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tv   Bloomberg Markets Asia  BLOOMBERG  March 3, 2019 9:00pm-11:00pm EST

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♪ rishaad: a sense of optimism taking place in this is the csi with a 2.7% gain on friday and moving up and up at the moment. going crazy at the moment compared what we saw last year as we headed down. the nikkei to 25 up 8/10 of a percent. the yen.action with it is all about optimism with trade and how close beijing and washington currently are. it is getting right down to the wire with a sense that a deal will be done. -- $20 billion worth of goods could have tariffs removed. will be done quickly or over a period of time? looking at chinese markets, we -- shanghairticular
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composite approaching that 3000 level. the best week we have seen since june, 4.5 years ago. flirting with the important level of 3000. that has in the past proved to have a little resistance. we have had this long, long streak of gains taking place. one of the longest rates we have seen for about three years or thereabouts. let's look at what has been happening. we saw u.k. prime minister theresa may, she has been given the provision that hardline brexiteers are demanding. the sunday times says numbers of the probe rags it -- pro brags xit group may have the overriding cause over the withdrawal agreement. the irish backstop was a
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temporary and clear route out of the backstop should talks fail. in japan, a record budget for the coming fiscal year starting april 1. lawmakers voted in favor of the millionrnment's 907 dollar package, ensuring a could be enacted before the new year begins. the budget will take effect 30 days after being passed by the lower house. wasinitial budget last year $873 billion. pakistan has reopened its airspace after releasing a captured indian air force pilot. amid signs cross-border tensions may be easing. international flights were disrupted when pakistan closed its airspace wednesday with carriers forced to devote or cancel services altogether. there are still reports of clashes and both sides accuse
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the other of killing military personnel over the past weekend. cfo facing extradition from canada to the u.s. has launched a counter suit. she filed claims in the supreme court of british columbia against the canadian government and police. this suit alleges false imprisonment and a breach of constitutional rights. she is accused of lying to banks to make transactions for huawei that potentially violated sanctions on iran. powered by more than 2700 journalists and analysts in more countries, i am su keenan. this is bloomberg. david: let's talk about our top story. the u.s. and china are said to be close to a trade deal. chinese goods
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lifted if beijing follows through on pledges ranging from things like better protection of ip rights and buying more american goods. let's get back to paul mckenzie -- tom mackenzie outside. we could see a deal. what do we know about what that deal might actually look like? certainly the sources we have in washington tell us the chinese demands in the last few weeks have been we will consider this deal, the purchases of aquacultural -- agricultural products. we want to see the tariffs lifted on $200 billion worth of chinese goods. speaks to the impact on exporters and the economy. what we are hearing is the u.s. side are actively doing this. as rich pointed out it is
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whether they will be phased out and withdrawn immediately. china has also said that beyond the additional purchases it may also look at cutting taxes on goods like chemical products and autos from the u.s. if we get this final deal. something else the chinese said they were considering and speeding up some of the changes to increase the ownership of foreign enterprises operating in china. a lot more still to negotiate in terms of structural changes. it seems like what we are hearing from those sources in washington, we are getting closer to this potential deal, a be in the next few weeks. yvonne: it is a big week for china with mpc kicking off. does the political pressure that facingnt g jinping is and how the trade discussion has moved forward, i have to wonder domestically, what should be expect?
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can policymakers deliver and actually keep the rally going? certainly a number of analysts would say you would not want to bet against the equity place when it is taking in beijing. certainly there is a focus, you are right on the policy priorities for 2019. that is when we will get more clarity. that kicks off tomorrow, tuesday. 3000 members of the government here for local government officials, members of the military and ceos are gathering in beijing. we will get the work report from the premier outlining some of these qualities tomorrow. the gdp target is clearly in focus and we are expecting that to soften to about 6% or 6.5%. we will have details later on in the week. this could go some way to relaxing the concerns in washington.
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this is potentially a system or new set of laws that could strengthen intellectual property . there is a number of different issues. this is in many respects the most difficult year. things are looking more positive but also the slowdown and of course the concerns. there is a lot for the president to juggle and we are hoping to get more direction in the next few days in beijing. rishaad: thanks tom. our next guest feels the discussions will be about technology, ai, cementing china's place as a world leader. >> good morning. rishaad: give us your thinking. you're saying where ai goes is where the global economy goes? transitionl be the between the old economy and the new global economy. who dominates ai, automation, and the future
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economy. yvonne: how should i look at this trade deal that seems like we are inking some kind of deal at the moment. is it the fact that we are at least reaching some type of conclusion? how should i be interpreting these lines? it is priced in at the moment. the reality is it will not be faces the 2020p elections next year. the trade war is definitely not over. from a markets point of view, the momentum trade has been up since march 2016. what was good about last year yields go above 3%, a dangerous level which triggered the last three concessions -- recessions in history. that is the sign that there is still some steam left in this engine. that is a positive. whether that continues through 2019 is obviously the million
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dollar question. rishaad: keeping it on china. they said they will come out with the global target. the only country in the world what they will be going at and they manage to do by the end of year. they do that in march. stirling: it was very scary statistic that 5% of funding was consumed in january alone. that is what's propping up the chinese growth story at the moment. whether that's the sustainable is a concern for investors. there are still some buoyancy in the chinese mainland stocks. the real question is where this is heading from a political point of view. particularly at market point of view for the u.s. and china. we missedave have out? stirling: if you zoom back out the trade from
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march 2016. if you believe there are still legs which suggest we have another 12-18 months you would stay in mainland equities. same with the s&p 500. if you don't, you need to look at alternatives. rishaad: what are those alternatives? stirling: there are a lot of megatrends. particularly moving from the old economy to this new economy is there are plenty of ways of capturing it. it discusses things like lithium, technology exposure, of those top 10 ai companies, china has three of them. that the it clear china 2025 plan is to dominate in all 10 areas. whether that is in the nasdaq in the u.s. or of course mainland here in asia. yvonne: are you staying a little more defensive than for the rest of 2019? do i look more when it comes to bond markets, gold? stirling: at the moment, to put it another way, no market
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plateaus and goes and collapses. there is no immediate retrace inside. the main implication as we will see a spike, a rally in equity markets and possibly a retracement there. you stay in mainland and the s&p 500 if you believe there is steam. if not, you start pivoting now. what is healthy is the relationship between bond markets in the u.s. and equity markets. how long that has to go is a question of assessment and that is one that individual investors need to assess. notes, you your mention china, is it mimicking the approach and tactics, what do you mean? stirling: it was a metaphor used in a bbc series. they referred to whether the british prime minister would push the button to nuke russia in a worst-case scenario. it became a geopolitical
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reference to how the soviet economy basically had influence over the rest of the world. how russia did that in europe was incrementally influence it and affect markets, particularly in the u.k.. that is very much what we are seeing in china with the initiative happening this week with the party congress and the move to in-house technology globally. one example is tictoc. it was the most downloaded app on the itunes platform in the u.s. last year. it is 100% owned by chinese entities. they are trying a very smart way of embracing themselves in the global economy. it thatyou like to call or smart marketing, that is what setting. yvonne: stay with us. we will have more with him from australia. he is sticking around.
