tv Bloomberg Markets Asia Bloomberg May 23, 2018 10:00pm-11:00pm EDT
as the struggle continues. this is bloomberg markets: asia. longerensions again, the we get into these rounds of negotiations, the less certainty we have. a stern response from north korea over the comments from mike pence threatening to cancel the leaders summit in singapore. lots of uncertainty out there. the bank of korea choosing to keep rates on hold today. rishaad: we also have a situation where the bank of japan will continue printing market. it has more they continue easing persistently.
it has been a rough market. stocks andp, jakarta the rupee holding steady as the bank governor of indonesia. malaysia down 1.7%, set for the for -- worst today dropped since 2011. concerns overving the country's postelection outlook and elsewhere, the nikkei is losing over 1% as the yen is trading near session high. checking on bonds, i want to highlight the drop in korean yields. if a julyrs assess rate hike is possible as the boj maintains a accommodative forecast. a drop of over five basis points for south korea's benchmark yield there. that. thank you for let's get the first word news with paul allen.
paul: major asian carmakers -- after president trump ordered the commerce department to investigate auto imports. the administration is considering a duty of 25%. investigation would produce the same position that saw tariffs on imported steel and aluminum. canada has blocked a takeover of china'soup by a unit of construction company. aftercision was announced security reviews earlier this year. sinceshares have declined october on concern it would be brought. l jumped more than 4% in hong kong after the resignation of the ceo and a warning it a not be able to serve the its debts after october 23 unless u.s. sanctions are lifted. that is the deadline washington
has given companies to wind down existing contracts. international banks are likely to cut rusal off, affecting cash flow. minutes showed policymakers feel the economic outlook warrants another rate hike soon and also signal the it welcomed a modest overshoot of the 2% target. the fed is on track to raise interest rates next month, but officials remain reluctant to declare victory on a achieving their inflation goal on a sustainable basis. global news 24 hours a day, powered by more than 2700 journalists and analysts in more .han 120 countries i'm paul allen, this is bloomberg. china as the u.s. and grapple with their trade relationship, one country that could find itself in the middle is germany. chancellor angela merkel could it threat towith germany's trade relationship.
tom mackenzie joins us from beijing. what is the chancellor hoping to achieve from the's, which comes at a tenuous time? tom: it does, and chancellor , it is kicking off in central beijing behind me. she will be meeting with president xi jinping and one of her priorities is going to be to ensure that any trade deal between the u.s. and china is not to the detriment of german companies. course, china will increase its imports of things like agricultural product's, services, and energy from the u.s. chancellor merkel will be keen to make sure that doesn't include -- mean german companies lose out as the result of the trade deal between washington and beijing. well, she will be pushing for increased market access.
berlin shares some of the concerns of washington around market access and cybersecurity and this industrial policy china has for automation and ai she will be pressing chinese counterparts for reassurance on those issues. in terms of the market access, china will be re-it rising that it has taken steps to liberalize the auto sector. we have heard details out about the joint venture structure that is changing here and about the tax cuts that are going to benefit many german automakers. the chinese will also emphasize the move to open up the financial sector and there are a number of issues chancellor merkel will be discussing. she may be pressured on the moves in germany to have closer scrutiny of chinese investment there, because the chinese ambassador to germany has said there are protectionist sentiments i work in germany. that is a concern for the chinese.
over a ten-year period 45% more in the european union than they did in the u.s. it is a key market for them and in terms of the trade relationship, that was worth 180 billion u.s. dollars in 2017. a number of issues they will be working on as well as the iran deal, germany hoping to get china's support. haidi: -- rishaad: stick around, because we have the co-author of "red capitalism." thatd ing suggesting angela merkel should make a play for some that trade that may be lost if the u.s. imposes tariffs. >> she is going there as the german chancellor, but also representing the eu. it is a bigger game at stake. the concerns are very similar.
it is a bad idea to look at trade as a zero sum game, that the u.s. is losing and germany will win. that is not the way to solve the problem. merkel's concerns are the same as americans, market access, ernest, lots of german companies complain about the environment in china. rishaad: perhaps some justification? fraser: absolutely, and they have kept quiet for many years. many companies have been making money in china and realize it is a tough market and unfair against them, but they are making money and will push back. haidi: it is little hypocritical is what you are saying? fraser: that is human nature. i never think of hypocrisy as a vice, but a fact of life. morehinese have gotten bold and what they are doing and largely many companies are saying enough is enough.
