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tv   Asia Edge  Bloomberg  August 23, 2015 11:00pm-12:01am EDT

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and west texas below $40. futures in their longest slide for three decades. hour, also coming up this marathon negotiations continue between north and south korea as kingdome -- as kim jong-un turns up the heat. powering down. toyota takes a hit in tokyo with confirmation its biggest chinese plant will remain closed for at least two more weeks. plus, banking on streaming. softbank in charge of netflix distribution in japan beginning in september. those stories and more in this monday edition of "asia edge." falling off a cliff. what do you want to describe it as? it is the view across asia. below is close since april. shanghai composite erasing the gains for the year.
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in a at its lowest point quarter of a century. david is watching this carnage. david: painful. it is a painful day for investors. on $1 trillionn of market cap that will be wiped off the value of asian stocks just this morning. we do have another big asian market opening up this hour, india. it says a lot. it says a lot when the outperform or is down 1.7%. is downutperformer 1.7%. shanghai composite erasing its gains on the year. , at one point,up almost 60%. , we are down about 900 points here. taiwan is the other big market as well. we were down 8% at one point. the biggest single-day drop.
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-- last time it was this bad i do not know which won the oscar best picture in 1990. what was it? the ban on shortselling that regulators have put into place to effect -- took effect today. we are down 3% for the nikkei. topix just entered a tight correction -- a technical correction. you put those two charts together, you have the yen gaining against the dollar. quickly,markets, very the ringgit and the rupiah falling more than others. the ringgit is at 425.
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ofhink the rupiah was north 14,000. brent futures under $45 a barrel. damage report. we will get the latest there. rishaad: governments have stepped in, trying to prop up the following markets. steve has been covering this for us all morning. 0 beinged about the350 the line in the sand. that has not held. coming in to talk about limiting shortselling. that clearly has not worked. >> there have been a number of measures and they are not necessarily working. , quoted earlier this morning saying hopefully asian markets do not panic. well, there has been some knee-jerk decisions.
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you have the directive coming out yesterday from taiwan, authorities slapping a ban on shortselling. the taiwan stock market is down 6.2%. it is down 11% over the last five sessions. it is the worst performance since 1990. china has had a number of different measures as well. funds can now buy stocks for the first time. that is not propping up the market. shanghai composite down 8% today. down 19% in the last five sessions alone. they have been major shareholders from selling. that has not helped. who is selling them? not the major shareholders. very few people are buying today. rishaad: talk to me about the price-to-earnings ratio. >> it is about 16 times. if you look at the median company, 61 times.
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that is the most among 10 largest markets and more than three times the 19 multiple for the standard bourse, the s&p 500. saying thes government in china is trying to defy market forces and politicians should try to help the real economy. they have gone past what we thought was a line in the sand, 3500. rishaad: thank you for that. stephen engle with the latest on the market. angie: we have had some big-name interviews this morning, including the ceo of south32. it posted the first set of results since a merger with bhp billiton. full-year earnings rising. their ceo told us they have been cutting costs to battle the commodities rout. we think about the group going forward and we are
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planning a couple of hard years. we have to focus on things we can control, the cost and the capex. if you look at the fundamentals, it is hard to believe that commodity prices will continue to trade where they are, or the majority of producers are basically underwater. angie: we also heard from the president of the thai stock exchange. shares hit their lowest in 17 months on friday following the bangkok bombing. she says several things are hurting the economy. >> we have two factors ahead of us. how they are just their portfolio. secondly, the slow growth of the thai market. we have seen the sale of the u.s. dollar so far.
