tv Bloomberg Daybreak Asia Bloomberg September 16, 2018 7:00pm-9:00pm EDT
threats.riffs let's take a check at markets closing. u.s. stocks were directionless. -- we sawas the s&p 500 managed to hold on to slight gains. still in the green for the rest of the week. financials led the gains and energy stocks were up. oil gained ground for a third week. iranian sanctions taking a bite out of the oil market. asare on hurricane watch tropical depression florence is hitting the carolinas. here is sophie. sophie: we are taking stock on the damage left by the typhoon that barreled through the
region. there is damage from low-lying flooding. work in honging to kong but there is debris in the streets. hong kong is trying to back to normal. stock trading will continue per usual. precautions are being taken. schools are still closed today. let's look at how we are shaping up across the markets. stocks are falling for the first day in three. trey concerns are not dampening the mood in sydney. we have caution ahead of the moon kim summit to be held in pyongyang this week. we have trade from singapore and in asia due out for august. we will look at reactions to china's home prices.
we have people in malaysia and japan joined a long weekend with markets shut this monday. japan is coming back on mine later this week. election could see president abe clinch a third year term. let's get you to first word news with ramy. >> the typhoon is weakening as it heads into china coming having left damage across the philippines, hong kong, and the cap. 200 -- 2.5 million people have left their homes and 15,000 fishing boats were ordered to return to port. schools and universities are shut today. casinos will reopen. tropical storm florence is now a tropical depression and is
moving through the carolinas. dangerous flash flood conditions and major river flooding our expected to -- are continue. the hurricane center says heavy rain will continue to follow many places. the effect is expected to be catastrophic with rivers swelling to record levels. heresa may will defend brexit plans on monday as speculation grows about a potential leadership challenge in a bbc interview. these so-called checkers plan is the only strategy that delivers brexit without a hard order with ireland. boris johnson told the telegraph that her plan is a car crash. -- he told abc that he has no intention of making a run for the white house, saying the current administration is
handling the economy well. last week, diamond boasted he could eat the president and election, backing away. 1.5 -- one in five people approve of and many will now -- approve of emmanuel macron. cut itsrnment last week prediction for 2018 growth while raising forecast on debt and the deficit. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> the week ahead on wall street will put focus on the latest housing data. it might take another week to show up in reports because of hurricane florence. what should we watch out for? >> a lot of economic data and
earnings reports. headlines will continue from hurricane florence is it works through the carolinas. let's go to the market snapshot from friday. market direction remains a big question as we trade near all-time highs. dollar strength is an issue. andnasdaq has been higher the focus has been on the semi conductor stocks, which rebounded in the last two sections -- two sessions. that's going to the stocks expected to move in a big way on monday. supposedly having big issues that the company is internally taking a look at the allegation that some staffers were giving out internal information in exchange for
bribes to rank certain companies higher on their search results. -- lockheed martin also benefiting from a big deal. kkr which will be in the spotlight about if they have reached a deal with the parts maker. u.s. equities breakaway. you can find our charts in our library on g tv . notice the blue line. it notice -- it shows may through august. it shows a breakaway from the u.s. stocks. we are near record highs. get more headlines on trade conflict, it tends to force the market lower. >> the semi conductor index, for
example, you can see it rebounding, dipping below the 200 average and then bouncing back. the key issue when it comes to the u.s. harkin and how that whole industry performed on thursday. reports.n to economic florenceat hurricane is going to affect the economic reports but it will be delayed. >> yes, at least one week delayed. we'll get the weekly report this week but we will not see an impact their. -- there a big focus on the fed. we are going into the blackout." -- blackout period. start remaining silent so that they do not
impact the news. look at the big data. the weekly jobs report will be out thursday. minimal impact. we're not expecting more of 1/10 of 1% impact. but the monthly jobs report, we could see an initial spike as we sometimes see post hurricane, but the real hurricane -- but the real impact is still a question. features posted in the third weekly game out of four. what are people saying in terms of direction? >> short-term, it is very difficult to be bear in oil. we are heading higher. there are a number of different presses. the iran sanctions appear to be impacting prices short-term. let's take a look at the chart for oil. we are trading near 170.
prices have really rebounded. we are seeing gold which has been under pressure, now below 1200. many are saying it will continue to be under pressure toward the end of the year. much.keenan, thank you so atll ahead, we will look what australian hong kong are seeing. and while the white house plays the waiting game, curtis chin is optimistic. why he says shaking up the status quo could lead to progress. this is bloomberg. ♪
haidi: let's get more on the trade tensions. we are fairly optimistic. our next guest says disruption of the status quo could lead to progress. much appreciate your time, curtis. the diplomacy of disruption, or of destruction? curtis: i am ever the optimist. i believe it is the prior. trump has certainly disrupted doesmacy as the status quo not stand anymore. but i think we are seeing progress because the disruption is not just about doing things differently. it is about there being progress because he has changed the approach.
