Transcripts For BLOOMBERG Bloomberg Markets Asia 20180103

Rishaad going to bring you up some history. Another record for the s p 500 recordht good 2017s year does not necessarily mean that 2018 is going to be a bad one. Lets bring up for two to three. Ityou have a great year, means quite often that you will get not a good year the following. Thats the synopsis we have going back to 1938 todays game, not tomorrow spain. The s p 500 on track for a 20 increase last year. It was matched 20 times in the last 80 years. Higherck market was three quarters of the time averaging 89 return here in averaging a 9 return. Haidi what is incredible is that we are not seeing a rotation. Were seeing a continuation of the tremendous tech rally. Here in asia, we are picking up on that positive energy. Not just for the s p, but also records for the nasdaq. Depressing 7000 points. Tokyo still off until thursday. Asia markets feeling this positive start to the year. Japanese investors can enjoy their holiday a little bit longer. We do have docs continuing to gain at record highs across the board. Be. The tech heavy cost extending gains for a fourth straight day. The taiwanese dollar is asias test currency so far. Levels, there is the consideration that investors might begin to assess whether or not the strong currency gains will undermine stocks in the region. We are seeing a bit of weakness coming through for the korean won. Were seeing a little bit of stock. There read joining the party after the stumble we saw on tuesday. Singapore stocks are seeing gains for the fifth straight day. Samsung eight getting the biggest boost. The tech rally we are seeing continue into asia. Leading the gains in that sector when it comes to the korean session. Posco jumping to a september 2014 high after golden raised to buy. Theyre looking to extend energy and material industries. And bhb in sydney, at its high. Money journal has reported that are. Nd balle a good play and 2017, but metals are bringing some alarm bells. The 14 day relative strike index for the Industrial Metals has stayed above 70. A level signaling overbought territory. Metals were mixed. Sinceggest annual day 2009. Copper showing signs of stalling. This rise that we have seen for metals, that may be under threat. Rishaad going to get you to u. S. Regulators. Lets get that story with first word news. Alibabas and merger. Offered 18 per share, valuing any deal at 1. 2 billion. Aboute prompted warnings National Security. The two Companies Issued a statement saying they will now Work Together in remittance and digital payments. Bitcoin bound back from new years. Saysall street journal that has spread across several of the funds firms. Bitcoin is one of its first investments. Befores started buying december. It is not clear if it has sold yet. Gold is starting the new year on the front that. Advancing for an eighth session to head for the longest stretch of gains since mid2011. Even as u. S. Stocks surged to records. Days with a 17. 34. The asset may be set for decline. Bloomberg has been told that europe Trading Volume fell. Traders are bracing for one of the most big regulatory shifts in history. Any transaction completed on tuesday would have to be settled after the directive comes into effect. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. There is continued unrest in iran. Russian calling for emergency meetings of the Security Council and the Human Rights Council of the Trump Administration says it may him pose new sanctions on tehran. What is going on exactly, where are we with this . It looks like the Trump Administration is ramping up threats to reimpose sanctions. They have about 10 days and they have to renew or decide whether or not to give a waiver as part of the nuclear deal. That is the deadline coming up. The white house says the options are open. Trumps involvement in weighing the benefits of that are questionable. There are a lot of people in iran who are not happy with the way trump has treated the country. Whether that is helping or hurting the situation is unclear. Rishaad lets talk about iran. Is, could sanctions really be something on the table to how far would that get Donald Trumps goal of renegotiating the nuclear deal . Certainly hoping to take advantage of the latest unrest to push his role of getting rid of this deal or renegotiating it. Europe has not wanted to do that. Congress has not done much of anything either. It is unclear whether he is going to do. It provides them a good excuse to reimpose sanctions. Its opportune timing for him in a way. Had donald we just trump tweeting in the last 20 minutes. The north Korean Leader just stated the Nuclear Button is on his desk at alltime heard will someone his please inform him tell him i have a Nuclear Button. My button works. It looks like we are starting off the year perhaps not with sophisticated diplomatic exchanges, but personal insults again. This is trump being trump once again. My Nuclear Button is bigger than yours. Said, look ieech want to have talks with seoul but i am not giving up my weapons. This will be the intention going up forward. The question will become how the u. S. Response. We saw overnight, the first sanctionsrump saying and military pressure is working to get him to the table, but on the other end, deeply skeptical about this. Never recognize north korea as a nuclear power. He idea from the u. S. Is that we are still not backing down at all. On our threats. Butcan talk if you want, whether that will lead to a solution remains very unclear. Haidi dan, thank you so much. One of the great themes of last year the tensions in the gran peninsula. Continuing to be a major theme as we go into the new year. Take a look at the impact on investors and brokers right here in asia. Rishaad should we act more of the same this year . His outlook is next. This is bloomberg. Rishaad this is Bloomberg Markets. Haidi a quick check at the business flash headlines. A sixmonth extension at a golden copper mine. We talked to the transfer of majority ownership. Untilberg will operate june. Freeport will give up its Majority Holding it in return for a deal to upgrade the project through 2041. Rishaad no sign of a pause. The nymex. On the weakness of the dollar help to produce alternative investments. December, it caps a fourth straight annual decline. That is the longest streak since 2000. Haidi gst alliance has agreed to buy a coal mine to feed the steel operations there. Agreementd a binding parent. He glencore gst says it key element it plans to expand production at still works in south australia. Japanese markets remained closed through thursday. Making some cautious gains after this rally we saw for u. S. Tech companies. We saw some up to fresh record highs. Us is sean darby. I put up a chart at the beginning of all this. It showed if you had a good plus, you see the following year a gain of 9 . Why are you bearish . We feel the Global Economy is doing really well. A lot of other markets are starting off from a very low basis. Evaluations are a lot more attractive. The earning cycles are much more appealing. You do get some of the benefits from the tax cuts going through for the s p 500 and also a lot of international flavor. But europe is going gang busters at the moment are at. Is running reallys strongly. It is a bit like a horse race. The u. S. Is lagging just a little bit. Rishaad just to clarify it is 20 times in the last 80 years. To be fair its not a market to be sure to of. Too many people were ultra bearish on the u. S. Over the last 18 months. Some of the work we did over the last couple of weeks to show that if the isn manufacturing returns a positive, we have also been showing a gain with the yield curve flattening. That is not a sign that the s p is going to be weaker for the next 12 or so months. A lot of the backdrop for the u. S. Is similar to the rest of the world your real Interest Rates on everywhere. We see this sector rotation taking place until the end of 2017. We did not see that yesterday in the session. Overall, it does seem late stage. One days trading to save things that are going on. It seems classic. It does. At the end of last year, we had the revenge of the underperformers. Some of the sectors rallied on the fact that they lagged so much. Not because of the earning cycle but because they were not in the winners group. I still feel that we have got a breadth. Re when you look at parts of europe on the banking stocks and also on the em. There are a lot more upside than the s p at the moment. You see particular opportunity what it comes to this rally continuing in japan . Yes. I think the paradox is japan just about ticks all the investment boxes. It has still got at least 50 in stocks trading around 1. 25 times book. This is still a very strong earnings drop here in. Lastoj is going to be the central to do any tightening. You also had record profits in 2017 in japan. Means the global japan comes out the best on that ettrick. The besting to find winner of a thai population of indices at the moment. Haidi it is hard not to feel a bit of vertigo. U. S. Stocks at record highs. Asian stocks at record highs. What could potentially derail this story . Two risks. E we could get back inflation, the very thing that is for years ago the banks wanted. High wage growth and higher push pressures coming into the Global Economy. Certainly there is evidence even in japan that wages have been growing. That is evident in germany. Risk for8 has a tail one part of a higher inflation story. The second one has in an insatiable demand for yield which has pegged the 10 year bond at 2. 4. Really, that anchoring of the 10 year has allowed a massive inflation to occur. The risk is actually that we get a normalization in yield curve. That is something we would be looking for toward the end of the second half of this year. The Global Change to growth story by way of trade on your radar . Thats a good question. I think longerterm, the type of econationalism that mr. Trump is promoting wills dart to will start to curb global trade. Although are getting a rebound at the moment, it is less than what we saw over the last decade before the crisis. Still not as strong as what we would have expected since 2000. But longerterm, that team perhaps has run its course. Again, when you start to have this type of selfpromotion of domestic investment spending, fdi flows will dry up as well. It is not a two to threeyear story. It is a five to seven your one. Haidi sean come a pleasure to have you on. Sean darby there. Getting that line out. Referenceng the u. N. At the highest level since may 2016. Coming up, another chinese steel inning shot down by the Trump Administration. Details bloomberg. This is Bloomberg Markets asia. Alibabas financial has turned down a merger. Money gram shares have plummeted. For an of a blow is this financial . The money gram deal was supposed to be a signature move. With this happening, the company will have to focus much more in the asia region. 