Economy is set to end the year in contraction as months of protests take their toll. There is course for massive evacuations in australia as wildfires continue to burn amid a heatwave. Shery starting with breaking news out of south korea, we are getting industrial reduction numbers for november, contracting. 5 is missing esti. It was expected to stay flat. It is a stabilization after a fall of 1. 7 . The previous number for october was revised higher, contraction of 1. 6 . We are talking about a contraction of 0. 3 year on year, a stabilization from the decline of 2 in the previous months. We have seen some signs of stabilization in the wider region and chinas industrial profits showing a rebound of 5 . More signs we could see stabilization in the region. Up for then exports first 20 days of the month contracting 2 year on year. This coming after doubledigit declines in the past six months. Industal production, month on month by half of 1 , missing estimates but a smaller contraction than the previous month. Lets turn to sophie for the australian markets which have just opened. Stocks in sydney looking little changed after a threeday gain or the asx 200. Weighted the most. Looking like a mixed session early in the day. We have the kiwi benchmark adding. 1 . Metlife gaining ground in the looking at board, the eq team for structure. We are looking at losses per tokyo and seoul. We have output numbers from south korea later. And it will be hong kongs turn. It will be closely watched. Shery lets stay in hong kong because the financial secretary saying the economy is set to contract in the Fourth Quarter. It will be closely watched. This is after four months of social unrest. Thedy is surprised, given really bad retail Sales Numbers we have seen from hong kong. The were some precipitous falls. For chinas financial secretary, he said it is inevitable the economy will continue to contract into the Fourth Quarter. They forecast and annual contraction of 1. 3 for 2019. The first is for the hong kong economy since 2009. Ofsaid the competitiveness hong kongs commissioner commercial sectors remains robust and healthy. He said his speech will focus on reviving the economy, relieving social distress. Hong kongs economy is already in recession because it has been falling, the economy contracting for the last two quarters. Fourth quarter doesnt look like it will be better. Retail numbers falling, they plunged by the most on record. That months of the fourth straight quarter, fourth straight month of doubledigit rate doubledigit declines. By tourism has been impacted a fallin they are three quarters of total visitors to hong kong. The protests have dealt a severe blow to the economy, but the economy was already weakened by a Global Economic slowdown and the trade tensions. We would get the latest from the business economy, the trade balance out later this afternoon for the month of november. Paul the Hong Kong Government has implement policies to help to whether all of this, but does it address the underlying cause . What are the odds the purchase will continue into 2020 . Protest will continue into 2020 . The government has met one of the demands, the withdrawal of the extradition bill. The other four, the government is not budging on. Inton expect more protests 2020. We have seen protests being approved for the first of january, organized by the civil rights front. Some of the biggest rallies we have seen in the last few months. We can expect a big gathering. In the last few days we havent seen protests in the skill of the ones we saw a few weeks ago at the universities in hong kong. We have seen smaller scale intests breaking out, shopping malls and with an increasing focus on those businesses which are friendly towards beijing. There were protests more frequented by mainland chinese shoppers. There are several hundred people arrested over christmas week and the weekend because of the protesters. Some teargas was fired. No letup expected in 2020. Paul thank you. You can get more on the situation in hong kong and a roundup of the other stories you need to know to get your day going in todays edition of daybreak. Bloomberg subscribers can go to dayb on terminals. It is available in the bloomberg anywhere app. Lets check in on the first word headlines. Wildfires are expected to get worse in australia amid rising temperatures which will peak on new years eve. Have on acres of land land have burned, 950 homes destroyed. Prime minister Scott Morrison said volunteers battling in New South Wales will be compensated for their efforts. As this is a prolonged fire season, it is putting additional demands on our Fire Fighters in particular. It remains that the callouts have been more extensive than previous years going well and beyond and above what is normally expected of those engaged in quality or service. In volunteer service. Least 41 people are known to have been killed by a typhoon which hit Christmas Eve. Dozens more are still missing and injure and the damage to local crops and infrastructure totals near 20 million. The typhoon was the 21st