From bloombergs u. S. And asian headquarters. Im Ramy Inocencio in new york just after 7 00 a am. Yvonne it is just after 7 00 p. M. In hong kong. Im yvonne man. The tech earnings this week will be the big focus with alphabet kicking things off. Ramy i was trying to get ahold of what was moving the markets today but there really wasnt anything but it was earnings. Well get to that in a little bit. Yvonne yeah. It was good it seemed like, in line with expectations at google earnings but just not enough to really convince investors to get too excited about given the run we have seen on the stock already. Lets look at how things are playing out in the asia pacific. It was the Oil Companies that were in focus and kind of offset in tech yesterday. Flat day so far. To australia things could get a little more interesting. Oil being a bump higher overnight with the saudis promising deep cuts to crude exports next month. Shipments capped at 6. 6 Million Barrels a day as we see more analysts saying u. S. Shale is close to peak production. Perhaps final l i taking some bite. 7924. A little bump higher than yesterday but really equity futures marginally higher up about 13 points. Japan, expecting the b. O. J. Minutes out later this hour from the june meeting of course but a triple whammy in japan yesterday. Dollar yen breaking and the yield also falling and new polls suggesting shinzo abes Approval Rating at the lowest since he took office five years ago as he faces day two of grilling in parliament over cronyism allegations. A majority, ramy, of japanese now are not in favor of the Prime Minister seeking a third term. Ramy lets get the first word news. Thank you. Oil rose as saudi arabia promised new export cuts next month emphasizing its commitment to draining the glut and rebalancing the market. Shipments will be limited to 6. 6 Million Barrels a day, one million fewer than a year ago. The kingdom says it is not acting alone and other producers should maintain or strengthen supply curves though it is understood it will take time to push prices higher. Yes, we are indeed ready to review this but the key question is should the decision be made now or at the later date when we have more data and more details as to how the market is performing. So at this point here we have conveyed, we have discussed, and we have decided to recommend that all the ministers keep this option on the table. Deutsche bank may move about 350 billion from its u. K. Balance sheet to frankfurt as trading inclines migrate to the continent after brexit. It calls for trading in frankfurt to go live in september next year and for the assets to be moved over by the following march. That amount is the equivalent of almost 20 of deutsches Balance Sheet. Hina has confirmed that rising star is being investigated for serious violations of discipline which is code for corruption. The announcement comes a week after detention. He was the youngest member of the communist partys 25member polit bureau and considered a candidate for promotion in the leadership shuffle later this year. Chinas inquisitive h. M. A. Group has disclosed its control by two charities as it seeks to dispel concern about its structure and financing. The two entities hold 52 , one based in new york and the other in h. M. A. s island home. 12 officials including the founders hold about 47. 5 with the rest held by the Airlines Holding company. Global news 24 hours a day powered by more than 2400 journalists and analysts in more than 125 countries. This is bloomberg. Ramy thanks. Lets look at u. S. Stocks. They were missed today with investigators waiting for the feds meeting and the biggest week for s p 500 earnings. Here for a rundown of the trading day is su keenan. Markets were mixed but the nasdaq popped. Su yeah. This is a big week for tech earnings of course google a bit of a disappointment after hours but facebook one of the big movers as we go into the big moves, facebook is set to report earnings on the 26th and has been hitting records almost every day. Today was no exception, up about a percent. At a never before seen price. The stocks, facebook, netflix, come on strong. In terms of other earnings, hasbro a big disappointment. A lot of the toys not selling the way of Old School Toys if you will not getting traction with some of the younger kids so the toy industry down. Although a gamemaker which makes slot machines, scientific games, just blowing it out. Biggest shareholder was ron perelman, billionaire. Stocks have been doing well and the gamemaker really blew it out in terms of earnings. Lets look at the market snapshot. We have gold. Oil was higher. Treasuries under pressure. Gold, a nonevent day. The 10year also reflecting treasury is a bit under pressure. Lets go into the bloomberg because inflation is something that the fed is very keyed on as they start their meeting. Here is the inflation if we look at this, which is really fascinating here that inflation and the value of u. S. Assets is at concerning levels if you talk to a strategist at charles schwab. He points out that data showing the Federal Reserve on households net worth relative to disposable income which rose to a record in the First Quarter is of concern. Look at this blue and white line. Theyre married together here as the market goes up. You can see there were big gaps all throughout history. So that is a different way of looking at inflation and perhaps something the fed might comment on. Ramy earlier you mentioned oil around 46 bucks a barrel or so but still under i guess what some might say the psychological 50 mark. Thats having the impact on a lot of oil stocks. Halliburton in particular with the Share Price Falling. What is the story here . Su what they said was it looks like shale may have peaked. That is very good news for the oil market in that it will relieve some of the pressure. Not great news if you are a Service Provider and halliburton is the giant. They did report a return to profitability because of the past quarters rise in oil though it has come down as we talked about. And there were some analysts out there saying, hey, buy on the dip. Yes, it was under pressure. In terms of oil rising, the commodity, the saudis saying they are going to cut, very good for the market. If we go into the bloomberg, weve talked about how opec has been cutting as the drillers have been increasing. We actually had some data from on from baker hughes that the rigs have declined so we could actually see these divergent paths come and meet in a way that is positive for il prices. Yvonne seems like a turning point. A lot of companies are reporting on tuesday. Particularly the food chains as well as the auto makers. Su yeah. Two big food chains, mcdonalds and chipotle. Lets start with mcdonalds. Check out the stock prices up about 25 year to date. One of the stronger performers. Two years ago people were saying mcdonalds is old school, over. Chipotle is