tv Bloomberg Daybreak Asia Bloomberg September 27, 2017 7:00pm-9:00pm EDT
>> 7 a.m. in hong kong. where live from bloomberg's asian headquarters. the top stories, a revolutionary change. president trump says tax changes will kickstart the economy and raise wages for the average worker. markets like the sound of that, the s&p 500 inched to a new record and the dollar maintained its rise. betty: it is after 7:00 p.m. on this wednesday evening. the fed chief faces criticism from a dovish games bullard.
the consumer devices battle heats up. apple and google are due to refresh their product soon. some breaking news crossing inflation numbers for south korea in the mouth -- month of september. inflation up.ve coming down a bit to 2.1%, that is below went economists had estimated and a big drop from what we saw, a gain of 2.6% in august. also taking a look at core cpi, 1.6%. below wently economists had estimated for a gain of 1.7%, month on month, your continuing to see the rises although very barely.
inflation numbers in south korea coming in a little bit below what economists had forecast and is on consumer sentiment and how the markets are reacting, how the economy is reacting to the continued tensions in north korea. stray too far from them be ok's target, the economy is going not full speed ahead but still quite rampant , exports quiten strong in the third quarter but you mentioned north korea u.k..t a wildcard for the betty: let's talk about the u.s. markets. a little bit of a different story in terms of the bullish sentiment driven by this tax reform plan that was unveiled by president trump. that helped juice the market. the dow also adding onto gains and the nasdaq rebounding up
about 1%. over 1%, tech, financials, they were the big gainers today after this announcement by the white house. yvonne: that could be filtering through here in asia. hadre up about .1 of 1% and the rmz decision. the new governor's first policy decision. also counting down some of the job owning in the kiwi. that stronger dollar story continuing through here in asia. here, equity futures up 20 points right now. 7854 for the aussie right now. in japan, futures in the green in chicago. the red.say in more than half of the companies
on the topix traded ex dividend. the dollar-yen inching closer to 113 against the dollar. also came in mind shinzo abe said to dissolve parliament but new polls showing that the cabinet ratings falling. betty: let's get to some more stories before we get back to the tax situation. i want to get to courtney collins has more in first word. courtney: japan's main opposition party look set to fall apart ahead of next month snap election. kyoto news says the dpj will not field any candidates but many members jumping ship to the new party load -- led by the tokyo governor. it has attracted 18% support in a poll conducted. voted overwhelmingly
for independence risking retaliation from neighbors and citizens. almost 93% of 3.9 million eligible voters backed statehood. the iraqi government had promised to prevent succession. turkey threatened to halt kurdish oil exports. china has hit out of what it said it is this -- is the spread of illegal information ahead of the next party congress. it has the authority to issue such orders. what -- whatsapp has been one of the few major messaging platforms working unfettered in china. and reports from asia and the u.s. say the new iphone x has been delayed due to problems manufacturing process.
component makers are struggling to hit production levels while the wall street journal reports delays in the facial recognition sensor. askissues prompted apple to to restrict some -- to ask suppliers to restrict some parts of shipments. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. betty: thank you. stocks as we mentioned surging, the dollar up, it was all about the trump tax plan. with the investor reaction. seen wall street wait for details and we have close of thee, the session. it had been much lower. so a lot of green on the screen as a result. we mentioned tech and financial moving higher.
so was the dollar moving higher on this. the dollar rallying to a six-week peak and you can see it come down, it was going sideways and here we are, the highest since august. andoing to the actives putting apple on the most active list as well. just because it had been so much under pressure with the experts, analyst saying it was weaker iphone sales and now analysts have said some of that is overplayed. apple bouncing off as did a lot of the techs. let's go into one more bloomberg chart. called tax policy uncertainty and you can move back to the prior presidents including obama. uncertainty picked in the first and it the presidency has picked with trump if -- when we did not get details. by theinty is falling
wayside and it is about the details as we know, the devil is in the details. betty: check and small caps, they are leading the way higher. what is the story there? u: small caps are benefiting from tax reform. this is not only the broadest measure of the market, it is made up of 2000 smaller cap companies into can see it hit a record. you can see the trough in 2015 and again in early 2017 and it has come off that and, for another trough just in the last couple of weeks where they has been all this uncertainty. ,e look at the financials goldman, bank of america, a lot of the banks and wall street firms of better than 2% and a lot of the tech stocks up more than twice as much. see wti crude holding
near $50, what are analyst saying now? su: let's start with oil. oil holding above 52 and we have broken about that tight range where it was hard to get above 50. andners say post hurricanes increasing demand, exports are up in a big way and we have the latest supply data, it showed a decline. that is supportive of oil as is the conflict in the middle east. turkey talking about cutting off kurdish supply. gold was on track to fall below its 50 day moving average for the first time since june. you can see the big trough in the middle when it fell before it dropped 2.8%. there are many watching the chart saying gold is setting up for similar decline. and it is on its way. betty: thank you. let's take a look on more on tax reform.
president trump has relayed the framework of a tax plan he's is will provide historic relief to the american people. joins us from capitol hill. paul ryan calling this a now or never moment for tax reform. we're still scant on the details, this was more of a vision coming from the big six. what has been the response from capitol hill? laura: they see this as a political move forward and the business community left it. universally across the board, trade associations, lobbying groups were putting the plan. that might end up being a problem because there is none of the tough stuff in here, tax reform will take away some benefits from some people and those decisions have fun -- have not been made yet. that is where the tensions and infighting from between republicans comes out.
