Transcripts For BLOOMBERG Bloomberg Markets Asia 20171120

Rishaad japans recovery on track, growing for a fourth straight month, the best performance since 2008. Investmentaba the to in chinas largest hypermarket chain. Rishaad we started with the markets. 6647. S a technical chart it is showing a double top formation. Msci asiapacific index slipping from last monday to friday, halting a rally that had lifted 6 . The asian gauge risk of a p technical pattern, which means the path of least resistance would be to the downside after it hits it. Fatigue, ifse of nothing else, creeping into the markets. The u. S. Session, thanksgiving towards the end of the week, and in asia, a loss of momentum of the that continuation japanese recovery story taking place. This week is all about centralbank minutes, the ecb, rba, and the fed. Four for rate hikes in 2018 supported by the october minutes. David im looking at the wti screen to show you the nuts and bolts. Sophie the kleins for the despite25 and the topix trade data indicating the best performance now with a stronger yen. I want to highlight singaporean stocks, opening flat. Prime minister saying the year,y could top 3 this but not helping the momentum in singapore. We have two weeks to wrap up before we ended november, but may yet clock and 11th record month of gains. For december, tougher because more items on the risk off platter. Asian benchmark still up year to date. It is shenzhen shares in the red when it comes to that year today cases, wiping out the gains on friday. There might be positive impetus for Chinese Developers with exposure to shenzhen after new home prices fell there. Quick check on the euro this is 9438, taking a hit amid that german political impasse. Some other items could be an traders, german ppi, mario draghi this week, ecb minutes. Noble group shares in singapore to see if we have anything on the move, back above that level, entering the rare earths business with an investment in that area, so looking to sell its oil trading unit. Rare earth and aluminum helping noble. Rishaad 25 minutes to go before we get going. Thank you for that. Germany Coalition Talks have collapsed over uncertainty in china and in the u. S. On tax reform. At the risk off issues has a we go to mark cudmore in singapore. Bearsre saying euro should not get too carried away by the news. What to expect for the euro . We have seen this dip this morning. That does make sense. This will not change the game for euro. It is not a new bear market. It is surprising talks have broken down, but it is most likely Angela Merkel will be at the center of any government that forms, and that is what every investor cares about, so there will be a risk premium this week as they allow for the possibility that it may not be Angela Merkel at the center of a new coalition. Rishaad what about the probusiness candidate in chile. Morednt we be paying attention here . Tends to be local stores, more isolated, but when you get a big story in the region, it can spill over into broader emerging markets and the fact asian assets. A couple of stories in latin america, nafta negotiations looking negative at the moment. Prepares will have to for a World Without nafta. We have the chilean residential election. There will be a second round vote that will be tougher for. He market friendly candidate there is a second round runoff. That is reminding investors surge or lesstist market friendly surge and politics in latin america, brazil, chile. That might spill over into other emergingmarket assets. China, someng at signs the deleveraging campaigns working . M2 growth is slowing down. It has been selective and targeted attack on the deleveraging process. Youre seeing Wealth Management products, they have focused on cutting down of that lending of credit. China deleveraging is working. There are new avenues opening up and it is shifting resources to different areas, but policymakers are making progress on deleveraging and making the system more robust and safer. We can debate on speed. That is the crux of the issue, but they are definitely making progress. That is not debatable. Haidi thank you so much for that. More on this story and all the days trading on our markets live log on the bloomberg at mliv. Ongoing commentary and analysis from bloomberg expert editors. Lets get you caught up to date with first word news. Chile heads for a runoff after the president took a smaller than expected lead and sundays first round with 89 of the votes counted. The billionaire leader had 37. 7 , while the Ruling Coalition had 27 . Pauls seem to narrow. Zimbabwe remains in a state of confusion after president robert did not resign. He had been expected to quit after leaders seized power last week. Sources said he would go after his ruling party dismissed them as leader. Remains onovery track with exports growing by double digits for a fourth straight month and not over. That is the best performance since 2008. Exports rose 14 come imports rose 19 , leaving a trade surplus of 2. 6 billion. Improving growing demand field growth in exports with new Electronic Devices creating orders for parts and machinery. Chinas Property Market stabilizing after house prices snapped a threemonth fall in october. Home prices rose in 50 of the 70 cities tracked by the government compared with 44 in september. That indicates china is having some success cutting prices without forcing a sharp deceleration. President xi jinping said homes are to be lived in, not for speculation. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad nice one. , continuing our discussion on markets. J. P. Morgan out with its 2018 equity outlook. On the discuss whats horizon with its head of asia research. Great later on, how ambitions for the region take it beyond the worlds economic powerhouses. This is for chinas parole potential. This is Bloomberg Markets asia. Rishaad a bit of risk off in asia today. Will the losses continue . Outlookgan out with its for asia and emerging markets. A bit of a pickup, gut check, but essentially an absolute tear this year. Far, so fast,so you have to think and the still go on. We are still bullish. It comes down to coordinator Global Growth along with a recovery in overall inflation to reasonable, but not extreme levels that creates an environment ideal for emerging markets with 15 upside to our index targets. You dont see headwinds from Monetary Policy . It is an incredibly important question. We have fight rate hikes between of 2018. He end there is a clear disconnect in terms of what people are expecting. It depends on why rates are going up. If its Global Growth, that is. Ositive if you look three out of the , emergingrate cycles markets have significantly outperformed. We dont see it as something that can derail the rally. Rishaad rates going up means a stronger economy. The all bold very well. Do people start looking at fundamentals. The rally we saw this past year was driven off of earnings revisions. At the 15 upside to emergingmarket targets, 12 percent out of that 15 is driven by positive earnings revisions. We would argue the underpinnings for 2017 were strong and we expect that to continue for 2018. This chart goes to the earlier point of whether we are seeing fatigue or janitors or have we gone up too fast in this market. This is chart 4919. We saw the biggest drawback when it comes to the emerging markets etf. Were getting to the end of the year a u. S. Holiday shortened. Eek the markets are scrambling to reprice the bond markets, the possibility we will get five rate hikes between now and the end of next year. It is an incredibly valid point. You have finally seen here flows turned positive for the first time in many years. We have a long way to go. You are still at an extremely depressed level, so we have several more years of inflows. Emerging markets has outperformed on a percentage basis so strongly that we would not be surprised if people take profits. There are two proceeds risks. A flat to flatly down u. S. Dollar in 2018, so we dont see that as a credible risk. Haidi it looks like going into the next leg of the rally that you guys are predicting that it is the same themes that have driven equities this year, tech, consumer facing. You are talking about a continuation of the reflationary trade. There are two key themes. One, a move away from global trade towards domestic demand. That in most emerging markets in asia on the back of rising private sector confidence and the resumption of the lending cycle. Most markets in a show for the First Time Since 2011, india the sole exception, all positive consumer demand. We have moved away from the smartphones cycle and see enterprise driven semiconductor the stoxxnning, which change slightly through 2018. Rishaad no doubt, but change on which country youre looking at. Tell us about that. To markets where we are overweight are china and korea. China is multifaceted. You have good exposure to the tech faced. Rishaad crowded though. Crowded. The overall increase in index composition relative to assets under management, it is crowded to where it was several years ago, but it is still at a good level and you need to see more inflows into that space. In china, you are seeing real concrete supplyside reform. Two years ago, 5 of chinese still companies were reporting positive profits. Today, that number is 85 . That is a structural change in the nature of supply tried supplyside management. Korea is positive on the tech space and broadening consumer demand. One of the hiccups through 2017 was the issues regarding chinese tourism coming into korea because of geopolitical issues at play there. Were seeing one of the First Chinese to a groups going into korea next month from us of that could turn the tide for a lot of the korean consumption stocks. Rishaad household that is a huge problem. It is. Seeingues, one, you are a move down, particularly in china, key source of investor concern. , 90 of debt997 held in asia is held domestically. We dont see the currency impacts we are likely to have seen in crises in the past. Haidi a quick word on Southeast Asia. Are getting singapore gdp adding to a rosy said of releases, the philippines with the fastest growth in the world, strength from thailand, indonesia, and malaysia as well. How do you feel about assets in those markets . We are selectively upgrading. Xposure across asean we took thailand from underweight to neutral. A resumption in consumers spend now that we have moved past the public morning ring, so we are seeing countryspecific issues of play. Haidi we appreciate your