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tv   Bloomberg Markets Asia  Bloomberg  June 7, 2018 9:00pm-11:00pm EDT

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rishaad: regional markets five. -- flat. investors looking ahead to the g7 meeting. it may be the most acrimonious in years with washington blaming its allies for triggering tariffs. more gloom in japan, growth missing estimates in the first quarter. consumption also on the way down. in hong kong, i am rishaad salamat. haidi: i am haidi lun. deal, but to a deservesay it doesn't that second chance and the administration is firing blanks
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on china. this is "bloomberg markets: asia." ♪ rishaad: we will be checking equity markets in this part of we will look at emerging markets, where the action has been. brazil intensifying efforts to protect their own currencies. the emerging markets facing the biggest test since 2013, the so-called taper tantrum. the movement not going to the havens. 109 and gold about $1300 an ounce, but down a fraction. haidi: the key question whether the central bank intervention in the emerging markets space is having longer-term impact.
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it seems investors are not getting that effort to shore up confidence. capyen, that strength will any outperformance in japanese equities and whether china is a safe haven as well. let's look at trading across asia this friday. thearkets coming online, taiex off ahead of trade data. stocks are sliding in kuala lumpur and singapore. emphasis on malaysia, technical indicators indicating what may come for that benchmark. elsewhere jitters across the region. treasuries have paired some of the moves overnight. rishaad: let's move it along and have a look at first word news and find out more. the imf says it has reached a
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standby deal with argentina for $50 billion in loans over three years in exchange for fiscal consolidation. hasays the government agreed to a deficit target of 2.7%, a cpi target of 17% next year, 30% in 2020. the imf says the deal is subject to board approval. ben bernanke says the u.s. economy could fall off a cliff. asfaces a major slowdown fiscal stimulus starts to fade you'd he says tax cuts and higher spending make the job for the fed harder all around. ben bernanke said it could be a wily coyote moment, just like the car from that cartoon, but it won't be funny. >> we are getting stimulus when the economy is at full employment. happens, buthat
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the current lot with the economy in a big way this year and next year. 2020, while e coyote will go off the cliff and they will be with drawn at that point. >> china's efforts to globalize its bond market are getting dual headwinds. borrowing costs are climbing as it works to reduce financial leverage. that contributed to defaults by s so far thisr year. 11 have been private companies and one was a state owned enterprise. 1mdb investigation is set to arrest two people, including a former goldman sachs banker. the anticorruption commission has yet to issue charges and it is not clear why warrants are being prepared. malaysia says $7 billion went missing and low is per trade as a central figure in the scheme.
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global news 24 hours a day on 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. getting some of these lines coming through when it comes to the philippines. numbers, a decline of 8.5%, expecting a decline of 3.2%. april trade deficit at $3.6 billion, imports rising 22.2% on year, april exports at $5.1 billion, imports at $8.7 billion. and mixed bag, but it will not add to any positivity in the mood given that miss on japanese gdp. rishaad: a huge mess as well. anyway, that is what we have. just to get you to president trump and g7 counterparts
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raising the temperature ahead of the summit in québec. thatdent macron tweets u.s. might be isolated and the remaining six could sign a deal between them. president trump tweeted that canada has charged the u.s. enormous terrace and it is set to be the most acrimonious in years. china has reiterated its willingness to ramp up imports as the clock ticks down to tariffs. tom mackenzie is in beijing. what is the government's message here? is one we have chinabefore, which is remains prepared to increase its imports of products from the united states, particularly agricultural and energy products , the focus of talks between wilbur ross in beijing over the weekend. what chinese officials have been telling us is those conversations were detailed, focused on those two areas, and
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china remains willing to increase those imports. the clock is ticking down to june 15, when washington could release this list of chinese products on which they could slap that 25% tariff, $50 billion worth of chinese goods. analysts think the odds are still in favor of both washington and beijing coming to some agreement before that happens, but point out the clock is ticking down. any agreements on increasing importance if tariffs are propose will be off the table. we are looking ahead to trade data out of china. that is in focus given the administration's obsession with the u.s. deficit. we are expecting import numbers about $33ade surplus billion. this comes as the u.s.
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says it has reached a deal with zte. some relief, but certainly pressure on this decision from trumps domestic audience. >> absolutely. deal as laidf the out by the u.s. commerce department are a fine of 1.200 -- $1.4 billion will be imposed. andmanagement will change it will be compliance officers inserted into the business. an a 10l effectively be year probation during which the commerce department can reenact that severe penalty blocking zte from accessing u.s. technology. they did that in relation to committed that zte around sanctions against north korea and iran. this is welcome news for qualcomm, the u.s. chip provider , and also china is overseeing a with nxp merger
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semiconductors, so we should expect that to move quickly. analysts expect zte to start trading in 2-3 weeks. a significant benefit for that chinese company and does move the trade conversation further. the oppositionto this agreement has faced in washington from congress, democrats and republicans both, chuck schumer on one side, and marco rubio saying or pointing out the irony that the trump administration is accusing europe and canada of violating national security and imposing sanctions while letting zte off. haidi: a fine balancing act there for president trump. we will be getting more rhetoric when it comes to the tariffs and thee, particularly with traditional u.s. alliances.
