Kong. The pace of tightening is critical with risks on all sides. Janet yellen does not want a boom bust economy. Rishaad correction, what connection correction . Last week was a harbinger of something, turnaround, but that does not look like the case this morning or yesterday. Lets have a look at btv 39. It feels a bit like 1999. Is it . Market bears try to draw comparisons between todays bull market and that of the late 1990s possibly are wrong, could be wrong. There is a reason behind the link being unwarranted. Market graft is alive and well. More than 70 of s p 500 members have been advancing. Research partners wrote a note on tuesday that this was not the case in 1999, when less than half of the s p 500 saw members rise. Before the crisis, 50 of stocks ended the year higher. What we have is market breadth. That could bring solace to some there. Ut there bulls out what about the situation here in hong kong . A hairs breadth away from the psychologically important 30,000 level. Lets bring up this chart to show how much the hang seng has gone up. Outperforming its peers as we look at the s p. , inellow we have the dax green the ftse 100, the laggard the shanghai composite in the nikkei 225 the secondbest performer. But does it have market breadth, the hang seng . That is the question we are asking. One third of the rise we have seen has been down to one stock, tencent. No prizes for guessing which stock has been boosting the hang seng the most. Even as we see the 30,000 level within reach for hong kong stocks, how soon will it be before we start asking about 25,000 when it comes to japanese equities, the nikkei . All of this amazingly coming against the backdrop of justice month the bank of America Survey saying we are seeing valuations entering the realm of rational exuberance, but investors dont seem to care. It looks like we will end the year with a bang. Lets have a look at the irrational, or at least some exuberance when it comes to the asian session. Reporter lots of exuberance when you take a look at the prethanksgiving cheer in the u. S. Spilling over into the asian session, investors seemingly energized after the correction. What correction indeed . Regional shares have rallied past the 2007 peak for a second time this month. 2017 setting up to be the best year for asian equities since 2009, when the benchmark gained 34 . Asia is outpacing the u. S. And european shares. That has been helped by surging chinese shares like ever granted soon at and ashares like tencent. We will see what the open is like in hong kong at the bottom of the hour. Tech shares are leading gains in tokyo and seoul. Malaysian assets are gaining ground ahead of inflation. Data due out at noon local time. Cpi forecast to have moderated in october. Taking a look at the inflation update, we are seeing a climbing to a 13 month high. The korean won is that it may 2015 hi as we count down to next weeks bank of korea meeting. It is expected to deliver a rate hike, the first since 2011. Taking a look at some movers in asia. Tdk is trading at a july 2016 high after announcing the developments of a rechargeable battery. As we await the statement on reports of a bid for former dupont unit xl set. Dena rising the most in a month as it releases a game for smartphones today. Rishaad thanks very much, sophie kamaruddin. New york authorities are opening an investigation into a hack at over the Company Covered up. We got a line coming through over uber being sued over the data breach, classaction suit. The attack apparently compromising the data of 57 million customers and drivers. It was only this week, more than a year after, that action was taken against the chief Security Officer, joe sullivan. Lets get to reed stevenson. He has that more for us on this from tokyo. What do we know about how this all happened here . Reed this goes back to last year and even before. Essentially hackers found a way to go to a coding site where google not google ubers engineers were working, and use basically steal 50 million names, email addresses, phone numbers of customers as well as driver license information for 7 million drivers. This was discovered because uber had initiated an investigation into the activities of these security staff, including the chief Security Officer joe sullivan. This came out at the time. Of course, the discovery was that they actually paid the hackers 100,000 to keep everything quiet. Kind ofhis is all spilled out in the last week and 24 hours and is yet another headache for this company. Haidi as you say, it is just more bad news for a Company Already battling negative pr when it comes to dodgy governance allegations, culture issues. The new ceo has been there for a couple of months. How is he dealing with this . One what has he said . Reed he was very swift to say there are no excuses. And while there is nothing he can do about the past, he promised that every uber employee would act with more integrity going forward. Obviously he took over from travis kalanick, who was the ceo at the time of this breach. There is going to be further questions about his knowledge and role. Right around the time that this hack happened, uber was actually settling a lawsuit with the new York Attorney general regarding the disclosure of private information of customers etc. So this is all sort of part and parcel of sort of a trend, or at least a practice by the company, in terms of how it treats Sensitive Data by its customers. Rishaad the question has got to kalanickdid thenceo said anything . He has not given his reaction. His role has to be explained as well is what the government has done so far. Have we heard anything from authorities . Reed at the moment, nothing regarding this new disclosure. I think you can be sure that given the issues that they dealt with before regarding regulations and disclosure of information, that there will be some sort of response as well forthcoming, we just dont know what that is yet. Rishaad thank you very much. Reed stevenson, joining us from tokyo with the latest on over uber. Lets get to sydney and paul allen with the first word news. Paul fed chair janet yellen says that while inflation should move up in the next year, it is not certain the current low environment is