Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20240713

Investors are not so sure. A Virtual Reality platform picked up for oculus. We are live in san francisco. Lets get to sophie forecheck on markets. Sophie aussie shares are unchanged after a threeday gain. Kiwi shares building on gains after topping 11,000 on tuesday. Nikkei and cost be futures kospi are lower. Slide despite the enthusiasm we saw for alibaba shares, which closed about its issuance price. Lets check on housing bonds, which are gaining ground after the rba governor the move tracking treasuries. Aussie yields falling 35 basis points across the curve. The three years left below the rba cash rate. A bond rally expected to push the 10 year to 50 basis points with unconventional easing expected in the second half as the australian economy slows. The kiwi holding its threeday gain. This morning, we heard from the rb governor. Mentioned rbnzso is working with westpac after the findings in australia. Paul thanks very much. Lets check in with first word news. Chinaly indicators show is continuing to slow this month. Growth is already the weakest in three decades during the third quarter. The financial gauge from Bloomberg Economics shows that situation is continuing. Indicates board, it domestic demand is weakening. As earlyweakened indicators show Boris Johnsons conservative party is losing its lead. Labour making up some ground. A Hung Parliament raises prospects the impasse over brexit will drag into the new year. Dhabi is said to be ready to. 1 . 5 billion into the aramco ipo. That turned only tepid interest elsewhere. Abu dhabi will make the investments through one or more state bodies. A major foreign investor would be a relief for riyadh after a plan to market the ipo globally was abandoned. Malaysia will allow public hearings in a dispute between 1m db and an Investment Fund in a legal battle about billions of dollars. Judges in the court of appeal tacked malaysias argument tha private hearings are not satisfactory, because it would be determined without public scrutiny. Global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Paul thanks very much. We discuss americas hong kong bill as additional tariffs loom. Coming up next, a pivot. Why he was markets continue to outperform the rest of the world. This is bloomberg. Paul this is bloomberg daybreak asia. Shery the gains may not be much, but u. S. Stocks hit fresh highs. Equity will continue to dominate globally, even in the 2020 Election Year. Carol pepper is founder and ceo and joins me in studio. This chart on the bloomberg right now showing the ratio of u. S. Stocks against the rest of the world. They are tending to dominate. In the past few weeks, that has been challenged. Thiso think in 2020, momentum will continue. Carol i do. The strength of the u. S. Economy and that we have an Election Year is good for stocks. Earnings continue to be important. There is no real serious cloud in our economy. I manage money for billionaires all over the world. The consensus is this is where you put your safe money. You put money that you want to do well in the u. S. Markets. Although we have our political squabbles, it is considered a safe, secure market. Technology here will continue to dominate through 2020. I think it will be a place to put a significant bet in your portfolio. Shery among those political squabbles, what are your expectations about how 2020 will affect markets . Carol i think the Election Year will be surprising. I personally think everyone would like a moderate candidate in the middle. It is interesting Michael Bloomberg is in the race. He is my favorite as a moderate. Middle,n end up in the most of the republicans and democrats and independents will go that way. If we end up with a split house, that is going to lead to further moderation. As long as we are going in that direction, that tends to be what happens. I think it will continue to be positive. Markets dont get terribly volatile until two or three weeks before the election, then afterwards it is all over. Carol we have to disclose bloomberg, the majority owner of bloomberg. Paul in terms of the build up to the election, do you see a trade deal put in place by then . The president saying the phase one trade deal is in the final throes. We have been here before, havent we . Do you fear there could be a slip up in the final stretch . Carol the final election is when he wants to have the big ribbon on the trade box. We will still have a reason to Pay Attention to the trade talks. I think we will end up with a positive trait deal with china. We are going in that direction, and markets are right to be optimistic. I think it will happen, despite the unfortunate events happening in hong kong. Paul if we could get some of your calls you are a big fan of the tech sector. What do you like . Carol yesterday, we saw the earnings of a video chip Company Coming out. They focus on security and auto. That is a fantastic buy the longterm. Those sectors are going to do well. If you cant afford tech stocks and you are more of an etf person, i like the nasdaq. That has done extremely well this year. Go with a big basket. In the long run, put amazon in your grandkids portfolios. That will pay for their college education. The attacks on amazon and attack on big tech is a political ploy that the general electorate can understand, but that will fade away they get through the election. Amazon is still up 18 this year despite that. Shery today we saw best buy surge. They took a huge chunk of the online market. Could there be more competitors for the giant amazon is . Carol yes, but look at all of the new things amazon is going into. Drone delivery to your home. They are constantly expanding what it means to be amazon. I would not be surprised to see them going into health care. They have a big pocketbook. Last mile warehouse rates. A lot of people will have to deliver online guns. Amazon is better competition on that side. Online goods. Shery whether it is trade or global growth, we see u. S. Markets rising and the rest of the world going along for the ride. Would you care to go into overseas markets . Carol it depends on your time horizon. My clients, we have an Asset Allocation for every portfolio. If youre talking about a longterm portfolio, a family trust or grandchilds trust or something that has a longterm horizon, yes, certainly. In the longterm, International Markets will be great. 