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you are seeing live pictures of québec. japanese prime minister shinzo oabe arriving in québec ahead of this g7, are we are calling it g six plus one. very much on the exterior of that, seeing the landing in canada of the g7 summit. more defensive tweets from the it has beenying wildly detrimental, this trade situation between canada come a europe, and the u.s., essentially going into talks this weekend with a bit of a battle town. still ahead, more on the trade spat between beijing and washington. ♪ growing tensions ahead of the g-seven summit and how that is moving the yen. this is bloomberg. ♪ ♪
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rishaad: just a coming in on these pictures in québec. this is the arrival of the japanese prime minister shinzo abe therefore the g7 summit. oft is the equivalent japan's air force one, prime minister abe should be getting out and making his way to the venue soon. let's talk about japan, a contraction for the economy during the first quarter. it was bad the first time when they measured it, and it was worse when they had a revision. business spending good, but a poor reading of consumption, gdp contracting .6% compared with estimates of a contraction of
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.4%. haidi: investors seem to be focused on the yen, the currency strengthening on trade tensions ahead of the g7 summit and concerns over rising instability and markets. joining us now is the chief market economist of nomura securities in tokyo. let's look at one of the ramifications of the emerging-market royal we have been seeing. a fraud feud days going into this kim-trump leadership meeting. if the yen continues on a strengthening trajectory, does that create another headwind for the boj given the ugliness in the revised final gdp number today? >> that is a good question. i think the weakness in the japanese economy in q1 was a temporary phenomena. the weakness was caused by bad
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weather, which affected private consumption, and also the weakness in global demand. the u.s. and european economies -- looking forward, we are more optimistic about the u.s. and eu , and that should help with japan's exports to regain momentum, and that should drive the overall economy. would like tog i point out is on the domestic arena the private capital investment is picking up. japan's unemployment rate has been quite low for a long time, but now the unemployment rate went down 2.5%, many companies including medium-sized companies, are rushing to invest in i.t., software, and i think that would try to domestic economy. the economy is on a
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favorable half from q2 onwards. haidi: we are just looking at live pictures of the japanese prime minister arriving in the first lady there by into i weekend dominated by tariffs, trade tensions and trade wars. on your assumption we see a rebound in the second quarter, how much is at risk if trade tensions come into implementation? tensions are very important for japan's economy. item, onejor export of them, is automobiles. the united states is examining to impose substantial tariffs on automobiles. if that is realized, i think that will hurt the corporate
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sentiment and the consumer sentiment, but we don't think that will be realized. i think with the u.s. administration is aiming for his to encourage japanese companies to invest more in the u.s. in the automobile sector. i think the situation is quite fragile and we need to watch that very carefully. rishaad: absolutely. that is one of those things adding to friction there. has there been a sense of disappointment about shinzo abe and all the trouble he has gone to to create a relationship with donald trump that japan has not been shown more leniency? on all, i have to say that national security front, the u.s. stance of the government has been almost same, so on that
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front that is very important for japan at the moment. front to say on the trade there have been lots of surprises, including the u.s. demand to have bilateral free trade agreements with japan. should see it we solved in a favorable way for japan has we see the tension between the u.s. and north korea next week. rishaad: of course everybody is hoping that is the case. tomo, what about the data? does this put the last nail in the coffin of abenomics? you know, there is a political uncertainty in japan right now.
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be antember there will election for the leadership. i am concerned for the japanese government, whether to implement the consumption tax hike next october 2019. there will be a national debate on this. japank the last time that raised consumption tax in 2014, we had an economic disaster. so this time i really hope the government will have lots of mitigating measures to help japan sale through the next consumption tax hike. as you mentioned in 2014 when they did it it did not go very well, so what measures could they introduced, and does it count as structural reform if they will be spending elsewhere to make up for the impact of the
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tax like -- tax hike? >> tax reform has been in place for many years. marginal impact of structural reform seems to be waning, so i think the government should be focusing on creating demand by the government expenditure and also the tax cuts, and the targeted for the low income population. i believe that should the a good way to mitigate the economic impact. haidi: great to have you on for us. thank you for joining us. taking a look at those disappointing revised first-quarter gdp numbers out of japan today. coming up, frozen out, why
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foxconn's multibillion-dollar unit this thing in shanghai today is not for the average investor. this is bloomberg. ♪ loomberg. ♪
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haidi: this is "bloomberg markets: asia." i am haidi lun. a quick check of the latest business flash headlines. not to use its ai for weapons, surveillance, or technologies that cause harm. it says it will work with the military to give its cloud business a chance to pursue lucrative government deals. alphabet has released a set of principles for how google will implement its tools in the future. ahead of estimates and reaffirming its forecast for the current quarter, a sign of robust sales offsetting lackluster demand in the smartphone side of thing. revenue above $5 billion.
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just below expectations. tencent's boards may be vindicated after passing a key level. ixth straighthe se session. straight session. this has been the call must week so far based on average price swings. foxconn industrial internet set to debut after its ipo. those looking for a piece of the action mentalist -- maybe at a lock. -- out of luck. why would it be so hard to get a piece of this company? >> because neither of us work for the chinese government.
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-- to clarify it bit, 90% of shares are held by the taipei listed flax strip -- flag strip -- flagship of foxconn. they're doing the bare minimum listing they are required to do in shanghai. of that 10%, 3% is going to a list of tours -- of strategic investors here at another 4.3% is locked up, so there is only 5.7% of shares available for free float. that lockout will apply for the next 12 months at least, and willafter 12 months, it only be expanded by a couple of percentage points. that is almost the third smallest amount of free float listed on the stock exchange. for those who did not manage to get their hands on shares during the ipo will probably hold on or sell at a very high premium.