my hope is that the destruction of diplomacy will ultimately lead to a better, more balanced trade situation that will benefit the u.s. and china. >> i want to look at a chart. if you are playing along at home, we have had 50 billion and we were talking about an additional $200 billion and now we are talking about an additional $260 billion on top of that. how does that progress the conversation with beijing and does it come down to an ideology low -- ideological fight? known: as we have all president trump, he is a man who is about the art of the deal very it is about a discussion. chinese leadership in the past has said the size of the trade deficit between the u.s. and china is not sustainable. so trump in many ways is taking
him -- taking them at their word and trying to build on it. whether it is $200 billion or the whole thing i'm a i am note fan of trade wars but i am a fan of disrupting the status quo. we have seen china trying to take advantage of the system and chinese alteration -- chinese violation of international property rights. there can be some good out of that trade war if it leads to a resetting and discussing of what has long been an unequal relationship between the u.s. and china. >> and we are seeing the u.s. economy pretty strong. the gdp payroll is looking solid. you can see the gain in all economic data. how much leverage does this give president trump in the trade
war? curtis: with the u.s. economy on all cylinders, it works to president trump's advantage short-term. but can any economy continue to grow and grow, there is inevitably a cycle. who will outlast the other? there were -- there has been china -- there has been talk that china is better able to democracy.robust but there is a force working against them. demographics. when we think about an aging china, the government needs to think through how to stabilize the relationship between the u.s. and china and how to move the relationship forward. to your question about more tariffs, all of this i hope will lead to continued discussions and an ultimate deal that leads to a
better trade relationship. >> will this be the achilles heel for chinese and government officials? if anything goes wrong with the chinese economy, a lot of the blame will fall on the chinese president. morningi saw data this and i am never sure about the quality of data coming out of china. but there was some that the chinese middle class was beginning to think a lot -- a thele less positively about president of china. chinese people, american people, they'll just want a better life. our governments want a better life for their citizens. but can it be done in a way where all sides benefit? that continues to be the challenge. our focus is on the u.s. china
trade relationship, but the reality is summit countries in asia will be impacted as this moves forward. dump goodsbegin to across the region that i cannot sell in the u.s.? will the u.s. and other companies begin to rethink where they put the supply chain? things are uncertain but my hope is that the disruption will lead to a better relationship between china and the united states. the complications when it comes to the diplomatic relationship are getting more interesting. this diplomacy of disruption. to think that takes into account the kind of risk it makes of the u.s. position in asia, and given at a time when washington is looking for help from china, russia, japan, when it comes to the north korea issue. and we have beijing and moscow getting closer. signifieshe trade war
a lack of appreciation for the security and diplomatic inflammations -- implications in the meantime? curtis: some of those questions are best posed to the trump administration. so many of these issues are connected. he has made it clear he has been elected to be the president of the united states of america and he is doing what he thinks is right for the people. i was struck by a recent piece on bloomberg that talked about the vietnam government reaction the between -- reaction of what is going on between the u.s. and china. this restructuring of diplomacy is leading to better results in the long run. from the initial reports out of the g20 meeting this friday, they talked about the
leadership, saying the world trade organization has to reform and revisit some of its roles. >> what about what is happening here in the u.s.? once the terrace come into play -- tariffs come into play, they will affect internet cost, plastics, chemicals, it will raise cost for consumers. how much patient -- how much patience will consumers have for trump's policies? curtis: it is unclear to what degree the higher cost be passed down to consumers? will some businesses begin to think differently about how they will transition to a different than aboard -- different kind of world? are trying to think through how to manage this transition. everyone wants their business to grow. but happened it be done -- but
how can it be done in a sustainable manner? how do we adjust to the uncertain world as disruption continues between the u.s. and china? haidi: we appreciate your time, curtis. you can get a roundup of the stories you need to know. bloomberg subscribers can go to tv or the bloomberg app. you can customize your settings so you just get the news on the industries that you care about. this is bloomberg. ♪
asia. >> here's a quick check on the headlines. the time medium brand is being sold for $190 million in cash. the deal is expected to close within 30 days. purchasingey are time personally and the transaction is unrelated to salesforce.com. the buyers will not be involved in day-to-day operations or journalistic decisions. haidi: we've been told that go check is in talks to raise $2 billion in fuel expeller he did overseas. is jakarta-based company building their arsenal to expand in southeast asia. >> elon musk made reference to a
mission at the end of last week. there is no word yet on how much a ticket will cost or when the flight will happen. john kerry says the iran nuclear deal and paris climate agreement did not come to not -- naught despite trump pulling from them. forhe gave trump credit sanctions on north korea. >> turning to china, a major strategic issue for you when you were secretary of state. what do you make of president trump's approach? there is tension. need a new trade arrangement and there are definitely serious issues with
respect to china, access to the marketplace, theft of technology and proprietary information, currency. we all know the issues and yes it is appropriate to try to do something about them. but i think the most important thing is to get china to focus on north korea, which for a time was happening. i give president trump credit for trying to reach out and move that process and getting china to go further than they had on the sanctions. i think that is an important part of being able to deal with north korea. sayn your book, you specifically what you wrote it. you say it is not to relive a difficult past, but to remember how we change the course of the country. is the democratic party up to changing the course of the country right now? it does not seem to have a lot of leadership right now. can the democratic party help do what you want to get done? >> i am absolutely convinced it
can and will. i think it always looks a little fractured when the other party is in the white house and controls the house and senate. it is the nature of the beast. i think people are making too much about the notion of fractured. i think the democratic party understands that every american ought to have health care and we should not allow the trump administration to try to destroy andss to health care prevent people with pre-existing conditions from being able to have it. i think the democratic party knows we need to deal with climate change, make sure the economy is fair, and we believe it is wrong to give billionaires huge tax cuts when average americans are struggling to make ends meet. >> that was john kerry speaking specifically to bloomberg.
haidi: it is 9:30 a.m. in sydney . we are minutes from the first major market open. stormy weather over much of the weekend with typhoon mangkhut bashing china. it is leaving destruction in the philippines as well, looking slightly less stormy with the markets, although storm clouds of the trade war still very much looming. shery: similar in the u.s. with florence downgraded to tropical storm. you can see the beautiful sky room -- skyline in new york. we have had more sunny weather.
