. all those details we are still waiting for. it all ties into a pitcher of the central government to reduce the reliance on coal power and increase reliance on clean energy in particular, but the biggest power company in the world. we are hoping for more details going forward. >> thank you. coming up -- spookingkorea investors, missiles and markets, next. this is bloomberg. ♪
♪ >> this is "bloomberg markets: asia." i am angie lau. >> more now on the market impact of north korea's missile launch. asian head of global markets for mitsubishi ufj. great to see you. northe to talk about korea, but my question is more towards china. given what north korea has done, could this increase tensions ,etween china and the u.s. leading to more protectionist measures from the u.s. which could have an impact on the markets? >> that is what we are thinking this morning. the trump administration has signaled that very soon it will come out with much tougher trade actions against china. donald trump is frustrated with china not doing "ore to "control north korea.
maybe it will make it easier for him to do that. >> japan calling for the group to meet. russia has said sanctions don't work. conversation at united nations security council, what else could be the fallout? >> the basic issue is that we have been dealing with north korea on a nonproliferation basis for decades. the question is whether that is the whole framework that is right or not. my own view for a long time is that like it or not probably the korean peninsula will go nuclear. i don't see any significant deterrent to north korea from developing, particularly the icbm. , i thinkhat happens
south korea will want its own nuclear weapons. either u.s. tactical weapons that used to be there until 1996, or it may develop its own. >> how will china respond to that? they will not like it. it at all.l not like they need to figure out the balance of having a buffer state our allowing north korea to go nuclear. themeast costly thing for to drop as the opposition to north korea going nuclear. >> you have to weigh the benefits of either having a buffer state or having them provoked more. about how this is affecting markets. we are seeing in the reaction in the flight to quality, particular with u.s. treasuries in the asian session. the chart i brought up earlier showing the 10 year yields are close to 2.1%.
could we see it fall to that 2% of all soon? if that is the case, what with that due to the u.s. dollar and emerging-market currencies? >> it looks like the reaction is pretty modest relative to other episodes we have seen in the last 3-4 months. we generally advise clients to buy yen-won on a day like this. >> why? it is counterintuitive, isn't it? >> the japanese tend to be the most up in arms on this. they are the ones who have warned their own people. it has the nuclear preparation exercises, like what the u.s. so there may be some repatriation out of korea into the yen. what i was going to say earlier
is that instead of nonproliferation, i suspect a nuclear peninsula will mean we need to focus on deterrence, which is a very different game than nonproliferation. if you are focusing on deterrence like india-pakistan, trying to keep this situation stable even though both sides have nuclear weapons, it implies negotiations. what is the un security council going to do? >> what does north korea want to do? they have been invited to the table multiple times and have sure to the opportunity. >> they want a bilateral discussion with the u.s., to be taken more seriously as a nuclear power. >> equals rather than -- >> it is not really a meeting of equals. >> but in their mind
psychologically? >> that's right. a lot of it will also involve money in terms of the opportunities for its economy opening up, etc. nonproliferation and it is deterrence, then when it comes to markets, maybe we see deterrence from the south korean side as well. does that mean south korean consumer stocks could get hit it china gets angry again as it did with the missile system? where should investors be looking at right now? >> if you look at india-pakistan, there has been no permanent risk premium built into those markets. our expectations is markets might get flustered for a while, but eventually people get used to it. we have seen this before. north korea in negotiations is that if you are not negotiating with him to stop
the program, then what are you going to negotiate with them about? >> north korea's economy is actually doing very well. >> it has done well. last year, they had famine and so on. >> they are doing well, better, but when you compare to myanmar and all of a sudden it wants to isage with the world, what the probability of that happening again this century with north korea? >> the probability is much higher than people realize. photographduced a from the washington post korean correspondent snapped early last year. she was at the beijing airport getting ready to get on a flight
to pyongyang and somebody was trying to check in a 50-inch korea, to bring to north and i looked at the photograph and thought it is not famine days anymore, right? what we have heard is the traders that circulate between china and north korea, entrepreneurial like anybody else, but the key thing is despite all the negative press, the grandson has actually allowed agricultural markets to centers, which is kind of what we saw in china starting in 1978, so i think they are open to economic opening up as people find things to do. >> like the black market
to be at the center. tell us what is happening there. has in ansaid, there explosion in online shopping in thailand because consumers are becoming more tech savvy and sales on everything from washington's two televisions have grown about 100% to that compares to traditional sales in brick-and-mortar stores growing at about 10%. growth,is driving the need or want? >> it comes down to a large number of factors. one of which is faster more stable internet connections as well has the increased success of online platforms, and the introduction of 3g and 4g networks. thailand's third biggest phone sompany estimate that thai
spend about eight hours a day on line. that compare to what is happening in the wider region, said china, south korea? thailand is the only country in southeast asia to break down overall retail sales and have a separate category for online sales. it is an indication of the wider region. while sales are going pretty strongly, it only counts for about 4% of overall retail sales. markets likeger china and south korea with higher penetration rates, there is room to grow for southeast asia, so it could grow 5% to 10% over the next six years within the region. >> given the lack of data, how else can investors assess the health of the retail sector? lack of data
causing some people to underestimate the help of the retail sector in southeast asia. there is the suggestion that people could look at credit card transactions. that could indicate what people are spending on and how much they are spending. >> always great talking to you. thank you so much. , bloombergore markets: middle east coming up. >> joseph kabila dean is standing by. what you have for us today -- yousef emily dean >> saber rattling from north korea has markets on edge. we will go through the safe haven plays and how you can mitigate those risks. also widen it out in terms of what is going on in
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♪ yousef: the un security council says north korea fires a missile over japan. russia says sanctions are no longer in use -- no longer in use. >> gold at its highest. strengthening as investors -- yousef: oil climbing. harvey is intensifying and preparing for a second run. fits cuts qatar summer ratings saying the