Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20171205

Prompted widespread fears and borrowing has prompted collapse. Fears of and, information sought on accounts involved in the elections. We have struggled to hold onto the gains we saw earlier this morning. Today, the u. S. In the red. The only sector still up was technology, but barely. We had that rally, but tech lost ground based on some of the details on the tax reform bill. , want to pull up this chart 879. It shows you how investors have been anticipating the tax bill will be bearish for tech stocks. Shares underperforming since the end of november as more details that come out on tax reform. David it has become a real problem, especially in asia. We have been down for seven days. Four of those dames with the kleins of more than 1 . It has been a drag. Declines ofhose it more than 1 . It has been a drag. Lets look at markets in new zealand, kiwi dollar underwhelming. Gdp,straight come big day, rba Rate Decision not to do anything,. 1 . Yields lower, bonds up, aussie dollar unchanged. Have a look at markets in japan and south korea. The market indicating declines. Here futures higher compared to yesterday. We are looking at a slight cap lower, the dollar lower. Just a quick look across the currency space to give you an indication of which way the market is moving this morning. Moves back into the u. S. Dollar and pressure there. Lets get you an update of your first word news. Thanks. President trump has told middle east leaders he intends to move the u. S. Embassy to jerusalem. He called the palestinian president and King Abdullah of it would offend the delicate mideast crosses. The president is planning on a sixmonth waiver on the news. Philipancellor hammond trying to reassure the world london will remain a leading place to do business. He said the government wants to protect existing ties to the eu. Some businesses are planning to leave london for ireland or continental europe. Jeff sessions says the alleged mdb staten at the 1 fund is kleptocracy at its worst. Sessions said more than 4 billion was laundered through fraudulent Shell Companies. Asian airlines who witnessed north koreas launch say they dont envision changing plans. Cathay pacific and Korean Airline said crewmember saw the launch. Carriers say relevant authorities were informed and no route changes are being planned. Some airlines have altered their routes to avoid north korea. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Betty thank you so much. Robert mueller has zeroed in on President Trumps dealings with the Deutsche Bank. He issued a subpoena several weeks ago demanding documents on the president and his family and the relationship to Deutsche Bank. Lets bring in our editor. Deutsche bank and trumps relationship with Deutsche Bank has been the subject of a lot of queries, but this is the first time we heard of Robert Mueller and the possibility of a subpoena. Bloomberg but other organizations have reported records, which would be an expansion of the investigation into the president s business dealings. Deutsche bank was one of the few had been willing to do business with President Trump. He has Something Like 300 million in loans outstanding to them, but i should point out that the president s personal lawyer has said there is no not say what does basis he is making that statement. Muellerear that robert is going beyond just the election and looking into what other connections there might be. David how damaging his this new piece of information . It depends on what they find. Ink andnother ch trumps armor. Investigations into his finances or family were what he called a red line. How he responds to that will be seen in the days and weeks ahead, but it is something that will give trumps critics and opponents more ammunition as they tried to go into the political season. David i want to ask about these negotiations taking place, hopefully getting one final version on the tax bill. Where are we . The senate has yet to appoint members of the Conference Committee, that is the joint committee of the house and senate that will hash out the most of the but negotiations will be between leadership of both chambers. One of the big Sticking Point is late inprovision added the process which would assess the alternative minimum tax on corporations. It was in existence before hand, but captured fairly few. This version will capture more, and analysts say particularly some companies. David roughly speaking, how long will this take . They want to get it wrapped up by next week. That still is a feasible goal. There are a number of Sticking Points, but at this point republicans in the house and senate are eager to get this done and have a lot of incentive to get that done it done. Betty thank you. Breaking news on samsung heavy, newng they are seeking a share sale to improve their newnces, 1. 5 trillion won share sale will be dilutive. They are seeing at 490 billion in 2017, and loss operating loss in 2018, so they are building up liquidity and seeking a new share sale to improve finances,. 5 trillio billion won david that will be a drag for sure. Markets overnight, almost a repeat of tuesday. N that wipedwoo out early gains for investors. Su keenan is here with the latest. Yes, another decline towards the close. Traders will tell you there is no clearcut reason why a market will suddenly shift, other than the fact that many hedge funds and institutional hour,s come in that last half hour, readjust positions. Red across the screen. Industrials dragged down the market the most. Copper had its biggest decline in three years. Miners moving there. The movesy reflecting and communication stocks surrounding the fox selloff. Same for comcast, same for disney, so a lot of movement in these stocks. Macron continuing to show how memoryry stocks chip stocks are highly favored. Up 88 year to date. This is 856 on the bloomberg. Ron gives you an idea icron shows how it has been hitting home runs. Better than 35 returns for the stocks. The last time we saw these big 1999, then the whole internet crashed. Say these strong gains in chip stocks are a cautionary signal yet to be determined. Betty there is pressure on banks. The sec is investigating whether banks have helped hedge funds inflate returns. It is an ongoing investigation, still fairly new, so it is not clear if misconduct allegations will result. The sec wants to look at at least a dozen banks. The banks have done well this year, but the sec wants to know did they do well from their association with hedge funds, specifically did they get a reward for helping hedge fund submit bogus quotes in return this has toeir way . Do with hardtoprice bonds. To the hedge funds ask for quotes to help them . That is what they are looking at. Isis an investigation that not advanced and not clear if there will be any indictments or misconduct allegations coming out of it. David thank you so much. So much. Thank you still ahead, i look at chinese debt. Find out which sectors are most fundable to beijings deleveraging efforts. , despite ther that talk of a government shut down, our guest says it is highly unlikely. We will be talking budget and taxes ahead. This is bloomberg. Betty this is Bloomberg Markets asia. I am betty lou in new york. An updates get you of the business flash headlines. Bloomberg has been told Softbanks Vision Fund is looking at health and financial businesses owned by ping an. The fund is in talks to invest. Fund would look to take 510 stake. Betty south korea has bucked the trend and raised Corporate Taxes for the highest earning companies. 