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tv   Bloomberg Best  Bloomberg  September 15, 2017 8:00pm-9:00pm EDT

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china, home of alibaba. beena past 18 years it has for not only alibaba come of the china as well and the global internet economy as a whole. we were here for the 18th birthday bash. . packed in with 40,000 employees into a outdoor stadium -- an outdoor stadium and we spoke with jack ma.
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cofounder and group ceo. >> everybody has a big chance to go digital, but people need to change, three liters driving alibaba: the global disruptor. ♪ it was a humble beginning for jack ma as they cofounded alibaba in 1999. the chinese were even connected to the world wide web and alibaba wanted the answer. senior executives were quarantined and that gave birth best platform which growth ebay out of china and led to the single day
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shopping extravaganza and the launch of many new businesses. much like bloomberg set up for the interviews, the rise of alibaba has been no small feat. more demanding. -- eight next step me be even -- the sars, there's a lot of things we can learn, but today the things we are doing, there nothing we can learn from. because we think, are the leader of this industry thatu -- the things you driving on the value of the
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mission. there's not a textbook you can read. >> i'll anyone could have imagined the kind of scale we reach today, but i think we are very lucky to have participated in the confluence of china's economic growth and also the rise of technology. >> this november i think is the best reflection of the landscape changing in china. million customers in china and today even more. 1999, therted out in was a hundred $70 800,000. it is over we have been very fortunate in both ways. >> we know where we are going.
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that is our direction, but on the way there, we have more more problems. today, if you look at the package, it is about a five minutes per day. we strongly believe that this -- i'm one billion telling my team it is like you climb the mountains. below wanted to meters, the growth is 400,000 meters. you don't have enough air. you don't have enough people working with you. now, we have probably 5000 to without as high so
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andng mind and mission ideas, it is difficult to continue to work. >> have you faced resistance in china for what you're doing? interviewed -- driving things down. you think there is an old car in china that is not quite understand the new economy? that they will have to adapt? >> we are having this kind of assistance almost every day. we see people a lot. the evolution. in the early days, they destroyed a lot of lower-level companies. sold more than 500 billion
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products last year and 70% were helping the manufacturer. we don't produce. >> will use rish facilitate -- we facilitate reform? >> we are pushing that. that is why a lot of banks don't but they --china, the china banks really act very quickly in the past three to -- you can run much
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faster. >> you are asia's richest man, but you -- are you still an entrepreneur? >> i don't have time to spend money. can -- how much money you can spend. >> coming up, alibaba broadens its scope, investing heavily in southeast asia and brick-and-mortar under its new retail concoction and jack ma competitors.of his >> i think tony did not have any experience in mobilization. .- ♪
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e-commerce,nquered alibaba is investing in areas like cloud computing, and even brick-and-mortar retailing. the convenience stores. it is a question, is alibaba moving away from its asset light model? >> when you're young, light
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model is good. , youyou're strong, big need heavy things. should not leave the heavy model to the others. because youdo it have to invest. consumero change the experience because you have this growing class in china whose expectations and demand are being elevated. offline, we cannot separate. be the retail formats will upgrading or redefined. to incubate the ouressful model and empower
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operating business process is most important thing is to embrace the change. >> what we can do is serve an in-store purchase. you can also walk in and eat right there so it is like a food hall. home forn stay at everything on your mobile phone as a gets delivered to you. everything that is done, in-store purchase, or online purchase from the same store location. obviously, alibaba investing into southeast asia and india as well. can this new model be implemented and will you implement that as you expand into southeast asia? >> i would -- to allhe retail the market globally. markets globally. >> at think the next five to 10 years will be a game of an
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attrition with e-commerce taking more penetration of overall retail. hallmark of southeast asia is less than 3%, specifically indonesia. this year, they will have less than $16 billion for the whole country so there is a lot of growth opportunities. >> always think about the future, so you have to think do, there are can key things. >> the pay has been running around for 10 years. ali hey, but not the mission we want to do. >> i think when you ask him, know there is someone
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who can work together and make the market bigger. this is the fun part. we are learning a lot from us and a lot from them. those two companies, if we can -- the whole society based on trust and credit, that'll make the market much bigger. >> what is going to be the criteria for you for your russian to southeast asia? -- hearave gone into india, i you are looking at big baskets so there seems to be a land grab in southeast asia. are you going to get the penetration and growth there through the payment structure or is it to get the e-commerce platform is so low?
