tv Bloomberg Markets Asia Bloomberg September 18, 2017 9:00pm-10:00pm EDT
>> it is 9 a.m. in hong kong and p.m. in sydney to read the markets are on a roll. investors are fairly relaxed ahead of it -- i had of this week's fed meeting. china, this traders says that it is an unprecedented threat to global business. we are also looking forward to the united nations general assembly as president trump prepares to address them. criticizing what he sees as bureaucracy and mismanagement. this is bloomberg markets asia. ♪
>> equity markets are higher and higher. the fed and the boj coming through. how do we phrase this? where we go from here? dust of the few minutes ago we were talking about how the boe and the bank of canada raising rates in the fourth quarter. requiring it to throw the conversation for next year. have a look at this chart, the question really is how much can the likes of the boe and the bank of canada, given how strong their currencies have become, continue to follow the fed on its current rate policy? at what point does a policy notngthen, and become inflationary? charts, whatat the it shows you is financial conditions in the united states in the bottom part. they are still fairly loose, and what that means is that despite the fact that you have a weak u.s. dollar and currencies like
the pound trading at fairly strong levels, it is not yet creating conditions where you would actually see disinflation coming through. in other words, there is scope for a lot of these big central banks will have been looking to raise rates being able to do so. because there is room to rise, for now. that is a good chart to follow, of course you -- of course. all of that of course, has led to the spread of money coming back into the asia-pacific. we will get a better indication of how much that is impacting the markets as china opens up. sophie, tell us how markets are tracking at the moment. taiwan is up to tens of a percent, and equity rally continuing across asia. japanese markets are catching up, nikkei 225 is up 1.3%. the currency is holding fairy --
fairly steady. is set to regain its strongest level in two years, after capping its west week since april on friday. expectations of a snap election is positive for japanese stocks and it could lift hopes for higher government spending according to japan-asia securities. sydney, the asx 200 gaining .04%, and that is the benchmark, tracking the rise of this metals like copper and aluminum and oil as well. crude is back above the $50 barrel level. for now, that currency is holding. -- ahead of the rba meeting minutes which are due out later today. the pound sterling as well as the loony, we had the comments come out denting the pound
overnight, but it is now rebounding, gaining point 02%. on --ut what is going check out what is going on with the dollar, resuming losses for a fifth session even though the taiwanese index is at an april 1990 high. we are observing swings in the malaysian ringgit, it fell earlier about 2%, the biggest drop since august 2015. thisted to highlight what trader is forecasting, he sees the malaysian ringgit falling, -- on expectations of a weaker yuan. michael avery anticipates that emerging markets will have a more difficult time over the next 12 months than the have seen in the past 12, for now, emerging markets, have managed index.b higher on the
the em index has reached levels rallying at levels that we have not seen since 2011. >> sophie, thank you for the market update you read a lot more -- lots more to talk about. the first word news is here, stephen engle to read stephen: president trump making his address to the u.n. general assembly. frequently derided organization june his campaign but he soft and his tone a bit saying -- bureaucracy and mismanagement has prevented organization from reaching its potential. he six to take on iran and north korea. the unitedt years, nations has not reached its full potential, because the bureaucracy and mismanagement. one the united nations on a regular budget has increased, or 140%, and it's staff has more
than doubled since 2000, we are not seeing the results in line with this investment. >> meanwhile, president trump spoke by telephone to president of china, resident xi jinping, aiming to step up the pressure on north korea. agreeing oners enforcing sanctions. a critic of u.s. policy on north korea, saying that diplomacy is the only way forward to read the united states say beijing must do more. top tradeent's negotiator has hit out at china, describing it as an unprecedented threat to world trade. he says of china's model creates andnatural competition distorts market, saying that he has received many complaints from american business leaders. bloomberge telling
that equifax learned about a major hack in march, a must five months before the date it has publicly disclosed. the company says the march breach was not related to the hack that compromised the privacy of 140 million users, but we are told that that reaches involved the same intruders to read at the same time, they say that the investigation into whether senior officials wrote trading brokehen they sold -- trading laws when they sold their shares after learning about the hack. i am stephen engle, this is bloomberg. david: steve, thank you for that update. of the fed's latest meeting, the markets are under pressure. the fed's latest meeting, the markets under pressure. we are joined by kathleen hays. this, bondell me
