Index to session lows in the final halfhour. Asian markets face an uncertain retention ofs want u. S. Actions. Meanwhile, hong kong braces for what could be the biggest protesting month as the City Government needs to discuss criminalizing disrespect for chinas National Anthem. Haidi lets get a look at the markets, which are being jolted by prospects of more u. S. China tensions, the prospect of these further sanctions from washington to beijing as well as Key Developments in hong kong as we get the second reading of this controversial bill as well as the expectations of more protests. Held by newg upside zealand markets. We heard from the annual testimony report there could be more mobility to the countrys Financial Institutions, hearing from the governor. Upside in kiwi trading at the moment. U. S. Futures stumbling. A little downside when it comes to trading in the futures on the back of the failure to hold onto the key psychological 3000 level for the snp, geopolitical concerns getting the best of investors overnight. Japanese futures looking flat as well as the situation here in australia potentially still looking to extend that rally of 3 yesterday, which takes us to the levels highest since early march. A quick note on wti. A bit of a pause in the oil rally on hints that russia is intending to scale back on production curves as early as july as well as increased tensions between china and the u. S. , putting doubt over the recovery for demands. Lets get back to the top story. Hong kong is bracing for perhaps the biggest day of unrest we have seen in months. Fresh protests are being called by student groups and a prominent trade union. The rallies are planned to demonstrate against National Security laws planned by beijing and local legislation that was criminalized disrespect of chinas National Anthem. Stephen engle joins us. What are we expect today . Reporter potentially a big day on the streets of hong kong. I am already getting messages on the local Community Chat saying police roadblocks were put up in place like the Eastern Harbor tunnel. This is anecdotal evidence that perhaps police are trying to curb the gathering of people today because as you rightfully said, the Hong Kong Confederation of trade unions representing 145,000 Union Members calling for a general strike in opposition to this National Security law proposal in beijing, and also the planned rally in front of the Legislative Council today in opposition to this national either way, which carrie lam, the chief executive, had said in the past that it is a priority. This would criminalize any disrespect of chinas National Anthem. Civil liberties groups saying this is a curb on freedom of expression. Thats why a number of High School Student groups, more than a dozen of these groups, have also called for a strike today despite just having gone back to school after the Coronavirus Closures just last week. Social media statements are being passed around calling on students to stand up for their freedom of expression, which they say is guaranteed in the basic law. Cable tv and local media reporting about 3500 riot police are deployed. I passed by the main government areas of the main government offices yesterday along the central waterfront. Many roads are blocked by barricades filled with water and metal barricades. It will be slow going on the morning commute if not already. Plaher big question, the put out a big statement yesterday saying that it is ready to carry out any national laws. It has been confined to the barracks since 1997 but the army seems to be emboldened by beijings new directives and the commander of the Hong Kong Garrison yesterday said they will firmly implement chinas implementnd plans to the one country, two system principal and discharge duties in accordance with the law. A bit ominous coming from the pla. Getting more from washington on how the u. S. Could respond. Could we see any of that being translated into real action . Reporter the big damocles among many, including the pla, and hong kong is the law donald trump signed into law a lot late last week. By the way, the u. S. State department is due to shortly make a decision on whether to certify whether hong kong has its high level of autonomy as promised under that basic law. Not to beetermined the case, the United States could revoke the favorable trading status that it basically gives to hong kong. Essentially or could potentially kill hong kongs role as an International Finance hub. People familiar with the situation say the u. S. Is considering a range of possible sanctions to punish china for the new National Security law including possibly declaring hong kong has lost its high degree of autonomy. Treasury could also impose controls on transaction as well as freeze assets of chinese officials and businesses. This is according to two sources telling bloomberg news. Other measures they say are being mauled. Nothing has been decided yet. Other measures include possible visa restrictions for party members. It is a significant story and one that the markets took a lot of credence and overnight. In overnight. Haidi a lot of supporters of the National Security bill are saying it will not make any difference if you are a hong kong person or someone doing business, you wont even kind of notice it is there. What are the arguments against that . What are the ways we could see this play out . Reporter a number of officials, both half chinese and hong kong, have come out in the last few days after this bombshell that the National Legislation would be basically circumventing any attempt by the local government that has tried since 1990 seven to pass article 23 as is required by hong kong law, which is the antisubversion secure the law and the local legislation. They have been trying to assuage fears saying for 90 or some of the population that is lawabiding, they would not be affected by the new law. However, there are pockets of the law that could affect the freedoms and independence of the judiciary that have raised a lot of concerns. The ministry of Foreign Affairs in beijing has said the new laws would not affect the independent judicial powers of hong kong courts. However, the Bar Association monday openly put out a statement saying they are worried about the language used in drafts of the law they have seen already. Reuters is citing unidentified people saying the new laws could possibly block foreign judges in hong kong from handling National Security trials and that central and security Government Agencies would set up in hong kong as part of the legislation. There are tentacles that we dont know how far they will reach into Hong Kong Society and the freedoms hong kong enjoys right now, because including carrie lam yesterday not willing to give any details on what is in the drafts of this legislation, which is due to be passed by the National Peoples congress tomorrow. So it is being fast tracked. Shery our chief north asia correspondent Stephen Engle with the latest. Coming up, we will be joined by hong kongs secretary for justice and also the vice chairwoman of the basic law committee. Plus, a veteran prodemocracy member. Lets get to first word news. Reporter we started in china were early Economic Indicators show the country is inching out of the coronavirus slump with Business Sentiment rising despite a bleak mobile picture. Small Companies Say they are more confident this month since they were since the production pandemic struck. Production expanded in april although consumption and imports continue to shrink. Indonesia has deployed army to enforce social distancing as virus infections tapped out on reopening on the economy. Almost 350,000 personnel will guard public transport, shopping malls, and tourist sites. Malaysia shot its saw its biggest jump in testing amid increased testing of migrant workers. Thailand is extending its state of emergency