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-- i'mink by going there missing again and again, the thing is alibaba should go in outside. >> we are not particularly andrested in one market getting some market share their no, we're not interested in the. they need and payment system they need a platform system so they can sell things globally. >> we are interested in training -- trading and e-commerce. we have been doing that for 15 years. good -- when you go to india, indian people do not use we chat. they have no
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experience of globalization. >> are you afraid of all the data that you are creating and because you do partnerships only have partnerships with time and best logistics, but you are all collecting data. -- >> you want to be a data company. >> that is your biggest asset. >> hang seng data in the future, there are two issues, security and privacy. for these two issues, there always a problem. >> you have to be very careful of the security of the data and private is us. but, you have to go forward. not like in your where you worry a lot. when you have a problem, solve the problem. >> how valuable is that data?
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credit must be extremely viable. with data that is extending it to everybody and that takes time to educate everybody. so i based on the flow think today, it is good. every government starts to worry but how to operate the improvethe properly can society and improve people's lives, that is something that is going to be critical. in the beginning to manila cared about data. the everybody love the oils and for the oils they love to have wars. >> up next, alibaba was listed shares are on a tear, but jack think we areck ma
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headed for another bubble? >> it is easier to survive today than yesterday.
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>> alibaba was founded at the turn of the century -- the century. office inopened an california and was ready to ride the wave. the -- correctly predicted the.com collapse in 2000. we facing a somewhere tech bubble -- similar tech bubble? >>. no.
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think the challenge at that time, it of people do not understand how powerful internet is, how to do internet the right way. a lot of people have crazy ideas . today, everybody knows internet is going to change the human history. >> i look at it from a long-term perspective. , we wentke a step back public in 2014, our stock price was $68 per share. today, at the current level, it is about two and half times the increase, but look at the revenues. our revenues have tripled so our stock price has not caught up with a revenue will -- we'll yet. same thing for facebook.
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if you look at the long-term perspective, these companies, there's a reason why they would stop growing. >> i think the infrastructure of the internet and technology is much better than 10 to 15 years ago. greedy.re not that if you are not that stupid, it is easy to survive today than yesterday because the speed of timesternet era often learns the lines of regulation >> the push the boundaries and .hen regulators overreact how have you stayed ahead of that and now overstepped your boundaries. >> we always step ahead of the regulators. we have to, otherwise we go nowhere.
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thing, there is a painful . improves not to people's lives. that is your job. it is same process that alibaba is learning. >> palette you stay closer to fire without eating earned? >> we are very careful. herselfbly regulate much more stricter than the regulators. today, we have more than half the people using. ourselves discipline much more. >> are you concerned of the capital controls and also the deleverage campaign and the crackdown on irrational purchases overseas in
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entertainment, sports, non-core businesses. is this going to be a deterrent for outbound investment? ambitionsrve your question mark >> not really. you do it depends how . in the other days, when you go to some countries -- we think you should share the technology. thinking andt of can then they come a lot of patience. we are so far ok. we are lucky we are a global company. >> there's a little bit of sentiment. it is understandable when you see a fairly large trade deficit
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. to us, we look at it, it does not really affect us because the trade flow we are talking about is selling american products into china so we are steadfast on that strategy and in the other direction, i think some of the retailers, both traditional and online will suffer first if there is a war based -- based on trade tariffs. think. is what we we don't want to be the local company.e >> you don't want to take on amazon doing what they're doing? >> about entertainment in hollywood. i know you had a partnership
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with amblin and steven spielberg. what is your strategy? think first and poorly, our entertainment is our strategy, the next 10 years we are going to be very profitable, very good in e-commerce, but 10 years that, this new business .libaba should be focused on the matter coverage, you want to be healthy. entertainment should be part of the business. it as buick as -- we view an investment on our ecosystem.
