Transcripts For BLOOMBERG Bloomberg 20240704

Welcome to daybreak asia. We are coming down to ages major market opens. Haidi the top stories this hour. The market searching for motivation as a tame u. S. Inflation report the case for a fed rate skip. A weak 30 year option. Alibaba returns to Revenue Growth across all major divisions define chinas define chinas economic woes. Bloomberg learns chinas market regulators will meet developers and financiers on friday seeking solutions to a worsening property crisis. Kathleen we are waiting for the Rate Decision from the banco ce ntral peru central bank. Expected to hold again even though inflation is falling. They did holder key rate at seven and recorders percent exactly as expected. We are going to be looking for messaging because Goldman Sachs had predicted they might cut their key rate today because inflation has had a nice downward trend lately. If not today they will do it at their next meeting. That is the latest from latin america. We will be waiting for any Additional Information on this. Lets take a quick look at the u. S. Markets. The stock market speaking of Central Banks. The cpi report came out and people said that looks like it confirms the fed will pause. A big rally on s p futures. Daily sf fed president said more work to do. The treasury auction, 30 year bonds sold at the highest yield lowest price since 2011. You can see after closing unchanged s p futures pretty much flat the nasdaq was lower today. It has bounced back as well. Perhaps everybody has realized it did not change much. A couple big reports to figure out what the fed might do next. The downdraft in futures is showing up in the 10 year note. They were down sharply. The 30 year was the big loser today. Crude oil putting much flat. Caught between the sense that slower demand as china slows down be a downdraft. Inventories are expected to continue to fall. There is supposed to be a deficit in the third quarter. Haidi it bit of a downdraft when it comes to that passing through to the we are seeing a bit of downside in kiwi stocks here we did get a deflationary picture when it comes to food prices from new zealand as well as and even weaker manufacturing pmi. The deepening recession as we get into the next rbnz decision. Then futures down by 3 10 of a percent. Watching for the rba governor, his successor, they will be speaking before a Parliamentary Panel for the semiannual testimony. Watch for signaling on how they see the inflation fight going. Kita trays trading at kita today treating action will be what happens with assets. Potentially some Key Developments in the property sector woes we have been tracking. China securities watchdog is said to be meeting with Property Developers on friday as the crisis drag on the entries recovery. Alibaba is in the makes. It is defying the economic turbulence in taking a step toward a longawaited comeback. For more on these top stories Stephen Engle is with us and annabelle droulers. Let me start off with you. Fascinating what we can see out of this meeting. Sources are saying the Securities Regulator will be calling a regular cash a meeting with select regulators. Also meeting with Financial Institutions to find a way to get out of this trouble. This is a cash dependent sector. You need those presales to Fund Projects and to fund coupon payments which has run afoul of Many Developers like China Evergrande which was the previous poster child the woes of the property sector. Now Country Garden could be the next poster child because it is one of the few Major Developers who have not yet defaulted but it has earlier this week and missed a couple of Interest Payments to they have a 30 day grace period so they have not defaulted yet. It looks after they put a statement to the Stock Exchange late last night the financial situation is in dire straits. Saying they are going to have a multibilliondollar loss in the first half of upwards of 7. 6 billion u. S. Dollars. The first seven months of this year attributable sales fell . 35 good that goes back to they need cash upfront for developments and paying off their dollar bonds and other domestic bonds. They are in financial trouble. It is being reflected in the stock prices down 61 yeartodate. Down within 30 in the past month. The dollar bonds we can change the page and look at the on creditors are concerned. The bonds have sold all 59 in the last month. This is a problem for regulators. They are trying to i would not say talk up the property sector but they are trying to restore confidence in a sector that has been battered down. Until now it had not hit the top tier. Up until last year it was just Property Developer in china by sales. It is now ranked number six. If it is cracking it shows further cracks under the property sector. Kathleen it is hard to understand with the regulators think they can do if they dont to some kind of restructuring. I guess the creditors figure the billionaire chair of Country Garden has deep pockets even with all the losses and they can get something from her. Stephen go straight to the bosses pockets and hand over personal money. That is what happened at China Evergrande when that link the saga went on and on. Creditors started saying dip into your pockets and he ended up doing so. Today the billionaire founder of Country Garden, she is one of the richest people in china. Of the richest women in china with a net worth of five dollars. She gets a 28 million Dividend Payment from her personal stake in Country Garden later friday. If you are not adding your Interest Rate not paying your interest due earlier this week and creditors are lining up for the payments into your own pocket. We will see. Haidi on a happier note, despite the water macro woes for china and the chinese consumer, alibaba is a shining light in these earnings. Annabelle that is right. When you take a look at what alibaba was facing in this quarter and so much of it in the june period was the weakness we were continuing to see in the China Economy and Consumer Sentiment still not managing to improve. Yet he tends competition from rivals. The results that came through overnight showed the first signs of a comeback for the company. The Revenue Growth this is for the china Sales Division which is the bread and butter of the company. Accelerating to 14 in the june quarter. A big turnaround for the company. Four straight quarters of contraction. Really notable when you consider what is happening in the mac economic environment. Other divisions in focus. There is the cloud arm as well. The other one we have heard spinoff plans for as well. It returned to growth although a little bit of a lower speed. What analysts had been projecting from the sell side can see in this chart that is the biggest positive cells we have seen for alibaba in the last years. The Market Reaction is very positive. Up around 5 in the session. Something else that helped lift rivals. Also gained in the wall street session. Kathleen alibabas six way split. Whenever i have read it i think that is a lot to do to this company. What is going to happen there . Annabelle so far when you take a look back over the last few months in the six way split, the three ones relate to the logistics, the food delivery and the cloud arms. When it came to the earnings quarter we did not get an update on any of these. The complete blackout that came through is interesting of course but some analysts in the market are saying it is understandable because perhaps it means the Management Team need more time to wrap their head around what that means. And also to consider in more detail, to quantify the impact it is going to be having. Not something to be concerned about too much. The silence that came through. Certainly something that was notable. You had seven analysts who raised questions and not a single one relating to the spinoff plan. Haidi what are we expecting when it comes to markets we spoke about the potential wrigley tory meeting with the Property Developers as one to watch. Annabelle i think this is going to be one of the interesting parts when you look ahead to the open today for china markets in asia markets. It will be the question mark over with the breeze to we saw in alibaba in the overnight session, the Golden Dragon index jump, how much of an impact that has versus setting off concerns in the property sector that have been so prevalent as couple of weeks in the Asian Session. Other factors like the u. S. Cpi. We do see hong kong futures pointing higher. China ones are broadly flat. Look at what we are seeing for the broader asia session. It does look to be fairly subdued. Pretty range bound which tells us it is going to be a little more of investors as these headlines. A lot more weighing up the stage. Broader going to be the u. S. Inflation print. The expectation for the fed where they go for the september meeting and onward and what that means for other Central Banks that will be the key focus we will see in the session. Haidi that was annabelle with the details. Also our chief north asia correspondent Stephen Engle with us on our china property story of the day. Well be getting more when it comes to the outlook for chinas tech sector and alibaba. Analysis of those numbers. First Defiance Etfs will be joining us. Market struggling for direction even as u. S. Inflation continues to cool. Talking investment players next. This is bloomberg. Oh booking. Com, im going to somewhere, anywhere. A beach house, a treehouse, honestly i dont care find the perfect Vacation Rental for you booking. Com, booking. Yeah. And your store was also the first time you realized. Well, we can do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com fabulous surroundings. But everyones looking at their phones for Financial Insights from merrill. Is he hailing a ride to the concert hall . No. Hes making sure his portfolio and retirement plans work in harmony. They want to adopt a child and build a new home. So theyre talking numbers with their merrill adviser. Shes not researching her next role. Shes learning how to handle market ups and downs without the drama. Personalized advice so impressive your money never stops working for you with merrill. A bank of america company. 