tv Bloomberg Markets Asia Bloomberg December 20, 2017 10:00pm-11:00pm EST
nasdaq listed company is a total zero.ud, a of japan meeting keeping policy at target. let's join kathleen hays. casting: let's put this in context. none of this is surprising, but we are previewing what might happen, now we know what did happen. nothing changed about policy. exactly what we are expecting. dissented again. the boj needs to do more. let's see what they are looking how far 8499 shows you from target even the most upward sloping line is. zero point 8%, the main number half glassches, i am full on inflation, like governor corona.
the commissioner saying they need to do more and even push yield curve control, keeping the little lower. it may get tougher in 2018 as we look to the future for the boj to keep it at zero given global bond markets. pushes upcentral bank global bond yields. putting this in perspective for us, you can see the blue line along the bottom is boj doing a good job, keeping the yield at zero. look at all three other modern -- bond markets. u.k. and germany at the right-hand side, all the markets have been selling off, pushing up yields. governor kuroda will be asked -- he still seems to be the front runner. bloomberg out on the is measure how well kuroda
doing, he was only called to testify before parliament 29 times, compared to 51 times last year and the fewest of any boj governor since 2007. with that kind of approval rating, it makes it clear he is a shoo-in unless prime minister abe has a big change of heart. he has been praising him for keeping after that 2% inflation target. it seems like we will be able to hear and see a lot more of governor kuroda in 2018. rishaad: do stay with us. having a look market wise. we are on the lunch break in tokyo, so no reaction from the equities side of things. this is where we are seeing a little action. not that much, but something. tono supplies when it comes ash came to the boj's policy meeting. it has been on cruise control. the dollar-yen sticking at
115.42 for a third day of strength. we are seeing some action when it comes to the jgb's, a seven white -- japanese futures are pointing to continued losses in tokyo. elsewhere, a mixed picture, but they are dragging downward 1% so far. dragging on the regional benchmark has samsung ways on the cospi. are leading the rally in jakarta, the rupee is at a two-week high and indonesian bonds are up. although dbh sees caps. large caps have swung to gains, gaining about half a percent while the yuan is pairing its advance after climbing to a three-month high. the focus will be the open of
japanese markets. volumes are light even that trading is winding down before christmas. rishaad: thank you. sony chiefng in the chief of list -- holdings. what do you make of the boj's pronouncement and what will you be listening for when we have the governor talking? basically, today's decision will not change the policy, the heeresting thing is that dissented again, adding the boj time,ething more and this one of the newest issues is that it was said according to the statement that the boj should attempt a 2% increase in 2018, rather than the 2019.
that is the consensus view in the market, that 2% inflation will not be achieved anytime soon, even in the next few years. on the one hand, the hawkish side for the boj would argue the 2% inflation in a limited timeframe, but on the other side, it was said the boj should do something more. corona is in between, so i am interested in what corrupt -- governor corona would say -- kuroda would say. kathleen: i hope to see you in tokyo for the next boj meeting, but what more can be done? of the bojvestment is getting better, you have the zero,, whatd at
more can be done by the boj to get growth going faster and inflation rising faster? well, the only monetary weing is not enough, definitely want to see a rise in the wage rate. what i have found in the past five years is the wage rate hike is one of the most important transition channels to convince people that higher inflation rate is a good thing. we liked the rise in the rage te, the risinga inflation rate is bad for consumers. against the background of the tighter labor markets, the trend of the wage rate is to the upside, but the question is how
far. height.be this will be the more important thing from my viewpoint. rishaad: i'll to you what the it isis telling us, showing the spread between u.s. treasuries and japanese government bonds on the white line and the yellow line indicates where we are with the its american counterpart. 1/10 of 1%. the bond purchases by the bank of japan has been arranged to meet those yields and get in line with target. as u.s. yields go up, the spread widens and that is where the yen comes in and the yen moves in tandem with that weakening. ics isportant for abenom
the weakness in the yen? is it that the core, or in the periphery of what they are practicing? masaaki: right, the yen weakness is one of the important factors to push up the inflation rate in japan, but this is one of the factors. if the weekend is too much, it will be counterproductive. is too much, it will be counterproductive. low yields will be needed to maintain the current yen weakness situation. what is more important is the change of the real interest rates. in other words, the inflation expectation in japan should be rates and if it should happen, the differential will be widened. japan's real long-term
interest rate will be down, even when the boj maintains the yield. does theion is how government, together with the boj, raise expectations. ? the wage rate is an important factor. rishaad: on that point, i am going to bring these comments a guest earlier and this is his view on where we are with the price rises in japan. >> i think that long-term 2% is fine to keep it, but we should 2% was notze that achieved because the rate of inflation depends on marriott -- various factors. rishaad: and your view on that? yes, i quite agree with a professor's views.