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lossesontinue to incur as long as it does the ecosystem? >> yes. there's a lot they can learn. they should not think this is good, we should buy. this is a strategy for 10 years. a lot of people criticized us. we have been criticized for 18 years. you know where you're going. >> and you see alibaba and what kind of company will alibaba be in the next 18 years question alibaba --ould say it is an economy. .t is an ecosystem think we want to be bigger.
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i think the most important thing is a quality. >> i think it will change because we will follow what our customers want. alibaba,tant thing is 52 10 or 20 years from now will do -- still the same company. >> i think 80 years is enough for us to improve globalization and anti-trade. i believe when trade stocks, war stops. caneople start to trade, we only fight -- only fight with this. this is the mission. this is the responsibility for alibaba to improve globalization. >> thank you so much. yo>> thank you.
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♪ nejra: how low can you go. asset managers with the dilemma. , howto work for washington likely is the repeal of the volcker rule. plus, we need to learn the lessons from the crisis. we hear on regulation over banking and the low rate environment.
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welcome to "bloomberg markets: rules & returns." this is the show where we delve into the regulatory opportunities around the globe. we will speak to top newsmakers, regulators and market pretense of vents shaping and reacting to a new generation of rules. let's get straight to the new regulations. take a listen. midid ii mr is disrupting the world of investment research. 3, that research will have to be paid for separately. why? eu lawmakers want to curb interest that could lead investors facing opaque cost.
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toestment firms will have demonstrate their getting the best execution for their clients when they trade. regulators hope this will lead to transparency and competition. analysts are rushing to improve their worth and investors are growing increasingly select of, then there are the regulatory conflicts, along with who pays. to payrms are planning for research out of their own profits, while others pass costs on declines. there are various offers, packages include basic pay as you go to all in offers. in some cases prices range from close to nothing to over $450,000. as the deadline looms, the question is how much the buy side is willing to pay and whose research is worth it. for more on the hot topic of research ahead of implementation and where fund managers will
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absorb the costs or pass them along to clients, are yes to joins us now. great to have you on the program. you have a unique perspective on this. you work for the buy side, but our head of research. one of the questions is what asset managers will do. of who will absorb the costs, who will pass them on to clients, a growing list. some have not come out with anything yet. will those who say they will absorb the cost come out better, or is it not that straightforward? >> i think none of this is straightforward. haveately all the research their own particular fortes. they have different research for different products. a firm like ours, we use external research, but private clients have similar needs, so all the research we consume is
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applicable to the clients we have. it is easy to say that we will absorb the costs. have a boutique fund management company with two products, bonds, equities, itething like that, then makes much more sense to apply the costs of the research directly to the funds using them. they are using distinct pieces of research. that is the reason why some firms will treat this differently than other firms. the important ring is that clients ultimately will be putting all of the costs of the fun. they have always done, and that ,s the nature of the regulation to make sure those costs are visible to clients. some had been hidden through doing costs not revealed. nejra: in terms of costs, will we see a race to the bottom, or
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could the costs go up? up, theosts will go research costs will go up, but they have started a high and they are coming down quite rapidly as we approach the implementation of midid ii. it is a challenge for firms because many don't want to charge for this research. even if it was not designed in order to attract and prompt transactions, they may still see it as a cost of doing a broader type of is this, particularly if you are a bank and haven't equity capital markets division. you want to demonstrate an understanding of the market. firms need a lots of clients to do that, and to ensure lots of clients, they are becoming more and more competitive on pricing. nejra: i want to take a listen about what they
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were going to do about their research costs. >> we always want to be very clear. we have been very clear as to general economic research, ecb research, the kind of research weeknt and did so this through a website available to anyone and accessible to anyone. pre-general research, but how is that for you as an asset manager? is: in the product types, it typically economic or credit-based research, where it might support a banking division much more as a form of promotion . it is less so in equities. there are equity firms providing
