And hang seng modestly higher here. This is after we did see liquidity injections keeping that targeted rate at 315. The chinese 10 year bond has been interesting. Yvonne david 313, lowest level since march. You are looking at sterling here as well. He thinks that it has gotten a little wide here at over 100. Sterling is under pressure. It is under more pressure if you measure that against the euro. A record streak of weekly declines. Continuing ratcheting up of tensions with iran. I guess it is about whether Boris Johnson is going to be the successor of theresa may. Certainly a lot of pound traders are focusing on the currency and focusing on shanghai as well. A little more green on the screen here. Really different from what we saw yesterday. For stocks currently in the green. Sawing close to what we yesterday. David it was a bit crazy. Giving your declines, this is 20 out of your 25. If you look at how they have done year to date, there we go, still up 360 in some cases. The program, lots more coming up here. Wang iseantime, selina in beijing. Selena . Thanks, david. President trump says congress has reached a deal on raising Government Spending for two years. We are told the agreement would offset the higher expenditure that would give the administration and the republicans about half the savings they are seeking. The new spending and limited savings will likely push the budget deficit over 1 trillion next year. The next u. K. Prime minister will be announced. The brexit chair leader Boris Johnson is the overwhelming favorite, but whoever wins will face a long list of challenges. U. K. Fromricate the the european union. Johnson has vowed to do that with or without a deal. Britains top Business Group says the next Prime Minister must move beyond brexit. Carolyn is calling on johnson or his rival to act quickly to move the economy forward, saying the u. K. s reputation has taken a battering. She adds that a no deal brexit would be seriously damaging. Praisedt trump has china, saying xi jinping has acted responsibly over the mass protests in hong kong. Could stopat beijing the demonstrations, but hopes his counterpart would do the right thing. The latest protests saw activists spraying graffiti in hong kong. I know that is a very important situation and you could say what you said, but you could also say that he has allowed that to go on for a long time and i think it has been relatively nonviolent. Global news, 24 hours a day, onair and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im selina wang. This is bloomberg. Mayne the u. S. And china be a step closer to rekindling trade talks. A role in that as well after President Trump met tech ceos at the white house. David he is in beijing for us, watching the story. Tom, where do we start . Weve been talking about the positive mood music ahead of potentially getting these talks next week. That would involve lighthizer and mnuchin coming to beijing. In terms of these particular measures, we have had china suggesting that it may start buying u. S. Agricultural products. To what extent, we dont know. The fact that they are discussing that is seen as a positive, at least trying to move things forward. We have had this meeting between President Trump and the ceos of Companies Like intel and google. You had the white house saying they would be issuing these licenses in a timely manner. These are licenses that would allow those companies to sell some of their technology to huawei. That was one of the key demands from the chinese side. Yvonne it seems like over in , even peoplemakers within the Trump Administration, dont want to relax on huawei. How much is that going to limit the chance of any trade deal between the u. S. And china . Arguably there is more clarity on the beijing position now. You are right to point to that uncertainty. The question of huawei, you have supporters of trump pressing him to ensure he continues to take a hard line. That is a key uncertainty. Resolve thisnts to trade issue with china or keep the fight going into that election period is another question. He faces pressure on the National Security side. Here in beijing theyve made the position very clear. They need a deal that makes these pledges more rational and reasonable. The chinese from side is pretty clear. There is a lot of uncertainty in washington. David in other words, we wont by agriculture goods just for the sake of buying it. This is the soybean purchases of china. Little bit of a pickup in 2019. Have they opened up the checkbooks . Any evidence so far . Theyve started the process to allow that to happen. They feel like they have been burned by this in the past, making these commitments only for the u. S. To backtrack. That would be the chinese spin. What theyve done is started conversations with importers like costco to allow them to start the process. Trigger then pull the to buy those additional soybeans and agriculture products. The other side is that china needs these imports. It is facing inflation as a result of this swine for or swine fever in china that is decimating the hog population. It has always needed u. S. Soybeans. There are domestic reasons as well for china wanting to buy more Agricultural Products. Yvonne thank you, tom mackenzie, our fellow anchor. Lets get