22 to 25 on businesses whose taxable income is more than 275 million. Other countries are moving to cut their taxes. The move came as lawmakers passed a budget worth almost 400 billion. And bank ofrgan america and say the republican tax bill will be good for big lenders once the initial pain wears off. J. P. Morgan expecting fourthquarter judgment on unrelated overseas earnings facing taxation. Bank of america also expected to take a shortterm hit on taxdeferred assets, but Brian Moynahan says the plan is good for corporate america. Staying on taxes, paul ryan has called the tax bill passed by the senate a monumental reform has he and Republican Leaders talked up the progress of merging it with house legislation. We passed a motion to go to conference to reconcile these bills. They have a brady, lot of work to do, but will get this done and make this legislation the best it can be come a better than what we have already seen. Betty congressional leaders meet with trump on thursday. Joining us now is our guest, a former professor of Political Science at the university of texas san antonio. Quite a fewtten columns on bloomberg on tax reform. You followed the republican push , the whole process ugly. Why do you think now, particularly when you look at the stock market, now parsing to the details, and it is mixed. A few weeks ago, this seemed like it was going to be good for the economy. What is going on here . I am not an economist. I can say the bill seems to be extraordinarily sloppy because of the procedure used. Hurricanehed through, strength brushed through, and they are now just triggering out what is in the thing. Betty the details are just coming out. Is most surprising to you in the details of this tax reform bill . It is not just we are finding out. The authors dont have a good sense. And file, evennk the people who wrote the bill. Theuse they put in alternative minimum tax for corporations and because they said it at the same rate has the new tax rate for corporations, r d tax credit wont be useful. They will have to work all of this out somehow or the other, whether Conference Committee or pingponging the bill backandforth between the house and senate. Betty now that the public is getting more details, there are more opinions about how beneficial this will be for the country. Sayingto pull up a poll that in terms of the gop tax plan come up 53 of u. S. Voters disapprove, so a majority of voters disapprove of this plan. 64 think the plan favors the much bigger majority. How do you think American Voters will react to this and how that might affect policy in washington . For republicans is that most voters are not paying attention to it and will not Pay Attention to it. Democrats are strongly against the bill, but if it does boost the economy, then that will be good in the long run. It iny are prong about this winds up being wrong about it and this ones of being money to the wealthy, then they will get killed. David i want to ask you about the government shut down. The audience in the asiapacific who might not be too familiar with the intricacies of what is coming up , help us to understand the math and whether it is likely we see a shutdown. It does not seem likely to me. The bill thathat funds the functions of the government expires friday. They have to pass a new bill. They need to do the full fiscal year funding, but what they will try to do this weeks do a 14 is do a 14 week thistemporary bill to tied over. Neither democrats or republicans believe there is a huge advantage to shutting down government while they argue about what they would do. So most likely they will pass this twoweek or so extension that hase only reason not happen historically is that one side or the other strongly once a government shutdown. , in happened only twice 1995 and 2013. Seen real have not evidence that either side wants a shutdown, so probably they will keep it going. David jonathan, we have to leave it there. We are out of time. Thank you for coming on the program. Training is there live from the nine states. Twitter reveals how far the kremlin went in its attempt to influence the u. S. Elections. Details are just ahead. This is bloomberg. Betty i am betty liu in new york. This is daybreak asia. Evidence showing russias attempt to influence agencyns included an publishing fake news gaining 500,000 followers. Selina wang has this story for us from san francisco. What do we know about a lot of these accounts . Out of the thousands of accounts twitter found linked to the Russian Internet research agency, dozens were masquerading local news websites youd websites. They were targeting a broad swath of communities across america. Convincing and gained tens of thousands of followers per account. Descriptions like following us if you want breaking and direct reports. Activeccounts have been for several years before the u. S. President ial election. Were active after the u. S. Elections during the french elections to post websites that were mostly backing the far right politician and to post links to propaganda and disinformation. Lets take a further step back. Purpose . The initial you alluded to some of these come and why were they created in the first place . It all of has to lead this information, so it took a lot of scraping from Third Party Research firms. It looks like these accounts were preparing for a major disinformation campaigns and wanted to be seen as a trusted source. They could really change the mindset of the community. Me thesercher told accounts were probably preparing for a campaign that never happened. Showintelligence reports the kremlin was expecting Hillary Clinton to win the election and were planning a broadbased campaign to invalidate her election. To do that they had a broad swath to push information to populations gather to go out into the streets and protest, and we did see them do this with facebook. Betty thank you very much. Staying on russia, more news on the widening scope of Robert Muellers investigation. Deutsche bank was subpoenaed over hundreds of millions of dollars of loans with donald trump before he ran for president. Joining us by skype is jonathan bernstein. Talked about the Mueller Probe last month and is it related to President Trump. You said President Trump should stay the course and not end this Mueller Probe. Do you still stand by that given that we have heard headlines increasingly damaging for the president . If the president has committed crimes, he is in big trouble. The problem is that if he tries to go about solving his problems by firing the special prosecutor , he will make bigger problems. That with clearly be considered obstruction of justice by virtually everyone. It is something that demands impeachment. Where trump and the investigation is right now is that there is enough material, enough stories, violations of democratic norms, that it would be reasonable or legitimate for the house to move forward with impeachment, but there is nothing close to the kind of material that would demand it, and firing the special prosecutor would do that. Betty we have to leave it there. Thank you very much. Jonathan bernstein on the Mueller Probe. Much more ahead on daybreak asia. This is bloomberg. 7 30 in the morning wednesday in hong kong. We are looking at markets in the asiapacific, a seventh day of declines. 