to the end of june amid fears of a second wave. The city at the epicenter of the coronavirus outbreak claims it has tested most of its population in just 12 days. China braces for a second wave of infections. Bloomberg calculation say almost 7 million residents have been checked this month following a new cluster of virus cases near the border with north korea. Even before the testing, most companies had volunteered to check. Spacex and nasa have completed preparations for wednesdays historic rocket launch that will see american astronauts sent into orbit from u. S. Soil for the First Time Since the Shuttle Program was shut down. They will lift off aboard a falcon nine rocket from the Kennedy Space center in florida. Nasa has had to rely on russias launch into space into the International Space station since. Global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im karina mitchell. This is bloomberg. Still ahead, the abn c releases the latest rbnz releases the latest. We will have more on the report later this hour. Up next, we will discuss how the Current Issues when it comes to hong kong will be affecting capital flows in the long run. The Matthews Asia Portfolio Manager teresa kong will be with us next. This is bloomberg. Arey u. S. China tensions marching further into New Territory on the back of beijings new security law for hong kong. Bloomberg learned the Trump Administration is considering a range of sanctions on chinese officials and businesses over the crackdown. What could this mean for asian markets and hong kong status as capital . Al lets go to teresa kong, Portfolio Manager and head of fixedincome out Matthews Asia. Great have you with us. What should we expect in terms of capital flight . We have continued to see more fears about the status of hong kong. Run, capitalg always follows opportunity. If hong kong continues to be the favorite option for Chinese Companies to list, and it becomes the gateway to china, after we continue to raise capital, the opportunities diminish and then we might very well see capital pull out of hong kong. I think one of the things we really have to remember is hong kong has never been a democracy. But it has had a strong rule of law. To the extent that the law is implemented in a way that actually safeguards the rule of law, i think hong kong is actually still going to be one of the most attractive prices to keep capital. My base is not to take material out of hong kong. Shery once you assess the National Security law, will it add or diminish uncertainty in the Hong Kong Market . Of the key things investors have been really struggling with is the lack of certainty with respect to this one country, two system. Are we moving towards more one country or are we still into the two systems world . It is all going to come down to whether or not the interest of beijing is aligned to that of hong kong. I think the answer is largely yes. It is merely in the interest of beijing to preserve the key to hong kongs success, which is the rule of law and doing business. It is the educated labor force. Ultimately, i think it will be important for beijing to keep these things in mind and make sure they dont end up somehow undermining this wonderful Capital Center that has really served china while for the last two decades. Because there are a lot of concerns that they will be undermined. For example, with relation to the transparency and legitimacy Financial Institution and hong kong, what happens if beijing does what it does on the mainland, which is to arrest and ban shortsellers . There are very real examples, dont you think, of ways the market can be undermined and that International Funds could be deterred. I think that is certainly one risk. I think we went through this exercise during the handle for hong kong to china in 1997 that hand over for hong kong to china in 1997. There were certainly people who voted with their wallets. A lot of people were able to stay and were able to benefit for the growth of hong kong with the rise of china. I think Going Forward, being able to look at the tradeoff from the perspective of beijing and making sure people dont vote with their feet as long as there will it Going Forward will be important. Beijing has a fine line to toe. Haidi do you see opportunities on the Hong Kong Market up the moment given the valuations we are seeing . Thef we should look at markets right now, the rates that are offered on the hong kong dollar are actually relatively attractive, relative to the u. S. Dollar. I think actually in the near term, because of the listings of companies that are going to be in hong kong over the next month , given the uncertainty over the regulatory to between the u. S. And china, we actually think capital will go into hong kong in the near term. Longerterm, it will be based on all the things we talked about. It is really too early to tell. Shery what about for the broader emergingmarket be Market Equities fear . We have seen how the u. S. And train are dealing with the pandemic. Where are we headed in emerging markets if the pandemic unfolds as it did in china and is unfolding now in the u. S. . The epicenter of covid19 has moved from develop to the emerging markets. While we havent seen the curve flattening yet, we think we are at a point of maximum uncertainty. Its actually a good time to actually take risks. This is where you can look at the skew. If you look at emerging market from the equities perspective, many are down. Brazil is down 45 . Indonesia down 30. 30 , excuse me, in dollar terms. A lot of the downside has been priced in. Emm my perspective, if equities follow the path of china across the u. S. , this might be a good time to be investing in emerging market. Iquidity haidi we have to leave it there, but always great to have you. Teresa kong come up fully manager and head of fixed teresa kong. Regeneron, set to be priced at 515 a share. We know this is potentially to buy up other assets across businesses like gene therapy and other therapeutics as well with a revamped strategy to focus on small growing research and development areas. We are hearing their Stock Offering a set to be priced at 515 a share. The transaction could boost their war chest up to 50 billion according to bloomberg intelligence. Coming up, oil marched to the highest level in more than two years, but we are seeing the rally take a pause in the Asian Session as we hear a report russia might be coming back to production sooner. We get the latest next. This is bloomberg. Shery seeing a slight retreat in electronic trading, new york trade and oil futures surged in the latest session as two opec producers boosted prices. Su keenan joins us. Despite renewed optimism on the market stabilizing, there are questions about whether russia will ease up on output curbs. Reporter theres an old saying that oil, that good news is sometimes bad news. The u. S. Is now hearing russia is said to be considering a couldof moves where they possibly start easing production cuts for july. They are said to be sticking to the terms of the opec deal that was dropped earlier in the year, and again, this is according to people familiar with the matter. We do know russias president spokesman has indicated that they would be assessing Market Conditions before making a decision, so now the market is looking to see if they go ahead with easing those curbs. Also we have the u. S. Said to be considering sanctions to punish china for its crackdown on hong kong. This is according to people close to the administration and could be accounting for market caution at this time. As you note in the fiveday chart, there had been a spike intraday as much as 5 in the tuesday session, following the 13 gain in the following week. Forwardrecovery went with nigeria and algeria, major opec players lifting the official selling price, which the market took as a sign they believe customers