somebody is going to have to give across the board. betty: how can the president convinced democrats that this is a tax reform plan that benefits just the middle class, when you take a look at some of the things they were outlining, but name him, those are things that will be quite heated i am guessing between the democrats and republicans. lara: the president left the door open to have a higher tax rate on individuals in that 35% there was in the plan. that is something that could appease some democrats. they do not need any democrats to pass the plan. there is enough of a majority in the house it can sail through and in the senate is where it gets tricky. they have a two seat majority but there is a bunch of democratic senators who are from
states where trump one. joe manchin from west virginia, some of these people he sees as potential votes, we have seen defections from susan collins, rand paul, john mccain, is there something -- i wonder does not like the plan and has not voted yet. betty: i am pulling up a chart here. about the question. how is trump going to pay for that tax cuts, one is the federal tax deduction that many high tax individuals are able to take a month they are able to deduct state and city taxes out of their federal income tax. it hit states that are more democratic leading. how is trump going to pay for it , he will pay for it with the democrats.
so it's winter us this deduction. laura: it is something that has been around in the tax code and it allows you to deduct your state and local income taxes from your federal income and the thinking is you do not want to be double taxed and it goes back to alexander hamilton wrote this down and made the framework for this idea. while a lot of the states, new york and california that have high taxes are low overall, you have republicans from some of the more rural areas in the states and there is a group of republicans from upstate new york, not from the major cities in california that are working on a plan that would mitigate the effect. that is not raise as much revenue so you cannot pay for as many tax cuts. many new could not get the tax rate down to 20% for corporations. , eddie davidson and later this hour we will
of partners founder and president chuck gabriel. what did you call this plan, disorder, a deficit remind me again. >> deficit attention disorder. betty: what do you mean by that? chuck: it does not have any .evenue offsets or pay fors we had a proposal from the house ways and means committee chairman kevin brady and the speaker paul ryan earlier this year that did do the exact same thing, seek a toy percent top rate. it had a border adjustment tax which was rejected as well as repeal of corporate interested in stability. they brought back the 20% rate proposal and decided to forget the [inaudible] eddie: what chance do you give
it being able to pass, is this health care reform all over again? check: markets have been through that and they are wisely reserved. i think they know that the republicans have a very narrow senate majority and the have to do with these difficult budget rules. betty: i think something happened with your microphone. just stay with us. we will be back with chuck it also we will talk about -- but also we will talk about amazon. we will try to fix his mic and bring you the amazon story. we will be right back. this is bloomberg. ♪
betty: this is daybreak asia. yvonne: i am in hong kong. let's bring back chuck gabriel back with us from d.c. we clipped her mike when betty was asking a question. how much of this will go through without the democrats? check: they will try to pass as robust a plan as they can without the democrats and if necessary and if possible they will try to bring on some democrats. they will not get down to it 20% will be arate, this nervous time for the markets. it is interesting how markets reacted. as you cry -- chronicled earlier. it was interesting to see the bank stocks rise and a lot of the expectation is that the fed
is going to raise rates in december. a lot of mixed signals in this but it is time to start thinking about tax reform as a positive sum game. that is our view. betty: is the idea enough of that impetus to keep rallying the records, records for the s&p and the dollar. move.tantial chuck: i cannot explain that dollar. this is not going to apply until 2018 at the earliest and there will be some sectors that are put at risk create if you have to raise revenue, to broaden the base and raise revenues in order to pay for a trillion dollars of what is otherwise tax release, you're going to hit pharma, software, i.t. companies, commercial real estate, there's a chance just to pay for the base broadening in order to lower the rates and provide
middle-class tax relief that they could put the residential real estate, the home mortgage deduction rate and even get retirement accounts. we have in through this. we had tax reform in 1986 under reagan. that was ultimately bipartisan but during that time when they were getting into the sausage making, it was a difficult time for the street. liar'sgo back and read poker. the several months will not be a walk in the park for the markets and it is funny that we are rallying, there is a relief that we are at the end of the beginning but there will be nervous times. reformalso with the tax lands, that exacerbated the deficit in the u.s. and caused issues afterwards. i want to put the chart here just to show you a bit more
about the bullishness that was interesting, you had small caps even in anticipation for tax reform rallying as well as value , from or value indexes the value funds rallying. if you look back during the election in the last quarter of last year, they were also sharply rallying in anticipation. it seems like the trump trade is act, is it back? check: partially. i do not think that is irrational at all. we do think we will get that top corporate rate to the mid-20's. the smaller the companies are, the higher the effect of tax rates they are paying. small caps is a rational, logical winner. when you get into globally diversified large-cap names particularly and pharma, software, i.t., they are the ones that are paying the rates now and they are the ones that will have to pay for tax reform.
they have patterns and trademarks that allow them to park revenues overseas. perhaps some repatriation benefits but they will pay higher effective tax rates in the market is going to have to figure that out and sort that through. of unsettled questions. as we mentioned, amazon strengthening its hardware product line today revealing an approved alexa smart home have and a smaller echo speaker and a version of the echo with the screen called spot. gurman.us is mark -- i do notpot will know that it will replace my dog spot. why is there a heavy push into these home devices? the smart home is the next technological battleground.