markets have been under pressure in the absence of no big economic reports out of the u.s. , why are we seeing this much pressure on the bond markets? >> it is because the september to have which seemed been put on the back burner by the bond market, the benchmark about 2%.sing just now it is back over 2.2 0%, it seems like there is just a subtle shift. few days forast example, when we look at world interest-rate projections, you , theee that the odds now chance of a hike on wednesday, are about 2%, nothing. if you go to the december meeting, you can see that those the chance calculations are over 50% and they had been over 30% just a few weeks ago. what we are going to be getting
out of this meeting, among other things, is not a rate hike, but over three months there will be an update to its economic projections. so, what will be focused and when it comes to that? if inflation has been running below target, one point 4% versus 2%, when we look at the fed up eating these forecasts, you have to say, will they cap their forecast? no. the bloomberg news survey says they will keep it just like that. up from 57% a couple of weeks ago. will the -- if inflation is so will they change their mind on a rate not? this is the kind of thing that on to traders i think, are beginning to wonder about. interesting as well, the ceo of guggenheim big investment management firm in new york, talking ond
bloomberg radio earlier, says if the fed goes ahead with the series of rate hikes, he says that will be enough to start pulling the rug out from under the u.s. economy, keep capital flows among u.s. corporations and cause a recession. if that happens, it could be good for that market, but now there is a lot more uncertainty, over just whether -- where the u.s. fed is, and where it is heading. it might be a bit more possible, and that is what people are waiting to the. whether it comes through in the policy statement. david: this uncertainty you alluded to, should i be nervous about that, kathleen? kathleen: how can we were nervous? why shouldn't been nervous, because we know that the cpi takes up last week, and a lot of think this a lot of people think that we do not have to be
worried about inflation, congress has a temporary debt ceilings fixed in place, and the fed is seen to be doing what they have been signaling for a long time, unwinding the balance sheet by letting the proceeds roll off. but look what has been going on in the bond markets, just the last week or so. if you look at this chart, what you're seeing is a look at how asset managers are slashing their 10 year futures position ahead of -- ahead of the fed meeting. fact, they took their long positions in 10 year futures contracts,4,000 leaving them net long by only 45,000 contracts. it is the least bullish on 10 years in year. is it nervousness about the
balance sheet and how it will roll through markets? we do not know. fact, kristina hooper, wasn't bloomberg television a couple of hours ago, she is the global markets strategist, and she seems to go along with it. here is what she said. >> my base case is that it will not rock markets. that what we are likely to see is the fed successfully orchestrate something that is so gradual and thoughtful. especially since they have allowed themselves a little escape hatch in the plan that they released in june. economic conditions changed enough, they can seize and deceased there quantitative easing for a while and continue to reinvest. >> it is very true that the fed is already laying out a potential unwinding of about $10 billion a month, david, it is slow and gradual. they can certainly adjust. someone else saying that the fed will learn and make adjustments
along the way, as christina suggested. also, asian central banks are joining in, the bank of japan making its decision hours after the fed. the philippine central bank as well, and the bank of indonesia, they still have to cut their rates. so a lot will be going on with central banks for the next couple of days. we are definitely going to be watching the central banks. theleen hays, wrapping up situation for us. still ahead, we will talk about there actually any hope for a peaceful resolution to all of this? plus, she thinks the synchronized environment where looking at here, hsbc head of toa strategy comes on next talk about their approach to investment in the region. coming up next. this is bloomberg. ♪
david: this is bloomberg markets asia, i'm david ingles in hong kong. let us get you caught up on the headlines, a change at goldman sachs. the bank has named ken hitchcock asian region.that he is a 25 year veteran of goldman. todd will become copresident of the asia-pacific region. there is a proposal of a special guarantee against losses that might result from the ongoing battle with its partner, western digital. toshiba says it could be worth up to $150 billion but it is aiming to file a sale of the chip business at wednesday's board meeting despite opposition. the end of and europe, toying
with the idea -- the end of an era, this company set to be on the verge of going last. -- going bust. the court dealing another blow to traditional retailing for toys "r" us . toys "r" us has struggled to raise its fortunes since a buyout a decade ago loaded it with a massive amount of debt. of ane could see the end era this week, with the fed expected to announce a reduction of its balance sheet. investors do not seem to be bothered, look at the record s&p 500 monday close. the eight -- gauge of global equities is still on record and if you look at the markets in the asia-pacific, asia has a 10 year high. one of the markets that performed low is taiwan.
