Keeping an eye on some of these gaming stocks when the session comes alive and a half hour. The situation when it comes to massmarket vs vip. Turquoise is the color for the mass gaining market. To itsprofits surge highest before a chinese ernment correction government corruption crackdown. Two years before restrictions sent profits tumbling. A sign that the industry could be singing these records again next year, before hitting a new peak in 2019. Expected policy changes out of beijing could be the major headwind. Revenues could rise 14 next year, according to our survey. The ip gamers expected vip g expected to be the key driver. We will have a look at holdings when the session gets underway. Haidi just in time for the holidays. Going into Chinese New Year as well. It is interesting, that breakdown. They are expecting a expected ty pickup in the vip and also massmarket. It is an interesting session, a subdued session when it comes to equity leads, getting closer and closer to the christmas break. Losing momentum, especially with that procedural snag setting the u. S. Back for a revote in the house before he goes to the senate. Openings in china and hong kong. Malaysia just coming online. To talkvery much a day about the remarkable move in bond markets overnight. Less so in terms of equities. Bond market selloff has been in focus. Asian debt, tracking the overnight drop in treasuries that sent the 10 year yield to a ninemonth high. We are seeing much in the reading of reaction when it comes to the yen, hovering around the 1. 13 level. The equities session turning positive. Nikkei 225 gaining 1 10 of 1 . Majorued session, with indexes like the cost be a quarter of a percent higher. We have a few data points to throw into the mix. Earlier we had new zealand trade data missing, keeping the kiwi below the 70 handle. Stocks under inflation data. Rbi Meeting Minutes on deck. Singapore, stock remaining under pressure, falling under 2 after its biggest slump since july. Noble group says it plans to defer deck. A Coupon Payment for its perpetual bond due december 24. Recall that noble deferred a bond in june on the same notes. Cyber again extending gains following the u. S. Fdas approval of its medical suit. That japanoupon payment for ret display is in talks worldwide. Sydney, Ardent Leisure is rising after being upgraded to buy. In the other direction, we have Retail Food Group extending fifth session, dry 2009 low. Cosmetics stocks are falling in seoul. This amid reports that china is reinstating bans on tourists. Uruha at its biggest loss since 2011. Nhk report of fuel falsification data. And more on latest the worlds biggest gaming hub, and how gambling is coming back. That is one of our top stories in our first word words in new york. China hashough, issued a skilled activision of the worlds biggest Carbon Market scaled back vision of the worlds biggest Carbon Market. Significantly lower than the 6000 proposed one year ago. Officials failed to name a date when this would start. Planingt xi jinping is to deal with searching electricity demand. Philippine president Rodrigo Duterte signed his own tax reform bill. The measurable lower income taxes, and raised the levy on some items. The president said he vetoed some provisions in the original bill, which will be explained later. The finance secretary says the bill will yield 2. 5 billion in revenues next year. Negotiatorope, an eu Michelle Barnier is taking an increasingly hardline on brexit. He told the Guardian Newspaper there would be no special case for the city of london, and said brexit means the end of socalled passporting arrangements. He said to the u. K. Would have to abide by any new eu rules postbrexit. Forates raised last month the first time in 2011, despite the concern of low inflation. One board member warned that any future hikes should be gradual, and that inflation should be seen as the most consideration most important consideration. Raised from a 25 basis points low 1. 25 . This is bloomberg. Haidi thanks for that. Our top story House Republicans passed their tax bill, but a senate rules mean that a revote isour top story r. Just a significant or little procedural snag . Joe it is basically a procedural snag that has to do with parliamentary rules in the senate. It was a small symbolic victory for democrats. It put a little egg on the republicans face. Various speeches and press conferences hailing the package. They will have to come back after these two minor provisions are stripped out. The senate will vote today, and i think the house will vote tomorrow. Haidi how soon will these tax cuts be voted into law . Joe the signing into law could take some time. It may take as long as 10 days for congress to do what is called an enrollment process. That is basically printing up the bill. It has to be read very carefully to make sure there are no errors. Copy editing, technically. It could be a little bit of time before it lands on trumps desk to be signed into law. But it will still take effect at the beginning of the year. The irs will be sending out february. Y there is always a wall of worry. The next one is, how do they avoid the government shut down on there is always a wall of worry. Sunday, get over that hurdle . Joe there was a lot of happy talk between Mitch Mcconnell and Chuck Schumer today, the republican and Democratic Leaders in the senate, about working out a deal. There were some holdouts on immigration that were thought to create some roadblocks. Some given that they will be able to effectively republico measures that the senate wants to tack on, for instance, on the taxllins vote plan. They will probably kick the can otherigration and contentious issues until january, when they have to come back and start this all over again. Rishaad thanks very much. Still ahead, curbing carbon. Using markets to help limit pollution. Haidi burgeoning bonds. What climate yields mean for the markets. This is bloomberg. Rishaad this is Bloomberg Markets asia. Returning to the highest seen before chinas crackdown on luxury and access. And excess. Gaming revenue up some 14 next year. Marketss tourist visiting. Two new casinos are likely to help after they are sent to open on the strip next year. Hnhi chinas Embattled Group is facing a new warning. Its investors and subsidiaries may be left in the cold. Reviews say the group is using its units as piggy banks for restoring financing costs. It is under scrutiny after a debt fueled 40 billion global sprinting spree. Conquerorhinas uber turning now to taiwan, valued at some 50 billion. Uber halted taiwanese operations in february amid complaints of local drivers. Haidi the bond market is seeing some aggressive moves in the asian session. Nikkei seeing the longest two day leap in a year. In the same session, we also heard from Robert Kaplan, saying he is concerned about the flattening phenomenon in the bond market as well. Is this a bit of a correction from the extraordinary artificial impact of global Monetary Policy stimulus . I think youre absolutely right. A lot of the yield curve flattening is due to distortions on the 10 year for demand, due to the fact that Central Banks are buying these bonds. We have seen the two year rise into next year. It is something we look at. This is a warning of a recession that could be coming. As somethingne that is not supported by other warning signals. You are not seeing defaults rise in the corporate sector. You are not seeing margins narrow like you would see toward a recession. In this market, we have higher valuations across assets. Is movingre that us into the lake cycle of its expansion. We do not want to completely dismiss it. We do not think it is the warning signal that it has been in the past. Haidi looking at the year that was and the unit is to come, this chart captures it. Traders have stock never been higher. The old country world index up 21 this year. Volatilities lowered in december 2014. What is the danger going into next year . Do you expect a continuation, or is that the greatest risk . Kerry i think we expect the continuation of the Global Economy as we have seen it right now. There is little to suggest you will see a deviation away from that. The data points to an economy that will expand, trending over the first part of next year, then maybe slow down to a trend rate. We reduced capacity around the world. That will come through. About rapid acceleration slowing down. The economy the Global Economy is slowing down at a decent speed. We think about equity markets that can deliver decent returns next year. We thank in the middoubledigits. Returns not being as great as they were in 2017. Growth is there, but valuations are a bit higher. The pace we have seen in 2017 will be difficult to maintain into next year. Rishaad valuations may be higher, but are they a product of the Tech Companies that have had a good run in the u. S. And hong kong . We have seen a move from gross late equity machinations. More of that . Kerry we have seen that moved from growth to value. The problem is where bond yields go. You need bond yields to go up more to support trade. It will be difficult for that value trade to play through. When we think about asset allocation, especially out of the u. S. , we think more about the sectors that play through rather than the Simple Growth value. Cash flow and earnings will be key in terms of which sectors will perform in the year ahead. There are pockets of things that look relatively more expensive, notoverall valuations are extremely excessive. Over the one year outlook, the valuation is less relevant than five or ten years. As long as the earnings are there, we are thinking about portfolios in the years ahead. Rishaad you also said bond yields will have to go of further. I suppose one of those key drivers would be this feeling, if people feeling too complacent about inflation is true. Kerry i think the trouble is without seeing a lot of wage growth coming through the question about whether we will ever see that wage growth come back before we talk about hiking the economy down, getting back to the normal level without having inflation. The Central Banks will move ahead as they worry more about the effect it will have on creating asset bubbles. The thing that creates a recession is a reaction to tightening policy, but the imbalance from having cheap money for too long. Thats something you have heard from janet yellen in 2017. She is passing on the reins. Shes talking about where this cheap money could go, and the distortions it creates. The aussie no consensus where it is going to go, whether it will be a positive china growth story, whether it will be a negative discrepancy with the u. S. Yield story. What do you see for the Australian Dollar going into next year . Kerry it has been resilient over the last year or so, mostly because Commodity Prices have held up to the differential between here and the u. S. For example. We will see a slowdown in china. It was not relatively stable in growth prospects. It will slow down further. That will lead to a lowering of demand for iron ore and steel. The China Housing sector pushing pressure on my aussie dollar. The r. B. I. Will be on hold throughout 2018. The said could hike up to four times fed could hike p to four times. 