tv Bloomberg Markets Asia Bloomberg May 9, 2017 9:00pm-10:01pm EDT
>> i am sophie kamaruddin. rishaad: i am rishaad salamat coming to you from bloomberg's headquarters in asia and hong kong. this is "bloomberg markets: asia." ♪ sophie: the yen climbs from a two-month low as investors seek safety on reports that north korea will proceed with the nuclear test. rishaad: the own yang high on the agenda as the new president takes power in seoul, korea. alert asang on high
the new president takes power in seoul, korea. right, we saw another record when it came to the nasdaq, weakness for the dow, and the s&p -- we have this whole story about the index, some say it is a view on options. lows, but to 24 year if you look at u.s. policy uncertainty chart, it is in marked contrast. indeed, we have that disconnect between the two bank. might have more to say about the options market, traders looking for that rebound
as volatility creeps into different asset classes. by the way shinzo looking stretch, so perhaps that will give some room for recovery when it comes to volatility. perhaps traders not prepared. rishaad: that was quite something this morning, wasn't it? sophie: that was a shocking given what we heard from the fbi. perhaps some clarity on that front? we are 30 minutes away from the open in china and hong kong. how our markets tracking. are markets tracking? haidi: the big story is australia, south korea, and the country waits for a new president, turning a new page given the turbulence and volatility we have had. kospi between bigger gains
in modest gains. and the suggesting any upside today, tomorrow profit-taking. despite the valuations argument, up a longspi has come way, hitting record highs in the lead up to the election. around the region, it will be about commodities in china today. we did have that selloff renewed and oil and gold overnight. yet another way opec is being undermined in its efforts to rebalance. we also have the china story, the cake market catalyst today with inflation numbers. take a look at some movers. dragging --anks are banks are dragging the market lower. look like one of the
biggest losers as they try to raise four point $6 billion over the next four years and whether they pass it on to customers, net-net it ist all bad, a bad outcome for banks, the customer, and the economy, calling into question profitability, so we saw declines as much as 4% for cba, being extended today. on strain banks have had a good australian banks have had a good run, some may be no surprise. sophie: taking it on the chin in australia. we have live pictures coming through. rishaad: this is the national cemetery in seoul, korea, the new president of south korea pledging to unify the country.
there he is at the moment paying respects to leaders gone by. sophie: he is claiming victory. andas the former runner-up now has quite an agenda with korea's economy forecast to grow at the slowest pace since 2012. let's leave those pictures as respects are paid at the national cemetery. we are going to look at the kospi up .1%. shery ahn in seoul, korea. paying his respects at
the national cemetery. towants to pay respect .ormer presidents he wants to show unity and this time of turbulence for south korean politics, so he is talking about wanting to be a president for everyone. it seems the official victory speech at the national assembly also spokesperson who don't need parliamentary approval. he hasnews has reported made his presence felt. he has talked to the joint cheese of staff and ordered the military to maintain a high state of readiness. taking a look at the way
faring, a slow start, reaction muted. we have seem to have lost the connection. sophie: we seem to have lost the connection on the ground. rishaad: apologized. apologize. there we go. let's get back to one of our top stories. president has fired fbi director james comey. the second fbi chief to be dismissed. he had been leading an investigation into alleged russian meddling into the election. the white house said it must restore trust. why hisrphy explains departure may not be the end of the drama. >> there will be questions if
this action was taken so trump and the administration could put someone in who would be more friendly to them on the russian investigation. there are calls for an independent investigation to be set up in the wake of this firing. and commentators suggesting this has strong overtones of secrecy, of wanting to get rid of this. thisey have kicked political quark marred down the road to limit the reach of that investigation, they are creating worst potential problems for themselves down the line should that investigation in fact to be closed or shutdown with no finding. understandcult to why the timing has been such, particularly if you're going to fire someone based on conduct. that was known in october and earlier in the year. , breaking news,
sean spicer, the presidential press secretary talking about the firing of indeed james comey as well. saying we have the director of becoming the acting director should the firing received bipartisan support. sophie: the firing it may stoke problems for the trump administration, but spicer calling for bipartisan support. australia announcing $55 billion in funding for infrastructure in a budget that seeks a return the surplus by 2021. that requires wage growth to accelerate above 3% from below 2% at the moment. face a direct attack on jobs and growth. china's insurance
watchdog says it is closely scrutinizing the industry to contain risks. insurance,ing on stock purchases, real estate, and all kinds of assets. it began an investigation into the chairman. withe: softbank commitments reaching $95 billion with interest from saudi arabia and abreu dobby -- i will doubly . apple's 10 year rally since the arrival of the iphone sees the company worth $800 billion, even as the company reported slowing sales of the device. that means they've added $185 billion in market cap.
