tv Bloomberg Markets Asia Bloomberg October 23, 2018 10:00pm-11:00pm EDT
rishaad: no plan b from italy. is there a plan b? especially if you're going to have a meeting between the two biggest countries in the world's leaders. and the bar is set very, very low. nothing meaningful is likely to happen. >> people are saying this is just kind of a sidelines type of meeting. we need something much more substantial, a sitdown or summit to wrap things up. we did see the u.s. rally or the drop of the u.s. rally pare d'back a bit but not enough to juice up the markets. >> i'll talk more about this later on but equities are sluggish today and not getting a lot of movement when it comes to the currency market which is a good thing i guess. here we go. g.m.m. just have a look. some are the sort of important points here. a big move down in oil overnight which actually is helping to some extent. a lot of these e.m. currencies.
we'll talk more about india later which might be a big beneficiary. the philippines is another one. we're getting some of these external drivers of internal domestic inflation. hopefully that -- state of the market, this is what we're getting across the region. compared to this time yesterday obviously very good. that is setting the bar quite low. of course, the other thing i want to point out, what happened in china yesterday, more so in hong kong than the chinese, 3% here. we're not really seeing this market stream higher as well. it is more a sentiment play and also about earnings coming through when you look at some of the revisions. yeah. it is going to be interesting to see how we play out. u.s. futures down one-third of 1%. i'll leave it there. >> all right. let's get more on the market analysis and bring in bloomberg's china markets team leader richard frost in hong kong and also the senior
sovereign analyst joining us from singapore. richard, let's kick things off with you. this trickle of stimulus we've been seeing, not really enough to turn around sentiment. >> yeah. it is quite a departure from what we saw in 2015 and also 2008. there they pulled it out in terms of stimulus for the economy and the stock market. this time around they seem reluctant to do that. the emphasis is on local authorities stepping in or companies themselves refinancing. they're helping on the margins with that but it is not enough for traders. given the huge fluctuations to be seen in global concerns we are unlikely to see markets stabilize at this point. rishaad: ok. a trickle of stimulus but theas four take time to work into the system. even the first one seems not to have worked so far according to people right there. >> as we know, china is facing that difficult line between china easing enough to keep the
economy going without upsetting the leveraging part they've been going on. of course if they take too easy a path it will add further pressure on the yuan, increase the possibility of outflows and everything that goes with that. so they're trying to keep all the balls up in the air without trying too hard. rishaad: or dropping them i think. >> we're seeing these drips and drabs of stimulus coming through from the chinese government. pboc as well whether it's helping the bonds for the private companies or the tax cuts are they pulling the right levers? richard: they seem to be pulling the right levers. i would argue what we are seeing out of china is very encouraging. l >> it is not yet terribly exciting for the markets at this point in time as richard said. i would sense that the policy stimulus coming through touches
all the right notes. they are safeguarding -- trying to safeguard the private sector and take care of corporate financing and trying to also shore up the household sector by giving tax breaks and raising the threshold of income. arguably it is the most productive part of the chinese economy and now when the trade tariffs really kick in it is going to be quite important. the household sector again plays to the long-term rebalancing of the chinese economy. i think they're hitting all the right notes and this comes in addition to the infrastructure stimulus where they've tried to raise 1.3 or 1.4 trillion r.m.b. to shore up infrastructure. the special bond issuance and that sort of thing which, you know, has mostly been issued at the end of september and hopefully the roll out will
begin to kick in in this month and the remaining months of the year. so hitting all the right notes but again when you scale it all up the number of the -- the amounts going the rounds, 150 billion or so, fall far short of the outstanding m.l.f.'s or p.s.l.'s which run into 3 trillion or 5 trillion and above. so this is still small change at the moment but the steps injure the correct direction. rishaad: so a day late a dollar short basically. or a day late a yuan short in essence, right? >> come again? rishaad: i'm saying it is a bit too little too late. is that the suggestion here? >> well, again, it is feeling the stone as you would cross the river as i would put it. certainly not a big bang stimulus unlike in 2008 or 2009