cyclone to hit this year. Top white house aide says kim jongun may have reconsidered his socalled Christmas Gift to the u. S. Suggested a gift would be forthcoming after talks to stall nuclear talks. The White House Correspondent said the white house is ready to respond if they should resume testing longrange nuclear missiles. The ev race in china is revving up as nio reports earnings. We will discuss the prospect for carmakers. Shery will be joined by an asian macro strategist, to be talking about 2020 and the biggest risks ahead. This is bloomberg. This is bloomberg. This is daybreak asia. I am shery ahn. Paul i am paul allen. Asian stocks are wrapping up a year to remember for risk assets. Sophie kamaruddin has a recap. What were the highlights . Sophie asia and are set to close in the green after the worst rout in 2011. The tech sector led for the recovery. Jpmorgan is among strategists forecast a recovery for asian stocks next year. Optimism pushed taiwanese stocks to anand it climbed above 12,000 points. South Korean Companies are expected to register the most Profit Growth in the region because of the tech turnaround which helped the kospi rally 15 . Citi turned bullish. Japans rally is expected to along next hum year. Morgan stanley also bullish. She valuations in malaysia might not be appealing enough for some. Daiwa included but ubs expects the worst to be over. Investors setting a low bar in light of Political Risks and weak profit forecasts. People can be enticed with the hang seng trading around 11 times estimated earnings. That is compared to the 20 times. Shery our next guest says asian equities are wellpositioned for solid performance in 2020. Joining us now, the asia macro strategist. Great to have you with us. Lets start in hong kong. Valuations are attractive. I wonder if it is enough top so what is happening in the economy with the protests continuing. The businesswing outlook looks dimmer and dimmer. We are expecting another recession and quarter of contraction. To letation enough markets rise in hong kong . What happens on the political front is quite difficult to predict next year. We have a political election next year. The result would introduce sporadic volatility in the market so to speak. Overall we think the market has suffered a lot. The marketsng about specific to hong kong demand. Nice, forrgue it is if a tradetext protestds, and if the stabilizes a bit from what we witnessed over the course of this year, it is highly conditional, then the valuation would look quite attractive to the investors. It might not be as strong versus the other markets, but we might relatively more Interesting Times for the hong kong market. Where in the market would you see opportunities, perhaps parts of the market that are less vulnerable and exposed to the unrest . The consumption and property lie at the heart of this market. We have to say it is highly conditional on the political developments. Two sectors which have benefited from increased linkage to domestic demand from mainland could be set up for stabilization next year. Contingent onghly what happens on the political front. On the political front we had comments from chinas ambassador to the u. S. He expects the ambassador to honor commitments made, which none of us have seen the text of yet. It has implications for taiwan and hong kong. It is not hard to imagine scenarios where Political Risk over trade blows up. Homin we cant rule it out completely for next year but given what we have seen in the negotiation between the two countries, there are reasons to believe pragmatism will win at the end of the day for both sides. Ifecially for china, because you think about the political calendar, the u. S. , they might not necessarily get a much better deal if trump fails to win reelection. Is calling the situation down has benefits. Eyes onve china has its mediumterm reforms. There is interest in opening the markets. The rational grounds for both sides to make this deal work, even though the outliers are not completely pinned down. With the political question yeah. Paul go ahead. Homin with the political question, it is a sensitive topic, but and because of the new law, there will be periodic review of the hong kong status by the u. S. Government Going Forward. But touching that tool, changing the status of hong kong for the perspective of the u. S. Policymakers would be something of an extreme measure. It will be that of the last resort. Guests is our g isuess it is unlikely from our perspective something will be done about it. Next year. Paul lets talk about opportunities. I want to return to one of the charts sophie brought up. It shows how well tech performed in asia. If you look at 2020, with would tech feature strongly . What is your favorite sector . Homin tech will continue to be interesting for the region, but it is interesting in a way because the region is hardware focused compared to markets like the u. S. This year certainly with the growing optimism about the product cycle in the smartphone area and a lot of 5g as you pointed out earlier, is to theng to filter down markets in particular. Trend toexpect that continue next year. Balance wille continue to shift in favor of the hardware of the tech space and the consumer demands and Communications Part of the chinese market. That shift will continue. It will underpin a solid performance in sectors next year. In terms of the style of the equity markets, the story has been so far that absolute dominance of global tech especially in software, we will be able to sense the stories beginning shift. If you look at the performance of equity markets, they didnt perform that well compared to others where tech exposure is higher. 