76 of 23andme Health Customers surveyed reported taking healthier working foactions. Th merrill. Because they know health isnt just a future state. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. The numbers this morning were close to what we thought. Progress on inflation for now. That cannot be ignored. This inflation is still going to be with us but like so many of the trends we are seeing nothing moons nothing moves in straight lines. I think the economy is growing above trend. I dont think the fed has done enough. Short duration tips to make sense to me. January 2025 yields 3 . Recession seems to be off of everybodys mind. I think that is probably a mistake at this point. Kathleen bloomberg tv guess r where acti to the date bloomberg tv guess reacting to data. Lets get more on the Market Reaction and more to the latest cpi print. Joining us as the cofounder, ceo and cio of Defiance Etfs. A big rally in the s p 500. Up over 1 . Mary daly from this sample does go says more work to do. The 30 year bond auction the highest yield since 2011. At the end of the day what has cpi done for your view if anything, for the markets view . It was a it of a roller coaster day. All guns were blazing this morning in terms of indices coming out so strong after that print. , the. 2 number, the lowest number in two years is exactly what we want to see. It lines us up for a fed that does not have to raise rates in september. The question and the dilemma will be what will the hawkishness be . What will the speech be like from fed chair powell about keeping rates higher for longer and we might have to raise rates because jobs are strong . There was a temp recession last year. Wages are increasing but at a slower pace. Inflation is coming down. It bodes well for the market. I think potentially we are at the end of rate hikes for at least the near term. Kathleen a lot of people are wondering now the year is more than half over and a big rally in stocks broadly. We know the thing stocks are not what they we know the fang stocks are not what they used to be. Where is the market going to go . You sound fairly bullish. Sylvia i think we are going to end up with a strong market going into year end. August has been the late summer doldrums type of month. Less volume in the market in general. It tends to be quiet. If you look at the first half we have had the last 10 times we have seen this strong of a first half, 100 of the time the market and broadbased indices have ended up up and in double digit percentages for the end of the year. I do think we hold onto the gains of the year. We have hired to go on some of the old x we have lost this week or so into august. I think it is a good picture. Corporate earnings are holding up. We are getting to the end of a fed hike. Barring any major event out of left field like a lower u. S. Credit rating or Something Like this i think have a good chance of ending the year with a rally. Haidi haidi the reopening trade the pentup travel trade continues to pay off, right . Sylvia yeah. The pentup travel trade continues to be pentup. If you listen to a lot of the ceos from the Different Airline companies, the Cruise Companies and the Hotel Companies talking about ongoing demand increasing, getting back to the 2019 levels and Business Travel picking up again, the reopening of east to west. It has only been a quarter or so the world has been open for travel. We saw covid the first couple of months in asia. The broadbased reopening, the higher wages, the spending going from goods to services has played out in that sector. If you look at single stock performances, carnival, royal caribbean, norwegian, youre talking about a triple digit performance in some of these. That is a stellar rebound. Haidi are you still looking at the ev trade as well . Sylvia yeah so ev is a strong conviction i have. I think this is one of those trades where innovation is actually monetizing. For years and years we have been taught about evs and autonomous vehicles. Tesla seemed like a great idea but not necessarily a rate investment. Low and behold every quarter these ev companies have proven us wrong. You have the same situation in china with expanding and nio. These companies are coming out with stellar numbers. If you look at 2022, 10 Million Units sold. 14 of units sold. 14 of sales. Talking about a space that is poised to grow by 2040 into the 1. 3 trillion number. Expecting a gross compound rate of 25 or so. They are more commercial. They are more efficient. You can charge them. The drive for longer. You have of and or policy and dedication to going climate neutral for the whole world i think it is a great trend to get in on an even though it has run up hi i dont we are halfway there in terms of where ev stocks go. Kathleen not too late to get in. That sounds good. In terms of this view there may still be a recession because the fed they prove to be more hawkish like volker than dovish like someone else. That could cause the recession. You like ai. You like ev. Are these recession proof . What is if they are not . Sylvia i think what is interesting about the ai trade the way we look at it on our side and that is a big question because a lot of these areas are growth targets. One of the areas we are going to have to continue to spend and grow will be in ai, machine learning. We need to replace workers we have not been able to find. We need to digitize factories, fixed supply chains so we dont have the issues we sold during covid. There Practical Applications of ai. It is not just the hype of it all and the chatgpt and things like this. It is a major part of it but there is so much more. It will revolutionize biotech come of the medical field, defense and so on. If you look at those companies, they Quality Companies. Youre talking about microsoft, nvidia, amd. You get the exposure to some of the smallcap names and you pick up those baskets. I think it is recession proof in that the leaders in ai are Quality Companies with strong Balance Sheets and with names of companies we all recognize and we know well. Haidi always great to chat with you. Ceo and cio of Defiance Etfs. You can get a roundup of the stories to get your day going on todays edition of debris. Terminal subscribers can get that on dayb. Also available on the mobile on the bloomberg anywhere app. You can customize your settings so you get the news on the industries and assets that matter to you. This is bloomberg. Kathleen u. S. Deputy treasury secretary set ass executive order restricting u. S. Investments in china will protect National Security while allowing legitimate financial flows to continue. He told us the administration is asking for Industry Input to get the islands right. The balance right. The first step of implementation is we are talking to stakeholders about our goal which the president outlined in his executive order which is to make sure we are in a position to protect our National Security by limiting the ability of u. S. Firms to make investments that further chinas military industrial complexs ability to get access to and also to certain types of artificial intelligence. What we are trying to do is make sure we are building a regime that allows us to put into place financial restrictions that match a number of the export trolls we have put into place export controls we have put into place. Yesterday the Treasury Department published a number of questions and definitions we have released to get input from industry but also other stakeholders. We designed the implemented guidance from the president s executive order. We do it in a way that allows us to protect National Security but also allows for financial flows to continue. And this is relatively narrow in scope. It has been described as about described as a high fence for a small yard. Could we see this expanded Going Forward . Our goal at the moment is to make sure we design these statutes in a way that is in keeping with the president s executive order which to your point speaks to making sure we have a narrow set of National Security priorities we are protecting and we want to make sure we do this with our allies and orders Going Forward because we share the same analysis on National Security risk. That is why we were encouraged by the statement put out by the g7. Ultimately our goal is to make sure we design these things to be as narrow as possible. With scope to protect