2020, u. S. Will continue to dominate. If you are a traitor trader at heart, momentum will continue to be with the u. S. Brexit is still a problem. The china trade talks will not get settled this year. Latin america is having a lot of political issues. Africa in the future will be amazing, but we are early. A lot of the wealthy families go into these lessdeveloped markets with direct deals, dividing hotels and real estate and these companies, and the buildings in vietnam and doing extremely well. India and these places will continue to be more volatile. Also with currency controls and the political shift, that is what makes it difficult. Carol, in terms of those larger markets, if we look at this chart on the bloomberg terminal, we can see Recession Risk rising in the u. K. , germany, china. When you are looking at markets you might want to avoid, are these on the list . Carol time horizon is the thing. Recession risks are rising. The u. K. , because they cant figure out how to handle brexit. Germany, overall challenges in europe. Have disclosure problems, accounting problems. Longterm, china is an amazing juggernaut. In the next 10 to 15 years, that will be the dominating markets in the world. President xi is brilliant. Time horizon is what you have to look at. Every time you construct a portfolio, look at your time horizon and put the investments in the right portfolio. Carol carol, thanks as always. Carol pepper, founder of pepper international. One company taking a beating is dell technologies. It cut its Sales Forecast for fiscal year 2020. Su keenan is following the after hours. Quarterly profit beat wall street estimates, but they dont like what they saw in the future. Gettingrosy outlook is the stock slammed. It is down as much as 4 . It is continuing lower during the conference call. The 2020 Sales Forecast disappointed. It slipped further off. Also, they missed on revenue. Again, revenue increased 1 to 22. 9 billion. They are paying 1. 1 billion in debt. That was part of the story. We mentioned quarterly profit beat estimates. Clearly, there is a focus on the outlook, particularly in this environment. They narrowed their guidance for 2020. 92. 5 billione range. That is slightly lower than before. Paul best buy coming to the rescue. What is the story . Su best buy is the poster child for the retailers fighting amazon. It is talking strong holiday season. Lets go to the regular retail sector. You can see how it lifted many boats. Dicks Sporting Goods is having tough sledding lately. Best buy up the digits. Dollar tree reported tariffs are hurting their bottom line. Lets go to best buys story. They are entering the season of the holiday on a positive note. They took analysts by surprise in terms of the strength of demand for tablets and smartphones and tech support. Easily beating projections. They are talking strong outlook for the holiday season. This is from last year. Notice you have a lot of shoppers lining up around the block before the store can open. They are predicting the same this season. Paul we have plenty more to come. Virtual bolstering its reality offerings with an acquisition of one of the offerings most popular games. We have the details in a moment. This is bloomberg. Shery this is bloomberg daybreak asia. Its facebook is bolstering Virtual Reality offerings with the acquisition of one of the industrys most popular games. The social network is buying the creator of beat saber to add to its existing oculus studio. Lets get to our tech reporter, kurt wagner. Tell us more about beat saber and why this is particularly important. Kurt this game is one of the most popular Virtual Reality games. It is a mixture of dance dance revolution with light sabers mixed in. It has gotten big in the last year and a half. When you look at an acquisition from someone like facebook, it shows they want to bring on good talent and bring on something that has hit mainstream in a way that a lot of Virtual Reality experiences happened. Havent. The issue when it comes to facebook and oculus, the technology is cool, but it has not gone mainstream in the way they initially thought. Maybe if you bring a game like this inhouse and give them the resources facebook has, maybe that can move Virtual Reality forward. Shery is this the beginning of more studio acquisitions . Kurt probably. As technology evolves, there is give and take about the benefits of the studio inhouse. Facebook and oculus have Developers Already on the payroll creating games like this. In this case, the beat saber crew will not be exclusive to oculus. They will make the game for other platforms. That gives you a sense of where we are as a vr industry, that facebook does not feel it needs the exclusivity shows they want to drum up excitement for vr more broadly. I imagine that will involve buying other developers, or at least supporting other Developers Moving forward. Maybe they find a way to give them money in other ways. Shery to another major deal, ebay selling stub hub to its than 4 rival for more billion. Acquisitions will give its founder and ceo a chance to reunite with another company he helped launch. We asked baker whether he regretted parting ways with stub hub in the first place. I had differences with my cofounder. I was pushed out of the business, remained a large shareholder. Before that decision was made. If it were up to me, i never would have sold it. Costing me a pretty penny to rebuy it, but we think it is a Great Purchase for viagogo. Has been criticism about the secondary ticket market. Viagogo has gotten criticism about its practices in the. Stub hub has criticism in the u. S. What is the advantage to someone like me going through one of your platforms . The whole premise of our businesses is to create accessibility for fans to get access to tickets. We have to earn our business every day from consumers to do that. The benefit, putting the two together now, you can buy a ticket for anywhere in the world seamlessly. Fans want a frictionless experience. So part of these platforms across various industries boils down to how much users can trust the system. There have been cracks in that system that have caused a degree of mistrust, to the point where regulators felt the need to speak out about it. Aredo you ensure that folks seeing Something Real and priced at the share market value . Eric when you talk about viagogo and stub hub, we dont set and stub hub, we dont set the prices. The buyer knows they will get the tickets on time, the seller knows they will get a. Get paid. We are building transparency and trust with users. Do you think as you get bigger as a company, you will face more regulatory scrutiny . Eric fans want to buy and sell tickets. That is popular with people. It is important you are always putting the consumers first and doing everything you can to improve. When you are at a certain scale, it will be the subject of attention. We think this will be positive for everyone in the value chain. You talked about how you have a sentimental attachment to the business. Do you think you got a good price . I read a bunch of notes this morning on ebay, and they also the price was above expectations. All said the price was above expectations. Eric the reason we thought it was a fair deal for all involved when you talk about the complementary nature of these two businesses, where viagogo has everything in terms of a phenomenal distillation platform, and stubhub is great in the states, that is not anybody else could have created from this combination. We think we are in a unique position to make this a fair trade for both parties. Where do you see the live event trend going next . Clearly, there is huge demand for people to have these kinds of experiences. What is the next hotspot in that kind of market . Eric when you talk about