77 cents today, relatively strong from what we have seen in the cycle. Hoping to get the economic blueprint from china today from its economic work conference. What is the biggest risk for china, and therefore the rest of asia . A hardthe fears of landing disappeared earlier this year. There is a view that beijing is in control of the economy, when they werent in april or may. They need to over correct for that, and that creates instability. Certainly policy errors from the Central Banks are one of the big risks we take in. China has been the source of stability over the later part of this year. We are aware they could reverse that into next year if it does continue with this slowdown of its economy. Haidi thank you so much for coming on right before you head off on holidays. Have a great christmas. You can catch up with all of our interviews by using our interactive tv function. He will also be able to watch live, do a deep dive into any of the security functions we talk about. Join the conversation. Instant messages during any of our shows. This is for bloomberg subscribers only. This is bloomberg. Rishaad china sent out a scale back of the financial world, aimed at reducing pollution. What do we know so far about the Carbon Emissions trading system that china is working on at the moment, and how it is going to work, and how will it work . Those are all very good questions. A lot of people watching the market are wondering the same thing. Although the announced the launch of the National Market, they do not provide a specific timeline. There are already nine markets they are piloting all over china. The expectation would be over the next year or so, those markets would have to merge to form one market. The sector it would cover will only, power sector which covers one billion tons of Carbon Emissions per year. It looks like it will cover companies,or 1700 basically different Power Generators across countries. Extent rish, i was going to ask, it is a scaledback version of what was envisioned. Is it kind of disappointing . In some ways you could say that is disappointing. At the end of last year, regulators indicated the scope of the National Market would be much more expensive. It would cover 6000 to 7000 more companies. Far more emissions than it currently covers. It was supposed to cover petrochemicals, iron and steel, etc. However, for their intention to get the National Markets going, to do it in a stable manner and do it efficiently, they have to focus on the sector that has the best Data Collection already, and that would be the power sector. It is a sector that is universal across all provinces in china, a place where sec where central regulators has a better scope in terms of understanding their general mission and incentivizing reducing emissions in the future. It will be the largest commissions market in the world. It covers more emissions in china basically the amount that it covers is more than the total amount of omissions from india. Rishaad thank you. Taking a break. We have the china open next. Cannot live without it. So if you cant live without it. Why arent you using this guy . It makes your wifi awesomely fast. No. Still nope. Now were talking it gets you wifi here, here, and here. It even lets you take a time out. No no yes yes, indeed. Amazing speed, coverage and control. All with an xfi gateway. Find your awesome, and change the way you wifi. Rishaad we are coming down to the start of the session. Looking like a muted day thus far. What are we looking at . Asian stocks mixed generally speaking as we have the tax vote in the pipeline. The real action has been bond yields at the moment, climbing on the outlook for increase in supply next year due to quantitative tightening. The Central Banks will be selling their bonds. More supply coming on as well. Not much in terms of economic data. It is about the tax bill. We have the bank of japan meeting thursday. No change expected. Last policy meeting of the year. Haidi before we get to boj, we have the bank of thailand. Its Monetary Policy decision out earlier today, expecting to hold rates at 1. 5 . A little bit more focused when it comes to the bond market. No sooner are we scratching our heads on this flattening yield curve. Hong kong joining the fray. Markets,ainland pressure coming through for shanghai. A small cap. Shares under pressure given the index. 2 10th of 1 ling after a twoday rise. Casino operators analysts anticipating profits to return to pre crackdown highs, before hitting a new peak in 2019. Vip gamers is forecasted to be the biggest driver. It is not all clear. Late mgm china and sjm are comers, they are likely to face stiff competition. Two stocks among the best performers Galaxy Entertainment gaining over 1 this morning. When you take a look at like wrecks tencent and sony optical sliding this wednesday. Yesterdays bump of 9 . This Company Selling up to 20 million new shares. Rising to aock record. It could boost asian growth to record. Buy asian luggage. Rishaad thank you so much sophie. Lets have a look at this bump in the road, albeit a small one, in President Trumps fiscal reforms. Republicans celebrated passing their tax bill, but not for long. 3 members of the senate found provisions of the legislation that violate the rules, and they will have to be stripped out before it can be written into law. That means the house must vote again wednesday morning before sending the bill to the senate, and ultimately to President Trump. China says President Trump is shirking americas traditional leadership role, one day after its First National security address. He says he is promoting a i win, you lose mentality that harms the u. S. , including the decision to abandon the Paris Climate Accord and declare she capital of israel a jerusalem. Saudi arabia rolling out an expansionary budget head of a critical year for its plan to lessen its dependence on oil. The kingdom will boost spending almost 300 billion, almost 3d expect budget deficits to narrow from the 9 of gdp. A return to growth would make it easier to implement the vision a 2030 reform program. Run may beg winning coming to an end, at least according to one wall street firm. Run may be coming to an end, at least according to one wall street firm. A rating lowered to neutral, saying iphone x sales are already within the stock price. Any boost from Services Wont be enough to lift the stock further, and repatriation of apple overseas cash may be priced in already. Global news powered by 2700 any boost from in more than 120 countries. This is bloomberg. Haidi thanks so much for that. Central banks in focus today. Linesds speakers raisingjournas on the policy path. Explaining its latest rate move. Dont forget bank of thailand will be out with its policy decision later. Kathleen, lets get back to the fed. Kaplans remarks are interesting, a question we have been asking people for the last few months what has been going on with the yield curve . What does this portend . Speaking on Bloomberg TelevisionRobert Kaplan was more of a centrist, wasnt not sure of the rate hike, got fully onboard. When asked if he was concerned, this is what he told us. We need to watch it. Isyear treasury, 240, meaningful. The history of inversions is such that it has tended to be a pretty reliable indicator of recession. Kathleen he mentioned the st. Louis fed would express its concerns. Chart tells a very powerful story. Far right hand side. You can see the yield curve has flattened. The bond market saw a little tip off in the end. Version. In version. Far rom inversion. Those are the recessions. It may not be telling the story right now, but that is the concern. That is why the president of minneapolis warned against rate hikes, saying that the fed should wait until wages are rising, that there is evidence that inflation is starting to rise. He says you should not move until you get to the 2 target. The other side says unemployment is so low. Interesting to hear some cautious notes earlier today. Haad the bank of korea what have we learned from their minutes about last years late hike . Rateeen they raised the for the First Time Since 2011. The minutes show that it came in spite of some inflation concerns. Koreas headline inflation rate sagged in november to 1. 3 . Here you can see in the white line, that tick up in the key rate. You can see how inflation was moving up and down. Members who voted for the rate increase next rest caution. There was one dissenter, a 6 to 1 vote. Is the economy stable enough for this . It has been boosted by semi conductors. Wages will not be that big. Ners there was a lot of caution expected ahead. Eople wonder if the bank of korea was anticipating fed rate hikes, and getting out in front a bit, even if inflation was low. Even that is due to supplyside influences that could reverse. Haidi as i mentioned a couple minutes ago, the bank of thailand also meeting today. We are not expecting a move there, though. Why . Kathleen they are in a position where they have pretty good growth. They said fourthquarter growth could come in at 4 yearoveryear. They are seeing key rates Holding Steady again. A lot of banks say they may raise their estimates given the growth they have seen in the fourth quarter. Hsbc says it will raise his fourthquarter estimate to 3. 9 from 3. 8 . Not a big move, but a lot of confidence in the economy. It will be interesting to see in 2018 how it will affect other asian Central Banks reluctant to move forward. It will be an interesting way in many years, wont it . Haidi we dont know how it is going to be interesting, but no doubt. [laughter] lots to talk about. Kathleen hays, going through the latest central bank moves, and lack of moves with what is anticipated with the bank of thailand. Theill be speaking with head of btcc. This is bloomberg. Rishaad you are back with Bloomberg Markets asia. Haidi lets get you caught up today with the latest check of the business headlines. Singapore is the latest to warn about bitcoin. The monetary authorities as investors face significant risks and will not be protected by regulatory safeguards if they lose money. There is concerned that the dramatic rise may tempt people to dive and. The banks as the resist the bank says the risk of a reduction is high, and investors could lose capital. Rishaad the exchange will close a proceeding after a Security Breach last year. Escape he the Exchange First clients to keep their tokens in a safer form. About 20 of all Global Cryptocurrency transactions happened in korea. Haidi u. S. Regulations have suspended trading in and of scared digital to currency due to the concern over stock manipulation. Shares of the cryptocurrency surged more than 17,000 in less than three months. The fcc was worried investors were not being disclosed accurate information, and worried about manipulative transactions involving the company. Rishaad i doubt we will be we willg this mania be assessing this mania amongst cryptocurrencies. Is with me inbtcc the studio. Is there any precedents for this . Bobby nothing i have seen in my lifetime, that it has gone up times in the past 2. 5 years. Rishaad where does it go from here . Bobby for this asset class, we are talking about a truly global nonasset class. Times in the past 2. 