Transcripts For BLOOMBERG Asia Edge 20160418

The lower house of Brazils Congress has voted in favor of impeaching the president. Parliament as the opposition achieved a two thirds majority it needs to move the process onto the senate. A simple majority will see her suspended while she faces and a peach mike trout. While she faces an impeachment trial. Ceo stuarttimes says gulliver plans to quit in two years and the bank will first appoint a new chairman to help pick the next chief executive. He took over in 2011 and has scaled back hsbc operations, cut nearly 90,000 jobs under pressure from unhappy shareholders. Stocks have fallen about 16 this year. Regulators are said to be unconvinced. They want the companies to sell part of their network infrastructure. Hutchison will challenge any block in court. You can get more and the rest of the days news on bloomberg. Com. Talks in doha dragged longer than planned, Still Producing no common ground. Alex, why no deal . Alex it was the country that decided not to turn up to this meeting that killed any hope of a deal. Iran made it clear from the outset that it ruled out cutting or capping production until presanctions levels. The notion it would freeze output was ridiculous. The day before the talks, the Iranian Oil Minister said he would not attend and any deal amounted to a selfimposed sanctions. The Saudi Arabians and other gulf states said there would be no deal without consensus. Effectively, these talks were dead on arrival. Angie what is next for the oil market . Alex the demise of these talks does little to affect the demand and supply balance. Two of the producers pushing hard for a cap russia and iraq producing close to record levels. Most analysts agree on one thing and that there is going to be more volatility ahead. What the market is overlooking, a much bigger deal is an Oil Worker Strike in kuwait. 60 ,s cut production by that is a considerable amount of oil, close to 2 Million Barrels a day. May not last long. It may be over in a few days. Dependent on that depending on how that plays out and how the gradual improvement in fundamentals, how that plays out as well. Analysts are predicting more volatility ahead. Marking june 2 on our calendar for the next opec meeting. China may say stronger headwinds this year, the boost for real estate proves unsustainable. Lets bring in malcom scott. Growth quarter on quarter basis was a little below economists expectations. What should we be worried about . Malcolm those numbers do not seem to add up so well. Quarter on the growth disappointed. re on your, it stabilized year on year, it stabilized. Seems to be a mismatch there. The other key concern is just how reliant the countrys turnaround has been on property. How fueledg sign is by debt this is. The credit numbers on friday were quite staggering, 2. 3 trillion in the much of march. Sustainedis can be into the rest of the year is questionable. Angie has the economy turned a corner . Malcolm it is how you view this property recovery. If you view it as something that will spread from toptier cities and there will be some more demand related as new people by furniture, new cars. If you believe in that story, maybe the economy has turned a story. If you are a little bit worried about the sustainability, maybe not. Deutsche bank, they came through and said they would upgrade their q2 number and leaving their fullyear number the same. They are expecting a little bit of momentum. The second half may be a little weaker. Angie that is a little bit an interesting insight. How much is that Lower Oil Price affecting sentiment . Regional index is off its fourmonth highs. Oil and gas sector playing into the market, down by 1. 8 in the region. Most of those producers in the red. And of the 27, we are tracking 19 falling. There have been a lot of other stories we have been watching across the region. Jpmorgan coming through with a note on casinos in hong kong. They see the recovery maturing. Be selective about what you buy. Elsewhere, in australia, qantas shares falling the most in two years. The uncertainty of the federal election in australia. Agency, mcgrath, plunging after an update. Q is rising fortis q escue rising. Japan coming back online at the bottom of the hour. It went into that lunch break down by 3 . Threeweekcks at a low. Not a positive start for the trading week. Lane, yvonne fast man takes lamborghinis latest supercar for a spin around hong kong. Find out why jpmorgan is upgrading its outlook on china. That is when asia edge returns after this short break. The leading candidate for the philippine president election says he regrets what he calls his gutter language. A video emerged at the weekend showing him telling laughing supporters he was angry that such a beautiful woman had been killed. Rival candidates say his comments show he is not fit to hold office. Chinas secondhighest ranking military commander has visited the south china sea. The Defense Ministry says officials inspected projects. Last week, the u. S. Said it would launch joint patrols