i think it takes time and the boj doesn't have to stick to the it will take time. probably more than a few years, the labor market tightness, which would definitely raise the wage rate eventually at a moderate pace, and then people will finally understand the rising inflation is a good thing, together with rising wages and other personal incomes. that primer mechanism is needed and it takes time for people to be convinced a mechanism is working. kathleen: how about corporations? what does it take to convince them, because they can see the jobs opening is getting more tight. we have low unemployment in
japan, and this notion that government japanese is suggesting tax rate cuts could be tied to whether companies or going -- are going to boost wages and hire more workers. is that a policy that maybe doesn't change the world with inflation expectation,, but could it make a significant difference? masaaki: that is a right direction, but i think that is not enough. japanese corporations are not the growth rate of the domestic market will not be much more than previous decades. i think further dinner -- deregulation is needed, including the labor market, so the japanese corporations need that as the view
growth rate of the japanese economy will be significantly will equally -- the capex, and it is increasing, but not as fast as we originally thought. as a result, the corporations still accumulate the cash holdings, but that is no good. anyway need to be convinced the economy will be good at head. kathleen: what about the reappointment of governor kuroda? is it a done deal? should he. appointed or is there an argument to be made that a new toernor could take this the next level, this process of trying to move inflation up and maybe a little faster? that is a decision by the prime minister abe and the cabinet office. it is not a done deal yet, but it is likely that kuroda will be
reappointed. the interesting issue will be who will be the deputy governor. if kuroda is appointed, the boj needs to rethink how the policy could be changed or maintained after april. the discussion is one of the issues in japan and if the interest rate level is bound to much, it could be counterproductive because it is bad for the bank lending and the bank's margin. in this sense, the boj is in a dilemma. the boj tohand, -- take further actions, but at the same time, kuroda and the deputy governor share the view that lowering interest rates too much may not be good.
this is what the boj needs to say something to the market after april. rishaad: thank you, so much for that. joint from tokyo and new york. you can turn to your bloomberg for more on this, tliv will give you more analysis from our expert editors. let's get to the first word news . we will hear why the white house is -- >> republicans passed the tax bill and president trump aims to sign it into law february 3. it is the most expensive change to the tax code in more than three decades. it hands the president his first major legislative victory, providing a permanent tax cut for work -- corporations and short-term relief for individuals. no democrats voted for it. the uber conqueror has raised billions of dollars in a funding
round. reserves are increased to $12 billion and will be using it to fuel expansion. investors include softbank and abu dhabi's -- capital. aramco is looking for natural gas assets from russia to the u.s. as it looks to meet soaring demand after its row with qatar. the energy minister told bloomberg aramco has failed to find enough domestic gas reserves, despite years of exploration. they are looking at ways to bridge the gap. >> aramco may invest with russian natives abroad, it is a possibility, including your earlier question on gas, but also refining investment and market that could take either or both of our crude oil. >> reports say north korea is
--ected to initiate cryptocurrency attack. they say it was targeted by north korean hackers while operating under a different name. youbit says the hackers got away with 20%. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm in man, this is bloomberg. asian companies turning to the dollar, bond market light . we will try to figure out the reasoning and predict how long that situation will last. g may be theiskin new deleveraging. -- presidentthe she's reaction to that. ♪
♪ rishaad: this is bloomberg markets, the leading chinese think tank says the company will slow citing decline for investment growth. the academy of social sciences estimating gdp at 6.7% next year. this as senior leaders an ounce critical battles -- announce critical battles including pollution and poverty. we are joined in hong kong, our editor is with us. hear?re they referring to >> i think they are trying to refine the message. we know they want to get a grip on the debt story, where the pace of credit creation is going, but now they are saying ofbe hold the -- in terms
deleveraging the real economy and the financial system. they have to focus on taking the risk out and attacking the wealth management products that are such a cause of concern. rishaad: what is your take on this? what are you hearing about this? >> i would agree. if you are a corporate bio or -- borrower, you might take comfort. if you are a financial intermediary, you are not taken off the hook. financial risks have been put to the forefront of what china will be campaigning to reduce over the next few years and that has pretty major implications for market liquidity and ultimately, for the price of chinese assets. sarah, have we seen much of a market reaction to yesterday's announcement and how
do you think it might play through china's market in the coming weeks? sarah: trading has been pretty choppy this morning. volumes are relatively low at year-end. we saw the yuan strengthened slightly. the focus on currency stability is positive from that point and we have bond yields hovering around three percent. the end of a pretty rough year for china's bond market. rishaad: did we get any new signaling on china's currency in terms of policy or messages on keeping the exchange rate stable or language used in previous communications? sarah: it was steady as she goes, maintaining a focus on stability, but that is good news for most currency players. i think people will be reassured to know that is not going to change significantly. we have seen the yuan appreciate over 5% this year, but that has happened against a background of
no volatility at all, so that is what we should probably expect to continue. rishaad: steady as she goes, i suppose. that is the message ultimately, everything is all right, don't worry? in 2017,lso have trying to become more transparent. enda: they've made gradual steps and we had from them they will stick to prudent monetary policy. central banks are tightening everywhere, but they are not planning any tightening anytime soon, even if they make modest tweaks. rishaad: that is the story. transparent as long as they want to be. if anything goes really wrong, that will be the test. --nk you both very much thank you very much. if you are a subscriber, you can use the interactive function tv .