time. The head of facial x Japan Equities research talking to the latest em strategy. Coming up, alibaba taking a bet on bricks and mortar. We we take a look. This is bloomberg. Rishaad counting down to the start of the trading week. Premarket session for the hang seng flat. Futures likewise. Is pushing further into the brickandmortar retail side of things, acquiring a controlling stake in chinas largest hypermarket operator for 3 billion. What two we know . He is launching his own supermarkets, cashless and alipay connected supermarkets and convenience stores. They have also been buying brickandmortar retailers. They took a stake in an , thatonics retailer department stores, and now along with two other retailers, a european, one of the french hypermarket retailers, also another run by a taiwanese billionaire. A 77 ree will combine , which operates 419 hypermarket surround china under the rt brand, so this is another way of jack ma reaching got last mile, going from his aobao toase with tile offline. Alibaba in february because we art heard that the sun group was working on a partnership with some online companies, but alibaba put out a statement saying we are not interested in sun art. This is interesting. It is part of his online to offline strategy that we have seen from jack ma. He is trying to create an entire ecosystem for the shopper. He has alley they alibaba, taobao, and team all. Last move to a move into fulfillment and retail centers. He has been looking at retailers and see some value in this company. In theck is up 26 , up premarket after being suspended for a week. It was last traded on november 10 and is resuming today. It is an interesting move because they will stay listed in hong kong and go in partnership. Logistics of his ventures are also partnerships but hes going to stay in partnership with the french retailer and this new venture. It is all coming together for jack mas retail empire. Australia in an may reach 10 of total spending after amazon opens it stores. Many Analysts Expect all strain expansion to mirror canada, where took 10 years for amazon to offer half the categories it sold in other markets. Raising 5. 5iba saleon and exploring the of its Nuclear Assets to avoid being delisted from the tokyo stock exchange. Details are on the way. This is bloomberg. Rishaad counting you down to the start of the session. The euro under pressure. Negotiationss have collapsed. Msci with the double top. Japan exports up. Gdp out later on. Imports picking up in japan, feeding through two inflation. Studied market sentiment, but a drawback at the start of the trading week. Lets get over to sophie. Seng rising for a third day. 25 . G shares in shanghai extending losses. Losses continuing. Hshares lower for a second day in hong kong. Pboc new Asset Management rules may stoke stronger competition for deposits. Icbc and bank of communications leading the laggards. The index is down. 2 . Pboc emphasize stability is job number one for policymakers. Also, the pboc will Pay Attention to liquidity. Deleveraging, developers in china and hong kong after new threemonth drop. Check on sun art retail. Stake. Buying a 36 art is the largest operator of hypermarkets in china. Thank you very much for. Hat lets get to first word news. Haslinda talks to form a new Government Coalition led by Angela Merkel have collapsed. Thats causing the currency to slump. Away saying there is no business for a four party deal. She may now go back to a previous partner, the social democrats. House would not remove of provision in the current tax plan that calls for a repeal of if itdividual mandate would help the bill passed. The budget director said it could be dropped if it would secure the support of key republicans. The treasury secretary and mark blanketed sunday talk shows to support the tax plan on capitol hill. Cautiouslyit is optimistic a solution can be found to stop north Korea Developing Nuclear weapons. They sharings invested or said his government has done everything it can to halt the program. He believes an answer can be found if all parties engage. President xi jinping sent in on t in on for a after discussing it with donald trump. Bitcoin investors shrug off a 29 tumble last week. Tradingdespite current in a recent move to bitcoin cash and checking volatility. Futures trading of bitcoin will start next month. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Haidi home prices on the up and more chinese cities than last month. Our asian investing editor is with me now. Rising in 50 of 70 cities tracked by the government. Fine, but by what magnitude . Gains are still subdued compared to previous phases. One city had the biggest month on month gain for new homes, 1. 7 . Beijing was up and shanghai was down, but in general these gains are pretty tightly controlled. There is a sense that there is limited room for prices to move. What is behind that . There is such an array of price controls. There are controls on how quickly you can resell your home. There are all sorts of mortgage controls. And there has been an ever increasing number of these restrictions, so the since is the government has things under a very tight leash. That stability is the main concern in the main priority rishaad i want to jump in here. And whata risk here are the main risks of this point for this market . This now seems to be a cooling market. The economy as a whole, the risk is this will end up being a drag on the economy next year. Intelligence estimates are that home sales next year will be flattish or slightly declining, so there is not a big bump from those. It becomes a more and more delicate task for the government to control the Property Market and keep the economy pumping. There is a big consolidation story amongst developers. The question for Smaller Developers who dont have great access to finance or big land banks, it is a question of survival for some of those guys in the midst of probably, possibly, flat home sales. Rishaad thank you a lot for that. Franciscord about san us planna, and ambitio to change the pearl river delta to a tech up. What do people think of this hugely ambitious idea . There is a great sense of optimism and opportunity. To theireen going factory, where houses come and sing the level of automation taking place in this region. Cities that will be linked with hong kong and macau. We are talking about potential of 1. 4 trillion last year and 4. 6 trillion in 2030. Currently the economy is equivalent to that of australia or south korea. It could be larger than that if this plan comes off. One person we spoke to is the ceo of a company that deals in robotics and said the plan and build on strength already in place around manufacturing, innovation, and financial clout. Without doubt the greater bay area plans are significant and consistent with the orientation of current industrial development. This region has already stood on a solid foundation, manufacturing infrastructure and scale, fast capital, appealed to talent, not to mention its complementary economy with neighboring hong kong and macau. There is enormous opportunity in these ways. Morgan stanley says this is evidence of chinas a shift away from super cities to sit the , and theyity clusters say you will see a population growth of 20 million additional People Living and working here in the next 10 years or so. Analysts also point out that the population compares to other they areas like tokyo, new york, and san francisco, but the gdp per head per capita is lower, so the Growth Potential is that much higher. Who are the likely beneficiaries of this plan . We have been talking about one of the big automakers in china looking to expand the brand abroad. They think there are opportunities around attracting talent and building up their brand, but another executive is the ceo of China Southern airlines, the Largest Airline by passenger numbers in asia. Benefit likely to because we are seeing a massive buildout of airports. He said the opportunities for his company were enormous. Take a listen. Main think one of the problems is just to motivate the economy and to abstract more International Companies to and for local outsideneurs to invest and make both ways more convenient, and for airlines, i think we will have a very big opportunity. Property prices, developers could be another beneficiary from this scheme. Many analysts said Property Prices are likely to rise. They could double in the next 58 years according to one analyst, so developers and not under another potential big winner. Rishaad what could derail this big push as you put it . The governments can effectively Work Together and coordinate to bring this to life, there are questions there. There are questions over the legal frameworks the kos many pushing for hong kong legal frameworks to be applied to attract foreign investment. How that will be implemented is important as well. We were expecting the Central Government to give more details, but they are Still Holding out. Timing, implementation, and whether these authorities can coordinate on this greater bay area. We will be hearing from all these executives throughout this week. Uto tomorrow and China Southern airlines on wednesday. We have also been speaking to key tech players and will have them throughout this week. Rishaad nice one. Coming up, breaking down trade numbers from tokyo with the japan macro advisors. This is bloomberg. Sun art retail popped at 11 open and has fallen by point 5 after alibaba agreed to billion, ae for 2. 