the 12 month price target has 202 dollars,o implying a market value of more than $1 trillion. sophie: global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. ahead, australia's finance as weer joins us live dissect his government's budget. that is in half an hour. lost theirtals have shine or is it time for a comeback? we discussed that with greg smith. ♪
in half and reduced debt to equity to 95% from 106%. it will allow the group to streamline operations and make it easier to grow individual units. exxon mobil and petrobras discussing a partnership that could involve multiple assets in brazil and elsewhere. it would give exxon access to oil fields and infrastructure in brazil, while petrobras would gain expertise in production and refining. they are looking at brazil after the government opened it up -- the market up to competition. says it expects a first-quarter loss of $130 million because of wrong way bets on coal. it was once the largest commodity trader in asia but has faced years of falling profits and credit rating cuts. it has been a tactic for -- for tax for accounting practices. rishaad: let's look at the
commodities index. it has fallen 6% this year, metals leading losses, a torrid .ime, and oil as well essentially this is what we have, you just see the s&p go up and up and up, but at the same time, well, look at this, look at the bloomberg commodities index. it has full and back. who better to talk to about this is greg smith. how are you reading this? you can be a contrarian at times. is this a buying opportunity? day, make. isn't that a fabulous chart. buy low, sell high. if you look at the relative value of the s&p versus commodities, you can take some profit out of equities, by some put a stop atnd
10-15 year lows. is like trying to catch a falling knife. >> it is. that's why i mentioned the stocks. there are two reasons to be bullish this relative trade. firstly, everything we do is cyclical, beginning, middle, and in. if you look at it mathematically, everything reverts. so what we are looking at here, at a relative perspective, there is a long way for equities to drop in commodities to rally. on a cyclical basis, commodities over three-five years, i think we are starting to bottom out. we had steel, copper, nickel taking a hit -- iron ore. the china picture? >> all those metals and the china story, you have a lot of
retail money in the china story. rishaad: at the end of the day, the data does not support what you are saying. >> i'm not bullish those at the moment. i am more bullish oil, precious metals, not so much the base metals. the story is we will have growth , spend more money, the budgets coming out, trump doing all this lord of thing, buy the rumor, sell the fact. at the moment, nothing is happening, and that is why base metals are coming off. oil,e: with that call in we are seeing it in a tight range given what opec is doing and u.s. shale continuing to rise. where is the upside? opec,n you have shale and they are butting heads come at some point, i would put my money and the russians moving the prices up. between the two of them, they
are the swing movers. haidi: you could argue that, but up to a point. rishaad: now we have a cap on oil because of shale? the u.s. becomes a swing producer, does it not? >> yes, does, but for how long, rish? they are cracking this stuff, it has a shorter shelf life and they keep have to drilling more and more. back to the relevant trade, we have to start about the value of commodities taste on what is left relative to consumption as well. sophie: let's pull up this chart that talks about whether or not we will see that commodities game. with the fedhat tightening cycle, we are likely to see gains in the commodities space. do you agree with that? >> yes i do. it is part of my pitch.