are willing to pay more. That was adding to optimism. Oil is some 60 off of its low, west texas intermediate. It has been a wild trading game for a lot of oil traders and investors, but it may be taking a pause right now with the latest news. Right. There has been some concern on the demand side of things for gasoline. Reporter we do know oil demand is showing tentative signs of picking up, but here in the u. S. , there is concern because memorial day weekend, the long weekend we just saw, is typically the kickoff to summer season. Summer driving yet, we sought gasoline demand estimated to be 25 to 30 lower. In fact, there were early indications it was significantly lower. That is underscoring the fragile nature of the return to normalcy that we are seeing, even again as we see lockdowns lifted not just across the u. S. But across many countries in the world. It is still slowly coming back in terms of demand. Bloombergs su keenan with the latest on oil. Lets get a quick update for the latest business flash headlines. Virgin atlantic shortlist a potential rescuers now has narrowed as it races to secure its provost virus future. Its post virus future. It pitched plans to a dozen firms earlier this month. The aim to secure almost 1 billion of funding. Rescue package would include cash from founder richard branson. The jp morgan balls jamie dimon says hes optimistic about the boss jamie dimon says hes optimistic about the u. S. Recovery from the coronavirus. He says business in general is back up and it will bounce up in the coming months. The u. S. Economy has been stalling amid the lockdown and and forced layoffs of millions of workers. The way we are speaking about it today is the base case, which is hopefully this will happen. I give it pretty good odds. The government has been very responsive. The Federal Reserve has been very responsive. Large companies have a huge wherewithal. Hopefully we keep the small ones alive long enough for most to get back into business. Macys is putting key stores and inventory to borrow as much as 4 billion, the latest retailer to raise cash after the pandemic fails. The main Manhattan Store will not be included. The retailer is also setting up a line of credit for 3 billion, backed by on solved groups. We have an interview coming up next in hong kong with the citys former justice secretary joining us to discuss the next step for hong kong. We will ask her how the National Secure people will fit with the citys picture. You are looking at pictures of Central Hong Kong as the city braces for what could be its biggest day of protests in months. Prodemocracy and student groups and trade groups are calling for. General strike we also contend with potentially more u. S. Sanctions as well. This is bloomberg. There are times when our need to connect really matters. To keep customers and employees in the know. To keep business moving. Comcast business is prepared for times like these. Powered by the nations largest gigspeed network. To help give you the speed, reliability, and security you need. Tools to manage your business from any device, anywhere. And a team of experts here for you 24 7. Weve always believed in the power of working together. Thats why, when every connection counts. You can count on us. Staying connected your way youre just a tap away from personalized support on xfinity. Com. Get faster internet speeds with a click. Order xfi pods to your home in a snap. Or change your Xfinity Services with just a touch. All in one place. Youre only seconds away from all of that on xfinity. Com. Faster than a call. Easy as a tap. Now thats simple, easy, awesome. Shery this is reporter this is Bloomberg Markets asia. Im karina mitchell. Darkening the outlook for the Global Economy, saying world gdp will fall 4. 6 , more than the april. En in late the agency says the view is based on downward revisions in the u. K. And eurozone as well as an emerging market including china. They see the technical pick up a 5 in Global Growth next year. Meanwhile, singapore is focusing on jobs in the fourth coronavirus stimulus package. They say it is to help businesses counter the follow from the virus and well push the deficit to more than 15 of gdp, the largest in singapores history. The new park edge package tex it to the equivalent of 55 billion u. S. A threeway fight between china, the u. S. , and canada over huawei reaches court later wednesday when the cfo has her first shot of beating an extradition hearing. The Supreme Court of British Columbia will rule on whether it meets the key threshold of canadian law. If the judge says no, she could be released from house arrest. If not, extradition proceedings to the u. S. Will conditioning continue. Global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im karina mitchell. This is bloomberg. Haidi hong kong is bracing for what could be its biggest day of protest and months with prodemocracy groups calling for a general strike against china plans to impose a National Security law. Castents fear it will doubt on hong kongs future. We are joined by the former Hong Kong Justice secretary. Wonderful to have you with us. For hongrned are you kong right now but the prospect of this National Security law, given that we know in the interest of National Security, this is used in the mainland for a variety of different things, including the detainment of foreigners, including arresting locals for shortselling, for rumormongering for example . Isnt there a real concern hong kongs institutions and people and Foreign Investors are looking to be undermined if this goes through . No, i dont think so. In the first article of the , from the National Peoples congress, it says the ential peoples government implementing one country, to systems, hong kong peoples governing hong kong and a high degree of autonomy. Which country does not have laws concerning protection of National Security . There should be a National Security law. Kong, rights and freedoms of citizens are well protected by the basic law as well as rights. People are considering where to put their investments, they need conditions and a stable society. Since 2019, there have been riots and demonstrations, people throwing petrol bombs and so on. That is not Good Business environment. Law, whichh this new hong kong cannot do by itself, environment for business and investments. But how does it even sit 23 . Gside article article 23 suggests or says hong kong has to put through its own security law. How does beijing come in and push through essentially by decree . Also succeed us suggests article 23 needs to be put forward as well. As you know, the different laws are required in different situations. Article 23 took care of the traditional security investment was 20 yearshat ago. The protection of National Security of the central peoples government is from time to time this is the autonomy of hong kong. Toicle 23 provides some protect National Security, but thats not all. It has to be constitutional power. Shery did the protest movement in a way accelerate beijings actions when it comes to the National Security law . Something protesters have called the Nuclear Option in your view. We can see that there have been activities. People got hurt. One person was killed. There has been some additional situations like at the council building. It is still going on. It is not possible for the economy and business to operate under such situations. They must have a stable society. There must be order. Shery and in doing so, beijing says this will affect very few people. At appens to those potentially arrested. Will they still be protected under hong kong law . Certainly. The basic law is constitutional order. There is a protection for freedom of expression, demonstration, and expression of opinion and so on. Congress,al peoples thatice chairman explained an entity is seen as follows, to propose legislation, and