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tv   Bloomberg Markets Asia  Bloomberg  June 21, 2018 9:00pm-11:00pm EDT

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rishaad: asian stocks facing a grim week as trade trauma haunts investors appeared the yuan fully and play as a trade more weapon, markets waiting on central bank support, cuts are further easing. china's plan hitting a speed bump after xiaomi's snub. i am rishaad salamat. also, opec and partners revealing a plan to boost output by 600,000 barrels a day, despite objections from iran. this is "bloomberg markets: asia." ♪
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rishaad: pretty red out there, the worst week since march 4 equity markets in this part of the world. a lot of negative sentiments and news out there. the spat between washington and beijing continuing. this is the current position for equities with those three markets coming on stream. having a look at currencies, after eight years, greece exiting its bailout. euro in focus as well. adding to that some concerns over the italian bond market overnight. the doe chief economist surprising everyone with a vote to hike rates.
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momentum is against sentiment when it comes to asian trading. let's get caught up with first word news. >> oriole is jumping after a committee of opec ministers back raising oil production despite objections from iran. the joint committee met in vienna ahead of friday's opec meeting. $600,000 --ed 600,000 barrels a day increased output to prevent the market from becoming imbalanced. >> the cuts today is a nominal figure come meaning what is actually delivered to the market will be a smaller number. england heldf policy at its latest meeting, but not all members of the committee agreed you'd three out of nine dissented, voting for an immediate hike.
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the pound jumped on news of the split, which leaves the door open for tightening. members voted to change guidance on when they will decide to reduce qe. big u.s. banks have cleared the membersrdle, all 35 examined could withstand an economic downturn. goldman sachs and morgan stanley came closest to the edge. it is the third straight year that every bank exceeded capital demands, assigned with increased comfort with reviews that once triggered headaches. melania trump made an unannounced visit to a child immigrant detention center in texas after president trump signed in order to end family separations at the border. she said she planned the trip on her own. the president has called for federal agencies to reunite families divided under his previous policy. on friday, the house will vote for an immigration bill that
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seeks a permanent solution to separations. >> we have to house them safely. them,y, we have to house then we should return them back home. that is what we have to do. >> 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. rishaad: having a look at hang seng futures, the premarket underway. let's have a look at what we have there. lurch lower 1%, the for equities and adding to losses this week. the ftse china index lower. the yuan pretty much flat, looking forward to the yuan fix out in the next 10 minutes or there about. we are counting you down to the start of the trading day.
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the shanghai composite hitting a two-year low thursday. we saw the yuan falling for a sixth straight session. what kind of impact would easing of the triple r deliver to the markets? >> may be not enough? it seems people are getting impatient for the pboc to do something. there were rumors yesterday there would be a big triple r cut, and a broad one at that. we have not seen anything so far. that is why the markets are so soft this morning. pboc may have to consider an , whichinterest rate cut would affect more parts of the economy, so a possibility, but so far keeping quiet. people will be watching the toity fixing this morning
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see the direction of the currency, which weekend yesterday. bank doestral something to comb everyone -- , but so fare down the bank has been quiet. haidi: there is always talk about the yuan being weaponize in this trade war. is it something they would likely do? >> i would say it will eat a last resort from their point of view. it is a dramatic thing to use it as a big weapon. seen in 2015 that it can have a substantial effect on markets and get out of control, but it looks as though traders are betting the yuan will weaken substantially and do not seem to be waiting for the pboc to make a move. yesterday saw high volume in options trading, volatility
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increasing, people speculating dollar-yuan rate might go 680, so the market is starting to move. it down, itt calm could take a life of its own. the central bank on china needs to get on top of this quite quickly. haidi: thank you so much. mark cranfield for us, taking a look ahead to that yuan fixing. you can follow more on this story on our markets live blog on the bloomberg at mliv and get a market run down in one click with commentary and analysis from bloomberg's expert editors, so you can get a sense of what is affecting your investments right now. we are hearing reports that somewhat how to officials are trying to restart talks with china before tariffs begin next month. this comes as president xi jinping hit back at critics who called the country's opening up a joke.
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we have the latest in beijing. do we know anything has changed? know, and ever since donald trump took office, there the whiterifts within house over various policies, and the china policy no doubt has been a lightning rod of different opinions. there is no difference in this case. sources are telling bloomberg news that there are those within the white house, including the national economic council, that are urging a restart of high-level talks ahead of the enactment of threaten tariffs on july 6. the national economic council has even floated the idea of inviting vice president of china to washington as soon as possible to try to reach some common ground. keep in mind that previous talks and negotiations that went on were pretty much thrown up the
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window according to china when donald trump threatened these new tariffs, so right now it does not seem like there is a lot of time. into tariffs will go effect next month. there is a time to go and it does not look like the real hawks in the white house are backing down. trump does not look like he's backing down. wilbur ross was not backing down overnight. he basically said china has been and again isears now over. he was quite sharp in his criticism of china's economic policies. we have a lot of noise out of washington. there seem to be splits on how to handle this. meanwhile in beijing, there is a unified voice right from the top. >> right from the top. speakingg was yesterday in beijing to an audience filled with many foreign business leaders as well. he was countering what we all
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heard from america's top diplomat, who was not too diplomatic in his comments this week, mike pompeo basically said china's pledges to open up its economy have been a joke and that their economic policies are predatory. he was quite sharp in his criticism. president xi jinping was not quite as sharp in the criticism, but his message was very clear. let me read it out, "lessons have yet to be learned from the global financial crisis. we have not fully recovered. he is talking about the global economy. we should not be fighting each other. we should work together to bake a bigger cake." that is the problem that wilbur ross and others say, that china has taken too big of a slice of that cake. in china, also sharp words yesterday at the regular briefing, saying the u.s. is abusing tariffs to trigger a
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trade war, and the spokesperson said china is fully prepared to respond to any new list of u.s. levies. rishaad: thanks. our chief north asia correspondent in beijing. xiaomi has, how dealt a blow to china's plans to compete with hong kong, london, and new york for ipos. haidi: next, trading on a trade war. we speak about how investors should approach the markets, while china and the u.s. face-off. this is bloomberg. ♪ is bloomberg. ♪
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haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. has dismissed concerns that u.s. companies are becoming anxious about the andpect of a trade war postponing investment and hiring decisions.
