David we are getting the tokyo session up and running. We have been out for 24 hours, no u. S. Trading overnight. Lets take a step back, it is friday. Goldman sachs came out with a note, 620 by 2018. We are currently at 567. The record high won was in 2007 at 588. Hopefully we get there. Yvonne hopefully, but the selloffs in china are the big picture. Given the steepness we saw in the late part of the session, you have to wonder if it is the start of a market meltdown. Most traders say, we are not quite there yet. There is a big rally we saw throughout the year, we are just taking money off the table at the moment. That is what they say. News get the first word with Haslinda Amin. Used aident trump thanksgiving address to the military to take credit for progress in fighting abroad and to warn americas allies could become the enemy. During the campaign he said u. S. Engagement was a waste of time. But now he claims his policies have turned things around. He told soldiers they would come home to a good economy, good jobs, and a big, fat, beautiful taxcut. Germany a step closer to a coalition government, with the Biggest Party to begin talks. Martin schulz and the spd wary about reinstating the grand coalition, when the voters punished them at the inconclusive the coalition. Margolis struggling to form a government in talks with when talks with the free government and the green failed over the weekend. Considering dropping the referendum for independence, if they talk with spain. Said it couldont be removed from the manifesto if madrid holds talks as equals. Catalonia holds new elections in december. Samsung rejected claims workers had been abused at two factories in vietnam. Hanoibased researcher documented a series of alleged health and labor violations. They say some workers, including pregnant women, were required to stand for their entire shift or face pay cuts. They interviewed 45 female staff at the factory. 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. As you see at the bottom of your screen, 0. 8 on the overall benchmark for the day. Lets check what is happening at the opening in tokyo and seoul. Sophie is with us. What are we doing . Given the severity of chinas stock wrap up, we will put it on the board to show you the start of trading tokyo. Japanese investors seeming skittish. The yen having strengthened beyond 112 as u. S. Inflation drag on the dollar. This is the first chance to trade on the u. S. Induced index. Flipping the board to show you what is going on with trading and seoul, we do have the kospi edging higher, but small caps are under pressure. The korean won Holding Steady at 1085. Consumer confidence for november rising to a sevenyear high. A little bit of positivity for trading in korea. Wb on thewarmed up, terminal. Chinese and hong kong notes among the biggest losers, flashing red on the screen. Otherwise fairly rewarding for other assets in the region. The chinese bond sellout has been we saw stocks slip the most in 17 months. Bond yields on the main men climb to threeyear highs. Take a look at what is moving in tokyo. Minolta leading gainers. This other one, dragging on the index in tokyo. Lets flip the board to show you stocks in focus. Radar, this on the as axalta topping 10 billion. Mitsubishi materials and focus after two of its units have been delivered to 250 customers. Something to watch in tokyo. David especially the bottom one. Thank you. Focus is china, 90 minutes from now when markets open their. There. Asking,ket participants where was the National Team . Lets get an assessment of the damage. Checkout chart 2409 for our clients. The top panel is the shanghai composite. The second panel in green, decliners. If you compare that to the darkest days during 2015, let me bring that up and see if we can get a clear shot. We did see the magnitude of the drop. It was one day. Hopefully it does stay just one day. Yvonne lets bring in stephen engle. No statedirected buying yet. Can we take that as a good signal that perhaps they are serious about reining in financial risk . Stephen that is the priority from the 19th party congress. It was an afternoon of selling, not a massive meltdown, yet. Most of the analysts bloomberg has talked to over the last 24 hours you asked about the National Team. In the afternoon if you see this kind of selling, the stampede, some National Players would come in and prop it up. In the last 45 minutes, the if you lookt again, at historical data. Yesterday, in the last 45 minutes, it lost 45 points. The National Team probably wont step in the market because it is not in a panic right now, and it is in order, not a panic. Investors are close they watching whether the central bank will put in injections to ease liquidity tightness, if bond yields continue. Yvonne cash is king. Stephen also, another is saying it is not good a good time for the National Team step in, because it would not make a difference. They cap valuations are high and smaller caps will not prop up the market. They might give window guidance a big institutions to ensure market stability toward the year end. They will be watching if this turns into a panic or not. 2015, the massive runup we saw, part of what we were watching was market financing. You could tell it is getting to be a bubble. What is the story now . Stephen two years ago in the first run off after the collapse in the popping of the bubble, we saw 360 four dollars billion in outstanding margin loans. 