live events, technology has changed so many things that people do, shopping from home. The one thing that has been consistent is live events continue to grow. That is because of the emotional and visceral connection fans have. It can never be duplicated. A global basis as folks get disposable income. They want to go to live events. The train is not going to stop anytime soon. Founderis viagogo and ceo. Xerox is ramping up the pressure on hp, planning to go directly to shareholders to present its case for a tie up. The latest on the deal. Writing to the board, xerox wanted to apologize for its aggressive tactics. Xerox will urge shareholders to persuade the hp board to do the right thing. Shery citigroup has been fined by the bank of england for years of inaccurate reporting about its capital and liquidity levels. The Regulation Authority says between june 2014 and december of last year, three u. K. City units have significant flaws in the system they use to give information to regulators, as well as failing internal governance. Paul swiss bankers facing more pressure. Institutional Shareholder Services is urging investors to vote againstthe banks remuneration report. Iss says all directors should share accountability. Plenty more to come on bloomberg. This is bloomberg. Shery this is bloomberg daybreak asia. The reserve bank of australia has discussed unconventional policy. It says the necessary conditions are some way off. A Bond Buying Program is an option as the cash rate is at a quarter of 1 . The threshold for such stimulus has not been reached yet. His comments come as the rba forced to revise inflation. New zealand decided against loosening mortgage lending cards as rates rekindle in the housing market. Loanbnz governor says rates will remain at current levels for now. He says low rates can boost inflation, but also promote debt and risktaking. China is proposing to tighten the supervision of its biggest banks with an annual review of sciences. Regulators led by the pboc have onfted new rules systematically important lenders. China is seeking to contain growing threats in the countrys 43 trillion Financial Sector as slowing growth drives bad levels higher. The government of indias richest state has collapsed after four days. The Coalition Led by Prime Minister modis party failed. A major setback for modis ambitions to govern all of indias states. It is home to the countrys two main stock market and capital city, mumbai. Global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Trade optimism is back as President Trump says talks with china are in the final throes. The positive signals come after negotiators spoke by phone, beijing saying both sides reached consensus on solving core issues. Lets cross to our senior trade editor. Is there a sense we may be getting close . When might we see see income paper . That is the big question. We are used to President Trump weighing in with his views of whether talks are going well, and if they are not, criticizing on twitter. Today is an up arrow day. The talks are progressing. That said, key issues are still being worked out. We hear things like intellectual property theft is still in issue that needs work from the two sides. That highlights how important some of these outstanding issues are. There is no deal yet. That is the bottom line i am taking from today. We are hearing good words, at least, not giving up hope words from donald trump. Looms the hong kong issue in the background. This is one beijing sees as a domestic matter. Secretary pompeo waiting in on elections. We congratulate the people of hong kong on free, Fair Elections on the 24th of november. The United States supports the fundamental freedoms of hong kong as guaranteed by the one country, two systems framework and aspirations of the hong kong people. Shery how does this affect the mood for any breakthrough in negotiations . Sarah any outright gesture by the Trump Administration to go against china interim in t erms of the hong kong issue would definitely sour the mood. Foreign policyre issue and the other is trained. They definitely intersect. It is some of the complexities the sides are dealing with. This is not happening in a vacuum. At any point, there could be a wider rift in the relationship t negotiate any deal. Always great to see you. We have heard from Senior Advisor Kellyanne Conway talk about the hong kong issue totally separate from the trade negotiations. President trump saying he wants to see things go well in hong kong. Can you separate the two . No. That is part of the price of doing business in Mainland China, which is why we do less there. Look at the nda. I hope President Trump went sign would sign the hong kong legislation, but at the same time condemn the reckless violence from the protesters. Being sympathetic to universal suffrage does not mean you can turn a blind eye to a beat cop getting slashed in the eye. We could see violence escalate after the prodemocracy candidates. Carrie lam did not get any concessions to the demonstrators. Advise your clients . Sean i think it is going to a bad place. I think hong kong is dying a slow death. Beijings goal is to run out the clock before people get the one person, one vote promise, which is supposed to have happened two years ago now. The violence, which i wish would stop, and political interference owneijing by beijings admission, it is whatever status we give hong kong, that is our business. That is not interfering in chinese affairs. Beijing should butt out of our internal affairs. Paul you make the point you cant separate the two issues of hong kong. Is in the final throes of negotiations. To what extent would letting those changes to the hong kong act create more problems on the trade front . Sean i think it would create more trade problems. That is fine with me. I dont think we should be doing business there anyway. This deal would just be a rolling back of tariffs, Mainland China buying agricultural goods they would have bought from us anyway. Our two systems are not compatible. Not our peoples. China is a communist oneparty state. It is not meant to be a free market economy. The u. S. Should give that up and look elsewhere to do business. Becomep were to let this law, i would expect beijing to react negatively. It could delay a deal, but that is fine with me. Paul it is all very well to say that, but china is the worlds second biggest economy. It is difficult to turn your back on a trading relationship with an economy of that size. Sean we dont necessarily turn our back, but we can minimize our reliance on it. Part of the reason it is the secondlargest economy is because we built it up. Companies leaving the United States, doing it to themselves. We need to make india and malaysia more attractive so that companies dont need china. I dont know why President Trump chose this time to pick so many fights with our trade allies, redo nafta in the middle of this, and leave tpp. The world is yearning for more business with china. We should choose our battles more typically more carefully. Function on the bloomberg showing u. S. Trade volume. China tops