Rishaad just about 30 minutes to go until we get going again for the hong kong session. Let us take a look at what has been happening. Has been a winning last day of trading for 2017. The highlights. Looking at 14 months, straight months of a global stock that is gaining. This is unprecedented. Let us go back to the dark days of 2008 when we had steep falls. In one month, 10 of the stocks declined. Since then, recovery taking place. 2009. D bag since the last 14 months has framed what has been going on. The hang seng up about 34 so far this year. Notwithstanding the gains we may be seeing in a little while. And that is when the session kicks off in about 29 minutes. Singapore and taiwan coming online as well. Let us go over to sophie and have another look at the markets. Grant sporre sophie let us take a look. The ringgit is heading for its best year since 2010. In 2017 following the rebound in oil prices. Is expected to test at a number three level. Singaporean stocks. The opening was flat but they are eyeing the best since 2012. 0. 5 t gaining ground at and looking at the best year ce 2009 but the towel while the taiwanese dollar is continuing to strengthen. The time when nice dollar is eyeing its best year in three decades. Even so, the Central Bank Governor Deputy Governor says this is not too good of a year compared to other currencies. 5. 5y inflows have upped billion. With Taiwanese Companies becoming a more crucial part of the electronics value chain, it will likely attract more in 2018. Looking at the breakdown given weakness,op of dollar we are seeing asian currencies ride the wave. The aussie has picked up above the 78 title for the first monthly gain since july. And we see continued gain for other currencies like the korean wan. And indonesian rupiah is also picking up and the kiwi dollar is also gaining about 0. 2 . The equities market is a mixed session. Sliding in sydney but some gains in tokyo. Offer the new year break. Rishaad thank you very much. Turns of britains attempts to leave the European Union has been one of the big stories. This is in our first word news. The British Government is withholding the publication of secret files on the creation of the European Union. 1992 andents date from were due to be released later on friday after the 25 year role. But almost 500 files from the Prime Ministers job Prime Ministers Office, 114 are being held back. The Cabinet Office denies they are hiding sensitive material. President trump is warning china about deliveries of crude oil to north korea. Saysth korean newspaper spy satellites have seen a transfer of oil at sea. The president we did caught redhanded. There will never be a friendly solution of this continuous. Leasing. Listed china jets taking 50 wide bodied. The ceo says wide bodies offer the best returns and he is looking at planes with broad market recollects recognition. It counts air china and air asia among its customers. Bitcoin. Cryptos latest slump came after korea said it is debating options. Those options include the potential closure of some bitcoin exchanges. Ridein has endured a wild in december and has now fallen on the 18th. Record global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. I am paul allen and this is bloomberg. Appled taking a look at for the moment which has been under pressure. Share price moving up . 48. We have pressure this time from the performance of the latest iphones. It is aware of dissatisfaction from the public regarding battery life. Apple has apologized saying there is a misunderstanding about the use of older batteries. Our tech editor joins us from san francisco. What is apple apologizing for in this battery issue . They are apologizing for the Software Update from about a year ago that slowed down some of the chips and other components to prevent phones from crashing. The other is the way they communicated it which was that they did a Software Update but they did not tell anyone what it was going to do. Rishaad indeed, it has also been something the company has been lookingrishaad at. We had that story about the iphone x. And disappointing sales which has been spooking the market on top of that. Shares were up marginally. That was after an initial fall. They fell a couple of days ago. There were some analysts that downgraded the iphone sales predictions for the march quarter which affected which is effectively the First Quarter of 2018. Since then, others have come out and said they are not really that concerned about that issue. I think the stock has recovered a bit from a couple of days ago. Rishaad let us move to soft banks and softbanks investment in uber. What will they do with the money . They are going to use it for technology investments. I imagine that is hiring a lot more engineers and updating the app. And investments in the u. S. And abroad which is interesting considering softbank also invests in a lot of other Ridesharing Companies outside of the u. S. Rishaad the thing is that this investment is a bit of a discount, isnt it . Could there be a Lasting Impact are the fact that people seeing lower prices than previous rounds of financing . It certainly is a blow from the perspective of the discount. It is about a 30 discount which is pretty big. Normally, there is a discount when you are selling a lot of stock in the private market and 10 15 normally discount. The other reason for the a lot of theecause governance issues that uber has had this year, softbank coming in and making this investment is offering and solving a lot of those problems. I think they were demanding a discount because if the a lot ofinvestment had not hap, uber wouldve been stuck with the governance problems still. Looting tou are a the deal happening in the governance reforms are not supposed to kick in. What does that mean overall for uber in a bit more detail . Basically, it means that everyone will know who is running the company and there will be a pretty clear lined of people making those decisions. Company,ravis ran the benchmark was a big investor and they fell out. Worrying was a lot of between the two parties and not a lot of decisions got made and a lot of executives left. Now, when this deal closes in january, benchmark likely will have sold some of its stock and will be the largest shareholder in uber. And those two board seats that it will get that will make things a lot more clear than they were before. Rishaad thank you very much indeed. Still ahead, we look at the benign forthings are oil. That is on the way. And later, chinas state bank, be a dominant player by the end of the decade. Be a dominant player by the end of the decade. We will ask if that screen play is feasible or likely. This is bloomberg. Is feasible or likely. This is bloomberg. You are back with Bloomberg Markets. We have fred niemann. What sort of year will it be for asia, economically . A broad brush start. Let us Start Talking about 2017. Of wind in oury sales. Exports have rebounded. Capex is jumping backs. Most of the highfrequency data held up until year end. The big question for the 18 is what is going to happen with china construction . There are some signs of a slowdown, the engine of economic growth. If you get a stumble, that will heard a spring 2018 but for now, looks like things will be smooth sailing. Rishaad they are trying to wean themselves off of it and it is proving to be difficult. They are determined to rein in credit. They are tackling the shadow Banking System which will hurt construction at the margins of the system in terms of infrastructure spending. Under other hand, they have an Aggressive Bank lending role. Y are expanding in regular regular bank lending. It makes things more transparent but it does not wean the economy. Rishaad the trouble with doing that is that the larger state are getting a lack of return on that. Have they been successful in actually going to the small and Mediumsized Companies and getting them and getting back to lending to them . The problem is the appetite among Smaller Companies. The private sector has traditionally relied on retained earnings. But wending is available still see hesitancy among Smaller Companies to start investing. The private sector has not really kick in yet. They have the resources and the internal resources but there is some hesitancy on their behalf to ramp up and that is policy uncertainty. The other factors that are really weighing on investment. Now as how far is china far as being the motor of growth for asia as a whole compared to 10 years ago or five years ago . It seems like it is also selfcontained in what it does. Then many ways, china is largest economy in asia but to some extent, it is still punching the lowest wage when it comes to driving the asian economy. Europe still matter greatly. We think that will change because china is going to more imports in years to come but as for now, it is a really closed economy in many ways when it comes to lifting growth and profit. There is some exposure to commodities which is china driven but beyond that, the exposure to china is the supply chains that ultimately feed into the west rather than domestic demand in china. An engine ofmaking growth is by removing capital controls. That is one way and china is expanding investment by Chinese Companies in neighboring countries bringing these economies together. They would like to have an increased capex in china. The 25 the china to agenda meaning china will have to import more capex, more machinery, more equipment that goes into the Machine Tools etc. And all of that has to come from overseas. Apan, korea, taiwan they will benefit in the coming years. Rishaad what about the risk to inflation . The economies have been able to thrive in this below inflation environment. The risk that many people say might come from and oil price that ramps up. Shale is a swing producer. Oil rallyime we see by a couple of dollars a barrel, it all comes back again. It seems there is enough supply capacity in the oil sector to spikes. Massive price if you go beyond energy, there is not much in terms of price pressure. This is narrative where in china growing. Ice pressures there has been a pickup in cpi. Inflation is running 2. 5 percent. 6. 8 conomy is growing at and 2. 