and certainly not unlike, not even similar to 2016 when you saw a much larger push to aggregate demand through crediting and that sort of thing. that is not what is happening at the moment despite a flurry of commentary from very senior officials in the last few days. >> can i just ask, you mentioned the private sector is the most productive but it also seems to have borne the burden of the deleveraging and if you look at the different financing channels they increasingly seem to be shutting down. why do you think there's been such pressure on the private sector? do you think they will take enough to ease pressure on that? >> well, i mean, you're hit go-to nail on the head here. the private sector has been deleveraging and if you look at it from a leverage standpoint its balance sheets are probably in far better shape than what would be the case at the state enterprise and so on. so the reason they haven't gotten the access to credit is
because of the implicit guarantee system. do expect, number one, more falls to assist in gradually eroding the impetus of guaranteed framework within china and, secondly, some of he talk now being discussed of providing more specific funding assurances for the private sector should begin to help but as i said the headline numbers so far look quite small. >> we've been talking about just the equity market but we take a look at the currency and it seems tamed down a bit. perhaps chinese officials are mmb? at taming the >> obviously the numbers are bit different. and what we have seen very notably is i think the average intraday swings in the last week are the lowest since the
-- since at least the end of last year but at the same time trading volume is highest since august. what that tells us is they have been heavily into easing the pressure on the currency to stop it going anywhere near seven. that is much easier to do than obviously trying to control the stock market. they've never really been out to do that as we saw in 2015 and 2016. but that will come at a cost. we are definitely looking out for any data that shows that inlt convention is increasing. >> absolutely. to you, and very quickly here as well, as they clamp down on shadow banking and really put a lid on it, this is where we've ended up. the economy has been squeezed because liquidity has been sucked out, the consequence of that. >> yeah, look. it doesn't look like the controls on shadow banking are being dramatically lifted just yet.
i expect some of these controls to remain in place. things could be eased in terms of specific regulations. very gradually smooth out the whole deleveraging process but i don't think you are necessarily going to get a jump in shadow banking loans any time soon. so we are pence ling in a slowdown in the headline rate of china's growth of 6.2% next year and as the process materializes despite this drip feed of stimulus, i suspect we continue to see some concerns in the market on an ongoing basis. >> thanks very much for that. well, we still have tensions with saudi arabia and the rest of the world. let's find out what is happening with the white house getting into the mix as ever. >> indeed, president trump is deferring to congress on the u.s. response to the killing of the saudi critic and also slammed the kingdom's shifting narrative as one of the worst
cover-ups in history. the secretary of state mike pompeo says the u.s. has identified a number of suspects in the murder and washington is already taking action against them. the president says he wants answers soon. the u.s. national security adviser john bolten says presidents trump and putin will talk on the sidelines of the world war i commemoration in paris next month saying it will be a normal bilateral meeting. the talks come at a time of rising tensions between the u.s. and russia. bolton repeated president trump's pledge to abandon a 1987 nuclear treaty citing violations by moscow. reports that theresa may has lost control of her cabinet with senior members openly fighting against her brexit plan. sources tell bloomberg seven ministers spoke out against it. we are told may reacted with anger. other ministers weighed in saying the u.k. will crash out of the e.u. unless she is able to compromise. reports from taipei say the
driver of the train that crashed at the weekend and killed 18 people had disabled the speed control system earlier in the day. the bbc says he told the court he turned it off after it slowed the train down because of a fault. carriages came off the line at 140 kilometers per hour, almost at a he speed limit curve in the track, taiwan's first real crash in 27 years. powered by more than 2700 journalists and analysts in more than 121 countries, this is bloomberg. >> thanks. still ahead philip morris is banking on a shift to noncigarette products as the traditional business faces pressure. our interview with the c.e.o. later on this hour. rishaad: but next, president meet and xi ping going to at the summit but officials on both sides not expecting much. >> it is not helping sentiment. shares down over 1% and also do not forget you can join the show and the conversation here. we have a lot of guests coming
>> this ongoing trade war between the two largest economies is already hurting companies' profits and clouding their outlook in this bloomberg review of earnings and transcripts of conference calls actually shows more global companies are feeling the bite. caterpillar for example out with earnings, 3m, united technologies citing headwinds from what has been happening with the higher tariffs. when you look at auto makers, harley davidson, ford, b.m.w. all see tougher times ahead. the u.s. slapped tariffs on $250 billion worth of chinese imports and beijing has retaliated with duties of $110