predatory. She told an audience that the fed is reasonably close to its goals, but tightening too fast could strand inflation below 2 . Yellen will step down in february and had some advice for her successor. One of the most important things i have learned as chair and thought was important to making policy is to keep an open assumed not to simply that history is repeating itself. Zimbabwe is entering the unknown after losing the only leader the country has ever known. Something of a party mood gripped the country as Robert Mugabe reside. Worldsearold was the oldest head of state and federal zimbabwe since its independence from britain. He quit after being placed under house arrest by the army and being fired by his own party. Reports from berlin say chancellor merkel is leaning toward a revived alliance with the social democrats, just 24 hours after saying she is ready for a new election. Sources tell us her true preferences for another socalled grand coalition with the spd, which underpinned two for three terms as chancellor. However, spd leadership is wary of going back to her aid. Hewlettpackard slumped after hours on news that Ceo Meg Whitman is leaving. She will step down on february 1 to be succeeded by Company President antonio narrate. Whitman became ceo in september 2011 and will remain on the board. Hp fourthquarter estimates missed fourthquarter revenue missed estimates. News 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. On paul allen. This is bloomberg. Haidi thanks for that. Still ahead, this guy is the limit for chinas new tech of. We take a look at why a new airport is crucial. Rishaad news from jpmorgan on where to invest and where to avoid. This is bloomberg. Haidi a quick check of the latest business flash headlines. Several chinese lenders have plunged after it is reported that country will halt approval to the new online micro companies. They sell as much as 20 . Others also dropping. The tightening is said to be due to risky cash loans, raising concerns lenders could be subjected to further restrictions. Rishaad hsbc has been fined a record 51 million u. S. In hong kong over structured products link to neiman brothers, its business division, without a license to advise on security suspended for a year while its dealing license will be partially halted. It was penalized for failures of internal controls and sales practices in the years before the mens 2008 bankruptcy. s astonishing 2017 side briefly surpassed facebook in the Worlds Largest corporations club. 120 rally has boosted its market value by almost 300 billion. That puts it above facebook and into the top five. Tencent was the First Chinese company to make the top five after petrochina also achieved the landmark, temporarily, in recent years. Rishaad asiapacific markets chasing rallies. The s p 500 put them in. That index with a new record. Earnings justified the strong returns, though valuations or something to watch. John milton is head of global multiasset strategy at j. P. Morgan. What is going on . We are seeing a coordinated global expansion. We have gotten what we finally wanted, which is all the world pulling forward economically at the same time. Bettergrowth means earnings, which means Better Outcomes for equities. Less than 10 of the returns on stock market over a oneyear horizonjo are explained by valuations. Hn more than 60 over a 10 year horizon. If you are trading for today, you are trading on earnings. If you are trading for 10 years, you are taking into account the valuations are above average. Rishaad [indiscernible] they have been steady all year. Lets look at the facts. Why have they been steady . Rishaad the pnd have both been moving up. The s p is on 18, 19 times earnings. Rishaad 21. 9 rv. The reality is if you look on forward metrics, as we have seen earning expectations pick up, the average is right about the midteens, around 15. 5 over 25 years and peaks around 24. 5. We are expensive relative to through cycle average, but still inexpensive relative to where we would typically see a cycle peak. If you believe it is right to call the top the economic momentum, sure, be cautious on equities. If you believe the expansion has room to run, you would expect it to be earnings that primarily drive rishaad then you want to also say, how much is the market dictated to by fundamentalism and how much by centrism . They are today my very different beasts. They are. We saw a lot of talk coming into the last couple of weeks about a correction. The market has gone up, therefore it must go down. The reality is we have people climbing a wall of warriors. People dont quite believe it. They have not gotten the exuberance we saw back in the late 1990s. If people are looking to value real underlying cash flows or businesses the. Com bid was valuing ideas. Rishaad i remember there was a somebody had a Business Plan in the. Com boom. It was a return on vision. People look at tech, which has had a very good run. We think it will continue because it is building structural improvements across all businesses. That adds to the potential upside that we see to earnings over the longterm. It also as the economic growth. There are ingredients today that are much more rational at this stage. We believe that we are late in the cycle. Lets make no mistake. But as the market is reacting more to earnings delivery than it is to sentiment exuberance, we feel that there could still be some legs in this market yet. Haidi john, we have been talking about the hang seng pushing the crucial milestone. Japanese equities have been trading up quarter century highs. I want to put up this chart when it comes to the s p, 6541 on the bloomberg. We are looking at 23 trillion index now. We saw a record high overnight. Nobody really knows the answer to when should we be getting out. The two triggers that seem to come up time and time again would be a miscommunication from the fed as we get the leadership hanover or a quicker than expected pickup when it comes to inflation, and therefore quicker than expected tightening. Do you think these factors could bite next year . I think you have got to look at things. When you are late cycle, you have got to be recognizing that you are looking for a trigger. Ultimately earnings