we don't like the made in china 2025 policy, we can't do the same in china and it is fairness. they are saying china is a lot richer and bigger, and when it was smaller, we were prepared to give it more slack. now the game has changed. tom: are you seeing any signs that china is prepared to change its strategy in light of what we is ineing, whether that china blocking a deal over security concerns, security concerns voiced in germany and also in the u.s., particularly as you say on the tech knowledge he moves in china and the made in 2020 -- made in china when he 25 policy. are you seeing changes -- 2025 policy. are you seeing changes? fraser: not substantial changes. in the canadian
deal, it is a construction company and what is the concert he -- security concern? is waved around as a banner in the same way compliances. -- compliance is. seen any major change by the chinese. i would like to think it will force change, but xi jinping has made it clear he wants a strong thea, a strong china run by communist party. his authoritarian model does not lend itself to an open china. how concerned do you expect and let merkel to be about the closer relationships and ties china is developing with eastern european countries? beat ofthat is a bug the eu because when dealing with any european countries, it is ultimately china against the eu and china has a history of trying to split off different countries to get leverage. i am sure she is concerned.
she will try to remind the chinese of that, but that much of the work needs to be done at home. many european countries feel they don't get a fair hearing in europe. often the problems are domestic than chinese. chinese -- the chinese will play the cards to their advantage and it is up to europe to make sure its house is in order. haidi: do you agree with the china'st the u.s. and technology ambitions is trying to curtail the rise of china's value share and how do you get a relatives -- resolution? fraser: i'm aggravated by the thought that the west is trying to curtail the chinese rise up the value chain. over the past 40 years, america -- a vast amount of money has gone into the country. no one is trying to contain china. what are they trying to do is fairness, they are expecting
reciprocity or are wanting that. when it was a smaller economy, they were prepared to tolerate bad chinese progress. it is nonsense to say anyone is trying to curtail china. look at the amount of investment, good spot in china. it is completely on -- goods bought in china. it is a line china likes to put out there. rishaad: a lot of pictures from beijing, the chancellor arriving earlier in beijing to focus on diplomatic spirits. informal breakfast with the premier and will be meeting xi jinping later. iran is going to be figuring too, fraser. china and germany want to salvage the iranian nuclear deal despite the u.s. pullout. they can both say they want to give the americans aren't going -- >> they don't have the pursestrings --
>> americans are key to that because so much of this ties into israel and the stability in the middle east. it is an shambles. aam not saying this was particularly good deal, but donald trump likes to break things and overturn things. while it is easy saying i dislike the existing deal -- show us a better deal. stick around, tom mackenzie in beijing and fraser howie will stay with us. "hypocrisy is not a vice, a it is a fact of life." the feds dovish signals are affecting emerging-market currencies. haidi: counting down to inclusion, we hear from the head of msci on next week. this is bloomberg. ♪
haidi: we have german chancellor angela merkel arriving in beijing. with her is the chinese premier. this is the great hall of the people. the welcoming ceremony there, some photo opportunities and a joint press conference. chancellork about, merkel not just representing germany, but the eu. entering into what has been a frayed relationship between the u.s. and china on trade. the agenda,me up on and germany as the biggest exporter in europe as well as china's longest standing trade partners has a lot to win, but a lot to lose, particularly if china starts to buy more american goods at the expense of german goods. rishaad: let's leave those pictures as she goes past that guard of honor.