9 36 stake in the group come operating 400 hypermarkets across china, so after initial exuberance, plunging badly and extending declines to session lows. Lets get back to data out of japan painting a picture of a resilient recovery. Trade is less certain because japan has hopes of persuading the u. S. Back to the tpp after insident trump dropped out favor of creating bilateral trade deals. The remaining 11 countries are pushing ahead. Said there minister is always a chance the u. S. Could return. Frankly the possibility of having the u. S. Back on tpp soon is quite slim, the japan would like to persuade the u. S. To return. The fact that 20 items that are still on hold will encourage the u. S. To come back to the negotiation table. In japan, exports grew by double digits for a fourth straight month in october. Joining us is the managing director had japan macro advisors. Evidenceion is is this abenomics is working if we dont look at inflation . Abenomics seems to be having a second life. 2013 it started, but we are zynga come back in inflation. If you look at superficial numbers, you can see stagnating wishes come but we are seeing , sos rise more than 2 there are some green shoots of inflation there. Those wage increases are in traditionally parttime jobs, not core jobs, which pejoratively people call salary men and salary women. That is true. They are 30 of the total workforce in japan in the parttime category. Is thatare also seeing Japanese Companies are starting to find it is very difficult to attract workers with parttime wages, so the parttime ratio, how much parttime workers account for total workers, starting to drop, so that means Wage Inflation for these parttime workers. Rishaad when does that feed through to that Movement Towards 2 inflation . Labor costs still account for a significant portion of costs. The company will have to raise wages, but on the consumer side, and they are enjoying the Wage Inflation, so there could be a virtuous circle there here it in a veryeacting positive development in terms of abenomics in the last few months. Had another report today that the government is considering some kind of scheme to corporate the Corporate Tax to around 25 from almost 30 for some of these companies that might put through wage increases and also spend more on capex. Is that something policymakers should be doing to force wages to go up and forcing stronger inflation . He s. Way for thes one government to tie in the Corporate Tax cut, but politically it will be difficult. This move by the government to raise the consumption tax, but lower Corporate Tax, i think that would be very difficult for the government to make the voter swallow. Throw up ant to quick chart. We keep going around in circles when it comes to inflation. This is chart 9616. It is a problem japan has been struggling with severely to run made the least headway, but you could argue its coming off the toughest situation when it comes to the decades of deflation, but globally we are seeing this seeinghere we are not stayin inflation. Is it a structural issue that tells the story when it comes to the japanese economy which has seen seven straight quarters of growth . , so japan did suffered two decades of desolation. Chinese look bobby lea now, but in the 1980s in japan, it was super bubbly. Then growth faltered and credit fell, so japan has a long payback time, but all of the bad debts are now gone and japan no longer has excess labor or capacity anymore. Able to makers are these Structural Reforms right, japan could be seeing a payback time after the two decades of deflation. Rishaad when we look at what corporates have been doing and how much cash they have on their Balance Sheets and look at nominal gdp, a phenomenal snor , isnt it . What do you think . Japan still has longterm pessimism, and there is good reason for that. The population is shrinking, but there are ways to deal with it. One by one things have to change to make Japanese Corporate managers and households feel more domestic expansion in their future. Tell me, how close do you think china looks at japan in order to not make the same mistakes japan made in the late 1980s and early 1990s . There has beenk an interesting discussion of this comparison between japan and china now. Japanstake japan made is did not just open its domestic market, even with strong alsoure from the u. S. , and japan didnt really try to go out into asia to capture the but those two, things where the mistakes japan made, so hopefully china will not fall into that trap. Rishaad indeed. Where do you see japan in one year from now . Itthe way it looks is that does seem to me that japan is on a comfortable cruise. In 12 months, i think people will be more convinced that inflation price in and i think people will be feeling more confident about the longterm outlook of the japanese economy. Rishaad thank you so much. Joining us from tokyo, japan macro advisors. With all our up interviews by using our interactive function tv to dive into securities or functions we mentioned. Become part of the conversation by sending us instant messages during our program. This is for bloomberg subscribers only. Check it out at tv. Rishaad we are back. U. K. Online fashion retailer mark. Ng a historic shares up 2 , boosting capitalization, nudging it ahead m s. Haidi apple says its new home pod Smart Speakers will not be ready for the holiday season. It had been scheduled to ship in december. Apple has not explain the delay. Year apple Wireless Headphones were held back. Honda recalling 800,000 minivans after injuries linked to faulty passengers seats and involves cars between 2011 and this year and comes to months after honda agreed to settle claims tied to potentially lethal airbags. Vehiclesmillion containing inflators had not been fixed. What can be learned from a hong kong neighborhood where president Resident Satisfaction is sky high. We talk through that research. This is bloomberg. Almost 1 00 p. M. In sydney. Im haidi lun. Rishaad i am Rishaad Salamat coming to you from bloombergs asia headquarters in hong kong. This is Bloomberg Markets asia. Haidi signs of strain, asiapacific extending losses, the benchmark run to a close. Retailersun art losing, falling like a stone. Slumped aseuro Coalition Talks collapsed in germany. The free democrats walk away. Exports japan on track, double digit growth for a fourth straight month. A quiet week when it comes to data. We have japan trade numbers coming through strong. Banks,ocused on central all looking at where inflation will come from and how that will impact the policy trajectory. Inflation out of china, 8494 is the chart. We have been talking about the theme of 2017, inflation out of china. We had the consolidation out of , cuttingstack industry excess capacity, pushing through ,rices when it comes to metals and what is about to change is the Pricing Power dynamics are downstream, sonys consumer facing companies. Has inactory inflation spreading to the world when it comes to export prices. Is a lag of a few months, but it does catch up. Inflation as we get this rebalancing when it comes to the environmental factors and a shift to quality this export of inflation will start passing through to some of these consumer , companiesso walmart that buy chinese apparel and toys, analyst saying that could change is the pricing data also changes. Makes markets feeling a bit of a heat. Msci showing a technical double , possibly presaging a fault. Asian stocks are mostly lower, led by the drop in china and japan. Shanghai and shenzhen falling 1 . He benchmark flat icbc and ccb weighing on the hang seng after the pboc unveiled new Asset Management rules friday. I want to focus on sun art falling as alibaba agreed to buy a 36 stake. S chairman and ceo is being held in a fraud case. A quick look at toshiba in tokyo , halting a two day rise after announcing its Capital Raising plans to avoid a delisting. The euro is a mover today. 9438, that decline after german Coalition Talks collapsed. It is just off session lows. The Surprise Development on the political front and the bounceback in the euro should keep the currency under pressure in the shortterm, but the longerterm view is underpinned by the positive flow dynamics. Should a new election be called, it is seen falling to the bottom of its range. Most currencies in the asian space under pressure, led lower by the philippine peso and the baht is the thailand trading at an april 2015 hi. The Malaysian Ringgit holding on to gains after the gdp beat in the third quarter. Haidi thank you so much for that. Lets get to first word news. Chile heads for election runoff after the president took a smaller than expected lead. Of votes percent counted, the billionaire ,pposition leader has 36. 7 while the Ruling Coalition has 22. 7 , and a third candidate just over 20 . Zimbabwe remains in a state of confusion after president robert not resign. He had been expected to quit. Afters said he would go the ruling party dismissed him as leader. Robert mugabe and his wife were fired from the party on sunday. Topping 8,000 for the first time as investors shrug off a 29 tumble last week. That takes gains to more than 700 this year despite trading in a recent move that injected volatility. Futures trading on bitcoin will start next month. Growth could top 3 this year, means singapore is benefiting but must upgrade domestically to sustain growth. He expects spending to keep raising taxes is but when. Er of wif, global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Talks in germany to form a new Government Coalition led by Angela Merkel have collapsed. The free democrats have walked away, leaving Angela Merkel in a tight spot and sending the euro slumping. David tweed is with me now. What went wrong . The free democrats walked away, but the difficulty within cdctalks was between the that wanted to see a cap on immigration, and the greens on the other side which wanted to see cap and wanted to see further flexibility on who was allowed to ask for asylum. Yet it was the free democrats that walked out. They said there were too many contradictory, verys plans and policies put into this Coalition Document in the first place. They said no government is better than bad government. Rishaad what happens next . Is there the possibility they get around the table once again . It looks as if Angela Merkel, who after these talks collapsed, which was just before midnight in berlin, she said she will consult with the president. There are a few choices on the table. Lead ashe will try and minority government with her cdu part hurt party behind her. That has never been done in germany since the new system was put in place after world war ii. She could potentially go back to the socialists who she has governed with in the last coalition, but that government was so disaster for the socialists. They had their worst performance since world war ii as well, so the socialists said we dont want to do that. Finally, she could start talks again or they could talk about new elections. That is a big risk because they are all concerned that the populace and antiimmigrant alternative might get more votes and take votes away from the player variant the Bavarian Sister Party cdu who wanted to see a cap on immigration because that is a party that place faces elections in bovard and next year in bavaria next year. Germany being the leading country in europe, certainly the leading economy. What is the upshot for the rest of europe and brexit negotiations . It means for the time being that we will not see Firm Leadership from germany on any of these efforts, and that includes the brexit