of the area. A British Airways flight has landed safely after being struck what is thought to be a drone. The pilot reported an object hitting the front of the airbus. It is thought to be the first time a drone has collided with a commercial airliner in the u. K. , although dozens of near misses have been reported. Powered by over 2400 journalists in over 150 bureaus around the world, this is bloomberg news. Angie crude producers failed to reach an agreement on capping output. Always good to see you. Oil,reprieve we got from we saw that a little bit. With this dropping down more than five dollars a barrel as result, is this shortlived . I think this is shortlived. No one has been good at Forecasting Oil prices. With the general assumption. The fundamentals of oil still a story of oversupply, too much stock in storage. The Second Quarter is a weak season for oil demand. Back with china coming perhaps, we did get better than ppi, also had exports and gdp figures that came out a little bit better. Does that mean demand for oil is going to bump up from china . You are seeing some better statistics when it comes to truck sales out of china. Remember the issue with oil is oversupply, a technological change. That is what changed here. It is not so much the china slowed down, we had record high Commodity Prices in 2010 which led to too much Capital Investment and too much supply. We are still sitting with a supply issue rather than a demand issue. Angie brazil, they got to that magic number, 342, the first step in what is going to be an impeachment. What does this mean for investors . Adrian investors have been betting on government change in brazil. If you take it from its february lows and look at the Brazilian Energy sector, that is more than doubled from its lows. Investors are very much in the camp where you will see some political change. The issue, if there is a change in government, what happens next . Brazil is in its worst recession we have seen since the great depression. A dramatic slowed down in nominal growth this year as inflation comes down. Profits is very poor. Angie how would new leadership change that . Adrian brazil needs to reduce the size of its civil service. It needs to get rid of the index nation of wages and pensions. It needs to open up its economy. None of the sort of things that get you votes from the electorate. 63 of congress is either under investigation or has been indicted for some sort of crime. Many related to corruption issues. It is a very it is very unclear who will step in. Even the Vice President did sign off on the budget papers. The president is being impeached on the basis that she midwest the country about the fiscal misledn that she the country about the fiscal position of brazil. Trend we saw in the first two months of this year with a lot of volatility in equity markets and commodity markets, aussie on currencies were very an currencies were very stable. Is it because the fundamentals or because of that stable u. S. Dollar . Adrian it improves the fundamentals. It allows the Central Banks to set Monetary Policy that is appropriate locally as opposed to having high Interest Rates. It is a fundamental improvement against the context that it tightening monetary environment , we were meant to get out of that but we did not. And then we had to wait for the fed to raise Interest Rates to prove that money was not going to fly out as soon as the fed offer do 25 basis. Offered you 25 basis. The conditions have fallen into place for money will come into emerging markets. Growth will accelerate. Angie what are good sectors to play . The changes we have seen in indonesia. That looks like it is bad news for the banks. I think you need to play the sectors that would benefit as borrowers. You are buying Consumer Discretionary companies, auto companies, department stores, the property sector. You probably get disproportionate returns out of the sectors because less money goes into the banks. Gettinganks are hammered. Which part of asia do banks see upside . Would it be china . I wouldeven in china, rather play the insurance companies, real estate, and even the brokers as opposed to the banks. There is still a bit of a debate about the asset quality and chinese banks. Asset quality in chinese banks. I do not see that situation being resolved. We have those record high statistics late last week. Is that good news or bad news . It is good news if everybody pays it back and can. And you can grow enough to be able to pay it back. Adrian at the moment, it is viewed as kicking the can. The problem with the chinese banks, those who believe in them believe we cannot get any resolution in that. The accommodative stance of the reserve bank in india is very helpful. It will take us away from looking at the nonperforming assets to looking at the growth opportunities. Banks in malaysia are quite interesting. Angie i want to get your thoughts on the Property Market in china. Thank you so much, see you in 20 minutes. A leading suitor emerges for yahoo as some big names fall away. Asia edge is back in two minutes. Angie welcome back. Consultancy services will appeal a verdict against it. Found the a jury indian cell phone maker should have billion dollars for using data without permission. The ceo of auto home has trumped a bid to buy 48 of the company. Nonbindingry proposal. Shares in new york rose than 6. 