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tv   Bloomberg Markets Asia  Bloomberg  June 4, 2018 9:00pm-11:00pm EDT

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rishaad: equity markets struggling for a bit at the traction. we did have a wall street close at a 12 week high, balancing tariffs. the mood may not last. g7 leaders are preparing to meet and others are threatening trade retaliation. apple taking a swipe at big tech rivals. they are also offering an opcode to help tackle screen addiction. i'm rishaad salamat and this is "bloomberg markets: asia." ♪
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rishaad: i'm just looking at inflation numbers coming out of the philippines. may inflation was 4.6%. that is the government saying that on twitter. checking how that stacks up next to expectations. ation a little more benign than anticipated. the philippine peso currently unchanged. let's have a look at what's going on not just with that, but looking at the broader gamut of stocks as we lead the open in hong kong and greater china. sophie is having a look at the technology issues. reporter: given what we saw with apple overnight, they are rolling out new tools during the worldwide developers conference. we saw a close up .8% monday.
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let's check to see whether or not we are seeing momentum for tech stocks in taiwan. gaining ground, up about 2/10 of a percent. , we areest boost so far seeing apple boost four tech shares in taiwan today. i want to check in on chipmakers insole as well as samsung. investigates aa legend rigging -- a legend -- alleged rigging. rishaad: thank you. chinese developers are leading the rally in hong kong. why, and do we expect more? reporter: chinese developers where the standout performers not only in hong kong, but in shanghai as well. you can see the index for the
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shanghai composite. investors are betting on strong home sales. a jump of nearly 18% month on month. that is the fastest growth this year as more new projects were allowed in second and third tier cities. with that backdrop, six of the top 10 performers on the msci, they were developers. investors expecting ll not be a new property sales curb and are likely building positions as developers released data this week or the next. given the deleveraging campaign, rising borrowing costs are giving a tough environment for real estate players. rishaad: just getting back to the inflation numbers out of the philippines, 4.6% was the number year on year. theyare also saying that
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see inflation actually tapering off a little bit through the course of the year. the philippines saying may inflation was 4.6%. let's look at an emerging timetable for tummit between donald trump and kim jong-un. today.xactly a week details from paul allen. paul: thank you. the white house has announced the first details of president trump historic summit with kim jong-un next week. they will meet at 9:00 a.m. singapore time on june 12. it is still not clear exactly where. the agenda is also unclear. both sides want denuclearization, but that means different things. the u.s. wants north korea to abandon nuclear weapons, while the north once american forces to leave the peninsula. senate majority whip john cornyn says talks has missed a key deadline and congress probably will not have time to approve
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the new deal this year. ryan saidker paul last month legislators with need notice of a deal by may 17 if they were to boat -- vote before the current congress ends. reports from washington say former white house economic aid that's politico says he held onto information out of concern the president might comment on them. week byved markets last tweeting in advance of the main numbers that he was looking forward to them, that indicated they would be favorable. apple is making its strongest statement yet on privacy. the software engineering had -- head said apple will make it dramatically more difficult for big data to monitor individuals. apple announced a range of new software, including features to help mobile users we themselves off of a screen addiction. global news 24 hours a day on
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air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen, this is bloomberg. s&p 500 index, let's look at this. a 12 week high. a lot of optimism about growth. some of the news is being filtered out. it was the mood of the investing community to look at the glass as half-full. stocks and treasury jumping in em. in asia, the focus might be on data out of china. it does come against a backdrop of emergent markets defying the strength of the dollar. somewhat tepid, but still a
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multi-year rally number. we had the head of asia equity strategy. that, we lookto at the central bank governor the pace of, interest rate hikes could hurt growth which would hurt equities, would it not? >> this is something making a lot of sense if we have continuing and the dollar also rising, then we would have to one one infln, in the case of india, there is a specific issue of the forthcoming election, so how the budget would look like --
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rishaad: populism would lead to equities being up in india? >> that is a risk. this is one of the reasons we are looking specifically at india and emerging markets. now, wts, looking at the fundamentals. they are good. what we had in the last six to eight weeks, at the same time we have rising price, rising dollar, and rising yields. that is a lot, and quite unusual. there is some chance we could the dollar might be. close to a peak looking at the , you can see the domestic story, whether in india or the rest of asia, is strong.
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i think this is where investors should focus. you shouldnger-term, be involved with these emerging-market assets, but the point is, which ones? which countries do you stay away in?m, which do ynvolved countries like india and indonesia have current deficits and that is a little bit of a straitjacket for them. proposed was too long indonesia equity. there has already been selloff on the indonesian market. story -- we have seen rising rates and reassuring the markets. i think this is when we have some kind of concern on where the country is going, especially
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we see problems in turkey, concern and brazil, and so on. i think this is a time where we really need to discriminate and see where technically there is an interest. i'm certain there is one on indonesia at the moment. as a long-term c market. we had a little concern recently because of the very high earning expectation compared to but thin which is now we are coming back because the strength of the consumer is something we need to take into account. rishaad: in emerging markets. >> yes. believe your of the this is something which is underestimated? think so.