commodities, printing money, correlation, the other one, run the s&p against the amount of money being printed and you will see that thing is highly correlated, and the commodities are in the inverse. they brought against collateral and kept on doing it up. that were all change when money gets expensive. when an just rates go up, cost of storage will go up. in a simplistic way, interest rates go up, so will the commodities space, particular long the curve. sophie: one would imagine that would boost demand for raw materials if infrastructure spending will pick up. why are you not seeing a more positive response and base metals? >> i think the base metals are financial eisen china. d in china.lize
they are moving around more volatile than other commodities. if you are a high net worth individual, you want to be putting it into some of those markets. is more speculative money in chinese metals than those consuming and building stuff. rishaad: so what is the big trade? preciousushing metals, oil? >> natural gas in particular. rishaad: why natural gas? >> is like coffee, you know. gas, more for air-conditioning in the summer, and gold, what is going on around the world geopolitically? we've made this call about gold hitting 1300, but is that overdone? still seeing the kospi
resent, so why higher gold? >> higher gold because of possible devaluation of currencies, and if inflation picks up? what will drive inflation is higher food prices or higher oil prices. food, the egyptians don't want higher prices for wheat. they are paying higher subsidy since the arab spring. rishaad: they have a currency that has been mashed up. >> that's another reason why you think about commodities, not just commodities, but what we churn and burn. rishaad: this is the part of the interview where we give you some self-promotion. >> thank you. scenario thatlous is developing for australian rules football. it is the first time an australian rules team has played
outside for points. competitive, nba, nfl, the soccer, one of the world's best games. it is worth watching. sophie: we will see about that. >> thank you very much. rishaad: always a pleasure having you on the program. >> thank you. sophie: coming up, find out why overseas investors are checking with chinese stocks despite the crackdown on leverage. details next. this is bloomberg. ♪
auction. futures indicating a rise too. shanghai has been under caution, but at the same time looking elsewhere and the msci china index, which has outperformed, as indeed h-shares in hong kong. we are looking more at that. that is what is going on at the moment. we also have a lot of money coming into emerging markets. sophie: the shanghai composite closed at an october low as regulators are intensifying their crackdown. seeing interest in unloved chinese banking stocks. #8139, chinese banks on the mainland have been underperforming as mounting sufficient to take
action. up, that has picks provided some support. #7150. what we have seen is with that first quarter performance by gbank, they reported better numbers and the bad loan ratio fell. we have the chart now. chinese big for banks and turns of market cap, it has been steady. in 2011, out of favor but now we are seeing a pick up here. has raised them to .utperform, but concerns remain a rather important data point.
rishaad: there we go. that is pictorial harbor. -- victoria's harbor. were talking about what is going on, a situation where we are seeing the msci china index not correlated at all with the market in shanghai. #8466, a quick look at that. this is what we have come of the least since 2006. we are looking elsewhere to. diversions had to do
with the old economy and the new economy. this is perhaps going to be a focus along with the inflation picture for china. that data is coming up soon. pmi data outeed, p.m as well, consumer price numbers as well. odd months of negative ppi showing inventory overhang, excess capacity. look at theg a positivity since september when it came to that ppi number. high as in the past, but that is what we have at the moment. this is what you wanted to bring up, the inflation story. #7008, the indicators that could because for concern potentially when it comes to china's economic health. this is all those quarters of ppi being negative
and deflationary. sophie: we do have the data coming through at the moment. let's go straight to tom mackenzie in beijing. for that ppimiss number in terms of the estimates, 6.4%. forecast had been for 6.7%. that sixth .4% does relate to the march number of 7.6%, so a small miss from the forecast and a significant drop compared with the previous month. there are weaker commodity prices and metal prices, and weakening base of fax. chinard from the chief economist at standard chartered expecting 6.6 percent, coming in below his forecast. he thought february was the peak in terms of the ppi number in graduald you will see a de-celebration of these price
increases for the rest of the year. numberorecasting a between 5% and 6%, and bloomberg intelligence have said it does show the reflation story is honorable because these producer , becauseis vulnerable these ppi numbers have a spillover effect to other prices globally, of that is why this is so important and questions about the push to combat some of that excess capacity, and of course what it means for corporate profitability, because that is likely to be dented at these prices, come in less strong, and that will impact how they pay whatdebt and plays into the pboc policymakers do in terms of tightening stance. we have the consumer price number, marginally above the forecast, one .2% increase in consumer price inflation for april. the survey had been for 1.1 percent come up on last month,
0.9%, largely due to gradually picking up increasing food prices as well, so it shows there is still an element of consumer demand. intelligence expects these numbers to increase in may and june, and there is a survey of economists that expect the full your number for cpi to come in at around 2%. in terms of the target for the pboc, the inflation target is 3% and most economists don't expect them to act on the benchmark rate given the numbers we have seen so far. these numbers are unlikely to change that equation. sophie: thank you. largely in line with estimates when it comes to the chinese data. let's get a quick check of the markets with haidi lun. you were to pick a key pillar of this narrative that has been spun by global markets
on the reflationary story globally, the chinese ppi number would the it, and that miss and the client we have been bracing we, many analysts saying expected to see more muted gains and the best is behind us. it does look like we are seeing that narrative play out. have seen that cpi number has not been translating into consumer prices, gains of the factory gate. the australian dollar is the key proxy. the intraday chart here. we saw a blip when that first set of numbers came out. there will be some disappointment, but we are back to where we were, some nice gains following the delivery of the budget seen as pro-growth and nation building, if you will, but investors will be doing a reality check, if you will, because if the callback
when it comes to ppi is based on oil coming off its highs, that situation does not look like it will get much better. we had another fall in oil supplywith libyan undermining the effort of opec to reduce the global glut. we had the shanghai, shenzhen come upetty modest about .1%. cause on thatg a $500 billion liquidity driven route as the government tries to clamp down on leverage, but has inadvertently created a misstep when it comes to sentiment in the markets, but we did see that producer price index fitting with the overall story that the best in terms of factory gate inflation has come and gone. rishaad: nice one there. a look at first word headlines. president moonn
jae-in taking office with plenty on his plate. markets a muted response. he got 41% of the vote, but his predecessor is in jail and he is starting his single five-year term patient threats from kim jong-un's regime. in the united states, president trump has fired fbi director james comey on the recommendation of attorney general jeff sessions and his deputy. he becomes only the second fbi chief and the bureau's history to be dismissed. he had been leading an investigation into alleged russian meddling and moscow's links to trump aids and associates. rishaad: walmart to pay $300 million to resolve an investigation into alleged bribery. --would mark as succession
significant move by the government. the government sought twice that amount as recently as last year over mexico, china, and india. may raiseina executive composition of banks and state owned enterprises to retain talent. premier li keqiang said he may review a policy that taxes their pay at a fraction of foreign peers. the china construction bank his pay cut to $87,000. jamie dimon earned $23 million last year. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. get a those's inflation numbers. the deloitte china chief economist is with us now. to them,your reaction slight miss perhaps on ppi, but very marginal?