5 on friday closing at their highest since january fed. Sources have told bloomberg that chinas secondbiggest online retailer is looking to raise 1. 5 billion in a bond sale. The company has declined to comment on the report. Chinas internet giants are providing a haven for bond investors. It is deadline day for preliminary bids for yahoo and reports are saying verizon is the leading suitor. Some big name bidders pulled out of the race. They dropped out of the race. The ones moving ahead, only a handful of potential candidates showing a slight interest. Bloomberg reported other suitors comcast, out, at t, microsoft deciding against making an offer. Andurce telling us verizon its pale ale and its aol unit are working with three Financial Advisors to make a bid for yahoo and that would include japan. Ke in yahoo yahoo is facing increasing competition and investor scrutiny. In the 1990s, yahoo was a pioneer of the internet. The stock has declined almost 20 in the past year as it faces growing investor scrutiny and questions about whether or not Marissa Mayer will be able to pull her weight and be able to take yahoo to the next level. Investors are skeptical. Many believe she has run out of time. Us it a source telling could give a stake in the japan affiliate to shareholders. That would be verizon, of course, after the takeover. Verizon, a huge phone company, a market value of 20 billion or so. We are hearing from sources saying the company could replace Marissa Mayer with armstrong, who would run a combined yahoo and aol. Last week, we are hearing yahoo was getting ready to divest all or part of its operations. The company altered the way a change of ownership would affect employee severance plans. They modify the definition in order to modify how severance plans will be carried out. Thank you so much for that. Australia, there you have it, falling a 10th of 1 as we see a broadbased selloff, including over in south korea. Asian stocks fall. We are also seeing them drop in kospi, have as percent down. Half a percent down. We are looking forward to the afternoon sessions in tokyo. The latest after this break. Angie asian stocks are retreating from a fourmonth high as crude plunged under doha. Ess talks anin Energy Stocks are leading declines along with insurers exposed to the earthquake. Chinas home prices accelerated last month. Prices new home prices climbed in 62 cities compared with 47 in february. The lower house of Brazils Congress has voted in favor of impeachment. There were wild scenes as the opposition achieved the two tords majority it needed move the process on to the senate. She faces and a patron trial and will be suspended she will be suspended while facing an impeachment trial. Lets get the latest from the markets with juliette as japan comes back online. Juliette not a great start to the trading week at all. The nikkei 225 hold on to those 3 losses as it comes back online. A lot of those insurers and companies affected by the earthquake have been falling, as well as exporters. We see the yen continue to strengthen. Ntn is the worst performer on the nikkei 225. A lot of these oilproducing kong, similar to hong heavily sold off. 200 is onlythe asx down 2 10 of 1 , that is its first loss in five sessions. Drops having its biggest in two years. In terms of how the region is looking, here is the picture. Every sector heavily in the red. Industrials down by 1. 7 . Big selling coming through in financials. The regional benchmark coming off those fourmonth highs. The japanese yen is heavily and focus. Heavily on a focus. 7. 95. Holding at 10 the commodity producing currencies coming under pressure as well. The aussie dollar is down by three quarters of 1 , holding at 76. 74. Angie japanese Prime Minister abe has sent more rescue workers to the quake stricken south of the country. Japans worst Natural Disaster since march 2011. Several companies have extended help to the operation. Latest on plant closures . Names that have been hit that have plants in the region. Just our reporters were there. They do not have any timeframe for starting. Theyve not been able to go inside to assess the damage for fear of aftershocks. Toyota, they have had to shut down production and Assembly Lines all across the country. To ¥30 billion impact on their quarterly operating profit. Angie how big is the Impact Likely to be . For the region itself, overall, it is too early to tell. There, it is down impossible to give an estimate at this time because they have never seen anything like this. Decade sinceany there has been an earthquake of this magnitude. Itself, the day today impact is huge. Trains are halted. 13 million people. For japan overall, it is very early to say. 8. 