directionless. we will see where the markets in asia go at the open. i am shery ahn in new york. haidi: i am haidi stroud-watts in sydney. let's get you to first word news with ramy inocencio in new york. is weak --hut typhoon mangkhut is weakening now after going over the philippines and china. two people died in one province and 2.5 million people have left their homes to seek shelter. hong kong schools and universities will remain shut, to casinos will be allowed resume gambling in macau. tropical storm florence has weakened into a depression has it moves over the carolinas, but dangerous flash flood conditions and river flooding will continue over a wide area. the national hurricane center
said heavy rain will fall in many places. the effect is expected to be catastrophic with rivers swelling to record levels. senate democrats are calling for the plan to vote on brett kavanaugh to be delayed. that after a woman accused him of sexual assault when they were teenagers. christine blazing ford is a research psychologist at palo alto. , and which sheon called the alleged assault attempted rape. reports from washington suggest china may reject an invitation to resume trade talks. threat for $200 billion in tariffs could kill any new negotiations. steve mnuchin proposed talks at the same time the president threatened to ramp up tariffs. prices climbed at
the first is -- fastest pace, adding to the likelihood of more tightening. new home prices gained 1.5% from the previous month, according to bloomberg cut relations released by the national bureau of statistics. that was the sixth straight monthly acceleration. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am ramy inocencio. this is bloomberg. shery: we are counting down to some of the major market opens in the asia-pacific. here is sophie kamaruddin. we saw the attempt at a rebound for asian stocks. we could see another challenging week given the trade deadlines. sophie: the resurgent trade wars -- trade woes, a new round of tariffs on china could weigh on sentiments. off to a lower start, .2%.
the move in sydney is helping a little. in korea we could see losses at the open their this ahead of the moon-kim summit on september 18. for the data docket, not much going on besides indonesian trade and singapore exports. we will begin using reaction to china's home prices over the weekend. ahead of the china session, we are seeing futures take a beating, this with trait -- trade concerns. we have a report adding some woes with china considering not to join the proposed tariff talks at the end of this month. potential catalysts weighing on sentiment. haidi: and hong kong, china get back to life as normal after the super typhoon. what kind of economic losses are being anticipated? i know that macau will be
hurting. sophie: macau certainly. when you look at the region at large, according to chuck watson, a disaster modeler in the u.s., the typhoon could exact a toll of $50 billion for hong kong and china and $20 billion for the philippines. and this storm could see damages day, 67% ofion a the gdp for the city of hong kong. consider damages to property and cars and what it will mean for insurance payout. keeping an eye on cathay pacific which will resume flights after canceling. another worth watching, there was trained disruption. -- train disruption. stop.had a 33 our that is a big dent to revenue
growth. when a typhoon hit last year, the government estimated economic loss to macau was $1.6 billion. shery: thank you. haidi: taking a look at the markets. moon jae-in has to pyongyang this week, the first to visit the north. with some of the biggest fixtures in north korea. this could define his presidency. let's go to our reporter. it is his third summit this year. his approval ratings are slipping. a lot at stake. reporter: indeed. a lot that perhaps the honeymoon phase after the impeachment of park and hey could be over -- park geun-hye. there is a lot at stake domestically and internationally . home prices are soaring high.
also unemployment rates reaching a record high in eight years. one of moon's pledges was to try to bridge this gap, this wealth economyin south korea's , people are saying he might not have been successful doing so yet. this summit could be a make or break sort of situation for moon. haidi: his office announced he will be going -- who are they, and what does that imply in terms of type of business we are setting up for? yesterday the south korean presidential office chief of staff announced a list of 56 people including the samsung electronics chairman jay y. lee along with heads of algae, sk sk hynix and others.
forward with what his government has been pushing for so far, economic exchanges with north korea. he does have to keep in mind the u.s. side of this picture, and this could potentially upset his u.s. counterpart. when they opened the liaison office, the state department stated it could be a violation of united nations security council sanctions imposed on north korea. so moon is sandwiched between north korea and the u.s.. shery: you take me to my next question because we have seen the white house say president trump is looking into a second meeting with kim jong-un. how much more has there been between the u.s. and south korea when it comes to dealing with north korea especially on nuclear issues? jihye: that is a good question but hard to answer because we don't know what information will
be coming out of north korea when it comes to north korea's state media. they do announce official releases, but when it comes to big movements like the singapore summit, that came as a surprise. there is back and forth with trump and kim canceling and then back on again and canceling. we really would have to wait and see. as for the united nations general assembly, there is speculation there could be a potential meeting with trump and kim. this is all up in the air. it is too early to call. shery: thank you so much. home prices in hong kong and sydney have broken records, and some fear they could break the bank. risky housing markets next. this is bloomberg. ♪ his is bloomberg. ♪
shery: we are less than two hours away from the open in hong kong. a foggy picture, but we know that fixed -- the stock exchange will open. on typhoones now mangkhut, signal number three. this dorm has hit and battered the philippines, now hitting china. borne theong has brunt of this. we see the exchange opening in two hours, set to open as normal. haidi. haidi: you see extraordinary videos from the storm, people who were unfortunately silly enough to be out in the streets, roads being blocked with trees falling. rescue workers, getting the status and attempting to go back to normal. disneyland's school, schools and
university. macau, where gambling gets restarted. oxford economics is warning of growing danger in the housing market especially in australia, hong kong and sweden. great to have you with us. having lived in hong kong, we are used to the nosebleed levels . australia doesn't usually make it into the list, but what makes it risky? >> there are a few things. we have had rapid rises over the past few years. we also have a relatively high proportion of the housing market -- variable to rest interest rate loans. when they move those, it gets passed on to the borrowers. you have very high valuation, high levels of household debt. people jump onto the market and a lot will have to face rate rises if they come through.