our national secured he. United states has put into place a number of export controls in many of these areas. The goal of the executive order is to make sure were limiting the ability of financial flows and the knowhow goes alongside the financial flows to give countries the ability to get around the things we are trying to prevent them from getting access to like the most advanced semi conductors. Haidi that was the deputy treasury secretary speaking with bloombergs kailey leinz. Some of the other geopolitical stories we are following. The Biden Administration preparing for visits from top president ial candidates in the top preparing for visits from taiwans top president of candidates. He will pass through this weekend. He will make a stop in San Francisco next week on his way back to taipei. Sources tell us his trip will be lowkey with meeting set with the Taiwanese Community in the u. S. You can catch our exclusive with him on tuesday, august 15. He will be discussing how taipei is managing relations with china and the u. S. And the future of the island democracy. This is bloomberg. Wow, you get to watch all your favorite stuff. Its to die for. And its all right here. Streaming was never this easy, you know. This is the way. You really went all out didnt you . Um, its called commitment. Could you turn down the volume . Here, you can try. Get way more into what your into when you stream on the xfinity 10g network. So. I know you and george were struggling with the possibility of having to move. Hows that going . We found a way to make bathing safer with a kohler walkin bath. A kohler walkin bath provides a secure, spalike bathing experience in the comfort of your own home. A kohler walkin bath has one of the lowest stepins of any walkin bath for easy entry and exit. It features textured surfaces, convenient handrails for more stability, and a wide door for easier mobility. Kohler® walkin baths include two hydrotherapies whirlpool jets and our patented bubblemassage™ to help soothe sore muscles in your feet, legs, and back. A kohlercertified installer will install everything quickly and conveniently in as little as a day. They made us feel completely comfortable in our home. And, yes, its affordable. I wish we would have looked into it sooner. Think i might look into one myself. Stay in the home and life youve built for years to come. Call. And take advantage of our no interest haidi we are awaiting the semiannual testimony to parliament from rba governor phil low. His farewell testimony before handing over the reins to his Current Deputy Michelle Bullock who will be hearing from today. This as we continue to look for crews as to the clues as to the fight against inflation, how they see resilience in the economy and where they go from here. The dollar dilemma is interesting for the rba. Quite a significant slide. The currency has spurred australias economy in the past. We are likely to see inflation and to complicate the fight from the rba. One thing to watch out for as we get into the testimony from phil lowe and Michelle Bullock. Always interesting in terms of the way they structure responses. Who takes the reins. Does phil lowe take a step hike and allow Michelle Bullock to step into the limelight given she will be haidi tober. October. And or does he have to kathleen october. And or does he want to have his say on what he did, why he did it. People will complain too hawkish, maybe too slow at times. This is his swansong in a sense. Interesting to see what he says. All of these the big overhaul. They want a different rba. It is one thing to put something on paper and say you dont want groupthink. You want to have more diversity in terms of backgrounds and professions. And yet they laud Central Banks like the bank of england. Or the Federal Reserve that has a lot of phd economists. It will be fascinating to see how he talks about what they know so are and what he thinks about where they are going to go. Haidi a nice chance to reflect on phil lowes legacy. He has not had an easy time. The war and ukraine, a pandemic, a bout of disinflation and perhaps most unfortunately the guidance that rates would not rise for 2024 and that has stoped so much political criticism. You can get a lot more this context of back round and all of the reaction on your bloomberg. Tliv for the analysis from our team of expert editors poised to react to the rba testimony. That is one thing that markets will be watching out for. Annabelle it is interesting you said phil lowe not having an easing time with someone else who is going to have a challenge ahead will be because of a way that at the boj helm with the path ahead to normalizing rates. The data we have had across the street this week for instance. Wages underscoring the point the boj, and a move away from negative rates, any major changes or an exit of the program of yield control is going to be a waste to go. The Market Reaction we are seeing today is the weakness coming back into the japanese yen. Very close to the 145 level. Japanese equity markets are going to be shot. They were not becoming online at the top of the next hour. Something else that could exacerbate any currency moves in the intraday session. The euro yen, a currency pair watching this morning given it is at its level we have not seen since the financial crisis of 2008. When you take a look at the broader equity markets today in the session, futures are fairly range bound in terms of what we are expecting ahead of the set up. Equity futures pointing higher. It is going to be subdued in the session given what we had in the wall street moves overnight. Investors come to term with the u. S. Inflation print. Some stories in china in focus. The property sector, will that lead to more stimulus . Kathleen kathleen we are going to get right to the heart of that. Alibaba has returned to growth across all of its main divisions define chinas economic turbulence. Lets discuss the outlook with willard chan, Senior Research analyst at forsyth are asia. The biggest positive sign of a turnaround, it is three years. They have at all these misses. Another have this one big beat is this a onetime wonder with all of the headwinds they face or is it something they are back on track . Willard i think it is a decent feet. Decent beat. It is not easy for alibaba to reach this achievement given they just started their restructuring plan. Also the beach partly due to the china side given we have the lockdown. We see alibaba the shining point is the International Ecommerce visits. This one is something we may focus on in the future. Very regressive in the expansion for the ecommerce visit. They have been in the space for a long time. A lot about the china that is to the advantage they can leverage on to try to provide highquality lowcost supply to the oil market to capture the growth of International Market versus china market. Kathleen it is a very competitive market globally. There is so much online commerce. Not only does china is the strength of its recovery if you can call it that anymore is definitely in question when it comes to the consumer. The u. S. Could go into a mild or severe slowdown. How much did they depend on that macro aspect or how much is it more the internal steps they take in terms of their structure, their Business Model . Willer i think in the short term that depends on the macroenvironment even the business nature. It is all about consumptions. China macro is not that good recently. We have seen some headwinds across a lot of space. I think for the consumption side as management said cautiously optimistic. Work a lot on themselves in terms of attracting more sme merchants before the Real Recovery of china. I think that is something they can do in the short term but obviously you cannot fight the macro trend. That could be a bumpy recovery in the short term. Also for the u. S. And global side there are a lot of competitions. Alibaba have the advantage on theres life side. There supplyside to this macro headwind covering may not be a sustainable one. It could be bumpy. I think alibaba could work on itself to try to do the Core Advantage to wait for a better time to come. Haidi stay with us. We are getting the rba governor delivering his farewell parliamentary comments. Lets take a listen. Quite a lot about momentum in rent price inflation. Also large increases in electricity prices taking place in large parts of the country. Another common feature internationally is the high level of demand for goods and services has meant labor markets have been resilient and they remain tight. In australia employment growth has been strong and the and implement rate has been close to 3. 