tv Bloomberg Markets Asia Bloomberg May 28, 2019 10:00pm-11:00pm EDT
right, so midweek, hump day, equities feeling that hump -- their ago, .8% in the equities space, so there's the rarer bright spot. >> people don't realize how important they are, everything from cruise missiles right down to your local store radio or mobile phone, a very important component of the modern world and this could cause severe damage to the technology industry in the u.s. what are we up to? what is behind today's move? have record low yields and australia, so have a look at this -- our gm in function, .9% -- our gmm function. >> we have in versions taking
place in some parts of the bond yield curve in the u.s., too, also playing into the expectation for more inflation expectations. nikkei 225 on the equity markets, 1.3% down. aboute general fears negotiations between the united states and china breaking down and they have broken down, but it could be a prolonged polarization between the two sides. one of the few markets moving to the upside, up 2/3 of 1%. seeoes look as though we do a bit of dollar strength out there, just seeing moves there currently speaking with the filipino peso, looking at the korean yuan as well. and oil, .6% lower.
markets life strategist joins us from singapore. how would you characterize what is going on? we don't know what happens next in this stat between d.c. and beijing. >> i think part of what you are seeing happen is a gradual realization from investors that the rhetoric is getting a bit worse, that there's no short-term solution coming hair, and so people are preparing for a longer battle. one of the significant changes is the message we've seen today about the rare earth from china. it's what we've been seeing from the chinese press and media in the past few days has been a lot more defensive than the same kind of messages we saw last in 2018. tariffs began the chinese present talking
about globalization continuing. recently, they have turned a lot more defensive. stand readyugh they to dig in for a long-term trade war, and that is unnerving investors because if we do not see a quick resolution, it will affect the global economy and growth will slow in the way the imf has been forecasting a will not be good for anybody. that shift is beginning to filter into markets and you can see people are starting to run for the exit, becoming very defensive, looking for bonds. we see yields down across all markets, so the tone is really changing and not for the better, that's for sure. there's more downside, i'm guessing, based on what you are seeing as far as yields are concerned. bones -- me started on on bunds. >> go on. get started. [laughter] treasury curve is really slighting pretty fast. we were just looking at it this
morning. the five-year sector, a very popular part of the curve known as the belly of the curve, it will not be too long before you are on a 1% handle in five-year treasuries. as you can tell people are getting very nervous about everything. this g20 sets up meeting at the end of june, it's becoming a very significant point for markets. if we'll get something positive coming out of that meeting -- if we don't get something positive coming out of that meeting, we could be looking at an ugly second half of the year. perhaps we can then could read it as supporting the market. if we don't get something by the g20, you and i were talking about a key support level. do i say goodbye to that level? >> oh, yeah. i think is a good chance it might not even last until the g20 because in early trading in
asia, the s&p 500 did go below the 20th thousand 500 line. for the s&p 500 could be very bad going into the month end, and that will trigger more bearishness across the whole world, so the china market will not be able to escape if wall street goes into for the decline in the next few days. >> mark, good stuff. thank you very much. let's now get over to new york and get the latest first word news. here is su keenan. we start with japanese politics. less than two years after winning a landslide, japanese prime minister shinzo abe's party is considering an early election before the economy takes a hit from october sales tax increase. the unpopular tax is set to increase from 8% to 10%, the
third such hike since it was introduced back in 1989. both previous increases have led to a political backlash. abe became japan's longest-serving prime minister. beijing could be gearing up to use its dominance of rare earth and its trade war with the u.s., -- the present -- president xi jinping visited a rare earth plant last week. an official at the national development and reform commission says chinese people will not tolerate products made with exported elements being used to suppress china's development. onto germany now, german chancellor angela merkel's succession plans have fallen apart. told merkel has been told her heir apparent may not be up for the top job.
merkel hess in her popularity slide since taking over as christian democratic union leader back in december. sunday, she oversaw the cpu's worst ever result in an election -- the cdu's worst ever result. disarray after the opposition national party release parts of its early and the treasury department said its computer systems had been hacked. the nationals say they acted appropriately in obtaining the information. thedrama is overshadowing hardened government's so-called well-being budget due on thursday and focusing on metrics the on economic growth. local news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries.