the way of the new. Mcdonalds has been up 70 over two years. Wow. Analysts expect continued strong same store sales and fresh initiatives such as ordering systems, fresh beef, delivery, all of that has sustained sales growth. Second quarter adjusted expecting to come in at a dollar 62. General motors under pressure. Again, it could slash car models to combat slum pleasing sales. That is the big story hanging over the company tas reports Second Quarter results. Can the companys sales base overcome weakness in the u. S. . Then there is chipotle, a brand new food outbreak, the neuro virus is associated with a chain store in virginia. Over 135 people reported ill in the past week. This is horrible news. As the Company Reports its latest results in a very challenging environment even though Health Officials say the kind of outbreak is not associated with a store but maybe perhaps the sickness for an individual. A that not for nonevent for any other company but for a company like chipotle where this has been an issue this is a very mortal wound and analysts are trd to see how they are able to come through this. Yvonne thank you. Over to d. C. Now white house adviser Jared Kushner has confirmed four contacts with russians during his fatherinlaws Election Campaign but denied any meetings were improper. Kushner was speaking after questioning by Senate Intelligence committee members. Ell get the latest now from washington. Joe, good to see you again. Of course, we have confirmed these meetings or at least Jared Kushner has. What do you make of the fact he says some of these why unmemorable, in fact he says he didnt recall their names or how many people were there . Joe it has been a problem in general for the Trump Associates with these meetings of not remembering meetings. And, perhaps, some of them were, but what their critics are pointing to are the pattern because some of these meetings, there was a brief meeting with the Russian Ambassador to the u. S. , the may flower hotel in which other ambassadors were present and it wasnt by itself necessarily inappropriate. But it gets left off their list and then another one of the meetings was the trump tower meeting with donald trump jr. , Paul Manafort with the russian lawyer that was billed as presenting information on Hillary Clinton from the russian government. Yvonne how does this all set up for the other hearings or i should say interviews from donald trump as paul metaford . Joe they have a set of questions on their own. Kushner is the first in the series. There are going to be going to he is going to be going tomorrow to the house of the Intelligence Committee interview as well. So it will give them other questions to pursue but they the investigators have their own questions for both of trump jr. And manafort. Ramy also this week the senates push to overhaul the health care bill. A few hours ago President Trump himself requested republicans to repeal obamacare. President trump the senate is very close to the votes it needs to pass a replacement. The problem is we have zero help from the democrats. Theyre obstructionists. Thats all theyre good at is obstruction. Ramy how likely is a senate vote going to happen before the lawmakers go on their recess . Joe Mitch Mcconnell at this point is still pressing a head with the procedural vote tomorrow to indicate whether they can even go further with the debate. It is not clear at this time that he has got the votes to do it. With john mccain out, recuperating from surgery, he can only afford to lose one republican. There are probably eight republican votes in flux. They are trying tonight, still meeting tonight trying to round up votes and theyll be doing, again tomorrow, lobbying members during their regular weekly lunches before having a vote in the middle of the afternoon. Ramy well be looking ahead to that. The latest on whats happening in the capital. Looking ahead, sowing the seeds. The u. K. Trade secretary meets his u. S. Counterpart and they work toward a post brexit deal. Well be joined by a former trade minister later this hour. Yvonne shares tumbled in late trade despite a profit by googles parent. Details live from San Francisco in a moment. This is bloomberg. Ramy welcome back, watching daybreak asia. Im yvonne mun in hong kong. Alphabet shares are lower in trading despite the Parent Company reporting profit that beat estimates. Joining us from San Francisco, mark, good to see you. The stock hasnt exactly been on an easy ride. We take a look at this youtube ad controversy, this e. U. Fine. What ultimately led investors to not like these results . Mark it wasnt really those two factors. A lot of it is that the market is just getting accustomed to Tech Companies really beating and google in the First Quarter traditionally not beat but this past quarter their revenue and e. P. S. Was much higher than expectations and this quarter they clocked in right exactly in the middle. The growth in the advertising business was around 18 and some analysts are getting used to 20 . You saw what was their traffic acquisition costs, the amount they pay out to partners and it rose pretty high and has been rising for several quarters. Yvonne so what are the things people are, i guess, excited about . I mean, i know they mentioned a little bit about the ads, the 52 growth in pay clicks but the cost per click has been coming down, and other bets of course. A lot of questions about the cost discipline that google has tried to implement here. Do we see a little more of that . Mark i think we did. We saw the losses in the spending on a lot of the other bets like selfdriving cars and google fiber fell dramatically. Part of that is theyre really cutting back on the expansion plans they had for google fiber. A lot of the spending is now going into the Cloud Business. Google does not share much about that but said it is one of the Fastest Growing parts of alphabet. They gave one stat about the number of businesses theyve netted in the past year has grown threefold through really big contracts. There is a lot of hope aroupped round youtube, a lot of investors interested in mobile search and the progress there and the cloud but these are much more expensive than the core desk top business thats been this Profit Center for years. Ramy as we see the after hours Share Price Fall roughly 3 or so i want to pull it back. One, it is sort of unfair to say, oh, you didnt over beat analysts expectations. Looking ahead does this really change anything for the company . Or is there something really ruly there to worry about . Mark the fundamentals are fairly strong. Investors said the advertising business is growing, money is moving from tv into digital. Google and facebook are the two biggest beneficiaries there. I think investors are happy with the progress of what they can see from the Cloud Business but you see this persistent problem the google had for years where mobile advertising is not as profitable as desk top. I think theyve shown wall street theyve been able to handle this but its still an ongoing question of how much they can continue to squeeze as more and more mobile devices take over desk top search. Ramy well leave it there, mark bergen. Thanks very much. Well have to see how the shares react in real time trading on tuesday. Meanwhile, the start of the tech earnings season, and later this week well have reports from many more, facebook, paypal on wednesday, twitter and amazon on friday. Lets look ahead to all of that with the founder and c. E. O. Lee, looking at alphabet right here, i want to go into bloomberg terminal and ask you about Analysts Recommendations and im also wondering if people are going to change off of that. Hop into the bloomberg terminal. I want to show you the a. N. R. Function here. This basically is a sea of green. The greens of course are the buys. The reds are the sells. 