if is the big thing. we don't see the rba having any time. they have been clear the economy is not in a position they need or want to raise interest rates. it is hard to see why mortgage rates go on up and put in hot water. it is a risk if that did materialize, but it is a low risk. we don't think interest rates will rise. haidi: i want to put up this chart. it is one of my favorites because it makes me feel concerned. this is looking at mortgage debt, household loans. wage growth is sluggish. the rba essentially going nowhere, very constricted rock and a hard place. and these gdp numbers, we saw household savings down quite a bit as well. retail spending, consumer sentiment, 26 years without a recession, are we due for one?
sarah: there are many factors that make us resilient and we don't go into recession. when the miners are doing well, that is not great for exports and services because they struggle with stronger aussie dollar. when things flip around, the miners have a hard time. the commodities boom is a bust, but it is good for exports because the aussie dollar has weakened a lot. that supports international inorts and domestic spending the domestic sector. we are quite resilient. we also have good underlying fundamentals, better than developed economies. i think strong population growth, we are rapid growth of population compared to japan and others in that space, so a lot of positives that help keep us from tipping over.
momentum will wax and wane, but unlikely to go negative and get us into recession. shery: when you look at global housing prices and economic growth, we have seen that weak ened link. what are the -- sarah: it is a good question. when you look at that linkage between house pricing and consumer spending, we think of it as positive. people spend more. i see evidence in some countries suggesting it is the opposite will save more because they are -- opposite. people save more because they are trying to get off the market. and we can be maybe somewhat less concerned about rising house prices or falling house prices and the impact they will have on consumer spending on the economy space. the big thing, it is true for
the majority of developed economies, they are not facing interest rate rises. we have got sustained increases in interest rates in the u.s., canada, but that is it. across europe futures are not moving, glacial in the u.k., and in australia, and in new zealand not seeing much happening. that increase in interest rates, but is those concerning peace. if that comes together with falling prices, maybe we have problems. we are not seeing that at the moment. we don't see it in the baseline materializing and being a drag. shery: when you look at all of those factors, what are you seeing in china? we had home prices rising the fastest in two years. we are now seeing china's 70 cities, home prices gaining ground as well as the second
tier and third and fourth tier cities. if you factor in everything you just told us, where are we in chinese house prices and the link to economic growth? china the key thing in and the outlook around housing markets is it is on the supply side. the developers and how they fit and how well protected they are and can they keep going because they are an important part of growth and the growth story is residential. we are seeing there are some lesszes in spaces, so international capital that previously but there are practices as well, a lot of .onetary policy losing that is supportive for developers. you have robust demand in the economy and house price data indicates demand for housing is still there. residential investment, generally surprised on the
investment this year. we expect positive growth to continue. we think the housing market will be supportive for growth in china. that are pockets of risk are a little different because it is on the supply side rather than demand for housing. indicates the commission should remain positive. haidi: hong kong is an interesting example at the moment because of the strength of supply. it is what it is. do you see the trade war? it is being vulnerable to the face of china? sarah: hong kong has a few things coming together. the exception to the rule, somebody will see a downward correction and prices. a lot of things for australia are true in hong kong. very rapid recently. unlike australia we ushered in to see interest rate rise come
through. -- starting to see interest rate rise coming through. if you look at month on month price growth, it is slowing. early days, also concerns around trade wars, all of that sort of stuff which could go away. momentum could restart. it is possible we are now at the tipping point, and we will see price directions humming down. what that does to the broader economy, it will drag on consumer spending, because that is an important part of household wealth, but with an economy linked with the mainland, that will be the key driver and determinate of what happens. it is a risk off margin and looks like things are turning, but we don't see it as a big drag on the outlook yet. we are monitoring that one where all these countries we are most concerned about. [speaking simultaneously]
comes exactly, and it all together. shery: thank you so much. sarah hunter, oxford economics head of australia macroeconomics. stories trending across the universe, twitter is talking coverage of the powerful storm of the year and how it is attacking asia. people are reading about how china is considering skipping trade talks altogether. and check of the story about slump's new alert system. texts directly to u.s. phones. check out the stories trending online from the terminal. this is bloomberg. ♪ ♪
looking at business flash headlines, tencent and hillhouse looking to help chinese investors diversify away from the mainland. they plan to start taking money soon from retail chinese investors who have existing assets internationally. it will be a fixed income fund opened to individual investors. shery: fiat chrysler is evaluating potential buyers for their really parts unit. -- morelli parts unit. they offered $7 billion that ended the, but exclusivity of the talks. a final decision has yet to be made. the cio may perform -- prefer to spin it off on the if stock exchange. -- of the stock exchange. haidi: the people's insurance company added to -- hedge funds called to a management and q1
capital are planning to buy in. million u.s.$377 in the hong kong offering, several times as prescribed. jack ma is a cornerstone investor. let's take a look at some of the stocks we are watching. what is on your radar? sophie: with japan off-line for markets, checking in on what is going on in seoul. we are looking at samsung mechanics according to a report that it is to build an electric conference family -- factory and be completed by the end of 2019. also watching on me tell which owns a stake in beutel, which is dropping anonymous accounts to boost transparency. also monday motors after they promote -- hyundai motors after they promote a new vice
chairman. that is closer to succeeding his 80-year-old father. health carek at stocks, they say the government is to establish a commission into australia's age care sector. this provides services to 1.3 million people in annual government spending. that is to drop -- jump to $60 billion from 2023. over the past year, the government has shut down one age care service provider over the past year due to a check on the sector. a quick reminder, japan is off-line for a holiday. it has been a long way -- weekend. on respectn actually for the age holiday. we will keep an eye on that for the market. checking south korea and australia straight ahead,
looking at aussie futures, a little direction from the u.s.. we see sydney down .2% and the aussie dollar losing .1%. u.s. stocks are finished flat in the friday session. we have downside pressure coming from reports president trump has instructed aides to proceed with tariffs.n $200 million we also have energy stocks up of course. take a look at oil. you can get oil futures up. you can see they have been gaining ground for a third consecutive session and pushed up energy stocks in the u.s. take a look at other stocks. gold is down .2%, copper losing ground by more than 1%. commodities have been battered recently as we have seen the strength of the dollar.