>> morgan stanley's china conferences underweight in beijing. trade is bound to be if not at the very top of the agenda very close to it. >> let's go to tom mackenzie, anger of the bloomberg markets china open show who is at the china markets. tom? >> thank you. it is the fifth morgan stanley china summit and i'm pleased to say i'm joined by carl edinburgh -- eikenberry, i should say. u.s. by the way, is the asian security director at stanford university. thank you for your time. a lot of people looking at the tensions between u.s. and china with a trade to some extent is a side issue. this is about national security, technology, how that ties into the u.s.'s concern about china
and its ambitions on the technology front and security front. what is the mood in washington at this point? >> i think that is a good characterization, maybe it bit of an overstatement, but the interconnection between trade and high-technology competition is very real and it's new for the united states. we have always had trade issues with china for the last three decades. what is new is that now when we look at trade between the two countries, we find an increasing amount of commercial commodities. technologies have national security applications, military applications. atwe went that to the 1970's the height of the cold war, about 70% of the technologies that really mattered for militaries, that was coming out defense proprietary industries. now, if you ask people in the pentagon what really matters, they would say about 70% of what is coming out of the commercial sector matters. as found in silicon valley. for the first time, we have the phenomenon where trade
negotiations -- trade negotiators are sitting side-by-side with those who are trying to preserve the crown jewels of international security and high-technology, and i think it profoundly complicates economic exchange. there is an expression, the securitization of the economic exchange and that is what we have seen really develop in spades over the last five years. >> were talking about how you draw the line if you are sitting on the security front of the trade front, how you draw the line to differentiate between those technologies or if it is impossible to differentiate. >> it's very difficult because what you have now is, as i said, a proliferation of technologies that have these national security applications and the pentagon is finding, and i'm sure the chinese people's operation army's finding in many instances that the cutting-edge technologies are coming out of the commercial sector as opposed to being developed by defense industries. >> of course, while way is -- while way -- huawei is front and
center of these discussions. do you think it is right or american allies to be cutting off and blocking them? >> the national security concerns the u.s. has about them and that many of our allies and partners have is very real, but on the other hand, it's also fair to say that if we are going to tell allies and partners that huawei, thatt buy you should not buy five g, we got to be able to offer a cost-effective alternative. unfortunately, we do not have that right now. >> the that we have seen today put out in some of the newspapers in china, the people's republic talking about cutting off rare earth exports to the u.s., do you know if this is a topic that has been considered? >> i don't know, but i am concerned. it is still rumor right now, the chinese considering cut off of rare earth elements to the united states and our partners.
it is the potential for this cascading effect of trade wars that have unforeseen consequences. trade wars, you go back in history and look at the results, they rarely benefit either side. >> you have served in afghanistan. you have a rich history in the military. how dangerous is this moment? >> i think in the end, cooler heads will prevail. it's true that for the united states, as we look at the growth of china's economy, some of the worldprinciples of the trade order china is currently violating. about intellectual property rights, about having competitive economic regimes where the rules are known and defended. you have sets of those principles which china has violated over time, and now china seems to be moving in a direction in which it is creating new norms and expecting
those that engage in trade with china to adapt to the chinese new norms. it's not for the united states or any country to tell china what its economic model should it is fair for the united states to take stock of the distortion china is making in the international trade system, the economic system, and to take measures to try to either get china to move towards and converge towards norms that are recognized by the liberal economic order or to develop countermeasures against that. >> would you expect the u.s. to south chinao the
sea the question of taiwan? >> i don't think those are issues that are transformable from the -- transferable from the trade debate. they define interest in particular parts of the world or functionally defined interest in ways that benefit them in that these are not socially transferable. that said, i know the united states does remain concerned about china's very aggressive military buildup and remains concerned about the militarization of the south china sea. >> the hawks, do they remain in the ascendancy in washington? >> i don't think there's a question about hawks or doves. i think there is a consensus within washington, d.c., that the united states for perhaps the last 15 years has been strategically sleepwalking as it has focused after 9/11 on the focusingr on terror, so many resources with disappointing results. several years ago, the united states really towards the end of president obama's presidency woke up and remembered that the most important aspect of