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, aboutd to the year 2013 6.2 billion u.s. dollars. calvin's regional ceo for ubs wealth management in singapore. he has talked about the economic impact of the expected fed rate rise. a september is the month -- we think that september is the month of the first rate hike. we think that volatility will spike up. all of the other factors, the chinese devaluation, the pmi numbers, if you put all these together, it seems there will be quite a sharp slowdown where the global economy is concerned. angie: and that was the word from asia. rishaad: let's have a look at some of the headlines today. with tensions rising again on
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the korean peninsula after a weekend of cross-border talks produced no agreements, the two sides meeting again amidst exchange of artillery and accusations in recent days. kim jong-un stuffing of the mobilization of his forces, sending gunnery units near the dmz. the yen advancing to six-week highs as investors are looking for a haven. index futures signal that the slump will get worse before it gets better. have a look at this for the aussie and the south african rand, also down. its biggest production lines in china will stay silent for at least two more weeks after the deadly explosion or the deadly explosions in canton -- in tianjian. -- august 12 last discord destroyed nearly 5000 vehicles
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that were awaiting delivery. met isaortescue tumbling after full-year profit missed estimates. ls let's get over to paul allen in sydney for more. how bad is this? paul: we have a suitably gloomy backdrop to go with the results. what a difference a year makes. billion was the profit last year. now it is down 88%. their only product is, of course, iron ore. is down., that it is unlikely to improve anytime in the near future. 58 million tons is expected to only go up. cue will maintain its current levels, but their cfo
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said the decision to maintain current output is market vandalism and self harm. they are desperately trying to pay the debt. they had some breathing room there. also offering a dividend of two cents per share. iron ore is a key ingredient in steelmaking and as the price of steel flunks, is saying bluescope that it might the government support. what is this? australia ships its iron ore to china, which turns it into cheap steel. it makes it difficult for australian still lingers to compete. bluescope also reporting earnings today. what is grabbing headlines is the remarks by the ceo.
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100 million tons per year, 20 times the output of bluescope's very large steelmaking facility just tell of sydney. as the iron ore price goes down, the price of steel goes down even more, making it cheaper than a local product. whatcope have been doing they can. ceo, sayingy, the that it needs a game changing approach to costs. if they cannot achieve this, they will need government support. they released a very encouraging set of earnings today. to $136it up 9% million. the bluescope share prices, as a counterpoint to everything else that is going on, are actually up. angie: coming up later on "asia edge," toyota is finding it hard
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to get its engines started with its biggest production line in china remaining idle. we will have more on that and the shutdown. rishaad: up next, what do you do when the markets are in turmoil? we speak about mccourty investment management about a strategy. ♪
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rishaad: checking some of the stories making headlines around the world. angie: china's second industrial blast in 10 days have less one person debt -- has left one person dead and more injured. an employee was killed when a fire at his plant caused an explosion. the latest disaster came as the number of people killed in the tianjian explosion has reached 121. seven police officers are among them. dozens more people are still missing. police say luck will be needed to catch the
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people behind the bangkok bombing. perpetrators have fled the country. the reward for information has been raised to $85,000. the investigation appears to have made little headway the on the security video, the sketch of the main suspect, who has yet to be identified. two major lanka's political parties have signed an agreement to work together to safeguard the rights of ethnic minorities. the deal between former rivals follows the prime minister's victory in last week's parliamentary election. it also ends a political comeback bid by a former president, who could now face investigation into allegations of war crimes and corruption. rishaad: there is only one story, global selloff, asia-pacific selloff. it is different this time. it is different every time, sam. sam: this one is more economy-related.
