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tv   Bloomberg Markets Asia  Bloomberg  May 28, 2017 9:00pm-12:01am EDT

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haidi: this is "bloomberg markets: asia." ♪ haidi: north korea ram some the tension with the ninth missile u.s.h this year, the sending another aircraft carrier. germany says relations with america have changed. vietnam's leading airline may listed shares on a foreign exchange. vietjet speaks exclusively to
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bloomberg. as our u.s.s close, and u.k. markets. a holiday thinned session in asia. things are decidedly mixed. of ave not seen much reaction to saber rattling from north korea with that ninth missile test. it is a big week in terms of news flow and data, china pmi, and waiting to see if that feeds into the picture of the growth or thathad from china is as good as were going to get your the second half could look dicey. we had an announcement from the pboc on friday saying they are considering looking at what they call a counter-cyclical adjustment factor. we are still trying to figure out what that means in terms of the daily yuan fixing. china has been fixing its dollar-yuan fix at gradually weaker levels, adjusting from the previous day's close.
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this istion is whether a dollar of fact. it tends to look different when you're looking at the yuan versus the basket of currencies, or is this something reading more into come it that we are seeing a continued weakness when it comes to the yuan. we will speak to a number of people about this throughout the hour, but certainly this counter -cyclical adjustment factor, this means greater manipulation when it comes to the yuan rate and is a step away from this end goal. we will get more on that in a minute. we are 30 minutes away from the open in hong kong. mainland china markets are closed good singapore, taiwan, malaysia coming online. let's get it over to juliette saly. taiwan one of those markets that remain close with china and the u.s. and u.k. we are seeing a mixed start to asian equities elsewhere.
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to recordholding on highs, no stopping foreign inflows into this market. ,t is lifting the overall kospi higher for seven consecutive sessions, and investors continue to ignore the north and another missile test over the weekend. consumer confidence in korea is that a three-year high, and a lot of optimism that the new president will signal great things for korea's economy. weakness in the commodities markets. new zealand down .2%. muted in japan and australia. strengthenedeen against the dollar, but it is flat now around 111 come as a not too much movement on the nikkei and asx 200. there was that they call towards the end of last week when we saw a lot of weakness come through in the commodities markets. the crude price of .2%, and gold iron some downside in the
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ore contracts. samsung lifting the kospi. some ofe, downside to these health stocks. domino's pizza, the biggest laggard, a sydney-based stock down by 3.6 percent after morgan stanley cut its downgrade. volatility, not a lot happening, so what has been a big mover is the move in south african rand. it strengthened by 2% against the dollar on reports that president jacob zuma was going to be ousted following a vote from members of his own party. has survivedr he that vote and the rand has pared some of those gains, so only app .3% against the dollar, but certainly some everywhere we have seen volatility overnight. haidi: thank you for that. we will talk more about the outlook when it comes to emerging-market currencies later
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on. word newsfirst with paul allen. paul: strengthening global trade help china's profits rise 14% to more than $83 billion, building on a jump of almost 24% in march, and 8.5% the year before. the national bureau of statistics and 38 of 41 industries have achieved better profits in april than a year earlier thanks to stronger overseas demand and investment. british airway says most of its computer systems are running normally again after a weekend crash that disrupted hundreds of flights from heathrow and gatwick. the ceo says the carrier plans to operate all long-haul services into and out of london today, but the after affects of the weekend direction -- disruption will mean delays but it hit check in, baggage check-in, and reservations. angela merkel has given the strong as indication yet that europe is drifting away from the u.s. under president trump.
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an eventto voters at near munich, she said relationships forged since world war ii are "to some extent over." she said europe must now plot its own course and not rely on america and britain. president trump has lashed out at fake news after wrapping up his first foreign trip without holding a single press conference. it finished with the g7, and the president was the only one who declined to take a single question. arriving back at the white house, the president tweeted that many of the leaks are fabricated lies made up by the fake news media. minister says he is confident economic growth will meet its goal of 6.7% this year without adding to inflation. in an exclusive interview with bloomberg, the prime minister said the country is taking steps to boost the economy and to keep its status as one of the world's
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fastest-growing. he will meet president trump at the white house later this week. we have a detailed strategy to achieve growth of 6.7%. i will give you a hint of some very good news, data in april and may shows a strong pickup in and agricultural production. that will lay the groundwork for growth in the third and fourth quarter this year. 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. south korea's defense stocks are on the rise after the north fired another missile. ninth thisngyang's year, seemingly in response to the u.s. beefing up forces across the region. let's get it over to peter pae.
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this is just a ratcheting up of tensions, but it really comes at a sensitive and challenging time for the new south korean president. , one of his jae-in campaign pledges was to engage north korea, have a more conciliatory approach. while notile tests, as significant or worrisome as perhaps a nuclear test or intercontinental ballistic missile test, it is still concerning. challenge for this administration, the new administration, as to how to engage north korea. noti: you talk about it being as worrisome, but we do know that the most recent tests made more progress compared to ?revious attempts still goingsis is
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on. the frequency of test have increased. this is the third one in as many weeks, so that is a bit alarming. one,er, this particular they are still analyzing it. it appears to be a short range missile, a scud variant, so it remains to be seen what kind of weapons development they tested today, and we will know that in a short while. we had president moon jae-in calling a meeting of his security council. do we know what came out of that and what we are expecting from the new administration in terms of their position? a sunshine policy going into this when it comes to dealing with the north. >> they issued an official statement, basically condemning noting that it
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is a violation of united nations sanctions banning basically nuclear missile test technology, so the official line is again .hat this is a provocation however, there is not much more it seems that moon jae-in can do, and as a result, they could only issue statements condemning it. however, recently, last week in sort ofon jae-in extended an olive branch and away by opening up humanitarian aid from south korea to north korea. stopped or prevented a year ago when north korea conducted nuclear tests. isdi: all right, that certainly a geopolitical risks to get the week started.
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as always, peter pae. there is one feature we would like to bring to your attention, our interactive tv function. you can find it at tv , where you can catch up on interviews and do a deep dive into any bloomberg securities or functions we talk about. you can send us instant messages during our shows. this is for bloomberg subscribers only. so do check it out at tv . exclusived, an interview with vietnam's prime minister ahead of his trip to meet donald trump in washington. though, find out what is fueling the emerging market rally as j.p. morgan gives its few for emerging equities. this is bloomberg. ♪
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haidi: this is "bloomberg markets: asia." i am haidi lun in sydney.
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headlines,sh softbank has declined on comments it may raise its stake in nvidia. it has 4.9% of the chipmaker, just below the amount that would require a regulatory disclosure. softbank is nvidia's fourth largest shareholder with a value of $4 billion. the ceo masayoshi son says he wants softbank to be the leading tech investor in the world. toshiba said to be disputing claims in the u.s. that it's bankrupt nuclear unit of those more than $1.7 billion due to breach of contract. it says westinghouse is liable for payments it has received as the lead contractor at the plant in south carolina. the degree met comes as toshiba and scana try to negotiate agreement to finish the project. lawrence ho says he would rather run a casino in osaka than tokyo when japan legalizes gambling.
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the government has yet to say where casinos will be allowed to operate or who can run them. the japanese market could be the most lucrative in the world, generating $25 billion this year. melco says it would prefer osaka because the region is "more fun." when you go ton, the region, it is more fun related. we are a company that focuses on andand entertainment attraction peer group pride ourselves on having the hotel and restaurant and top amenities. for instance, in macau, we have the most michelin star restaurants at our properties, so these are important elements that we want to bring anywhere globally. some lines crossing the bloomberg. john williams speaking at an event in singapore, expecting unwinding of the balance sheet to begin sometime later this clearone of the
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indications we have had so far as to the fed's intentions on how to deal with that balance sheet unwinding, saying gradually raising rates will help prevent overheating when it comes to the economy, saying the u.s. has reached or even exceeded for employment. onare getting jobs numbers friday, expected to be robust, saying we don't want unnecessary volatility and the balance sheet unwinding should run in the background and the "boring." this is coming from a text of the speech he is giving in singapore. john williams saying he's not worried about a hard landing in china and that three rate hikes for the fed still make sense, and inflation approaching 2% within a year or so in the u.s., saying the unwinding of the balance sheet will be gradual and well telegraphed. don't won any unnecessary
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volatility or disruption. hitting maximum climate and inflation targets by next year. we will be to getting more on that. voting member of the fomc this year could bloomberg subscribers can watch that live at live . you can also catch up on some of the market moving events you may have missed out on earlier. emerging markets stocks are posed for a fifth straight month streak thehe winning longest on a year-to-date basis since 1993. my next guest says emerging market stocks continue to see inflows despite uncertainty. james, i want to get your reaction to some of these lines coming through from san francisco fed president williams. do you anticipate that this unwinding of the balance sheet will happen later this year? will it be as smooth or boring
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as fed members wanted to be? certainly i and hope that is correct. j.p. morgan is expecting $1.3 trillion to $1.5 trillion reduction between now and 2020. if the market understands this in advance and it is effectively priced into rates in advance of the unwind, then we think we are in good shape and it is the equivalent of a .25% rate hike. it's all about getting that information into the market advance -- in advance of the moves. haidi: we are looking to u.s. jobs at the end of this week am expected to come in robust and not lessening expectations the fed will go in june. what could happen between now and then to prevent the fed from hiking, and are we still thinking about when this infrastructure reflation, fiscal policy is going to come through from the trump administration?