why are we calling this a mc harmer song, you cannot touch this -- eight mc hammer song? it speaks to the fact that it has been a very good couple of months for asian equities. we seem to be breaking out of the slumber that occurred in the summer. to talk about this, is our next guest, from hsbc. my question is with equities at these levels, what is expensive? what is not expensive? what is the risk, reward at the moment? >> at the beginning of the year, asian equity markets actually performed the global #and this rally is predominantly driven by the sterling recovery. we continue to expect a third upside in the asian market because of the fundamental outlook remaining positive. the second quarter earnings season reflected pretty robust
growth momentum, especially in those sectors which are sensitive to the cyclical recovery. companies which will benefit from structural reform progress in the region. >> it is a synchronized rally, a global synchronized uptick that we have sin, but at some -- that we have seen. of thesepoints -- some markets look expensive, does india look expensive to you? for example? then asia, we have seen evaluation looking more stretch, in india, we have seen a stage of unimpressive rally -- >> what a party is happening there? >> relatively rich, however, india delivers the softest eps growth in the region, and we expect the high growth momentum to extend into 2018. originalstronger than
earnings growth and india, which is expected to surpass the valuations going forward. structural reforms remain positive and in the region, we see attractive value in china and singapore, especially with strong earnings upgrade in china which are driven by cyclical , whichy in those sectors benefit from the supply side reforms including the materials, , which have seen improved capacity outlook. the overcapacity problem has been easing. the profitability of chinese companies has improved, so we see investment opportunities in the chinese financial sector, technology as well as energy sectors. china, 85 right now
is the index level. do you have a target for this? what drives it? you mentioned some things like supply-side reform, the dust does that mean you are looking at things like cement for the strongest: structural growth potential of the i.t., health care, energy stocks, continue to provide the pop for the ms year china -- msci come a china. we have seen pretty strong earnings performance in the insurance sector and business driven the development of new wealth management products, and a rising consumption by the middle class. this bodes well for the earnings outlook. the earnings are improvement but the data suggest that we might have seen peaks chinese growth. does that affect your's these
this? -- those that affect your thesis? guest: we expect to be moderate in the first half, and the thesis is driven by the recent environmental policy tightening in beijing and other regions, head of the party congress that is coming up. the manufacturing sector recovery is chat -- is still going on in china, and more importantly, i think the enhance profitability of the chinese soe is going to help earnings extend further into 2018. will continue the conversation, i want to get your thoughts on the debt markets and india and asia. we will see what happens. this is bloomberg. ♪
♪ david: this is bloomberg markets, and david english and hong kong. they continue our china -- our chat with the head of asia management at the hsbc. i am very curious, do you like indian and indonesian debt? why? guest: we remain positive on indonesian and indian credit. the fed'sthink that binding of qe will and the rally at these markets. those markets remain very well supported by the improving macro economic fundamentals in the region. asian central banks, remain accommodated and the latest interest rate cuts in indonesia and india, continue to provide -- >> do you think will get more rate hikes from those banks? guest: bank we expect the
monetary policy easing will continue and indeed, will continue to provide pretty attractive carry for fixed income investors. with global central banks staying relatively dovish, and the liquidity environment still pretty supportive for asian credit. of canada andk others might raise rates next month. you see that resulting in outflows out of asia? bank we continue to see diverging global monetary balicy, and the boe and the r are expected to raise their interest rates later, and in the region, the asian central banks are still facing pretty limited invasion threats, and the growth agenda, will continue to dominate monetary policy positions. with favorable policy.
