tv Bloomberg Markets Asia Bloomberg February 20, 2019 10:00pm-11:00pm EST
it's a mixed picture in asia as we enter the final hours for the first session of singapore and hong kong. investors reassessing the fed minutes. it is pausing for the next couple months, but what will it do later in the year? it has not eradicated the possibility of the fed hiking rates if economic growth does turn up. let's look where the indexes are. gainshong kong, we have for those indexes, but losses for the likes of japan. korea posted disappointing export numbers. the conclusion of those trade talks in washington dc, weighing pretty much on the
emerging-market currencies. after a stronger dollar, a loss for malaysia and the philippines. we are keeping an eye on the malaysian currency because chances are the fed is about to stand pat. let's look where we are in terms of gold. this is an asset class we have not been watching. it is up 4/10th of 1%. a strong correlation between gold and equities. that correlation has been strongest in two tears. perhaps investors are starting to see gold as a safe haven given uncertainties in the global space. how is it looking for india? wishaad: we had an up arro after nine consecutive trading days of drops. a bit of positivity.
a look at what will be making waves today, some state owned lenders winning $6 billion worth of rupees injected into the state owned banks as they are tied to regulatory constraints. something to watch how that plays out. against theupees greenback. the yield on the 10 year edging lower. the rally continues slightly for indian sovereign fixed income. let's see what has been going on with the rupee in detail. what we have had is a trade talk rally in-- talk-fueled these currencies. ofee up 4% since the end august. these are levels we have not seen since 2013. it is the white line we are
watching. the rupee has just fallen back sincecent since -- 2% that timeframe. >> we have been watching some of these lines coming through. of ofs showing signs six mou's, asing we are hearing it now. the two countries discussing a 10 item list of shorter measures, largely in the purchases of commodities and other goods, which as we talked about is the low hanging fruit. but we are seeing markets turn on that news. david: you look at the benchmark in asia. session highs have been bobbing around these gains and losses. japan was down for the day. we are now up. the aussie is now coming off its
bottom. here in hong kong also pushing a little bit lower. not much of a game changer, but incremental change across assets. until that march 1 deadline. perhaps signs of positivity again. let's get you to the first word news. >> we are expecting more from those trade talks. the talk economic aid will join talks in washington wednesday as the clock ticks down to the march 1 tariff deadline. president trump said he would be prepared to extend a deal if the in agreement is close, but will also ramp up tariffs if china does not agree to what the u.s. wants. president trump threatened new tariffs if talks fail on an eu d
eal. the president is weighing a commerce department reports on whether auto exports are a threat to he was security. he has 90 days to act on his findings, which have not been made public. the chinese premier morning of the threat of short-term lending, saying banks should offer longer loans to support the economy. adding the government will not flood the system with excessive liquidity. the pboc cut the amount of cash banks must hold to encourage more funding. it will take a $900 million charge in fourth-quarter results from probes into violations of u.s. sanctions and financial crime control. is facing a regulatory
penalty after a separate investigation last month. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> as we have been discussing all morning, the latest fed minutes say policymakers widely in favor of running the bank's balance sheet. there was a certainty of -- uncertainty of needing to raise rates at all this year. there is talk of patience and a rate hike later on. reactions are pretty mixed. >> traders are taking it as if the fed is done for the rest of the year. if you look at the long-term projections, traders think there could be a rate cut in 2020. they have not fully priced it, but they are leaning that way.
the fed has a lot of work to do. the communication will have to be clear. even if we get pretty strong data, the market will probably look past it. it is not too surprising when you think the ecb and bank of japan is being pretty dovish. >> never questions whether the em rally candy sustained as well. theirchina continues with monetary policy, there is plenty of liquidity out there. we have seen a good rally in chinese equity markets. >> a different story in australia. now we are talking about double rba cuts. what is your take? call was made in 2011 for rate cuts, and they
were right. not everyone will agree with it. the rba has been consistent saying there is an equal chance of rates going up or down. vote when you have a good track record of someone like westpac saying there is a rate cut coming, it may not be long before you see other banks following the same path westpac is taking. >> how about the impact on the rest of thanks in asia? mark: in india, they have cut rates already. it is a big contrast to last year when we saw a rates go higher. when you look at somewhere like malaysia, inflation has come down really well. they have been on hold for some time. their economy could use some help. >> indonesia will stand pat at 6. mark: the same thing is going on there. inflation is under control.