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he says washington has a distinctive fannish in the trade tussle. >> once they put tariffs on the whole $150 billion, they have nothing more they can do. we can go theoretically all the way up to $500 billion. that is not an easy game for them to play, and similar ratios with the other countries. that is what president trump means when he says that if it ,eally does get to be a big war we have many more bullets than these other countries. rishaad: let's bring in our next guest. welcome to the program. wilbur ross saying they have more bullets than the u.s., but china has the nuclear option. it has all of those treasuries, and this is the deal. quite work because it is not just tariffs, there
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are other tools in the arsenal china has. ,here is the treasury market which you alluded to come and the potential for sanctions on individual companies. u.s. companies in china. it isd: people forget u.s. companies trading in china. >> absolutely right. apple has been the recipient of some rhetoric, some anti-american talk in the past. again and thepen food chain could be affected in asia and the u.s., so it is not just tariffs where there is $500 billion on one side and $150 billion on the other side. rishaad: let's look at what they can do elsewhere. it's also about the supply chain in asia as a whole. it is not just china-u.s.. >> absolutely true.
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when we look at the apple food chain, for example. if that became a target, there are suppliers in taiwan and korea that could potentially be foldable in that space. let's hope this gets negotiated out to which was the original intention of these threats. the tariffs that will be implemented on july 6 are around $50 billion, actually $34 billion, so the threats of 200 billion dollars may or may not materialize. it is not only the size of tariffs, but how long they are in place that impacts the trade cycle, commodity cycle, and growth path of the regional and global economy. haidi: i want to throw up a chart on vix. you can find it in our gtv library.
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follow to look at february levels. investors are short volatility. there is still risk appetite in the market. >> absolutely right. it doeslook at the vix, not indicate we are seeing a high level of risk premium in risk assets, particularly the equity space, as measured by implied volatility. it is in the options market. ,f we look at the russell 2000 when were looking at growth possibly outperforming value, so when investors are rewarding growth and there is not a risk premium associated with paying for growth, it indicates risk on tendencies rather than risk aversion. complacency and should investors be striking a balance between being opportunistic and also hedging against what could be a
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worst-case scenario? >> i am a half glass full kind of person. i look at this and say what this sentiment isthat not as bad as people might think it is. rishaad: let's have a look at this particular chart. ll is showing copper bu stokings some demand concerns, a retreat coming through. people getting more sanguine about it all. >> i think you are on the right track with regard to if we had a genuine trade war. my base case is that this is a negotiation. we might have a skirmish and some moderate tariffs that will have a limited impact on growth, that will have a muted effect on the trade cycle, if any, and is unlikely to affect the commodities space because that is driven by supply-side
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discipline, and not just the energy space come a but also structural supply-side reform in china, which is putting a bit underneath. rishaad: perhaps you have to be very careful, but china and new higher education. thehen we look at what underlying micro factors driving retirement, it has been solidly growing. year, it was growth at any price. i think this year we turned the way, but all the growth at a reasonable price. japan isanley asia ex
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less than half, so small caps fifth that characterization. you highlighted china new higher education. this is a niche consumer discretionary clay. there are some regulatory tailwinds. the 13th five-year plan come 50% of the chinese population will need a higher education. it is a higher education and vocational play in china. 42% of the only population have a higher degree or diploma, and several provinces the number is lower, so it is focusing on certain promises whether it are tremendous growth opportunities. -- where their argument is growth opportunities. rishaad: thank you for that. >> thank you. haidi: i will take it from there. just getting the yuan fix. , the centralr
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o4 friday.6.48 lots of into's a pboc does next as we have mainland markets on the cost of entering that bear market, just down 20% at this stage. bloomberg users can interact and it can catch up on key analysis and save them for your future reference as well. this is bloomberg. ♪ is bloomberg. ♪
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rishaad: we are back. this is "bloomberg markets: asia." president trump's trade spat with china may put at risk boeing's lead in the world's second-biggest aviation market and could get into attempts to duringre airbus aircraft the french prime ministers visit
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to beijing. he is expected to try to steal a deal for more than 130 jets. the order would signal an option for china to retaliate against u.s. tariffs. haidi: boeing faces competition. buy 20 aircraft valued at close to $1 billion based on list prices. the deal follows one inmate with american airlines for 15 jets. rishaad: singapore airlines saying the trade battle between the united states and china airatens to slow demand for freight. the ceo telling us that he expects carriers to add capacity, and that would put further pressure on yields. widely expected to cut the reserve ratio, but several think it would only provide
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short-term relief from markets and would not be able to withstand the rising tide of defaults from bond investors. let's get more on this. unless are skeptical that any rrr cut would in the longer track be able to stop these credit defaults. cut will provide short-term sentiment boost to the market. it does inject liquidity in the financial markets. theill make people think pboc will loosen further. most importantly as you just said, the move will be widely anticipated. the impacts will be smaller this time compared with the rrr cut in april. cap doesrtantly, a rrr not change the pboc's long-term goal to control financial leverage and control that growth in the economy, and does not change the plan to crack down on shadow banking.