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when i look at the news flow, the conversation we have with clients, thedlines, it is .ll about the trend this is a risk. it really, how much has impacted the equity market? how much has it impacted growth? i think we just really need to balance the risk. we have this risk, but at the same time, you have some domestic story in a number of countries. i talk of indonesia, india, and thea, which is probably major story, actually. and i think this is probably where the focus should be. rishaad: but if we have a trade war with china, it is not a trade war between beijing and washington, it is more about also the u.s. versus asia in a
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way because of supply chains and the like. >> yes. nasty, wereally got ,ill have a number of companies chinese companies, the crosshairs of the world. that would be the electronics and technology companies, and also global supply chain, which would be disrupted. probably this is where it would be most disrupted. this is where we would be careful. rishaad: ncsa shares, the highest position for that. you have much interest? impact itsill country, not much. what i find interesting is we ofe this very small addition
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the huge market. think given the domestic market, which is very much consumer oriented, you have this , it will of liquidity make a lot of sense to look at the chinese market because china is just 0.4% of emerging. it is not that much of crowded trade. msci china asia, you have 230 companies, and more than a third of the companies which are in some way consumer related, whether it is health care, technology, discretionary. most of them are domestic.
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these are some companies which i look at this from a fundamental point of view. it does not trade at the irrational level. we are around 15 times price earning. this is something that, given the growth which is steady, and don't forget you have income growth in china, it is not bad to hold at the moment. rishaad: thank you, frank generale.rom societe coming up, south africa's carrier ceo and how it can stem years of losses.
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this is bloomberg. ♪
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withad: you are back "bloomberg markets: asia" in hong kong. china is increasing efforts to push a more global use of the , having put that on the back burner for two years. the government has taken several steps, including signaling mainline investments could have a ging the yuan. this points to less concern in beijing about capital outputs. just having a look at the 6.41% againsts, the dollar. that is just referencing that, are good for china to
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revive its push for the internationalization of the yuan now, given the noise surrounding the country, and world trade. >> china always wanted to internationalize the yuan. china is the second largest economy in the world. it makes more sense for the you want to take a bigger share in global finance. what happens now is the yuan is much more stable compared to a couple years ago. the currency had its best quarter in a decade at the start of this year. capital flowsn are waiting -- waning and volatility is low. buy thes came out to chinese bond equities, so it makes a lot of sense for china to revive the push at the moment. rishaad: how would such a push influence the exchange rate? also, how would it affect capital flows? as we discussed in the introduction, they are seemingly not as worried about it.
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doeseoretically, if china this at a quick wit -- pace, we will see outflows because investors are keen to diversify their portfolios. they want to buy foreign assets. it is tricky, because the dollar is rising on the expectations the fed will raise rates, but ensure thatl likely inflows and outflows are basically balanced. i think the bottom line is that policy makers do not want to see the kind of turmoil from 2015 and 2016. rishaad: we want to bring up this chart. this is where the yuan has be going and the shan global payments. that is in the blue bars. you can see how we really fell back in terms of global payments. it went steadily creeping up, thecurrency, against
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dollar. could this help to revive the currencies used in payments? strengthens, they are trying to open up the onshore bond market. investorsnt is that get more familiar with the yuan and the stoxx, they would be more comfortable with using the yuan in trade and global transactions. that is why policymakers are trying to open up the border on that. rishaad: thank you very much. if you wanted to have a look at that, you can have a look at the recent charts we have been television.
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and key analysis you can also save those charts for future reference, should you wish. ♪
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rishaad: you are back with "bloomberg markets: asia" as we look at the business headlines. toshiba confirmed it is in talks with sharp about the pc business. they will discuss the matter. later, the nikkei reported they would by the division for about $26 million. the acquisition could be signed this week with toshiba to remain a minority investor, sharp saying it would consider various options. wirelessbroadband and fccviders telling the u.s. to go slow while it considers -- they say nothing should be done
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in case the threat of any security networks are identified. an investigation in china after a u.s. rival chipmaker said it was visited by regulators. office was checked on the 31st of may and is cooperating with authorities. the media says china accuses them of colluding to fix prices. we get back to commodities. let's look at crude oil futures. slid to the lowest in nearly two months. speculation about opec and allies. curves on -- tell us what the latest is from opec, and how that is being viewed by oil investors. reporter: right now, it is looking like bullish news.
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i'm sorry, that is looking like bearish news. at the is an idea of both saudi and russia will increase the amount of production and stop the voluntary hold they have on the output. we looked over the weekend at some opec comments. it was coming from the meetings they have had so far. what they say is there's a general idea there needs to be more investment into a stable oil market, and perhaps in the future, more production. those comments are coming out and they are looking bearish for the market, because in a lot of ways, that is opec signaling they think production should go up in the future. no decision will be made until the end of the month. until then, we won't know exactly what opec is taking, desk thinking, but it is something investors are looking at at the moment. rishaad: absolutely. what we saw in the past is that
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oil seemingly had this ceiling $60 and $65 a barrel becae was so much shale production. what are we seeing with u.s. production and inventory in the united states as well? reporter: that is precisely what hundred percent correct. what we are seeing right now is cause oil is back up, near $70 for wti, the production of shale increased. g countseeing ri increase, and last week, oil reached the highest numbers in production in years. the magic number, no one is exactly sure, but inside the $60 range. it is good news for oil producers in the united states. as the price goes up, so will u.s. production. that's what we are seeing right now. rishaad: thank you very much indeed for that, joining us from tokyo. a look at the prospects of the trading day and how we expect
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the hong kong market to actually open. it is looking like a flat start to the session. futures down a fraction as well. the open is next. this is bloomberg. ♪
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>> >> 9:29 year in hong kong. hang seng is looking pretty flat. does -- the nasdaq hit a record high. u.s. stocks, 12 because overall. that is not having an impact. what is happening is trade tensions. canada suggests they could have retired a few measures against the united states. it is looking more like 86 or plus one. certainly we have oil with wti
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trading. we have two-month lows for the oil price. looking ahead to what we have coming up, the reserve bank of australia is coming up. no changes expected. the opening is up is upon us here in hong kong. >> we aren't seeing too much enthusiasm just yet. it is edging slightly higher after the 31,000 level. the mood is a little less optimistic in shanghai. it comes to sectors to us, keeping an eye on developers, china's developers after they valid on monday. more projects were allowed in second and third tier cities. this property index is edging lower. the hunt sang property index is getting grant. carriers,n on chinese
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there are surcharges for domestic wise from june 5. this includes air china and china eastern. chinese eaern is allowed to do so when gentle costs exceed. stocks are getting around this morning. checking in on chinese battery makers. this is after jim try to announce that it will open a battery pack facility in shanghai later this year. they are trying to tap the growing market for ev cars. chinesee among six cities that have a 21% of global ev sales. apple rose overnight honest about rollout. rishaad: the thing with some of the technology companies, we have apple giving the software that runs iphones and ipads.