3 billion in outstanding margin loans. What is worrying, it is now past the 1 trillion mark. A little less than half. It has climbed for six consecutive months. In the terminal we can see the mountain that was the lending pile in 2015. There it is on the right. The one we crossed trillion yuan threshold. Still a far cry from the 2. 6 trillion yuan in june of 2015. Crack on micro leveraging and these instant online loans have gone into a rising stock market. Yvonne listing in the u. S. , too. Stephen there is a general report they would get guidance from regulators soon on whether they are indeed shutting down these other 157 micro lenders that are in china, and leave it to the licensee holders, the big Online Companies like alibaba. That would be quite devastating to the market business that wants to go ipo. I think the figure is 152 billion worth of loans in the market. It is fairly unregulated. There have been new regulations that came out this summer the clampdown on the market. There have been ponzi schemes and other frauds. They want to rid the market of that and add more regulation. Often they will move with an iron fist and ask questions later. Yvonne thank you, stephen engle. We will continue the discussion. Bank of America David a change of pace for your friday. Jonathan stone comes along to discuss the benefits of investing in arts. That comes up in about two hours and 30 minutes. This is bloomberg. David you are watching daybreak asia. I am david ingles. Yvonne i am yvonne man. Focusing on china this morning, what do you make of the moves we saw the end of the session, the speedup in selling . It seems like there is panic. Are we back to where we were in 2015 . Cliff we are not there yet. H in chinas market has not been in equities this year. China has been unformed. Is in credit,h is whether it is rice properly or not. There will be a contagion effect on equities and that is what we saw yesterday. David there is nothing to indicate they wont ease off deleveraging. Will slowlyguessing hopefully grind higher from here. Is there enough for the bulls to get into the market in china . Cliff i would not characterize what china has been doing as deleveraging. We have been saying that to our clients all this year. Because china is the credit economy, more demand for credit than supply. You do not want to look too much at the price of credit as a guide to policy, but the actual quantity of credit. If you look at the trend great of trend rate of growth, it has not changed through the party congress. I do believe authorities are now more concerned because of the growth of shadow banking. Not so much on the borrowing side, but that has led to some policy changes we have seen in the last few days. Of the shadowh Banking Sector is still in the shadows, so to speak . At what point is it beyond reach of regulators . We know they take a big slice of it. But much if not all is off balance sheets. An abundance of loans were disguised as investments to get around restrictions. How do you begin to quantify the potential Systemic Risk in china . Cliff that is what authorities are so spooked. They realized there is a big chunk of this they do not have numbers on. As a joke over the last 18 months we started calling total social financing in china, somewhat total social financing. There has been new Product Development in the interbank market that makes me think of actual amount of credit outstanding in china could be 10 or 15 of gdp higher, than the already high number reported. Ivid at the end of the day, would imagine it comes down to the amount of money available for the products. People talk about the new rules, that is one avenue of refinancing that is done. What happens to that money . A lot of these products were withted as hybrid projects a high dividend, it was super popular. Now, sincemoney go people cannot get into these products anymore . Cliff i am not sure the money has migrated away. The key here is the authorities said a week ago, i do not remember which day, we are this. To save the this we are not standing behind these products, you will lose money. Please take that into account. Nobody in china believes them because they do not think the government would allow that to happen. And they may be right. For them to migrate elsewhere means they take the governments warning seriously, which i do not think they have, as yet. Yvonne where do you see yields going . Maybe in the corporate world as well. I have a chart. Take a look at the recent growth and cpi data from china. Perhaps it is in line with where the 10 year bond yield is that now. Is this at an appropriate level . Cliff when i look at spreads, those over the governments, not quite as white as they were in 2014. Wide as they were in 2014. David is that a sign of finally we have gone to the point where we can look at Interest Rates and it is being priced properly . Because to get there, beijing has to allow default and people do not want to allow defaults. Where do we go with this process . What is missing in between . Cliff