34 buys. Six holds yellow. One sell. You think that is going to change and fall . Lee Analysts Recommendations to begin with are always going to be skewed toward the positive realm. The interesting thing that we find with Analysts Recommendations is exactly when they change and how much they change. If you saw it this morning, the company the banks that brought blue apron public came out and upgraded and we saw the stock up a lot. We know, im a former arbitrage trader that looks at data like this. We know that you want to basically play off of that change in the ratings. But, yet, it always tends to revert that trade. So it is a very short lived trade and it doesnt mean anything for the longterm nature of the stock. So when analysts change ratings will they change ratings . Probably not. You probably wont see google buy sell hold ratings change at all. As you were talking about, i think it is interesting that the what theyre getting on the cost per click data continues to decrease and at a faster rate than our estimates were expected. So they missed that number by a pretty good amount. Now the number of pay clicks was up a lot more than people expected. That kind of balances things out. You saw they did beat the revenue numbers, which was nice. But, yes. Some things could be changing a little bit there. Ramy looking ahead we have facebook, amazon, paypal, twitter all on the docket here. Overall, in the general scheme of things, positive, negative . Leigh i think super positive. Ramy super positive. Leigh yeah. One thing you always want to look for as a trader as an investor in terms of the earnings estimates is what is the trend in the estimate revisions over the course of the quarter . We find that as the consensus numbers trend up and Companies Beat several quarters in a row it is very hard to stop the momentum in a stock like that. Normally estimates on average come down over the course of a quarter. Analysts want to come in to beat. Facebook estimates are straight up this quarter, e. P. S. And revenue, amazon estimates straight up. Paypal estimates straight up. Twitter estimates straight down. So i would not, you know, if you want to put all the odds in your favor here the twitter numbers are not going in the right direction. Although there are a lot of other factors that play, m a and stuff like that. But the facebook numbers, now doing 250 million daily active users with the instagram stories, which is that blows snapchat out of the water in terms of numbers already holistically, mobile video ad numbers are great. I would not bet against that stock at all. Yvonne you take a look at the moves on the s p were up more than 10 year to date and i think a third of the moves come from these bank stocks. When you look at the second half does it make you kind of wonder whether this can actually continue, this fascinating runup that we have or is it really time to start trimming some of the holdings . Leigh i really do think as we get to the second half of the earnings season you may see the market get a bit exhausted because youre going to get into the energy names. Youll get into the retail names which havent performed well. Amazon is eating their lunch obviously. Youll get into some of the industrial names where theyve been bit up a lot on tax reform and it seems like at some point given the political situation that multiple may come out of those names. It could be the second half of the earnings season. Yeah. I think the first half will look real strong and the second half i would be a bit more cautious. Yvonne what would you be in particular cautious about . Which stock in particular . You mentioned amazon is about to look, seemingly cannibalize the world. Anything else that struck your fancy . Leigh yeah. Looking at anything that has to do with the shopping center, so i really dont like here looking at all of the numbers and the directionality of those revisions to the estimates on the estimize site. G. M. C. , any of the names that are retail that you can get all the stuff online. I think amazon is eating all of it. I really dont like auto zone, oreilly, just basically pick your industry that is being cannibalized by amazon or some other kind of, you know, internet company. I think theyll have some issues in the second half. Great to have you. Estimize founder and c. E. O. Joining us from new york. Thank you. Get todays edition of daybreak. Its also available on your mobile and the bloomberg anywhere app. You can customize your settings and only get the news on industries and assets that you care about. Check it out at db go. This is bloomberg. Check it out at dayb go. This is bloomberg. Ramy youre watching daybreak asia. Im Ramy Inocencio in new york. Im yvonne man in hong kong. Said to be targeting 15 billion for the next u. S. Buyout fund for what could be the largest pool ever focused on the region. Part of carlisles ambition to raise 120 billion by 2019. Private equity firms are raising ever bigger pools of capital and seek returns in an era of near zero Interest Rates. Ramy theyve agreed to be taken private by k. K. R. For about 2. 8 billion five months after hiring jpmorgan to explore a sale. The price is 20 more than the companys friday close and 29 higher than shares were trading in february when the bank was brought in. An earlier attempt to sell fell apart in 2012 when the stock was near alltime lows. Vonne ali baba said to make a major investment. The negotiations right now to lead a funding round of up to half a billion dollars potentially entering into southeast asias biggest economy. Back in may bloomberg was told the alliance would likely preclude a tieup with the rival j. D. Com. Up next creating more jobs. Can south koreas new president achieve what his predecessors couldnt . Well take a look at the growth plans, coming up next. This is bloomberg. These days families want to be connected 24 7. Thats why at comcast were continuing to make our services more reliable than ever. Like technology that can update itself. An advanced fibernetwork infrustructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. 