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those cash-strapped small and private firms which cannot make enough money to repay the debt will still face refinancing pressures in the future. policymakershina's want is more defaults because they want to attract more foreign investors into the onshore market. it wants the credit rating to be tested. rishaad: very quickly, how would this affect some markets out there, government bonds and stocks in particular? >> the last time the pboc did a reacted a lotonds because it was unexpected, but this time it will be smaller because it is pretty much everybody expecting to see a rrr cut. for stocks it will provide a much-needed boost to the equity market. rishaad: thank you so much. open. running up to this
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were looking at futures in the premarket auction for the hang 29,215, futures down .4%. the open is next. ♪
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there in hong kong as we count you down to the start of the trading day. a.m. looking ahead to the turkish there in turkey. we have greece perhaps exiting its bailout program today. the euro in focus. toughg at equities, a time of it. we could be having the worst sinceor trading in asia march. oil on the agenda. vienna.ting in
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elsewhere in terms of data, flash pmi in germany and france and the eurozone as a whole. this is what the market open looks like. let's have a look at the hang seng and the shanghai composite and the csi 300. a down move is what we are getting. hang seng off .25%. h-shares,g a look at .3% down. that is currently the equity position. the dollar is steady. also in wait and see mode for investors. we are looking at the chinese market. we are seeing it on the cost of a bear market.
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manila has entered a bear market as of yesterday. there is a sense that momentum is what is driving this next leg downward when it comes to asian equities. let's get the first word news with paul allen. releasee will see some on loans from second bailout. creditors have agreed to extend the repayment by 10 years. they also agreed to disperse $15 billion to ease the greek exit from the program. finance ministers gather to prepare the end of the third rescue deal due to expire on august 20. malaysia's government will complete a massive project and kuala lumpur despite the appropriation of $750 million mdb scandal.1 they have promised to recoup the missing money and repay borrowings, potentially achieving a small surplus
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return. get morek you will confidence. first, you want to reassure investors. see an eyesoreto messyassey project -- project. office space the most expensive in the world, 30% higher than london's west end. that is the third year in a row that central hong kong has topped the survey. ofjing came in third, ahead kowloon. midtown manhattan in the city of london did not make the top five. argentina's world cup hopes hang by a threat after their shock 3-0 loss to corrosion.
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they turned in another below par performance with lionel messi unable to inspire a response. australian hopes on a knife edge after a frustrating 1-1 draw with denmark. they need a strong win over peru , and for france to beat the danes. 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. thank you for that. a rocky two weeks for traders in touching a 2018 low as trade tensions between beijing and washington escalate. the benchmark plunging, prompting a wave of promises to boost confidence. up over 100 chinese firms have pledged to buy back their shares. strategists from goldman sachs ubs have begun coverage of those shares.
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morgan stanley seeing it falling into a bear market. rishaad: let's get more on that. our guest is with us now. what do you make of this? >> it is different from 2015. we had basically a margin , and by june everything started to collapse because there were a lot of margin calls. it is a lot more geopolitical risk involved now. investors have a negative sentiment, and hence quite a bit more selling this time. rishaad: do we get a catalyst which would change people's minds? it must go deeper than the rhetoric around trade. >> short-term you will have followed to markets and may need the pboc to do more to spur consumption. rishaad: would a rrr do it, for instance? have right now is
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short-term volatility, so there is a short-term fix. medium to longer term, fundamentals are strong. a lot of companies that reported first-quarter earnings and guidance, things are still solid , so short-term volatility, you need short-term fixes, and potential he having a rrr helps. haidi: i want to throw up this chart which we have been looking at today. pattern we are seeing when it comes to declines in asia. we have a 4% decline in a fortnight, touching the years lows for the msci index. is there a sense you should stop eating opportunistic. are you seeing opportunities in this selloff? >> you are right. there are some opportunities in various sectors. given there has been a , they are trading
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below value or what their normal ranges are. those are good opportunities. haidi: what you are seeing when it comes to the chinese market at the moment, the shanghai index looking like, it seems an evitable we will be entering a bear market. you are seeing companies pledging to buy back shares. the government trying to shore up confidence as well. in that sense it feels like a repeat of where we have been before. does that tell you that there were always be support for mainland markets? >> we see that quite a bit. if we are getting more share buybacks, that is good because we have not been seeing a lot of that from chinese corporate's, so share buybacks helps promote company awareness, help investors get a better sense of corporate governance from these companies. we believe the ability to buy back shares does help.
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the chinese government can do quite a bit to boost investor confidence, so there will be ways we believe the central government will potentially participate, especially as we see more declines. rishaad: that is just it. it is about returning to fundamentals. some of those good companies with strong balance sheets being ignored currently. >> looking at banks. when you look at overall earnings growth, they have been better than the past couple of years. we had quite a number of banks do provisions, setting aside for bad nonperforming lows. that is why growth was low single digits. rishaad: two and a half years ago, three years ago, a great return on equity, and some of those basic measures, the tier one capital ratio is great as well. you look at these numbers and even dividend yields, why aren't
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they being snapped up? >> earnings were not good. there are a lot of provisions. nonperforming loans are dropping. as a result, smaller provisions can be set aside. earnings help boost and drive up opportunities. .7, .8 times are book. rishaad: thank you very much. up, china hitting a speed bump in the race for the world's biggest tech ipo, what this note of xiaomi means for competition with hong kong. that is next. this is bloomberg. ♪ ♪
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haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. decision to delay its
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listing has created a speed bump in the race against hong kong and new york for the world's biggest ipo. join me now is been robertson. what are the snacks when it comes to the roll up? it did feel like they were trying to get it done very quickly. >> it was a rush. sowas announced in february, it was going to be a rush to get it done in time. beseems it will have to delayed by a few months, so there are still questions as to 's work, share configurability, fx convertibility, and those have not been resolved. there was a question specific to xiaomi. there was a long list of ,uestions regarding issues valuations, what sort of company, and others. those questions were not going to be answered in time to
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arrange it in time to be in line with the hong kong ipo. rishaad: we had this huge controversy about hong kong excepting dual listed shares. much does this benefit the hong kong market? >> at the moment, xiaomi is the only one to file for an ipo with dual class shares. there are others coming along. and speaking to bankers others, there is a full pipeline in hong kong.st there was a second part, the biotech companies that don't have any revenue yet. there are a lot of those companies applying to list. year or twoct in a bank we will look back and see quite a transformation in terms of the types of companies listing here and the change from