5 inflation is not something to be overly concerned about. Is not aprice pressure concern and that means Monetary Policy will stay accommodative. Rishaad and japan would love more inflation. Yes, and every time it takes everyone isks up excited. That will be important to watch not only in japan itself but also globally. With such a tight labor market, when will it spillover . Sean. Ad what about aussie you dont have a breakout in terms of growth. Five points stuck at 1 growth and they are not really accelerating out of that. Indonesia may go for a rate cut. Fed hikinging about Interest Rates in 2018 but indonesia might cut Interest Rates showing how emerging markets are experiencing aflation disinflationary process. Sweat the fed next year. More after the break. This is Bloomberg Markets. Let us get back to our guest, frederic neumann. Thank you for sticking around with us. Let us look at that dont sweat the fed. Who knows what will happen when janet yellen steps down. There is a wide or broad way of there will be another bad year for the dollar in 2018 and the emerging markets will outperform. What are the implications of that and do you buy into that . Frederic it really is why the fed would be increasing rates. The might be negative for emerging markets because it would imply that the fed will need to continue tightening into 2019. In some ways, it is all about the curve. If it hikes the longterm if it hikes the rate, longterm rates fall off as well. It will put pressure on the yen. If it hikes and the curve remain flats because no one trusts that net inflation will come back, the emerging markets will do quite well. It is really about the narrative about why the fed is raising Interest Rates. So far, there is no inflation so the market is doubting whether the fed can sustain this pace of Interest Rate hike. Rishaad is that sense of doubt responsible for the flattening of the yield curve of late . Frederic there is not a belief in markets that we have a sustainably higher inflation coming through and in some ways, the market is telling us that the fed is hiking Interest Rates for the wrong reason. That the economy will slow down over time and as a result of these rate hikes and therefore the yield curve does not steepen. Ishaad but the other side that we see the manipulation of it with qa. We are not painting the right picture, currently. Areeric the ecb and boj still distorting a lot of the fixed income markets and holding back the back end of the curve. If you look at inflation linkers. They often do not show that the market is really concerned about inflation coming through. It is partly the lack of inflation driving fixed income markets and the ecb and the boj. Themeam for 2018 one for 2018 is willow bay signal a faster stepping away from their accommodation . Is will they signal a faster stepping away from their accommodation . Well it may mean kuroda will be reappointed as governor. He is bordering on being irresponsible. Any pullback by the boj would undo a lot of the work that he has done. It went to to make a bold india, cap 12 months. Frederic a lot of distortion with demonetization. Looks like the economy is recovering gradually. They are doing some reforms. We see some progress on the Banking Sector reform but it will be a long slog. Dont sport dont sweat inflation, india. Rishaad thank you so much for joining us. Have a great 2018. Let us take a look at some business flash headlines. Another of its underdog stages in the u. S. Says uberutive remains nomura remains weak. And he warns the european staff that it is well below that of americas and jobs are on the line. 12 million in claims. The regulators at Citigroup Global markets showed incorrect ratings suggesting by instead of sell. This is from february 2011 until december 2015. Hong kong listed splendid technology. And equipment maker. Losing shares at 20 this year. The stock has soared in the past two days though. The most shocks stocks that have changed hands. Of the last trading day of the year for the hang seng. It seems to be dictating sentiment. 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. Here is Victoria Harbour here in hong kong. Counting you down to the last trading day of the year. Counting you down to the last trading day of the year. We did have the regional benchmark, the msci pacific index marking a record high on thursday cap a fabulous year. The most since the Global Financial crisis of 2008. The best year since the rebound of 2009 as well. We are sitting at the moment on the asiapacific index with a gain of 28 . Hong kong, 35 gains. Since january the first. On top of that, we have the worst year in a decade for the dollar. In all of this. We are watching the hang seng today because we have more of this class half full feeling. 85 point from that psychological level. The open is upon us. Sophie final trading day of 2017 for Chinese Markets and we are seeing good things coming through for the shanghai composite. The hang seng is plotting i had. Fifth straight day of gains. Offshore yuan is trading at the strongest level since september as the pboc raises the daily fixing once more. The dollar has seen its weakest year since 2012 and dollar we and dollar weakness will likely continue to play. The performance for the onshore you on. , and bondntrols yields. Setting up the yuan for its steepest yearly rise since 2008 and its best yearly performance since 2013. Let us look at the breakdown for the hang seng which is up 0. 1 . The discretionary segment. China mobile. Helping that segment. The Consumer Staples segment is being led by. The i. T. Segment. Keep an eye on tencent in particular. Stock may fall with chinas crackdown on screening online games. Btv 432. E that on g that may check that out. Ron wyden. We the point i want to make is that the hang seng is doing fairly well this year. Some stocks are lagging behind the global benchmarks. You can see that happening here. The shanghai composite is in yellow. Investors have been rushing in through chinese large caps. We are seeing this in shanghai stocks resulting in a record performance gap between the bid 100 index compared to the shanghai index. Keep an eye on this space as we head into 2018. Rishaad thank you so much. Let us get you up to speed with the first word news headlines. Paul allen starts us off. The fixed income markets are responding. Itindian bond yields aims to bother an additional 7. 8 billion dollars to lessen the impact of slower revenue. The 10 year yield jumped the most since february as the r. B. I. Says the government will borrow almost 15 billion dollars through march, more than base the amount for the same period announced since september. The italian president has dissolved the Parliament Opening the door for elections in march and the possibility of an inconclusive result in further political instability. The eurozones thirdbiggest economy but its recovery is trailing most of its peers. Opinion polls put the antiestablishment Movement Ahead of the Democratic Party and a potential centerright coalition. Market enjoyedty a robust the 17. Value ofte says the the nations entire Housing Stock increased by 6. 5 or 2 trillion this year. The value of all homes in the country is a most 32 trillion. Again in housing values is the the realince 2013 when estate was in the early stages of recovery from the recession. Two sons from the late king of have beenia has released. They have both left the Ritzcarlton Hotel in riyadh are those arrested in the investigation have been held since early november. Several suspects evan able to purchase their freedom by agreeing to pay to avoid trial. Global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. I am paul allen and this is bloomberg. President trump is awarding china that elicit deliveries of crude oil to north korea. The president needed caught redhanded. Very disappointed. There will never be a friendly solution of this continuous. Government editor is with us and what does he mean by china being caught redhanded. The Un Security Council the spirit of the agreement. Resolution still allows some oil products to be sold to north korea legally. It does not completely cut off oil but what the president is referring to is a report in a south korean newspaper that cited u. S. Officials saying there was a licit ship to ship transfers going on out on the high seas. Basically, the president was saying this is evidence that there are vile violations of the Un Security Council resolutions. They werealready said not aware of this earlier in the back at they threw it the u. S. Saying there are other countries not implementing the resolutions fully. Mostly the provisions calling for a peaceful resolution to the conflict. Rishaad overall, what has been the impact of these latest accusations against pyongyang . To limit the oil supply going into the country means the average population that has been using it for , andulture, driving cars everyday lives, these people will get caught off from that. Whether it hurts the regime itself and its Missile Development program is another story. The military and the regime will take all of the oil indy for themselves before it they give it to the population at large. Rishaad with the Winter Olympics nearly upon us, these venues are not that far away from the border. Should fans and athletes be worried . There certainly is some concern. You can never say never with north korea. I had of the olympics in the 1980s, they blew up an airliner trying to deter people from heading to those games. It did not work. The games were seen as a success. The south korean government is doing everything it can to eliminate any fears and get the u. S. To delay joint military exercises scheduled ahead of time. The u. S. Has not said one way or another if that will happen but south korea is also hopeful a can get north korea to send athletes to the games. They are Still Holding onto hope that it might happen. It is unclear if it well but there are some people that see this as a potential opening for some dialogue. Ws isad the nikkei nee reporting that abe may be skipping the games. He messed have his own reasons. May 17. He must have his own reasons. From india to indonesia to japan. Record highs. Often, despite geopolitical tensions and government interventions and surprise elections, let us find out more. Tell us about all of this. It has been quite a 12 months. Indeed it has. Investors in the stock market in asia must really be rejoicing today considering it is up 28 or 29 so far. There are a couple of things but when of the main things that has happened is the tech rally. Asia had sub gauge for more than a 20 weighting for the msci pacific index. More than 50 up this year. That is one of the main reasons with Companies Like tencent and having and samsung really good years this year. In the background as well there are other things going on. Valuations for asian stocks. Grade earnings. And Global Economic growth. Well . D japan, as blackrock. The recommendations going into next year. More of the same . What are the dynamics . Off a littleted slow at the start of the year and then it took off in the second half. For the most part, it has to do with cheap valuations and blackrock is expecting stronger corporate earnings next year also. I would say those are the two main reasons for that. Which cameso nomura out saying it expects a strong rally for japanese stocks citing the same reasons. Rishaad sticking with china. Where at where has it in in all of this . Shanghai composite. It has been a relative underperformer this year. Big capital slides. China is an interesting market. This year and the year before and i think it will continue to be that way. One of the things that happened recently was the governments campaign to cut risk in the Financial Sector which led to investors rushing into mostly stateowned largecap companies. Because of that, there has been a huge gap between these companies in the broader market. What is going to happen next year . We will have to wait and see but for the most part, government interest seem to play a huge role in the market there. Rishaad great stuff. Joining us from singapore. Taking a look at what we are going to be looking at next. Attention on u. S. Equities. Would you believe the Dow Jones Industrial village Dow Jones Industrial has had a record high this year. Can we expect more of the same in the new year . You are back with the Bloomberg Markets. 