tv Bloomberg Daybreak Asia Bloomberg March 4, 2019 6:00pm-8:00pm EST
haidi: very good morning. i'm haidi stroud-watts in sydney. shery: good evening from new york, i'm shery ahn. sophie: i'm sophie kamaruddin in hong kong. welcome to daybreak asia. ♪ this: our top stories tuesday -- markets to bring wall street lower as investors look for details on a possible trade deal. two reports say president trump's tariff strategy may be backfiring. the u.s. economy is taking a hit. investors waiting for the annual
report, announcing tax cuts for factories to support china's slowing economy. shery: we have breaking news out of south korea. fourth-quarter gdp numbers, the final numbers coming in line with the advanced estimate. year on year rising 3.1% which is as expected. quarter on quarter coming in at a growth of 1%. the fourth quarter final gdp. these are largely in line with estimates. we had more government spending from the korean government in the fourth quarter that has helped momentum in the broader economy. also, consumption was steady. one of the key drags on the economy has been investment. we are seeing fourth quarter final gdp coming in line with the advance estimate of year-over-year growth 3.1%. when it comes to the cpi numbers, there is a discrepancy. year on year gaining .5%. the expectation was for a rise of .7%.
this is really muted inflation. core cpi year on year beating estimates, rising 1.3%. the estimate was for 1.1% in february. inflation has been muted. given the inflation environment right now, bloomberg economics expecting the bank of korea will hold a very accommodative stance. cpi year on year growing .5%, accelerating just .5%. let's get a quick check of the u.s. markets close. we saw markets dropped the most in a month. the s&p 500 down 4/10 of 1%. the advance is really petering out below the 2800 level. health care, financials led the losses. investors speculating about what is with happening with u.s.-china trade negotiations. the nasdaq fell the most since february 7. s&p futures down 1/10 the 1%.
let's see how we are shaping up in asia. sophie: checking on the citi open. sydney open. kiwi shares retreating from the press all-time high on monday. following u.s. stocks lower. u.s. stock futures under pressure. mnuchins digesting bringing measures until april. they may be taken off of the table after the positive start to the week. we will be waiting on those updates from the national people's congress in beijing. checking in on on the aussie dollar ahead of the rba decision which is looking steady. the currency being weighed by chances of further downward revision to australian gdp forecast. anticipated this morning, mainly dialed in some payments and net exports which could come on the heels of software company profits for the fourth quarter
than we got on monday. haidi: sophie kamaruddin in hong kong. let's get the first word news with jessica summers. jessica: china is now linking the cases of two canadian potato after the arrest of the huawei cfo in vancouver. "he severely violated chinese law by spying and stealing secrets by working with the international crisis group." the report said an entrepreneur was kovrig's primary contact and supplied him with intelligence. justin trudeau describes the detentions as arbitrary. the philippines has named a new central bank governor with the budget secretary exceeding. the finance chief carlos dominguez confirmed the appointment. he says his experience as a professional manager makes in the ideal person to lead central-bank policy. diokno will serve the rest of the six-year term which ends in
mid-2023. self-proclaimed venezuelan leader juan guaido returned to caracas to challenge president maduro. he met supporters at the airport and fellow opposition leaders say his ability to fly unchallenged shows the maduro grip is weakening. vice president mike pence tweeting that any threat against guaido would be met with a swift response. lostn trudeau has another cabinet minister over an influence controversy. the treasury board president says he lost confidence with how the government has handled the matter. trudeau and his staff are said to have pressured the vent attorney general the end a case. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts.
i'm jessica summers. this is bloomberg. haidi: china is said to be preparing a range of measures to support the slowing economy including tax cuts for manufacturing. the national people's congress opens in beijing on tuesday. tom mackenzie is at the scene of the action, just outside the great hall of the people. how much of a boost are we talking about from this tax cut? the delegates will be arriving in the next few hours. the work reported around 9 a.m. local time. hundreds of journalists ready to get their hands on that work. we have been told by sources that a cut for manufacturing is going to be a central policy that will be announced, if not today, then in the next few days because this event goes on for about 10 days. about 3% for the manufacturing
sector. morgan stanley says it will be valued at $90 billion. this is a sector that has been hit not just by the trade tensions, but also the deleveraging campaign. it is underscoring the emphasis policymakers to support sectors that have been beaten down by these two aspects, but to ensure they are using fiscal measures rather than this flood of liquidity. that is what they want to avoid, they tell us, and put the focus on fiscal measures to support industries like manufacturing. we have the tax cuts towards the end of last year. and now a bat cut for manufacturing. we are waiting for that work report. we also have a pboc press conference later this afternoon. on the agenda. much of this is how policy makers in china will support this slowdown in growth while ensuring financial risks do not bubble up. as the trade talks continue. shery: every year, we wait for
that gdp growth number. what can we expect this year? an: it is a bit of a cliche, annual cliche, this target. some people dismissed it, but it is important but it is around is gdp target that other policies in china bend to this target. we're expecting it to be softened between 6% and 6.5%. , 2018, the target was around 6.5%. now they are softening the band, we expect. there are some economists who call for the chinese government to drop the gdp target in total. that is unlikely to happen this year. but growth will be slightly lower. we expect the deficit target. how is the chinese government going to fund these tax cuts? they will expand the deficit from 2.6% to between 2.8% and 3% this year. we may also get some signals
around the monetary supply and inflation target as well out of this work. the central bank is going to be holding a press conference. the pboc expected to maintain a neutral policy and reemphasize that. they have started easing with these targets. was importantar's with the massive restructuring of power, consolidation of the leadership. this year, how much pressure is xi under politically? a reprieve from president trump, who of course has said they are not close to some kind of deal and this trade deal could be potentially signed off by the end of march. that is what we are hearing from the trump administration. that decision to remove the threat of additional tariffs by trump, that gave president xi some breathing room, but there
are some serious issues the chinese leadership has to contend with. of course, the slowdown in growth. the continued financial risks that are provoking concern here. the reform agenda as well. there are conservative forces here and reform minded forces and those discussions will be played out behind me. just how far to go on the reform agenda. there are some big anniversaries as well. two notable ones -- the anniversary of tiananmen square and the anniversary of the chinese communist party taking power. historically, anniversaries in china have been somewhat of a flashpoint. there is a concern from leadership around social stability in light of the key anniversaries in 2019. shery: tom mackenzie in beijing in front of the great hall of the people. here in the u.s., evidence is growing that president trump's trade war is actually hurting the u.s. economy. two new studies show his tariffs are the most consequential trade experiment since the 1930's,
blamed for deepening the great depression. joining us is joe. given the cost of this war, what are we expecting the impact to be on president trump going forward? joe: much will depend on how long this goes on and whether or not he can get a deal with china that would mitigate some of the trade war costs. one of the papers came out and said it was costing u.s. companies and consumers about $3 billion a month. with an economy the size of the u.s., still at a fairly low level, but it continues on, it will start rippling out into the rest of the economy. it is particularly hitting trump supporters in agricultural states, because agriculture has been one of the biggest impacts. as well as some small industries who are paying more now for
steel and other materials. at the same time, we are expecting to see when the figures come out on wednesday that the u.s. trade deficit last year was the largest on record. that was a key issue for the president. he's promised to bring that down. so far, that has not happened. i think the confluence of any disappointments that he does not get out of a deal with china or it fails to resolve the situation, that will have an impact on trump politically. haidi: treasury secretary mnuchin has invoked a special that measure in the meantime to continue to pay the u.s. government bills. what do we know about this? joe: this is what are called extraordinary measures. snapped debt ceiling back on march 1. this is widely expected.