people thought tablets were the next big thing. smart watches is a big category, smart glasses but the smart home is where it will be at. no matter what devices they have in their pocket they will always go someplace after work and wake up somewhere in the morning. daysmart home is where your begins and and and amazon has been at the forefront of that for years and they are taking another step forward. with echo home devices. amazon betting all of this on alexa? mark: alexa is becoming a conduit to buying things, amazon's big as this proposition is selling things to you and that is what traders and everybody cares about. overtime you will see more people wanting to buy things, make amazon money with their
prime subscription services. amazon's vision is where you can be walking by you can be walking spot, at home, in your car, you can buyherever and you stuff with your voice and microsoft put microphones and speakers everywhere. they have the partnership with bmw and the new device for the nightstand, one for your living focused toe kitchen vice and you have of alexa and the place where you watch tv in your den with your new fire tv set-top box. betty: that sounds a little big brotherish. this is a blockbuster holiday season for consumer technology. i have been talking to you on these programs on bloomberg a lot and it is busy season for me but also for the tech industry,
a.m., and a beautiful morning in hong kong. the water is so blue. i wonder what that says, it looks gorgeous. it is 7:30 p.m. wednesday in new york. the markets rallying on the back of the trump tax plan. a gorgeous night as well here in new york. very hot. still feels like summer. i am betty liu in new york. yvonne: i am yvonne man. this is bloomberg asia.
>> facing new setbacks with costs addingsion to the uk's divorce bill and the european parliament taking a tough line. brussels thinks london should parliamentary summary insists the european court of justice must have jurisdiction in the u.k. during the post-brexit transition time. german finance -- the german finance minister is ready to give up the job that made him a dominant figure in the euro area that crisis. as the chancellor tries to form a government. the 75-year-old was part of her three previous administrations and helped negotiate reunification. he is a fan of austerity and was bill if i didn't greece for germany's policy on debt. of china's money rates have touching the highest level since january of 2015. contracts surged to 8%
before paring gains. the pboc has pulled a net $30 billion in net market operation saying liquidity remains relatively high even as it is deleveraging with and of quarter cash demand. of quarter cash demand. and telling a business form that she may propose lowering the corporate tax rates on the first s make.llion corporate she is considering bringing it down to 10%. she said the government is in a s make. strong position with finances in good order. >> we are sitting on a huge fiscal reserve with no debt. if we issue on's that is to enrich the bond market. we do not need the money. >> global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries.
i'm courtney collins. this is bloomberg. yvonne: the wall street session, trade making quite the come back. focusing more on the japan bond market. now attracting some investors. what is feeling that? typically cautious japanese investors who are hungry for yield. corporate you that bonds are near trade the loweste early 2016. investors have increased their tolerance for risk which is driving them to companies that used to struggle. we have all of this, tepco, and japan airlines. all of this was able to sell its
first bond since 1996. ando issues its first note japan airlines is outperforming its rival ana. it is not just higher yields that lured the investors but proving better prospects. this is one that investors may be underestimating the risks. betty: as we were mentioning, just looking at our screen, hong kong airport could be tapping the bond markets to finance their expansion. what other recommendation that the funding study have? >> work has begun on the third runway. the study recommends borrowing from the market in addition to a construction fee on passengers.
dollar bondsing and hsbc recommends issuing 3,000,000,002 5 billion hong kong dollars in resale bonds which would be the first retail offering since 2003. hsbc estimates as much as 8.8 billion dollars could be raised on reasonable terms given the authorities strong credit profile and being supportive of market conditions and these conditions have made for demand when it comes to asian bonds. have s&p global ratings warning that we might have a correction looming for asian bonds given liquidity may soon be drying up. betty: thank you. some of the big stories to watch in the asian trade. the boston fed president echoes fed chair janet yellen's speech saying the fed should keep
raising rates despite the drop in inflation. thes after jim bullard said opposite, it should not. kathleen hays here with more. thisus more, he has given speech, what else is he saying? kathleen: he is still probably working his way through his remarks. was callinge who for a total of four rate hikes. here is here -- here is what he is talking about now, he is concerned the economy is growing, there enough signs of strength that it may pass what is sustainable and that it raises the probability of even higher asset prices. he is saying he is concerned about stocks and their continued rise and concerned that inflation could top his 2% target. here's what he says. steps lowering the probability of what is advisable and it is
my view that regular and gradual removal of accommodation seems appropriate. he did acknowledge the hurricanes are going to cloud the view of the labor market inflation for a while. he is convinced that the weakness in -- will prove transitory and sees inflation rising as unemployment continues to fall. let's take a quick look at something we have not looked at for a while. this is a nice simple chart, the fed's dual monday -- mandate. thisently he figures that line, unemployment will go down and the tight labor market will boost wages and give us the impetus for this inflation rate to head toward 2%. it has missed the target for most of the last five years. betty: jim bullard looks at the chart and says no. kathleen: he said there is no
need to raise rates with inflation lagging. here is his argument. what you're seeing in the current fed fund rate is consistent with -- with what he is saying and the data. a unemployment is up -- if poor signal of where inflation expectations remain low. i call this up because we are looking at the unemployment rate which is falling quite a bit. here is the level we are down to. down to 4.4% on that access. that is wages, the year-over-year monthly rate, we are at a free month moving average. they have come up and down. maybe that is one more reason why jim bullard it is saying where's the inflation just? he thinks the current forecast, one more great blacks market credibility. let's see what the markets are