are bust right now, evaluations are above average. Sentiment gets carried away. The market could be vulnerable to a trigger such as inflation, an excessive rise in interest rates. What janet yellen said yesterday was interesting. She reminded us that we are not out of the woods with regards to disinflationary pressure. Although we have seen cpi pickup , we are still not clear we have got much in the tank in terms of wage pressure. Inflation across the globe more broadly is well below centralbank targets. The notion that we are moments away from an inflationary shock is probably wide of the mark. Doesnt mean we should not be watching inflation . Absolutely not. It is a very important figure, not because of inflation itself, because it could be something that would trigger Central Banks to be more overzealous. Differentthe story and perhaps more positive when you are looking at asia with the tech story, the consumer story, the reflation story we are seeing . We believe emerging markets are a structural story. Our longterm Capital Market assumptions, we see emergingmarket economies growing around 4. 5 on average over the next three years. Developing markets going around 1. 5 on average. That 3 additional growth wedge means it does justify a higher level of earnings and revenue delivery into equity markets. We do think that as we have seen structural reform among the fragile emerging markets, there are good reasons why you would want to be leading into emergingmarket equities as a proxy for Global Growth longterm. Haidi you have pointed out opportunities when it comes to onshore chinese stocks. Taking the latest example of what is happening with online lenders, is this a market that you think will continue to be driven by policy as opposed to fundamentalists . Chinas markets are opening up. That is something we expect to continue. We saw a couple years ago the beginnings of the loosening of how the renminbi trades. If you look at where the bond markets are, only 2 held by international investors. Treasury market, 14. 5 trillion, 14 birth percent 14. 5 by international investors. We are at the start of a multiyear journey in seeing chinese assets open up internationally. As we move through the process, we will see increasing focus on fundamentals and the underlying drivers that dictate developed markets as much as they will over time dictate the direction of chinese assets. Rishaad next time you are in town, please pop in. John bilton from j. P. Morgan asset management. Beginning the session in hong kong. We are moving to the upside to above the psychologically important 30,000, looking like we are going to breach that right at the start. Up. 9 . Haidi singapore and indonesia are working together on common standards for tax reporting. Speaking to bloomberg, the senior manager for finance said it is all about improving corporate transparency. Our regulations have always been clear. If you put money into singapore, if you invest into business activity, you should make sure it is clean, that it abides by our government regime, and if there is anything wrong with that money, it is something you should be very careful about. As far as we are concerned, where do people put their money, why do they put their money in a particular place . Usually because they want to have the best returns on the money, because they feel the place is good for economic activities. Those are the kinds of moneys we want to attract. If there is out flow for wrong reasons, thats up to those companies. As far as we are concerned, you should be here because you want the demand business activity. If there is anything wrong or illicit, we will clamp down on that. Could you shed some clarity . Will this involve mainly banks . How about another how about other Financial Companies like insurers . How about nonFinancial Companies like property agents . Will they be impacted the same way . I think all companies will be looking at the new regulations. They would have to see where they want to base their activities. From our part, as long as you have good, solid, real, substantive activities in singapore, you are fine. Companies will have to make Business Decisions depending on where they want to put that money. We are in an environment where data is being shared on a global basis. How do you ensure that is being done within limits . That is a very good question. You really do have to be careful with data. Obviously individual organizations need to have proper processes and procedures. When that is shared with tax authorities, the authorities themselves need to make sure they have proper processes and procedures in terms of who can access the information, who it is shared with. Above all, you do need to have strong i. D. Systems, a strong i. T. Systems, strong protection against hacking. It is a complete wraparound approach with respect to data protection. Rishaad singapore is a senior minister of state for finance talking exclusively to haslinda amin. Urgingup, janet yellen central bankers to keep an open mind about inflation. We ask if Jerome Powell is likely to heed her advice. It is also the market open, next. ,ishaad 9 29 a. M. In hong kong counting down to the start of the trading day. Up u. S. Major markets ended in record terrain. Giant investors taking stock of the profit outlook and liking it. Also tax reform debate on hold at the moment as congress has its week on holiday for thanksgiving. At Goldman Sachs, stott gains for next year. Generally speaking it is a bet currently on Global Growth. That is the driving force chiefly as we move higher. Haidi absolutely. Considering we are looking at a truncated week for u. S. Trading. Goldman is really on the barrier side of the balls bama of the bulls. They have said they are expecting 2850 for the s p next year. China opening now. We have this sense of exuberance when it comes to the hang seng in particular. Sophie can we get a drumroll please . The hang seng has broken 30,000 points, the fifth day of gains. Shares are now crossing the 12,000 mark. We are seeing shares in shanghai on the rise, getting. 