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they have been using their worldwide developers conference. there is an operating system to tackle screen addiction. let' a look at all of this. reed stevenson is in taipei. what is going on with all of this? read: it was all about software and nothing about hardware. we do not get any new upgrades or refreshes to any of the max, -- macs, iphones. the focus was on software. these features are and that helping people essentially use the iphone less. that is a little current -- counterintuitive as well as some built-in features for ar and vr. perhaps a subtle but significant one is the ability for software
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softwares to write once and have it run on iphones as well as macs. mergingessentially those two operating systems into a single platform. >> what about privacy? i am not sure if they conduct this book specifically all that much. obviously they are not commenting on the current social media giant. it is more about giving users control over how facebook get information and is able to track you on apple devices. apple has always been an advocate of users having more control over their own information. the encryption of iphones is the best example of that. this is part of that broader package of keeping control in people's hands of their
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information. >> i suppose everybody is watching this very closely. w'll see what that operator system will look like. >> been a disservice there are a lot of changes going on. for most people he will be invisible. you will get new scenarios where a different app on the iphone, suddenly you will be able to use it on your mac. if each of the mac might morph into a usable form on the iphone. it is also about tying the user experience between their mobile when they said in front of a computer together. that will he to selling more apple products and making more money. rishaad: great stuff, thank you very much. that was reed stevenson.
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you can have a look at your bloomberg for more on this. let's have a look at what is going on, first word news wise. let's get to paula. paula: -- paul: angela says he wants preparations to begin on tuesday but did not elaborate. he did say that the european signatories to the deal cannot expect them to tolerate these sanctions under the restrictions. president trump is still -- stuck in the debate about his powers. he tweeted that he has the right to pardon himself. although, he insists he has does nothing wrong. giuliani says that
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declaring a pardon was possible but with the two engagement. starbucks fell in late trade after news that the chairman is stepping down. each of the company from 11 out that's two over 28000 and 77 countries. his departure comes as u.s. growth sales slow. the title of chairman of america's. the number of people killed by this guatemalan fire has risen to 62. it is expected to go higher. and interrupted with barely any warning even local residents no time to escape. evacuations were ordered as experts report activity was decreasing. global news, 20 hours a day, on air and on tictoc by twitter.
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than 2700 more journalists and analysts in more than 120 countries. i am paul allen, this is bloomberg. rishaad: coming up, a cash infusion. talking to south african airways as they pay $4 millto stay in the air. that is on the way.
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♪ are with bloomberg markets. we will head to the airline industry as it holds its annual meeting in sydney. this is all against the backdrop of gentle prices and what about profits. is here with us. let's look at south african airways. it has had a tough -- tough couple of years. you know the men who knows about the prospects. take it away.
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he has his own skin in the game. we w out why in just a moment. the ceo is joining us here. but you ve here with us. on thisyour own money time running successful. absolutely. we are looking at the prospect of change. we have had many strategies in the past and when we come in with a new board to implement the strategy, there is a great significance. i want to put my own skin in the game. since i came in in -- came in in november, we may hard and tough decisions. >> how much do you stand to lose if this doesn't work? >> 100,000 brand of my own money sales.n't break the
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it is not about money. it is that commitment to the country and what we need to do to make the airline turnaround. it plays a very important role in south africa. we have to make it work. inhow has the mood changed south africa since the election? i think it look in the market, we place inevitable in connecting africa to the rest of the world. that is alongside other major players of course. there is a minute sense of optimism inside faa. i think the people there are committed to make it work. we are all committed to intimate in the strategy. >> you said the airline needs $400 million or thereabouts to meet debt repayments, are you likely to get that? >> that is part of it. part of the money has been
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committed by the government. there is much bigger framework of change. many people know that as a has made a lot for many years. this department has a particular strategy that we look to a skewed. we are taking out some of the cost on the supply chain side. that is what we are doing. assembled a very strong leadership team that is committed to making sure that it works. mentioned some of the changes in the cost structure. what needs to be addressed? a lot of people claim that the airline is bloated. what changes will you make to change and achieve profitability in some states?
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looking at the road television. we have to look at roads that which onesing and are not. we have a. -- full-service carrier and a low-cost carrier. we seeing margins recover on this. business, how we approach the services, the cost of buying things, it will utterly give us big savings from purely operational efficiency. others, weall of the have to make this work. we have to rebalance the portfolio of people's cost to revenue.
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that is what we will do for the next couple of months. rishaad: how many job cuts are you looking at? we are doing the analysis now. every month i meet with unions. we are working on an operative model. we have designed a new operator model that will be going through the design process. countse to work out head without understand a framework on which we actually this this. french people can come today. we have to be very specific about this. we have to make sure that we make the airlines fit the growth one more time. -- rfid for growth one more time. rishaad: that for growth.
