What is going on out there. Continues for the s p 500. This is 1172 on the bloomberg. At what has been boom,on since the dot com 1989. Expecting the index to hit 2800 by the end of the year. This is the s p 500, the blue arc showing the dot com bubble. A little under half an hour away from the open of markets. Look at what is going on. David, is there any real theme today so far . Gains, except for korea. Gdp at of india, pmi out of china. Here is a flavor of the equity markets. Everything but korea. Samsung, downn to over 3 . Morgan stanley cutting their call on the stock. Blue line is your consensus price target. You take the median there. 2. 68 is the stock price right now. Here is the spread between the two. The other thing i want to point hiking rates for the first time in seven years. This is the chart. We have seen the three year yield and the repo rates widen. Bond markets are saying they better hike. Another thing happening thursday , opec setting to extend the output cut. Opec and russia have worked out the framework on how to extend those cuts into the end of next year. West texas near a high. Come risk on,ings except for south korea. Rishaad the bears perhaps outing their coats to head the door. Lets get to first word news. The earliest indicators for november suggest confidence among chinese Sales Managers and steel producers is waning, matching the mood among international investors. Sentiment among Small Businesses improved according to a survey of more than 500 companies. Is littletivity changed from last month. Atedith to acquire time inc. 18. 50 a share in and all should deal worth 2. 8 billion. The boards of both companies unanimously approved the deal. Ceo says it creates a premier Media Company serving almost 200 Million Consumers in the u. S. Washington, the republican partys tax plan interest a crucial week with Senate Leaders planning a make or break vote as soon as this thursday. Democrats are expected to delay or derail the bill. Concernedlicans are about the potential end of federal to directions for state and local taxes. The president is scheduled to address Senate Republicans this tuesday about taxes and his agenda for the rest of the year. Egyptian stocks rose sunday despite the countries deadliest terror attack. ,he benchmark rose. 8 in cairo taking its advance to 15 this year. More than 300 people were killed in the attack on a mosque in northern sinai. Egypt has raised its security alert to the highest level after claims from Islamic State were responsible. Angela merkel has stepped back from the possibility of a new election following a possible revival of the grand coalition between heard christian democrats. She said the two had worked well. She also said in a potential Coalition Partner would have to support a balanced budget and broadly probusiness policies. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad lets get back to one of our top stories, the colons a stellar year far from over, the largest cryptocurrency hitting another record high, surging past 9,000 for the first time a week after hitting the milestone of 8,000. I remember it was 6,000, we were describing it as being in a frenzy, and the frenzy continues. What is the driver behind this . Is it heard mentality, the fear of missing out . What is going on . Take your eyes off the screen for the weekend and you get another 13 bump higher come so it is ticking up pace. Lets dive into the bloomberg. This is 1183 on the bloomberg. Beenber of theories have thrown around around this latest to the ideae comes that one of the largest exchanges has increased their 13 millionse, now accounts. There may be some prudence and the idea that people are not pendingahead of coming splits with Bitcoin Dimon and super bit going. It momentum is there and continues to be an asset driven continuesnt, and that to remain very positive at the moment. Rishaad so the question remains how quickly can we get to 10,000 . The context of this move is we are up now more than 800 this year. If we look back over the year, 1166. S chart it has been a rocky road. We are up a significant amount, but also have three 25 pullbacks during that time. Towe think back augustseptember when china announced a crackdown on digital currencies, that triggered some the techy, and after upgrade cancellation a month ago, you had that 29 plunge, so we have seen significant moves. The pace at which we have been seeing these anes suggest we could be at 10,000 very soon indeed. Key events are coming up rishaad i have to interrupt you hit 9,600, so a 16,00 . Of that, now up we could be at 10,000 of by noon. One Upcoming Event which will why you some context Money Managers are becoming more , momentum withs the bulls, but the skeptics will be coming out in great force saying this thing has gone too far. Rishaad thank you very much indeed. This story and more and all the days trading on our markets live blog at mliv. And one click with commentary and analysis from bloombergs expert editors so you can find out what is affecting your investment right now. Can japan inc. Survive another scandal . We discussed the countrys Corporate Culture later in the show. Plus, a good month for chinese lawns. Could the route worsen next year . That is next. This is bloomberg. Rishaad this is Bloomberg Markets asia. I am Rishaad Salamat having a look at the business flash headlines. Consideringrtered additional Aviation Finance joint ventures. Singorporate finance head the ventures would potentially be southeast asia, middle east, and africa. The Financing Division began the leasing joint venture in march. Softbank is expected to proceed with its investment in uber despite the Security Breach the Company Covered up for one year. The wall street journal says it told softbank about the attack one month before acknowledging it publicly. Softbank plans to purchase 14 from shareholders and invest 1 billion. Vocus putting its business as a challenger to vodafone. Credit suisse said Goldman Sachs made a pitch to challenge new Zealand Telecom rivals. A busy week for bond traders and fx traders tuesday. Beforeellen testifying the joint Economic Committee. Lets have a look at all this. Thank you for joining us. We have pmi inch chin in china,n india, where are we in the fx pace and what is the path of least resistance for the dollar . Concern is wete are seeing some rebound in European Economic data. We saw pmi outperforming expectations across the board. That happened during a month was strong come so it is validation of how strong the euro has been lately. If we get the of urgency in the then get divergence in the pmi data, then we will have to consider that. There are also event risks, and the pce deflator on friday for the u. S. Can be important. It is the fed preferred indication for inflation. It has been falling persistently. You want to see how this thing is going at a time when janet yellen and Jerome Powell are likely to be assessing their views on inflation going forward. Rishaad the base case is shooting for a december hike, but the question is what is the path beyond that, and with data and a flattening yield curve, some are saying hold your horses, guys. Absolutely. Inflation is also low. The pce deflator has fallen from 1. 9 and is now 1. 3 . The is still some way off 2 target the fed is talking about. Deflator refuses to go up, then all this talk about ,ow inflation being transitory janet yellen talked about some key reasons, but you need to see inflation picking up from now and hopefully in march when that one off fall in telecommunications will fall out of the equation. You can be a bit more confident inflation is transitory, otherwise the market will be cautious. The december hike is priced in. Beyond december is a big question and probably Jerome Powell can give his views on inflation. Rishaad if we get anything concrete on tax reform that is likely to play out in fixed income. A lot of the people in the equities market are already factoring in some kind of reform. What has been lacking is the conviction that this could push beyond theto next 12 months. That growth can be sustained close to 2. 5 to 3 . Those levels have not been priced into the long end and that is why you get a flat yield curve. If you dont get confidence and longterm growth from tax reform, then that flattening of the yield curve can continue even as the fed hikes. So what you get will probably be the conundrum you saw in 2001 Alan Greenspan was hiking Interest Rates and the curve cap flattening. It went into an inverted curve in 1999. 2001,ed to recession in so is this a recessionary signal . That is a key question the market will be looking at. Rishaad lets move it to china and have a look at what happened last week. We had a wild ride of it come a big fall down in the middle of the week. Not much reaction from other parts of the region, so that tends to show that china does not represent a systemic risk. From the Financial Market specifically. Week, yourkets last mentioned the selloff in the stock markets, also the bond market. The 10 year yields went above 4 for the first time in many years. In other words, the bond market was facing some selloff as well, equity selloff, on selloff, the currency weakened. There was a bit of a across the board selloff in china Financial Markets, but not so much in everyday life. You dont see significant changes in property prices. If this was to continue, more selloff in equity markets in a 2 fall last tuesday, so for me if we dont get further selloff in the equities and bonds market and the renminbi, then it will translate to more pressure elsewhere in the region. Rishaad great talking to you. You can catch up with all her interviews by using our interactive function tv. You can dive into the securities and functions we do mention and send us instant messages during our programs. This is for bloomberg subscribers only. Check it out at tv. The 100 billion man, how black friday sent jeff bezos his fortune skyrocketing. This is bloomberg. We are looking at u. S. Retailers adding up how black black friday was, online spending hitting a record 5 billion, at 17 jump from last year, and there is still cyber monday to come. The u. S. Online retail kicks off this Holiday Season on a very merry and bright note. First to my bloomberg chart, 7236. The white line is amazon shares. I want you to look at the right hand side. 2. 5 will it is a jump of just on black friday. That was its biggest jump in a month, taking it to a record. Meantime in the blue, this is Alibaba Group shares. It is still trailing amazon. Just for of reference, even billione did see 25 for alibaba singles day on , somber 11, that fell 2. 