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somerve you have seen weakness in the data as we work through the first half of the year. you would have to see that trailed down significantly and in order to avoid a rate hike in a couple of months, which the market and j.p. morgan has forecast. the key thing for us in the u.s. and one reason we are overweight emerging markets in europe relative to the u.s. is the fact that aggressive fiscal and petitioner appears unlikely given the gridlock we are likely to see in washington right now. haidi: we were talking during woe break about this t paths for the reflation trade. is this something different from the fundamentals you're seeing in europe and in emerging asia? the biggest impact for the reflation trade in asia is really the impact that inflation has on nominal gdp growth, which
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is the biggest precursor of corporate profitability. see nominal growth in china as an example pick up, we are seeing a strong resurgence in corporate profits, which makes it more profitable on the the financial side in the short to medium-term basis, as well as the overall long-term outlook. about oil. to me we have had a rebound recovery after that selloff post-opec, selling the fact as we have been bracing for going into that decision. do think compliance will be an issue and has that changed your outlook over the next 6-12 months when it comes to oil and oil-sensitive economies? >> it does. we are looking for a breakdown in the agreement by the end of this year. we have just taken down our 2018 $44, so we do0 to see difficulty in that space, and it is largely off the resurgence of supply in the u.s.
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and the shale community. we have to be careful about how we think about the ongoing aspects of the reflation trade, which we think are limited, so we are more selective as a result of that. stay with the spirit we will pick up on china after this break. there is plenty more ahead. this is bloomberg. ♪
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haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. let's continue our conversation with j.p. morgan. for sticking around. i want to throw up this quick bloomberg, on the showing new credit generation in china despite deleveraging efforts to get that under control still coming in strong. growth has been stabilizing, but i guess my question is in terms of this china trajectory, the
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stabilization we have been seeing, is this as good as we are going to get? as aanalysts are expecting result of the low base effect that the second half will not about anyod just to indicator coming out of china. therethe leverage side, are two time periods to discuss. in the short to medium-term, it is clear that rising corporate profitability will increase the length of the runway within which the government has to deal with rising leverage levels in the economy. from a longer-term perspective, it is clear that there are only three ways to grow, add more people come and we are out of chinese people. the number of chinese people 18-34 are in decline, so you cannot push it through the growth and labor force anymore. you can add productivity, which is difficult to legislate come or you can add more equipment. the only china option is
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continued ongoing investment, and we see this in many economies around the region, which means on a long-term basis leverage levels have to go up because there are social reasons why the government does not want to see the overall economy slowdown. clearly there will be a slowdown in the second half, however it is well known by many market participants so that does not necessarily play out in the negative view from our perspective. is no longer an economy that can grow it self out of debt. the amount of debt overhang is starting to drag on what they are getting for their credit in the system. are you concerned about volatility and shocks in the market coming from the liquidity squeeze we have seen of the past few months? >> so again, short versus long-term, from a short-term perspective, the government is targeting specific elements of leverage and the economy, sme banks etc., so we think the current policy impetus will be
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controlled and is not targeting inflation or efforts that will impact the overall economy in our view. from a longer-term perspective, the concern still has to be front and center. how long will rising corporate profitability overshadow or give them the ability to carry this leverage longer than some market participants have thought? eventually you have to drive structural reforms in the over all economy, labor mobility, etc. haidi: talk to me quickly about your call on tech and how that is informing your overall view on e.m. it is particularly relevant to the conversation on china, which is one of the most under held markets. one of the things that surprises some people is that the china do read about in the wall street journal is different than the china that exists in the stock market. most journalists or wall street articles will talk about the smokestack industry country, when over 50% of the index is tech and financials.
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fundamentals are driving the positive view. haidi: great to have those insights. have to leave it there. more on the other side. ♪
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across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. 9:29 in hong kong. we are counting down to the hong kong open. we are seeing the premarket session looking flat. a is shaping up to be beautiful, sunny day in hong kong. i am haidi lun in city -- sydney. oil front and center given that horrible selloff in the wake of the opec decision, markets this appointed their word deeper cuts despite well telegraphed extension of another nine months of that output curb deal. take a look at this chart. it suggests the medium to longer run could bring more pain ahead when it comes to oil prices,
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#8994, short squeezes and net longs continuing to plunge when it comes to brent. you have hedge funds and financial advisors placing huge bets that oil prices would rise, and that is slowly being unwound. abm amro saying we are seeing the long squeeze over the past few months, but after yesterday's move, there is room for a short squeeze, so watching that as we get underway. ,et's get over to hong kong trading underway way, a quite session given the absence of the u.s., u.k., and china trading today. juliette: yes, although it does seem things have turned around in the past 20 minutes or so. the nikkei 225.2%. hong kong open higher. the seventh session of gains for the kospi despite the missile
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test from north korea over the weekend. downturn coming through from new zealand, off by .1%. australia flat as well. let's switch that out and see if hong kong is coming up on the pretty flat there we see the absence of china, also taiwan, so a muted start. in play today, low volatility in the u.s. on friday, and it does seem to be a subdued start to the trading week. deutsche boerse iron ore under pressure as well. let's have a look at the movers. samsung electronics lifting the kospi 5.4%. nintendo hit a high on friday. up by 1.25% on an upgrade for its switch sales forecast.
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if we look at some of the losers that softbanks may lift its stake in nvidia. softbank is the biggest the kleiner in terms of the regional index come off by 1.3% in tokyo. still seeing weakness from australia banks as they continue to tell the market what they expect this pretax profit will be from the proposed banking v. you have another of companies, domino's pizza, one of the ones under pressure after morgan stanley reduced its forecast for domino's, so a little mixed certainly banking players weighing on the asx 200, but a very muted start to the trading week. haidi: thanks for that. let's get to first word news with paul allen. paul: thanks. jacob zuma is said to have survived the dead to force him from office.
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members of the anc decided not to call a vote of no-confidence despite the president facing increasing pressure to step down. the decision to fire the finance minister in march sparked public protests and cost south africa its investment grade credit rating. british police have arrested two more people suspected of links to the manchester bombing, with 13 now in detention. police say more than 1000 people are working on the investigation, trying to determine whether the bomber was acting on his own or part of a wider terror network. the explosion killed 22 people and wounded about 100. hong kong has criticized moody's, saying the decision to downgrade the debt rating was based on "shallow evidence." hong kong's close relationship with china can't be considered negative as the mainland is the global growth engine. moody's cut china for the first time since 1989 on wednesday and
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lowered hong kong hours later. gameplaying artificial intelligence program has completed a three match sweep of its human opponent. he has been playing go professionally since he was ten-year sold and once boasted no machine could beat him. however, after his latest defeat, he said alphago is perfect with no flaws and no emotional weaknesses. go veteran said it would be years before computers could master the game. 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. trade and climate change expected to top the agenda when li keqiang attends the annual eu summit in brussels later this week. tom mackenzie to joining us for a look ahead from beijing. does the summit take on greater significance given what did or did not come out of the g7
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meeting? on a series of levels, a number of levels at least, particularly when you take into account what we know from angela merkel in terms of this realignment in the relationship with united states, just off issues like trade and climate change, which will be top of the agenda at this summit. there is more alignment, at least in terms of the rhetoric from china and the eu policy and goals, so in that sense, it is going to be more important, and it does take on an added significance, so trade will be key and china is going there with some priorities for themselves, still pushing an angry they have not been labeled market economy status or have given that status towards the end of 2016 is part of the wto deal. they are pushing for that, and pushing to make sure their companies get fair and equal access when it comes to m&a deals.