international security is interstate competition, and china poses a severe challenge to the united states. great analysis, thank you so much for your time. u.s.-asia security director a stanford. plenty more coming up here at morgan stanley. >> thanks to tom. just going to get you to a crossing the bloomberg. coming through from the ministry of finance. coming up, more from the morgan stanley-china summit in beijing. >> don't miss our exclusive interview with the bank chairman and ceo who be joining us tomorrow on bloomberg tv and live at 8:00 p.m. wednesday if you are watching us out of new york. you're watching bloomberg. ♪
>> you are back with bloomberg markets. almost $31 trillion has flowed into investment funds around the world that emphasize good governance and socially responsible business. joining us, the former black ofk asia-pacific head stewardship. thank you for coming in. frame this. tell us what we're talking about when we come to corporate responsibility and social responsibility. >> if we can get corporate governance right, it can have a huge impact on performance. it is about getting the board right, getting the confidence of people on the board, getting diversity of thinking on the board that provide that oversight for management, working with management around the development of that strategy and providing that oversight and counsel and constructive debate
with management around strategy of limitation. >> this is something which has had a lot of traction in other parts of the world, not so much in east asia. tell us about that. >> the other markets have been around a lot longer than the asian markets. as a very typical western model around directives and that applies to companies that are generally widely held. one of the key features is around 70% of companies have a black shareholder. a lot of the family companies or most of them at least here, are very large and have got there without western models. i think as globalization has increased and they have gone heading towards one market if you like and the challenges around disruption and technology, i think hong kong boards really have to ask themselves, do we have the right people, the confidence, the right skill set for the
challenges that are likely to happen in the next five to 10 years and i think this is a whole new era that did not apply 10 or 20 years ago and again, the appropriate government structure should be value enhancement for those boards and those companies. air,st before we came on you talked about how it is seen as a compliance issue is supposed to a strategic one. >> that's right. when i was engaging with boards and i'm still engaging with boards in another role, we've got a nomination committee and an auditing committee, so we are all right and we don't need to have further discussion. >> should this also extend to independent directors of the board, not executives? >> the independent directors are crucial as part of this. we need competent directors, not just technical independent directors. i think hong kong in particular,
there needs to be focused on increasing the gene pool or the pool of erectors that is available. women on boards in hong kong as a percentage is actually decreasing and that is a result of boards not doing the appropriate process to identify directors to come on their board. >> do you have any example to back up their claim -- to back up your claim of people taking on a diverse board and then making a difference? >> this research that shows good governance leads to better performance, but there's an equal amount of research that shows that there's no correlation or in some cases that it's negative, but good governance is like an insurance policy. you don't see companies that have lost significant shareholder value with good quality boards. i think it is more about protection of value, and if used can go, buty, it there are so many things that
contribute to our performance and it's very difficult to say that governance is there, but when there has been an loss, you look and see if they have a competent board, and the answer is no. >> does the corporate toponsibility naturally lead better performance, but does it lead to very different strategies that might be taken? >> it should because it is really risk management at the end of the day. australiast been in for the world commission and investigations into banks, some , it's about risk management. >> why are you in town? >> am here for the sun conference bringing together some great minds and it's also a great fundraising opportunity proposing toation raise awareness of chronological
mackenzie conducted. >> the full interview coming up this saturday, so don't miss that one. we're looking at markets right now over in japan not doing well, in fact, equity-wise. >> we do have the renault chairman, renault trying to get .n bed with mitsubishi the chairman attending this alliance meeting at the moment briefing clients on that merger. mitsubishi looking like it will be revamping its regional jet to a smaller model. this is as production there of is too big for regional roots. no news to be going with. biggest drop we have seen since january. the company, of course, an internet advertising agency.