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i am not surprised -- i'm a little surprised we did not have p recently.u very soft economic conditions of ground in china i think what we need is a revision to the economic growth target. then we need some monetary easing, some stimulus programs to put some confidence back into the market. that is where we are at the moment. it is really a very large selloff. it is sliding across the rest of asia. taiwan today is down over 6%. a very significant selloff. angie: the message is a little scary for retail investors in china. eventually, it was the pboc or china will always step in. below the 3500 mark, they always stepped in, whether it was stimulus or cuts. now, silent. m: you can look at the stock
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market in terms of regulatory approvals. it needs to be the economy. what we need is significant liquidity to come in via the pboc and then lent into the real economy. we need interest rate cut rrr cuts -- interest rate cuts, rrr cuts. also, the corporate market is still very high. we need to essentially cut the rates and that will help the economy. rishaad: we were talking about this on friday and we saw the flash pmi number. it did all right in the afternoon. some news that they were going to do some cuts and we would see the market bounce up. just the prospect of that would see a market recovery. as you were saying -- angie: nothing. sam: we are seeing the need -- we really need some reaction. or reaction is, continue qe
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supplementary lending. we talked about that a lot on your show. it comes back to, on the ground in china, retail sales are softer. one thing that will balance my -- the h the age shares, i do not think they are expensive. we took a lot of profits. a lot of taiwan and a lot china. potentially, some opportunities are presenting themselves. is on 15 orkely hsi 20 times earnings. angie: what is the mentality in terms of the selloff? profits or areng they really feeling that the fundamentals are so skewed, so different that it deserves capitulation? are some cracks in
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the fundamentals and that is important. if you look at the stocks that have been sold off, it is the cyclic -- the cyclical sectors. the brokers have been sold off quite aggressively as well. equally, there is not anyone stepping in and buying. you have these stocks down 10% today. risk and risk is is incorrectly priced, there is also opportunity. we are sitting on a lot of cash for our clients and looking at some opportunities at the moment. but expect very volatile conditions to continue. it is a must a certainty. rishaad: picking up on what angie is asking, when do we know we are in the capitulation? we have just begun. there needs to be a lot more selling off dennis. the pboc announced some very program, that would put some balance back into the sentiment. it is going to remain very volatile for the time being. angie: so you are sitting on some cash for investors.
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when do you go in? or do you feel like there is still more to go before we have hit bottom? greater china fund we have been overweight for seven years. we took significant profits in june. some of that timing is coincidence. we did sell taiwan aggressively. .e also took profits in tech we took some profits in the materials and cyclicals as well. for us, i think you just be patient. you have got to see the tangible earnings coming through. you have got to have reference points to have that confidence come back in and then the ensuing valuations. if i'm going to buy this throughout the cycle, will i have confidence that they will continue to deliver margin improvement? that is fundamental investing and that is what we would do. we will be very selective. equally, it is going to be very volatile. you do not want to be catching falling knives either.
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angie: no, we don't. you need some bandits after that. let's get the rest of the gang in. rishaad: you look at a company like htc, 6.8% down at the moment. 8.5 percent down for the shanghai composite. this is getting ridiculous. angie: we are going to continue the conversation. u.s. equities, down the most in four years. we will check out what is ahead this week aside from volatility when "asia edge" continues. ♪
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a tough week for wall street. let's take a look at what is ahead for investors in the u.s. su keenan from new york. will focus onhead one key question and that is the direction. will the market rebound from last week's sharp losses or continue? the global selloff saw the dow .all more than 500 points the nasdaq fell 3.5% in what turned out to be one of the worst weeks for wall street in four years. analysts described it in different ways. one said thursday was a decimation and friday was a followthrough. another said it was a flight to safety for many investors. the big question is, what will the coming week bring? commodities also appear to have
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been stuck in a very sharp downward path. goldman's head of commodities research said it is unlikely we will see $100 a barrel oil again. >> when you look at commodities, they just go from corner solution to corner solution. the market thinks it is around $50 a barrel. we think about what is going on right now, they typically just run a surplus and hit a wall. of the latest economic data, a number of reports expecting to hit the market. the u.s. economy probably grew at a faster pace in the second quarter than previously reported. confidence is also forecast to have gained in august. all of those reports likely will gain a lot of investor focus. meanwhile, central bankers, economists, and other market participants will be gathering
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in jackson hole, wyoming, for the federal reserve bank's annual symposium. best buy among the companies reporting. rout extends over in seoul. amidst tensions between north and south korea, south korean equities down close to 3.5%. it ishere in hong kong, following all major asian markets lower today after u.s. stocks had their biggest two-day retreat in almost four years on friday. we are also seeing the biggest five-day retreat for japanese equities right here. ♪
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angie: the top stories this hour -- it has been a devastating day on asian stock markets. investors facing losses rapidly approaching $1 trillion. the shanghai composite erased its gains for the year while the topix is headed for its lowest close since april. the taiex has had its biggest drop for a quarter century. over in australia, the asx 200 has fallen the most since 2011. oil continuing its slide.