7 30 a. M. Tuesday morning in hong kong. We are 30 minutes away from the major market open. Pretty clear out there. Ramy before morning. 7 30 p. M. Monday in new york. The s p 500 was down. 1 . He nasdaq was up i am Ramy Inocencio in new york. Yvonne i am yvonne man in hong kong. You are watching daybreak asia. First word news with nina melendez. Mama President Trump jerod President Trumps soninlaw Jared Kushner has denied involvement in the campaign. At a presswo hours briefing to kushner confirmed he did not act with impropriety. I did not collude with russia, nor do i know of anyone else in the campaign who did so. I had no improper contacts. I have not relied on russian funds for my businesses. And i have been fully transparent in providing all requested information. Nina googles parent alphabet tumbled after hours as secondquarter revenue met forecast but missed most optimistic estimates. Shares were not helped by the company thing the price of google ads declined. The chief Financial Officer says the Biggest Country bitter to growth was mobile search, an area the Company Expects to improve. Aimedrkish president has at resolving the regions diplomatic disputes. He flew in from kuwait after having visited saudi arabia and says he supports initiatives to end the crisis. Turkey maintains a military base in qatar. President the philippine president has assured the country he is not planning to impose nationwide martial law. The Army Continues to fight islamic militants, prompting some to predict a crackdown across the country. He said he will not that it will not happen, but warned drug traffickers that they face the ultimate punishment. Philippines, it is eye, aan eye for an tooth for a tooth. You took a life, so you must pay. Even it,he only way to the only way to do it. If you do it, you will die. Work is working in the nightlife center. It wants the old the hotel closes its doors on july 1. The owner plans to convert it into office space by mid2018. Works plans, as global news, 24 hours a day, powered by more than 120 countries. I am nina melendez. This is bloomberg. Yvonne we have some lines coming out. The earnings on sk hynix. It looks like it was a beat. Sales coming in at 6. 6 6. 6 9,000,00 trillion won. Memory trips, a lot of bullishness. We do see a super cycle when it comes to memory chiops. These companies seem to be a beneficiary. We will see how sk hynix trades s time. An hour trading underway in asia. Let us get the latest from adam haigh. Adam, we have been talking about u. S. Banks posting Pretty Healthy earnings. The stock has been under pressure lately. What is going on here . What does that say about the broader economic worry . The yeah, at this point in u. S. Earnings season, it is interesting to see it happening in u. S. Banks. What is going on here is profits are doing pretty well. We have artie seen 30 billion worth of profit earned in the reporting season from the big ten banks. Profits are exceeding expectations generally across the board. Just speaking to the folks. They are happy with what they have been seeing from banks. The share prices are under some pressure. Interesting chart here shows the kbw banks index against the yield shows you the mirror image. As at treasury yield has come off, bank stocks have been coming off as well. We are in a situation where profits have been doing nicely at u. S. Banks, but talks have been selling off during the reporting season. They have been down on this index for nine of the past 10 days, which is the worst performance we have seen during any reporting season of this bull market, which began in 12,009. I think that tells you began in 2009. I think that tells you people are looking at the future of high rates over the next two years. Some of that fading as we see some of these selldowns. Very interesting at this point. Ramy looking ahead to china, it looks like foreigners are looking at the program which started last year. I am curious what those were, and looking ahead if there are any pitfalls among those. Adam yeah, so this is all about opening up ofthe these domestic equity markets in china to foreign investors, which in its latest iteration, happened in december, when the shenzhen to Hong Kong Link was opened. We have been looking at some of the bestperforming stock through this trading link, and they have been the likes of midday a group doing very well idea group doing very well. Strugglingmarket is on a broad basis. The shanghai composite index is performing poorly, but the small caps index. It is interesting to see the outperformance of some of these names, very popular with foreigners who have been buying through this channel. The question now becomes whether valuations have got a little bit rich given you have had 50 plus ofcent moves on the number stocks. In july, some of this outperformance is slowing down a bit. Ramy all right, it looks like we may have lost adam haigh. Let us move right along and see if we can get him back later on. We will move to moon jaein because he has been in office less than three months. He has been painting a bold, new vision for the economy. How he will achieve that will be laid out in the fiveyear plan to be released in the next few hours. We are waiting with bated breath. Kathleen hays is here. Kathleen he made it pretty clear on the campaign trail. Since he won the election. Midjune. He sees a new vision for koreas economy, a new vision for the way they grow, create jobs, create wealth. He talks about moving from an exportdriven model, dominated by large corporations, Big Industrial groups, more towards creating jobs across all tears s ofociety all tier society, and supporting small and medium businesses. That is another thing he has been hitting pretty hard. That us take a look at a very specific chart to show everybody why this is so, so important. Btv 2477. 3. 8 . That is what this white bar shows the. That is a nice, low Unemployment Rate overall. That is older workers. Korean youth, 10. 5. Be more specific. How about people not quite 30 . 10. 6 . Remember, young voters gave president moon a lot of support. They were a big part of him being elected. That message has resonated with them. We know that gdp has been growing pretty healthily, 2. 9 in the First Quarter. We will get the new gdp numbers on thursday. Overall, growth is not bad. It is the way growth is occurring and who it is benefiting. That is who he is talking about and what this fiveyear plan, released at 10 00 a. M. South korea time, is going to highlight. About hisnt to ask own support. Does he have the support, and to what extent does he have it . The Youth Support him, carried him into his victory. Adam Consumer Confidence has surged kathleen Consumer Confidence has surged. 111. 2 from 111. 