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the hong kong focus on finance and real estate towards technology. it will be quite dramatic within a few years. we have to get you back at xiaomi,t, looking theahead of that, this is company and how much it is worth. valuation given market sentiment and shrinking liquidity right now is too high. at this point in time, the vitae wish in the market is willing to to this business, which is basically a hardware manufacturing business, is actually relatively low. how do you react to
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that? >> i agree. from a chinese hardware perspective, especially a-share hardware companies that supply xiaomi and apple, they are trading in midteens or high teens. if show me comes to the market at mid 20's, high 20's and they are promising growth, if it grows, you would expect to grow together with them. if there are other hardware companies in china substantially cheaper, one has to think -- rishaad: they have been at pains on the road shows, telling everybody about everything they do apart from just being a smart phone maker. havepose that is where you got to get the value, or at least perceive the value. >> correct. likesee them selves more
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fitbit, gopro, or higher multiple companies, but at the same time until we know what they are doing, we have to compare them with other peers already listed in the marketplace. whether it be a-share tech stocks or h-share tech stocks, we have to focus on those companies. haidi: how much runway for growth do you see for some of these asian tech giants? hard to say. when you look at the internet ones, you would expect higher growth, whereas the hardware ones, it depends on the type of new products they come out with. we see a bit less in terms of the hardware ones, and at the same time the gross profit margins are expected to be lower for hardware makers as compared to the internet players. you talk about the hypothetical impact of a trade war, and given that we have not
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heard indications that apple would get an exemption, surely that will be one sector hard hit. >> correct. that's why investors need to continue to invest in tech, but be selective in terms of what they invest in. over the past two years, the msc , they have outperform msci china by 30% for h-shares, a-shares versus the csi 300, they have underperformed by 10%. if we see better attracted ,iolations on the tech markets the mean reversion as an investor, that is where we want to focus our attention instead. rishaad: i think we have been unfair on china by saying they are snubbing these cdr's. i'm sure others are looking at china deposit receipts. they are wise to give it a wide berth. that it is clear
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something half-baked to so far. work in progress that will take more time for all the rules and regulations to be in place, but if they don't do it now, it does not mean they can't do it six months or a year later. that is exactly it. if you rush in and something goes wrong, it does not bode well for the company. let's wait and see and hopefully they can do it again. rishaad: the idea is to bring technology companies home. >> correct. rishaad: do you see alibaba or baidu coming home? >> potentially. once they establish the --mework and ground walls ground rules, we should see these companies list back in china. haidi: is the regulatory oversight or the policymaking occasionally knee-jerk reactions from beijing a major risk when it comes to buying tech in china? >> not necessarily.
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if you look at buying technology companies in china, there is no issue with cdr's. there are companies are delisted in shenzhen, so we don't believe there is any risk whatsoever when you invest in those companies. there will be corporate governance risks, and we do e about it. any companies that do better, that would be a step in the right direction for us as an investor. most people say you have to do your research when it comes to a-shares. how much transparency are you getting into the governments of these companies? >> it will take time. there is no way to sugarcoat this. it is somewhat of an untapped situation. that is where there will be good opportunities. time withend more management and get to know them
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and understand what they are doing and how they are improving , then it gives us more assurances that these companies are potentially good investments for portfolios. haidi: thank you so much for joining us. up, is apple's main ?upplier breaking its addiction how foxconn is growing its revenue streams coming next. this is bloomberg. ♪ this is bloomberg. ♪
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rishaad: this is "bloomberg markets: asia." let's have a look at the business flash headlines. anz doubling the size of its share buyback, $2.2 billion. this is after it received proceeds of $740 million from the sale of its austrian life insurance operations.
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expect the expanded by back 1 ratio at theet end of march. haidi: the timing of the saudi aramco ipo back in the news, with the saudi energy ministers and it would be nice if it happened in 2018. he says the time is not critical to whatsaudi government should be the biggest ipo in history has already been pushed the next year after being flagged for 2018. intel dipping after the ceo was removed over a relationship with an employee that violated company policies. officerf finance was made interim ceo. intel heard about the relationship from an employee
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under company rules that requires employees to report such matters. assemblesconn, which iphones and ipads, is looking to grow revenues from other sources. our bloomberg opinion columnist joins us. we heard about the impact of a trade war between washington and beijing, but this diversification of revenue theme has been going on for a while. are they finally able to get there? >> they are getting there slowly. 54% of revenue came from their largest client, which is of course apple. that felt last year to 51%. that is still a big reliance on apple for the meat and potatoes of the business. it has fallen to the lowest level in 4-5 years. it has fallen to 45% for the
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first quarter this year. it is just one quarter, and it is cyclical, but when the first quarter contribution from apple does fall for the first quarter, then it would generally speaking fall for the rest of the year. a better is off to start in terms of reducing reliance on apple, and that is a big deal. apologized to shareholders for not reaching their 10% growth target. this has been an ongoing problem, keeping the top line growing. haidi: what has the mood been ase and what is top of mind they are dealing with trade uncertainties? he has been leaning to china.
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china has always been important for hon hai. they have been manufacturing in china for 30 years. the relationship has been about finding places to invest, build factories, get tax breaks, and hire workers. they just listed a unit and shanghai that has been a real appeal to beijing. he is a businessman that has to play both sides. china is very important as a future growth market. there is concern about foxconn in terms of reliance on apple and the possibility apple is not as strong as it used to be, but he's trying hard to diversify the client base and products they are making, trying to get into cloud services, aia, robotics. in thosenot doing well
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areas, but he is trying hard. that believeers will stay on believing, but those looking to get out will take these reasons and sell out and run. there are a lot of true believers for foxconn still. rishaad: very quickly, where does this company go next in your view? >> i think they need to go beyond just the standard manufacturing. really athey are components maker. that is where there are good margins. i think they will spend more time getting back to the basics on that. he wants to build services, do robotics, which is a tough is this, industrial robotics. he needs to build up cloud computing, software, analytic, and a ip address where he wants to go, and he does need to go
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there. rishaad: great stuff as ever. up, looking at opec and what happens there next. ♪
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rishaad: asian benchmarks closing out their worst week in almost three months. globe.ears around the the white house said the split on restarting talks with china. s -- committing to long-delayed elections early next week -- next year.