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what might have been previously considered research, but is now actively pr, for free, but largely the reality is that most value most investors get is not from a hard copy piece of paper. it is the ongoing dialogue with analyst in order to understand the nuances of how they have reached their view. nejra: how difficult would that be to get? more difficult under mifid ii? expensivewill be more , more explicitly expensive for those who have previously paid for it by directing trades, and that is in truth most of the market. the written research that people receive as i would term it is commoditized. ultimately nobody gets much of toedge by even signing up
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the highest rated analyst on such and such as stocks. the edge comes from theirtanding the basis of decisions, and also getting them to help you with the basis of your decisions. of a personalore service, which clearly will be expensive. nejra: how much it is there a risk for asset managers of thing accused for taking inducements for cheap analysis? guy: i think that is a source of great anxiety for them. again, everyone uses research in a different way, and if you read lots of hardcopy research or pdf research, that has little marginal costs to produce, so it becomes difficult to ascertain what the value is, and that is where they have a real problem. if you use an hour of analyst time, that is expensive, and you can pay accordingly.
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nejra: thank you so much for guy foster, brewin dolphin group head of research. still to come on "bloomberg markets: rules & returns," find out about regulation over banking and the low rate environment. this is bloomberg. ♪
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♪ welcome back to "bloomberg markets: rules & returns." i am nejra cehic a bloomberg european headquarters in london. the latest news on financial regulations, here is sebastian. asset managers are mostly taking the his son mifid research costs. in force inons come january and assigned to make markets fairer and transparent, forcing money managers to pay separately for research. only a fraction have publicly
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stated their plans for the new regime. financial regulator will conduct inspections on investment products. it is planning to interview bank officials and visit ranches to branches to check how their implement policies. bitcoin tumbles the most after china's central bank said initial coin offerings are illegal. the people's bank of china said that all ico's should be stopped and refunds divided, although it did not specify how many would be paid back. the decision to relocate its headquarters out of sweden has been seized on by opposition politicians who say it is the latest example of jobs leaving the scandinavian country. puts the only globally systemic important bank inside the eurozone. savesay the decision will 1.3 billion dollars and
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regulatory cost. that is your regulation news roundup. memberbundesbank board says he has had discussions with bankers who are considering moving to frankfurt post-brexit. david westin spoke to the central tankers attending the morgan stanley conference in frankfurt and asked him about regulation in the finance sector. >> that depends on the size of the banks. the top level of the banks needs that regulation. we need to learn the lessons from the crisis. if you get too small banks, i the capital and liquidity rules are correct. is the amount and frequency of notification to the supervisors. for example, if you were to cut off banks below a balance sheet in germanyn euros, you would reach 82% of the banks
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with 14% of aggregate assets, so small risk with a large number of banks. i am thinking of some relief in the administrative issues and costs of the banks, rather than changing the regulations per se. we don't need to notify the supervisor about each and every high-frequency as much as large banks do. i'm not going to ask about interest rate setting, but in general, are smaller banks under pressure in germany because you have this low even negative interest rate situation? >> actually, they are, if you look to the german banking sector, three quarters of all earnings are interest-rate sensitive coming from the interest rate margin, and only 25% come from income.
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if you have that sort of business model prevailing in germany, you can imagine this very low interest rate environment is causing a lot of pressure on margins. having said that, this did not start with ecb policies. the 1980's, we have compression of interest rate margins and have seen interest down, song banks had a lot of time to prepare, but it is geared towards interest rate income, so you are more heavily affected by a low interest rate environment than others. it depends at the end of the day how long this very low interest maintain. will we are expecting each and every bank, germany, europe, or elsewhere, is adjusting to which ever interest rate level there is. talk about we consolidation in the german banking system, there is also foreign investment interest.