billion of products in the u.s. and maybe we'll get an escalation. hopefully not, the start of next year. guys? rishaad: not exactly looking forward to the issues on both sides, pessimistic about the prospects for a deal between resident trump and x ping. what is the best hope really? obviously really lowering expectations? >> yeah, they are. larry kudlow the president's economic adviser said they'll be meeting for a bit on the sidelines at the g-20 late in november early december which already is not making a big deal out of it, for a bit on the sidelines. there have initially been hopes that maybe with both there they could start to talk more seriously about what to do about the trade situation, the escalating tariffs. but it looks like now they may be talking about whether they're going to talk again,
really kind of setting the stage for further discussions on this. certainly president trump doesn't want to appear to be this nything to advance with china over trade before the elections. he is using it as kind of a bully pulpit issue as he goes on a campaign for republican candidates. tough talk on chane seems to work with his base. yvonne: more and more of these companies really voice their concerns about whether it is time to reduce the reliance on chinese suppliers and now is the time to perhaps start diversifying. is that changing the rhetoric or narrative from the trump administration in any way? >> yeah. i think so. a lot of them are going to their plan b suppliers looking at other ways in the supply chain to work around the fact that these tariffs could be lasting a while. certainly in china this seems to be the rhetoric as well. that there is a new normal now. that this could be a lasting,
prolonged trade dispute with the u.s. and that they are looking at other ways to deal with it from their side as well. so both sides seem to be looking just for the long haul and any talks would be really down the road. any significant talks. rishaad: do you remember that handshake about four years ago between xi ping and eab? it was one of the coldest things. it's amazing they're getting together again. >> they are. this time they're rolling out the red carpet. when shinsue abe took office six years ago it would have been hard to believe this would be happening but donald trump is helping make that happen as the relationship between china and the u.s. worsens and also the relationship between prime minister abe and president trump while warm he hasn't gotten a lot out of that. so there is much more
pportunity for mr. abe and china's president to meet and to talk things like trade. it is a remarkable moment. see how things shift on the international stage. again, donald trump is responsible a lot in an odd kind of way for this happening. he didn't make it happen but his relationship with both these other countries is causing this to happen. rishaad: thank you. yvonne: the budget battle between italy's populace government and european bureaucrats rumbles on with neither side giving any ground yet. so could a full blown financial crisis be brewing? rishaad: kathleen, he won't back down, will he? kathleen: well, remember we had that election in march.
a populace government elected by the italian people and determined to set the path that it thinks is going to lead italy in the direction it needs to go. more growth will ultimately help bring down a step but e.u. says this doesn't fly. italy is proposing a budget deficit 2.4% of g.d.p. three times more than the previous plan. italy's debt-to-g.d.p. ratio is around 130% more than double he 60% limit of the e.u. couldn'te insists his budget -- conte's insisting this will help the poorest italians, and support pensioners and reduce ket. he made it very clear today there is no plan b on the budget cap. let's listen to what he told bloomberg. looking forward to
sitting around the table and talking with them. of course if they are going to ask me to change the measures it will be difficult for me because i cannot accept that. >> shortly after this interview ended the e.u. officially reject editly's budget plan and order editly to revise its spending plan. italy's debt load is the second highest in europe after greece. that is another reason people are concerned about where this could lead. yvonne: right. kathleen, i think a lot of questions that we ask here in this part of the world, if i'm not in europe should i care? how big a risk is it? we could see a financial meltdown in italy and that could spread across europe and even go further. kathleen: let's start with a couple things we know. moody's investor service down graded italy's sovereign bonds to one step above junk on friday. people are concerned about italian banks. deutsche bank saying just yesterday they have bigger pital cushions but liquidity
or ill lick quidty risks remain. the 10-year bond yield has nearly doubled since the march election up to 3.58%. when we asked mr. conte about this, though, he said what he really referred to is he thinks a lot of the sell-off in bonds in all this turmoil is due to fears italy will leave the euro. here is what he said about that. >> evidence that the spread is due to the prospective ex-brexit. e feel very comfortable. we feel -- we think that the e.u. will ease our currency, will be our currency, the currency of my kid, 11 years old. the currency of my grandchildren. kathleen: it seems like a lot of pressure is on the -- yvonne: it seems like a lot of pressure on the eu now though