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the average joe if they want to get their hands on the shares will have to pay a lot. we will see it bit of higher and higher. haidi: how does that play out as a win-win for hong kong and beijing. ai and beijing? >> may have wanted to lower chinese companies to list there. xiaomi doingg at it after their ipo, and other companies are considering it. they have not done that well so far. getting the big tech companies to list in china, so getting hon hai to do that allows them to curry favor with beijing and allows them to hold on to 90% of check -- of shares and bring in strategic investors. beijing wins because they get to
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say we have this massive chinese company. haidi: thank you so much for that. foxconn industry rising by 20% in the premarket limit in its shanghai debut. this is bloomberg. ♪ this is bloomberg. ♪
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not strong enough at the moment to close business. up premarket against this backdrop of tech stocks under pressure globally speaking. the nasdaq on the way down. place.meeting is taking we saw the japanese prime minister land there. gdp in japan was wait worse than economists had been calculating,
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the contraction .6%. looking ahead to trade data out of china in the next couple of hours. looking at foxconn and these markets in shanghai and hong kong, here is sophie kamaruddin. looks like that gloom outside the window is reflected in markets. set for the first drop in seven days. on the mainland, shanghai stocks the benchmarkut could be set for the first weekly rise in three. chinese stocks are looking cheap compared to emerging peers. the line and white is the shanghai composite. the forward p/e ratio has dropped 11.5 to 13.5 in january. goldman saying load up on chinese stocks with factors like
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growth and the msci inclusion providing tailwinds. equities,o chinese the risk from rising debt defaults is looking limited as regulators want to avoid major disruption to the market, but volatility likely to remain as more defaults are likely on the horizon. policy have spurred on some about borrowing with the recent measures. checking in on suppliers in china for zte given it may resume business, highlighting one company that receives 46% of its revenue from zte. that stock jumping 8%. jeffries expecting zte may be in business next week and has cut its target. checking in on foxconn popstrial, we did see that to the premarket limit. the listing has caught a lot of , the largest money
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since 2015 in china. from anet's get more investment strategist at credit suisse. talking about the impact of the emerging market rout overnight it comes into this trend of central banks in the emerging market space trying to shore up confidence in their economies. what you think has been the contagion, risk for economies and emerging markets in asia? don't asian markets, i take we see much impact, except india or indonesia. both central banks have come out and asked the u.s. fed to take it easy and keep in mind emerging markets could get impacted from policy. beyond that, i don't see much impact for the asian markets inen that the environment
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asia is strong. most of the economies in asia are running on a surplus. as long as the growth is coming andugh, emerging markets asia markets can cope with higher bond yields in the u.s.. haidi: one of your conviction calls is china. if you look at the tech names in inticular, do you see growth that sector correlated with the strength in tech stocks in the u.s.? >> definitely we like the chinese tech names given they perform in line with u.s. tech stocks. the growth in chinese tech names have then strong. look at the first quarter results. most e-commerce names delivered more than 25% to 30%, so despite concerns about high vibration, as long as growth is coming
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through, we like the chinese tech names. rishaad: i just want to move briefly to foxconn industrial. just because you put the name internet in their it does not make you a high-tech company. they don't make that high-tech product here. what about that? i can just tell you what has happened. we have seen this become china's top listed tech company. quite something. what is your view on that? >> i think it is more about the future growth potential. if we take the case of china not a big plays in artificial intelligence so far, but chinese companies have been investing in this space. china will emerge as one of the biggest players in artificial intelligence.
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that is what the market is paying you for. that is why the stocks are trading at high multiples because the future growth potential is very high. where else are you looking at in china for value? is that the way you are approaching investing? >> yes, within china we are looking at banks and insurance companies. if you look at the performance of the chinese equity market, all sectors have gone up except banks and insurance, so we think there is good value in these names given that valuation is still attractive. doing okse economy is and now we are seeing the shadow banking clampdown happening and more corporate's are moving towards banking loans, so the banking stocks will benefit from this deleveraging effort.
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china do youe of like financials? asia,r it be the u.s. or if you talk about this rotation into value, surely financials would be one of the sectors ripe for the picking? >> definitely. within the global equity strategy space, financials is the top pick. inlike u.s. financials and asia singapore financials. financials play on rising rates. rates, we wills see higher bond yields in the u.s.. if you take the example of u.s. banks, and have come down by 5% to 7%, which provides a good entry opportunity for investors given the medium-term growth story is still attractive.
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valuation is not very expensive. most banks have announced dividends or high backs and earnings are still coming through. as they go higher, the u.s. banks could start to outperform. we are seeing a similar case in singapore in the last month. come down 5%. singapore banks are down because u.s. banks came down. has bond yields in the u.s. go higher, singapore banks will start to participate. thank you. do stay with us. we will be talking to him a little bit more. to be oute expected and a little while against this background of this trait tussle with the united states. let's have a look at these numbers with malcolm scott. the trade surplus expanding to just over $33 billion. what would be driving it? >> often at the start of the
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year you get chinese new year that muddles things a little bit. we get back toay factories running at full speed, around 33cking up, so billion dollars is the average we had each month last year. that is about on average. the backdrop trade tensions, but a rosy global economy, robusta band -- robust demand. so things for chinese factories are looking pretty good. rishaad: tell me about the trade tensions. they play out in all of this. there is a willingness to ramp up imports. what did they want to buy? deal.looks like the every day we get different news, but it looks along the lines of don't put those tariffs on us.
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president trump has set the stage for a potentially tense g7 meeting this weekend, tweeting getting ready to fight for our country on trade. we have the worst deals ever made. he goes to québec with the u.s. increasingly isolated by allies and said they will address the issue of tariffs face to face. president trump laid out the ground rules when he met the japanese prime minister. >> the united states stakes -- seeks a bilateral deal with japan based on the principle of fairness and reciprocity. we are working hard to reduce our trade in balance which is very substantial, remove barriers to u.s. exports, and to achieve a fair and mutually beneficial economic partnership. >> big tech is facing a growing in congress about links to china. the senate intelligence committee will call public hearings into tieups between facebook, google, twitter, and
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others and the chinese firms. vice chairman michael warner said there is a chance of documented links to the communist party having access to user data, and that raises national security concerns. president putin has acknowledged russia's economic disconnect. meanwhile he insists the country is moving in the right direction. by annual: show was marked the contrast between the upbeat report and the sometime desperate tone of his questioners when they asked him how they were expected to survive on shrinking incomes. >> speaking in terms of black and white, i would say we are moving in the direction of sustainable white color, but you never see anything purely black or white. even in the arctic there are gray and lack spots among pristine white, and this is what we have come a but on the whole we are moving in the right direction. >> 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. coming up in asia emerging markets and better position than the global peers, or are they? uncertainty and geopolitical uncertainty and the list of worries is growing. that is on the way next. this is bloomberg. ♪ this is bloomberg. ♪
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rishaad: we are back. this is "bloomberg markets: asia." looking at emerging-market assets remaining out of favor, the brazilian trio and the south african rand having a tough time. investors more upbeat about asian emerging markets. as weld bring more churn have three central banks convening with three different agendas.