the currency has stabilized nicely. indonesia possibly looking for a rate cut as well. >> it is decision day in indonesia. we will know in a couple hours. >> let's bring in our next guest joining us here in hong kong. let's talk about the fed first. we just showed that chart, traders are still pricing in we could see a cut in 2020, all the ded weaning with a bias towar hiking rates. >> are we fed up with the fed? [laughter] note, let'serious turn to the minutes. the phrases were "patient posture," and this indicates not just in the next meeting, the
next two or three meetings. at a minimum we have a pause. it is about the balance sheet, particularly for emerging markets. >> the conversation on the balance sheet is they think it should end this year. it is a bigger balance sheet. is that the key takeaway? >> absolutely. this is as transparent as one could get without having a prescriptive plan. the current one is on autopilot, what jerome powell mentioned. there was a statement on the 31st of january, this adds to that. another choice phrase out of the minutes was before too long, the balance sheet will start shortly. for us, that means the end of the year. >> we have had mixed signals when it comes to the u.s. economy. it seems to be holding up better
than the rest of the world at this moment. do you think the fed is exiting its tightening cycle too soon? >> no. current data could argue the case, but to me it is the lead data. the u.s. is the largest economy in the world, etc., but it cannot ignore the international slowdown. say an seeing their i international recession outside of the u.s. let's look at inflation, and not headline cpi numbers, but inflation expectations. they are falling rapidly in the u.s. there is one measurement the fed uses. the implied rate is now 1.8%. china ppi is just barely above zero. we are seeing strong inflationary forces. >> is not looking too good.
markets -- and wecould be wrong -- that should not fully price out the fed, what is the best way for me to act? what is the investment strategy that allows me to bet on that? >> it is those that are cutting too much or too soon. argue inflation has come down to 2%. necessarily a trade, but there are risks if em bank s/rates in this period.
the first thing that comes to mind is inflows. how large is that money about to come in? andre: in terms of the plan, as april, between april and november 2020, the waiting will be 6%. last year we saw $72 billion inflows. that in itself is a large number. when you put it all together outstanding, now 8% of the chinese government bond market. the majority overwhelmingly has been government bonds, not credit. that very much in our understanding is from central banks. we have flows to come. inestimate $150 billion
incrementals into november 2020. yvonne: given this rally we have seen in sovereign bonds, china blogs not giving you that kind of yield you see in this part of the world. what role do you think chinese bonds have been global portfolios? andre: we have been bullish since last year. this is 10 year government bonds in china. on a dm context, this is an aggregate index. it includes u.s. treasury, it includes japanese government bonds. then compare yields in terms of treasury, 20 basis points. guess, whereest
does this allegation go? it is a zero sum game in a lot of ways. andre: if we estimate $150 billion flows. if this is a systemic em index, that might have some negative consequences in em flows as an expense. this is more about a recalibration of others at the margins, because these are big beasts. i think it has less ramifications on in this specific index. yvonne: you mentioned 3.1% for the chinese 10 year yield. do you think we could break below 3%? andre: yes. , we aretarget 270 still in a slowdown in the chinese economy. it needs to be fiscal and monetary, not one or the other. whatever operations they pursue,
we think there will be lower market rates as a result. david: your title is head of global em rates research. with china, there are so many rates to look at. what do you look at, and does it really matter? andre: to a certain degree it does, but you are right there is an alphabet soup of policy measures, and that bowl is getting full. we can talk about lending rate cuts if they do materialize and rrr's, but it is ultimately getting short-term financing rates lower. let's take where we are now around 240 at its current level. we see it going down to 220, which is a little bit of a deja vu moment related to 2015. those are the sort of levels we got. that is the end target for us as
trading system that has benefited us all this while for the last 30-40 years, where the growth of the world, the uplifting of the millions from poverty has come through with global integration? or are we going to have a turning point where we are thinking it is better for us to have unilateral, more isolationist policies. this reminds me of the situation almost 100 years ago before the great depression. at that point in time, it was the same fork in the road that we had to confront. do we go for an open rule-based system, or do we end up with more unilateral isolationist policies? >> singapore and open economy, highly dependent on trade, the u.s. as well as china. do you see singapore getting caught having to decide which
way to turn? >> singapore wants to remain plugged in with both the u.s. and chinese economic ecosystem. we don't want to be in a position where we are only dealing with one and not the other. i think it is the same for the rest of the asian countries as well. >> isn't it possible at some point sooner or later singapore and the rest of southeast asia may have to decide which i like to go with -- whjich ally to go with? >> i think that will be a poor choice for singapore. we want value for both the china and the u.s. we want to remain neutral and open where the u.s., china and europe can engage in productive economic activities. that is how we position ourselves. it is an opportunity for singapore to distinguish ourselves. first, we have long-term