negotiations. Its going to be very difficult to really see any leadership, and that is probably why we are seeing the euro fall. Just looking at the currency , its done this year pretty well, and that is a reflection that the German Economy is doing very well along with the rest of europe, allowing the ecb to wind back stimulus measures come so that will probably continue to support the euro unless we see new elections, then we might see some weakness as we just heard earlier. Certainly instability or uncertainty ahead. Thank you for that. Up next, investor frenzy, what is driving hong kongs biggest ipo bonanza in close to a decade. Rishaad next, heading to guangzhou to look at chinas ambitious plans to challenge Silicon Valley. This is bloomberg. Rishaad i am Rishaad Salamat in hong kong. Franciscona has san set in its sights transforming a delta into the worlds most powerful tech hub. Tom mackenzie has been in guangzhou. L river delta was known notits manufacturing might, a tech and innovation hub. What are people making of this plan . You are right. I spent a week talking to executives and going into the factories to see how they are moving up and implementing automation. We did that at cointreau auto, guangzhou votto, a pharmaceutical company, so we are moving away from the production of cheap textiles to a highend Technology Manufacturing push. Aret of the executives optimistic and see this as a great opportunity. This region is growing quickly with a lot of dynamic, innovative companies. Willbelieved that bush help to underpin and sustain that growth. One executive is the president guangzhou auto, helping with branding, attracting talent, but to grow domestically and internationally. Opportunity golden for Guangzhou Automobile Group under this National Strategy and government support. Capital, talent, and advanced technologies will converge in this region, which is key to integrate resources from across the globe to further improve our products, brand, and competitive edge. So benefiting as well, not just from the talent because we will see a population growth byund 20 Million People 2030, but also the buildout of infrastructure and logistics and supply chains. Guangzhou wants to start selling cars into the u. S. By 2019, and xiy are behind the trump brand. Playingear about that out, not just the area here but International Expansion plans as well. Rishaad who are the winners, losers, benefit, or not . Executives, the ceo of China Southern airlines, thinks they will be a huge beneficiary. As well is building out the highspeed rail links between now and 2030, the airlines are building out airports. Is expectedub here to open next year and China Southern is the Largest Airline by passenger numbers, so they will benefit from that buildout. Morgan stanley analysts saying longrs in long dong in the region will benefit as well. There will be attempts to build this plan and get this plan into the space it needs to be for the likes of the company we have been speaking to and the Wider Population as well. Rishaad good stuff. Tom mackenzie there. China has tried to balance growth with the needs of communities. Lets discuss the idea it with art next guest. He said it could be a model for sustaining an inclusive cities across this part of the world. Lets talk about this greater bay area. It will be a collection of neighborhoods ultimately. Do think there is a place that could be the place to model on . If you go to president xi jinpings comments, it is clear the mediumterm direction of residential policy. It is evolving. He is emphasizing affordable housing, but also a broader range of factors. He talked about Economic Prosperity of citizens, social, cultural, ecological benefits that need to be given to society. Rishaad it is certainly not affordable. How ecological is it . In kennedy town we were trying to understand the neighborhood level what residents like and what residents dont like. Infrastructure investment as we talked about in the greater bay area will be hugely significant and transport infrastructure has been significant in hong kong. Some of the things hong kong does less will, public open quality design a building, and walk ability. 90 are satisfied with the neighborhood because of good transport and access, but the aries it wanted to areas of wanted to move into were better quality space, better design, and better affordability, and those are things that given the success of chinese cities over the last 20 years, remember shenzhen was a fishing village in 1980, now more than 11 Million People. I have confidence the Chinese Government in focusing on Livable Cities will be innovative. Rishaad you need to have affordability. Im going back to that point. We have Property Price data out of china showing 50 out of 70 cities showing increases in new home prices. How does that play into this narrative . Coming at the end of a long showsle, i think the data the Property Market has begun to stabilize. I think the government has been successful in managing policy at a local level. The strength of the Global Economy and domestic economy has allowed for measures to begin to restrain prices into your one and tier two cities, and affordability is a key aspect, but as cities compete for talent, they compete for workers and Companies Come and they need housing people can afford. Affordability is a key part in hong kong and the greater bay area. Are they at achieving their goal of stability without too much of a stark sudden slowdown . Can they continue to do that . I think so. I think policy has been well managed. At the local level, governments have been able to tailor policies to suit particular dynamics. Chinese developers have been relatively sensible and cautious in acquiring new land. They are certainly not over invested in the cycle, so i think supplydemand fundamentals are reasonably constructed in most markets, and that allows the governments to manage policy at the margin. Land sales will decrease next year. Policy and the economy is in decent shape. Why youhere is a reason dont see much of a market slowdown when it comes to demand in cities like beijing, shenzhen, shanghai. There is a reason why people flock to these cities. In terms ofy do creating opportunities and creating demand and other cities to spread it out . Andhat is a major challenge again in the greater bay area you have seen an inflow of people into some of the bigger cities. The challenge for the government ofproviding a range affordability. The development of the rental sector will be important. An interesting area to watch is the government prioritizing and providing a good range of. Esidences for citizens to live we will not see the gba grow in a way that economic forecasts would suggest. Haidi have they learned their lessons from overcapacity in the cities that were built out . Yes, the narrative is being over emphasized. Really the development of chinese cities over the last 35 years has an extraordinarily successful and policy has been extraordinarily successful. 56 , itnization rate is took the u. S. 60 years to achieve that level of growth come and china is moving to 2. 0 of urbanization. Now they need to provide for their cities, better housing, better infrastructure them a better Economic Opportunities to deliver growth and make citizens happy. President xi jinping emphasized happier citizens, healthier citizens, and that will be the focus. Haidi thank you so much. That is the china dream, isnt it . You can catch up on all our interviews by using rtv function tv function. You can also join the conversation and send us instant messages during the show. This is for bloomberg subscribers only. Check it out at tv. This is bloomberg. A quick check of the business flash headlines. Toshiba raising 5. 5 billion and sale of Nuclear Assets to avoid being delisted. The company said selling its holding and claims against would significantly reduce resources required to revive the unit. Reports from tokyo say Japan Tobacco will replace it ceo in march in an attempt to in 13 straight months of falling domestic sales. The company has been hit by the ping. Of favoring vap a 1. 6arter went on billion dollar buying spree across Southeast Asia. Rishaad nissan will have to build a new production plant in the United States as sales continue to grow. The north american chairman said it would need to be an entirely new facility has existing plans are working at full capacity. Nissan already has the most productive plant in north america. It is the top automaker in mexico. Up, will tideland joined the rest of Southeast Asia and post standout Growth Numbers. We will be trying to find out next. 10 29 in singapore. These are the first word headlines. In germany, talks to form a new Coalition Led by Angela Merkel have collapsed. Tot is causing the euro slump. The probusiness free democrats have walked away and say there is no basis for a deal. Angela merkel wanted them to join, but now may go back to the social democrats. Reversing earlier gains after alibabas Online Shopping unit is investing 3 billion in the company. 36 afterl own ceiling agreeing to the deal. It will help taobao export new retail opportunities in food. Philip hammond has indicated that government will make an offer on the brexit divorce bill before a key summit next month. To the bbc, he said london makes up concessions to break the deadlock in negotiations. His words are in line from david davis last week that more details on the bill may be presented soon. Of korea is seen raising Interest Rates this month, the first hike since 2011. Analysts predict policymakers will eventually raise the 2 chmark rate from 1. 25 to by the middle of 2019. A Bloomberg Survey points to a short hiking cycle. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Haidi we are waiting on thailand gdp to drop. Whether it will paint this picture of resilience, stellar growth, when it comes to Southeast Asia led by the philippines, seeing the fastest pace of growth globally. Not so much when it comes to the asian equity rally. It is taking a breather. We are seeing some signs of fatigue extending pullbacks from the severe falls last week. Story ofis really the the morning when it comes to the fx space. Angela merkel, that Coalition Conversation seemingly with the free democrats out on that, making that coming together of the government more difficult. I want to go back to the thailand economy. Done an amazing thing. We have thirdquarter growth coming through. 4. 3 year on year growth. 3. 