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the fed looking like it will raise rates. bonds, andend buying the boj should maintain its massive stimulus program as well. let's have a look at this in more detail. we are back with our guest. he emerging markets earnings have been sliding since the start of the year. libraryrt from our gtv shows us what has been happening. this is the s&p since the start of the year, estimates up and up . after a spike in march, we have an sliding. does that represent what is going on? how worried are you about what is going on in emerging markets? >> we are not too much worried about that. theings came down after touary period of february april.
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now we are seeing earnings coming through, especially asia given the economic data has started to rebound. q1 is the soft patch for the global economy and the global economy we'll -- will improve from the end of q2. we are not too much worried about the soft patch of earnings in the last few months. forou look at earnings asian markets, we are looking at 12%,rowth this year, and 13% next year. come tonvestors emerging markets for premium growth, and they are getting it at this time, so despite the soft patch, we are not too worried about that. rishaad: we were talking before and you were alluding that we are still in this era of very cheap money. bernankeomething ben
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has been warning about, saying this is the wrong time for it is policy when you have the american economy powering ahead. this has implications for this part of the world, does it not? >> definitely. higher bond yields in the u.s. have implications for asian markets. the growth in asia and emerging markets are strong and can't cope with the higher bond yields. is 2003-2007xample when bond yields jumped from 2.5% to 5%. during that time, a return of 180%. i am not saying you will see these returns, but we see a similar scenario. theyh in asia is strong so can cope with higher bond yields in the u.s.. the other factor is inflation in asia is low. in the past we have been concerned about high inflation.
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whenever bond yields in the u.s. have gone up, we have seen negative implications for asian markets, but were not seeing that now because inflation in asia is low. if on yields go higher in the u.s., i don't think we will see the same implications for asian markets. haidi: how much of a headache is a stronger u.s. dollar and the long-term, or is that not your assumption? >> in the medium-term, we expect the dollar to start weakening. the dollar has been stronger the last few months because positioning was stretched. the next few quarters, given concerns in the u.s., the dollar will start to weaken. if dollar remain strong, that will be a headwind for asian equities. we have seen $17 billion of outflows from asian equity markets this year. if our view plays out and the
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dollar starts to weaken, there will be substantial value in the asian equity market. haidi: thank you so much for joining us. talking us through these implications for asian emerging markets. let's take a look at the movers. we are watching foxconn clearly. up 44%. what else are you watching? >> that's it for the day for foxconn industrial after a stellar debut. other stocks to watch and the tech space, japanese stocks like advantest, tracking declines after ever core highlighted risks in the second and third quarter. suppliers in the spotlight, moving on news the company is close to resume business. development generates 46% of revenue from zte.
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tokyo, one company a sliding after a drop in the same store sales, another sign of weak consumption on top of the gdp reading. i want to show you what is going on with fujifilm, rising for a seventh straight day, the ceo saying fujifilm may walk away from the xerox deal because the price being demanded is too high. we had foxconn industrial in the limelight. let's take a last look at that stock, jumping 44% by the daily limit in shanghai, becoming the top listed china tech company fight value -- by value. rishaad: more breaking news. bloomberg and twitter have launched tictoc, offering live video coverage and is hourly updated. top news reports verified. jump on twitter and follow ticto
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c. ♪
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rishaad: taking you now to the arrival of the italian prime arriving there ahead of this g7 summit, which is promising to be one of the most acrimonious ones in years. donald trump facing off against six other leaders. we have justin trudeau looking for a chance possibly of redemption as some have been putting it given the war of words with the american
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president. this could be a chance for that. you have the world on the brink possibly of a trade war. the stakes are high at the g7 meeting. looking pretty miserable, anyway. the italian prime minister just landing there at that airport space. let's get you to the business flash headlines. lufthansa expects 2018 profit to be below last year's record, but says it is operating against the trend of sharply weakening earnings at other carriers. i asked if profits will slide this year as expenses go up. the ceo reckons the fans it is in a good place in terms of the oil price and has better prospects than its european competitors. >> i think short-term we tend to be hedged in a better way than most of our competitors, so i am less concerned than some of my fellow competitors.
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long-term, higher oil prices will mean more consolidation, and that is good for the industry. is set totsche bank have spoken to shareholders about a merger with commerzbank. discussed theas idea with leading investors and key government officials, although no formal talks are underway and the tie up is not imminent. the two leaders had discussions two years ago, but nothing came of it. has to: airbnb compensate travelers at the height of the tourist season. it wouldd warned delist those who fail to comply. the date was suddenly move forward at the beginning of the month. up, the deutsche
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bank joins us to talk about the china trade numbers sometime over the next hour, expecting that easing back after a torrid set of growth numbers from april. this is bloomberg. ♪ retail.