30 minutes away from the open in japan and south korea. Betty thats right. Looking dreary there. A great day. You can barely see the skyline. Markets also gloomy. Nine out of 10 sectors on the s p closing lower. I am betty liu in new york. David you are watching daybreak asia and let get your an update of first word news. The russia inquiry has moved a step closer to the white house with Robert Mueller demanding details of President Trumps links to Deutsche Bank. Has rebuffed calls to provide more transparency over owed throughion real estate dealings prior to becoming president. They want to know if there are any links to moscow. A meeting for the gcc ended abruptly. The abandonment of talks in kuwait raises questions about the groups future and that the uae is forming a new relationship with saudi arabia. The group was originally set up to counterbalance the shia influence from iran. It is working with International Authorities to clamp down on black money. The financial secretary says the enclave is engaged in talks with the European Union on the issue. On an eu taxed black list of features, bahrain, and the uae. Russian athletes will compete at the 2018 olympics, but their dals want fly and any me when not count towards their tally. The kremlin denies doping allegations and has threatened to boycott the games. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. David we are counting down to the open of markets in tokyo. We are looking at some pressure on the equity space, tech losing steam, but we start off with a visit to the doctor, dr. Copper. He is catching a cold. This is two to 32 on the terminal 2232 on the. This amid fears chinas growth is slowing down, building of roads, bridges, and subway set for a major slowdown in 2018. This is taking a toll on mining stocks in sydney. Pulling up the board to show you some decliners here. Independence group has fallen to an october low. Producer sandd fire resources loss over 2 . Using the feature on the terminal, you can see materials are down 1. 4 . Energy also sliding. Take a look at telcos. Tpg telecom had been under pressure come up the rollout of a National Broadband network, and now tpg looking to the future, saying guidance for 2018 looking confident. Is theco industry worstperforming group on the asx 200 this year down over 27 . Betty the bleeding looks to continue while the yen is listless. We are seeing it me and are in this range. We are seeing futures in japan point lower. There has been little too cold traders out of the rut. Pull traders out of the rut. The dollaryen has failed to top 112. 90, while the downside is mid112 level. Are seeing as well as that they begin the jim has been tracking what is going on with the dollar, the dollar rising. This is 5080. This has seen a flattening of the treasury yield curve. The blue line shows you the 210 spread, while the white line is below30 spread, plunging 60 basis points for the First Time Since 2007. This given the backdrop around u. S. Tax talks. Betty thank you so much. Two big Central Banks in the spotlight has trading gets underway with the rbi wrapping up a policy meeting, and a report soon to show Economic Growth in australia is in line with what the rba was forecasting. Kathleen hays has a preview. Lets start with the restraint gdp numbers. We are expecting a good number. The rba that, holding rates , holding rates steady. They see a stronger economy, but reasons why it wont get stronger quickly. What is the number . 3. 0 is what the forecast says and what the rba is forecasting. Lets take a look at a chart that puts this into perspective. 1. 8last two quarters, percent, not bad, but 3. 0 looks better. It did just about a year or so ago. What is driving gdp higher . Scenario, exports rising, Mining Investment slowing, but that slow down is starting to ease. NonMining Investment is picking up. Hiring momentum increasing, and that is boosting spending. One big negative we talked about his wages. Wages are not going anywhere. This is 8743 on the bloomberg. You can see it in black, white, yellow, blue. The wage price index flat. At 1. 5 ,ash rate record low. Graduallye cpi is decelerating. Thats another reason why the rba is in no hurry to signal a rate hike at this point with inflation weak. All kinds of reasons to sit back and wait for growth to pick up, and if the fed keeps hiking, that weakens the aussie dollar versus the u. S. Dollar. Not worried about inflation. Maybe in till next year, 2019, and one guest said 2020 before the rba has to hike rate. There we go with the aussie sitting pretty. That will be a contentious meeting. We got a surprise last time. Any chance we get another surprise . I might take that bet. The consensus is clearly in line keeping the key rate steady. Growth has rebounded. , 30 a look at this chart 816. You can see this big deceleration and growth in india. Demonetization, the gst tax, and a stronger than forecast rebound in thirdquarter gdp to 6. 3 last week, so that is one reason not to worry about the things they might worry about. What should they worry about and think of cutting rates . In the nearsing term, but people looking for reasons why this could be temporary. Oil prices may push it higher. Modis keyndra economic advisers in an interview with Bloomberg News been misguideds on its outlook on inflation and they should be cutting rates. I want to look at another chart. This is 1506. Now you see how rates have come down in india. This is another reason why the rbi does not see any reason to cut rates further. Core cpi hasindia been rising and they expect that to receive. Another thing you had, indias ppi falling below 50. Probably one more reason why Bloomberg Economics team in will cut that the rbi that key rate later today, so it will be interesting to see if they are correct. Again, give me some points. I will take that bet. David Kathleen Hays, our editor. G coming up, chinas efforts to deleverage has an impact on growth, the risks that may come about. The implications for the rest of the region. This is bloomberg. Are counting down to asias first major market open this morning. 3 n, equities futures down , of the toe better coming off lows of the session has we are 15 minutes away from the tokyo open. David absolutely. We will hear how things play out in the session. You are watching daybreak asi. Has been aas debt chronic concern come of thing fears of a wider collapse. Lets get a primer on chinas debt load and the deleveraging efforts. Ramy innocence who has the charts you need to know. Lets get an overview of what the debt pile looks like. This is for 20. This is the annual look at the debt to gdp number for china over the years. It stands at 260 right now. The white, blue, green, and grade represent a corporate debt, Household Debt, government debt, and the bank debt. These are at their biggest percentages to date for 30 ,rate debt, 160 , 40 , and 20 or so. This is only expected to get bigger. Whileerg economics saying in , it could rise to 327 2022, and gdp growth is expected to fall from 6. 8 to possibly 5 in coming years. 1009. Hart is i was talking about gdp growth. We can see that in the white line. It has been pulling back. What we are wanting to look at is total social financing, the blue bars. We can see an uptick after the has china tried to help itself out in the wake of a slowing global economy. Below3, it had not dipped one trillion yuan. Last quarter, it did do that, so onare seeing this knock effect as deleveraging is trying to take hold, and is taking hold in fact. I want to throw in this next chart 7584. The white line is what you were seeing in the blue bars, aggregate total social financing. The blue line is chinas new monthly yuan loans, also falling. There is less financing, less growth, less infrastructure, means less demand for commodities. Today we are seeing that downtick in global commodities. Finally one other concern, possible big headache, 1910. Mind the gap, widening premiums. We are looking at on deals rising for the past 23 years. The premium between the fiveyear aaa bond in blue and the Government Bond in yellow has been rising and is now at the highest in three years, 1. 