5the question is, does it reay only stay at the socalled 300 allion level, or is it trillion dollar Asset Classes . This is one of the great Asset Classes, just like stocks, real estate, bonds, precious metals. Rishaad more like gold, it has no Intrinsic Value as such. You could argue the Technology Behind it certainly does, but bitcoin is not just about the blockchain, sis it . Bobby correct. The technology is just a facilitator. It allows this currency token to be transferred around the world globally. For the first time we have a decentralized unit of exchange. In the past, money has been either physicallybased or controlled by national governments. This is something refreshing and society. Rishaad you are saying people dont understand that blockchain technology, which is holding the price back. Bobby it is true. Society. Rishaad you are saying people in the last few weeks and months, there has been a mania. The reality is when i talked to bankers, they are very skeptical that Something Digital can be useful globally. My sense is over the next decade or two decade, the Younger Generation will grow up. They will realize their interests in christo will cover rpto will cover the rest of the world. That obody disputes there is so much diversification over bitcoin itself. The critics what are they not seeing . Bobby some of the critics are criticizing the risks of trading. I agree with them that it is very volatile. It has been having a very tumultuous week. It has been falling a bit. It has risen a lot. Even in the last two months, it has doubled. Can we separate the future Intrinsic Value of this decentralized nonnational Digital Asset from its socalled trading risks today . Many of the platforms are not regulated, people involved are not that well informed. There is certainly a risk to the market today. We have spoken with aaron brown, who has been looking at valuations for bitcoin. He said it is like putting a value on internet Stock Options back in the day. He couldnt put a number on where value is. Trading with bitcoin takes place on the technicals. Can you look at the fundamentals in terms of valuation . Bobby traders will always have a short to mediumterm view, but for longterm investors, it is simple. Is 275 billion in circulation if you count all in existence. It is probably on the water of 500 billion bubbleke in the dotcom days in the late 1990s, we have a few Companies Region 50 billion valuations or 100 billion valuations. For the next 20 years, we are sure that the internet revolution and ecommerce is fo r real. Same thing with digital currencies. Years, it is a trillion dollar proposition. Are we ahead of ourselves . I think it is going to be quite bumpy. Haidi what do you say to the critics that point to the extra legality nature of bitcoin at the moment . Would you say that greater regulation is needed, and that would give more credibility to bitcoin . I have spoken to some investors that have sent that would be criminal for them as fiduciaries to have that as part of portfolios. Bobby i dont think it should be illegal. I think more regulation is needed. As there is an asset class that is growingly more digital, the way you protect investors use different than the traditional way from a bond or stock market. I think regulations will come out from every Department Around the world. It will just take time. For the savvy investors, if they choose to invest wisely, i think this is a good investment class for the longterm. For the shortterm, it will be volatile. Rishaad how do you deal withrishaad the chinese crackdown . Bobby they have said that the training platforms operating for notlast 3 or 6 years are operating with a license. Down the road, they may reconsider this an issue licenses. At this point people are doing it person to person. What they call thewhat they cal, overthecounter. Me buying fromnd each other. Rishaad a lot of people say that bitcoin has much further to me buying from go, not because of the reasons you are saying the technical and lack of appreciation for the blockchain but because they cant get their hands on it. That is why there is so much of demand. Contracts are just one way of doing that. Bobby its going the supply is quite limited. It is close to 70 million. There is not much of a supply for sale. It is much like real estate in hong kong. Not a lot is for sale. Rishaad when does it mature, and when do we know it has matured . Bobby the time it is mature anchors dont ask me why it is valuable or not valuable. You dont ask me, why is going valuable . Is gold valuable . Why is the u. S. Dollar valuable . Those are Asset Classes that have reached maturity. It goes on for another 100 years. It gets harder and harder. 9000 u. S. Dollars is one bitcoin. Bobby it depends on the cost of the structure, yeah. Rishaad you have to find the best service and Electricity Supply to do that. Bobby and people are doing it in mass scale. The socalled Bitcoin Mining industry is fascinating. Rishaad where will bitcoin be then where are we now . Where is it in a month . I have no idea. I can only tell you that over the last few, it has gone i hava lot faster than anticipated. This is the reality. Weh every single have seen at least 4 large bull market runs. This is one of them. Rishaad coming up, bitcoin is not the only one with a dramatic year. With a gain of over 1000 , i will meet australias top performer. This is bloomberg. Haidi the tech sector isnt a heavyweight in australia by any means, but one Company Managed to return over 1200 this year. It makes promotional videos for small businesses, and is a top performer among 700 companies tracked. How did this happen . Even the company does not know how it exactly happened, haidi. They have been reporting higher revenues throughout the year. They have updated their revenue estimates more than five times. I spoke to the chairman, and they dont know how it happened either. Haidi clearly he is happy with it. Is it sustainable . That is a good question. The Company Thinks it is sustainable. They think they have a Business Model where they will be able to adopt to the increased demand without increasing operating costs. The analysts are very bullish thinking the share price will go up over five dollars. It currently sits at three dollars right now. Some investors are not so sure. They think thinking the share price will go the Company Needs to retain its line before they put their money into it. Rishaad one does this all tell us about technology, and the Tech Industry in australia . As we all know, the Tech Industry in australia is quite small, which is one of the reasons we have not seen the asx make as big gains as the nasdaqs or s p 500. While this is one company that has gained so much, the only other big company we have here. Rishaad thank you very much indeed. Trade,ained in extended this after it raised its annual profit forecast. Seen as aics company bellwether stock. It comes amid talk on tax cuts, and an upgrade for u. S. Economic forecast. Fedex on . 30 a share this year. It also says it is on track seea bellwether stock. It comes am for record christmas deliveries thanks to rising ecommerce transactions. Haidi subaru executives will return part of their compensation after admitting faults in vehicle inspections. The ceo and others will give up their salaries this month through march. Reported to the transport ministry, outlining the course of the misconduct. The automaker recalled over 400,000 cars last month after admitting issues in its domestic plants. Coming up, we will talk all things central bank. This is bloomberg. House republicans celebrating sweeping tax cuts, but not for long. An issue with the senate rules means a new vote is required. Casinos expecting profits to return to levels not seen since chinas corruption crackdown. New concerns about the fed policy and yield curve. Robert kaplan the telling bloomberg that he is worried. I am Rishaad Salamat in hong kong. I am haidi lun in sydney. Global ambitions, we speak with Kweichow Moutai. We are starting the countdown treadingmas, markets water, lower volumes in the u. S. , a procedural spanner in ,he works for tax legislation but one sector we are watching his tourism, cosmetics retail. In southetics makers korea being dealt a blow. A report saying the chinese a bans. Ent has lifted vis this tussle began over the u. S. Missile shield system thaad being deployed. Beijing unhappy and this is seen as policy punishment. Another report from korean media saying that ban is starting again wednesday. This is the affect we have been seeing when it comes to tourism numbers. China outbound travel, these Straight Lines, over outbound to japan, macau, hong kong, relatively buoyant, but purple, that steep decline into south korea, and quite a lot of attention and quite a lot of attention in state media discovering individuals to south korea. Rishaad also looking at anxiety over china reinstating a ban on mainland tours. The kospi does not seem to be succumbing to this drag. Lets get to sophie kamaruddin. Rising after a soft start. The index this month sticking below 2500 as less than exuberant data hit corporate profit growth. We do have health care leading Industry Groups higher, offsetting the drag from consumer stocks and i. T. One store Department Operator falling on reports of that chinese tour ban. We look at this and this is a bump in the road. President xi jinping and president moon meeting. There has been a lot of to and fro here. Thaad aressues on behind us, but were not getting a clear run, are we . Sophie i want to highlight casino stocks in hong kong. When you take out the space, in gm china jumping to a november 2014 hi, leading peers higher amid analyst optimism that profits will return to precrackdown highs. Other players also on the up. That is not helping the hang seng today. Sliding. 1 percent, fluctuating after a twoday rise. You have tech stocks leading the drag for the hang seng, tencent and sunny optical under pressure. The bond market selloff in process. When it comesing to the 10year note for the treasury space. We have stocks looking mixed now in asia. We have some data on deck, malaysia inflation. We do have the Malaysian Ringgit climbing with stocks. Haidi thank you so much for that. The state of play when it comes to this wednesday session. Thats get caught up with first word news in hong kong. China has issued a scaledback vision of its Carbon Market, saying it is working on a trading system covering 1700 utilities, less than the 6000 proposed a year ago. Officials also failed to name a date when the system will begin. President xi jinping is trying to make Companies Pay with surging demand for electricity. Philippines president has signed a tax reform bill, for filling a promise made on the campaign trail. It will lower income taxes and raise a levy on some items. The president says he vetoed some provisions in the bill that will be explained later. The tax bill will yield 2. 