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this is bloomberg markets: asia. ♪ it's been a volatile time in the oil patch heading into the opec talks in vienna. ministerial talks about he begun. optimism that the 600,000 barrels a day deal will go through. iran walking out of those talks, proving that we could be setting up for a contentious meeting in vienna. rishaad: we have a very important election coming up for turkey as well. is seeing a close call on this. get itring greece as we
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finally exiting some of its .ailout some of those debtors have increased the amount that greece has to pay. yvonne: wrapping up a volatile way -- volatile week in a volatile way. a selloff across asian equity markets. extending declines after entering into bear market territory this week. watching shanghai as well. the pis it -- the pic i is down as well. not enough to turn around these markets. .8%, the inflation numbers were not any better. far from the 2% target. across the board, the south asian markets inc. pressure as the south asian markets
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seeing pressure as well. this is a balance on a what is to come here. , the woncts -- em fx sliding against the dollar. it raises questions about how to lose.oc is willing you continue to watch the likes of morgan stanley, goldman sachs, slashing their forecast for this year. says that a full-fledged trade war could see asian stocks tumble 30% from this year's peak. haidi: momentum very much against the board in asia. this get you up to date with
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paul allen. is set to see a relief from loans in its second bailout. creditors have agreed to extend the payment period by 10 years. disperse $15eed to billion to ease their greece exit from the bailout program. finance ministers gathered in luxenberg. healthk of england policy at its latest meeting, but not all agreed. three had of nine members dissented, voting for an immediate hike. it leaves the door open for tightening at the august meeting. policymakers voted to change the guidance on when they will consider reducing quantitative easing. big u.s. banks have cleared the first hurdle of this year's stress test. all 35 lenders examined could withstand a severe economic downturn. this year, goldman sachs and
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morgan stanley came closest to the edge. melania trump made an unannounced visit to child detention centers in texas. trump said she planned the trip on her own. the president has called for federal agencies to reunite families. on friday, the house will vote on an immigration bill that seeks a permanent solution to separations. >> we have to house these miners safely. frankly, we have to house them and we should be taking good care of them and return them back home. that is what we have to do. paul: global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries.
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i'm paul allen. this is bloomberg. ♪ rishaad: let's take a look at oil. jumping off of the committee minutes. the bank raising all production, despite rejections coming from iran. a quick word on brent and wti. the joint ministry meant in vienna ahead of friday's full opec meeting, recommending a 600,000 barrel a day increase in order to prevent the market from becoming unbalanced. recommend a million barrels. with the cousin plays, -- with
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cuts in place, that is anonymous number. what is delivered to the market has to be a smaller number. haidi: this is the most misaligned opec meeting in years. want to show you this chart. current total opec producing is 32 million barrels a day. do you think all things considered, balancing out the potential impact on demand from a trade war that this would be a reasonable compromise from the 1.5 million proposed by saudi arabia and russia earlier? >> i think it would be. opec is on a knife edge. they risk the market moving into
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material deficit in the second half of the year, given some of the supply outages coming from iran, libya, venezuela. but if they do too much, they risk pushing them in terry's higher -- inventories higher. so i think the 600,000 barrels a day real production increase would be enough to effectively keep markets in balance in the second half of the year and keep prices at $70 to $80 a barrel. talk about how misaligned things to be going into the meeting in vienna. move ahead onudis their own anyway. presumablyll unilaterally increase production on their own, even if they can't reach an agreement. iran and venezuela can't benefit from an increase in output that
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opec agrees to. it is not in their interest to see opec raise production targets too much. but at the same time, no agreement would raise questions about the sustainability of the viability of opec, which is why, at the end of the day, opec will look to fudge some sort of agreement to show a sense of unity amongst the members. rishaad: what about the oil price itself? how bushooking at positions on crude have faded away of late on wti, which is in white. and brent, following each other. positions were extended in the market, over the last month, we have seen the market move from into risk off mode.
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the markets have been in clear risk off mode. as we await what happens at the opec meeting, i think we will get beyond that and get back into accounting barrels against. looking at what exports are doing, looking at what inventories are doing. i'm not sure this is the market -defining event the people expect. rishaad: exactly. looking ahead now, what sort of oil prices favorable for everybody? >> if you look at what the saudis need to balance budget, they need $80 $85 a barrel. if you look at other members of opec, it is a slightly lower number. $80 seems acceptable to most members of opec and to a lot of the buyers.
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china, india come in the u.s. as well where, trump has tweeted about oil prices being too high. there, it not we stay really depends on a lot of things, on how demand plays out in the second half of the year, on how much barrels opec and physically put in the market, but also on geopolitical objects. this is going with iran, venezuela, and libya. haidi: do you expect the spread to continue to widen between wti and brent? how quickly can you us shale respond? re clear bottlenecks now give the u.s. cannot get the oil out of the middle of america given the pipeline constraints. between the middle of this year in the middle of next year, we think those constraints will be
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very real. when newlook at incremental capacity becomes available, it's likely to be the second half of next year. this is not a problem the time and money can fix. in the near term, i believe there will be restrictions to area. coming out of the and the spread between wti and brent remaining close to $10 a barrel. haidi: thank you so much for that. still ahead, we hear exclusively from thailand's prime minister. we will look at the driving forces behind the economy. market at riskty in china. that and more on the way. this is bloomberg. ♪
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♪ rishaad: chinese builders could be singled out as having the highest risk of default as credit lines tighten. on hisaking its toll credit worthiness. how bad is the cash squeeze for developers? all?uch can rrr if it >> shadow financing has impacted though developers. such financing accounts for about 20% of their funding. that's a fairly big number. . the onshore bond market has been shut. china large developer in canceled a deal, saying market volatility. actual markets have to pay almost double-digit yield to declare a deal that is -- a
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deal. that is penalizing. it all in its of the highest default risk in the sector among industries. models shown 0.9% opportunity for developers to miss payments this year. cuts will trickle down to smaller companies. developers, the effect is yet to be seen. refininge proverbial world in the second half, what is this? raisingopers have been huge amount of debt in the past year years to build their land bank and other expansions. now it's payback time. in 2019, they will have to pay 100 billion dollars in bonds, and both domestic and offshore markets. aboutumber will double to $184 billion if put options are
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exercised. those a record maturity numbers. haidi: is there a worry that this will become a systemic problem? good combo for financing come find -- combined with maturities. enjoy international said this month that it messed -- missed some payments. there are overdue loans. figured this to be 1.8 times china's gdp. that is a fairly big number. is happening to the developers, that could have repercussions in other parts of the economy. for example, banks will have been hit by bad loans. construction and. material industries would have an impact as well.