30 million asd part of the termination agreement. Rishaad how could this change Investment Strategies for Chinese Companies wanting to get into the u. S. . The money gram deal was a tester for trumps at it to attitude for deals coming from china. Along with the shutdown of an earlier deal for an enterprise company. The two deals together sense a strong signal to chinese countries that they have to be much more cautious Going Forward if they want to invest or by u. S. Companies. Haidi where does and go from here . Well placedprettys in asia. They have investments in all of these regions. T will have to and t focus on asia instead of the u. S. Rishaad ultimately here, what does ant financial do elsewhere in the world. Global . T see them they are part of the supporting function of payments for alibabas going abroad strategy. For them themselves in china, they started from the payments as this but gradually expanded into wealth management. On the credit finance, and you probably expect that to happen in all of these other asian regions that they invested in. Rishaad think you for joining us. Counting down to the start of trading day here in hong kong and shanghai. Adding to the gains we saw in this session tuesday. Looking at that up to half of 1 . We are seeing equities generally higher in this part of the world. Oil also having a bullish start of the year. We will see how long opec can sustain their highs. That is next. 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. Rishaad 929m. Here are at here in hong kong. Records in the s p and nasdaq providing us with a tailwind. Technologies stocks rose in america. U. S. Futures are also high ahead of fomc. It did weigh on european equities. Yuan up. Go we had the haidi absolutely, it is a short week as far as asian markets. A lot to get through on the agenda during. Certainly a picture of oil and see to start the trading. To shanghai and hong kong. They have just open. Sophie is taking a look for us. We are seeing marginal losses or the shanghai composite. We are seeing i. T. And real estate duke it out in terms to which is the biggest driver this morning. Gaining a 10th of for percent. My comes to the mood in hong kong, we are seeing the hang se ng up. Getting about 4 10 of a percent. Oner the q1 strengthened atsday, we did see the pboc the highest level since may 2016. Offshore yuan trading at a four month high. Developersa theme of leading gains for Chinese Markets. Real estate stocks are on the move again in hong kong. Chinese estate is climbing for a third day after disclosing its holdings in ever grant. That is extending its tries its rise after tuesday. Jinmao up almost 4 . Checking to other stocks. Aac tech was upgraded to overweight. Ony were raided and hang of sevenonal is one Chinese Super stocks set for a 20 rally in 2018. When you take a look at what movers are leading gains. Rising for all or take her gaining over 5 this morning. Rishaad thank you so much for that. Getting you to singapore to get a look at the first word News Headlines. Thank you. The Trump Administration says it may impose new sanctions on the run as the number of people arrested in street protests nears 1000. The white house says it is heaping its options open after the president tweeted the people of iran are finally acting against a brutal and corrupt regime. U. S. Ambassador rice says has no international plants. She wanted and emergency session. It takes great avery for the to use the power of their voice against the government especially when their government has a long history of murdering his own people who dare to speak the truth. Singaporebased Traffic Group is denying any involvement in the illicit transfer of fuel to north korea. They owed aid cargo. The shipment had been sold to a littleknown Hong Kongbased company. Which then sold it on. New research from the markets say Driverless Cars are set for lift off. First in the u. S. And then around the world. Fueled by the growth and increasing chance of abandoned human operated vehicles. Autonomous car. 33 million in yearly sales by 2040. 2017 proved tough for hollywood. Moviegoing falling to its lowest level in a generation. Admissions in north america slumped to 6 . The lowest since 1992. Its a different story in china wo brokerld warrior t world records. Reflects chinas strength. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad the fight against debt is continued this year. They will make modest increases in money market. How many rate hikes can we expect . Lets get to jeff black. Atone hand, we are looking three, but it is not quite as simple as that when it comes to ratesetting in china . Its not quite as dramatic as three rate hikes in the u. S. Is because what we are talking about here is pboc guiding the price of money in the money market slightly higher. That is not a dramatic tightening. To make it clear, what we are not doing here is raising the cost of arlington across the economy. Pboc is keeping its benchmark. Keeping it on hold until 2020. Rishaad so they have other tools. Thats what were getting at. You alluded at some of them. To tweak the Financial System in the manner they are. About managing the price of money in money markets through their liquidity operations and the volume of liquidity. Stable and secure is what they are aiming for. Prudent and neutral is the word there. That means keeping liquidity pretty much stable in guiding the price higher through the price of those sevenday operations. Haidi how much of this is a reflection of what is going on with the fed . We did see them reference in the u. N. Today. It comes back on the bloomberg dollar index hitting a 14 week low. Are they trying to tweak its own policy to make sure its not too much behind with the Federal Reserve is doing . A certain element of that. It is about managing the risk for example accelerated capital outflows would materialize. But that is not an issue right now. The situation at the u. S. The weakening dollar, that is giving the pboc a little bit of space to conduct its to mester priorities without having to worry too much about what is going on in the Global Capital markets. Thank you so much for that. Taking a look at the outlook when it comes to the pboc. That last money market tweak took a lot of us i the price. Prices hovering near 30 month highs. Charging into the new year with unprecedented bigger. Credit goes to opec. Melbourne, theor down torm spike is concerns over a run or is the Bigger Picture credit going to opec a sign of the success of its strategy . Themes that are affecting the market like you said, opec and shale here they will be the key themes of 2018. For opec, we have 12 more months to go. Their objective is to bring supplies down to the fiveyear average. And compliance is good. Theyre still about 100 Million Barrels above the fiveyear average. On the flipside, we have shale here at it has been a thorn in opecs side for the past couple of years. Pro action production recently is down to a weekly record. It is forecasted to climb to about 10 Million Barrels per day. Their the key themes. Out of that we have got things that will affect the market as unplanned outages. The Hurricane Season in the u. S. , and the unrest which you mentioned earlier. Then situation protests are unlikely to affect the market, but if it does continue, that it may have affect on price. The key thing here is global investors. On priceut any cap bikes from here. Its a pretty good market at the moment. Consensus in terms of how this market plays out for pricing . Moment, 60 for debbie ti. Probably at the top end of the range. We had a report from moodys yesterday predicting prices would fluctuate between 40 and 60 this year. If you take that into account, it looks like we are around where most people thought it would be. If you look at some of the bullish bets, some people are putting out options and calls for around 100 for the end of the year. That is very speculative. Whether content that price is anyones guess. Drains,al supplies, the if we see more political unrest, certainly can climb higher than here. Rishaad alternately, its good to be about demand. We have record cold temperatures in the northeast and parts of the united states. We often talk about heating oil at this time of year, this time it could he a big factor. If this cold spell continues. Most definitely. Its a very wti specific dynamic. Well supply in the u. S. Declining. Supplies continue to decline, and the weather situation putting demand off for heating oil even though they are still quite high. Anything demand related, especially the weather will effect keep prices a better bid. Especially with price of around that to your high like we mentioned earlier. Up, for theing asiapacific. This is bloomberg. Haidi this is Bloomberg Markets asia. Rishaad im in hong kong. Haidi the business and finance world faces one of the most seismic days in History Today. To transparency rules kicking in. They will have wide ranging ramifications. To mifid ii comes into effect on genworth third year it. Re from january 3, that search has to be paid for separately. The new rules, investment firms will have to demonstrate that they are getting feet test execution for their clients when they trade heard regulators hope this will lead to more transparency and competition. Analysts are already rushing to improve their work. Investors are growing increasingly selective about what they will pay for. Then there are issues of regulation. Along with who pace. Some plan to pay for research out of their own profits while others plan to pass costs onto clients. There are various offers on the table. Basic to pay as you go to all in offers. Asces vary from as little nothing to over 450,000. A partner in the financial relation group. He has been advising his Companies Clients on the implication of this. It is a lot of work to get prepared for as well. It is. The funny thing about this is it is a very wide piece of legislation. Certainly some of my clients are spending two years to get ready for the big day. Rishaad what does it mean for your average customer now who wants to trade equities . For those clients who are dealing now with european regulated firms, theyre going to be in a world of increased transparency. There will be diligence requirements. Their brokers will expect them to do. That will be a big compliance exercise for the client. Actually, the real pain is being felt by the the regulating institutions themselves. There have been a whole sweeping wrath of internal control systems and procedures getting ready for the big day. Rishaad how does it play out for people in this part of the world . For the most part, if youre a big institution in asia, these new rules will not apply to you directly. It is european law. Every day you will be dealing with european regulated counterparties. Your dealers, or others that you work with. They will be looking to you to change the way you service them. Youll find a lot of indirect compliance being pushed on institutions in asia. That is what most of my clients have been struggling with. The legislation runs with almost 7000 pages. Five times as long as war on peace. How much of a risk is the Company Prepared to you with the scope and detail of regulations and impact . That the great question. And thats a great statistics about war and peace. Its a real challenge for companies to get ready for this. If i was to give a slightly sweeping generalization, for those institutions, they have very deep exposure to the new rules. Think for those institutions who are locally based here in asia, without particularly regulatedon agencies. It is a hugely long and complex piece of legislation. Struggling with