5 billion in revenues next year. The e. U. Negotiator is taking a tough line on brexit as theresa may is healing divisions in her cabinet. He told the Guardian Newspaper that there would be no special case for the city of london and brexit means the end of socalled passporting arrangements and warned the u. K. Would have to abide i knew e u rules on up postbrexit. The banknutes show of korea minutes show concern about low inflation. One board member who back the move warned that any future hikes should be gradual and inflation should be seen as the most important consideration. The board feet at 61 to raise 25e benchmark it rate by basis points to 1. 25 . Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad thanks. Several asian Central Banks will tighten policy year due to inflation and inflationary trends. Something else could add to the pressure for a hike, the republican tax plan. Lets find out more with our guest from singapore. Tell us about the implications for this part of the world. Sachs wereldman talking about how they are getting these questions all the time, how does the u. S. Tax impacttion going to Central Banks and economies in asia. The biggest impact they see is on Central Banks and Monetary Policy normalization, so as they get that boost, the fed will need to turn hawkish, and the risk of moving faster mike ross Central Banks in this region to move faster as well. Risk of moving faster might cause Central Banks in this region to move faster as well. Rishaad for the better or worse . It depends on how you look at it. This Corporate Tax move to 21 percent is something you cant ignore. The Goldman Sachs economist looked at two areas, Economic Activity in terms of corporations moving from this region back to the u. S. To take advantage of tax rates. They see that has a small impact given that firms are here for other reasons, not just tax rates. The other Economic Activity was repatriation of profits. Risksee that as a modest because a lot of these profits they judge to be in u. S. Dollars as well as the fact they are coming from europe and other developed markets and not so much this region. Two things to look out for, but some big caveats to how the impact would be on those two factors. Much forank you so that. Now,ext guest joining us great to have you on with us. ,ets talk about the tax plan moodys saying it is a longterm negative for the u. S. Economy. Is it necessary at this point, and will it be impactful when it comes to having that pass through to growth and inflation . You have to look at it from two different perspectives. If tax reform and cutting the Corporate Tax, that makes sense to simplify the system and reduce complexity, that makes sense. A tax cut at this point in the cycle makes no sense at all. Trying to stimulate growth makes no sense. In order to buy the votes for the reform side of it, you have to offer some sweeteners. Together, but go from a management point of view it looks completely unnecessary. Big theme ofher the year for a lot of Central Banks is searching for this answer to the inflation conundrum. Does that change and is there a risk going into 2018 that we will get more and inflationary pressures than we are expecting at the moment . That is one of the key risks for markets in 2018. 2017s inflation rate was almost inexplicably low. Something goes from being inexplicably low to inexplicably high, then things bounce back again, but there is a risk from march when the year on year rate will step higher that people focus on inflation, get a bounce back, and question whether Central Banks can go slowly has they had been indicating. You start to get more hawkish rhetoric out of the Central Banks, that could be tough for Financial Markets after such a fantastic year in 2017. Rishaad let me bring up what you have written, your research. We are moderately cautious looking into 2018. Everything looks expensive. There is not much room for positive growth, and bad inflation surprise. God, you are depressing. That is economics. We are not the guys driving the party. 2017, just about everything went well. You had positive growth surprised in america and across the world. Buttive inflation surprise, not to negative to worry about deflation. Tax reform capping the end of it. You have the guide in the white house guy in the white everybody was afraid of, and nothing has happened. Hard to see that 2018 can be as benign as the last 12 months. Theaad you could argue u. S. Help to drive Global Growth. Will the rest of the world be driving Global Growth in the years to come . I am not convinced the u. S. Did drive Global Growth. A lot of it was the internal dynamics, structural reforms, better traction of Monetary Policy. Outside of that, a lot of countries have been pursuing their own internal reform programs. , the turnaround in these countries has nothing to do with what is going on in america. People talk about a synchronize recovery. I dont think it is synchronized. I think a lot of countries are finding the internal positive dynamic at the same time. It should mean the recovery cycle is resilient even if there someslowdown in industries, it gives you better resilience of the overall global cycle in 2018. Rishaad if you would, please stick around with us. He is the chief economist for the bank of singapore. Stay with us. This is bloomberg. Rishaad this is Bloomberg Markets asia. I am Rishaad Salamat in hong kong. Haidi i am haidi lun in sydney. Lets continue with richard still with us. This quickhrow up chart, one of the resounding conundrums of the year. U. S. Twoyear and 10 year, you pull this back and an inverted yield curve that analysts say we will get next year portends something terrible ispening to the economy, but it different this time to do because we have had this decade of extraordinary Monetary Policy . What is your explanation of this. Robert kaplan is concerned this is more meaningful. We have been looking at this a lot. We are not that worried about it. Normally the yield curve inverts tight,olicy becomes which is to say after shortterm rates go about neutral. Neutral depending on who you believe is 2. 5 , 3 . You explain the unusually flat yield curve, not inverted, but function of Global Quantitative easing taking place, tremendous demand for u. S. Assets. That seems to be holding down the long end of the curve more than you would expect, so it is a version of the conundrum we had 1015 years ago when ben bernanke was running the fed and he talked about the different cause of that demand for u. S. Debt, but a similar impact. The market has been pretty sanguine with this idea that the unwind from the fed, potentially ecb, going into next year will be a smooth transition and nothing will really go wrong. The you think a policy misstep from a central bank is a risk next year, or would you be looking for a steeper slowdown in china as the bigger problem . I think it is not so much the policy misstep. It is how the market responds to the policy. The new supply hitting the u. S. Bond market will be doubling with the increase in the deficit , and then the change in fed policy, then you get the ecb tapering down to nothing by the end of the year, maybe even the boj becoming honest about the fact that it has reduced its bond purchases, and that wall of money, we see a peaking of the Balance Sheets of the big Central Banks next year, then it starts to shrink. So that is a different environment. Misstep,ot cause it a but in terms of how that affects risk premium, that will be a challenge in the second half next year. China . what about how this china due in 2018 . N 2018 . The credit bubble has gone up slowly, but still going up. You get a sense that they will try a little harder to squeeze the credit, more likely to have an Economic Impact than it has over the past 12 months. Given the choice that they will beat torrent of continued increasing credit in order to keep on track, so something about 6 looks reasonable for next year. They can always get it wrong. There is a bizarre assumption that the chinese policymakers are all seeing, allknowing, and all powerful come a win in reality you tend to be disappointed when you run your investments on that basis, so there is plenty of from for policy misstep in china because butsystem is so precarious, it is hard to say why it would happen next year rather than last year or the year before that. Ere it you cant you cant see an obvious trigger that would cause a problem. Rishaad there has been a move to have more policy transparency. That was supposed to be a good thing. As we get more of that, will certain things go by the wayside , such as the targeting of gdp growth that many people are saying should be the be abandoned . Abandoned . Eally be i dont think there is any incentive to have communication with the market. It is nothing like a democratic country where you see the efficiency gains from transparency. They can change their minds. Transparency might work while they are getting outcomes they markets get the wrong view, you can see the shutters coming down. We have had that in the equity market and the capital controls over outflows, so i am to be in dubious about any promise, because it can be rescinded. Rishaad donald trump highlighting effectively russia frnemie fr enemies. Will they be a big risk in 2018 . Big surprise,en a nothing has happened on the trade front. At 810rican deficit is year high and is going up, even before tax cuts that will make you go up faster. Half that debt is with china, so it is an easy target. There is obviously the potential for this to be the next issue now that tax reform has been done. , you mightcynical say if you are a president trying to distract people from domestic failings, you might want to pick a fight with somebody outside of the country to distract people or rally support around the flag, so it will be a persistent risk given the characters involved in making u. S. Policy. Rishaad thank you very much indeed for that. He is the chief economist for the bank of singapore. Why apples biggest supplier sees shares headed in the other direction. That is coming up. This is bloomberg. Rishaad haidi foxconns parent hon hai gives half of its supply to apple, but while apple hit a high, hon hai was moving in the opposite direction. We have the story in taipei. You have been looking at this. The proxy traditionally has been the suppliers for apple. Exactly. If you run the numbers and look at hon hai and apple this year up until septemberoctober, they were tracking equally going upwards come up but then after that phone was unveiled and the sale started, the iphone 8 come at and the iphone x, hon hai went in the other direction south. Part of that could be down to the fact that there was production problems. It was not hon hais production problems. It was a shortage of components in the supply change that hurt everybody, apple as well as hon hai. Hon hai cant churn out the phones and cant get the revenue. That apple shares kept going up because investor thought it would be ok in the long run and people will get their iphones and apple will get the revenue, but they have been taking a different view on hon hai. They should be a proxy for each other, but it has not worked out that way. They have been going in Different Directions the last three months. Hon hai what dos reported figures what do hon hais reported figures tell us about demand for the iphone . One of the key things we get to see out of hon hai because it is a Taiwanese Company listed in taipei, they have to report monthly sales. Julyseptember, they were pretty then november came along and year on year revenue went up 18. 