it did not happen immediate affect. the steps he took were to shift some money out of civil service retirement accounts. those will be made whole when the debt ceiling is restored. the important thing is in congress, there is no big rush to get this fixed. the congressional budget office in its analysis says the treasury can go until late summer or early fall with these its ordinary measures to put off any chance of a u.s. default. say theyf congress will probably get things done by then, but as with many things, nothing moves before a deadline in congress. they are talking about trying to tie it to budget deals. it certainly will not be taken up by lawmakers before april, and most likely later on in the year until it gets closer to the time with the u.s. is beginning to be affected by the budget limit. haidi: our congress editor joe
sobcyzk. still ahead, cisco dismisses concerns over huawei as being overblown, saying 5g infrastructure will be sourced globally. we speak to the company's innovation officer later. shery: enforceability will be key in any trade deal between china and the u.s.. we will be joined by the chief micro strategist. this is bloomberg. ♪
haidi: this is daybreak asia. shery: we take a closer look at the most recent swings in u.s. stocks. the s&p 500 fell on the trade news and partially recovered before the close. su keenan joins us with the action. what are chart watchers telling us? su: as you know, we have been stuck in a range, but the fact we were almost at a six week low in the middle of the downturn is
we may be now in a low range. let's go into the bloomberg. we have been talking about the 2800 number. we have broken above it a couple of times in recent weeks. have not been able to sustain it. you look at the line to the right, it does look like there was a sell on the fact, buy on the rumor in terms of the trade agreement. we may be looking at a range of 2600 to 2800. let's look at the market snapshot. what you will see is the cloud and software technology was among the weakest sectors. really, this was a tech lead rout early in the session. we did regain a little momentum towards the close. but, it was a pretty much risk off day for the most part. futures just starting to trade, only down marginally. let's go into some of the big movers and earnings played a big part of the story. salesforce.com was down ahead of its after our earnings, on
concern this growth area on stock has reached its peak. facebook had a strong day. united health, part of the health care sector that continues to take a lot of hits. newmont mining reportedly saying no to a takeover offer. that was up a little bit as well. haidi: you mentioned salesforce falling because of the revenue forecast. su: both profit and sales came in just weaker than expected. let's go into the way it is trading after-hours. initially, there were some positive moves in the stock. we have seen it down almost 4%. of its low after-hours, but really a hit. if you look at the big picture, one year charts, year to date, you can see the climb has been astronomical. this stock was at a record, many of its rivals at a record. he really saw the boom in cloud. shery: su keenan, thank you.
joining us now is agon asset management chief micro strategist frank. great to have you with us. su was telling us how u.s. stocks failed to stay above the 200 day moving average when it comes to the s&p 500, despite the fact we have a continuously dovish fed and potentially more problems in the u.s.-trade talks -- why did we see this plunged today? was this another incident of sell the news? frank: if you think of what equities are, the discounting mechanisms, they have discounted a lot of good news since the lows in december. you are up close to 20%. with regard to trade, it is like a daily soap opera. some days, you have good news. some days, not so good. i think you are seeing markets have discounted some type of deal being done. youiscount more positive, would have to get really substantially positive news on
trade. if you think of, well, what kind of deal can we get from here? it probably will have something where china is buying more goods, more agriculture. some of the tariffs that trump -- some of them come down. but then you have to ask, is this symbolism over substance? is there going to be meaningful progress on things like intellectual property? then, how enforceable is that? i think it is similar to back in mid-2017 when president xi came through florida, and after his meeting with trump, they announced an early harvest. it showed that the two countries were working together, which is very positive. you don't want very large trading partners to be fighting and putting up more restrictive barriers, but you don't have anything substantive from that early harvest. the question is is it going to be something like that? shery: if the trade headlines
are soap opera, as you say, economic indicators are not. they are more stable. this chart showing that the economic surprise index is at the lowest level since we have not really seeing since june of last year. yet, the markets seem to be shrugging it off. bond yields are clearly ignoring this. how long can a rally last when you have fundamentals also receiving -- receding? frank: this is what happens when you get into the, what i call, the late cycle game. people are trying to determine if the cycle ends next year, this year? if we are using stocks as a discounting mechanism, that is an important question. that is where you say what are your economic forecast? we at aegon think growth is slowing, it is going more towards trend. it will still be around 2% which would be in above trend, but it is slowing to where we were in 2018, and the high 2's. when you think of equities,
stocks go up because pd multiples expand or earnings grow. when you get late in the cycle, earnings start slowing and multiples have pretty much peaked out. you have had a long multiple expansion throughout the cycle. it is kind of like a game of usable chairs. you don't want to be overweight equities as one or both of those could slowdown. haidi: when are you opportunistic late in the cycle? an attractive entry point? frank: that is a great question because entry points matter a lot late cycle, because late cycle, you have an uptick in volatility. when you look early in the cycles and mid cycles, p.e.'s are low because they have been bonded out from the downturn. earnings are dropped out. as though start to increase over that midcycle, it is a pretty good environment for stocks. when you get late cycle is when
you see more volatility, things like the vix. there, you want to be a lot more sensitive. for instance, if you bought stocks on christmas eve, you are up close to 20% in less than three months. if you bought stocks a year ago or the end of january 2018, you are flat. you assumed a lot of volatility. your risk-adjusted returns in equities compared to fixed income over that time period are not all that great. end of cycle, the entry points become very important. is appeal lying outside the u.s. given you have the fed training towards breathing room with the weakness of the u.s. dollar. emerging markets which have outperformed pretty much everything else so far this year. are you looking for opportunities the on u.s. stocks? frank: we are. we think -- overall, we would be
overweight fixed income. but if we look at equities, we would favor u.s. and e.m. e.m. was one area that got bombed out last year, but as the fed's narrative started slowing down, we saw the dots come down. , that kind of was a relief valve for the e.m. complex. you look at the long-term fundamentals there, it is a pretty positive picture too. we would look overseas. rybinskiat is frank joining us. lots more to come on daybreak asia. this is bloomberg. ♪