the impact. Haidi what are the extraterritorial impacts if you can give us examples of how it affects is this is in asia . I think the Research Want that was picked up in the video that you played is a great example. If you are a brokerdealer in you, it wont bite on directly, but it will bite on you very much indirectly. If you are servicing european that isnage clients, the way that all business worked. Today, you can receive research for free. They either have to pay for their own pocket or from a special Research Payment account. You have to think about pricing for your research for the first time which is something you might not ever have thought about. Is it a per report charge or a subscription fee . The added complication is that some jurisdictions it is if you start charging youll require additional licenses that you wont have. Haidi this is the European Union isolated in the sense of its application. We have seen australia try to frontrunner that. Over the next half a decade these rules will be globally implemented. Set a strategy you would recommend to clients to get ahead of it because it is inevitable . I think it depends on where your global footprint is. Is no onesizefitsall for some of the rules. The rules on research in europe were promulgated by the regulators. With passingssue the buck onto clients who dont see any value from the research. Some people are worried about how it will have the effect on how its reducing research available. For other jurisdictions, others feel there is not enough research. Implementing rules that might curtail that wont be likely. On your question, global institutions will try to have Global Solutions because it is too hard for them to unpick each jurisdiction and each business line. Thextent that they can into extent to doesnt conflict with other local laws, in japan they have been trying to impose Global Solutions. Rishaad there will be a lot of job losses in the research wings. The other part is will it be a boon for independent Research Companies . Thats a really good question. Its fairly to see how the brokerdeal he community is dealing with this new asset manager driven competition. One of the drivers of having to Price Research is it makes quality of research better. Abouteard lots of stories larger Asset Managers thinking about rating the brokerdealers. I think there might be some impact on jobs in the sector. They will find excellent jobs elsewhere in the industry. How does it affect will this really make markets more transparent in your view . What do you think what is your biggest worry . My biggest worry is that a lot of the clients im seeking to worried that it will be expensive to get ready for this. Theres a huge amount of data that needs to be collected and published. The eu has the right mindset. They want to make markets as transparent as possible. Clearly the intention is to prevent and detect market abuse before it happens. Clients have been worried about this huge data they need to correct. Whether or not the information will be helpful. Rishaad American Companies have a bit of a stay on this. Yes. We understand that in the u. S. It is quite difficult for you to price for research. There is a stay of execution while the u. S. Sees how that develops. Rishaad great talking to you. Tell you about how you can catch up with all of our interviews. You might want to see them on again. You can watch us live, you can check in on the securities and functions we talk about on the bloomberg terminal. You can also send us instant messages during the programming heard. This is bloomberg. Rishaad this is Bloomberg Markets. Haidi a quick check of the business flash headlines. Amazons shakeup of the retail landscape is extending into 2018. Amazon expected to move the target. Target is an ideal offline partner with shared the graphics and manageable store count. Timing might be difficult but the value is easy to see. The future of retail is going to be a combination. I would bet that investors would view this as amazon the takeaway would be amazon taking over the world and that is a good thing. Alibaba jumped the most since june. Its mobile browser was used by more people in indonesia and india than google chrome. It has more than 430 million users globally. 51 of the indian mobile market compared with crohns 30 . Rishaad coming up in the next hour of Bloomberg Markets, china economist joining us in a little over 10 minutes. Looking at whether the chinese economys strong momentum can hold into 2018. Is that telling us about the state of play in china. This is bloomberg. Haidi i am haidi lun. Rishaad i am Rishaad Salamat coming to you from bloombergs asia headquarters in hong kong. This is Bloomberg Markets asia. Haidi signs of confidence and china, todays reference rate the highest for 18 months. Ant financial dropping its plans for moneygram. Rules new transparency and europe, the implications will be felt on the other side of the world. Rishaad the new year and the new breakthroughs it will bring, the view from googles internet evangelist. The theme from the overnight session on wall street, tech will continue to be a strong theme into the new year, but so will u. S. Dollar weakness. Whimper,d off with a the dollar index falling to the lowest and 14 weeks. This is chart 7381, the year that was. It was not the year of the greenback. It was the biggest yearly decline since 2003. Taking a look at the environment , it is hard to see catalysts for getting better. The bloomberg commodities index at an 11th month 11 month high. Of haves talk this talk of reflation trade and highs in Global Markets and emerging markets. Es forf the preference eas highyielding currencies will be the theme going into the new year. Rishaad exporters took a hit in europe, the economy going gangbusters in certains parts, pmis at records. The euro climbed, and exports got punished. Thes have a look at asiapacific, jakarta as the session gets underway. Asian stocks chugging along at record highs. When it comes to themes in the equities space, i. T. Leading the rise in asia with mining stocks, particularly steel stocks. Gauge is bullish driving that space. Undercies are coming pressure as investors are assessing recent gains, while of the dollar is sticking around september lows. The won halting a five d advance. The Singapore Dollar near twoyear highs. The yuan snapping ahead of that handle. The pboc strengthened by the most the fix. The dollar bucking the trend. The mood is more dour for base metals as well. Copper and aluminum sliding in shanghai, and gold shine still knew the highest level in three months, set for a ninth day of gains. Twoyear high as political unrest continues in iran, opecs third biggest producer. That ongoing situation with north korea, but korean bond risk is continuing to fall, now the lowest level since june, falling by the most in five weeks on tuesday, so investors might be able to continue to shrug off geopolitics. Rishaad more tweaks coming s coming tweet through from donald trump. Lets get the first word News Headlines with paul allen in sydney. The Trump Administration says it may impose new sanctions on iran as a number of people arrested in street protests neared 1000. The white house said it is keeping its options open after the president tweeted the people of iran are finally acting against a brutal and corrupt regime. Says the u. S. Dor has no plans for but wants an emergency session of the Security Council. It takes a great raver before the iranian people to use the power of their voice against the government, especially when their government has a long history of murdering its own people who dare to speak the truth. Bloomberg has been told that european Trading Volumes fell as investors avoided doing deals before the mifid ii rules come into force wednesday. Traders are bracing for one of the most isaac regulatory shifts affecting research to dark pools. Any transaction completed on tuesday would have to be settled after the revised directive comes into effect. Ant financial has abandon a merger with moneygram after they failed to win Regulatory Approval. Ant had offered 18 a share. Chinese takeovers of American Companies have prompted warnings about National Security. The two Companies Issued a statement saying they will Work Together. An intranet on per newer is defined china come refusing to return from the u. S. To help the company he created pay off debt. He has been given until the end of last year to go home. He says he is staying in america to work on his electric car startup. He said his wife and brother are empowered to handle the affairs. Leshid he would work withlesh to resolve these issues. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Haidi thank you for that. The rally being extended across the asiapacific, traders keen to see how far local currencies can go without undermining stocks. Lets get to garfield reynolds. It is a fine balancing act. It is. You can see that several currencies in asia are under the weather. You have the taiwanese dollar and the korean won have been fluctuating. The malaysian bring it also. The aussie dollar had another good day yesterday has been weak, and that is probably good news for stocks because as we saw in europe overnight and has long been the case in australia in particular, but also korea and taiwan, too much currency appreciation too fast can hurt exporters, and exporters are what asia is all about. Haidi this is a theme for the rest of the year given how unloved the greenback is. A bit of a race to the bottom against the greenback, isnt it . The only currency in recent toes that has been willing give love to the greenback is the yen, and even it is doing well now. To some extent that helps things because there is no currency that can stand out as long as everything is falling against the greenback. He biggest risk is the won it had a spectacular year and is getting towards 1000, which it has not hit for many years. Outid have korean officials overnight saying they are becoming more vigilant about the currency, and that help to put a cap on the recent rally. Come the nexteld thing we will have to deal with is to avoid a shutdown, and looking to what we have coming up, payrolls data, fomc minutes, wranglings over immigration, health care, and the budget. Although to be honest, the markets sometimes seem to care as much as things like that debt deadline like the Nuclear Button teteatete between trump and just liken overnight, korean stocks and korean bonds have been shrugging off fat. Off that. U. S. Stocks and bonds have not been worried about the debt deadline or other matters, the tax reform bill did seem to have an impact on stocks and also treasuries, but even then the treasury 10 year yield was between 2. 3 and 2. 4 , now between 2. 4 and 2. 