5 . That is a lot. October and november are big months for hon hai, but that was a record month, sales were huge. The key thing is that what that catch up demand, demand in the supply chain, they managed to out, or was it anticipation of the future with apple, telcos, or anticipating excess or extreme demand coming into the Holiday Season . That is what we will keep an eye out for come up but we have seen some good signs from november sales. The key is that we will be looking at the numbers in early january, which will give us december sales them up but there is something that says while there was an uptick, maybe to hiccup was over. Maybe the hiccup was over. Haidi quickly, does the decoupling continue . Analystss where the and those who have their finger on the supply chain will make their money in the next few weeks. Downgrade, buta that was a cut to neutral because they thought the best was over. Maybe there is an upside for hon hai and people will be watching out for that. Haidi thank you so much for that. Coming up, the Worlds LargestLiquor Company has big plans for the Financial Services sector. We will speak to the chairman of Kweichow Moutai next. 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. Haidi House Republican celebrated passing their tax bill, but not for long. Three members of the senate found provisions that violates rules, and they will have to be stripped out before it can be written into law. That means the house must boat again wednesday morning. Vote again wednesday morning. A day after his First National , critics sayess trump abandons u. S. Leadership. China said that makes it harder for the u. S. To win trust and respect. Saudi arabia is rolling out an expansionary budget ahead of its critical year for lessening its dependence on oil, boosting spending to 300 billion dollars and expecting the deficit to narrow. Ofap oil has meant to years austerity, but the return to growth will make it easier to implement the vision 2030 program. Apples long run may be coming to an end according to number when it lowered its rating to neutral, saying iphone x sales and other positives are in the stock price. Any boost from Services Wont be enough to lift the stock further at this point and the repatriation of apples overseas cash might also be priced in already. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Haidi thank you. Note ofs feeding into a caution or sluggishness ahead of asian equitiesn, swinging between gains and losses them of that first stop for the s p for the first time in three days on account of tax reform if he gets done before christmas being priced in and we had that procedural snag requiring a free vote when it goes to the house tomorrow. Of thailand,nk Monetary Policy decision before the boj, later this week, but lets get it over to sophie taking a look at markets. I suppose some of the concerns of what we saw overnight in the pond space has subsided a bit in the asian session. Sophie you can see that when it comes to the 10 year treasury yield. Hass still above 2. 45 , but paused its recent rise. Asian debt remains under pressure. 10 year yields for aussie notes picking up five basis points this morning. Taking a look at whats happening elsewhere, the subdued dollar not reacting to the move in the bond space, and the yen holding below 113 while at japanese shares have been fluctuating. The nikkei two to five closing out the session little changed. Her much a muted session across the region. Thea look elsewhere nikkei 225 closing out the session little changed. It is a much muted session across the region. The Malaysian Ringgit inching higher. Stocks and kuala lumpur halting a three day drop before this afternoons inflation update youd the hang seng little changed and the hong kong dollar softer for a fifth session, and the yuan is below the 650 handle. Take a look at shanghai. One Steel Company among the biggest laggards with chinese financial stocks like ag bank and citic securities. You have Kweichow Moutai leading consumer stocks higher, and one store resuming gains, the retail chain that tencent bought into this week. With the launch of chinas national Carbon Market, cold companies coal gaining ground. Rising towind player a twoyear high and shenzhen. In australia is expected to Start Construction in 2018 as part of its vision to diversify from its core chinese demand. Macau casino operators, a pretty good day for those stocks. Mgm china jumping to a november 2014 high, leading peers higher amid analyst optimism that profits will return to precrackdown highs. Rishaad lets just take a look at this story in macau, asian consumer reporter here. We are expecting new record highs next year, getting over that crackdown. Where is this optimism coming from . Indeed. 2017 was a heavy year for the casino operators. Analysts now all the and junket operators are looking forward to another bullish year. Is main reason is that one exposure. For the last two years, several built there. Were next year, several more will be built. So next year all casino operators will have their footprint in this area of cotai. The second main point is the mass market. With the new offerings, the mass market has more revenue than 10 bettergo and much profitability and Profit Margins than the vip segment. Next year, analysts are bullish that because of the massmarket contribution that the profitability will approach a new record high and maybe in 2019. Rishaad what about the winners and losers for 2018 . Haidi based on these two keywords just now i am afraid for the newcomers that it will still be a difficult year for for casinoecause so operators who have a footprint aree, the new properties there and they can use the full potential to attract customers from vip and the mass segments, so those will be the winners. Mgm, it will be better next year, but it mate when a Little Market share. Mgm, im afraid they will lose market share. Haidi what are the potential Downside Risks next year . Twoownside risks, there are Downside Risks, and most come from china. ,ne is the stricter regulation potential stricter regulation, especially for capital outflow, and the second is the unexpected shock to the chinese economy will also cause Downside Risks for macau, but anyway up to now the whole market is still happy about the situation and looking for to a good your next year. Haidi thank you so much for that. Just in time for the golden week holiday and Chinese New Year. To talk about a stock, one that has suffered under policy come up but has more than managed to bounce back. This is the bloomberg luxury goods competitive peers index. Going into the member ranked returns function come out of the , thenk, Kweichow Moutai producer of the fiery chinese spirit, 100. 5 when it comes to returns. This is a stock that has really recovered. It has rallied so strongly that state media have had to come out and say maybe it is going up too fast and saw a little bit of a correction, but back on the rise. We spoke to the chairman of Kweichow Moutai yuan renguo on wantserg, and he says he to bolster sales and expand into Financial Services. 2018 we will produce over 107,000 tons of liquor next year. The sales will equal this years sales. Aiming to improve and expand our financial business next year. We are already running an Insurance Company and became stakeholders in a few banks. We are headhunting toplevel executives to strengthen our financial operations. Our goal is for all businesses under the group to reach a combined 100 billion yuan in sales. In the past you have said that you have the capability to have 23 spinoff companies. Which areas do you see those companies coming from . We are planning for ipos for exchange. N the china our online sales have reached billions and still growing rapidly. Plan to list, we our agricultural company. Our goal is to complete at least three ipos by the end of 2020 and improve our brand image as the number one the stiller via these moves. State run number one distiller the of these moves. What is your view on the stock price question mark the stock price price . Is it overpriced . You will have to ask consumers. Ourtly, investing in company is investing in the future. Secondly, the stock market is risky and you always have to be cautious. That is really all i can say. Rishaad Kweichow Moutai chairman yuan renguo speaking exclusively to bloomberg news. Coming up, Oil Edges Higher as u. S. Y speculation stockpiles declined more than anticipated. We will get the view. Haidi a bigger than expected drop in crude stockpiles looking to send oil prices to the highest close in just over a week. For a second yearly advances we get opec extending its output agreement when it comes to curbs. I want to bring in david lynn next lennix. Great to have you. Is it sustainable . At the factorsk impacting the oil market, yes, it is sustainable. Ceiling oftended the 32. 5 Million Barrels to the end of 2018, and we are starting to of a good track record compliance with that particular target they set. That is something opec has not had a long history. When you add those factors together, the market is comfortable that opec will be able to control output and control some part of the supply equation when it comes to oil in 2018. Haidi what happens when they taper . There is unwillingness to talk about it. They may not want to spook markets. You have to think that what opec is doing is largely priced in. What opec is doing is priced in, let it is always that compliance issue the market comes back to and gets concerned about. At this stage, we dont think they at this point are going to look for an exit strategy. 20152016, budgets were really stretched and they dont want to see those Oil Prices Get near 40 to 30 we did see, so an ex it strategy is not likely. That may only come if u. S. Domestic production continues to rise. Talk about gold, a pretty forgettable year, but what you make of this correlation that is more frequently drawn between bitcoin and gold . Interestingn association the market is now starting to look at. Gold is a physical substance. We have had it around for a long time. We know what it is and what it is made up of and what it can do over time. Bitcoin, well, it is a modern commodity, and what is its value . What is behind it . What is it substance . It isint of view is that just that momentum we see that investors are trying to place on bitcoin and bring it into some form of reality, associating it with gold. Mind, whatth that in we have is perhaps people going into bitcoin rather than gold. Is still a store of value, and bitcoin has yet to prove that. It seems to be a tool for speculation more than anything else. I have to suggest at this point in time, yes, it is. I think investors are just starting to understand perhaps what an asset bitcoin may be without fully understanding what it is, whereas we have that understanding of gold because of its long history. Is the association that investors are trying to bring to the two to bring some former reality to bitcoin. We dont think at this point in time that you would want to be investing in bitcoin, primarily because it has no as we can see substance apart from an electronic a base, and electronic base, and that you cant value, whereas gold is a physical substance that doesnt change over time and you can put value on it. What is the real value of bitcoin . I cant tell you today. Rishaad nobody can tell you. Tell me about gold . Why the negative correlation with dollar going by the wayside at the moment . It hasnt completely gone by the wayside. See the moves when we u. S. Dollar rise and the gold price fall, and that has been a relationship that remain strong. It may be just starting to inch away a little bit. We are seeing other factors or speculative classes of assets coming into play such as bitcoin , and we are seeing that flow of funds that would have gone into gold go elsewhere, so that would take the and nurture of the u. S. Dollar slightly away from gold, however we still believe it is a strong relationship and one of those relationships that in 2018 apart from the rises in inflation will continue to drive the gold price up or unfortunately down. Haidi what is your contrarian call for next year . Biggest contrarian call . Look, we called commodities in 2016, so we will continue in 2018 with a continuation of Commodity Prices across a broad spectrum, including oil, base metals. Haidi including iron ore . Yes. Think we have seen them in 2017 coming into play. They are more concrete going into the end of this year, which means a solid base for next year for prices to increase. Haidi sounds wonderful. Nothing to worry about. Thank you for coming on. Have a great Holiday Season. David lennox. Stay with us. We will talk about the uranium market. 