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tv   Bloomberg Markets Asia  Bloomberg  February 8, 2018 8:00pm-11:00pm EST

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♪ david: here we go, time for a correction. the s&p 500 closed 10% below. rate hike worries continue to shake the market. we are looking at the asian market. japan leading the benchmark, with declines approaching 3%. when you look at the core of the issue, the issue has more than doubled. lots to talk about. i am david ingles in hong kong. haidi: and i am haidi lun here in sydney. the new york fed boss said it is simply an adjustment. is smalley says it
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potatoes. this is "bloomberg markets: asia ." ♪ haidi: small potatoes. investors have been caught on the wrong side of the bed. a blogger saying it is like a horror movie that you just have to keep watching even though you know exactly what will happen. let's look at the steepening declines when it comes to japanese equities. korea taking the brunt of the selling. we are seeing selling across the board. the nikkei 225 down 0.7%. lower.ix 4.4% the s&p as you said, entering true correction territory. david: we are very close to that
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level here in the asia-pacific. we put everything together on the msci asian-pacific. take a look at my chart, g #btv 6180. the red line at the bottom is the threshold. we are getting very close to that. my gut is, once we get hong kong up and running, that will give more fuel to the downside. that. happens in about 30 minutes -- that happens in about 30 minutes. we have taiwan, singapore, asia. markets mays like be suffering from motion sickness, given the turbulence across the board. over $5 trillion are raised global stock valuations in january. how low can we go? losses of over 3%.
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6. worst drop since february losses as well for the sti, joining their brethren in the red. let's get a quick check of moves in the currency space. the aussie dollar, pulling the rba's statement. it was dragged lower by the rba governor's speech in which he said he will not push rates higher. pressure, won under watching that 111 level. -- yen holding on to gains holding on to gains. oil at the biggest drop in 10 to 11 months. two opec nations set to open up giant fields. anxiety for crude traders today.
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again investors once dealt a stark reminder of how quickly things can change with regards to the chinese markets. sophie: there may be more pain. traders are reducing their leverage position. 051, margin financing, the line in white, has fallen to the highest -- lowest level since january 2016. this could exacerbate potential for a selling stampede. chinese financials have wiped 0 billion in chinese stock valuations. still waiting for the national team to come through. more than one strategist [indiscernible] let's get more analysis from the fed as these markets are selling
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off in asia. mark cranfield joins us from singapore. aeing that hard close, negative signal for asia. we come back to the question of's -- question of fundamentals. is liquidity of price the ultimate fundamental? and liquidity are fundamental factors. people think of fundamental factors in terms of what central banks and governments are doing, where inflation is area they are all valid data points. market changes, price changes -- especially when they change so quickly. when you have had such a dramatic reversal and loss of markets that definitely changes things. when you think of the losses in terms of value to holdings, just in the space of a week, billions
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or trillions of dollars have been wiped out of investment portfolios. that is a significant factor people have to take into account. it is not just about, yes, you can think it will stay higher, below 3% this year. but once markets moved to a certain extent, that can affect consumer confidence. it will impact of the economy as well. it is not something we can ignore. is, when youstion look at the extent of the moves from tuesday to today, we see a fairly hard sell up. how much is this forced selling and people squeezed out of positions? how much is down to fundamentals and rethinking where inflation should be or should not be at the moment? mark: forced selling will play a part in it. january was such a spectacular month for equity gains. you can tell retail participation, individuals
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buying shares, were coming in and very large numbers. the biggest numbers we have seen for a few years. theave them come into market fairly recently and see the markets go against you so quickly, it is quite painful to investors, quite shocking. also, some of it may have been bought on margin. margin you lose money quickly when your share price goes down. and your broker tells you to put up more capital, and you might not have capital to put up. it feeds on itself. the acceleration downside is not that surprising. there could still be more to come. the new year, a lot of people will not want to hold on to something shaky ahead of a major holiday. david: the dreaded margin call. cranfield from singapore.
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you can follow his commentary, this story, all the analysis on today's trading on our market live blog. it is at mliv . a lot of expert editors chiming of whatng to make sense has been happening throughout these markets. we will talk more about markets in just a moment with our guest from singapore. here is paul allen. >> bank of england governor mark carney says interest rates may need to rise at a steeper pace to prevent the u.k. economy to keep from overheating. he says inflation is likely to remain above the 2% target. 3.25 hikes expected in the next few years. going to tie our
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hands to a specific path for rates going forward. though,eiterating, importantly for your viewers, these are interest rate cycles unlike those they would have experienced in the past. >> a senate vote on the bipartisan budget deal that would avert government shutdown was held up by a republican that objects to higher spending. rand paul demanded the restoration of existing budget cuts. the deadline for decision is midnight, eastern. after which, several federal agencies would be forced to shut down. qualcomm rejected an improved offer from broadcom, saying it undervalues the company. it raised the deal from $105 billion to $120 billion. qualcomm says that falls short. -- thell address whether
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deficiency. a new study says criminals are ditching bitcoin because it has become more expensive and inefficient. the most widely used cryptocurrency is likely to lose its dominance as a payment method on the dark web. itecoin is the sixth most powerful currency, and accepted by many shadow vendors. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. ♪ report, singapore 1.2%.%, malaysia, opening minutes for that market on the way. let's get more on the markets story. we are joined out of singapore, steve davies, founder and ceo of
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a javelin wealth management. thank you for joining the program. andselloff we are seeing these massive price moves are a symptom of something. what do you think these things are a symptom of? read various commentaries, and there is a change in inflation expectations, more importantly is -- it is a reflection of a unwinding to take advantage of relatively low interest rates. the core thing when we look at markets, the way in which we are rebalancing market performance from a leveraged-driven low interest rate environment, to a growth environment. when you get to these inflection points, although the end result may be the same, markets going up, it is a painful adjustment. david: can i safely assume this
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wobbles? we have a day of stability here or there. will discontinue next week? week?l this continue next steve: it is anybody's guess. the new year holiday will squeeze liquidity a bit. there is extremely good fundamental value. whilst we have this periodic nervousness, it could continue. better earnings coming from the corporate sector. so that becomes apparent, interest rates will be higher. but we will be looking at generally positive. but we have been about of indigestion to get through first. haidi: definitely nausea to get
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through when it comes to japanese markets. i want to bring up this quick chart, g #btv 6071. with the recent pullback, the topix is the lowest since december. japan is one of the most popular picks to find more opportunity. what are you telling your clients? do you sit this one out and see what washes up? --du add to your positions or do you add to your positions? we see top performers getting crushed. steve: taking my mind to ancient history, when i was on your program in 2013, we probably had the same conversation then, at taper tantrum in may and june of that year. we saw markets come back
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quickly, on concerns thinks would start winding back on qe. in the event that was proved to be pessimistic. i am not expecting we will see anything materially different this time around. it takes time for nerves to calm . and we get back to fundamentals. markets like, japan look like a good value. sphere,lobal developed the most earnings growth. it might put a little dent in that on a short-term basis. but it looks pretty good. we see no reason to change that view. like thisalmost feels narrative of what is going on in the bull market is feeding back into bonds.
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are we seeing a negative feedback loop at the moment? steve: yes, that is exactly what we are seeing. moreu overlay -- we saw esoteric leveraged instruments such as the inverse vix, taking quite hard hits. when they do get unwound, the ripple effects is greater than anticipated. that is still a lot of leverage out there in a variety of asset classes. that will take a little time to unwind. once that is done, however long that takes, there will be pretty good buying opportunities. i am not sure, jumping in with both feet yet. it would be nice to see more stability. nonetheless, value will out. haidi: lots more to talk about.
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steve davies, founder and ceo of javelin wealth in singapore. this is bloomberg. ♪
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♪ david: beautiful evening in new york city. when you look at where markets everyone could maybe have a new york state of mind. 26. futures, session highs, 09 is your level on the s&p 500 futures. many futures pushing toward a session high. we are also getting fixed income from the pboc, 632. lots to talk about. i am david ingles in hong kong. haidi: i am haidi lun in sydney. a nosedive causing alarm. we have not seen levels since
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that massive shock evaluation. davies, ceo and founder of javelin wealth management, is still with us. we had this heavy, blunted buying the from the flows supporting the hong kong markets this week. thewe getting worried about issue of margin again when it comes to the onshore markets? steve: i think there is an element to that. theere talking about concept of global markets before the break. i think china is no different. it may have a higher level of in bedded margin, giving the inclination of investors to treat the market as more of a short-term pending venue -- punting venue. nonetheless, we are heading to chinese new year, so we see a squeeze in liquidity. that is a very seasonal
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phenomenon and it happens every year. uncertainty is adding a little fuel to the fire. haidi: steve, it is really interesting, whether the air at of the central bank is over -- era of the central bank is over. did not give us a great deal of confidence that the fed, the policymakers, are willing to react. we spoke exclusively to bill dudley. his comments about this being small potatoes was interesting, almost taunting the market. >> the implications for the economic outlook are marginal. it probably will not change our thinking. if it were to go much further and be more persistent, it could affect household and business spending behavior, and influence the economic outlook.
