Transcripts For BLOOMBERG Bloomberg Markets Asia 20240712

We will break that down later on. Take a look at the rest of the market. You see caution still. The likes of gold, despite the rebound in stocks, gold topped at 1800 for the First Time Since 2011. Theres caution around a resurgence of cases. We have the situation in hong kong with china and acting sweeping powers. Goldman saying we could see 2000 for gold in the next 12 months or so. Extending theg best performance we have seen in 30 years. Money coming off of the dollar here, more of quarter selling and rebalancing. A little bit of strength in the yen. Offshore renminbi gaining at 705. Take a look at the nikkei. A survey cannot very negative. Manufacturing sentiment dropping to the lowest level since 2009. China seeing shares up 6 10 of 1 . The pboc said to Lower Borrowing costs for small businesses. Perhaps anticipating a rate cut today. Watching bonds. Treasuries did tumble. They continue. 68 basis points. Lets get to our top story now. Hong kong marking 23 years of chinese role hours after president xi signed a landlord Landmark Security law for the city. The legislation promises life imprisonment for some cases of state subversion and terrorism. It is being described at the uss taccone and. U. S. As draconian. Weve been able to comb through the details. What are the biggest takeaways . Stephen both sides, representatives say this law is tougher than they anticipated. We did not have the full draft of this National Security law, all 16 article 66 articles, until 11 00 last night. It was implemented immediately. We did not have time to go through everything. It is a bit tougher because of those issues that you talked about earlier. Some of the provisions that would allow, under rare circumstances, secret trials. Trials behind closed doors. Trials associated with state secrets. In issues of the version, secession, collusion with foreign forces, terrorism. Also, we are learning that the maximum sentences for these crimes would be life imprisonment. As well as, under certain circumstances, the trials could be conducted in Mainland China. That has been a concern for many people here in hong kong over the last year. This round of protests really sparked by carrie lams extradition bill. That issue is very sensitive to or in hong kong. There are a lot of questions about the definitions of these four main categories and whether voicing support for some sort of secession were criticizing the communist party of china, whether that breaks the law. Position, where is the position of nongovernmental organizations as well as the news media . Theres lots of questions. We did get the final text. Speak, they are holding a briefing on the Hong Kong Security law. You were talking about the need for more clarity. We will listen to that to see what officials in beijing are saying. Lets listen in to this briefing now. This is coming from beijing. [inaudible] the propagation and implementation of this law will be of profound and farreaching significance for upholding and improving the system and institutions of one country, two systems. Safeguarding chinas sovereignty and development interests and sustaining these, stability, and prosperity in hong kong. Adopted by the cpc last year highlighted the importance of upholding and improving the system and institutions of one country, two systems. The need to establish and improve the legal system and Enforcement Mechanisms for safeguarding National Security and strengthening lawenforcement forces. No act that attempts to challenge the policy of one country, two systems or split the country will ever be tolerated. The view of the Current Development in hong kong, it is imperative to establish and level, at the national the legal system and Enforcement Mechanisms for safeguarding National Security in hong kong. Important to do so. Multiple approaches could be adopted at the national level, including the decision made by the mpc and the standing committee, the explanation of and adding national law into the basic law of hong kong. Theseal government are the approaches that could be adopted. On the basis of making a comprehensive assessment of various factors involved. Party andent Central Government departments proposed a twostep approach of decision plus legislation. I think you have already read the decision made on may 28. The 13th mpc, the decision of the National Peoples congress on establishing and improving the legal system and enforcement mechanism to safeguard the National Security in the Hong Kong Special administrative region. This is an important systemic design made by the supreme body of chinas state power to establish and improve the legal system and Enforcement Mechanisms for safeguarding National Security in hong kong to address the need presented by new developments. This is a very important systemic design. It for provides the constitutional basis for formulating this law. Following that, the Npc Standing Committee tom weve been listening to the director of legislative affairs of the National Peoples congress. A couple lines coming out of that briefing in beijing. Saying thats there the implementation of the security law will be of profound importance, saying that the law will plug loopholes in hong kongs legal system. Lets get back now to steve engle, a north asia correspondent. What do you make of what weve heard from the state Council Information office . How does italian to what we are hearing in terms of reaction internationally to the security law . Quizen it still begs the big question. How do you define which crime will fall under these four main categories . Criticism or being involved in activities that are associated, etc. And peopleommunity here in hong kong will have to tread carefully. They dont know what acts they could do or inadvertently be associated with that could fall land themselves in trouble here. The Hong Kong Deputy to the National Peoples congress was on Bloomberg Television earlier today. He basically said, i will quote him, everyone has to be much more careful than before. I dont think i could make it more blunt. Especially on these four main categories. The problem is, we dont necessarily know what precise crimes will be considered criminal under those four categories. Thats why we already see a Chilling Effect from local opposition groups, closing down. You have some prodemocracy lawmakers quitting politics, moderating their views. You wonder what kind of schilling we will see from the Democratic Front here. Our chief of asia correspondent with the latest right now. Lets go to the first word news. The top u. S. Fire is expert has told lawmakers on capitol hill that the country is going in the wrong direction over the coronavirus. Infections can more than double to 100,000 a day. Cases are surging in the south and west with several states putting reopening on hold despite president trumps call for a return to normality. Fauci says the numbers speak for themselves. Confidence among japanese manufacturers has fallen to the lowest level since the financial crisis as the coronavirus stifles export demand. The bojs Quarterly Survey shows that carmakers and Electronics Firms dropped to 34 in june. Capex and hiring. Goldman sachs hope its nearing the final stages of resolving its biggest legal threat in a decade while avoiding a guilty plea. The bank is under scrutiny for its work with malaysias fund where billions of dollars of compassing. Have gone missing. William barr is overseeing the argument. Ahead, hong kong is one of the most unequal economies in the world. Many believe that is feeling the unrest in the city. We speak to one of the bestknown voices on the issue. Herrerot, Alicia Garcia gives her outlook for the Global Economy as many countries review plans to exit their lockdown. This is bloomberg. Yvonne lets bring you back to live pictures out of beijing right now. The china state Council Information Office Briefing on the Hong Kong Security law that was imposed last night, went into effect today. What were hearing from officials is that this law will plug the loopholes in hong kong legal