own planning on its takeover of arrival. barrick says it will definitely not withdraw. newmont expressed doubts from the bid at the very start. >> a pair up with barrick would expose newmont shareholders the very risky assets and risky operating model. there is a better way to do that through a joint venture structure that can deliver the value of the synergy out of our nevada operations. shery: jpmorgan is turning less bullish on macau gaming stocks, downgrading galaxy and wynn to mutual from overweight. any big rally would require an upgrade, which the bank sees as unlikely in the current situation. the macau gaming sector has risen more than 20% so far this year, compared to 11% for the hang seng index. coming up, decision day in australia with the rba's latest
jessica: i am jessica summers with the first word headlines. more evidence emerging the president trump's trade war is hurting the u.s. economy. studies show the terrorists are the most consequential trade agreement since the 1930's measures that are aimed for deepening the great depression. economists found the impact is in the billions and being born largely by american consumers. china is said to be planning changes the value added tax and that could be announced this week. sources tell us manufacturing could be lower by three percentage points to help support the slowing economy. annual work report later
tuesday. morgan stanley says such a cut to vat could boost gdp by $90 billion or 6/10 of 1%. treasury secretary steven mnuchin will invoke special accounting measures until june to help pay government bills without reaching the u.s. debt ceiling. it came back march 1 after being suspended by congress, but the treasury department can override that to prevent the default of payment. mnuchin has appealed to congress to increase the debt limit as soon as possible. the philippines has named a new central bank governor with the budget secretary succeeding the late secretary. finance chief carlos dominguez confirmed the appointment. he says his experience as a manager makes him the person to lead central-bank policy. diokno will serve the rest of the term which ends mid 2023. global news 24 hours a day,
powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. haidi: let's take a look at the aussie market. the rba decision day. sophie is in hong kong. sophie: aussie stocks are stepping a four-day decline with the asx 200 up a third of 1%. consumer discretionary shares leading the drop, along with materials players. the aussie dollar stuck, while bonds are climbing ahead of the rba decision. on anticipation there will be more weak eco data prince which could lead to further down revision for gdp forecast for australia. the board for some of the movers in sydney. trades just off session lows. losing ground. the stock is trading dividend today, but also downgraded to hold. i want to highlight evolution mining, slipping amid the sector as barrick pledges to push ahead
with a new bid. evolution has been seen as a potential beneficiary from a deal. domain holding slipping 3.4%. we have real estate stocks looking mixed in sydney. this is the housing slump down under, pushing the rba to rate cuts potentially by this year. shery: watch what they say, not what they do. that is the advice to follow when the reserve bank of australia and malaysia wrap up policy meetings in the coming hours. neither expected to change rates, so the language usage will be scouring for clues. kathleen hays is here with a preview. let's start with the rba. will they sound as confident as they did back in january? kathleen: i think there is just enough change in the air, shifting dynamics that i think they will. they are seen holding the key rate at 1.5%. if we jump into the terminal, we
can see a picture of this. you can see the rba cash rate, dropped twice in 2016 and steady ever since. the dollar, of course, the aussie dollar has been holding in a range pretty steadily, a bit weaker now, but no big moves would alarm the rba. one of the things that is going on here is the reserve bank of australia, in terms of confidence, they are not losing confidence in the outlook. they could turn to the labor market. we move on to our next chart. what you will see is there is volatility in jobs growth. for the last several months, you can see this white line showing a trend up in employment. why are these purple and turquoise bars so important? because these purple bars are full-time jobs. the turquoise bars have gotten smaller, they have even gone negative.this is very important . you earn more when you are working full-time rather than part-time. that is one of the thing supporting wage growth in australia.
in terms of some of the red flags over the aussie economy, let's take a look at what is on this list now. right at the top, housing prices, the drop remains quite pronounced. we can move along. manufacturing, the preliminary purchasing managers index for february slowed sharply. that is not a good sign. business investment outside money looks like it is inclined to slow down. credit in the private sector down 4.3% year-over-year in january, continuing a downtrend. the global view, a slower economy globally. that means less demand. not only lingering from u.s.-china tensions but the u.s. threatening to put auto tariffs on other countries is a question as well. bloomberg news carrying a story. after saying no rate changes by cutsba in 2019, now two this year.
50 basis points worth of cuts. they have definitely come around. interesting to see if the rba signals any of that in their policy statement in the press conference later. haidi: expected to mirror the rba. still facing these down slide risks. kathleen: they are holding their key rate, that is what is expected, at 3.25%. you are going to see the overnight policy rate, the white line at 3.2 5%. the cpi has been falling. malaysia's economy has been buffeted by these surge in oil prices, the rally we saw last year, but then oil prices coming down. that is one of the reasons why we see inflation falling. the problem is malaysia exports oil. when the oil price comes down, it hits their export receipts.
if people are not making as much money, they don't pay as many taxes. this is one of the dynamics that has been difficult for them. with the recovery in oil prices, with the return of risk appetite, emerging markets back in place, this is a plus for continued recovery this year. but again, just like australia, trade tensions continue, slower growth overseas. this is something that probably gives them some reason to consider with the outlook is for the rest of the year. with the federal reserve on cause, you know that everyone who is thinking of holding their rate steady, maybe moving towards a cut as more leeway to do that. shery: thank you so much, kathleen hays. now, the annual geneva auto show kicks off this week with a range of shiny new models, but with old talk of trade wars and tariffs too. bloomberg intelligence shows a jump and import duties of 25% sched hit vw', audi and por
brands the hardest. ramy, if president trump goes ahead and imposes that auto traiariff. ramy: the fear is he will go ahead with this. let me read you a headline bloomberg news. geneva showcase first winky cars shadowed by talk of trade war. this is a headline from march 4, 2018. we have been talking about this for the whole year. this just came out, as i was doing some research. the fact this is continuing on, we have been here before. today, we are seeing some ceos weigh in, from audi. audi's ceo is actually a little bit optimistic. let's take a listen. >> i don't see this a threat. complete automotive is transforming. we have to cope with the issues and we will manage. ramy: he says he will manage but perhaps the biggest concern is with china. he is also optimistic there.