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so far, i would say this is small potatoes. haidi: that is bill dudley speaking. is this something the markets are grappling with? after this expectation that if not outright stimulus, we are looking at the unknown with jay powell? steve: to a degree, yeah. been backed up by central bank liquidity for 10 years now. central banks across the world have been desperate to get out of the way of both markets and the economies. bit ofe giving finally a inflation into the system with a degree of relief. janet yellen, and her departing that ity, was saying would still be difficult to get inflation to remain consistently above that 2% annual target.
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that remains the fed's focus. above, theyreep will remove, provided it does not accelerate way beyond that and encourage a much more aggressive policy response. i don't think that is the case at the moment. i think we will see a little wage inflation. it has been interesting to see the way in which commodity prices have performed over the past week to 10 days. only a couple days ago brent was touching up against 70 u.s. dollars. it is now five dollars off that level. inflation isven beginning to abate as well. david: we have to leave it there, steve davies. just as we were speaking, getting more risk on. s&p futures up, dollar-yen on
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the way up. fairly encouraging signs. stay with us. this is bloomberg. ♪
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♪ minutes away from the open of cash markets in hong kong and china. the damage is fairly extensive as we look at the pricing ahead of that open. 2.5% down. similar losses for futures. shares down to 3%. the latest inflation numbers out of china. at's look under the hood what is happening within the segments in hong kong. every sector is down. are we watching any specific stock? yes, but on a day like this, these little things don't matter. we are waiting out the inflation
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data. one other thing a want to mention, we are getting more encouraging signs, as far as money coming out of haven trades, into the likes of u.s. futures. they were up on the s&p about 15 points. 109.ollar-yen about down 0.1%k, this against the u.s. dollar. 631, fixed, coming from the pboc. more than a wobble we saw coming from markets yesterday. you think expectations were slightly on the extreme side. a lot of these bets coming in, expecting the chinese renminbi to stay strong. and then we had a shocker of a trade report.
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half the surplus expected by economists. and then we had a selloff across equities. we will get to this, as well as inflation data. stay with us. this is bloomberg. ♪
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haidi: it is 9:29 a.m. in hong kong. we're struggling our way through final trading day of the week. asian stocks taking the negative cues from the plunge we saw in wall street overnight. final trading day of the week. possibly we have seen the worst. waiting for these inflation numbers out of china. it is looking a bit wobbly these days. we no longer have the base effect to help lift us up. we will see how these look.
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have a look at how markets are trading at the moment. correctione to point. we were looking at some of these haven trades earlier on. knock knock knocking on haven's door. we are waiting for this inflation data coming out. reminder, the shocker of a trade number we got out of beijing. we have those inflation numbers. -- standing by for us in beijing. tom, what do we have? in producerup prices for the month of january year on year. that was below a we saw in december. we had a 4.9% in december. a couple of factors bear in mind -- this is going to be the weakest print we have seen from of from number -- november 2016.
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we have seen things like steel prices fall quite considerably. question about what happens when corporate profitability and their ability to pay down debt. that there has been a showdown in construction activity here in china. that may be something of a factor in pressuring these producer prices. the consumer price number is is in line with expectations. suffering from the previous month of december. the target for the pboc is 3%. well below that. we have seen a bit of a tick up in food prices around the edges. the eye numbers feeding through into the cpi inflation. to, thepointing inflation question is going to be squarely in my for many investors playing and this. it did not come into play in a significant effect in 2017.
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stronger producer prices are seen as key in terms of the profitability of china's corporate. no big fireworks year from these numbers. squarely in line with what the forecasts have been. expect the pboc to hold the line currently. going to be continuing to edge up rates in these back markets. no benchmark weight rise. that is not the expectation. consumer prices are softening december numbers. it seems to suggest that there is not going to be innocent -- imminent pressure. one major caveat, you have both been pointing at that, seasonal numbers. chinese new year. you have people stocking up on good. factories are being put out of service. foreed to see the numbers february, march as well, to get a clearer rate -- reading on the
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inflation numbers here in china. haidi: it is a distorted part of you when it comes to china. tom, thank you so much. let us get the market reaction. the pressure is off of policymakers given the inflation numbers coming in line. the pressure is on for mainland markets. loss is piling up. shanghai shares sliding 2.7%, large-cap or small-cap also under pressure. stocks have entered correction territory. let us check in on a leash the internet. the should jim force is warning investors to be prudent when buying the stocks. we have been flirting with that daily limit after yesterday an 11 day losing streak. let us take a look at property stocks.
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it is in talks for a point $.3 million loan package with the planned privatization of that company. a quick look at what is going on in the casino operator space. they posted fourth-quarter revenues that came in below estimates. they're under pressure, falling nearly 5%. will it harm the company's reputation? on what is dragging the most on the house, country garden. have no bright spot so far on the index. a last look at what is moving the dow in shanghai. energy and financials leading the drop, over 3%. we are seeing bleeding across
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the board tear. david: bad news. you are just doing her job. thank you so much for that. the inflation numbers coming out is not very exciting. there in light of expectations. take a step back. what is the bigger question -- picture? you and i were speaking a bit before the break on what this means. we put it up on the chart so our viewers can see. you have tbi and industrial profits. these two things track each other. what doesbsence -- this mean for profits? >> i think we're going to see both a moderation of pbi and profits. it is not just the base effect. a huge surge in 2016 that continue to run through 2017. what we expect to happen is,
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they finished 2017 higher than we expected. are coming off of a higher base. we can still see commodity prices coming down. this is not mean it falls off a cliff. you have upstream, mr., low stream prices. there is a transmission effect that we are waiting to see come through. that does not always go through to cpi. because you and lower stream prices. -- midstream and lower stream prices. textile manufacturer prices will be inching up higher. pbi we expect will come down to around 3.5 this year. that is much lower than 6.3 next year, but not negative. we are expecting a similar transition to play out. last year's profits benefited
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commodity program fosters -- commodity performers. this year the costs will not be parting as much. we should see more of the prophet michael -- revival. david: you might a drive in production? can we just ignore it? relativelyhave more downing affect on the consumption power. it is not going to be huge. we are expecting cpi to rebound on a mix of different things. you see a normalization of that backing bounds of -- bouncing back up. they will be increased yes. but gradually. we do not see cpi rebounding hugely. it'll come up to around 2.7%, up from last year's to -- 1.6.
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i think investors are watching. david: i want to ask about the trade numbers we got yesterday. aberration because of the chinese new year. when you look for the other half that was missing? where is the other increment? look for that in march? january plus february, yes, together. fundamentally, if you look at how the u.s. and japan are doing, external demands for made in china dim -- items will do well. that is why we turn slightly more positive. we now see china going -- growing at 6.6. that is due to increased demand
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coming from outside of china. on, --a secondary impact consumption at home. we're going to reserve judgment until we get to the time of able -- april. i want to get your take on the yuan. we had that extraordinary move yesterday when it comes to dollar-you want. want -- dollar-yuan. to see the start of some signs of discomfort for policymakers? i thinknot think -- policymakers are aware of what is happening. even though it is not a two-year high, it it is not the much higher than where we were. yes, but noter significantly higher.
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what they are most concerned about is maintaining stability. in creating sentiment at home towards the home currencies they do not get revival of pressures. at the moment, we are not anywhere close to that. year, what they will try to do is take relative stability in the market -- you may some numbers up or down incrementally. not much movement. any movement would likely be putting on the dollars owner movement. expecting the dollar to be weaker this year and next year, they might be depreciated slightly to 6.2 by the end of this year. what are the prospects of this feeding into a low grade currency war? you have washington, much much, wink wink. they are not abandoning the
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strong dollar policy. they're not displeased with the weaker knowledge -- dollar. his beijing going to strike back beijingpoint -- is going to strike back at some point? >> i think beijing would be very careful to keep the currency and trade as two separate issues. they would not see it as a way to retaliate against u.s. trade measures. angstiggers even more among global the dramatic relations. it is not going to do much to support china's trade. china might take this opportunity, should there be u.s. trade actions against china, to allow greater appreciation given the dollars current weakness and perhaps mitigate against the revival of expectations. where u.s. is concerned, you will get a lot of noise. i do not see a big trade war
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happening. i think china's response will be proportional. they will target china with specific specters. -- sectors. china may also take aim. or import more u.s. products. haidi: how is the domestic policy agenda going for beijing? we always talk about financial the risking. peopletinued effort -- have been saying it is going long crate well. does this ultimately end up with more capital efficiency? >> i think that is what we are aiming for. seen a more efficient allocation of resources in china this past year. you are starting from a low base. we have seen incremental improvement.