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♪ rishaad: with markets heading on the decline, the week comes to a head. a pretty anticipating rough time coming with the g-7 summit. took off, and as you can see, it was immediately suspended as well. getting back to g-7, it may be the most acrimonious in years. the u.s. lashing out at its allies, blaming them for triggering terrorists. i am rishaad salamat in hong kong. >> and i am haidi lun in sydney. count out thealso latest economic numbers in china. this is "bloomberg markets:
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asia." ♪ haidi: we are already starting to hear about this acrimonious state of mind as leaders begin to arriving in québec for the g plus one summit, as it is being referred to. the u.s. on the outside. we have 30 seen the likes of two ariza may, resume -- president -- prime minister theresa may and also prime minister shinzo abe. of course, the newly minted italian leader as well, all of them coming together. they say that they will not be sending the traditional
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communiqué. >> breaking news coming through, this company closes their funding round, a company that we were looking for to raise something like $10 billion. they have not raised $14 billion. the new financing will help them move into tech development. let's get you straight to the jakarta open, and have a look at how the emerging markets turmoil is playing out in that particular index in jakarta. here is sophie. sophie: we are seeing the stock by .2% inthis best the session, sticking below the 14,000 level. we are using this to demonstrate the sea of red among asset classes. atasuries are paring losses the 10 year, losing nine basis points overnight.
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is set for the first drop in seven days, off by .9%. chinese stocks are extending the the declines ahead of their economic data coming out. the brazilian riel, south african rand and the korean won are off by about 93% ahead of the trump-kim summit. commodity currencies are also getting hit hard. the aussie dollar should've closed below 70's -- if it closes below $76, that could we had to first word news here with paul allen in sydney. paul: a standby deal with argentina has been reached for 50 billion dollars in loans, and exchange for what they call fiscal consolidation. the government has agreed to of two .7%,argets with a two-year target of 17% -- 30%ar and 13% in 2020
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in 2020. former fed chairman ben bernanke says the u.s. economy could follow for cliff. he says growth faces a major slowdown if the fiscal stimulus from the trump administration starts to fade. he says the tax cuts and higher government spending are all happening at a time of the unemployment. he says it could be a wily coyote moment, just like the cartoon, but it will not be funny. >> the are getting a stimulus at the very wrong moment that the economy authority at full employment. we will see under current law, if it is renewed or not, but it could hit the economy in a really big way this year or next year. in 2020, wiley coyote will go off a cliff and what he looks down come i will be gone at that point. paul: president trump is said to be sending it to do with kim jong-un next week to formally
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and the korean war. trump predicted great success in talks. this will be the first time a u.s. sitting president has met with the north korean leader. secretary of state my compare will be holding a debrief after the summit. to investigation is ready arrest two people including a former goldman sachs banker and the malaysian banking scandal. says at least $7 billion went missing from 1mdb. news, 24 hours a day on air and on tictoc at twitter, global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists in over 120 countries. i am paul allen. let's get back to the u.s. treasury yields, recovering some of thursday's declines.
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traders rushed to safety, pushing the 10 year yield after nine basis points. justppened in a matter of minutes. driven by turmoil in the emerging markets in brazil and south africa as well as turkey. we are seeing the third rate hike in two months of just minutes. their. investors are also looking toward this weekend's g7 meeting in québec. donald trump may find himself isolated from other leaders. m on a macron warning that france will not sign an agreement on tariffs. let us see how markets are looking at this, what prism there are looking at this through. we are joined by mark cranfield. thatsolutely, i think investors are looking at the meeting as a very acrimonious meeting. the great thing for markets, is that expectations are very low going into this meeting. the backdrop as that global growth is good, earnings are
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good, and liquidity is still there. it is a low bar for the g7, even the we might get some scary headlines or negative headlines on global trade in the morning, that will only be a short-term risk aversion. moment, investors want to see what the real gdp impact will be on these economies, rather than reacting so that you to the headlines. i think we might start out with some turmoil next week, but it should be a good week for assets given how low we have got -- how low bar we have got. should the em situation worsen, how will that affect the talks? mark: i think it will be ok. the situation is worrying but overall, we have seen a lot of the em reduce already. and and russia,y
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these countries weaken a lot a few weeks ago. they have artie done some of the correction, we are seeing -- they have already done some of the correction, and we are seeing central banks starting to fight back. at is like turkey seem to be finally getting ahead of the curve. over all, there is a resurgence. we are at this turning point where the e.m. is looking more constructive. we are seeing dollar off the highs, u.s. yields off the highs, oil as well. the micro pressure points have used off a bit and we are also back. central banks fight so that year markets are starting to look more positive overall, but there is some divergence in the sector. thank you very much, we had even there follow more on the story at the markets like log on the bloomberg terminal. looking up trade data as well,
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bloomberg service sees the country's trade service expanding. chiefe deutsche bank economist and head of china strategy, joining us now. tell me, what are you looking at? what importance will it have? and does it have more importance given trade? >> there is a lot of attention on the trade issue. investors attention these days is really about in the next week or so, what will happen to the investigation. there is a big deal for the so the g7 isy going to be key if china is not there? china is not there, but the north korea-u.s. summit in singapore is a key issue to watch. will15, is when the u.s. make the decision on whether to
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impose tariffs of 50 billion or not on chinese exports. it is a big deal. for today though, the import and export data coming out, it is likely stable. it has been doing quite well, double digits. imports probably growing much faster than exports. there will be much more attention paid to say commodity imports, whether china's domestic economy is still doing quite well, which we expected has been. are smallerhese issues, compared to the trade tensions. haidi: depending on what the outcome of the investigation is, how aggressive do you expect beijing's response to be, and how swift? we have really seen a pretty restrained posture from reaching today ? zhiwei: yes indeed. thatnk the message so far we took from beijing, seems to
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be rather quite collaborative, i would say. by u.s.latest visit officials to beijing after the visit, the statement coming from beijing is a bit more hawkish. itre is a last paragraph, says that if the u.s. moves to impose tariffs on chinese then allf $50 billion, of the premises china made to open up the economy are gone. would say that that is a very strong statement, it put a lot of risk and uncertainty on the outlook for trade talks and for the global economy. haidi: i would like to talk about the fx reserve the data that came out this week. let us their of this quick chart , looking at the reduction of foreign reserves, related -- the trend with the weakening yuan as well. a drop of over 1% in the u.s.