this story last year was people were worried about china's hard landing. i think this year, people were too excited about so-called reflation. at the end of the day, the unlikely toomy is again be in a recession, but the first quarter, 6.9%, that is not sustainable. that is what we are asking right now. sophie: no change to the pboc tightening bias with this? pboc couldly the have changed the exchange rate lower. at the backdrop of exchanging rates in the u.s. come he can't do anything, but china still has over $3 trillion in reserves, so my preferred policy response is to not lower the exchange rate. is lower, theix weakest since march 21, so they are listening to you here.
>> the reality is -- rishaad: they don't want to be called a currency manipulator, do they? >> the ideal scenario is you ease the restriction on capital controls so that firms and individuals can allocate their investment in a bigger universe. ease restriction on capital controls when they are looking to prevent outflows, how will that -- months, weast few have seen various administrative measures. some of them are quite ciccone in. think about the chinese economy, one of the most open economies in the world. some of these measures actually could hurt the real economy, big it isor small firms, so understandable. at the same time, confidence comes back. i think the pboc also became a
bit more relaxed. onhaad: we had greg smith before you talking about base , copper, andore the like, a shocking time of it, but he was suggesting these are the metals which represent the china trade and what is going on with the chinese economy. how does that fit with the real economy and how the real economy is growing? is that a lagging indicator or ford indicator? >> in the short-term, it is difficult to say. aren or prices, i don't -- iron or prices, i don't think anyone can predict that in the long term, but in the near to mid term, the big picture is this come up for some of the factors in china, the consolidation must take place. simply because china is too big. deal -- cannot makes
steel profitable, then it will be difficult for other countries to make money. sophie: the debt burden being a priority for chinese regulators, the world bank warned -- do you see a crisis looming? >> i don't see a crisis, but you will see sporadic financial distress. what the policymakers and the regulators are trying to do, a controlled failure. i don't know whether that can be translated into english, so we .ay controlled explosion it means you want to engineer small-scale failure so you controlledrds and the failure, but you don't want to create systemic risks. i think that is what regulators are doing right now. so much.hank you a controlled failure it is.
sophie: the australian government answer the call for economic stimulus with a $55 billion infrastructure plan. it borrows from president trump populist playbook. that's this gus all that with the australian finance minister. thank you for joining us today. something at the heart of the conversation surrounding the federal budget is whether a aaa rating can be kept intact.