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they have made meaningful and visual process. capacity in excess terms of remaining capacity, you have seen capacities improve. within the soa sector, you have also seen beverage levels stabilizing. consolidation of industry through these areas reforms. china's growth is gradually becoming more capital. we are at the very beginning stages. they are making the right move. it will take time. it will be harder going forward to take the higher hanging fruit. david: it takes a back to the ppi question. at producerk prices, they were sporting for a long time. mean, andese numbers inflation in general?
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what is china inflation mean for the rest of the world? going forward, chinese inflation numbers will matter most because that is the trigger point to them going as to whethe will see a benchmark rate hike in china. china is still in the middle of typesaign, using multiple of financial regulations coming out. you're seeing the regulations themselves being overhauled in terms of the structural framework. themve not seen implemented yet. markets are antsy about. the conditions are very tight, very tight. to provide a competitive environment for that to take place. , they doaccess markets
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not like rates being high. if you get a benchmark hike, it pushes everything else. that is what investors are worried about. ofid: the very mention liquidity and markets, it is like leather pants. there is never a perfect time for them. donna, you're going to stay with us. much more analysis on the chinese markets. if you have a question for donna, send them in right now and we will try to get those questions to her. state -- stay with us. this is bloomberg.
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♪ david: this is "bloomberg markets: asia". joining in on this seller buyback.
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about the tightening rate environment, concerns about rising bond yields. an overwhelming sense of unease. this selloff has further to go. it has a systematic feeling. hong kong off by 3%. the shanghai benchmark down by close to 3%. energy leading those the clients given we have had a falling over when it comes to oil prices as well. let us get back to donna, the economist at uba. there was lots of talk about potential for the national team coming in and supporting stocks. is that still the way that the chinese stock market work? would you expect support at some point if the selloff gets to extended?- too
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>> it would be a complete surprise. have seen periods were they have come in, where they have not come in. when it work if they came in? would it work if they came in? structuralg-term reform of china, which is it is like a dive in rescue. they only do so much. what we need is fundamental reforms. liquidity is concerned, as long as liquidity conditions antinue, that is also backdrop figure to consider.
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you have seen selloffs in multiple markets. how few is a technical correction at the moment. fundamentals have not changed. china's fundamentals have not changed as a result of the selloff. the global story has not changed. china, we see a modest moderation this year. global growth outside of china, we expect to be better this year. eurozone, we expect to be accelerating this year. overall, i am not overly concerned. david: we are sort of looking at good themes to latch onto because of this market. talk to me about this. china, they're working against the chinese consumer. they're going to run this issue in your face. at one point does the debt issue become an issue for the chinese yuan? >> the debt issue is a blessing
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and a curse. consumption lags far behind others, for example household consumption is only around 45% gdp. then the 70% you see in other -- different markers. -- markets. incomes have lacked. credit access has not been great. credit markets do not start to develop until these last two years. you need it to continue to develop to work on this rebalancing toward consumption story. it surge in the less two years because of property. that is what we are starting to see more, regulatory attention. want to encourage credit. purchasenon-housing
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types of credit so that it is fueling consumption. it is a fine balance that has to be struck. people were capitalizing on the cheap financing, they were throwing money around. it is a good thing that regulatory attention has, towards these areas -- come towards these areas earlier rather than later. you,: last question for just in case things go down the drain from here -- chances are they will not. this china have the space it did in 09 to save the world? >> they have the fiscal space. i'm not talking about the actual general government. i'm talking about the balance sheets.
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if they really had to, they still have it. it will not last forever. you cannot keep dipping into it heavily. as always, one of the first tools to be used a structural headwinds. david: always get another is always hope. lots of analysis on this market drop that we are seeing drop the day. at 11:30.r comes on he causes collapse -- he called this collapse a few months ago. this is bloomberg. ♪
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♪ this is theidi: kansas said it. george saying that rate hikes are reasonable for this year and next. it is important to continue gradual rate hikes and that high
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wages are a welcome development. the current job make it mark -- market may make it easy to push it higher. just adding to the overall narrative coming through from said that speakers, that the economy is on track and inflation is just around the corner. three or potentially more heights this year are on the table. in as itta still comes has been, you be in favor of voting for a hike come march. very much unmoved, largely. it does not seem to be deterring them. u.s. futures looking like we are setting offer a bit of a recovery. morere all showing a bit
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of a bright spot. we'll be talking about the markets, taking a look at the selloff in china. also the volatility here to stay. bloomberg. ♪
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♪ flags flying in hong kong, and china joining the slump, the hang seng entering a technical correction. 10% below january's record. rate hike worries shaking markets. it'still in the slide, biggest weekly drop in months on fears supply will swamp demand. i am haidi lun in sydney. does notork fed boss seem overly concerned, bill dudley saying the market slump is small potatoes.
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this is "bloomberg markets: asia." ♪ haidi: volatility all around. theave been pointing out volatility when it comes to the equity markets. the vix double where we were a week ago, currency volatility also on the way up. i want to assure you that bond market volatility creeping up as well. bond market participants backing for volatility. i bet they are wondering how wild this ride will get. up, thety has gone highest levels when it comes to 10 year treasury levels since april on a closing basis.
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whether we areis seeing a withdrawal of the this newank put and fed president jerome powell. it is symptomatic of what triggered everything in the first place, this repricing around the bond markets. assumptions ofg where inflation was, too low to begin with, that is being rethought at the moment, which speaks to the fact we are not to this when it comes adjustment across global equity markets. yes, there might be forced selling, but after all that dust settles, 2.9% wage growth on friday, and we price of around of that. some miss pricing is happening as you get extreme moves ,verywhere across the world
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almost two standard deviation moves. you will get some opportunities there. let's get you a market check. indonesia joining the fray. i don't want to look. sophie: look away. acrosse a broad downturn asia, indonesia joining the fray lower. the worst week since september 2011, so markets pricing in this unwind. we have had central bankers saying tightening is not imminent, but that is not soothing investor anxiety. the segments that of the biggest drags, tech and discretionary players. chinese large caps slipping forw 4000, the biggest drop
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the csi 200 since february 2016. in tokyo, led lower by electronics and carmakers. nissan cutting its profit outlook and sales target, and the hang seng falling over 3%. the bond space makes, indonesian debt. we have that benchmark treasury yield climbing to 2.84%. let's check in on the currency space. , the sellingn pressure has eased. we are keeping our eye on the 1100 level. the yuan onshore and offshore gaining ground as the fixing came in around this anxiety for the currency markets, so the yuan fixing weakened by the most since january 2017. the commodities space, ouch.
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,il, the biggest drop for crude new york looking at that $60 handle. gaining, but easing bigwhat, set for a second drop on that rate rise concern. , demonstrating2 the hang seng is set to close 10% lower than the january high, which would mark a correction as all stocks are sliding. warnings this week not to get enamored by these technical rebounds until the rest is settled. .t will be interesting haidi: always interesting insights, speaking to him and a little bit. let's get over to mark cudmore
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covering this story from singapore. horror this is like a story. , but wehow it will end have to keep watching. are we nearing and ending, or will there be many more sequels like the one overnight? >> we will probably not get an end until the u.s. yields come lower. we need that adjustment. the tightening in the u.s. has squeezed the market. it is surprising bonds haven't rallied and that is worrying for equities. until then, it will be tougher equities and it will probably get worse in terms of the pain spreading and dollar gaining traction, spreading to emerging markets and commodities, which tods back in negatively equities. i want to reiterate the structural story and earnings
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are good, but we want play those themes until liquidity comes back into the market, and that requires lower yields. david: just to your point on yields moving up, we have a chart that shows us this. 2.63%, anything above that starts to light equities. he was right. can we get this up? ,uestion the assumption though why should i expect bond yields to move down when arguably the repricing of inflation expectations that were frankly too low a few weeks back? all thatot sure it is inflation. i think it is about momentum. 90 u.s. to year yield move basis points from september to late january, so less than five
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, more, an incredible move than three rate hikes priced into the front end of the curve in a short time. we have not seen such a pace of tightening since 2008. inflation expectations picked up .2%, so no where near the tightening we have seen. most of that tightening occurred before the improvement in wage data. wage datauptick in and where inflation headline should be, yet that was a momentum trade, stopping people who had been structural bullish, and now that trade is frozen and yields can come lower. david: we have seen a overreaction to the wage data on friday. where should i start looking, the short end, which is driven by the fed, or the long and, where markets have more sway? >> i think it is a good
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question. whether it is risk aversion and equities are selling off, you will see the whole curve come lower and equities can stabilize , but the bigger reaction will be in the long and where markets drive this back. in the next couple of weeks while equities are struggling, we might start trading this theme the fed might not hike in march. i firmly believe the fed will hike in march and would undermine their credibility if they don't come a markets might play the possibility maybe they won't, maybe they will, and that might see the front income down low work, but the bigger move will be in the backend. we need to see yields lower, than equities can get a floor and we can go back to growth and earnings. so much for you that. in the background of this market noise we are watching as the
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u.s. government inches closer to the next shutdown deadline when they run out of funding, washington midnight. , that shutdown now likely with the houseboat coming after the deadline. there is that chance the boats will move up that the senate speeds its actions. there has been this house democratic whip, the minority whip proposing a one day stopgap bill to keep the government-funded while they feud over the details of this are so used but we to the shutdowns and the last one had few implications for the market. this is all just happening in the background. of theat the other end conversation, today is one of the worst days for bad news. equities are selling off to begin with, then you have this bad news to consider. to that point, very quickly can we get my terminal up?