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germany is a big region of the country in terms of their appetite for assets. perspective,pean there is going to be a push and pressure on china to really deliver on its rhetoric when it comes to reforms and opening up its market because there is deep resentment and deep concern amongst european companies that they are not getting more access to some of the sectors that chinese firms get equal access to when they are operating in europe, so there are areas of friction, but there is this alignment at least rhetorically on trade, globalization, and climate change in that paris climate change accord, and they are expecting to release a joint statement on that issue at the end of the summit, the summit taking place on june 2, also likely to hear conversations around north korea and the south china sea and other europeans wanting to get some clarity on china about the pressure they are putting on pyongyang. haidi: fascinating as europe and the u.s. seem to be lifting
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apart. does that push china closer? this trip comes amidst further signs of a cool down in the chinese economy. what are the latest data points telling us? we are getting pmi this week, but we are you have a good idea what this will look like. is crystallized around this idea that we will see a cooling chinese economy in the second half. we did get stronger industrial profits for april, up 14%, slightly lower than what we got in march, 23%. we have a terminal that shows what has been happening, #8130. in 2014-2015,t you saw week industrial profits in china. in 2016rted to pick up and powered ahead from december 2016, then this huge pickup in march, so april still strong, increasing 14%, but we did find
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out from their data that there is increased pressure for chinese exporters when it comes to credit and the expense of credit, so that may start to push down profits going ahead. we also got ford indicators, some syrup -- ford indicators, some surveys that china is starting to weaken and wobble somewhat. we have a standard chartered survey looking at small and medium enterprises in china, pointing to concerns about access and cost of credit, and a sales manager survey that showed in theed optimism services sector, but concerns and the lack of confidence in the manufacturing side of things. we will get that pmi data on wednesday. the manufacturing pmi is expected to weaken to around 51, so it's still an expansion territory, but slower then the april whennth and
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the number came in at 51.2, so underlying the argument that we will see a cooling in china's growth picture in the second half. haidi: thank you so much for that. tom mackenzie there for us. nonce first quarter growth came in at the slowest pace since 2014, but the prime minister remains confident in the annual target. he spoke exclusively to bloomberg ahead of a trip to washington to meet president trump. it is true that first quarter in the vietnamese economy is slowing down, but there are a few reasons for this year it however, we have a detailed strategy to achieve growth of 6.7 percent, even in this scenario. we will take concrete steps and measures at each industry down to the product level. the main goal is to create a
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favorable, open, and enabling investment business climate. i will give you a hint of some very good news. in april and may, data shows a strong pickup in exports, sdi, and agricultural production, and that will lay the groundwork for growth in the third and fourth quarters this year. growth were at risk, would you sacrifice your inflation target? >> although we set the target for growth at 6.7%, we also have a mandate to fulfill on keeping inflation at the rate that we have committed with the national assembly. was kepthat inflation at 0.9% in the first quarter, however, credit growth was very good during the first quarter, standing at 5.9%. theinda: you talked about
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liberalization of the banking sector pick can you give us an update on that? to there submitting national assembly for consideration of a resolution of restructuring the debt in the banking sector in the at non-. we will allow foreign investors and substitutions to take over commercial banks in vietnam if they expressed interest. and for the commercial banks in which the government, the state, holds a significant stake, we will also invite strategic investors to come in. that was the vietnamese prime minister speaking inlusively to haslinda amin hanoi. signs of clamping down on financial risks. the former fedo china economist next. this is bloomberg. ♪
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haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. a quick check of the business flash headlines. told shareholders that it is evaluating several options for its u.s. shale unit to carry out a review of the energy operations. elliott claims bhp has destroyed $30 billion in value from its foray into shale in the u.s. andrew mackenzie told investors that the country will consider selling part of its energy portfolio. raisen australia could billions of dollars by asking rio tinto and bhp to pay a levy on iron ore. would be madement instead of increasing attacks, but it has been met with a lukewarm response. it is looking to reduce its debt pile, which the government says
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could take decades to pay off. carrierng italian flag alitalia has been hit by industrial action with flights canceled on sunday, walking out, demanding the government re-nationalize the airline after years of losses. alitalia is in a second bankruptcy in 10 years and has spent more than half $1 billion to keep flying while searching for a buyer. funding costs have soared after the pboc is considering the way it calculates the daily reference rate. it would partly filter out the impact of excessive volatility in the stock market. asian head of global market research at the bank of tokyo mitsubishi ufj is with us. say that the endgame is a free float, the internationalization of the yuan
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, liberalization of the currency? is this a massive backward step? >> it is. the interesting question is why do they feel the need to do this now? received the pboc trying to nudge the markets into a lower thear-china spot level for past six weeks or so, and find the things have gotten very frustrated and basically imposing its will through this new mechanism. suggestoes it seem to that this seems like overkill given that we have had more or less stability when it comes to dollar-yuan, and less stability when it comes to the basket against the yuan, but is this necessary and does it setback this whole process of opening up? the concern with volatility wasn't necessary. if you look at the intraday ny, somethe dollar-c an
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days have been extremely narrow. so i don't really buy the to combathis is volatility, because there has not been any. it is more likely that someone senior at the pboc, look, do something about volatility before the party congress, and this is what they have come up with. haidi: so, cliff, what you are saying is that when it comes to policy making in china, you still get these politically-driven knee-jerk reactions that result in policy changes? >> we have actually looked at this in some detail since the news leaked late last week. as far as we can tell, and we don't have exact details, but the pboc is injecting itself into the daily fixing through extreme mechanisms. a sickly they have what we call
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an asymmetric reaction, depending on whether the currency strengthens or weakens against its reference basket, the pboc is telling banks to lean against the wind. policy come for example, the kind that singapore runs, there is no need to lean against the wind. the mechanism is pretty mechanical from day to day, but that will not be the case from this point going forward. haidi: if in fact this adjustment is a countercyclical adjustment and it does make the currency less market oriented, does it weigh in negatively when we go into the msci decision in a few weeks? and could it potentially jeopardize its position in the imf basket? principle, it should jeopardize its position in the imf basket. i think it will be harder for people using the renminbi to
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figure out how to hedge the currency and any aid or programs it might receive from the imf. that is a political decision that the imf has made that this is part of the way of getting china to play by international rules, and it is not going to go back on its own strategy. this is not clearly the year for big reforms. we have seen them try to push for the deleveraging campaign, and we had some market volatility across equities and also bonds come about that has since pulled back a little bit. is it just going to be steady as she goes until we get that party congress? >> we have seen some promising signs in the way they are trying to get the credit system to deleverage of bit, but it is not enough. we will have to see if they can stay the course in terms of
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those reforms. otherwise, i think reforms or other reforms are very much on hold right now. haidi: i want to throw out this terminal chart #431, talking to gdp ratio, 270% of gdp. the moody's downgraded last week, did that surprise you? think it was late actually. moody's put china on negative watch in march 2016. it basically looks like it's been a year trying to debate this internally. the only what happens with ratings is that the ratings tend after market prices have are removed, and i think that is true to some extent. thatmoody's is saying is regardless of the macro signs, that they are alarmed. littleallow me to get a
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more technical, the other thing we are hearing about this mechanism in china is that part andhe input now is the pboc what it thinks of the macro economy. so if the markets think the economy is not doing as well as it could, but the pboc thinks it is going great, the currency will not be allowed to show with the markets think. that is really fascinating. i want to leave it there for a second p we will get more on china and the implications of this moody's downgraded last week and what that means for beijing trying to push forward. plenty more ahead. this is bloomberg. ♪
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haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. let's pick up our conversation with cliff tan. thank you for hanging around.
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i want to go back to the moody's down grade. youomes at a time when think about the efforts to open up the bond markets. does this cast a bearish shadow over how foreign investors perceive the chinese bond market , and also what does it mean for chinese firms under pressure from a fund-raising point of view? with some of my friends who are bond investors. feeling is this ratings change will not be that big of a deal. perhaps the supply side of the was looking for the downgrade, so the timing was more of a surprise than the actual move. liquidity, the onshore markets, how quickly they can move their money in and out, the credibility of domestic ratings and things like that, and what ,hose means for chinese bonds
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that is more or less included in the global indices. all of them are far more important factors for investors than the particular ratings change itself. you talk about some of those reforms that were suggested or required by the msci. do you think progress is made to get a share inclusion in the next few weeks? have tried toy make some progress, but the ansi nest over the capital accounts and stability ahead of the party congress means that they have thrown more sand in the works to capital flows,se and that is not positive for msci conclusion. again, i think probably the foreign investor opinion has been that this is inevitable. china is just too big of a stock market to ignore, but over the
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last few years because of the intervention in the markets, including capital flows, that has delayed the inclusion. unfortunately, i expect we might have something similar again this year. just quickly, cliff, we were talking about the slow down when it comes to the macro economy and have the pboc will use this new fixing regime to impose its views. you think we are past the peak in terms of the indicators we will get from here on and you think it will be gradually slower? of the economy, yes. we had news last week that has slippedron ore below $60 time. their prices are important for smokestack industries. if they continue to drift lower, smokestack industries will slow. will see those import prices start to fall over.
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great to have you, as always. cliff tan from the bank of tokyo mitsubishi usg. coming up we talk with mark mobius next. this is bloomberg. ♪
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♪ bloomberg markets asia. ♪ haidi: san francisco's john --liams calls for tensions on the rise as north korea fires a ninth missile this year. the u.s. is sending another aircraft carrier. growth targets will be met this year. the prime minister speaks to
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bloomberg. we have been focusing on china. mainland china market are closed for the holiday along with the u.s. and u.k. a holiday tepid session in terms of volumes. on friday we had the volumes lowest in a year. comess a big week when it to china. the chinese recovery is really coming off that peak. we had that reflation with ppi coming in strong over the past few prints. these import prices start to weaken as the commodities falter and global trade headwinds are potentially starting to waiver. take a look at this over the weekend. that expansion was supported by stronger local trade. most economists are saying this is the peak that we have seen and the various data points you see over the next few weeks will
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so -- show that start to ease. the private reading on thursday, show something of an easing. not exactly a slowdown but the start of the china stabilization is starting to weaken. watching all the ramifications, particularly when it comes to commodities under $60 at the moment. oil as well. trading in asia hitting underway. let's get over to julia where it has been a funny session for this monday. julia: a lot of direction lacking. china and taiwan closed. volatility on u.s. markets on friday was virtually nonexistent. it seems to be the same here in the asia pac region. another missile test from north korea.
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but once again south korea taking it in stride. seventh consecutive session at a record high. they have squeaked out from some of these commodity-based markets . isis faring -- new zealand faring better than it was. it has been fluctuating today along with movement in the japanese yen. the yen had been strengthening significantly against the dollar during overnight weekend trade now it is steady. in what you are seeing in commodities, all under pressure. around aoned oil off 10th of 1%. gold, fairly steady. doesn't seem to be much clear direction coming through to investors today. looking at the crude futures, it is fairly flat at the moment. it is been interesting.