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one investor tells bloomberg the air of outperformance is over. more from that interview. rishaad: president trump back to bashing the fed as he tries to stir up his voter base. more on that. this is uber. ♪
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david: welcome back. president trump has repeated his view that the dollar is too strong. fed chair jay powell he said is someone who likes raising rates. he said the u.s. is doing well despite the actions of powell. he wanted a currency that wasn't good for business. the dollar was quoted lower against the euro and the yen in early trades this monday after of course course, those comments. president trump: we have a gentleman that likes raising interest rates in the fed. that lovesentleman quantitative tightening in the fed.
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we have a gentleman that likes a very strong dollar in the fed. yvonne: that was the longest speech in his presidency. irling larkin.k str seems like the markets moved a little bit on these comments but should we care? stirling: absolutely not. i need to learn how to pronounce quantitative tightening like trump does. what is important is there is no a 100%here is -- this is political statement. the fed has been accommodating as they could be. they just came out discussing average inflation rate which would be enforcing more monetary policy. for 2020e is running it is 100% politics. rishaad: the thing is, look where the 10 year yields have gone in the u.s.. they have moved about 10 basis
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points while we have had a global bond rally. what does that tell us? how does it inform us about equity markets? stirling: you hit the nail right on the head. inre are still steam left the relationship between fixed income markets and the yield. as we referred to in the when the 10sion year yield went to 326, it came back and it stayed at that level for the last five or six months. when he the next retracement will see how much steam is left in this. we will definitely see a rally, hopefully in the s&p 500 and hopefully will be a healthy relationship. david: just to build on that point you just made, i am
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looking at the s&p, forward earnings in 2019. a little below 17 times. with the fed not doing anything, i would imagine that is taking down your discount rate. what, in your view would be a justified range of valuations before we can say they are expensive again? that is quite an open-ended question. we could see another 10% or 15% of upside on the s&p 500. people are expecting a retracement or a recession. the funny thing is there is no science behind this observation. recessions seem to come when people call recessions. likely means we still have another 6-12 months of the markets going sideways like they have through 2018. what is important is whether we believe the momentum can see us
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through 2019 and 2020. if we don't, we consider other investments like the megatrends we referred to a few months ago. david: what does that one way look like then? if we get to a recession between now and say when risk assets fall out of favor, how long will that be? i know that is a moving target. stirling: when it will be or how long it will be? david: we know it will hit but usually risk assets rally into a recession. in long-term, how long does that look like? stirling: this time around it will be very quick. the reason is they are referring to how we open this discussion today. we are moving from the old economy to the new economy. that means a technology is driving behind markets. he saw in the s&p 500, the market didn't go down by more than 2% on any given day. what it indicates is the computers are pushing markets
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into keeping that movement going. when we do see the retracement it will move fast and hopefully not too volatile. yvonne: in that case, i am, at what point do they start bringing back rate hikes in the fed? stirling: five years ago. yvonne: i feel so complacent at this point. people things we could see rate cuts as soon as 2020. there is still i guess the inflation picture, which is still muted but people are saying there is a chance that perhaps this is the year things will start flaring up again. are we too complacent? stirling: 100%. we have been far too complacent. should be much higher, we have known that for a long time. the fed is not representing the true underlying boeing see --
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buoyancy. when we do see a retracement, people will refocus on what is going on in the underlying economy. now it is to position ahead of time and consider, do they think there is not much left in this mainstream momentum trade? in that case you look at alternative investments like the megatrends or other options as well. a australia, we have not had recession since september, 1991. similarriends who are aged to myself who grew up in don't even know what is a recession. that is very unhealthy. rishaad: is there one coming in australia? the housing market is looking distinctly shapely. we have things like negative during which could accelerate this process. are there signs of perhaps china demand falling off? these are things not good in australia's favor. stirling: i set myself up for that question, did night. what is important to realize is it would be healthy to have a
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recession. abnormalities in the australian market, both in the real economy and equities as well. rishaad: pleasure having you on the program. thank you so much for coming in. look at what is happening. david: just to mark some of these lines coming out here. , that unitit of hna is said to be attacking second-round bids. we are talking digital china. other suitors includes advent here. we will get you more details on this. it looks like based on the headlines coming through that it has asked for binding bids within the next few weeks. we will get something more concrete when we have that 40. lots more coming up here on the program. stay with us. this is bloomberg ♪
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juste: let's get the lid -- latest business flash headlines. elon musk keeping his investors glued to his twitter feed. be ans the model y will suv and will be built using many of the components from the company's first manufactured car, the model three. it will be 10% eager and cost about 10% more. faces a tax bill for miscalculating income of withholdings from workers in early retirement and also marketing and catering expenses. back to 2009. it also includes the cost of the 60th birthday celebration for then boss matisse mueller. yvonne: facebook and its instagram unit are suing people in china for promoting the sale
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of fake accounts, likes, and followers. facebook says fake accounts can be used for spam, fraud, and misinformation. it said it used ai software to find and disable more than 2 billion fake accounts last year. rishaad: let's have a look what is going on right now with japanese markets as we go towards the lunch break. , proximityto 25 reported between a trade deal between dcn beijing. a little bit of yen weakening too. it is nearly ¥112. let's have a look at what is going on with japan tobacco, facing a class-action lawsuit of something like 13 billion canadian dollars. they lost this appeal. some, nexon --
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, it is have the recce 10 on the way up just over 5%. with a look at japanese markets. this is bloomberg ♪
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>> is 10:29 in hong kong. i am su keenan with the first word headlines. we begin with reports from washington which say that most if not all u.s. tariffs on china are to be lifted as part of a trade deal that is approaching its final stages. sources say beijing has made it clear that removing duties on $200 billion of chinese goods they one would be critical to financing -- to finalizing a deal. the white house wants a conference with president trump and xi as soon as march.