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as the news broke from downngton, u.s. futures 4.2 5% as we move into the mid morning session in the asia-pacific. this selling across risk assets around the region, we are getting more reasons to not get back in. we will get you more details on the breaking news out of washington. in the meantime, let's get over to paul allen. >> thanks. china's factory inflation slowed month,ht third straight rising 4.3% in january. that matched forecasts and down from 4.9% in december. continued moderation in producer prices may signal the waning of a global reflation trend. in lineclimbed 1.5% with expectations.
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dipped as thelar rba signal policy is unlikely to change. the bank says the economy is some way awful employment and inflation and growth targets are unchanged. the statement as that most of the the klein has passed -- the decline has passed, so mining should make a contribution coming years. market carney said interest rates may need to rise at a steeper rate them thought to prevent the economy from overheating. he says inflation is likely to remain above the 2% target with 3.25% hikes priced in. mark carney says capacity is a key challenge. tie our hands to a specific path for rates going forward. , ande reiterating go courtney for your viewers, that these are interest rate cycles unlike those they would have
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expensed in the past. >> global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. still ahead, sports this diplomacy. next, it's all about the selloff across markets. should traders base for more pain to come? we will discuss that next. this is bloomberg. ♪
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>> this may be a short episode hand this might in the in a few days, i week, nobody really knows, i doubt this will be the volatility inf
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2018 because we have exchange rates shifting as adjustment to monetary policy. >> a fascinating move in the treasury market. when we see a significant correction and equities, we would expect a flight to quality on the treasury side. , and itot happened suggests there is a feedback loop that is undermining risk assets has treasury's selloff. once volatility comes out, it is hard to contain and will keep investor sentiment fragile a while longer. correction, and now we are telling people to be careful what they wish for. this is back to normal. fundamentally nothing has changed. david: some of the long list of views from our guests this morning across what is happening across markets, to highlight
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that point, quick damage report in china and hong kong. correction ifical directio things don't change. of the day.ows t onere down 4.5% a point. at the moment no place to hide across markets. we have the lunar new year holiday starting next week, where may be reduced liquidity might become a problem. we are joined on set by hao hong . thank you for coming on the program. iat part of the market should must be worried about at the moment? >> at this point, there is nowhere to hide. the we are seeing is chinese small caps are falling
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large- less than the caps, so those of the places to watch to look for places to hide. david: is it safe to assume we will be in this very turbulent ride across markets for the next few days simply because people are getting squeezed out, forced selling, calls at the moment? how much further before this all settles? the knife is falling and it is still too soon to catch it. we are seeing consecutively for almost three weeks hong kong large have been let by cap and blue-chip stocks. even the chinese market is the same. so today what we are seeing right now is the momentum reverses on many of the stocks and blue-chip and large-cap
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stocks are the ones suffering the most selling. the selling pressure is for now difficult to ease. at thiso him on its way very strong, so on the way down wayan be worse than on its up, so it is a mirror image of the first couple of weeks we saw this year. i think in china the problem is that if you look at the market structure, many of the wealth management products filed into many of the large cap blue-chip stocks. before the market consensus stocks that these are cheap and low volatility, so they just piled been. theow because of deleveraging campaign and because there are new rules coming out saying that many of these wealth management products may not be able to extend their probably sometime this
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year, so that would have to sell down the positions, and that is one of the reasons we are seeing such heavy selling pressure. get an idea of how bad the damage could get based on that assumption. how big of a part of the market are these wealth management products? 30 trillion renminbi. david: is that going to be forced selling, and how much of has been squeezed out? >> there is forced selling now. you can see where the sign pressure is. forced selling is still going. keep in mind no one knows for sure. that is why if you want to get back into the market without a definite answer of how much of the structure is being blown out is difficult to say with confidence.
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haidi: haven't we learned lessons since 2017 when it came to the china markets? >> the market never learns. that is the reason why history always repeats itself. we have seen the igo's bubble in recent chinese history. 2016, we had the circuit breaker aga that caused the shanghai index down almost 20% in a couple of weeks. also in most recent, they were theing about how capable regulators have been managing market volatility. to stand aboveed the market and lose respect for the market, we tend to get a richer fusion, and here is what
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we are seeing right now. haidi: you have to have some fear. we have been speaking to some fed president's, getting their views, and they have been remarkably unmoved by everything. i want to play you this quick soundbite from robert kaplan saying this has all been very abnormal and what is happening is actually quite healthy. >> that has been a very abnormal period. there are some market mechanisms that probably need to be looked at in hindsight and more volatility in the markets and maybe addressing the excesses and imbalances in the market by having more volatility is probably a healthy thing. of the existential crisis that developed markets are dealing with right now is whether we have lost the central bank put, but for china, the csi put is still there.
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>> wow. it is not there in recent days. before this plunge, people believe they should pile into it is morebecause than 65% of the shanghai market total capitalization. it is a huge market component. if you look at last year's market, the 50 stocks that have been surging while the smaller caps have been falling, it was the first time since 2006 that such a phenomenon happened, so right now we could to a point where the market position is very one-sided. much of the money is being put in the 8050 large caps. -- the 50 large caps. wealthwhy when
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management tried to liquidate positions to meet requirements, here is the market weekend. we have been talking about the progress on de-risking , deleveraging, supply-side reforms, overcapacity and such, is that translating into greater capital efficiency? >> not yet. it is a long-term task. we are on the right track. in the near term because of the volatility, you will see some of how mucherms pressure to the system. having said that, china is still ratio, one ofdp the most highly leveraged in the world, so it takes time to reduce the leverage. during this deleveraging pressurethere will be and pain we will be seeing, and
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what we are seeing right now is just part of it. haidi: always great to have you on for us, hao hong. plenty more to come. this is bloomberg. ♪
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a groupchina's hn marketing $4 billion of commercial real estate in the u.s.. 123 mission street in san francisco along with a tower in new york it bought a year ago are among assets. hna made headlines with a debt-fueled shopping's brief, but now the group must repay $2.5 billion this quarter. boost alibaba has confidence. the main property unit is the main performer among companies
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you'd -- companies. coming up, we will be hearing from and his comments -- from bill dudley and his comments. that is next. this is bloomberg. ♪
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haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. right, quick look across some of these parts of the market. there we go. if you are looking for a place to hide, one thing that is up his volatility. ks. four major benchmar we are back. how is that translating a cross equity markets? sophie is standing by with an .pdate on this damage
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i am not going to look. sophie: this report will be painful. greater china markets bearing the brunt of the losses. for a fifthding day, losing 4.5%. said earlier, there is nowhere to hide. chinese bonds, perhaps small-caps, not falling as much as large caps. japanese equity bulls nowhere to down overthe nikkei 3% at the morning close. i want to show you what is dragging the most, i.t. stocks sliding 3.3% right there in taiwan. ,eading the drag for the taiex so tech stocks under pressure. morgan stanley put out a note saying they were more
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pessimistic regarding the asian i.t. space. i want to pull up the board and check-in on u.s. 10 year yields. the jitters have emerged from this space. we have a call from j.p. morgan suggesting the bulk of this selloff in benchmark treasury bond markets may be done for now. anticipating that 10 year treasury yields could spend the next month and the 2.6% to 2.9% range. we will see if there are more calls along those lines. that. thank you for let's check first word news with paul allen. >> the latest market slump has caused the world's 500 richest people almost $100 billion you'd jeff bezos saw his worth drop by $5.3 billion. warren buffett's wealth dropped $3.5 billion, mark zuckerberg losing less.