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now is a good time to go long to because of the decision cut could lead to large deficits. let's have a look. we have seen some upside coming through in the japanese session. --sung really we're hearing that samsung sold more than one million healthy eight phones -- one million galaxy eight phones. nintendo at a fresh seven-year high up 3%. an upgrade from morgan stanley on friday on its switch console forecasts. sharp also doing well after forecasting a ¥90 billion operating profit. there is good movement in the tokyo and seoul sessions. otherwise it has been a fairly muted start to the trading week. haidi: i would say, for some of
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those yet it companies. let's get you caught up with the first word news. paul: the san francisco fed president said taggart should be approached carefully. saidwilliams is shed -- they should work towards a goldilocks policy. he added he expects three or four hikes in 2017 overall with investors seeing an 80% chance of a rise next month. >> when you are docking a vote you don't run as fast as you can towards short it hope you can reverse heart later on. -- hard later on. instead, the rule of docking a vote is never approach a dock faster than you can hit it. ,imilarly in sustainable growth the best rule is to close in on the target carefully and avoid substantially overshooting. paul: so threatening local trade
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health -- strengthening global trade health china. that builds on a -- helped china. national bureau of statistics said 38 of 41 industries achieved better profits in april than a year earlier thanks you stronger overseas demand and investment. british airways since most of its computers systems are running normally again after a weekend crash that disrupted hundreds of flights. the ceo said the carrier plans to offer -- operate all services out of london today. but the aftereffects will mean delays. the computer problems hit chickens, bageling which -- chec k-ins, baggage and others. munich, to voters near german chancellor angela merkel
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said relationships a since world war ii are, quote, over. she said europe must now follow his own course and not rely on america and britain. out attrump has lashed fake news after wrapping up his first foreign trip without holding a single trust conference. his nine-day tour of the middle east and europe finished with the g7. the president was the only leader who declined to take a single question. arriving back at the white house the president tweeted, many of the leaks are fabricated lies made up by the fake news media. news 24 rows at a coward by more than 2700 journalists and analysts in more than 120 countries. i am paul allen and this is bloomberg. haidi: thanks. north korea has fired another missile. it's ninth so for this year. seemingly in response to the u.s. shoring up its forces in the region.
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our correspondent has been tracking this. dan, what we know about this latest missile? dan: the latest one appears to be a short range missile. this is not the intercontinental -- ballistice missile which would spook the trump administration. nonetheless it landed in an area where there are ships and planes operating in japan's exclusive economic zone. it also may have been an area between japan and south korea which is claimed by both of them. this could be something where kim jong-un is looking to devise -- divide south korea and japan over the response. haidi: -- over their response. haidi: you have a brand-new president, a real kaleidoscope of challenges. he has had a dialogue-based strategy it comes to dealing with pyongyang. how long will that likely be
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and you need to balance men's a relationship with beijing? dan: it will be a tough balancing act for him. i don't think this missile will throw off a strategy much. as long as it is in this short to medium range missiles we have seen over the past few weeks and months. what would really escalate things is a nuclear test or an icbm being fired. he's under a lot of pressure not to reward kim jong-un for not doing those things. and they need some kind of restraint, some kind of signal from the north that they can move ahead with dialogue measures and more engagement. haidi: given the ratcheting up of these multiple tests we have had so from this year, it is fair to say the north is doubling down and we can expect to see more. is that right? dan: there appears no sign.
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kim jong-un is not giving him any space to operate. not giving him the political capital that he needs to convince everyone else and say it is time to engage with the north and bring them back to the negotiating table. that said, the u.s. has claimed some success with the fact that there is not been a real escalation. we saw the uss girl vincent aircraft carrier -- we saw the aircraft carrier leave recently. we are not seeing many gains of a shift towards dialogue and peace. yet we are not seeing the tensions we saw a few months ago. haidi: all right, thank you so much for that. talking about this little missile test out of pyongyang. we want to bring to your attention are interactive tv function. you can find us at tv on the bloomberg.
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you can catch up with phoebe's interviews or to a deep dive -- with previous interviews or go into a deep dive. you can also send us instant messages during our show. this is for bloomberg subscribers only. check it out. still ahead this hour, betting on japan. wantsut why a billionaire to build a casino in a socket rather than tokyo. plus, investment opportunities in emerging markets. how much more does the rally have to run? this is bloomberg. ♪
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♪ this is bloomberg markets: asia. i'm haidi lun in sydney. a quick check of the latest headlines. the declined to comment on claims it may raise the stake in nvidia.
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they have just below the amount that would we choir -- they are nvidia's fourth largest shareholder. says he wants softbank to be the leading tech investor in the world. toshiba is said to be disputing claims in the u.s. that its billions forowes breach of contract. the disagreement comes as toshiba tries to negotiate a plan to finish the project. vietnam's dominant airline is in talks to become the country's first company to list shares abroad. they say they have been approached by london, hong kong hanged -- and singapore. they will be the u.s. sometime this week.
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they want to boost foreign ownership to 49%. >> we have been approached by foreign stock exchanges including london, hong kong and singapore. they expressed interest in our stock. we don't want to hide our hope to become the first vietnamese company to list shares overseas. haidi: what a run for emerging markets this year ending 18% so far your today. stocks showed a fifth straight month of gains. that would make it the index is winning streak the longest on a year-to-date basis since 1993. it could all yet unravel thanks to rate hikes, trade protectionism, the list goes on. let's go to singapore. get a gase of
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where the ami rally goes from here. is -- emergingat markets are about to go gangbusters. what is rising the optimism? >> growth. it is all about economic growth. emerging markets are growing almost three times faster than developed countries. that is good news for emerging markets to begin with. secondly, the u.s. is destined to grow, which will be good for the whole world. if trump can achieve 3% growth that would be amazing growth for america. >> right now there is concern because of labor. can he actually -- how optimistic are you you can get 3%? mark: i'm optimistic because i think the deals he did in saudi arabia is just the beginning. i think he is probably going to deal with the chinese to
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engender more investment in the u.s. and he will be doing deals with other countries around the world we get more exports from the u.s. and more investment from other parts of the world. i think it is quite achievable. ,ven if he doesn't get to 3% emerging markets is still growing at 4% plus. you look at the biggest countries, they are growing at 6%, 7%. you could say china might go down to 5%, but even 5% is huge. investmentok at the opportunities. he said the prospects are amazing. -- you said the prospects are amazing. which sectors in particular are you liking? mark: the consumer oriented-type companies. for example, fast food. that is one area that is. exciting in vietnam. new concepts, new ways of distribution. and logistics. get products to the consumers.
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it is a big potential consumer market. then if you look at certain areas in the construction area, they are going to have to do a lot more infrastructure spending , that would be interesting as well. but that is more problematic. >> but there are risks. president trump has named vietnam among countries that a trade cheap. trump impose a tariff, it would be detrimental to vietnam. mark: yes but i doubt that will happen. i think strategic considerations are more important. country ina very key a part of the world. yet the south china sea. if the u.s. wants to keep those lanes open in opposition to china, they need vietnam. the current secretary of state when he had the oil company, was doing deals with the non-drilling offshore. -- with a vietnam, drilling
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offshore. >> how much more upside d.c.? -- do you see? 30% within a year. but it is anybody's guess. >> i want to touch on french all five. we look at asian countries they are looking good. indonesia, india. what is your assessment? mark: look at indonesia. despite all the problems, the index keeps climbing because the economic picture look so good. we believe that joe zhou is doing the right job. trying to get industry going, trying to get agreements going. though. slow mark: faster than you would expect. i think the thing with the vietnamese that you had to remember is at the national level you don't see very much. but that the individual provincial levels -- they
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distributed the power and the money to the provinces. you are going to see a lot more things happening at the provincial level which might not able -- make people leave -- lose at the national level. you are going to see this distribution of wealth to the various states in india. >> what would it take for indonesia to see more upside? we saw the recent upgrade in his credit rating. that was a done deal. what would it take for indonesia to make a jump and -- mark: at the religious level. in other words, a decline in each -- religious extremism would be a big signal. investors would feel comfortable whether they are christian, islamic or whatever. this would be an important extent for the country. even without that, cut down on
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corruption, which they are working on and it is very important. generally speaking for emerging markets you have seen a reduction in corruption levels. mainly because of the foreign corrupt practices act in the u.s. because that act is impacting all these countries. anyone doing business with the u.s. in any direction is subject to that act. we are seen the results in brazil and other countries. i think that will reach a throughout asia. >> hang tight, we back shortly. you're watching bloomberg. ♪
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♪ >> welcome back. we continue our coverage with mark. all eyes are on the fed. ont impact will that have the markets? mark: i don't think there will
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be much impact. you look back 10 years the correlation between the fed rate and the index is not there. upetimes we rate has gone and emerging markets index is gone up at the same time. i think this is all overdone. i think people are focused too much on the fed rate in the impact on the markets. >> three rate hikes this year. mark: it's quite possible if things keep going the way they are going. looking at inflation, employment. things for the economy look pretty good. >> some people are saying it is too much too fast. could that be possible? mark: of course. there are many indebted countries who have been paying very little interest on their debt. when rates go up they could be in trouble. expect bankruptcies around the way. >> we have seen a weakening
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dollar. how should people play a weakening dollar situation? mark: emerging markets. the emerging-market currencies are getting stronger against the u.s. dollar. that's the reason emerging markets are doing so well is that the currencies have rebounded from low points. euro, itrds to the will probably get stronger. be, noting concern would possible terrorist attacks, protectionism -- what is of grave concern? mark: protectionism is not a concern anymore. i think trump will make eye lateral agreements from these countries. >> to replace the tpp? mark: yes. multilateral is out. going forward trump is going to probably make strategic agreements on the military level as well to various countries. you see what happened in saudi arabia. you're going to see that happen
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as well and asia. an agreement to cooperate but not necessarily to aid. trump is going to be very careful in giving aid, military aid to these countries. you will see that playing out in asia. >> so the biggest risk will be? mark: some kind of big terrorist event that hits london, new york or other major cities around the world, which has a very detrimental effect on the psychology of investors. >> mark, you recently made a call in pakistan. to haveis not yet ready an emerging market status. why? mark: it is great for the pakistanis to go to the emerging market index. it is sort of a graduation. graduate to the big leagues. at the same time you are going from being a big fish in a small
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pond, the frontier index -- pakistan was about 8% of the frontier index. to ifll be less than 1% we are very lucky, 3% at most to the emerging market index. it is a big loss for the frontier index but it is also a loss for pakistan because the focus on pakistan will be less than it was before. because of this change. it is nice for the pakistanis to have that happen. but for the frontier index, not very good. >> all right, we thank you for your insight. heidi, there you have it. haidi: great stuff. coming up we will speed ahead when it comes to vietnam. an exclusive conversation with the country's prime minister. huge plans for one of the world's fastest-growing economies. this is bloomberg. ♪
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paul: these are the first word headlines. jacob zuma said to have survived a bid to force him from office. decided nothe anc to call the vote of no-confidence despite increasing pressure to step down. his decision to fire the finance minister sparked public protests and cost south africa its investment grade rating. u.k. have arrested two more people in connection to the manchester bombing. more than 1000 people are working on the investigation to
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determine whether the bomber was working on his own or part of a wider terror network. the explosion killed 22 and wounded 100. hong kong has criticized moody's, saying the decision to downgrade the city's debt rating was based on "shallow evidence o." paul chan said it cannot be considered negative as the mainland is the global growth engine. for theut china first time since 1989. googles artificial intelligence program has completed a sweep of its opponent. after the latest defeat, he said alphago is perfect with no flaws or emotional weaknesses. veteran said it would be years
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before computers could master the game. 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. straight to the markets with juliette saly, looking at how things are shaping up. has been an interesting start to the trading week. no volatility. its break.ng into the asx 200 leading declines. it is down .4%. .3%, andoff by downward pressure coming through in the oil contracts. some gains from emerging markets. , and nones up by .4% stopping this a record high for south korea's market, the kospi another record high, up .4 percent despite the weekend with another missile test from north
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korea. and its from singapore, is muted in the currencies, aussieh some commodities-based currencies under pressure. let's look at what we are seeing in terms of the stock movers today. grande has hit another high. this latest move, we have not seen why. country garden in hong kong 8.7%,well, up by j.p. morgan raising its price , so these stocks are doing well. samsung not showing up, but samsung itself has been a front runner on the overall kospi index.