systems. The implementation will be a profound importance. As we come through the details, we have seen that this is chinas way of showing powers here on the territory. We are watching what else could come out, any clarity we can get from the beijing front. The outlookiscuss now in terms of the economics of hong kong in the region more broadly with Alicia Garcia herrero who joins us from spain. Thank you for joining the program. Lets start with hong kong. In terms of the sentiment, the mood, this may affect hong kong in terms of Business Sentiment and the sentiment of tourists and expats working in the city. To what extent will the security law pose a threat as to the longterm economy of hong kong . Does it move it closer to china in a way that the economy will be more short up and in a stronger position . What is your take . Alicia thanks for the question. [inaudible] one of the most of open economies in the world, hong kong. Going through a massive global shock. Things unrelated to international law. Its all horrible for hong kong. That, the uncertainty [inaudible] that is really important. We need to remember that hong has accelerated. [inaudible] hong kong is no longer a Global Financial center. State centric bond issuance, the difference will be minor. Creditors are mainland centric. In. I need to jump we have some lines crossing the terminal right now about apple. This is according to reports from nikkei. Apples five g iphone production is facing delays of one or two months. Apple is seeking to cut those production delays in its 5g iphones. Apple and suppliers are working overtime to make up for time lost due to the pandemic. Lets bring back alicia gurria Alicia Garcia herrero. You highlighted the pros and cons here. Weve seen, when it comes to the u. S. , they retaliated in some form. Revoking some of these trading benefits. Some say thats more of a symbolic move. You have positive developments in the greater bay area. A lot of secondary listings coming here in hong kong. Ipo connect in china. Do you think that hong kong can still say a Financial Hub . Yes. Its going to be more of mainland only type Financial Hub. The role of hong kong might be diminished. It might not be the port of entry to the mainland for equity investment. In may create a system for mainland offshore investors. [inaudible] direct access. [inaudible] yvonne we will have to cut you off. The audio is not looking strong today. We will have to get more from you next time. Just want to recap these lines crossing from beijing. The china state Council Information Office Briefing on the security legislation is saying that china repeats that the hong kong law will safeguard National Security. The challenges of one country, two systems need to be addressed, they say. A lot of critics say this could be the end of that trade war. Taiwane global response, is now considering easing rules for hong kong citizens to work and invest. This is just part of what we have been hearing globally and from International Leaders as well. Lets listen in right now. The wellbeing of its people would go down the drain. Will be the sort of damocles hanging over a tidal tiny group of criminals and serve as a deterrent to external elements who interfere in hong kong affairs. This law willfully protect the rights and freedoms and safety of their lives and property enjoyed by the vast majority of hong kong residents in accordance with the law. Rights of the lawful overseas investors in hong kong. It will be the bedrock underpinning hong kongs prosperity and stability. This law will be a turning point and put hong kong back on track for development. I visited hong kong last week and talked to people from different sectors to seek their views on National Security legislation. I met with business leaders, professionals, taxi drivers. Challenged by the chaos hong kong was plunged into by riots last june. Filled with fear. They told me that some people in hong kong wants to emigrate, not because of others, but because they are scared by violence committed by mobs and they see no future. A member of the Legislative Council told me that a friend of his, a good friend of his, already started to apply for immigration to singapore. It was almost done. When he learned that the Central Government was formulating a law for safeguarding National Security in the Hong Kong Special administrative region, he tore up his Application Form right in front of the member i met. Said, thereled and is now hope for hong kong. Me duringny said to my meetings with them. It is high time for hong kong to stop chaos. Restore law and order. Move forward. Tom thats the Hong Kong Macau Office in beijing, continuing this briefing, saying theres a need in terms of the security law for stability in hong kong for its future economic prosperity. He did not mention that pulls suggest the majority of hong kongs citizens oppose the security law. He did not mention 2 Million People in hong kong have been taking to the streets peacefully opposed this book the treaty. No details in terms of how this will be implemented or what it means for the media. Lets check in on the markets. Hong kong is closed. Csi 300 posting decent gains. The manufacturing pmi coming in above expectations, strongly in expansion reterritory. Kospi also up 1 . Exportsrean june falling 11 . That was below estimates. We can move the board on now in terms of the dollar. A little bit of weakness over the last 24 hours or so. The lawn is showing strength. The bti has gained 1 . Gold is in focus. Features above 1800. Plenty more ahead. This is bloomberg. 10 29 in beijing in newg kong, 10 29 york, the first word headlines. Inking rule of hong kong china, with life sentences for attacking beijing and the communist party. Says itower, britain, is deeply concerned about the new security legislation, while the u. S. Is promising strong action. The usual antichina rallies have been banned, although some activists say they will defy the order. This legislation is considered the most Important Development in the relationship between the central and Hong Kong Government since the handover, and a historic step in improving the mechanism to safeguard the national sovereignty, territorial integrity, and security. Anchor a Bipartisan Group of senators may issue a bill for Refugee Status of hong kong residents at risk of persecution for taking part in the protests. The legislation tuesday was in response to the new beijing security law, which gives broad powers to them. Bipartisanlso been a effort in the house. Moving in that direction, i think there is a variety of ways we can do it. A broader classification of Refugee Status. I would be open to considering a separate visa track altogether. Anchor the eu top brexit negotiator is rejecting the latest proposal, accusing london of trying to keep Single Market benefits after the financial split. Barnier dismissed the idea, with staff flying into and out of the eu on business. He said there could be significant risk of the u. K. Regulation altogether. Officials in victoria are we imposing lockdowns of several melbourne suburbs with spikes of virus. The measures will last at least until july 29, people allowed out only for essential reasons. The International Flights into melbourne may be diverted for the next two weeks, and new zealand has already said it is suspending service to this body until july 14. To the city until july 14. Anchor the markets, a pretty tepid start to the quarter, although we are mostly higher on the regional benchmark, but just slightly higher here. We are dealing with a little bit more of mixed data, not just with the asian market pmis, which did show improvement, but in japan, manufacturing sentiment still very negative. The south korean export picture fell more than expected. That, overall, means we are just treading a little bit of water, Southeast Asia looking better, the nifty futures down about 40 points right now as we count down to the mumbai session. Across assets, what we saw overnight was a pretty stellar u. S. Session. Bonds did tumble. We are seeing the u. S. 10year at 68 basis points, but we are seeing some money coming back 107. 