5 we are seeing a contrary and move between these major ecommerce giants. Expected to pull and 1 billion in sales from black friday and expected to get 45 percent to 50 of all Online Retail for that day. Meantime lets look at my next terminal chart, 8686. This is amazon with the ecommerce space. Walmart is the worlds biggest retailer. That compares, 572 billion for amazon, but 289 billion or so for walmart. Just looking at walmarts performance on friday, it only rose by. 25 , while amazon jumped 2. 5 , so it will take a to approach ever amazons market value. We are seeing better and better ecommerce growth for walmart. Saw a growtharter of 54 . For my final chart, this is a richt function you know, our. Jeff bezos saw his total net. Orth jumped by 2. 4 billion it is up year to date 35 billion. He has been there worlds , and now broke past 100 billion. Rishaad right. Startng you down to the of the trading week in hong kong. Lets have a look. Is the situation unchanged premarket flat. We might well be seeing a fall. That is premarket pricing we do have here. 225 moving to the downside by. 2 . Elsewhere, bitcoin grabbing the 9,603, a the price move up of 16 . Coming up, snubbing singapore. Is cooling on the line cities bond market. Ket. Rishaad the heart of hong kong. A new trading week. Industrial profits data out of china shortly. This week have fee on numbers and figures. Pmi, official and unofficial, surveys coming out. Japan Industrial Production numbers. Looking out with gdp, at how that sales tax has hit growth. The u. S. Very hectic as well. We have this tax reform plan. On top of that, confirmation hearing tuesday for Jerome Powell, the next head of the fed. A day after that, janet yellen talking to a joint Economic Committee and congress. Ce figures on top of that, thirdquarter gdp in the u. S. A lot going on. We should be getting numbers from china. David we are waiting for that. Have a look at what is happening. We have come off our highs. A lot of that has to do with south korea down 1 in hong kong under pressure. Taiwan,. 25 lower. Most stocksng at on the way down. We have started to see equities come off their highs. Into friday, gains the s p did not upgrade following what moodys did. Some people were disappointed they did not get that upgrade. Snapshot of your broader picture across the asiapacific. Have a look at the china currency. Right, h aside to give you a sense of how things are moving in the market basically split in. Etween 212 ine a look at this picture shanghai. Most were actually down. Not surprise, look at ppi. We will talk about that more in a moment. Here is the split in shanghai. A better way to look at it is function. Telcos down 1. 7 . Samsung pulling down everything in korea. Our charts today, bitcoin. This is bitcoin against the worlds best performing stocks, no match. That coin over 900 . 1360. Art is rishaad we will look at bitcoin in the second. Breaking news, industrial profits in china. An idea of what is happening with nominal gdp. Industrial profits up 23. 3 year on year. We had a 27 gain in the previous month as well. To october,ary industrial profits up 23. 3 . In october, Companies Profit rose 25. 1 . News. Get it to first word Goldman Sachs is warning that new york city could lose some of its highest income residents if the tax bill crawling through congress does become law. The legislation could eventually lower the number of top income owners. The trigger would be a provision restricting the taxpayers ability to deduct the amount they pay for state to state and local authorities. It is not clear what caused an explosion that killed at least two people on sunday south of shanghai. More than 30 were injured in the blast that flat vacant buildings due for demolition. Witnesses blamed a damage gas pipe, but the local Power Company says there are lines in the area. The u. K. Hasays just seven days to produce a new offer on the brexit divorce bill if it wants to break the deadlock before the end of the year. He gave Prime Minister theresa may and tell next monday to bridge the cap the two sides. Tothat day, may is scheduled meet the European Commission president , a date now critical for the u. K. Balis airport has been closed and the island on alert as a mountain interrupts again. Hundreds of tourists stranded and people have been told to leave. Saferities insist bali is ries to avoid parts of the island are excessive. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad it would seem singapore has been left out in the cold in asias dollar bond market. More Companies Choosing to skip roadshows. I reporter joins us now. Reporter joins us now. Why are they overlooking singapore . This is a story of china buying china. Who are those buyers . Chinese Financial Institutions thedominating buyer base. Talking aboute people doing roadshows in singapore as well, arent we . Thats right. Most chinese Financial Institutions are based in hong kong. That is why the borrowers can just come to hong kong and get all the money they want. In the past decade we are seeing more Chinese Companies not needing money from u. S. Investors, and then they find londonbased investors less important, now singapore. Rishaad what has been the reaction of singapore . They are not happy about it. 37 Chinese Company skipped roadshows in singapore 136 ther out of conducted investor meetings in hong kong. A quarter of them skipped roadshows in singapore. Are investors and singapore complaining about this and saying they need to get them to come to singapore so they can do due diligence. Some at there as well our thinking is Chinese Companies get bigger that they may one day need a Wider Investor base. Rishaad what are the risks if we see this trend continue . Is a risk of concentration of Investor Base. That is never a good thing because you need a stronger Investor Base when times are tough to provide financial resources. It may be convenient right now to do a deal quickly and hong kong, but over the long run, some investors say this could be sacrificing getting investors to know the companies better. Rishaad thank you. Having a look at chinese bond sales, dollar bond sales, concentrated in hong kong. Giving singapore a bit of a wide berth. Facing conglomerate hna scrutiny after a swiss regulator the Company Provided false information. Group and with gate the deal there. Why . This deal is close. Significant change in ownership structure. Rishaad that is the big issue here. , the its own disclosures change was there and they are asking why such a change. In thenge mainly explode ownership like the last year document no mention of any executive ownership, but this they expect the ceo and cochairman to own the shares come so that is why the answer that about them. Rishaad for you what was the most interesting finding in the ruling . Said the documents, they the two largest shareholders for the three individuals, indian businessman and the original chinese guy, and these swiss regulator say in the ruling that it is actually two guys who are not real shareholders. Trustees fort as a, theecutives of hn real shareholders are the executives. Hna failed to disclose that information. Rishaad this is getting the attention of swiss regulators. Has anybody else been looking into this company, other government bodies . The u. S. Did this the deal has been announced early this year, but there is no update so far. Rishaad we dont know where it is. We dont know. We dont know. We dont know it we are still waiting for the update. Rishaad lets to you what we have got on the way. A string of corporate scandals. Why is this the case . Guest saying more are in the pipeline and it is not really about japanese Corporate Culture. It is individual company culture. This is bloomberg. This is bloomberg. Rishaad this is Bloomberg Markets asia. I am Rishaad Salamat in hong kong. Arabias two Biggest Companies agreed to build a plan to process crude into chemicals. Ic willramco and sab process 400,000 barrels of oil a day. Saudi arabia moving to a more diverse economy to reduce dependence on oil. Adnoc wants to raise as much as 2 billion from its fuel retailing arm. . 64 to . 80 a share, valuing the unit between 8 billion and 10 billion. Ipo activity in the emirates is picking up after only two deals 20152016. Warner bros. And Justice League held top spot at the box office. Disneys latest pixar animation was second, but claim top spot in north america. O is set in mexico, where it opened last month. Japan inc. Is reeling from another blow to its reputation for manufacturing pro s. Manufacturing materials ,dmitting falsifying data sending airbus scrambling to determine whether safety had been compromised. There is a question of corporate problems in corporate japan. An expert on organizational change at companies in japan and he joins us now. Great to see you. We were just talking a few months ago. Aboute saying it is not japan. It is about individual Corporate Culture, but all these Corporate Cultures do exist seemingly in one country right now. As i write in my book, it is not about japanese culture. It is about company culture. I talk about how it is that as ceo and a leader of a business is able to impose the culture he wants on his company. N we see different companies, you need to be looking at the leader and not so much the company itself. Rishaad that brings me back to haveuestion again, there been so many corporate scandals that surely japan and cultural japan must also be questioned, even though you deny that. Well, this is not a japan problem. It is a mitsubishi problem. Areexample, in the u. S. , we seeing a raft of scandals related to Sexual Harassment. That does not mean Sexual Harassment is an american problem and not a Japanese Problem because we are not seeing as many come to light in japan. That is not the case. This is a mitsubishi problem. In the same way as when we talked last month, it was a kobe steel problem, not a japan problem. The danger in blaming japanese Corporate Culture has other implications, because what it does do then is prevent us from questioning some of these companies. Yes, and that is exactly right, because there is no way a Single Person or single leader can singlehandedly change a countrys Corporate Culture. Change the culture in his company and many have done so successfully. Something, very few of these top executives have been called to account properly, have they . It seems to be accelerating in japan. There seems to be less tolerance for this kind of thing. It seems that company employs internally are speaking up. Rishaad and that is a change, is it not . It is a change, and it has gone in the right direction come but when it comes to calling leaders to account, this is critical. I do not believe mitsubishi head can stay in a position of leadership incredibly lead an investigation or ultimate reform. I believe the same is true of the ceo of mitsubishi cable. He allowed thet malfeasance to continue even after the new for months. Remain inle cannot leadership positions with any kind of credibility. Rishaad what are the chances that they do in the end . That really depends on the board of these companies. I think it is incumbent upon them to do the right thing. Dont, this type of malfeasance will continue with these companies as it has up until now. If i might say, i think this has to go all the way down to the midlevel managers as well. You cannot retain midlevel managers who are managing staff in positions of leadership without compromising the next generation of leadership. You have to ask yourself if you were a cyclist, which you want Lance Armstrong as a coach. Would you want that kind of leader as your boss . That type oft leader cultivating the next generation of leaders for business . This brings us to one other thing, which has been about board structures in japan, etc. This is chart 1510 on the bloomberg terminal. Is this one of the reasons why turquoise, s p in looking at 19. 