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there are reports from yonhap news that it has sold more consoles than it did with phones. , creditthe losers suisse has put an underperform on the stock and has a price -- 2.10f two dollars 10 australian. weighing intadawul --iron ore weighing into fortescue metals group. we have seen a low volatility and going today. haidi: absolutely. so many major markets closed. thank you so much for that. some breaking news crossing the bloomberg, trade numbers and i lot of data coming out of vietnam at the moment. .he inflation figures at 3.2% we were expecting just over 4%,
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also slowing from the previous month. inflation coming in lower. the trade balance deficit of $800 million is what we ended up with, the same as the previous month. rapid pace,%, very beating expectations of just over 24% and slowing from the .revious exports at 17.4%, upbeat -- a beat on 17%. well, staying with vietnam, the prime minister says he is confident economic growth will meet the country's goal of 6.7 percent this year without adding to inflation. in an exclusive interview, the premier said the country is taking steps to boost the keep its status
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as one of the world's passing growing economies. >> we have a detailed strategy 6.7%.ieve growth of i will give you a hint of some very good news, data in april and may shows a strong pickup in exports, sdi, and also agricultural production. that will lay the groundwork for growth in the third and fourth quarter this year. let's take a better look at vietnam's efforts through five the economy. first quarter growth was a disappointment, so what is the current state of play? it is one of the great hopes in emerging asia, i guess. >> it is. --st quarter was saudi, one ofbut is considered the stars, still projected to 20 21. more than 6% to the underlying fundamentals look
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strong, three main pillars driving growth at the moment, manufacturing exports up 12% last year, and it is not just low end garment or textiles, it is up the value chain, samsung mobile phones, sophisticated , then of course international tourism is doing well, up 30% in the first quarter, high-end hotel brands looking to open hotels in vietnam, and a classic sign of an emerging middle market, the growth of the middle class in vietnam. there is a significant percentage of consumption that continues to grow there. on a month bying month, quarter by quarter basis, there is a view that vietnam is in a sweet spot able to harness the demographic side to fulfill its economic potential, which has some way to go yet.
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that domestic demand story is pretty stunning, that may import number growing at 24%. some of theset misconceptions when it comes to vietnam ease exports. how is the export base there? >> it is reasonably diversified. vietnam's main trading partner is the u.s. the tpp decision by president trump was a disappointment for them that would have opened more internal access for vietnam, , butles, electronics nonetheless, they also have a growing market days with china, notwithstanding wider tensions between the two governments there, and they have a growing export base with the eu. the eu and vietnam have signed a free-trade agreement.
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sure, vietnam has a lot of exposure to the china story, but has a reasonably diversified export base. to be one of meant the biggest beneficiaries to the tpp, very different now with the u.s.. what are some of the other risks? global trade headwinds, some of these things? >> yep. we can't rule out the prospect for trade tensions, right? it is in the crosshairs of president trump trade review and asia so we don't know what will come out of that just yet. that is one we really want to watch. then there is disappointment with the trump reflation story as the u.s. consumer story starts to slow down, that will impact vietnam. of the import data is linked to the new samsung
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, so a dropng online in demand would hurt vietnam. then the obvious elephant in the corner which continues to be the china story. the narrative is not for a china hard landing, but if we were to see the authorities hit the brakes too hard with the deleveraging such as it is, that would spillover into big exporting neighbors such as vietnam. some of the risk are the obvious ones, and the trade tensions story still has not gone away. that is one to watch. haidi: thank you so much. enda curran in hong kong. pakistan expected to be added to the msci index come june 1. aat might be something of headache as the stock market could attract more money than it could handle.
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this is quite a problem for pakistan to have. problem of be a plenty, at lease that is the view that seems to be back. it will be added to the msci index. is if it is inon a position to handle the influx of money that would come the day before inclusion, may 31. pakistan's stock market infrastructure and the brokers don't have the necessary wherewithal or financial capital to execute trades for index investors. that one not look to include pakistani stocks in their portfolios. on one hand, you have so much euphoria about this potential addition, and we live in a world where we are flush
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with liquidity looking for places to go. just spoke with mark mobius. he says pakistan is not ready. is it the case that infrastructure-wise that the market is not developed enough, even to be part of the msci e.m.? it is more to do with the capital adequacy that pakistani brokers have or don't have to handle such large high-value traits. pakistanus, about being included in the msci had to do more with what he sees as inadequate disclosure standards. i don't think he made any comment on whether the market is able to absorb this or not. haidi: it is interesting because -- willntier managers
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they end up vacating the positions? >> not necessarily. toin, we put the question them, and some of the may look to pay down their holdings. pakistan has had a fantastic run over the last 8-9 years since it was first downgraded to run tear -- frontier. thoses are that some of people might want to exit and look at the smaller emerging markets such as vietnam and even argentina, which has done remarkably well vis-à-vis pakistan in recent months. haidi: very interesting story to follow as that addition happens on the first of the month. our across markets editor there in mumbai joining us. our next guest is not
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see the reason for moody's downgraded on china affecting the country's credit markets. we will discuss more with blackrock next year it -- next. this is bloomberg. ♪
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going to get over to a managing director and head of asia-pacific fixed income at black rock joining me from zynga or now. -- joining me from singapore now. the downgrade comes at a time when they are trying to open up and garner more interest for domestic bonds. sure. i think the impact is fairly limited. the markets and how they behaved, we saw a
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limited move in the credit markets. china stayed relatively flat, , it issure bond markets released to mystically -- domestically own. the foreign ownership and the onshore bond market is close to zero. it is around 2%, so the impact of the ratings downgrade is limited. impact ont about the these chinese firms that are scrambling to fund raise right now? doesn't the pressure simply make it more expensive? >> if you look at the pricing of chinese credit and the regional market, what you will realize is that it doesn't trade in line with the rating. if you compare to the sovereign in the region, you have the china premium, so a rating downgrade doesn't change the cost of funding looking at the
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regional market. i would expected to remain where it is right now. thei: just switching to u.s., because we had these comments from san francisco fed president john williams, a the fomc,number of suggesting that we are close to hitting inflation targets, maximum employment when it comes does thator market -- change expectations for what the fed does in june, and what with need to happen for these market expectations to change? >> there is certainly a lot of data that is supposed to come out. if you hit a higher end of the spectrum coming yes, you would see the market changing expect haitians, but current need the close is to 100% expectation of a june hike, but the second hike expectation is close to 20%. you might see that pinching higher as we go, but the fact
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remains that in spite of where unemployment is, the wage at pretty lowtill levels, so you don't see a lot of pressure from the inflation side for the fed to move faster. aidi: i want to bring up chart, #8226 comparing the u.s. 10 year with the aussie, that yield advantage is almost nonexistent. the last time we saw the spread this type was when the aussie dollar was $.50, so what is driving this phenomenon at the moment? >> well, if you take a step back and look at the whole concept of the search for yield in income driven by demographics, and to some extent the lack of fixed income in the world. the aussie market is 55% owned by foreigners, and you see significant interest in the high
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rated complex and the government bond market which is yielding anything, and i don't think this is different. there is an implication that yield differentials will be so narrow between australia and the u.s. that it becomes less interesting for some of the global investors, but it is not reversing in terms of the flows. it is not becoming less interesting, isn't? reflationout the trade and other opportunities, you are still seeing a continued hunt for yield. you expect that to continue? >> i do expect that to continue. the hunt for yield is driven by two factors, the shortage of fixed income or higher quality fixed income and demographics. demographics is a one-way street. the firsten it for time and this will continue and keep pressure on the need for income and need for returns in this world, so i don't think that is changing any time soon. themes thatf the
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central banks this year seems to be the great unwinding. we are coming off these unprecedented monetary policies. the u.s. seems to be getting closer to unwinding, expecting that process will be boring, not inducing volatility. we are looking at the boj and when it could start talking about doing that too. you expect this will be an orderly unwinding? what does that look like when it comes to bond markets? the balance sheet reduction for the central banks, and most importantly fed, i do think you will start to see some communication around it getting towards the year end, september-december will be the window to communicate around the the lack ofven pressure from an inflation standpoint and the focus on financial conditions, they will be gradual, and they will be careful about the unwind mechanism.