5 . Looking ahead, things will be getting more expensive for companies trying to refinance, but the good news is that in the long run we can figure out which companies have dr. Helfand dont have Better Health and dont and trying to figure out Strategy Officer that. These are your four bloomberg terminal charts. Thank you so much. Ramy inocencio there. The head of is now research for s p global ratings. He says 2018 outlook is positive. And we hade doctor this conversation over good and bad cholesterol, alluding to the. Ype of debts as long as you keep exercising, he says, you can eat whatever you want. 13. 5 percent next year is the highest growth rate in her asia, will growth be there to support that. That . Paradox. In a credit on the one hand, we have andtive economic financing industry sector outlook improving, synchronized Global Economics. At the same time the Downside Risks have increased because of the debt buildup. It is a question of what is good and bad debt. Chinese authorities are trying to reduce the bad debt, es, reduce the so coal capacity, and hopefully the good debt catering for the consumer rising in china will pick up the debt growth, so it is a balancing act. The open question is will it be good debt or bad debt . Alluding tore whether we get that moving on Balance Sheets for the banks. They are now stricter on these Wealth Management products, which has been a key source of refinancing for corporates here. Which sectors get hit the most . Some of the heavy industry, but also in every end,try we have the tail the risky guys who into the market, but rely on shadow banking, Wealth Management products, offtraditional banking source of funding, and that is where they will take a hit. That is why that china deleveraging question, there are two risks. One, leverage continues to increase. Eventually you have to pay the piper. Two, you deleverage too fast and implosion, you could slow down growth come impact commodities come impact consumer and Business Confidence them at is negative for overall Economic Growth. Two risks, one deleveraging too far. Two, leveraging too far. Betty you have to find that balance. These werent some of the risks for 2017, 2016 as well. You have released your outlook for 2018. Are we looking at the same factors to affect the credit markets, the asian debt markets. Our all those risks the same in the last several years . We look at asset repricing, the china debt we discussed. We still have concerns about north korea and the u. S. Administration, and liquidity risks. Liquidity in our view, the risks have increased globally due to the low volatility that has allowed assets to go up, including property and the stock market. We were just discussing the correction in the stock market. Those kinds of risks have been building up, particularly emerging market asia. We have had volatility in india and indonesia over the last 34 years. It comes and goes, but because the markets are relatively small they are more sensitive to liquidity flows. With the fed raising rates in the u. S. Into 2018, there could be some liquidity pullback is a risk for asia. David i want to bring back one. R functions here, rat row, wean see bottom have seen it increase incrementally throughout the year. I we going to get more downgrades next year . Are we going to get more downgrades next year . A lot of the risks have abated and the ratings outlook by has as much better. Bias is much better. So possibly more upgrade and things are looking up, the tail risks are a factor, so there is that downside element, but our base cases for better prospects going into 2018. David on that positive note, we have to leave it there. For 2018their outlook across sector groups. Sixth rateindonesia cut has not been effective as toluse who makers have hoped. We hear from the former finance minister on his solution for boosting the countrys growth. This is bloomberg. I am betty liu in new york. This is daybreak asia. David indonesia has cut rates several times since the start of last year. The former finance ministers said the bank may need to start raising rates. Atspoke with us exclusively the year ahead summit in jakarta. The biggest problem is size. The question is what is the point for Business People to expand production if demand is not there . So the solution for this is expansion, but unfortunately you have some problem that does not allow the government to do the fiscal expansion. Is that reflected in loan growth below 10 , basically below historical averages . Correct. 7 , 8 , even though the Interest Rate has been cut almost 200 basis points, no impact. It is a unique problem that also happens in japan and the u. S. , so we need a more aggressive fiscal policy. The tax revenue collection is still a problem unfortunately. 8 eight rate cuts, the president has suggested he is for further rate cuts. Should bank of indonesia consider hiking rates instead given the higher rate environment now . I dont see much room for the bank of indonesia to cut rates. May starting next year, if the ecb starts tapering, if the u. S. Thinkues normalization, i risks to thehe president s initiative of Infrastructure Development and alleviation of poverty . What are the risks to his goals . Is theiggest concern issue of fiscal liabilities. Jet t debt to gdp is 50 . We need to be very careful to make sure all this process goes to the Good Governance and economically feasible and not have an impact on these issues. What is your assessment of the president so far . If you want to create the president , where does he stand . The macro stability is there. Inflation is subdued. He works very hard, which is something we need. Our economicern is growth is stagnant at 5 . Betty we will be live at the year ahead asia congress. We will hear from the nations 09 10 hongnder at 1 kong time. David dont miss our exclusive conversation with president joko widodo at 10 00 a. M. Hong kong time. Stay tuned for that. Stay tuned for the market open, next. This is bloomberg. David it is an 00 a. M. Here in hong kong. We are in bloombergs. Asian headquarters. Im david ingles. We had mixed starts here in asia. The s p 500 saw the first threeday drop since august. Traders are weighing taxes. Once bank inquiry details. Betty from the global headquarters, i am betty lou in new york, just after 7 00 p. M. On tuesday. Overcapacity in cheap oil has hit the bottom line. That u. S. Turns the heat on malaysias troubled state fund. Attorney general Jeff Sessions says it is cryptography kleptocracy at its worst. David where have all the buyers gone . That is the best question. Over the past several days, we did get some gains. Are, you had gains at the open, then things lost momentum. It brings to mind the conversation about the end of the bull market. I want to bring up a chart here. You have the mci all country index, the global index at the top, and the advanced decline line at the bottom. When these things move in separate or opposite directions, thats when you have a problem similar to what we saw leading into the dotcom bubble in the leak 1990s. Looking at the right side, things are looking up both ways. The market seems to suggest that equities will continue to move higher. Betty it absolutely does. It goes to the point of what we heard from jeff garlock, the date on the big bond guru. He expends a bond bull market is going to end pretty soon. Everyone is puzzled. Economy stocks look good. Why we are we implementing huge tax cuts in the United States . We will talk about that. In the meantime, lets go to first word news with kaylee lyons. Reporter reports from seoul sadie u. S. Air force is sending bombers to the aerial drills over the koreas today. They will join more than 230 other aircraft taking part in the exercises. They include a dozen stealth fighters in the latest u. S. Warplane, the f35. North korea says this is a preparation for war and has threatened to respond. The russia inquiry has moved another step closer to the white house. With special prosecutor Robert Mueller demanding details of President Trumps links to Deutsche Bank. He wants transparency over the roughly 300 million trump owed to the bank. They want to know if there is a link to moscow. U. S. Attorney general jeff says in death Jeff Sessions says washington is working to provide justice. On the Justice Department website, sessions says more than 4 billion work laundered through opec transactions and fraudulent Shell Companies in switzerland and luxembourg. A former indonesian finance minister says southeast asias largest economy needs a more aggressive fiscal policy to spur demand and intelligent demand. He told bloomberg how he reads the president s economic performance. If you look at the current deficit under console [indiscernible] only constant is Economic Growth. It is about 5 . Reporter global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im kaylee lyons. This is bloomberg. David thank you. Lets have a look at samsung. Talk about heavy and talk about dropping like a stump. Lets look at the chart. Lets get this up. Turns. S the percentage a massive drop, the biggest on record. 