33 , and a slight losses and shenzhen. We are seeing the exuberance continue for mainland and hong kong markets. Taking a closer look at the dial in hong kong, this one getting about 2 , another continues to gain ground. We are seeing a few stocks lagging. The biggest drop so far this morning. Hsbc also under pressure. Financials are going to be very much in focus today, given what is going on with this clampdown on shadow banking. Turnover for hong kong shares rose to a 28 month high on tuesday amid the tencent frenzy. Lets take a look at how tencent is faring so far this wednesday morning. We are seeing shares continue to go higher. We are watching this one after it posted a second consecutive profit again. Demand for gold lifted sales for the worlds leading jewelry retailer. And king soft is climbing. Lets take a look at what is moving the dial in shanghai. Financials are leading the rise along with materials and staples. Financials will be in focus as brokers and banks have been climbing. Shares have soared 122 this year, the best performer on the msci china finance index, just to show you the breakdown of that particular index. Keep an eye on this throughout the day. Online shares also one focus after a report said china is halting approvals for new online microlenders. Analyst john davis says the market is misinterpreting those rules, which he says will help provide a competitive advantage for players. Rishaad thank you, sophie kamaruddin. Lets go to first word news in sydney and joined paul allen. Paul the new York Attorney general has opened an investigation into uber after bloomberg revealed the company paid hackers who stole the personal data of 57 million customers and drivers to keep the breach secret. Bloomberg says the attack compromised names, email addresses, and customers of 50 million customers and 7 million drivers. They fired the chief Security Officer and one of his deputies this week for their roles in concealing the hack. The Trump Administration has sanctioned three Chinese Trading Companies and north korean shippers to disrupt kim jonguns funding. Steve mnuchin said action being taken against one individual, 13 entities, and 20 vessels, which cumulatively have engaged in trade worth hundreds of millions of dollars. None of the firms sanctioned are publicly traded. The mexican peso weakened against the dollar as the trade were positive says there is no evidence canada and mexico will seriously engage on renegotiating nafta. His statement followed a fifth round of talks, which sources tell us fell short of completing work on any section of the agreement. He says the u. S. Still hopes for meaningful progress this year. Court were crimes war crimes wraps up with a verdict in the genocide trial of the former bosnian serb military chief, the last major case. They were blamed for europes worst killing since world war ii. He is accused of ordering the murder of thousands of muslims in 1995. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. On paul allen. This is bloomberg. Rishaad as janet yellen gets ready to hand over the baton at the fed, her message on the rate hiking path remains cautious, saying the risks of tightening too fast are at least as big from moving too slowly. Kathleen hays is with us now. Yellen speaking at new york universitys stern school, being interviewed by the former bank of england governor. Lighthearted during that stock. It was interesting she was outlining the tight rope that is central banker has to walk down. Kathleen you make a good point. This was a lighthearted conversation in many ways. Marvin king, very charming interviewer, janet yellen relaxed. He talked about her first days at the fed, who is her favorite economist. There was definitely discussion around policy and the question of inflation. Lets start with the risk of yellen talking about tightening too fast. That, she said, could be a problem because it would maybe even keep inflation below target. The longer it stays below target, the more people expect that. She is watching expectations. She sees some signs they have flipped a little. 9351, you can see the fiveyear inflation breakeven. You see what investors are seeing five years out. You can see over time Inflation Expectations have been a little bald. It is a very big come down and now they have climbed out. Some cases indicating lower again. Bottom line, this is an important observation, something dovish fed officials have talked about. It is clear she sees two size of policy risk. Lets listen. Moving policy accommodation to quickly risks moving inflation below our target with all those dangers. On the other hand, removing policy accommodation to slowly too slowly also has risks. The labor market could tighten very quickly and move to levels that are way below those judged to be sustainable over the longer term. Kathleen as usual, pretty cautious, pretty balanced. If you look at the entire conversation, there was quite a bit of acknowledgment by janet yellen that the fed could move too quickly and could worsen the inflation problem they are trying to solve. When its yellens view comes to below target inflation starting to change . Kathleen lets start here, haidi. We know that all year, her mantra has been below target inflation is transitory. 189, you cant btv see why maybe she and others are starting to wonder. The yellow line has come down so much over the years. Thats unemployment. Average yearly earnings have bottomed out and started to come , in someplateaued cases pointing lower on the threemonth moving average. It is interesting that janet yellen was asked if the low inflation was surprising and she said yes, it is, unlike in the past. Lets listen to one of the things she said about this. This year, low inflation is surprising, because we are at essentially full employment with a 4. 