5 . U. S. Stocks keep going up and up. Anything, to see including a debt deadline, putting a serious damper on that. I think it is more a longterm issue and not something republicans want to have extended, the midterm Elections Come a but for the rest of the year it is hard to see politics having a longterm impact on stocks. Rishaad today marks the end of a lot of hard work for a lot of Financial Professionals as we get mifid ii. There is no market impact, but is there a sense of foreboding . Like with any change, you always worry that somebody is going to have not crossed is i always worry about getting that mixed up and that is the worry. And you end up running into problems with regulators . It is probably not a coincidence that europe had a questionable start because it is ground zero for that, so that could add to some of the caution in europe. Europe has a lot of reasons for caution apart from mifid ii, there are the italian elections, the German Coalition concerns, will stopd the ecb buying bonds at some stage this year so we will see how that works out. Rishaad nice one, garfield. Garfield reynolds in sydney. You can follow his musings on our markets live blog at mliv. And market run down and commentary and analysis from bloombergs expert editors. You can find out what is affecting your investments right now. Gatheringome, clouds over capitol hill, the Senate Getting back to business. We look at the possibility and likelihood of a Government Shutdown. In a, risky business, how the u. S. China relationship in trade is the one to watch for 2018. This is bloomberg. Rishaad this is Bloomberg Markets asia. I am Rishaad Salamat in hong kong. Haidi i am haidi lun in sydney. Freeportmcmoran has won a with talksxtension to transfer majority ownership to its local subsidiary. Juneinor can operate until , and indonesia says the extension bring certainty to the ownership negotiations. Freeport will give up a Majority Holding in return for a deal to operate the project through 2031. Rishaad no pause in the palladium rally. The metal is used in catalytic converters. It is at a new high on the nymex. The weakness of the dollar partly responsible as it boosts appeal for alternative investments. Rate cap say Fourth Annual decline, the longest streak since 2000. Alliance has agreed to buy a coal mine from glencore. The group signed a binding agreement to buy the operation in new south wales. Bloomberg was told the mind could fetch 390 million. Gfg says it is a key element and plans to expand steelworks operations in australia. Chinas starting the year on a solid footing, shares extending outperformance and a suggestingcaixin momentum is robust. Risks, including possible conflict with the u. S. And the Federal Reserve doing more in terms of federal tightening. Lets bring in ligang liu from citigroup. We have all these possible known unknowns. What is your view . Happy new year. Yes, from the official pmi we can see indeed activities are slowing, but one thing in terms of chinas ppi indicator, purchasing price of chinese firms are still rising. The other thing is good news for china is that external demand continues to pick up. This numbers suggest that in q4, chinas gdp growth slowed to 6. 6 . For the whole year we have around 6. 8 . Keep in mind this is a number for the first time in six years that chinas growth momentum started to rebound somewhat. Our view is that growth will continue to slow down coming into q1, led by the tightening of monetary restrictions and growth around 6. 4 , but in the second half we might see growth pick up to 6. 6 , and for the year 6. 5 . Today, the yuan fix quite a move. Is that down to dollar weakness . More than thatly because dollar has been weak for a while, and this suggests that perhaps to preempt this years potential sinou. S. Trade conflict, strong renminbi could somewhat help china to manage. Take the heat out of it . Thats right. The other thing we should know is that last year because of capital control policies, that has helped china stabilize the renminbi. They would have to slow and even stop has china has tightened its crackdown on underground banking corporate and foreign profit repatriation has become more difficult to repatriate. Entering 2018, has soe will have to invest abroad under this one road, one belt program, and given pentup demand, we expect a Large Capital outflow. That means that in the First Quarter or first half of the ber the renminbi could still under pressure to depreciate because of renewed capital outflow. In addition, china probably those documentary requirements. Criticalere are three battles on the agenda this year against financial risk, debt, pollution, and poverty. Achieve a chief all of that and maintain the level of growth they need, which is around 6. 5 . . If you look at chinas Fiscal Program in the Monetary Program this year to 6. 5 growth is still achievable. When we tallied chinas fiscal numbers last year, the total government deficit according to the imfs most Detailed Analysis could be for 2018, general government deficit could be smaller, but still remained quite expansionary. We continue to expect the Central Government will announce 3 fiscal deficit this year. On the Monetary Policy side, the aggressive tightening will be quite limited. If you look at two benchmarks. One is chinas offshore and onshore Interest Rate differential. For the last year as a whole the 302 350emains around basis points. The other important benchmark is to 350 basis points. The other important benchmark is a number that could be as high as 5. 9 . Thannumber is higher chinas private firms profit margin, suggesting in the next year that the pboc will fully follow the fed Interest Rate hike. Our review is maximum two Interest Rate hikes, 20 basis points each. If the financial tightening were to be too excessive, we cannot something by the pboc. Haidi always appreciate those insights. Citihief china a con at in hong kong. Coming up, the latest chinese deal to face the regulatory axe. This is bloomberg. Rishaad we are back. This is Bloomberg Markets asia. I am Rishaad Salamat in hong kong. Haidi i am haidi lun in sydney. Ant financial has abandoned a merger with moneygram after they failed to win Regulatory Approval in the u. S. Ant financial had offered 18 a share. Plunging by ass much as 17 in extended trading. Lets get over to our bloomberg have five columnist with more on this from taipei. How massive is the blow to ant financial with this deal falling through . Well, it is certainly a disappointment, but surprising. That is the key point to remember. Haveis the third time they not been approved. It is important to remember that the committee on Foreign Investment in the u. S. Does not make the final decision. It is the president of the united states. The point link that it has taken many months for them to decide to call it off. It is a bit of that below, but not that surprising. Jack ma will have to look for a new alternative. Rishaad what does it mean overall for Chinese Companies who want to do business in the u. S. , who want to grow their in organicall organically . We knew eight year ago that chip deals with not go anywhere in the u. S. It was frowned upon in the obama era, and donald trump did not seem to keen on them either. We thought this ant financial moneygram deal would be ok. There is no technology that is sensitive for leadingedge, but clearly there have been concerns about privacy, security, and the Ownership Structure of ant financial. This raises the bar once again for the kind of deal that could be done from a Chinese Company into the u. S. Boringeals that are more or plane or vanilla such as hotel groups, the Chinese Government has restrictions on their side on what they were allowed Chinese Companies to invest in overseas as well. They are not keen on Hotel Businesses or sports businesses, so there are restrictions on both sides. Haidi in terms of what ant here, theyoes from have such a substantial International Expansion plans and things underway anyway, right . They do. They are looking at southeast asia, specifically ant financial , rather than alibaba. Southeast asia will roll out alipay in as many places as they can. In the west, they have merchants that will accept alipay, but that is focused on Chinese Shoppers and tourists being able to buy something from the souvenir store in newark city. Western globall expansion in my opinion, so that is a blow to that and jack ma will have to come up with new ideas on how hes going to build out in the u. S. Haidi its hard to avoid the political overtones with moneygram saying the geopolitical environment hadrons degree changed in trying to get this deal done. Inenvironment had changed trying to get this deal done. Should investors be miffed about mifid ii. We will look at the impacts, and as farreaching as in australia. This is bloomberg. This is bloomberg. It is 10 29 a. M. In hong kong. I am paul allen with first word headlines. President trump offered conflicting opinions on north korea, saying the pressure of sanctions may be to talks, but then engaging in schoolyard games about the size of their respective nuclear options. He tweeted the following. Singaporebased group is denying any involvement in the illicit transfer of fuel to north korea after the south set the worlds third egg is independent oil trader unloaded a cargo ship in our toper in breach of sanctions. The company says the shipments had been sold to a little known Hong Kong Based company, which then sold it on. From declinesback on reports that peter thiel is holding a large amount of the cryptocurrency. The wall street journal said that that is spread across several funds, including one that launched in mid2017 that made bitcoin one of its first investments. The founder started buying before the volatile december and is not clear if sold yet. Hollywoodd tough with with moviegoing falling to the lowest level in a generation. 6 to 1. 25st billion, the lowest since 1992. It is a different story in china where sales are at a record as local blockbusters ruled. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Haidi thank you for that. Theite titfortat between u. S. President and north korea, asian stocks pretty sanguine, extending record highs. As thate as amusing tweet is, it is still a reminder of this game of chicken taking place at the highest level and how geoPolitical Tensions continuing to be a key theme for this new year. Rishaad his button is bigger than the other one. Nevermind. Up, helping are gains across the board for the asiapacific. Sincean fix the strongest may 2016. How does this work out for Market Participants and how are they looking at it . Sophie we have the war of words, but geopolitics not translating to the session so far. Fixing theyuan strongest since may 2016, reflecting dollar weakness since 2017. We are seeing currencies on the back foot, led lower by the korean won, weaker by. 5 . Asian stocks mostly higher. In the commodities space, cold swinging losses, but still toding gold swinging losses, but Still Holding onto gains. Large caps rising almost 1 in china and offshore shares having the best start to the year in 2009. Suggests the likes of alibaba and tencent will continue to gain. I. T. Stocks gaining ground, but telcos and real estate taking a prominence when it comes to industry groups. What else is moving when it comes to the shanghai session, bbmg shares rising. The ashares rising to an april high. Imax chinaing rising. And china jinmao rising with other developers. Some movers in seoul, korea, cosco leading the rally in steel stocks. Posco leading the rally in steel stocks. Drbsbought a stake in proton. Eo jumping to a september hi there. Haidi thank you for that. No escape from the effects of ii when they come into effect today. The implications are wide ranging, even on the other side of the world. Is here. Ce reporter as farreaching as all the