a-shares,200 mainland they are going to be debuting on msci's main indexes. we have the chairman here, talking to us exclusive earlier. asking when he is going to increase the weighting of these stocks. >> very focused on making sure next week goes well, that the august second half goes well, by the beginning of september, and we are beginning to oversee what else will happen next. most of our attention is making sure the this happens correctly, that we do consultation with clients after the first phase, that we see every thing we expected, are there any issues, is there something to be concerned about and the second step at the end of the summer. we started thinking about what
are the other areas that need to improve to get to the second leg of this, but it is too early to tell right now. yesterday, they said they weren't interested in buying asia, what do you think of that? over 150 talked clients from all over the world, passive, active, hedge funds, broker-dealers and there was a strong level of support. like anything, it wasn't 100% and some people were more do yout and saying, what continue to put pressure to open up? we don't put pressure on anybody. we open up when the markets open up. there will be some that weight, but the majority will put their toe in the water and that is what we wanted. >> is it natural to see a 5% weighting increase to 20%? oury: i think our plan in
internal discussions in the company and index policy committee have been that we don't want to go very small step at us -- at a time and drive the whole process crazy. fore, our plan is not to go 5, 7, 10, 15 -- it will have to be sizable steps every step of the way. therefore, the conditions need to be there to go to that sizable step. it cannot be very small incremental processes. we will being having discussions with various regulators in both areas to see what are those steps taken? our discussions have been, there is no question in our mind that they are really intent on opening up the country. buts not and if, -- an if, a when and a way to do it in a
stable, measured way to not create any upheaval or instability in the financial markets. hat -- and our company believes, that the process would be faster than we thought a year ago. fernandez, was henry msci chairman speaking to us exclusively earlier at bloomberg. ,e are back with fraser howie an author. thanks for staying with us. a longclusion has been time coming and is a positive milestone but in terms of whether this really does throw the doors open to china and its structural reforms, is that being overly optimistic? i think so, ultimately, the people who decide if china opens up are the authorities themselves in china. nothing has been stopping them from opening up for the past 10 years.
in major program came out july 2003. there is lots of history of china trying to open up, but it has been a slow process. msci is high profile but small. msci cannot do the heavy lifting needed to change china's rules and open capital flows and that is where the changes need to come. haidi: we are getting a line through from the ministry of commerce and china saying china is encouraging companies to import more from the united states. how does this rebalancing work? we talked about germany being penalized as the result of the rebalancing toward importing more out of the u.s.. also, australia. that has to come from somewhere. theer: it does, but discussion of trade is completely wrong. the idea that you have positive and negative is just a factual measure on the trade flavors --
flows. made theump has deficit with china as defining the entire economic structure. a lot ofn america buys stuff from china is china makes things americans want to buy. trade flows are balanced globally but they are focused on these bilateral numbers. ands a foolish way to do it giving instructions for chinese companies to buy more for america, if americans want to buy them, they'll buy them. rishaad: how can we rely on this data? trade flows measure the hard stuff, not the stopped -- soft stuff and this is where becomes gray. -- trade is trip just one measure of the discussion. there are capital flows, services, american companies do very well rishaad:. software, how do you measure that? exactly, look at iphone
as the classic example. the bulk of the money from an iphone goes to a u.s. company. 20% added to the iphone? fraser: if that, trump has taken a basic this -- statistic and misused it and built an economic policy on it. the blame here is on donald trump. there are many issues in global trade and with chinese business practices but looking at the surplus and a deficit and saying this is the key number is foolish. rishaad: another great quote there. , author of "red capitalism and privatizing china." one feature on the bloomberg tv , you can watch us live and look at interviews we have had and look at the functions we talked about and messages during the shows. if you want to ask a question, this is for bloomberg
haidi: we are getting this press conference from the bank of korea, explaining the decision by the korean central bank to leave rates on hold at 1.5%, saying the board will maintain and accommodative policy, holding rates as uncertainties remain high. they say they are closely monitoring how much debt rose. one of the key issues in the south korean economy. we have seen a sluggish labor market growth. inflation will radically rise in the second quarter, the economy overall continuing steady growth. we are getting those lines through. nothing surprising thus far. jobstion below target, creation has been sluggish and of course, the trade headwinds, given how vulnerable they are. function, at our tliv