7 ofomy is about Japans National gdp. It will very much depend on what we learn about the damage over the course of this week and have the supply chain issues affect production across all of japan. Angie the supply chain is being affected by a string of aftershocks as well. What is happening today . That is right. Today, we have not had many reports of damage. We are awaiting an update on the latest death toll and damage and l. Juries she injury tota the government has dispatched thousands of rescue teams. The u. S. Military has been contributing by transporting japanese responders to the local sites. The premised are in parliament the Prime Minister in parliament when asked about an extra budget to support the local region, he said it was something he would consider. Angie watching out for us in tokyo. Thank you for your efforts. Plungeer big story, oils following the failure of the doha talks. Us it doesrrett told play into irans hands. The fact we did not get anything out of doha clears the case for what iran is intending to do. Produce as much as they can to play catchup. Chris weston says it was unrealistic to expect iran to agree to a freeze. This is semantics. Iran has not been at the meeting, they were never going to be involved. Politically palatable. There is an opec meeting on june 2. If we see prices spiral out of control, perhaps they could use that as a stepping ground to undo much of this bad will. Angie a senior oil and gas analyst says the oil markets will be in a much more stable position by the next opec meeting. We y disappointing that iran clearly were not going to cut this deal coming into this. Int comes next, the meeting june, they will try again to see if they can agree to cap production. What will happen in the oil markets, we are moving toward a rebound market. Demand is still relatively strong. As we get towards the end of the year, we will be in a much more balanced market. Angie that was the word from asia on oil. Not the best day to be long on oil and the plunge on Energy Prices having a bigger impact on asset classes. What are the risks if Energy Prices fall further . David a lot of things. Think of what we have seen in the equity markets from late january, mid february, up until where we are at the moment. A barometer of risk aversion. I have been showing this very cool graphic all morning. That is oil. Simpleis shows you, very 3ds, the xyz or visualization of where option markets are positioned in oil. You have the strike price, whatty, and you have you want to look at is the smile, if you will, and how the curve actually plays out. As you make your way towards the future, the volatility tends to come down. That is the natural course of mathematics. This is very good to play around with as we approach the london open and new york. Do run this function, you can play around with it depending on what floats your boat. The outlook for the price, can we just get the index up . Here we go. The median forecast across 16 analysts of where they think the oil price will be at the end of the share. We are currently at 39. 50. Plateaued at this point. Days, since the meeting ended with no agreement. Says negative belowent might pull brent 40. They do see an improving supplyside picture. Minister energy 42 for west texas. Et me end on correlation that is something we have been talking about all year. Since the oil prices started to rally and the jacking up of equity markets. This is the correlation between countries. Prices on theoil way down. A very strong positive correlation between the two. Let me end on this my mistake. From the 10 year to the 40 year yield. We are currently at. 046. Dont be surprised if at some point today or this week, we fall below zero for the first time. Angie i think david covered it all. Will asian markets be able to make a comeback . We will have more analysis coming up next. These other stories making headlines around the world. The number of People Killed in a quick and ecuador has risen to 246. It struck about 170 kilometers northwest of the capital and was one of the strongest in decades. Considerable damage and the area was it by dozens of aftershocks. State oil company says there is no damage to its refineries in the region. The new president of myanmar says he will release more Political Prisoners amidst Sweeping Democratic changes under the new government. Opponents of the old military backed regime were arrested and jailed. It is not clear how many Political Prisoners there are. The wife of johnny depp has pleaded guilty to illegally bringing the couples two dogs australia. Dropped to more serious charges two more serious charges. She is expected to be sentenced later today. Powered by over 2400 journalists in 150 euros around the world, 150 bureaus around the world, this is bloomberg news. Guess, hindsight is 2020, but nobody thought iran was going to come to the table for talks. Why did we ever expect a deal . I do not know how to answer that question. You summarized it very well. There is a strike going on in kuwait. That willt presumably just be