♪ are just under a minute away from the open of market here in hong kong. china has been a window washer, i see. it is probably a good idea to be out there, it is a bit humid. said, markets are hyping hot here in hong kong. have a look at my chart, 28,200 is now your level on the hang seng index. we're looking at this, there we go. we talked about how some of these markets like taiwan for example, a 27 year high for the philip ins, which will also be opening in a few minutes. it is -- the philippines, which will be opening in a few minutes
. that is a record as well. it is the best-performing market in the asian pacific market this quarter, and near-term target of 28,000 588. -- 28,588. let us see how this all plays out, we are down about 31 points, 35 changing of course as you see there at the top of your screen. theher thing to mention, philippines as i mentioned is also having a rally. sophie will bring you that news in just a moment to read and we have breaking news from australia, the meetings have been removed -- released from the last meeting. they are keeping their cash rate on hold at 1.5%, and the minister saying that the rba
as x growth to continue. we have seen some great improvements in the unemployment rates, and the rba says solid growth and employment are good by they need to balance the risk of high household debt. we know that inflation is very weak here in australia as it is in many parts of the developed world. we also have the rba saying that there are clear signs of sydney housing easing as is the case in melbourne. note, economic data is remaining positive, conditions conducive to a big up and none mining investment for some time. growth and wages and inflation remain low but stable and is expected to remain for some time as well. wages growth is one of the keys that is holding the reserve bank of australia back from joining the mobile tide cycle that we have been seeing -- the global cycle we have been seeing.
the aussie dollar, we saw at gain impressively just moments before the reserve bank of australia released its meeting minutes. it might have had something to do with the second quarter price earnings. at 79.84.igher 80, -- belowhe low 80. we will speak more with you as we have more action -- more reaction from australia. aremore on how markets trading, we go to shanghai and hong kong which are just opening right now. sophie, how are we doing? look at whatake a is going on with the large-cap on the mainland, again for a third straight day. the hang seng is on the front foot, up a 10th of a percent, running -- raising for the third session.
is going on with the hong kong dollar, surging the most since january 2016, also as the hdm a announces sales. the hong kong dollar has gained yuan, onshore and offshore rates are falling here, after the pboc news. we have the offshore rates near a september low. uzuho says that the yuan is vulnerable as bullish sentiment is fading. regulators are being encouraged to loosen capital outflows either. fromding to estimates capital economics, capital outflows from last month were moderated to a three-year low of $12 billion. while we do have the hang seng
shaking higher, check out what is going on with rate shares. , and the percent gain real estate segment is the biggest drug, especially in china which has fallen for a third straight day. david? if it bank thank you for the update -- david: thank you, for the eight. we have some decent upside in the market rally continuing to enjoy some momentum here. let us take it over to steve with an update of your first word news. an increase of u.s. holdings is an indication that the are curbing capital flight. bonds are said to be building for a sixth straight month, in china. in july, an increase of over $18 billion from a month earlier. japan owns 1.1 trillion, up by over $22 billion from june. majorw york trial of a
hsbc currency trader accused of defrauding a client, prosecutors are saying that it is a clear case of front running. he apparently tipped off traders on a trade by karen energy, benefiting the bank at the expense of its clients. hsbc has been under criminal investigation over currency trading. is ann's move to wisconsin step closer, the governor in wisconsin running an extensive package. it provides nearly $3 billion to foxconn if it invests 10 billion in a flatscreen factory which employs urging thousand people. supporters a they could make was causing a hub for tech companies. the brexit drama has turned another page, united kingdom johnsonsecretary boris saying that he may quit over policy differences with the prime minister, theresa may. onsays that the comments
last week were unauthorized and she remains in charge of the government. ireland says the uk's making a fundamental mistake. >> i think they need to move from their current position. i speak as ahead -- a friend of the united kingdom, i have spent much of my life in britain at the university, but i believe that britain is making a huge mistake at the moment in terms of their current approach to the brexit negotiations. day,obal news, 24 hours a powered by more than 27 journalists and analysts in more than 120 countries. i am stephen engle, this is bloomberg. david: steve, thank you for the update their. here.date t there are plans being drafted by the chinese central bank, who will be meeting today to discuss reforms. that is according to sources who