the list, but the next ones are mexico and canada. There, when, as you said, tpp is no longer a viable pathway . Sean vietnam is the biggest beneficiary. Shery even then, the Trump Administration acknowledged they are exporting so much more now . Sean those jobs are not going to come back to the United States. The u. S. Is only 5 of the world population. We will import from other countries. I would just not import from our number one geopolitical rival, china. I would rather import from vietnam. If it comes from vietnam, that is fine with me. That is why we should get back in tpp. Shery you are seeing the world as being completely separate from each other, but the supply chains are so interconnected already. Wouldnt this cause more harm than good . Why not try to find a more cooperative stance between the two . Sean i think the supply chains are already reorienting themselves. They have already gone to other countries. By fighting with our friends and allies at the same time, we will not lock in these gains for the longterm. Shery we also heard from Henry Kissinger at the new Economy Forum in beijing, saying we are in the foothills of the cold war. He warned this is different than the situation with the u. S. And soviet union. China is such a massive power. Would the cost outweigh the benefit of having the separation based on the different civilizations . Sean i dont buy this decoupling argument. We are not coupled to begin with. The cold war we did not do business with the soviet union. China it was their number one trading partner. It is not like a total eastwest divide like it was in the cold war. The less business we can do with china longterm i think is in our geostrategic interest. We cant turn our back fully, but we should minimize our exposure. Shery Park Strategies Senior Vice President , sean king. Another country rocked by unrest, chile. The president announced an Economic Reconstruction Program to rebuild the economy. Proposals go to congress in the next few days after weeks of social unrest. The former president told bloomberg how she is reading the current situation. It is in chile, but unfortunately in other places as well. It is linked to people who feel they do not have equal access to different opportunities and rights, and they dont want to accept that anymore. I think it is important governments listen to the people. You think the government and police in chile dont listen to the protesters . There has been a lot of criticism of the tactics of the police force at the moment. With all can say is the problems we have seen theye, governments have to listen to what the protesters are protesting for, and the solution they want to convey to the government. All governments. Chile has responded with law enforcement. Team to have a whole conclusion. Sent messages of my concerns about what is happening, what kinds of injuries we have seen, and to look at these protocols. Like there has been certain difficulties with the protocols if we look at the damage in relations, etc. But, i would wait until my team would come and gave a full report. What we need to do is do the report, but mainly recommendation. Do you feel the social unrest will go out . I hope there will be an important political dialogue and a new constitution. In my government, i worked on a new constitution. We sent a project for parliament, but then it was stopped there. I hope there is a new discussion. We did participatory consultation. 200,000 people participated. This bill was built on the discussion of the people. Now the government has said they will do the same. I hope that can be an opportunity to listen to the demands and finds the ways to get out the crisis. I think chile is a country that has great possibilities. I hope there is political will from all sides to develop a specific dialogue, plus social measures that to be taken in in improvingken salaries, pensions, health, education, etc. Human rights commissioner and u. N. High commissioner Michelle Bachelet speaking to bloomberg. Lets get to sophie for a check on markets. Sophie a stock was raised at goldman, rising to an august 30 high after the company confirmed its costcutting efforts were on track. Westpac resuming declines, falling for a fifth session and headed for a fourth weekly drop as shareholders call for more changes to the board. Analysts expect the lender will have to pay an estimated 679 million fine. Taking a look at the bigger picture, gains for the asx 200, just holding on 6800 points. Index climbs for a fourth straight session. Aussie yields are sliding across the curve. This morning, the threeyear has fallen below the rbas cash rate. Declines having tracked similar moves we saw in treasuries. Paul still to come, softbank exception, is an rather than a symptom of broader problems. Itselve into why investment model is under fire. This is bloomberg. Shery this is bloomberg daybreak asia. Im shery ahn in new york. Sean after the wework fiasco, softbanks investment model is under fire. Now the companys accounting is drawing scrutiny as softbank provides little transparency of the profit gains on its income statement. Lets get over to pavel in tokyo for more. How does softbanks accounting model work . Why is this drawing scrutiny . Pavel we took a deep dive in their evaluation practices with their vision fund. It was a twopart question. Did vision fund play a role in inflating startups . How does Softbank Bank those gains . You have been concerns a fund of that size, a 100 billion Investment Fund, is bound to draw out valuations. We have seen anecdotes trickle out of founders speaking to 100 million and walking out with 1 billion. We have plenty of deals to look at. We look at notable investments like oil, doordash, and seen a pattern of steep valuation gains every time softbank took part in the rent. Of course, there is no smoking gun. In softbanks defense, they were investing on the side of very andied terms like sequoia corporates like toyota. The scale at which they operate they have 88 companies on their portfolio, many of them are unicorns. They have to reevaluate the revaluations of them every quarter. The process follows the accounting rules, but it is a complete black box. You have these valuation rounds. For comes out is profit softbanks balance sheet. Shery as you say, this is because we are trying to value these yous. Is it value these unicorns. Is it a problem of softbank, or are the rules too archaic . Pavel we did not make decisions about the rules themselves. By all accounts, softbank crosses their ts and ots their is. What we do know is softbank is not shy about those paper gains. In the second year, the number shot up to 11. With the wework fiasco, the question is whether this can continue. In the most recent quarter they took a 6. 