tv Bloomberg Markets Asia Bloomberg April 5, 2017 9:30pm-10:01pm EDT
speculative frenzy when i investors tried to buy property. there was a ban over the weekend. we had cement makers, industrial names, let up on a given nation lead to infrastructure. of whereindication policy goes, you see investment flows. let's get first word news with paul allen in sydney. yum china soared after a turnaround, beating estimates. saleshut same-store climbed 2%. analysts had expected growth to be flat. results signal a strong start after it's been off last year. oil pulling back from a one-month high as traders balance concern over u.s. stockpiles with rising refinery demand. american supplies rose above 535 million barrels, the most going
back to 1982. refineries were at 91% capacity, up 1.5 points from a week earlier. u.s. refineries typically increase production ahead of the summer driving season. the department of homeland security will continue searching mobile phones of travelers into the u.s. as lawmakers questioned whether the policy is unlawful and intrusive. secretary kelly told the senate committee that the searches help keep terrorists out of the country and affect only a fraction of the people flying to the u.s. every day. president trump has reiterated his discussed at the gas attack in syria missing the perpetrators have crossed a line. dozens of people were killed in tuesday's attack in the idlib province, and the president has said using chemical weapons will have consequences and said the obama administration had failed and he now carries the responsibility proudly. >> it crossed a lot of lines for
me. ,hen you kill innocent children innocent babies, babies, little babies, with a chemical gas that is so lethal that people were shocked to hear what gas it was, that crosses many come up many lines, beyond a redline, many, many lines. paul: global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am paul allen. haidi: thanks for that. -honghai kong-shenzhen markets opening. let's get a check with sophie. sophie: looks like they are joining the regional downturn in asia. advance,a two day shares in hong kong lower 5.5%, shares in shanghai lower by .1%. we are waiting for china caixin
pmi. we will see how that feeds into market reaction. taking a look at how that is playing out when it comes to sector breakdowns on the shanghai composite, only real estate and materials stocks on the up-to-date. just a note, we do have several governments around the new economic zone to be developed, seeing they will be putting into place property tightening measures to ensure speculation is not too rife and otherwise, banks and consumers staples leading the drop in shanghai. take a look at some stocks and focus. let's look at tencent shares trading today. wells fargo ind terms of market value to become -- part of the top 10 biggest companies in the world. we do have that trading lower by .8% today. china unicom resuming trade, up
.4%. it could see a change to its shareholding structure in response to the government nudging is so easy to draw in more capital. ejiang expressway falling over 5% today. ahead of its post-earnings briefing at 11:00 a.m. today. it was one of the gainers. this chart,ent, on number nine on that chart of top companies by market value to give you that visual of how it is doing so far this year. i would like to end on a look at how korean assets are faring ahead of that summit. we do have the won an korean stocks on the back foot, the won retreating for a third day. geopolitical events on the peninsula will be a key focus
for donald trump and president xi jinping when they kick off their summit today. that, thank you for sophie. china markets are joining in on this regional shout out on the back of those fomc statements overnight. chemchina is closer to its $43 billion acquisition of syngenta after the eu competition authority approved the deal him a but china's capital outflow restrictions could mean it is the last megadeal for quite some time. our gadfly columnist has more on this story from hong kong. are we sing this latest step by step towards the ultimate conclusion of this deal, why are they so key to chemchina? >> because i think these are the two big approvals that would have gotten the deal through. now they have the u.s., and in europe. you only have mexico, india, and china left. mexico and india have not stood in the way of big mergers.