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brent is below $45. west texas is under $40 in new york. weak demand and the global glut are to blame. the drilling race has increased for the seventh time in eight weeks. marathon talks are continuing between north and south korea amid rising tension on the divided peninsula. as the two sides meet, seoul said kim jong-un stepped up the mobilization of his forces. the won has hit a four-year low. stocks in seoul are retreating for a sixth straight day. let's get the latest on what we're calling carnage in the market. david ingles is standing by. it is quite that. we are seeing a sort of carnage or damage. all of these micro-investments, the earnings get thrown out the
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window. we are seeing declines just about across the board. indiscriminate in some cases. volumes are quite heavy. we are likely to see europe and the u.s. open up with sharp losses. there is a little bit of rotation back into the bond markets. is at around 2% this year. let's bring it back to asia. closing in on about $1 trillion of market cap that disappeared this morning. do not be surprised if we do cross the trillion dollar threshold when india opens up and asked to the damage we are seeing right now. china, what do we have? lunch break. the shanghai composite has erased all of its gains this year.
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we are down 4.5%. despite some of these rules that limited shortselling. things didn't look shaky for taiwan if you go to back to early july. then, billions have been pulled out of this market. a similar theme in south korea. morning, 244 million without close out of the country. take a look at japan. if things do not improve, the topix will close in a technical correction. out.ollar is moving you look at those two charts and that tells you that investors are sitting this one out as far as risk is concerned. that brings me to currency markets. have a look at the malaysian ringgit.
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4.2455 is your level right now. levels last seen in 1998. that is the good news. back to you. another update before the hong kong exchange rate for lunch. give us an idea of what is going on there. >> as you would expect, not a great day here at the hong kong stock exchange. the hang seng index officially into their market territory in the close on friday and has been continuing to sell off today. down 25% from april 28. we have seen a 17-month low on the hang seng index, the seventh day in a row that we are in the red. every stock at the moment is in the red. the best performer down by .2%. the leading movers are all in
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the red. if we look at some of the lagging stocks, we're seeing big through from china life insurance. diversified stocks down about 5.6%. banks down by about 4%. hong kong exchanges also under selling pressure. i was here two weeks ago, talking to the ceo of hong kong exchanges when the results were released. he was saying that the outlook for the market moving forward was a lot more buoyant following the big equity route that we saw in july and when we started to see intervention into mainland stocks. he was also saying that the climate for ipo's is a lot better. you would have to say today is not a great day for hong kong exchanges. quite a lot of selling an activity here. the phones are buzzing behind me as we continue to see these downbeat rides in the markets. rishaad: you were at the stock exchange a matter of weeks ago, talking to charles li.
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he was pretty of the if i -- upbeat, if i recall correctly. >> yes, he was. a sickly saying that they had the first ipo since the equity rout on july 8. we were here for that as well. it was one of the stops on friday that actually fell from its ipo listing price. so all five of the big $800 million ipo's at the hong kong exchange have fallen below their listing price. even though he was quite buoyant about the outlook for ipo's moving forward, we touched on the fact about whether or not the hong kong exchange would tie up shenzhen. today, quite a lot of selling coming through. rishaad: thank you very much. among those contributing to the market rout, toyota plunging the most in 18 months after confirming its biggest china lines will remain silent
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for at least two weeks before -- because of the deadly tianjin blast. let's bring in craig trudell now. how does toyota get these plans working again? plants working again? >> it is a very good question. to some extent, it is out of the company's hands. there is concern about the safety of this area with a media saying there are about 1300 metric tons of explosive chemicals that were at this blast site. toyota is saying, look, we cannot guarantee our employees safety and until we are able to do that, we are not going to put them in harms way. they have also said to this point that they have not been able to get to those silly that all near the blast. there have been pictures circulating on social media suggesting that there was substantial damage to their facilities. you have seen a lot of photos of but alsout cars,
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blasted out facilities, including toyota's operation. some substantial concern that to augustt extension 26 being the point at which toyota plants would stay down -- to this point, they have had to move that date back further and further. some real question as to whether or not this will be the last time. angie: that is the thing. how costly could this be for toyota's ambition in china? >> the company makes a range of models in these operations. the costliest vehicle in these plants is the crown, a car that sells for more than $40,000 u.s. there is a range of cars being produced here. you have corolla and some cheaper models around the