way down under. Indeed. Australia the commercial impact of these new regulations. Any Money Managers, that could have to be compliant under these regulations. These guyseans is will be going to their brokers and saying you have to unbundle Research Costs and training costs so we can show our clients what money we are spending. There are pretty positive overtones that as well. , a 140 million money manager based in sydney across their entire Global Operations and told brokers you have to unbundle these costs even in australia. Haidi trying to get ahead of it . Exactly. They expect the principles to be rolled out globally in the next 35 years. The jobssers will be of some research analysts, but what are we looking at . Research analyst of course. A lot of the guys on the sell side will go out and opened their own shops and go to other independent research houses, but that could be a win because it researchem to develop that is more fight to Asset Managers. The other side of the coin is the smaller guys. They might get more Corporate Access because the big investment banks wont have a stranglehold on the large corporates when they come through and do a roadshow. They have to charge out that willce, so the corporates be saying i am not getting my value for money here. It is a very mixed bag. Rishaad today may be the day, but we will have to wait for the full impact of the regulations to be felt, not least as some countries have had a stay of execution, if you can call it that. There is no doubt about that. Even the european regulators said the market will have leeway for a couple of months. Showing they are going along with the principles of mifid ii and implementing them and it may not be necessarily 100 compliant as of today. You are looking further down the track. Even in the region throughout theralia, asiapacific, principles are expected to come through in the next 35 years, so still gives time to people in this region to see what happened in europe and make the changes better for themselves when they eventually do,. Come. U. S. Lawmakers returning to washington with the risk of a Government Shutdown looming. A lot challenges as the new year begins. Jodi schneider is with us now. In veryexpectations different aspects of society, not the least of which is the budget. Bithis going to be another of brinksmanship where we end up kicking the can down the road . By january 19, they need a budget or the government will shut down. No one seems to want that. Mitch mcconnell keep saying it will not happen. They have been able to allow that to not happen by shortterm fixes. Appear to want to. They would like to move on to things and not have this hanging over their head. Other issues out there like immigration and other things, the Democratic Leaders would like to have been discussed as part of this budget discussion. Apparently that one not happen. The republican leader said when they go to two the white house to discuss this with the budget chief, they will stick to the budget and do not want to discuss other things. They said the president would not be bringing up other policy issues until later in the month. He has a meeting at camp david, then a republican retreat later this month and they will be bringing them out then. Rishaad tax reform showed that congress could work with the president , but there are probably still unresolved issues, are there not . Things like building that vaunted wall between the u. S. And mexico. The issue of immigration. Infrastructure was something that was going to get done. It really hasnt. Is that going to rear its head this year . In Midterm Election years, congress does not want to take on contentious issues. They want to get reelected. They still have the debt ceiling to deal with as well by march. Haidi my button is eager than yours, more par 4 is bigger etc. ,ours, more powerful, do these insults jeopardize the progress made towards possible negotiations . BePresident Trump seems to that she first said before those latest tweets, taking credit and northr the south korea talking, saying our sanctions worked. We made them come to the table. Then he turned around with the which seemedlts, to be a jab at the fact that we dont know whether the warheads for north koreas missiles could reach the u. S. Or not. That is the real question, is this useful, and doesnt have any affect . North and south korea will be talking on january 9. There is a meeting scheduled. It is to be about the olympics and north koreas participation. It is historic. They have not met in years, and given the confrontational rhetoric, it is important. President trump says we are not taking part in this. If there are ongoing talks, that will be pressure on the u. S. Haidi thank you for that. It does look like these tensions to and frond fro, will continue. Coming up, china jostling to be number one on the world stage, but is president xi jinping ready to take the reins away from the u. S. . We will be hearing exclusively from the Eurasia Group next. This is bloomberg. Haidi this is Bloomberg Markets asia. I am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. This yearoup morning could see a geopolitical crisis on the scale of the financial meltdown a decade ago. It says the biggest uncertainty surrounds china. Andrew bishop spoke about beijings move to fill a vacuum has u. S. Influence wanes. China and xiow, jinping and President Trump tried to downplay tensions. They played nice throughout 2017. 2018 is a year for china to grow with assertiveness. There is a moment of opportunity for the chinese leader with china having one of its strongest president s in decades at the same time the u. S. Has one of its weakest president s and decades. China is the only country that has a global strategy. Most of its rivals and competitors look at the world in a tactical daytoday basis. China has a 20 year plan, and we think it is well on track to achieving it so far. When you talk about u. S. And china, you talk about trade, trade tensions, and certainly you saw trade tensions crop up in 2017. Chart thatoint out a shows you how worried many are about trade, 7842. It really has dropped off in recent years. Saw mentioned in 2017, it no shortage of trade tensions sparked in part by President Trump with his counterparts. Trade 2. 0 tensions, how much will that factor into 2018 . Absolutely. A few things to say. In 2017, markets were rattled by the idea that a trade shock would calm, but it never happened. Year to say we dodged that bullet. It is the year that will really see trade tensions between the u. S. And china. Trade is a big component of the economic relationship, but investment is also a major component. We think the u. S. Will be tightening investments grew tuning measures in the first part of this year, and that will be a huge part of this. , whaty to your question does protectionism 2. 0 look like. A is protectionism back with vengeance, but under a new guys. Specifically this is no longer focused on agricultural, automotive, oldschool sectors, but focus rather on technology and forward looking sectors. Were looking at nontariff barriers rather than your typical tariffs and at the border in the mens in impeachment we have seen battles break out over electric vehicles, for instance. Where do you see this new frontier in this tech cold war . If you think of the tech sector over the past 30 years since the end of the cold war, it was pretty much rainbows and sector led,ivate positive some gains, everybody stood to gain. In 2018, technology is becoming associated with National Security as it did during the oldschool cold war and governments are taking an interest in technology. What we see happening in 2018 especially between the u. S. And china, a raise for supercomputing, ai, that we think could be destabilizing. Andcrux for washington beijing is that whoever gets access to these topquality, nextgeneration technologies will have massive geopolitical leverage, at least in the short run. You have to think about this like the space race for the Manhattan Project in the second world war. Up, a new year and the new breakthroughs it will bring. We will get the view from google. This is bloomberg. Haidi this is Bloomberg Markets asia. I am haidi lun in sydney. Rishaad i am Rishaad Salamat in hong kong. Having a look at the business flash headlines. Settlement with songwriters is being challenged in a lawsuit that says artists deserve 1 billion more. They are claiming spotify has influenced on copyrights on more than 10,000 songs. Settlement with songwriters last year, but many of them and their representatives remain unhappy. Haidi alibaba jumped the most waseport its mobile browser used by more people in india and indonesia than google chrome. The browser has more than 430 million users worldwide and had 51 of the indian mobile market compared with chromes 30 . It also let chrome in indonesia over that same period. Accused ofogle being moving 19 billion to bermuda in 2016, saving 4 billion in taxes. Used a showed google double irish and dutch sandwich to shield international profits. It shifted from an irish subsidiary to a dutch subsidiary and then to a mailbox owned by an islandregistered company. Haidi staying with google. Every new year brings new pluses and minuses, and tech is no different. On bloomberg surveillance, chief internet evangelist discussed how he sees tech evolving in 2018. It certainly means more internet everywhere and more software, devices with programs running everywhere. You have heard the term internet of things, believe me you will be surrounded by software, and a lot of it will have bugs that will be exploited. If im worried about anything, it is buggy software, and that is what 2018 will deliver. , thiss this software miracle, our iphone, whatever we do with them every day, is it a job creator or a benefit to an advantaget is to some, but truly a disadvantage to so many others . I would not put it that way. We have shown that softwareenabled devices we arey, we wear, or surrounded by come have done a great deal of good for us. I still think that is true. I think we have to be more aware of the potential risks this dependence is placing on us. I am sure that is something that ian would agree with. You have to be smart about using the technologies in a fitting us. That is the part where 2018 will be important. People have to learn how to protect themselves in this online environment. Talk to us about the convergence between ai and the data. In 510 years, how will that change our world . The term Artificial Intelligence is horribly misleading because it makes people think these devices are like human beings. It is not that fancy. It is that a lot simpler than it looks or sounds. Big data is a completely different thing than Artificial Intelligence. Is that hugeeeing amounts of data are being processed by these programs that we call Artificial Intelligence. We use the term Machine Learning because that is closer in spirit to what is going on. Processing data and deriving insight from it is what these tools can do for us. They are tools, and it is important to recognize it is the human beings that use the tools wisely that makes the difference. Haidi the chief internet evangelist at google speaking on bloomberg surveillance. You can catch up on that interview and all interviews by using our interactive tv function, tv. Deepan watch live and do a dive into securities or functions we talk about. You can join the conversation and send us instant messages during our shows. This is for bloomberg subscribers only. Check it out at tv. In thea look at equities second asian trading day of the brandnew year, extending record highs. 