1 unemployment rate. Oil prices have been stable. The dollar has been roughly stable. Inflation is surprisingly low. Kathleen surprisingly low. For 2014, 2015, 2016, the fed saw all these special factors. Even now, she went on to say, maybe there are reasons why this is still kind of an idiosyncratic thing, because Health Care Costs are bigger part of the economy and they have come down, changes in cell phone prices. I think it is very important that she said the fed is no longer certain low inflation is transitory. This is subtle, but if you look at the beginning of the year and what she is saying at the end of the year and as she looks to end her term as fed chair, i think she is starting to show that the fed, including janet yellen, are taking a closer look at what is going on with inflation, white is not raising. Why it is not raising. Haidi it is kind of like soulsearching. Looking for the answer to the question of 2017. Thank you so much for that. Coming up, skyhigh competition. We are going to ask if Cathay Pacifics costcutting efforts are match for its mainland competitors. This is bloomberg. Haidi this is Bloomberg Markets asia. Im haidi line in sydney. Rishaad im Rishaad Salamat in hong kong. China southern has plans to beef up u. S. Routes and close in on mainland rivals. They purchased an airline this year for 200 million. A representative explains how the partnership will help China Southern reaches targets reach its targets. Amount is not so many, the meaning is clear. For China Southern, on the one hand, we want to keep the regulation. On the other hand, we do want to get more support from the United States. And theet between China United States is the biggest one. So we need strong support. We got the reason why the cooperation relationship, a strategic relationship with aa. It is just the beginning. I think in the future, we will run more lines to the United States and they will fly more to china. Have potential space to cooperate. I know that air china and china eastern are restructuring and bringing in private investors. Is that something you might consider . We have to be very careful, because it concerns employees and a lot of various sensitive issues. But i think we will do. Haidi that was China Southerns vice chairman and president speaking exclusively to tom mackenzie. Lets bring in peter are percent, executive chairman for aviation. These grand ambitions, the new ,eijing airport, the new hub how impactful is it going to be . What does it leave for the likes of cafe Cathay Pacific . Cathay pacific has already been a very high quality airline which has fed strongly on the chinese market. When the Chinese National mainland chinese carriers started expanding, obviously that was going to be true on Cathay Pacifics profitability and market generally. From China Southerns point of view, they have been a very successful domestic carrier, expanded aggressively internationally. The prospect of a new beijing airport and being able to create a relatively large hub is very expensive potential for them. Haidi but they struggle when it comes to brandon, quality of service when it comes to branding, quality of service . I think all chinese carriers suffer from that. They are learning very fast. They have got new equipment generally, which in terms of hard product is getting there. In terms of customer service, there are a lot of issues where the cross where the crosscultural capabilities are not where they should be yet. It will probably take another 35 years before you get that consistency of inflight products and Service Product generally that would get them up to the level of Cathay Pacific. Haidi what about International Carriers . You have got the new beijing airport. What do you anticipate in terms of agreements and the number of flights that will be allowed . You do have the converse situation, where the overseas carriers dont do so well in the domestic markets. Yeah. The new beijing airport but theyve all new complexion on the way beijing operates. China has had the real lion share of the traffic from the domestic point of view. This will open it up to China Southern, china eastern, other carriers. From that point of view, it does expand their opportunities and competitive capability with china internationally. For the foreign carriers, i think you are right. There is intensity of competition for the chinese carriers means that foreign carriers are going to find it difficult. Haidi huge discounting comes into play as well. To what extent do oil prices need to stay low for the chinese carriers, for China Southern, for example, to stay competitive and continued to do well domestically . Across the world you have seen a fairly significant reduction in fares as fuel prices went down. The idea has been to stimulate pricesensitive markets. Is other side to that coin if fuel prices start going up, a letter of the pricesensitive traffic starts to find its too expensive supply, and or the Airlines Start to become unprofitable. There is a prospect as Oil Prices Increase that we are going to see a bit of a softening in demand. Chinese carriers are pretty low cost and certainly very aggressive on pricing. Rishaad you can have as many starts as you like an open up as many routes as you want, but authorities in beijing have to play ball. If they close airspace randomly, there will be a lot of people off, isnt it . Yeah. Certainly good to drop you. The whole airspace issue in china is basically becoming more intense, because as traffic increases the conflict with military requirements increases exponentially. That is an area where something has to be done. My office has been fairly active in terms of accessing chinese airspace. It is an issue that will certainly not go away. If anything, in the shortterm it will intensify. Rishaad it is something the u. S. Suffered from a lot in the early 1980s. It was effectively done away with with negotiations between the military and reagan administration. Does a deal like that have to be struck . Totin aning andant froing between the authorities and the military always prevails in these issues. I think it is a matter of beijing recognizing the importance of Civil Aviation to the economy generally and to the future prospects of china, to try to influence the military more substantially. It is a continuing issue. In china, it is quite intense. Rishaad lets go back to what haidi said, as we look at Cathay Pacific and how it is impacted. There has been speculation that air china might take over Cathay Pacific. At the same time, Qatar Airlines taking a near 10 stake. What is going on with this carrier . Think it is pretty evident to everybody. As i said before, Cathay Pacific has fed successfully off the chinese and hong kong market. It has been very effective as a hub, a point to aggregate traffic from all over