one principle is that it is not substantially safeguard rights and interests of hong kong residents are the National Security law also demised that it should respect peoples rights and freedoms. Such restrictions must be the protection of natural National Security. Any restriction on such rights and be prescribed by law must be for the protection of National Security. The rights and freedoms of the hong kong people will not be affected by the national they thinkw unless they break the law we spoke with emily lau yesterday, the former democratic chairperson in hong kong. I want you to take a listen to what she had to say. The International Community will come up and tell beijing, tell the Carrie Lam Administration to come down and not to boot those things over the people. The people by and large are not violent. They want to talk. They want the government to come out and give concessions, which is something we cannot get. Thats why we keep seeing these scenes a very violent clashes and it makes our blood boil. Haidi i wanted to make the point also theres a chance for people because firstly, people what are thend main issues and legislation will come in the second step. So in the meantime, people can the National Peoples congress as to what should included. There will be chances for them to do that. Haidi so if they have a security law what . Haidi if this law is passed through by decree through the annex, doesnt this open the floodgates for other laws that beijing deems to be necessary for hong kong to be passed through in this way as well, overwriting the parliament, overwriting essentially what was promised as part of one country, two systems . Only laws relating to Foreign Affairs outside the autonomy of this message is certainly outside the authority of hong kong. Shery is this National Security law still worth it if because of this, hong kong were to lose washingtons special training status . Certainly for the military, that operates mutually. Washington will consider that carefully. Do you expect the United States than to take as aggressive measures as they have been already discussed . We are hearing we could even cease anxious see sanctions against chinese officials. We accept that the United States might, but i think they should it operates in the interest. Shery that would hurt the hong kong people and the hong kong economy. Not the u. S. Economy and the u. S. People. We are expecting huge crowds in hong kong again. This is clearly something that is distressing large parts of the population. What do you say to those people that are actually concerned about Judicial Independence and concerned about the threat to the institutional legitimacy of reallyy, and is beijing willing to trade the future of hong kong as a Financial Hub and as a viable tourism and Financial Center to gain this control . I would say it does not affect that, which is well protected under the law because the basic law is that the justice it is an the peoples favor. That is not only the basic law, but entrenched by the judicial system as the protection of the term of office. They cannot be removed unless. Hey are unable they look into the case to see what is justified. Tell the oath and take it seriously. The Hong Kong Economic and Financial Hub, i think most important thing is we must have law and order in the city in order to continue Economic Activities and also for investors in hong kong. We must have law and order. Estored we must and these activities in hong kong. Whatever is lost will resume. Before. E stronger than. Curious, ifeally you are a protester for example, or a hong kong bookseller who is perhaps carrying controversial will or politically sensitive titles, if you are arrested for doing one of these Things Considered politically youersive by beijing, are protected under mainland law or hong kong law . [indiscernible] the communist party will commemorate on the fourth of june. Think those rights and freedoms will be taken away. Of course organizing people. There must be law and order in the city. Point, why not spell out what the law means . Why all the secrecy with such few people really knowing what it entails . They havent started the legislative process. It is just a decision directing should Peoples Congress start the law. It is the first up. There will be plenty of people expressing views. Shery in that sense, given the lack of transparency of what could come out of the National Peoples congress, wouldnt this also go against the free market ideals hong kong has been based on . How will the investors around the world trust that the rule of law is being followed in hong kong when you really dont know the outcomes of some of these very important decisions . There are two steps. The first is tell the people so they know. Then when it comes to legislation, this will be taken into consideration. You are commenting on something not in the system yet. Assume it will deny people. There are real concerns about the hong kong economy that have suffered not just from the coronavirus, but also months of protests. Now there are increasing concerns this National Security law will be undermining the functioning of the capital and financial markets. If you are a short seller who gets into trouble for placing short bets in hong kong, are you now going to face up to the rest of beijing . Will hong kong protect thats short seller . What do you say to investors and International Institutions that are legitimately concerned about examples like this . First of all, i dont think its established those people subversive inhing hong kong. But that is not carried out in hong kong. Haidi but thats the kind of thing that on the mainland, that is hong kong haidi in china no, actually in mainland china. The activities over there should be governed by the law. If they carry out business in hong kong and did not infringe, there is nothing. The law is aimed at a very small number of people who try to carry out subversive activities. N hong kong doing bombs and so on, those are things that should be punished. Shery we will have to leave it here, but thank you very much for your insights. Former Hong Kong Justice secretary. We continue to bring you voices from all sides of the debate over hong kongs future. Joinsmocracy campaigner us in the next hour. We will also hear from a ledge legco member, regina ip. This is bloomberg. Haidi the reserve bank of new zealand says Financial Institutions have would it takes to survive the impact of the coronavirus, but the longer it takes, the more chance some will fail. Policy editor Kathleen Hays has been listening to the rbnz hour. Or speaking this what is the assessment of the governments Financial Institutions and resilience . Reporter resilience, going into this with some strength. S was kind of a big seal deal. It is the semi Financial Stability report. Theyay be remembering that benefit from the cut and pass rate to customers. They also said that they will be able to survive. They have the Capital Buffers that helps them absorb losses and keep on lending, that is important. But the rbnz said in the report willa prolonged pandemic boost business failures. It will deepen loan losses further. Even so, the distress test indicated they will be able to keep capital ratios above minimum requirements. But then he goes on to say, there are limits to the resilience and capital could come under stress if a downturn in Economic Activity is more severe or prolonged than expected. He went on to say that they have a role to play. They have to make loans available and help people make payments. Ortgage i think it hinges on how long it takes to reopen and get the economy going again. Everybody has to be prepared for the worst, but i think he is hoping for the best. Shery we are also watching the release of japans second supplementary budget. How big could it be . Reporter certainly in terms of what it is the