stability, a neutral position whereby people can come here and be engaged. and the strong intellectual property system we have, the skill sets of our workers, all good qualities that i we getf the fundamentals right, we will write out the short-term challenges and position ourselves. singapore's was minister for trade and industry. westpac facing a class action lawsuit for irresponsible lending for home loans. were givenaintiffs five loans worth 1.8 million aussie dollars calculated with the household expenditure measure rather than an actual total of their expenses. they say they were granted loans they could not repay. david: deutsche bank said to be so concerned the trump organization would default on
loans after the 2016 election, they discussed rescheduling repayment dates until after the second term. then-ceo was worried about the bad pr they would face after the sitting president. those loans are due in 2023 and 2024. this is the position as we get into the lunch break in shanghai. half an hour before the hang s eng trades. composite up by the same sort of margins. let's look at constituents on the markets. it is not on the hang seng itself, but down a fraction as it takes a $100 million charge tied-- $900 million charge to fourth-quarter results. lenovo coming through, a 10%
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yvonne: we want to bring you an alert across the bloomberg in the midst of trade discussions. the u.s. china trade talks are said to include distilled and aied -- and dried grains, byproduct of ethanol. the u.s. has been urging china to remove the tariffs on those. this will be a part of the negotiations. david: we are getting more of these lines of confrontation. removing or even just reducing as part of this discussion. that is leading to further declines in dollar china.
6.76.w of the day we have an update of our first word headlines. >> the latest fed minutes say ending production of -- reduction of bank rate hikes. the fed earlier said it would be flexible and patient on hikes. jay powell said caution was needed among the risks posed by brexit, china trade talks, and the government shutdown. theresa may is facing a new threat to her authority, with some of her own ministers considering voting against her brexit strategy. sources say up to 15 ministers are involved, part of a cross party effort to prevent the u.k. from crashing out of europe without a deal. the eu says there can be no more talks. president trump says kim jong-un
must do something "meaningful" to see u.s. sanctions lifted. president trump will fly to hanoi for his second summit with kim. they will build on the statements they signed in singapore last year. the president says he does not think the hnaoi some it will be his last meeting with kim. president clinton -- president putin said he has no plans to deploy missiles, but will respond to any u.s. move. his annual state of the state address was less belligerent from a year ago, showing weapons that had appeared to target the u.s. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ishaad: this is what is going
on asia-pacific-wise. nikkei,ng up in the asx outperforming. one company doing really well. has beenme out that it making more money than it has anticipated. it is well positioned for growth, getting rid of its supermarket chain. consumers do remain cautious. that is a way of protecting themselves. it was up 6% last time i checked. is the position of raku ten, opening a world-class 5g lab in tokyo. trading volumes have doubled, nearly 5% up. one of the biggest gainers on
the msci asia-pacific index. shares,ack 2% of its but going to cancel those shares once they bought them. good news for the shareholders in some regards. we had investors fairly underwhelmed at the announcement of new telephones. foldable phone we have been talking about as well, that driving a launch in london and san francisco. an event that did not engender much of a positive vibe amongst people investing in the company itself. those the current positions we have at the moment. gradually getting a bit of traction, moving to the upside. david: hopefully it holds. let's look at these potentially
other market moving events, further catalysts from around the world. we have been talking trade. end of itss the balance sheet runoff by the end of this year. yvonne: the data itself in this part of the world hasn't been pretty. bring up the chart dave put together. the export engine stalling basically. we are waiting for the january numbers, hong kong and thailand to report that neg leg. theh korean exports were first key trading day. it has been a great bellwether when it comes to global demand. that well over 12% with germans chinana -- shipments to down. our guest joins us to talk more
from hong kong. if you look at the grand picture when it comes to asia trade in particular, do you think any traded deal between the u.s. and china could reverse this? >> it would not reverse, but it would lend support. it is a degree of slowdown. we expect exports to moderate. we think a trade deal will be made. a lot of what is driving the export slowdown is chinese domestic demand. we are very convinced chinese policy easing measures will work. credit measures have been on the upside. that means the chinese economy stabilizes from the second quarter onward. the fed has seemed to be on the dovish side. david: when does it bottom? the rate of change is still pointing down. how long before these two things
-- the trade deal and consumption story in china -- when do those show up in the numbers? deyi: we expect the first quarter to be weakest in terms of gdp. looking at global gdp numbers for em's around the world, second-quarter is when we expect things could stabilize. yvonne: we have talked about how we have seen this parade of central banks turning more dovish and following the fed. is that exaggerating that we will see rate cuts? deyi: if i think about the monetary policy cycle for this part of the world, we have come to a point where we would not see any more monetary policy. i would see the central bank to cut rates following the footsteps of rbi. we don't have a rate cut in our base case, except for rbi. those at a greater rate of
fp.ing would be b david: we have that on screen, trying to extrapolate. been inflation has surprising to the downside. it feels like a global phenomenon. the downside has been on the oil front. at the inflation target in this part of the world, four out of the five central banks in the world which are inflation targeting has inflationb below the inflation target. it is quite different on the inflation side. yvonne: we were talking earlier about inflation numbers in china. will we see china exporting inflation around the world again?