73, and this is around where some of the survey thought it was going to be for the year. Old futures still pretty much close to the 1800 mark after we hit the highest level in about eight years or so gold futures still pretty much close to the 1800 mark. And performance for oil, the best performance we have seen in 30 years. And currencies, we are watching the dollar, which we did see a little bit of selling towards the end of the quarter. We are seeing that strength coming through for some of the asia currencies, like the korean won, taiwan dollar, the rupiah going the opposite direction, but we did see a bit of a spike in the pound after the chief you negotiator said the brexit deal, remember that, is still on. Further is keeping pressure on china and tech leaders, designating baht ei as a threat. W we spoke to jessica about the decision. We are not going to pay with federal dollars to use that equipment in the United States, and todays decision makes that final and makes that clear. What is the evidence that you have seen that makes you believe they are a threat to National Security . Well, you know, our evidentiary record is strong, consistent with the executive branch and also congress. Deep ties to the chinese government. Also, companies with obligations under chinese National Security laws to make sure they share intelligence with the government when asked, so we do not want to have their equipment in our National Communications network. So in that case, do you think that todays decision goes far enough . Todays decision is really only part of the puzzle. We want to make sure that the network, especially as we get to the 5g era, are truly secure. The first step is to make sure that this kind of equipment is not in our Network Going forward. Also, to the extent it is in our networks now, we are going to have to take some of it out and replace it. And then, finally, we have to work on methods to find a more competitive and diverse Equipment Market for communications in the future, so we do not tend to rely on these companies that may pose a security threat. Now, this is at a time when we are sheltering in place, quarantining, working from home. We need our networks now more than ever, but we have got small, rural carriers who say this will handicap them, because they can get relatively cheaper equipment from huawei to keep their networks up and writing. What is your response to that . Getting networks everywhere in this country is really important. It is how we will solve this digital divide, and they have sought to use this equipment in the past because it is less expensive. But Going Forward, we have to figure how to give them funds to help them replace this equipment to the extent it is in their networks today. That is a longterm smart investment in our National Security, and it is time to make it. Now, speaking towards this, aboutis the approach standardized hardware across the network. Can you explain what that is and how that will solve these problems . What we want to do is create a much more diverse and competitive market that will and one of the, best ways to do that is to virtualize part of these networks, particularly the networks and your device, and if we can bring more software into that system, we are going to have more Companies Enter that market place. It will become more diverse. Over time, more secure. And then focusing on software, will be focusing on something that the United States has traditionally led in, so getting a first in washington and with our Telecom Companies nationwide, and so i think it is important that we invest in that Going Forward. It is going to be a big part of our National Security Going Forward. Fccs and that was the jessica. Coming up, one of the most unequal economies in the world, which many believe is fueling the unrest in the city. We speak to a professor, one of the bestknown voices on the issue. Richard wong. This is bloomberg. Composite, shanghai actually hitting some key levels for the benchmark, hitting 3000 for the First Time Since march. The benchmark is still down some 3 for the year, but certainly, we have seen this resurgence in appetite. We are looking at the march low that we saw. I think we are seeing about a the lows gain since of this year, so we are seeing that 3000 level tested once again. The huge income gap, and a spiraling cost of living. Especially on housing. A root cause of unrest in the city. Our next guest is the bestknown scholar on the issue, the author kongong kong land for hong people, and what is research focusing on problems and their solutions for joining us is a professor of economics at the university of hong kong, richard wong. Thank you for joining us. As we mark the handover anniversary, you see this wealth and weite remarkable, have people still below the poverty line. What do you think is the source of disparity . Professor wong globalization a class for in three decades of more. And this has particularly accelerated in hong kong because of the Mainland China opening up and a draining of income over the past decades. Anchor driving up prices, this is an economy that is very reliant on mainland money right now. You mentioned it has exacerbated the issues. Any way,changed in especially with the political unrest in the city . Professor wong well, i do not think it will stop, but in part, the mainland influence is not just money coming in. The past 40 years, there have been huge influxes of lowskill, new immigrants, with a crossborder narrative between mainland and chinese and Hong Kongchinese residents. As a result, the that gap has also widened in terms of human debtal distribution the gap has widened. The prices have been rising, creating a huge wealth gap at the same time. Is iteans that not only inequality in asset ownership, particularly homeownership, and this presents upward mobility, and this process is not going to abate. Professor, they are going to address this for pledge to address this for a number of years. And it was to address the question of housing. Professor wong like most is apolitan areas, it heavily regulated industry. Housing hasnd for grown so rapidly that the regulatory restrictions have slowed down developers compared to rising demand, and as a result, there are price increases. Now, changing regulatory building ofs a consensus. It needs political willpower, and this is a bit lacking for the past two or three decades to address these issues. It cannot bese easily rebuilt in a short amount of time. And half the population live in government provided housing, and mostly as renters. So privatizing, with the sitting tenant, it provides the fastest solution that government can , such as what has gone on over the past decades. Anchor we had a similar policy in the u. K. With maggie thatcher. The problem was, we did get a new middle class, but used up all of the housing stock. What would you like to see . Professor wong youre absolutely right. And they had housing very much in the hands of local political companies. We worked to privatize the stock. Government will have to continue to participate in increasing the supply of Public Housing stock for sale. Basically,hing is relax and ease the regulatory restrictions to development. And this is a common phenomenon in major urban centers. And the restrictions that slow down development particularly in one area. Anchor professor, i am sorry. We have to leave it there, thank you very much for your insides. These are important issues, and you have addressed some of them. We have to get you back on the show at another time. Professor of economics at hong kong. Now, lets get back to chinas new sweeping powers over hong kong. Proponents say it will bring stability for a city rocked by months of protests. To group founder, michael, earlier. The Central Government is telling us to stay out of politics, right . , built upeconomy livelihood, build bigger flats for people to live in, that more land, but stay away from politics. We can still criticize the government, but on the livelihood issues and structural projects, how to improve the quality of