he says he sees opportunity for market share gain at things the company is going to be able to compensate for a possible slowdown. we are looking ahead to the national people's congress and the expectation for that range of 6% to 6.5% for the gdp there. for daimler, let's pull up the full screen so i can show you what they are talking about. they say the trade tensions are the top concern. this is from daimler's head of sales. credit suisse has said they will see an operating profit falls by 7.5% if that 25% u.s. import tariff happens. they say they can shift production on u.s. tariffs to someplace else, but they can also raise prices on customers to pass on cost. it's interesting to note that daimler has raise prices on u.s. suvs that are headed to china there. eo isther thing, the c saying she thinks there is a huge lift that could happen if those trade tariffs actually do
not happen. take a listen. >> of course, it would have an enormous effect. we import vehicles, we export vehicles. we sell over one million cars in a year. we are seeing at the moment, we are forecasting a market in europe at about stable. all of those things could impact it dramatically. ramy: to the bloomberg terminal as i wrap this portion up. it is interesting to see how all of those car sales do interact with the 23% of u.s. sales that are actually from imported vehicles. this is on your terminal library. 23.4% is the number of imported vehicles coming into the country. about 10% of them is made up of mini.bmw, mercedes and that could be impacted, along with the rest of this 23% of those tariffs come to pass. haidi: the future of the auto industry looks more and more
electric. what latest developments are we seeing? ramy: audi is the one coming out first. over the next two years, they will see 12 either fully electric or seven plug-in hybrid cars coming in. the ceo saying he wants to restore audi's tech cache and he is also throwing down the gauntlet with some of his competitors, saying they will switch an existing model line to all battery-powered. he says he wants to "surprise competitors." what you are seeing on the screen is the e-tron. they will show the q4 e-tron design complex, seen as an electric shot for tesla. back into the bloomberg terminal, i want to show you. according to bloomberg intelligence, electric cars will overtake existing cars by the year 2023. we are talking about challenges
for the auto sector. tougher emission standards, a new generation of people not wanting to drive. lyft and all those other electric competitors including tesla. haidi: ramy there. coming up, we will speak to cisco chief innovation officer about investment in australia. that is next. this is bloomberg. ♪
shery: this is daybreak: asia. haidi: cisco systems has announced an investment of 61 million aussie dollars to drive digital transformation in us really as part of the company's digital acceleration program. similar programs in china, india indonesia. high tensions over the issue of 5g. the internet of things and a.i.
as chuck robbins suggests, the worries about huawei at the moment are overdone. what are the opportunities available? the chief innovation officer francisco joins us now from melbourne. i want to get your views on the headline making issue of huawei. we have seen these shots fired between china and the u.s. regarding these issues. these concerns over dominance in 5g, do you think they are warranted? guest: i don't. the reason i don't is because it is a very large playing field. in fact, what cisco focuses on is innovation. that is what we are most interested in. with regard to how government respond to huawei, that his government to government. what we are interested in as the market leader in the space is making sure that we stay focused on what's in front of us. those market inflections, those
opportunities to innovate. that is what we're really focused on is a company right now. haidi: what is appealing about investing in australia? guy: australia is a very unique marketplace for us. the country digital acceleration program that we started four years ago was started because world leaders were introducing the national digital agendas. they have announced under much fanfare, yet they would not go anywhere because there is no real execution plan. cisco step in. we delight -- developed a process whereby we can take the most valuable pieces from the national digital agenda, the highest priority items, and help them get to their value much faster. we make direct investment in the country's, primarily in projects that are really going to move the needle in terms of gdp
growth, jobs creation, and innovation. the reason australia was so interesting is because they are really starting to invest in the digital age now and in the country and in the population. sayknow, we always like to if there is a strong government leader in place, then that helps, but it is not absolutely critical. i know we're in the middle of a transition in australia, but of course, we are also in a country that just set the world record for continuous economic growth in 27 years, i believe. it's just a wonderful place for us to invest and to see this country's digital acceleration program take off. shery: australia seems to be more selective when it comes to where to put those investments. we are seeing greater scrutiny on huawei, that could be facing an outright ban in the country. are these greater efforts to
scrutinize the chinese firms give cisco a competitive match? -- edge? guy: again, we don't necessarily compete directly in the same marketplace. we have different products, sometimes our products coexist in the same network architecture. other times, it's just going with one or the other. our whole focus is making sure that the country is prepared for the digital age and can prosper in it. our investments are in places like digital government. focusing on education and health care. digital industry, where we are focusing on mining and agriculture. infrastructure, where we are looking at 5g and a.i. andg with i.o.t. cybersecurity.and smaller to medium-size businesses to
which 97% of the australian workforce makes up. we are really investing in things that are going to help move the needle economically for the country. shery: that seems to be a very worthy vision. i do wonder what is the business case for cisco? guy: the business case is that we want to be in the 25 countries in which we are operating and beyond that trusted technology partner for the digital age for governments, industry and academia. those are the three key pillars that every single program that we do. as long as we have those three involved -- government, industry and academia -- the programs a very successful. quite honestly, we want the countries to be successful because a rising tide lifts al l ships. if they are investing in technology for the sake of investing in technology, rather than a larger digital strategy that is linked to the economic
development initiatives that are really going to impact the country, then everybody loses because you are just sending money down a black hole. if you are investing in a proven process, that has been proven 25 times around the world, then you are going to prosper in the digital age. of course, that means the entire industry along with cisco will prosper as well. shery: guy, thank you so much for your time. the cisco vice president and global innovation officer joining us from melbourne. if you missed out on that interview, tv is your function on the bloomberg. you can watch past interviews and watch us live. you can dive into any of the securities or bloomberg functions we talk about. if you have any questions for our guests, the lower left side of your screen, ask the guest a question. this is for bloomberg subscribers only. check it out. this is bloomberg. ♪
shery: let's get a quick check of the latest business flash headlines. jpmorgan has won the rate of overseeing lyft stock in the early hours of after trading after the ride hailer goes public. the ipo agent oversees the first price study and manages additional shares allotted to underwriters. the coveted role for banks he goes it comes with a potential for more commissions on trades. haidi: some good news for jaguar firstts electric suv, ever european car of the year award. the first electric car for the company. it has been a tough start of the year for the luxury unit. a $4 billionsuffered loss last month. shery: southeast asia's biggest bank is turning its attention to
india to reduce its reliance on singapore. the smalling loans to businesses to the locally owned unit. the ceo says trying to build retail and operations outside the home market has been a itllenge, but he believes offers a once-in-a-lifetime opportunity. haidi: disney is slashing its paycheck to ceo bob iger, cutting compensation by 28% to $35 million after disney complete a deal to acquire 21st century fox assets. our los angeles bureau chief chris joins us with the details. what was the rationale behind the compensation cut? chris: disney did not say exactly what's going on, but we do know they have been under pressure from corporate governance types to do something about the pay. the paper.s rejected unless use annual meeting, which is very unusual.