5 for a year now. That is the lowest level of unemployment for almost half a century. The participation rates also at a record high. Many women and young people are benefiting from this. This is one of the positive legacies of the policy response to the pandemic. In my view it is something that should be welcome. Low unemployment is good for our society. We should welcome the lowest Unemployment Rate in 50 years. The recent data indicated there has been some easing in the labor market with firms reporting to us through our Liaison Program is less difficult to find workers than it was late last year. Employment growth is still strong at a time of rapid population growth. We expect employment to continue to grow below the rate of growth in the labor force as a result. The employment is scheduled to is expected to rise gradually. The easterly and economy is experiencing below trend growth and this is expected to continue for a while yet. Many households facing a painful squeeze on their budgets and consumer demand has slowed considerably. Not less because high inflation is eroding peoples incomes. Increase in Interest Rates is weighing on households could others are benefiting from higher Interest Income on their savings. The rba staff are working hard to look the on the aggregate figures. And to understand the financial pressures people are experiencing and where they are most acute. It is clear some households who borrowed at low Interest Rates during the pandemic are in conditions difficult as are some renters at the moment. We are doing our best to understand these pressures could looking forward, the banks central scenario is Economic Growth remains subdued for the rest of this year before picking up to around two and a quarter percent by the end of 2025. The ongoing moderation inflation will mean really, will start rising again and this will ease the financial rushers people are facing. Business investment has also been on an upswing as firms respond to pressures on capacity utilization. Investment expected to increase again after the recent of all teas in the Residential Construction sector. Or like to return to the reserve bank board Monetary Policy decision since the previous hearing in february. Since that hearing there have been six rba board meetings. Three of those board meetings we raised Interest Rates by 25 basis points and the other three we held rates steady. Haidi the rba governor giving his farewell his final testimony to parliament at the moment. A couple of key things that jump out from his testimony so far and from those prepared remarks. One is the fact the possibility the tightening cycle is not yet over. He is saying it is possible some further tightening of Monetary Policy will be required to ensure inflation gets back to target within a reasonable timeframe. That is dependent on the evolving assessment of risks and the outlook and of course datadependent. The two wrists he flags in terms of uncertainties. One is the outlook for household consumption. The other is the risk of sustained upside when it comes to Services Price inflation. We will continue to watch for that. Not a huge surprise for markets given he is reiterating the stance the rba has held for some time. We will be getting questions. There is so much focus on whether we could get more indications as to with of the tightening cycle is over. We will leave that for now. Keep you uptodate as the developments come through. Lets get back to our ever patient willer chen. We appreciate your time. Continuing on the focus on alibaba, were you surprised there was no further information when it comes to the split and none of the analysts asked on the call . Willer i think in the last quarter alibaba gave a clear picture in terms of the unit they are going to split in the next 12 to 18 months. I think no one mentioned about it. I think people already have expectation on when they come to market such as well unit. The spinoff should be right on track. We will see more updates in terms of fundraising. We will gradually see more updates from that side. Haidi what do you see the wrist size in terms of competition and in this earnings season so much of the focus in the upside has come from restraint in spending if they want to maintain competition. If they want to be competitive in these new capitalintensive areas like ai, do we see upside risk for capex . Willer in terms of ai, aia could be one of the gross the Growth Potential for the club is in is in the future. A lot of the companies will be looking for power to fuel their ai ambitions. Alibaba is a major Cloud Service provider in china. They can benefit and have a little more capex on that. The macro has not fully recovered yet. We see some companies other Service Providers or other macro environment or the price cuts in terms of cloud space. Haidi a lot of the i guess comfort for investors in the past few months has been the flogging that regulatory wrists whether crackdown is over. Does Regulatory Risk always remain high with china . We have been talking about ai. That is going to be the next realm where we will see potential regulatory volatility and concerns. Willer i think after the previous two years of crackdown in tech space, the regulation becomes normalization. We will never have big regulation afterwards but we will see more normalizing things. As you mentioned for the ai side, the ai frenzy in february this year. Compared with this time regulators have a quick result click response and give guidelines to better regulate should it is a good thing. They just want to things to stay easy. I think this kind of regulation will be more normalizing. It may not be as big as before. Haidi really appreciate your time. Senior Research Analyst at forsyth asia. Plenty more to come on daybreak asia. This is bloomberg. And a greater loss of jobs. Fabulous surroundings. But everyones looking at their phones for Financial Insights from merrill. Is he hailing a ride to the concert hall . No. Hes making sure his portfolio and retirement plans work in harmony. They want to adopt a child and build a new home. So theyre talking numbers with their merrill adviser. Shes not researching her next role. Shes learning how to handle market ups and downs without the drama. Personalized advice so impressive your money never stops working for you with merrill. A bank of america company. Haidi lets turn to aviation. Fresh from the surviving the pandemic the Aviation Industry is about to and passengers the 5 trillion bill to fight decarbonization. Our Global Business reporter joins us. Tell us about your big take story on this and the implications for the traveler. Good morning. Todays big story is a deep dive into the cost of decarbonizing aviation which is pretty much the next existential threat after the industry emerging from covid. It is clear already although the industrys target is to reach net zero by 2050 of course, it is clear the costs of this process are so huge there is no alternative but for passengers to pick up this bill. The bill is going to be vast. It is a 5 trillion cleanup job. There is no way the airlines are going to be able to shoulder this on their own. The costs are going to start landing on passengers probably sooner than we think. There are projections perhaps as soon 2035. Medium or longhaul flights could add hundreds of dollars to the cost we would otherwise be paying. It is a huge process. The scale of it is i dont think something people are aware of. 5 trillion. 25,000 planes the need to be switched to a cleaner fuel. Billions of jet kerosene that needs to be replaced with a cleaner beaulah cleaner burning fuel. Kathleen when you talk about getting copycat fuels, what might those be . Are they going to be Cost Effective . Presumably that is going to be a very important decision to make. Angus that is right and this is really the plan a. There is not a plan b in the immediate future. What the industry is banking on is Sustainable Aviation fuel. A call it saf. We have to create almost an entirely new fuel Production System from scratch. If they get it right potentially saf could reduce Carbon Emissions by up to 80 . The trouble is there is not enough of it to go around. There is only under 1 of total Aviation Fuel needs supplied at the moment. It is much more expensive than conventional fuel. Upwards of. Of two times more expensive. That is a big problem. If you look at the cost to airlines through 2050, even the industry itself says it could be Something Like 4 trillion just to produce this fuel. Talking hundreds and hundreds of production plants, refiners. Then you have the Clean Energy Capacity to produce it. It is those extra costs that slide down the chain to passengers. And for airlines that are not able to do this, it could be an even bigger threat because these carbon costs could end up being so onerous especially if you are obliged to fill up on a certain deadline which we are seeing already, then potentially you would not be allowed to fly to these places. It could redraw the aviation network. Kathleen going to be tough on people with families overseas and hurt the people who can least afford it the most. That is a Global Business reporter Angus Whitley with his big take. It is on the terminal. You can find it on bloomberg. Com. Lets move onto to oil. Speaking of fuel, oil sevenweek rally has paused year highs as technical barriers stall further advances. The latest opec data indicates markets are set to tighten further. Su keenan is joining us. This big deficit we are on track for, i dont know if everyone was factoring than in. All of a sudden that is what everyone is look yet. Is looking at. Su a lot of things are coming together saying those who were delving opec was going to try to bolster the market by all of the extra supply cuts were wrong to they could not do it because the price of oil is definitely higher and now opec itself is coming out saying we are going to cat Million Dollar dashed going to cat Million Dollar barrel day this month and into the next. It has had the impact opec says of causing Oil Production from the opec plus allies as a group tumbling this month. The saudis are starting to see the effect take hold. They also say production could average the current rate of 27. 