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>> let's get to your first word news. the trump administration again refrain from labeling china a currency manipulator. it avoids a further escalation. report to congress does add vietnam and malaysia to the watchlist. politicians from around the ofld have representatives facebook, google, and twitter. lawmakers from countries including canada and the u.k., mexico, participating in a wide-ranging earring.
much of the conversation centering around the fact mark zuckerberg did not show up as requested to answer questions himself. europe, bonds rose after a commissioner said he does not favor sanctions over reaches of the debt rules. he said an exchange of letters was more likely. towill devote all his energy old and obsolete rules. there was a divisive this -- decisive win in the eu elections. awayas promised to give billion she is getting from jeff bezos. she is one of 19 signatories in the giving pledge. more than 200 people have committed to giving more than
50% of their wealth to such causes. >> let's check in. tokyo. having a look what is going on. weakness across the board. we are coming back from the lows of the day. a-shares are recovering. csi, mainland china, down. hang seng also down. let's have a look at elsewhere. a lot of moving parts. where thessence a day way to characterize what is dollar strength. falling to one dollar and $.26. perhaps down to who will be the the u.k.. minister of u.s. level.elow the
the u.s. dollar moving. up three point -- you a 3%. done sinceey have the 17th of january. flat, as youuan can see. that is currently what we have. >> we need more support when it comes to the chinese equity market. we have been revisiting this a lot. is the low, right at about this level. we are up for three days into the 16 point drop. volumes have petered off into where we are. things are starting to look stable.
let's take a closer look at the markets. is one of the largest asset managers. harvest fund management ceo. nice to see you. >> let's start with sentiment in the market. trade wars kept people on the sidelines. what do you think people are waiting for? >> regarding politics, the policies, everybody is making the internal analysis. it is not something we have control of. toare more overreactive politics and policy decisions. we were probably going to make investment decisions how we can standardize future decisions. generate the return for investors.
i think the keyword you just mentioned, range bound. the sentiment is because goingainty exists, we are to be moving step-by-step. external environment policy as well as china domestic policy will change accordingly. we would probably change our investment strategy as well. >> i am interested in the chinese market. it does seem to go from feast to famine. how do your clients react to that? clients, the clients in china, you have to think about that. the clients in china, they are focusing more in the domestic markets. evidence,velops, the the signs we are seeing, the
efficiency in the market is being enhanced. governance, which has been the key focus by regulators. far, it is moving in the right direction. internally, from the domestic perspective, esg getting more and more popular. >> we headed in visor he person in. it seems more of a compliance issue as opposed to one which can enhance value and create more dynamism. compliancefrom the -- so far if you are looking at the market structures, they need to improve their governance practice. from our perspective, the governments improvement.
our compliance requirement, getting more transparent. the china requirement as well. >> this goes beyond just compliance. be more forward thinking. marketink from the development perspective, the regulations, market moving into the same direction. there is no difference between the east and the west. china and the international. and then it takes time to move in the right directions. before, looking at prior to 2015, the proper governance was never a major focus. since 2016, 17, 18, governance issues becoming more and more
popular. the domestic investor is demanding better corporate governance part is. that is why esg's are becoming more and more popular themes. >> what do you tell institutional clients? who look at the market and say there is not a lot of quality information out there. who is providing that information? is that a valid concern? regarding the thing the china capital markets. the local expertise are vital to be successful. managementating and of the capital management. the information qualities are not the same standard to come on par with the internationals. you have to realize in china, the line, goead
behind the meaning of the word. it is the local expertise. understanding the whole market operating. the policyions, decisions. what is the meaning of the policy decision? providing your insight. that is providing our expertise to the clients and making the right decision. >> i would imagine an asset manager would help you provide those questions. in terms of your priority, you went from fifth to fourth last quarter. excluding money market funds. how do you plan to address that? market side, you are looking at the overall growth over the last 20 years.