♪ you are back with bloomberg markets. as we check the business flash headlines, the struggling noble group wants an extension on a waiver on financial covenants tied to a billion dollars revolving credit facility and that stays in place until it matures in may. -- to comply with the covenant and the existing time limit expired wednesday. the security waiver gives noble more breathing room as it tries to reorganize more than $3 billion worth of debt. indonesia saying it is still in talk with freeport-mcmoran over the transfer of the goldmine to a local company.
the finance minister saying the government is determined to stake to 51%. the two sides are negotiating, freeport estimates evaluation as well as governance. -- back to china. transaction involves a 20% holding that will be offloaded at a 32% discount from wednesday's closing price. it has been investing its portfolio around the happiness industries that provide services for china's middle class. straight to the equities session. a bit of a flat session for the dollar against its japanese 113 .42,rt, trading the dollar has been against the japanese currency of late.
yvonne: prime minister theresa may hit back at the increasingly tough line from brussels, saying the eu will learn it needs london. she expects to finalize a free trade deal with the block before march 2019. the transition period should allow the u.k. to understand the transition challenges ahead. period willition enable the administration in britain to get prepared, to the kindhemselves for
of challenges that they will have to face. their borders, which are also our borders. indonesia has won a second ratings upgrade this year . fitch has rated at the second lowest investment grade, months after the nation was lifted. it is put on par with the philippines and portugal. the move is likely to help the president as he embarks on a $62 billion borrowing plan next year. were forecast for this year and next. one day bond repo rates staying at 1.5% where it has been since 2015. meanwhile, the latest r.b.i. minutes showing a more hawkish tone on inflation, reinforcing expectations that the easing cycle might be ending. anti-want us to make a rate decision later on thursday.
mexico's new central bank governor has defended maintaining a tight policy, andng high inflation uncertainty over trade relations with the u.s. make it impossible to change course now. he took over last week when the quarter-pointr a increase, despite mexico's weak economy, inflation has held that more than twice the 3% target for seven consecutive months. has beenflation posting very high numbers. one of their policies has been taking a restrictive stance to cope with that challenge. we understand clearly the cost we do notls, but anchor expectations properly, we do not have adequate price position.
rishaad: let's get back to our top story. the bank of japan maintaining policy in the face of stubbornly slow inflation. big names.talking governor andat the his team are missing a golden opportunity. >> we cannot counteract monetary policy. now, the employment figure is quite good in japan. but still, they have inflation picking up, so that is a kind of golden opportunity for the central banks to tap into. so why doesn't the boj do more? >> a former director general of is is not being considered despite inflation being a long way from the two percent target. >> we see the boj will miss the 2% inflation target, both in the
short-term and also the medium medium-term, but having said more in termsoes of monetary policy, will it lift the inflation rate up to 2%? i doubt it. i think the current framework as well as the current target is a kind of ultimate monetary easing measure. there's no way to move beyond this point. >> a former boj assistant governor. it is a very political matter. the prime minister will decide who might be the next governor for the boj, and in my view, i think the prime minister is quite satisfied with the job is done for the last five years, so
i can get is quite reasonable to assume he will be reappointed. at the same time, if not, i think continuity of the boj policy will be what we expect. >> let's go to the applications from that meeting. what will investors be listening out for from the governor later this afternoon? >> i will start by saying nice job with the japanese name pronunciations today. a little test for you. the governor will do his press briefing later this afternoon, and the key question here for market players, anyway, is, you know, does there exist some wiggle over for the bank of japan to change its yield curve targets, even before japan hits the 2% inflation goal?