5 or thereabouts, and ratios in japan are below that in the white line is that one of the reasons why we have that . In spite of these massive rallies we have seen on the nikkei 225 so far this year . That it is one of the reasons. I think that board reform in japan could change that. I think there are still a number of companies in japan where that reform has not taken place and is waiting they wish ands down. Weighing valuations down. Rishaad you have seen companies instituting change from the top to make them better run and that topdown approach working. Yes. I think a good example of that one company that is endeavoring to change the withny culture, starting imposing the use of english, which is quite controversial in japan. Rishaad absolutely. Do you hold out more hope for Corporate Governance reforms in japan which would make people more confident about investing there . Yes, however, i have to say that i do not believe that governance is the first solution in the first instance. Overnance is only in the last it has to come from the top, leaders of boards and businesses, to ensure this type of poor leadership and malfeasance does not occur in the future in their businesses. Rishaad thank you so much for joining us. Redng up, could hong kongs Property Market get hotter next year. Find out what is driving the demand. That is next. You are back with Bloomberg Markets as we take a look at this redhot financial Property Market in hong kong. Coolingy no signs of down recently. Prices have climbed 11 so far this year despite skeptics who are waiting for this bubble to burst. You only know it is a bubble after it bursts. Who are the real corporates behind this . We dont know it is a bubble, do we, really . All signs point to a steady increase. Forecasting 4 to 5 prices next year. Who are the corporates . The property developers. They are greedy and control the supply. They are sitting on huge tracts of land. If they would develop that, we could quickly doubled the supply. Rishaad we are waiting to hear something on this in the budget. Was deafening silence. One of the ceos of the Major PropertyCompanies Said no signal from the government whatsoever. The government is being greedy also. They are expecting big land premiums to be paid for the right to convert this property into residential. Moves ine been some that direction, havent there . There have. Henderson is doing a pilot plant, but most developers are sitting around larger tracts of Agricultural Land than they have in their Standard Land banks come and they are lying fallow. The thing that make who thinks down would be Interest Rate hikes by the fed. We have the peg with the fed and. He dollar peg that is bound to feed into higher Interest Rates. You can get a mortgage for less than 2 if you can go in and ask for from hsbc. Hike wouldasis point not make the cost of financing that onerous for most hong kong property owners. People who own homes are debt free, so they will never feel the squeeze when Interest Rates go up. Is chart 1203. New Mortgage Loans approved, hitting ag, etc. Peak in june. There is no falloff here. It has been steadily increasing since the beginning of 2016. It is mom and pop helping junior by his first flat. The banks are encouraging people to come back and refinance their home so they can help their kids with the down payment and get on the property ladder. Unintended consequences that families that are not asset rich will never afford a home. So you have this widening divide, which is a huge social issue between the haves and havenots. Rishaad the possible solution is we get this land developed. Exactly, but even if that happens, what will happen is the price of land at auction will , record prices are paid every time the government sells land. This is land slated for development. Soon as the price is achieved, are people who have houses expecting higher prices when they sell. Thank you for that. Coming up, a big week at the fed for Jerome Powell and janet yellen. Rishaad the latest data greatering chinas resilience, industrial profits jumping 25 and factory gate inflation remaining robust. Another jawdropping milestone for bitcoin. Past 9,000. Rged tencent taking a message from facebook to boost ad revenue at home. I am Rishaad Salamat in hong kong. This is Bloomberg Markets asia. Rishaad an actionpacked week, trading under way here. China, official and unofficial. Industrial profits showed 25 increase for large corporates in china. Figures out of japan for Industrial Production. Thirdquarter gdp by india. Looking at the effect of that general sales tax and how that make play into what was expected to be 6. 5 growth. Gdp from the u. S. , another reading of that, influential, as indeed tax reform and solidity in that regard. On top of that, Jerome Powell and his confirmation a day before janet yellen speaks to an Economic Committee and congress. All that is in the pipeline. Here is david having a look at what is going on. Bitcoin grabbing headlines. 9,600 at the moment. You are looking at the jakarta market opening up. David very much in the mix. This is a split. Indonesia,oint out shares unchanged at the moment. Thaton the back of volcanic eruption in bali. The broader picture across the asiapacific looking like this. The kospi. N 1. 3 . I 300 down falling in china. Here is your split on the shanghai composite. 4 . Os let me give you a snapshot of how this breaks down across movers up, down, and unchanged. There we go. Up 400. , very much under pressure there. Here we go. Samsung electronics, your rate of change at the bottom, 1528. There is the stock price below its 50 Day Moving Average for the First Time Since summer. The other thing i want to point out, Morgan Stanley cutting the stock to equal weight price target. Is 2. 6 six, soel implied return still positive. Bear with me while i change this chart to the price target on the spread between the two. This is your pool. Given a moment. 3. 4 million is the samsung price target across 31 analysts. Can see this widening spread between the two, so perhaps there might be speculation that we might just get another around of downgrades, bringing back expectations given the fact we have flatlined over the past four weeks, so something to watch for their. 1275 on your bloomberg terminal. Rishaad thank you very much. Lets get to first word news headlines. Meredith to acquire time inc. In an all cash deal worth 2. 8 billion. Reports from both companies that they unanimously approved the deal, 600 million in backing from the koch brothers. Says it creates a premier Media Company serving almost 200 Million Consumers in the u. S. Oneshares close at 16. 90 friday. In washington, the republican partys tax plan enters a crucial week with leaders landing a make or break mode as soon as this thursday. Democrats are expected to delay or derailed the bill. Some republicans are concerned about the potential and deductions for state and local taxes. The president is scheduled to address Senate Republicans tuesday about taxes and his legislative agenda for the rest of the year. Egyptian stocks rose sunday despite the countrys deadliest terror attack. Rose. 8 in cairo, taking its advance to 15 this year. More than 300 people were killed at a mosque in northern sinai in the attack. Egypt has raised its security alert to the highest level after claims that Islamic State was responsible. Scaled back its response to conservative protests that have paralyzed islamabad over the past three weeks. Is sending in Paramilitary Forces after the army called for a peaceful solution. Two officers and six people have died in clashes. Pakistan is preparing a 2 billion bond sale. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad chinas industrial profits have maintained their surge, underscoring the countrys resilience. Tom mackenzie is in beijing with the details. 25. 1 in the down from september, but really that is going some. Marginally below that september number, 27. 7 . In october, which is the second highest number in terms of industrial profits so far this year. The expectation is that number will soften, but the reason we are seeing this strength is factory inflation remains robust , october at 6. 9 . , but it isslowed that inflation picture that has led to higher prices. In terms of what we could be seeing year, the cooling Property Market could start to reduce the demand for some of the products produced by the industrial sector. That could be of potential impact as could the Deleveraging Campaign. Pretty solid and we will get more details on the health of chinas economy when we kick that official pmi number on thursday and the caixin private survey on friday. Rishaad the read through for the Corporate Bond markets, we have seen a lot of pressure there late. We have been hearing in fact from the countrys top bond fund manager. He said we have seen the biggest pain and selloff in bonds in two months, but the pain will continue in 2018. 