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meanwhile, president trump is saying the u.s. dollar is too strong and lashed out at heirman jay powell, saying loves to raise interest rates. he said the u.s. is doing well despite the actions of powell and his colleagues, and he wants a currency that is good for business. the dollar was lower against the euro and yen in asia pacific trading on monday after the president's comments. >> we have a gentleman that likes raising interest rates. lovese a gentleman that quantitative tightening in the fed. we have a gentleman that likes a very strong dollar in the fed. venezuelan opposition later -- leader says he will return home despite threats from president nicolas maduro that he will be arrested if he does. -- he met mike
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pence in columbia and with gathering support for his bid to depose maduro. he is calling for supporters to march on caracas on monday. space access taken a giant leap for it the successful docking of its first astronaut ready capsule at the international space station, or iss. the craft was making its maiden flight and the only passenger on board with a life-size robot dummy named ripley, after a character in the "alien" movie. in 2014, nasa gave spacex and with moreng contracts than $6 billion to fly u.s. crews to the iss. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan, this is
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bloomberg. the bond king has finally bowed out. ill greece was -- l gross was the biggest name in fixed income, but he still has some surprises of his leave. hean exclusive interview, told us the air of performance is largely over. bill: i think there are things to look out -- to look at in the market. generatinglities of in the same way are much less than they were. outperformancef is not over, it is what? bill: it is certainly diminished. because, you know, it is harder to say the stock
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market isn't a bear market. it is easier to say that 0% interest rates in bonds, basically can do no better. a 10 year treasury over the past 30 years had an information , it could be simple, and how far, of 30 or 40 basis points. just holding it. the bull market and having it roll down the yield curve to a nine-year produce structural alpha. 10 years do not roll down the curve anymore and they only yield to 70 -- 270. andrmation ratios and sharp alpha generation, which in part over the past 30 years, was generated simply by the market , wherever you were.
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the opportunities are diminished. speakingbill gross exclusively to us. let's get to what is happening with bond markets and fixed income. they are not bullish on emerging markets globally. good to see you. give us your thinking. >> we've been going through deleveraging in the last year, two years and china. it has come to an end. we had an important event last week that further confirmed to us the china has a base under it, that was a change in trust. backanks can get lending into the economy. as far as were concerned, china has its shadow gone. it had got rignet but -- have gotten rid of it.
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the private firms are in the high-yield names, and in particular, money is going to get back into property. today, we had a strong rally, north of 6% in asian high-yield or chinese property bond. we think there is another 5%-6% rally for the remainder of the appeared we are -- of the year. switchingt should be out of european and u.s. high-yield back into asian high-yield, and particularly chinese property bonds. yvonne: how do you see the push and pull with what is going on in the equity market. is that going to impact inflows into the bond market at all? hayden: the space i was talking about is hard currency. definitely not. on the local zika my think you're spot on. chasingenough, they are chinese government bonds because they want to use those for
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collateral so they can get into the stock market, which is kind of counterintuitive. one thing to watch, around april of this year, bond market inclusive -- inclusion into the global indexes. how do you still is that amount of money coming in over the next 12 months? it will probably not end up in the housing market. my guess is bond market inflows are going to end up in the equity market, which will give us higher at the end of 2019. rishaad: does bond connect make a difference? hayden: we are using both channels. yes it is accelerating and making it easier for global investors. if you are big enough on the ground now, you go through icbm access. david: as a follow-up to what you brought up, the inclusion for april, where do you think
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the allocation gets taken from? hayden: we are already seeing it from institutional clients. it is coming from under yielding bonds. you are chasing income. it is going to come from every single bond market around the world. we are telling clients, please be researching this, even if you don't want to buy a chinese bond. it will impact your portfolio, as the re-waiting process starts. over the next five years, we think it's going to go to something like 20%-20 5%. one, because credit securities will be included at some stage, and second, the bond market will double in size so the market cap goes up. this will be the biggest change in capital markets anywhere in the world, and ultimately it should end up leading to summer like $3 trillion u.s. info -- inflow. that does not happen overnight. it takes time. david: correct me if i'm wrong,
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the initial allocation goes into sovereign. i can't help but think we're going to get a basic spread of china over u.s. the 10 year, about 46 bits. change, is a mess of does it drive yields lower in china and do we see a discount eventually between u.s. and chinese debt? rates: yeah, the chinese hang around the 2.5% level. you can fully hedge your currency now so there is no risk there. it is quite easy. you do have to make a currency call. the spread of deadly going to compress. we don't think there is enough chinese government bonds on issue to satisfy global demand. let's hope they keep running a fiscal deficit. they need to keep increasing the government bonds apply. it is a funny structure, nowhere else in the world are the policy bank so you -- so large. see the supplyo
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increase in the market. yvonne: the that impact the currency? i'm wondering because of the rally we have seen. do you see it having legs? it seems to have deviated from fundamentals quite a bit. hayden: nobody is talking about that, right? nobody is talking about the inflow coming through over the next 12 months. that is a scary thing. everyone is paranoid about the outflow. once the inflow comes in, i'm more worried about how to they sterilize that huge amount of money starting to come in from april onwards into the country? normally it ends up in some other asset, because they can't sterilize it that easy. it could end of the neck we market, i think. rishaad: that brings us onto any people's predictions, weakening after rallying. with that money coming in, it has to be a win positive. hayden: it is come and also focusing on what is happening with the oil market. ruanetro you're on --
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deal. more people are recycling back into -- rishaad: but the overall narrative is to get price of the dollar frame into the rmb frame. hayden: think you are spot on. if you look at what happened with the quotas, you can trade commodities on the exchanges in china if you are a global investor. again, it is essentially changing. we caught up with a lot of central bankers in bali, and the number one conversation is how do i move away from dollars to renminbi? we know they are moving in that direction. this is starting to happen in commodity markets, bond markets, and as the msci changes on equity markets, we get a further increase in remember the allocation -- in renminbi
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allocation. yvonne: in january you were more cautious on the rest of the ian space. what are the concerns now -- the rest of the em space? one or the concerns now? hayden: china's recovery this time, it used to be a v-shaped recovery quickly. during the credit caps on, you go through the roof. this time, because they are focusing on private enterprises, it is an l-shaped recovery. it will be longer and in an l-shaped because they are focused on the internals of china. pushedpast, if they liquidity or credit into the economy, you got an instant response in the yen. i don't think you will get the same response. much --cus on the into on the yen too much. i think at the moment behaviorally, you get an impact
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that will be a shock down the track. is not such a big credit impulse as in the past. yvonne: always great to have you here. up, fighting back as canada and china tensions heat up. this is bloomberg. ♪ ♪
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♪ the huawei ceo is under house arrest in vancouver and she is suing canadian authorities saying she was wrongfully detained and search. it was felt the same day as the canadian government agreed to begin the expedition request of the u.s. we are joining -- joined by our asian tech editor. what she alleging in this suit?