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your court, they are stuck with them. you have to get what television plans. how do you get that? what do you do with those a340's? >> obviously, we know that we are challenged. it was his inefficient. we know what the oil price it will cause problems. we have to find it submitted solutions while looking at all the fleets without making long-term decisions under pressure. once we have done the
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optimization, we will spit out a framework. once we know what the fleet will look like, we will have to look to a new allements of the fleet without breaking the business model. it is important that the plan is not broken. we are finding new ways of offering the fleet. work. is big piece of being modeled by the team today. i know that in the next three to four months, will be talking about the scenarios. >> how do you come visit with that? what is the right fit in terms of the alliance? >> it is an important point. alliances are important. they will be very key to our strategy. we will be looking at commercial jvs. we are working with airlines that have the same aspirations, their like-minded. within the african continent is the only way to win.
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this will be a partnership between large and small airlines. we have to make sure that this is not hard to find in terms of safety. >> how damaging has the turnover been? are you hoping it is things will become nonissues going forward? >> all of these things have brought it to where the sa can rarely change. i think what we have done in the past six months is bring in of leadership that is committed to the work.
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i figured we would get, it could be quite instructive. we are showing a great till of commitment to the strategy. that is the disadvantage. people become a bit cynical about whether it will change. i contain that we are committed to making work and changing. >> when are you hoping to make a return to your hedging? >> we have a hedging policy today. it fully,o implement you need the financial wherewithal to do that. we are looking at other instruments of protection against the movement. that is until wee sense at the top end in a normal economic framework outside of joe policies.
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we have a hedging strategy but we haven't fully implement it up because of our own policies. exchange does bring by the protections that doesn't help the movement. the movement has been a balancing act. >> what has really hurt you? what are some changes you are making in regards to the fuel price? >> you will say that if you look thate pace, 60% of it is it is in the economies of the airline. you have the second level of balance. , it iss a second level there to see the impact on this. there is a range of movement within one branch of the dollar range. you can still keep profitability.
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we will have to look at other metals. this is the hedging quality. gettingthing is efficient aircraft into the system so that you are able to manage the callshout this. challenge the biggest for your turnaround plans? >> the challenges were less about the market. they are more about how we are organized to address the market. if you look at the internal. this is the biggest obstacle. it is our culture. we have to understand that we are not a state department. our present-day mark -- pricing framework is important. getting people to understand that managing the cost significance becomes integral.
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>> thank you so much for joining us. this airline in particular has a pretty of the battle. we will live qatar airways. breaking news coming through. the numbers for may are out. this is the personal managers index. 52.9 is what was expected. the previous month of april was 52.9. what did we get this month? 52.9. there we go.
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that is exactly what we had last month and that is what people were thinking. >> let's take a deeper dive into the numbers. falling.e new numbers look at the market reaction. not much of a market reaction. this is trading near mid-january levels. we're speaking about that level. this for the first drop in three days. china and the futures have been on the back foot. we did say a deepening of his windows. we are seeing easing of that decline. this composite is under today as well. let's take a look at some stock right now. let's highlight with what is going on with wit and macau. over in tokyo, kobe steel falling. there have been suspected of
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violating the law. sinking stocks are after mitsubishi. these displays are losing ground and soul. they denied the report that runa is demanding- to rishaad: -- rishaad: we have the services numbers in line with expectations. of course, if you want to look at that interview, you can look at that on tv go again. you can watch us live and go the and look at any of securities and bloomberg functions. you can also become part of the conversation during a programming.
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♪ >> we are back, having a look at
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those business flash headlines. nintendo recovering from the biggest drop in stocks. shares lost 4% on friday. that is the most level we have since in september. it is at the biggest discount since rule three targets in three decades. we looking at microsoft. there will be access to 20 million programmers. this extends the transition away from a strategy of developing software. this is the open source according that the former boston described as a cancer and one that went against the american way of doing business. this point is moving into the hottest crypto market.
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they will run the new operation. we will play what we have coming up in the next hour. we will look at the clues coming the fed and other central banks from the former governor. what's a gig of data?
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rishaad: balancing trade. tensions against some of the prospects of strong u.s. growth. steel, tumbling on reports that prosecutors are searching the company's offices. fed policy is hitting emerging markets. raghuram rajan in hong kong. i'm rishaad salamat. this is "bloomberg markets."
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we've had c.p.i., more than anticipated 4.6%. 4.9% with the expectations priced in, p.m.i. small to middle sized nterprises in china. 52.9. same number for april as well. the nasdaq at record highs. we did see u.s. stocks at a 12-week high. let's find out what is going on. >> asian stocks are trading mexicoed. back to our 6,000 level earlier. off 1/3 of 8%. samsung the biggest drag on the benchmark.
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the nikkei up by .2%. treasuries, holding steady with yields hovering 2.94%. in the commodities base, we ave oil holding losses as opec stressed the need for supplies to meet the growing demand. elsewhere, a highlight move in the aussie bond space, yields are rising with the aussie dollar earlier ahead of the policy decision due out midday today. we do have kiwi stocks gaining ground. aling with a 10-month budget surplus coming up bigger than forecast. rishaad: thank you so much for hat. sydney.
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we have paul allen looking at a timetable for a meeting taking place this time next week. >> thanks, rish. the white house has announced the first details of president trump's historic summit with kim jong un next week. the two will meet at 9:00 a.m. singapore time on june 12. place and agenda is not clear. the u.s. wants north korea to beaped nuclear weapons. they want american forces to leave the peninsula. the nafta talks have missed a key kleine deadline and congress probably won't have time to approve a new deal this career. may would need notice by 17. ryan said there might be a ouple of weeks of wiggle room.