2017 stocks hitting records across the board despite global uncertainties. What do we have to in 2018 . We speak to our lead blogger, mike reagan. For the u. S. , it is surprisingly cautious. The average strategists from the middle of december levels a midsingle digit, 5 or 6 gain from where we are now. Despite the fact that Earnings Growth is expected to be in double digits, our estimate is about 12 or 13 based on the tables that bloomberg does inhouse, tallying up all of the individual forecast. A are surprised there is not little more optimism there especially with the tax cuts coming. Why isnt there . Everyone gets nervous this late in the bull market. Go ons possibly going to to be one of the longest bull markets we have ever seen so there is a little nervousness about that. The prospects for higher Interest Rates are not usually the best thing for stock valuation. To me, the Biggest Surprise would be if we did see valuations continue to creep higher. I am not certain that is completely off the charts right now. I think it could possibly happen just because if growth keeps humming along, unemployment as low as it is, people keep putting their market in the stock market. Asple are not necessarily sensitive to valuations as may be they arguably work in past bull markets. Speaking of valuations, what about the fang trade . In Technology Trade . Will that continue in 2018 . Mike the earnings potential for the tech sector are still very high. To me, the interesting Thing Movement is that they are getting so big i feel they will be drawing some regulatory scrutiny which goes for cryptocurrencies as well. It is amazing to me that we have not seen any regulatory backlash. I wouldnt be surprised if that changed in 2018. Why . Mike whenever something is this hot and drawing this much attention, it is funny. Every now and again, we have seen some followups in bank stocks. One day in late november i was trying to figure out what was causing it. One strategy i came upon was that germanys defense minister said it is time to regulate big tech. How can we protect our people against and he literally named all of the stocks. It that i think that affected the market that day but it added to what is creeping into the it is an outlier right now. My i dont expect there to be a huge crackdown but if you look at the midterm elections coming up in 2018, i think there will be a lot of scrutiny about the advertising and who is advertising for whom in that election. When you think that on what made us joined facebook originally i went to high school with betty liu and i wonder what she is up to now and does she still had that hairdo from the 1980s . Yes. Mike now, look you look it facebook but you fear being influenced by the russians. It is a different mindset going into the big social media stocks in general. What might replace that . P e as people rotate out of big tech . Mike i dont know if that is enough to p e as people rotat of damage the business that much. I think it is a risk worth keeping in the back of your mind. We have seen this tentative akin for throw tatian into financials out of big tech. Obviously, on the prospects for higher Interest Rates in 2018. A lot of it also bleeds into factor investing. Time, the growth factor or moment factor was dominated by big cap tech. I was looking at when of the this. Um that tracks we present financials right now. Things are changing a little bit into not exactly what it was in 2017 where it was growth and momentum dominated by tech. Momentum will still be there for tech but optimism around financials is so great that i would not be surprised to see financials dominate. In thelly in the big beginning of the year when people are still amped up. Mark is a question what impact will the tax package have. 2018, just to put you on the spot, what do you think could be a story that we will be talking about in 2018 that we did not talk about in 2017 when it comes to the market . Mike i think the dominant stories will be trump and regulations. Clear that he is not a big fan of jeff bezos. I think that is a tension always lingering in the background. And his whole approach to regulation. The white house has surprised a lot of people at the justice it opposed the at t time warner deal. We will have to see how m a is regulated going forward. I think that will be telling if there is any pushback from the government against that. Wish it again, i could come up with some out of the blue story line that we will all be covering, but i feel as though will continue to dominate. Cryptoi feel as though will continue to dominate. I think i wrote to one about crypto in 2017. It felt like a bubble back then. It feels like a bubble now in bitcoin but it has been an asset that no one knows how to put a valuation on. It would surprise me to see it go much higher from here. Rishaad mike reagan. Imaxs rival in china wants to be number one. Why it now has the government backing to do just that. We will tell you that, in a stock on bloomberg. That, nexttell you on bloomberg. Welcome back to Bloomberg Markets. Imaxs rival says it aims to be company on the jumbo screen. Where are talking about a country with more than 46,000 movie theaters and imax has only 430. Why is this important . Exhibition across the world is looking at ways to build a Premium Experience. That has been the watchword. So many viewers are gravitating towards smaller screens. Theyre watching movies at home and using netflix so they have got to improve the moviegoing experience. One of the ways to do that is by adding a big screen. You also have a trend where shopping malls and retailers are looking to drive entertaining experiences. New experience type Entertainment Venues including jumbo screens. If you look at their growth, the number is small but the growth is amazing. The last few years, they have doubled the number of screens. Both of the rivals have that rate of growth. Looks like this will be a new technology that will help shape the future of moviegoing. The dominance of imax in this market, it is the challenge of confidence warranted . They certainly believe it is. What they cite is the government backing. Of chinas film company and they have a distribution monopoly for foreign films in the country that gives them access to a huge catalog of the latest films that that access. Atch imax focuses on one film at a time for its National Network of screens. Cgs can offer a bigger variety. They also dont necessarily have to make a profit. The chairman of the company told us we are on growth rather than profit because they have the backing of the government. As a state run to company. There is also a government mandate to promote chinese films are brought which feeds into their plan to expand outside of china as well. A have a lot of support. Slightly different formula for how they sell their service. They let exhibitors keeping bigger percentage of the revenue which gives them advantage in the market. They are growing faster than imax but it will be a big battle between the two. Imax is a great brand name and is known internationally. It will be interesting to see how they go at each other in this fastgrowing market. You have been talking to various people in hollywood and among the major theater operators. Been a topic of interest for many including kazakhstan and other countries in east asia. Global is a growing business. A lot of countries that dont have a big infrastructure of exhibitors and developed countries as well are looking at the Premium Experience where markets can be higher. That can of venues promote films are expanded into theme parks as well. A lot of the parks have a jumbo screen and imax facility linked to one of the attractions. Has is the technology that a high growth future at a time when the regular exhibition market is not having as much growth because more viewers are taking a personal option to watch on their devices at home. Rishaad thank you so much. News asiae Bloomberg Telecom and media editor. We will have a look at the year ahead in a little over 10 minutes. 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. Markets entering the last trading day of 2017. Ok tohareholders saying selling a stake to softbank. The deal would smooth the road ahead in a year of the ride hailer would like to forget. We look at the market for fine wine and where i am Rishaad Salamat to uncork a winner. Where to uncork a winner. I am Rishaad Salamat in hong kong. This is Bloomberg Markets asia. We are talking on this last trading day of the year about equities with stellar vietnamfor the likes of , which outperformed everybody. Hong kong with a 35 gain so far this year. Looking at that and what a fabulous year for equities. What about the year in bonds . Here we go. Global high yield total return coming in just over 10 . Emergingmarket local currency returns about 15 . How does that compare with treasuries . Far more muted. Corporate bonds in the u. S. 6 , but the sovereign debt his way down here with that 2 total treasury return. Inflation protected securities, if you like. Increase their over the year, and european credit just ofut 1. 8 through the course 2017. Lets take a look at one emergingmarket. Gettinga, jakarta underway for its last session of the year. Here is sophie kamaruddin. Sophie the recordsetting gains , butnue in jakarta, up. 2 a mixed move when it comes to equities. Leading gains, set for the best year since 2009. Chinese stocks looking to finish on a high note, the gauge and include 4 . Japanese stocks headed for the best year since 2013 them rising as the yen is firming up at that 112 level. The taiwanese dollar on the g m m extending its fouryear high, the best year in three decades. One of the biggest themes this year has been the tech rally. You can see in this chart the i. T. Segment on the msci asiapacific index has gained 52 , its biggest yearly gain in eight years. That has helped to push the index to a record high in november and supporting gains for regional stocks. Checking what has led gains on the index. You have a Korean Company coming out on top, gaining over 600 . Malaysia press metal has surge 200 , tracking aluminums willing rally. Winning rally. You have Top Developers like sumac and ever grand jumping over 400 . They are ending 2017 on a whimper after the maker rally peak in october. Led to drop since then, perhaps over concerned that chinese homebuyers may find it tougher to get mortgages. Softened asave housing policies are seeing to be turning positive. Deutsche bank expects strong growth for chinese developers. Rules are government showing signs of easing controls in home purchases, so investors are betting that more cities are following suit. When you look at a breakdown of chinese developers, Country Garden leading the group higher. That stock jumped to a record cigh on thursday, but suna remaining the worst performer, losing over 9 . Rishaad thank you. Lets have a look at first word news headlines. Lets join paul allen in sydney. President trump is warning china about illicit deliveries of crude oil to north korea. A newspaper says that u. S. Spy shiftstes have seen transferring oil to north korean vessels at sea. The president tweeted the following. Hong kong listed china Aircraft Leasing is to spend five point 5 billion on new airplanes from airbus, 50 wide by the jets to tap surging demand in the asiapacific. Wide bodies offer the best returns and he is looking at planes with broad market recognition. They already have 89 planes and counts several airlines among its customers. The italian president has dissolved parliament, opening the door to elections in march and the possibility of an inconclusive result in further political instability. Areas third biggest economy, but trailing most peers. Polls for the fivestar Movement Ahead. Apple under pressure over the performance of the latest iphone, saying it is aware of public dissatisfaction over battery life and will release an update to improve powerpack health. Apple apologized am a but said there is a misunderstanding in the use of older batteries in new iphones and would never potentially shorten the life of any apple products. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. I am paul allen. Rishaad softbank planning to invest in uber. Our Asia Technology reporter is tracking this from tokyo. Tell us about the key governance reforms that will now kick in. Good morning. The most Immediate Impact would be the expansion of ubers lord to seats dashboard 17 seats. The company will get rid of the dual structure for its shareholders that has favored ,eavily early backers specifically the former ceo and , whonder Travis Kalanick has been fighting the new incoming ceo as well. Biggestof the deal, the Venture Capital benchmark will drop its lawsuit against the company, hoping to put behind the strife that has burden the company in 2017. Rishaad what is uber likely to do with this cash coming from softbank . The 9 billion will go to existing investors. There are 1. 