more on what is moving markets. Mark cudmore joins us from singapore. We are in this blackout period for the fed. It seems like now markets are more focused on what is going on with trade. I think it is both trade and micro issues. Weve taken away some of the mac elements. That is a slow moving story. Theres some optimism there helping markets. It is very quiet. Earnings get some real , ok results, but more negative guidance, unless you get more earnings, it may stay quiet for the rest of the week. David would that be the trigger to revisit your call of the Chinese Markets . You were bullish back in may. What are you watching right now in terms of indicators to make you turn bullish again . I think the most important thing for this year is the u. S. China trade war. The reason ive been very bullish is that overall growth has been ok. Theres been a lot of support from various Central Banks. The reason im more worried is because the trade war has escalated. We actually need some of those tariffs in place. To see some concrete progress. It was only a week ago that trump was talking of escalating tariffs again. Driver thatbiggest we know about. There are many other risks. Most important is the iran middle east tensions. That could cause an oil spike. That would cause disruption to companies. That would cause higher yields. That would be altogether a bad situation for equities. The known risk is the trade war. Yvonne what else are you watching this week . Im guessing the ecb is pressing as well. Are we going to hear from mario draghi to lay a pathway to easing policy . I think we will. I dont think hes going to deliver this week. I think the ecb wont be a big macro driver. What we are just negotiating is which month they deliver what. Most likely it will be setting up for september. Whatever the ecb does this week will be driving it. The most important story this week is very much equity earnings. Mark, very quickly, iran and oil. What is important and what is not . Until we get military escalation, then overall, the negative fundamentals will continue to weigh on oil. East are around middle probably underpriced. If there is a flareup, this will cause a massive surge in oil. Mark. All right, good stuff there. Mark cudmore out of singapore. Coming up on the program, citigroups head of Health Care Research joining us on the program to talk about his top picks in the sector. We also discussed his strategy and how it is affected by what is going on with government and conditions on the chinese mainland. Stocks the outlook for in the philippines as president duterte keeps his eye on the stocks. Lets focus more on the philippines now. Vowingnt Rodrigo Duterte to reimpose the Death Penalty in his war on drugs and raise levees on alcohol and tobacco. Corporateans to slash income taxes as he enters the second half of his sixyear term. Ofid all against a backdrop a market that reentered a bull market. Manila, theut of vpn head of research. Good to see you. Just your Key Takeaways as an investor from his state of the nation yesterday . I think as an investor im quite happy with what he said. The continuation of the Tax Reform Program, i think that will help improve the competitiveness of the country. Is the the promise benefits are not quantifiable. They are more qualitative. Think thisely i would be something welcome for people. It would improve our competitiveness. I think down the road we will see the benefits in terms of higher investment, and we can talk about how these developments are positive for the economy. Yvonne the markets have been looking for some type of catalyst. Im just wondering, does what said and laid out, is it enough to sustain this rally . I think it is quite difficult. The benefits of these developments are not as quantifiable as the Tax Reform Program which was initially passed in 2018. You could talk about additional revenues and spending on infrastructure. With this one, this is going to make us more competitive. Think the guest earlier made a good point. The focus is earnings. Quarter, wend suffered from a delay in the passage of the government budget. Is there any specific part of the market that stands out on the positive side, and if you do a net analysis, does the market look overall expensive . On the positive side, the good. Gs continue to look demand come in and go up and to be absorbed by the market. On the negative side, what we saw the last order was a little bit surprising, but may continue. It seems like consumers which suffered negativity from higher inflation, the confidence is still negative, which is hurting the earnings of some select consumer stocks, and in the second order that may still be the case. Confidence has recovered, it hasnt gone back to a proper level yet. That may still be the negative earnings drag in the second quarter. Yvonne on the back of david mentioning valuations, philippine stocks among the priciest in the region. One of the highest after india. Are there parts of the market that are looking to rich for you right now . Valuationsook at the , if you do a holistic valuation, we do seem to be expensive. But if you think about the component of the index right now, they are different from what they were a few years ago. Whiche heavyweights now are consumer related stocks