italy probably has to give some ground. don't forget back in 2003 and 2004 germany and france pressured the e.u. and got those rules kind of suspended for a while. so they've gone around the caps. kathleen: one more thing. if italian debt gets downgraded to junk status it will make it very difficult to get any financial help from the european central bank. so it seems this is coming to a head. we'll see where it goes next. yvonne: all right. kathleen, thanks, our global economy and policy editor. rishaad: coming up saudi arabia facing growing outrage over the death of the journalist with turkey saying the killing was planned in advance. we'll assess the geo political implications for the middle east. this is bloomberg. ♪
30 post ipo companies on concerns that valuations have peaked. the $18 billion state backed fund manager didn't specific which stocks it is planning to exit but says it'll happen as soon as possible. the c.e.o. there is saying the global markets including the united states have peaked and investors should be preparing for the next round of financial crises and turmoil. yvonne: sources say black rock's interest in buying a minority stake in tesla's asset management unit has cooled after recent meetings failed to resolve an impasse over issues including price. we are told talks earlier this month exposed a kist over the valuation of tesla's arm following the recent decline of financial stocks and the broader italian market. rishaad: the central bank of indonesia says the country should license -- if it wants to draw more chinese tourists. indonesia trying to boost earnings after being caught up in the emerging market rout.
singapore, and thailand have approved wechat and alipay. >> let's get awe quick view of what is happening in japan. some of the movers. caterpillar was out with fairly disappointing outlooks and that is playing out quite clearly across the heavy equipment makers over in japan as well. subaru down 5.7% sliding after missing targets here. down to quality related costs. now let's have a look at the big picture here. asia pacific, where the bear market is, take my terminal and bring it up here. 150 is the current level. that is about 149.72. so we're barely above that level. if you will. we did dip below it at one point. we have to close below that. very quickly, this we go. just to give awe sense where we are. it is not as bad as yesterday
sophie: economic advisor larry kovler said the two leaders would meet for a bit of the g20. privatelyficials are bracing for a prolonged fight over trade. more u.s. companies say they are ready to relocate supply chains if the cost of importing chinese products become prohibitive. president trump is 30 to raise
-- isty to 25% in january threatening to raise the duty to 25% january. president trump tweeted on monday that the chairman of people include unknown middle east shares. proof, yet he still insisted that terrorists could be there. will make its first electric cars in singapore. it plans to build a factory by 2020 and rollout its first model the following year. dyson already has motor plants in singapore and a state agreement with china. 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 sophie kamaruddin. this is bloomberg. ♪ smiling crown prince
mohammed opened the summit. financialozens of executives and for dignitaries dropped out. trump says it is appalling. >> the cover-up was one of the worst in the history of coverups. the bad deal should have never been thought of. somebody really messed up. they had the worst cover-up ever. --re it should have said. should have stopped was at the idea. whoever had that idea should be in big trouble. rishaad: let's go to austin, texas. present almost as if
handed -- president erdogan was handed a gift. it actual terms, the crisis seems to be dying down. we have not seen any political breaks with saudi arabia. everyone is realizing that the isolation of saudi arabia could be quite dangerous. at this point, everybody is shocked at the murder, but the basic geopolitical reality stays in place. erdogan may pick up some points , but hegainst salman seems likely at this moment to be surviving the crisis. haidi: you think things are dying down. we heard from the speech, president erdogan is adding pressure.
president trump facing pressure in congress as well. are you saying we should not expect too much action from the white house? >> erdogan has made certain demands on investigations. he is not threatening to break diplomatic relationships with saudi arabia. the united states has mentioned that some individuals might be sanctioned by the united states. so the basic geometry in the region remains intact. there is the iranian presence through the region. israeli-saudi-uae quiet alliance against it. the united states, and i think turkey as well, still in place. if saudi arabia were plunged into a political crisis, that alliance against iran may collapse. hear a great, we deal of rhetoric designed to look fearsome.