life. Now, in terms of freedom of that is something very much on peoples mind. Inse laws all have a part instigating and inciting, ok, instigating and inciting ,tate power, about terrorist you know, damaging public properties, ok . It is not only action. You can get into trouble by instigating. Anchor right now, we have talked to people who say it is a deterrent, that it will have a deterrent effect. Is this what you mean about it being tough . Giveien yes, you have to me a chance to respond. I quoted the Macau Official who said this will be over a minority of people. It was meant to be a deterrent, and i believe it is. In a way that it is now very, very clear what exactly constitutes incitement or instigation i guess it may not be easy to specify or quantify that, and therefore, my personal judgment is that they are only going after a handful of people. They do not want hong kong to become a political center, right , dealing with all this kind of conflict between the mainland and taiwan and the Central Government and the west. Anchor how does this deal with the spirit of the law, and how does it possibly get implemented and applied and not threaten hong kongs Judicial Independence . Guess it is still that we are one country, two systems. When it comes to politically sensitive matters, ok, we need to think more of one country. If there is not anything in that category, it is two systems. That is the message i get. Anchor michael, given everything you have said, do you think that leads companies to be confidence any their employees and continuing to do business in hong kong . Right now, the status of hong kong as a Financial Hub has really been centered on its freedoms. Mr. Tien can i come to this again . This will be a sharp sword hanging over a minority of people. Time will tell. I cannot guarantee. Cannot given that you guarantee and only time will tell, will that erode the confidence of hong kong as a Financial Hub for all of these businesses . Why not then go to singapore . Why not go to japan . Mr. Tien no, i do not think so. Dong a Financial Hub, why you have to talk about hong kong being separated . Why do we have to talk about the chinese anchor what about some investors that criticize certain Chinese Companies . We have seen those activist investors really delve into the finances of some of those Chinese Companies. Could that fall into some of those categories that beijing has outlined . Mr. Tien i do not think so. It is not about secession or state power or collusion, endangering National Security. I think we are stretching it too wide. Back to these. E they all carry a maximum sentence of life, so they are serious, all right, but they are right . G to these four, in article 23 years ago, when bengs go they will thinking of these. I believe it is meant to be a deterrent, but how lenient will they be . It would be up to the eventual enforcement, and we have to think about what the Central Government really wants one country, two systems to become. I believe what they want is that you guys better thing more about one country. Forget about your two systems. Everything else, you can still go on dancing. You can still go on racing preview can trade. You can do all of those things. Just stay away from these four areas. Anchor and that was the hong and lawmaker michael tien, we will continue to reach out to all sides of the debate about hong kongs future. We just want to bring you more about the state Council Briefing on this security legislation, and the fresh lines coming through is that china did, as they say, consult Legal Professions on hong kong law. They said they also solicited views on this draft law widely. I think we have been speaking to some in the Legal Community in hong kong that there has not maybe been enough public comment, but beijing coming out in response. Crossinges, a line now saying sanctions, threats. Of course, we have this, logic, bandits paid china says no logic supports the threats. Also, some lines crossing with a minister expecting the 2020 gdp for this year will contract five 5 or 6 forget also, a line on inflation. Minister says the cpi in 2020 will likely be negative. Now, lets look at goldman sachs, seeming to be near a their scandal, which may include a fine of 2 issue. For the 1mbd su keenan joins us. They may have to avoid potentially entering a guilty plea, which prosecutors have been going for. Are they any closer . Hearing ishat we are that prosecutors what to get a guilty plea from goldmans asia unit. The top attorney is on a mission to avoid that at all cost. It would be the very first guilty plea from goldman. Now, reports of it nearing a settlement, which hinges on a decision with u. S. Officials, and this does involve the biggest legal threat in decades, and that sent the stock higher by about 2 in the latest session. Thatberg has also learned two over a penalty on its work for the malaysian sovereign fund, goldman has appealed to the very highest levels of the u. S. Justice department forget we are talking about attorney general william barr. Overseeing the case after a special waiver, because his former firm overseas goldman. Prosecutors have been pushing for a guilty plea pretty much since 2018, and goldman has been pushing hard back. Su, goldman is also separately negotiated a settlement with malaysian authorities. How does this all fit into this case now . Su yes, that is happening simultaneously, and what we are hearing is that a recent offer of about 3 billion would, in fact alright, im going to toss it back to you. Thanks. There with thean latest come of course, as we withto this goldman case 1mbd. You the riskow appetite we are seeing when it comes to chinese equities. Ewald down. Pretty quiet. It looks like this rally has some legs. The nikkei 225 still on the lunch break, but we ended the morning session down about 1 5 of 1 . The survey weighed on stocks. And you are watching the asx 200, all up about half of 1 , even though we have seen some of the states, like victoria, three imposing lockdowns with the resurgence of cases. Anchor yes, and domestically, here in the mainland, you have pmi better manufacturing for june building on those numbers. The data in china seems to point to the slow, gradual recovery. There is still that murkiness between beijing and washington, trump saying he is running out of approaches with china, getting more angry with china, so we are watching those tensions. Plenty more ahead. This is bloomberg. Its pretty inspiring the way families redefined the word school this year. Its why, at xfinity, were committed to helping kids keep learning through the summer. And help College Students studying at home stay connected through our university program. Were providing affordable Internet Access to low income families through our internet essentials program. And this summer, xfinity is creating a Virtual Summer camp for kids at home all on xfinity x1. Were committed to helping all families stay connected. Learn more at xfinity. Com education. Anchor it is almost 11 00 a. M. In singapore and hong kong. I am haslinda to. Welcome to Bloomberg Markets. Rishaad life in it jail, and hong kong were marking about a new law that has heavy punishment for those who attacked beijing or the communist party. The secondntering cautiously, crossing 3000 for the First Time Since march, shanghai. Rishaad and more pressure on huawei, as the u. S. Views it as a threat. Haslinda asian markets off to a muted start after ending the quarter with a big, big bang. The biggest quarter since with 1 ,msci index up by 2 10 of in the positive, steady, sitting right above the 200 moving average. Investors assessing betterthanexpected Economic Data and concern amid rising u. S. China tensions. 1 after thense of s p had its best quarter since 1998. Down 3 10 of 1 . Rightnow that they were to go all in on the recovery story. Rising,300 index possibly hitting 3000 for the First Time Since march, as we said earlier. China has been less volatile, pmi, and today, we had the better than expected at 51. 