20 more to come. Plenty more to come. This is bloomberg. Will 2018 be the year that uranium makes a comeback . The largest mine will halt production in january and in day sixyear slump. Steve dixon has the story for us. What is this mismatch over the supply situation . How bad is it . It has gotten pretty extreme. Disaster, fukushima prices have fallen 70 over six years. Japans Nuclear Industry has six years worth of supply, so they wont be buying more uranium any time soon. The only option left to minors was to cut back on supply, and that is what has been happening lately. Kind of defects have we seen from production curbs . Has been working. Since last month when the first big announcement came out of canada from one of the big rose. Ers, prices that day they are up 20 since then. The supply cuts have been working. , a lot of analysts are expecting 2018 probably will not see much of a boom. That will take a lot more before a full recovery in the uranium market is underway. Haidi thank you so much for that. Lets talk more about the rainy him market, which is not something we talk enough about. I want to bring back david lennox. We were just talking during the an easily, is not readily tradable market. Know, uranium at the best of , uranium at the best of times is not readily tradable. It usually goes from mine to customer in its raw form and doesnt leak out anywhere else. It is difficult for speculators as such as we see in copper or intoore and oil getting prices and putting momentum behind price increases, and that is why we think primarily it has been a commodity that has been out in the cold for some time. Haidi not a compelling play for next year either . We would suggest no. In theas been a blip price, and that is on the back of production cuts were seeing coming out of a number of countries. Those production cuts will first have to stick, then we will have to likely see more production cuts. Over the course of the last 34 years, we have seen mine production closing and Companies Moving away from production, but at this point it has not changed that to mindsupply scenario for 1018. 2018. It may narrow, but we have probably already seen the price adjust to that equation for 2018. Is itd david, how traded . You cant take delivery of it unless you have certain permissions to put it in the diplomatic way. It is very restricted. Certainly that is the case. That is primarily because over the course of the last 45 years there has been other factors that have come into play that have been used or could be seen to be used in uranium as a dirty bomb or Something Like that, so these outside factors have tightened up the processing flow from mine to customer, and that is to ensure that there is no leakage outside of that process, so you cant really wander down to your local commodity trader and quarter one Million Pounds of uranium. You have to go through a number of steps before you can do that. , great seeing you as ever. Ennox at fat profits. It is time for david to take up the reins. We managed do all that and not mention yellowcake. David there goes your window. Investmentirector of a global advisors. Forhinks its possible 2. 75 on the 10 year next year. I will ask them what needs to happen for that to happen. Rishaad what have we got at the moment, 2. 45 . 30 basis points . Thing the fed doing its has not driven us to those levels. It has to be something else. We will talk about that coin. Is cto one guest who cofounder. We have other guests talking about infrastructure and the underlying technology. That is in about 15 minutes from now. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. I am david ingles and we are in the middle of this asian trading session. Welcome to Bloomberg Markets asia. House republican celebrate sweeping tax cuts, but not for long. Senate rules mean a new vote is required. What a difference a month makes. And we have got to talk about bitcoin. The Business World is increasingly united, saying it is dangerous. At last check, prizes of bitcoin falling quite a bit. Thats more than bitcoins standars. Equities are fairly mixed. We are getting more upside momentum. The other thing to mention of course, and this goes into the outlook for next year, we are always on the lookout for early signs that the bull market or risk radar is about to change. Have a look at my chart. These are one of those things you want to revisit. We are some ways away from an actual turn. This is your 30 day on your msi index. In the last six years, we have 0ad less than 10 proper episodes of distress. A dip below 40. The other thing i want to mention, those times coincided with a move either toward or above zero in that measure. Thats when you have to start worrying. That said, its our usual chart to indicate what your first month of defense are. Now, lets get a sense of what is happening across markets. Sophie is tracking all the market moves and crosssector. Sophie we see some cautious moves higher, that when you look at the breakdown, it is very much mixed. Financials and stocks leading gains, while i. T. Stocks are the decliners. Tencent, weighing on the. Hang seng today picture,t the bigger major benchmarks are under pressure. We have some data on the docket as well. We have Inflation Numbers out of malaysia due out this afternoon. Lets take a closer look at the movers when it comes to the equity space. Tokyo. Extending gains in the stock is trading at an august 2016 high. Chinese carriers are climbing today, air china and southern carrier are at levels last seen in 2015. You have c. J. Logistics slipping to a july 2014 low. It is to merge with its construction affiliate. Is plunging after an nhk report of mileage data falsification and knows the the chinesei could tea, contractors are amongst the biggest drags. David a lot of these japanese firms are doing some funny stuff. When you lookt at japan are the financials. That has to do with the steeper curve. Sophie japanese banks are leading the topix gains. We are tracking the treasury yields. This trend remaining intact. The topix is the line in blue against the u. S. 10 year treasury yield. Its all about the rates. The earnings recovery for japanese financials looks more likely with those rising u. S. Yields. Thethe biggest boosts to topix today, helped along with the report that megabnks will consider raising fees for atms. Chibag the path we have bank gaining almost 4 today. And tnd has risen to the strongest levels since november 2008. Xpi holdings remains the best performer on the group right here. David slightly more yield, slightly more curve. Lets get an update with your first word news. We are starting with chinas response to the united states. China says President Trump is a shirking americas traditional leadership role just a day after its First National security address. A mentalityuating that harms the u. S. That makes it hard for the u. S. To win trust and respect. China has issued a scaledback vision of the worlds biggest Carbon Market, saying it is working on an emissions trading system, covering 1700 utilities. 6000 was proposed one year ago. Officials failed to name a date when the systems a should begin. President xi jinping is asserting demand for electricity. Saudi arabia is rolling out an expansionary budget as the economy stalls. The kingdom will boost the almost 300 billion. That budget deficit could narrow from 9 gdp. A return to growth would make it easier to implement the vision 2030 reform program. [indiscernible] we expect the gdp to grow north of 2 . And macau is on its way to seeing casino profits return. The average forecast is for daily revenue to rise 14 next year. The ip gamblers will be the biggest drivers. Two new casinos from mgm are supposed to open next year. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. David of course, some big news overnight. Asia waking up to the u. S. Tax bill approaching the finish line, only to face a bump in the road. Inhave eye popping moves bond yields across the board. Lets get it over to sydney to break down the story. E you. Ld, very nice to se can i draw a Straight Line now that we will virtually be getting the tax bill signed by donald trump and what is happening with the bond markets . You could draw a Straight Line, but it will not take you to where bond markets are right now. Policymakersb surprised by being a bit hawkish. Then we had some nice u. S. Data and we had a big block trade that added to the steepening and the possible tax bill. Bill help steepen the yield curve and if it will keep on doing that, that will cause pain to start. It also highlights the dangers on this side of things. We do expect the ecb will be easing back from its quantitative easing and getting rid of it all to gether. Europes growth is looking strong. There are many reasons to see a steeper u. S. Yield curve. That will be a big challenge to the u. S. Market that is getting kind of old. David it really is. I think more and more people keep talking about when this market starts to turn. Back to your point on the yield curve here, beacuscause, we are also approaching year end. Some traders are unwinding what has been a very profitable trade, making money out of a blessed yield curve. Out of a flacid yield curve. Garfield there is that. People are trying to get ahead of the game. On the one hand, you are looking at what might go on next year. More importantly, a lot of people are out of the game for now. That reduces liquidity. That means you can get outside moves going on. It also means you want to take some of those moves with skepticism. You see some big moves, soem big bets put on by the end of the year, based on the consensus of where we are going by the end of the year, only to see the new year bring a different set of rules. David when i put multiple things together, a lot of people like to watch the u. S. 10 year for obvious reasons, help us understand what is the line in the sand for the 10 year in the u. S. , and equally, what has kept that in check are bonds trading at 30 to 35. Im actuallyll, more bullish when it comes to bonds. I think theres going to be strong underlying demand foer t hehem. Ocne you get qe coming off, traditionally that leads to a bond rally. Its about more than bonds. Theres also jgbs out there and what the boj is doing. I prefer to look at volatility. If global volatility is staying low, i cant see 10 year yields going above 2. 