1. Take a look at that bar chart. The political scandal last year that led to the previous president s impeachment really undermined korean Consumer Confidence. Look where we were in february. As the Election Campaign went on, as he rose in the polls, look where Consumer Confidence is now. It had a big jump. He is winning the budget battle so far. He has been able to pass legislation that would give the korean economy, the korean government about 10 billion u. S. Dollars more to spend, and of course, he has been pushing for higher taxes on the big corporations on the top, the super rich, in korea. The main Opposition Party, the korea liberty party, has been talking about a fearsome tax bomb he could drop. If you look at his Approval Ratings as of two weeks ago, 83 . Public clearly still supports their new president. He does want tighter regulations for the Big Industrial groups. He is going to meet with 14 of them over the next couple of weeks, and presumably, he needs to get them on board with creating more jobs. A is just so interesting that noodle making company is also going to be part of these meetings because he wants to reach out to small and mediumsize companies as well. He wants to get them into the discussions. I guess he holds them up as a good example of a company that is not raising prices. Yvonne as he does push for the tighter chaebol regulations, we see the kospi at record highs. Kathleen foreigners are buying korea small caps. People are listening to president moon and his intention to get the small and mediumsized businesses in the mix. It is hard to compete with these interlocked, traditional, industrial chaebols, groups. He wants to make a place for them in the economy. I want to show another chart, as a matter of fact. This is btv 455. It is looking at koreas Consumer Confidence, the turquoise line, versus the path of Consumer Discretionary stocks. A tracksee how broadly each other. Big jump in Consumer Confidence. Consumer stocks follow along for a while. They have pulled back a bit. If this is the leader, maybe this picks up again after the budget plan comes out, yvonne. Particularly after he has these meetings. We will see what public statements we get from some of south koreas biggest companies, most important Business Leaders in terms of their support for president moon, this plan he will be releasing a couple of hours from now. Yvonne all right, kathleen, thank you. More analysis later on and bloomberg. We will be joined from the head of Korea Economic Research in the next hour of daybreak asia. Ramy that is right. In Bloomberg Markets, Credit Suisses representative will give his reaction to the Economic Strategy at 12 10 in sydney. Withe next, a trade deal washington. We will discuss the situation with a former trade minister. He says British Business will be better off out of the e. U. This is bloomberg. Ramy you are watching daybreak asia. I am Ramy Inocencio in new york. Yvonne i am yvonne man in hong kong. The u. K. Laying the groundwork. The Prime Minister is in washington for talks and claims they are moving transatlantic barriers, and it could mean an extra 45 billion dollars in trade with the u. K. By 2030. Joining us now from perth is the trade minister, laura digby jones. I appreciate the time. We are hearing from the trade secretary about how difficult this trade deal could be, just the fact that we do not know what brexit will look like. These negotiations could run on for another two years or so. Is this really more of a symbolic meeting between the u. S. And the u. K. . Guest i do not think so. Two reasons. One, the quicker we can get all of the pitch ready on which we are going to play, and get terms right, that goes for australia, singapore, china, the termsbrazil, get of reference right. What areas do you want to cover, and where will be the sticking points . We are such a free trading nation. We do not do their protectionism of france or the e. U. It will be an easier thing to do them people think, and there will be areas where america is not known for being that open. And i guess youre going to get areas where america is going to say sorry, this is a redline. Let us identify those soon. The second reason of course puts liamressure on not fox, but david davis, who is doing negotiation for the e. U. It puts the pressure there because the e. U. At the moment is saying all the time we are not budging. We are not doing anything. We dont care. Eventually, they will think theres quite a bit world out there, and burton is quite place arnier,t, so mr. B play ball. Yvonne what he really meant by a quick trade deal is he thinks the u. S. Has more leverage. They actually have more negotiating know how here when it comes to trade talks than the u. K. Does. Do you think that could force britain to give more when it comes to concessions on issues like regulations or food standards . Digby i do not see trade. I took part in the negotiations oha, and i have never seen trade deals as a zerosum game, and onee side wins, side loses. All the votes go up. I do understand how certain things in america will be politically unpopular in britain. You mentioned food stamps. You are right. Things like chlorinatedwashed chicken and hormoneinduced beef. That is tricky. Understand is 4 million americans go to work every day for Companies Whose headquarters are in britain. Britain is americas big investor from europe, and we value hugely americas investment and to britain. We are starting ahead of the game. We are not trying to go from nowhere to try to get this done. We are in a normal sleeping trading partner, given our relative small size. Over 65 million people. America is 330 million people. There is a difference in size, and therefore, america will have more, of course. The special relationship goes back a long, long way. People washing this want to miss this morning, it is not just about america and britain. It is about how america can open up to trade and how britain outside the e. U. Can help global meansand globalization something for the guy in the street. That is a problem with business at the moment is how do you get globalization, trade, business, understood by the guy in the streets as being good for him or her . I think if the world can see america and britain do something constructive and not throw their telly out of the playpen, it will reverberate around the world and people will think trade is a good thing. Ramy im curious if there is more that you know about what is happening with the u. S. And u. K. Talks. There was a tweet you sent out on july 18. I want to bring that out here quickly. Basically you said so that is trade deals with both the u. S. And aus in the back. Is there something you know that we do not that is happening here . Or what did you mean by that . Digby i do not know any more than you. I do get around the world. I chair six companies. And all of them i am here in australia. I was in america recently for therapy. Thet around and understand way it is going. In that respect, there