close to 35%. and then you look at the consulting paper, greater china, the wealth management. the growth rate for that is in the double digits. here is a big enough cake for the asset and a jurist to participate in. for me, getting the bigger share of the markets, one thing, the first thing is we need to make and researchstment capabilities continue to increase the standard of the investment and research capabilities. we are the asset managers. we are providing the expertise to the x -- investors. this is our core competency. i would say, the competition is moving and all asset categories. innovations continue to be a main driver. that will come from more of the
leadership. which we have been building over the last 3-5 years. we are more asset managers. we believe the future asset management is moving from the people tomorrow of the firm leadership. >> thank you for coming. looking forward to have you back. about 120 billion u.s. dollars. this is bloomberg. ♪
an analyst warning headlines -- earnings could fall by 2020. latest advisory to paint a dramatic picture of the risk if trade tensions continue to worsen. urgencye has gained after the trump administration blacklisted huawei. >> columbia sportswear prepared trump tower.m the on what he calls taxes, calling the trade battle a very disruptive event. >> we have put distribution products -- projects on hold. we have moved them around the world to have more certainty than we have in the near term in the u.s.. at the chinese economy,
the earliest of early indicators. compared to april, they have moved to the left side of your screen. a lot of them are market driven. copper fight prices, fairly depressed. the pmi numbers, which i believe should be up friday. >> should make for some interesting reading. a big fall there. indicators are turning down. turning down globally as well. trade contracting since 2008. these are subjects of the china meeting in beijing. let's go there. the
>> thank you very much. we will be put some of these questions to the chief china economist. we will be talking about the may early indicators indicating the downward trajectory continues after a miserable set of data. what are the numbers telling you in terms of the chinese economy? >> high-frequency indicators, weekly export data. high-frequency issuance data. pointing to some weakness in may data. caused theplication threat in terms of recovery. we were more focused on the economic recovery. to $50 billion. 240. half of that in the form of tax cut.
however, the potential impact from the corporate confidence is more of a concern. even if you have textiles. that raises the question about the economy. >> the escalating tensions between the u.s. and china have written off the positive impact you would have expected to see. >> there is no doubt. the policymakers could introduce new stimulus. aey are trying to strike balance between financial risks and also stabilizing economic and job growth. they will rely more on fiscal stimulus rather than monetary. it is more about direct public spending and consumption
incentives. multiplier could be relatively subdued if you have these confidence issues. >> how much additional stimulus do expect to see. wife's we are expecting them to stimulusrrent fiscal -- using thatwo carried over bonds from the local governments. focusing more on spending. a little bit on the monetary front. to accommodate the cutting and interest. >> will it be enough? growth could go to 6% by the
end of this year. not enough to offset the negative impact by the confidence channel. it will be sufficient to provide a floor. within growth targets. job market bye the end of the year. >> that is where we have a full-blown trade war. >> yes. terms of the currency, the department, they are not going to label china a currency manipulator. does it need that additional -- where we get to the point where there is a full-blown trade war? thet is so interesting market is obsessed with this.
15, to 16. pboc has more credibility. more insurance, managing capital flows. volatility. tools forthe disorderly depreciation. they can use communication. also increase the offshore funding costs. they can do this by sending dollar -- it does not mean disruptive outflows. they can still defend it. it depends on the development of
trade tensions. it is still very fluid. if you have a scenario like a tariff, is it a tariff war? marketn allow more depreciation as long as they can manage the volatility. >> thank you very much. including thes asia chief strategist with his analysis. we are here at the fifth annual summit in beijing. >> tom mackenzie joining us. just had of course, allude to it. an exclusive interview with james gorman. on radio live, 8:00 p.m. hong kong time. 8:00 p.m. in new york city. >> futures, flat yesterday.
and moon by opening up. let's get a preview. broader read for the market? >> as far as the earnings are concerned, they are below expectations. overall, when it comes to revenues, it is subdued. we have seen a cut as much as 50%. the reason behind this is a one-time expense. the company has been required to take with regard to its distribution plans. they had to make a lot of changes. one of the directors stepped down. picked up a non-executed. opening uply to see
with weakness. tell us about this indian iron or minors. it is about forward guidance. the guidance of course, the company has suggested they are capitalo put in expenditure. lower compared to what we have seen. a lot of these factors are they are going to continue to be of concern. thank you. plenty more ahead.
proposed merger between chrysler. >> how is the narrative about this merger of all vain? evoloving? >> it is an opportunity. blind-sided? another separate entity to create a car company that would dwarf the current alliance between renault and nissan and mitsubishi. eight plus million compared to nissan. 5 million. does this give more time for him? is it a good distraction while he tries to turn the company around? it is a story we are going to be
watching closely. right now, he is in yokohama. briefing nissan and mitsubishi motors on the merits of such a merger. >> thank you. complicated. programp here in the come alive out of beijing. jonathan gardner read >> the asian equities strategist. a lot more besides. the hang seng, down 0.4%. this is bloomberg. ♪