9 , soooking for there we have it come up better than expected growth, matching these economies producing higher growth than calculated. Lets get some flesh on all this. Philippines, gdp beating expectations, thailand doing the same thing now. Good morning. Very strong numbers from thailand at 4. 3 year on year. Thailand has finally joined wetheast asia and the boom have seen. Malaysia gdp numbers last week were also very strong, and the philippines has been growing steadily at more than 6 since last year, but malaysia was certainly the bright spot this year. It is benefiting from a pickup in exports. Its oil prices have also picked up, and we are seeing strong domestic internal demand. We had the Prime Minister giving an expansionary budget, boosting consumer spending. Now what we are seeing with thailand also despite the strong currency, the export sector seems to be holding up very well. We are also expecting with the urning for the king the the government will push ahead with its infrastructure program, so all in all a good picture for Southeast Asian economies. Haidi i suppose the question we stellarsk when we see print after stellar print, can it be sustained. What are the longer term indicators suggesting to us . And that is the compelling question. That thetation is export recovery will moderate to some extent, but the underlying support his there. We have seen a globalized synchronize recovery, the u. S. , china, and the euro zone expanding come and that trade boost will be there for Southeast Asia mall trade , and even withes moderation in the export sector, we have strong support next year for the Southeast Asian economies. There will be elections next year, and you get some kind of election related spending that adds to the momentum in the economy, so malaysia with an election, thailand as well, and indonesia, so you can expect some support from the internal demand. You also havet, governments up infrastructure spending. The philippines is a case in point. They expect more spending on projects helping to offset moderation in the trade sector that we will see again next year. More news from thailand. The Statistics Bureau saying 8. 6 export growth through this Second Quarter year on year gdp growth has been revised to 3. 8 . Singapore final gdp data this week. Expecting that to be revised up and the economy the recovery theyre broadening to other industries i suppose. Singapore final gdp numbers out on thursday. Andearly estimate was 4. 6 , economists we have surveyed are seeing gdp being revised to 5 , so that is a very strong number. The Prime Minister over the weekend speaking out at a party conference, saying gdp growth this year is going to exceed 3 , and that is a very strong number , a very welcome recovery it is seeing in the economy. The numbers, we are seeing a broadening out. In initial recovery came external sectors and export related industries. We are seeing the Services Sectors pickup strongly. Recently seeing an improvement in employment, and improvement in the Property Market, which has been depressed for a long time, so you can expect to see some recovery as well in the Retail Sector and in construction going forward. Overall, the singapore economy is looking in a really good place at this point. Rishaad thank you very much indeed. Lets get it back to the market action. Couple of up and wrote stories, philippines and indonesia. Lets get to the big numbers. The losses in asia are being led lower by china and japan, so japanese stocks extending a weekly lost, led by utilities and financials with some bright spots as carmakers and retailers on the way up, but overall a down day in tokyo. Number is optimistic when it comes to fujikura. Taking a look at chinese equity markets. Small caps leading the plunge on the mainland. The shenzhen index falling to a threemonth low. To slight gains for now. On shadoww clampdown banking is the excuse to dump equities already under pressure given liquidity concerns and moderating growth. Ubs remains optimistic about the economy and heshare market. Ashare market. Taking a look at the picture on ,he hang seng, now sliding. 2 snapping a two day rise, led lower by financials and energy. The banking space under pressure unveiled a new era in supervision. One stock mover, wenzhou automobile guangzhou auto sliding by the daily limit. When you look at the broader composite index, it is among the worst performers for that index, sliding 6 right there. Rishaad thank you so much. Hong kong has experienced its biggest retailer frenzy since 2009. Have our deals specialist with us now on hong kongs 163 billion ipo bonanza. They have not been as hungry since 2009. They have piled in 163 billion, just counting than 500raising more million. Four major ipos salt they were more than 100 times oversubscribed in the retail portion. That is a figure it has not seen since 2009. That was when asked so he companies came to hong kong. We have these companies coming in every time there is an ipo and we see it go up. Ipos werent so attractive in the last few years and suddenly they have come back with a vengeance. Any reason . Deals in the past few years were necessarily very exciting. Ipo market in hong kong are dominated by chinese financial institutions. This year we are seeing china ,iterature, . 10 ebook unit razer. Nancing and these are stories that are interesting to investors. It does help that li kashing is behind razer. Tencent and alibaba as well, so companies that are backed by celebrity investors give investors a lot of confidence when it comes to what to pick and choose. Aidi celebrity investors 2018, what are we looking ahead to . Still a little bit from 2018, but in the coming months we are seeing an ecommerce unit. The market continues to expect more highgrowth stories to come to market. Music unit has sent out a proposal for a 2018 ipo that would raise at least 1 billion. We have seen other fintech and Health Care Growth stories in general, but we can still expect to come through, which is the china tower. Haidi thank you so much for that. A huge year when it comes to tech ipos in hong kong. Coming up, real yields will remain compressed. That is next. This is bloomberg. Traders looking forward to fed minutes waiting to see if they will support the idea as many as for rate hikes next year. Lets talk about that with our next guest right now. Comean sachs the latest to out saying between now and the end of 2018 that we will get five hikes . The market is quickly trying to rush to reprice the bond market. A lot of economists are expecting between 45 hikes. The fed has probably said four. Markets had only been pricing in two. Im probably more in the two camp because it is hard to see where inflation is coming from. Even janet yellen said some of the factors causing inflation to remain below that 2 target our industry. We solve that mystery the fed is more likely to keep rates on hold longer than what markets anticipate. Haidi lets talk about the pancake. I want to bring up this chart. Twos, tens come the spread the tightest in a decade. Are you in the camp that says this is suggesting something horrible will happen or it is a demandside situation . Demandside. You get some funny things in the queue he environment, but rather than look at the shape of the yield curve and markets are forecasting low growth, but markets are pricing in 10 year average inflation in the 185 range. That is where we are in todays world. Are seems like markets forecasting the status quo for the very long run. Are you still buying duration . Duration is a hard call and a terrible risk return tradeoff. One of the reasons people have duration is to hedge against equity risks and bad things happening. I am not sure your duration will that to you, so there are better ways to get value in the bond market than just taking a duration position. Haidi one of the interesting reformis that if tax does go through, what is the risk it overshoots and you get inflation as a result . When i look at the tax reform likely to get through, rich people get their taxes cut, corporates get their taxes cut, but for the most part one not filter through to the main part of the economy, the people who would spend, lower and middle class people. When they get tax cuts, they will spend it. The rich dont spend it. The plan so see in far, even if it gets through, more tax cuts for the rich, and that will not promote longterm growth. How has the Investment Strategy changed over this year, and why . How did you start off at the beginning of this year looking for income and how are you ending it . The big thing we decided at the start of 2017 was dont take a lot of duration risks because youre going to see a lot of from the latest trump tweet and the latest geopolitical risks, so we did cut our duration back dramatically. We were more confident income, strain bonds given the profitability story and yields being wider, bonds being cheaper in australia than the rest of the world. That is what i see for 2018. As far as Corporate Bond strategy, now is the time to highquality bonds, particularly australia. That will not change in 2018. All strainont end of rates with you being contrarian that the reserve bank will not move on policy through 2018, why do you think that, and how much is the rba caught between a rock and a hard place . In one area where we are not consensus versus the market, rba hiking rates over 2018, there are probably oneto priced in. We think there will be zero. The australian economy faces the same headwinds, a lack of inflation. And you can start with Wage Inflation. Andn globalization technology changes, workers dont have bargaining power. That wont the enough to drive inflation toward the bottom end of the rba 2 target. We think the rba will be on hold for a long run. Haidi wage pressures are low, household debt, even this morning we heard from the head of Financial Stability at the rba saying there is a risk of a sharp downturn in the Property Market. Is that one of the grey swans you are pricing in for next year . We willt think wee see a major downturn. Any bubbles could have been 1025 years ago, so even though people are highly levered, they pay their mortgages. They have jobs. Until you see the jobs situation deteriorate dramatically among which is unlikely over the next couple of years, the housing situation will stay as it is, especially when you consider immigration. Haidi any impact of government dysfunction. Australia has one of the least versus the rest of the world. It is not perfect and there are problems, but the differences are minor compared to the differences around the world. Have done governments a good