usually those nonbinding votes go through. disney this year was facing all three of the major proxy advisory firms recommending that the big investors vote against this paper polls will as well. disney was looking at that and say we have to act. shery: disney has been scrutinized for quite a while now over its pay. do we have any idea of its succession plan? chris: secession is an ongoing issue at the company. right now, bob iger is scheduled to stay on the job until the end of 2024. at that point, we will probably, before then know more about who the number two is. shery: chris palmeri, thank you so much. let's get a preview of the market open in japan and south korea. here's sophie kamaruddin. sophie: japanese and korean stocks will go on a downturn
after the drop on wall street. the yen is holding its overnight gain. we do have in korea the focus on the latest data which shows falling to a two and a half year low. bloomberg economics sees weak inflationary pressure keeping it on cause for a time. turning to the boj and speculation of more bond b uying, that has helped 10 year yields rebound from two-year lows back above zero for the first time in more than a month. more upward pressure is anticipated. lastly, i want to highlight a trend being observed in japanese stocks. short-term traders, hedge funds, buying up futures linked to the topics and nikkei 225 which helped push japanese stocks to a three-year high. long-term players including pension funds are still selling which means buying was fragile for the finances in japan. haidi: sophie kamaruddin in hong kong. let's take a look at when it
comes to asian markets. investors from the u.s. and now in asia say give me the details when it comes to this u.s.-china trade deal, giving of the earlier gains we saw yesterday. australian stocks ahead of the rba decision where we are not expecting a move on the cash rate. new zealand, which was trading at an all-time high in the monday session, getting back some of those gains to the tune of 1/10 of 1%. we're looking at a down day when it comes to the start of trading in tokyo and seoul. shery: coming up on the next hour, we will be joined by ease capital partner to discuss her conviction trades in e.m. and asia and why she says china is looking attractive. plus, more on china and the npc with asia analytica. she says china slowdown is essentially an inside job. the open is next. this is bloomberg. ♪
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very good morning. i am haidi stroud-watts in sydney. asia's major markets have just opened for trade. shery: i am shery ahn. sophie: i am sophie kamaruddin in hong kong. welcome to "daybreak asia." haidi: our top stories this tuesday, markets are set to truck wall street lower. investors looking for details on a possible trade deal. the s&p 500 falling for most of the month. investors awaiting an annual report. huawei set to be ready to
fight back against western critics. two reports say it is going to sue the u.s. government. we are watching right now including the launch of the national people's conference in china. we are hearing that china has set its 2019 gdp growth target between 6% and 6.5%. the growthnding target at 3%. the 2019 annual gdp growth target has been set in the range between six percent to 6.5%. 6.5%.8, it was set around we are getting more leeway. the jobless to keep rate at 5.5% in 2019. let's get straight to tom mackenzie in beijing for the latest out of china's npc.
tom. tom: those lines being dropped. the journalists have lined up behind us about one hour ago to get hold of that report. accessve just been given to that. as you say, the key figure to come out of the work report that everyone is always looking at when it comes to the annual parliamentary event is the gdp target. they have softened it as expected between 6% to 6.5% for the year of 2019. in 2018, the target was around 6.5%. the real figure, final figure, from last year came in at around -- economists we surveyed say we are on track for 6.2% so far this year. the growth target is something the other policies orient themselves around. that is why it is important. it has been debate about whether or not they will drop it entirely. we have that deficit target, and
that is important because it gives us an indication as to how fiscal room policymakers have to support the economy. they have raised that target to in 2018, again, giving themselves scope to put in place of those fiscal measures. we have heard from sources that they are going to be cutting -- for the crucial manufacturing sector by 3%, valued at 90 billion u.s. dollars. that could be worth about 0.6% of gdp. the focus is on the fiscal measures. haidi: at work report, china planning the 3% point cut. that is 2 trillion yuan of total tax cuts from the chinese policymakers. when it comes to 2019, credit growth should be in line with gdp growth. bracket to total
yuan in 2019. when itg a steady raise comes to growth in trade as well . what are some of the other key announcements we are watching today? really the headline, and looking at the softening of that gdp target, there is i guess a tacit understanding that we are seeing an economy that is slowing and we are moving away from the de-risking priority to stabilizing growth now. absolutely. we have heard that of course not just from regular policymakers, but from president xi himself hinting that the deleveraging campaign that many said did a lot of damage to the economy last year, that they are going to be softening that focus to ensure that they can stabilize the economy. there are very few economists who think there is any emphasis on trying to grow the economy at a rapid pace. is about ensuring that as
the economy slows, they can keep it stable. you're getting a softer gdp target and more room around fiscal support with the greater deficit target. expecting inflation targets and details around special bond issuance. some suggest special bond issuance could be almost doubled. that will be towards infrastructure spending that fell substantially in 2018. ont has been emphasis policymakers ensuring infrastructure spending ticks up. they want to ensure they have some transparency over the funding mechanisms. and others who have spoken to us suggested that this could be the first year, 2019 where you see the debt to gdp actually increase for the first time since 2016. you are right to say that the emphasis on deleveraging, that focus has shifted somewhat. they obviously are trying to strike a balance, because they are still concerned about financial risks in the system,
and therefore, they are taking this targeted approach. we have the pboc. we are expecting the deputy governor to give a press conference this afternoon where they could give us more details on where the central bank will step up to support the economy as well. we are expecting them to reiterate their prudent line. the rrr cuts will be in focus. shery: on fiscal policy, they are saying they will be proactive, stronger, and more effective. they have set their deficit at in% of gdp against 2.6% 2018. fiscal revenue is expected to rise 5% year on year. we are getting the latest on trade as law. they are saying they will continue to push forward the trade talks with the united states given the pressure that prices and xi jinping has been under. could we expect more pressure to come out of this legislative
meeting? key point.s another absolutely. we heard from officials as saying there had been significant progress between the two sides, echoing what we heard from the trump administration. what we will be looking out for is additional reform measures that could signal to the u.s. they are taking seriously some of the concerns and very much in focus is the foreign investment law. we got some details out yesterday around scrapping some of the case-by-case adjudication process around foreign investment in china, to essentially ease the process and allow for investment to come into the country more quickly and easily. that is a step in a positive direction for many here. we are expecting additional details and changes around some of the laws in terms of the intellectual property regime to protect foreign countries and their intellectual property and to ban forced tech transfer. if there are any steps around
changing or reducing some subsidies, particularly for state owned enterprises and companies in key industries, that would be a signal to the u.s. that the chinese are serious about taking on board some of their concerns, some of the key concerns, and could move the dial in the trade talks. if trade is put to one side, the concerns about tech tensions and technology innovation remains because we have an official coming out, hitting that very strongly against the u.s. , saying against huawei these were attacks against the wto rules. tensions overhe technology, innovation, and national security will remain. shery: the latest lines out of china, the central government planning the 2019 defense spending of 1.1 9 trillion yuan trillion yuan.
tom mackenzie. let's get straight to the market action with sophie kamaruddin. sophie: let's kick it off with the offshore yuan, which is nudging closer to the -- against the dollar. we did see some of the trade optimism dissipating. on the back of the updates from the npc, we are seeing the offshore yuan moving back towards 6.70. japanese yen, the slight reaction to the latest lines out of beijing. we did have the japanese yen thehing 111.82 against dollar as we are seeing some reaction. flipping the board to check in on how equity markets are faring in tokyo, you have the nikkei 225 losing .4%, snapping a two day rise, and ditto for the topix. checking in on trading in seoul, you have a cost be losing ground, extending the losses we saw on monday. the korean won is back above 11.