21 on the back of news that the company is looking to raise a lot of money, and also forecasting an operating loss. Putting those things together, you essentially have a perfect storm. You understand why shares are massively under pressure. We are down about ¥3000 up at the moment. Suffice to say, not a good day at the office for shares of samsung heavy. For the to sophie market opened. Sophie samsung heavy is dragging on the cosby kospi. Korean investors will have to consider the passing of a 2018 budget. The parliament agreed to raise the top Corporate Tax rates, is relevant when it comes to samsung. Japanese stocks sliding a half a percent. Thirdquarter gdp data, we have aussie shares headed for a third day of losses, while the aussie dollar is heard holding steady. You can see the glaring red on the gm end up taking the overnight drop for copper prices. Stockpiles rose, denting the 18 year to date jump. We can see in the chart, havent seen a decline in copper imagery, but we have seen a perk up in lme track entries by the most since september. When you take a look at copper producers in sydney, we have those shares under pressure. Oz minerals has fallen to an october low. Lets look at what is moving the dow in tokyo. The yen gaining some ground. We do have stocks under pressure, led lower by Consumer Discretionary shares. They areind that in mind that we had a view from the u. S. Imports to the u. S. , rose to a record. Allow for share from exporters, but today we are seeing pressure from stocks in asia. Betty we will continue to watch samsung heavy shares today. Thank you, sophie kamaruddin. One of japans leading Financial Exchanges is taking a step towards launching Bitcoin Futures. Tokyo Financial Exchange says it plans to study cryptocurrencies in january, which may lead to the launch of bitcoin derivatives. We want to bring in our asian across acids managing editor. Tell us what this means exactly. What are they looking at in terms of these Bitcoin Futures . What does it mean for bitcoin . Is ther whats going on tokyo Financial Futures exchange, which is essentially the secondlargest exchange in japan, is moving in the same direction that a couple of the chicago exchanges, the cme and cboe have moved just recently, to introduce futures trading in bitcoin. Allowhis will do is to people to make bets on a regulated exchange, allow people to make both short and long bets on bitcoinsprice direction. These are initial stages in japan. They are a little bit behind the u. S. Here. The tokyo Financial Exchanges going to be setting up a working january, which is essentially the First Step Towards proposing legislation, which would then need to be passed to the parliament here in japan. Betty sounds like a lot of steps need to be taken. Generally, how long from the inception of a working group to look into this before they actually launch something . Well, its interesting that the chicago exchanges have moved pretty quickly. Japan has, up to now, been at the forefront of regulatory moves with regard to bitcoin and cryptocurrencies, generally. It would not be surprising if they moved fairly swiftly here. Much japanese legislation you think about the casinos bill tends to go through the process for years. Japan has kind of been at the cutting edge here in terms of embracing cryptocurrencies. In april, they allowed bitcoin to be used as legal tender. The Japanese Financial Services agency has approved, as of now, 15 exchanges to trade bitcoin. It would not be a surprise if they were to move the little bit more quickly than the japanese legislative process usually allows. David chris, thank you for wrapping that up for us, out of tokyo. Our asian across acids editing. Coming up, we talk about the r. B. I. And policy decision coming out of india leader. Bloomberg is forecasting a 25 basis points cut. An expert asking which camp he will be in. Betty dont know what to expect. The impact of tax reform on chief economy with the global economist david mann joining us. This is bloomberg. David this is bloomberg daybreak asia. I am david ingles in hong kong. Betty im betty liu in new york. Stocks dropping, assessors invest look at the impact of the tax bill. Is david mann, the chief global economist at standard chartered. Impact limited positive on the economy from the tax cuts. Positive u. S. Growth is not what it used to be a decade ago. We will talk about your 2018 outlook in a moment. First, give us your assessment. Say thatjeff gun lock the tax reform package will be good for the economy, but will markets. Ndly to bond he mentioned how we could be 50 basis points up in the 10 year, and that would be the end of the bull market. What do you think . I think it can make some difference over a very short period of time, but the biggest challenge we think we will see from what has been proposed so far, and it was not at the end of this process of working out what will end up in a tax bill, is the fact that the main beneficiaries are the ones who already have a low propensity to either invest or consume. We know in the corporate sector held relatively cashrich, and they have already been increasing investment. Will it make a real difference to the economy, or will it mean when we had the repatriation of earnings from abroad . Thats why we are skeptical. Its a similar story on the income tax side. Betty it is. The devil is in the details, but so far, you are seeing some critical reaction from governments from europe to china, to elsewhere, to the tax reform package, saying that it could create confusion in some countries as to whether it violates trade policies. Do you expect that will intensify as we get through this process . I think it could do, but im not so sure it will change the course of policy. Willnk the way congress process this is that is is entirely domestic. Interesting is even if it does help growth to be investment, faster that does not necessarily healthy economies in asia where the sensitivity to their growth visavis the u. S. Comes mainly from consumption rather than investment. That is something where it will not change anytime soon. May be the capital goods exporters in northeast asia could do a bit better, but for the region as a whole, we need consumption to be that much better. You say for 2018, you cannot ignore more and more leverage. We are not even talking justin china, but across the asia region . Thats right. It is not just to do it china issues that have been wellpublicized. Household sector, there is rapid credit growth. That is relatively early stages. Still quite low, it can go on for a number of years. Elsewhere in the region, we will watch for other household sectors that have become stretched. Malaysia is on the list. Thailand