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one important point is that if you remember the taper tantrum in 2013, that probably does have impact on how the fund looks at it from here. haidi: yeah, it is interesting. i think a lot of people are saying we will not have a taper tantrum. that will not happen. still, thank you for that. coming up, no owner lawrence ho weighs in on the gaming market in japan, why he sees a casino in osaka rather than tokyo. this is bloomberg. ♪
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local resortner of said he would rather build a rather thanaka tokyo because it is more fun and has less competition for entertainment dollars. lawrence ho said it would be a better fit for his company. >> in my opinion, when you go to the region, it is more fun related, and we are a company that focuses on fun, entertainment, and attraction. on having thelves hotel and restaurant and top amenities. we have the most michelin star restaurants come of these aret's
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important elements that we want to bring anywhere globally. analysist's get more from bruce einhorn. osaka apparently more fun than tokyo. >> what he is talking about is that there are big cities, global centers like new york, like london, like tokyo, where you don't need casinos to attract people to go there. right, just to put into context, this is getting ahead of ourselves a little bit. we have no idea about when this is going to go through and when construction can start, but it is a lot of speculation at this point. >> that's right. the parliament passed the initial legislation last december, but there is still more that needs to be done. there are more laws that need to be passed.
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the government has not come out with any clear rules and regulations on how it will work, so there is still one way to go. it does happen, who are the main players expected to be interested, and are we expecting this to generate and infrastructure boom, but a sizable piece of investment from these companies? there are quite a lot of companies that are clearly very interested in this market, so in addition to melco, you have the big names from the united states, las vegas sands, just to name one, but all the big players are quite keen on this market. there are estimates the market could generate as much as $25 billion in gaming revenue, even more, so companies are quite toling to spend billions
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build a casino complexes in japan they get permission to do so. haidi: quite a lot of excitement already. thank you. sherryhead, and she and with the big stories of the day. with the bigshery stories of the day. >> speaking of markets, we welcome fidelity international on the rise of china and india findrope as both leaders themselves courting the eu. this is bloomberg. ♪
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angie: it is almost 11:00 in hong kong. shery: we are in the middle of the asian trading day. welcome to "bloomberg markets: asia." ♪ shery: a muted start to the week, but global stocks remain at a record. investors are betting the system can withstand more rate hikes. angie: john williams calls for a goldilocks economy. one that runs neither too hot nor too cold. tensions on the rise as north korea fires the ninth missile this year.
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a strong response promised. and, vietnam and sister targets will be met this year. the prime minister speaks exclusively to bloomberg. busy morning still, but a quiet morning in asian trading. shery: not a lot happening given shanghai close, new york, london , no real major data out today either, so a quiet morning, but when it comes to what is happening across markets, there was some reaction to that initial news that north korea fired another ballistic missile come up with the markets seem to shrug that off. we do have the south korean kospi at the highest level on .4%, great gains for the south korean market. , crude coming5%
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down from that slight rebound on friday, down .3%, holding steady at $49 a barrel. disappointment after the opec decision, a slight pickup, but not sustaining gains in asian trading. .2%south korean won gaining . ae commodities market, not lot of movement other than wti. did in the morning session slightly positive, the yen first saw a strengthening after the north korean news, but right now holding steady and holding on to gains. so couldeard that ms. have fallen into japan's exclusive economic zone. -- that missile could have fallen into japan's exclusive economic zone. the offshore renminbi up as well. as i said, the chinese offshore
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yuan gaining ground again. the last session saw gains of .2%. we are also seeing the south korean won, and plied fall into the in the offshore yuan has peaked, climbing at the fastest soe since august 2015, things are getting interesting .or the offshore yuan the indonesian rupiah losing .1%. week, thet big last we are ino consolidation mode around 13,300 , but when it comes to emerging-market currencies, you have to keep in mind that we have had pretty good gains in the past. take a look at the msci emerging markets currency index, now overlaid volatility, j.p. morgan indexng market volatility
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, and the relationship between the two seems to be fading. if you look at the 100 day isrelation, we are seeing it the least a correlation since 2013. our market live team said the last time this happened we saw a bounce back of volatility and currency index losing ground, 2013, 20 of 11, so this could be something to keep in mind as you look at emerging-market currencies. we will get more details later in the program, but for now, first word news with rosalind chin. fed presidentsco saying turkish should be approached slowly and carefully, not rushed. john policy says the policy should work towards a goldilocks economy, neither too hot nor too cold. he expects three hikes over all,
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with investors seeing 80% chance of arise next month. boat,ou are docking the you don't run in as fast as you can to shore and hope you can reverse the engine later on. afoul, so therun rule of docking the boat is never approach the dock faster than you are willing to hit it. similarly and sustainable growth, the best rule is to close in on the target carefully and avoid substantially overshooting. the managing director of the singapore monitor of authority will also speak. nonperforming loans have been rising to the challenging economic environment, he is confident the bank of singapore has contained exposure to the struggling oil and gas sector. >> nonperforming loans have risen amidst a weakening economic environment, and emerging asset quality risks in sector which has
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been way down by low oil prices. our banks exposure is contained. rosalind: strengthening global trade helps china profits to rise in april to more than $83 billion, built on a jump of almost 24% in march, and 8% rise in industrial profits before. of 41 industries had better profits in april thanks to stronger overseas demand and investment. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. angie: south korean defense stocks on the rise up to the north fired another missile, the ninth this year. brings the u.s. to beef up its forces in the region. shery: not a lot of response.