2 chinese investors are betting the rebound will continue. And the index up by half of 1 now, and take a look at where we are in the asian market, in the money, as well, up 3 10 of 1 . This quarter has been historically challenging for the the biggestr contraction in three decades. , andenchmark unchanged indonesia says it is pressing ahead with a new capital with the aim of reviving the economy. The bank of indonesia with the government pandemic spending, set is up right now. Overall, not too shabby for these markets. Rishaad yes, the numbers are an in, what, just about hour. Hong kong marking 23 years of overall rule. Trials in life sentences for attacking beijing as well as the communist party. In the u. S. Is promising strong action. Hong kong looks at the antichina rallies having being banned, and some say they will defy the order. Lets bring in our chief north Asian Correspondent, Stephen Engle. Global reaction. Just touched on that a little bit, didnt we . Tell us what you have been seeing and what you have been hearing, the general atmosphere, steve . Steve yes, we knew this was coming. We did not have all of the details. We got that at 11 00 last night as it has been promulgated on hong kong and imposed, and really, it is how it will be implemented and enforced, and how will people here in hong kong know what side of the law they are on on those four main issues, those being subversion of state power, terrorism, as well as collusion with foreign forces. Hey are fairly vaguely written in the 66 articles in the 18 pages of this National Security law that is something hong kong is going to find out in the course of this new normal, if you will of being rolled out if you will, being rolled out. China says this is important for the continuation of one country, two systems. In fact, officials in beijing over the last hours have been saying the laws implementation will be of profound importance. Well, it will definitely be of profound importance for those who have taken to the streets, some of whom called for independence from Mainland China and questioned the authority of the communist party of china as the ruler of hong kong, and those who are participating, those would be illegal crimes ng forward Going Forward illegal crimes Going Forward. A little more uncertainty now that we have the letter of the law in our hands, now is time to start interpreting that. Haslinda and, steve, Global Reaction has been immediate. What are we hearing from the u. S. And the u. K. . U. K. , boris the johnson has come out and said, and i will quote what he said. I have it right here. We are deeply concerned. Also, the Trump Administration saying they are valid strong actions if beijing did not reverse course on this National Security law. Also, we are hearing from mike pompeo, the u. S. Secretary of state, and i do believe we have a graphic of his statement. He said, hong kong demonstrated to the world what a free people could achieve, one of the most successful economies and vibrant societies in the world, but he goes on to say beijings paranoia and fear has to eviscerate the territory. He also called this new law draconian. Again, these are the words of the u. S. Secretary of state, mike pompeo. We are also hearing from other regional financial centers, whether it is tokyo or even taipei. They have put out statements, in japan saying there is a move underway there to perhaps try and attract some financial professionals, if they want to leave hong kong, that perhaps tokyo could provide a realistic opportunity. However, those i have talked to in tokyo say they have an uncompetitive tax structure they need to work out. Also, in the last hour, we got headlines coming from taiwan that they could, perhaps, welcome those people working in hong kong to the shores of taiwan. So this is a movement, evolving story, obviously, that we will keep track of, but now that we have some details that include some of those very fine points that are points of contention to the road democracy camp, and that is the potential to have closeddork trials, the potential to have nonjury trials, that potential that they could be tried across the mainland to have some closeddoor trials. They will have immunity in hong kong, so it raises tons of questions, especially, as well, the news media, the foreign news media, which this announcement says they will have stronger control of, as well as nongovernment organizations. Haslinda some say it is worse than expected. Correspondent, Stephen Engle, in hong kong. Now, lets get to the headlines. Debating how to make tokyo more attractive, it says they will welcome finance workers who want to quit hong kong because of the new Chinese Security law. Tokyo has long aspired to be a Global Financial. A panel on foreign labor says what japan offers that hong kong does not is freedom. Negotiator isxit rejecting the latest proposal items, accusing london of trying to keep final Single Market benefits after the split. The idea of letting france operate from the city with flights flying in and out of the eu on business. Barnier said it would create a situation of the u. K. Avoiding regulation altogether. Expert, the u. S. Going in the wrong direction over the coronavirus, dr. Fauci saying infections have more than doubled, and cases are surging in the south and west, with several states putting reopening on hold, despite president trumps call for a return to normality. Fori says the numbers speak themselves. And in victoria, a locked down after a spite of virus infections. The measures take effect , with people allowed out only for essential reasons. And flights in and out of melbourne may be diverted, and new zealand has already said it is suspending services to the city until july 14. Hour,d still this further curbs in the United States, while the u. K. Says it is only a matter of time before huawei exits its 5g network. And risks around a second wave of the pandemic, dollar strength. Getting the outlook with a huynh. E bank cio, tuan this is bloomberg. Asian stocks started the quarter in a muted fashion with mixed Economic Data amid concerns about the threat of the coronavirus. Markets continue to be volatile in the second half of the year, our next guest expects. Huynh joins us. After the best quarter we have seen. Tell us about it. What are you expecting . Tuan i think after the strong rally we have seen in the Second Quarter, i think Third Quarter would rather be from our perspective more sideways, but obviously, with volatility, because we think a lot has already been priced in, and we are seeing a higher number of infections, mostly coming from the u. S. , so there is still some risk around, so we do not expect, obviously, a similar quarter like Second Quarter, so more sideways. Rishaad absolutely. It seems the good news or possible good news has been priced in, but none of the bat hasbeen. At least, it has not been for the last month or so priced in, but none of the bad has be en. Markets, ask the you also rightly said, pricing in the reopening of economies, so as i mentioned, we are seeing a continuous number of infections rising. The u. S. Has the highest sevenday average since the hence, wen march, so, think if it does not lead to a second lockdown, then the markets should at least be quite robust in this regard. We can imagine there might be some profit taking, although over the past two or three weeks, whenever there was some weakness in the markets, it could stabilize, like last week, when we saw in the u. S. , the s p 500 was close to 3000 again. Today, we are back to 3100, so i think right positioning is also a reason why markets did not correct that much as many maybe had expected, because there is still a lot of investors waiting on the sidelines. Most missed the rally and are waiting for an opportunity to step in, so, hence, we are not expecting a major outbreak in each direction, so, hence, sideways. Ofin, if the number infections would potentially lead to a second lockdown, then and would be a bad news, the markets clearly have not priced in this scenario. Uan, no doubt come you are right. You can talk about a no doubt, youre right. You can talk about different shapes of recovery. We also have an election