7390 thatrminal chart charts what is going on. The whitest Corporate Bond yields, then the three your government and blue, and underneath yellow, the spread. He is saying the spread between , andaper, that is widening that is likely to continue in 2018. President xi jinping it seems will continue with the Deleveraging Campaign and banks are hoarding cash on expectations of more policy measures to tighten, pushing up rates. You will still have this window of opportunity effectively because the background remains robust and he does expect policymakers to take further steps on this tackling of but does debt in 2018, not think it will be overall credit negative. We have seen 21 defaults this year in terms of local corporate 2017, 21 defaults. That compares to 29 in 2016. The top fund manager saying yes, more pain for the bond markets and 28 teen come up but it will not necessarily be credit negative because you will see continued Strong Industrial profits, which we see in the data today. Very muchhank you indeed. One feature we would like to bring to your attention is our interactive tv function at tv on the bloomberg. You can watch us live, see previous interviews, and dive into securities or functions we talk about. You can become part of the conversation as well and send us instant messages during our programming. This is for bloomberg subscribers only. Check it out at tv. , ourad still ahead conversation on chinas latest industrial profits continues with sterling larkin with us live in hong kong. Central banks paying attention to cryptocurrencies eight years after the birth of that coin, but have they missed the bus . This is bloomberg. Rishaad this is Bloomberg Markets asia. Home . Shaad salamat in in hong kong. Noble falling again after offloading its u. S. Subsidiary. To sell that the vision for 17 million. Loss of 63nting a million based on the units of value in september. Shares at their lowest since april 1999. Chinas hna group facing scrutiny after switzerland said it provided false information. Disclose that executives held important stakes in the deal. Hna says it cooperated fully and the ruling has no impact on the validity of the takeover. Standard chartered considering 12 aviation financial ventures. The banks Corporate Finance had saying the ventures would potentially be in southeast asia, the middle east, and africa. Beganiation financing arm a leasing joint venture in march. Softbank expected to proceed with its investment in uber despite the Security Breach the ridesharing Company Covered up for one year. The wall street journal says huber told softbank one month before acknowledging it publicly. Softbank is planning to buy 14 from shareholders and an investment of 1 billion. The confirmation hearing for the next fed chair Jerome Powell set to start tuesday, Jerome Powell favoring gradual Interest Rate increases and sympathizes with calls to ease regulations. Lets try to make sense of all this and bring in sterling larkin. So good to see you. Tell me, how much importance does this hearing have and the legacy of janet yellen . Is important for markets with regard to expectations for 2018, but what should be concerning investors are his comments on inflation and what we are expecting for real growth. He thinks the u. S. Economy has full employment and if these belte visit the industrial of america, most would not agree. Rishaad referring to the precipitation Participation Rate . Real economy is not represented by Financial Markets. Rishaad with the Participation Rate has low as it is, is that why were not seeing that much Wage Inflation pressure . Absolutely. The point im making with the real economy is that we are in the longest u. S. Expansion in marketsstory, and when moved like they have over the last 612 months, people dont care about the underlying economy, but when a retracement happens, that is the first thing people look at. Rich, but notare as high as they have been . Late stage. The it is the longest u. S. Expansion in human history. The relation between markets and equities is distorted at this point. Rishaad obviously qe and operation twist. 100 . Are instill forget we emergency mode from a Monetary Policy point of view. Rishaad every retracement since 1881 in the u. S. Has been triggered by a fixed income spiked, then collapsed and affected equities and the real underlying economy. Is the his unnatural real economy has to attached from Financial Markets. They should so the real underlying economy. Rishaad that hasnt happened for years. There are some fundamental economics that have not changed in 150 years. The same relationship should apply to china at this stage in the cycle. That relationship appears to be asntical in Mainland China what americans have seen in their markets. Rishaad are you saying that we are due for a crash . At this stage, but we are not living in normal times. It is it an economic or market slowdown . It should be a market retracement coming, and then people will put their focus on the underlying real economy. Rishaad why do you say this applies to china . China is a planned economy . It has had many doomsayers over the years. People say nothing grows in a straight line, not quite straight, but it has not had a downturn for two decades. We were public and saying china from 2014 onwards could triple. In 2015 with the great retracement, people said that was not true, but china is moving in that direction. That market has doubled since 2013 and the relationship between bonds and equity markets are maturing. Rishaad tell me about that. What came out of the aanetary is the chinese want developed market like they have in the west. Clearly we will have retracements and volatility, but to say what happened two weeks ago, that is not real volatility. We are used to having these limit uplimit down moves. Is a positive it thing and china is becoming a more mature market come and that is healthy for everybody. Rishaad stick around with us. On where the chinese economy goes and what are the roadblocks on the way. You are back with Bloomberg Markets. As weishaad salamat continue our conversation. We were talking about china. Having a look at this indicator, the Chicago Fed National activity index. I take this back to 1967. The base case is if we have zero valuation, that means the economy is side lining, but up to 100 , there is expectation of expansion in the next quarter. ,ishaad this will be the gfc, the oil shock in 1974. If this is a leading indicator as you say of the real underlying economy. Rishaad i am changing this to five years. It has been accurate to predict the u. S. Economy in real time. Coming. Aw the gfc it actually flag people who are watching that index. It is not done by a private bank. It is done by the Federal Reserve itself. Rishaad that is going back to 2008. Down. Y violently move rishaad from the end of october 2007. Markets should Pay Attention employmanagers will people. That has a Material Impact on earnings and something we can rely on that has been reliable since 1967. Move to europe. We seemingly have good data coming out of there. What is your take on the eurozone . There is too much the quiddity and Global Markets come all Asset Classes, the u. S. , europe, japan, asia. Europe is playing catchup. People on bloomberg have been saying the spreads between developed markets in the eurozone will widen in 2018. That is something to be careful in a crowded trade, retracements come thereafter. A market crash. That in mind, lets take a look at what happens to the rest of the world. Interconnected. Thats going to the conversation about understanding the real underlying economy. Markets are healthy wherever you look at the moment. Rishaad because there is a wall of cheap money out there. Now detached from what is happening in reality. That is its own thing. You cant change that, but as an investor we have to be able to protect that capital. Trades, onecrowded has to be careful and understand that relationship. What about this tightening, something we have never done before. We did not do qe in the manner it it was carried out. One cant be sure. Qe, it waslook at designed to flatten the yield curve. Saw was thatlly real yields went up, which is the opposite of what is supposed to happen. Rishaad because inflation being 0 . And pushing investors into riskier assets. It product of fixed propped up fixed income markets and equities. Thats why we have to be careful now. Rishaad what are the implications as you have to settle those bonds and do quantitative tightening . Capital . Is safe everything seems to be off that simple relationship between risk and reward. One would argue all Asset Classes are welloff and the in 2017 is nott the same as 2009. You have to make that assessment yourself and where it has at risk for you. Rishaad is there such a thing as the new normal . Time will tell. It seems to be that term rishaad thank you for coming in on joining us. Taking a look at the world and Financial Markets and relationship how economic world. Central banks getting real about cryptocurrency. Priceme, looking at the bitcoin, looking at the price now 9000 600 90, a gain of 17. 5 for the day. This is bloomberg. Haslinda these are the first word headlines. China industrial profit increased 25 compared with 27. 7 a month earlier. Robust factory inflation has and moves profitable to tackle pollution have benefited larger firms as smaller competitors shut down. The moves will be tested by a cooling Property Market. Anis not clear what caused explosion that killed at least two people sunday south of shanghai tuesday. It flattened buildings due for demolition. Damaged gasamed a pipe come up with the local company says there are lines in the area. Hascellor Angela Merkel stepped back from the possibility of new elections following a possible revival of a grand coalition between a Christian Democrat Party and opposition social democrat party. She said the two have worked well over the past four years. She also said any potential Coalition Partner would have to support a balanced budget and broadly probusiness policies. Donald tusk says the u. K. Has just seven days to produce a new offer under brexit divorce bill if it wants to break the deadlock before the end of the year. He gave Prime Minister theresa may into monday to bridge the cap between the two sides. They are scheduled to meet the European Commission president on that day, they now critical for the u. K. Close andrt has been the island fall cano a alert island volcano alert as a volcano erupts again. Authorities insist that bali is safe and says singapores advisory to avoid parts of the island is excessive. In 1963 major abruption killed about 1000 people. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad just looking at what is going on market wise. Things coming back a bit and markets pairing some of of those gains. New zealand on the way up. Thephilippines moving to downside. South korea the biggest loser. China under pressure. Philippine volumes are light. Miss universe is on television at the moment. That captivates the nation. Theignexchange wise, dollar coming back a tad. Oil undering crude pressure, wti up by. 4 . Stocks look at these adding to the declines in hong kong. A hang seng off by. 5 at the moment. Zte is down. Im not sure why. The hshares under pressure. 7. 3 down in shenzhen as well. 5g is being tested in china next year. Thats what we have coming through the moment. Eight years since bitcoin began the Digital Currency revolution and now banks are recognizing the upsides and downsides. Howporter now has a look at some countries are really thinking about issuing their cryptocurrencies . That has been the case where a few countries have explored this and have done some research over the last couple of years. They have looked at Research Projects on Digital Currency. Issued ads has currency they are experimenting with. Rishaad they must have concerns. What are they . The Central Banks are remarkably conservative institutions. Right, some of the concerns with cryptocurrencies is you are conflating it with some of the concerns with bitcoin. Privacy, the cd, criminal aspect that is sometimes associated with cryptocurrencies like bitcoin, that some people might not use the currency for what it is intended to be for. Thee is some commentary on fact that this changes the role of Central Banks and Monetary Policy and the role of money. Japan, if aof Central Bank Issues cryptocurrencies, you are opening up the accounts of Central Banks to the public, which is not what we have now and fundamentally changes the role. It is block chain. It is changing the way people use money. Up until now, we used a fiat a central bank controls how much money is in the system. The other were of cryptocurrencies and bitcoin is it is decentralized. That is one of those real concerns for Central Banks and the underlying issue is a lack of control. Re,t is part of the allu there is no central controlling body, so there is some tension there. Rishaad what can we expect from the Central Banks . More froml hear Central Bank Says they do more research on this. They will not move quickly. It will be deliberate thinking. As the year cryptocurrencies and bitcoin entered the mainstream. Up until now people thought it was on the fringes. Some people described it as a , likeing or a mini bubble witt tulip trade 100 years ago, but now we are seeing the likes of cme group talk about bitcoin futures, Financial Institutions are looking at this. Rishaad thank you very much indeed. Lets say about another source of consternation out there. Republican lawmakers rushing to secure the votes they need to pass the tax bill by the end of the year. They are planning a make or break a vote as soon as thursday. What is going on here . They can only afford to lose to republican votes, then the andvice president steps in votes. The concerns are the costs of this. The latest scores coming out of congress an independent analysis show it would add to the federal budget deficit 1. 4 trillion over the next 10 years. That has some senators concerned. Collins has said she has some concerns about the repeal of the individual mandate and obamacare. So there are various kinds of resolvehich they could this week, but it will be tricky to resolve all of these and to get it through quickly. What is the likelihood of it ending up on Donald Trumps desk by years end . That will be a tough one, and the whips will be busy. Very tough, very complicated legislation. If they get it through the with amendments coming fast and furious at the end of the week, they then have to reconcile with the house, and they have to pass the exact same legislation. , there will beat some issues that will need to change in the house bill, and therefore they may lose some votes in the house. They had a bigger margin for error in the house than in the senate, but not a lot. No democrats in either chamber thelikely to vote for legislation. We heard the threat of holding them over for christmas, but it will be tough. Rishaad why the hurry . It may be badly thought out if it is done so quickly. What is at stake . Why the rush . It isre telling me before the elections next year, i would say theres probably more to it than that. Hard andave in pushing there has been criticism that this is extremely complex legislation and we have not seen an overhaul of the tax code since ronald reagan, so why so fast . Largely from democrats, but others as well. 2018 campaign is the issue. Trump tweeting, big week for tax cuts and many other things of great importance to our country. Senate republicans will hopefully come through for all of us. The end result will be great for all. The usual modesty playing out there. He wants this badly. He needs a win. They have not had a legislative win in congress. It is a Republican Congress, so if you cant do this with the Republican Congress and republican president , it does not bode well for keeping all the seats in 2018. In an election year, it is hard to get legislation through and the momentum would die after a long recess. To come back and to tax reform would be almost impossible. They know that. Rishaad still ahead, discussing fixed income strategies. That is real yield, the segment on the way next. This is bloomberg. Bond traders are about to find out how worried the fed is about inflation has janet yellen and Jerome Powell lead of this week. What are your thoughts on this . We do see Jerome Powell will come in and get testimony this week. Minutes or at the whenever janet yellen speaks, they have been confident inflation will come up, which is different to where the bond markets are trading and investors are seeing things. We have seen an uptick inflation, but will it last . That the fed is determined to increase rates and continue to increase rates, that trend will continue. Rishaad nobody knows essentially because it is economics, people saying that inflation will not be a problem for years, and another saying people are far too complacent about inflation and inflationary pressures at the moment. That is definitely true. Youll curves are essentially flat, but if you need to look into where the fed, they have andomic data looking good unemployment at an alltime low. Sustainable,th is asset prices continue to go higher, inflation is something we can put aside for the moment. Rishaad why is there so little inflation . You could argue with the pce deflator than it looks like it is moving down, less and less inflationary pressure. Inflation is a big question. Rishaad do we need to rethink inflation . , it ise sharing economy perhaps not the best indicator of price rises. That is stephanie true. Central banks have started to think if inflation is a good target. We have seen various Central Banks from canada, australia, and europe starting to talk about it. This is something central bankers are thinking about as well. Look at thes chinese bond market, very volatile, yields going up, credit spreads widening small part of this deleveraging. Deleveraging will continue. We have been calling for higher since the end of last year, and yields have been going up. Tofeel yields will continue go higher, especially with the 10 year jgbs, potentially 4. 5 in the short to mediumterm term, but the focus is that valuations now are attractive and given the economy is showing signs of robust growth and at the same time inflation, but when the overcapacity issue is still there, the inflation is hard to sustain. Industrial profits have been rising, pmi coming through, should say,n, i that suggests excess capacity has in many ways been dealt with by companies with Pricing Power and that is showing up in industrial numbers. We are not there yet. China, especially the regulators, are concerned if they have to stop the supply side reform. It is a long process. We will see more to come. Rishaad tell me about the on space. They have so much debt on the Balance Sheets, at least some of them, do expect a few bankruptcies next year perhaps . We will see more bankruptcies next year. It will be a Healthy Development in the longer term for investors, making the Financial Market more sophisticated, robust, and default levels have been artificially low in history , so what we will see his more defaults, but for investors, this is good news. Defaults go higher come it does not mean everything will default. That is not our base case. The Stronger Companies will still benefit, as so ease or private companies, and they will still be robust. Levels will be higher, but not something investors should be afraid of. Because we see defaults will be higher and at the same time the law and framework will be more robust, that will be more sustainable and beneficial. Rishaad there may be more bankruptcies come up with there is still the selfinterest of the ruling party and government. In terms of what you mean by the government , asaad a government put some would put it. A strongvernment has determination to make Financial Stability a key agenda in the coming years, and this is something the government is clear about. Are they willing to let go of things . We will see if the government lets go. We have seen that happening, but it will be a gradual process and a slow process as well. Rishaad lets talk about one of those stories we have been covering today. Snubbingve china singapore, or at least seem that way, in these asia bond market sales. Happening is an lot of issuers have not been going to singapore and doing roadshows in hong kong and china because the size of chinese investors are getting larger and larger and a lot of Smaller Companies are not saying i need a lot of money and i can satisfy this demand already in hong there will be issuers not needing to go to other parts of the world. Is not goodhat it for the investors and issuers because you need to diversify the source. At this moment in time, that is still too young, too short of a sample size had we will see investors and issuers come in. Rishaad looking at your research, one of the contrary and things is you are expecting bond yields statue higher. Yields edge higher, but