2 5 billion directly into the company. Cashis not ask actually strapped, but that is not to say they could not use the money. For one, and they are engaged in a struggle for the north American Market with lyft. They are also in the midst of an aggressive global expansion. You would be surprised to find it is not just europe and north america. In ecuador ander malaysia, so for sure the money could be used to promote their self driving research, which they are pushing out against Companies Like google and automakers. Does it mean then for softbank to have this stake in uber as well as some of the competition there . Over the past year the founder Masayoshi Son emerged as the biggest backer of ride hailing companies, di and grabhinas di in Southeast Asia. In some of these markets, they compete directly against softbank, for example india and Southeast Asia. This sort of competition is always costly. It comes in the form of incentives for drivers or free rides for consumers. It is a good question whether Masayoshi Son can play the role of an active investor and potential kingmaker to prompt some consolidation in those hopefully save the companies from destructive competition in which they are locked in the right now. Rishaad thank you for that. Our Asia Technology reporter in tokyo. Is chinasxiaomi most wellknown smartphone brand, but there is no guarantee it will hit a landmark valuation before its rivals. We look at two that may be joining cap 100 billion club. China,he challenges for how the leadership intends to tackle the obstacles ahead in 2018. This is bloomberg. Rishaad this is Bloomberg Markets asia. I am Rishaad Salamat with the latest headlines. Coming to the rescue of his billionaire brother, agreeing to buy assets from Reliance Communications after emerging as the highest bidder. The companies have not disclosed terms. Bani says he wants to cut borrowing by 6 billion by march. Givensed at that when that they are not talking. Citigroup has been fined to resolve complaints with customers by displaying in Accurate Research ratings. Citigroup Global Markets showed whenrect ratings like buy they meant sell on Something Like 38 percent of equities covered by its research department. To december2011 2015, and they made money even then. Up efforts to refinance debts and its Technology Division will raise 3. 2 billion in the local bond market. Sun is among the giants in china facing greater government scrutiny as the government cracked down on outbound investment. China heading into the new year saying the control of financial risk will be the pivotal challenge over the next few months. Atwill have a deeper look all this with our next guest and our north Asian Correspondent stephen engle. They say it will be the pivotal challenge of the next three years, containing financial risks. Rishaad a lifetime of it really. Campaign, ifraging you thought it started in earnest in 2017, get ready for 2018. They are ratcheting down expectations for growth as they weed out over leverage in the economy. The 6. 5 is expected to be consensus fullyear growth come of the slowest pace since 1990. The economy is stable, except rising debt to teach peter debt to gdp ratios. Be, that is the biggest pivotal challenge, reducing financial risks. There is poverty reduction, pollution a big one, again beijing issuing a winter warning just yesterday lasting through today. Has backfired. They did not have enough gas supply for the countryside, so they relax that ban. Internationally, how to handle donald trump and not overreact, how to handle north korea without overreacting, and also the fed. What happens there . If the fed overshoots and the dollar goes on a rally, there could be more outflows from china. Rishaad is the prospects of the fed doing more than three hikes in 2018 . The dollar goes on a rally and China Capital files out. While they may want to do that, while there are theories they should do that, the reality would tell them that would be a foolish thing to do. They use this thing called the phillips curve. Rishaad that went out the window in 1977. They are unfortunately using it. Rishaad much more important is the one that followed from the friedman school. There you go. Notaad so we have that working particularly because you get Wage Inflation as a result of employment thing so low. I think edmund phelps, the nobel prize winner, who looked into this more carefully, has the right tack on it. Labor participation is getting higher, especially in the older age brackets, and under those circumstances there is more risk aversion hitting the labor market. People are more interested in keeping their jobs and getting higher wages, and that his across the board. Looked at the whole question of globalization and how it impacts the labor market, and all of this means inflation really does not rise with the lower unemployment rate. We have not seen inflation across the world, and that means the Party Continues in asia with centralbank sitting on their hands. Korea did raise by 25 basis points, but they have a seating because inflation will not be too high. In china as well. The only political reason rates might rise in europe is simply because savings are being punished. In germany, it is a big issue. For that reason, there may be an hike,ot exactly a rate but a faster reduction than some people expected in the quantitative easing. So that has a bit of a tightening effect, but will not affect United States very much. Rishaad touching on what steve was talking about as we introduced him, debt to gdp ratios at 250 plus or thereabouts. Any othere that in country, the alarm bells would be ringing. What gives . You have to look at the composition of that debt. It is not useful to have these average numbers. A lot of this debt is in infrastructure and was incurred why some of the large Stateowned Enterprises building a lot of railroads, building a lot of roads, building a lot of electricity, so under those circumstances, that is something that helps productivity, and that will be built back. Im not worried about that. A lot of the debt is also offbalancesheet in the municipal government as well. Whereng the roads to know , the Business Partners to know where come etc. Is like the houses without people. Now they have people. Mention someto other television network, but they had this big deal about all these empty cities in china. They are all full now. Those zombie towns and ghost cities yeah, but some of them have filled up. Northernally in the parts of china, and that will continue to happen. Im not worried about that at all. I think the property sector, especially second tier and third tear cities, will be a good investment. Japan . I ask you about we are not likely to see any change or reversal at the boj although governor kuroda will stay on. ,apan is on the upswing consecutive quarters of positive growth. It is riding the wave of global trade. We have had a very positive year and japansobally, exports have been rising and going up very much, and that is a very positive development. That will continue to happen. More or reason why this less synchronized part of this growth globally should be retracing anytime soon. Rishaad that is just it. In there no reasons mediumterm, even medium to longer terms. What would have to happen . With Interest Rates have to go up to 4 , 5 . Then you have something to worry about. You have an impossible mistake by the fed, but i dont think that will happen, and then geopolitical risks, especially middle east. That could be a big deal. 150, Oil Price Goes to that is not good. Trump and bitcoin, no touch either. Certainly not bitcoin. Jamie dimon said dont touch them. I wouldnt touch them either. Rishaad futures contracts, infrastructure now, but if you can trade it, banks will traded ultimately. Stick with us. Trade it ultimately. Stick with us. This is bloomberg. Rishaad you are back with Bloomberg Markets. I am Rishaad Salamat in hong guest. Th our the wall of worry, november about tax reform in the u. S. Guest. Hopefully next month we should be looking at that in the rearview mirror, but a lot of it has been priced in. What about the reality and implications of it . Real implications are twofold. There is a political implication. A good deal of opposition across the board and the United States because people did not think they would as individuals would in a fit and only the guys and corporations would benefit here it i think they will see that judgment is wrong. I think politically it will pick up steam. It will helptly, small and Medium Enterprises and startups. Companies that are 23 people that get taxed individually can now afford getting taxed as corporations, so they can start hiring, start investing, and they will be able to deal with these investments from a tax standpoint in a much more favorable manner. How and when will we actually be seeing material benefits do you think . It will be through the course of next year, but it is a key point to be looking out for. It takes a while. People will say this now gets implemented. Lets see how long it takes to make a difference. But i think it will make a difference come april 15 when people begin to see they are benefiting, and for the , it begins now because they will look at it and say, hey, what is wrong with starting to invest at this point . Rishaad they are sitting on so much money and have not been investing. What would incentivize them now . They can bring back there additional funds from europe essentially taxfree. Taxed at a much lower rate in the United States previously, so that is an incentive. It is better to have that money in the United States, and that that are Investment Opportunities will be in the United States. What comes next is this 1. 5 billion infrastructure fund. Rishaad how do you afford that . Why not . That is privatepublic. You dont have to put a lot of public money into that. A lot of people interested in building a railroad. Rishaad one of the big stories this year is the coin. Dont touch it with a barge pole is your feeling. It could go to 100,000 or nothing. We dont know, do we . I used to be a currency trader. I dont know how to traded because i dont know how to value it. It is purely speculative. If im trading the dollar or japanese yen, i look at Interest Rates, money supply. I have benchmarks i can look at and make up a forecast. Case, there is nothing you can look at because there is nothing to see. It is totally transparent by definition, so how do you deal with that . I have no way of looking at it. Theaad people say it is Blockchain Technology behind it, but i will not dwell on that for the moment. Have a great 2018. If you are a bloomberg subscriber, check out tv. You can watch us live in catch up with previous interviews that we have had. We have had. It is 10 29 a. M. In hong kong. I am paul allen with first word headlines. Uber shareholders agree to sell a stake in a group led by softbank. Of deal involves a valuation 48 billion, and the investors 1. 5 billion dollars at a higher by you wish and of 69 billion, making softbank one of ubers largest shareholders. The British Government is withholding the publication of secret files on the creation of the European Union. The documents date from 1992 and be released on friday. However, almost 500 files on the Prime Ministers Office that year them at 114 are being held back and relate to european policy. They denied the delivery hiding sensitive material. Sons of the late King Abdullah have been released from detention after the crackdown on corruption. Have left of the Ritzcarlton Hotel in riyadh where those arrested have been held since early november. Several suspects have been able to buy their freedom by agreeing to pay to avoid trial. Beijing has issued a warning about heavy air pollution for schools and kindergartens. Local Authorities Say the air is expected to clear friday, but advised the elderly and those with breathing problems to stay indoors. President xi jinping has launched a crackdown on pollution msn it is one of the leading challenges facing china in 2018. Pollution, saying it is one of the leading challenges facing china in 2018. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. The last lunch break for traders in tokyo. Lets find out how the japanese market has been preforming on a day of tepid gains. Japanese shares closing out the session. 25 higher, the index headed for its best year since 2013. In jakarta, recordsetting moves continue, but stocks in sydney and singapore under pressure and singaporean a bonds on the decline while the dollar is looking study, investors positioning for next weeks fourthquarter gdp data do out of singapore. Here asnback is set asian currencies are led higher by the taiwanese dollar. Trading at multiyear highs along with other export currencies like the korean won and the thai baht. You can see the rise for the won , thai baht, and taiwanese dollar in this chart 1656. Given the rise in the korean won , south korean officials have come out to attempt to jawbone the currency lower. When it comes to the taiwanese dollar, this week the central bank steady governor said its appreciation is not as big as other currencies. But certainly something to take note of this year. Athaad lets take a look 2017 as it comes to a close and what the coming year will bring, especially the introduction of the recent republican tax cuts. Lets get the view of a former fed vice chair. She says the focus should be on the changes to business rates. Think it is mostly a middleclass tax cut. It is actually a corporate rate cut. That is a very important part of it. Weightedy heavily towards advantages for upper income people. The middle class will benefit. There are rate cuts and other benefits. Taxes, butay higher the middleclass tax cuts are temporary. They will go away according to this law. Of course they may not, but i think it is very heavily weighted towards business and upper income people. You anticipate my next question, who benefits the most plan . His the supporters of this plan feel it will benefit the economy broadly because it will stimulate growth. But who will benefit from this in your view . Corporations will benefit, and that is long overdue. We did need to get how Corporate Tax back in line with most of the rest of the world. I would rather have seen it done in the context of a bipartisan and revenueneutral bill, namely one that did not increase the deficit over the longterm, but gethat as it may, we did Corporate Tax reform and a rate cut to bring us in line with the rest of the world. Kinds of other businesses that are not corporations, passthrough businesses of various sorts, will benefit. That part is so complicated that one has to mention that this bill is welfare for accountants and lawyers. Employee online of experts to figure out what in the world is going on. Becauserms of stimulus, you said stimulative for the accounting and legal professions, fair enough, but will it be broadbased immunity of for the u. S. Economy as the white house and republicans believe . Modest boost for the economy in the short run. It is the long run i am worried about. We are increasing the deficit substantially. We did not need to do that now. We have an aging population that will cost more in health care and other benefits. Cutting ourd to be taxes to make it harder to meet the challenge of an aging population. I am afraid now that we are very close to full employment that it will be difficult to create more jobs. One hopes we can create better chops at higher wages, but there is not going to be a huge boost to employment. And from a long run point of view what worries me is that escalating the deficit and debt forces out other investments. We have to improve our infrastructure and the skills of the workforce, and it will be harder to do that if we are running a bigger deficit. I have spoken to economists lately about this who believe it will not just be mildly stimulative, but more broadly stimulative because of the fact of corporations having more money to invest. Consumers will have more money to spend. What is wrong with that argument . I dont think the cost of holding backeen our investment in the United States recently. A clear pathack of forward for the economy, the uncertainties of a lot of things, have then much more important. Some certainly may be investment affect, but this is a complicated bill. , i of the things it does think rightly, it is to a Territorial Base for the Corporate Tax, that his you are taxed in the country where you are in the profits. Of low tax lot countries around, so we may see increases in investments in some multinational corporations continuing to move out of the United States and to into low tax places. It will be very complicated and i dont see an obvious boost in u. S. Investment. Rishaad the former fed vice chair speaking to Bloomberg Economics policy editor kathleen hays. 2018 is expected to bring tightening and tax hikes in singapore has inflation rises gradually. Lets go there and speak with our chief Southeast Asia economics correspondent haslinda amin. We see these growth figures come in. One quarter they are down and down by a massive amount, and then not in the following one. You are right. It is an export dependent economy. If we look at the projection of the central bank, 3. 5 next year. Growth,casting 4 pretty strong for a mature economy like singapore. Anz said jobs lost will return , consumptiones will come back, and construction will pick up. Can the economy withstand the tightening . It could bests say a headwind for growth and the economy, but if you look at the consensus, pretty encouraging. Global growth is picking up, great news for singapore. Plus, the recovery is more broadbased, no longer confined to manufacturing or electronics. All of that points to more sustainable momentum. The central bank did open the door to tightening at the last policy meeting. The move may come as early as april. Rishaad what kind of tax hikes are we expecting in singapore . Probably not income taxed or property tax, because that would affect singapores competitiveness at a time when the u. S. Is trimming taxes. The goods and services tax may be race, maybe the Motor Vehicle levy. The government has a range of possibilities. The budget in february could have announcements given that the government has indicated that higher taxes are coming. They are inevitable. Businesses in singapore are bracing for higher costs in a country among the most expensive to live in. 30 rise in water prices, higher diesel prices given the carbon tax. For 2018 it is brace, brace. Rishaad thank you. Coming up, tiling up big anders, chinas ambitions the 100 billion smartphone maker. This is bloomberg. Rishaad you are back with Bloomberg Markets. I am Rishaad Salamat. Nomura saying it has had enough of its underdog status in the u. S. 10 years after failing to acquire Lehman Brothers north american operation. More remainsg no weak. He says he is open to hiring teams or chasing acquisitions. Citigroup being find a 12 its Brokerage Division harmed retail customers by displaying in Accurate Research ratings. In roup showed citigroup showed incorrect of equities8 covered by its research toartment from february 2011 december 2015. Apple under pressure over the latest iphone, saying it is aware of dissatisfaction over battery life and will release an update to improve powerpack health. Apple has apologized, but says there is a misunderstanding about the use of older batteries in iphones and would never intentionally shorten the life of any apple product. A 100s yet to produce billion smartphone brand. New Research Says it may not be the most obvious contender to be first. Our gadfly columnist joins us now. Taipei has a 100 billion smoke from company, and it is not xiaomi. What are you looking at and what are they looking at instead . I think it could be vivo or opo. Same company, the separat separate brands. Xiaomi has had a good year this year. They do deserve a lot of credit for that. It is quite possible that the Fourth Quarter into next year over themi will take in terms of sales. The key point is that in terms according to counterpoint research, xiaomi gets only two dollars per handset. Down to valuation, it comes down to what kind of earnings you are making. If you are selling your phones at a higher profit per unit, your company will be worth more. ,ishaad what about huawei xiaomi, what is the difference in terms of their reliance on an ecosystem and why that matters ultimately . Is an interesting company. It is also private. I wouldnt imagine it would ipo soon. They make a lot of money from , theetwork equipment side client devices, the smartphones, that is just one part of their business. They do get more money from their phone. They have a lot of research and development and make their own ships. The one thing that separates the others is that xiaomi admit they are not out to make a profit from handsets. They hope they can build an ecosystem like what apple is doing, so then you get a games,connected filter, services, content and all that. Vivo and oppo so products and mark them up and make a profit from the device they sell, so a different approach. Rishaad what are you looking at 42018 . What will be for 2018 . What will be the big story . There is this crypto currency called bitcoin. I dont know if you have heard of it. Rishaad i am flummoxed. Seriously, where do we go from here . Arent we all. The key with bitcoin is if you talk to someone and ask them and do you know where bitcoin is going to go and they give you a confident answer, you know they are lying. Nobody really knows why it should go up, down, left, right. A lot of it is guesses and so forth. Lets come back to xiaomi. Ipo ine looking at an 2018, maybe 2019. It will be interesting to see what happens in Greater China and the asia area. I would recommend people keep an eye on xiaomi. Whether that translates to profits, i think we should definitely keep an eye on it. Rishaad have a great 2018. Aheadnvestors are looking to what is next, but jack ma is focusing on the next eight years. The alibaba founder saying there is a crucial error of innovation era of innovation ahead. It will be much better because of the internet. Saidis our vision, which i is we are making Small Business and young people benefit from that. I think 80 years is enough to improve globally instead of killing globalization. When trade stops come or stops. What is the u. S. Strategy right now . We want to help small and mediumsize companies. This is what we think. We dont want to go through the ,ocal company, amazon, ebay nice, interesting Ecommerce Companies all over the u. S. You dont want to take on amazon . No. Hollywood . Ut you have been patient there. What is your strategy . Entertainment ali for 10 years. We have seven years to go. To buy aimportant Movie Company or by this and buy that. You you buy all the stuff, have to learn from them. You have to partner with them. I think a lot of things china entertainment can learn from the hollywood. We should partner with them. We should not think it is good, lets buy it. The comingd about winter in 2007 when you listed alibaba. Com, and sure enough the winter came quickly with the collapse of Lehman Brothers and the collateral damage. I was watching your progress through the tech bubble and that bursting them a so you had t hese challenges that wiped familiar names off the board. How we facing a similar tech bubble now . Are there any similarities . No, not that much. I think the challenge at that time, a lot of people to not understand how powerful internet is, how to do internet and whether internet can sustain, so people just jumped in and started to do it. I found a lot of people had crazy ideas them of the did not know how to operate and does not know how to make capital. But today Everybody Knows internet is powerful and will change human history, and also the infrastructure of the internet, the infrastructure and technology, is much better than 1015 years ago. Greedy, ifnot that you are not that stupid and crazy, it is easy to survive today. Mahaad alibaba founder jack speaking to our own correspondent stephen engle. To come, including a look back at 2017, a bumper year for equities investors come in the asian market as a whole, the msci asiapacific market up 28 or thereabouts. Can it continue . This is bloomberg. Upside tokyo to the. 25 for the nikkei 225. We have had records, 71 record highs for the Dow Jones Industrials this year. , it ise is such a thing days the dow 3. 