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$15,000 range. it is difficult at this point to say just how costly this will be for the company. oftainly, an extended period lost production would be a big hit to toyota. it comes at a time in which the company has kind of but the trend ofbucked the china's market slowing down. the company was showing some positive signs of being able to overcome that. this could be a significant roadblock to keep that up. angie: craig trudell out of tokyo for us. thank you for that. rishaad: having a look at some of the other stories we are keeping tabs on today. releasing his first result since being spun off from bhp billiton. about 170 million more than one year ago. they have had to reduce costs amid a rise in output and the fall we have been seeing
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commodity prices. shares dropping about 30% since their debut in may. reports from india say nestle noodles might be on the shelf since the end of december -- by the end of december. june.ere banned in nestle says it will continue to sell the existing formula without changing its ingredients and will spend aggressively to rebuild the brand. the finance minister saying that the official target of 8% gdp growth can be achieved if there are no "adverse global trends." he said that inflation is under control. moody's lowered its growth forecast earlier this month. angie: india's prime minister swept to power with the biggest popular mandate in three decades.
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his reform agenda has faced bitter opposition in parliament. soon he will face state elections that may consolidate his position. first, we will be in poverty-stricken bihar, where modi just announced a $19 billion development plan. tom last there has been to bih toassessar -- to bihar assess the challenge of daily life. >> when the river is high and there is no bridge, the only way of getting there is by boat. what you see is much of the coming tot by boat the shore. when the boats get close enough, they sort of pop up -- prop up a plank roughly the size of a two by four and people slowly walked down. you see wedding parties, merchants holding sacks of goods , motorcycles going down one by
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one, young mothers holding their babies close, young men getting off headed for work. the life of an island off, one by one, down this plank of wood. coming back from the island after interviewing the police officer who replaced another officer who had been shot through the chest and thinking about that officer who had been shot, his journey from the island to the mainland as they were taking him to a hospital, just bleeding out of his chest , coming backboat from that interview, i thought about that. the fact that this guy, because he had to take that both, -- bat, -- boat, because there is
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no bridge, because of the paucity of resources there, he really had no chance. lasseter onwas tom the challenges. and there are many facing the people of bihar. let's go over more of india's challenges. it is important to modi's political future. let's go live now. what makes this election so important for modi? modi won national elections 1.5 years ago with the largest mandate in 30 years. is controlpublished over half of india's parliament. accomplished is control over half of india's parliament. for him to gain power in the --er half of parliament
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house of parliament, he needed victories in states like bihar. by fivell be followed other elections next year. this will really set the bar for modi. if he can win any game this momentum going international elections, then he has a good shot at really consolidating power. it will help him pursue the reform agenda that has all -- stalled in the upper house of parliament. to slidees, he begins down a slippery slope of potentially waning national support. angie: tell us about the big challenges for modi in bihar. is one of india's poorest and most backwards states. this is a place where lawlessness runs rampant. the social infrastructure needed for upward mobility among 100 million people is really lacking. for him to really win this crucial state, he needs to cut
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across the society, which is based largely on caste. people make their decisions on who to vote for based on who is running from their community. and largely, who has the same last name as them. by their best chance of getting representation in government. to some extent, that has not really worked. what modi needs to do is consolidate power and pursue his development agenda and convince the populace that my way of doing things is significantly better than what you have done for decades. thank you so much for that. out theret is a rout across the asia-pacific. "ront and center on "asia edge today. do stay with us. ♪
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let's take a look at the stories making headlines around the world. angie: singapore has been promised more editors ahead of elections. the premier announced plans to raise the employable age to 67 from the current 65. he said he would call in elections soon, which would be critical for singapore's direction over the next two decades. rishaad: the americans who helped avert a mass shooting on iteris-bound train a they acted purely on instinct. publicly foroke the first time since a heavily armed man tried to open fire in a crowded carriage. they helped subdue the attacker, who was a 25-year-old moroccan who authorities say had links to radical islam. angie: welcome back.