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dow and s&p 500 both tumbled to their lowest since november on fears of rising interest rates. the u.s. government is heading for a temporary shutdown as rand paul's objections put congress on called to miss a deadline. a shutdown make last only hours as house leaders advise members to be ready to vote between 3:00 and 6:00 a.m. eastern, and perhaps earlier as they moved to pass the bill. loyal fell to the lowest in a year after a report showed record production in u.s. fields. production dropped, posting the longest streak of losses since april. its biggeststing reserves, having replaced 183 percent of last years oil and gas production, and has the equivalent of 21 million barrels of reserves, enough to sustain years. output for 14
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facebook admits it can't catch every fake account, but insists it is working as hard as it can. executives gave evidence in washington amid signs of rising global pressure to take control of their once freewheeling platforms. google, and twitter repeated pledges to promote better quality content. >> you are very bright we don't catch every fake account at its inception. we do find and remove many of these fake accounts every day. this is an area of tremendous technical investment and we have gotten better at this. >> a new study says criminals are ditching bitcoin because it has become expensive and inefficient. firm says therity most widely used is likely to lose its dominance as a payment method on the dark web to li tecoin and dash.
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rejectedhas officially an offer from broadcom, saying it undervalues the company. the revised bid of $82 a share raise the deal from $105 billion to $120 billion, but qualcomm said it fall short, but is prepared to meet as what it sees as serious deficiencies in value and the certainty of a successful transaction. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. haidi: thank you for that. build that they stuck to his guns thursday on an exclusive interview with bloomberg tv, saying the stock market selloff has not reached a point where it is a game changer for the economy or fed policy. kathleen hays is here with the highlights of the conversation with him. byseemed a very much unmoved
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the carnage we are seeing in markets. he isould not say unmoved, but he is putting it in a longer-term perspective. he has been president of the new york fed for 10 years and workinghis career after at goldman sachs. he says you have had a 20% run-up, it is not surprising to see a pullback. he is sanguine. let's hear why. the implications for the economic outlook are marginal, so probably not change our thinking about the economic out look. furtherre to go on much and be much more persistent, then it could affect household and business spending behavior and that could influence the
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economic outlook, but so far it is small potatoes. that this iss dramatic and makes a lot of headlines. people have to be impressed by this come up at it is not something get that will make consumers spend less money or businesses invest less weird in fact he has revised his growth for 28 teen up to he thinks there will be enough growth to start boosting inflation. rate hikes,three ok, that is consensus come up that there is talk on wall street about for rate hikes. here is what he said. >> if the economy look stronger through the year, could that three be more? perhaps. to lookconomy starts softer or inflation does not materialize, then the fed could go slower.
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the jury is out. >> it was almost surprising this weird bill dudley has a fairly optimistic growth forecast that he just revised higher and sees inflation moving higher. he has talked about his concern the economy could overheat that the fed does not raise rates fast enough. think itybe four, i was obvious he was trying to downplay that view and say we are still data dependent and will continue to be data dependent, and if they supported , we will be raising rates, but is still in that three rate hike camp. david: you expect your central banker to be the most calm in the room. when you see them panicking, that is your cue to call elon musk and book your place on the rocket to mars. the other thing, transmission effects from the selloff into the real economy, that is likely the bond market. is he concerned about the bond market selloff? sees an adjustment to the
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fact that the growth of stronger in the global economy and central banks around the world are starting to reduce stimulus or looking to do that. selloffring that, the today, or thursday in bonds, was kicked off again when the boe chief mark carney said he may have to raise rates more and faster this year, so then what is next? sale,a tepid 10 year note less indirect bids, less it's to cover, and other words a measure of demand, that was another factor. in in japan dumping bonds december, the most treasuries they have sold in a gear in some time. a lot of people saying that 10 year u.s. treasury may touch 3% in weeks. 9462.look at you have this move from 2.48,
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-- are bond auction chart that is our bond auction chart, but the point i want to make is yearthe run up in the 10 note yield has been from 2.4% to 2.82% in six weeks, a dramatic run. that might find is the 10 year note yield, in the 2.8 range. you can see it has been quite a run and getting steep. touching 3% in a few weeks doesn't even seem like an aggressive forecast. when markets give momentum, they often don't stop, pushing that trade to the point where they stop making money and the trend is your friend. when does exhaustion said in an someone says a 10 year note at 3%, i will find it. it seems like we david: are not
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there yet. david:don't stand in the -- it seems like we are not there yet. david: don't stand in the way of a raging bull or bear. diplomacy thi ease tensions on the peninsula? that is coming up. this is bloomberg. ♪
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haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. a quick now of the damage report across markets. yeah we were on the break, come it there we go. no need to say a lot. just look at that, the magnitude , 1200 points on the hang seng on thebelow 12,000 h-shares index, down about 5%.
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the function i would recommend right now is going to give you a bigger sense of the moves within the market within the names and industries. i have it on my bloomberg right now. run gd and you get a screen like this. 600 points. here is your price move. .ave a look at the declines , 9800. high we will not go into the details. ,oo depressing right now substantial volume, top sector movers essentially everything is down. i'm talking too much. that is the story across markets so far. let's hope things improve before not so happy hour later. if we take a look at
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south korean markets on the eve of the winter olympics opening kospi at the cos 1.5-year lows, so wholesale selling across the asia-pacific as we end they difficult trading week. we are looking ahead to the winter olympics. i would not blame you if you would like to change the channel and watch some ice-skating. all of this is happening under the shadow of tensions with the north, so joining us from boston is john park, director of the career working group at the harvard kennedy school, advisor to the department of defense and the treasury and the national security council. it is fair to say a very credible voice to talk to us. do you see this as a relative détente in terms of north-south tensions as being temporary or almost a distraction? >> i think the emphasis is on
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the word temporary. this is a welcome pause. that is exactly what it is. with the momentum of north korean testing in 2017, that momentum will continue. this is something even kim jong-un in his new year's address said they will begin mass-producing nuclear weapons. is the hope from some sides that all of this will end orcreating a channel openness to dialogue after the olympics are done and dusted? is that a false hope? >> it is a real hope for south korea. has put a lot of capital into these dialogues, the winter olympics, and getting a delegation there, and hopefully creating an opportunity for north korea and the united states to begin discussions as well. for the united states, the focus
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is getting back to maximum economic and military pressure on north korea until north korea gives up their nuclear weapon, and that is the message vice president pence is bringing to south korea. the united states expects south korea to cease with these diplomatic overtures after the olympics. with this acceleration over the past year or so, clearly they are getting closer to fulfilling the north's and visions. is the goal still denuclearization? i think you and i know that that's never going to happen. >> that is something we are bracing for in the sense that north korea is developing a capability for what they call minimal determines -- determinants for self-defense. they will not give this up any time soon. the imageere we see of two trains racing towards one another, the united states and
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the north koreans, both being adamant about their respective positions. how we see this resolve itself. we have thought about different permutations. we are hoping the diplomatic route could grow into something, but we are managing our expectations here. haidi: what are the chances of diplomatic overtures or the chance of being more pessimistic on the chance of diplomatic clashes throughout the course of the winter olympics? selectingated by kim his sister, that could rile tensions up again. are seeing a consistent north korean playbook in terms of responding to south korean overtures and having the two koreas try to plan further dialogue and meetings. there are reports the north koreans will invite president moon to north korea, perhaps the
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august 15 independent state that both koreas celebrate. it seems like parallel universes here. and japan states pressuring north korea with military and economic means, and the two koreas trying to engage closer, and that is the part where the gap, especially among the allies here, that is something we have not seen before in to this degree. of this cometics how does it play out in the north? >> north korea right now if you look at the pace of developments have made remarkable strides in their nuclear weapons development activities overall. one technological breakthrough after the other with new technologies, longer ranges, and so forth. what is clear now about the strategy is to consolidate gains , try to mend some fences with
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south korea, but stick to their game plan of parallel development of nuclear weapons for self-defense and focusing on developing their economy as well , and that is something the north koreans are focused on and making some strides forward. haidi: what happens after the settled? there were points last year when a lot of people saying we were closer than we have ever been to some sort of military response from washington. do you think that is a possibility or risk that is there? >> there is a it is specifically under the category of increased likelihood of and missed calculation of some kind. we have a lot of u.s. military capabilities in the region, and frankly there will be more. that is the maximum pressure strategy of the united states to impress upon north korea that the only way he slowly out of this is to give up their nuclear weapons.