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mood. shery: china may reject further trade talks in light of new threats from the white house. let's see how all of this is shaping up the open in the asian markets. sophie: a look at how things are shaping up. 1.4%.spi with a gain of the again is back below 112. -- the yen is back below 112. japan will be a heavy focus for the rest of the week.
we have the boj policy decision and the election in the lineup. let's check in on currencies. with the firstar weekly advance on friday. we are waiting for the rba september minutes. aussie bonds are backup, but a drop in the treasuries as the dropped 3%.d annual growth is below 2% later this year. brent trading at about $70 a barrel, off i about .1% -- off .1%.out on
haidi: thank you for that. early trading action a little bit patchy since we have the absence of the japanese markets and malaysian markets. don't miss our exclusive up.ersation coming let's get the first word news with ramy inocencio. weakening.yphoon is a left a trail of damage across the philippines, hong kong and macau. alleys to be -- at least two people died and 2 million people have. left their homes to seek shelter hong kong schools and universities will remain shut. macau casinos will be allowed to resume gambling. tropical storm florence has depression.a
but flash flood conditions and major river flooding are expected to continue over a wide area. heavy rain will continue to fall in many places. the effect is asked -- the effect is expected to be catastrophic. reports from washington suggest china may reject an invitation to resume trade talks. officials close to those discussions say president trump's threat to impose an additional $200 billion in any newmay scoffer negotiations. says he is done with politics and blames machismo for his claim that he is smarter than president trump. he has no intention of making a run for the white house saying the current administration is well.ng the economy
last week, he boasted he could beat me president in an election before rapidly backing away from that claim. 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. inocencio. this is bloomberg. ♪ shery: the hong kong observatory emergency. its courag --king at the the damage. has it been for other parts of the region? >> the philippines has taken the brunt of it. it hit to the northwest army region and significantly disrupted rice production. philippines were already facing something of an
inflation surge. they were already looking at ways to import extra rice. that will not tell the inflation outlook in the philippines. likewise in hong kong, the city lost an entire day in terms of outlets wereretail shot, restaurants were shut, the airport was shut. macau should done a full gambling, it could have an impact. haidi: how long before things go back to normal? enda: in hong kong, they are trying to get to the airport open again. likewise in macau, they are talking about getting the
casinos open again. it will take a while before the ferry routes are back on time and the back up at the airport is cleared. the debris in the damage around the rest of hong kong needs cleaned up. it will take some time to get everything cleaned up and get the city back on track to where it was before the storm. shery: still ahead, sounding the alarm when it comes to the chinese investment. this is a new screening tool intong investors looking chinese companies. next, an interview with sergio ermotti. we will talk about business strategies. this is bloomberg. ♪
♪ haidi: this is daybreak asia. : our next guest is the ubs.dent of theinda: this is one of most stable banks of europe. let's get perspective with sergio ermotti. good to have you in the studio. u.s.-china trade war, volatility in the markets, a strong dollar environment. what is investment sentiment? look at the financial markets, every asset class is fairly priced or highly price across the board. on one end, we see an all-time
high being reached every day or every week. on the other end, when i look at client sentiment, i'm not sure they are so convinced about how resilient or strong the underlying macroeconomic assumptions are sustaining those markets. there are still a lot of liquidity. you see investors making sure they don't lose anything. but the conviction level is not very high. haslinda: not too optimistic, more realistic. can we expect some kind of correction? the american markets have been testing highs after highs after highs. >> trade tensions, joe political tensions -- geopolitical tensions, we are likely to see some kind of corrections or opportunities for markets and investors to step in and take advantage of that. .ne cannot underestimate
we see some tensions in emerging markets. be has to be focused not to too exaggerating the problem or too complacent. the amount of cash levels in investment is still very high. haslinda: what is high? >> in everything which we don't manage, it's about 20% for a while, which is a high level of cash considering the lower rate environment, which is a good indicator that people are not or have it there for potential opportunities. haslinda: what are you suggesting your clients to do? what advice, what strategy should they be a. -- adopting? >> we have been recalibrating
the location in the year to be more neutral and these -- on equities. we took exposure to the emerging markets. that is the stage we are waiting --, potential entry point in should the correction come. haslinda: are you looking a financial target? tothere is no reason for us review dramatically our financial targets. we probably can be more specific about what they really mean because we have ranges where we operate. in that sense, we will explain how we achieve our targets and also defined more precisely how we get there. but strategically speaking, we the set on how we want to develop our business. we want to make sure that we have a more granular description
of our plans where appropriate to explain to investors are next steps. haslinda: some of your investors were pretty disappointed with the financial targets. they felt you were not aggressive enough. for instance, your buybacks. you are looking at 2 billion francs. 2 billion what would it take, under what circumstances? interesting. some investors still don't understand the difference between a buyback program and the potential that we have for buybacks over the years. we made it very clear that are number program was a that we have to execute. as soon as we are getting close program, weg the will further expand into a new one. we will take a chance to reexplain once again what it means.