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steve, and is shery, the cohead of asian equities at mcquarrie asset management. thisad: we were looking at earlier. steve and i were messaging on friday about breaching 3500. stephen: on friday, it did that. sam: where is the support? stephen: you are saying china is losing the arm wrestling. sam: i think they are. they need to come out and revive their growth targets. -- revise their growth targets. if you have a cleansing growth is ad say little bit tough, i think that is good for the sentiment.
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angie: you were mentioning a triple are cut earlier -- a rrr cut earlier in the program. sam: if you go back and you look at the rrr from 2007-2008, it was down. that was really the inflows that we were seeing. if you look here today, the capital outlook -- how close we -- capital outflows we have seen are not enough. to answer your question, there are two different types of rrr's. the large banks and the smaller banks. we need 1000 basis points across both the large and small. about 12s points is trillion rmb. that is a huge amount of money.
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relief more than the rrr program. angie: generally speaking, what do you do with investors? you have managed a fun that has done -- fund that has done exceptionally well. you time to really nicely with the june trigger point. do you sit on your profit for the rest of the year? how do you make your money work for you right now? to: i think it is too early come in with your head down. we need to remain defensive, focusing on two things -- quality and risk. that was the mantra for us in june. we took a lot of profits and put the client interest first. we are going to take profits and hold some cash. we are holding a lot of cash at the moment. even still, i would not be rushing in and buying. ery: you mentioned south korean cosmetics stocks. what do you do with them now?
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are you still sticking with them? sam: we are. they continue to outperform. most of the korean names that we and are still outperforming even some on an absolute basis. .ong-term, you hold them true the worst thing you can do in this type of market is to be reactionary. if you are selling them just because the stock market has fallen already, why didn't you sell beforehand? that is the job of a portfolio manager, to price risk accordingly in the market. with korea, the job is to focus on risk and risk management. with korea, if it came off, we would look at it as an opportunity. i think korea is a very cheap, absolute market. korea is one of our lease concerns at the moment. angie: our technicals a good clue to buy in?
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say you wanted to do some shopping. you have some equity shares down at a range that is the lowest price point average -- what do you do? or should you still remain defensive? sam: if you look at it in terms of long-term average, like p/e, index in japan is just below its 10-year average. some markets are above. keep away from the cyclicals, buy quality. angie: quality is better than quantity. thank you so much for that. coming up next -- rishaad: softbank signing an exclusive deal with netflix in japan. angie: we have the details when "asia edge" continues. don't change the channel. ♪
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angie: netflix set to launch in japan next week. for the world largest subscription video service, they are partnering with softbank. rishaad: this has been a long time coming. angie: they were talking about fall. we did not know when. september 22 will be the official date. the first step into asia as they continue further expansion in the region. some say the move does make sense. in terms of internet connection speeds, one of the fastest in the world. he partnership with softbank
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could be huge. they will be helping themselves subscriptions through its retail shop. if you want the basic plan, about five dollars a month and up to $12 a month for the premium plan. they launched in europe last year, new zealand and australia earlier this year. who knows what is going to happen after japan? could it be hong kong, singapore, china is angie: how much competition is there for netflix? yvonne: they are four years behind hulu, which entered back then. but there are local players as well. softbank has its own streaming service as well. this is the first time that a u.s.-based company is going to be launching overseas and launching full content. they are partnering with fuji media to bring some interesting dramas, documentaries, whatnot.
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we would normally be going off their, but we have a special half hour. angie:
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announcer: the following is a paid advertisement for time life's video collection. carol burnett: hello, i'm carol burnett. and i am here at cbs in los angeles, at studio 33. come on in. ♪ announcer: from television city

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