has been burdened with that as has korea. Even australia is starting to get more attention given the stretched metrics in the household sector. David when do you think that will be a real problem . We have a graphic of the shortterm yields you look at. Moves like this in yields an Interest Rates moving up , you sort of get a sense that this becomes destructive. A lot of the households are stretched. Are we near that point . If we get a sharp move up in financing cost, this is not something people are expecting. It would be a shot. We dont know what the reaction will be from tightening measures , and that full confessions of all the major banks by the end of the year. I think that will be a very dangerous time for worrying about leveraged risks. We are ending an experiment that we dont know what the and game looks like. David without much inflation, to boot. If you ask anyone on the show, they would say the biggest risk to the global rally is inflation coming out. I dont think we are going to see a sudden surge in inflation. We will see it picking up. If it were to search and then Central Banks would be tightening really aggressively, that would be the worst Case Scenario of all, especially if i were partly triggered by a surge in oil prices. Instead, it will be a case of higher inflation, some rate hikes here and there. We could see malaysia or the philippines. I think in those economies that have high leverage, it will be a Factor Holding them back from being too aggressive, because they will want to shield their way as they go. David in terms of the move in the currency markets, stronger so far, that seems to be down to a weak dollar. Is it too early to have a conversation about that being counterproductive, or is it the same denominator, no problem . For currency markets, the interesting thing is which country around the region is actually going to see a sudden deterioration in the balance of payments that leads to underperformance of the current. Currency. If you look over the last several years, indonesias drop into a deficit. Similar with malaysias drop and the philippines not too long ago. The next one on the list is probably thailand, where we might see a drop in the current accounts. Bigate 2018 into 2019 with projects kicking off, private Sector Investment as well, that could become a major issue by 2019. Betty getting back to the u. S. , you were talking about perhaps surprises to the upside on inflation. What about the forecast for wage growth . Do you expect theres a possibility we might he and help take see an uptick . It could surprise a little bit, but i dont see why you would get a said insurgent just because the labor market is tight. There is still a large amount of slack in terms of people doing jobs they could be doing even more productive jobs. Thats what the challenges of a decade of economic expansion. The quality of the jobs has not led to major productivity gains. Thats what you need to justify wage rises. The problem is, in a lot of cases, there will be a choice of automating over paying higher wages, which could keep wages subdued for a long time. Also, a large portion of the working population will be increasingly at risk of more automation. Take the transportation industry, like driving buses or delivering packages. That does not suggest the labor market is as tight as the statistics say. Quickly, theres about 2. 5 trillion u. S. Sitting outside the u. S. Assuming everything gets brought back in, how much liquidity in the end would that be . Thats the issue. I dont think it is all about a hit to the exchange rate, because so much of the earnings over the years of the dollar rallying so much is probably already in the u. S. Dollars anyway. On the tightening up of liquidity, we should be watching for the funding markets all around asia, particularly the bigger ones everyone goes to regionwide, where you could see dollar liquidity and expensive funding costs in a world where we were used to them being low. David absolutely. Unique perspective. Thank you for coming on the show. T coming up on the program, the u. S. Attorney general heads out at corruption. What the u. S. Plans to do. This is bloomberg. Betty betty lets check in again on samsung heavy shares in all soul, that keep dropping like a stone. Down about 25 right now, falling the most on record. The daily trading limit insole is up or down 30 before shares are halted. Lets take a look at the chart. This shows you how big of a drop that is on the righthand side. Raising 1. 4 billion. Ining a 450 million loss 2017, being hit by what of a lot of the Ship Builders are hit by, falling oil and excess mobile capacity. David to say the least. Certainly, the drop is not a good day at the office. Lets look at whats happening in malaysia. U. S. Attorney general Jeff Sessions has labeled the corruption related to the malaysian state Investment Fund 1mdb as hypocrisy at its worst. He says it is working to provide justice to victims. I have to ask you this. What did Jeff Sessions comments tell us about the u. S. Investigations . Interesting what sessions was saying. Not too long ago, the Prime Minister visited the u. S. Well. Ite house as there was speculation investigations would fall to the wayside. This is clearly not happening based on sessions comments. This is significant, given that we have elections in malaysia soon. David what is the status of all these other Global Investigations . We have the u. S. Here. Give us a review of where we are. Singapore, most of the investigations and cases have seen quite a lot of action taken by the singapore Central Banks. Switzerlands investigations are continuing. Those are the two main cases that we keep close watch on for the 1mdb investigations. Betty in terms of these investigations, how are they resonating in malaysia right now . We have elections coming up in august 2018. The focus will be on how to make it easier for people as they go about their daily lives. 1mdb hasnt resonated over the past couple of years, even though the opposition tried to make it the biggest topic of the day, so to speak. Betty thank you, our Kuala Lumpur Bureau chief on 1mdb. A quick check of the latest business flash headlines at this hour. South korea bumped in a reason hopeful corporate trend, raising taxes for companies. It will rise to 25 . Businesses whose taxable income is more than 275 million. Other countries are moving to cut Corporate Taxes. The u. S. Is set to slash the rate to 20 . David bloomberg has been told that the Softbank Vision Fund is looking at investments in health and financial. The 97 billion fund is in talks to invest in Companies Like pingan. They would love to take between a 5 and 10 stake in the company. Coming up, the Growth Numbers out of australia. We will have our guest as well following the release. Stay with us. This is bloomberg. David it is 10 30 in the morning in sydney. We are waiting for the Third Quarter gdp numbers, which are just about coming up. I am david inglis. Betty im betty liu. You are watching bloomberg daybreak asia. Numbers are coming out for thirdquarter gdp in australia. Up 6 10 of 1 . That is slightly below the forecast. Also a little below the year on year figures of 2. 8 . They expected a rise of 3 . Still an improvable an improvement over the numbers earlier, but not quite as robust as what the rba was predicting. David im looking at the range of forecast and how that compares. We were looking at the range. Morgan stanley out with that, the least bullish call. 3. 2 . We are right below the midpoint, 2. 8 . Lets take a look at the bloomberg. A bar chart of where we are in growth. There is the record of quarterly growth. 1. 8 . There for thetes 2. 