equivalent of, when you look at the kind of projects and things, the assistants or businesses and households and students that will be provided, the Bloomberg Team got a hold of some documents. They had the documents laying out what the second extra budget is going to look like. That it isound is going to be, japan will subsidize up to two thirds of the rent of small and mediumsize firms and freelancers impacted by the coronavirus. They will put a subsidy cap on rent. It will be ¥500,000 a month for firms and ¥250,000 for individuals, but payments will last up to six months. If you own several properties, than there will be a higher limit of ¥1 million per 500,000 individuals. Local media is suggesting the second supplemental budget would trillion. Llion to y13 Prime Minister abe said the overall scale of economic measures to be funded by the extra budgets will total more than ¥200 trillion. Of course, this is occurring as japan is getting ready to reopen, looking at baby steps, and in some ways they handled the virus a little better than people thought they would. Have time to we quickly pull up a chart dont even bother, japans economy is in recession. Annualized rate they already had trouble pulling in. They definitely need the help. Shinzo abe has been down in the polls. He is getting the message. We are waiting to see more details, but it looks like something that could be made a difference. Shery our Global Economics and policy editor Kathleen Hays. Lets get a check of business flash headlines. Apple is reopening about 100 more Retail Stores in the u. S. This week. Half will offer Curbside Pickup only for online sales. The openings will come across the country from california to , following new york 30 story openings around this month. Apple has about 270 Retail Locations across the u. S. Stores that let people inside will require masks and social distancing. Google is planning to reopen offices by july 6, but only for 10 of the staff, rising to about 30 by september. The ceo says they expect the majority of ceos employees to continue working from home for the rest of the year. All employees will be given 1000 each to expand on homebased equipment. Coming up in the next hour, we will discuss the new security built in hong kong and the protests with the founding chairman of the Democratic Party of Hong Kong Martin lee, and look at the impact of the virus and what impact it is having on commercial real estate with the ceo of china group. The market open is next. This is bloomberg. Good evening from new york. I am shery ahn. Makers asias major markets have just opened for trade. The top stories, u. S. Considering to be considering sanctions on china. The white house says it casts doubt on the citys future as a financial leader. An uncertain day as traders waive implications of u. S. Actions and the dollar is falling. Meanwhile, hong kong braces for what could be the biggest protest in months as the discussnt meets to disrespect for the National Anthem a criminal offense. Korea and australia are opening now. Nikkei and topics under pressure. The japanese yen Holding Around 107 level. We have seen a tight trading for the japanese yen in the last three weeks. Japan has just lifted their state of emergency. For details on the second extra budget, which could be over ¥30 trillion. Take a look at south korean assets. Under pressure down to tenths of 1 after two sessions of gains. Also coming down from the highest level since marth march. Korean won leading the game in yesterdays session. The prospect of reopening giving strengthnd korean won continues. Haidi we are seeing a bit of downside that comes to the start of trading in sydney. A staggered open. Keep in mind we are seeing sizable gains of over 2 monday and tuesday. Yesterdays almost 3 rally taking asx to the highest level it has seen since march 10. Maybe some color maybe some consolidation seen. We are watching the aussie dollar which has been on a rally but could be tapped by increasing capped by increasing trade tensions. In new zealand, upside when it comes to trading in kiwi stocks. They are pondering lower rates and we are wondering if we could see a limit as to the resilience of the countrys Financial Institution. Hong kong is bracing for more protests against chinas move to increase control of this city and we have learned the u. S. Is now considering a range of sanctions to punish beijing for the crackdown. An avalanche of inquiries about , viktor, we were of the the scope National Security law proposed will be limited. Is it a problem . We know paging hat beijing has often crackdown on what it considers subversive activities and that affects the scheme of the markets. Concern as we you ared is that what doing is removing one piece at a time. Youessence of the tactic is never inflict enough pain for the opposite party to react aggressively until it is too late. I think that is a problem. The degree of distrust, you are looking at different societies between hong kong and china, the different level of evolution and different views. That is really the problem. Hong kong itself would need to coalesce and find a compromise. If hong kong manages to do that, then you find some of the distrust will go away. If hong kong cannot find it, clearly it will be quite a rocky path ahead. So it is all about the degree of trust and how hard you want to push it and the extent to which you want to converge hong kong and china. Convergence is inevitable at this point, right . It sounds like this is just the ,atest cut out of a thousand whether that is the intention or the effect, it has the effect of undermining hong kong institutions and the appeal is a Financial Hub. Of if you question continue to converge or try to, hong kongsppen to special status . Most commercial transactions, hong kong is treated as a separate entity akin to a. If you converge it too far, there is the question, should one maintain special status . And that is in international agreements, not just a question of what china would like to do. It is also a question what britain and the United States in particular would like to do with the status. Question markts a on the trade hub. I think that is in the future. As of today, i very much doubt the status will be revoked. I think what we will see is more sanctions, individual and corporate, and some restrictions and flow of goods and technology transfers. But i doubt that either the United States or britain will go to the extent of revoking status. I think they will probably find it as 1. 5 systems. Under the best case, what happens to hong kong assets . When beijings plans were announced, we saw stock take the biggest plunge since 2015. So if this law is passed by the congress, does that mean more uncertainty for the Hong Kong Markets . Early, the trend in hong kong has always been towards convergence. In 1997 that hong kong and china will converge, the idea was that china will become more liberal and converge with liberal terrain. What happened over the last 13 years is the paths started to diverge rather than converge. Thenevitably, you will have move toward forcing a greater debate greater degree of convergence, which creates more volatility in Hong Kong Markets, real estate markets, the Banking Sector. But i do not think we are at the point where either hong kong or the Banking Sector is in danger. Lets talk about the hong kong dollar. Resistancey remains resistant for now. Well continue to act as a support for the currency in the meantime . Yes. Hong kong is sitting on roughly 130 of their gdp and Foreign Exchange reserves so there is plenty of cushion in hong kong to protect the hong kong dollar. The special status is maintained on the global basis. This is the by the books signal in hong kong. If you look at the chart on bloomberg, for every time it has fallen below the ratio of one, it has seen a rapid rebound. We are also seeing trade valuations at the Biggest Discount to global stocks in over 20 years. Metrics, are there opportunities in the Hong Kong Market . What would you be looking at . Most people look at Hong Kong Markets hang seng, which is not hong kong. It is predominantly china and china related stock. The appropriate one is the nci hong kong, which you might have shown. Reflects hong kong itself, which is predominantly banks, real estate, jewelry shops, retailers. I think all of these areas in hong kong are challenged, whether from tourism arrivals, real estate transactions were ability to rerate the Banking Sector. Is desperate. Always great having you with us. Thank you. Head of asia strategy. Ahead, we will look at how business in hong kong is being withted by the pandemic donald troy. Up next, we will look at Business Sentiment is improving despite geopolitical tension. This is bloomberg. You are watching daybreak asia. Heres the first word headlines. Trading has darkened the outlook for the Global Economy saying world gdp will fall 4. 