coming up in the u. S. We also have rising tension between beijing and hong kong. What would it take before people begin to recognize those, with the markets looking as though they are fairly pollyannac. Tuan absolutely. You do not even have to look too far ahead. The week, we are starting Second Quarter earnings season, and you involve the downward revision. It is continuing, though at a slower pace. As we know or are supposed to know, it is supposed to be the worst quarter since the second world war, so, hence, this is supposed to be priced in, but like in the first quarter, we have also seen some companies disappointing. That would also be interesting, to see how the markets are taking secondquarter earnings released, it would also be interesting to see if companies are now finally making some prediction how the rest of the year will pay out. If we look a little bit further ahead, i think action would clearly be in action would clearly be one of the risks. At the moment, it looks like biden will have a clear edge over trump, and then, if i look at europe, of course, brexit is still an ongoing discussion here in europe, and then the u. S. And china tension, although we are not expecting here any disruption for the phase one deal at this moment. Haslinda tuan, the dollar. It has been pretty enigmatic. Consensus where the dollar is going. On the other hand, structural weakness. Where do you see the dollar heading . Yes, we are expecting a slightly stronger u. S. Dollar. For example, the euro u. S. Dollar, it is not far away from where we are currently trading. The dollar has come of course, lost its Interest Rate differential. In the past, the dollar was, of course, for most investors quite favorable, for those looking for a higher Interest Rate. It was the u. S. Dollar, but the fed, this year due to covid19, they have cut Interest Rates down to zero, like many other Central Banks and currencies in the world. This gap and this Interest Rate differential is no longer existing, and, hence, the dollar is now more or less acting as a kind of safe haven type of currency, so if markets are dropping, then we see the u. S. Dollar moving a bit higher, and as we are not expecting the markets to shoot through the roof here, and rather, at least in the short term, expect some downside, that would rather speak for the u. S. Dollar to go a little bit stronger. Tuan, thank you so much for waking up at 5 00 a. M. Great, in frankfurt, inside. Still to come, a Large Pension Fund is looking overseas for better gains. The ceo of the fund tells us where he will be putting some of the money to work. This is bloomberg. Haslinda welcome back. Malaysia s largest interest fun is seeking to beat the return it has been achieving. I spoke exclusively of the employees attainnt fund efforts to high dividends for malaysian workers in the face of limited opportunities on shore. Akri it has been rearing its head on a yearly basis and every year seems to be getting more and more challenging. So we actually had a challenge. We have to do it very, very quickly, right . Longterm view of funds. At the same time, we are operating in a world that changes literally on a dime, so for us, we have two look at the way we do investments we have to look at the way we do investments. Those promised longterm yields, so more dividends. Eable, forbecome trad example, and the ones we did for equities, or traded on a shortterm basis, it is becoming more. Or 5 return,4 can you beat that this year or in the coming years . Alizakri we will try to do that, but as you know, it is challenging. Media, they the like to go and compare our returns from a yeartoyear basis, but i keep on reminding them that every year, especially now, on a yearly basis, things change so fast. Last year, nobody would have thought that covid would have come into play, right . And in the space of three months, Something Interesting happening, it is now a global threat, right . So do not look at us from a year basis. Look in terms of the overall Market Performance for that year. So we always have an internal on at of around 2 , 2. 5 threeyear average, and that is the one we always look for. Context, likeof 10 years ago, we use to return over 8 , right . But the market during that time was more than 8 . So giving a number of a percent, you would think, wow, really performing. So giving a number of h percent, you would think, wow, really performing 8 . Our internal targets have been outperforming. Haslinda you talked about how challenging it is to compete for assets overseas. Right now, about 30 of your portfolio is invested overseas. What are you looking at . Are you looking at pumping more overseas . What are you looking at . Alizakri it is outgrowing malaysia paid whether we like it or not, we have to start looking overseas. I have said this quite a few times. There are also challenges, because for us, with malaysia, it could have a real impact on economic basis of malaysia. So we also have to start looking into investing back into our country. Is into whatn then type of Asset Classes . Moving forward, we are looking into some assets and investments, specifically a certain type, because as you know, the majority of our population are muslim, sharia type investments, and these are very much in line with the principles at esg. And shariasg investment, is there a figure you can give us . Alizakri one of the problems, especially for shariacompliant components, there is not that much out there. I think you need to look at it from a global perspective. It is not something that is in the mainstream, right . It is much easier for Global Investors to go into the normal type of investment products. So for us, it is not a question of whether we want to or not. We definitely want to. There, fors out those of you out there, please come and see us, because we will be very, very interested to talk to you. At anda malaysia looking recession and at risk of a downgrade. Employees provident fund, speaking exclusively to us, alizakri alias. Rish . Rishaad singapore property inces falling, and that was the latest quarter. A similar drop to the first one and reflects the closures during the virus locked down. And across australia, home prices continuing their declines. And a developer is raising more than 5 billion with distressed real estate assets. On heels ofow another, and then the clear out three years ago. Has been picked up, hoping it will help them. New properties caused by the coronavirus. A lot more on the way. This is bloomberg. I got an oriole here. Eh. Common bird. Ooh look over here something much better. There it is. Peacock, included with xfinity x1. Remarkable. Fascinating. Very. It streams tons of your favorite shows and movies, plus the latest in sports news and. Huh run the newest streaming app has landed on xfinity x1. Now thats. Simple. Easy. Awesome. Xfinity x1 just got even better with peacock premium included at no additional cost. No strings attached. Just say peacock into your voice remote to start watching today. 11 30a its almost a. M. In singapore. We are in the middle of the trading day. Up about 10 of 1 . We heard from the Prime Minister today saying that the country has controlled the spread of the virus. The way the government has handled the virus is going to be a big issue for the upcoming election on july 10. Sci up a 10th of 1 . 