27 above the greenback. they did see fourth-quarter gdp matching the previous estimate, getting a boost from government spending. markets innapshot of australia and new zealand. aussie shares halting a four-day climb with bhp leading the drag in sydney. kiwi shares retreating from the fresh all-time high hit on monday, down .2% in wellington. haidi. haidi: let's get the first word news with jessica summers. china is linking the cases of two canadians detained over the huawei drama in vancouver. an official news outlet says he severely violated chinese law by stealing state street gets -- state secrets. contact andrimary
supplied him with intelligence. the canadian prime minister is following the case closely. trudeau: we will ensure that the law is fully respected, and we will go through those processes in a proper and rigorous way. it is unfortunate that china forward ono move these arbitrary detentions. we will continue to stand up for these canadians. treasury secretary steven mnuchin will invoke special accounting measures until june to help pay government bills without reaching the legal u.s. debt ceiling. the limit came back into force on march 1 after being -- by congress. congressas appeared to to increase the debt limit as soon as possible. self-proclaimed venezuelan leader, juan guaido, has defied threats of arrest and returned to caracas to challenge
president maduro. lawmakers say his ability to fly in unchallenged shows that maduro's grip is weakening. mike pence tweeted that any threats against him would be "met with a swift response." the philippines has named a new central bank governor with budget secretary benjamin -- succeeding the late mr. espen the late governor. they say it makes him the ideal person. he will initially serve the rest of the six year term. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. haidi: still ahead, we are going growthmore on those
haidi: all right. these lines just released. the top line gdp growth target for 2019 softened from 6.6% in gdp to between 6% to 6.5% growth. that is a target beijing is giving a little bit of little wriggle room for this slowdown. they allowed for a budget deficit of 2.8%. wet is wider than the 2.6% had in 2018.
the target coming in at around 3%. getting confirmation of the tax cuts that we were expecting. -- comprising part of this 2 trillion yuan of total tax and package.curity we are getting in other lines regarding the defense budget growth. that is lower than expected, said at 7.5%, lower than 2018. set at 7.5%,% -- lower than in 2018. the trade deal pledged to keep stable at the equilibrium level and considering policies to boost consumption when it comes to auto and appliances as we get the deterioration. not much in the way of surprises, but really, this theme of giving them a little bit more wiggle room to be able to tweak the economy to allow for a softer managed slowdown. shery: no wonder they are talking about reforms in many
areas. when it comes to the financial sector, they are saying china attract more long-term capital inflows. let's discuss all of this with our next guest who says china is looking very attractive, especially a-shares. official easing will focus more on consumption and services. kong,g us now in hong karine hirn. let me get started on the latest lines on the financial sector openings that china will attract more long-term capital inflows, according to china of course. we have seen various measures hinting that china's economic growth will slow down this year, softerg with a lower, gdp target, not to mention lots tax cuts and policies to boost consumption. how attractive will the chinese market remain for foreign investors? , we willery attractive
say, for a number of reasons. at thef all, look valuations. we are right now in a situation after a very poor year last year where the china at a share market trades at two standard deviations below their average. while if you look at the s&p trading at 15 -- that is one reason. the reason is because of what you said. where the market is being managed in terms of the economy being managed, i would say, you know, more focus on consumption, let's focus on said investment. still focused on the financial risks that are always very important in china. that is very good because the a- share market has a lot of companies involved, particularly in sectors where consumption is the main theme. you know, i am thinking about health care, consumption, and all of that. and the third reason is the one you also mentioned. indeed, the market is opening up for foreign investors.
we have been investing there for many years. more new investors coming in, and the msci decision last friday was in that sense a milestone. they need tosaying brace for a tough economic battle. of course, they earlier talked about trade talks with the u.s., that they will be pushing forward. they reiterated that they will yuan stable at the equilibrium level. how confident are you that these u.s.-china trade talks will actually bring real structural change in china? this is an interesting question because actually, a lot of people in china -- we spend a lot of time meeting with companies -- we hear a lot about the fact that a lot of decisions that have been made or will have been made in relation to this u.s.-china trade spat is
actually positive for china in a sense of forcing china to reform . you know, a lot of discussions have been taking place since a few years back. is a lot ofe pushback. now, in a way, china gets a new chance to trigger this reform. something as well which is very positive for the long-term story , the structural transformation of china. >> that is a very optimistic view given the vested interests when it comes to structural reforms, which has been acknowledged by policymakers will be a painful process. we aree an issue given seeing an economic slowdown that the window for these reforms is closing? because awould say no number of these reforms are specifically addressing weaknesses that we all know are actually the reason for the slowdown. for the populist it --
optimistic view. when you see what china has to do in terms of reforms, there is external pressure and push points. of the best examples i have is the environmental protection sector. when you see the pollution problems in china, they have to be able to be very strict and close down factories and make sure the regulations are being implemented, and to do that with much more confidence when the problem is really important. will beed interests less powerful and going against these decisions, so to say. haidi: some of the points in this work report that i think are most pertinent to investors is the pledge to keep the yuan stable at the equilibrium level and saying china will prevent abnormal fluctuations and to enhance capital flows and financial market risk. know,eads to me that, you
the capital cap" essentially used a closed and capital controls will stay in place. is that a benefit to the a share market? you still have this one great ball of money that cannot really go anywhere else. and doesly beneficial it suggest it is a market that is far from being developed or mature at this point? karine: we think it is not a market that is mature yet. it creates a lot of opportunities for dedicated investors. at the same time, we welcome all kind of reforms and measures to open up this market. what people do not know now is it is the second largest market in the world. the domestic retail investors are indeed still a driving force in this market. at the same time, thanks to all the reforms that have taken , the foreign investor is
now are around 80% of its market , which is a huge jump from just a 3% level we had a couple of years ago, and with that, we of which are moreet institutional, a market that becomes more long-term, and hopefully a market where the fundamental quality of a company is more appreciated by investors. shery: this chart on the bloomberg is showing that chinese stocks have entered the bull market. we continue to see the rally. as we see the latest news about cut, howa t cut -- vat much will this boost momentum for the equity market? karine: hard to say. were allions we have quite expected. i think it is interesting to think, now, one day, talking about economic targets. they are giving a softer target. we are no longer talking of an average of 6.5%.