what is missing is company opportunity. What is strange about chinas credit situation, supposedly you have an economy growing at 8 or 9 in nominal terms. And they cant seem to deal with 4 Interest Rates, which is alarming the authorities. That tells you the financial conditions for many of chinas big borrowers is far less robust than what is great then what is pricing the credit spreads. That is troublesome. Yvonne in terms of the renminbi, does it stay stable . Cliff we saw the rally yesterday. I think it is temporary. The reason i think it is temporary is because, if we have an economy going into a challenging year when it comes it would be an exaggeration to say the authorities will allow cascading defaults. But in increasing number of defaults of larger size with contagion. Based on my experience, it is weird for a currency to be strengthening in the face of that. We think the strength is temporary. David in terms of the strength we see across other currencies, we know a lot of these equities are inversely related. It has not kicked in. When does this kick in and went to equity markets start tracing back . Cliff the question you are asking is about Profit Margins in these countries. Strengthen,ncies are they going to see it in the Profit Margins . That, i do not have a complete answer to yet. That is something you need to look at. I do not see a lot of nearterm macro risk for a global selloff. Ifause central banks, anything, will continue to be more benign than recently expected. And growth is really good in places like europe and the u. S. And asia, as well. I would just say we want to look at Company Earnings and see if the valuations make sense. Right now we are probably in the latter stages of a bull market. But we are not at the capitulation point. Yvonne what would you buy in terms of currencies for 2018 . We see the dollar in the doldrums. Goldman and the likes saying we could see three or four rate hikes from the fed. Cliff we are not in that camp. Again, we do not know that much about powell as a chairman. An because he is not economist, he is likely to be looking to staff and other outside economists for guidance. I think he may be getting benign guidance on this. We are looking at may a couple of hikes next year. I am sorry, i forgot the first part of the question. Biggestwhat is the conviction call when it comes to currencies for 2018 . Continue i we do not see things going in a Straight Line for 2018. In some ways, in the latter half of the year, a may see some of these asian currencies strengthening as you start a selloff of it because of the valuation terms. Call,ot have a bullish but we have a bearish call on the renminbi, which is unusual. That is because of the credit story. I could be wrong. Experience,t it is weird for currency to strengthen. David japan, cheaper than it was 18 months ago. Stellar earnings season. Japan is aink relatively safer bet in the equity world. The story you were reporting on a few minutes ago, the acquisitions and so on, is a sign of corporate japan trying to restructure and find new ideas abroad. I wish them well in that because they needed, in order to revitalize their economy. You, cliff tan, thank head of Global Market regions. You can get a roundup of stories to get your day started in todays edition of daybreak. Go to dayb on your terminals. It is available on mobile with the bloomberg anywhere app. Customize your settings to get news on industries and assets you care about. Stay with us. This is bloomberg. Yvonne this is daybreak asia. I am yvonne man. David and i am david ingles. Bmws stepping up its search for a long time supply for batteries to Power Electric cars. Talks will include transparency, compliance and sustainability, when it comes to the supply chain. Itold electricity has made an indispensable part of batteries. Yvonne fast retailing applied for approval to open stores in india to further raise their global presence. They want to operate under the uniqlo brand. At last month, fast retailing predicted International Sales for uniqlo would exceed those of japan this fiscal year. David the Company Behind angry of itsost almost 1 4 value after earnings described as a brutal disappointment. They spent 26 million to track games. Four times what it had invested a year ago. The Earnings Report fell 29 . [indiscernible] percentage of sales at 8. 6 . Yvonne lets see how they are trading in the asiapacific session. Most of the downside on the nikkei 225, coming down from the thanksgiving holiday, down 114 points. The cost be the kospi Holding Steady. Down one third of 1 . Key to watch, china in one hours time. Breaking above 4 once again. Sending large cap tumbling to the worst day in 17 months. I think it is still too early to tell if it feels like 2016. But when you see a selloff of more than 20 2 , it gives you a flashback. David a bad flashback. We are looking at a changing of the guard in asian governments. This is bloomberg. Yvonne happyyvonne friday. 