8 10 of 1 . Rishaad more on the election and a look at first word headlines. Brother of strange singapores current Prime Minister saying he will not run for office. Does remove an obstacle as his party looks to retain power. They have ruled singapore since singapores independence in 1965. Campaigning is underway, with nominations across the country. Its on the 10th of this month. Goldman sachs hoping its nearing the final stages of resolving its legal threat while avoiding a first ever guilty plea. Withank is under scrutiny a work with the malaysian one mdb fund, where billions of dollars have gone missing. He had taken the defense where attorney general william barr is overseeing the argument. Same with the u. S. And a Bipartisan Group of u. S. Senators introducing a bill that would good Refugee Status to hong kong residents at risk of persecution for taking part in protests. The legislation is in response to beijings numerous new security lock, which gives broad powers to critics. It has also been introduced into the house. I would support moving in that direction. I think there are a variety of ways we could do it. We could do it by granting process for Refugee Status. Awould be open to considering separate piece altogether. Rishaad hong kong marks 23 years of overall rule from china, Holding Secret trials that life sentencing and the communist party. They say they should be concerned while the u. S. Is promising strong action. Hong kongs first of july antichina rallies have been banned, but some activists say they will defy the order. This legislation is considered the most Important Development in the relationship between the central and Hong Kong Government as a hand over. And is a historic step in and proving that mechanisms to safeguard the country sovereignty towards security. Haslinda asia is showing signs of brother strength. Broader strength. South korean taiwan explodes slightly. Andaling contractions expansion. Takery output in vietnam above 50, while indonesia saw the biggest rise while still remaining below the 50 mark. Chinas pmi rose in june to 51. 2. Analysis is the Commerce Bank director. Good to have you with us. , onis pretty much improving even. How resilient is it looking . Especially given signs of a second wave of virus cases . Thank you for having me. In general we have seen that there was an improved trend. Particularly by china. A lotuth korea reported of data. And south koreas exports with china have turned positive. But it has relatively stopped. Given that the Global Economy reopen, for the asia economy it is brighter Going Forward. The improvement trend will continue. Have ana will probably positive q2 growth. In q4 we will see that chinas growth,as potential which will probably be 5 or 6 in the second half of this year. Its a good thing for asia. You talked about house shipments to china have recovered. The question is whether or not that is enough to stabilize the overall trade picture . Happened is that we have seen the commodity being relatively resilient. The problem is that, domestic looks in china and asia like it has time to recover. But the political sector is lagging behind. Compared to what we have projected about two months ago, the trade future has been improving. Slump in thea big trade picture about two months ago. They believe that kind of slump will not happen again. I think it will be so good, but not as bad as we thought about three month ago. Haslinda chinas picture is more a story of a supplyside, demand, not so much. Jobs picture still muddled, what is the gross trajectory for china . Hao you are right. The supplyside in china has recovered. The problem is on the demand side, especially that the job market is under pressure. China wille, i think have more jobs for people, but somehow, above normal jobless rate will be there in china for some quarters. In this case, the gross , we will see china zero positive growth in q2. In q3 and q4 we will see a 5 growth, in the second half of this year. For the whole year i think chinas growth will be around 1 at the moment. But we have uncertainty from the trade sector. U. S. China correlation. To still have a cautious view on china for the time being. You said that you saw the supplyside recovering, tell me why you say that. At the you look manufacturing and pmi in china, it has been relatively in the expansionary territory for a few months. More importantly, if you look at the highfrequency whichsumption in china, has already come back to a relatively high level in china into two. The demand sector has been leaving the recovery in china. That iflem right now is demand cannot recover as fast as what we have seen, we are going it going up. Many sectors will not come back as fast as many people projected. Permanentobs will be permanently gone because of the virus. We have to keep that in mind that demand will not come back as fast as many expect it. Rishaad wrapping up everything you said, it presents a bit of a puzzle, doesnt it . Do you really believe that chinas industrial profits are in6 year on year with ppi 3. 7 territory . Those two dont add up. A lot of profits are coming from the costcutting from the government. Because companies dont have to pay as much tax as before. So they went to the profit. Power. Ans you have the ppi deflation is sure that the demand is not as healthy as expected. That is the problem. That is why the government will continue to provide support and provide Cost Reduction plans for China Companies to make sure they can get through the difficulties and uncertainties in the coming quarters. Hao, thank you for joining us. We are counting down to the market open in india. We have just over six minutes to go before things get underway. Nifty futures are getting priced. We have a slight move down. We had tensions between beijing and new delhi with the apps being banned in india. Nifty closing out with a few tenths of 1 gain. We could be reversing some of that. That is the look at mumbai, and this is bloomberg. Rishaad this is Bloomberg Markets. Tensions rising between the United States and china with the fcc, or the federal Communications Commission is nationalhuawei security threats. These are companies with the ties to the chinese governments and companies with obligations under chinese National Security laws to make sure that they share intelligence with the government when asked. We dont want to have their equipment in our Nations Communications network. Rishaad lets go over to our china correspondent. What does it mean for those smaller carriers in the United States . Selina this designation formalizes a proposal that the sec had adopted in november. The action means money from federal subsidies used by small carriers in the u. S. May long may no longer use the federal subsidies to buy or maintain equipment reduced by huawei or zte. This is based on the grounds while ways equipment could huawei s equipment could exploit vulnerabilities. These ideas. The communication in the u. S. Says this will cost service to suffer, as small carriers lose the cash to keep their networks afloat. In that the general counsel of the association said small carriers will have to shut down parts of their networks because they cannot use those subsidy funds for maintenance or replacement parts. The fcc estimated last year that there are three or four dozen rural carriers that use it for equipment from huawei or zte. And the average cost to replace the equipment may range from 40 to 45 million. Has themal designation u. S. Enacting to constrain huawei. To preventem both chipmakers using technology from supplying to huawei. Haslinda the u. K. Says its only a matter of time before its 5g exits its 5g network. Seems like they are making a uturn on policy. Selina thats right, it does the it does appear to be a uturn. Ors johnsons government said huawei good apply equipment for the 5g networks. Officials argued that bans on huaweis use in sensitive areas and core technical parts would be efficient to mitigate any risks, while allowing the u. K. To benefit from new technology from huawei. That decision outraged members of the parliament in Johnsons Conservative Party and angered the Trump Administration. And chinas actions has increased a tougher stance. These comments come from the u. K. Culture secretary. He told parliament that huawei will eventually not be part of the u. K. 5g telecoms network. When questioned by parliament, he said that while ultimately huawei equipment will not be used, there is a difference for the different paths they could take to get to that point. He said the u. K. Government is considering trade and financial incentives arrivals, adding that he welcomes alternative vendors including samsung. Selina wang in beijing. Lets do a check on where the Indian Markets are. It is a risk on day here in asia. India is expected to be under pressure after posting its best quarter since 2009. There are concerns about poorer economic outlook. There are concerns about the week macro data. Arereopening of businesses being weighed against the challenges. They may get a clearer pictures addresses the nation later today. Look at where we are. India is open. Then sex up by 2 10 of 1 of 1 . Up by 2 10 nifty up by a 10th of 1 . 