but our financial targets, i think, are realistic. when you see our ambitions to growth in our wealth management, that a grows between 10% to 15% over the cycle, i have a hard time to understand how those targets cannot be defined as aggressive. i would say they are ambitious. in my point of view, it takes a little bit of explanation again and see people get convinced that we are working for growth and sustainability at the same time. it is very important that we , with scenarios that cannot be achieved. we are determined to grow our business, particularly coming from asia and the u.s. where we still see a lot of opportunities for us.
picking up on your buyback program, is that likely to be continued? what would that depend on? on the regulatory front, things have been resolved. we mentioned we have a clear target in terms of our capital ratios. we are above our targets. we always say that we would keep extra amount of capital only if it is this is very to either grow -- and we have growth initiatives -- or we have some idiosyncratic issues that may or may not come -- which has not stopped us to execute the fact of the parts of the buyback that we announce for 2018. it has been executed in the second quarter. it is a pretty good indication
keepwe will not unnecessary amount of capital if we can employ it, creating value for our shareholders. do we also look at making sure that we have the right financial resources to grow our business will -- business growing forward. haslinda: is litigation a risk to your capital? >> litigation is an idiosyncratic event that happens once a year to the extent that we come to resolution and a reduction. not genetically changer capital return story. haslinda: earlier, you talked about how you are optimistic about growth in asia. where in asia? kind of growth are you interested in? >> asia is a very promising
place to operate from if you go on millionaires and multimillionaires, it clearly indicates that, let's again, the number of billionaires in asia was impressive. last year, china took over the billionaires.of in asia, you have a billionaire every two days. haslinda: yes. [laughter] >> you were one of them, right? [laughter] haslinda: i wish. >> china had 2 billion is every week on average. billionaires every week on average. still a lot of wealth creation.
this fits very well our ambitions to grow. leader ineady the wealth management in the region. we manage almost 400 billion assets. our senior leadership in the region as a 10 year of around 20 she -- 20 years of service. we focus on how we can help our clients to really manage their wealth. looking at their corporate needs, their personal needs, their wealth planning, their family needs. these are things we will continue the next few years. haslinda: number one in well, how do you guarantee maintaining that strategy? >> we keep investing. haslinda: how much? example, china is developing as we speak. we got the licenses last week to start to distribute funds and
insurance products in china. we have been there for more than a decade. in 2015, i say we will double our account in china. we are physically almost done. 2020, already in 2018, we will have twice as many people in china as we had in a few years. so we are investing for the growth of the next five to 10 years. this is a very promising place. the rest of asia is also very interesting. haslinda: like where, indonesia? >> southeast asia, taiwan, japan has very promising opportunities for us. we are operating in 13 countries. we have 12 wealth management locations. hong kong,ters in singapore.
haslinda: what are you looking at? >> our business is growing double-digit it's. we arty have 10,000 people in region.on -- we have a significant presence and continue to grow across the board. singapore, hong kong, taiwan, and japan. haslinda: is there a need to rethink your strategy? thatmbarked on a strategy would reduce your risk. but do you need to rethink your strategy to open up your next phase of growth? >> we have reduced our balance sheet and focused our balance sheet. reshape model,r serve our clients. if i look at our growth path in the u.s. and in asia and now our swiss markets over the last five
years has been pretty good. in the u.s., our wealth management is this was losing money in 2010. now we make more than $1.5 billion pretax. in asia, we have been growing impressively over the last five to 10 years. we meet double digits every single year. we are really thinking about takesgic changes its realizing something has to happen so we can further leverage our leadership. we are the largest, most global of the fine globally leadership. the moste largest and local operator but it is still a fragmented market. of course, we need to look at how to grow further, how to grow faster. haslinda: that's the thing. you said you will be on track.
can you grow faster? the likes of credit suisse are not growing faster than ubs. credit you look at growth, one has to define the point and timing throwing you want to watch -- run your analysis in. bloomberg has very nice tools. come up with a statistic that is the story. we are very pleased with our growth trajectory over the years and the predictability and sustainability what we do. they are very active with our journey. we keep the investment for girls. 224. environment, it is the quality. i'm not sure you're willing to deposit that
basically cost the bank capital or doesn't yield any interesting margins. so we are trying to look at trying to make sure that it is beey is a prospect that can invested and deployed. 4% is deemed ao fact of life. of course, we may be well about this. we look at average over the year . haslinda: organic growth is one side. are you looking at potential acquisitions to grow, looking pretty attractive in terms of prices? >> we look across the board and wealth management. prices are not so attractive. importantly, we have to
look at things that really add .alue as i mentioned before, from time to time, we have an opportunity to buy assets, but they are not really transformational in that sense and they take a lot of time. integration takes time. in some cases, we are -- if you 2% tot our growth rates, a half of theven size or the quarter of the size of the asset or competitors that may be available. it is very time-consuming. it is not really changing the situation from acer digits point of view. though we are happy to look at -- ler acquisitions, haslinda: would you do bigger
deals? in asia, what might be of interest to you? --who would not talk about one thing is clear that any , you cannot rule out m&a forever. sakeas to be done for the -- the sake of doing things any to be done. whether for strategic value-added proposition or/and there has to be clear value added to shareholders. if you go down just to elements, strategically and financial attractiveness, you will find to that it is not so easy come up with combinations that makes sense for many players, not necessarily for ubs. nowadays,ot least, for large banks to do large transactions, there are regulatory constraints by other
publications. i do think consolidation in our industry will be part of the , particularly when you look at your. there's still unnecessary capacity compared to the rest of the world. m&a will be part of the solution. over time, the only capacity will be managed by creating a share back office, infrastructures between banks that frees up resources to in clients' businesses. haslinda: how soon do you see that consolidation in europe? we have had lots of reports swelling around, linking just about everybody. buffett has been mentioned. unicredit has been mentioned. when is the consolidation, how soon, and what impact will that have? >> and ask couple of years, you