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dollar in may, the biggest .onthly decline since may, 2016 you saw the fx exchange level fall again for the second month. given that higher currency to attract higher reserve requirements, does it suggest a bigger requirement for cutting in the rrr? zhiwei: there is always pressure providegovernment to more liquidity as reserves come down. but i would say that the monthly data, the reserve numbers first of all, the decline is not terribly big. secondly, part of that is probably because of the dollar appreciation, while the other currencies depreciated. because all these reserves are counted in u.s. dollar terms, for evaluation. we need to get more data points down the road to verify, but at this one, looking at the past
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couple of months, the type of data, it looks pretty balanced. i would not say that there is huge pressure on china to toughen capital reserves or flows, or the requirement ratio immediately. i think the government has the option to wait and see what happens to the trade talks first. intensify, onons june 15, if the u.s. imposes tariffs, i think there is a much higher chance that china would loosen policies domestically. haidi: what is interesting is that the pboc and some of these policymakers in china have all of these meetings, that they can with. if you look at the deleveraging campaign so far, where do you think we are? is it fair to say that we are
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halfway through? how would you rate their success in reducing risk without choking off growth? zhiwei: i don't think we are halfway through at all, i think they are still at the early stage of this. said that they have about a three-year strategy, to deleverage the economy. i think there are right, they have a long-term perspective. it may go well into 2020. they are not trying to rush the process. de-leveraging can be risky, right? so i don't think there are forcing the banks to cover their positions or cut credit lines or things like that. there are trying to first stabilize the leverage ratio, instead of cutting down the leverage ratio. there are very focused on that point. rishaad: just going back to the trade numbers, we are expecting any
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they are misleading in some regards, aren't they? general motors sells more cars in china than in the u.s., but that is not reflected in the numbers, is it? zhiwei: absolutely. the current trade discussions are very much focused on bilateral trade balance, the u.s.-china trade balance. there is a surplus against the u.s.. but if you look at the u.s. goods and services sold in china, a lot of them did not go through trade at all. iphones, for instance, there are more of them active in china these days than in the u.s.. that they are made and this debated in china. caroline: so they are counted as i -- rishaad: so they are counted as a chinese products? >> most of the value added china, chinese is more of the assembly place. you could make the same argument for a lot of products such as gm cars.
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the car is made in china and they sell more cars in china. so u.s. multinationals operating in china, they sell their , rather through fdi trade.rough so when you abrogate everything together, u.s. firms likely sold more things to china than chinese firms to the u.s., in more recent years. rishaad: how much did u.s. firms sell in china that? that should be what we are looking at, and vice versa? datai: up we aggregate the together it is about $400 billion, $400 billion worth of products. looke net balance, if you at it that way, it is actually very small. the latest data from the u.s. government, from the bureau of economic analysis shows that china runs a small surplus in 2015 of about $20 billion.
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that surplus is shrinking as well. if you look at the trade site, china renick huge surplus. best china ran up a huge surplus. i think the bilateral trade element is very misleading. thei: talking about de-leveraging side, the negative side effects we are bracing for was maybe a flurry of defaults. a litmus test of whether the government's and policymakers are willing to allow the market forces to take place, and let the chips fall where they may. . we had a story out of bloomberg today looking at the defaults by 12 bond issuers in 2018 through to june 4 of this year. the likes of j.p. morgan and fidelity warning that a lot more work going to happen -- a lot more of them are going to happen. willingness,e is a to avoid the risks, or is there no systemic risk at this point? zhiwei: there are more defaults
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happening this year, and i think there will be more coming as well. i think the government is determined to actually tolerate higher default rates, which is a thing. i think of the trouble in the past few years is actually because there has been no default, there is a huge moral hazard problem. the government is willing to tolerate short-term pain, to allow the moral hazard problem to be resolved. that is a long-term process. out of the think there is a systemic risk. china is a huge country, we are only talking about 10 or 12 defaults. there should be more. the bankruptcy rate in china is way too low, and it would be much healthier for the whole economy of there was more default. the $11f you look at trillion market, on the 12 defaults in the first half of the year, it does seem tiny. governmentreconcile
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that is much more centralized in policy, that it has arguably been for the past 50 years in china, that a market that is meant to be increasingly opening up? does that square with you? -- in: there is always these kinds of transitions to a more open economy, there's always a challenge for the government on how to handle a liberalization of the market. opening up the market more to private and foreign investors. the property market in particular. foreign investors have more interest in buying chinese assets, in particular, bonds. how you open that process of opening up and diversifying the investor base -- you basically have more new investors coming into the market. it is a learning process i think, for the government, as well as for investors coming into the market. i would say that it definitely to have it is healthy
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more foreign investors coming in, and to have more defaults, so that the bad apples so to speak, in the market, will get screened out. as should view this process a way to get the bad apples out of the market. that is important to enhance confidence when they purchase the product. they know that there is a mechanism. like in hong kong come up when you buy a bond, you know that there is a mechanism if things go wrong, what the bankruptcy procedure is. it is actually a healthy process. haidi: great to have those insights from you. chief economist at head of equity strategy in china. he will be with us as we continue to await the numbers from china. chief economist and head of equity strategy in china. thank you for being with us.