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theser when you have military capabilities operating in close proximity to north korea, this is where the fog can where this calculation miscalculation is a big concern. david: thank you so much for joining us. kennedyk at harvard school joining us on the eve of the winter olympics. of course that opening ceremony in a few hours. in the meantime, these are your chinese markets at the moment. it is a pretty frightful sight, the hang seng lower, but the shanghai composite, look at those declines. it has been very prayer in recent months. since 2013, very rare to see moves of this magnitude. h-shares inr 55.8%, hong kong also seeing downside close to 6%. the csi 300 down by 6.25%.
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we did see u.s. futures looking more positive when we get to the open, but in asia, this friday trading session is all gain, pretty much wholesale selling across the board. 20 more to come. this is bloomberg. ♪ -- plenty more to come. this is bloomberg. ♪
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david: you are watching
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bloomberg markets: asia. haidi: i am haidi lun in sydney. you might want to covert your eyes. what a selloff we are seeing when it comes to the chinese markets. they had been supported in the first leg of the selloff, no longer. seng lower by over 4%. we are seeing the brunt of the selloff accelerating and it comes to mainland markets, the shanghai composite, and in the shenzhen. david: it really brings to mind was sayingng earlier, the same way these flows into etf's lifted markets in the u.s., it was the same dynamic into wealth management products into chinese large caps , and when that starts to unwind, you get something like this. ,he shanghai composite down
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about 1000 300 stocks on the way down on the shanghai composite. it is similar proportion to that dramatic drop in 2015. on a global scale, and we will show you this on the chart, 6395. over $5 trillion of market cap globally has been wiped out since the peak in january. in terms of how far this can go, i will enlarge the screen and take it back to 2007. when you look at this long-term, you see when the start of cute he took place and all the liquidity coming into the system , $20 trillion during the global financial crisis, that was the market cap of stocks globally. as $60 trillion for the msci all country index, so we are just giving back $5 trillion of that. i look at the co-relation between equities and central-bank liquidity, that
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co-relation is set 95%. if you do believe the global economies are now on escape velocity and doing very well, that co-relation should be breaking down, but it is not. haidi: what we are seeing is this argument that at the end of the day in this systematic selling you are seeing, price, liquidity, volatility are the most powerful fundamentals. you can forget about the macro picture come up because that is not giving any support to markets. half-full or at these not entirely empty, 63 67 on my terminal. we are talking about the japanese stocks earlier, so you could get good value. this route has eroded the p/e ratio of all asian stocks. this looks a bit more like a head injury than an opportunity.
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david: some blood gushing from the forehead. yes, hit his things like this that we are mindful of. you have to be a brave person, data, corporate earnings, nothing seems to matter. maybe in a few days. lots more coming up. it is all about the selloff. mark tinker is on the show. he told me that when you look at the problem, so his insights will be interesting in 30 minutes. michael evans joins us from south korea to talk about their initiatives in that market. this is bloomberg. ♪
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♪ >> it is almost 11:00 here in hong kong. i am david ingles. >> and i am haslinda amin. welcome to "bloomberg markets: asia." ♪ haslinda: red flags are flying as hong kong and china join the steepening slump. chinese stocks up by 6%. the s&p 500 and the hang seng index, nearly $5 trillion
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wiped out since january's high. haslinda: the new york fed boss is not overly concerned. bill dudley says the market slump is small potatoes. david, what a day. s&pr that correction in the and the 1000 point drop in the dow, markets in asia following suit, bloodbath across the board. david: it is one of those days. we had similar losses on tuesday. signs of stability wednesday and thursday. what we are having across the region right now. this will like -- india will likely join the orut -- rout. there is a shutdown and news out of washington we have to contend with. msci asia-pacific poised for a
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technical correction. enter thete, as we last 30 minutes of trading, china is getting killed, silly. the shanghai composite brings to mind how we were selling earlier. this unwinding of wealth management product, we will talk more about in a moment. have a look at our risk radar. we are getting more softness when it comes to the yen. perhaps points, to the fact, yes, when you look at s&p futures we may have found a fault for china. gold is being offered up at the moment. but it is substantially in japan and across the region of hong kong, asia, and australia, on the way up. we have seen better days across markets. haslinda: we have.
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we tend to get scared when we see the sea of red. perspective,to we're still up at 20% since 2017. market ofbring up the palladium. we can bring up the chart, g #btv 6162. we are seeing how palladium is being hit, hurting heavy metals, generally. palladium has dropped four straight days. copper seeing bears outnumbering bulls. traders concerned about stockpiles rising, the six month high, and a slowdown in china given the lunar new year holiday later this month. i want to bring up another chart silver.he cheap metal
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the gold-silver ratio. it is expected to rebound after the drop versus gold. that is what the bank is -- that say. -- isrbank is a saying. that is markets. let's get the first word news. u.s. government has heading for a temporary shutdown as a rand paul's objections. however, a shutdown may only adviseurs, as they members to be ready to vote between 3:00 and 6:00 eastern, or earlier if they move quickly to pass the bill. the philippines posted a record trade deficit in december. but imports and capital goods surged. a shortfall of $4 billion was since 1980, according
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to data compiled by bloomberg. manila, the biggest drop since 2016. signaled a policy is unlikely to change in the future. they say the economy is some way off from employment and growth targets are little changed. the resource sector should make a positive contribution to gdp in the coming years. facebook admits it cannot catch every fake news account created on its site, but is working hard. they gave evidence to u.k. lawmakers and washington the global pressure to take more control of their once freewheeling platforms. google, facebook, and twitter repeated pledges for better quality content. notou are right, we do
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catch every fake accounts at its inception. we do find and remove many fake accounts every day. it is technical investment for us and we have gotten better at it. >> global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. ♪ that.da: thank you for begging for more volatility may be over for traders. it looks like bulls are back with a vengeance. up g #btvbring him -- 6164. u.s. treasury yields behind equities, concerned by the unknown. specifically, what jerome powell will do when he takes over the erins -- when he takes over the reins from janet yellen. the unknown could continue to cause this volatility.
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wes in it is all about the power put. we are not seeing that because of all sorts of chaos in the market. >> it goes back to the greenspan put. alan greenspan would cut interest rates if there was a big crash in the market or firms that caused turbulence. that turned into the bernanke put and yellen put. is seen as more hawkish than janet yellen. we have heard them talking about three. they said three seems reasonable. putting people on alert, warning people, don't expect the fed to step in and save things. aboutda: why the concern
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jerome powell now? why the questioning only now? wes: maybe now is the time he is taking over. of thea: in terms treasury, how are they showing they are vulnerable? enormousave seen an meltdown in the global markets. you would think people would be rushing to treasuries as a safe haven, but they are not. the last time the s&p 500 fell, early 2016, there was a big rush to treasuries, a huge rally. but we are just not seeing that. i think treasuries are showing they are vulnerable. if they can't rise when they should be, it shows of fall is more likely. david: wes, u.n. died were speaking on bloomberg radio this morning about the pricing in the bond markets. 2.8%ok at the 10 year at
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and i think about the horrible auction we had and the weakest demand in five months. -- it seems distant the likely. wes: 3% is the next level people are looking at. pimco says 3% is a buying opportunity. will ring aumber bell with people, make people pay attention and take notice. a buying is opportunity is easier when things are calm. when treasuries are showing as much volatility as they are now, 3% looks like a barrier that can be easily broken. david: it certainly does. something has to be mispriced. 3% buying opportunity, you look are, and the 10 year
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one of those things has to be mispriced. what do you think? wes: i am not sure what is mispriced. ill dudley said markets are perhaps repricing. here is one way to look at things. the new normal is changing back to the old normal. interest rates are rising and new normal will be a thing of the past. yes, things are repricing. thank you for your insights. interesting days ahead. you can follow more on this story and all the day's trading. you can get a market run down in one click on commentary as well as analysts -- analysis. find out what is affecting your investments right now.
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we will discuss more about the stock selloff later in the show. we are joined by mark tinker, who told us of a potential blow up in the vix. of -- we will be live out we talking to the president of alibaba. and the stephen engle, to talk about the company's partnership in the current winter olympics.
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♪ you a quick get check of what has been happening across chinese markets. on your screen, roughly the last 20 minutes of trade. we're entering the last 45 minutes for the session in hong kong. tencent getting whacked silly.