and these are very expensive. In the past, we were more heavily weighted toward infrastructure issues. But then what we do is we do analysis across all 30 constituents. Based on our analysis, more than half of the index stocks are trading below 10 year average. There are some stocks that are offensive expensive, but there are a lot of opportunities. David april, thank you for that. In terms of your top picks, you have a favorite in property. You like tuna. Within the banking space, you have one more. Can you flesh out those very quickly . , oner the property sector of the stocks we recommended, the reason why we like it is because in the past it was heavily focused on property development, property sales, but now several years of growing a portfolio and it is now benefiting from that move such that it has a good cash flow. It is still trading at a good valuation, which we think is no longer justifiable. I think the market has not yet rerated the stock. Like, ittock that we is the biggest Market Leader in terms of tuna, but i think what the market is not yet pricing in is the Strong Performance of its milk business. The milk business was up 50 . , the banks. Our favorite is security bank. Of its the growth Consumer Lending business. Yvonne april, thank you. The vpn head of research at cole financial group. Coming up, chinas plan. Going to meet one of the industry analyst and discuss the winners and losers coming up on bloomberg. Lets get your latest business flash headlines. Apple is in advanced talks to buy intels smartphone chip business. The deal would cover a portfolio of patents and staff valued at 1 billion. David microsoft is investing 1 billion in a partnership with a Research Group cofounded by elon musk that will use microsofts Cloud Services to run its ai software. The two will also jointly develop supercomputing technology. Lets look at markets. Estimateshe highest here, missing median estimates. Yvonne actually falling lower by 2 at the moment. Watching sports as well. They came out with a profit alert that was to the positive. The market up 3 . Already, these gains on the hang seng. Samsung as well. We are seeing a lot of chip stocks rise. Goldman sachs operating excess inventory going to deplete quicker than expected as well. Plenty more to come. This is bloomberg. It is 12 29 p. M. In sydney, 10 29 a. M. In hong kong and beijing. I am selina wang. With the headlines. Trade talks may resume in the coming days, after what would your describes as goodwill gesture from china. Mainland companies have contacted u. S. Exporters about Agricultural Products and also implied for exemptions from chinas retaliatory tariffs. The South China Morning Post says the u. S. Trading team will fly to china next week. The governor of the bank of japan says he and his team are keeping a close eye on Global Growth and, they will maintain their policy of easing. Governor kuroda told the imf in washington that the bank is monitoring global risks. Uncertainty regarding the growth of the economy has been heightened, and some nervousness has been seen in Global Financial markets. The bank needs to pay close to the last Economic Activity and prices. Any report from london says the uks stumping moves toward brexit may have already triggered a technical recession. Of economic and social Research Says the e. U. K. Economy will only grow by 1 of the year and next. Is also a one in four chance that the economies already in reverse. It may take more than making money to secure a big bonus for bankers in australia. They will be limited to 50 of performance criteria for bonuses, under new regulatory proposals that pressure banks to focus on better Employee Culture and governing. It comes after an inquiry concluded that pay and incentive structures were the root cause of misconduct. Global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. I am selina wang. This is bloomberg. Alright, lets look at the Chinese Health care sector. We are looking at pharma, jumping on reports and we can look at it on the chart here the regulators in the country are looking at a decentralizing scheme. Authorities are mulling expanding the scheme nationwide, with three suppliers for each drug instead of the one. Yvonne joining us as john yung, Citigroup Global markets health care analyst. He joins us here. John, great to have you here. I am wondering, this drug Procurement Program, seems like they have made some changes. The terms are milder but have expanded nationwide. To what extent does it ease concerns that the Procurement Program was going to drive down drug costs as well as Profit Margins . John right, thank you for having we today. I think the reason the market inaved so well last week, the rally from the beginning of the year, is because consolidation is actually coming. Obviously, everyone knows that generic drugs need to cut price. But there are 4000 pharmaceutical companies in china, and the government is using everything they can to eliminate 70 of those in the next five years or so. Imagine top 10 companies in on theby domestic ones, continuity 15 of market share. Imagine half the drugs get their prices got. However, the market share will probably be five times higher. David we put the statistic you mentioned on the chart top 10 in percent. The