2020, the performance gap between north and south asia will be reduced. There will be more opportunities for markets Going Forward. It will be more diverse opportunities in 2020. The l performers of the software will not out performers will not be solid in 2020. Tech your point is on hardware in asia especially when we have these trade tensions not only between china and the u. S. Despite the fact we get a trade deal. The tech is still there not to mention japan and south korea have their own export issues. Will those weigh on these companies . Deal, the phase one assumption is both sides will be able to at least stick to the ceasefire that has been agreed. Obviously we have issues like huawei in the background potentially it could blow up again. It would provide risk to the markets. We have no choice but to monitor the situation. Overall in terms of creating the space for china, to have a bit of relief and have healing, we believe without the complete huawei, there is recovery in global trade and demand from elsewhere will provide good enough support for the sectors Going Forward in 2020. Regarding the dispute between south korea and japan, we believe that both countries are talking to each other. That is good news. It appears south korean producers in the Semi Conductor industry have been able to come up with alternative supplies for the final imports from japan. Outcome we will see is either south korean producers have enough alternative supplies to cope with this shop, or shock, or the solution countries come up with will compromise, given the more diplomatic tone they have been able to establish. After the Christmas Eve session. The Lombard Oda Asia macro strategist, thank you for joining us. Stay with us. This is bloomberg. President trump is facing criticism from political opponents and some supporters tweeting ating rew post to name the whistleblower. Lets get to ros krasny. So aside from the political criticism, is this even legal, exposing a whistleblower . Rosalind the answer is probably no. Severalspoken to whistleblower lawyers. Possiblyeved trump has violated one if not two laws. Certainly one of his duties is to protect whistleblower identity. By retweeting this post, he may have violated that law. There are a lot of people who are upset about this including some in the white house. Any are there going to be consequences . It is possible some of the lawyers representing the whistleblower could take legal action against trump. They could go to congress or the department of justice and say this needs to be looked into. At the the senate trial impeachment coming up for President Trump and there has been a lot of controversy over how that is likely to be configured by mitch mcconnell. I would think democratic lawmakers going into that would hold up this example, the say,leblower identity and president is not following the law and this needs to be discussed. Mcconnell willow handle that. Dozenrd from more than a senators who supposedly are committed to protecting whistleblowers as a whole senate caucus. It is focused on whistleblower protection, havent heard a people from them. From them. A peep maybe as more people come back, we will. Take can President Trump relief in that we didnt see a Christmas Gift from kim jongun . Ros anytime you get through kim jongun with the express, some big threats kim jongun making vague threats, it is a relief. Pyongyang is two days into a Central Committee meeting that is focused on north korean strong defensive measures. He is not backing down and more missile tests could be coming any day or week from now. It is unclear kind of communication areas with washington. We understand relations soured in the automatic dont think they have improved in the autumn and i dont think they have improved. You. Ros krasny, thank more to come. Stay with us. This is bloomberg. This is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Less trading day of 2019, pointe the asx weaker by 3 . Most sectors are lower. Looking at that picture, it doesnt look right. Hat is from the bushfires they are burning pretty much all the way around sydney at the moment. It is murky and unpleasant. For more on this, lets bring in our managing editor for australia and new zealand and johnson. Ed fight and new zealand johnson. Outsideve got smoke sydney. That is from about 105 burning across New South Wales. Out toe, 90 kilometers the northwest, the gossipers mountain fire. It is been burning has been