is this going to be the case in your view? moody's has come out and confirmed our aaa credit rating. these are matters for the credit ratings agencies to decide. as a result of the decisions of this government, spending is back down close to the long-term average. we are bringing it down to 25% of gdp. theave reversed deteriorating trajectory we were on when we were coming into government. remain on a pathway to surplus by 2021, a seven .4 billion dollars surplus, quite a bit higher than anticipated only a few months ago in our pre-christmas budget update. sophie: moody's pointed out they
do see the debt growing to 45% and the coming years. they also pointed out that australia has been coming from a low base compared to its top rated tears. you see this can be maintained given the desires of this budget? our projections show we go back to surplus in 2021 and 2027-2028.urplus to if you exclude new net capital investments and look at our operating balance, we are rejected to return to surplus by 2020. our cash flows are positive and we are not adding on from 2019 will be so net debt peaking as a share of gdp in the early 2019 financial year, 19.8%, and over the medium-term reduced down to 8.5%, so by
international standards, that is a healthy trajectory. minister, the shadow minister of finance, he was thatg it is a finance bill his party would never have brought forward. there are important differences. it is not a labor budget. >> we would not have given the tax cuts or taken the deficit levy off the highest income earners, cut schools, universities, because that hollows out the future of the country, so there are differences when it comes to the budget. naturally he is giving us the differences between him and you. what about you? what is your reaction? are significantly
boosting investment in schools, so he is wrong there, but when it comes to the corporate tax cut we have a plan over 10 years to reduce all strays corporate tax rate for all businesses. theave been able to deliver first three years of that 10 year plan, which means all businesses with a total up to $50 million australian are seeing their taxed reduced to 25%, and we will roll that out to all businesses. critical to remain competitive international, boosting product to the deke, generating growth, protecting our economy, and being able to increase real wages. jobs and better pay jobs come from successful, profitable businesses. given what is happening in the u.k. and the u.s. with corporate in rates, the 30% rate australia is high by
international standards and we need to bring that down to it these 25% at this point. up ond: i'm going to pick that wage growth story. you want to increase real wages by 3%. virtually every developed country have struggled to do that. how on are the are you going to do that? come as we to look take advice from experts and our treasury, and the assessment is based on the rate of improving global economic outlook. domestically, we have a low official cash rate, a lower exchange rate, a flexible labor market, a progrowth agenda from the government focusing on company tax cuts, focusing on getting better access to key markets around the world, as significant infrastructure investment program, everything taken together, the best advice
is that these forecasts are prudent, credible, and indeed responsible. being: this budget is painted as nationbuilding progrowth. tax levied against the banking industry could be seen as punitive. could this set a precedent for other sectors, other tough measures against the financial industry? well, what we have put forward in the budget last night is not dissimilar to what other countries have done in the past, including the nine did kingdom. -- united kingdom. our preference was to get the budget back in balance through spending reductions as fast as possible. we did make significant progress and brought spending under control, but the australian senate was not prepared to pass
all spending reduction measures. if you want to bring your budget back in to surplus and can't get your spending reductions through the parliament come the only other alternative is to look at the revenue side of the budget. all strain banks generate $30 billion of after-tax profits a year, this is a $1.5 billion believe that is a fair and proportionate contribution for them to make the budget repair in australia. we have seen these banks hauled over the coals for not passing on interest rate cuts, of course led by the reserve bank. if that will stop them from passing these on? >> there is no reason for them to do that. the reason we designed the levy, there is no reason for them to do it. all the day today bank accounts
and mortgage accounts have been excluded from the scope of this and as i indicated, 30 billion dollars of after-tax profits, a $1.5 billion levy, we believe that is fair and proportionate. will not bebanks subject to the levy, which will make them better able to compete. rishaad: great talking to do. the minister of finance in australia. up, disney'sg bottom line takes a hit from espn at profit at the cable unit slides. we will break down the numbers next. this is bloomberg. ♪
sophie: there was a bright spot in the form of theme parks. >> this was a particularly important project for me. i worked on it for over 17 years. i am proud of what our team designed and created, but i am also proud of how it has been operated and how the chinese people have taken to it. frome a few days away hitting 10 million in attendance. we celebrate our first year anniversary in june, so we are running ahead of where we hoped to be. two thirds of the and tendons is outside the shanghai area. that is interesting because it suggests this is a national destination. frankly we did not expect that. we thought two thirds would be from within shanghai, and the opposite has been the case. that is very encouraging.
we have a piece of land that is large in terms of size and the ability to build it out and a willing partner enabling us to do that. we announced expansion before we opened, so we are building a large toy story land. we have not announced a specific date, but it is already under construction. given the success of this business already and the size of the land and the interests of our partners to continue to invest in it, we believe you will see substantial expansion of this particular facility over the next 5-10 years. that i think is very encouraging. we have always believed that there are other opportunities in china, but our first priority has been to open this one and do and it would be premature to speculate on what we would be doing, but we hope
♪ inouncer: from our studios new york city, this is "charlie rose." charlie: we begin with sally eight's testimony, to the former -- he testified alongside james clapper. senators question them on a range of issues, related to russia's meddling in the u.s. election. yates addressed michael flynn, saying he was vulnerable to blackmail. >> we believe general flynn was compromised with regards to the russians. charlie: joining me now from washington