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>> she is alleging that the way ,he was taken into custody was constituted unlawful detention and interrogation and search for property. what happened is she landed in the vancouver airport about 11:00 in the morning. she was taken into custody by border security. she was not told, allegedly, what she was being taken into custody for, and then they began to ask her some questions. they asked for access to her electronics. she had to smart phones and ipad, and computer. they got the passwords for those and went through them. she was not formally arrested at that time, which would have triggered some key protections in canada, including getting a lawyer in being able to not answer questions. she was originally detained under the auspices of border security, were they do have the right to look at all of these things. it was not clear at that time why she was arrested.
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the dispute is she should've had legal representation from the beginning and the right to not answer these questions. david: bit of a great area -- gray area. talk about timing. why is the timing of the arrest important? peter: the key question for the lawyers, theawei allegation is that during these three hours, she was not given the legal representation she would have been entitled to if she was formally arrested. lawsuit, it'se interesting, i was just looking at it. there was an arrest warrant and is that she should be immediately arrested. their argument is immediately arested means you should wait three hours a lever with border security to be questioned. is also not clear what came out of those three hours. they do not do tell any statements she made or evidence gathered from the electronics. the u.s. case against the
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company is broader than this, bank fraud and violating sanctions against iran. it's clear the u.s. had that evidence before these three hours. it's not clear where the cases can go from here. week, we were talking about how pivotal this week would be. the extradition hearings starting canada. much should be -- what should we be looking out for? will there be fireworks? there are a lot of things going on at the same time. are in tradechina negotiations. were getting signs that those could be moving in a positive direction toward some sort of resolution. i andispute between huawe the u.s. is not moving in that direction. last week we had canada deciding on the extradition, they are going to proceed to move meng
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to the u.s. so there is the broader case that the company has to fight. yvonne: thank you. our asian tech executive editor. let's do a check on the business flash headlines. the ceo of valle has stepped down temporarily as the company comes under scrutiny for going to prevent a second fatal them collapse in brazil -- fatal dam collapsed in brazil. he said at the time, never again. however, another collapsed last month, killing 169 people. david: the chinese currency trading stronger against the dollar. it has been asia's second best-performing currency since the start of last month, but the rally may stall as traders shift focus from the trade war to the state of the economy. the rally has seen the currency reached its strongest level against the greenback since
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july, but it is said the currency will likely weaken in line with weakening eco-data and any sort of good news on the tray dispute will -- dispute has been priced in. new survey from citigroup says s&p 500 companies repurchased more than a hundred billion dollars of their own shares last year. surpassing what they invested in new equipment for the first time since 2008. this is partly due to president trump's tax overhaul. citi says is dominating the use of cash over the longer term with investment seeing $6 trillion over the past decade. rishaad: let's look at the chinese markets. we are seeing higher gain for equities in this part of the world. the greater china rally continues. with relations coming out good for your figures for 2018.
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there was a profit warning in there as well. it's a case of people looking at things and being prepared to take on risk and ignoring some of the bad news. china is making waves, we have it as one of the possible hma divisions as well. not the only possible bidder. sands china has said that sheldon adelson should not affect day-to-day operations. bidders apparently n.r next on -- nexo they are one of five. there is a look at some of the companies making waves at the moment. this is bloomberg. ♪
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rishaad: it is battle of the charts. be putting our best charts against one another. yvonne: viewers can access the charts on your bloomberg, just run the function at the bottom of your screen, gigi b go. go.
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>> i have this chart, the nikkei ratio. it's basically for presentation of ratio. topex, and theby ratio is currently near its highest in more than 20 years. there are many ways to interpret this. one of those is that the japanese stock market might not be as strong as you think it is. both of the nikkei and topex have risen by more than a percent this year, which is a pretty strong rebound, but the nikkei continues to outperform the topex by a significant proportion. one of the reasons is automakers a bignks, which take up proportion of the topex, and japan's corporate profits in general are underperforming. the nikkei doesn't really have a fair presentation of these industries. the nikkei, has it is a price
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weighted index, its performance is dependent on a select number of stocks like retailing and others but -- others. the fact that the nikkei outperform shows it's not a representation of the whole market. you should not just focus on the nikkei. yvonne: all right. that's a different side of it, which i like. wes? wes: there has been so much talk about china's growing influence on the world stage, and here is one more piece of evidence, which is the bond market, these are charts of the total size of the bond markets. , itbottom line coming up shows china's bond market is growing and is about to overtake japan since it the top line shows the u.s. is the world's
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biggest bond market. china bonds will be added to the global benchmark indexes this year. starting in april. this year and probably in the years ahead. you may find because of that that you have some china bonds in your own portfolio soon. yvonne: we were talking to hayden about a lot of money headed that way. i like both charts. . am going to go with min it shows something, which i felt was interesting, which we don't see often. rishaad: i think wes has got it. it was pressing, we were just talking about it. idea of the the market opening more. yvonne: tiebreaker, dave? david: you don't have to look at my face. here we go.