job in terms of mostly fiscal restraint and spending on infrastructure. Those are things youre not seeing in most of the rest of the world. Better than most of the world. Haidi reassuring words to end on. Up, chinasg backers in Silicon Valley, white u. S. Lawmakers want tougher reviews when it comes to foreign investment. This is bloomberg. Haidi Silicon Valley startups have increasingly attracted foreign money from chinese investors, but that a be about to change as u. S. Lawmakers have introduced legislation that would toughen regulatory scrutiny of foreigners buying up foreign states. We have more from san francisco. This new bill would significantly increase the oversight of the committee on Foreign Investments in the u. S. , which reviews foreign takeovers of u. S. Takeovers for potential National Security concerns. This committee generally reviews mergers and acquisitions am a but even small earlystage investment in startups could trigger review, especially in the most innovative and growing areas like Artificial Intelligence, augmented reality, robotics, and drones. Fromlegislation comes growing concern from lawmakers and the department of defense that these types of investments could lead to a transfer of technology to the chinese military. They have made it clear that they want be the leaders in Artificial Intelligence in china and they want chinese businesses come in universities, and military to collaborate with each other am a but critics are concerned that this will have the opposite of the intended effect. Chinese investment has flooded the u. S. Market in emerging tech in recent years and has helped to fuel innovation come and if it willl comes through, make it difficult for startups to get investment and for u. S. Investors to exeter investments. That, and this extends the review time for up to 120 days, which will make it very difficult for earlystage startup deals to close. This bill and may not be voted on for several months, but it is expected that a version of this ill will close as it does have significant bipartisan support. Right, ahead on Bloomberg Markets, david will take up the reins and update us on the big stories of the day. David some very interesting calls into year end, essentially staying dont sell long positions, but get dollaryen hedges and that sort of thing. I will also be asking what the story means in europe. You get a feeling we have not really seen the acts on the euro until london opens up. There is also a story in the next hour on how china is itsting treatment of antipollution measures that are infecting affecting inflation and how people do business there in the industrial space on the chinese mainland. That is coming up. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. David i am david and we are just getting started. Welcome to Bloomberg Markets asia. David some signs of strain, extending last weeks losses. The euro under pressure as Coalition Talks collapse in germany. Japan stays on course. Exports rose for a fourth straight month. Thailand out with its gdp numbers. We will get you opening numbers in a moment. A recap, what we got out of bangkok, have a look at my chart. We had gdp growth overall in white. We will wait for that to update. We did just at the numbers. The moderation in agriculture from the stellar quarterly stock we saw in june, but we are looking at the best you to be growth since 2013. All guns blazing there. Lets have a look across markets. We are down a fifth of 1 overall. Sophie . , sophie that would be the case. We are Holding Steady around that 112 mark. On the direction of the dollar or the euro, which could support the yen. Through thatoming could help to sustain gains. The south korean yuan falling for the first time in five days, down a third of a percent. Mark. Pped below the 1100 that is a closely watched currency this week. The euro very much in focus. Please on the back of germanys Coalition Talks, collapsing. That thought fall to a twomonth low. That that saw it fall to a twomonth low. We have lots of being led by japan and chinese stocks, although the drop in shanghai and shenzhen has moderated somewhat. The hung saying on the back of the data, seeing losses primarily across the region. Pulling of the board to show you some stock movers in the region. You have guangzhou auto. Raised 15 billion yuan from a private share sale. Have ccb sliding along with financials in hong kong after the pboc unveiled new Asset Management roles on friday. We have sun art using the drop we saw earlier. , a discount for that megadeal for sun art. Alibaba pictures extending losses after falling over an 11 last week, bringing shares to a 2014 low. Taiwan, flipping the board to show you this company. Msi see was asias hottest stock at one point, now snapping a four days a fourday drop. David thank you so much for the market update. She was mentioning earlier the broad story we are following this morning. We will get a further kick when europe wakes up. The Coalition Talks collapsing in germany. Hike timeline, the big things impacting markets right now. We will talk about these. Lets bring in mark cudmore. We are going to start with germany. That is the big story. Angela merkel is likely to pull something out of the back hopefully in the next few weeks. Where do we see the euro going . Has reactede euro negatively, and that makes sense. I am not sure this is a sustainable negative story, that it is a little bit of a shock. Werehe coalition stocks hard and we were hard and we werent expecting them to collapse this weekend. La merkel newstors would not like elections, and that could be a negative. This is another drag a missed a whole host of negative stories. Amidst a whole host of negative stories. China, theng out of language added to the po the theuage under the pboc language added the pboc. Mark it looks like it is stepping up again. There is a whole new raft of measures. It will affect all other assets. , itash needs to be raised wont just affect illiquid assets. People might need to sell more liquid assets to sell cash. You are seeing a negative story in china, germany, and stuff in america happening as well. David lets talk about latin america. Countrys out of the coming out about the same time as germany. How much should i be focused on this . Mark it is marginal, but another thing happening in latin america that is a bit more negative. We have the market friendly candidate doing worse than expected. Investors he is going to face a Hostile Congress and that in mexico and brazil you are seeing leftwing candidates doing better than expected. It might raise the risk premium on politics in the region. Are seeing nafta negotiations struggle and the idea that we might need to prepare for trading mexico it is is on the radar. This is a headwind for latin america. David it is. Base, coming from a low so anything perhaps from this point is more in the market. To change gears, bitcoin. I am looking at the price. The market just keeps coming back in and buying this thing. What is supporting it . Mark i think it is going to keep on going up for the moment. There will be a massive crush someday, but i dont think you need to worry about shortterm volatility. It is getting because it has momentum. People are excited about the volatility. This is a market that has many people who may want to buy in. It doesnt have any fundamental drivers. , more morentals people want to buy, still went in, and there is no reason that should stop. Excited people get very that you still have fundamental drivers. Who knows where the bubble could go to . We cant put a cap on it, because there is no valuation anchor. David absolutely. It is also amusing how some people are trying to chart the thing. We dont have enough data. Mark, lots of stories. They do so much for coming on the show. Get more on his work on mliv. Commentary and analysis as low from bloomberg expert editors. You can find out what is really happening. Mliv on your bloomberg. News with haslinda almond. Some bubbly remains in a state of confusion after the president and did the National Address without resigning. He is expected to quit after meeting leaders who seized power last week. Afters said he would go the party dismissed him as leader. Onwas fired from the party sunday, would you days after the military put him under house arrest. The singapore Prime Minister says growth could top 3 this year, addressing his party convention. He says singapore is benefiting from the improved world economy, but must upgrade domestically to sustain growth. He expects spending on health care, infrastructure, and social services to keep rising. Gains reversing after alibabas Online Shopping unit it will help them explore new retail opportunities in food and will continue to be traded in hong kong. The bank of korea seen raising Interest Rates this month, which would be its first hike since 2011. Policymakers are predicted to eventually raise rates from the to around 2 d low by the middle of 2019. Solid growth and inflation support the view, but a survey points to a short hiking cycle. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am haslinda amin. This is bloomberg. David thank you. Let me tell you what is coming up on our program. Emerging from the smog to become chinas clean air winter. Air winner. Stay with us. This is bloomberg. David this is Bloomberg Markets asia i am david ingles. Toshiba in the mix today. Have a look at this. Planning to raise 5. 