1 . Ydney up a bit of weakness when it comes to the financials and Consumer Staples sectors. Rishaad looking at singapore at up again, as we move second day of gains for the Straits Times index. Expected better than house price data showing momentum returning to the Property Market in singapore, asping those developers, they did in hong kong as well. Up 10 points. In hong kong, we had a triple digit gain taking us way above 30,000point level. 30 stocks to the upside, 19 lower. Retail sales in hong kong out later as we do also get onlwinds coming from records the s p and nasdaq. What about the big stories of the day so far . David is with me now. You will be talking buttons, are you . Is your button big in this . It depends on how big your hand is, rish. We have to talk about that. Geopolitics is a key 2018 team. Lots of things to talk about. Techuest took profits from and moved it into other areas of the equities market. You mentioned retail sales out of hong kong, retail sales out of thailand and 30 minutes. Markets at record highs. David its almost 11 00 here in hong kong, 2 00 p. M. If you are watching us out of sydney. Happy new year are in the middle of the second almost all trading session of 2018 happy new year. We are in the middle of the second almost full trading session of 2018. Tech leading stocks ended 2018 with a flourish. Offshore chinese shares on a daring rally fueled by last years top performers. Now no escape. New transparency rules come into effect in europe. The implications will be felt all over the world. And President Trump lashes out at his two favorite targets, warning north korea and calling iran a brutal and corrupt regime. We be talking about all the applications for geopolitics and bigger risks as we head into this year. Equities up, dollars sideways, on the way up. Commodities, of course, on this record. 14 straight days, we get the market start from sophie in just a moment, but let me zoom in on what is happening with gold continuing to glitter. Monthy is actually the for you. , januaryver reason tends to be the best month for gold, but by far, it is. 3. 5 on average for gold prices, and if you look at this on a quarter basis, we are looking at that average going up 4. 3 . Let me just shift this and have the function in case you dont believe me. Trailing average at the very top, 3. 5 percent, if you can see it. 3. 5 percent is your average gain for gold prices in january. As we mentioned, january is pretty much a good month for gold and then just sort of peters off from that level. Speaking of commodities, lets look at how markets are doing right now. We cannot count those golden chickens before they hatch. We have seen that shine, commodities just a tad. When you look at the metals space, we have gold under pressure, losing about. 4 , but holding on to, following that eightday rally we saw. Gold the hottest metal we saw. The lady installing, precious als sliding and aluminum palladium, Precious Metals sliding. We are seeing some outliers, though. Zinc dan and ground in shanghai. Goldman says environmental to find even ae high price level. In unwinding of the short dollar and loan commodities trade, and given those consensus traits, been left in the dust while Commodity Prices rally, but weve seen the bloomberg Commodity Index snap a 13day advance, but even then, we see materials stocks gained ground, leading the charge along with tech shares in asia. The steelstco leading stock rally following goldmans upgrade of the stock. Even the prospect of the pboc tightening this year is not fluster in Chinese Markets. Large caps leading regional indices higher. We just have indonesia the anomaly in the equities space. In the currencys space, we do have the taiwanese dollar bucking the trend. Bear in mind, the korean one slipping. Investors are anticipated to shrug off geopolitics weve seen this week. So far, markets have managed to shrug off any geopolitical concern. In alitics continues to lot of ways drive sentiment because for example, in iran, north koreas nook at the top of the list north koreas nuke at the top of the list. Resident trump weighing in we discussed that and all the applications with our asia editor. He says basically his Nuclear Capabilities are larger and more the button works, a little dig at kim, who in an earlier tweet he called rocket man, basically making clear that confrontation will continue. Interestingly, President Trump said earlier in the day that he was actually sort of taking credit for these talks that are going to occur between north and just tough, that talk in a sanctions were bringing them to the table, so trying to take credit at the same time as belittling the leader, but north and south korea will sit down for the first time on january 9 for the first time in more than teen of years, and that is a significant development. David then he came out with the does have a bigger button. Iran, speaking of nuclear, and perhaps considering more sanctions. Yes, he is seizing on the opportunity of the unrest in iran to again really criticize, blast the nuclear agreement, the agreement with iran the u. S. Entered into or his predecessor into den to several years ago, 2015, so saying that the u. S. Might consider further sanctions or might consider undoing the deal in terms of imposing sanctions. The deal basically took sanctions off the table as long as iran was in compliance. President trump has not yet said that they are not in compliance. Of course, it is mark obligated than that. They cannot just unilaterally undo it. ,here would have to be steps but he and his spokesmen are making it sound as though they may well consider imposing sanctions, so if there are further sanctions, the deal really does not mean much if that action is being taken. David just to remind our viewers as well, roughly what would those steps be for him to repeal that deal . Every now and then, i believe they have to review if they are in compliance, and then what . Right, theres a deadline for that, and its actually about 10 days away. It goes back to congress, and at that point, they have to decide if they are not in compliance, what happens to the deal, which would be a major step because theres other countries that. Ave entered into this those other countries have said they actually see iran is being in compliance, therefore, the u. S. Would become an outlier in this. David not that that has stopped them. On several issues, including obviously Environmental Issues and other kinds of things. Avid thank you so much lets get you an update of your top global stories at this hour. Heres paul allen with your first word news. Paul thanks, david. Financialsitive and failed to win approval in the u. S. And had offered 18 a share, valuing 1. 2 billion dollars alibabas and financial ant financial. Bloomberg has been told european. Rading volumes fell traders are bracing for one of the most seismic regulatory shifts in history, affecting everything from research to dark polls. Any transaction completed on tuesday would have to be settled after the revised directive comes into effect. Bitcoin bounceback from new year declines on a report that Peter Thiels Founders Fund is holding a larger amount of the cryptocurrency. Founders started buying before bitcoins volatile december, and its not clear if it is solved yet. 2017 proved tougher hollywood with moviegoing falling to its lowest level in a generation. Admissions in north america slumped almost 6. 6 to 1. 20 5 billion, the lowest since 1992 according to researcher box office mojo. A different story in china where sales were driven to a record as local blockbusters roared. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. David thank you. Still ahead on the program, all hands on tech. We will have more on what is driving stocks higher later on, but before that, investment ideas. Politics, currency risks weighing on these markets. This is bloomberg. David this is Bloomberg Markets asia. Lets get you a check of your latest business headlines. Google being accused of moving with a 19 million to google. Regulatory filings show google used vessels known as a dutch sandwich involving shifting revenue from one error subsidiary to a dutch company. Alibaba jumped the most since june on a report that its mobile browser was used by more people in india and indonesia last year than google chrome. The wall street journal said it had more than 130 million users worldwide and 31 of the indian mobile market compared to chromes 30 . Looking at risk ahead, stock speculation will get ahead of itself leading to a correction, but he says even with a decline, the benchmark will end the year of of 3000 profits rise. Jumping he sees oil 30 as populism and tribalism spread around the world. More on markets now. We are joined now by the chief Investment Officer of investments hong kong. Tell me this equities last year brought 20 , 25 gains. Did we get anywhere near those returns this year . 20 is not a bad number, and i think that is what we should expect for 2018. Valuations are still at an average level, so typically, as utilizations pick up, you will levels play out. That is already happening in china, korea. As the earliest upgrades happen, you will see more allocations. You will go above your mean valuations and probably they get more comfortable with the space of recovery. Specifics, what do you have in your portfolio what changes have you made to your portfolio the last couple of weeks . We have been positive. Inancials they are trading below book. In the mindset that financials need to trade below book. That is likely unfounded. In an up cycle, these names would trade at least at book or at a premium to the book. David when do you abandon the trade . When you look at the yield curve, it is flat, but when do you say you would abandon that . Do we get any flatter than this . If we take liquidity out of the system, you will see the cost of capital rise, and that is where you can get totality in 2018, but would also look at this whole cycle playing out. For the last several years, we never really had an investment cycle. Thanks to the tax cuts in the u. S. , the proposed tax cuts in japan, you will see the investment cycle pickup. My point is do not get bearish too early. You will get clarity in 2018, but i think 2019 is the time with the capital of the cost of Capital Increase is significant enough to lead toward a recovery. People are worried about Central Banks for drawing liquidity. It will not be a oneway street like it was last year. But its not really the time to be too bearish about equities. David you are still bullish in india. Why . I think india is the best economic story globally. Despite all these concerns of impending longterm Capital Gains tax, 2017 was particularly tough. You have the gst, which has kind of been having its own impact on the economy. 