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effort, but wes, big market story. just for our clients, check out the charts. you run the function and it takes you to our charts. very cool stuff and hopefully you find it useful for your own analysis and reference. have a look at these live pictures as well, looking at the free trade agreement. we're talking indonesia and australia. headwinds for both economies front and center, and really underscoring why these companies need to do this. we will get you more details and we will be live out of sydney, next. this is bloomberg. ♪ this is bloomberg. ♪ so with xfinity mobile
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♪ it is almost 11:00 in singapore, 8:30 in dubai. i am said haslinda amin. rishaad: and this is a look at our top stories, with china leaders gathering to set goals for the year, the president is promising progress and prosperity. sources in washington say the u.s. and china are in the final stages of an accord that would see tariffs lifted. speculation lifted the yuan, while the shanghai composite is trading around 3000 for the first time since june. this is "number of markets --
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"bloomberg markets." ♪ haslinda: gain for most of asia. optimism that the u.s. and china will come up with the deal pretty soon. there is optimism that xi and trump will meet as early as later this month as long as china lives up to pledges, and progress continues. looking at where we are at now, we have the csi continuing, up by 1.9%, already up 25% year-to-date. if it wants to get to the pre-trade war level, it still has a further 8% upside to go. japan higher by 8/10 of 1%. pretty much boosted by exporters. we know that a trade deal between the u.s. and china will be to the advantage of japanese
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exporters. gains for indonesia, new zealand, and the home -- vietnam in positive territory. at the fork space, some calling for a weaker dollar. one currency to one side is the indian rupee. it is up at the moment. the, nott the next joining in the rally. other frustrations still there as we went up to an election that is by no means certain, and on top of that, we have problems with debt issues and evaluation story around india's high valuations. notaps playing part of them being look at at the moment because people are looking at china instead, because they have
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cheaper stocks. looking at the negative start there for the nifty in mumbai. let's get our first word news. in the u.k., the prime minister has been given conditions that hardline brexiteers are demanded -- demanding. membersay times said might back her if she agrees to a legally binding clause that overrides the withdrawal agreement. the stronger promised that the irish border backups will be temporary and a clear route out of the backstop if top -- if talks fail. the u.k. foreign secretary says is in the last chance saloon with peace talks in yemen . meeting his yemeni counterpart, he warned that it is the worst humanitarian crisis in the world at the moment and that opposing sides need to follow through on the peace talks they held in
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stockholm in december. in japan, a record budget for the coming fiscal year starting april 1. lawmakers voted in favor of the abe governments package, ensuring a can be enacted before the new year begins. under the constitution, the budget will automatically take effect 30 days after being passed by the lower house. the initial budget last year was $873 billion. pakistan has reopen airspace after releasing a captured indian air force pilot, and made signs that cross-border tensions may be easing. international flights were disrupted last wednesday, with flights forced to divert or canceled altogether. still, both sides are accusing the other of keeping military personnel over the weekend. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am rosalind chin.
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this is bloomberg. haslinda: thank you so much. never mind growing anti-globalization sentiment. the signing of the trade pact with indonesia and australia. it is a long time coming. it has been worked on for years. it will cover automobiles, textiles, and human development as well. a very significant trade pact for indonesia. rishaad: indeed. we've had a problem in indonesia of late with exports a slumping, especially in the last three months or thereabouts, but the country is going all-out for trade. we are seeing this with australia, we've also got the country close to sealing deals with iran, turkey, and the european union. officials also sing they are
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looking -- saying they are looking for partnerships. indonesia,tralia and no doubt we will be visiting jakarta for more. haslinda: it has been a volatile relationship between the two neighbors. bloomberg subscribers can continue watching it live. we have big diary entries coming up today and as well as some of the events you may have missed. rishaad: keeping tabs also on the international people's congress. will of course get you to that as our china correspondent tom mackenzie is nearby. he will be joining us. indeed, tom? tom: yes. the national people's congress, the annual parliament in --
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parliamentary gathering for china, you have delegates meeting here. we are outside the forbidden city. is where thel actual become a few hundred meters to my right. they will kick things off tomorrow with the so-called [indiscernible] the focus is on the list of priorities that the premier will lay out in terms of the economy for 2019. squarely in focus will be the gdp target, which is expected to be softened up from about 6%, the target last year, to between 6% and 6.5 percent. also expecting to get details around the deficit. that might increase to 3% to eight fiscal support, 2.6% in 2018. we will also look out for new foreign investment law and details around that. we expect to get some changes around intellectual property and
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tech transfer, in demand from the u.s. in terms of negotiations with the chinese. pbocve a lot going on, the presser at some point tomorrow afternoon where we are expecting more details on monetary policy as well. there is a lot for markets to digest as the event gets underway in beijing. haslinda: tom, the u.s. expected to watch this closely as well in terms of policies and where they are headed. tom: absolutely. opportunity for chinese policymakers to signal to u.s. counterparts that they are serious about some of america's primary gripes when it comes to the trade relationship. i think the foreign investment law, which we are expecting to be sped up, the passage in review process, that it will be a key signal from chinese policymakers that they are serious about strengthening the intellectual property regime and eventually even outlawing completely forced tech transfer, something that chinese officials
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deny have happened. they are under pressure to codify that in law. that process may be sped up at this national people's process. -- congress. hence the importance of this annual event, which is expected to be one of the most difficult years for xi given the slowdown and questions about debt and ongoing trade conversations with the u.s.. haslinda: financial stability one of the key three areas china is focusing on. what are we expecting from that? , financial stability. we have debt stability as well. the question of keeping a cap on the debt even as they open up ots asig its -- the spig well. also, pollution as well. policymakers thread a fine thread and not ramp up liquidity to much?