deyi: that is not in our base case, but we are watching out for it. if china reaches deflationary territory, that could prompt pboc to take a rate cut. david: i know you don't look primarily at currencies, but given the weakness we have talked about, do you look at how some of these currencies in the region -- because of dollar weakness. is there a sense currencies across em asia are too strong given the fundamentals of these economies? deyi: there is always a disconnect between where the market should be and where we push it to. thailand, growth is not superstrong. there is vaguely any inflation in thailand. if the currency is weaker, it
could help thailand with their macro rebalancing process. because that is not think i -- is not in control of policy makers, spending could occur more on the fiscal front. david: morgan stanley asia economist staying with us to talk about what i just mentioned. yvonne: we are talking more about bank of indonesia, that policy decision coming up pretty soon. this is bloomberg. ♪
around the world winning the argument. it is different in bank indonesia because they were one of the most aggressive hikers in the region. pivot.en at hard the hold today was a unanimous call from our survey. the rupee it has been strengthening here to date. one of the stoutest currencies in the region. of the the core focus bank of indonesia, to maintain stability from last year. issue.lso a political in an election season, that is something they will be focused on. policymakers across the board, not just indonesia. last year was the widest it has been since 2014.
we will see if they make more progress on the current account trading deficit. they are also looking at inflation. that is getting them room to breathe, 2.8%, on the lower end of their target range. haslinda: you have to look at their policies, make sure it helps the people instead. david: leaning populist is a way of putting those policies into the election. let's get more on indonesia. let's start with just very short-term here. the meeting today, they are likely going to hold, bank of indonesia. was there anything from the fed minutes because they are turning more dovish that might -- i don't know -- make sense for the
indonesians to consider a cut? how small is that possibility? deyi: unlikely to happen today. secondll, it is a 2019 half thing we are talking about. -- isn't that long ago think they want to buy insurance on that front. --er sectors they will watch i think going 2% will be more comfortable. inflation also has two statement. -- has to stay low. beenl fuel subsidies have low for a while. he talks about wanting the economy to grow at 7% as it transitions from being a
developing economy so to speak. do you think that is ambitious? deyi: 7% looks unlikely in the next few years. our growth forecast this year is 5.3%. and even that i am getting pushback from investors, saying the growth forecast is a little too optimistic. david: i know it is a simplistic question, but growth has been stuck in that range as long as i can remember. what needs to get unshackled for them to be able to realize even 6.5%? deyi: indonesia does not have the debt problems a lot of other asian countries have, but they have a flow problem. they don't have enough liquidity, not enough savings. in order to grow, you need to generate liquidity on your own. that can only come if you improve your non-commodity's
competitiveness. to do that, policymakers will need to focus on institutional and regulatory reforms. those will be the first links of the game in order to get your non-commodities up. this process is very much underway. that is why our growth forecast is more optimistic. statistically, the biggest deficit since 2014, 3% of gdp. how much improvement can we see? deyi: we are expecting things to go to 2.6% of gdp this year. we believe it will narrow for a few sectors. global oil prices will help indonesia. expect export lending will also help.