burning several weeks. It has destroyed an area quite the size of singapore. Region oft gets lend victoria state, there is an extraordinary appeal from firefighting authorities yesterday. That was directed at 30,000 holidaymakers and 40,000 residents, get out now. Fire conditions are said to be so dangerous with temperature soaring to 42 degrees celsius, high wind and a threat of lightning strikes, they say it is not safe. Shery we have seen a petition asking for sydney to cancel their fireworks celebration for the new year. What impact are we seeing . Reporter a petition was signed by about 200,000 people to fireworksneys spectacle. They thought the money spent from the fireworks could be better spent helping the firefighting effort. The city council has rejected that and assured people it will be safe. It has assured people it is a revenue raiser for the local economy with tens if not hundreds of thousands of torists coming from overseas watch the spectacle. It would be insanity to cancel it. But the fireworks in sydney will be going ahead. They have been handled canceled in canberra. The smoke is too bad. Other festivals have been canceled in australia. The falls festival in lauren, the annual Music Festival on the great road down there, it has been canceled. About 9000 festivalgoers have been told to pack up and leave because of the danger of fires. Paul these have been burning for weeks. Some of the pictures were of volunteer firefighters who are unpaid. Scott morrison says they will be compensated for all of their work. Lets listen to what he had to say. This is a prolonged fire season and it is putting additional demands on our firefighters in particular. The callouts have been more extensive than in previous years, going well and above what is normally expected of those who are engaged in volunteer service. Expectede assistance but it is a reactive measure. Have we seen anything proactive . Reactives been a measure from the prime minister. He was rejecting calls days ago for payment to be made to the volunteer service, saying it spirit andmine the culture. The government has been on the back foot and it is showing a spotlight on their climate policies. It was the conservative government that scrapped the price on carbon emissions. Scott morrison is a champion of the coal industry. He has dismissed calls to step up efforts to cut australias theon emissions, saying country will meet its paris objectives at a cancer. At a canter. Shery lets turn to the markets in australia. They have been treating half an hour. Half an hour. Sophie you have a beta medicare themng ground after we saw study. Also highlight this one climbing representing a fiveyear cloud platform. Will start in a few weeks. I want to check in on aussie dollar. Trading is little changed, shrugging off the initial selling. The aussie unwinding all of the declines we saw in the back half of the year. This as the u. S. Dollar is on the retreat. ,he bloomberg dollar index steep drop for december. Putting the greenback on course for a quarterly decline of 2. 3 . It is going for a yearly loss. Shery for more on what to watch in markets, lets bring in our mliv strategist. We had a big announcement from the pboc. Changing the pricing. This chart shows how they have been using their oneyear benchmark lending rate, the line in white. They are saying they will get rid of that and convert existing loans to the new base of loan prime rate which is the line in red which is now 20 basis points lower. This sounds like an effective rate cut. Is that the case and will markets think of it that way . Indeed. The idea is to give them the message to markets that the pboc wants to continue to see lower rates for global for Good Companies. This is one of the key points they want to make. They dont believe Good Companies are getting lower lending rates they need to get their business done. The loan prime rate changes more frequently. The pboc has more control over this week. They can target it from with help from the repo rates. This is another step in liberalization of the markets in china. The china pboc is trying to get a more marketdriven response in Interest Rates. They dont want anyone to wait for long times to see whether Interest Rates change. They wanted to be driven by supply and demand want it to be driven by supply and demand. Those who become market focused, what will happen is lending rates will come down for the best companies but the companies on the periphery with lower credit ratings, costs could go up. This is in line with other Major Companies major countries where the weaker ones have to pay more and good ones pay less. This is what china is trying to steer the chinese economy towards. Paul which assets are going to benefit the most in early 2020 . We have governments financing vehicles which is the default. Are they indestructible thanks to passive government backing . Not necessarily. We are seeing a lot of defaults. The pboc has been allowing more and more companies to go under. The terms are not that huge compared to the size of the market but they are