the world. Increasingly as china and particularly the east coast of china has become more affluent, it has relied more extensively on the chinese market. Now as the chinese carriers start easing from that table as well, it starts to hurt Cathay Pacific. The more the Chinese Airlines cater forpmarket and the premium traffic, the highyielding traffic, the more that will bite into Cathay Pacific. Where are they going to be in 10 years . I think there is a good chance air china will loan most of them and can will own most of them. Rishaad and be an airline luxury product, if you will . I dont know that any airline can do that. It is difficult. Well most of the marketing is about those nice seats at the front of the airplane and , young flight attendants have got to fill those tiny seeds in the back to make the whole equation work effectively. I dont think there is going to be any such thing as just a highquality operation, premium operation. Rishaad what about the middle eastern carriers . How do they fit in with this super hub idea and the chinese one, which is effectively pointtopoint . Just to pick up your last point, i think increasingly the chinese carriers, particularly China Southern, are starting to appreciate the opportunities for collecting traffic from the south and carrying it to north america and europe. This freedom operation, the hub operation, is potentially there. As far as the gulf carriers are concerned, china has been quite restrictive on allowing access. Theyre not going to have assuming that continues they are not going to have the same impact on china as they have on australia or some other countries. It is really a question of how much the government wants them to be able to compete. So far they have been fairly restrictive. Haidi is an open skies agreement a possibility in the near future . Skiesna the big open opportunity is with the u. S. That defense again not just on the u. S. Government, but on what the u. S. Airlines themselves want. They would like open skies with the u. S. , because that way they can have immunized joint ventures with the chinese carriers. U. S. Government says you cant have an immunized joint venture unless you have open skies. Australia, for example, has pretty much open skies with china. The market has grown enormously as a result. With other countries, china is fairly selective in who it wants to have open skies access to. The growth is really out of china, so it is our growth as opposed to someone elses. Haidi always a pleasure, thanks for coming on. Peter harbison, executive chairman for aviation. Hercan check up on interviews by using our interactive function, tv. You can also watch live and dive into any of the security is security, assets, or functions that we talk about. This is for bloomberg subscribers only. This is bloomberg. Rishaad this is Bloomberg Markets. Pay Morgan Securities will 1. 25 million to settle claims it failed to do sufficient background screenings on 95 of its nonregistered employees for more than eight years. The Financial Industry Regulatory Authority says that up to may this year, four people worked in the unit who would have otherwise been disqualified because of criminal convictions. That apple has discovered its main supplier in asia has employed High School Students working illegal overtime to assemble the iphone x. It said interns at a foxconn factory were volunteers and or and benefits the work longer than the law allows. They were on a threemonth Work Experience gate. Six of them told the Financial Times they routinely worked 11 hour days. Rishaad skype is no longer available in the chinese language app store. However it still appears to work on the mainland. Apple says it has been notified by the ministry of Public Security that a number of apps dont apply with local laws and have been removed. This is coming as the communist market tightens controls over social media in the country. Coming up, he is trying to fix what he calls a dysfunctional market economy. We are talking to this man, Michael Spence. He is also a nobel laureate. Talking to him about where we are with the economy, talking to him about where we go next. Professor Michael Spence will be joining us live for an exclusive interview, which is steve engle will be conducting, and about 10 minutes. On a day where we got equities on an absolute tear, this is bloomberg. Asia markets lifted by fresh highs. The fed boss says the pace of tightening his critical with risk on all size. Avoidinglen discussing a boombust economy. Airbus speaking to bloomberg about flying cars and autonomous planes. I am Rishaad Salamat and hong kong. I am haidi lun in sydney. Globalization, protectionism, and the worlds two leading economies. This is Bloomberg Markets asia. Haidi janet yellen may be flagging risks when it comes to potential policy missteps, but investors are not buying it has we head into this short week, thanksgiving shortening the u. S. Session. After last night, another record close for the s p 500. We are looking at a 23 trillion market. This coming despite a recent survey suggesting we have irrational exuberance when it comes to valuations. Overnight, Goldman Sachs revising its outlook when it comes to the s p for next year, drastically taking it higher. Have concern over where this bull market will end and what that triggers will be, inflation, a misstep at the fed, or this of global synchronized growth story falling apart. Upside asng at an 18 we close out the year. Rishaad looking at that and elsewhere with no discussion of tax reform this week. Generally just positivity. Lets find out from sophie with the markets. Investors energized after the recent correction, the hang seng above 30,000 for the first time in a decade. Chinese financial shares reporting gains in hong kong and shanghai. The indexes flirting with 12,000 points. In tokyo, i. T. Stocks are the leaders. Earnings Growth Potential is part of the rationale for this exuberance. Outperformance from asian stocks is expected next year. Stocks in hong kong on the rise. One china rising after its share buyback. Want china rising after its share buyback. Nippon shares had fallen 4. 