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we are expecting support for fiscal support. we spoke with someone earlier that said they're expecting cuts up to $120 billion in terms of the pride -- support for private enterprises. were also expecting and take up and local government bond issuance. that's the expectation from the likes of the chinese investment banks. towardonds will go spending on infrastructure, which fell off a cliff in 2018. we are expecting a tick up in in the structure spending. the pboc will be in focus tomorrow with its presser. they want to say that financial stability remains a priority for them even as they take measures to support growth. rishaad: thank you, tom mackenzie in beijing. guests been asking our to weigh in on what they want to see from china's leaders. on the top of my wish list is
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the foreign investment laws. i'm interested to see what they will do in terms of technology transfer and opening up. >> i think to see some sort of concrete measures that are likely to see sustainable growth beyond this year. >> the market would like to see more for sure. for example, monetary and fiscal policy. >> at this point in time, when the data points have been quite poor over the last three months, i think anything that sends a signal that they are back-checking will probably be taken poorly. >> the question is, we haven't seen much details regarding this. welcomed bywould be the market to see some details and explanation about this target. i think they are trying to play it smart this time. on the one hand -- i think the key is stability. growing steadily, but with high
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quality rather than uncontrolled angled and also directions. rishaad: there you go, opinions from our guests on what they want to see from the npc. ken, what you want is a? -- want to see? >> those points are important. space forimited supplies on the from. a lot has been well expected. i'm looking more on the regulatory side. withdo they plan to do regulation on education, media, gaming, things like health care? those types of more structural things are, i think, much less obvious compared to how much tax cuts there may be.
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haslinda: i want to take a look at what this means for the markets. we can take a look at this chart, 6729. chinese stocks seem to be going pretty much gangbusters, and some say that perhaps a 4% upside from here. what is your take? this creditook at impulse, right? you look at january, a record-breaking number. what that has done is list credit impulse, which is basically the changing credit. that tells me that sometime later this year, we could get to a more supportive position and that could give us a higher theation, for example, for msci china index, looking at about 15 times. currently, even after the rally we have seen this your, were only at about 13. -- we are only at about 13.
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put that with potential earnings growth, we are probably only halfway done with this rally. it might not happen in a straight line. but i think we are only halfway through. haslinda: at some point, the fundamentals will have to be taken into account why the markets. we are seeing even today weaker pmi from korea and taiwan. would you think that will happen? when that market starts focusing on fundamentals as opposed to this momentum? few weeks, wext are still probably in decent shape because we are looking for more policy announcements. this, we might get an announcement with trump and xi on a trade deal. the young that, first quarter earnings numbers might not look very good. i think that is when we would expect a setback, the april-may timeframe. i think that creates an
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opportunity rather than an end of the rally. rishaad: looking at china small-cap indexes, upper 4% is incredible for this index. what about the shanghai composite? in june, it fell below 3000. the thing is, that's when they were going to release the list of goods that were going to be -- tar now there could be a deal on the table and were getting toward 3000. there is almost serendipity. ken: i think again, the credit growth is going to be a major driver for the index. we have the index occlusions announced last week -- inclusions announced last week. easing,ely have credit the market -- the onshore market tends to respond more.
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i think the lift from credit to valuations should be larger in the onshore asia market anyway. rishaad: please stick around, we have a lot to talk about. up, just over 10 years since buying jaguar and land rover, a case of buyer's remorse. we look at the struggling automaker. ♪ haslinda: next, investment strategy for emerging asia as the u.s. and china get closer to a trade deal. this is bloomberg. ♪
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♪ rishaad: the united states and china focusing on patients and stability. many investors hungry for
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short-term gains may be turning to emerging markets at least this week. fedsding to analysts, the rate hike calls and china's return to stimulus could breathe life back into the em space. ,aslinda: let's bring back ken who is overweight in emerging markets. pretty much free money encouraging risk-taking, especially in emerging markets. be won't this he fatal -- fatal? had thet year, when we , toward the scare end of the year, but really through the year em was in quite a bit of trouble. a lot of that was because of higher u.s. dollar cost and a meeting u.s. dollar,
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capital was leaving emerging markets and going to the u.s., thanks to tax cuts. thinkng to this year, i the expectation of the fed is at most they can hike one more time, and they are probably going to slow down the pace of the balance sheet and probably stop by the middle of the year. that means there is less drainage of liquidity. on top of that, you have china providing more liquidity that we just talked about. the ecb is contemplating another round of [indiscernible] and some central banks are likely to cut rates. we will hear tomorrow from malaysia and australia. they might not cut rates tomorrow but i think the tone is decidedly dovish. to put everything together, both dollar borrowing costs and local currency borrowing costs are coming down. i think that extends this cycle, the positivity, for a while. i think it does contribute to
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potential outperformance of emerging markets versus the u.s. haslinda: so where are the best opportunities? are you liking indonesian bonds, for instance? ken: they are definitely offering a higher yield. we wouldn't expect the u.s. dollar to be a range bound situation. a little weaker later this year. that gives investors an opportunity to capture carry come more than most other markets. rallyd: quickly, is this a bear market rally? what is it? ken: probably the rally before this cycle ends. rishaad: when does that and? ken: last year the common consensus was sometime in 2020 we will see the next recession, but what i just said about global central banks, return to dovishness, it's earlier than
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when we would have expected. that may have extended the life the cycle longer. now we are pushing it back to perhaps 2021. a little longer runway and we would've expected lester. rishaad: thank you so much for joining us. at hma, the look tech unit. it is debt laden and apparently attracting suitors from china as well as a big name. details on the way. this is bloomberg. ♪
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♪ just getting this news conference taking place in beijing as we run-up to the chinese national people's congress taking place. they say they will be voting on a foreign investment law on the 15th of march. just one headline coming through from the conference.
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let's have a look on what is going on here. we have hna technology outsourcing, attracting interest from potential buyers. the debt laden chinese conglomerate is looking for possible bids in the next few weeks. what has happened? where we going what we know so far? >> basically the company has for a second firms round of bidding. the second round will be in the coming weeks. assetse trying to sell for the second time and they have not had much success, so they have credit suisse on board to help. what challenges do they face? vinicy: i think valuation is a
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challenge. 70 -- 700to recoup million they bought in 2016 from blackstone. apparently the business has deteriorated a bit and the bidders may not be willing to pay as much. rishaad: thank you so much for that. were having a look at data, a debt laden conglomerate unloading assets and tech outsourcing is well. [crosstalk] rishaad: chinese markets on the way up. 2.6% up. ,mall caps extending further 4.3%. today is all about optimism surrounding trade. haslinda: that's right. trade deal.