is an enormous appetite for these trade deals and britain. The press in britain constantly says how it is going to be cold outside and we do not want to do it. They would not understand it. I can tell you, there is a big appetite to get it done. So therefore, i do not know more than you, but perhaps on the street, i hear a bit more. In terms of what i wrote, not only did i write that, but i meant it. I meant it emotionally. Of course it is not in the bag sign here. Of course it is not. But what it is, emotionally, is australia and america have leaders australia and america, as leaders, has said they will do it as quickly as they possibly can. Ive meant the original band, which i meant the original bit. That is in the bag. We are already down the let us have a look at the nittygritty. I stand by it. Of course it is not in the bag in terms of the secret deal or anything else. Ramy it is an extension of hope or passion as you are speaking with us now. Digby it is hope and expectation at the same time. Said,some people have some analysts have said, that the u. K. Would not be in a strong position if and when negotiations go through because they have relied on the e. U. For much of that. What do you say to those critics . Digby in terms of trade between the e. U. And britain, i have no hesitation in saying to you that it is going to be fine. When you hear what we call the remoaners, people who wish we had never left and paint everything in a bad way, i say it is in no ones interest that they make anything people are going to buy more extensive. When i negotiated tariffs years ago, i can tell you now, you 10 , 15 , andat the idea is to get them down. I have never been in a negotiation where you are trying to put them up. At the moment, they are not. So i cannot see the german Car Manufacturers wanting their cars to be more expensive. The ibms and the bmws and the porsches and the volkswagens. I cannot see them wanted to be more expensive in their big markets. I cannot see it. In terms of the half billion pounds worth of italian luxury goods, all produce from france, i cannot see it being more expensive. Where there is a worry is what i call the nontariff barriers to trade, the regulation, bureaucracy, border control, the stamp on the bit of paper. I think that can be a problem and we should concentrate on that rather than the tariff. Ramy thank you very much. Definitely, we should continue this. Thank you for your time. With that, one teacher on the bloomberg we would like to bring to your attention is our interactive tv function. You can find it at tv. You will not only be able to watch live, but the previous interviews and dive into any of the functions we talk about. You can become part of the conversation by sending us in show. Es during our this is for bloomberg subscribers only. Check it out at tv. This is bloomberg. Yvonne you are watching daybreak asia i am yvonne man in hong kong. Ramy i am Ramy Inocencio in new york. We will be looking at what is happening with the markets. What isake a look at getting underway enough to really a, japan, now minutes away. With koreaunderway and japan, now minutes away. Sophie a slightly higher open. Plenty for traders to chew on. Markets are waiting on the administration to provide its roadmap or Economic Policy, but korean futures looking unchanged. A slightly higher opening in sydney as well. Otheynd map, a tw drop. Flipping the board to show you stocks. This company among them as it is due to announce firstquarter results on thursday. The nikkei reporting that operating profit property fell 10 on year for the company. We do have Mitsubishi Motors due to announce results today. We will check on reaction to sk hynix. Operating profit coming in at 2. 7 billion. That is a brief look at what well be watching at when trading gets underway. Plenty ahead when it comes to ers indrivers for trad asia to keep an eye on. This is bloomberg. Pacific yvonne asia markets headed for a quick start. Ramy Oil Producers leave longer supplied curbs on the table as saudi arabia agrees to cut exports even for the next month. Yvonne investing billions in the u. S. States across the country are jostling for position. Ramy Donald Trumps soninlaw confirms meetings with russian officials but insist he did nothing wrong. Yvonne this is the second hour of daybreak asia. It is just after 8 00 a. M. In hong kong. Ramy it is just past 8 00 p. M. Here in new york. Looking at the u. S. Markets, youre talking about how asian markets look set to have a mixed picture. We had a mixed picture here in the u. S. A third of a percent. Interesting to see this turnaround. People are on the edge of their seat as we wait for the earnings later this week. Tech rebound seems like it could feel the tech old here in asia. We also have the schedule boj minutes from the june meeting. Interestingly enough, no surprises, but they did mention that many members continue powerful easing. They say the exit could not be foreseen. It was premature to even Start Talking about this exit. He says that might confuse the market according to some members. Diversionsntralbank with the fed on one side the boj on the other end the ecb somewhere in the middle. We will look at that later on. Bojs not wanting to confuse the markets. Not much in confidence either. The nikkei 225 looking flat along with other asian stocks. We are tracking treasuries lower. We do have oil continuing to rise. We have gold falling as the dollar is rising slightly. Gold is down. 2 while the dollar is up. 8 . Given the dollar strength, we are seeing the yen snapped a five day advance down. 2 after 110. 62 a high of monday. The yen could find some support if the upcoming u. S. Consumer confidence figure increases dollars selling pressure. Keep in mind that speculators are holding the dollar since 2013. We do have the aussie looking fairly steady before data due on wednesday. We are waiting on the weekly Consumer Confidence that at the due at the bottom of the hour. We did have it come in later this morning better than the june re. A do have the yuan snapping today rise down. 2 . It did break a trend line overnight. We might see it hit a new 2017 high. With the upturn in Consumer Confidence, lets take a quick look at what is happening there. This reinforces the improving sentiments. We see the blue line representing the consumer index. It did look somewhat optimistic giving the passing of the extra budget along with the boost to the minimum wage that we will see next year. There could be room for cap best stocks to play catchup. The white line depicting consumer stocks. You can see it dropped in 2017. It was peaking earlier this year. They have underperformed. The msci korea index has rallied 22 so far in 2017. Take a look at the consumer index. 2 n see we have it up 2. 