5 earlier. At a twoyear high as the the ok is expected to hike rates next week. The be ok is expected to hike rates next week. An upside surprise from Third Quarter construction work data. The mexican peso under pressure after a dour assessments of nafta talks from u. S. Trade representatives. Asian currencies, the Malaysian Ringgit the best performer. Malaysia has postponed its Inflation Report to november 24. Be thailand bought trading aht at those levels ahead of trading data. Haidi lets get more from singapore. Another recordth close. Revising its target. It is hard to find a bear these days. Indeed. Nobody wants to look for bad news. Focusing that Global Growth is synchronized, projecting upwards for 2018. Market momentum is positive across the world. Tech stocks keep booming. Relativelyrkets are quiet, which means everyone is focused on equities. There is nothing to distract people so it is just feeding on each other. We suggest fresh buying is taking place. Everywhere you look it is a very healthy picture. Marketit feels like a that even a week or two ago was reacting to every negative headline. Is there a fertility to this market and what could make it turn . It would probably need to be something substantial and out of left field. Even though a couple of weeks ago markets were looking wobbly but so far this year they have been so shortlived, lasting a couple of days, then taking off again. The hshare index hit 12,000 today. The trend has been completely one way. It has been going up the whole year. Tech stocks up every month this year. We need something big, maybe a geopolitical event. For now people dont want to see anything wrong and are willing to look past these things, even when central bankers speak. See what would put people off their stride here. Rishaad for the time being, we can dispense with the trend is your friend intelligent be nds. The korean won seems unstoppable as well in all this. The bank of korea and the finance ministry say the won is too strong and gaining too quickly, and the market just ignores them. It is difficult because the korean won is slightly undervalued. If korea does too much, they will get the attention of washington, which they dont want. Plus, they will raise interest rates, which is drawing people into the currency. We will just have to grin and bear it. The korean won will get strong in line with other asian currencies and they will have to hope it does not outperform on a bigger basis. All about sentiment ultimately, mark, right . Yeah. Sentiment is a powerful driver. Yesterday for example, Retail Investors in hong kong came back in huge numbers from a purely driven by sentiment. As long as that kind of thing is happening and markets are backed up by take participation, it can go on for a long time. Rishaad thank you very much indeed for that. Can follow more of his musings on the markets live blog at mliv. One click and commentary and analysis from expect expert editors. Getting over to singapore, lets get first word news headlines. Uber is being sued for negligence after it paid hackers to keep her breach secret. Theattack compromise information for 50 million customers in the licenses of 7 million drivers. Chiefmpany five the Security Officer and one of their deck it is this week for their roles in concealing the hack. One of their deputies this week for their roles in the concealing the hack. Zimbabwe celebrates as robert gabi quits. Fed chair janet yellen says while inflation should move up in the next year or two bank, it certain that the complementary not and low inflation may not be transitory. Yellen will step down in february. The most important things i learned in this chair and thought was important to make a good policy is to keep an open mind. Assume thaty history is repeating itself. A senior minister says singapores Wealth Management industry has not seen significant outflows despite a move to clamp down on offshore tax evasion. Startore will sharing information on Bank Accounts under a transparency program. Say there hasrs been no meaningful exodus of funds. Where do people money and in a particular place . They want to show they have the because they feel like the place is good for its economic activities. Those are the ones we are trying to attract. If the outflow for wrong reasons, that is up to those companies. You should be here because you. Ant legitimate activity anything wrong or illicit, we will clamp down on that. Haslinda global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Haidi still ahead, our onerview with the airbus cto white shenzhen is the new Silicon Valley and the development of flying cars. Next, Michael Spence theing us discussing dysfunctional market economy. Rishaad this is Bloomberg Markets asia. Haidi i am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. And influential members of Society Gathering for this years asia global dialogue. Stephen engle is there with a rather distinguished guest. Absolutely a distinguished guest. Lets get right to it. Spence. Ofessor michael thank you so much for joining us. The asiaspoke at global dialogue, making sense of global disorder. How do you make sense of it and what disorder . Things seem to be all right right now. If you are a skeptic about the turbulence and populism and so on, you look at the Global Economy and markets and say things are going well. We have synchronize growth acceleration globally. Highs, are at alltime low volatility, relatively little nervousness, reasonably calm reaction to the withdrawal of monetary stimulus and so on, so it looks like we are in better shape than 10 years ago. The question is, what disorder . Theanswer has to do with political and social polarization, especially ofthe west, the rejection establishment parties, elites, the governing structure, and this is in part a function of adverse distribution oh characteristics of growth patterns. Which leads to protectionism. It can. It can lead to all kinds of policy mistakes. When you have a rejection of the system, it does not mean you get Something Better coming out the other end. You can get political paralysis, instability, poor policy choices , so the rejection of globalization is certainly what kind of dialogue do want to get going with your fellow noble laureates and other economists. You want to get a dialogue with Global Leaders