but it is impressive that no one has taken any concrete steps. rishaad: the whole thing was very badly handled, to say the least. on an ally's land was even worse. pressuree facing internally? >> the real pressure against him doesn't come from reformers. he is considered the reformer. he is the one who took the radical step to let women drive. it's the people who oppose these reforms that are the threat against him. the people he imprisoned a while ago at a hotel. he has a lot of opposition to the fact that he wants to transform the saudi economy. liberalization. and up until this murder, he was the hero of much of the world saying here is a man who wants to modernize saudi arabia. of course, he has committed this
murder and is despised. but israel enemies are the conservatives in saudi arabia who are appalled by what is happening and they are a threat to him. unless everything changes, the threat does it come from outside. haidi: if there is that internal opposition, can he still succeed the throne? >> they doesn't have the throne. his father does. can he succeed as his father's appointed i'm? he has -- appointed guy? he has been surviving the side along. inside of saudi arabia, the basic question is how long will the conservatives give him to play out his game, to see if he is successful? outside of saudi arabia, the question really is is anybody
prepared to destabilize the anti-arabian front that is there? right now, the answers from the outside is no one is about to push saudi arabia out of that. and from inside, the opposition is still there and happy. rishaad: you're saying this doesn't change anything. perceptiones the among western liberals that somehow salman was a great liberal reformer. please remember that the will to the whoopty-do made over him allowing women to drive. , theorld cannot afford united states and turkey, i should say, can't relay afford to have saudi arabia destabilized. so whatever their outrage is,
notice that everybody is backing so whatever their outrages, notice the everybody is backing off any action. impact,does this have if any, on the aramco ipo? >> that depends on what the markets think. my view is the markets are fairly cynical. if there is money to be made, they will buy it. and in six months, this killing may not be remembered very clearly. this is an enormous story at this point, well over a week. the fact of the matter is that nothing has happened and i suspect, if there is money to be made, the ipo thing will go forward. i'm not so clear what that ipo is, but others -- if others do understand it, it will happen. rishaad: thank you for that. .
yvonne: regulators have ended the issuance of licenses through a stopgap approval process, also known as the green channel. last official halfway. rishaad: this look at what is going on with market reaction. david: here we go. the subtitle tells you everything that you need to know. tencent currently trading at
278.20. --p in mind that regulators , we willy risk continue to track that. that tracks it all the way to the free market open. we have some of these gaming is in japan. we will revisit that later. no need to check it. we are still getting a little bit of reaction. at the moment, just keep in mind, these are the apparel stocks. that is how we ended in the morning session. keep your eye on that. we are not getting any moves on that stock. tencent is the one to watch. we have more details on this one. let's get to ugi
tomorrow -- nakamoro. >> china has frozen new game licenses. they kept to this one channel open. it was called the green channel. it was used by companies like tencent to release some games in limited fashion. now we've learned that that channel is also closed. officially, every channel that we know of for releasing new games in china, which is the world's biggest gaming market, is now officially closed as far as we know. this kind of raises a lot of questions about when the overall freeze might be lifted and what will happen next in the world's biggest gaming market. stock: we see tencent reacting to that. we saw that initially earlier this year when they were talking about halting some of these
approvals as well. do we know why this time around this?re doing i know the government has been cracking down on video games and addiction and whatnot. ji: there isn't any specific thing that prompted the closure of this channel. some people that we talked to say that, possibly, the overall freeze will be lifted, which is why they won't leave the screen channel anymore. that could be positive for game makers. other people say the entire process is being completely revolve, including the green channel, which potentially could be negative. it may carry the freezeout through next year. it is -- it may carry out the freezer next year. monthclosed as of this and that includes domestic and foreign new titles.
it closes off access to the world's biggest gaming market. we will find out in the next couple of weeks just what impact this has had. a lot of companies, including tencent, will report. tencent reports earnings on november 14. others will be reporting as well. they will give us more clarity on how these companies will be able to cope with this raise. that should give the market and investors some much-needed transparency. otherwise, as you know, china is one of the least transparent markets in the world, especially when it comes to video games, especially how these licenses are approved. the green channel is something we can confirm. it does seem to be a negative for now. let's see how things play out. you.ad: thank we will move now to fellow horses. -- weexpecting regulators
move now to phillip morris. it is expecting regulators. shift to aking on a tobacco products. thank you so much for joining us. the fiveighted promises of aikos. tell us what is the transition right now. is this a shift from true -- traditional cigarettes to what? >> first of all, thanks for having me. here in tokyo because japan is the largest market for non-heated tobacco products or smoke-free products. aikonounced the launch of
made ever. aikos we today, one billion people smoke around the world. many of those are not in asia. alternatives that are much better for their health and ,he people around them exist with some of them and others in the market. i think this product should be made available for these men and women who smoke and the faster the better. scientifice all they expectations of the product. they submitted, as you know, to the u.s. fda for approval.