india has asked for concession sometimes, but generally they don't get in the way, whereas china once this deal. china has to cope with the basic dilemma. it has such a huge population and only 9% of the world's land. we have heard the sentiment coming through from chinese corporate, mumbling or capital controls have put a stop to their ability to do deals. is it really protectionism, or is it controls over currency being able to leave the country that is having that impact when it comes to dealmaking? isyou can't deny that there an increased protectionist backlash. we have seen it with the u.s. national security body that looks at deals, and there are lawmakers pushing back against deals in hollywood, for
instance, but we have seen it in australia and germany, so there is definitely that, but the bigger issue is the chinese capital outflows. so china will probably stand in the way of big deals. thei: yeah, so i guess trend for these mega deals because it is so high profile, we have seen a number of other ones get vetoed, not just when it comes to the u.s., europe, but also here in australia, so do we expect to see a steady flow of smaller low-key deals, if you will? have smaller deals that are strategic and important to the chinese company eyeing it, but not -- buying it, but not buying a hollywood teamer hollywood assets for the sake of it, then yes, they will get through them up at the make a deals, i think you can forget it unless they are of strategic importance to the company or country. haidi: thank you for that. this is something likely to be
opene agenda, these borders ahead of this highly anticipated meeting between president xi jinping. let's look at the economic and market impact of these talks with bloomberg intelligence chief asia correspondent in singapore today. so much attention and analysis going into the summit across the media, but i have a feeling you're going to for cold water over this a little bit. >> i'm afraid so. so a huge amount at stake in the bilateral relationship from trade to the exchange rate to regional security, and a lot of ink has been spilled on the outlook for this summit, but the reality is that the markets are not particularly excited. if you look at key gauges that should be moving, well, taiwan tech stocks, chinese ports,
which should be first in line to suffer if there are trade sanctions, they are unmoved, maybe up in the time since election. if you look at the yuan, we should be moving if people expect trumps talk on currency manipulation to have any impact, as well.uan is stable inc. being spilled come interest on social media, but so far, no traction in the markets. haidi: you mentioned currency manipulation. that theyeresting expect trump to label china a currency manipulator in these meanings. that would mean they either change the definition or ignored the definition. do you think that is likely? >> well, anything is possible. definition of currency manipulation was defined by the united states. it is open to change the definition if that is what they
want to do. definition to the designate china a currency manipulator, i think that will undermine their own credibility. the reality is that china is no longer intervening in the markets to keep the yuan undervalued. if anything, they are intervening to stop it from depreciating against the dollar, and a u.s. currency manipulator designation which ignores that reality i don't think we'll have much impact on changing chinese behavior. if youi suppose that were to argue that anything can happen in come out of this meeting, you have on the one hand, a lot of domestic pressure going into an election year in china head of the party congress. trump is under pressure to appease the voters that voted for him on the promise to get tough on trade in china, so what is the scenario that could play out if either of them, neither of them, i should stay, don't
back down. it is a codependent relationship, but who needs the other one more? >> i think you are right. it is a codependent relationship, and i think that is why it is difficult for either side to make extreme moves away from the state's quote. yes -- status quo. yes, for donald trump it would be a publicity when and a -- win and a concession his supporters if he took a swipe of china on trade, but the reality is that some of the biggest losers of that move would be the people who voted for donald trump and who enjoy cheap chinese goods at walmart and target. also in the firing line with the u.s. companies that produce in china for sale to the u.s. market or sell into the u.s. market. so, yes, there could be some easy publicity wins by taking a swipe at china on trade.
the reality though is that the cost would likely outweigh the benefits to it haidi: all right, we will leave it there. thank you for those insights. joining us in singapore today. we will get more on the meeting and a moment. we have the chief economist at lord's china to talk about the economic issues that both leaders have to address and what could actually be achieved. this is bloomberg. ♪
againstp says betting individual u.s. retailers is the next big short. analysts say investors should consider buying default protection through the derivatives market through a basket of bonds. the strategy does differ from that pursued by many hedge funds, who bet against retail properties. jp morgan shareholders will vote next month on a proposal to halt payouts of an infested equity. -- i'm invested equity. invested equity. it comes as donald trump taps wall street figures for top post. it says it doesn't see how the bank benefits from golden parachutes. some breaking news crossing the bloomberg. at 52 .6 inmi
march, a third day of falling. 52.2.rvices pmi at it was 52.6 in march. let's get some analysis on what this means. we are looking ahead to that eminent first meeting between president trump and president xi jinping with strongly different agendas and play. i want to talk to my next guest about what the two leaders can accomplish in florida. he is the chief economist at deloitte china, based in beijing, but great to have you in sydney. one of the things you say is a warning that china should take trump seriously about what? >> about bilateral trade. complicatedabout supply chains, value added, but in the end, the trump administration is taking so-called surplus countries very seriously. chinese are on the top of the list, followed by germany and japan. more importantly, some people
have attributed a very large bilateral trade surplus to certain states, very protracted job losses among blue-collar workers, so china should take trump seriously. haidi: do think on that indicator a loan that they were label china a currency manipulator? >> i don't think that is the case. i think everyone knows that china is trying really hard to keep the renminbi exchange rate stable. otherwise today's exchange rate would have been seven against the dollar, so try no china is g very hard, so i don't think currency manipulation is an issue. access isrket an issue. this chart is a correlation between foreign reserves and the yuan. isare in an era where it
domestic factors driving policy, not this need to devalue for competitiveness or global trade competitiveness. >> no, it is not about competitiveness. if you look at, for example, the data from the wto, actually compelling evidence suggesting australiarket share, and new zealand included, is staying remarkably stable, so that suggests chinese products stay competitive, but at the same time, i believe renminbi -denominated assets are extremely expensive, so if you look at real estate in sydney and melbourne, compared to beijing and shanghai, it is no comparison. urge foris this strong consumers to diversify. that is natural.