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former whice economic aid withheld payroll numbers from president trump. he held on to the information on the concern that the president might comment on them. trump tweeted he was looking forward to them and indicated they would be favorable. starbucks fell on late trade on the news their chairman is stepping down. schultz's departure comes as u.s. sales growth slows and also with starbucks criticized for the arrest of two black men at a philadelphia cafe. there is speculation schultz may run for president. i'm paul allen. this is bloomberg.
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rishaad: the federal reserve has signaled it is ready to raise interest rates next week but sent no clear message on how many hikes we can expect this year. the federal reserve was asked to slow its tapering pace to overcome market turmoil. haslinda. quite a special guest in your view right now. >> that's right. we're talking with raghuram rajan. he said the fed is not likely to step up until it is close to normal. let's get perspective now from him here in the lion city. good morning. when you talk about the fed unlikely to step up, are you looking at two, three more rate hikes this year? raghuram: i think probably three. i think the next one, june
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seems to be baked in. unless something untoward happens in the global economy or the u.s. economy, in the u.s. there is more sign that something bad is going to happen, that we will have a couple more rate hikes after which the fed will look around and see are we getting close? three is approximately where it could stop. maybe one more next year and then perhaps pause at that point and say we're closer to neutral than we were. monetary policy has lagged. reporter: we're seeing a route recently in emerging markets. you're successor. the tapering pace of the fete is to blame for what we have seen recently. do you agree with that view? raghuram: i don't know that ese -- the lick kid -- liquidity in the financial
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markets -- raising the question about going forward if there is a substantial withdrawal, whether it causes markets to ten. my guess at this point is that the u.s. is focused on the growth of the domestic economy and thinks that inflation is pretty much where it wants it to be and with labor markets below what it thinks is consistent with full employment that is -- 3.7%. this is an historic low, that really therefore, unless there is something big outside that happens to knock their sense of what is going to happen in the u.s., they are going to continue. reporter: having said that, should the fed at least take -- in the wrath that we saw in emerging markets? bear that in mind? >> i think in a world where countries take -- of international responsibilities, one of the things i have been
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pressing for is the that she knows the big central banks should look at the consequences of their actions also on other countries. that said, i think merging markets are in a much better situation today with a few exceptions where finances as well as politics are creating soertainty. broadly they are in a much better situation than they were around the time of the tantrum. that is not to say accidents cannot happen. reporter: that is agreeing with the view of jerome powell. when you talk about there are exceptions, which countries? raghuram: i would say they are in a better position. i think there will be stress in the emerging markets and they will have to go with the rising dollar and rising international interest rates. there will be stresses. of course if you lookround the world and you ask which
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countries are already stressed, you would say argentina is stressed and of course turkey is under going some stress. the central bank has raised interest rates considerably. but i th in countries looking forward, italy, depending on what the government does and how much it wants to break the fiscal constraints that the union puts on it and the euro area, that is going to be a place to watch. elections coming up in brazil. they have a medium term fiscal problem which they need to resolve by dealing with pensions of public employees, that is going to face the next. . it is not going to happen before. it is going to be something the next president will have to act on quickly. that is something to watch out for. there are countries that have issues that they have to deal with as we go forward. reporter: you didn't mention the emerging markets in asia.
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raghuram: i think asian markets are in a healthier situation than in the past. fairly small fiscal deficits as well as moderate inflation. there is more confidence in the currencies. many have moved to inflation-targeting regimes. there is a sense they are not going to let inflation get of control. they are in a different position. i would say it can get stressed, at this point, reporter: you talked about italy. a fallout in italy throughout the world. two months ago lagarde said they were on a sustainable path of growth. raghuram: the advent of a populist government in italy will raise the questions that have been raised and have been
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quietened down which is what are they getting? in truth, a lot in terms of inheriting credible monetary policy. much more interest rates than they were us at this point in a relative sense when they look at the past, they feel that the exchange vate stronger than they would like and the benefits low interest rates are being subverted to some extent by fears about these countries and the spreads are widening. on the one hand, if we don't have the extraining rate as we would want and on the other hand interest rates are higher for us than we would like relative to the past. firms paying these high interest rates are not being able to match competition from germany and the netherlands. the divide is growing again. there is a dialogue to be had. but it is going to be a tough
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one. reporter: italy is one challenge. the other challenge is trade. u.s. and nafta. u.s. and china and of co .s. and and steel and aluminum tariffs. is asia most at risk when it comes to -- raghuram: you feel accidents can happen. the world is not well prepared for the entity of the center of the global financial and monetary order and trade order. turning aroundnd saying i don't believe in elders. i want to change things. now the system has been built by the u.s. around the u.s. now the u.s. actually doesn't believe in using the multilateral system. this is a very big change and we're not prepared for it. now you would hope that good sense prevails and some of what we are seeing are bargaining tactics rather than actual threats which will be carried out. the problem of course is positions harden.
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you make a threat, somebody else makes a counterthreat. soon you find you cannot back off. then get into -- this is true of war. it is true of trade war. one of the big worrys is that threats are being made left, right and center by some strong, largely men, strong men who want to be seeong. and the move to back off is far more limited. every country with a democratic or aauthoritarian -- essentially the governments want to look strong. my worry is what you may think of as bargaining ploys, working out the art of the deal, soon becomes hardened positions which become very difficult to back. then you enter actual con flag ration. that combined with the high degree of leverage and asset prices which are priced to
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perfection. that is important. reporter: we h it there for the moment. we'll be back with there rajan live from the lion city at the nomura conference. rishaad: thank you so much to raghuram rajan. chinese companies going short on bond issues as the default list grows longer. more on that also on the way, the godfather of taiwan's semiconductor retires at the age of 86. look at morris chang's legacy. this is bloomberg. ♪
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rishaad: this is "bloomberg markets." a selloff presents its central bank with a choice, hold interest rates steady to keep
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the economy motoring on or ollow the example of the philippines an raise to stem market pressures. yields meanwhile have been spiking. that's really with government as well as corporate bonds. are economists unconvinced. inflation accelerating to a 6.4% or 4.6% in april. and that's above the central bank's medium term goal which is 4%. -- s get back and get the to former r.b.i. governor raghuram rajan. take it away. reporter: let's stick on inflation in india. there are signs that it is rising and remains a big issue.