3 Million Barrels a day for the whole quarter. That is more than a two and a quarter Million Barrels of oil west. Haidi haidi the big question, where do we go from here . Su it is a big question because kathleen mentioned technical barriers. Lets drop quickly and said the bloomberg. Brent crude has been on a tear. Futures hit 88 intraday before pulling back. The spread jumping on supply concerns. When we talk about west texas intermediate, we sell that close just below 83 but it is catching a little bit of it in asia. We are still seeing oil move higher. Crude has jumped about 20 since late june as opec has relayed these cuts. There has also been the geopolitical pressures. We talked about the Ukrainian Drone attack on a russian oil tanker. That has added to the rally. Looking at town at contracts all the way out the curve. Looking at potentially weakening consumption. Talking about china here. Have cap some of the gains. That is the question Going Forward. Haidi su keenan the latest on oil. The resurgence in Energy Prices is one thing Central Banks have to contend with in this final leg of the fight against inflation. That is the main question posed to the rba governor in his final speech in testimony before parliament. We are in the question and answer section now. He has been asked to reflect on his time as governor. He said he is incredibly proud of his team. He says he has faced criticism for years about lowering or lifting the nation target. He is glad the recent review of the rba has endorsed two to 3 inflation target and have been resolute in sticking to it. Earlier we had seen markets taking the remarks in their stride. Nothing much new flagging the possible need for further tightening. We will continue to monitor those developments. The market opens next. This is bloomberg. This is daybreak asia and we are counting down to asias major market opens after we saw a rally in the s p 500 after cpi news suggested the fed could pause in september and it was being down by the San Francisco fed president saying there is more for the fed to do and the fact that the 30 year bond auction did not go off as expected. Haidi also highlighting in that testimony from the rba the risk that china is closing and that has been front and center. The weakness we continue to see in the chinese economy even though the alibaba showing some signs of support for the economy. Haidi breaking news when it comes to the singapore economy. This is the final reading coming in. We are just getting those numbers crossing the bloomberg. You have some recent beads when it comes to the singapore gdp number. Coming in at. 1 quarter on quarter. We are seeing some data from the second quarter, the year on your numbers, we are waiting for those. The vulnerability of the singapore economy and terms of external issues is looking a little more optimistic in terms of resilience in the second quarter. This is the nature we are getting, faster growth in the second quarter. Expansion when it comes to construction and producing industries. It was a concerning contraction and manufacturing. 5 according to the revised data comparing with the advanced estimate which was a little higher,. 7 growth. That accounts for an almost 7 decline in manufacturing in the second quarter. The gdp growth forecast for 2023 has been narrowed to. 5 up to 1. 5 . Singapore, the risk to the australian economy, a lot of that comes from the risk of what we are seeing out of the chinese economy. When you look at the chinese economy another one that is reliant is the south korean economy. A huge trading relationship. We just had the export data coming out for the august numbers for south korea. We continue to see exports sliding more than 15 on the year. Global bellwether, the korean economy. These numbers are tracked closely in terms of signs for a slowdown in external demands. Imports also significantly dropped. In terms of Market Reaction, we see the kospi coming online hi so perhaps there is a question on the alibaba earnings and some truth coming through there. We saw strong chinese sales numbers. And the concerns we continue to see and the chinese property sector particularly around Country Garden. Perhaps beijing will need to issue stimulus measures sooner rather than later. In terms of market re Market Reaction for the korean wan, we are seeing it a little weaker against the greenback. That is one focus. And at the fed numbers as well given we saw the u. S. Inflation print coming out telling us that if the pause could be in the september meeting but no signs of a pivot bang. Lets change and look at how australia is coming online. The low testament the philip lowe testimony is front and center for us. It is still underway. Key takeaways include inflation moving in the right direction. But still the central bank is committed to bringing it back into the 2 3 range. What else we are looking at terms of the session today, the reaction to the u. S. Inflation print. That is notable in the japanese yen. Equity markets are shut for a public holiday. The yen is sliding close to the 145 level. Not much to stop it in its tracks. Haidi when it comes to currencies, the aussie dollar weakness will be interesting for the rba to contend with. Lets get back to philip lowe who is in the q a session at the moment. It is interesting, there is a fine balance. Not much new. Still flagging the chance that they may have to do more. Kathleen and as he said in his opening remarks, inflation has been significantly above target for some time now. But the board wants to have reasonable confidence it will return the target over the current forecast period and they will do what it takes to achieve that outcome leaving the door open to more rate hikes. And of course, he things Inflation Expectations are at risk of moving upward. Like a guest we had, the former chief Economic Advisor to modi in india, looking to china to help bring down global inflation. Philip lowe sees a risk there in terms of growth for australia and the rest of the world. Haidi quite a bit of a risk given australias economic fortunes have been so tied to chinese demand not just for goods but for services as well. We are hearing potentially of a meeting between regulators in china and Property Developers. That will be a key part of if they can given the implications for broader demand for iron ore and Steel Construction in china and how that will affect australia as well. China already being flagged by philip lowe as a major downside a risk to the australian economy. Lets bring in our next guest. Lets talk about that with daniel lem. Head of equity strategy in Standard Charter Wealth Management. Is that the trade reliant on getting something out of this highlevel regulatory meeting and they do have a stronger strategy Going Forward to support the property sector . Or are you happy to trade on that now . Daniel that is the catalyst for chinese equities to rebound. At this moment in time if nothing is done it will probably trade it is already at a 35 discount. It is very cheap right now. To get the upswing we need some sort of action from the government. We believe that we will be getting some action from the government. We need to because the data this week has been pretty dire. So that is needed to support the property sector and for consumption. Haidi support might just mean putting a floor under it. We know longer term that china will be slower for longer. Where do you see opportunities . The consumer is still selectively looking pretty good. Daniel especially after the alibaba earnings yesterday which were quite encouraging. Showing signs of life in the consumption side of the economy. The government has explicitly said they would be looking for that area for growth. At the latest politboro meeting they highlighted the economy as a key area of focus. Kathleen i am wondering about lets speculate. Everyone is pushing back against the Chinese Government saying they do not want to just push money at things. They want to make specific changes that will boost important parts of the economy and create sustainable growth. It seems to me that is falling on deaf ears. Do you think that will be affective . What are you looking for . Daniel fiscal stimulus is going to be a key integral part of what they will be needing to do. Because, at this moment in time it seems monetary stimulus is not as effective as what they would have wished for. Because if you look at how the corporates have been doing since 2016, they have not been increasing their so much, as much as before despite the fact that liquidity seems to be abundant. The fiscal side is what the government will have to focus on. Whether there are changes to the industries, whether there are areas such as what you said, those are areas they will be needing to look at. But i believe they would be looking at those. Kathleen i have to ask you about japan. The nikkei had a tremendous run. We had a tweet to ycc by the governor. And people are split, maybe that is the next step towards october, what are you looking for . What Investment Opportunities do you see in japan . Daniel the japanese yen is at a critical level. It is close to the 145 mark. As we know, that is where the last time we saw intervention. That line probably needs to be heavily defended. Around 145147. You will probably see the boj intervening again. If you see the japan consumption pattern it is rare to see recreation and leisure coming out at the top in terms of their credit card spending but i does what we are seeing at this time. If you look at the u. S. And european experience, after covid, that is the area that has seen the biggest surges. And japan is at that stage. One would believe that the japanese inflation is increasing on the upside further. That would probably demand a tightening in boj policy. Around q4 the policy might be tightened in a most significant manner. We are recommending investors to be buying japanese yen. Haidi i want to get back to the property sector because we have developing news when it comes to Country Garden. Reportedly having high cic for restructuring. This as we know a default risk is looming. We know Country Garden is expecting to see a firsthalf loss of up to 7. 