we have spoken to. tomchina correspondent mackenzie, joseph from beijing. tom, we have been talking about greater access to the chinese markets, this time around, what kind of access are we talking about? tom: david, it is still a gradual process, what we've heard from these proposals at the jointthat, venture structure, the investment banks, the foreign investment banks have to engage in, when they operate in china, the limit of 45% ownership currently will be lifted. so that foreign investment banks can own a majority of their joint ventures them at that is one of the key takeaways that we have learned of as a proposal -- a potential proposal. another one is lifting the ceiling on foreign ownership of chinese banks. it is currently set at 25% and it could be lifted. there is also the prospect of
foreign institutions getting a slice of the clearing high, especially when it comes to car services. those are the three proposals we have heard may be implemented. beijing is meeting in today with chinese institutions, trying to hammer out the details, get feedback and get a timetable as to when these reforms may be enacted. >> those three main points that you mentioned tom, are these one offs, or are they a broader push towards opening up the financial industry further? tom: it is certainly not a one off, this has been a long, drawn out process. it is part of a broader effort by china's policymakers, which is really those who are intent on reform. there is of course debate within the party system about how fast to enact reform, and this is part of that. we heard from the pboc governor back in june, saying that it was
not helpful to have chinese domestic firms protected, that you needed to breed a bit of oxygen into the system, increase competition, or jiggly when it comes to government issues. your is a feeling that getting greater access to government, will increase best practice. that is what they are hoping for. we also heard from the chinese back in august saying that they would like to open up the banking sector as well . it is part of a broader push. foreign is the titian's are definitely looking to expand and it is seen as a positive -- foreign institutions are looking to expand into china and is looking to a off now. which are the groups that are set to benefit, tom? tom: the likes of morgan stanley, j.p. morgan, credit suisse, they have joint ventures there, so if those 49% ownership
caps are increased, nearly, they will benefit the rich just to focus in on j.p. morgan, last -- they willited benefit. just to focus in on j.p. morgan, the ceo like jim -- the ceo, jimmy demo will definitely be happy. year, we saw some managers like fidelity and others setting up operations in china, trying to carve themselves a slice of the pie. many have said that they would like to see this come slightly earlier. acknowledgment from chinese policymakers that the added come petition is healthy long-term for china's domestic policy. david: thank you, tom. pboc isentioned, the meeting not very far from where tom is at his office in beijing. speeding up its
♪ david: this is bloomberg markets asia, i am david ingles here in hong kong. all roads lead to new york, where president trump is set to make his address to the you and general assembly. during his campaign, trump criticized the body, that now he says he might actually need their help to rebuild their relationship, as he takes on iran and north korea. joining us to talk more about this, how to take the conversation forward, we are joined out of new york by thomas, he is a president and
ceo of the korean society. a very good morning, from hong kong. we are generally expecting president trump try and rally the world behind him. does he get the support he needs, especially from china and russia? thomas: apparently, he is getting more support from china. i just noticed that both president trump and president xi jinping of china has agreed to put maximum pressure on north korea, through the sanctions. china only implies the un's sanctions -- applies the un's sanctions area i think it is the significant statement -- applies its own sanctions -- it's only unilateral sanctions along with the un's sanctions. having come from the financial sector, it is almost like years
ago, when the chinese government was trying to get its arms around to control the shadow that. >> -- banking system is it too early -- the shadow banking system. david: is it too early to talk about this, tougher sanctions have been in place for a year, do we need time to make these tougher sanctions cymer and see what comes off it? guest: it will take some time for these sanctions to take effect. perhaps there are signs that it is having a psychological effect on pyongyang, and a couple of other cities along the border with china. there are reports that fuel prices have jumped up by 45% or more, probably because of according by both the state, as well as a private traders. response totional the serious cutback and fuel supplies. the key thing is enforcement. sanctions, of the
and the top sanctions regime, it , only in theent past year. the enforcement has been spotty, internationally. >> what is the hope if we do get enforcement,100% realistically speaking. -- ideally speaking? will it be enough to get the north koreans back to the negotiating table? would have to ask. the bottom lines are diametrically opposed. the south korea and the u.s. both insist on a complete irreversible and verifiable denuclearization of north korea. i think that china shares that autumn line. russia says that it does -- shares the bottom line, and russia says it does. it is not a major player yet, but it could lay a bigger role in getting north korea to become a more responsible player in the international community. >> generally speaking, do you