about what . About what the realistic options are for shifting the growth patterns in a direction that improves the inclusive dimensions of them, deals with difficult transitions to new kinds of jobs come a difficult transitions to reskilling and shifting the Human Capital mix, and the sustainability issues. A part of it will also focus on the financial side of the Global Economy. To doare issues having with volatility and stability and so on the probably need to be addressed as well. While eu were speaking here, back in new york at the stern school we heard from janet yellen. She will be the outgoing fed governor, so had to see this transition going . I think the best guess is that this is an issue of continuity. I think her successor has shown every evidence of being pragmatic and so on and has supported her colleagues in the gradual withdrawal of so on the central bank side commit you have superb performance around the time of the crisis, then you had an excellent run under ben bernanke , another under janet yellen come and i think it will continue. I think Central Banks have been a pillar of strength. Will stubbornly low inflation continue . Forces in our economy are pretty par 4. Pretty powerful. There is not as much evidence of real inflationary pressure, even when unemployment rates drop what to use to be viewed at the level you start to get inflation. We are just not seeing it. It is very broad. We are not seeing it in europe. We dont have much indexing left in our economy. At some point you have to have a market response if youre running short of supplyside capacity, but we have not seen it yet them a so there may be hidden elements of capacity in the Global Economy that are lurking around ready to supply demand. Do you coordination among Central Banks continuing into 2018. Jerome powell would be the new fed chairman. We will potentially have a new governor at the boj, even though governor kuroda could carry on. In beijing, the Central Bank Governor likely to be replaced at the National Peoples congress in march. Central bankers do coordinate. They meet in switzerland at the bank for international settlements. They talk to each other. Their mandates dont allow them to formerly make arrangements with other Central Banks, but on an informal basis, i think they keep themselves pretty well informed. These are big changes. We have had giants heading these. Nstitutions i think on balance the best way to think of this is a younger generation, well trained, likely to take over. What is the biggest risk they will face in 2018 . I think the biggest risk would be an outbreak of volatility somewhere in the Global Financial system global monetary system. I dont think it is a very high risk, but you cannot dismiss a completely. Can you stick around a couple of more minutes . We will take a take and talk about china in more detail. Our guest here is dr. Michael spence. More of our conversation coming up in a couple of minutes. Welcome back to hong kong university. Our guest is dr. Michael spence. Lets talk about china. That was a big focus at the 19th party congress. Are they making his priority to tackle the debt . How much of a priority is this that showprojections gdp will continue to pile up . It is pretty important. There has been an enormous runup of debt. It is in the neighborhood of 270 of gdp. That is probably the level you will find in a wide range of countries, developed and developing, but the trajectory can go on like this without incurring serious systemic toks, so the commitment getting it under control in terms of the rate of increase, i dont mean they will cut it right away, but get control of the rate of increase and except if they have to some impact on growth in the short to medium run. There is no guarantee that consumption kind of middle class growth engines will kick in fast enough to replace generating but i think credit, they are pretty committed. The pboc governor has warned about the possibility of a moment where you have a sudden drop in asset prices after a long run of growth. Is this a possibility or do they have a firm hand on the tiller . A possibility, but there is also a great deal of confidence in the central bank and policymaking structures and they have a fair amount of weapons to counter this. Because if they intervened too much and Financial Markets they will extend and at this moral hazard problem. Thistend and exacerbate moral hazard problem. Miss allocation of resources and the mist pricing of risk. It is not an easy transition come a but you cannot reject the possibility that you have a major asset price reset. Where would the tipping point, . , the localal level Government Finance vehicles . Household debt is rising, but still low. Property sector . Sector ory mismanagement in the sme sector. The big runup in credit has been in the corporate sector. When you look inside the , between sector private and Stateowned Enterprises and the problem is not just debt. It is that debt was taken on to build assets that are worth less than the cost of creating them. That is the definition of negative returns. They know all this and have the resources to deal with there, but it would not take a big mistake to have some kind of fairly violent sort of convulsion. Front, i juste follow donald trump around asia. He was talking about lowering the goods deficits the u. S. Has with Major Trading partners. Did you see any deliverables on that front . No, i wasnt able to detect much of anything. There are some business deals that were signed it might make a difference, but the heavy lifting were have to be done in the United States, and i hope, although parts of economics the notion you have to have a balanced pattern of trade with every major country in the world or major economy is silly, right . Nobody does that, right . When peoplethat start paying attention to job creation, competitiveness on the tradable side and the overall deficit, but not bilateral ones. Michael spence, thank you so much for your time on bloomberg television. More coming up at the hong kong university, including with the former u. S. Representative in the house and also the former trade negotiator coming here from hong kong. That. 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