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rishaad: raking in the billions. details on the latest funding round for this company. this is bloomberg. ♪
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♪ haidi: let's get more on the breaking story this hour. this company closing its latest funding round, raising about $14 billion. we are joined by bloomberg asia's technology managing editor, peter elstrom. this is much more than the target amount? peter: let's write. the early reports were that this $10going to be about billion by ant financial, which in itself would have been an enormous. a couple of weeks ago, we broke the news that it would be $12 billion.
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the final number has come out, and it is 14 billion. it is an enormous fund-raising. valuationot disclose as they did this come up but sources have told us that the valuation of the company is an up about $150 billion. in comparison, mastercard is about $200 billion and goldman sachs is not even $100 billion. so it is a big fund-raising for this company that is growing very quickly, a big event for the company over all. rishaad: how will the capital chinaith the clampdown in ? peter: ant financial has been expanding very aggressively within the country. the financial sector within china has historically been dominated by state backed financial institutions, often with not a whole lot of innovation and not the best cost. they have taken advantage of that. the payment system that they
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use, they have online payments and insurance, money markets. they have been expanding quickly and many of these areas. issue.s been a big but the rapid growth has raised concerns within the chinese government that wants to make sure these new innovative financial companies, are not getting too big and too quickly. rishaad: thank you, peter elstrom joining us there from tokyo. we have lots more coming up here on bloomberg, also looking ahead to the japanese close for their lunch break. ♪
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♪ rishaad: let us take you to what is happening over in tokyo. the nikkei 225 being fitted around as have been the other equity markets in this part of world. not really being helped by the latest reading of the economy, which showed a much deeper contraction on its final reading in the first quarter. more than had been anticipated. that is not helping. as we head toward lunch, asia
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stocks ending down. it is definitely a day that people are not willing to take risks, particularly in the technology side of things. we have seen a broad-based markdown. ♪
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>> it is 1020 nine in hong kong. 1229 in sydney. i am paul allen. the first word news. president look on tweeted -- president trump tweeted canada france charged the united states enormous tariffs and created trade barriers. the g-7 summit is said to be the most acrimonious in years. investigation into russian contacts with the trump presidential campaign will
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include the leaders of the house and the senate intelligence committees. the last meeting said that trumps statements about fbi spying on his 2016 campaign for president are incorrect. insists thes country is moving in the -- vladimir putin is moving in the right direction. the show included the desperate tones of his questioners, when asked how they were expected to survive on shrinking incomes. >> we are moving in a youainable direction, but never see anything purely black or white in nature. this is what we have. on the whole, you are moving in the right direction. china is looking to
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mobilize a trillion dollar bond market. as national borrowing comes the country is seeking to reduce leverage. these include private companies and state owned enterprises. global news on air, 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am paul allen. this is bloomberg. haidi: thanks for that. let's get the latest on these markets. >> let's take a look at the close of the morning in japan. a four day rise. the final reading casting a first quarter cloud given the ramp up we saw in business spending for the first three months of the year. slippingstocks are after a bearish report indicated
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risk to shipments. a broader look at markets on the terminal. we will see a drop about -- of about 1%. there is a clocking of losses of about 1%, the first drop in six sessions. stumbling. manila is hoping for a three day advance. this is after exports fell by the most since july 2016. -- reservers dropped -- reserves dropped to a 10 month low upon the central bank's efforts to defend the rpuupiah. when you take a year to date luck, this currency has approved -- appreciated in 2018, in
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thailand. this comes in the wake of monetary policy stability. there is this other scramble to hike rates. the finance minister said thailand may avoid tightening until 2019. rishaad: markets are getting underway shortly. southeast asian investment. bloomberg heard about the plans to attract the first foreign stock listing this year. areost of the companiest tight -- companies are tied. in the next few months, we expect to see more foreign listing in the trust and funding in thailand more.
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we are working on the stock side, and within the next few months, you will see that. >> in terms of outflows, foreigners have pulled out more equitiesillion of thai this quarter. this must be a concern. say you say to investors to , don't? >> when you look at the outflows, it is quite big. when you look at the reaction of been doing, it has quite well. year -- withof the which we started the year, the liquidity of the market is very high.
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the lower retail investors have been absolving those funds. the market has been quite stable. that is good news. ofn you look at the number first quarter earnings growth, it has been going up two digits. when you look at the fundamentals of the companies, it the is very good. pakorn, talk a little more in terms of the reforms you are set to do as you take on this new role as ceo? how will you make it easier for foreigners to trade? for foreigners to trade in thailand, risk is very low.
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you can invest in the thailand market freely. we would like to look at how we listet our companies to more quickly using less time and touch on liquidation, regarding flows in thailand and across the country. that was the stock exchange of thailand president speaking earlier. thailand has become an oasis of policy stability. the wave has swept across other emerging markets. interest rates are staying on hold for the rest of this year. different?land
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how has it been able to weather the storm that has been lashing from e.m., some of its neighbors? advantages to other countries, over $200 billion of foreign reserves, and a surplus. inflation has been below target in thailand for a long time and only recently got back in isget, into even now it below the midpoint of what the central bank is aiming to achieve. policy is very steady. the ministry does not expect that to change this year. we don't expect increases until next year. tightening ifdest anything changed. the outlook from that perspective is stability. the central bank has said it does not feel the pressure to
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join this global wave of monetary tightening. about i want to talk resilience and strength. how is it looking for the economy? nil: pretty well right now. it has been driven by towards him and exports. -- tourism and exports. will be increasing its forecast to 4.5 percent. some are arguing that growth is at or above capacity to the hope is to make it broad-based by bringing in more public and private investments and spending. the objective for the government in power at the moment is to achieve more innovation in the economy, to find new drive beyond just exports and tourism. those are the long-term challenges in thailand.