thinking at least about the december rate hike. what you see on september 8, the chances of a fed rate hike -- rate hike were seen as over 20%. now they are up to about 70%. you can see that whatever jim bullard might think, the market is coming around, maybe quickly to the view that there is one of whatetus, enough said officials are saying, maybe that the rate hike is coming. betty: it is interesting racking up all the fed officials we have heard from this week including neel kashkari and l dudley. we are seeing a divided fed. kathleen: bill deadly spoke and -- janetet ally jef
yellen's ally. he is on board for a rate hike area neel kashkari and lael brainard spoke but they did not touch on monetary policy. is sympathetic to the fed's difficulties with inflation because there is no reliable model that tells you where you are and where you are going but he says it is clear to him that janet yellen is leading the charge toward that december now i thinke you >> we are in a mode in which the fed is basically saying we're on this gradual path and it is going to take something to knock us off this cap. say i heard the chair yesterday was as of now there is nothing that is knocking her and the fed off. : it is important to get a sense of what the momentum
is and the momentum seems to be toward a consensus around, if labor markets are strong which it is, it almost doesn't matter if inflation is below target because we are so convinced that the strong labor market has to push and higher, it justifies another move this year. even with all the discussions, they were getting a lot of eliminating talks from the fed the last several days. we certainly have. 2018 seems cloudy in terms of where we will go from december. thank you. up china's 21ake million private businesses. the biggest wave of family succession is sweeping across the country. the 37-year-old taking the reins
of one of china's largest agricultural companies. for mys a big deal daughter to join my company and so far, it has proven to be a good deal as well. because a lot of employees around her age have now risen to the manager roles. my daughter got along well with them very well. the company became very much alive. >> given that you are your father's daughter, if you feel a sense of pressure to show that you can do the job and do it successfully, to show your colleagues as much as anyone else to prove that you can do it and you can do it well. >> taking over the family business is an extremely stressful thing. there is an old saying in china that it is difficult to start a business that much harder to maintain the business. to me, succession is not just to keep the business at current levels, but also to explore new territories and go forward. myyou can see, today
everything in china has been going through some significant changes. urbanareas are changing, cities are changing, and consumers are changing. this is a situation that no business or company has encountered in the past three decades. therefore, what i really need is to unite all the employees around me and engage them and make sure we understand each other. so we can work together to maximize the interest for the company. it is not just about me. >> this is a conversation that has had all the time in china, gap, theation generational difference. how much is that a challenge when you look at the succession of passing your business onto your daughter and how much is that an opportunity as well? wewe go to work together, live together, we always have thorough decisions -- discussions before making important decisions. i have been learning a lot about the mobile internet business as
she knows what the young people want create i spend as much time as i can with young people. quite often, she comes to me when she needs to make a choice. and i will give her enough independence to make her own judgment. she needs to learn and get used to this. >> what drives you, what gives you the hunger because you come from a very different background, you have met had -- you have had many advances your father did not have and your father grew up with very little money. you have benefited from that. it would be easy for someone in your situation to sit back and relax and drink a couple of cocktails on the beach. what gives you the hunger, the drive to continue to drive this business forward? >> and the beginning it was a sense of responsibility that drove me. my father was under a lot of pressure and i wanted to help him out. i have grown as the company has grown. the company named new hope was
created while my parents and i were having a foot bath. my happiness is closely attached to the family business but now, after i have become more comfortable running such a big company, what drives me is the sense of accomplishment. new hope is already the most successful agricultural company means thattry, which any progress i accomplish here will represent the highest level of -- that a chinese agricultural company can ever achieve. this is a huge encouragement for might pursue to realize my own value. betty: that was the new hope chairman and his daughter speaking to tom mackenzie. next, staying on china, the chinese kindergarten is a part -- about to lift on the new york stock exchange. why investors are tapping into china's education boom. this is bloomberg.
betty: this is daybreak asia. china's are widely education rose on the stock exchange and the early childhood education sector expected to double to $165 billion within five years. parents willing to spend their -- to give their children a head start. leon.scuss that with great to have you. talk about the sector in general. we spoke with them a couple weeks ago about the growth prospects. a lot of competition in the space, valuations have gone up
exponentially in the last 12 months. do you think that is sustainable? you have to look at the demographics in china. the chinese one child policy has resulted in two interesting dynamics. you are looking at a reverse triangle. you look at two sets of, two pairs of grandparents and the parents and one single child and you have 300 million middle income class in china. quality education for the single child so the market for growth is tremendous. the market see what we saw a few years ago. we have gotten a very warm welcome to the public listing. betty: that is a lot of tiger moms. dealou able to find a good for this segment? guest: the segment has a lot of
consolidation opportunities and if you look at kindergarten and the learning center, those numbers, 100 billion in 2011 and it tripled the last five years. it is projected to be doubled. in billion and 600 billion 2021. yvonne: is this your first opportunity in the sector? guest: absolutely. we are the largest in china. we are in 307 cities in -- with 20,000 students. we are .5% of the overall market. imagine how many mom-and-pop shops and subscale operations in china can benefit from an integrated and scalable operation in kindergarten and the childhood sector. betty: there is a lot of ampetition in these spaces, lot of tiger moms out there,
tiger parents out there who want that education for their kids. are valuations getting rich and perhaps to rich in this space? vhaidi: you have to look at pe adjusted growth. if you look at the growth in the sector, organically and in organically through acquisition and consolidation, valuation is well justified. the market has spoken loudly about the confidence in the future growth of the sector. betty: in your view, you still see if there are any potential deals out there as pretty good value at this point. guest: in the education sector, ,ou have to look for ideas tools, creative operations scalable -- and scalable operations. up in china, we had