7 has hit a record high. The nikkei, not so much. 24 so far this year. Sydney has been an underperformer, down. 4 , meaning this index is up a paltry 16 tiered that would be a good year 16 . A good yeare normally. Singapore straight times index made the best of it, but somehow off a little bit. The Straits Times index up 27 this year, flat on this particular friday anyway. Lets have a look at whats going on closer to hong kong. Moving 35 up from that of. 4 , 25 points shy psychologically important 30,000 level. Thisndex even despite stellar 35 gain so far this year looking cheap. Price to earnings ratio just hy of 14, paling against other indices. It also tells us that some of those very richly valued stocks may not be the ones which will drive it next year. ,he likes of tencent responsible for huge gains on the hang seng index, having multiples of 50 in terms of price to earnings ratio, so could we see sector rotation in 2018 . Question we will be asking our next guest from ubs Wealth Management and his outlook for the year to come. Stay tuned for that. We will look at foreignexchange markets. Where do you put your money in the year ahead . This is bloomberg. Rishaad 11 00 in hong kong. Im Rishaad Salamat. The middle of the trading day. The last session of what has been a remarkable year. This is Bloomberg Markets. The last trading day of 201736 the first crisis rebound since 2009. Great highs. Dramatic declines. Debating new regulations in the closure of some exchanges. Staving off insolvency. Thats next hour. We have something for the bulls as well as the bears. Lets get our first word newswise. Paul allen is in sydney for us. Paul . Paul thanks, rish. The british goved is holding documents dated from 1992 and they were due to be released later on friday under the 25year rule. However of almost 500 files from the Prime Ministers Office that year, 114 are being held back and a dozen of them relate to european policy. They deny deliberately hiding sense ma terrel. Material. U. S. Spy satellites have seen chinese ships transfering oil to north korean vessels at sea. President tweeted caught redhanded. Very disappointed that china is allowing oil to go into north korea. Taking 50 widebodied jets to tap surging demand of the airlines to the asian pacific. Wide bodies offer the best returns. There are 89 planes, china, airasia and a. M. A. Among its customers. Agreed to sell sizable stakes. 48 billion for uber. They will pour another billion and a quarter into the business at a higher evaluation of 69 billion. The deal makes softbank one of ubers highest shareholders. Rishaad breaking news this week. Coming out of china. It is concerning a private company. They are very bullish. Sales growth is likely to be about 15 through the course of this year. Thats what we have at the moment. Looking at 600 billion yuan in sales for 2017. This is one of the telecoms giants. It is a Networking Company as well which is where it garn ers most of its revenue. Talking about smart phone shipments as well. Reckonning 2017 will have seen 153 Million Units sold there as well. This is just coming across at the moment. Expecting 600 billion yuan in sales. Just shy of the 95 billion level. Also, some movement in the Technology Space with regards to that. Lets get to the view of what is going on marketwise. The lay of the land this quiet friday, asian currencies riding the dollar weakness commodities maintaining gains until the end of the year. New york crude gaining. 6 . Next year there will be a tug of war between opec and u. S. Shell. Highlighting real quick what else is happening in the currency space. The dollar continuing to gain ground at a fouryear high. We are seeing chinese equity gains softening somewhat. Slipping after thursdays surge. In hong kong, we are seeing the ally continue for a fifth day. Tencent is in the news under pressure china may crack down on gains. The gains have been central to he hang sengs rise. T added about 36 in 2017, outperforming almost every month this year. In hong kong, along with japan, are asias top stock markets generating a combined 2. 5 trillion. A last look of what is going on in the bond spaeth space. India has toppled china. Indias decision to raise the borrowing target set the 10year yield to a high on hursday. Well see the sf the indian bond route will continue. Traders say the worst year has come through. Rish . Rishaad global stocks on track for a 14th straight monthly gain. This is the first time on record we have gone through a calendar year without a single decline. Head est, Adrian Zuercher of u. B. S. Chief Investment Office management. It has been amazing. To say it is going to be a roik it cant ride be smooth sailing all the way. Tell me about the factors in your landscape looking ahead. It has been excellent. Very market is up. A goldilocks environment. Global growth. The most synchronized pickup we have seen globally. We take a lot of this momentum into 2018. Equities versus bonds going into 2018. Looking at where inflation is going. Slightly higher. Interest rates basically going up. It will be a drag for the bond side. That could translate into higher volatility on the equity markets. Rishaad which is something we havent seen that much of. It hasnt really been a year where you could say volatility. What is it all about . Absolutely. Volatility is chief. The vicks vix is so low. If the u. S. President is tweeting that the stock market is poised for another excellent year, that is usually when the alarm bells going on a bit that maybe things are actually happening in a different way, volatility will start to pick up and maybe it is one of the unknowns that basically will drive the market and it also could be high inflation, more exploration of fed hikes or Interest Rate hikes more globally which could spoil this part of the market. Rishaad depends on how many times Donald Rumsfeld gets on that one. We go into 2018 looking as though well see a couple of rate hikes. Three in the u. S. I think one thing i was looking t, the output gaps are significantly different to what we had at the beginning of this year. Thats something youre looking at as perhaps where inflation may come from ultimately. Tell me about that. We are still quite dovish with our forecast on the fed hike. We have only seen two fed hikes. We actually think the fed will be on hold until june. The new chairman will come in nd see how things are going. It will gradually move higher. Looking at the outputs, the key that we are basically forecasting and think inflation will go up and leads to high volatility on the equity side and the fixed income side. Gaps have closed globally and will move into a surplus. Naturally should lead to higher Wage Inflations. Wage growth should pick up. Something positive initially. It could mean higher consumption. The Central Banks more on alert. Maybe more hawkish than what the market is expecting. Rishaad people have been saying for the last four to five months people are too complacent about inflation. Point is, when do we start worrying about it . The complacency doesnt seem to exist. There sunt seem to be inflation. I think one of the key con none drums that we have is it is flat. Rishaad it doesnt work anyway, anymore. It is definitely one of the key aspects. There are other inflations like asset Price Inflation where probably the fed is also watching. If the equity market is continuing to move up, we still expect high Earnings Growth but it is coming at an increase in evaluation then the Central Banks will become more concerned. It will definitely mean higher Interest Rates and more volatility for the equity markets. Rishaad who are likely to be the winners and losers in the next 12 months . Im talking about equity markets. Great performances. The nikkei here in hong kong. The hang seng as well. It has been a stellar year all around. Tell us about that. Our our key focus at the moment is asia. Were looking into if we look at where we stand in the macro cycle, asia has done very well. In mid cycle, late cycle stage of the economic cycle. If you look 18 months, asia is and europe are the best performing regions. If you only look six months is the recession, asia best performing region. You probably see a bit more rotation out of the growth stock into value stocks. A bit more shift to is the best stocks that basically have been neglected. Macro psychwise probably still in the mid cycle. Rishaad the equity cycle . The equity cycle after nine years of the boom market in the u. S. , it basically means you want to look at laggards and since this synchronized pickup means higher Revenue Growth and better earnings, it is beneficial for the stocks that have basically shown quite little Earnings Growth and therefore we think we will get this rotation into the laggard stocks. In asia, we like the financials. In china, we like the banks. We still Like Technology but it is more a secular trend. Rishaad part of that move from growth to value that you still like. I you have to go more underweight on it. Exactly. Rishaad the market, rich with value stocks. One of the key underperformers this year has been china. Especially large cap china. Absolutely. Rishaad does it rebound . China, the index, the offshore index is up 50 . We still stick to our but we definitely have seen a lot of by the internet stocks in the ux and hong kong as we think actually will be much more broader rally going forward. China is one of our key markets. Overweight. We think it can do well and will produce double digit Earnings Growth. We think industrial stocks look interesting. Some of the material stocks have seen this destocking of capacity and could start to rally and show better Earnings Growth and i think that is exactly the sweet spot at the moment where china can actually do quite well. Rishaad adrian. More from Adrian Zuercher in a moment. Well try to figure out the feds plan for the year ahead. Forgot stocks, bonds or currencies. Look at alternatives to alternatives. Asias continued liking for fine wine. This is bloomberg. I consider it an important priority to make sure that inflation doesnt chronically undershoot our 2 objective and i want to see it move up to 2 . If the trajectory of Interest Rates next year that is really of importance. I think there is some uncertainty about that. Will it turn out to be three . I think time will tell. I think we should be removing accommodation in a patient way. Hikes the same as the fed not priced in the market just yet. We maintain our cautious outlook for the year. It could trigger a lot of inflows into the u. S. We also expect three further hikes next year. Now if the pack bill leads to more capital spending, we just really need that incentive. If we do get more capex growth in the u. S. , then in that environment, the fed can be more and with with regards to their rate hikes. Changes in tax policy will likely provide some lifts for Economic Activity in coming years. The magnitude and timing of the Macro Economic effects of any tax package remain uncertain. Clearly has conomy accelerating into the later part of the year. A long way to go. At some point, the fed needs ammunition for a