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raghuram: inflation is always an issue. right? especially since india has entered the inflation targeting regime relatively recently and has to establish credibility over time that it is controlling inflation. thus far, i think it has. you know, yes, there are ups and downs. there are pressures. the regime is working as advertised. said a : the market has be oint basis cut won't enough. raghuram: i have stayed away from commenting on monetary policy. i will continue doing that. reporter: the banking sector is also under a lot of stress given the recent scandals. have we seen the end of it? raghuram: of the scandals, who knows? i hope so. the key issue for incorporatedia today is to get the banks lending again and to
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et them to lend again, clearly capital, the government has providedapital. but what is also needed are two very important things. focus on enhancing the capability of -- credit evaluations and lend and second, a sense of confidence amongst the managers in public sector banks that they will be evaluated on a commercial basis and not held up for every time there are losses for perhaps acting beyond their -- i think this needs confidence building on the part of the owners of the public sector banks which is the government, to assure them this they can lend and they will not, if they lend with good intercept it will not be held against them. lending is always risky. losses happen. ey have to have more
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confidence. we have seen some ebbing r.v. credit from the public sector banks. i don't see that reviving except for small hict dones. -- ticket loans. reporter: they are perhaps in a happier place because we're seeing the end of the worst, to have bad debt situation. your take on that? raghuram: recognition has to be quite good. maybe some more to recognize but it is going to be relatively small compared to what has been recognized. i think what is important at this point is the process which they are working through. some of the big ticket items in the various courts. when they come back and there is actual resolution, you will see some capital flow back into the banking system because they have provided more than some of
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the, you know, final resolution value of some of these loans and therefore some capital will flow back. i think that will be positive for the banks. it is important that this resolution process be worked in an effectivthat the public also recognizes it is a fair process. for that it is quite important some of these big promoters n't actually recap their assets at bargain basement prices. reporter: one time question very quickly. your name has come up as a potential replacement for mark carney as b.o.e. governor. might you be interested in that? raghuram: i have said repeatedly. i'm very happy in my current job. no comments on that but i'm
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perfectly happy where i am. reporter: raghuram rajan from the r.b.i. speaking to us live from singapore. ish? rishaad: coming up, tim clark talking about air faresd more. more from that interview on the way. ♪
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rishaad: air fares will have to rise due jet fuel costs. tim clark telling us earlier how the airline is dealing with swinging prices. tim: prices rising has done damage to our bottom line. obviously the costs are rising. 27% of our total costs. but not as bad as it used to be. at one point it was 31% of our costs.
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we're managing it as best as we can. air fare also have to rise to make up part of that cost. there were issues. that affected the global economy in a number of ways. we're looking for an equilibrium which should be about $50. we can live with that. eporter: air fares rising. -- being reintroduced? tim: i'm sorry? it is already in. we can move that element which is fully transparent. as the prices rise, they go up in increments. we try to recover as much as we
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can without doing too much damage to the demand. reporter: are you comfortable with the strategy? would you consider hedging? the part of airlines, to hedge and come unstuck. the ick is to manage trade with whatever fuel throws t you. others will not perhaps agree with me. reporter: one of the biggest things is -- you talk about trade tensions, potential trade war, closing borders. do you see impact on the passenger flow or cargo level in your business? tim: no. not at the moment. i'm not a believer. this is a paradigm change. what you're seeing is a reset.
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the manifestation is a little bit worrying. give it other year, 18 months. we'll be back on track again and the global economy will move ahead. perhaps in a slightly different way. will it afort cargo? maybe. reporter: you come we alluded to earlier, a period of declines. what is the outlook going into summer? tim: emirates, we're very strong. the growth -- increasing all the time. we're looking forward to a very robust -- rishaad: emirates airline
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president tim clark speak with heidi at the conference taking place in sydney. there we go. this is a look at the nikkei as this is bloomberg. ♪ ♪ two, down, back up!
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rishaad: 10:29 in hong kong, 12:29 in sydney. first word headlines. inflation adjusted income fell in japan by .2%. the fourth month of declines. the economy is slowing or at least continuing to struggle the grow. the government has been struggling to achieve solid economic growth. president trump is tweeted that he has the right to pardon himself though he insists he has done nothing wrong. the white house sharpened its
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defense against russian meding in the 2016 election. rudy giuliani said a pardon is possible but would lead to inimpeachment. apple will make a dramaly more degree for big data to monitor individuals. the news came as apple announced a new range of software with features to help mobile users wean themselves ff their screen addiction. leaves o in guatemala 63 dead. evacuations were not ordered as there were reports activity was decreasing. more than 2700 journalists and
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200 countries. rishaad: let's have a look at what is going on market-wise. you would have thought, wouldn't you, sophie, a better tail wednesday off the nasdaq hitting a record high. reporter: that is not translating to the asian section. you see a divergeance in japan. closing higher by .1 o 0%. looking elsewhere, we do see samsung, the biggest drag on the kospi. we do have the regional benchmark ticking lower here after that judge that we saw on monday. a we are seeing treasuries steady
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here after four straight sessions of declines. the 10-year yield trading below that 2.94 level. rishaad: toshiba selling its p.c. business. 4 billion yen, $41, 41 million dollars. this is a breaking news story. it stays impact on 2018 earnings would be minimal. 41 million, 42 million u.s. dollars. itself of sting that p.c. business. increasing companies are issuing short-term bonds. down to a surge of long-term debt. hey have shied away.