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rishaad: lots of challenges you mentioned, and the military government is key in some of those challenges. sunil: there is going to be a transition to democracy next year based on what has been said recently. the leader said he is sticking with his plan to have an election in february next year. the country has a history of elections followed by unrest and coups. if there is an election next year we have to see how that plays out. that could be the critical factor next year for thailand. an election may help the economy, but others think the victory would be after the election. rishaad: sunil, thank you indeed. confus up, economics and
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ion-ism. traditional philosophy is underpinning china's seemingly unstoppable expansion. this is bloomberg. ♪
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is bloomberg markets. google is pledging not to use or powerful ai for weapons, technology that cause harm. but it did say it would work with the military to give its cloud business to pursue lucrative government deals. there is a set of principle for how google will implement its software in the future. pessimism reaffirmed for the qualcomm forecast for
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the current quarter. offsetting dull demand for smartphones. slightly above $5 billion until the end of july, just below what they are looking for. tencent, shares failing to hold above the key technical level. asia's stock has broken a six day winning streak. frustrating few months for analysts and investors who watched the tech darling struggled to recover after losing $100 billion since march. they say nothing grows in a straight line. why has china not collapsed? this question to drive our next guest for decades -- did drive
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our next guest for decades. china has changed the greatest show on earth. it is due to a tradition of , which isilosophy behind the country's record-breaking transformation. hugh is our asian economics correspondent. tell us about your findings in general terms. ugh: probably the most interesting thing for your that westerne fact , has donet america well over the past 200 years until the past one or two decades. rishaad: it is about long-term thinking. hugh: and pragmatism.
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particularly with a country the size of china. quickly,t do things but you have to do things in the right sequence and half to implement them. them.e to implement seen a rapidave transformation. never in history have so many people been alleviated from poverty. hugh: china was the world's number one in quantum -- economy to1820, and then it fell 65th. 1975, there was no alternative and an enormous amount of later capacity to apply to recovery. is there a recipe that
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can continue to work for china? can the economy get to where it was in 1820? or are there genuine barriers that could derail this project? that the biggest worry is they don't continue to change. that is what they have to be aware of. reform has always fought against the vested interests. another point,s with the president that could be rolling over the next decade or perhaps even longer. 88 million other people in the economist party probably have some views. these are often the thought of a generation. each generation has a different experience.
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he has more support at the moment but he has to start thinking about a generation that is younger than him. will they reach their potential in terms of per capita gdp? will it prior -- it require radical political change? when the president in the hely 90's rebooted reform, realized everything had to change, but not at once. union russia put political change first and china just went with the economy. i don't think anyone in china thinks the economy can do it alone. point, presidentxi -- president xi wants to be
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technology self-reliant. do you think china can achieve it in the way that the former soviet union wanted and the way america has? hugh: when i first want to live in china in 2002, people said, can you ever see china exporting cars to america? i said, no, a lot of things have to happen first. now they are doing it. never underestimate china. nothing is baked in. one of the points i make in the book, this is not about chinese exceptionalism. thoughts.o special most of these things are in common with the rest of the is so muchthere energy at the moment because of how much china fell back, and everyone is conscious of that. >> where do you get china wrong?
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china is most vulnerable in that part of the economy -- bears have got a point constantly. the thing they get wrong is they don't understand the process. there is a process that comes from traditional philosophy. were notne not -- they thinking about the next quarterly earnings statement. helmut cole went against all the advice in the last quarter century because he saw the much bigger picture in the reunification of germany.
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and a quarter of a century before that, putting a man on the moon. it, if they manage change. it fundamentally the case the west does not understand china? lot of peoplee a in china don't understand china. people in central china might not understand what is going on in southern china. might in southern china not understand western china. it's not just the geography. someone said to me china lives in three for centuries. to whetherdebated as it is in the 18th century yet. d: thank you for joining
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us, hugh peyman. a quick word. a smart phone company that makes telling -- telecommunications it needs a stock exchange approval for an ipo. it is looking at the evaluation of $100 billion -- an evaulation of $100 billion. ando, you can watch us live interviews we carried out. conversationf the during our programming. this is for bloomberg subscribers only. tv . ♪
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it is time for the battle of the charts. these charts can be accessed on the bloomberg at the bottom of your screen. you can play along. david: next week is a big week for korea. risk premium has been built into the market.
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have a look at my chart for the day. asia --pest index in not because of that building premium,- built-in also because recently, earnings have not been revised high. they have been revised lower or they are flat across the market. fundamentalr for reasons, not only geopolitics. haidi: rish? that was a very timely chart. rishaad: people are looking for financial haven demand. when the price of gold goes up goes up -- copper relative to that of gold, that suggests there is good economic years ahead. get this demand
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for a haven, gold. is in thefety play yen as we go to this g six plus g6 plus one-- meeting. the center of gravity is pulled to the yen. economic haven demand is waning as that's gold-copper ratio has risen quickly -- that gold -copper ratio has risen quickly, indicated by the turquoise, suggesting there is demand because people are piling into the haven, the yen, the white line. haidi: i commissioned that chart yesterday, so you have to think me.
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narcissism, it of myll pick rish's chart, oior chart, or ben's chart. plenty of time over the following days to talk all things korea, dave. you can browse over the charts with tv . you can catch up on key analysis and save them for the future reference. also, when it comes to bloomberg markets -- asia. aboutl be talking more asian geopolitics before we get to that trump-kim summit and the summit over the weekend with the g6 plus one. this is bloomberg. ♪
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♪ emily: i'm emily chang in san francisco this is "bloomberg technology." the u.s. has reached a deal that will allow zte after paying a record fine to management changes. we will discuss the next steps for trade talks between united states and china. plus amazon is attempting another home device breakthrough. customerstract more now that alexa is on board? microsoft traveled to the coast of scotland to set up a data center like you have never seen be


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