multiple siblings and today it is one single child and six adults willing and able to pay for quality education. if you provide good services, quality curricula, and truly benefit a child from zero to six years old, the market potential is tremendous. has the market reached the maturity level you are content with and when it comes to the competitive returns, how are you going to ensure that, it is not just based on survival let real success. mature to use a word describe an industry, it sounds negative. when you describe a person, the word mature is more positive. in this case, the letter is more suitable. the chinese i've it industry has gone through an early childhood and teenager and now growing
into a young adult. differentisplaying characteristics, sometimes very aggressive, very competitive as you said. we eventually grow into successful adults or successful models and more confident and more sophisticated. education, are there opportunities in china and what sectors are you looking at, especially with the outbound environment? the opportunities, we look at the demographics. we talked about the young side and the older side of population is aging. there's a lot of health care services and health care products, very important to cover and tremendous growth as a result of the demographic profile. in the middle of it, 300 million income class, they will eat
better and drink better and travel more. only 6% of the population has passports. to have a people get passport, they want to travel abroad. thank you. you can get around above the stories you need to know to get your day going in today's edition of daybreak. it is also available on your mobile in the bloomberg anywhere app and you can customize your settings so you get the news of the industries and assets that you care about. make sure to check it out. this is bloomberg. ♪
multimillion dollar investment in uber. we are told that venture capital from benchmark sought a guarantee in writing that softbank would reject reappointing him as chairman. he still controls three board seats. two remain unfilled. teaming up with ford to develop teaming up with ford. the traffic so data generated. almost every major automaker has promised to launch the cars within the foreseeable future. origin says the proceeds will be used to pay down borrowing, putting it on track $5.5just the debt below billion by the end of this financial year.
betty: 8:00 a.m. in hong kong. yvonne: welcome to daybreak asia. renewed optimism about the world economy set to give asia-pacific markets a boost. the s&p inched to a new record. they will kickstart america and lift the wages of average workers. is just after 8:00 p.m. on wednesday. voices of dissent. janet yellen faces criticism from james bollard. is speedingbuyer
off and the u.s. seems to have an edge on the middle east. ♪ yvonne: talking about tax reform . this now or never moment. it was interesting because trade is very much in focus. inflation trade coming back on a vengeance. markets are getting a little ahead of themselves when we do not know how this will all be price. i would say the answer is a firm yes. we saw the markets get ahead of themselves even before and after the elections of the trump trade. there is lots of anticipation it will be the same thing all over again. package think this tax
-- it is going to be very difficult to try to get this through. it will be a lot of action for us to watch over the next few months. yvonne: absolutely. let's get to the first word news with paul allen. japan's main opposition party is set to fall apart ahead of next month's snap election. standing as an independent. they will not field any candidates with many members jumping ship. the fledgling group has already attracted 18% support in a poll conducted. -- senate has confirmed at&t's time warner take over.
the 47-year-old was previously a white house counsel. his appointment was opposed by senator elizabeth wharton who criticized his lobbying on behalf of big companies pursuing mergers. china has set out saying it must stop the spread of illegal information i had a the next communist party congress. -- ahead of the next communist party congress. it says it has the authority to issue such orders. thesapp has been one of platforms working unfettered in china. with the 3-d manufacturing process. component makers are struggling to hit production levels. wall street journal reports delays in the facial recognition sensor. the issues prompted apple to ask iphone xt some i --
shipments. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. of the let's take a look market open. equity positive when it comes to japan. with sophiee latest kamman. we talk about tax reform and president trump talking about how this is revolutionary. theie: who do not know details of these tax refund plans. it will be a battle in congress. we are seeing asian bonds continuing to drop. a 10 year yield up about four basis points. the dollar is trading at a six-week high. trading at 86 yen after breaching 113 overnight. we do have japanese stocks
coming out of the gate looking fairly strong. according to the latest finance ministry data, they turned net sellers of japanese stocks -- it was the biggest weekly portfolio outflows since june. i want to highlight what is going on with the kiwi as well. they left the key rate at a record low. it did follow after the decision of the central bank. we had at the aussie little change this morning. it is edging lower. we do have gold slightly higher here. 1284.still holding below
bullion could be set to test its 50 day average since july. about five bounced times since july. when gold slipped below this line, it fell 3.8% in three weeks. while we do have the share markets higher this morning in sydney, it is the second worst major market. investors have shrugged off the last earnings season. should the selling momentum continue, they said a break extend theat could stocks by in aussie another 3.6%. president trump
releasing that framework of a tax plan that will provide "his toric relief to the american people." want to do it country by country comparison rate. here on the left and white is the u.s. corporate tax rate at 40%. corporations do not usually pay that much. if it falls to 20%, which is under the new tax proposal, it would undercut what is happening in germany at 30%. -- beld put a red it brett relatively -- it would be relatively competitive the u.k.. ireland has the lowest corporate tax rate in the world. heading to my next terminal line is the s&p
500. i want you to focus on the white line. this is a goldman sachs basket of the most taxed companies. over the course of the past year or so, it has been outperforming the s&p. the defaulted because the trump trade for third. it has now been on a tear. it is up .5%. if this gains traction, we might expect to see this basket rise higher. , amy third and final chart great and very colorful function that we have. i want you to function of -- focus on the deepest colors. here in new york, new england and california.