rest because 3900 or something. Who might be the targets for m a here . John if you ask me, i would say most of the inferior, Small Companies should not be acquired, they should be eliminated. I think that is what the government is trying to say as well. The government is helping the leaders to kill the smaller guys. Yvonne what does it mean for foreign Multinational Pharma Companies . Most of them lost out, i think there were only two that won these bids. Will they continue to lose out . John we think of a generic drug market is already a gun game for Multinational Companies and gone game. Patents no more reduction for the last 10 years or so. They need to selloff their assets to some smaller Chinese Company willing to pay. But there is a growth driver, innovative drugs. The government has never been so supportive on innovative drugs. The approval teams, the china fda is hiring more people and resolving more cases, which means foreign drugs can launch sooner and faster in china. Companies are setting up sales forces and they are very happy with the new market opportunity. David the third category, no more genetics, innovators is a given, what about by assemblers . S . Hn on the bio similar john i think at this time there similar launched yet. Everything is due to a lack of trust guarantee at this time. They have the advantage of the the first mover. But i think it will become quite crowded. Names are there any primed for a first mover advantage . John we look at applications to the fda and we did not see anything standing out yet. Yvonne i want to talk about china health care. Break it down for us, what the best investment is. Is it still pharma, biotech . Medical services . Private hospitals . Where do you see opportunity . John great question. The are so many subsectors. If i were to choose one, it would be pharma. Stick with the largest. If it is a domestic or international company. That reason is because for domestic Chinese Companies you have three profitable things that will happen in the next 10 years tech upgrades they are upgrading themselves. Number two, consolidation, and the government is helping without. In the policy is helping them as well, approval processes may have for Chinese Companies, not saying that they just help them, they are helping everyone was innovative drugs. David already spending is or did quite high as a proportion to spending. So you need to spend more if not already fewer move generics. How much room is there for them to spend . John it is high in terms of their revenue. 14 or 15 . But in terms of absolute amounts, it is nothing. David is there an Industry Benchmark you follow that might be the norm . John i think Multinational Companies spend double digits below 20 , by the absolute amount is different. Will grow in proportion with the revenue. I think that is what they are doing, the larger guys. Yvonne when it comes to biotech, there is a lot of hype, but even in hong kong a lot of these ipos that happened last year have an underwater in terms of the stock price. Why do think they are shaken by this sector in particular . John i think investors in asia are still need to the sector, they havent been trained to look at Clinical Trial data and closely linked in a court trial data and the results of the stock price. They are still being trained. A lot of times, if it is difficult to understand, they will give up, and low interest will actually do that to the stock price. But i am seeing more and more these companies coming in. More hedge funds getting interested. And spending so i think it will improve over time. David to yvonnes point, everyone we talk to, if you have to one sector, it is health care, and if you have to pick one, it is china. There has to be a risk out there, though. If i pick the top side. , you said it is a nobrainer, what is the risk to that trade . John i think that sounds good to me. [laughter] if you have to pick three names i would pickge, this one in asia, in the hong kong market, i would pick ciobo pharm and also hangso. They are a highquality company and they have already spent so much money in the last 10 years to a cumulative pipeline. In the next five years, they have a very Innovative Products track. David what is a risk, though . There must be something that would worry you . John you have to understand that the pricing issue in china farm sector will be in you normal. Will be a new. Generic drugs have to cut price periodically. There will be time to time correction. But i think markets will get used to it. People will look at the consolidation and say that it is actually more important than a price cut. And a Larger Companies will prevail from this trend. From time to time, the biggest risk is pricing. Correctionrally, the is normal. After all, in the longer term, the valuation is still improving. Yvonne all right, john. Thank you. John yung, citigroup had of research. Coming up, after a selloff in trade talks, science and technology are being brought back down to earth. Speaks to the man who helped devise some of those companies, next. This is bloomberg. S bloomberg. Yvonne a quick check of the latest is nice flash headlines. Than your boss of struggling deutsch danske bank says anyone who has an idea about how to run company to drop in email