6 billion. Is this as bad as it gets . How much worse does it get for the broader property sector if this is to worsen . Country garden was seen until recently as a stable one. Daniel that comes back to what we said before. The government see yang that they need to step up. In the early part of the conversation, they will have the focus to shift the economy and transform it to become more highquality, value added economy. But at the same time they will be needing to juggle between doing the aspirations and sorting out the immediate issues that the economy is facing. It is a juggling act. I believe they are doing the best. Haidi daniel, great to have you with us and thank you for reacting to that Country Garden news. We will get more details on that story. Daniel lam, head of equity strategy at Standard Chartered Wealth Management. Lets get you to belle for some of the movers. Annabelle the results of the quarterly review from this morning. Looking at some of the additions and deletions to the index. These are the ones for korea. We are seeing mixed moves in the session. Broadly you stocks inching fractionally higher on the kospi. 15 minutes into the trading day. Look at some of the deletions. Some of the moves in focus for the korean market which has not yet moved into the developing market stage. Something they are working towards. Further internationalizing their exchange. These stocks are being deleted. Lets look at what else we are seeing today. Brent crude coming online in the top of the hour. A fairly flat today. The rally we have seen in oil generally is causing near yeartodate high. What is stopping it from moving further ahead, technicals suggest they are the next barrier for the commodity but we are still at the sevenweek high. Raised on some of the big constituents in the emerging or Asia Energy Index and we can see they are looking under more pressure. And the aussie session, Something Else we are tracking as we get trading underway. Annabelle Hong Kong Based mtr posting a firsthalf revenue beat. We will look at the numbers later with the ceo. And China Securities watchdog set to call a friday crisis meeting. All of the details next. This is bloomberg. 76 of 23andme Health Customers surveyed reported taking healthier actions. Because they know health isnt just a future state. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. Was also the first time your profits left you speechless. At the counter or on the go, save 20 with the lowest transaction fees and keep more of what you make. Start saving today at godaddy. Com if you wake up thinking about the market and want to make the right moves fast. Get decision tech from fidelity. [ cellphone vibrates ] youll get proactive alerts for market events before they happen. And insights on every buy and sell decision. With zerocommission online u. S. Stock and etf trades. For smarter trading decisions, get decision tech from fidelity. Haidi we do have some breaking news when it comes to one of the big movers. Off a session high, this is the australian casino operator jumping on the news that the New South Wales government will prevent the sydni operations from turning into an unviable operation. They will pay more tax on poker machines as gaming revenue rises and the new regime kicks off in july 2030. It will be legally bound to maintain more than 3000 jobs between now and 2030. Start head and alltime star hit an alltime low. They will be introducing a number of changes in order to maintain the regulations and the details of this deal it has struck with the New South Wales government. In terms of Regulatory Oversight the Securities Regulator in china is said to be convening an urgent meeting on friday property managers. Problems continue to mount. Country garden may have lost a great deal in the first half. Not to mention we just saw the breaking news reporting that the hired cicc for restructuring. The fact that the Securities Regulator is calling an urgent meeting with other developers. Sources tell us that Country Garden has not been invited. This is front and center. Until recently this was the largest developer and china by sales. It is fallen to number six. Attributable to the fact that sales fell 30 and the first seven months of this year and the stock has plummeted 61 already yeartodate. Bonds down 59 in the last month. And it is having significant cash flow and Debt Repayment issues. Moodys yesterday downgrading it three notches essentially saying because of its heightened liquidity refinancing risks with the headline that just came across that chinas Largest Investment Bank cicc will be handling the restructuring and this is according to yicai reports. This is potentially a big shock, a further shock. Keep in mind these woes have been going on for years. When the former bellwether in the property sector which until now how to avoid a default, earlier this week it missed Interest Payments but they have a 30 day grace period. But if they default this tells you this is a systemic issue with all developers and no one is safe. Regulators are taking this quite seriously. Kathleen it is interesting to me there is all of this talk about President Biden making strong comments about chinas economic problems and how tough they will be on china at a time when china is so vulnerable. And now maybe china is not pleased with the remarks that biden said. Things just come out of his mouth sometimes. How do you tie it all together . We are getting these comments from joe biden speaking at a fundraiser in park city, utah. He is speaking to donors, off the cuff a bit. These are alarming comments. At a time a day after signing the executive order limiting investment in Cutting Edge Technology and china. And also at a time when the administration is trying to bridge the differences and make peace, if you will. Here are the comments he is calling at the fundraiser within the last hour saying china is a ticking time bomb because of its economic problems and demographics. He says china is in trouble with the highest Unemployment Rate going. Definitely youth unemployment at a record high. He goes on to say they have some problems and that is not good because when bad folks have problems, they do bad things. This is going to get him in trouble with china calling them bad folks. I anticipate as has happened in months passed that white house officials will have to walk back those comments. Kathleen they have gotten pretty good at that. Stephen engle talking to us about china and the president s remarks. Lets get to garfield reynolds. We are showing photos of philip lowe, the outgoing governor of the reserve bank of australia speaking to parliament. The latest things he is saying, saying everything they need to do to fight inflation. They feel they are in a phase where they are getting closer and also saying that maybe they only have to make small adjustments to calibrate policies. What are you taking away from philip lows remarks . This is his last public speaking event before stepping down. Garfield the last fact is in many ways the most important one. He might say that he thinks they need to make small calibrations to policy Going Forward. But that will not be his decision. There is one more move before he leaves next month. Even that might be partly a decision driven by his successor, Michelle Bullock, the Current Deputy. Rates traders are strongly sure the rba will not move and september. There is a 90 chance of no move in september currently. They agree calibrations are yet to come because there is a 60 chance of one more hike but no more than that and they see that taking place in either december or february. What he is saying is in line with the expectations. The rba remains concerned about Inflation Expectations not becoming unanchored. There is a strong reference to the idea that globally most Central Banks are either at their peak or close to their peak so he is aligning where australia will go with that. Haidi you mentioned rates traders being muted in australia. Rates trade euros when it comes to the u. S. Sounding hawkish. How much do we see that gap continuing to widen given we see the risk that the aussie will fuel inflation concerns . Garfield there is that risk for the aussie that it might fuel inflation concerns. Then again, when the where the aussie goes at the moment goes down to where the u. S. Goes. So far the rba has not paid as much mind to where the Australian Dollar is, whether it is strong or weak. There is a lack of Significant Interest from the rba in part because there has usually been a strong concern. We are seeing the concerns about possible Australian Dollar driven inflation would have to be balanced against the rbas concerns for the appreciation of the impact of rate hikes here. Haidi our mliv contributor, garfield reynolds. More to come here on daybreak asia. This is bloomberg. Fabulous surroundings. But everyones looking at their phones for Financial Insights from merrill. Is he hailing a ride to the concert hall . No. Hes making sure his portfolio and retirement plans work in harmony. They want to adopt a child and build a new home. So theyre talking numbers with their merrill adviser. Shes not researching her next role. Shes learning how to handle market ups and downs without the drama. Personalized advice so impressive your money never stops working for you with merrill. A bank of america company. Hey corporate types. Would you stop calling each other rock stars . Youre a rock star. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. Haidi watching currency trading so far in the session. We are just a hop away from the june high of 145. 07. We see the risk of u. S. Inflation making a comeback. We could see another spike higher when it comes to dollaryen when tokyo traders returned after the weekend. We are also watching weakness against the euro, the lowest since 2008 at play as well. We also see weakness. Not much change when it comes to the aussie but it is one haidi this is bloomberg daybreak asia. We are 30 minutes into the session. For korea and australia. Japan shut for a public holiday. A lot for investors to be considering. U. S. Inflation print came through overnight. The fed setting up for a pause at the upcoming september meeting. No rate cut insight yet. In the Asian Session we are seeing them move fractionally higher. Other stories, it comes down to the impact of chinas economic slow down and how it is hurting other regional trade partners. Korea, the first 10 days of august trade figures coming out. In august there was a big contraction of imports. Imports as well as slumping more than 30 on the year. We are also watching when we look at the korean wan fractionally weaker off that. Other news in focus because we have the philip lowe testimony being delivered right now in camera. Rough in canberra. Reflecting concerns on the chinese economy saying these slow down poses a global risk. And words from joe biden saying china is a ticking time bomb. Continued concerns as we wrap up the week around chinas property sector in particular. Country garden, local media says it has appointed the cicc for its restructuring. Something we are watching across the session and whether those moves can offset the more positive information from alibaba. Haidi China Securities watchdog will hold a meeting on the Real Estate Market today. For more on what to watch as we got into the start of trading and trend of this friday lets bring in our asian stocks market reporter. High expectations building when it comes to what outcome we could see from the meeting. Yes. Obviously people are expecting, this is the one big thing in the market people are watching out for her. Financiers and developers are invited. Bear in mind that Country Garden was not invited. And that really is not great for the company which used to be the biggest helper in china which is now mired in a lot of debt troubles. Country garden just reported that they expect a big loss in the first half of up to almost 8 billion versus a net profit in the first half last year and moodys has also downgraded it by three notches, the ratings to i believe caa1. This is to show that Country Garden as a barometer of chinas broader Property Health is showing a lot of signs of weakness and that also shows chinas stimulus for the sector may becoming a little too late or not sufficient to rescue one of the largest bella bars in the sector are Just Developers in the sector. With a property slump, that means chinas economy is not adding better anytime soon. Kathleen it is like an albatross around the chinese economy is not. The chair of Country Gardens is a very wealthy woman, a billionaire. We know in the past the governor has the government has waited for the and the bondholders have waited for money to come out of the pocket of the owner. Is that going to work . Is there any sense that china will finally look at some kind of comprehensive debt restructuring in order to put an end to this kind of pressure and let the Property Market bottom and start coming back up . The chairwoman does have a lot of money. She just received or is about to receive about 28 Million Dollars from Country Gardens Services Unit and that would be more than enough to pay for the missed coupons. Whether she will put more money into work for the company or not remains to be seen. To be sure she has already put in quite a lot of personal wealth into the company through noninterest bearing loans and other equities. We dont know whether the founder has the confidence to put any more money in and revive the company. And the company is even more important than evergrande. It has four times as many projects as evergrande used to have. To answer your question whether the government can do something to put an end of this, the big concern i think is what does huge stimulus mean to chinas overall macroeconomy and the yuan . Further easing, a big move would mean a weaker you want and it is our a weaker yuna and it is already pretty weak. And that could mean capital outflows. The government does not have a lot of resolve to do big stimulus. Haidi are we likely to see another leg higher for the tourism stocks given travel resumption . Or is it already priced in . The rally probably has a little more lag to go because investors are still digesting the data points. We did see a good jump in the likes of lvmh and all of the hotel and Airline Stocks in asia and europe. There is a report, our Bloomberg News article that japan is likely to benefit the most from chinas travel resumption. I think we are currently also asking analysts what kind of sectors and what markets will benefit more from chinas travel return. Just to be sure, this kind of resumption of group tours may not be coming all at once because consumers are also quite cautious about their spending because jobless rates are high and the economic prospect has not been bright. Overall, investors may tend to overreact at some point so we will have to find out. Haidi bloombergs asia stocks manager ahead of the market open. Alibaba is under watch. It gained almost 5 and returned to growth across almost all of its divisions. Taking its First Step Towards a longawaited comeback. Lets bring in catherine from bloomberg intelligence. You were constructive going into these numbers. Did anything surprise you or jump out at you . I think if i put aside what we discussed earlier about the clout business, alibaba did extremely well and the rest of its business is the International Side of things, we have seen a significant contraction in losses which is great. I think there is a possibility that that unit may break even by the end of the fiscal year. The next bright spot has just turned profitable this quarter. These are the two businesses that stood out as a surprise to me. Taking a step back, the traditional business, we have seen margins declined as expected and this is because the company is increasing acquisition costs to try to get more merchants and users online. Kathleen what about the macro side of this . It is a big turnaround. Will it last . Especially if the chinese economy stays in the doldrums and including if the rest of the world slows down . Right. If you take a look at the macro headwinds affecting these businesses, the company has been clear in articulating this overnight. Within china itself, i think with the stimulus, the policies we have seen to date, any incremental pickup in the sentiment will be progressive if any. But the companies themselves are doing what they need to do to try to get more business back on their online platform. We definitely will see more of that action in the upcoming singles day Shopping Festival in november. Kathleen kathryn looking at alibaba with us. Mtr posted a firsthalf revenue gain. We will look through the numbers with the ceo, jacob kam. This is bloomberg. Haidi hong kong operator mtr has reported a 12 decline even as revenue jumped. Lets get more on the results of that outlook. Jacob kam joins as. Have you been disappointed by the pace of the recovery following the reopening . Jacob we have seen significant recovery in the last six months. Domestic patronage has gone back to recent average. Travel has only recovered two about 70 . However our highspeed rail service has done well and exceeded recent levels, the prepandemic level. We remain cautiously optimistic. Haidi there is a lot of concern about footfall in malls especially when it comes to