5 year to date. Lg electronics up 31 . Storeed by a department operated and ahead tell among the leaders there on the consumer. The hotel is due to report earnings today along with lg household. We did have the earnings out from sk hynix this morning. Lets pull that up to she how that share price is faring. It is beating estimates this morning. Sk hynix is up following a morning where it went down 14 . Theating loss widens in Second Quarter. Electronics shares falling after reporting the second round of share buyback. That is what is going on. Ramy lets get the first word news. Soninlawt trumps has denied any improper contacts with russian officials during the president ial campaign. Adviser spentouse 2. 5 hours answering questions from a senate panel behind closed doors. After the twohour meeting, krishna reaffirmed his stance that he did not act with impropriety during the campaign or transition. I did not collude with russia, nor do i know of anyone else in the campaign who did so. Contacts. Mproper i have not relied on russian funds for my businesses. Transparent inly providing all requested information. Oil rose as saudi arabia promised export cuts next month emphasizing the commitment to draining the glut and rebalancing the market. Shipments will be limited to 6. 6 Million Barrels a day, one million fewer than a year ago. The kingdom says it is not acting alone. Other producers should maintain or strengthen supply curves, even if it will take time to push prices higher. We are ready to review this. The key question is should the decision we made now, or at a when we more details as to how the market is performing . Petersburg,t in st. We have conveyed, discuss, and decided to recommend that all the ministers keep this option on the table. Mate moved bank reggie 50 billion from its Balance Sheet to frankfurt. Sources say the project calls to go live in september of next year and for the assets to move over by the following march. That amounts to almost 20 of deutsche banks Balance Sheet. Someone is being invest getting for serious violations of this of the. In answer comes a week after report that the youngest member of the communist party 35 member politburo and was considered a candidate for promotion in a leadership shovel later this year. Chinas group has this closed its twoisclosed talkties as it seeks to about two holdings. One based in new york and the other in the heineken island home. About 47. 5 . The rest is held by the holding company. Global news. 24 hours a day. Powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Thank you. We are in countdown mode. South koreas new president releases his fiveyear economic plan. He hopes to lift prospects for small and mediumsize businesses. We will get the details of that plan in just under an hours time. Heres a look at what the president is looking to college. We have already been looking at how we want to change it from an export led economy. Reporter export led to income led. The president said the traditional model has enraged large corporations, created very wealthy south koreans, but not enough is filtering through to the broad base of the korean population. Any are finishing college and having a tough time getting jobs. When they do get jobs, they have a tough time getting any kind of wages. This led he is focused on. Is down to create jobs, particularly publicsector jobs. This is contentious because there is a guaranteed 10year in government jobs in korea. There is pushback from the opposition parties on that. Jobs for of creating millennials, it is hard to believe anyone will be on board with that. If you look at 2477, we have to show to again. This is such a great chart. Overall, National Employment 3. 8. For the 1529yearolds, you have a 10. 5 rate. The 2029 euros, 10. 6. This is after years of studying and it exams, getting through college, graduating, and trying to get a job. This is what the president is saying. The Large Industrial growth control so much of the economic output. So much of what happens in the south korean economy, it is important to help the small and mediumsize businesses grow. To pay for a lot of this, they are pushing for higher taxes on the big corporations and the wealthy. His Approval Rating two weeks ago was still 83 . Aboutasking talking tighter regulations for these Large Industrial groups. He will be meeting with 14 of them over the next couple of weeks. One mediumsize noodle maker who he things is a good example of what company should be going out. They havem sure raised their growth forecast for the year to 2. 8 more hawkish for asian bankers out there. Twoday meeting that wraps of wednesday. What is expected there . Reporter if we are looking at the Federal Reserve from the perspective of Asian Central ways, they are not expected to do anything. If youre worried about pressure from the feds raising rates putting pressure on your central bank to raise rates as well, that is one piece of good news. Lets look at a bloomberg favorite, world Interest Rate projections. Theres never been any expectation of anything happening at this meeting. Now a flat zero in september. Move10 odds that it will according to these fed funds features trader. Only 2 is in the play two. What people are watching is the Balance Sheet. There is some conjecture that the fed somehow in his policy statement after the meeting wrapped up on my say could announce the date they will start unwinding the Balance Sheet. Bloomberg intelligence came here in new york and washington. You can see that starting to happen in october. Another question, the debt ceiling angst, what will happen . We are already seeing that reflected in the latest bill self. It was a lighted worst demand since 2009. Wondering if that could slow down the feds eagerness to start the Balance Sheet reduction. Most people say no, but that is in the balance as well. Yvonne continuing to depend on what janet yellen views as a transitory force on inflation. A Company Plans to invest in the u. S. After the election of President Trump. Now a host of states are trying 7 billion companys dollars spending. Lets get the latest from a reporter tracking the story. , one of theoned first supporters of President Trump after he won said he wanted to create jobs in america. Some of these states are swing states as well. How would you describe the clock qualcomm strategy in the u. S. . Reporter the political environment is very important here. Look at the states they are looking at, it is between wisconsin, michigan, and ohio. Reasonse not business to build a factory that, but there are good medical reasons. Wisconsin and michigan in particular were narrow margin of victory for the president in the election. Being able to claim you brought jobs there could make a difference should there be another run in 2020. Ramy what kind of jobs might foxconn bring to the u. S. , especially areas like the midwest . Reporter there are not going to be hundreds of thousands of jobs. The factory theyre looking to build is an lcd panel plant. They will build a few more satellite factories