he says he would like to hear it directly from employees and investors. The ceo says he is handing out his Contact Details to staff and others across scandinavia. David phillips is redoing is Global Expansion amidst the ongoing trade war with china and the u. S. The company will not spread manufacturing of key products, trailed the world rather than focusing anything on single markets. Phillips reported secondquarter profit beating estimates, but says it is bracing for more than 20 million of costs when the next batch of expected tariffs comes into full force. These trade wars are divisive in the world. Believer in what globalization has brought to the world, i hope we can see people coming closer to each other. And that will be good for the world economy. After outputs fell missed estimates by more than 10 Million Metric Tons amidst supply concerns last week sent iron or prices to their highest in more than five years. Secondquarter production fell more than 54 million tons, down 12 from the previous period. To scrap output this year following a deadly dam collapse in january. David ok. Lets. Have at the tech board in china. But trading frenzy that gripped the open market. Look at where we are, this is day two. Four or five stocks up, the rest are underwater, following triple digit gains yesterday in some cases. Selina wang joins us now to wrap up some of these first or maybe second impressions. Selina there was a lot of excitement and optimism yesterday. We saw a huge increase in the prices of all 25 companies, as much as 400 . But a lot of them a are paring down their gains as stock prices come back down to earth. Regardless, this is a bold Capital Markets reform by china. They scrapped a lot of commerce regulations. Allowing Unprofitable Companies to list. It is a big from beijing to get their homegrown Tech Innovations to list at home. The personal wealth gains that come with it is part of the bid to get them to come back to china with these high valuations. I had a chance to speak with fan bao, chairman and ceo of a Boutique Investment Bank that has been working with many of hasas top startups and also worked with some of the companies that listed yesterday. Take a listen. Fan what is the difference is the timetable and the disclosures. It is not about whether you need a certain requirement, at the end of the day, it is about disclosures. That is a process for us, who actually represent a lot of chinese Tech Companies, were already familiar with. It is a quite interesting change of the concept. Selina the has been concern about the quality of names listed, for a country that has the most unicorns after the united states. There are no highprofile household names. That . S your view on fan from the launch of concept to implementation is barely six months. I think the first batch of companies, a lot of them are there not necessarily because they are the absolutely best Technology Companies in china, but often times because they are the ones who are ready for an ipo. Having said that, we have gone through a lot of the companies, i am on the committee for the Stock Exchange as well, in the first batch of companies, their overall quality is pretty good. Selina how do you think this shifts the balance of listing from hong kong to mainland china. The u. S. Is still a very attractive place given the opportunity to trade in u. S. Dollars. Fan . Fan i think these are different markets. U. S. , hong kong and china, including the stock markets, all have a different focus. I think if you are a largecap company, in the u. S. , you have a perfect home. It is the most liquid. The broadest Capital Markets in the world. Hong kong, they obviously have liquidity to the china market. If you are Consumer Company with a unique business model, hong kong is probably your top pick. If you are a hard tech company technologybased company, semiconductor companies, power companies, china is probably the best choice. From our perspective, it is always good to have more options. Eventually, chinese Text Companies will also find Tech Companies will move toward different selections. Yvonne you heard fan bao address one of the concerns of investors. Selina is why arent there any wellknown names that are listing. He makes a point that it is more hard Tech Companies that will be listing on the new exchange, and that the big, well Consumer Companies will still go to to hong kong or new york. There have also been. It has also been investor pessimism about the fact that these companies cannot live up to their lofty valuations. We are already seeing that on day two of trading. But investors are also still mucking the volatility. They think it needs to go through this process for a fair valuation to come to fruition. Yvonne things look a little bit tamer here today. Selena, thank you. Lets check in on indian markets. Our reporter is standing by with less than one hour away. How are things looking today . Well, some civility can be anticipated after the three days of selloff some stability can be anticipated. Already pulled out by foreign institutional investors. Actuallyhe money has gone into the bond market and the debt market here in india. But the 200 day moving average, will be a crucial want to watch. It fell to 11,127 on the index. They could open