5 billion of theloring a sale westinghouse unit. Funds can be used in new businesses. Reports of tokyo. The replacement of a ceo in march due to falling domestic sales. The company has been hit by rise of ecigarettes and bathing. Vaping. Cigarettes and lets quarter, the company went on a buying spree across Southeast Asia. Staying in japan, nissan says it will have to build a new production plant in the u. S. As sales continue if sales continue to grow as expected. It would need an entirely new facility as the existing plans are working at full capacity. They have the most productive plant in north america and import several models in japan and is the top model maker in mexico. Injuries related to faulty passenger seats for honda. Recall comes two months after honda agreed to pay 484 tolion to settle claims tied potentially lethal airbags. ,ets have a look at the euro slumping on reports that the Coalition Talks have collapsed in germany. Angela merkel in a very tight spot. Thats discuss this with kay vanpeterson. Very nice to see you and happy monday. Lets talk about germany first. Looking at the eurodollar, i have a feeling we havent really felt the angst of the market. We have to wait until london wakes up. Kay great to be back. You are spot on. We have to wait for the price action after the europeans get in. It is supposed to be the start of a quite week with things giving weekend in the u. S. , but that eurodollar is already down. Was is something that expected to be in the bag, so a surprise for the market. David what is next . What is the next milestone in germany . Kay what people are going to be doing the math is, she has been there 12 years. They expect her to be there for another four years. The worst Case Scenario is if they are forced to call for a new election, given they just had one in september. I dont think that is the case we are going to get into. You can imagine this is going to be bearish for the euro, at least in the near term while the market comes to grips with what is going on. I am confident she will be able to come up with a different coalition at some point. David before we move on to asia, what is your feeling . Is there a case to be made the the market is less sensitive now to geopolitics in europe because the economy is in its best shape in years . Kay it is a good point. Is, but in thee nearterm and tactical, we just saw germany beating gdp again this year, last week coming in strong. Roar. Ngine continues to i would agree that at least geopolitical temperatures instead be lower than it was two or three months ago, or even close to where we were at the beginning of the year in the heavily contested french elections. David lets talk about your trading recommendations. You are looking at puts on eurodollar, corporate yield, em. Looking at this list, i am guessing youre not recommending kay i think anyone who is saying get out of longs, you must one have one hell of a list of all given the bull run we have had. The conversation i have been , the s pth clients is is up, nasdaq close to 25 . It makes sense to have protection going into the year and and start of next year. Is three to six months puts an put spreads on the likes of dollar yen, dollar swissie. The dollar longs are still heavily vested. Some were questionable contested names such as the nikkei, high yield index, emerging market. To give you peace of mind, because i expect risk off to be taken off of the table over the next few weeks. David is that what makes you think dollaryen moves down from here . What is the strike on dollaryen if i get into this trade . It looks like it is going to go up. This comes down to what kind of time you were talking about. A longterm policy perspective, there is only one game that japan has, and that is for a weaker yen. They need to get that up. That is structural, longterm. In the nearterm, we are hoping around 112, critical levels. 112, are hovering around critical levels. Call i am looking at your on the vix. If i listened did this advice 12 months ago, i wouldve lost a lot of money. What makes you convince it moves up from here convinced it moves up from here . To it is to be symmetrical the backandforth we are talking about on the puts. It is a little bit misleading. 1 last at the vix, up week, but if you look at it from the lows on november 3, we were at 899. It is a 62 to move. There was a 63 move. It is another way of thinking about your and and early next year protection. Maybe 50you doing basis points or hundred basis points of a u. N. Or 100 basis points of aun. Is a littlehikes bit too much with the fed. More coming up. Stay with us. This is bloomberg. David this is Bloomberg Markets asia. Lets continue our conversation with kay vanpeterson, still joining us live out of singapore. Market is up, depending on which equity benchmark you look at. Not that it is a good idea to every time the market, but what would be the Early Morning sign appetite is turning . That the tide is turning . Grail, if you will, and i never think it is just one thing. It is a cascade of red flags going through. See thistinue to highyield nervousness continue to unravel, if we had instead of foreigners on the curve, steepeners, the biggest risk is a big explosion in the bond market. From my perspective, rates expectations are too low for next year, especially in the u. S. That will come to fruition i believe. Goldman was that with a note on friday. Ac four rate hikes. You say look at the bond markets. Four rate hikes seems a bit much, given how there is no yield on the curve. Kay this has been contestant for the entire time this has been contested for the entire time the fed has been raising rates. I look at it globally, pmi is leading. If you look at what markets are pricing in now, they are barely pricing in two hikes between now and the end of january 2019. The december hike is a given. They are only putting in one hike for next year. I believe the risks are to the upside. It is one of the few things that is screaming at me and i have been bending the table about this for the last few quarters. Anging the table about this for the last few quarters. Beenelestial trade has short. Fed funds futures, talking about from 98 even levels. If we had any kneejerk reaction, i would use that opportunity to go back and and put on those structural shorts. You could be short outright duration as an easy way to play it, or put on fed funds futures or fed fund bond futures as well. Know you feel strongly about this next topic. Cryptocurrencies. Drivenl it is an event structural change that is coming next year. What is that structural change i should watch out for . Kay they call me crypto kay. This news is colossal. I dont know if everyone is aware of this, but it seems like it is going to be the second week where we have futures from the cme of bitcoin. Pricene looks at the suction and goes, it is ridiculous, it is up 700 your to date. My point is you have seen nothing yet. You look at the evolution of the space, which is in its infancy. Most of that has been without a traditional institutional money. What the futures will do is create vehicles for that. Of etfl have a cascade in different vehicles for people to go long or short. Come upt is hard to with an estimate for bitcoin, but word you think it will be this Time Next Year . Fivex think we will see five x or 10 next on bitcoin. That is a bit too much math for me. Kay vanpeterson joining us live out of singapore. We will catch up with the interviews. Tv is your function. Become part of the conversation. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. This is Bloomberg Markets asia. Lot to talk about across markets. It is feeling a bit tired. Thailand supports the Southeast Asia story, the reemergence of growth. Thailand. About this brings everything together. We had the philippines thursday, malaysia friday. Singapore with final numbers on thursday. Thailand reporting 4. 3 growth. The best growth since 2013. Malaysia below that number, and the philippines blowing through every estimate out there. When you look at markets, they appear stretched on the by the way should in Southeast Asia. Markets in the asiapacific. Sophie has more. Sophie when you look at this red, stocks mostly lower. That is despite some solid gdp numbers from malaysia and thailand. A big story here is japanese hases continuing to slide financials and utilities lead the drop. Goldman sachs sees brighter days ahead. They are pointing to domestic demand, earnings growth, and fund flows. Stocks sliding amid a clampdown on shadow banking, sparking concern tighter supervision will siphon funds from the market. In shanghai, a fifth day of losses, now a twomonth low led lower by consumer stocks and property players. Some of those decliners in shanghai among the biggest drags when it comes to the developers said forichow moutai its biggest loss in more than two years. Guangzhou auto mobile has fallen by the daily limit. David thank you very much. Europe. R big story is lets get you an update with first word news. Haslinda german talks to form a new coalition have collapsed. That is causing the currency to slump. The free democrats have walked away saying there is no basis for a four party deal. Angela merkel may now go back to her previous partner, the social democrats. Off after theum president took a small the than expected lead in sundays first round. Of votesoint 8 counted, the Opposition Leader has 37. 7 , while of the ruling a thirdn had 22 , and just over 20 . Bitcoin is topping 8,000 for the first time as investors shrugged off a 29 tumble last week. That takes gains to more than 700 this year despite trading and a recent move to currencies injecting volatility. U. K. Chancellor Philip Hammond has indicated the government will make an offer on the socalled rugs a divorce bill before a key summit next month. Speaking to the bbc he said london may accept concessions to break the deadlock in negotiations. Withnds words are in line david davis last week that more details may be presented soon on the bill. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. David thank you. When you think of the bay area area, you think san francisco. China is looking to revisit that seeks to transform delta into aer tech have. Tom mackenzie is in guangzhou. What do people think about this hugely ambitious idea . Tom youre right. We have been speaking to some of the biggest bosses in the province and the country as guangzhou auto and China Southern. There is a feeling this can help sustain Growth Numbers that are now 9 or 10 , to help sustain and underpin that growth, connecting nine cities in the province of guangzhou with hong kong and macau. We are talking about an economy around one point 4 trillion in 2016. Grow to about the size of japans economy. , a head of madea group poster child when it comes to the moves to automate the manufacturing process here, and he said this greater they plan was about building on the strength already here, the manufacturing, innovation and tech, then of course the Financial Services in hong kong. Take a listen. Greaterut doubt, the they area plan is of great magnificence. It is consistent with the orientation of current industrial development. Ons region has already stood a solid foundation, manufacturing structure and scale, the intensity of capital, or the appeal to palate, not to mention the complementary economy with hong kong and macau. We have seen and the norm us opportunity in this wave. The enormous opportunity in this wave. Tom the size and scale are huge. The population is currently 68 million. The expectation is that could grow to 86 million by 2030. That has consequences for transport, so you are seeing a huge drive