5 billion loss. That is not even accounting for potential devaluations of grab, all the ridehailing Companies Held privately now being measured against uber. Admits wework is a mistake, but says that is the last one and it is business as usual for the vision fund. Unfortunately, the stock market does not see it that way. The discount between what softbank thinks the company is worth and what the market is showing is 60 , the whitest in quite a while widest in quite a while. Shery what does this mean for the vision fund . Billionhat is another dollar question. It is not clear what the other limited partners will follow up. The initial closing has been a modest 2 billion. The big ocean is whether saudi is whetheruestion saudi arabia and abu dhabis Investment Fund will double up. Far, they have stayed on the sidelines. Without them, it is not clear whether the vision fund can hope toe scale they keep this up. Shery a fascinating look into the bookkeeping of softbank. More ahead on bloomberg daybreak asia. This is bloomberg. Paul you are watching bloomberg daybreak asia. Lets get a quick check of the latest business headlines. Dell rose after the bell on quarterly profits beat expectations, a sign demand for computer hardware remains strong. Adjusted revenue rose a little over 1 . Financial said to be raising 1 billion to invest for startups in southeast asia. It will focus on Digital Payments and the Online Finance world to strengthen International Markets. One of chinas biggest Drinks Companies is weighing an ipo that could raise one billion u. S. Dollars. It is working with Financial Advisors for the potential share sell. The offering could happen as soon as next year. It makes bottled water, juices, tea, and soft drinks. Shery markets in seoul open at the top of the hour. Sophie a mixed start in asia with the nikkei showing gains for a fourth session. Little change to the downside. Yen trading above 109. Fresh catalysts not to be seen as volatility continues to flatline during the holidayshortened week in the u. S. Futures higher than a narrow range after a rally tuesday on a strong for your option that confirmed appetite for positive maturities. Treasuries lower after yields fell overnight. Yields willexpects climb in the second half of 2020 with the u. S. 10 year rising to 205 basis points on improving growth. Paul still to come on the next hour, head of asian equities strategy joins us to discuss why their outlook for asia next year is decent, but not great. Is bloomberg. Asias major markets have just opened for trade. Good morning. Asia. Come to daybreak top stories this wednesday, new optimism about trade talks. President trump says negotiations are omicron the final throes. Highstreet extends record. Investors are not sure. Weak signals from china. Shareholders are urged to vote against the board. They may have to plead for funds to pay for any fines. Japan and south korea coming back online. All that trade optimism is translating into markets. We are seeing that indeed. You have the nikkei 225 five up 0. 1 the tokyo share market thes to be on a roll with two to five at a oneyear high despite the rise in bearishness. We are seeing gains on the cost be the sole benchmark up 0. 7 . Also being gauging reaction to the be ok bok. We are seeing the asx above the 6800 level, tough to crack as the index is rising for a fourth straight session. We are seeing aussie yields flip across the curve on the rba governor dismissing qe. Citi reversing its calls for qe. The rate has fallen below the rba cash trade, falling every day this week. We have the u. S. 10 year yield little changed. The first word news now. The main road tunnel connecting hong kong has been reopened after being closed for two weeks following protest vandalism. Hong kongs Polytechnic University siege seems to be winding down. Just one person remaining. Other peopley says are avoiding arrest. Sterling weakens as surveys indicate Boris Johnsons conservative party may be losing speed ahead of next weeks election. Labor making up some ground. Parliament raises the prospect of brexit directing into the new year. One and a half billion dollars into the aramco ipo as saudi arabia cannot find a neighbor to support the deal. It has earned only tepid interest elsewhere. Abu dhabi will make the investment through one or more state linked bodies. It would be a relief for riata yhadr original for ri after a legal battle over how millions the private arbitration hearings mean the case would be determined without public scrutiny. 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Paul . Paul thanks. Our next guest says conditions are in place for a decent, not great, equity return in asia in 2020. Earnings may recover after two years of stagnation. Joining us from hong kong is the Societe Generale head of asia equity strategy thank you for joining us today. Lets start with positive news we have had on the trade front. President trump saying we are in the final throes, interesting choice of words. Throes are usually associated with childbirth and death. Is that an apt description . It has been quite some time stage i has been discussed. We think stage one has already been priced in. At the stocks, they have been very sensitive to the trade war. They have not been doing so well since september. We have seen chinese currency reappreciating again. I think it is already very well priced. Paul that notwithstanding, are you saying investors should hedge the rest of trade wars, the coming of financial war how great a risk to think that is . Do you think that is . Seen the u. S. The u. S. Treating investor to invest in chinese if this isand happening, depending on this on if this war would happen, it would make the economic extension between the u. S. And china more serious. It is athink is that very remote risk at the moment. What would happen is action specific number of companies which are involved in very specific sectors. Investor inanother the market. One of the reasons we have been bullish the onshore liquidity isket for most of the year the equity risk premium is very high on chinese equity, declining. Level ofng to the other markets. Now there is a risk if we see further restriction, some questioned the integration of a company within the global system, we could see the risk asset trend increasing again. Shery we have seen the mainland markets stall since april. We have to note that the shanghai comp is still up 18 year to date. How much more room delay have to rise . Will we keep seeing the diversions with the hang seng index given the unrest over there . Been comparing our marketasm of the chinese on the onshore market, there is an increasingly narrow leadership. This one, valuation is becoming high. Also what we are seeing is we negative. Pi the cpi still rising. It is not a good combination. I think for us there is a longterm picture on the chinese equity. 2020 will not be as good as 2019. Shery on the hang seng index, can it recover it recover going into next year . There seems to be no resolution to the protest the protests that there. What im looking at in the hong kong equity markets is the previous p or bang the previous period of recession. 