allowing people to stand up on their own and survive or not depending on the ability of the company and not because of who is behind them. What the pboc have done today is help sentiment overall. It is positive for some parts of the credit market as well. Edge,ople who are on the it will not be good news. This is what you would expect to see going into next year. China is allowing more people to make the choice whether they should be driven by the market rates which tells you one thing or the official rates, which is another story. They want more and more people to be in the supply and demand which is how they differentiate and distribute the way money is to is spread. It is not for everybody. Shery which is how they differentiate and thank you forr insights. You can follow more on this story and all of the trading on the markets live blog on the bloomberg at mliv go. You can get a rundown in one click. There is commentary and analysis. You can find out what is infecting what is affecting your investments now. Hong kongs economy is set to contract in the Fourth Quarter as the city reels from six months of violent financial unrest. They say it is inevitable negative growth will continue and the government will be less flexible using resources after an economic recession. Prodemocracy demonstrations are set to continue into the new year with police having approved a mass rally on new years day. Its has shot operations at refinery after protesters marched into the facility. 700 protesters blocked employee access to the refinery which processes between 25000 and 30,000 barrels a day. They are pumping more from their fields to make up for more. 37yearold man was arraigned on five counts of attempted murder after multiple stabbings in new neighborhood. Andrew cuomo described it as an act of domestic terrorism. President trump urged the nation to unite against antisemitism after multiple incidents targeting the Jewish Community in recent weeks. China electric carmaker nio unveiled the third major product in its lineup, while tesla will start delivering chinese build cars on monday, bringing more competition to the market. Selina wang joins us with more. Neo has been under financial difficulty. . Hat is the plan to stay of low selina stay afloat . Have tesla, and it is watching closely how exactly nio will be scaling back costs. They have been aggressive on marketing and Profit Development which has led them to burn cash faster than tesla. They laid off employees. In september they announced the ceo and tencent would be taking ofdred Million Dollars convertible notes to help financing and that they would restructure businesses and stave off noncore businesses. Despite these efforts, analysts they dont ramp up, get more financing and continue to lower costs faster, they may not sustain very long. Over the weekend they announced their third production model. William lee remained optimistic they will fend off competitors. They have been fueling demands with efforts including 0 interest for three years in guaranteed subsidies for cars registered before the end of 2020. We have predictors and analysts predicting demand will climb 44 to nearly 30,000 vehicles. Things are turning up for nio. Financial issues remain. Shery not to mention more competition. Today the first made in china tesla cars. What are we expecting . Thena we are awaiting first 15 units of the made in china cars from the shanghai giga factory to be delivered to its employees. Fullys chinas first owned foreign car plants. It is teslas first outside the united states. It is symbolic in terms of elon for the Largest Electric vehicle market. They have built Close Relationships with the Chinese Government which have been on display considering how fast the plants have ramped up. Tesla announced it would get a list of vehicles qualify for exemption from a 10 purchase task purchase tax in china. You have competitors like nio down,hers doubling mercedesbenz and dfw bmw. There has been an unprecedented slump amid the economic downturn. You had falls because china was scaling back subsidies. Despite this, the signal for tesla has been strong. We saw new registrations in tona jump 14 in november more than 5000. Elon musk has very ambitious targets and it has yet to be seen if they will reach those. Elon musk said he wanted more than 1000 cars produce a week before the end of the year. That will not happen. Produced a week before the end of the year. That will not happen. Shery thank you. Our china correspondent. A screen, away from you can find indepth analysis and the days big news makers days big newsmakers on the app. Bloombergradio. Com. This is bloomberg. Hong kongs economy is really from months of protests which have scared tourists away and smashed retail sales. The property sector has proven resilient. The chairman said while the impasse will end eventually, he sees unrest elsewhere. It is more than hong kong. It is a sea change in the world, and there will be more of it. The technology being used by the rioters in hong kong is the most advanced. That will continue and many