8 30 in singapore, half an hour away from the open of trading their there. Looks to be a good day in the lion city. David you are watching daybreak asia. Haslinda amin has your first word news. The slump in chinese large cap has rattled the market that is grown accustomed to state support when losses become too severe. The index sank 52 points in the thel 45 minutes of trading, steepest afternoon decline since january of 2016. Slump, theydays apply 20 this year, to the highest level since july 2015. Margin debts rising for six straight months. A newg may be finding crackdown in cash. Microlenders to reduce risk in chinas Financial Services sector. 157 say the countrys leave microlenders will only those with licenses. That could dash many lenders hopes for new york ipos. The u. K. On course for the longest fall in Living Standards since records began 50 years ago. Analyzing the budget, they say the economy will be 42 billion pounds smaller in 2022 than the government predicted in march. Wages will not return to prefinancial crisis levels until at least 2025, once inflation is taken into account. The oecds warning on debt. It poses an increasing threat to growth. Korea, canada and the u. K. Lead the world in private borrowing and the organization it says it does not imply problems, but does increase vulnerability to shock. They said there are issues that could trigger a downturn. 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. Seeing how the asian markets are shaping up this morning. Lets get the latest with sophie kamaruddin. Sophie a challenging friday for asian investors. Pull up the board to show you what is down in tokyo. Japanese docs dropping, the nikkei 225 on a second weekly slide. X is falling, it could resume gains after losing 2 last week. Jasdaq index for a gain of almost the are. 3 . The dollar takes up ever so slightly against g10 peers. Mitsubishi materials sliding in 2015, the most since may after they falsify data on parts delivered to 250 customers. The company is to hold a briefing today. Buy axalta. To the kospi resuming gains, while the won fell under pressure. Taking a last look at what is moving for them kospi when it comes to contributions index points. You have a samsung leading gains. Gaining almost 5 , after being upgraded. Lg household the biggest drag on the kospi, after cut to neutral. Cosmetic players under pressure following the jump we saw in that space thursday. One rose as much as 14 thursday. Just skin gains were deep. Thank you for that market update. Lets take a look at the picture in asia pacific. They face important decisions over the next few weeks, whether it is change or reappointing central bank chiefs. If it is change, does it mean a change in policy will follow . Yvonne Malcolm Scott has been looking at this. Leave . In line to you have china, japan, taiwan. Who is set to change . Malcolm it is unprecedented. New zealand, indonesia potentially, and korea. We may not get a change in policy direction with the changing faces. Some of these spaces may be reappointed. But over time seems fairly set. In china we have a new governor expected sometime between now and march. There is rampant speculation. But the policy part is fairly clear, keeping flush with money so the real economy can grow, but clamping down on excesses. That is unlikely to change. Especially given any new government will have the same profile china has. The same profile china has. If you look at korea, they have been doing fairly well. It does not look like will be appointed. The governor has been reappointed since the 1970s. He was appointed by moons predecessor, park. The president will want to put his own stamp on things. But it looks like a tightening trend in korea. One, is the other big another big economy facing change. The most recent surveys show there will probably not be change. Reappointed, what economists are betting at this stage. Still, we do not know what he is thinking. He has not given public hints as to his attention. Intentions. It is unlikely a hawk would replace them. David in terms of potential names. There is the opinion he is set to leave. Any names floated around for joe and kuroda . Malcolm kuroda seems a moot point. The latest survey we did was fairly strong in predicting he will be reappointed. That would be somewhat unprecedented. The First Time Since 1956 we had a reappointment there. In china, so much speculation. May be only one man in china knows who the next person will be. One name that often comes out, he would be a reformer. Much in the league of another. Someone that would continue that sort of push. Yvonne Malcolm Scott, ever asia economy managing editor. Switching gears to cosmetics, be 145 years old, but tradition has not stop them from moving slowly. And are eyeing more takeover targets after buying some of the worlds bestknown brands. David Haslinda Amin spoke to the president about the push to become global. We needed a change. We needed to transform the company to accelerate our growth. 