2008 and today. The level of valuation today is much higher than the current position, the recession. Given we have this certainty on earnings and the risk on the market, i think we should remain cautious on the Hong Kong Market. Chineser to be on the onshore markets. Confidence does alibabas Successful Listing give you and other investors when it comes to the broader Hong Kong Market . Of confidence in the market. Difficult to find any challenge hong kong as a financial center. It is interesting the idea of now alibaba is a specific case. A lot ofhere was exposure on the company. We should not draw too much conclusion about the one ipo. Are sticking around. We still have plenty more to discuss. Lets check on what stocks are moving this morning. I want to highlight toshiba in tokyo rising 4. 6 on a report the Tokyo Exchange plans to ease requirements for moving to the main market as soon as 2020. The rule change would help toshiba return to the main market faster. Come, westpacs ceo has resigned. While the lender is still under pressure. This is bloomberg. Paul this is daybreak asia. Us, thetill with Societe Generale head of equity strategy. Let me start on your overweight call on south korea and taiwan. How much of this is based on your assessment that semis might be bottoming out and whether the tech cycle is also seeing more positive signs . We were seeing the previous quarter some signs of the tech cycle bottoming out. We can see the Semiconductor Sector recovering. Memorysee the price of also starting to rise. Whether you look at the , you have a number of signs. We took a less negative view on the current market. We think the good run that we have has some legs. Korea is a good combination of the industrial company, the cyclical company, and the value market. Market. To be on this it is very much a tactical one. I would say taiwan, the quality of earnings is higher. We see less volatility. Is remains a great market next year. Those markets are vulnerable to the latest trade headlines, right . This could be a potential challenge. They are vulnerable. At the same time, especially the taiwanese market is one of the trade tension. You have a number of companies in taiwan which have benefited disruption in the global value share. Is the view that we are taking on the trade tension is there is a aescalation, and that is wonderful scenario for 2020. There are going to be elsewhere. Ons in trade, but more export control. Risk moving. Paul one economy has been insulated from the trade upheaval is india. I know you like opportunities in india despite easing growth, but look at this chart on the bloomberg terminal. We can see the indian midcaps have been slipping lower. You view that is a buying opportunity . Or would you be looking elsewhere . There is valuation on a number of sectors in india market we this is a stopped to look more positively since we have the tax reform in , a first step toward more reform. This is an economy slowing down. Not very exciting in terms of growth. What we like in the case of ability to pass new reform. We see a number of sectors which are interesting. There has been one big issue which has impacted growth around the banking sector, which has impacted trading growth, which has been slowing very much. Some recovery of the credit make it more attractive. Reform, arems of there Political Risks surrounding that . We have been hearing the coalition government, the home state of mumbai, collapsed after just forming days. Labor reforms are attracting opposition from union movements. India has a very lively political scene. How do you protect yourself against Political Risk . Ofwe are talking emergingmarket investing. We know that risk and we know there is a Political Risk. We have thethat, mandate that has been one has been has been won done with wide majorities. To implement the program proposed. There will be hurdles. On the mainthat concern that we would see on india would not be very much on the political side, but more on a certain part of the market, on staples which are trading, the earnings. This is a major risk. Other risks are external. Way, especially in toia, they have been looking have a relatively moderate price. Shery you like india over indonesia, but we have seen some activists dont investors dont like indonesia because it has a market friendly cabinet. Why are you not liking indonesia that much . Just quickly. In both cases, growth is being done, but we find reforms that are more in india than indonesia. It can be a good market on the long side but we would like to 5 ,more growth rate, about before being more excited on the equity market. The Societe Generale head of equity strategy in asia. Thank you. Discuss what is next for westpac. Paul this is daybreak asia p or daybreak asia. To eliminate 50 of its workforce in germany to lift earnings by 6 billion as the groups best profit maker pushes ahead with a costly transition to electric cars. The turnaround is aimed at regaining ground lost to luxury tomakers like bmw and counter pressure from tesla. To cut 10,000 jobs from its home market by 2025. Paul fairly 24 hours after up, the. K. Future intention of launching a ridehailing Service Within weeks. He wanted to open in london before the end of the year. Into january. Pped the company is already in other u. K. Cities, birmingham and bristol. Shery softbank has more scrutiny over investment after the ceo of a dog walking app announced she was leaving the company. Hillary schneider joined wag around the same time softbank invested 300 million in the startup. Wag has been exploring a sale that will see less than that. Westpac remains under pressure even after the resignation of the ceo. Shareholder advisors are calling for more changes to the board. Matthew burgess joins us now from melbourne. What is being recommended here . Investor Shareholder Services, a very important proxy Advisory Firm has recommended shareholders voting against the report and against the reelection of two caskey Company Directors as well as the atrium on december the agm on december 12. It comes the day after the ceo step down in the chairmen said he was going to bring forward his retirement from the board as well. That process carried out hopingay was essentially to stave off investor fury. That may not be the case with this recommendation coming down. Shery how much weight does this have . Iss is fairly influential in australia. Globally they have 2000 institutional clients. When it comes to westpac, i have been told it covers roughly 50 of their shareholder base. We do have to put a caveat on this. It is just a recommendation from a proxy firm. Funds themselves, especially the they will be, looking at what westpac is doing and also advice from other funds to make their own recommendations when it comes to the agm in a couple weeks and how they are going to vote for that. We know another influential phone in australia, they want to see more for renewal. They are suggesting they are looking out for renewal next year. We dont know their recommendations yet for voting. Thats going to be coming out in the next couple of days from sources, not from the pension fund themselves. We wait to see what happens. They had a meeting with westpac monday morning. A meeting thats was already organized. As you can imagine, with the allegations that came out last week on moneylaundering, at the time there has been shift their. Shery our bloomberg reporter joining us from melbourne. Thank you. Coming up, early indicators point to a continuing slowdown in chinas economy in november. We will get reaction from Credit Agricole in just a moment. This is daybreak asia. Of australiaank has discussed unconventional policy. Said a buying program is an option at a cash rate of 0. 