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you have agent a from china investing in deutsche bank, maybe allianz. i know you can't comment on individual banks, but is there concern of some point of foreign investment into the german banking system? in principle, there is no worry. we are an open economy. we will look to each investor and do a proper check. if we don't do it ourselves, we will use the ecb for larger banks. that applies for national or international investors. they need to be fit and proper, but the nationality of investors don't matter to us. david: finally, earlier today, john cryan, the head of deutsche bank spoke in germany and said a particularly attractive alternative for banks coming to the continent from
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london because of brexit. how do you see the competition among frankfurt and dublin and paris are some of that banking business? first of all, let me start by saying germany has always had a good relationship, which we will maintain that. londongly believe that will stay by far the most important financial center in ofs area, but still in case the brexit, and we are assuming brexit will happen, there will be movement and the need for licensing banks on the continent. we are in competition with other european financial centers from a frankfurt perspective, and clearly as a representative of the german central bank, i will not be competing with others. nejra: that was the board member of bundesbank speaking to david westin. still to come on "bloomberg markets: rules & returns," are repeals of dodd-frank and the
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volcker rule dead on arrival? president trump called the legislation of disaster, it how likely is it that strict regulations will be dismantled. this is bloomberg. ♪
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♪ welcome back to "bloomberg markets: rules & returns." in bloomberg'sc european headquarters in london. rewriting the rules of washington, president trump has called dodd-frank a disaster,
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but is a fix in the works? when it comes to the volcker rule, how likely is repeal? joining us for more is our bloomberg government analyst from washington, d.c. you, it isat to see going to take a lot of time for some of the key issues to be rolled back. let's talk about the volcker rule first and foremost. the congressional talk, is that just talk? natahan: it is just talk. you will see people trying to produce beals to repeal or change the volcker rule, but it will not get pass the senate. the volcker rule is still subject to the filibuster. you need 60 votes. republicans only have 52. it will not happen this year or next year. there is bipartisan support for tweaking the volcker rule.
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that will not go through and less it is a last-minute scenario. , so a full repeal not likely, as you say, but about those amendments, what might they look like? are two we are telling investors to keep an eye out applicable to the large investment banks. first, preparatory trade. -- proprietary trade. complaint from the banks, so i would not be surprised if you see that expand reserve move to the market-making exemption, making it easier for banks to make markets. there is reasonably expected near-term demand, so the federal reserve and other regulatory agencies are the five regulators who have to work on the volcker rule, you could see actions late this year, early next year to
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tackle that market making exemption. the other one is the covered fund exemption. of their tier3% one capital to invest in covered funds, private equity funds, hedge funds. the definition is way too broad. the private equity funds will tell you they need investment because they are job creators, so i would not the surprised to see the fed or ecb could take steps to make it easier for those banks to invest. in terms of timelines, any key dates investors should be watching for? natahan: the occ has asked for comments saying tell us what we should repeal or change, but it will be the fed driving this. with janet yellen at the home, you will not see a lot of action. it would not be surprising to
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see the fed say give us ideas, that you need to enter into a formal rulemaking process, and that takes time. if this does not happen until march or april 2018, proposal, commentary, cost-benefit analysis, it takes time. the final rule will not be out that's beingnd generous come as a not impacting the banks until 2020. there is steps the fed can take to loosen compliance in the short term. this is something you hear about in the political circles in washington. if i am a compliance officer, i am excited about it here it if i'm a trader, not so much. -- excited about it. if i am a traitor, not so much. fora: thank you so much nathan dean from bloomberg intelligence talking is through the volcker rule. that is it for this episode of "bloomberg markets: rules & returns." ift time, andrew bailey, and you have questions or comments for the team, anything about
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financial regulation at all, email us at rules returns of bloomberg.net. this is bloomberg. ♪
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