5 . 2. 5 , and go above then you get volatility breaking out in other markets, those are the kinds of things that will happen and set off some major spikes. I dont think you can look at the 10 year in isolation or just the 10 year bund spread. David solid stuff. Thank you, garfield, for fleshing out that story for us. Of course, more on this story on our markets live blog. Just one click. Theres commentary from garfield and all the other bloomberg expert editors. You can find out what is happening beneath the hoods and your money. The bitcoin bubble debate rages on. All things cryptocurrency later on. The markets of 2018. Global investors say it is risk on. This is bloomberg. David welcome to Bloomberg Markets asia. Im david ingles. Noble group, something again ahead of the key deadline of wednesday, as it prepares to restructure the 3. 5 billion on the balance sheet. Noble, taking massive losses over concerns over company debt. Now, lets get to another debt story. A new warning with analysts saying investors may be left in the cold. Debt analysts say the group is using the unicef piggy bank amid foreign financing costs. Under 40 billion. Chinas uber kryptonite is now trading in taiwan, leading to operate as a tech hailing platform. Than 50ed at more billion. The company is in contrast to uber, which halted in february amid opposition from the government. Now, lets have a look back at the markets and gaze into 2018, into whats really been an extraordinary year. Im placing my bets you will never see another year like 2017 in a very long time. Our guest continues to favor a fully invested portfolio. Kirk west is here. His firm has nearly 415 billion in assets under management. You are still long equities. I am wondering if everybody is long . Where does the incremental fund flow come from . 2017 exceeded everybodys expectations. We still could have a period of consolidation, but i see that continuing into the first half of 2018 and where does it come from . In our case we are overweight in risk assets, and we have started to become underweight duration. Still, remaining overweight equities. Still you mentioned it is a possibility that the 10 year yield goes up to 2. 7 . Nothing the fed has done has pushed it above that. We hit the ceiling at 2. 5 . What needs to happen for us to get to that level . Kirk i think longerterm rates will go up. Clearly, in the case of the u. S. , they are held back by a number of issues. There is a very low rate elsewhere. Part of it is more midterm growth expectations, which are pulling it down. Having said all of that, two key things will drive. You will start to see inflation come through. You will see a push come through in 2018. And towards the end of 2018, markets will see that some of those other banks, such as the ecb and bank of japan, will start to make more hawkish noises. That will allow the longerterm rates to increase. David we already saw a little bit of that overnight from the ecb. Do we see that coming . There everybody is looking for early signs of inflation. I cannot imagine a situation where we get blindsided by this. Moves overnight looked bigger than they were. If you look over the course of the year, they are well and he the ra ge, lower end of the range. Liquidity is very subdued. Having said, that, i dont think we will be blindsided. Isone thing i would say momentum is often a key driver of returns. Its the case of making sure you are on the right side of momentum when it turns. David how do you know that, though . What are the early signs of momentum turning . Its in hindsight when that happens. Kirk it is often seen in the credit markets. I mean, equity markets can be elevated for a long time. But you will start to see it more often than not in the credit markets with widening spreads. David i want to get your take on this view that has come up in light of what has been happening in washington and we are likely to get a tax overhaul by the end of the week. These corporate you have been sitting on and we are talking trillion central ins of dollars. Assuming a decent amount gets repatriated back into the u. S. , does that cause disruption in terms of dollar liquidity . Kirk that is a very good question. In terms of the lever of the dollar, no. We think the dollar will go sideways. The reason for that is a lot of that money is in u. S. Assets already. But you are right, if you do see that money move very quickly, that could cause some tightness. We will see that in emerging markets. We like the emerging markets, but when it comes to credit, we think it is better played from a shortterm perspective next year. David Morgan Stanley sent out a very interesting note. That 2018 will be a year of dispersion. 2017 was obviously a synchronized move up. What in your view, and you can do asset class or geographical mvoes, what in your view is 2018 . Kirk i agree with that analysis and i think the dispersion will be seen within the Asset Classes, though i think they will be opportunities within all Asset Classes. This is a time when i think Asset Management will come back to the fold. Of equities, the we expect growth to be slower in china next year, i think there will be new opportunities in the case of new china. In the case of credit, the we think that duration is something you should play from the lower side i think there are going to be opportunities from the long and short. Next year i provide opportunities from all the Asset Classes. David thank you so much for coming on the program. Happy holidays to you, kirk. Now, lets give you a preview of what is coming up. The honeymoon looks officially over. We will ask if another domestic spat is upon us between china and the u. S. That is next. David this is Bloomberg Markets asia, and im david a list. Just one month after Donald Trumps trip to beijing, it looks like the u. S. And china are on the edge of another diplomatic spat. There are claims that the american influence are undermining. Lets bring in our china government reporter. Chinasyou make of response . China did not lash out at washington, didnt throw a hissyfit. There is reason for that. China does not think it should present a policy shift. , beijing has been responding to the speech. Are all responding to the speech. Narrow a contradictory, view approach. A shows the u. S. As using zero sum, cold war thinking. One interesting piece about the commentary the u. S. Should give up, its actually you think the previous u. S. Administrations language against washington. Likerump is sort of describing china as a revisionist power that is challenging the status quo, which is backed by the u. S. Leadership. U. S. A is saying, the should take more Global Responsibility by adopting this very unilateral view, you are shirking your global responsibilities and leadership role. China is urging the u. S. To take more responsibility. This is the exact language that bush and obama used with china. You see this very interesting reversing of the roles. David you talked about it a little bit, but how do we know it is not a policy shift . Started tonk beijing approach towards trumps unpredictable of ministration. He said, we should look at what he does, not what he says. They have had to adopt this policy. And see david instead of lashing out. Ting exactly. David i have a feeling we will be talking about this more in the months to come, in the decades to come. We are looking ahead to the reopened over in japan. A Rate Decision out today. The open, next. This is bloomberg. David this is Bloomberg Markets asia, and im david ingles. We are looking at bond markets, and deciding whether this is the start of a longerterm decline on the longer end of the curve. Look at this chart. We are calling this a brief history of the curve. A shout out of course, to our charts producer for helping me out in this chart. This tracks the spread between the 30 and five year treasury back to the early 1990s. It shows you why there were a lot of people concerned over the flattening because in a lot of ways, it previewed the kind of economic downturn in the early 2000s. We on the what happened in the we all know what happened in 2007 to 2008. There is the steepening. We have gone from 50 basis o closero closer t 60 basis points. Lets look at what is happening across the bond markets with sophie. Sophie asian bonds are tracking nicely. We are seeing that rise in the 10 year treasury pause today. Are climbing, along with stocks, losing ground oa around. 2 , but hovering near a onemonth low. We are waiting for more inflation data due at noon local time. Today the dollar is looking lackluster. E are seeing the australian yuan at the strongest level. The korean won is edging closer to the years high. The won, up about 1 3 of 1 . The kospi, that is little changed. The korean capex is also under pressure. Tourism related stocks are dragging. Tokyo, you made mentinon of how a rising u. S. Yield will do well when it comes to the Bank Earnings outlook. That is helping banks lead gains for japanese stocks, but we do see a drain from japanese stocks. 225,e do have the nikkei opening the session slightly higher, up about 0. 8 . In hong kong we are seeing that tech tumble. But thats being offset by the rise in casino stocks, like mgm china, gaining ground am id optimism that we will see a return to the precrackdown profts for macau, and perhaps a new peak in 2018. David thank you, sophie. Lets get an update of your first word news. Reporter House Republican celebrated passing their tax bill, but not for long. Three members in the senate some provisions that violated the rules. They will have to be stripped out. That means the house must go to vote again. The bank of korea minutes show despite,l rise concern about low inflation. One member warned any future hikes should be gradual and inflation should be seen as the most important consideration. The board voted 61 to raise the rates. Bill, signed, the filling a promise made on the campaign trail. The measure will lower income taxes. The president says he vetoes some provisions in the original bill, which will be explained later. Domingas says the tax bill will have a revenue of 2. 5 million next year. An increasingly tough line on brexit from banier. He told the Guardian Newspaper that there would be no special case for the city of london and says brexit remains the end of socalled passporting arrangements. He added the u. K. Would have to abide by any new eu rules drawn up. Apples long winning run could be coming to an end, at least according to 1 wall sone wall street firm. Uvall says any boosts from services will not be enough. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Bloomberg. David thank you. Now, lets have a look at india. The stock market just starting now. Theipped below 64 for dollarrupee. Bloombergg in our asia reporter. He joins us live out of mumbai. We are talking about that dreaded stagflation word, arent we . Absolutely. Factors thatggest could keep the central bank on hold in 2018. The latest readings show that cpi inflation fell to a 15 month high. Enter 2018, we will have a budget. It is likely to be a very popular budget, which will have implications for inflation. Also keep in mind that einflt inflation right now is above the Central Banks. The central bank has absolutely rates goingut forward. David i look at the bond markets, though, and yields pushing up, it seems bond tra ders dont agree with the view from economists here. Absolutely. Bonds have been consistently falling for the last five months. This will be the longest losing streak since 2000. There are a couple of other factors in the bond market, including inflation which has dashed hopes. Factors, likether a higher supply of government bonds. Right now are telling you there will be an Interest Rate hike soon. Haveet, some people interestrateng hikes will occur towards the end of 2018. David the minutes from the rbi, i believe most recent meeting, comes out today. What am i looking for there . Absolutely, everyone will be looking for any outlook, any forward looking comment the central bank has on inflation. What is the outlook on the budget deficit Going Forward . That will help them shape up or get some signals on the future path of the market policy. Thats the main thing everybody is looking for in the rbi minutes. David thank you for this guidance, kartik goyal. Lets look at china here because the country has set out how do i describe this i guess they scaledback vision of the Worlds Largest financial market. New Energy Finance head is with us out of beijing. My question to you is this. What do we know about this trade in excessive Carbon Emissions china is building and how do you think this will work . The Carbon Emissions market will be covering the entire power sector in china. They expect to cover 3 billion pounds of Carbon Emissions per year, and about 1700 companies or Power Generators will be in t his market. It is smaller than what people were originally expecting. They were expecting up to 4 billion tons and 6000 or 7000 companies, and it would enter other sectors. However, we cannot discount the fact that this will still be the worldss largest emissions trading market, much larger than the eu market. Ssionsount of emii covered will be more than the total emissions per year from india. David how far do we see this going in helping bring in the bad air . What are the potential challenges before we actually get to that objective . The air pollution in fishing has been much better over the last few months. Maybe because there are policies the Central Government is trying to implement to make it better. The Carbon Market will be able to address air pollution remains to be seen. This is one of the policy mechanisms the admin us traders are considering, along with many other things, like supporting renewables, which help to reduce air pollution. Right now with the announcement of the National Market, they are very short on detail. We are not sure when the National Market will be launch. We are not sure how they will start the carbon cut, and how high the prices will be and without these details, it is difficult to determine whether or not this will be able to help air pollution in china. David as you said, it is a good day today. So, lets leave it there. Coming up, our next guest says. He cryptocurrency is a bubble so, what does this actually wen, and what does this mean should expect . This is bloomberg. David this is Bloomberg Markets asia, and im david a inglis. We are looking at movement in the South African currency. Week. Been a topsy turvy there we go. Keep your eye on this one, 12. 783. U. S. Regulators have temporarily suspended the trading over concerns of manipulation. Shares of the cryptocurrency surged in less than three months. He sec is worried it has also raised concerns about potentially manipulative transactions. Warnpore is the latest to about bitcoin. The Monetary Authority there says investors face significant risks and will not be protected by existing regulatory framework, and are likely to lose money. Are driven byes speculation and there is concerned as to medical rise could attempt people there is concern that this rise could tempt people. The cryptocurrency dealer in south korea. There was a south koreas Security Breach on thursday, losing 17 of the companys asset. About 20 of all global currencies takes place in south korea. And now, lets do a price check. We had the cboe last week, cme this week. We are looking at the cme futures. Roughly 70,000. Its a really big decline. Lets bring in our next guest, cofounder of the company. Is it a bubble . Well, i think it feels a bit like the tech bubble, doesnt it . Remaining price is speculative. Cynicalther hand, i am about the fact that a lot of change can come through there. Out of the tech bubble, we saw some world changing companies and world changing technology. It is certainly a gamble and it is certainly speculation. Most Asset Classes could turn around without bumping into an inflated asset class. You have to be wary. David we were talking during the break. Exampleey property, one of things being inflated. An argument to that, a lot of these other things whether it is gold, equities, bonds, currencies there is an Intrinsic Value there. What is the Intrinsic Value of bitcoin . The Younger Generation has no problem in treatin attributing value. When i was younger, i would check my government advisory. Now i have a trip advisor. I trust people on the internet more than i trust my government advisory board. People perform valuations on an asset like this . I think analysts and economists will start to build models about the value. It is quite new and difficult. Enormous market inefficiencies and volatility as a result. David where does the industry go next year . Help me understand the major trends. Hugh we have a more professional and institutional engagement. We are starting to see some vehicles for more professional counterparties to enter the market. Lead regulators to introduce better markets for the balance. There will be more certainty, more regulation. On the other hand, its hard to engage right now for professional firms because they dont have much liquidity. Long onlyare mostly david does it become safer . Ows,ainly when a thief kn they will make a go of it. How do we make it safer . Do we need to start regulating it, just like a bank does . And then does that take the lure away from something that is not regulated . Hugh there are two answers. We need regulation for consumer protection. But there are some Interesting Technology innovations, like decentralized trading technology, which allows people to trade their funds without trusting any third party. Both parties can trade without entrusting their funds to a th ird party. Regulation is half the answer and Technology Innovation is the other. As the friendly ghost, casper. What is casper . Hugh for those viewers, the two main cryptocurrencies are bitcoin and a variant. Ethereum is shifting away to a different approach, which reduces the energy consumption, makes it more green. David as a business, what are your priorities for next year . And how do you leverage this safely . Hugh my background is traditional investment banking. Key specialties are. Its pleasing to be integrating with those venues. We are starting to trade on professional venues and participate in the market. David do we see more consolidation and i guess, do we get a narrowing in the spreads . Hugh as we get institutional participation, yes. We definitely will. Right now the vast majority of trading is through public internet services. 350are 70 million to billion elsewhere in the market. As we see an uptick in flow, that will have a dampening effect on new impacts on volatility. Ethereum,coin and quickly. And bitcoin, 100,000 ethereum 50,000. If you are a bloomberg subscriber, you can catch up on the interview and any other conversations you might have missed. Is the function on your bloomberg. Check it out. Coming up in the program, cheers to that. Macau says, pour me another. We will hear exclusively from the chairman of moutai, next. David you are watching Bloomberg Markets asia, and im david inglis. Kweichow moutai is the Worlds Largest liquor maker, yet it has ambitions of growing even more. We spoke exclusively to the chairman of Kweichow Moutai and he says he wants to bolster sales and even expand into Financial Services. In 2018, we will produce over 107,000 tons of liquor next year and the sales will equal this years. To expand our financial business next year. We are already running a business company. We are now headhunting toplevel executives to help strengthen our financial operations. Our goal is for all businesses millionch a combined 100 yen. You see which areas do those companies coming from . We are planning in the China Europe International exchange and our ecommerce business in shenzhen next year. Going forward, we plan to list our agricultural company. Our goal is to complete at least three ipos by the end of 2020. We expected to improve our brand image as the worlds number one distiller. State run media says the share price of moutai grew too fast beyond reason. What is your view . The stock price is a reflection of the underlying value. Is our stock overpriced . You have to ask investors and consumers. I will only make two comments. First become investing in moutai is investing in the future. Secondly, the stock market is risky and you have to always be cautious. That is all i can say. David that was the chairman of Kweichow Moutai, speaking exclusively to bloomberg. The target, i know market is not exactly the board, but they have to change the packaging. Just my note. Bloomberg markets asimiddle east, coming up at the top of the hour with yousef gamal eldin. Yousef we stayed up late into the night, as we finished up interviews with key decisionmakers regarding the saudi budget announcement. You laid out the program for us, in terms of expectations for economic growth, and how he is looking to revitalize the domestic outlook for the Saudi Arabian perspective. We will put this all in perspective. Course, no conversation will be complete without tapping into what is going on with the u. S. Tax cut program. What iumpacmpact will that haven valuations . Thats next on bloomberg. You are watching bloomberg technology. The house of representatives will vote again on the tax bill. That is after it voted to pass the most sweeping rewrite of american tax law in more than three decades just this afternoon. Gop leaders blamed Senate Procedural issues that must be resolved. The senate is still expected to vote tonight. House majority whip Steve Scalise says the chair of the House Appropriations committee should keep his job. That is despite voting no against the tax overhaul, the most important vote of the year for republicans. Ghoulies says new jersey