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indonesia and australia, a longtime coming. dealoptimistic that the would come through in an environment where there is rising anti-globalization. we are also keeping an eye on the meeting happening in beijing. a crucial 11 days for china's economy. that begins this week. we are looking for some kind of indication on policies on the part of the chinese leadership for the year. they're also looking to stabilize growth amid concerns of trade and that. what we have is optimism generally since the beginning of february. we have a look at what has been happening. $1.1 trillion of value added since the start of last month. let's face it, we have 2018, the most chinese investors would like to forget about. you add the rally today, and we
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are probably closing and on about a $7 trillion market cap for the whole index as well. more --surging wants once more. we are up. this is bloomberg. ♪
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♪ >> almost 11:30 a.m. in the lion city. we are in the middle of the trading day. gains%, the second day of boosted by the optimism that the u.s. and china trade deal will somehow come together, and of course we have the deal happening right now, we are awaiting policy announced by the leadership to give some kind of indication of where we go from here. let's take a look at the first word news with rosalind chin. 's big policy talks have begun with what they say is the big picture,
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policymakers continuing with the form. the talks include building a moderately prosperous society and upholding the core position on the communist party central committee. washington say most if not all u.s. tariffs on china are to be lifted as part of the trade deal approaching its final stages. sources say beijing has made it clear that they will reduce the terrorists, necessary for any deal. the white house says there will be a summit as soon as mid-march. president trump has repeated his view that the dollar is too jay powell isat someone who "likes raising rates." he says the u.s. is doing well want ofthat and that he you that is good for business. the dollar was lower against the euro on monday after the
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president's comments. >> we have a gentleman that likes raising interest rates. lovese a gentleman that quantitative tightening. gentleman that likes a very strong dollar. >> and spacex has taken a giant leap forward with the successful docking of its first astronaut ready capsule at the iss. it made its maiden flight with a life-size robot dummy named ripley. nasa gave spacex and boeing combined contracts worth more than $6 billion to fly u.s. cruise to the iss. global news, 24 hours a day and at @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm rosalind chin. this is bloomberg. >> just a quick snapshot of
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what's going on. nikkei 225 coming back after the hour-long lunch break, 1% up, part of this down to a move up in the exports as we've seen the -- the hangagainst seng again is falling on the heels of what going on in china. they did just close up for their lunch break in shanghai. .5%,is a position up by trade optimism responsible for what we are seeing at the moment, people looking at the and that these are compellingly cheap. australian moving higher as well. about -- we have c, waiting to see what
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policies will be adopted. what do we need to hear to ensure that momentum can continue? >> i don't think we need to see anything concrete. what we need to know is they will be consistent in their tone. 2018 for the chinese government was a deleveraging drive. there was the trade war, the global context, the domestic context. we saw that shift, and in goingr they said we are to support the domestic economy and to mystic assets. in february we saw proof of that. we saw the poc allen's sheet expand massively in december, credit wrapped up in january. have already made clear they will support the economy. what we need to know now is that they are not changing tack. >> i want to ask you the question of the day, if we can bring it up. what is worse for the global stock market? the numbers out there, some say 9% or more. >> it's about 9% year to make a
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new record high in the msci all country world index. we have already risen 16% since the christmas day low. many say a lot of the optimism is priced. you've got to remember, what are the three big negatives? the trade war, the leveraging, and the fed hiking cycle. they are all turning positive. if we get a trade deal, the three big headwinds in the global economy are tailwinds. it's an incredibly supportive environment for investors if the trade deal is signed, but it is still a big if. >> looking at the mliv blog, there is trade optimism, not ,nough to lift tech stocks partly down to uncertainties about what might be done with the ip deal. >> absolutely. it is important to differentiate
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between the time spent. obviously the games you see in chinese stocks have been incredible, and short-term it is hard to know where the price action will take us. even if we get confirmation of the trade deal, it could be in the very short term. but i think that overall this year, the environment is incredibly supportive, and overall, stock prices do not look stretched, even on a trend basis. if you take the 10 year trend going back to the start, or even 10 years ago today, it is right in the middle of that range. it's a very sustainable slope. it looks like there's a lot of upside still to come. it does not decide where the next will go. l> the most bullish bul could appreciate that. you can follow more of the story on our markets live blog, mliv .
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you can get a market run down in one click, with commentary and analysis from our expert editors so you can find out what is impacting your investments right now. let's look at what else has been happening. the aberdeen co-ceo martin theert maintains that united states is a particular bright spots. he spoke to us earlier about the market impact of trade tensions and donald trump's complaints about a strong dollar. ourselves whyask he is commenting on the dollar. he clearly wants it weaker, of course, to boost exports and continue growth in the economy. i think the u.s. is doing fine. growth is good. management, you ignore the u.s. at your peril. it continues to do -- the stocks continue to do well. >> speaking of stocks doing
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well, you said last year equity is the best investment for 2019. we have seen such a healthy correction. do you stand by that call? >> i think so. we will hopefully go back to what i would call normalized markets, that quantitative easing has officially almost finished. i think that brings back stock pickers. ours,siness like bottom-up stockpicking style, more tending toward volume rather than growth and quality, had a tough time the last few years until the last quarter of last year. i hope they are turning back toward active rather than a more passive style of management. >> does that continue when we start to see the fact that the u.s.-china trade relationship -- at least by the headlines we are close to some sort of agreement. >> i think hopefully we will get some sort of agreement.
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-- i think trump would like to reach an agreement. it is whether we can now take the hawk of his own government who really tend more toward being anti-china than he is. >> is that still the greatest risk, or is the fact that we are now approaching march 31 bringing in a greater risk? >> i think america and china are much bigger risks and brexit. , andt is more localized probably a bigger risk for ireland and anyone else, because their supply chain comes in through the u.k., nuc predictions, that there's a hard brexit that could see a significant slump. and it's a risk for europe as well. >> i want to go to the co-ceo,
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speaking to us exclusively. still to come, from the jewel in the crown to a crown of thorns. the options for -- after it caught the biggest loss in history. this is bloomberg. ♪
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♪ we are back with "bloomberg markets." deteriorating, tough options including the stake sale of a partner. a recent announced on falling writing thate been it simply isn't coming in as fast as it is going out. quite a lot of this was hubris. i think jail are -- jlr has
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been an iconic brand and it tried to stay ahead of ice ending a lot and billions of pounds of investment, but a lot of those strategies have to be tempered with the market kind ofent and you think about how much are you having to take on to spend all that money? are you taking on a lot of debt? are you tapping markets repeatedly? r cash flows sustainable? it seems like the company had a thoseer of that -- turnarounds weren't concrete enough and eventually what has happened is -- they are now in a where they are necessarily being bailed out immediately, they are looking for options of how to keep it running at an appropriate pace. that is where it is.