you see that as a buying opportunity . If youre looking at the real yield environment in a shirt, china is one of the highest yielding. Campaign and the positioning that has led yields higher, the economy itself does not need a current high level of yields. If you compare to say other economies where we are starting to see normalization and real ,eels are flat or negative china from a valuation perspective is very attractive, and at the same time we have the potential index inclusion as soon as next year, which would to investgn investors in china as well. Rishaad if it all keeps going the way it has been, i guess its predicated on an economy that continues to deliver the goods. Rishaad it will accelerate. The economy itself is going through a restructuring and slowing at the same time, moving away from reliance on exports and more consumptionbad. Big transition and with healed so i and impacting how corporates are barring, china doesnt need such a highyield in the long run. Rishaad thank you so much for that. Right, that was this weeks real yield. Coming up, wide tencent wants to mirror facebook when it comes to advertising. This is bloomberg. This is bloomberg. You are back with Bloomberg Markets. The state of play for asian forces. Nikkei 225, there we go. 3 down. We did start on a positive note. It has headed lower. We have not seen anything like this in japan since the early 1990s. Asx one ofydney, the the few markets moving to the upside. Stocks on the way down in singapore. State. A look at the city the straight times index lower. We are on tenterhooks ahead of this busy week. We had gdp figures out of india and one of our floor managers falling down in the studio as well. There we have it. Hong kong. 3 to the downside. I do hope he is all right. Tencent looking to facebook for inspiration. Lulu chen is with us now. What did he like about facebooks approach . The thing that captures him is social advertising, which enables predictive advertising. China, 10 small in of total advertising spending. The largest share is occupied by alibaba, but there is a lot of space to explore in this area. Athaad what about potential Revenue Growth at 10 a tencent. For tencent, it is only 17 . For facebook, it is 97 . Tencent cents revenue gaming. Om online they only make two dollars on average compared with facebook. They are combining the different advertising units and looking at how they can synchronize third synchronize their data. Rishaad what are the challenges ahead . Breaking down silos is one of the areas they are looking into. He does not oversee any specific because they have seven units with massive amounts of data, they are looking at how to deliver the precision advertising we were talking about. Rishaad thank you. Always a pleasure indeed. What we can learn ultimately from facebook. Equities in this part of the world giving up early gains, the hang seng. 3 down. Angie and david are next. It is almost 11 00 and on time. We are in the middle of the first Training Session of the week. Bloomberg markets asia. The rally that took asia to new highs loses steam as investors turned their attention to tax the dollars rising against his peers. Morgan stanley is falling, chinas latest data underlying continuing resilient and industrial profits. . A drop or bitcoin just eight years after its birth. It is now surging toward 10,000. Remember when i was telling you in august that i wanted to buy bitcoin for christmas . Yes. It was about 2000 at that point and i was thinking that was a little high. To 10,000 and i will be ok i think. The question is whether or not more people will pile on and this euphoria is reaching a prepared, take a look at what we are all talking about. No match for bitcoin. We are taking a look at the equity market here, what is the bestperforming stock on the world index. That is over in tokyo. They have jumped 183 . That house in comparison to the 853 jump we are seeing in bitcoin. Right now, what is the price on bitcoin . 9591. We are off the highs of the day. Greedy, 16 . We could get to 10,000. We will be here to break that. We will be back with that in a minute. Look at the equity markets. You get a sense of what is happening. Asiapacific, we are down for the day, we open a little higher but since a lot of this markets open up, it is very much mandatory in the asiapacific. We could get a lot of positive here. You have a very dovish rate hike. Very good numbers out of china as well. These tracks the monthly returns on the index, you can see 11 straight. This is into the calendar, this is early 90s, that is when you go back with the asiapacific. It is up here 2. 7 . Keep that in mind. Argan stanley out with revision. 2. 8 milliontarget is what their same right now, this is where the stock is, 3. 4 is the average now from analysts, heres your spread between the price and the target price. There is a sense we are getting because of the massive drop we are seeing the share prices. Well see what happens and whether or not we will get an adjustment lower but at the moment it looks to be a bit more to the upside. When it comes to the target price. This is what opec meets. Opec and russia have no agree to extend those price cuts into the end of next year. Expect a lot of these headlines to come out. Here is your function on your bloomberg terminal. Angie lets get the first word news with debra mao. Deborah Valley Airport has been closed at its highest level. Hundreds of tourists are unable to fly out and people within 10 kilometers of the volcano have been told to leave. Even so, people insist valley is safe. Bali is safe. The last major corruption in 1963 killed about a thousand people. Meredith court is to acquire time ink. Worth 2. 8 billion. The boards of both companies unanimously approved the deal which is to have 600 million in backing from the koch brothers. Stephen lacey says it creates a premier Media Company serving almost 200 Million Consumers in the u. S. , timeshares closed at. 90. Democrats are expected to delay somerail the bill and republicans are concerned about the potential end of federal deduction for state and local taxes. The president is scheduled to address Senate Republicans this tuesday about taxes in his legislative agenda for the rest of the year. 25 strial profits increased in october from a year earlier compared with a 27. 7 pace in month earlier. Inflation has kept plans profitable and an official tackle pollution and have it benefited small competitors as they shut down. Ae mood will be tested by point Property Market and action to reduce leverage. Global news, 24 hours a day, powered by more than 27 of the and analysts in more than 20 countries. I am debra mao, this is bloomberg. The rally that carried asian stocks to record highs here is peter as investors turned their attention to u. S. Tax reforms. Gdp, ppi, lets talk about what is ahead here. Equity and iat the cant figure out what is wrong, is there anything wrong . Is there a case to be made . Shortterm, i think it will be difficult as we are heading toward the end of the the positioner got in equities is likely to have a good ending to this year. I think that next you could be quite tricky. We had gdp and corporate Earnings Growth. We have Something Like 100 billion of money in the system this year. That will disappear next year. It will not disappear, it will just slowdown. Toward the end of the next the u. S. Reducing the Balance Sheet and that will offset the dojs program and we think it will definitely terminate the qe program. By about september of next year. It is really only the u. S. Versus the doj. It is possible that those two will upset each other. The whole point of that is that the Global Economy is healthy. Reachedund that we have this, we dont need that kind of liquidity because the quiddity that wrote that will replace that will be based on fundamentals. Liquidity that will replace that will be based on fundamentals. Liquidity is an incredible driver of the bond market and of the equity market and commodities and bitcoins as well. These are beautiful fundamentals this may be something we havent tested yet. Because we were worked hard for the liquidity, the inclination to spend it is going to be a little bit more for a little bit less. That is for the leverage. Especially when next year, our view is that the Federal Reserve will continue to raise rates at least two times. We are looking at close to 2 . A a lower expenses little more expensive. Will that drag out everything . Will that be the usual yields growing up and getting out of equities or will that drag down almost every single asset class . What can trouble this beautiful paradise or bit of a cinderella scenario . Feeling think that i am saying is that i think with all of these factors coming into play, we will have to be a little more cautious and a little bit more selective. This is producing a crash in the market by any means but i think it will be harder, this year and last year was easy. It was beautiful and so easy. Everyone has bought into the synchronized global recovery. It is everywhere, it is in every newspaper. The buying of equities has been tremendous, a lot of money going into equity markets so people are positioned for it. Turns,l these twists and one has to be more selective, that is what we think. What about volatility before we had to the break . Do you hedge with volatility . That . T an unsafe bet . There are some that are very cheap. To use this, us that is the way we are looking. Strike . At what is the strike . I think that anything below 10 is cheap. We are going to a more difficult liquidity environment. Cinderella, i think that next year we should be able to see the big story somewhere between now and about 20. Stay with us, party more to discuss with kindle from bearings. This is Bloomberg Markets asia, i am angie lau. Ingles. David an we looking at 2018 but before we get to 2018 we want to get your thoughts on china. Drop, it could be a oneoff, it could continue but a lot of people pointed to tightening conditions that. Do i have to worry about anything outside of china . Definitely, in the case of china, the spanish will be leveraging and it is good to say. This needs to reflected to the bond market. Market payut the attention to that. Within theve to work local environment and obviously when you are confronted with a 4 bond yield you have to Pay Attention. Bsolutely a lot of what fueled this rally is coming from shenzhen. It has petered out a little bit. Is it inaccurate statement to say that without