i want to focus on the is because it has to do with one part of the test proposal plan that says they want to abolish tax deductions. where are those happening? the coast.ppening on this is relative to what is happening with congress this year and 2018 midterms next year. democrats will be fighting tooth and nail to keep that money on the table. we are just starting the conversation. a lot of this has to be planned out over the next several months. these are the top bloomberg charts you need to know. yvonne: let's bring our top asia editor on set. you have to decipher this proposal now. what will be the source of contention among the party? will be the main can the
syndrome -- criticism? does -- by lowering that rate to 20%, president trump said it is a perfect number. it really does save corporations a lot of money. there are things in their not just lowering the rate for higher rates but also a repeal of the estate tax and minimum tax, which really benefit the wealthy. the democratic presidential candidate is a senator from vermont. he really criticized the plan yesterday. said this is all about helping the wealthy. there is not a lot in there for middle income earners. it is a high income corporate
tax break kind of plan. that is what a lot of the criticism will be about. yvonne: are there any democrats who will be on board with this at all? the chances of getting this done by the end of the year is very unlikely. >> the last time there was a major rewrite was 1986. ronald reagan was president. it is really complicated. every time there is a debate about sitting in a tax break, you have to get rid of one. nobody wants to be on the losing side of that battle. even the international side, that could be a fight. doing something done quickly seems like it is quite ambitious. especially when we are talking about an administration and a congress which has not been able to do much. we have not been a lot of legislation go through.
betty: we know that donald trump is so desperate for this legislative victory because he cannot get health care reform through. tocribe the exact obstacles getting this legislative victory by the end of the year. >> there is the whole complication and enough time to do it. this takes a lot of debate. it has to go through committees. senate finance committee is headed by war and hatch says he is not on board. even among republicans coming you have some debate. the administration itself which has not been able to work well with congress. there is another hurdle. distracted.t gets he says this will be his big push. , when heer the weekend was supposed to be in the lead up to tax reform, talking about
nfl and picking a fight with the nfl. whether he can stay on task and continue to push for this and will his administration work with this, that will be a big question. thank you so much. we will continue our discussion and analysis on tax reform next. we will look at the implications for asian markets. later on, why s&p is morning about a correction in asian bonds. we will hear from the rating agency in about 20 minutes time. this is bloomberg. ♪
debut in sydney after raising $3.9 million. most of that money will be used in the next two years. managing director nigel ferguson says okapi is looking at potential acquisitions. yvonne: australia's beach energy has agreed to buy latisse energy. proceeds will be used to buying down borrowings to reduce debt by $5.5 billion by the end of the year. portion of the gas production under long-term supply agreement. betty: south carolina utility owed $2 million by toshiba has sole rights to the claim at a discount. this was after toshiba bailed on unfinished nuclear reactors. theas sold at $.92 on
dollar. instead of accepting installments over five years come they have accepted cash. yvonne: a bump from the tax plan after it worst slumps in a decade. do see that the dollar is breaking out of the short-term weakness trend that we have seen in about six months. our next guest says the dollar was technically oversold. mark, thank you for joining us. our tax cuts necessarily dollar positive in your eyes? >> over the long-term, they may not be, if the tax cuts cannot be offset by other places.
that is what happened under the bush administration. i just cut taxes about trying to offset it. they ended up increasing the deficit. initially, the reaction will be positive. yvonne: we certainly saw that under reagan as well. mentioned the deterioration of the fiscal side of things. what does that mean for the dollar going on from here? does it get a little more nuanced from here? all in the details. i think there is a large contingent in the republican -- that does not want to see that expansion in the country's debt levels. they will be resistant to tax without closing loopholes and other things they are talking about. i think it is a positive because taxes will be reduced, but it is
not going down to the 15% were talking about this time last year. 15% was his way of getting to 20%. i want to pull up a chart talking about pricing and tax reforms in the market. this function jerseys some of .he highest taxed companies it is catching up to the rest of the market in anticipation. it looks like for the unveiling of the tax reform plan that they will benefit. how much of these tax breaks priced into the market? >> i have seen numerous charts like the one you are showing disappointmente that followed the election and lack of reform led to a ng.iating -- de-rati the entrances that the market has plenty of room to go up on the back of tax reform.
i see some truth in that. the devil is in the details. placesseeing in these where judge moore won a couple days ago. they are more socially conservative. i assume they are more fiscally conservative. it will be a huge thing. it will be good enough for the market to go up. betty: another function on bloomberg. i'm sure you are quite familiar with this. it calculates the future and probability of interest hikes are you kathleen mentioned this -- interest hikes. kathleen mentioned this earlier. we are at 72%. i think it is interesting that if you look further, they are furtherricing in any
rate hikes. do you think we will get one this year and then we are done? is one this year and one next year. her comments on tuesday were even more important than what president trump said yesterday because she did say they want to continue with the interest rate increases and not wait until inflation get to 2%. we are looking at the beginning of the balance sheet production next month as well. -- reduction exports as well. -- next month as well. yvonne: we are starting to see some signs of fatigue. em specific or is it country by country? >> there is clearly some limitation going on.
one of the reasons why the eight asian and emerging markets have been doing good this year is the weakness in the dollar. againple warm to the u.s. as the same time that they are little less warm on europe, in light of the german election. perhaps you see some less interest in asia. i think we still have very good earnings growth in asia. strong global growth on the economic side. party congress kicking off in beijing next month will be the beginning of serious reform which will be very beneficial for china's economy and the world. yvonne: always great to have you. bring you we will china's biggest online and sure.