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the japanese yen strengthening, now holding steady. explains, we say nine consecutive missile tests from north korea, but it seems that as we have been saying that the markets have shrugged it off so it did not matter as before. >> it doesn't appear to be that significant. south korea and the u.s. are more concerned about is conducting a nuclear test or launching an icbm that could reach mainland u.s. this one today appears to be a short range scud variant. the question is what kind of missile technology with a testing with this one? what is more intriguing with the test today is that it was fired into disputed territory, an area that south korea and japan have
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in disputes over in terms of who has the economic rights. thatnalyst suggested perhaps north korea is trying to create a discord between japan and south korea, both of which have been very resolute and jointly condemning north korea's missile tests. way, that missile headed towards japan or fired towards japan, nato partner, and the geopolitical response has been pretty strong. saying repeated provocations cannot be tolerated, and trump has been briefed on the launch and has promised that military wece remains an option, so are hearing a ramp up at least when it comes to rhetoric. , there is no doubt that this is a very serious test, the third one in as many weeks, the
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ninth one this year. north korea has continued to ratchet up its nuclear weapons development. that is the still very worrisome, and as a result you see strong condemnation of the tests. the question now is what can south korea, u.s., japan do? imposeave been sanctions that have called for help from china to impose stricter we are notbut again, sure how effective any new measures will be considering make theseontinue missile tests. very interesting you bring up the angle that this could have been intended to provoke this court between japan and south korea. how are relations with the new president moon jae-in. he was known to be against that comfort women apology from
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japan. president he has made a number of campaign pledges. he has expressed his views on the comfort women situation, a euphemism for when japan used korean women for basically the secondn during world war. this is still a sore point for south koreans, and this is raised by moon jae-in, so relations -- it remains to be seen. it is too early to say, but the timing of this missile, particularly into this disputed territory, is intriguing to one of the analysts looking at this. shery: thank you for that. still ahead, why pakistan could itattracting more money than
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could handle as a brokers to be added to the msci index. angie: narendra modi's visit to germany, spain, and russia, how he will attract more investment to india. we will discuss that with fidelity next. this is bloomberg. ♪
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angie: welcome back. this is "bloomberg markets: asia." softbank has declined to comment on claims it may raise its stake in nvidia. it has 4.9% of the chipmaker, just below the amount that would require a regulatory disclosure in the u.s. fourthk is nvidia's largest shareholder at $4 billion. masayoshi son says he wants softbank to be the leading tech investor in the world. angie: toshiba disputing claims in the u.s. that it and its bank rep nuclear unit 01 $.7 billion
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for breach of contract. scana says westinghouse is liable for up to 25% of payments it has received does lead contractor. the disagreement comes as toshiba and scana try to negotiate a plan for finishing the project. talks toetjet is in become the country's first company to list its shares abroad. vietjet says it has been approached by london, hong kong, and singapore, and will meet officials in new york later this week. annoyed recently ease the rules on investment and received shareholder approval to boost its foreign ownership limit to 49% from 32%. we have been approached by some foreign stock exchanges, including london, hong kong, and singapore, and have expressed interest in our stock. we don't want to hide our hope
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to become the first vietnamese company to list shares overseas. angie: let's get back to the markets. greeting theokyo latest north korean missile with the equivalent of a shrug. shery: like who cares, basically, but we are talking not only about south korea and the topix, but india. this is #8928. you can see korea and india have led the way in 2017, well ahead of its peers, even if the topix is not doing too bad, the kospi again rallying, a seventh session of gains, and the sensex also closing at record highs on friday. fidelityng in international for look across markets today. of northupta news
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korea, but it did not seem to matter, futures ok, the kospi rallying to record highs, so what will it take to derail the market? >> if you look at korea, asia, markets are shrugging off some and relatedolitics issues we have seen here. back, wee 12 months might have seen a sharp a reaction, but when you look at korea, the market is chugging along because the election of the new president has improved sentiment. the export numbers from asia are looking recently good, and growth is generally looking quite ok in asia must some things are doing quite well here, and that is one of the reasons why what we are seeing is from a sentiment perspective, europe, when we talk to clients across the world, europe has come back and people are looking towards asia as an under allocated region. unemployment rate for
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young people is disturbingly high still, and the chinese discord as it pulls away its tourists from south korea and that really impacted tourism domestically, so are there still domestic issues that perhaps are necessarily being addressed by the market reaction to those export figures? >> that is definitely there. some of these issues are structural and need to be addressed, but that is what the markets are looking for. it is really about hope. in india, when prime minister modi came to power, we got a change in leadership. his election agenda is really about reform, and markets are cheering that, but there are underlying issues. there is unemployment. they need to monitor and -- angie: from market observers and participants, how long does the
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honeymoon last? as longcould continue as we continue to see decent macro data coming out. china continues to stabilize when it comes to its economy, so growth looking well in that range. they could press the pedal when it comes to liquidity or pull it they but as long as continue to implement reforms, china is the big daddy. that will have a big impact on sentiment and what happens in the region. korea, there is a lot of value in the sector, so we are looking at things on a bottom-up basis. shery: what about the valuation problem? you talked about india under pocketst we are seeing of bubbles in certain sectors. which are the sectors at risk right now? >> india specifically, if you dissect the market, the small cap space come and that's why we are concerned about violation,
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so we are staying out of that space for now. there is a risk that some of these businesses and managements may not be able to evolve and stock prices have run ahead of expectation, and it could be a risk that some businesses could be in for a shocker. where we are focused is on the ,arge cap side, specific stocks the earnings season in india has been a mixed bag, health names, i.t. services names have not done as well, and we are selective there. consumer side, logistics, utilities, that is where we are focused on. angie: you said you're trying to ekk value in the asian plate. what they annoying in asia to their detriment? china is the trendsetter. whatcould be ignored is
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happens if reforms get derailed. what if they don't come up with the expected outcomes, that could be a risk. what happens to china's credit looktion, although when we at the new economy, we don't think these businesses are impacted. it is about geopolitics having an impact on volatility and sentiment. shery: the offshore yuan strengthening at the highest level since february. does this signal problems for .he equity markets >> outflows continue from china and we think you could see volatility continue, but china
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and what governments do and how they go about in asia in terms of driving reforms ahead, so theher implementation on first of july in india, china ahead of its party congress, you have to see this baby steps continue. angie: let's talk more about that. investment director at fidelity international, we dig deeper into china and india has both of those leaders are in europe. this is bloomberg. ♪
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shery: let's turn our attention to an economic dominance rival between china and india, leaders of both countries visiting europe this week. in brussels,ll be while modi travels to germany, spain, then russia. let's return to our
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conversation with fidelity investment. we were talking during the break about donald trump and the discord he has created as the lone wolf. angela merkel saying we can't depend on our historic partnership with the u.s. anymore. how does that benefit a china and india visit to europe this week? things is one of the key why both leaders are there, to further talks with the european union, and if you look at germany specifically, this is india's most important trading partner in europe, so modi's visit there is absolutely important from a perspective of further attract thing foreign direct investment into the country. in india, 2016 has been the largest recipient, and that is the key thing on his mind as he talks to angela merkel. the other thing is about promoting free trade and open
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trade, and both countries have made statements to that effect. that benefit in terms of attracting from their capital. for china, it is held and road initiative. shery: great thing you bring up the belt and road. the function under this , where theysrc can see the loans made by china at the aiib. it is for the date after september 13, 2013 when the initiative was announced. you can see which countries took all of this money. you can see the uae took $2.3 billion. pakistan also, $400 million. money come ines terms of how much you can increase your influence on these countries? >> china has long-term plans and long-term and dishes --
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ambitions. when you look at what is happening, there is increased commitment to funding over the long-term, and that would then if it the countries, the smaller is going, where china to. from a portfolio perspective at this point in time, we don't see much impact on the construction companies look at the long-term impact, we think it will be very positive or china. it is about establishing its dominance and clout on the world economy, and that is what it is really about, and that is where china is ambitious. angie: let's look at the trade picture for china and india #6561, take a look at the china trade balance, a small surplus, then you look at india at asia #8927.
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you can see this historical trade deficit relationship in terms of imports and exports shows that india needs this visit to go well, more than anyone else. >> india has never been an export destination. it is an exporter of services for pharmaceuticals, healthcare services, and i.t. services, but when you look at real goods, it is china leading exporters in the region. about attracting foreign direct investment to strengthen this made in india campaign. the campaign is important for jobs and employment which india desperately needs. manufacturing in india for domestic consumption, so that is the difference when you look at these trade balances. so much for you joining us today.
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the investment director at fidelity international. we will be looking for to that open in india, and also japan. the yen holding steady at 111.37. ♪
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angie: it is 11:29 a.m. in hong kong. embattled south african president jacob zuma is said to have survived a bid to force him from office. members of the anc decided not to call a vote of no-confidence despite the president facing pressure to step down. the finance to fire minister in march sparked public protests and cost it its investment grade rating. british airways has said most computer systems are running normally again after a crash that disrupted hundreds of flights. the ceo says the carrier plans to operate all services into and
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out of london today, but the after affects of the disruption will mean delays. it hit ticketing, baggage, and reservations. british police have arrested two more people suspected of links to the manchester bombing with 13 in detention. police say more than 1000 people are trying to determine whether the bomber was acting on his own or was part of a wider terror network. the explosion killed 22 people and injured about 100. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. juliette: it is a bit of a muted start to the trading week. markets closed today for public holidays. china and taiwan closed in the asian session. next to no volatility or volumes and the u.s. markets friday,
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similar to what you are seeing across the region today. indexuth korean kospi higher, up by .4%. emerging markets getting a bit, philippines up by .6%, and hong kong with a turnaround and a strong surge in developer stocks. hong kong up .1%. .1%, that market fluctuating little as we see movement in the yen. the again has been significantly stronger against the dollar and the overnight session, but steady against the dollar, and not much movement in terms of the forex markets, the singapore dollar the weakest. contracts,ti crude iron ore still under pressure, down .3%. in terms of market movers china nde surging to a record
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high. j.p. morgan questioning the rally in emerging-market stocks. in terms of what we are seeing is after aside, this broker downgrade by morgan stanley. domino's also a downgrade, -- i should correct myself. health care had a downgrade from credit suisse, and domino's from morgan stanley. and fortescue impacted by that weaker iron ore price, the very low volumes and volatility across asian markets today. angie: one notable thing we are tracking is this euro short, the .ongest lived short leverage funds have started to e xit from that trade. this is #8925 on your bloomberg, something we have charted out.