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depth has t-term some cool in chinese corporations are relying on like never before. 42% of the bonds they issue are short-term. which means they will have to refinance them very soon. the maturity was being built up which would increase chances of them running into -- rishaad: it is not exactly encouraging if they can't get off long-term bonds, if they can't sell those off at the moment. it is not confident-inspiring, is it? what is the default outlook looking like? >> investors are bracing for more default as well. in the international and domestic eck market. in the international markets, two very high profile defaults happened last month. china the energy and cefc china.
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we're seeing one default almost every other week liquidity conditions in china are very tight right now. rishaad: is there a sense of panic do you think? >> i think so. from many investors i spoke to, the sentiment is very fragile. they are dumping the bonds that have any inkling of week governance. that has led to a surge in hina of dollar junk bond yields. ishaad: we have with us in a moment, the director of china marketsed a road yum group. what do you make of this? >> this is ultimately relled to the expansion of the financial system as a whole and the banking system quadrupled in size between 2008 and the present. there is little credit risk in most of those assets as it
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expanded. more defaults are probably on the way. based in the leveraging program whs been very significant in its impact. beijing's deleveraging campaign has done two things. it has reduced the overall credit impulse in terms of overall bank asset growth has fallen from 16% to just above 7%. a significant adjustment. more significantly for the corporate bond default story redirected credit growth from corporates to households. households are generally where you see stronger demand at present. which appearance in the first time you have this significant adjustment in the overall pace in credit growth in china. as a result you have corporates that are seeing declining assets to working capital. why you're suddenly seeing defaults emerge. it is becoming more acute.
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rishaad: we haven't talken about this for the last couple of years. we expect there to be monumental amounts of defaults. we are getting some but could that turn into something really much worse and does it -- is it a systemic problem? could it result in a systemic e? thhe thing. >> the issue is the growth is rapid. you're never sure where credit risk is going o show up. we have seen roughly a $30 trillion expansion of bank assets between 2008 and the present. the volume of default so far is pretty minor. just over 100 instances of default in the domestic bond markets so far. but if you look at the rise in credit risk warnings, that is even more interesting. many of the companies shu issuing credit risk warnings are those cut off by the informal banking system. traditionally loans from banks to nonbank financial
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institutions. ishaad: hold that thought. this chart shows bank lending to other financial firms dropping to one-year lows. that is probably indicative to some extent, isn't it? that is exactly what is causing these declines in bank assets. you have claims on non-bank institutions, the shadow banking sector. that was responsible for as much as $9 trillion asset growth. it was negative in 2017. the overall -- that is responsible for the overall pace of bank asset decline. it is not a scalpel. it is a sledgehammer in terms of how it is impacting chinese corporate credit conditions. >> the deleveraging campaign has been going on for at least two years now. are we going to see financing conditions tighten more from here? >> i think what is interesting
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is that this stress in the corporate bond market and some of the other credit events that have developed are likely to drive and are currently driving an easing campaign in monetary policy from the pboc. we expect easing to continue as long as this regulatory pressure is also terrelizing it is -- materializing. you could see this intensify. the issue is when you have these shad ole banking loan -- shadow banking loans migrating back, that means banks have to raise liabilities in order to fund those loans. it is very difficult for them to do so right now. which is why i think you're going to see reserve requirement cuts. rishaad: we talked about that the other day, didn't we? >> yeah, i think the banks now are facing this new rule change in assets management. they will have to cut a few layers of how they can get other people to manage the money for them which meansless
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leverage involved. >> exactly. it is it is also pushing up short-term liability costs for banks. you see them increasingly use structured deppeds deposits which are higher interest on balance sheet deposit structures but they are using it for liabilities. lending rates are also rising which is intensifying the corporate credit stress along with widening credit spreads in corporate bond market. >> you mentioned earlier that property companies are probably most likely candidates for default. why is that? and also is it difficult for them to get trust financing these days? >> trust loans have been one of the areas targeted by regulators earlier this year. you have seen trust loan growth decelerate in 2018. the reason they are impacted the most by the deleveraging campaign is because this is where shadow banking growth
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really took place. banks were restricted either through formal credit restrictions and therefore they have restructured those assets in different forms in terms of investment receivabl, trustbene on other financial institutions. with those assets contracting, those borrowers are the ones now impacted. it is hard to say where shadow banking assets have gone but that seems to be a good bet. rishaad: we have to wrap up. what about dollar bonds and companys with dollar denominated bonds? >> it is a different picture in the bjorn shore and offshore markets. offshore we expect to see developers that have manufactured bonds offshore for asset prices from the bjorn hore stress.
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we're really more acute to the risk of the onshore market. >> cover a lot of offshore bond market. it seems the money cr the chinese investors has been slowing significantly this year and then there is a real concern that with the main buyer being away who is going to really continue to buy chinese dollar bonds? rishaad: in order, watch your space. thank you. till ahead, godfather of taiwan's semiconductor industry stepping down after more than three decades. that's next. this is bloomberg. ♪ ♪
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rishaad: this is bloomberg markets. bubble warnings may be getting louder. tech giants are surging ahead over the market. you can see here, right here, on this g.t.v. chart. goldman sachs saying this is from past bubbles. unlike the frenzy in 1990's. less on evaluation expansion over the last decade. 87% of share gains from profits and 13 pbt from increases in price multiples. technology has taken the top prize in the market for the first time ever. this chart back in 2008, apple. starting to match wake up the big boys a market cap of $75 billion. still less than half of microsoft's nearly $200 billion market cap at that stage.