see this going the same saw, goings we go in iran, where we make it a more structured approach, if you will, to the north did nuclear rising? uclearizing? the sanctions are becoming tougher than they weren't -- than they were in iran. in iran, they focused on the energy sector. however, in the case of iran, the security council more or less trust iran, whether it was declaring what it has. in a north korea, the trust has never been there, even from the initial episode back in 1993, or 1994, when the iaea, the international energy agency,
said that there was a discrepancy in what north korea was declaring and what they were calculating. the big difference, can you trust north korea? i would say, no. peace dealthe run right now, under a current regime that is not trustworthy, would be different. david: to play devil's advocate here, i do not know if the question has been asked, has kim jong-un actually done anything illegal? and what would be so bad with letting them have nuclear weapons? more than a bunch of countries have nuclear weapons. i guess the responsibility is in the eye of the beholder, isn't it? >> i would disagree with that statement. i think north korea is a classic case of a rogue nation. it has broken just about every international agreement it has entered, it has proliferated its weapons systems to other
countries, in the middle east and africa. also, it has not treated its own citizens every well, it has a very gross human rights violations. the united nations had an international inquiry on this, and found north korea to be among the most or if not the isst -- among the worst or not the worst human rights abuser in the international community. so, north korea is a different case. with nuclear weapons, north -- i think what their bottom line with the nuclear weapons there, is a strategic objective, just let the alliance, put a wedge between south korea and the united states and get the u.s. military to leave. then, south korea, as well as japan and the rest of northeast asia, would be left best would be held hostage to a nuclear iran -- to a nuclear north
korea, which does not act in accordance with international norms. the involvement of japan, what are the implications of japanese involvement in the issue? japan is becoming alarmed by the missile tests which have flown over the northern island and they will probably look to beef up its defenses. it could lead to an arms race in southeast asia, which -- in northeast asia, which would not be good for china. david: thomas, thank you so much for coming on the program. we have to leave it there. joining us live out of new york, where in about 10 hours from now, the un's general assembly takes place. take a look at the business headlines. $30 million dipped after scrapping hundreds of flights because too many pilots
have been on vacation. discount airline has apologized, and plans to reimburse about 400,000 passengers. ford has weakened the partnership with indian suv maker, due to its lagging operations. they have formed a partnership for a few years to partner on making electric cars and distribution, and it was that to become the words -- the world's largest car merger. there are two other automakers which are interested in supplying india with thousands of electric cars, parts of the best part of the country's mission to reduce emissions. those are the sun and hyundai. -- nissan and hyundai.
bounceback is our guest. when have we seen a rebound? guest: what we have seen over the past few days is a lot of people moving through overseas via their dpn's or other forms -- buyer there -- using their vp n's. the movement has moved off the exchanges, which shows why we are having a rebound, not only in china, but as well in japan. japan is starting to really take over of the movement, there are a lot of exchanges popping up and people are moving their currency over to that market. it means the policies there are much more supportive. towards this community. david: what concerns lie ahead, can you map out for us -- there are so many things to consider with bitcoin. guest: taking exchanges off the table does not really impact the coins infrastructure.
what is really concerning is that you have such power centralized in china, about 80% of bitcoin mining power is still there right now. theyovernment has not said are going after this part of the business, we have not seen any disruption to that as of now, but there are real concerns that they could potentially do something, which would instruct the network. they could go after these bitcoin mines, and they could take that mining power and launch a attack on the network, which is something that is of real consequence. for now, i think the chinese government is really focused on keeping the money within the country, making sure that their own people are not taking it out of the system. they are not concerned with attacking bitcoin, the entire network globally, that is something that this community should pay attention to? fore will, thank you, lulu
♪ from our studios in new york city, this is charlie rose. >> another terrorist attack on friday, this time in the london subway. at least two dozen people were injured. meanwhile, in new york, the united nations was holding a conference on what can be done thatmbat violent extremism leads to terror attacks. one of the speakers is the survivor of a terrorist attack