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hedge funds are close to exiting bets against the euro after it rebounded after three years of declines. bearish positions have been cut in the past five weeks on the heels of u.s. economic reports that have started to miss economic analyst estimates. it is interesting to see this long-term play may be nearing an end. shery: the smallest position in the top panel and the bottom panel, which is what is interesting. the u.s. economic surprise index falling, an index that surged after president trump got elected, and now emerging with the eurozone economic surprise index, holding steady. get anek, you have to eye on u.s. personal spending data on tuesday, and made nonfarm payrolls coming out. depending on what happens to that data, it does not necessarily spell the fed could
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be derailed, but could apply pressure on the u.s. dollar. angie: bad news could be good news. shery: mark mobius has told bloomberg that good times may continue. the executive chairman at templeton emerging markets fund haslinda amin about why he is optimistic. >> >> i think the deals he did in saudi arabia is just the beginning. werenk he has done deals china to inject investment in the u.s., and he will be doing deals with other countries around the world, where you get more exports from the u.s. and investment from other parts of the world, so i think it is quite achievable. doesn't get to 3%, emerging markets at 4%, and china and india growing at 6%,
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7%, ok, china goes down to 5%, but even 5% is huge. use of the prospects in vietnam are amazing, your own words per where exactly? which sectors are you liking? >> we like and the consumer-oriented companies. for example, fast foods, one area that is exciting in vietnam. introducing new concepts, new ways of distribution, and logistics, again, products to the consumers. it is a big potential consumer market. if you look at certain areas in the construction area, they will have to do a lot more infrastructure spending. that would be interesting as well, but that is more problematic. president trump has named vietnam among countries considered as trade cheats come
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a $32 billion trade surplus with the u.s.. should trump impose the tariffs that would be detrimental to vietnam. i doubt if that will happen because i think strategic considerations are more important. vietnam is a very he country in that part of the world, china, south china sea. if the u.s. wants to keep those lanes open in opposition to what china is doing, they need vietnam. rex tillerson was doing deals with vietnam drilling offshore, so the relationship is going to be strong. haslinda: how much more upside do you see? >> 20%, 30%, 40%. ,ithin a year, quite possible but it is anybody's guess. nobody can really know. haslinda: we used to talk about the asian countries, indonesia,
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india, they are looking good. what is your sense? >> despite all the problems with terrorism and so forth, the index keeps on climbing simply because the economic picture looks so good. getelieve he is trying to industry going and -- haslinda: are you concerned with the pace of investment in infrastructure? >> yeah, the thing is that at the national level, you don't see very much. but at the individual levels, what they did is they distributed the power in the money to the provinces, so you are going to see a lot more things happening on a provincial level which may not make people lose at the national level. you will see this kind of distribution of wealth to the various states in india. haslinda: what would it take for
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indonesia to see more upside? we saw the upgrade in its credit rating, but that was a gimme. what would it take to make a jump and be a darling for investors? reconciliation at the religious level, a decline in religious extremism would be a very big signal. in other words, where investors would feel comfortable, whether christian, islamic, or whatever. this would be a big step for the country but even without that, cut down on corruption, which joe joe was working on and is very important. angie: that was mark mobius. has givenela merkel the strongest indication yet that europe is drifting away from the u.s. under president trump. speaking to voters near munich,
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she says relationships forged a sense world war ii are "to some extent over." she was with the president at nato and g7 and says europe must now plot its own course and not rely on america and britain. angie: ian bremmer says the statements that the u.s. and europe are drifting apart and that germany cannot provide traditional american leadership. >> there is no question that her relationship with trump and her administration's relationship with trump is very badly damaged. while i don't know merkel personally, i know many of her advisers, and they will all tell you that they think he is very far from capable to actually lead his country or that relationship. -- presidentce and trump this back home after his somewhat controversial foreign trip. changed from a
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previous administration. thatere is no question trump is more comfortable with leaders in the middle east than he was in europe, and that simply reflects a change in tone from the previous administration. certainly not just with respect to the substance of the dealings with europe and the middle east, but the mannerisms and the way in which the president conducts himself. thee: richard haass is president of the council on foreign relations and says eu leaders have a completely different view of the president and his predecessor. they see him and they literally scratch their heads and go, this is not the united states i thought a new. they loved barack obama. a were so comfortable. look at the difference in body language. it really is night and day. shery: and that was the word on president trump. angie: coming up, vietnam's
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prime minister says he is confident of meeting growth targets this year without stoking inflation. our exclusive interview is next. this is bloomberg. ♪
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angie: this is "bloomberg markets: asia." i am angie lau. shareholderss told it is evaluating several options or its u.s. a shill unit amid pressure from elliott management to carry out a wider review of the energy and minor operation. elliott says it has destroyed $30 billion in value in the u.s.. will consider selling parts of its energy portfolio. angie: western australia could raise billions of dollars by payng rio tinto and bhp to a levy on iron ore early as a
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lump sum, made instead of but it hasthe tax, been met with a luke warm response. western australia is looking to reduce its $22 billion debt pile , which the government said could take decades to pay off. , any: oil and natural gas unexpected drop in quarterly profits, despite higher prices for crude. missing estimates on gas revenues and a jump in policy ngn, seeking to raise output as india looks to cut its dependence on oil imports. byie: alitalia has been hit action with hundreds of flights canceled on sunday. unions walked out, demanding the government nationalize the airline. the airline went into administration this month after years of losses. is in its second
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bankruptcy in 10 years and has spent more than $5 million to keep flying while searching for a buyer. shery: let's head over to vietnam, first quarter growth at the slowest pace since 2014, but prime minister nguyen xuan phuc remains confident that the annual target will be met. right.that's he spoke exclusively to aheaderg's haslinda amin of a trip to washington to me president trump. >> it is true that first-quarter growth in the fianna mise economy is slowing down, but there are a few reasons for this. we have a detailed strategy to achieve growth of 6.7%, even in this scenario. take concrete steps and measures at each industry down to the product level. the main goal is to create a
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favorable an open and enabling business investment climate. i will give you a hint of some very good news, data for april and may shows a strong pickup in exports,i will give you a hint e very good sdi, and also agricultural production, and that will lay the groundwork for growth in the third and fourth quarter this year. haslinda: is growth at risk? would you sacrifice your inflation target? >> although we set the target at 6.7%, we also have a mandate to fulfill on curbing and keeping inflation at the rate that we have committed with the national assembly. keptee that inflation was at 0.9% in the first quarter, however, credit growth was good in the first quarter, standing at 5.9%. spoke,a: when we last
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you talked about the liberalization of the banking sector. can you give us an update on that? to there submitting national assembly for consideration of a resolution of restructuring the debt and banking sector in vietnam. we will allow for foreign investor and institutions to take over commercial banks in vietnam if they express interest. and for the commercial banks in which the government, the state holds a significant segment, we will advise strategic investors to come in. shery: let's bring in our chief asian economics correspondent for more on vietnam, enda curran . the prime minister seems confident, but they disappointed in the first quarter, so will they be able to achieve it? >> it was a soft corner for thenam, but this is one of
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best emerging market growth stories out there. the economy has tripled in the past decade, a manufacturing export base, the economy itself is projected to grow by more son 6% each year up to 2021, the overall growth story remains intact notwithstanding quarterly variables. international tourism is up by over 30% in the first quarter. the consumption is a classic sign of an emerging middle class , emerging economy, the consumer base is continuing to grow and will grow exponentially from here because people are buying more goods, more expensive things, so all those signs are there that vietnam is in a good spot not with tending the headwinds on the trade side of, so in good order. angie: how diversified is vietnam's export base here? ,> when the u.s. dropped tpp put vietnam and a hard spot because they had invested a lot
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of political capital. it would have opened u.s. markets to textile and garment exports, opening u.s. markets to buttronics even more, despite the tpp setback, they have a growing days with china and a growing base with the eu. they have agreed a free-trade pact with the eu and will be signed off by the eu parliament this year. was a disappointment, but as export nations go, vietnam is not in a bad place. shery: i remember being in hanoi a few months back. top of mind is what will happen after the u.s. withdraws from tpp. what are the risks now for the vietnamese economy? will they be affected by the rate hikes coming? >> the fed story so far seems to be subdued.
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are well flagged in advance. the capital outflows are reversing to capital inflows, so there won't be any surprise, but the backdrop remains the trade tensions that have not gone away. in the crosshairs of the u.s. review on trade, and we don't know where that will go yet. that is is why we will watch the talks next week when they meet. if china puts their foot on the too hard, there would be risk for vietnam. remember, were not just talking about low in textiles and garments, there are sophisticated goods, and that bodes well for vietnam's economy. these integral as free-trade agreements. when he goes to washington, will we see a similar trade agreement being worked out between the two
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nations? >> it will be interesting to see what path they pursue. for some sort of new bilateral framework, and that will be key. asian nations are hoping tpp can be revised with or without the u.s. we don't know what vietnam strategy will be with the u.s., but that's why we are watching for bilateral or multilateral arrangements. stem: what sort of risks from reforms being carried out in the banking sector? >> when you do reform your banking sector, it can have obviously painful knock on consequences to the economy if you're tightening credit too hard or making state owned enterprises fail, there is a spillover effect, so it is a delicate balancing act. doing is long overdue and has been given the green light. angie: thank you so much. enda curran talking about
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vietnam ahead of that washington trip. set to be added to the msci, but will it be able to handle the amount of money that it generates? more on that next. this is bloomberg. ♪
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shery: welcome back. this is "bloomberg markets: asia." angie: indian markets getting under way. we continue to watch the sensex as it sets record highs. we are off that right now. it is pretty much flat. some pressure on emerging markets, a mixed picture, but a quiet trading day as shanghai, london, and new york will be closed for holidays. pakistan comer to
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up because pakistan is expected to be added to the msci emerging markets index on june 1. market could attract more money than he can handle. angie: what does this mean for pakistan's fortunes? >> it is a problem of plenty. it is a good problem to have. the only problem is if your infrastructure is not geared to absorb the inflows. that is the message, that brokers may not have the financial wherewithal and the capital required for overseas index funds. will front tier investors abandoned pakistan? -- front tier investors abandoned pakistan?
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second be one of the key questions for that market. >> i don't think they will abandon pakistan. there is a good reason for them to move some of the capital to other emerging markets like vietnam. not everyone is confident about this move. he did not say he was bearish. is he would continue to treat pakistan as a front tier market, even if the word to
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be added to the msci index. his reasoning is essentially pakistan would have enough to thatde its standards, so makes them think that pakistan is ready for inclusion in the msci emerging markets space. angie: bloomberg markets middle east coming up at the top of the hour. iswe will be looking at what happening in terms of the rate outlook in the united states. he will talk to the latest turmoil coming out of south we will widen out the
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conversation and the joined by bank of america merrill lynch
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