mainland travelers. Do you expect to see more of a peak . Or do you think the second half and going into next year jacob we have 14 different shopping malls and we just added a new one. These malls are positioned differently. A lot our neighborhood and local regional malls serving mainly hong kong customers. He also have a la grippe mall that also serves hong kong customers as well as visitors. We have seen a healthy growth in footfall in the malls since the reopening of the boundary cross boundary travel. Our new border our new mall that we introduced a few weeks ago has had a very good response. We have customers from surrounding areas. We remain cautiously optimistic after recovery. Kathleen one thing that has happened from the beginning of the pandemic until now and recovery is Interest Rates are much higher than they used to be in many cases. That means your financing is higher. What does this mean for hong kong property prices, generally and commercial property as well . And everyone is watching foot traffic to see what consumers do. Jacob correct. Good question. We look at our business we have a 3050 year investment. The financing cost are over a long period. In the next few years we will be investing well over 100 billion in building new railway and expanding our network. And we have deployed a property model which has proven its worth in the last 40 years and it has maintained the sustainability of the company and given a firm and stable Financial Foundation to do our work and keep up the level of quality of our service. We believe over time we will continue to have this benefit to the sustainability of the company. Kathleen your company is very busy. A lot on your plate. Everyone is interested in learning more about the project that you are doing with malaysia and an economic hot along the singapore border. Malaysia wants this crossborder rail link. Can you tell us more about the deal and what you have agreed to . Jacob through the investment and construction and operating of our railway system, we have accumulated a lot of experience and expertise in City Development and in supporting transport infrastructure growth and so on. We are honored to have the opportunity that we may be able to have to contribute to the City Development of malaysia especially in the border area with singapore. We hope we can contribute first of all by offering our expertise in planning, investment and construction of the area as well as opportunities for us to invest as well. Haidi can you give us more details when it comes to the malaysia deal . Jacob at the moment, we only have an agreement that we will go in to see and provide our expert advice for planning with something equivalent to our model. We call that transit oriented development. We are hoping we can offer our expertise in their planning and also in the packaging of the development projects. Haidi where do you see further scope for expansion . Is there the confidence to be looking at more deals, collaboration and joint ventures . Jacob yes, we have been expanding both in hong kong as well as Mainland China and international through different investments or participating in and operating the franchise. Just to give you a few, we operate less than 300 kilometers in hong kong but around the world we have 3000 kilometers of railway in different countries. Kathleen jacob kam, thank you. Ceo of mtr. Big news of microsoft breaking on the bloomberg. U. S. Cybersecurity Advisory Panel is going to investigate risk in Cloud Computing including microsofts role in a recent breach of government officials email account by suspected chinese hackers. This has not been publicly announced but this is according to two people familiar with the matter and the stivers safety and the cyber safety review board. This is seemingly more common all the time. The Biden Administration has been investigating these cyber events. Theyre going to identify and authenticate management etc. And all of this is according to a department of Homeland Security official and this was actually brought into focus by the breach of microsofts email system. When a company like microsoft, a Top Tech Company can suffer these breaches as well. And the boards decision to focus on Cloud Computing, which everyone is happy to be in until they get hacked follows a request from the senator from oregon to investigate microsofts role in the breach. Oaks like things are moving forward on the breach and what microsoft had to do with it. You can watch us live and see our past interviews on tv. You can also dive into any of the securities and bloomberg this is for bloomberg subscribers only. Check it out at tv. This is bloomberg. The biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . Haidi we are taking a look at some of the stories we are monitoring. Ecuador will host a president ial debate on sunday on scheduled despite the killing of a candidate on wednesday. The council says elections will go on as planned with the boat set for august 20. The president called for a statewide emergency in the wake of the killing. Some 59,000 Police Officers will be deployed throughout ecuador on election day. President biden has set up a clash with House Republicans by asking lawmakers to approve billions more for ukraines defense. This strains the ability of congress to avoid a government shutdown. And joe biden has talked about federal support for hawaii. After the wildfires killed 36 people. I have ordered all federal assets on the island including the u. S. Coast guard, the navy and the u. S. Army to assist local Emergency Response crews along with the Hawaiian National guard. We are working as quickly as possible to fight the fires and evacuate residents and tourists. Haidi the u. K. Is considering whether to follow President Bidens move to limit u. S. Investment in some chinese advanced technology companies. In a statement the u. K. Government said the president s order gives important clarity on the u. S. Approach. But it still wants to consult British Companies and other stakeholders before determining its own next steps. Kathleen another big story Morgan Stanleys ceo gorman will need a successor in the next nine months. Leaving a summer of speculation. We bring in vonnie quinn to look at both sides of this. There are three sides or more. And it is all playing out in public. James gorman is being very open about it saying that by next may he will be gone and the board will choose the successor but there are three competent and qualified people that could succeed him. Ted is the front runner but we will talk about that and a second. Ted runs at the Institutional Securities Group that handles trading and dealmaking. He has 54. He had been the topic but there is an investigation into how his division handles block trades which could hurt his odds up because the bank is negotiating what could be a costly settlement. The other copresident is andy who handles the Wealth Management machine. He is 56. He has been providing his division provided 60 of the profit last quarter. And the dark horse, the person that had not been in the mix until recently but now we are being told that his name is coming up surprisingly often. It is dan who oversees asset management. He would be the only one that could merge both sides of the bank just as james gorman did because he has the Investment Banking and the trading side of things in his background. Haidi will the succession battle lead to any top executives leaving . Would it be odd if it didnt . This is what james gorman says will happen. Whoever does not get picked will want to stay on. I have my doubts about that but you never know. It is all very copacetic within Morgan Stanley at the moment. Each of the three and perhaps others are friendly towards each other and they dined together. But all of the archrivals, we have seen this countless times most recently with david sullivan. We also know that at bank of america right now jamie dimons jp morgan also things are being held close to the chest. Running the bank for 20 years and no one is talking about their successors. No one knows. Haidi vonnie quinn. That is it for bloomberg daybreak asia. Our markets coverage continues as we look ahead to the start of trading in hong kong, shanghai and shenzhen. The china opener is next. An do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com did you know you can get someone to shop for you . With stitch fix, it couldnt be easier. I share my style, size and budget. And they shop just for me. My shopper sends me stuff i feel good in. I keep what works, and send back the rest. Stitch fix. 76 of 23andme Health Customers surveyed reported taking healthier actions. I keep what works, and send back the rest. Because they know health isnt just a future state. Health happens now. Start your dnapowered Health Journey today with personalized insights from 23andme. So, youve got the power of xfinity at home. Now take it outside with Xfinity Mobile. Like speed . Its the Fastest Mobile Service around. With the best price for two lines of unlimited. Only 30 bucks a line per month. Thats hundreds in savings a year when you wave bye to the other guys. No wonder Xfinity Mobile is one of the Fastest Growing mobile services. You really shouldnt walk out the front door without it. Switch today at xfinitymobile. Com