6 , more than the 3. 9 drop seen in april. It is based on downward revisions in the u. K. And eurozone as well as an emerging market, including china. 5 ro technical pick up a Global Growth next year. Indonesia has deployed the army to enforce social distancing. Almost 350,000 personnel will guard tourist sites and shopping malls. Malaysia saw the biggest jump in new infections amid increased testing of migrant workers. Thailand is extending their state of emergency to the end of june amid fears of a second wave. A fight between china, the u. S. And canada over huawei reaches court wednesday. At beating an extradition hearing. Ontish columbia will rule the detention. If a judge says no, she could be released from house arrest. If not, extradition proceedings will continue. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. As we have discussed, sources have told us the trump is considering a range of sanctions on chinese officials on, and Financial Institutions to crackdown on hong kong. Selina wang has more. Have we seen any response from beijing yet . We know the talks in the u. S. Are ongoing. The Treasury Department imposing control and raising assets of chinese officials. Includemeasure could visa restrictions. A law requires the state department [indiscernible] resources say a termination could made within a week. In terms of a response from , they called trumps threats a nothing burger. It is not decisive in determining whether hong kong is the Financial Center citing as long as the economy and the chinese mainland, hong kong will not decline. The Trump Administration is under increased pressure from congress to respond firmly but if they play that card, any of chinarsh penalty, [inaudible] in terms of the economic recovery, for may, what are the earliest indicators china telling us . Shows thely data economy continues a slow recovery but there is more confidence that production that is that is according to a charter survey. Improvement inhe production, whether it can be. Ustained sluggish but the stocks and commodities market in the last month, production has been underwhelmed by the economic target and the measures announced. Selina wang in beijing with more signs of a strengthened recovery in china. Up next, japan purportedlys plans to spend more than 200 billion in a second extra budget. This as asia continues to splurge to combat the virus. More details, next. This is bloomberg. Areovernments around asia adding to stimulus measures of longer than perspective markdowns lockdowns taken their toll. Slumping activity is reaching a bottom. More stimulus due from japan to stem the economic fallout as they left the state of emergency in the country. Is to finance minister present the second extra budget to japans cabinet wednesday, which covers five areas of support, including rental subsidies for businesses and income support. Over media is reporting ¥30 trillion is being earmarked for spending. Expect more debt supply in the pipeline. Marshall increment in 20 and 30 year paper. We have breaking news out of china. They are reporting an additional coronavirus case for may 26 and reporting 28 asymptomatic cases on may 26. This comes at a time when we have more than 5. 5 million global cases and wuhan has tested about 7 Million People in the last 12 days. Perhaps signs of stabilization. In south to Group South Korea we are seeing signs of stabilization in the economy. In april, fitch had a 1. 2 gdp decline for korea and is anticipating a bounceback in 2021 of 4 . 41 and implies a boost of fiscal stimulus but should the deficit the wind did wine why didnt, he raise widened, it could raise red flags. President moon is calling for a third extra budget bigger than the first two which were 10 billion each and last week local media reported 40,000,000,000,001 could be sought for supplementary 40 forion won could be sought supplementary. We continue to see measures of Monetary Policy, Central Banks continuing to discuss the right approach to policy amid the coronavirus. Lucy kendall spoke to bloomberg about flexibility. With respect to the pandemic emergency program, it is going. O be temporary seen the have evolution of markets has been totally so far and i am sure. Are you open to abolishing the team . We have not discussed in the council but i we havere you flexibility in the shortterm not only in terms of assets we provide but also the timing of the purchases. The evolution of markets is more quiet. Quiet. It is now but we do not know if we will get a second wave. One thing that has not been announced to the public is reinvestments. Something a lot of people in the market expect to happen. Does it have to happen . Program lasts until the end of the year and after that we will see. We have not decided anything on that yet. But we have time. Cannot possibly into december 31 because we will not know if there will be a second wave next winter. Variable. It is a when you look at the evolution of markets, it is much better than one month ago but i think that has to do with the evolution of the pandemic and the infection curve. I do not know what will happen with the potential second wave. Markets the recovery of the economy once the worst of the pandemic is over. I think this will be extremely important for everything. Interest rates are a burden on banks and insurers. Probably have low rates for longer and it is more of a burden and threatens the solvency of some insurers. You want to stay away from more Interest Rate cuts and focus on purchases . Approach in terms of Interest Rates is the real drivers of the banks is not our Monetary Policy. It is structural. Is very high and the Monetary Policy was positive of the of the recovery Monetary Policy. When you look at in a balanced the pros and cons of Monetary Policy, what you can theis at the end of the day Monetary Policy is not the real cost. The longer the low rates last, the bigger the problem becomes. There is no alternative to the Monetary Policy we are delivering in terms of the Purchase Programs and liquidity we are giving to them. Do you see a case for cutting rates more . That is not the approach we have now. We are focused on delivering the delivery of liquidity to the. Anks in good conditions the Purchase Program has a real impact on markets. Kong next we speak to hong prodemocracy Campaign Martin lee ahead of more expected protests. He tells us what he sees for hong kongs feature. Future. You are watching bloomberg daybreak asia. These are live pictures out of hong kong. The city bracing for perhaps the largest day of unrest in months. Fresh protests are expected. There calls by student groups and the trade union body for citywide strikes. This comes as protesters are against the National Security laws planned by beijing and local legislation that would criminalize disrespect of chinas National Anthem. Saying the