chinese money that it wont go anywhere . I think that is accurate, i think they are a main force the 50 rise, definitely a main force. Dont forget that a lot of people want to own tencent and they own alibaba and also, i think about when you look at the on the index, the financials are doing quite well. I think that it is not just the money from china coming in but it is definitely one of the main drivers of it. Angie we are getting industrial profits, the iron ore has been very interesting, does that rally continue to have legs, especially with china . I think iron ore is a bit more difficult, i think that is a very volatile market, it really depends on the level of inventories and many supply situations. That is more volatile. In terms of the industrial profits, it has been wonderful. I think that it is very rare to see a consistent rate of industrial profits in china as a result of the reforms and restructuring in a number of industries. Sector is the finance actually also delivering as well. It is quite broadly based. China , what do you like into next year . We still have the emerging markets. The emerging world has actually restructured a lot more. Do i buy the index . Is for a person that doesnt run the big portfolio. That is a wonderful index to on. Lit ail, looking little better. They seem to be recovering somewhat and china is going down a bit over the next 12 months. Still, running above 6 . We often talk about policy era but some would argue that policy errors are in abundance when it comes to china but no matter, it still happens. With policy errors are we talking about . A number of things, policy driven moves to the downside, it is almost as if it gets too robust when it comes to tencent all the sudden governments step in and say things are a little bit too foggy or is thats in and says we want financial reform or it tells we chat that it needs to we think it is video as its strategy when it is one of the main drivers with all the best when it comes to chinese policy drivers in the equity space. That remains a risk, doesnt it t . Estio there are a number of champions that the government is prepared to back. Even within the steel industry, they are grooming champions in space and the internet space, they are also champions. The same goes for the banking industry. As long as that is the underlying philosophy of the government, i think that the stock market will benefit because those champions have to be listening to the stock market. If they change that philosophy, perhaps one can still look at the fundamentals of these companies and if they deliver earnings i think investors are prepared to back them. The bank of korea meets next week. Are they in a hike . Yes. R. B. I. . I dont think they will cut. Thank you so much. Angie undermining scrutiny, we will talk about why they are interested in chinas hna group. This is bloomberg. Check of the latest business flash headlines. Struggling trader noble is struggling again. They are trying to sell this to new Zealand Farm Services for something Million Dollars which would represent a lot of more than 53 million based on the units book value at the end of september. Shares are now trading at their lowest since april 1999. Lets have a look at the standard chartered, the bank is considering another one here. It lies in china earlier this year, the Corporate Finance has said that the ventures would be in asia, the middle east and releasing inbegan march. Softbank is inspected to proceed with its investment in over despite the Security Breach, the Ridesharing Company recovered for years. The wall street journal says wall street told softbank about the attack before they melted publicly. Defended by 14 of shareholders shares from current shareholders. David facing further scrutiny after a swiss regulator ruled that by default information. This is our conglomerates reporter. Prudence the deal is complete but the board wants to know why hna has cigna begin change in the ownership within a year because last year, it did not show up in their ownership. The company included and regulators want to find out why it changed. What is the impact on hna . What do they face . This individual that is valid so nothing very major there. They were disclosing such major information to the difficult they areers because inspectors in perspective of not last year. Said it was below to shareholder the largest shareholder. These two guys were holding shares. In a nutshell, these two guys were just holding the shares for the others. David there were other beneficiary owners. Regulators. Hese dealey announced another that they has from the firm. We havent really heard any kind of update on this deal. This deal is in the hands of them. It is obviously currently watched in the government. In terms of hna liquidity health, i guess some wall street banks have shied away from hna, what has the impact been on the Financial Health of hna as a of what doesnt seem to be on the up and up . This inhad inquired on a couple of months. They have been coming into the equity market. Money to keepise the business running. Sohave seen more hotlines definitely they want to ease the but in theressure shortterm, bonds are showing the market will come. In terms of the longterm financial instrument, we need to wait and see more. Thatank you for all of prudence. At money market rates in hong kong, up, up, up. Back to levels of 2000, look at my bloomberg chart, this is a daily chart that takes you all buyback. Certain is hoping to watch, 90 or 91. This is the hong kong dollar, there we go, it will bit of strength coming through, that might be one of the factors on some of the things to watch. Notable today. Lets check in on trading across the region right now, we are seeing that rally with record highs. It is petering out over sydney. The biggest problem at samsung, it should be a little bit up, samsung is down 23 points, the drag is 23 points after 35 that we are seeing over. Kong,r here in hong stocks falling as well, this is bloomberg. 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. This is Bloomberg Markets asia. David monday is not always the week. Ay to start the lots of data coming through. Not looking good midsession. Some weakness from equity futures. Have the regional Index Holding on to record highs, but now down for tenths of 1 . 4 . In it she players weakness coming through from south korea, the kospi way down samsung, theurn in company off 1. 4 . The chinese economy cooling in november. The csi 300 off by 1. 3 . October, some for strong moves reflected in the steel price. Story of there is this a little downturn in the equity market. The philippines off by over 1 . There have been low for items on that market. Lets have a look at some stocks we are watching. That they can move in bitcoin. , weighing on the regional index, the worst performer. Today,been at year lows the biggest loss in over a year. News around the Hong Kong Listed share price. , we huge surge in bitcoin will hear more on that. There has been speculations that it could be signs of a bubble bursting. Moving towards that 10,000 point level earlier. Have a look at this, a fair bit of data coming through across the region. We have rate decisions from malaysia and at least two increases in 28 seen from both countries. Showing you where the normalization of the rate is projectionsut the for a higher boost and in south korea, no change expected this week. Have a look at where spot traders are indicating we could see the bank of korea move in 2018. Both currencies outperforming against a number of key asian currencies on the speculation. Thank you for that. Now lets get first word news. Saya reports from pakistan the standoff is coming to an end. Members of a conservative religious group had been demanding the minister quit over changing the wording. That minister has resigned. Two Police Officers and six other people have died in the clashes. The unrest may and nerve investors as pakistan prepares a bond sale. It is not clear what caused an explosion that killed at least two people sunday south of shanghai. More than 30 others were injured flattenedt that vacant buildings due for demolition. Witnesses claimed damage to gas pipes, but the local Power Company says there are no gas lines in the area. Theres confidence among chinese steel producers is waning. Sentiment among Small Businesses improved according to a survey of more than 500 companies. Factory activity was little changed from last month. , Angela Merkel has stepped back from the possibility of a new election following the revival of a grand coalition the between christian democrats and social democrats. She told her party that the two it wasked well, but rarely spoken of. Any potential Coalition Partner would have to support a balanced budget and broadly probusiness policies. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Angie loyal is slower in asian trade, fed still near highs ahead of the opec meeting this week. Is your function to watch as leaders gather to decide to extend supply cuts. Saudi arabia and russia going to determine whether or not to extend production cuts that are supposed to sunset in march. Is they around town will. You will be a busy guy this week. What is the outlook here . The saudis have been broadcasting an extension to cuts, but russia hesitating as to whether a decision would be required this week given those cuts dont expire until march. On friday, head looks like the russians have come around to it. It looks like those cuts will be extended for another nine months. Headline is russia and opec said to agree on a framework. Do we know what that looks like . They will agree to an extension, a ninemonth a bition, so that takes of skepticism out of the market. Prices this week should hang around that twoyear high mark. He wouldnt want to be too short given the outcome come but questions are how long with the duration be. It looks like nine months. Anything shorter than that, prices could pull back from here. Angie counter moves by u. S. Drillers as they added nine oil rigs last week. How can that offset any benefit we could see coming out of opec . The u. S. Is obviously the biggest swing factor. Up,es rise, production goes and you have seen that most recently. Since are up 25 september. That has drawn a more supply back in the market, the record high for the u. S. Now at 9. 