8 for the Third Quarter. Lets see how this is playing out across markets in sydney. Lets go to sophie, standing by the market board. Sophie checking in on the guys the dollar. We are seeing aussie dollar. We are seeing a dip. It is looking to resume losses. Keep in mind the backdrop is about what the rba might do as we have a slowing Economic Outlook for australias gdp. Taking a look at whats happening with the sydney sharemarket, asx down a quarter of a percent. Copper producers are under pressure. Im taking a look at the Bigger Picture here. Aussie 10 year yields, continuing to decline, numbersg the latest gdp and after the rba decision. Adding, regional stocks to the longest losing streak of 2017. The aussie is under pressure and the korean won down a quarter of a percent. Seoul, falling. Samsung heavy announced a share sale plan after forecasting the loss for two years. It is the world thirdlargest shipbuilder. In tokyo, we are seeing a positive the tech selloff. Heavy conductor and hardware players are gaining ground, shrugging off the drop we saw in u. S. Tech stocks. Tdk is leading gains. The nikkei reporting the company is on track to generate stronger sales thanks to Rechargeable Battery sales for smartphones. The biggest take away is looking like a massive rally in the debt market. Lets get more on the story out ,f singapore, Vishnu Varathan mizuho bank head of Economic Strategy. Us understand your initial reaction to the numbers. [laughter] i do agree that the numbers are improving. It is something we also saw coming. In our quarterly, we also highlighted that aussie gdp would be slightly under 3 , 2. 8 to be exact. That was a lucky call. Some of the improvements resigned exports, some of that is attributable to the price ratio that has diminished in gdp, and the lingering worries that the rba has that Household Spending might be hampered by lagging wage gains. That will remain in the picture. Seerba said that they improvement coming through and they are consoled by the act that the aussie dollar is helping the recovery alongside low Interest Rates. They are cognizant of high Household Debt and lagging wage gains, despite high fulltime employment. We see the some susceptibility in some spots, particularly on how china pans out. We see improvement continuing, but not without risk. David i would imagine, what does that mean for the rba . Do they just sit pretty for the next 12 months . I think you took the words out of my mouth. It will be a prolonged pause. Every now and then, you will find the rba reminding market that under unlike the other g7 central bankers, their neutral position is really neutral. They will remind markets that the risk to policy is on both sides. They could cut or hike. Our forecast is a hike late 2018. Once in a while, the markets get carried away. I think the rba will step into see, particularly if you find the aussie dollar moving too fast. Betty what might drive the aussie dollar . It has been on a weakening trend. Given that rates are on hold, theres no sign of wage growth in australia. What might be the factor that drives the aussie dollar up again . Us, we arefor looking at china to see what drives the aussie dollar. In particular, the winter shutdown in china. We want to see how much that impacts iron ore prices and coal prices. That will translate into some of the fluctuations we could see in the aussie dollar. The other aspect is we are seeing how much of the dollar inival could come through cash market and catch markets by surprise early next year. Lets see what happens after the fomc. But you are right. The rba, if anything, will do anything to quell the rise. The aussie dollar would go up about . 80 by the end of next year, but that is in the context of a dollar trend that weakens after. Betty the next time they will need, they skip meeting in january, and will not meet until february. Do you expect much to change on the economic front until then . That is quite a ways away. Thats a good point. Between now and then, there will be a lot of cash our expectation is some of the gains in the labor market will continue, albeit margaret. One of the things that will come through is we want to see a strong pickup of commodity prices. The rba will probably maintain the same stance. Toween now and then, we want see how investments and Capital Expenditure pick up. If we see further recovery in nonmining and Capital Expenditure, you will see that the rba might get slightly more comfortable talking about the neutral stance. Otherwise, there could be another reminder yet again about how policy is can swing either way. Betty thank you. Stay with us for a moment, because we will turn our attention to india. Lets go to kaylee lyons. Reporter Asian Airlines who witnessed north koreas Missile Launch last week say they dont envision changing five flight plans. Crewmembers saw the launch as planes flew to asia from the u. S. The carriers say the relevant authorities were alerted and nothing is being planned. President trump told middle east leaders he intends to move the u. S. Embassy from tel aviv to jerusalem, a recognition of the divided city as its real capital. He called the palace Union President and the king of jordan, and both warned that this could upset the delicate peace process. The president is planning a sixmonth waiver on the move. A planned today. Leader of the gold copper were abandonedks abruptly to this raises questions about the future of the group, following rumors of a new partnership with saudi arabia. The group was set up to counterbalance iran. That cow has emphatically denied being a tax haven and is working with International Authorities to clamp down on dark money. They are engage talks with the eu on the issue and rejects claims they turn a blind eye to illicit funds. On a tax line named list including south korea, bahrain, and the uae. Russian athletes will be allowed to compete in the olympics, but the flag will not fly, the income will not play, and any metals they win will not count toward the National Tally this. An investigation into doping. The kremlin denies the allegations and is threatening to boycott the pyeongchang games. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im kaylee lyons. This is bloomberg. Talk coming up, we will and the policy decision later on today with india. This is bloomberg. David this is bloomberg daybreak asia. Im David English in hong kong. Betty im betty liu in hong kong. The reserve bank of india is wrapping up a twoday meeting with economists, almost unanimous for no change in policy, even as key policy Officials Say it is time to cut rates. Editornomics and policy is here, Kathleen Hays. Big questions around. Not as much as yesterday with the rba. A lot of questions about what the r. B. I. Is going to do. Reporter the rba is in a position where if the courses are Strong Enough to hold steady , reserve banki. Of india, has been dealing with so much. Introducing the goods and services tax. We have seen the impact on the economy. Is of the reasons the r. B. I. Seeing keeping rates steady right now is the fact that gdp, which had come down for five quarters in a row, rebounded in the Third Quarter. If you take a look at this thely chart, you can see rebound to gdp back up to 2016. Its a long way from 9 . The 6. 