betty: good morning. this is "daybreak: asia." yvonne: sure tax may be the buzzword on hong kong markets today. may be the buzzword on hong kong markets today. very interesting time for zhongan. big cornerstone investors as well. >> those are the main cornerstones. it is attracting a lot of attention. with thed timing
index. the buzzword is in sure tech. this will be the first major listing. itwill test the demand for and get a pulse check of the online shopping revolution that is going on. you have all these competing rivals investing heavily into the largest, the first and largest online and sure. r. insure 492 million customers. not surprisingly, they price this at the very top range. betty: what about the demand in the market? >> it is looking pretty strong. with the latest summer's we got yesterday, it was up to 56 dollars.
price.s after the ipo capital in singapore saying demand is strong. it goes on to say that with softbank as the cornerstone, they are well oversubscribed. any investors missed out on allegations. amanda seems to be very high. have 13%.dy softbank 5%. not a lot for the retail investors. there will be a high bidding. stephen engle, our chief correspondent in hong kong. we will hear from the cfo coming up at 9:45 in hong kong. much more ahead. a hedge fund manager says the bond market is heading for a
yvonne: it is always some are in singapore. the open of trading. wellels like summer as after we heard from president trump in indiana revealing the republican tax plan. betty: i am happy staying in a one season that he as long as it is hot. city as long as it is hot. paul: negotiations are facing new setback with rising pension costs adding to the u.k. divorce bill and parliament taking a tough line areas higher pension
costs will increase wetland and what the u.k. will pay. ready to give up the job that made him a eminent figure in the debt crisis. chancellor merkel tries to form a government. the 70-year-old was part of three previous administrations and helps orchestrate reunification after the fall of the berlin wall. he was vilified and greece. overnight, weibo contract surged more than 8%. $30 has pulled a net billion in operations this week saying liquidity remains relatively high.
prime minister has been jailed for five years for negligence in a controversial buying program. she is thought to be in dubai in self-imposed exile. the case against her was politically motivated. -- may propose lowering the rate is currently 16.5%. executive says she is considering renaming it down to 10% to help start up small businesses. we are sitting on a huge fiscal reserve. basically, no debt. if we issue bonds, that is to enrich our market. we do not need the money.
paul: global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. yvonne: thank you. time to see how the asian markets are shaping up. sophie: taking off with what is happening with the dollar. holding gains at a six week high. againstobably the most the kiwi dollar trading at a session high after briefly dropping. it kept its key rate at a record low. a look at elsewhere in the region, japanese stocks could reach a 2015 hi. on monday, shinzo abe said it would be difficult to achieve a primary balance surplus by 2020, which prompted s&p to flag
concerns over a fiscal shortfall. while growth is looking sound humbly have legislation growth. under pressure ahead of that autumn period. the korean won has flipped to a mid july low, breaking the 1140 resistant mine. is fighting for an eighth session today. -- sliding for an eighth consecutive session today. followingtomobile almost 1.5% today. 2.8%stock falling about this morning. that stock was downgraded to sell at goldman. they see lingering challenges for the hyundai group.
they expect it to face more pressure from their partner in china. we do have the latest stocks under pressure today. hawks versus doves. yellen's speech about raising the rate just after the president jim bollard said it should not be doing that. our editor kathleen hays. she said what was more important with what janet yellen said on tuesday that what we heard from president trump in terms of the impact on the economy in the market. what he will not do. kathleen: we know the federal reserve has spun stability. price stability, low inflation,
strong growth. do juste heading to that. to eric busy listening rosengren. calling fortely more rate hikes. let's listen to what he said. >> we are already a little bit below estimates. the expectation is that it will continue to tighten up, relative to where we are. if we continue to push past what is sustainable, the risks of highs -- higher asset prices will increase. that will highlight the fact that in my own view, it is advisable that we remove accommodation over the course of the next year and a half.
betty: he is certainly known as much as a dove. kathleen: he says there is no need to raise rates because inflation is lacking area the difference -- lagging. he said don't worry about it, we can work hiking rates. let's look at this #. -- hashtag. unemployment is down to 4.4%. why did we see wages head up again as they have in the past? they have dipped again and plateaued. his speech, her repeated that he would be concerned about inflated asset prices.
it could lead -- he thinks unemployment under 4% is certainly a possibility. is interesting that he said he is the most dovish member. another view. ishleen: eric rosengren bullish on the economy. we do know that the economy picked up steam in the second quarter. let's take a look at some bars that illustrate this nicely. the first quarter gdp was coming down from the third quarter of last year. 3%.as gone up to the something that could be
changed by the hurricanes. one more point i would like to make is that the atlanta fed said it would be over 3%. that is down to 2.1%. -- tax cuts could boost gdp and jobs. yvonne: thank you. we watched the state of the u.s. economy and we are hearing that a hedge fund manager out there is planning to sell off bonds. let's bring in adam in sydney. he -- we have already seen aces central -- substantial jump.