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a huge amount of flow on risk and repercussions. thank you. there is a feature on the bloomberg, our interactive tv function. you can find it at tv . you can watch us live, catch up , and dives interviews into any of the securities in the bloomberg functions we talk about. you can become part of the conversation as well. send us instant messages during the show. check it out. it is at tv . global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. --this is bloomberg. ♪
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>> a great discussion and tremendous success. ♪ haidi: this is bloomberg markets: asia. the price of oil hangs in the balance ahead of opec's meeting in vienna. for the airline industry, fuel is one of its biggest costs.
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airline fuel hedging strategy. component of any airline's cost base. can be aes go up, it significant drag on performance. speculate how oil will move. not too long ago, we had people talking about oil possibly reaching $200. but look what happened. we have a fairly consistent hedging strategy, to manage the volatility of high price. we hedge five years out. 40%.nges of to wem a hedging perspective, are in a reasonably good position. oil pricesmean that
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don't have an impact on us. it always has an impact on cost. >> at what price of oil would you feel uncomfortable? obviously price will affect operating cost and that would affect potentially demand because, obviously, individual airlines will have to look at what makes sense on how they can do pricing. we from our perspective, don't actually look at pricing from a cost perspective. we look at pricing from a demand and supply perspective. is on his we see there is demand and operations he can do, we continue to do it. rishaad: let's tell you about this major business and airlines. the hefty aircraft will also book.
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profits at multiyear highs. singapore airlines is obviously doing something right. what is it? >> yes. a couple of things going in the favor of singapore airlines. the front of the cabin, demand is very strong. expansion and business feeling good. that plays well into singapore airlines hands. seendly, we have [indiscernible] there has been some easing of capacity. loweras helped increase taxes as well as stabilize yield. year, they started last year. we saw them getting their cost under control.
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overall, singapore airlines is in a very good state at the moment. rishaad: the company is increasing investments, spending more. is that paying offer them? how will you pay off of them? they have the longest airline , restarting world that flight to new york. >> indeed. this comes after a flat stage. they are spending billions in andading their aircraft getting the aircraft more fuel-efficient, targeting your markets. we have the new new york route coming in. playinghese factors are in. i expect those investments to pay off for the next few years. haidi: they are also
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consolidating and restructuring the merger of his best its low-cost units and are looking to -- they are also consolidating and restructuring the merger of their low cost units. low-costecomes a brand. we expect they are targeting 2020. are significant synergies to be had. in the end, we will have a full-service carrier in singapore airlines. are getting ity right over the next few years. the top two topics are basically oil prices and trade routes. with regard to the trade
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tensions and all that uncertainty, how does it affect the likes of sia and cafe -- cathay. >> it impacts business sentiment. if you see the escalation is go further, it will impact investment demand. corporate might pull back. on more direct, the asian airlines are more exposed to the cargo market. growth in the next few quarters could slow down. that is a challenge for the airlines. haidi: definitely a vulnerable industry. we appreciate your time. check of the a business flash headlines.
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could give into european attempts. try to seal a to deal for more than 180 a320 passenger jets. been effective option for china to retaliate against u.s. tariffs. rishaad: greater competition, securing a deal with delta air lines. many airlines do get discounts on the official figures. 3g is attempting to -- convince aempting to
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judge to allow the opposition of xerox. ♪ retail.
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>> it's 10:29 in hong kong. in sidney. jumping. this despite objections from iran. the joint monitoring committee met in vienna ahead of friday's meeting. it's recommending a 600,000 barrels a day increase in output fromevent the market becoming unbalanced. malaysia's government says it will complete a massive financial district project in kuala lumpur despite the $750propriation of about million linked to the scandal. the promised to support exchange project by recouping the missing money and repaying
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borrowing, potentially achieving a small surplus return. >> we can't be complacent. i think we'll be able to more confidence, first you want to reassure the investors.foreign to see a messy, in the heartject of the city. so we finish that project. >> hong kong office space remains the most expensive in the world, with central district prices 30% higher than the nearest competitor. that's london's west end. year in a row that central hong kong has cpi first quarter survey. cameng's finance district in third. midtown manhattan did not make top five. the philippines says its on a popular resort
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by october 26. softficial said the opening could happen as early as september. fortourist hot spot known its white sand beaches was shut down for rehabilitation in april. government estimates tourist revenue losses at over $370 million. global news, 24 hours a day, on air and on twitter, powered by journalists and analysts in more than 120 countries. this is bloomberg. now.rkets closed let's find out what's going on elsewhere. china, first of all. respite?tting any >> we are seeing modest declines to what we saw for the rest of the week. we are down about a half of 1% -- itt comes to the really has been a downward trajectory. for thatpeople waiting
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r cut to happen. they were said to do it. the chinese cabinet has signaled were going to be something but they are dragging their feet at the moment. somee still looking for type of move from the central bank. we're also hearing a lot about a-share companies pledging to buy their own shares. is this archive too little, too late to kind of boost these markets? that certainly could be the case. away fromt a whisker it hitting into bear market territory, down about more than 19.5%. something to watch here the next couple of hours, throughout the session. focus on this as well. below ahmark breaking key level, which is a 200-day moving average. through time we broke that level and failed to kind of come back up, we actually saw the hang sang plunge within
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eight months. going to be much harder to bring juice back into this broken thiswe have bareerer.cal the hang seng is more tied monetary policy. they are expecting another 10% downside on the hang seng. the japaneseng machinery stocks to show you how they're doing in tokyo right now. falling, after we turned that machine tool orders from china fell more than 9% ago.a year so they are saying these stocks have been going through a stocksion recently and are likely to remain under pressure until the midterm elections in november, until we kind of upside when it comes to these trade negotiations. at least nor now, they -- for they don't see much more downside. finally, this is the a shares we are seeing diversions on how things are going.