theave not heard from governor as to if he would countenance a fine tuning in policy. they got the 10-year yield target at 0% now. exist in circumstances 2018 if global bond yields are rising, if the global economy is growing well, if inflation expectations in japan are starting to tick up a bit. boj the -- would the consider lifting that inflation target just a little bit? >> equities on the way down after the passage of that long-awaited tax cut. what is the sentiment there like? speaking, what is the
sentiment? how would you characterize it? >> i guess this is one of those classic buy the rumor, sell the fact. global equities has had a very good run this year. part of that has been due to the u.s.ons to boost growth rate, still the largest next year the world and possibly in 2019 as well, so equities have had a good run. the u.s. benchmarks hit record highs just earlier this week. we have had the nikkei and the topix at their highs since the early 1990's. sayingly, investors are the tax cut passage was baked in , and we are even seeing a .ittle bit of a decline
>> a lot of factors in play here. not much going on equity-wise, really, to be honest. >> this is very interesting. there's no real trigger for u.s. bonds. we see australian and european body yields come up a bit over the past few days. there is nothing really that investors can pinpoint and say this is what did it. some people say you've heard some hawkish language from a few ecb officials, but it's be honest -- it's not that convincing. we all know that the german totral bank wants the ecb stop qe next year, so there was nothing really new there. of,thing that it reminds me years ago, the chief economist that when told me
somebody was asking him when will the u.s. trade deficit start hurting the dollar, his response was to say it's a psychological thing. the u.s. trade deficit will start hurting the dollar when the market decides it is time too. there are plenty of reasons for bond yields to be higher. central banks are scaling back stimulus. the world economy is in the synchronous growth phase, as we know. inflation rates are anticipated to pick up and coming months, so there's plenty of reasons or bond yields to be higher, and what we are seeing is that the psychology is just shifting a little bit this week, and we are seeing yields back to the highest since march, and if sentiment turns fully, then there could be a significant move. back inlling risk that 2014, u.s. 10-year yields were above 3% and were only at about
2.5% now. that was before the fed started raising interest rates. >> i got to get to bitcoin. just a quick comment. this is a very wide ranging interview. i've got a chart here showing a 1600% rise does far in the price of bitcoin so far this year. but we had a 20% slump so far this week, the fourth, which would indicate we got a fair market in place, but how can you have a fair market with the thing is -- the cryptocurrency, to be more accurate -- 1600% on -- on the year? >> that's right. essentially, we are going to have to redefine a bear market. we like to use the 20% mark as the standard for going into a bear market, but as you say, we have seen a whole bunch of their markets and bitcoin just in the past few months, and it is still
up 1600% for the year -- we have seen a whole bunch of bear markets. in contrast, you look at the s&p 500, which has not had a bear market since 2009. we did some math and look at the size of bitcoin relative to the u.s. stocks, and they are about the same size as wells fargo, the u.s. bank, which last had a bear market in its stock last year, but it took more than a year to develop the latest bear market in bitcoin was three days. it is really an entirely different animal. chris, assets management editor. you can follow more on this story and the days trading in markets on our blog. there's the usual commentary analysis from bloomberg expert editors.
let's send it back to your money. talk about your money, see what it is doing at the moment. >> japanese markets are back online. supported by exporters like , so we are seeing it back around a 26-year high, and some other bright spots are coming through seeing a rebound in japanese contractors. a selloff triggered by that maglev investigation, but when you look at the nikkei two it is trading little changed. but jgb us are continuing to slide with regional bonds. indian debt joining that downtrend while we are seeing 10% at the open, but elsewhere, we see indonesian thats rally here following rate to triple b.