remember the fiscal policy is more focused on fiscal concerns more than infrastructure. consumer spending tends to be less important. those are factors we think will bring cd narrower. haslinda: in terms of unwinding this recent tightening, can i pin you down on when that might happen? deyi: in our best case, we have policy rates on hold for all of this year. if we go wrong, i say the risk of easing is likely in the second half after the elections are over and we get more clarity on inflation and debt in progress to the retail fuel subsidy policy. haslinda: thank you for your insights today. david: let's have a look at india, up and running for almost three minutes.
i wish i had something more exciting to say, but that and indices at the bottom of your screen dead flat. i still early minutes. yvonne: we are pretty much quiet around asia. what are you watching out of india today? indices began where they left off yesterday. the company is trending marginally and the red. sensex is flat. the indian rupee has seen very little movement considering it is currently trading at 71 to the dollar. not much to speak for. certainly a lot of action in the banking space. haslinda: speaking of the what is thee,
reaction we are seeing? >> the public state owned banks lan going to see a recap p another $6.8 billion coming through. that will take the total to as much as $13.5 billion for this financial year. that is why we are seeing the surge in the nifty banking index. the index which forms the state owned banks is surging. the likes of corporation bank which will move out of the isrections active framework looking at a lot of gains, punjab national bank up as well. this is one story on account of that rate hike infusion. haslinda: still to come, we take to the skies. shares continue to sort after the airline expects profits to
yvonne: a quick check of business headlines. tesla has another bump in the road as it general counsel is leaving two months into the job. the latest in a string of senior departures, as ceo elon musk had to backtrack on production numbers he tweeted. tesla is facing a growing number of complaints from customers seeking refunds that have been significantly delayed. xiaomi have launched its latest smartphone ahead of the conference in barcelona. it goes on sale with a starting ings anag of $488 and br ai triple camera with a sony sensor.
costs are shredding the numbers of its international operations. fromargin narrowed to 2.4% 6.5% a year earlier. the burden is putting the international business to the edge of profitability, with revenue growth wiped out by higher costs. fuel increased for the second half was half of what it was for the first half. we are seeing our competitor's capacity come down to either flat or negative growth. that is good for those recovery fuel. it gives us optimism the second half will fully recover refueling rates. david: here we go. we have been watching the chinese currency. obviously a lot of news lines have been coming up to last 45 minutes or so. that has led to what you see.
belowfshore yuan trading the 670 handle we saw this summer. yvonne: reuters first reporting the two nations are coming up with these mou's to come up with a trade deal. the u.s. has mentioned they want some kind of deal before the first of march deadline, just eight days away. is part oforted dvgs the discussion, the distilled or dried grains duties china has imposed on the u.s. there is talk of reducing or removing them. moving. sent the david: cathay pacific is a big story as well. haslinda: an 2018 profit forecast of 293,000,002 u.s.
dollars. the turnaround is finally delivering. right.has done something the overhaul is certainly working. out to increase their revenue. they have revamped some of their aircraft to add more seats so they can get more revenue. they have done a few things with services like offering new premium class meals. they seem to be working very well, since they are expected to report earnings profit this year. haslinda: where are you seeing signs where this recovery is getting traction? does it still have momentum behind cathay, or are you still seeing challenges ahead? >> i still think there are
challenges ahead because oil prices have been volatile these days. oil prices have hit the airline's profit last year. that will be a key concern going forward, because that is out of control of cathay. the other challenge they face is talks with the union. they are trying to talk with the union on their pay, and that has been dragging for quite a long time. david: since you brought it up anyway, one of the biggest headaches for cathay was in hindsight that bad hedge they had on oil prices. do we know anything, if this as part of the reason why they are given such good guidance ahead of the earnings release? kyunghee: one of the things they
did when they started seeing problems and losses is went to the market and started shortening their hedging contracts. previously they hedged as long as five years. they shortened that to two or three years now. in most of the hedging contracts you have seen causing losses for them in the past, they are maturing as well. much of the bad contracts they have gone into are pretty much expiring. you should see some of that improving as we go forward. yvonne: thank you, our asia transport reporter from singapore. seng extendingng those lifting equities. this is a look at the nikkei, up one third of 1%. we do have cathay on the way up for a second day after that
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like never before store. the xfinity store is here. and it's simple, easy, awesome. ♪ >> emily chang in san francisco, and this is bloomberg technology. in the next hour, highlights from samsung, debuting their most extensive lineup of devices and taking aim at apple. and rising competition from china. tesla's general counsel leaving the company after just two months on the job. is 2019 shaping up to be as agonizing as last year for ceo elon musk?