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we're seeing upside of 4% on the h share market, this after we heard from the commerce talks are saying still going on with senators. didl, no deal yet, but he stress there are further u.s. will shut down the company. back to you. >> yeah. a rocky rideill ahead for investors. is intensifying, seeing disappointment as well, that they haven't yet cut reserve requirements for banks, as was the word on the street. we're going to get more with the head of asian economics, joining us in hong kong. to throw out this chart, theme.nd on the bearish you've got now, when you take a relative ratio between the s&p 500 and the shanghai comp, investors are
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pay more than double for shanghaild stocks. just a whisker away from a potential bear market there. does this tell you that beijing is going to come out a little worse than washington? >> well, remember the trade issue is one thing. but there are other things weighing on the chinese market. we had very weak economic data coming out in may. a decelerationbe in china's economy. certainly the momentum is in china and policymakers have tightened financial conditions. so that, i think s a much more -- is a much more meaning -- has more meaningful implications for earnings in china than perhaps some of the trade news. on the other side of the stillc, the economy is accelerating, so it's perhaps that surprise that you get divergence.
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>> you can kind of look at chinese markets -- everything is still so centralized from the way they start markets to decision making. still hold atment the moment? ofthe investor base -- 2% the shares are held by foreigners. in addition to that, the economy is actually very close. forgotten.n yes, trade issues are grabbing the headlines. but if you look at the share of in g.d.p., the contribution of exports to g.d.p. growth, is actually small.ely even the estimates of how much the proposed tariffs might shaif off of -- shave off of china's talkingrowth, we're not about very large numbers here. i think it is important to keep notgs in perspective and
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necessarily link the chinese performance or attribute the theormance entirely to trade tensions. there's a lot more going on that onshore investor attention here. >> the u.s. accounts for about 3% of g.d.p. it's a fraction. >> and that's even a high thosete, because a lot of are imported components, right? probably more like 1.5%, 1%. issue, butplay the in a macroeconomic sense, it forldn't be too disruptive the earnings profile of the economy. >> where it's going at the 10%nt, you can see a decline. so to just negate that -- it that anyway,gate wouldn't it? >> that's true. want more- they flexibility. as the dollar appreciates, cny depressure yaits, because that's -- depreciates, because that's just of the coin.e t
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stronger dollar as a result of these trade measures here. for a tripletation r cot. policy do you think would be most effective to kind of get ahold over the sentiment that we're seeing at the moment? >> well, they're probably most effective because not only do which isct liquidity, tightening the regulatory environment, but it also has a strong signaling effect. but the medium term, lending is not pictur quite as headline grabbing. if you really want to send a markets, you're probably going to cut the rrr. they play their cards very close
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know, inest, as you china. friday nights seem to be always timing,you know, historically speaking, whether it comes tonight or in the next few weeks we'll have to see. but broadly speaking, the direction will probably be for rrr to go lower in china over the next few months. >> watch out for the friday nights. to keep the journalists up at work late. back inng has to fight a trade war, does that derail their opening up campaign? >> not necessarily. is sort you know, there of a strategic opening in some saying, hey,ey are we're trying to actually build bridges to other parts of the that are still open for business, both in terms of trade,ent, in terms of maybe trade agreements with other parts of the world, and in encouraging capital in and out flows. message thatmuch a
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beijing has sent very strongly and has stuck to, even in the months. we'd expect that to continue, because it is very much a chinese toove by the keep the economy engaged with the world economy. say if one part is not just shift to'll other parts of the world that are still open for business. >> fred, stay with us. from fred newman, cohead of asia just shift to other economics. coming up, our exclusive with thailand's prime minister where he says they are committed to holding an election year.next this is bloomberg. ♪ bloomberg. ♪
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>> this is bloomberg markets: asia. quicklet's get you a check of commodities -- i should say currencies check. it's making some gains after prime minister prayut can-o-cha his militaryg that
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government is committed to holding an election early next year. trading -- they are saying upside when it comes tenth of one percent. givenle bit more support that currency has weakened recently. >> i just have a quick look at for thee of affairs economy. g.d.p. growth, well, five-year highs. country's central bank raising their growth forecast. however, some fear that the upcoming election may cloud the outlet.s economic the fed could have another couple of hikes this year and turn could weaken it. but weakness of the currency, weighing on the market there. the stock market down 8% or thereabouts. to foreign all down funds selling out. the indeed let us hear from thai prime minister, prayut can-o-cha. his statement during our interview.