2018 is going to be the first full year of economic recovery, and they have done everything right and terms of putting together a Strong Foundation for a company. You see the same operating leverage play out. You will see street getting supplies positively. David the other market you prefer i mean, there have been concerns recently. Morgan stanley noted a couple of months back this super cycle and semiconductors perhaps ending. Is that something you might want to watch, or is the export story outweighing the potential weakness in that spot . Again, be mindful of the socalled peak in the semis. The valuation in the stocks anywhere from five to seven times. Again, what happens is people are getting bearish, but it is a bit early. These are good, wellmanaged companies, and over the last 15 , the industry has consolidated a lot more. It is there in the price. The concerns are reflected in the price. You also see china taking a breather. Is there a full version of equities with anything coming to china . China would be close to 15 , hopefully, but unlike 2017 where china outperformed india, we believe that chinese returns would be in line, so when we 17, late 2016, it was absolute disbelief about china. I think that disbelief is gone. David you are staying around. Of course, theres a lot more to talk about across the world today. We will get more broadly, thoughts on how it will impact Interest Rates ahead, so we will be back after the break. Stay with us. Thecan catch all of interviews using our interactive function, tv. Join the conversation, and fact, get a question in. How does it really affect you . Of sweeping generalizations maybe not the case. Send instant messages to our team. Check it out. This is bloomberg. David this is Bloomberg Markets asia. In of the most seismic days History Today with the eus new id iid method mif rules. Disrupting the world of investment research. In the past, Research Reports and Corporate Access have typically been accent offered to Money Managers as free added services from brokers they used to carry out trades, but from january 3, that research will have to be paid separately. Why . Eu lawmakers wanted to curb conflicts of interest that could leave investors facing opaque costs. Investment firms will have to demonstrate they are getting the best execution for their clients when they trade. Regulators hope this will lead to more transparency and competition. Analysts are already rushing to prove their worth, and investors are growing increasingly selective about what they will pay for. Then there are the issues of regulatory conflict in europe and the u. S. Along with who pays. Some firms are planning to pay for research out of their own profits, while others are proposing to pass costs on to clients. There are various plans on the table. Prices vary widely, too, in some cases rom is little as nothing to over 450,000. David for more on this, we are still joined by the chief Investment Officer at me ray as its Global Investment here in hong kong. Very complicated. 7000 pages, wide ranging. I think it depends on where you are in the supply chain or value chain how it affects you. Look,m our perspective there is no legal obligation to a sizable amount of our assets come from europe, so our partners are inclined to look at the cost of the sector. From that perspective, we would look at each of our costs closely. David what have they told you so far . Or are many not really going with unbundling. You gain market share from small. Rench players i think this is really a big opportunity for us to gain significant inroads in the business. David in a way, it forces us about be more secure unbundling. Does it add to your cost . It does not really add to the cost, but it forces us to look. Ery closely to the services we revisit its of the cost closely, so you want to be competitive on cost compared to someone offering to the same client who is mifid compliant. David there is one view out there that you and i are having this conversation during the break that these bulge market firms might push out a lot of the critiques. Clearly the preference. The revenues getting impacted for a year or two because they are looking at the fiveyear story of gaining market share. At the same time, there are boutiques who crossed markets, so i think it is the french players who were never really committed to the broken business. David what is the biggest worry, if any, for you . Anything unclear about it . I think what happens is this. Hole race to the bottom again, im rather surprised. In equities. Year i think the focus is on the wrong thing. Will be more on equities. David thank you so much. Let me leave you, of course, for the closing numbers Chinese Market as we enter the lunch break on the mainland. This is bloomberg. Is this a phone . Or a little internet machine . It makes you wonder shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. So all you pay for is data. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit, or go to xfinitymobile. Com. Kong, 11 29 a. M. In hong 2 29 p. M. In sydney. Im hall alan with the latest on the news. President trump has offered conflicting opinions on north korea, saying the pressure of sanctions may ease tensions but then in gauging in schoolyard games about the size of their respective nuclear options. He tweeted the Trump Administration says it may impose new sanctions on iran is the number of people arrested in street protests news 1000. The white house says it is keeping its options open after the president tweeted the people of iran are finally acting against a brutal and corrupt regime. The United Nations Ambassador Says the u. S. Has no unilateral plans, but she wants an emergency session of the Security Council. It coin bounced back from new year declines on a report the Founders Fund is holding a large amount of the cryptocurrency. The wall street journal says the that is spread across. Everal of the firms funds founders started buying before bitcoins volatile december, and its not clear if it has sold yet. New research from iron just markets says Driverless Cars are set for liftoff first in the u. S. , then around the world. I says Autonomous Cars will talk 33 million in yearly sales by 2040. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im hall alan. This is bloomberg. David normally, we would be looking at the reopen of japan, but the market shut. We have had a lot of other things happen across markets. We are looking at gold. We have to kick it off with gold. We are seeing that dollar selloff increase pressure for currencies as well. The superlative series carries on for equity markets. Check out what is happening in thailand. Ties stocks set to crack a fresh alltime high. After the central bank reiterated its easing Monetary Policy on monday, there could be more records on the horizon as this year. When you look at what is leading gains, chinese large caps performing the best when it comes to indices in the region. In hong kong, we see shares rise for a seventh day. The Index Trading at its strongest level since 2007. Consumer shares also recovering from the drop we saw on tuesday. Property stocks mostly higher, but looking a little bit mixed, we have Country Garden retreating from a record today. Crown goes to tech shares with tencent providing the biggest boost in terms of points, so we are seeing last years favorites helping offshore chinese equities clinch the best start to a year since 2000 nine and therefore far outpacing the msci global index. Before i go, a quick check on some equity movers of note and unsecured isthink rocketing to a record on news that chinas state own citigroup is buying a stake in the Hong Kong Listed brokerage for 1. 4 billion. The png jumping by the daily limit and shanghai. The cement maker rising with other stocks linked to chinas new Economic Zone as officials met this week to discuss development. Stocks like beijing capital and sogion capital also rising, the shanghai share index is rising for a fourth day today. And a lotot of love, of love, a lot of love. Thank you very much. Were looking at tech shares. I. T. Index up. 5 percent. Obviously, this new year rally extending across the region. Tech stocks obviously still on the rise. Drivingmore on what is all this optimism across the tech sector. People may turn over a new leaf when it comes to the new year. Not so, it seems, investors here in asia. They are flocking to the stocks they know best, and that means the favorites of 2017 tech stocks. We are seeing the likes of tencent, as you mentioned earlier, powering ahead on the second official day of trading shares, and applelinked up more than 5 in hong kong, really powering ahead. Other stocks as well, not just in china, taiwan, tsmc having a good day, and even samsung and in south korea rallying as well. David what are you hearing . Will this continue . It is an old story. When you look at what people are buying, perhaps it is down to the same old things. I just wonder what you are hearing. Do those themes continue into 2018 . Thats right. Nothing much has really changed. Theres some geoPolitical Tensions on the horizon, but not really affecting assets and trading at the moment as yet. Nothing really has changed since last year, so people are sort of sticking to what they know, continuing on with that ball rally, which we know has been very prevalent in asia and has really hit with emerging markets as well. Similar themes just continuing on. Market, dream run one of the phrases or stories on the terminal. Emerging markets dream run could see a reality check in 2018. How bearish . That sounds a little bit more ominous than probably it is. We did a survey of 20 analysts, investors, and traders, and they do see that bull run in the emerging markets continuing, but the people will become a little bit more selective and a little bit more picky in 2018, and that could particularly hit the currency market where often the first tensions and selloffs are seen. We obviously have the head likely to continue tightening this year. We also still have this trump trade threat hanging over the horizon and what he might do. There are still issues that people are focusing on that could make them just a little , givene selective valuations right up there now. China also was cited by respondents in this survey as when the watch given the intensification of the Deleveraging Campaign here. Most in terms of the favored across emerging markets, i know theres a multitude of selections, of options from currencies to bonds, geographical allocations, what seems to be the most favored right now based on the survey . Our turf,nately, asia, does not went out on that front. In latin america, mexican bonds and the currency, the peso, is very favored by investors, probably because trump toss overhaul of nasa does not seem to have got many ground as of yet and brazilian stocks are also quite favored. They have weathered a slew of political crime scenes crises and have come out on top. On the other side of the ledger, turkish assets are universally disfavored given the ongoing Political Tension in turkey. David lovely. Thank you so much. Lets have a look at alibabas financials, abandoning this merger with money gram after failing to win Regulatory Approval in the u. S. Valuing any deal at 1. 