3 is a good growth rate. Thats one reason why most economists are betting they can sit back. Bank of America Merrill lynch 2018 outlook conference was and the cohead of Global Economic research was saying how bullish they are in india. They see the economy having weathered well some of the big ships. Shifts. They see modi on the right track. And they have economic tailwinds. They have a growing middle class, young people coming into the workforce to drive growth. I guess, thatng, some people are actually talking for a rate cut. David yes. Lets talk more on that. We are joined out of singapore by Vishnu Varathan, head of Economic Strategy at mizuho bank. This entire debate on the r. B. I. , what i find strange on threeeeting is that all probabilities are on the table. Not equally, but help us understand the confusion here. I think what we could possibly do is use the time dimension to make sense of all three possibilities. Im completely on board with kathleen. We are forecasting that the next move will be late next year. It is most likely going to be a hike rather than a cut. Cut now ist for a premised mainly on the fact that the uptake we saw in industrial the pickup in Industrial Production has not been a strong. It is always in the governments interest. It is in the governments interests to get Interest Rates down. Our sense is that the r. B. I. Is looking past some of the cyclical dropdown draft. They are looking at growth beginning to stick up. Momentumlooking at going forward. They are looking at the fact that there needs to be more done on the Bank Recapitalization and getting rid of npls, getting rid of policy transmission. We see that inflation is going to stabilize around 4 to 5 . Is consistent with the r. B. I. Wanting real rates around 1. 5 . Hardening recovery coming through, we see a rate hike as being the case over some period of time, but right now, there is always a case for a cut if you only look at a select number of factors. I think thats where some of the disparity comes through. Betty im glad you mentioned the governments position, because the key Economic Advisor came out to an interview last week and said that the r. B. I. View of the inflation is wrong and they should be cutting rates. I appreciate the point you just made about Bank Recapitalization. People may not realize theres a whole lot going on. Special funds being issued. Theres another reason to cut the key rate. Bond rates bond yields up in india. We have Bank Recapitalization. A lower rate from the r. B. I. Would have that part of it. How important, and are they right . We are putting up a chart right now, showing the reserve repurchase rate at 6 . And a slight uptick in inflation, which many people say is temporary. Thats a good point. This is where the conflicting factors come in. On one hand, it would be helpful ,or markets overall particularly for the government and how they finance things. Softer bond yields are going to help stimulating the economy, hopefully reviving demand. There are two arguments. Credit demand is also weak. It is not weak simply due to Interest Rates. It is weak due to a multitude of factors. Thats where the bank will be more helpful than marginal rate cuts of 25 to 50 basis points, which is what the r. B. I. Can afford before they undermine ability. A benefit to is lower rates, but will come at a high cost. They would rather do it through the fiscal avenue. Thats exactly what the r. B. I. Has its eyes on. Ahead of the elections in 2019, theres a sense they could be some fiscal debates. They need to see how much they want to ease policy because they see the authorities doing more easing. Using and heavy lifting i think this can beers off by looking at the fiscal and and as well as what the Monetary Authority needs to do. Betty theres a global trend, global Monetary Policy trends, of rising rates. Is an argument for why the r. B. I. May not cut rates at this moment, but is that an argument for that surprise for a rate hike going into next year, its that tightening trend becomes faster than what economists are expecting right now . I really like that thought. It you look at it in a silo, it makes a very good argument. What we want to bear in mind, in terms of real rates, the r. B. I. Has the highest real rates in all of asia. They have the most room to allow global rates to go up without adjusting too much. It is convenient they also hike alongside the global trend, but they are not necessarily in a rush. We dont see that until the later part of 2018 when the recovery continues. Is looking at a slightly more closed india compared to asian peers. Reporter i want to quickly get in a question about elections coming up. Thats another reason why people are in the know rate cut camp say there will be more spending and another reason why the r. B. I. Will hold still, bracing for the fact that they might have to hike in the future. Absolutely. We are on board, which is what we meant when we say the r. B. I. Is looking at heightened fiscal there is a fiscal stimulus being planned. Some is going towards Bank Recapitalization. Weve got over 3 trillion rupees worth of debt that may be waived off because of the political pressures going on. That will cause quite a bit of fiscal slippage. That is why the r. B. I. Feels it is better off holding. They explicitly alluded to these risks. Thats a very good point. Betty we will leave it there. Thank you for spending time with us. Mizuho bank had of Economic Strategy. Thank you to Kathleen Hays here. You can get that story and many more in todays edition of bloomberg daybreak asia. Bloomberg subscribers can go on the terminal. Its also available on mobile and the bloomberg app. You can customize settings so you only get news on industries you care about. This is bloomberg. David this is bloomberg daybreak asia. I am david in glass in hong kong. Betty im david im betty liu in new york. Amazons australia launch has drawn a less than enthusiastic response from many shoppers. Social media reaction ranged from underwhelming to claiming the site is a whip off with higher prices rip off with higher prices. The kindle paperweight the reader is 20 cheaper at a local chain store, while other items cost less to ship from the amazon u. S. Senate. Air travel could be on the way back more than a decade after the last flight. Penn airlines is investing 10 million in Bloom Technology and is taking an option to fly 20 planes under development. They are planning an aircraft that cruises at mach 2. 2, meaning it can fly from new york to london in about three hours. And just in time for coffee before we go. Innesday sees the opening shanghai of starbucks biggest ever cafe. Its about half the size of a soccer pitch, and it is part of a move to go upscale. Customers can watch beens being roasted, sample highend bruise brews, and use augmented reality. The chairman sees it has the largest market within the likes next 10 years in asia. A scheme to turn tea drinkers into coffee addicts . David absolutely. When they first went into the market, there were doubts whether they could change the mindset. Look where they are right now. A second place as far as market share is, far, far second. It speaks to the fact that they are able to do it. Ins wall they are putting up the guise of a starbucks cafe speaks to their commitment to the market. The was 30,000 square feet . Betty something along those lines. Howard schultz says he is good friends with jack ma, so there might be something brewing between starbucks and alibaba. More to come, it sounds. David pun intended. [laughter] thats almost it for us on bloomberg daybreak asia. Lets check on whats coming up with the markets. Rishaad indonesian president will be talking to us in the indonesian capital and jakarta. We will see what he says about the economy, projects, and the infrastructure. Mb will also be talking to ci group. Current climate, where are we with the equity cycle . Mark franklin will be joining us in about an hour to talk about that, brexit, and more. That is on the way. A declines for the asiapacific and samsung heavy as shares fall by a record news of the share sale. Traders weighing on taxes and trump. Congress gets to work on a compromise deal while the russia inquiry want to bank detail. And is america losing its a lower . It is becoming less welcoming. We have an exclusive interview. This is Bloomberg Markets