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towering above all of them nearing $9 trillion. $943 billion. as well, at tech microsoft shelling out some .upport 7.5 billion there is concerns that it will beless attractive to developers. they are bullish on what they can do. >> we feel very good at the gr rates. it starts which you're a hobbyist or a student or a small start-up working the large company. to be able to use github as a free service. they have done a good job of have been having a premium model going from that free service to organizational use.
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we think we can stay true building that service up and make sure it is an open platform for all tools, all clouds, all platform targets as well. we think we can bring a lot in terms of scale and reach to additional commerce and channels but we feel very, very bullish about what we can do for developers on organically growing github. >> there has been son consternation about this. i'm sure you have seen some of it. some critics say this is a sad end to github's independence. the list of reasons why is endless. how do you reassure them and bring them along? >> it is a very critical almost to this. in a sense, we are very committed to keeping that developer firstethos of github going forward. the c.e.o., we decided to run this company independently,
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even post close operated as an open platform and matt friedman who came to us, has a lot of open source credentials. he is going to be the c.e.o.. he will be the new maintainers of github and he will stay true to what the github community really demands for anyone who is maintaining that community. we will have to earn the trust. no question. our actions from the recent past, and this should measure up by what with you we do going forward and hold it accountable. to emily eaking chang. the man known as the godfather of taiwan's semiconductor dustry morris chang is etiring today.
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returned an astonishing 7359% to shareholders since they listed in 1994. keeping top secret the chip designs of global manufacturers like qualcomm. et's bring in tim who is lye for us in taipei. tim? tim: it is an historic day as we speak right now, the shareholders meeting is going on. that's the point at which they elect the new board of directors and morris chang will not be on that board. he is stepping down today. rishaad: what is chang's biggest legacy? we have talked about the returns to shareholders but ver all? tim: that alone is a pretty good legacy.
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7,000% return since 1994. it comes down to one thing. founded this fabulous business model. back in the day, the saying was real men have -- that was from the former chief of a.m.d.. morris said we're going to be a pure foundry. we're going to do the manufacturing. you design it. we'll manufacture it. before he would go and get other companies to make it for you. intel did a bit of that work. so many other companies felt safe and comfortable basically going out designing basically cooking up a recipe and handing it over to tsmc to bake the cake so to speak since then companies like qualcomm have been able to flourish because they have been able to use the ools and manufacturing capabilityings to be rather light companies and they have good profit margins. if you invested in qualcomm in
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the last few years, you could have done very well out of it. rishaad: thank you so much. tim joining us from taipei lking about the godfather of tbmc sem conductors. the sale by october 1, expecting earnings to be minimum. it was an incorrect map showing it was $41 million. the chip divisiono a consort shum. samsung -- under investigation in china. this hot on the heels of u.s. rival chip maker saying it too is being visited by regulators. samsung said its chinese sales office was checked on may 31
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and that it is cooperating with authorities. they have not said why they are being questi. they are accused of colluding on prices. nintendo recovering from the biggest two-day drop in 18 months. shares tumbled 6% monday and 4% on friday. its biggest discount vers wall street targets in a decade. ranging from falling expectations to positive news at next week's conference. reaking news wherever you are. first global news designed for social media offering live video coverage and updated top news stories, reports verify by us at bloomberg. jump on tictoc and follow us
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via bloomberg. this is bloomberg. ♪
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rishaad: it's that time. battle of the charts. the two contestants today. sophie and david pitting their best charts against each other. there they are. >> ok. ishaad: i haven't decided.
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>> this is the southeast asia edition of battle of the charts. in this corner representing malaysia which has been an underachiever, may turned out to be the roughest month since october 2008. stocks have been unloved by foreign -- underperforming the region then to date. here is an upside. nowhere near a bear market. 7.6% from the record high it hit in april. stocks no longer expensive. when it comes to evaluations. credit suisse, they are keeping heir underweight rating. optimistic about their outlook. >> is it truly asia? keeping with the theme here. we're looking at the fingertip
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peens. inflation was out earlier. 4.6%. rishaad: bang below estimates. >> it really was. in fact, it was at the lowest he forecast. but still, we're getting the central bank governor out. it is still not over. e is not sure it peaked just yet. the red line is the average. about double. the bottom panel -- rishaad: they are saying it is going to perhaps come down in the next few months as well. >> that depends on what the central bank does. they are saying the central bank will need to hike twice. when you look at some parts of the markets, they see two more hikes. the change in policy over the next 12 months. rishaad: this is very tough for me today. i'm going to ask -- if you were sitting here david, who would you suggest --
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>> i would go with sophie. >> oh! rishaad: what about you, sophie? > clearly. you have no idea how much grief i get after that program. bloomberg users can interact with these charts. charts featured on bloomberg tv. you can also save the charts for future reference as well. market-wise, sophie will be telling you in a few minutes,. this is bloomberg. ♪
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♪ emily: i'm emily chang in san francisco and this is "bloomberg technology." coming up in the next hour, apple rolls out software upgrades from the iphone to the mac, tv and watch at the worldwide developers conference and fires a shot across the bow at facebook. we'll bring you highlights and reaction. plus, microsoft returns to its developer roots with its 7.5 billion dollar purchase of github but not all developers are happy. i speak with microsoft's c.e.o. up ahead.


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