that force in the medium-term will dominate the trade surplus. talking with our bloomberg intelligence analysts about this codependent relationship. if you look at this our chart on the bloomberg, we are off historic highs when it comes to the amount of trade the u.s. those with china as a portion of total trade, global trade, but still very high, 17% in 2016. who needs the other more? this point which i think is lost among trump supporters who want him to get tough on china, that is the part of the american consumer that will be missing out on these cheaper chinese goods come and that will have its own negative impact on the u.s. economy. >> it is difficult to say who needs more. without china today, if you look at short-term interest rates globally, we would be at very different levels. without china, i don't think real estate prices in sydney and
melbourne can sustain today's titration because interest rates would've been higher without china, so it is difficult to say, but i do think at this point there is a very important work being highlighted by policy wonks in washington dc, reciprocal. actually that is exactly what china wants to do in the long run, but in the short-term, i don't know whether is there a sense of urgency. or example, financial services, health care, education, entertainment and so i think china has leverage, and the leverages meaningful market access. haidi: what is the potential for escalation? whereve two deiters, president shanshan feng is facing an election year, the party congress. trump needs to appease core supporters who want him to get tough on china, so what is at risk there? >> you have two strong personalities that could clash,
so that is a risk we should not underestimate. right, president xi jinping -- there is a need to save face as well. >> well, i do think in the end that both countries are pragmatic. practical, and in the end, the chinese are quite rational. haidi: let's hope cooler heads prevail. we will continue our .onversation a bit later, we will be joined later by mark mobius at 11:10 hong kong time, no doubt weighing in on whether this emerging market rally has legs, but before that, we will look at post brexit britain and europe with the vice chairman of yners. council paul m
haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. china's that also growing more complicated as bonds surge. now is stephen engle. this is another piece of the puzzle appeared what we have going on here? >> i have been covering this for years. , it isructure spending an old cocktail the chinese government and the local governments are having a hard time weaning themselves off of. createn easy way to stability and gdp growth, so
these local municipalities were forbidden from selling bonds, so they turned to local government financing vehicles to sell the bonds for all these infrastructure projects, airports, roads commit business parks, stadiums. they are empty and don't have a lot of cash flow from so that funding was often times off book , a we did not necessarily know the true extent of the liabilities and the depth pile at the local government levels, but now these cash-strapped municipalities and local governments have been given the green light to also sell bonds come off book bonds, called special bonds in china. these have swollen to eight times 2015 levels to fund the construction projects like railways and the like. they have an given the green light to sell upwards of $116 billion of off book bonds. that me show you this chart in the bloomberg terminal. on the right is general bonds
come on the left, off book bonds. this year, off book on issuance is almost equal to general bonds. haidi: special indeed. how does the story and and when does it end? we have been talking about it for so long. >> a lot of people have called this the treadmill to hell, the constant rolling over of this debt, sometimes it will come home to roost, or maybe not. maybe they have us cofounded. says it is not sustainable. enjoy the ride, but don't expect a final destination. have you have been talking with your previous guest, leaders want stability ahead of the twice decade party congress at the end of this year when cadres get their promotion papers or do motion papers. they want stability, and the best way to do that is to sell off book bonds and stimulate, stimulate, stimulate. haidi: at all costs.
♪ announcer: from our studios in new york city, this is "charlie rose." charlie: president trump will meet with chinese president xi jinping at trump's mar-a-lago resort this thursday and friday. it is their first meeting, an important step in u.s.-china relations. they are expected to drop -- expected to address such issues like global trade, one china policy, and climate change. joining me is kevin rudd. he was the prime minister of australia from 2007 to 2010 and again in 2013. he now serves as the president president of the asia society