people are learning from them. I wonder where the rioters learned it from. I suppose the difference between what is going on in hong kong and the other Different Things is the political framework doesnt seem to allow for any resolution between the protesters and lawmakers. Riots anywhere in the world continue tend to move in the same pattern. I think hong kong will probably follow in general terms that pattern. Ehey will have to becom political solution then i cannot be just initiated from hong kong. It will have to be something haidi Economic Conditions are looking [indiscernible] retail is down, to resume is down. How has it affected your business . Ronnie Hong Kong Retail rent is down. We will break even for hong kong rentals this year. Thank god our maintain mainland retailer is doing well. Have till hoping to aiming at even doubledigit total rental. We will see. Haidwill be solved in hong kong, that the raqqa economy will recor from this . We have not increased our hong kong portfolio for a long time. It is mainly mainland china. They are growing at 6 . Hong kong is growing at 2 . Where do you want to be . We have a chance to make money. Hong kong is a mature market. There is a lot of good players. Why bother . Haidi what would you like to see from ronnie carrie lam . Ronnie the better question is what total package solution can it be . I dont think [indiscernible] haidi what would beijings next moves be . Ronnie i have no idea. If i did, i would not be sitting here. Haidi do you feel this impasse can be broken . Ronnie yes. Every problem is eventually passed. Doesnt matter what form or shape they will be. Hong kong be hurt. How much can we recover is a question. The Financial Sector will still be fine. There is not a lot of alternatives. Haidi with the mortgage little has, very quality unrest. Has it made a difference . Ronnie it is not meant to quell unrest. I havent seen the sales, residential sales in terms of price drop that much. That is a good sign. Haidi we are sitting in singapore. We are talking about the impact of rising Interest Rates, the doves have taken control of the fed and a number of other central banks. Has this affected Monetary Policy . Ronnie my company is a little strange. Mainly ly give and Interest Rate doesnt affect us that much. It affects a lot of people but not us. Where do you see opportunity . You talked about mainland china. Ronnie luxury, retail, Shopping Center business. Mainland china is beginning to scratch the surface. Other people say it is a hotly contested if you are in the space,three star competition is not that keen. There is only five of us, mostly from hong kong, that know how to do luxury malls. China is humongous. It is 100 one million. Something like 90 cities over 3 million. There are tons of afor his busi. Haidi you are still banking and putting money behind the luxury Chinese Consumer even as the country is gripped by economic slowdown, a trade war, geopolitical tensions. All of those problems are actual situations but my business is a longterm growth. From the day i lay eyes on a field of land until i opened the Shopping Centers, if i do it in 10 years, i am doing it well. Haidi we had an optimistic conversation so far. Actually it is Getting Better for people like me. I am seeing more opportunities. If the economy overall slows down, which may be inevitable does, there are opportunities for me to buy land. Paul ronnie chan, Hang Seng Group chairman. Alerto get you across an on the bloomberg. We have got grabbed holdings apparently partnering with singtel to apply for a full Digital Banking license in singapore. It is one of southeast asias Largest Online businesses, does everything from ridesharing to finance, would take a 60 stake in the finance. Singtel, the Largest Telecom firm, would take the other 40 . The Monetary Authority of singapore announced earlier they would grant up to five virtual banking licenses. We have grab and singtel giving up together. This is bloomberg. This is bloomberg. Shery markets open in tokyo and seoul at the top of the hour. Lets turn to sophie. Sophie the kospi could see losses. Begin futures on the pressure ahead of the holiday for japanese markets tuesday to friday. In tokyo we are watching softbank as the fast ceo leaves the board after 18 years. He is one of the few Board Members who could go after masayoshi son. And to stem the profit slide. Toyota in view after being fined by the anticorruption regulator. A former government minister as new ceo after a scandal over improper sales practices and insurance. Thank you. In the next hour of daybreak asia, and bmg group cofounder and managing cofounder paul goebbels will join us. Stay with us. This is bloomberg. Good morning, i am paul allen in sydney. Asias markets have just opened for trade. I am shery ahn. Sophie i am sophie kamaruddin. Welcome to daybreak asia. Paul our top stories this monday, volumes may be low but sentiment seems high as markets enjoy a year and recovery. Can the yuletide cheer continue this week . The financial secretary says the economy is set to end of the year