where you watch events like this live. you will get analysis from bloomberg's expert editors as these events happen. this is bloomberg. ♪ rishaad: not the only lines, we china'sp in, we have ministry of commerce -- lots coming through from the spokesman, monitoring the u.s. probe on autos. we had donald trump suggesting he could be putting tariffs on the pimports of some cars there. --s also gives the backdrop the reports out of washington, d.c. when we had visitors there. trade talks taking place there. trade surplus cuts outlined there for the united states and washington, d.c. the commerce spokesman saying they didn't pledge a number for
kong,is 10:29 in hong 12:29 in sydney. north korea says it may reconsider a summit between president trump and kim jong-un, and says it will not "beg for dialogue." pyongyang plans to destroy its major nuclear testing site. independent nuclear inspectors are not there. washington insists the pressure is still on. >> it is my view we have made zero concessions to chairman kim to date, and have no intention of doing so. >> former malaysian prime minister facing a second date of questions as part of an investigation into corruption
and money laundering. billions of dollars are said to have gone missing, with several hundreds of millions landing an account linked to him. raid of his properties. he has denied all wrongdoing. $7 billion due in the next five years. the news comes as the finance industry says debt exceeds $250 billion. that is more than disclosed by the previous administration. cambridge analytical whistleblower christopher wiley says mark zuckerberg is unwilling to face the committee over the data abuse scandal. he told bloomberg perez is the one for -- paris is the one forum that will ask the tough questions. he said so far the ceo has been evasive. >> is a spectacle of
non-answers. bizarrely, facebook's strategy seems to be, go to testify, whether it is at congress in the u.s. or european parliament, and then saying i'll get back to you, i will get back to you, that's a good question, i will get back to you. paul: political news 24 hours a day and on tictoc on twitter powered by over 2700 analysts and journalists in over 120 countries. this is bloomberg. rishaad: the close of the morning session later on in the lunch break. sophie is having a look at the in termstion thus far of what is being said in beijing and seoul. 1.5%. nikkei off by auto stocks dragging the most. yen holding onto overnight
losses, trading near an eight-month low. china is where we are seeing the brunt of losses. givenian stocks slumping concerns over a higher national debt number, as paul mentioned, as well as concerns over 1mdb. foreign inflows are returning. check out the indonesian two-year yield, jumping 60 basis points. prospects of rate hikes with the new governor taking effect today. barrel, thisks a after a surprise uptick in u.s. supplies. >> what we have seen on currency markets is the turkish central bank trying to stop the bleeding of the turkish lira. it raised liquidity window.
the currency reversed its daily losses by going off at the moment. turkey not the only emerging-market in trouble. sophie: no, that is right. desoto volume of concern is starting to rise. econom -- numeral the nobel prize-winning economist paul krugman joining in, others warning of a meltdown in em's. this is what krugman tweeted, saying this resembles the financial crisis of the late 1990's. when em currencies falls, causing corporate debt to blowup, causing further declines in the currency. futures wills continue to face challenges. do you think paul krugman is
bringing the warning bells a bit too dramatically at this point? there is this negative feedback look. you look at what the lira is facing. i think that is the right tone. i think he is being too dramatic. any comparison to 1997 is inappropriate. all the time we have to look at each emerging-market individually. it is dangerous to take them as a group. as we mentioned in the introduction, there are economies with external deficits. it will be hard to fund those deficits in an environment where interest rates are going higher. that is what we believe is happening. we expect we will not always see these sorts of losses, but we will continue to see volatility in emerging markets. sophie: continuing to get these lines from the bank of korea,
saying em market is unlikely to affect the korean economy. who does it affect, though? it is not the triple r currencies, maybe just one of the triple r currencies in asia being battered at the moment. >> true, it is different than 2013. you must remember then, global growth was very soft. we did not have the same prospect of inflation picking up. at the time, there was not a lot of discretion. we better so cold markets. -- better sell all markets. now talking about asia particularly, to receive inflow on the back of strong growth and managing money stewardship, we would say yes. those that are under pressure are the ones battling inflation. inflation is the one thing that will undermine your asset prices and in turn, currency value.