yvonne: yep. >> yes, there is debate whether this product should be available to consumers. but like any other product category, the fee have a better product -- if you have a better product than the existing one, you make it available. rishaad: the fda did not give approval in january for iqos. you call this reduced risk products, which means it still has risks. which are those risks? the jury is still out, isn't it? currently is reviewing this product. the fda has taken a decision. least hopeful for at
approval for the u.s. market very soon. these products are not zero risk. that's for sure. they do contain nicotine so they are addictive. but nicotine as part of the satisfaction. the objective here is to convince the people who smoke to switch to this product, 10 they have to have taste and satisfaction -- and they have to have taste and satisfaction. cigarettes, these products will have a positive impact on the individual and the population in general, so it will be beneficial for public health. i don't think the standard way it applied today should be -- risk if youour 100% continue smoking and that any alternative to the should be zero risk. that is unreasonable. 90% theuces by
carcinogenic substances. that is very substantial by any standard reduction. i think people around the world should be entitled to know about this product and make their own choice. prohibiting them on their behalf, that's not a very reasonable way of going. thesek governments, as products become are accepted and popular, will revise the policy. that is what i wish they would do. the publicons for obsolete help. i don't know if you are a smoker, but would you smoke this product? >> i use this product, yes. i used to smoke cigarettes before. and i feel much better. clearly, that's me. scientific evidence in
clinical studies that proves what i'm saying is correct. all the data is available. it has been submitted to the fda. david: i guess we will have to wait for the fda on that. point taken on your experience. how does this affect the business moving forward? talk about the margins. overall, our objective as a company is to replace cigarettes with this product as soon as possible. it makes sense from a business perspective because we are gaining market share in relative terms with this product. japan is one example. many other markets are an example. in many countries, regulators have recognized that these products are not cigarettes,mann so they also have a lesser tax burden on cigarettes.
ok, today, we have initial investments in commercial investments. but the margin structure is very attractive. and in many places, better than cigarettes. it makes so they also have a lesser tax burden on sense for us from a business point of view. i think it makes sense for the smokers and also for governments because of the lesser impact on abaco. i am at -- on public health. be betterre it would in terms of business results. at the same time, public health would benefit. but alone, it would take us more time if governments intervene and encourage people to switch to this product if they don't want to quit. then i think we can go much faster. yvonne: appreciate the time. much.nk you very vonne: we have more on this breaking story.
yvonne: time now for our battle of the church segment -- of the charts segment. viewers can access their charts on the bloomberg. rishaad: let's kick things off. chart can be accessed on the terminal. the chart is divided into two panels. it shows we are at a very critical juncture as far as asian stocks are concerned. earnings are lagging price. earnings are following the price action, not the other way around. run, markets don't stand to correlate or go in the direction of where earnings are headed. the first chart will show you the technical bearish stocks. they have entered bear market territory. they have declined 20% from
january. the second chart shows that investors should not by the argument that stocks have increased by 4%. earnings are trending down. in the context of central bank tightening, the equity risk premium is decreasing and assets are cheap for a reason. chart: very telling actually. david: donald trump has been consistent with the criticism of the fed and jerome powell. he might have a point. we are looking at a chart looking at home builders at automakers. affected by the rising interest rates and the cost of are rolling in their industries. it is clear that rising interest
rates are not an issue until it is. we have long-term consistent growth in the u.s. the question is, with the cost of borrowing rising, will we see more of this in other industries? joshua brown pointed this out yesterday. he put in hemingway. he says things happen very slowly until they all happen at once. yvonne: very poetic. is where you go for those charts. this is bloomberg. ♪