25 . The threshold for such stimulus has not been reached yet. His comment comes after speculation the rba will be forced to turn to unorthodox message methods to revive inflation. Inst asland decided aga Mortgage Rates activity in the housing market. Value strictures will remain at current levels for now. He said low rates can boost inflation and jobs but warned they can also promote debt and risktaking. Hong kongs exports declined for a 12 straight month in october with ryan and recession amid the ongoing trade and unrest. A 9 drop from a year ago. 11. 5 from aby year ago, narrowing the trade usd. It to 4 billion the Coalition Led by Prime Minister modi failed to form a majority. Modis major setback for ambition to govern all of indias estate indias states. News 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. Shery thank you. Let us turn to sophie for another check of the market. Sessiona tepid risk on for another record day on wall street. Stocks rising for a fourth day. Holdingar index just onto a six day winning streak. We have the cost be gaining ground adding 0. 4 . The rebound we saw in korean consumer confidence. The nikkei two gains. Ratios the put to call has risen. Investors optimistic about japanese stocks. Lets check on bonds, which are gaining ground. Bonds falling five basis points across the curve as rba odds have firmed up after governor low ruled out qe. S p has warned australias aaa Credit Rating is at risk if stimulus is deployed by the government. Chinese industrial profits are due later this morning, which likely fell in october. Here is a look at a bloomberg gauge wihich aggregates indicators on the mainland pointing to a seventh month for trade, sales, and factory sentiment worsening. Let us get a little bit more on that, chinas economy. Joining us from hong kong we have the chief china economist and senior emerging strategist at Credit Agricole. I want to get your thoughts on the chart sophie was showing. And what it means for what we can expect later this morning. It seems investor profits continue to track quite rapidly. Similar to what we saw. Stabilization of the pace of contraction. When it comes to sentiment, it will be improvement. It tends to look better in november. We need to reap something from progress. There is positive momentum with negotiations. The majorve been reason why sentiment has declined earlier this year. There is real hope for a breakthrough. Things would improve. Much of those numbers can you blame the trade war on . Is there Something Else happening in china . Structural issues as well causing downturn in growth. Issues, are structural the main one being trends which have led to a drop in economic access for the population. Declined,ayrolls which was negative growth last year for the first time in several years. Fewer people actually getting jobs. The jobs paid more. There was a declining number of recipients. If you look at the results in car sales, you also delay the of credit to investments. Spending in china looked good earlier this year. Is subtracting 1 growth this year. We subtract from growth next year. It is a headwind. If the cloud lifts or stops darkening, there will be better conditions for stabilization of momentum. President trump talking about it being himself holding up the deal with china. He is right now at the moment speaking at a keep America Great rally in florida. We continue to see fraying negotiations between the two sides. The president said he continues to speak to president xi jinping , although there are many issues left unresolved. Let me return to the chinese economy. There are challenges there. Be solved by fiscal stimulus from the government . They cannot. Fiscal stimulus is a shortterm boost. Propensity and the need to bring down over leveraging. Longterm issues that are unrelated to what fiscal policy can do. However, if pressure from external factors remains significant, even with the hold of tariffs at the current level, it will be significant. Room for more fiscal stimulus. Iselieve fiscal easing something that will increase further next year. , which opens in november we expect. Governmentbroader next year and a broader public sector. , it is 6 to 7 of gdp likely to expand in 2020. Bar, given the swine fever outbreak in china, we have seen these targeted measures from the pboc whether it is the medium term facilities or the pr. Is that the trend we will continue to see . I do expect there will be more. Extremely minor in terms of their magnitude. We talked about the number of rate cuts in china, but only because they cut mediumterm lending in the longterm rate at separate times. It was one rate cut. Just five basis points. It is not really meaningful for the economy. The market rate will continue to rebound. They have moved higher. Unlikely we will see a intained decline in cost of demand market. What the central bank wants and needs to do is bring down the customers, especially businesses, are experiencing. Dont expect a lot. More will happen on the physical front than the volatile front with china. Front than the volatile front with china. Paul a record bond sale bringing in 6 billion. How much of a vote of confidence is that . It shows that global investors, most of them from around the world, are not concerned about chinas ability despite theebt trade wars. This is a major vote of confidence. Much thethink of how spread has tightened versus helpal guidance, it will nonsovereign issuers. The yield curve has been formed. It is helping the renminbi do better this week. They need to spend dollars outside of china. Will them onshore and that develop additional demand. They actually send it back to seven against the u. S. Dollar. Shery thank you for your thoughts. Thank you. If you are away from the screen you can find indepth analysis and the big newsmakers on Bloomberg Radio and broadcasting live from our brandnew studio in hong kong. Listen via the app or bloombergradio. Com. Shery this is daybreak asia go daybreak asia. Paul Bloomberg Intelligence says a smartphone maker may have missed sales estimates. Joining us to explain why is Bloomberg Intelligence senior analyst. We expect a significant slowdown in shipments for shall omi. Xia marketrall smartphone shows signs of recovery with 0. 