we need to be more discretionary. asia and the philippines facing some pressure. has them -- u.s. this is from your research. position has been there for a while. dollar went the other direction. it has come back a bit. is there an inflection point where people go, right, now they look attractive? >> that is a good point to make. earlier we saw u.s. yields coming down. the fiscal deficit was widening, the dollar going up, yields h igh, but not extending on. what is that point? we have to look at the real rates and the prospect for the economy to grow. when the dollar was underperforming, it was under a
belief we would see better or greater growth in other countries. rishaad: particularly the eurozone, where it has gone in the other direction. some may say it will be temporary. patrick: we think the euro is likely to be a function performer at the moment, because the economy certainly hasn't gained from the momentum it seemed to have in the first quarter. pmi's are soft. we have concerns in italy. we have seen those before, but it doesn't lead to confidence in the economy. rishaad: why no confidence? patrick: i think people are concerned about the political set up. rishaad: where the control is? patrick: italy is talking about expanding fiscal spending. we would say that is a good thing. when the private sector is not spending, it is incumbent on the public sector to spend. the way the eurozone is set up, that is not always possible. we have come up against a brick wall there. sophie: given the trade
unknowns, what is your call on the aussie as well as the kiwi? patrick: we always like ozzie and kiwi. we like buying weakness. they are leveraging into what is happening in asia. overall we are positive on asia. rather than being such a traditional exporter of industrial or food commodities, new zealand big exporters of tourism. we think those help them in the long-standing. we are long-term buyers of both currencies. sophie: did anything surprising come out of the fed? markets were a bit more dovish. do you think there will be an inflation overshoot? patrick: i think so. we read it the same way, the next hike is coming in june, and after that we will see what happens. we will tolerate slightly higher inflation.
we are concerned inflation is the bogey that influences asset prices. we would be concerned if we let inflation run high, because that will in turn undermined the dollar. dollar.mine the >> you were expecting rmb below six. that is a brave call. that question is, when? hasick: we think china strong external services, strong growth. mdsi being introduced into the bond indices as well, there will be demand for the currency. if they wanted. patrick: remember in early 2015 we traded six. now we are only 4% weaker on a trade basis. we are really only returning to levels we were two or three
bloomberg markets in hong kong. haidi: the ruby continues to fall after slumping to its weakest level in 2.5 years, despite the central bank pledging to take stronger measures as it hike ratess -- hiked rates for the first time. the indonesian bank governor starts work today. talking about his policy priorities, he's got a lot to contend with the moment. >> good morning. it doesn't come tougher than this on the first day in his job. perry warjiyo will be sworn in at 10:00 a.m. today. we were hoping he would make some comments to give us live an idea of what his approach will be going forward. the only comments we have had so
far from him in recent has been a confirmation hearing in march. that time it was a slightly different environment. he was speaking about looking at progrowth and a pro stability approach. i think we are going to see very different comments coming today. governor warjiyo is not new to crisis. he came in as the deputy governor. he has decades of experience at the central bank. he has looked through the asian financial crisis as well. all eyes will be today on how he takes that approach forward. haidi: they raised rates last week, said they would take stronger measures if necessary to bring about stability.
hikes? the start of more patrick: i think the new governor has his hands pretty tight. =-- hands pretty tied. the outgoing governor made it clear they will take stronger measures is necessary to bring that stability to the currency market and financial markets in general. governor willw continue that approach. he has worked with the previous governor i think deputy for a long time. i think they are on the same page as to how to tackle the crisis. i think we will be in for more interest rate hikes. i think it is a different situation than it was in 2013. at that time, when the deputy governor perry warjiyo was in office, it was also a new governor at the time.