slowdown. The 10year at 235 threatens the economy going forward. It should stop soon or the economy will slow down. Im not going to change that now. Rishaad the new year coming up but it is likely not to really endanger fed policy. The debate which surrounds it. Still with us is Adrian Zuercher. With u. B. S. Wealth management. The fed. Three rate hikes have been penciled in for the following 12 months. There sunt seem to be any reason why they are doing it. The bond market that currently. Is it what mike metcalf said . Were just waiting for them to be able to have enough bullets in the chamber for the next crisis . You could argue like this. We definitely see that the has improved. As a natural reaction, you want to increase Interest Rates. We have to see the equity rket the bond market, actually makes sense for them to gain a little bit of a buffer and build up some cushion if get into the next crisis that we can lower Interest Rates. Were a bit more on the dovish side. We think the fed will only hike twice. Of 2018 we irst dont expect any Interest Rate hikes. We also think that inflation will be volatile. There is still a disagreement among the fomc members on where Interest Rates should be and that basically will keep them more in check at the beginning of 2018. Rishaad adrian, tell me something. We have a Tax Reform Program where we signed off the beginning of next month. That is an interesting cut to corporate america. It definitely helps corporate america. It will help some segments on the private side. The Consumer Base could start to benefit. But some actually some groups are facing higher taxes and for us it is unclear how it will play out in terms of consumption. We think it will be more diluted. There will be more money spent. I think rishaad it does if you have a significant dollar weakness. Absolutely. We still see the u. S. Dollar weaker. I know that a lot of markets see the u. S. Dollar a bit stronger because of the tax cuts that are coming through and that could mean higher Interest Rates and maybe some repatriation of cash that is held outside of the u. S. Corporates. We will disagree with that. I know there are 2. 6 trillion u. S. Dollar holds outside. 75 the dollar. The other 25 been used as working capital in this market. I think the repatriation is not an argument for a stronger u. S. Dollar. We do see that the e. C. B. Is building up their end of quantitative easing. The bank of japan is running significantly below their target of the 80 trillion per year of asset buying bonds. It is mattering much more for the currency side. We see the u. S. Dollar continue to weaken but less fast than in 2017. Rishaad the Corporate Tax rate and how it changes will affect earnings. What about your forecast then for the s p 500. Is it all priced in or do you think we need more evidence before things manifest themselves . Evaluations for the u. S. Equity market. Rishaad they are a little bit historically speaking. Look, we see the impact probably around 9 of e. P. S. Growth. Additional banks, the tax cuts are coming through. We see Earnings Growth for 2018 for the u. S. Market in the mid teens to around 15 , 16 . That should allow the u. S. Equity markets to move up around 10 . We think some devaluation is happening but it is definitely basically the start for the equity markets looking at where Earnings Growth is in the u. S. , in europe and also in asia. Rishaad adrian, very, very quickly, in 20 seconds. Your one prediction for 2018. Very briefly. Equity markets is the place to be. Bond markets definitely will be more challenged and have a look at asia in particular. China. China will continue to surprise on the upside. Rishaad thank you. Have a great 2018. If you are an index subscriber, you can use our interactive function, tvgo and you can send messages during our program. Do check it out at tvgo. Youre watching bloomberg. Bloomberg. Rishaad im Rishaad Salamat. Lets have a look at the business headlines. A twoyear wait. Inally paying off. On course for its longest winning streak in a generation. The stake. Disclose it is on par with the 35 return to have s p 500 over the same time period. Hong kong listed splendid technologies is enjoying gains, a surge more than 20 this ear. More than 130 million shares changed hands. The most ever. They have not made a Stock Exchange filing. No one has been around to comment on this change of fort chuns. Up by 9 in just three days. Thats year to date, i should say. Most of that coming more of that coming in just the last three days. Imax rival. The number one big screen player on the mainland. It is going to do that by expanding a Business Model that let theater operators keep a bigger share of ticket sales. They said having government mandates becoming the largest screen brand in china. It is confident that will happen by 2019. The chairman says the priority is growth. Not profitability. Checking on the trading day. Asian stocks mix today. Not mixed in the year. They really headed in one direction. Sydney being the laggard so far. The gains 18 , no, 6 . Thats all for the year. There we go. Hong kong. 35 up. This is bloomberg. Its 11 29 a. M. In hong kong. Im paul allen with the first news. Apple is under pressure again over the performance of the latest iphone. Says its aware of public dissatisfaction over battery life and will release an ios update to improve the visibility health. Ower apple apologizes but says theres a misunderstanding about older batteries in new iphones. They say they would never intentionally shorten the life of any apple product. The italian president sergio doorsella has opened the to elections and the possibility in further instability. Italy is the third biggest economy but its recovery is of its peers. Opinion polls put the fivestarlishment Movement Ahead of the Democratic Party. Of saudi arabias late King Abdullah are said to have been released from detention in the crackdown on corruption. Theprinces are both at ritzcarlton in riat, where those arrested in the investigation have been held since early september. Several have been able to buy to payreedom by agreeing to avoid trial. Beijing has issued a warning about heavy air pollution with schools and kindergartens told to reduce outdoor activities. Isal Authorities Say the air expected to clear friday but advise the elderly and those to stayathing problems indoors. President xi has launched a crackdown on pollution, saying one of the leading challenges facing china in 2018. Indian bond yields spiked after the government said it aims to ofrow to lessen the impact slowing revenues. 10year yield jumped by the most since february. The government will borrow 15 billion in the three months through to march, more than twice the amount for the same period announced in september. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im paul allen. This is bloomberg. Just back from lunch, having there. At whats going on stocks are advancing. A little mixed. Really, its quite something, isnt it . Last trading day of the year. We were this time last year to where we are now. Yes. As you pointed out, theres something to consider, when you consider the gains for 2017 across the region. Highs for various benchmarks. We have stocks in jakarta recordsettingr gains. And we could see the hang seng also maintaining its weekly gains, the best in some months. So we have, of course, this. Many traders perhaps are out for the holidays here. A weaker dollar of asianthe tide currencies. Hong kong dollar, softer this friday. We are seeing the overnight rates rising again, climbing by the most since october. And check out whats going on with the rupee. We do have trading starting for currency. Just above that 64. The rupee headed for the first in seven years. Helpednt oil, that has lift the rupees fortunes. In indian a surge bond yields. For the worstet year since 2009. Going back to this oil story, we theave oil on the rise in second half of the year, after lagging in the first half of the year. So both have been picking up. But it remains to be seen whether this momentum can be sustained into 2018. The second best performing after,y group in asia, of course, textures. Lagging. Koas, they are tellcos, it has been a difficult year. Stock has surged 162 in the past seven sessions. The next boost could come ar reliance agreeing to buy arcoms wireless assets. Thank you. Now, this is the story, one of of 2017. Big stories its bitcoin. What a wild ride soaring,y this month, dizzying declines. New regulations and even the exchanges. Across asset markets. Our guru is here with me now. Is this what one might call a cryptocraze . Its a mania, isnt it . How big is it . Well, korea is one of the bellwethers for the because theres been crazy demand. Fifthk something about a of Global Transactions are conducted. So you get a sense of the relative size. Given that koreas economy is only the fourth largest in asia, its pretty huge. So its been kind of a growing point of concern for the korean government. In have the Prime Minister korea warning a little while ago about the corrupting nations youth. Been on their radar for a while. So i think the news that we saw day, not necessarily surprising, because i think they have to move on it at some point. What has the government been saying about a clampdown . How do you do that . Because you can just trade it elsewhere possibly. A little bit in china earlier this year when they announced a clampdown on there. Es all the trading just moved to other places, like korea and japan. Not actuallye specifically saying theyre going to shut down exchanges yet. More of a stern shot across the bow. Theyre taking about concrete moves, including forcing real names for transactions for cryptocurrencies. Theyre also talking about preventing banks from offering exchanges. Ounts for then also kind of this strengthening the wording about the duty for banks to watch out sort of financial fraud or anything like that. Theyrebasically saying keeping a much closer eye, saying this is on the radar, because i think some of the wording of their statements is pretty strong, calling it overheated speculation. So the wording is quite strong here. I think its really very strongly worded statement. I think last time we had this information, there were about 250 cryptocurrencies. Now many more than that. Are our colleagues here one of our colleagues argues bitcoin craze people begin to notice the market value of other cryptocurrencies. So in a way, you get dilution. See thisher observers playing out . Its interesting. When you talk to people in the expectation is its actually a good thing to have more diversity in the ecosystem. To have more kinds of currencies, because it encourages more people to get investing into cryptocurrencies. Sort of a Virtual Exchange between them all as well. Thats the thing. That would be really interesting. Thinking about taking cryptocurrencies and converting them into, you know, real currencies. Legacy currencies. Like the u. S. Dollar or other currencies. Is e question how much is it worth, in a bitcoin, or a really hard to pin that down. So do carry on. What are other observers saying about this . I think the key point in about that column is the idea, as long as the pie keeps okay if then its bitcoins market share maybe isnt as high. At thestory points out, beginning of the year, bitcoins somethingre was like now its Something Like 40 and seems like its dropping, because money is going to those other currencies. As long as people are buying currencies,other then its okay for bitcoin. But if you start to see people from bitcoin for instance, if you buy bitcoin cash instead of bitcoin, then thats where you might see bitcoin get into trouble. Its when we start to see places allowing you to transact in those currencies is maybe when people will start to make decisions on, do i buy bitcoin and Something Else or just Something Else because