5 Million Barrels a day. Opec and its allies seem confident they can train the market and bring the stock piles down. I guess you have to watch from here and see how the u. S. Responds. David before that, thursday. We expect you to be here on the show as we head towards this meeting. , 9006 under 22 now. Day at thatff the level. Ive never seen one as vertical as this one. 10,000 is your next milestone. Lets bring in mark cudmore. A bull inever been bitcoin, but maybe you have changed your mind and the coin. I is that . Why is that . I have been a cynic has a financial asset and currency but bullish on the price. I think it will go higher in the shortterm. We are starting to see anecdotal morning signs. Part of the reasons i have been bullish the priced despite i was cynical as a currency is the fact it is driven by belief, speculation, so as long as it is getting new believers, it will keep going up in price. It is just seeping into the mainstream now. I think there are a few signs that worry me. There was a great article last week about instructor spending more time letting people know how to five bitcoin. There are signals like that, another cynic ringing me up and telling me he was about to invest in bitcoin, so there are a few flags where everyone is piling in. It is the beginning of the end, but not the end. David it is like Alan Greenspans rational exuberance. Pole dancing instructor, a taxi driver in china. There is no pole dancing instructor. Good journalism there. Said thatrs in china before the shanghai composite burst we had people buying property ahead of the subprime mess that led to the 2008 Global Financial crisis. Are piling in. Le could there be a a lot more upside. Why not get in now and get out before it all topples over . It is a reasonable question. To thee may becoming final stages or the beginning of the final stages of this bubble, that is where we normally get the most violent moves. Godoes not mean it can not crazier still. At the start of the year, it would have seemed crazy at 3000, now 10,000, why not 20000 and 30,000 . There is no anchor for value here. There is no too far when it is about belief leaf and speculation and you have to rely on anecdotal morning signs. It is very hard to call the turn. Why not wait for the turn and see how far it crashes. Angie i see a lot of people on twitter. David do we have enough data to figure out the price move up of this asset . I dont think so. People have tried doing overlays of previous bubbles, but the scale seems to change. People have tried using fibonacci projections, which are tenuous at times. Any kind of Technical Analysis on how far we can go is really just a guess. If someone says it is 10,000, 20 thousand, there is not one more reliable than the other. This is trading off police and that is why those anecdotal stories are important, but we are only in the very early stages implying we are reaching saturation. Ofcould have another couple months, but it is time to start looking out for those warning signs. Thats a good point. We will leave it there. Thank you for that. Whyng up, there on bonds, chinas Top Fund Managers say the route will only get worse. David this is Bloomberg Markets asia. Angie saudi arabias two Biggest Companies have agreed to process crude into chemicals and c sayic. Aramco and sabi the project will process 400,000 barrels of oil a day. Saudi arabia is moving to a more diverse economy to reduce its dependence on oil. Wants to raise as much as 2 billion from an ipo of its fuel retailing unit. That would value that unit between 8 billion and 10 billion. Ipo activity is showing signs of picking up after only two deals were completed between 2015 and 2016. Challenging nz telecom rivals. The formal paper is due next month. Before june deal 30. David china has released industrial profits numbers, jumping more than 25 . Tom mackenzie has the details. What has been driving this growth . Strong Consumer Sentiment on higher input prices leading to this pickup in ppi. 6. 9 . Higher factory gate prices leading to this increase. This is good news for the can pay down they that debt as they are under increasing pressure as this Deleveraging Campaign continues. , if you remove the september number, that is the second highest number since the end of 20 of 11 in terms of industrial profits in china. Strong. We also have this antipollution crackdown which is reducing capacity in some of these sectors. Will it continue . It seems like from Bloomberg Intelligence and economists that it may start to slow, particularly because of the housing market. These curbs in place are continuing and any cooldown is likely to see industrial profits soften marginally in the short to mediumterm. Still a pretty strong number for the industrial sector in china. Angie more data later this week , early indicators suggest a cooling economy . Yes. Ive number of early indicators looking at the november data. Foreign financial experts, a china panel which surveys their sentiment are starting to be more bearish given what we are seeing in terms of the shift from the government to focus on sustainable growth, this continuing crackdown on credit, and then you have Sales Managers come and the least optimistic for 13 months and starting to reduce spending and pullback on some of their inventories to make sure they are not too exposed to a potential slowdown in demand. The global china index suggesting steel mills are less optimistic as well, and the will likely focus on the winter protection curbs taking place around novemberdecember. One area of positivity was her now lookinges, slightly brighter, and that is following on from this decision by the pboc to put in this should funnelt more money to those smes, so no surprise were single optimism in that sector. We will get official pmi numbers out on thursday. The expectation will be belowng what we saw in october. We will also get the caixin private survey on friday. David thank you. Lets talk about the bad news. November has been the worst month for local Corporate Bonds in two years. It just might be getting started. Time we ask you to come on the show it is always about bad news. That is right. Angie how bad will this get . The key messages the pain is not over. Investors should be prepared for more sotloff to come. According to this bond fund manager, a top bond fund in china, so there is a high likelihood that the credit spread will widen because president xi jinping is unlikely to slow the Deleveraging Campaign in 2018. That means liquidity will remain tight and china spohn market is primarily driven by liquidity. Angie we are seeing more companies canceling the bond sales. How would they get more liquidity . Even chinas most highly rated companies are having this impact, so they excluded a 10 year sale from its auction tomorrow and the export and import rank of china has deferred up on sale last week. So we are seeing 50 million yuan in bond offerings. David there must be something good about this. It is diverse. Bonds. S convertible it is a small asset class, but theyre saying it will outperform corporate and government bonds because the listed companies will still have high Profit Growth and that will benefit the equity asset class, and the fund expects more fund inflows into the equity market because the Property Market is getting cooldown next year. Angie thank you so much for that on china spohn market. Why Goldman Sachs says its not too late to join the party in the equity markets. Party time. It is a very interesting look. This is bloomberg. Angie Goldman Sachs predicting china will grow 6. 5 next year. Chief asiapacific strategists telling daybreak asia the partys not over yet for the worlds number two economy. The party the best of to use your metaphor is probably behind us, but we think we have credible gains ahead of us for 2018. , thet some numbers on it index is up 32 friday, and we think we can go up another 11 in price terms, which includes the dividend yield. The main reason to pick up on your point is earnings. We have a terrific Global Growth environment in which we are operating right now. It is on our current activity indicator. We are running close to 5 . That may moderate, but will stay quite strong next year, and that should power 14 Earnings Growth for the region as a whole, so as long as far you wage ands are ok, less than 14 times forward earnings, even allowing for multiple compression that we can still rise earnings and get 11 price return. Just focusing on china, you see this bonds selloff and yields hitting 4 , a little bit of contagion with equities as well do you see that as further alarm bells on where equities will go or it is the government taking froth off the market . We are inclined to think the latter. Larger certainly a theme, which his Interest Rate to your globally are likely to rise because we are at full capacity, notably the United States with unemployment at 4 . We and the market expect the fed to raise in december. The market is pricing one next year. We think there will be four, so we are more hawkish there. The metaphor we use is the growth and rates jaws. The upper jaw is growth and rising this year, but the lower jaw which is financial conditions has been falling, widening, so the jaws are wide open and that has been a fertile environment for equity markets globally. Next year we believe the growth will stay stable, but the lower one will start closing somewhat, so the key dynamic is how much and how quickly it closes. So what is the level in treasuries for that to start to hurt equities . Is a great question. We have done some work on that. No punchline is that somewhere around 3 , maybe mid 3 , is where 10 years start to become more of a drag for asian markets. I think it does depend on how quickly we get there. Upont think if we grind during the course of the year that it is not as challenging as a sharp 50basis point rise in a week. That was the chief asiapacific strategists for Goldman Sachs speaking on daybreak asia. David Bloomberg Markets middle east is coming up. Yousef gamal eldin in the by. We will look at the fed in the struggle to convince investors. We will have that discussion. Also the prospect for u. S. Tax cuts, and wind up with crude oil. Regional plays, strategies on how to make some good yield. That is all we have for this edition of Bloomberg Markets asia. This is bloomberg. This is bloomberg. Saudi arabias Biggest Companies signs a deal to process oil and chemicals, ultimate could be worth 20 billion. The rally loses steam as investors turned their attention as the dollars rising against his peers. Near twoyear highs as opec and independent producers meet, production curbs on the agenda