we are talking between 6% and 6.5% and talking about vat tax cut, which is clearly supporting the consumers. a few years back, whenever china was trying to stimulate, it was all about building new airports and new railways and a lot of money going into investment. a new time for china. >> thank you so much for that. karine hirn, east capital partner. we will have continued coverage of the national people's progress in beijing on bloomberg television, coming up on bloomberg markets china open. the deutsche bank chief economist, michael spencer. also another director. they will be joining us. this is bloomberg. ♪
of trading after the ridehailing goes public. ridehailerailer -- goes public. it is a coveted role for banks because it comes with the potential for more commissions on trade. shery: good news at last for jaguar. the carmakers first ever carved the year award at the geneva motor show. it is jail are -- jlr's first electric car. it has been tough for tata first electrical unit. poor sales in china and a heavy debt burden. coming up, going on the offensive. huawei may sue the u.s. government as it fights washington's efforts to undermine the company. we will have the details, next. this is bloomberg. ♪
shery: we are getting live pictures out of beijing as delegates arrive for the national people's congress. we are getting the lines from keqiang's report on the 20 goals, saying china will further cut smaller banks. the funds are cut to support small business. -- 2019 goals, saying china will further cut smaller banks. the funds are part to support small business. now, we are hearing that those funds from targeted rrr cuts will support small business, further cut smaller banks' required reserves in 2019, and
china says they will decisively prevent property risks, expectations,et and on capital flows, they will enhance supervision of capital flows and risks in financial markets. that of course despite the fact that they are now pledging to further open up the financial markets. haidi. haidi: we are getting some breaking news out of australia as well when it comes to the current account balance coming in at a deficit of 7.2 billion aussie dollar, slightly narrower than expected. also, some of the other details. exports cut .2% from gdp, slightly worse than expected, but really, the current account balance coming in at a deficit of $7.2 billion.
the aussie dollar seeing a reaction, dropping .2% after the net exports number missed estimates for the fourth quarter there. let's take a look at how asian markets are shaping up and reacting to all of this. in particular, the setting of the economic agenda from the national people's congress economic work report. let's get it over to sophie. sophie: with that that drop, we have asian markets on the back foot. we are seeing weakness across the equities space along with currencies. the aussie dollar sliding on the back of the weak net exports number. the yuan under pressure as we did get the latest read on fourth-quarter gdp, which came in mine with estimates. we did see the cpi the february slide to a 2.5 month low. we are seeing a nudge back handle.the 1.12 losses being led by australia.
bhp among the biggest drags on the asx 200. the nikkei 225 set to snap a two day decline while the ndx 50 is trading at a high. the offshore yuan looking steady . now, let's switch up the board to check in on some movers across equity markets. i want to highlight this company jumping after being upgraded to overweight at j.p. morgan. the company pushed a your 15% rise. sliding aftergeon its results, falling 9.4%, the most since september 2015. on ihi corp.to end falling. they were confirming improper checks were conducted. thank you so much for
that. we have more lines out of china's nbc. china will keep the economy leveraged in 2019. we had been wondering what the deleveraging reform momentum would be for the economy. china saying they will implement inclusive tax cuts for small companies and start up that they y'sl keep the econom leverage basically stable. the question was what they would do on monetary easing. targeted rrr cuts will support small businesses. policy,monetary monetary easing, because we have to now watch what these central banks say, not what they do. that is the advice to follow. neither is expected to change key rates, so the focus will be on hints of future moves.
kathleen hays is here with a preview. so what should we expect out of the rba? kathleen: we just saw that number that haidi was suggesting that the australian economy missed on the net exports number. export has independent country, let's exports, let's -- less exports and growth. australia, as the rba goes into this meeting. they are supposed to make no move at all. jump into the bloomberg library that helped make this picture become even clearer. after two rate cuts, the rba has held that key rate at 1.5% ever since. aussie dollar has come down along with that. the currency is not a question. when it comes to the economy, one thing that is given confidence right now is the labor market. it is holding in at a pretty strong level. we can move to another chart
full force. that is what the chart says about the labor market. you can see a lot of volatility, but if you look back to eight months, there is a steady uptrend higher. job growth. that's good. subtitle says. it is fueled by full-time jobs. is getting much bigger than the previous ones. purple bar, part-time jobs. it is going negative. that is what australia is seeing now. there are some red flags over australia's economy. let's just look at a few as we get inside the heads of phil lowe and his team. housing is so important. the price drop for me is very pronounced. moving onto the next one, manufacturing. the preliminary purchasing managers index flowed sharply. that could be linked to slower exports, business investment. that is not helping the economy.
you can take a look now at credit. year, beginning of the continuing a recent downtrend. that is not a good thing for breath. demand is softening in a slower global economy. nomura, in fact, bloomberg news learned earlier today, after seeing no moves in 2019, no moves in 2020, now see two rate cuts this year of 50 basis points on signs of weaker growth. interesting. we will watch the policy statement. any acknowledge meant that that is a growing risk -- acknowledgment that that is a growing risk. haidi: still looking at these downside risks. kathleen: yes, in fact, they raised their rates recently at bank negara. they are not expected to do much of anything now. let's just take a look at a chart from our bloomberg library
because what has happened since then january rate rise, you can see inflation had moved up at the beginning of 2018. they raised that key rate and meanwhile, inflation has come down. a lot of that is due to oil prices, and of course, the plunging oil prices had put some downward pressure on those receipts. they export oil. growth inlps slow 2019, but household spending remained pretty good, rising 9% year on year in the third quarter of last year. inflation coming down. basically, economists are saying this is a steady growth outlook. the big risk for malaysia is this question over the global economy. is it weakening? is there going to be less demand for their exports? that is something they had to be aware of. whatever they say after that policy decision is what we are looking for today. haidi: all right, kathleen hays. let's get you the first word news headlines with jessica
summers. jessica: thanks. china's national people's congress has opened its headline announcements on growth, the budget deficit, and inflation. premier li keqiang says gdp growth is expected to be 6% to 6.5%, slightly lower than last year. he said inflation will be unchanged at 2% while the deficit will be .2% wider. more evidence is emerging that president trump trade war is hurting the u.s. economy. arestudies say his tariffs the most consequential trade experiment since the 1930's measures that were blamed for deepening the great depression. the impact of trump's duties on the u.s. is in the billions and is being borne largely by american consumers. canadian leader justin trudeau has lost another cabinet minister over an influence controversy ahead of upcoming
elections. the treasury board president said she lost confidence with how the government has handled the matter. trudeau and his staff are said to have pressured the venn attorney general -- the then-attorney general. the australian government is facing criticism for allegedly spinning data on carbon emissions ahead of elections in may where climate change is said to be a big talking point. the morrison government has been boasting a quarterly drop in emissions levels, but ministers have ignored the same data, showing emissions have been rising every year since 2015. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. thank you. while way could be opening a new front in its legal offensive against western critics. the new york times reporting it
is preparing to sue the u.s. government for banning federal agencies from using huawei products. the potential action comes as china -- justin trudeau dismissed those allegations. justin trudeau: we will ensure that rule of law is surely respected, and we will go through those processes in a proper and rigorous way. it is unfortunate that china continues to move forward on these arbitrary detentions. we will continue to stand up for these canadians. haidi: all right. let's bring in our asian technology executive editor, peter elstrom. we are seeing huawei go on the offensive now. is it working? peter: it is interesting to see this happen. at first, what you got is the offensive. you saw the huawei executives begin to open up. them get out interviews,
high-profile interviews. then, there was the appearance in barcelona at the biggest telecom trade show, where they talked about these criticisms and showed off their technology, including this fancy folding phone. now, you are seeing the punch. there are two lawsuits. the first was filed in canada alleging that how their cfo was taken into custody violated canada's rules. the second lawsuit that is coming is going to be more targeted at the u.s. criticism of them and precisely that the u.s. is barring huawei equipment from federal contracts and federal agencies. they are saying this is an unfair attack because the company been singled out -- has t anysingled out withou trial. they want more evidence as to why they think huawei is a security threat and why they think huawei equipment should not he used in agencies networks. shery: over the past year, we ramping uphem
pressure on huawei. tell me about some of the government moves around the world. well, the u.s. administration has been very critical of huawei. it has never been very popular within the u.s. communications network. more recently, what you have seen is lessee in the administration go out and make the case to allies like the u.k., australia, germany, that they should also not be using huawei gear in their communications networks because there may be security threats chancethere may be some that they are using backdoors and spying capabilities to help the chinese government. huawei has always denied this. the u.s. has not produced evidence. that has hurt their business in key regions around the world. >> all right, peter elstrom there.