u. S. Is considering a range of sanctions to punish china for their crackdown on hong kong as the Trump Administration ways whether to clear the city. We are joined by martin lee, the founding chairman of the Democratic Party of hong kong and former member. Great to have you with us. Let me read you the tweet that just came out from marco rubio. Rubberstampsina legislature moves forward on thursday blowing up the one country, two system in hong kong, the u. S. State department will have no option but to not certify that hong kong is autonomous enough from beijing. You thatistic are foreign governments, especially in the United States, will take some concrete action against beijing . I cannot decide what any government can do or should do. All i can say is what is happening now in hong kong, what the Chinese Communist party is doing to hong kong, i call it the rate of hong kong. Kong. E of hong chinese saying the communist party in hong kong because they say we have complete power and control over you, over National Security. So they can send people down to hong kong and act on behalf of. He Hong Kong Government this is what they are saying. And they are not saying it for the first time. They said this six years ago in the white paper they published in june 2014. To the out if the outside world, they would say it was none of your business. Hong kong is my daughter. This is what is happening. Does a very strong words. Not everyone agrees with you. We just spoke with the former secretary for justice for hong kong and she tells us this law would be very restrictive, that actually hong kong citizens would be protected by hong kong law. Why dont you trust that . Listen to exactly what she had to say. It might affect national [inaudible] s how do you respond to that how do you respond to that . She is a very nice lady. I respect her. But what can she do . She would have to agree and play it down. But the basic law actually says hong kong should legislate against secession and all these things on its own. It should be up to hong kong to legislate. So why is beijing legislating for hong kong . Law, our constitution, does not admit anybody else to legislate for hong kong. Not even beijing. Not even a Standing Committee of the National Peoples congress. It is very clear. Nobody mentions that. Martin, supporters of the security law would argue beijing has been left with no choice because article 23 is so domestically and popular that no progress has been made to pass through a domestic security law in hong kong and that is why they are stepping in. This is twisted logic. Hey control the majority of the members who somethingbeijing on so serious, they would not dare not listen. They have a majority in the Legislative Council not because we are not popular with people but because the laws are so democratic and they will not change it. But if they control the majority of the Legislative Council, they can pass the law any day if beijing wants it. Beijing does not want it because they want to legislate for hong kong. The extradition bill, for example, they can do it in beijing instead of hong kong. So they will do that. They say they will do that. Comprehensive power of control over hong kong. That is what they are doing. As someone who has been arrested for taking part in previous protests, are you concerned about what the implications are for people like you . If a protester is interested in hong kong, do they face to beijings version of the law or are they protected under hong kongs institutions . Of that this precedent committee legislating for hong kong, the next thing they could legislate is extradition bills and once that has passed they could come to her courts and and we wouldents be transferred to beijing for trial. Prosecutory have authority in beijing and they have said officially that the according to the prosecuting authority have 14 charges. Them from prevent having us be brought back to china for trial . I am prepared to face prison. Not in hong kong, because i doubt that would happen, but certainly on the mainland. Im not concerned about myself. I am fighting for democracy for hong kong all these years, more than 30 years. People toant to young be sent to prison for years and years. We are doing this for hong kong. I do not care what they do to me. I expect the worst. But i do not want Hong Kong Government not to love and look after our students. What is carrie lam doing . She is the chief executive hong kong. She should be saying, you cannot do it. Leave it to hong kong. You promised this in the declaration and to the International Community. China back in 1954 with the asked andaration lobbied for International Support of the agreement with the u. S. Government and many governments gave open support and applauded the one country, two systems policy, which they are now completely breaking. Completely breaking. Martin, what would you say to those who say you conflate the rule of law with democracy and hong kong has never really been a democracy, that they are a liberal society with a strong rule of law, that by getting this National Security involved and implementing it fairly, you would actually get a Stronger Society with a stronger rule of law to her businesses can actually prosper and flourish and Foreign Investors can come in and really do what they are supposed to do in a free market . Of course the British Government never gave us full democracy. The last governor gave us partial democracy. But we were always enjoying under british rule the fruits of freedoms, aike the level playing field, because the British Government in hong kong, British Administration in hong kong is answerable to the british parliament, which is democratic. So we do not have the democratic tree and hong kong that we did with british rule, where we had the fruits of the tree. Chinese government is not democratic, that is the problem. That is why they promised in our own basic law, the constitution that i helped draft, it is promised in the basic law that we would have suffrage 10 years in 2007. Handover this is the 23rd year after the handover and democracy nowhere in sight. Carrie lam already said she is not interested. No one is going to give us democracy. How can hong kong people the ruling hong kong if we do not even elect our leaders . That is a problem. They are reneging the promises. They also promised us in the basic law of the constitution not to interfere in hong kongs internal affairs. What are they doing . They say openly they are coming in. The communist party from beijing to hong kong to monitor our executive legislature and judiciary. Ipr judges. What are they going to do ipt our judges i pity our judges. What are they going to do . What will they do next . I hope protesters do not use violence because violence begets violence. But how can you win against communist china by using violence . I hope the students and young people and all generations should not use force. We stand on the moral high ground. They are breaking the International Law and the International Community i hope will finally wake up and do something, instead of just expressing concern, series concern about serious concern about what is happening. They are raping hong kong system. Is the International Support look like, martin . What would you hope to get from the u. S. , u. K. , in light of the situation . We hear the u. S. Could be considering more sanctions for china. Should they be threatening the special trading status of hong kong . What are you hoping to hear . I could ever ask other governments what to do. Decideve the wisdom to finally went to do, if anything. All i am saying is the International Community actually supported the one country, two system. Hong kong ruling hong kong. That is what i support. All of the years, i have not asked them to give us anything which they have not already promised and solemnly promised with the