2020,t through of vision which is in fact a longtime strategy. And to change the strategy. Is it enough . It is an increasingly competitive competitive market, all clamoring for a bigger slice of the market. Can you see ahead with this strategy . Three years are proving we are ahead. We are accelerating our growth. By the end of the third quarter, exceptional. The Group Announced 15 growth globally. In asia, plus 12 . Everything is on track. Has been acquiring other cosmetic companies, bare e gabbana, dolce even. Why do these brands make sense to your overall strategy . Diversifiedegy is with different culture behind our brands. Somebrands are from japan, from the u. S. , some from europe. We try also to focus on the growing categories. The makeup category in asia is booming. Mes lastsition of year,sier was a good one. It is a Makeup Artist from france, with a french taste. Goldman sachs has been upbeat about the prospect of shiseido. It upgraded shiseido. But there have been other concerns. Reen you think about ba essentials, 6 million, was that a mistake . There is a history between bare essentials. Thislieve we can make brands better than it is today. We have not grasped all the potential of this brands and that is what the group is trying to do, to revive it and make it better. Is now constructing a manufacturing plant in japan, something it has not done in decades. What is the thinking behind that and where is demand coming from . Demand comes from many markets. We have three factories in japan, and it is not enough to full capacity. We needed to have another factory. So it is a very good sign we are expanding. Talk to us about your digital strategy. Brands acrosstly sectors need to look at digital access. It is no longer enough to have brickandmortar business models. How are you are approaching it for a company deep in tradition . We do get consumers and how they shop. There have been big changes. 67 of millennials are shopping millennials are shopping online. That is a big number. In china, ecommerce is big. In southeast asia, ecommerce will be big in the future. We have a Digital Center of excellence in the u. S. [indiscernible] i hear a very big potential for that. It will be increasing in the future. We calculated that we want to triple our contribution to ecommerce in the coming two years. Yvonne that was shiseidos apac president speaking exclusively with Haslinda Amin. Up, the senate prepares to vote on the republican proposal. Differences with the house must be bridged. This is bloomberg. Yvonne this is daybreak asia. I am yvonne man. David and i am david inkless. The full senate expected to make amendments and vote on this. The house bill will need to be reconciled before any final version will be sent to president trump. Yvonne Jodi Schneider is watching all of this for us. Seems tax reform is making progress, the whole debate around all this. What potentially blocks this . The house block to this bill with little drama. The senate can only afford to lose a few votes because it is such a narrow margin. No democrats are expected to vote for the bill. They have to satisfy some concern. Isan collins from maine concerned about the individual mandate being repealed from obamacare. He has problems with the bill, though seems to be in a better mood about it. And jeff flake, leaving congress to retire, says he has no problems. If you lose too many votes, they would have to change it, which will take time, or try to get democrats on board, which would be difficult. David and there are two versions, there is that. It one. E to make and who gives way and what are the points of contentions between the two versions . Jodi this is a step a lot of people forget. You have to pass the exact same bill in both chambers. The house bill that passes now will presumably have to have changes. In this case because the senate had such a narrow margin, the houseful have to go more to the senate bill because they have to get that back through. Some chairman will have to vote again. Voted to repeal obamacare, which the senate has been unable to do. What they want to go for the individual mandate again, that is the question. They evaluate state and local taxes differently. The senate bill gets rid of that resumption exemption, while the house keeps it. Republicans from states where there are high taxes, this is viewed as a benefit to their constituents. It will be tricky, it will not be easy to reconcile. And time is of the essence. Interesting, be these are lawmakers coming back from their thanksgiving breaks. Maybe they have not talked to their constituents about how they will vote, moving forward. Will this affect midterm elections next year . Jodi potentially. Both chambers are trying to get this done now. Into 2018 it is difficult midyear to pass legislation. History has shown this. It would be a huge win for the trump administration, which has not had a big legislative win. And the Republican Congress, which has not either, if their opponents on the campaign trail can point to a Republican Congress with republican president has not been able to pass anything, that is a talking point for the democrats. Because they badly want this and they wanted in 2018. The question is, can they get there with complicated legislation . David a big week, we expect you on the show again. Jodi schneider, our Bloomberg News asia editor. Yvonne a solution to gridlock, taking to the skied. The startup planning drone taxis from the u. S. To the dubai region. This is bloomberg. Yvonne a quick check of markets in play across the region. In japan, shares down 0. 3 . We are gaining a little more ground than we saw in the initial open. But we are seeing dollaryen at 111. 40 against the dollar. David lets take a look at australia. A flat session yesterday. Beautiful day in sydney. Yields at 2. 