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who would have thought we would be talking about 3000 on the shanghai composite+ -- composite? minutes when india opens up, that will take it straight on the chin. 00 onng on the open, 10,3 your nifty futures. haslinda: more than $600 billion wiped out in the chinese markets alone. ain thing, the large caps in banks. let's return to the winter olympics. alibaba, providing cloud computing services to move the event. our chief in north asia correspondent stephen engle is standing by. steve? steve: i get to pop indoors and
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get some warmth after all day outside the olympic stadium freezing. right now we have our own olympic gold medalist. a bigpens to run e-commerce company out of china, the president of alibaba. your first time partner with the olympics. sense of partnering with the olympics for such a large company as yourself? [no audio] from what it is today to a much more digital experience for the fans, for the companies and countries that participate, for all of the people that want to see this event the don't get to see it taking it from 3.5 billion people that see it today [no audio] we are just getting some technical difficulties out of south korea where the winter olympics are taking place and we are speaking with the alibaba
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president. once we sort those things that we will get that interview straight-backed to you. a quick look across markets, it is not looking good. we will talk more about the top market stories in a moment. stay with us area -- stay with us. this is bloomberg. ♪
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♪ this is "bloomberg markets: asia." i am haslinda amin. david: i am david ingles. let's talk about the south korean olympics. 5gy will launch the first service. kt says the olympics are great place to showcase their system. >> we have successfully
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completed everything and it is a huge achievement to showcase 5g at pyeongchang. on al revenues have been downward trend. the reason we are rolling -- out 5g is -- rolling because of the capabilities. in the future it is about how enablew devices 5g can like autonomous vehicles. we are focusing on new technology and product development and new industries to overcome stagnant revenue. >> we all know 5g networks are promising speeds 40 times, 50 times the current technology. now? is kt's speed right have you solved the latency problem? have 200m for 5g is to times faster speed than existing technology.
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however, the technology is not improved yet. what we will experience in pyeongchang is 50 times faster. it usually is 50 milliseconds and cannot be felt as ugly. when it comes to driverless car's, it has been a big hurdle. we have been able to reduce the by 10 milliseconds. we use new technology called edge cloud. contained -- we have the technology to reduce the latency time. david: let's return to the winter olympics where stephen engle is standing by. thanks a lot, david. let's get back to our conversation with the president of alibaba. thank you for staying with us. let's talk about the u.s. market. not only are their geopolitical
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concerns, but the market selloff. is it a complete sell down, a correction? we know alibaba has a target of creating one million jobs by 202 1. where are we on that pace? >> our strategy is to connect small businesses to the u.s. -- chinese consumer. president xi expects china will consume 8 trillion u.s. dollars of products. not all of those will be consumer products, but a substantial portion will be. the best come from the united states. small businesses produce many of those. china created in millions of jobs. we expect to do the same in the u.s. >> can you quantify how many jobs you have created on that path to one million? >> in china we created $30
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million over 18 years. it is too early to quantify exactly how many we have created. but we know based on the volume of business we are doing, we have created. it was $60, $70 a year ago. it was $205. >> i am not worried about the alibaba stock price. volatility is not new to me. in my prior work i dealt with it on a regular basis. anytime interest rates stay too low for too long, at some point, one or the other will change and we will get volatility and things will optimize and balance out. i am not concerned about short-term volatility. i think short-term fundamentals in terms of gdp growth, and the financial crisis, it is looking
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good. most of the world looks pretty good. >> jim rogers thinks the next correction will be the worst of our lack -- the worst of our lifetime. >> he has been talking about that since i started the business 30 years ago. i am sure at some point he will be right. >> we have seen successes in china. we have seen what amazon is trying to do. jeff bezos bought whole foods. we also know alibaba is in talks with kroger's, and possibly going into china. what about kroger's in the united states? do like what amazon and whole foods is doing? >> retail has been a focus for us long before amazon bought whole foods. we have done a lot in china, not we have beenarea testing the model and developing
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the model for a long time. in china in new retail is huge. our focus on developing new retail is going to be primarily china-based. and otherf kroger large retailers, we are in active discussions with them all the time. is to bringl focus great products to the chinese consumer. >> how about the focus on the cloud and big data? next oil.lled it the there are disputes over who owns the data. how much importance is that proprietary data and protecting it? wemany people believe, and do as well, that alibaba is a data company. we do lots of things, but there is great value in that data, provided is -- provided it is used properly. our business is the largest in china.
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we will continue to develop that business very aggressively. >> how about ant financial? it. took at least 1/3 of you coming from the banking world a lot of eyes are looking at that flow. >> we did not take ant financial back into the fold. we changed the arrangement for equities. we now have a 33% equity interest. the financial part is not the most interesting part. it is using ant financial as part of an ecosystem to balance retail, off-line and online, to optimize the experience for the merchants and build consumer ses.s -- ba stakees taking that 1/3
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create a better vision for the business community? >> you would have to ask of the investment community that. the real question is, is this a precursor to aunt going public? it has nothing to do with that. and will go public when it wants to. we sort of are already thinking singles' day internationally. of millions of consumers that participate and thousands and thousands of margins selling products as part of singles' day. to take it to another market is something jack talked about. which market and when are things we discuss all the time. >> and the olympics, getting the brand message out -- who are you rooting for? >> canada. >> mike evans, thank you for your time on bloomberg television. we have to go back out into the cold. back to you. david: speaking of cold, perfect timing.
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the markets, at cold feet, a lot of fear on the street. we will get an update on china in a moment. have a look at our bloomberg chart. this is our momentum tracker across the asia-pacific. it has just collapsed. we are at 24 right now. a few levels you want to watch, we have cut through the 50 day moving average, and the 100 day. we are watching the low we had in december. beyond that, we are looking at 164, the two day moving average. it happened violently and quickly across the markets. a lot of people had to be talked -- stand out of this out of the way until this settles. haslinda: the downward momentum in china continues. we see the msci down. 10 stocks or so
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dropping more than 10%. more than 1200 stocks are pointing lower at this point in time in china. this is bloomberg. ♪
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♪ >> if it were to go on much much mored be persistent, then it could start to affect household and business spending behavior and that could influence the economic outlook. but so far i would say this is small potatoes. >> this might be a short episode and and in a few days. -- end in a few days. nobody knows. but i doubt it is the last in 2018. >> we have had that 10% correction. it was wished for, to a certain extent. but we have told investors, be
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careful what you wish for. it is back to prior years. fundamentally, nothing has changed. >> this is falling less than the large caps. also, it it is stabilizing. those are the faces to watch if you are looking for places to hide. the places to watch if you were looking for places to hide. >> this will take a little time to unwind. once that is done, however long that takes, there will be pretty good buying opportunities. i am not sure i would be jumping in with both feet quite yet. david: you have got to be a very brave person to do that. let's get you when update on japan. that market is just coming out of its lunch break. here we are for both of the benchmarks and the currency. lend a fairly
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encouraging sign on the dollar-yen. another encouraging sign, before , the nikkei 225 was doing well. this brings it down closer to 17 times. kabob atost like a 2:30 in the morning. bike knowing the shark is still out there? momentum seems to be strong for the downside. haslinda: i don't know about taking a bite into the kabob. the nikkei having its worst week in two years. that is something to watch. let's get a check of the first word headlines with paul allen. bank of england governor mark carney says interest rates may need to rise at a steeper pace to prevent the brexit-weekend u.k. economy from overheating.
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he said inflation is likely to remain above the 2% target, with about three quarter hikes in the next few years. >> we are not going to tie our hands to a specific path for rates going forward. importantlyrating, for your viewers, these are unliket rate cycles those they would have experienced in the past. >> a new study says criminals are ditching bitcoin because it has become more expensive and inefficient. the most widely used cryptocurrency is likely to lose its dominance as a payment method on the dark web to litecoin and dash. 1/3coin is now accepted by of shadow vendors.
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vendorsruled grubhub are contractors, not employees. the ruling may have a far-reaching implications to other sharing economy companies, whose businesses traditionally avoid the costs of normal employment. the world's 500 richest people. jeff bezos saw his worth drop, according to the bloomberg index. losingckerberg fractionally less. the dow and s&p 500 tumbled to the lowest since november on fears of rising interest rates. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. ♪ david: let's get back to the market story. the big issue this week that has
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caught a lot of attention was the shortfall trade that imploded when the vix exploded higher. we put that on a chart for you. we have seen a variation on this across the programming this week. i put the top one that credit suisse holdout. i call this the kiss of death. you see how these two things went toward each other. investment manager, head of framlington equities. you were one of the first people i thought about. i remember when you said, watch xiv. it is an example of extreme positioning. exploded, isas there more out there and have we learned anything? referring to it as the
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greed index. it was just a momentum trade. what people did not realize, it 0, they are0 to 14 buying it without any view of what they are doing. the kiss of death is what happens when you get a distressed seller and forced buyer at the same time. it should wash out. i think it is interesting. i have seen it in australia. -- one point i was making, people said, reduce your risk [indiscernible] not seem to learn anything for a decade. era. during the dotcom it brings down the beta. 2000, thate early
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whole market cap up session did not reduce my risk. i have a new plan. i will reduce my risk by having low volatility. tobacco.e us the cds -- debacle. what is quite important, and the lesson we need to learn is, these rules-based systems -- we can measure volatility, a notion as part of your model -- no. your return is a function of your risk. and wouldhoping for like the discussion to move on to, particularly these investors, what about liquidity? what about leverage? it is always leverage that blows markets up like this.