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it gives clarity to some extent on the country's political future. >> i think we've made very significant progress regarding the elections, regarding our map. right now we already passed two organic laws. laws thato organic will facility the election is now pending for the endorsement. so according to the current we'd be ablem sure to hold an election by february next year. here, talkingy about the election time line, i could not clearly say when should be the election time frame, because we need to wait until the law is passed. legislation,dures, but now we're pretty sure. in the past, people have asked where and when about the elections in thailand. but the important criteria for laws.ection is organic right now the factor is quite i'm quiteelections so sure we would be able to hold elections in february next year. stayingou considering on and being part of the next government in some capacity? made be honest, i haven't
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any decision yet. but right now, i'm focusing on two very important issues in thailand. the first is the coronation of the king. and, of course, the second one of thepreparation election. i need to make sure the election will be smooth and after that, it is dependent on the situation. right now we already have the politicians. by but as for me, i haven't made any decision yet. focusing on the two important issues. >> can i ask you a question about trade? very much in the news at the moment. and thailand really does have a big exporting economy. worried about being caught in the crosshairs between a trade war, between china and and what areates, you doing to protect the economy from the fallout? think that in order to cope with the trade war situation that you're talking about, of trade is important. and, of course, negotiations between countries is important. as mentioned to you earlier, i had the opportunity to visit the talk to theand
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president of the united states about trade and investment between the two countries. a very fruitful conversation and we understand the situation that both countries confront. i think negotiations in order to find the best solution for each country is very important. apart from the u.s., i also talked to the leader of china the of course, we discussed same thing. a negotiation in order to find out the best practice. order to cope with this situation, diversification is very important. make sure we can invest, we can export our goods countries, to all regions. this is the reason we're here. this is the reason we're talking kingdom.ited >> prayut can-o-cha speaking there. let's get more on the thai economy and get it into perspective. our chief asia correspondent. we read through some of the forces for the thai economy. it is sort of caught up in the affectingch has been
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emerging markets as we've seen these funds flow out. >> it is. but it also has quite strong cushions. it has the strongest growth in a very strong surplus, international reserves, more than 200 billion. economy is doing quite nicely, strong exports and strong inbound tourism. all of that, notwithstanding the mentioned, areou providing somewhat of a cushion for the thai economy. not completely immune from the pressure. >> i'm going to go back and bring in fred. fred, what's your take? >> well, actually, you know, as in a veryed, they are robust position. volatilityent, the might be well, because it weakens their currency. they've been strongly with the while.y for a so to the extent that it caps itide risks on the currency, actually might not be the worst thing. but yes, volatility matters for thailand and it is a very export-dependent economy as
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well. so the uncertainty over trade, you know, the volatility in outflow, makes any emerging market very uncomfortable. >> but this is a military regime. has that in any way impeded into the country, impeded perhaps the way its perceived and perhaps even down,-the-even though it's -- even though it's done had? the growth it has >> that particular political about thet, since asian financial crisis, you have not seen necessarily a surge in in.stment come so global investors have looked at other emerging markets. has never beens as strong. very low yield. and on the equity side, not inessarily the growth we saw other markets. that low positioning is now to some extent a benefit, which means we're not necessarily so exposed to the reversal of dm's.l become to
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>> the global trade story, and the global trade tensions, is there a risk that it could be sucked up in a china-u.s. battle? could. but it's very hard to read, because you don't know how these ripple through supply chains. it would be hard to say how exactly it impact thailand. but any challenge like these disputes also offer opportunities. and so some multinational to diversifyl look investment maybe out of comien. if thailand says, look, we're open for business, why don't you set up shop here? might be a bit of a boost. but you have to deliver these policies. central bank can stay in a hold, do you think, for the near time? looks as if they can comfortably remain on hold. hiking the country's interest rates. thailand can probably afford to and let the fed
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do its thing. and the thais just relax. such reserve buffers and surpluses that, well... >> how does thailand compare to some of the other regional players in that part of the world? of the better one situated. so in asia, broadly, you can distinguish between current account countries and surplus countries. are hikingines rates. >> malaysia? surplus, sohas a actually malaysia could sit. malaysia is more on the thai side. korea side, the central banks, are not really under rates quickly.se that means you could actually see divergence in monetary policy. the fed keeps barreling ahead. emerging asia actually saying, what?ow you raise rates. we're fine where we are. >> do you think the philippines on indonesia have more to do that front? >> they might. it's not necessarily an issue of local inflation. where the dollar is
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going in the next few months and i'll tell you whether they're rates.o hike >> same for india? >> same thing. driven.ally externally and there's also oil prices. that's another thing in the equation. days,y, over the last few we saw oil prices ease a little bit. >> looking at those countries, quickly, in 10 seconds, which one has been attracting and alsontion for you, investors too naturally? >> indonesia. probably within this region, it indonesia. >> in a good way or bad way? reassure- we want to investors that it's a not so bad kind of way. >> good. always a pleasure. economics.of asia's chief asianell, our correspondent. global newse first network. join us on twitter and follow
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ticktock, by bloomberg.
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>> time for our battle of the charts, friday edition. adam hague. they're going to pit their best chance each other. run the function featured at the of your screen. kicking things off, making his adam.
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>> well, basically, basically showing how the aussie has been pressure, almost performing as an emerging asset market. we discussed a lot on the show about the pressure the emerging markets have been facing. but the aussie has also been under pressure, pretty much tracking that emerging market index. is, how far now does it go? can we get into the 60's? earlier in the week, they're saying that definitely 70 cents by the end of this year. into the 60's? when does it start to become a kicker for the australian economy? it's beenact that tracking so closely, i think, is moment.tinent at the >> very nicely done. what have you got? >> well, i woke up to the news that argentina is on the verge of crashing out of the world cup at the hands of croatia. let's have a look at what's going on in these world cups. just seeing how
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they've become perhaps less and less exciting, the last one that had was, what, five and a half goals per team scored tournament? 1954 that we saw the most exciting one. switzerland.ce in there was an average of 8.7 goals scored by each team. so 3-0. maybe we could see more big that, after, of course, saudi arabia was beaten 5-0.ssia maybe we can see that futbol is coming back again. there we go. different.tely >> i can't believe we have a ofrt on the excitement previous world cups. you know what? used to have the colombia
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kidnapping charts, but they've fallen too, so you don't have that anymore. >> i like them both. i'm going to call it a draw. winners in each respective section there. you can interact with the charts. bloomberg t.v. catch up on analysis and save for future reference. lots to mull over for investors friday. before that, we do get the opec prices. watching oil 600,000 barrels a day is the aboutmise we're hearing but iran has walked out of those talks. looks like it's going to get still.ntentious this is bloomberg. ♪
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>> i'm emily chang in san francisco. this is bloomberg technology. coming up, the u.s. supreme court frees state and local collect billions in taxes from online retailers. -- a majoror seafood shake-up. removed.anich is remove we're going to discuss who is in the running to permanently

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