will see some form of consolidation happening in some cases, to complement business models. immediately create and act on new champions. haslinda: how many players will there and of being? three? >> it is difficult to assess the situation right now. if you look at the reality of the european landscape, you need ecb assessingly their power, their regulatory power to allow this kind of m&a consolidation to happen. there is still a lot of country-specific regulation in some cases preventing consolidation in europe, which is necessary, particularly in the euro area. haslinda: of course, we have the
.rexit aspiration date more and more expectations of a hard brexit. what is your take on that? we are preparing ourselves. whatever solution is coming now that may make it a little bit softer is de facto no longer relevant for us. a few weeks ago, basically, we had to make a decision to go and execute for a worst-case , therio your de facto financial system is already operating under the assumption that there are no agreements. so whatever will happen for now onwards will not make the exercise less expensive. it will not make the feeling about the disconnect and resolving those kinds of issues are not very high. theo to where we started in
beginning. it is a competition that has toermined the willingness make investments. if you don't know what will happen, how can you start to invest? i would say in the u.k. and generally in europe, it has been something that has prevented some people to take actions and invest for the future. mainnda: is the time zone that will be the time the for you? >> we have an existing operation in frankfurt. a are looking at multilocation strategy were frankfurt will be the brace. we are branching out. so we will have that some people will look at it in madrid and good chunk will frankfurt. haslinda: the expectation that a hard brexit lead to the next banking crisis, what is your take on that? >> i think the system is
well-prepared. first of all, i don't really believe that the next crisis will be a banking crisis. brilliant. system is of course, you have some banks here and there. in the past, the insurance sector was also part of the problem. but i understand it. the financial system is different. i don't believe that brexit can be a triggering for a financial crisis or a banking crisis. but it could undermine lead to as and slowdown in the economy. haslinda: earlier, we talked about china. i want to talk about jds in china. major banks are looking for that license to own more than doing percent. how is that going along? what is the status of
negotiations. >> we have completed de facto our negotiation and we were the first bank to file for the auto authorization. we have been in china, starting with 2003 and later in asset management with our securities is this, we have been a pioneer in a local presence in china. we are the first one to five for the authorization to go about it. this is showing our commitment to invest for the longer run in china. i fully think the situation can be resolved in the next couple of months. haslinda: do you suspect american banks will be at a net -- at a disadvantage, creating tensions between the u.s. and china?
>> american banks don't seem to be under any advantage now. i have a hard time trying to believe. issuesa: what about the facing the economy today. in your view, what is the biggest de-risk? >> certainly the trade's of tensions although we are u.s.istic, if you look at -japan, most likely some solution will be found. on the china front, things can get worse before they get better. in any case, even if you have a with other countries, between the u.s. and other countries, tensions between china and the u.s. is enough to on thesecond effects
rest. all exporters into china and then into the u.s. will suffer. far, trade, by tensions can trigger a slowdown furtherconomy and potential in currencies and turning to emerging markets. haslinda: is the banking sector the biggest risk? i it's not necessarily -- would say the biggest risk is outside. it remains to be seen how it will be addressed. >> we are talking about how companies are increasingly disrupting the space. is ubs in the position to cope with the changes that are coming? >> the banking industry has been
able to cope with technology changes for two or three decades now. future may well be that some something inwill and try to capture parts of the value chain. but at the end of the day, income and banks will emerge and convince you because we will be one of them. we are constantly investing in technology. experience,client at the dimension of having better products faster, execution. the battleground for us in technology, everybody likes to talk about fintech, the .attleground is on the backhand how do you make yourself leaner, more efficient and effective in the way you serve clients and at what cost.
that is where we see a lot of investments. we keep a very diversified approach on technology. technology development is the -- is an evolution. haslinda: which require rater regulation? if they act like banks, should they be regulated like ranks? >> one would hope so. [laughter] history tells you that those not so niceand after that happens. -- peoplerobably see that are de facto doing banking business without a license, i have a feeling that we are -- have already reached that point. even at the legislative level,
people are shutting to look at what people are doing at banking service. a bank is not allowed to do even half of what some of this's motion media technology allows to do with sunshine. this is our level playing field that needs to be addressed. haslinda: thank you for your insights this morning. there you have it. ceo of ubs. around the world in asset hai -- assets. haidi: asia is still the place i would rather be. he said asia is still very much a promising area furry -- for ubs to bnp or debussy markets like taiwan and japan listed as his most promising markets,
seeing double digit growth in asia each year. also talking about the emerging markets, reducing their in exposure by recalibrating some these allocations, that -- not convinced when it comes to the markets outlook. and also talking about ups as ec's greater market consolidation over the next five years or so andshery a lot of comment -- five years or so. a lot of comments. crisisn't think the next is a banking crisis. it is a strong, resilient system. but the brexit deal will not trigger a banking crisis but it does undermine investments. so there could be an economic slowdown.
that exclusive conversation with haslinda amin. ray: the time -- ramy: the typhoon left a trail of damage along the philippines. at least two people died and 2.5 million people have left their homes to seek shelter. hong kong schools and universities will remain shut this monday. but markets will close and casinos will be allowed to resume gambling. on the other side of the world, tropical storm florence has weakened to a depression as it does over the carolinas. to danger is flash flood conditions that are expected to continue over a wide area. heavy rain will continue to fall in many places the effect is expected to be catastrophic with her refining, toward record levels. theresa may will defend her brexit plan this monday as
speculation grows about a potential leadership challenge. so-calleday that the checkers plan is the only strategy that delivers brexit without a hard border with ireland. boris johnson told the daily new proposalt the is a car crash. came out of at how many people approve of emmanuel macron as president. the government the estimate on gdp growth. the latest installment in the predator franchise topped the american box offices over the weekend it. that is despite poor reviews and a controversial rollout.