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this is what is going on at the moment. i don't know how much leverage there actually is in markets. what i do think is the trigger for the offense of these weeks, many were saying, everyone is buying s&p on margin and throughput options. -- and through put options. they said, i will sell those cheap puts. thesee reality is, indices. it tells me we have to deleverage all those people that came into 2018 going, i haven't got the money, but i can borrow it off someone else. deleveraging hopefully, and a focus on real risk. haslinda: mark, you sound cautious. dudley said gyrations
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in the market are just small potatoes. what do you make of his reaction? and what do you expect jerome powell to put a lift on the drop we are seeing? mark: [indiscernible] this is what we call market mechanics. it is so much of the short-term noise. when you get markets moving 5% this is very much about unwinding of leverage positions. like i said, forced buyer's and distressed sellers. the thing to do is stand back and let the noise settle down. if you have a portfolio of stocks, and you like the stock as much as you did last week, and they have sold it down 5%, buying off should be
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a distressed seller if you are a long-term investor. if you are a trader, different game. remember, asia is decoupled from the west in many senses. in terms ofmically, what is the drive of the profitability of the companies you are looking at. if you are looking at alibaba, is alibaba's business conditions going to change? no. it may be the stock sold down because it was owned by people that only sells stocks. a lot of long-term investors are saying, let's look at my portfolio. what has changed? should i pick up the ones i think have been oversold? there is no point being overly optimistic or overly pessimistic. it is the boring stuff. it is about adjusting your waiting.
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insaw something like this 2015. the broader issue, this is not to do with the fed or economists, this is market mechanics themselves and leverage, deleveraging of those risk parity products. people will hopefully focus back on fundamentals. haslinda: having said that, do you see signs of panic in the or similarities at all with the black friday back in 1987? mark: black friday was an early example of insurance blowing up. they thought they would not take any risk. there are some echoes of that. it has not come out of the blue like it did back then. we have been watching things like the xiv, backing away from markets or stocks.
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this is the volatility of markets. there is not panic out there, certainly not with institutional or medium-sized investors. maybe on the retail level. a couple years ago we had this going on in china. the china market, many individuals buying on margin. volatility.g to get but now you see where we are two years later with china. we have to get used to the old days of markets shopping around. a low volatility environment is pretending itm, is suppressed through a curious product that gives you equity-like returns with bond-like risks. david: you saw this coming, what should we watched specifically? mark: always we have to watch for leveraging markets. whenever a market gets crowded,
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the narrative is the most persuaded -- persuasive at the top. my point is not to be a deliberate contrarian. mia the last person on this particular trend? am i the last person on this particular trend? do not believe a tradable price is necessarily forecasting, would be my best piece of the device. haslinda: interesting stuff, mark tinker from framlington. he will be sticking around. where the check of indian markets will be headed when they open later on. it does look they will join in down by about 1.5% to 2%. it will be across the board, red arrows in asia.
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david: and we will see who takes the biggest hit. stay with us. this is bloomberg. ♪
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♪ markets in india joining the selloff area that let's get an early assessment from sophie. >> asian stocks set for the worst week since 2011. indian stocks joining the fray, losing 1.5%, wiping out your to gains -- year to date gains. these are likely to get lost amid the wreckage. a second weekying of losses. rupeesas been relief for
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this week. this is something bond traders will be keenly watching, given rupee bonds are seeing the first again. -- gain. to talk about that, we just had the r.b.i. a couple days ago. budget missing inflationary but that is coming back down. put everything into context. sophie: it is dragged into this vortex. 3, afteree g #btv 617 the best start to a year since 2013, it gave up gains. set for the worst week since april. those positions are falling from a record. opec nations that set to open fields. the supply and demand question. haslinda: it is china, china,
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china. what is the damage report? sophie: chinese markets are melting. with the lunar new year looming, that is unlikely to bring back risk appetite anytime soon. chinese large caps bearing the brunt. enjoying the worst week since 2008. tencent is thinking. -- sinking. week, ther 11% this biggest slump since 2011. this could perhaps entice buyers. they were arguing the stock was looking pricing. reinforce what mark tinker had to say about rebalancing portfolios. david: let's bring him back into the conversation from axa
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investors. too much commentary on these short-term valuations. after all of this -- in hindsight when we look at the vix, it did not do what it was supposed to do, which was to provide an accurate indicator of where the market is. can i trust the vix again? mark: the vix is really the price of put options. at the end of last week, puts were really cheap. it was not reflecting complacency, but the fact that there are a lot of people selling puts. it was selling puts and buying calls. it is not a fear index. the inverse of it was a greed index.
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many people here in hong kong did very well out of hanging onto the hang seng. but it was the first christmas season in a decade for people said, you work and financial markets, should i be buying hang seng, bitcoin? there was a greed around after constant fear for a decade. reflectedys, xiv that. what we see at the moment is a shakeup. some people borrowed money from other people to participate in this peak. where it settles depends where the bond yields and leverage is. if i said it look at asia itself -- in china in 1997, when we had the financial crash out here, chinese gdp was less than $1 trillion. last year, china grew by more
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than $1 trillion. class in china are spending online, which is why we are buying from tencent and alibaba. it is a different dynamic. what we are saying is, let's get back to basics and look at earnings, dividends. are paying down debt, they are generating so much cash. that is not something you don't understand as being magically created by a trade index. that is the main lesson to learn from this. put your capital to work in the real economy via these vehicles, not these hidden volatility models, whatever you want to call them. if you don't understand them, best not to buy them. haslinda: i want to bring in a
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chart, g #btv 6065. you talked about the opportunities in the asian markets. you can see how asian markets have seen the worst week in two years. my question relates to emerging markets. they have seemed resilient. that is not to say emerging-market assets are not overpriced, right? mark: it depends what you are basing it against. if you look at sovereign debt, you get a much bigger yield then you do on western, developed ones, even corporate debt. equitiesok at non-us versus u.s. equities, they are the cheapest since 1997. it depends what you mean in terms of cheap or expensive. people have to put their money somewhere. back in 1990 when japan was 50% of global markets people said, i
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should have had 50% there. america is 50% of global markets. after this shakeup, people will say, why do i only have 2% or 3% in emerging markets or asia, when the next billion middle-class consumers will come from asia, and they will not be moneyng 9 -- 90% of their on things built and sold by u.s.-listed corporations? this shakeout should point people back to emerging markets. you have to go from the bottom up. be in the right place at the right time. the other lesson we might learn from this, if i want to get exposure to economic growth, i need to do it at a micro level. i cannot just do it through one of these big market indices. the guys that used
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secondly,winners -- these derivatives will throw me around all over the place. nobody really knows or understand that. in asia isrkets where we should be paying more attention. aaslinda: mark tinker, ax investment, thank you today. if you are a bloomberg subscriber, catch up by using our function, tv . by sendingnversation instant messages to our team and guests. please send us questions. this is bloomberg. ♪
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♪ futures pointing to a slightly higher open, up 0.4%
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for the s&p. not bad considering the bloodbath we saw overnight. corrections for the s&p as well as a 1000 point dropped for the dow. david: we are getting more bids. i guess that is the encouraging sign as we move into the other markets. at these levels it tells you what kind of morning we had. 3.2% on the hang seng index. a look at other markets across the region. haslinda: a quick check of the latest business flash headlines. parentsau, a lot of its down after moody's revised it to negative. they said allegations against steve wynn could harm the company. down from the operation in macau over allegations of sexual
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harassment. he denies wrongdoing but said the publicity made it impossible for him to stay. hnad: china's indebted group is marketing $4 billion of property sales in the u.s. headlinesorldwide with his -- its debt-fueled shopping spree. but they have to repay debt this quarter. wanda --dalianon wanda, the best performer among real estate companies and all nine. returning more than 2% since december. they were the worst performers, losing 9%. david: we are heading into the lunch break in hong kong.
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a quick damage report. not bad at all. csi 300, let's hope the afternoon is better. this is bloomberg. ♪
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♪ alisa: i am alisa parenti in washington and you are watching "bloomberg technology." rand paul is the reason the senate has not voted on the senate's spending package. he is holding for a vote to keep congress under strict budget caps. all 100 senators must agree to hold a vote. without full consent, it would happen at 1:00 a.m. the government shuts down at midnight tonight. letterelosi send a saying she would not vote for the bipartisan deal because it does not include protections for dreamers. she did concede it created investments that will create


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