temporary. Why do we expect anything out of this . I dont know. Angie june 2, do we even care . I do not think the position for saudi or iran will change. If the oil change was to move up further how important was that . In terms of a deal not happening. How big of a game changer . What people are concerned about, the performance out of the refiners, concerned that on the risk of seeing an inventory fall. It matters for the Oil Producers listed as well. The correlation between old prices in the market. The reason we think there is a correlation is when the oil price is falling, it indicates deflation is going to be protracted. That tends to be very bad for top lines. It is very rational. A stable or price is probably very important a Stable Oil Price is probably very important to a stable capital market. Do you think the oil prices are a threat to the story . The oil price needs to move back below the 35 level before we would start to worry about that. The trend has been the oil price coming off a low level. 44 at the high. It is a bit early to worry about that. If we drop below 30, lets worry about that again. You are overweight china now. What was that driver for the change in sentiment . We have just been highlighting to people they should not be as bearish as they have been. There is a school of thought that you will get a depreciation and the rmb. Depreciation in the rmb. We saw the fx reserves in march rising, a little bit of capital outflows. Fears around the currency diminished. Evidence that the economy is stabilizing. The extreme fears about the slowdown in china are going away. That is often all that matters for capital markets. You get array from some of the you get away from some of the extreme risks. Chinese household, i do not think is any different than anywhere else. If you reduce the cost of Home Ownership by bringing down Interest Rates, you will get an increase in demand. It is encouraging that Monetary Policy does have a mechanism when it comes to the household sector even though you could debate whether it has a mechanism that will work with the industrial sector. Is it the case that sentiment china oved a lot on is that what is driving growth . Structural issues do not go away overnight. Often, they do not go away at all and we live in a world where g4 plus china has major structural issues. The way you deal with those structural issues is you dont. You pick the can. Thatlow Interest Rates so the debt levels do not translate into more significant crisis. We have lived in a world in which people are very happy to buy european equities for several years. If you get a slight cyclical risk, you can get good returns. I use the same framework in thinking about china. Angie adrian, always good to talk to you. Thank you for joining us. Delayed reaction after new york listed shares jumped 8 on friday. Down when numbers asia edge returns. Angie welcome back. Shares are enjoying a pop in mumbai. The markets first chance to react. More than 2 billion in profit last year and mumbai listed shares are doing the same. A beat on almost all fronts. Haidi it is not surprising we are seeing the same in market sentiment. We have pentup demand given there was a Public Holiday on friday. Shares jumping in the most since july jumping the most since july. Impressivety earnings report, 2 billion of profit. A nice beat, fourthquarter earnings were also a beat as well. This is something of an industry bellwether. The secondlargest importer of software in india. The company has been focused on artificial intelligence. The slowdown really affects i. T. Spending. We are seeing that being reflected in the share price today. Angie can they sustain this level of growth . Haidi certainly seems to think so. For the next full year, growth is between 11. 5 and 13 in terms of revenue growth. Insurance was the worst performer. Financial and insurance makes up 40 . On the upside, when it comes to deals coming up over the next few quarters. Trying to justify his pay, which went up to 11 million. Tosays this is linked performance goals. Angie thank you so much for that. The latest version of lamborghinis supercar has landed in hong kong. It produces more than 600 horsepower. Hour pereters per three seconds. Yvonne man ticket for a spin. Spin. K it for a yvonne this is so scary. This is the lamborghini 580 two. 580to. Angie how fast can ago . Much quicker than you need. 02 100 and 3. 4 seconds. In 3. 4 seconds. It will adapt to what you need. s is about having the driver high. Yvonne this is the first one to land in hong kong, right. This is the first one. Yvonne lets take it for a spin. Come on. You are not going to pull me over, are you . This is what you are paying for, the respect on the road. The color car is bloomberg orange. I will work really hard to get one of these now. Angie the following is a paid program. The opinions and views expressed do not reflect those of bloomberg l. P. , its affiliates or its employees. There is Nothing Better than a perfectly cooked french fry, straight out of the fryer, piping hot