shares in hong kong on the rise, lifted higher by energy and financial stocks, and hong kong 10-year yields are jumping. the one-month hibor has risen the most since the server seven. of the morning session, we are seeing shanghai stocks swing to gains as real estate and health care stocks advance. checking on some stocks that we are watching in china, looks like china wants more coal in its stocking. authorities are reportedly temporarily lifting coal import restrictions to secure energy and givengiving -- recent fuel shortages. and a last look at samsung which is followed to a 10-year low. the fair trade commission has instructed fbi to sell an additional stake in samsung
thingme, the only inaccurate about that is china. there's nothing nationwide about it. fraud,ing is a complete a zero. we call this in the report muddy waters is publishing today a king zero. what does that mean? another ofns it is these empty boxes from china which is just a teeny tiny fraction of what they report. it is hard to tell if the percentage of rise here is greater or less than, but it's on par with. >> meaning that it is worthless? >> yeah, it's worthless. also, in addition to it's not having nearly the business that it claims, the way this company thetructured, like many of
past, shareholders do not even own the operating business, and we see that as just a deliberate attempt to further insulate the chairman and the perpetrators of these frauds from anything that could possibly go wrong. to understand -- and this is probably a bigger point, list,en these companies when these frauds list, nobody ever gets in trouble for it. they do not have to worry about any jail time. thistting the company up way, they do not even have to worry that at some point this shareholders will somehow get control of the company or its assets. it is basically guys sitting in china, laughing at the gullibility of u.s. investors. >> i want to come back to the gullibility of u.s. investors and what if anything regulatory or self regulatory bodies should wedoing about it, but before
get there, walk us through some of your analysis. how did you and your colleagues determined that this is worthless, a fraud, a king zero, in your own words? >> sure. let's look at the company and at claims on their face first. this business supposedly was started in 2014. by 2015, it was clocking in percent.gins of 97 net margins in excess of 70%, and that climbed to above 80% .he second year of business what do they do? they claim to make loans to small-medium enterprises or arrange loans to small-medium enterprise. when we look, pretty much every disclosure they make that you can try to verify, if their
business is real and not, every stone that we can overturn shows that it is a zero, so the purported borrowers that it was disclosed, those companies look like they are sham counterparties basically controlled by the chairman and his friends, leading us to conclude that these loans never occurred. other customers, same thing. this looks like a classic china fraud where you have the company and you set up fake customers to basically create paperwork, but , no moneyo business to be made other than from the ipo.
>> as we are on the subject of shortselling, let's have a look at a lot of the business that has been going on in asia's booming dollar bond market. tell us about the story. >> i think we have seen more shortselling in the dollar bond market, and there are a few reasons for that. the main reason is because of an increase in repo liquidity, and that's because of banks becoming bigger buyers of bonds and bending out those bonds to hedge funds. broad story and also at the same time, we are seeing high-yield issuance this year. people are thinking maybe they could make some money if they shorted bonds, so we are seeing more interest, but also it is becoming cheap and easier. >> let's look at some of the
issues here. us issue is, i should say. what are the reasons then behind actually going short? >> you short and company if you think you can make money out of the slide in the bonds. you know if companies are risky, the bond markets might fall. when you see the bonds slide down, it is often weaker companies that get targeted. market issue is come to as well. maybe they are less transparent. for whatever reason, they are sort of c&s targets. we also have situations which are sort of unfolding and people may see an opportunity to short sell those bonds. >> thank you so much for that.
>> indian markets just getting under way. the rupee pretty much unchanged. let's talk about, though, what is going on in india because it is a bumpy road for the government. we have rising inflation, higher oil prices, and this is converging on the indian bond space with a result, the deepest selloff in something like 17 years and the signs point to things getting worse here. .et's get to mumbai how far do investors see these bonds actually falling now?
>> yeah, there seems to be no relief for bond traders right now. as you pointed out, there in the longest losing run since 2000, something like 10 out of 15 traders and strategist see bond yields rising from here. some see it rising as high as 7.5%. more pain to be seen for indian bonds going forward. >> what is causing uncertainty with the budget deficit? >> a lot of factors have waited on the bonds recently.
just a reminder, we had elections in a very key state in india, the home state of the and the prime, minister's party won the elections, but the margin of , andry was very, very slim that has stoked speculation the government might lean towards populist measures to attract voters ahead of the 2019 general elections, so if the government resorts to more populist measures, it could be the government dividing its budget deficit, and the government may actually come to the bond market ,o finance that budget deficit and that is the main reason bond traders are very, very worried. very quickly, 10 seconds, what about inflationary concerns? very quickly.
>> there are a lot of headwinds on inflation. .il prices have climbed there are high government salaries. mayor plusnder, the most recent policy was released last evening, and that speaks of concerns about inflation. >> a great stuff. bloomberg markets middle east is coming up in a few minutes. tell me about it. what have you got on the plate today? >> we had a budget announcement, and in the last 12 hours, we sat down with the minister of energy to really explore his view and outlook when it comes to global energy markets in the new year, in 2018, but we also break it down in terms of some of the stories coming around domestic
alisa: i'm alisa parenti in washington, and you are watching "bloomberg technology." let's start with a check of your "first word news." president trump is celebrating the package of republican tax legislation, claiming it fulfills his campaign promise to repeal the affordable care act. the $1.5 trillion package was passed in a revote by the house today. the senate approved the legislation early this morning. house republicans are moving toward passage of a strict-down, temporary funding measure to avoid a government shutdown on saturday. that's after a number of senate measures were pushed back to next year, including a plan to stabilize affordable care act market. that is something that was promised to maine senator susan collins before getting her tax vote. some members of the house refused to support the measure.