haidi: this is "daybreak asia." i am haidi stroud-watts in sydney. shery: i am shery on a new york. china has lowered its official 2019 economic growth targets to a range of between 6% and 6.5 percent. our next guest says china's slowdown it essentially an u.s.-china that the relations will remain strained no matter what trade agreement may be made. joining us is pauline moon. great to have you with us. raise itsen china
budget deficit ratio, not to cutson announced some vat as well. are the problems in china systemic instead of cyclical here? >> yes, i do think so. the high levels of debt and the fact that all the engines have been sputtering for a couple of years now. what the trade war has done is essentially show who has been -- for the past couple of years, the chinese government has been trying to keep things together with all sorts of policies, but now, with the trade war going, china has decided that it really needs to reverse its policies and calm all out in support of growth. shery: we are hearing from china that they will pledge to
actually open the financial markets as well. we know the mpc will review a new foreign investment law. how big of a game changer would this be towards further opening of the chinese market? , it is a big game they areecause collating all the different laws and putting them together in one proper statute, but the problem it is not thethat law that matters. it is the implementation, and it is the interpretation of the laws. so far, from the drafts that have been coming out, the statutes have been worded very vaguely. init could be interpreted many ways. and unless there are specifics as to how this is going to be implemented and interpreted, it
will be more or less along the eines of, you know, onc more with feeling. i think this is what is holding up the final wrap up to the trade negotiations. as to how wecifics are going to monitor implementation, how things are going to be done. the chinese are saying, yes, we intend to do it. we need time. so that is what is holding it up. >> speaking of once more with feeling, i am looking at some of the fiscal target measures and getting a sense of deja vu. we do have the budget deficit, two .8% of gdp is the official target. the 300 $21 billion worth of special local government bonds, and that will expand to 5%.
is this the same playbook of investing in local government infrastructure that we have seen before? >> essentially, i think china is to with tried and true policy. when in doubt, invest in infrastructure, because that is the easiest way around it. i think the markets are too focused on numbers. how many percent of gdp or what is the target. essentially, the problem now is that china has decided, in this very difficult times, to go back to loose monetary policy. officially, they are saying it is prudent, but it doesn't matter what the terminology is. levels, ited at the is huge. it is about half a trillion
a similarompared with amount for the total stimulus package in 2008. china is pulling out all the stops and going back to its old playbook of investment, investment in infrastructure most probably. haidi: do you expect that playing the hardball game when it comes to the trade war from the u.s. side, is there a chance it could force china to make some of these difficult structural reform changes? >> actually, china is extremely good at negotiations. they have very smart negotiators. they have dealt with the easy bit of negotiations, buying more american goods. that is over and done with. the other bit, changing the structure. it is in the details.
i mean, how much detail can you put into an agreement? it's got to be broad-based. are trying to negotiate in such a way that they will have plenty of wiggle room and live to fight another day. shery: how does this end? >> i think it will end with some sort of an agreement because i think both the trump administration and the chinese want to wrap it up with some sort of an agreement. you can always get that together. the problem is whether this is going to the that markets can peaceorward to relative in trade and investment relations in the coming year or two or whether we are just taking a break before trade war ii breaks out. buckling up for the
in sydney. sophie. sophie: at the chinese government braces for a tough economic battle, picking up lines from the npc work order and keeping an eye on oil and gas players to build a natural corporation. infrastructure stocks may move to deepen soe reform. we are an eye on auto-related players. now, flipping the board for other stocks to watch, keeping an eye on defense-related companies on the plan to boost defense spending to 7.5% in 2019. this commercial bank. there will be a further cut this year. we will be watching for manufacturers to move on to cut to the value-added tax rate for the sector, which morgan stanley says could see a .6% addition to gdp according to morgan stanley. haidi.
haidi: sophie kamaruddin. interesting. we are hearing a lot of markets chatter saying they will be keeping the yuan essentially steady at the equilibrium level to allow for more flexibility. i am not sure how that works. a lot of talk about stability. everything but the kitchen sink in terms of these fiscal stimulus measures, but it is certainly intended to give beijing a bit more wiggle room to stabilize growth and not worry so much about the structural reforms and the deleveraging side of the equation. shery: when it comes to deleveraging, they are saying they will keep the leverage basically stable in 2019, but yes, you said it. it is soothing words coming out of beijing. they are talking about those trade tensions, saying china will continue to push forward on this trade talks with the united states. they will stabilize jobs.
be really this would tricky because the u.s. has complained about those subsidies to state owned enterprises. jobs andstabilizing companies affected by trade tensions. the deutsche bank chief economist, michael spencer. fidelity international investment director kathryn young. they will be joining us. do not miss it. that is it from daybreak asia. this is bloomberg. ♪ so with xfinity mobile
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this is beyond wifi, this is xfi. simple. easy. awesome. xfinity, the future of awesome. -- >> it is 9:00 a.m. here in beijing. welcome to "bloomberg markets." >> i'm yvonne man. we are counting down to the opening of trade. >> the premier's do to reveal for thepolicy blueprint national congress this morning. this year's growth target is lowered to between 6% and 6.5%. the premier says to brace for a tough economic battle. yvonne: a tax cut