2 billion dollars, money gram shares plunged extended trades. Our reporter is here with us in the studio to flesh out with the story is all about, and against the bigger question is how big of a slow this is in its overall strategy. Ago, heber just a year flew personally to the u. S. To meet with trump, promising one million jobs in the u. S. , and even under that context, the deal still did not pass through, the head so it shows when Chinese Companies will be facing going into the u. S. And other companies, probably, will take this as a signal as well. David that is the point, right . Does it change any of the strategies of other companies perhaps in similar situations . It does. Financial, annt affiliate of alibaba, wanted to take full control, and this says in the future, Chinese Companies looking at u. S. Companies might look at minority investments instead. It might still be something viable or a collaboration, strategic cooperation. David more palatable. Back to this, though. Obviously, that is a setback in the u. S. I imagine they have other plans elsewhere. What is plan b or plan whatever it is . Exactly. They have had other investments in asia. Specifically thailand, indonesia, india. They have placed their chess pieces all over these countries and probably, with the u. S. Taking a backseat right now, they will focus more on giving more resources to these regions, replicating their Business Model that they have created in china and these regions as well. David thank you so much. Happy new year. Theme yous is one will want to follow in the new year. Coming up, we are having a look from theark warning Eurasia Group president on geopolitical risks for 2018. From a up next. This is bloomberg. We will hear from ian bremmer up next. This is bloomberg. David this is Bloomberg Markets asia. Limited inflation of is coming out of thailand. Not just a miss, but an unexpected drop in inflation, so we are looking at Consumer Price , a drop of. 08 , marginal, but might give you a little bit of pause for thought there. For headlineng inflation somewhere close to it 2 toabout 1 close to about 1 . Core inflation coming in a little bit in line with expectations. We look at the index by thailand, the set index set to close above the record last set in 1994. Thew years after that, Asian Financial crisis, or what some would have preferred to colloquially back then. In other, chart, words, if things essentially stay the way they are, we are set for a record low, so not much disruption coming from that inflation story into thailand. Speaking of inflation, oil might just be an extract of moving into 2018, hovering near 30month highs, as well as this new chart into the new year. Analysts say the credit all goes to opec and compelling signs the cartel is winning its tugofwar with shale. Lifeis our Energy Reporter out of melbourne. The question i have for you is do we get a rebalancing sooner than expected . . But shale surprise and opec are the key things that will drive oil this year. The thinking is that rebalancing will occur some time this year, maybe 20 back and that is what opec is essentially hoping to do after extending their cuts through the end of 2018. It looks like they have a little bit of work ahead of them. If you look at the fiveyear average, which is their objective, stockpiles are about , but supplybarrels has been really good, probably better than expected, and there is expectation that we will not get a rebalance market this year and that opec will meet its goals. What if i am a traitor, am i looking out for the next few days or so . . If i am a trader were at pretty good levels at the moment. You mentioned Brent Holding at the highest level in tune of years, so you are probably looking at hoping that prices will hold at this stage. Signals are that demand is increasing, much better than expected. There are some people talking about the possibility of shale, that they are a little bit too bullish on output there. Has aa the eia forecast that the output for u. S. Shale will climb above 10 Million Barrels a day, which would be a record, but also goes for the moment are for a pretty strong and pretty bullish market. David hopefully, and a lot of people are prepared for that to happen. It is an unexpected change of course. Thank you so much for coming on the show. Quick check of some of the other top commodity stories. Gold starting the new year a little bit lower. Heading into the longest stretch mid2011,going back even as u. S. Stocks surge to records and the fed hikes Interest Rates three times. Fortuneday rsi, up 17. 3 points. Levels indicate an asset may be set for perhaps shortterm. Theres no sign of a positive pausepalladium rally a in a palladium rally. A weaker dollar continues to boost alternative investments. Inventories and warehouses tracked by nymex shrank last month, capping a fourth straight annual decline. The minor can now operate until june, and indonesia says the extension brings certainty to andorder should negotiation gives the majority of holding in return to operate the project in 2041. The Eurasia Group has released its annual output for leading global this and says 2018 could be the year of a geopolitical meltdown. Mckinseyer has joined us global managing partner for a chat. When the Global Economy feels today, geopolitics do people respond. They see it is a crisis. They know they need to do something. They got to bail things out. I have to do infrastructure projects. They have to get the banks ready. We had that back in 2008. It was a crisis response. The geopolitics are easily as bad today globally as the economics were in 2008. They might be were. And yet, there is no crisis, no sense of we have to respond. If you look at the one superpower in the world, the one country that could conceivably help to respond to dig us out of the crisis is actively doubling down. We are saying we had no intention of providing the kind of certainty to our allies, supporting institutions, so as a consequence, anyone looking at geopolitics today have to understand this is not sustainable and that crises are coming. mckinsey and Company Without question the top think tank research. I dont carry about that. I want to know what businesses are going to do this year. Dr. Bremmer talks about accidents. You cannot do three or fiveyear planning amid familiar with accidents. What do you see in the behavior of officers this year . And the yangying we should recall that over the last couple of years, we have seen growth improve. The challenge is you have to go after that growth but at the same time be prepared for these risks. Us number one risk that ceo see out there is geopolitical. That is the number one risk. Is they are not probability curves. They are 1 or 0. If something goes pearshaped, it is bad. Theres issues about resilience. While you are growing, what are you doing about resilience . What does your supply chain look like . How will it withstand some of about . Cks ian is talking how do you think about agility in your organization to be able to move resources very quickly . Also recall that we are in the midst of a Massive Technology a digitization. Tom we are going to talk to brad smith about that. Francine, please jump in. Francine is 2018 the year that protectionism strikes back . 2018 is certainly a year where we see much greater fragmentation of the global marketplace because governments are becoming more interventionist. Part of that is because the chinese have an alternative model for their investment and will be seen as increasingly the most important driver of other economies around the world who will align themselves more with beijing than with washington. Part of it is that President Trump here in the united states, who in 2017 talked a lot about protectionism, talk a lot about beating up on trade deals, but aside from leading the Transpacific Partnership did not do very much, in 2018, the u. S. China economic relationship gets worse. In 2018, nafta has to renegotiate in the midst of a mexican president ial election. David that was ian bremmer. Coming up next, more details on news coming out of thailand. Stay with us. David we have the latest tight inflation reading we got the latest time thai inflation reading a few moments ago. What sort of picture is emerging in thailand . Inflation remains stubbornly low, but no impact on the market right now. Pretty much holding steady. Take a look at the numbers. In december, Consumer Prices, 0. 08 . The estimate was 0. 14 . Core inflation pretty much in line at 0. 62 , so inflation remaining pretty muted. With deflationd last year, and the blt has been fighting for monetary easement. To follow the global trend of raising rates this year, but the dot itself has said it does not need to do the economy is set to expand without inflationary pressure, plus, the risk of capital outflows is pretty low. For now, it makes sense for it to maintain a loose Monetary Policy. David the broader picture is when you look at the economy, it is playing catchup. How much of a boost is thailand actually getting from this recovery we see across global trade . Global trade is helping. Well show you how thai exports have recovered. You can see how momentum picked up in 2017. What is also helping is the flood of tourists from china, not forgetting the ambitious Infrastructure Spending plan, and this is a record spending plan, all that according to the world bank should prop up growth 2022, but some say do not expect too much. Maybe the best performance in five years, after which momentum will probably taper off. What is really missing in this story is private investment, which is needed for gdp. These are risks to the economic recovery of thailand. That is why thailand has been lagging behind neighbors like the philippines and vietnam, which have posted more than 6 growth. Gets this is as good as it for the land of smiles. David maybe. Hopefully were off. Thank you very much. Ofjust had inflation out thailand. Later on this afternoon, hong hill comes up 4 00 p. M. Local time. Have a look at the chart, we put that together with china to show you this relationship between what happens on the mainland certainly affect what happens here in hong kong. The survey youre looking at, 4. 2 . Was the previous read. The uptick is what were looking at, hopefully coming out for 00 p. M. Hong kong time. Coming up at the top of the hour, tracy is with us in dubai. A lot on your plate today. Yeah. Good morning. As you mentioned, we are, of course, going to be continuing that iran conversation you were having earlier in your show going straight to tehran, getting the latest on the ground. Eaction the news the u. S. May be weighing fresh sanctions has big implications for the country, especially at a time when it is grappling with an economic slowdown. Of course, we also will be discussing the rally in oil prices. Does that mean that gulf countries take their eye off the economic reform ball . Thats all coming up on Bloomberg Markets middle east. This is bloomberg. 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. Alisa im Alisa Parenti and youre watching bloomberg technology, utah senator orrin hatch says he will retire after four decades in the senate. In a video, on twitter, he said every good fighter knows when to hang up the gloves and for me that time is approaching. The 83yearolds retirement opens the door for public and mitt romney to run for his seat. U. S. Ambassador to the United Nations nikki haley blasted kim jongun today following the north Korean Leaders declaration that the u. S. Is now within range of a Nuclear Strike from h