49 . Certainly one to watch. Yvonne keep in mind, pretty thin trading volumes, more than 30 lower since the 30 day average. Not a look at the kospi, going anywhere on the benchmark. Shares just at 2,537. David everyone waiting on what is going on in china. As you can see, a fairly uneventful open. A little pressure on the singapore benchmark. At the moment. 05 at the moment. Yvonne look at the drones. To paraphrase the superman comics, is it a bird or a plane . A Chinese Company has a solution to travel woes. May want to roll out drone taxis from the u. S. To do by next year ai next year. David we had exclusive access to where they are raising money to start mass production. Drudgery of your daily commute could be a thing of the past, if the makers of this taxi drone get their weight. The chinese startup hopes to build drones in cities across the world. The Company Founder says that vision will soon be a reality. Just waiting for our trial flight permits. Them, you will see our taxis flying publicly in dubai. Where you see the most opportunity . Is it consumer drones . Definitely commercial and humancarrying. We are only at the beginning stages of large use of drones. Especially passenger drones, have just come to the attention of the public. Our company shifted our focus from technology to the business side, as we see huge opportunities in the Global Market. Is the biggest challenge for drugmakers the Regulatory Environment . Is that still the number one fore for girona dronemakers the Regulatory Environment . All the policymakers put us in the center, working closely with us on regulation. This is already very unusual. Is china your primary focus in terms of a market, or are you looking overseas as well for sales . Market is indeed bigger than the Chinese Market in terms of purchasing ability. However, we are making our way in china. We signed with two local governments and help them build control centers to use our drones extensively in urban control and environmental monitoring. We have seen huge changes in our sales, as more than half our revenue came from commercial deals in china. I expect our passenger drones to bring us more income next year. Billion order1 from a u. S. Company and formed a strategic partnership. Ehang will become a star in 2018. You received a 52 million in funding. Are you looking for more investors . We will kick off funding targeting 300 million as we massproduced drones at the beginning of next year. We plan to have fully Automated Production lines in 2018. Furthermore, we will sign in saudi arabia, singapore and several european sites, where we will need funding to support drone testing. Ng was putting delivery drones through the paces, delivering coffees. If they get the green light, it is another service they hope will soon take off. Tom mackenzie, bloomberg. Yvonne pretty sweet. David no it is not. I am not getting on. Yvonne you can get your copy delivered through a drone. David i am not getting one. Yvonne struggling noble group asked creditors to agree to a unified response to a proposed debt restructuring. They held talks in london earlier this week about a resolving Credit Facility that ends next year, and three bonds that end soon. Exchange current debt for securities without taking a cut on face values. David the latest on the hack attack, the uber attack exposed information of users. The digital ministers says he has demanded axis from the company. They paid hackers to conceal the attack. About thesoftbank hack, while hiding it from the public. That Mainland Police and regulators are investigating a data breach. Officials are looking at allegations that the details of one million students, clients of the beijingbased company, were lost and possibly sold. Sources say the investigation may not lead to action. David that is all of it from us here on daybreak asia. Time for a quick look at what is going on in the next three mark three hours. Guess there is only one market we are watching. Yes, it will be the yuan in madagascar. [laughter] the shanghai composite, huge stuff. It just went down, down, down in the afternoon. What happened . We will be looking at this in the company of our guest from ccb. Just looking at the impact, the margin calls have had on this. [indiscernible] where was[indiscernible] where was [indiscernible] just having a look generally speaking at christies. About to have a brandnew auction. Shaping up to be one of the most significant of all time in asia. We will speak to the deputy chairman of christies in asia. He will be along in just under two hours time. Just a flavor of things. There is a lot more than that. But it is about shanghai today. Yvonne that is it, market coverage continues. 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. Mirrors on nerves on edge. Leaving the rewards, the decision to go digital to the core, making southeast asias Biggest Company buy market capitalization. A group in singapore discussed creditors. Th leading i am Rishaad Salamat in hong kong. Anchor and i am haidi lun. A deep breath against pollution. The drive is shaking up industry and inflation. This is Bloomberg Markets asia
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