that has more utility . Of okay. Thank you very much. Got a breaking story. Chinas sevenday rate, jumped seene highest level weve since january of 2014. Just days actually after we saw the highest level its been since march. Obviously some attempts here just to drain a bit of liquidity after we sawystem, things being withdrawn from the market as well, open market earlier on. A bit lets take a look at gold. Facing plenty of head winds this equities in bitcoin among the assets. Weve got a new Bloomberg Survey saying investors evenly split on where gold will be next year. Mark in singapore. How is it all looking . You look at the survey that bloomberg has just run, 38 market professionals, as say, the range is extremely wide between the highest and the year. Suggestion for next 700. So seems to be anybodys guess where gold is going to go next year. Interestingly, the median among all those forecasts is pretty spot rate ise the right now. So maybe thats implying that gold is going to have a really in 2018 and end up pretty much unchanged. So theres something for everybody in there. Okay. Well, the question then has to mainhat are the geopolitical factors at play here, and is it surprising that has not been having the same sort of impact on gold as well as it used to . Yes, i think youre right. North korea obviously is right the list off geopolitics. But what people have got used to launches and that not having much of an impact on the market. But of course if that was to turn into the risk of a genuine conflict with north korea, the United States, for example, got close or even warned that they were about to start a military attack on north korea. The whole thing changes. That most likely would be a very good thing for gold. A would be the place where lot of people run to. But the streaming would just shadow boxingthe between the u. S. And north korea and gold isnt going to get much from that. T another risk could be the italian elections, which are going to happen in march. A slight chance that the Italian Government will become a new government. Antie. U. N government. That could pose the risk that have a vote,o Something Like the u. K. Did, to leave the European Union. Thats a relatively small risk the moment but it is something which people will be watching. So march could be a time when comes into foask. If you look into focus. Is whatof those really people expect as the main forecast. Geopolitics is not a major gold. For mark joining us from singapore. Weve got more to come on all this, on bloomberg, looking at, course, the markets once again, as we just wrap up at 2017. This is Bloomberg Markets. Confirmed hes considering plans private equity fund, this at a time when crossborder asia offer,theast quote, exciting opportunities. Isi think the biggest risk on the geopolitical front. This year of rising Interest Rates, i think, will be okay. Banks havet central been very good. Risingaging the pace of Interest Rates and so on. Thate geopolitical shocks worry me. During the its pretty much it has a foothold in soon to be 10. Given the growth projection for the region, ranging between 5 and 7 , how would that impact industry . G well, its interesting, because at the moment, youre countries,some of lonerowth ahead growth. Its quite un unusual. Potentially a be lag effect. If i read that correct, 2018 a very good year for banks. Where in particular . Bets . Are you placing your which countries in particular . Well, i am always bullish on indonesia. In terms of because i think is there. Ial growth i think the key to indonesia is the infrastructure improves you canantly, i think get a significant uplift. It may not come in 2018 but two, three years time. I think malaysia, singapore will continue to be very, very stable. And were excited about the newippines, which is our market, as well as vietnam. 30 ofalked about how the jobs in banking will disappear in the next five years. Estimate . R own i think it will probably be more. How are you preparing for eventuality . Two things. One, you in terms of productivity, your competitiveness, i think youve got to go for it. At the same time, you also need to acknowledge that there are human issues involved. Sort of saying, okay, maybe banking doesnt require so many people. It mean its only limited to banking . How do you employ this resources . How do we help retrain them . These are things that i think people need to do. Cant just go forward and think about your bottom line and forget about the human cost. Tochairman razak speaking our correspondent for Southeast Asia. Im just going to get you some the business headlines. Citigroup being fined almost 12 million to resolve claims that a brokerage unit harmed retail displayingy inaccurate headlines. Citigroup being research rating. They are saying they showed ratings such as buy instead of sell to customers and supervisors on some 38 of the equities covered by its research department, from february 2011 2015. Ember nomura said it had enough of its status in the u. S. , almost 10 years after failing to acquire Lehman Brothers. The chief executive says nomura remains weak there. Open to hiring entire teams of investment newers for chasing acquisitions. Quick check in on indias markets. For thethe position rupee. 98. Upees, for 1. There we have a move to the benchmarks. Oth the mumbai is indias richest location. Of histo the rescue billionaire brother. His reliance has agreed to buy mobile assets from embattled Reliance Communications, after emerging as the highest bidder. Gush has been tracking this. How important is this deal for arcon and how come his brother the coming to the rescue when they were not getting on well at all, to put it mildly, for years . Let me answer your first question. For arcon. Important creators, including publication firms, have taken them to the Bankruptcy Court demanding payment of dues. Perspective, into arcon has about 7 billion of debt. Was the transaction that announced yesterday does not reveal the amount of Money Exchange thats going to take place. But what they said earlier this week was they were expecting the sale ofion from mobile phone towers and other assets. Ofts almost more than half their debt. So it is very important for them. This wasrestingly, done on the First Anniversary of father. The announcement came yesterday. So it is rather interesting, the entry of him into the mobile phone industry. Expedited the downfall of arcon and across theon industry. Now, bigger brother swoops in assets. S up most of the having said that, last year, he announced a deal with his which theyer, in were going to share assets. And which he said it was almost a virtual merger. So they have been working together for a while. Nothis was kind of, well, totally surprising. Have a great 2018. From mumbai. Great expectations. That. About hong kong, still have a taste for fine wine. Why. Tell you this is bloomberg. Bloomberg markets having a look at wine now. And they say a good one ages said and the same might be of an investment in a good vintage. Auction,about an chairman kaplan said wine is a place to put your money, as no matter the state of the economy, people would always to drink it. Hottestbecome the segment of the market. One is scarcity. It. Not enough of theres 100 cases, 500 cases. Very small productions. Is just really blossomed out here in hong kong particularly. Theres more knowledge about the greatest burgundies. Theyre definitely buying more more of them, which is adding pressure to pricing. Burgundy has been on fire. Some wines double in the last year or two in value. Russo, producers like theyre on a tear right now. Some wines overall, i think theyre up 30 , 40 this year alone. I think, has a tendency to do the small production to make the biggest, runs. Mmediate bordeaux is very consistent and tortoise that wins the race, slowly but surely accumulates in value. A lot more of it. So its more of a steady increase over time. Ive seen others have theceably taken jumps over past six months, moving up again. France, of course, this year in the spring in bordeaux. Affecting see that this batch, 2017, down the road when its finally bottled . Well, frost is no wine makers friend. The production levels will be done. I mean, burgundy has been hit not only by frost but by hail in three of the last four years, which has really hurt them in the south. Fact, inn 2016, in burgundy, theres only going to producers have to pull things together because they were so devastated by hail. So, you know, obviously when theres frost, hail, and mother doesnt cooperate, it means less bottles. That usually means the price goes up. At some of theg charts. You could see a short runup. 201011 peak in around and it dipped off a bit for a couple of years. Perhaps maybe im reading too but in china, there was an anticorruption crackdown. Was that a big reason why the come back down . But they are starting to come up again. Well, there was a huge bordeaux boom in 201011 and the prices of bordeaux, they tripled and quadrupled over that run. I think that anticorruption probe really kind of stopped a buying. He bordeaux it kind of fell off a cliff. Then the rest of the market came up. Even though bordeaux crashed a little bit, thats when burgundy started ascending. Italy, Everything Else is as expensive as its ever been. Coming back. Weve got actually steve with us here right now to discuss wine. Didnt just come back from the bar. No, you didnt. Its a bit early. Forget, its up, 6 00 sometime. World. Where in the our director is upset because you didnt discuss the merits of wine. No. I even asked about new world wines, chile, has that come to auction yet . No. What about the tasting, tips for tasting, what do you buy . We tasted a little bit. I wanted to ask, direct from house,s largest auction you know, what are three tips for investment in wine and also three investments for tasting . Investing in wine, pretty straightforward. It would be the same for any kind of asset class. Know the top producers. Educate yourself. Is interesting. Buy more than just one lot or one lot can be full cases, cases, very important in the original vintage. And also buy in quantity. Quantity, because you end up wanting to drink it too. Originall case, intact case will have more value down the road. The last one is storage obviously. Youve got to store it well. Heat in hong kong, it can destroy the wine if you keep it goyour apartment while you home for summer, right . So store it well. Three tips for enjoying wine, smell it. Very important. Stick your nose in the glass and roll. Really stick your nose in the glass. And okay. And also the color, thats really important. But on top of that, how smelling of the cork . He said its not important at all. Because hey, what do you do with this . You feel like an idiot. Says, you know, maybe some wine snob hundreds of years ago hed it was a good idea but says he sees no value in smelling the cork. He says cork smells like cork. And there are stories of it being given from other bottles. Thats another issue as well. The counterfeit bottles, how do you detect that . Buy from the source. Thats it for, well, this edition for 2017 for Bloomberg Markets asia. Editiont a special coming up next. Have a great 2018 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. Its noon in hong kong. Heres an update of your top stories. Stocks arecific missed on the final day of trading. A big year, after the best year postcrisis rebound of 2009. Backed by world beating growth approach by major Central Banks in withdrawing stimulus. Apple has apologized after about the latest iphones. I says it is aware of public dissatisfaction over battery life and will release an ios update to improve the visibility power pack. Apple says it would never intentionally shorten the life of any apple product. Uber shareholders have agreed t
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