them worked closely to bring that stability to the market, but it was a very different environment that. -- different environment then. interest rates rose steeply. i think now we will see a more gradual approach to interest rate increases. rishaad: thanks nasreen, in singapore for us. let's get more from patrick from cibc. what do you make of what is going on in indonesia? patrick: it was tough, because years ago we thought things were moving the right way. tariffs on fuel seemed to be the right thing, now they are falling off. there is impact on infrastructure in the trade account. trade account is moving back into deficit. certainly they have to provide greater stability, some confidence for global investors to want to invest in the
economy. at the moment we are seeing investors run for the exit. that takes it is very small. we are seeing outsize pressure on the currencies. rishaad: what do they need to do? patrick: i need to raise interest -- they need to raise interest rates. rishaad: they did that last week. patrick: yes -- we look to india, the philippines, economies which are perhaps value trades. we have to get to the point where we see the premium, the interest rate premium sufficient enough to cover the risk for the country. we have seen constant inflow into indians -- and indonesia. it is got to the point where the inflection point has been rea ched. there was of the same appropriate premium to continue to invest. -- was not the same appropriate premium to continue to invest is
this -- to invest. haidi: is this catching a falling knife? do you wait to invest? patrick: you let it bounce off the ground rather than try to grip the blade. we will see the currency underperformed against the dollar and other asian currencies. we will see what is the new mode of the central bank, then start to dip the toes back in. right now it is better to the late than to be early back into that trade. haidi: if you look at the range of em's, which ones do you think are being unfairly penalized by the strong dollar environment? patrick: we still like the surface economies. we like korea, we like china, and we don't so much like indonesia and the philippines because of the deficits they are
facing. f see a trade weighted gains or the surface economies against india and indonesia. we wait for better levels to enter in indonesia against the dollar. rishaad: is this reflective of the big story currency was, emerging market-wise -- turkey. a lot of money has come out in recent months. we see this move toward the yen as a result. tell me what is going on. patrick: we do see that. earlier thereke wasn't much discretion going on. you have economic and political concerns adding up. investors are getting concerned, is this punch bowl of ec monetary policy going to be
taken away?we are not moving toward synchronous, but -- rishaad: with the logo -- where does the dollar go in six months? patrick: lower. rishaad: we will see if he is right. he won't come on if he is wrong, will he? forumternational economic plenary, vladimir putin speaking alongside the french president, all monitored by my boss, editor-in-chief. do watch it live on bloomberg television and radio as well. this is bloomberg. ♪
haidi: a quick check of the latest business headlines. adding about a merger, skepticism within the lender it's a. -- lender itself. completes a strategic overhaul. reports barclays is under pressure to shrink its business and boost returns. rishaad: indonesia taking off dividends,mp, paying also raising its profit forecast and at the same time announcing
a $1 billion share buyback. an attempt to redesign stores in an attempt to attract younger buyers with refreshed lines. worldwide store sales blew away estimates, led by america and asia. haidi: fourth-quarter earnings missed the lowest estimates. net income was the equivalent of $310 million, slightly half the average forecast of $550 million. that comes as the jaguars spendver unit plans to on technology upgrades in this financial year. rishaad: it is that time. it is battle of the charts. to my left in the red corner is sophie kamaruddin, haidi also joining us in sydney with a look at how their charts compare with one another. viewers can access their charts
by taxing their bloomberg terminal -- by accessing their bloomberg terminal. let's start things off with sophie. meltdown,th this em we can't ignore our frontier friends like vietnam. best asian performer in 2018. up the crown to singapore. more support with the 200 day line intact. it could potentially graduate from frontier market status. even argentina is on the in this dei watchlist for an upgrade, even though it looks for an imf rescue. the amount won -- vietnam won a rating upgrade. when you look at the opposition of its stock market, it may not be ready for fund managers due to distortions in the market. emergingjoining msdi
markets index, it can be not a blessing -- it can be quite the reverse. we have seen that with the karachi stock exchange. what is happening? haidi: i'm sticking with the em theme, given we have a pretty dire commentary from paul krugman, saying he sees a resemblance to the asian financial crisis. a rush for the exit. foreigners are fleeing em stocks and buying up japan. this has been triggered by the turkish lira falling off the cliff. this is an extension or worsening of an established theme, right? trade tensions now prompting this pullout from asian em's. in terms of the pace, a pullout across indonesia, taiwan, thailand, about $25 billion since the middle of last year. a lot of the money going into japanese assets. the yen weakness over the past
quarter or so has prompted that interest as well. rish, i don't know i agree with krugman we are seeing a redux, the looks like a. of -- looks like a period of pain for em's to come. rishaad: sorry sophie, i quite like that chart. i do apologize. haidi the clear winner today. of course you can have a look at these drugs and use them yourself -- take a look at these charts and use them yourself. you can catch up on the key analysis therin. "bloomberg markets: asia continues. ♪
emily: i'm emily chang in washington, and this is "bloomberg technology." coming up in the next, facebook's fake news fight. how the social media platform continues to tackle this issue, but can they win, and what does it mean for upcoming elections around the globe? plus, tech giants like facebook, alphabet, and apple facing new pressure pressure from washington. what's in store for tech regulation? we will talk with the congressman. tech leaders are congregated in -- congregating