to build out the highspeed rail network, quadrupling that by 2030. You are seeing airlines and airports building out hubs, so transport links absolutely. Building those links is possibly easier than building the links between local governments and getting them to Work Together on a plan, and thats where you may see some problems. But overall, they have been enthusiastic about what they are seeing so far. Is one of the things that could derail this greater bay push, the challenge between local governments to agree on things. Absolutely. There is huge competition between local governments. We got a sense of that a few weeks ago speaking to officials who were visibly riled when we talked about how we enjoyed going to shenzhen. Cities ashose other rivals, so ill with a cooperate to develop this plan together is a question for sure. We will see China Southern airlines as beneficiaries. Their ceo said they are building up airport hubs around the city of stringent shen jen and in guangzhou that could be a regional hub. Inna southern is the largest asia by passenger numbers in the head of the Company Thinks opportunities from this ferry with the buildout of these airports will be huge. Take a listen. Think one of the main purposes is to motivate the moremy and to abstract International Countries to invest here attract more companies to work here and for local partners to invest and make both ways more convenient. Willirlines i think we have a very big opportunity. Tom we also spoke to the president of apec automobiles guangzhou automobiles. They talk about the greater bay area plan and about their Companies Domestic plans and International Expansion plans as well, so well worth tuning in. David thank you. Tom mackenzie live out of guangzhou. It is a slightly hazy day in guangzhou, behind me as well and hong kong. This comes down to this battle with the pollution that china embarked on in 2013 and has left companies scrambling to adapt to tighter regulation and has sparked consolidation across sectors driving up ppi that continues to find its way into global inflation. Lets talk more with our metals and mining reporter. You and i were speaking about this. Help us understand what the updates are on this antipollution drive and how much these are changing the industrial landscape there. Is a relatively clear day and shanghai as well. A clear year overall in terms of pollution relatively speaking. The government is in the midst of the most serious crackdown on pollution that the country has seen and its decades of growth. A couple of my colleagues visited a fair recently and spoke to people there. That is a major trade exhibition ofsouthern china where tens thousands of people who are trying to sell goods outside. Hina gather every year they took the temperature there and found these curbs are not just affecting industries such as steel and aluminum, but areas a march wider including plastics, textiles, and everything like the suitcase industry where manufacturers are able now push prices a bit higher because in some cases a lot of the competitors have been closed down and wiped out by xi jinpings crackdown on pollution. Guessing the polluting industries have the most to lose. Who has the most to gain here. I think i would frame that differently. I would say here are the winners and losers within Different Industries. Steel, aluminum, or plastics, you have scale if you have the right technology. You will be able to withstand the kinds of more stringent checks and regulations that the government is seeking to enforce. What is happening is a lot of Small Companies that previously sprang up very quickly across Different Industries are no longer able to survive. Its about raising the margin of costs to these industries. If you are a big player in steel or aluminum, if you are one of these companies, these are good times in your margins are healthy. There is no sign of that easing very much. David i would imagine some of that is getting passed on to consumers. How are consumers taking these price crisis then . I think i have lost the sound. David martin, are you still there . We just lost martin. Perhaps down to pollution. I am just kidding. It earlierking about , but have a look at beijing. This is 637. Pollution ande you have this periodic spike as the coal plants begin running. Beijing this year has not acted up just yet. Pacemaker,is as a and so far you have not needed it. So the china air quality index here in beijing must so far, so good. Speaking of good, hope springs eternal. Japans economy minister speaks to bloomberg up out the tpp and whether the u. S. Will make a comeback in that deal. That chat is coming up next. Stay with us. This is bloomberg. David this is Bloomberg Markets asia. Get a quick update of the business flash headlines. Reachlia online sales may 10 of total spending of Amazon Opening its doors. Helpingch is seen to be brickandmortar retailers build online businesses. Likefear expansion to be canada. Has reached a historic landmark with market value surpassing m s for the first time. Shares up 2 friday. Over 4 billion bounds. From the 18cry billion it was worth in 1997. Its home pod Smart Speaker will not be ready for the Holiday Shopping season. It had been scheduled to ship in december. Apple has not explained why the occurred. He delay lets have a look at japan. The countries has it has hopes of persuading the u. S. To back. He tpp President Trump dropped it in favor of bilateral trade deals. The economy minister spoke to bloomberg and said he will continue to try and persuade him. Japans ability to have u. S. Back on tpp soon is quite low, but japan would like to make a persistent effort to persuade the u. S. To return. Fact that 20 items are put on hold will encourage the u. S. To come back to the table. Can if you expect the tpp 11 to be signed. There are different political events next year, so we hope to resolve it before these events. There are remaining issues to be salt and japan will take the leadership to get this signed as soon as possible. Canada asked for cultural exemptions. What is your view on that . It was quite interesting how. Anada brought up exemptions we expect canada to give more clarity to what is really involved in this and make more effort to convince other member nations to accept it. David that was the japanese economy minister there. Export drive continues this morning on doubledigit growth for the fourth straight month in october, the best performance since the financial crisis. Japan success depends on the performance of a lot of its partners. Japan important thing for and for most countries is the global trend continues to grow. It has been bouncing around since october last year, flat year on year, and now it is bouncing around 5 , 6 a year. Pmi is suggesting acceleration to 7 . That is pretty healthy. If japan exports are doing less well, the Auto Companies for example produce the vast majority of production overseas him at so i would not get too hung up on just one month of japans exports. It is always hard to get hung up on one piece of data. In the meantime, we have seen this month of gains in the nikkei 225, lots of people wondering if we are in for a correction in japanese stocks. What do you say . Out on ituld not miss if i were you. Japanese stocks are cheap and have some of the best growth , so we are 14. 9 times earnings. The u. S. Is 18 times. Japan,d yield is zero in so that means earnings yield minus bond yield to 6. 8 in. Apan and 3. 2 in the u. S. That is a heck of the difference between the two. The important thing is you by japan on a play on global trade, and as emi is showing you, global trade is doing well indeed. I would not miss out on that if i were you. Even with this rebound, what we saw on friday, is it time to adopt a different strategy because volatility is starting to come back into the market and be a bit more defensive . I dont see the point of going defensive when foreigners are underweight a market on fire. Celebratingade is is accelerating, you would be nuts to be going for defensives. Up, alibaba go a deal worthing up almost 3 billion in chinese hypermarket chain. That is next. David this is Bloomberg Markets asia. Chinas largest hypermarket sun 2. 5 . Wn that on the news that alibaba is acquiring a controlling stake in the company. We have been following develops all morning. Its going down because they paid, or will pay a discount of 6. 50o they were offered for this total 77 stake in Sun Art Retail Group. Purchasing a 36 of the stake, and another partner, a retail group out of france, are increasing their stake to 36 . Will have aoup combined 77 of this Hong Kong Listed Sun Art Retail Group that runs more than 500 hypermarkets across china. Online withted taobao and tmall. He wants fulfillment within 30 minutes. He has bought into other retail chains as well, not just the organic concept where it will be cashless and alipay, but department stores, electronics retailers. He is really going all in with this brick and mortar. David it is almost like amazon and whole foods. Them on ais ahead of bigger scale and taking on many partnership. Art is an interesting company. I was looking at what they have been trying to do. They are a traditional retailer hypermarket concept, but revenue has come down and more people are shopping online, a last february theyve worked seeking partners to boost their online presence. There was a story where alibaba was not interested, but they were interested. Have the french brand, and soy carry that, and rt mart, 15 of chinas hypermarket business. David quite egg. Big. You so much quite thank you so much. Tracy alloway is coming up next with Bloomberg Markets middle east. There we go. What else do we have today . Talking thell be latest on all that risk off sentiment. City banks health of Wealth Management. We will ask him about that china shadow banking crackdown. For wealtht mean management, Asset Management products. Closer to home, the latest on zimbabwe stocks. They are falling. We might discuss why that is a good thing. We will also talk about the saudi budget deficit numbers shrinking by 9 all coming up next. David that is it. Bloomberg markets middle east is next. Mong we will be flushing out the market story next. This is bloomberg. Tracy risk off, asian stocks resume the slide, and the euro falls. Is a correction coming . Grow for an exports fourth straight month by double digits. We are live in tokyo with the latest. Resign,efusing to robert yougov a shocks zimbabwe and does not step down in a tv address. His impeachment the next step