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they are hoping to return something and there's no clear path -- they haven't laid out anything for investors to be like -- this year we are putting this on the page and this is how much cash we can guarantee coming in based on these operations and investments but you are not seeing any of that. that's where the hubris is. washe thing is, you say it a long time coming. why is that? >> this pattern of spending has been going on for a while at this point. looking back to the past few years, you look at where they have been raising money -- last year they ran through a billion-dollar loan facility. if you are running through cash , all of these
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pressures for carmakers globally, you would think at some point a couple years ago or even earlier you would have stopped and thought we should probably cut the spending back a little more, and where we are spending, and spend where we can hope to see returns. that pattern has gone on for a few years at this point. >> you are staying with us. let's bring in -- jaguar land -- the director of automotive advisors joins us. the biggest loss of $4 billion has already cut 4500 workers, you say there are headwind still . what are the biggest? >> hi. jaguar's problem is the size. was always restricted to a
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few markets and now the two main markets are the china in the u.k. with problems going ahead. china is facing an economic slowdown and we are entering the brexit. jaguar is investing a lot, no one is making money and that right now. that,turns coming from it's a pretty good product and they are doing well, but they will need much more investment in that area and there will be many more products in that architecture. all of that amounts to a good amount of investment, and it's a headwind for a company the size of jlr. >> who could they then get into
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bed with to get what you are alluding to, this critical mass to get to the size of bmw or mercedes, if that is indeed what your argument is? business is brutal but technology demands for the highest and the customer is unforgiving. to bridge that gap at least partially, jlr needs to find a partner, may be a chinese company, may be one of the new tech companies which are entering the automotive area. electrification does seem to be the focus in the future and they do need stronger hands to guide them. do we think -- even if they had a partner to week inc. they need volumes or do they need a partner for the money and the capital expenditure? whatook at bmw, daimler,
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they've announced with electrification, they are spending far more -- they are far larger than someone like jail are. or do they need someone to help them make cars? or do they need the money? >> well, they need the money first of all, because it's a huge technology investment. second, they need volumes because when you have a limited amount of monday you have to decide to go into the electrification area and not go toward making smaller product. 25% of mercedes and bmw comes from products where they don't even have a presence. they don't even have a product. i'mof that has happened -- going to go toward
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-- that's what has been happening. look at how they have done in china, they tried to have volumes, but now they are having inventory issues in china. i guess it makes you wonder whether they can actually have the right product in the right place without having product across the board, which several more mass-market competitors have done and they are now pulling back and cutting this environment it isn't necessarily a sustainable strategy to pump volume. >> well, it was a tough call. you had to enter the chinese but they said china will have the brexit with new cars,
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making jaguar products and sustainable -- you end up and the prices in china market has been slowing down. >> right. >> may have denied rumors that they are selling their stake. why should they continue to hang onto this take when it's not making money? markets if i was in the i would definitely deny it to the media. that's the first thing to do. jlr -- it was doing pretty well
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havee, and they do significant equity when it comes to -- they think they can do it on their own. fromof the revenues come -- -- it's agroup but probablylgame, there is an equity stake. >> thank you very much for joining us. marketsctor to emerging in bloomberg opinion columnist. , they have through the moment for investment, based on new law coming through.
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the ford investment approvals will be based on the laws, case-by-case approvals for foreign investment. this is all being designed for this new investment. more on this. this is bloomberg. ♪
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♪ back with bloomberg markets, i'm rishaad salamat in hong kong. >> i'm haslinda amin in singapore. indonesia has just signed a free-trade agreement with australia, one of several. it is pursuing trade tension exports and threatening to worsen the current account deficit. our southeast asia economics reporter joins us from sydney. it has finally happened. what's the latest? >> hi, haslinda.
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that's right. indonesia pursuing a bunch of last deals, but in the hour they finally inked the deal with australia eight years in the making. this wasn't without controversy -- it was put on ice after the prime minister announced a plan to consider moving australians to jerusalem. the deal was put on ice and signed about an hour ago. looking at the numbers, australia just a few years ago with export 1.3 billion, trace 600 million. it is not chicken feet but they are good numbers. they oversee preferential treatment of indonesian goods going to australia. good news for both countries. >> what else is in the works for indonesia?
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i know it is trying to i address the current account deficit. what will it do? >> there are a bunch in the works. on the european union, but the regional ,omprehensive partnership that's the big one. but trade deals tend to drag on. for indonesia, it is really important. the trade deficit last year widened to about $8.6 billion, the worst on record. the current account deficit close to 3% gdp, and that current account deficit was hit so hard in the emerging market rout, the rupee recovered during that rout that saw the central bank raise interest
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rates six times. they are now saying that the rate is at its peak. odds are rising that the next could be down. april 17 is the election, any kind of news that is good news with trade agreements -- it is good. much.nks so joining us from sydney. we want to tell you about these takinges coming through, place ahead of the national people's congress in beijing. taking a look at questions being asked. the latest ones about the in,stment approvals coming abolishing case-by-case this is what happened
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with the yuan as a result, trading and extending its games 6.69 renminbi against the dollar, that's currently the situation with regards to the chinese currency as people are taking a look at risk in china is certainly a destination for that. >> that's right. and for the next 11 days we are expecting china to outline its 2019 economic expansion goals, inflation money, supply, the u.s. will be watching this really closely. take a look at policies that will be implemented with intellectual property, fiscal challenges, and also the antipollution efforts. trend ins a downward average air pollution. a lot to talk about over the
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next 11 days. >> and of course this trade optimism is also engendering a bullish view. "daybreak: middle east" is next. ♪
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♪ >> this is "bloomberg daybreak: middle east." our top stories this morning. >> asian stocks in u.s. equity futures rise as washington and beijing are said to be close to a trade deal that could put most or all u.s. tariffs. isthat comes as china prepared to kick off its crucial policy gathering. we will be live at the verb in city for the latest. >> trump bashes jay powell and leman the dollar strength again, but are investors and economists learning to tune out the rhetoric? >> and algeria's protest decide. the president says he will run for election, but says he


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