International Treaty and registered with the united nations. I want nothing more than that. But hong kong people are entitled to the full implementation of the british declaration. And what is promised to us in our basic law, our many constitution. Mini constitution. They promised it and i do not want less. Go back to the blueprint for hong kong, and we are happy. We would not interfere. Give us democracy and let elected chief executives for the government run this place without interference from beijing. That is what i want. It is the least we are entitled to. Martin, went to the latest developments mean for the september legislative elections . Free even under such undemocratic rule that the democrats would win. I think it is quite impossible. Without having seen the results of the elections last november, i do not think anything is impossible if we put our act motives. Our they are afraid of that. It is why they are preparing. Majority, theye because theto worry committee can legislate all of these laws for us, whether they like it or not. Whether we like it or not. That is why i call it the rape of hong kong. Martin, thank you so much for joining us. Chairman ofsounding the Democratic Party of hong kong. We will continue to hear voices from all sides of the debate. A big interview tomorrow. Joins us on bloomberg surveillance. Up next we speak with one of , donald choi hub will join us with his outlook on hong kongs property market. This is bloomberg. This is daybreak asia. These are our headlines. Early Economic Indicators from china show the country is inching out of the coronavirus slump with business rising despite the bleak future. Companies say they are more comfortable confident this month with production and auto numbers are climbing. A consumption and imports continues to shrink. Have tested they most of their population in 12 days. This is china braces for a second wave of infections. Our calculation say almost 7 million residents have been checked this month in wuhan following a cluster of viruses near the border. Volunteeredes had to check staff. An investigation into last weeks plane crash in karachi that killed 97. The plane went down in a residential neighborhood after suffering engine failure. The crash happened days after pakistan authorized resumption of domestic flights and made the lockdown and came ahead of the holiday that marks the end of ramadan. Two people on board survived. Twitter has started Fact Checking President Trump following a longrunning criticism of the platform has allowed him and others to spread misinformation. A pair of his tweets about voting were appended with links saying the facts about mailin ballots. The president has said the move is stifling free speech and he will not allow it. Hong kong developer chinachem is offering 20 to 50 discounts on rent and charging tenants close to zero base rents in major shopping districts. Donald choi, great to have you with us. Thank you for your time. To expand yourng rental relief to tenants at this point . Depending on the recovery of the economy, we will continue to assist tenants to ensure the continuance the of their business. What will it depend on . Coming out from covid19. Somekong still faces social unrest and that is a consideration, to take that into what is then about best way forward. What are you expecting in terms of increased Political Uncertainty we see in hong kong . What happens when the National Security law is enacted . Will it affect hong kongs property prices . Beeninachem has established in hong kong for years and we have seen a lot of uncertainty and i think this time is no different. We believe hong kong will continue to have very Good Business environment and remain competitive. We are expecting big protest in hong kong today. Certainly it is difficult to imagine they will stop just here. I am wondering what impact you see on your business in terms of sales, and how much you see sales falling. The Asian Pacific gdp has already been slowing down. 6. 3 and 2019, 5. 8 . The trade war will consider will continue a slowdown. Recovery will not be shortterm. Confidence in the economy to recover slowly and asia will still be in a really good place to grow and continue to attract capital and tenants that love hong kong and international business. Willte the slowdown, we come around the corner and be on the path to Sustainable Growth in the future. What do you see in terms of rental interest for Multinational Companies not just going into an uncertain future with the National Security law, but the uncertainty we have seen over the past year from the lockdown, people from people working from home and ongoing protests . Do you imagine there will be far less demand for office space . The impact of monetary disruption, ecommerce will be a fundamental change in how assistance is being conducted. For example, shopping online already. Are ready fore the Additional Information and our Online Business in the future, we will create a realistic model to continue. So it is not just about covid19. Are you already diversify r assets going from office diversifying your assets from office space to more Logistic Properties . We are exploring the opportunity. Is angistic Data Center Area we are looking at. Of we are also moving toward model. Services have become important to offer unique experiences to our tenants and the future of technology, we can provide an open service to our customer. About, what it is customized experience. Includee customers relying less on mainland Chinese Tourists . Do we need hong kong to diversify away from dependence on mainland consumption . Yes, that is a good point. We cannot just have one single consumer group. It is important to diversify in customermore inclusive setting and losing what we have planned in the shopping mall. So now we have the Hotel Business is looked at for additional markets and service to the local markets. Better thanen doing the ball, which is for tourist mall, which is for tourists only. I am sure you can see the transition to more locally oriented business. How sustainable is this model . How long can you carry this through for . I think it is not just cutting the costs and lowering rental. Model is to ensure there is sufficient business for. He tenants the tenants to enable them to do more business. We are providing the resources for the tenants to deliver their consumer so they do not actually need to come to andthey can have the order deliver the products to the office tenants. Donald choi, it was great having you with us. Please join us again soon. Chinachem group ceo. Jobng is ready to announce cuts in seattle this week as they shrink their workforce and made the sharpest contraction in aviation history. Layoff notices will be sent out friday and some employees have already been informed they will be let go. The ceo has already said boeing needs to cut up to 16,000 physicians as customers struggled to survive. Reliance industry is said to be working with banks on plans to lift their digital and wireless business overseas. We are told they are preparing geo platforms for an ipo away from india and it could happen in the next 12 to 24 months, although there is no decision yet on timeline sign or value. Coming up, Bloomberg Markets discusses the Coronavirus Impact on south korea with the former finance minister. That is it for daybreak asia. Market coverage continues as we look ahead to the start of trading. The china open is next. This is bloomberg. It is 9 00 a. M. In beijing and singapore. Welcome to Bloomberg Markets china open. Our top stories today hong kong braces for what could be it just antichina protest for months. The u. S. Questions the citys financial future and may levy sanctions on beijing. South korea earned praise for its response to the coronavirus. We hear from the former finance minister y i
comparemela.com © 2020. All Rights Reserved.