in you door for the index and we could expose are soft a bigger downside. Banks have been the pressure point. About of the big banks have reporter numbers and have been the key cause of pain, they have disappointed the street and have given commentaries speaking of more pain in the future, which is not liked by the markets. That is the main crucial area causing damage to sentiment. Todays session, keeping in mind how the rest of the asian market is trading we can anticipate, a slightly new start. David i like that. Ending on a good note. Talk to us about earnings. A couple of names were out this week. What is in store for today . We start with the hindustan unilever. Badly withot done so the volume numbers they have been posting. In trend with what has been happening with the rest of the pack america could achieve a higher number, considering this is one of the most favored stocks. Bigother one is larsem, a engineering conglomerate. The key want to watch is commentary from the manager regarding revenue and guidance, and how they plan to tackle that. Lastly, this hartline will be in focus, to see if there is finally a deal on the table from management. The stock has been tumbling the last few months. If there is status occasion of that. David wow. Dropping big words. [laughter] yvonne plenty more on ahead after the indian open coming up in less than one hour. We will focus on the battle the charts, too. Yvonne time for the moment we have all been waiting for the battle of the charts,. We have our reporters about to go headtohead and see who can tell the better story using data. That is a new intro. [laughter] we have Jeanette Rodriguez in mumbai, and andrea in sydney for us. David all right, jeanette. Excite us with your data presentation. [laughter] jeanette what my chart shows is that each time india launches a successful probe into outer space india stock market gains. Yesterday india launched a probe to the moon and this comes on the back of it. If you look at the green circle, in 2008 that was because of indias first moon mission. It confirmed the presence of ice on the moon and also caused a bomb to the stock market a bottom to the stock market. In 2013 when the Mars Orbiter Mission happened, there was a rally in stocks. Same in 2015. I have a caveat, this is a coincidence. There is not evidence of direct relation or causation. [laughter] for more weird things to feed into the algorithm, this is something to look up to. Yesterday india launched a successful moon mission. In the app plans to study the knowsxt year and who next . Yvonne yeah. [laughter] david ok, lets bring it back to earth. Hopefully we dont have any spurious correlations here. Andrea, go for it. Andrea [laughter] guys, ok. My chart shows how the Australian Dollar has failed to break out of a downtrend for the fourth time since december. The reason this is interesting is because it highlights how important rate differentials are for currencies, given Central Banks are in easy mode. The aussie approach to the trend, as you can see last week on these brief speculations that the fed could cut by 50 basis points, and also encouraging jobs numbers in australia, but then failed to break higher, as we adjusted the view of the fed from 5225 basis points. The rba has already cut twice this year. So the fed would have to cut more aggressively than that rba to see the aussie move higher. The chance of a 50 basis point cut is something that traders are looking at closely. Also the speech by the rba governor on thursday could provide some catalyst. Weits not a downtrend, could see a significant move ither given the has faced that resistant many times faced that resistance many times. Yvonne i think i like andreas chart. Avid i like andreas too yvonne the Interest Rate differentials. David and it is true [laughter] yvonne but that was an interesting coincidence of that we all love when talking about this. David if your dreams are not big enough, if they dont square best scare you, they are not big enough. [laughter] really come i think with indias aspirations, i think it tells you where the index is going. Although it is a very serious correlation. I pick andreas as well. Yvonne sorry, jeanette. But definitely a fun chart. Gtv is where to go to check out all these charts, and also catch up on all the key analysis, and save the charts for your future reference. Lets look at markets. David yes, we are slightly higher on the benchmark. Thailand opens in the next hour. We might have something there. This is bloomberg. Were the slowskys. We like drip coffee, layovers and waiting on hold. What we dont like is relying on fancy technology for help. Snail mail we were invited to a y2k party. Uh, didnt that happen, like, 20 years ago . Oh, look, karolyn, weve got a mathematician on our hands check it out now you can schedule a callback or reschedule an appointment, even on nights and weekends. Todays xfinity service. Simple. Easy. Awesome. Id rather not. Emily i am emily chang in San Francisco and this is bloomberg technology. Coming up, tech giants visit the whitehouse. The Trump Administration posts some of the biggest u. S. Tech kohls to talk about failout from the trade waist with china. And the proclaimed air gaps of silicon valley. The pitch to lawmakers presum