21 392. Index is at we are looking at the bond market. , providing some support to the bond market of which indias the yield curve steepened in recent weeks. Thats right, lets have a look at what we have coming up. Hong kong returning to china with a controversial security law. We will look at these developments on the way. This is bloomberg. Haslinda chinas imposition of a security law in hong kong is expected to escalate tensions with the u. S. Even further. Washington has suspended some of the special trade privileges that hong kong enjoyed. They have put restrictions on visas for some chinese officials. We spoke to a republican senator of pennsylvania with the of adding whether more steps will be taking. Isthe statute by design intended to take away for beijing to undermine and trample the freedom of people of hong kong that have enjoyed for many years, and that the China Communist Party had promised to continue in the basic law. Senator, the u. S. Commerce department is starting to revoke the special training status for hong kong. How far will the u. S. Response go . Hard to say. Part will depend on how china response to this. That there is broad bipartisan concern. There has been some criticism and analysis that the moves reallyed yesterday was more symbolic, and if you really sanctions,mpact for you have to be targeting exports to china, not just hong kong and affecting the exports status there. In terms of how far it could go, could there be further, and i guess, more significant moves . Sen. Toomey yes. One of the challenges in dealing with this whole situation is thati would prefer anything taken in the United States in response to Mainland Chinas back down on freedom in g kong, that our response would not be the objective. Legislationy imposes sanctions on the bad actors in beijing, rather than impose a burden on the people of hong kong. I think that is the better approach. To some degree it is inevitable that we will have to reorient with hong kong. Hong kong no longer enjoys the autonomy and justify that special freedom in the first place. Bipartisan bill being launched by Congress Addresses potentially providing Refugee Status to individuals at risk of persecution under this new National Security law and hong kong great is that something you look to would you extend Refugee Status and welcome prodemocracy protesters that are now potentially targeted under this bill . Sen. Toomey i would support moving in that direction. I think there is a variety of ways we could do it. A could do it by granting broader classification for Refugee Status of the people of hong kong that usually qualify. I would be open to considering a separate piece altogether. For starters, i think the United States would benefit enormously from an influx of hong kong residents. What are the chances the president will agree to that that into law, given that we are seeing more visa restrictions for foreigners in the u. S. . Sen. Toomey you are right, we have Seen Movement in the other direction in a general matter. But when these policies pertain specifically to china, its a different set of circumstances. Im not sure what the president thinks, but i would not be surprised to find broad bipartisan interest in doing something to provide this safe haven for the people of hong kong. Foromething we have seen the hong kong autonomy act, your legislation would penalize banks doing business with officials involved with that security law. The best chance for passage seems to be in the house, then getting to president trumps desk would be to put in the defense bill. How confident are you that you can do that . And are you expecting pushback from the administration . Sen. Toomey there are two tracks we can pursue to get this legislation signed into law. We have already passed this in the senate. There is a companion piece of legislation in the house. So its not farfetched to see the house passed this legislation and send it separately to the president. As you point out, there is a track we are pursuing, which is to get it in to the National Authorization bill, which is on the floor right now. Thatcautiously optimistic our legislation will be included in the National Defense authorization bill. We have had extensive conversations, we have worked with the administration, especially folks in the treasury department. I am cautiously optimistic. I think we will get this done one way or the other. Rishaad republican senator pat toomey. Getting voices on all side of as isory as it develops, our journalistic mission. Lets wrap up developments with our chief north Asian Correspondent, Stephen Engle. What are we seeing and what is the atmosphere like ultimately . The ceremonies for the 23rd anniversary of the hand over have completed in the building behind me at the convention center. Now it is a waiting game to see if some of the protests protesters follow through on what some of the leaders have called for, and that is a march. Even though the rally that was applied for was denied by the police. We have seen indications on social media, i cant cooperate it, but the police have new banners that indicate perhaps they would put them up. They deemed people were violating the new National Security law. It has been implemented as of 11 00 p. M. Last night. The big question is, how will it be enforced and how will it be enacted on those four main concerns . That is subversion of state power, terrorism, collusion with foreign forces, will where will the line be drawn . I listened closely to the interview we had this morning with hong kong step 80 chief of the National Peoples congress. Member. So a legco its hong kongs take of the chinese law, without the wording of Hong Kong Government officials. I will quote exactly what he said. Everyone has to be much more careful than before. He is referring to issue surrounding the four main criteria of National Defense. I dont the guy could make it more blunt. He went on to say, beijing do what itkong to does best, make money, stay out of politics. And i was paraphrasing. Where does it lead the prodemocracy movement in hong ofg, given that the likes these people have cut ties with the political groups . People of the party resigned and disbanded the party late yesterday after this National Security law. They did not want to, as the figureheads of the party, possibly implicate others in the moment. Perhaps it will go more underground. The last twitter post that i saw last night, he recited a passage from the bible, from psalms about walking through the valley, etc. , etc. , which is often used in eulogies. Thel democracy prodemocracy camp is trying to figure out what to do. Is it over . Is this game over . They said, no, its not game over. Thats before the law was implemented. I think there is a lot of reassessment of strategy Going Forward, but this law is very firm. If you are going to violate those laws of National Security, the law of the land will come down very hard on you. Haslinda chief north Asian Correspondent Stephen Engle in hong kong. Bank indonesia intervening directly in the fx interbank market. The idea reference rate is set at 14 341. The bank of indonesia said the currency is undervalued. That is it from Bloomberg Markets asia. Bloomberg debris middle east bloomberg debris middle east is next. This is bloomberg. The following is a paid presentation brought to you by rare collectibles tv. In 1792, as a Young Country in its formative stages, the United States of america needed to assert its status as a new global power to the countries around the world. As a way to firmly declare to the world that the United States of america was now an independent country that would continue to propel freedom, the first president of the United States, George Washington signed the coinage act of 1792