they collected an estimated $24 million in the u.s. and canada, coming ahead of the non-and simple favor. 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. i'm ramy inocencio. this is bloomberg. ♪ haidi: thank you. , questionable numbers on it comes to chinese companies. we will be speaking with the research firm that created it. this is bloomberg. ♪
sophie: the major markets that are open are soft. the dollar is holding steady. his urgent trade growth -- resurgent trade growth is giving stocks lower. in korea, the government has downgraded the gdp forecast for the year, due in part to the trade risks. current assets are leading that's korean -- three in assets are leading the markets. won off by .6%. ofre has been a series indicators that the new zealand economy has hit a soft patch. gdp data due on thursday. stocks on the move so for this morning, some movers in sydney.
health care stocks taking a beating. one falling as much as 17%. this is as the government is preparing to establish an investigation. could delay a project for sdr. -- for estia. hanmi said last week it would pursue m&a with money earned by of developedtion drugs. haidi: thank you so much for that. this mondayy morning. let's look at the hong kong and china open.
that one company is using tools -- we have the founder. macro --ity of china's you are saying that the accounting practices of some of these companies should be closely looked at as well. absolutely. there have been 200 confirmed cases of companies making up their numbers and listing on overseas exchanges. you have to wonder how good are the gdp numbers if they are working off company data that is just made up. haidi: tell me about this tool? how does it work? what data is it based on? can it be extrapolated in other industries? >> essentially, we downloaded
data from 16,000 companies globally, five years worth of data. look outstanding levels of ratios and changes in ratios ifr a number of years to see formulas or anything within a company's financials are unusual. fraud, a on the particular type of fraud, will leave a unique imprint in a company's financial statement. of the 400 companies that have just made up the numbers, they all leave certain comments best common distinct characteristics you can pick up on -- they all leave certain, distinct characteristics you can pick up on. haidi: like what? two thirds of the sector has
turned out to be fraudulent over the past 10 years. but it doesn't matter. you can focus on sportswear companies or any other other 400 companies. they all look the same. it is unusual profitability. these sportswear companies are even more profitable compared to global leaders. they generate excess capital because you can't pay fake profits in dividends and you can't use it to repay debt. you have an unusual buildup of production assets because you have to hide your pay profits on your balance sheets. there are a couple of other trades as well. are actorsd these jake some of these forms are -- could these best
>> the sportswear companies are a highly in competitive industry and they are listed higher than any other listed company. so they are getting returns in their assets in excess of 100%. that is just economically almost impossible for such a competitive sector like the sportswear sector in china. it does not make sense. it is not possible. shery: when i read a report like this, i think, how can you be surprised? this is a market with some of these chinese companies -- it is just a jungle out there. it is more like a casino than a fundamental-based market must of time. it really pays to do your grassroots due diligence and research, right. >> absolutely. you have to understand cash
stewardship. how are companies? generating their profits? ? is it reasonable -- how are companies generating their profits? is it reasonable? accumulating curious assets on their balance sheet, which is the trade of a fraud? traitve to -- treat -- of a fraud. through many of these companies -- you flashed up the chart of the latest sportswear company to blow up gas was in excess of 100%. it should be around 10% of sales . in is it retaining cash excess of 100% of sales on its balance sheet and not using it to repay creditors are shareholders? this company was raising debt at about 9% and was factoring its
receivables on top of that. that is a contradiction in terms when it's got so much cash on its balance sheet. haid youi: have been looking at :pparel and sportswear -- haidi you have been looking at apparel and sportswear. what are you targeting next? >> we have looked at the education stocks. we have looked at some of the pharmaceutical companies. looking for companies that are just faking their revenues or sales, that is part of what we .o there is window dressing and profit manipulation. some are notorious at window dressing the financials, using accounting techniques that would not be assigned off -- would not f in any other markets but it is here in hong
kong. companies are pushing the boundaries. shery: we are talking about negative reports. what about some positive ones? you also have positive accounting flags. [laughter] >> that's right. when we are looking at companies understating their profits relative to what they -- what we think they are, there are more companies that are overstating their profits then understating their profits. positive series of green flags, we can call them, that highlight companies that quite --ave accounting. shery: moore daybreak asia is next. this is bloomberg. ♪
is looking into allegations that it sold information to independent merchants. let's look at what is coming up over the next few hours. >> i miss you guys. i miss daybreak. in the next hour, we are talking more about the storm cleanup, not just here in hong kong. recovering after we did see the casinos set down late saturday night as well. says they are
opening casinos at 8:00 a.m. here, but in terms of the clean up process and traffic to resume back to normal, it will take a day or two. will it be a setback on a weekend which is pretty crucial? gamer slow down as china slows down. we will look at the rest of the year and how -- and at casino stocks later in the open. the damageing at assessment from the typhoon over the weekend. look at how commodities are performing. oil with a third weekly advance. brent and wti going there separate ways. brent a little lower. well. seems declining as
they will not benefit with the stronger dollar and play. we may see the trade war taking another leg lower. trump is ready to go ahead with the next round of tariffs and china may just reject this next round of trade talks. still having an impact on the japanese yen. 100 1210rading at while the korean won is losing ground after two sessions of gains. asia.s it from daybreak our market coverage continues as we look ahead to the start of trading in hong kong.