the bank question i want to ask is where is he seeing the question i want to ask is where is he seeing the inflation? is sayingument is he that over the next couple of months what you will see if prince from cpi. people will look at what is fromning with -- prints cpi. is seeing more underlying factors of inflation coming through. he has a very broad basis of modeling for inflation that he , that he brought on board recently. also a number of consultants that he uses across the board over the years and has built relationships from his days at tudor. he is looking for the 10 year yield to go back to three this
went. we are not seeing -- to 3%. in december, the fact that the inflation will be coming back system, it will be more prevalent and noticed more by the market. it will take it further over the course of 2018 before we get to that 3%. caution that he got it wrong before. about the 2015 experience where he thought the fed was going to move the policy further. he is cautious, but he says he is structuring the exotic trade so it will allow him to not have too much downside if yields do not ramp-up as quick as they can. that brings him benefits from taking a position. betty: he makes a point about
the quantitative flow of tightening. why is that important? at is the is driving rate of change or the delta. it is all about how quickly that is changing. he is is that term. we have spoken a great deal and itow the fed tightening measures are in a different situation over the next 18 months. also, the central banks are dialing down their monthly purchases of on over the course of next year. the second half of 20 will look very different from the first half of 2018. that is what they mean by the flow. the total amount of buying will lead to the tightening. that plays into the investment piece. it is a big call.
morning. we have been throughout this world fed on easy liquidity over the last 10 years. you are saying asia is not immune to this stimulus pullback that we are seeing in the u.s. and eventually europe. >> that is correct. it is basically a spillover of the quantitative easing of the .olicies in asia's particular case, the spillover of chinese money. abundant, liquidity starts to go down. it has been a very good ride for almost 10 years. we expect the qe tapering off. pricing ofon of bonds, equity, and credited -- credit. betty: you talk about a
significant correction, which sounds like a very warning. what does that look like? >> we have been obviously quite far off the trend of normal. it willssed a market not be as high as it was. it is quite dramatic. we can see that in terms of of going out into the market, knowing inevitably that it will close. this is a 10 good time to borrow and good a good rate. it pushes up the day of reckoning because inevitably, the liquidity have to pull back and we will see rates going up. yvonne: you cannot deny the demand out there. you mentioned the liquidity in
asia. we have shown the issuance we have seen already this year. that haselming part of been taken up by investors in the region, and asia. doesn't that bid itself give enough cushion to offset any type of external shock? >> it is. it is relative value. if we seem interest rates going up in the u.s. or in the euro, then people say relative to this, given the risk, what i rather invest in asia or elsewhere? the capital markets are still not that deep. we have very large markets in japan and china. the pullback could be magnified. that is our concern. there has been a selloff when there is risk of emerging asian bonds. yvonne: taking a look at a chart
here for our viewers. we see the spread of asian at 164 basisming points over treasuries right now. we're back to levels for the financial crisis. when you take a look at that, are the specific markets open more distorted -- a little more distorted? >> not specifically. it comes down to strategy. we see both india and indonesia coming back. in years past, we have seen drawback. that is why we are trying to watch where the drawback becomes overly dramatic. we create a spiraled down. react,much how markets to how they rebalance their portfolio is something we are keeping an eye out for you -- out for.
betty: there are significant risks that could trigger this reaction. any number of events. nobody can predict what it will be. what you think -- do think could likely cause this kind of correction you are talking about? >> the market is watching each other. segments, we discussed the smart money portfolio insurance. correction, that is what money is doing. when there is a rush, they do not want to be the last. we heard the hong kong government about changing the tax. it may be initiated by the u.s. tax reform, that governments
will feel compelled to adjust their tax rate in order to compete. that causes low market distortions. the u.s. tax reform, they are thinking about adjusting the text deductibility of interest. repercussions. betty: a lot of factors to way. weigh. still more ahead on "daybreak: asia." this is bloomberg. ♪
betty: this is "daybreak: asia." yvonne: economists are dialing back their outlook asian x orders as consumer desire -- exporters as consumer desire wanes. that may have wider implications for taiwan and south korea. bring in got in hong kong. -- scott in hong kong. >> it is not only the lackluster demand that we might see from some of the you new smartphones -- the new smartphones. you combine that with signs that slow again.rting to
it looks like it will decelerate again this quarter. economists expect that next quarter. you have monetary tightening starting to take off in some of the developed economies. factorn the additional that those effects will start to come through. the week figures will start to fade away because we have this strong performance. some of the readings -- impact is much of an that having for this region #-- region? we did not get a concrete number on it. a very from economy to economy. there has been very strong this year. newman sachs has got a
trucker out. they look at some of the early reporting at our numbers from biggest economies -- big economies. they definitely point to a deceleration in august from what we have seen. tradeimports into asian is a big deal. betty: we are in the middle of this. there are some reasons. it is not all negative. there are reasons for optimism. >> we still have the economy faring a lot better than what anyone would have thought a year ago. -- none of that -- china is re-fleeting.
-- re-flating. yvonne: not all about iphones. that is pay much it on -- pretty much it on "daybreak: asia." we have the first insurer in china. softbank is also among early investors doing what they can. engle in joining steve about 15 minutes, looking at that one. yvonne: have you been on the site before? you can by phone insurance. -- buy phone insurance. rishaad: did you buy anything?
yvonne: no. it will be interesting. looking forward to it. get a break, i want to show you some photos of what is going on in south korean armed forces. this is the ceremony in seoul. they are putting their strategic weapons on display during this event. this is a show of firepower against north korea. this is according to the ministry of national defense. ,his holds more significant given these geopolitical tensions and north korea. that is it from "daybreak: asia." this is bloomberg. ♪ is this a phone?
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>> and never felt any pressure to. david: did your father say if you worked hard you would be the ceo? >> he was not a guy to make thomases. was accompanied into growing up with your father and family being famous? >> we were not famous at all. standby was accompanied into growing up with your father and family being famous? >> i think this is the moment that i have been waiting for. would you fix your tie, please. david: people would not recognize me if my tie was fixed. ♪