8 growth. They are losing market share in china, the most profitable market, we believe. Xiaomi sells the most highend phones in china. Have been doing well in india and europe. Our concern is the most profitable in china may be challenging for xiaomi. The company may miss estimates. Felt much of an impact from the u. S. Ban on huawei . Huawei did very well. Rose more than 60 , in fact. Xiaomi shipments fell 30 . Wei is taking a hugely gaining hugely. Chip, itithout its own would be hard to enter the highend market. Shiphuawei continuing to in the domestic market because overseas,ficulty with that would be very difficult for xiaomi to revive shipment growth. Shery what about the Internet Services profit side of things . During the ipo two years ago, xiaomi said they would focus on selling chip handsets or at a very low margin, good price, in order to attract users of the operating system. With the user base they would cross into Internet Services. That generates the most Internet Services revenue for xiaomi. Area smartphone shipments not doing very well for xiaomi. That would hurt their internment their Internet Services revenue. With more overseas sales coming to fill the growth gap, overseas users, it is hard to generate revenue from them. They can use google. Competee local apps to against xiaomi. Shery thank you. Let us turn to another company. Debut. s hong kong joins usinions now. Are we expecting a revival of the Hong Kong Ipo market when it comes to those tech listings . Is the Hong Kong Ipo market has been incredibly resilient. There were a few big ipos the last few weeks despite the protests. Ipo that is like a stimulus for hong kong. Yes. This will draw other ipos and other tech firms, i think. Paul how about liquidity . Is that expected to improve in the Hong Kong Exchange . There was a stage when the quiddity in the u. S. Liquidity in the u. S. Was a quarter of hong kongs whole liquidity. That will definitely improve the liquidity of hong kong. Interest inot of chinese champions in this market. For joining so much us. Abu dhabi is planning to pour more than a billion dollars into aramco. We will have details. Asia. His is daybreak shery lets get a check of the business flash headlines. Westpac is facing more pressure. Investors are urged to go against the report in the reelection of tucows keyboard members. Board members. Ant financial is said to be raising funds to invest in startups. On digitalcus payments and Online Finance growth to strengthen mobile internet market positions. Players such as paytm, and has invested in 60 companies. Shery one of chinas biggest drink companies is weighing an ipo that could raise a billion u. S. Dollars. Bloomberg has been told they are working with advisors for the share sale. The offering could happen as soon as next year. They make bottled water, juice, tea, and soft drinks. Last year the company scrapped a decadelong plan for an ashares listing in china. Paul barely 24 hours after ubers u. K. Future was put into doubt. Has startedola signing up drivers in london with the intention of launching a ridehailing Service Within weeks. Wanted to open in lund up london before the end of the year. The company is already in birmingham and bristol. Shery abu dhabi is said to be ready to put 1. 5 million into the aramco ipo. Saudi arabia taps from the ,eighbors to support a deal finding only tepid interest elsewhere. This is the first concern for an investor in the aramco ipo. We heard china could be interested. How much do the saudis need this . Saudis. Big for the they started talking about this ipo more than two or three years ago. It was such a big deal it was going to rees 2 trillion. 100 billion. The company was going to get away from oil and gas. Reasons,a variety of it has failed almost at every single level. More recently, the company has had to turn away from International Investors and start weighing heavily on local investors to raise just 25 billion in the ipo, a fraction of what they thought they were going to get at a lower valuation. Getting a foreign company, even a neighbor and ally like abu dhabi, is a little bit of a face saver for saudi arabia. Paul why is abu dhabi interested . Question. A good you have saudi arabia on the one hand, an oilrich state trying to sell part of its oil company to raise money to get away from oil. You have abu dhabi, an oilrich emirate investing in oil. It is a strategic hedging option abu dhabi is doing. Most likely the crown prince of abu dhabi is friendly with saudi arabias crown prince. A mores like it is political idea to reach across to a neighbor and give them a boost then a strategic investment for abu dhabi. Shery have we heard any updates on a potential China Investment . How significant would that be if it came through . Pretty significant. We have been hearing very little. A bunch of Countries National , like malaysia, and the Singapore Investment firm, said they were going to shy away from saudi arabia and not become investors. We have not heard anything out of china. There are a lot of synergies there. China is the Worlds Biggest Oil importer. Saudi arabia is the Worlds Biggest Oil exporter. China is always going to be short oil. Saudi arabia is always going to be long oil. It is just a question of whether saudi arabia saudichinas Oil Companies or other state investment firms want to put money into an oil company while we are seeing valuations around the world plummet. Including those of chinas big three. Petro china, sinopec. Thanks so much for joining us. Lets get a preview of what to watch for markets later on this morning. Sophie . Sophie this wednesday, xiaomi thirdquarter results. Day two for alibaba in hong kong. Tencent bumped down to second place as hong kongs most valuable company by market cap. Investors waiting on the sidelines for now. Seeation decline could alibaba narrow that gap with tencent. There is the expectation alibaba will be added to the overseas funds are piling into chinese stocks. Tuesday march the largest net by for foreigners since 2016. Msci rebounding. A key data point this wednesday is Chinese Industrial profit. The pressure on mainland factories seems not to be letting up. Falling for a Third Straight month. Deepening deflation in the Manufacturing Sector is also a drag. Prices fell 1. 6 . Declining profits will reduce capacity for companies to boost investment as well as take on debt. Paul thanks, sophie. Before we hand over to the china open lets get a look at how we are trading. Green on the screen as we saw wall street setting a new record. The nikkei up 0. 4 . Positive territory in australia. We are also hearing from the reserve Bank Governor phil lowe saying qb in australia is further away. The cash rate would have to make it down to 0. 25 . Shery we are watching President Trump making remarks at the keep America Great rally in florida. This rally in the midst of that house impeachment inquiry which is shifting into a new phase with President Trump himself being invited to present his defense. Plenty more on the trade negotiations between the u. S. And china as well coming up. The china open is next. And beijing, 00 shanghai, and singapore. I am tom mackenzie. Yvonne im yvonne man. We get to the open of hong kong and mainland markets. David lets get your top stories today. Optimism about the trade talks. President trump says negotiations are in the final throes of going well and will continue. Yvonne President Trump is invited to testify when the impeachment inquiry starts a new phase next week. Tom when does state owned not always mean statesupported . We look at changing attitudes in china