to turn lcds into tv screens and computer screens. It is very highly automated. That is very different from the manufacture of iphones. The small screws in iphone needs manual labor. Manual labor in the u. S. Is a lot more expensive than it is in china. They will bring production to the u. S. , it wont produce mass numbers of jobs, but still a few thousands. They will keep the iphone manufacturing in china where they require a lot of labor intensity. Ramy interesting stuff. We will leave it there. We will be looking for those jobs if they do materialize. Still ahead, beating bad loads. Well hear from indias most valuable they about dealing with the countries soured debt problem. Thene plus, find out what debt market say asias walking a fine line. This is bloomberg. Yvonne youre watching daybreak asia. I am in hong kong. Ramy im in new york. Recent inflation figures suggest there is no serious chance the feds will raise rates this week. Traders are looking for clues of a hike in december. Lets bring in the head of asia credit in singapore. He manages the asian fixed income came with assets worth 4 billion. Thanks for joining us. Give us a general overview of what youre looking for and what should be on our radar right now. It is the way the fed expectations of the markets get resolved versus what the fed has been promising. Convinced is not yet they will be another rate hike this year. Some have been indicating one more rate hike this year and three next year. How that gets resolved is really critical. It is critical for the yield curve. It is critical for asia credit cash credit markets and the outlook. Ramy how sad to talk about the impact of donald trump and the policies here is trying to connect. A lot of that seems to be freezing up right here. What is the impact on the asian outlook . Unfortunately, he is not had the impact on inflation that we once thought. Some of his physical ventures were going to be quite inflationary. That was going to lead the fed to fester rate hikes in a highyield curve. At the moment his fiscal policy is still on the back burner. The impact for the remainder of this year is really quite needed. He is still struggling with obamacare and tax reform, clearly. Yvonne the bond market is continuing to call Janet Yellens block. You can see the bullish bets when it comes to 30 year treasury debt position for the longterm part of the curve. Do you think that is the right decision ahead of the fed right now . Might she Start Talking about the unwinding of the Balance Sheet connected flow Growth Investors offguard a bit . I think so. I think she is likely to bring in the Balance Sheet reduction at some point this year. I agree, it is a difficult that at the moment. Any the market not pricing fed rate hikes over the next year or so, if the fed is actually right and janet yellen sticks to her promises, then the process for a prospect for a much flatter yield curve will have impact on leveraging investors and tenant markets. That is our view the next 612 months. You play it at a time when asian credit is getting more expensive, especially in height yield . Can em debt stay in favor . We are taking a moderately cautious approach year. It is hard to be too cautious because of the flow of funds into emerging markets is still extremely strong as investors continue to look and hunt for yield. We are still taking a moderately cautious approach over the next 612 months. If the yield curve does not go flat, we think a lot of leverage comes out of the market. We cant forget that chinas deleveraging initiative is going to accelerate. Know that Financial Products in china are extremely leverage. From forcedanating deleveraging on the economy cannot be ignored. That leads us to a moderately cautious approach into the second half of this year. Yvonne is this route in onshore lawns a case of bad news versus goodness . Good news . We saw the dry spell intensify. The average you for aaa Corporate Bonds still fetching 4. 5 right now. That is a good entry point for investors . News for ait is good manager like myself. We have seen evidence in china on what can happen when you force deleveraging on a Financial Product or a company. This force style of assets. This is the fine line the pboc in other Central Banks globally have to walk. It is a delicate balancing act as they try to initiate deleveraging. They dont want to create a spiral. We have seen a few examples of that in onshore china. I dont think it is time to get extremely bullish on some of those aaa spreads as you mentioned. We think it is a key risk Going Forward as Central Banks lean on some of these financial imbalances. Investor credit in particular has been a byproduct of the policies. Yvonne great to have you. Head of asian credit at a fever investors. Live from singapore. Ive a feature on the bloomberg. I want to bring to your attention the interactive tv function. You can find it at tv. You can watch us live in see interviews and the securities and functions that we talk about. You can become part of the conversation. Send us an instant message during our shows. This is for bloomberg subscribers only. Make sure you check it out at tv. This is bloomberg. Ramy youre watching daybreak asia. This company has set a bumpy ride this year and things may not get much smoother. Analysts have ratings after the automakers firsthalf net profit might have fallen 40 . Lets get the latest from our Bloomberg Intelligence director in other research. Whoalk about great wall recently this a of suvs. How will those who in china . Reporter if you look at the consumer base, they are getting smarter. Great wall is to have the largest market share. They did still do, but it has been eroding. As the consumers learn more stripthe brand, as they bright the bells and whistles and go underneath the cover, it is an upgrade of the existing brand. That technology has been around since 1995. Really old technology. They are putting a lot of bells and whistles and nature options to charge a little bit more. Yvonne so still dated when it comes to technology. You mentioned great wall is still leading in suv sales. Will that market share in road . Reporter i think it will. The two pillars of a successful automaker are marketing and r d. In terms of r d, great wall is lacking. Another company has done a good job, they acquired r d when they acquired arco although if years ago. Then there was a gem of lotus cars. That companys done a much better job in terms of accelerating their automotive technology. Great wall is not a wrong strategy, but they went about it on their own. It will take longer than what people are anticipating. Yvonne will they rival the likes of gm . Think this year they are introducing vehicles with volvo technology. Volvo has been around for a long time, a premier swedish brand known for safety. A lot of the powertrain tebow technology. Ramy what does this mean for the companies profitability. It does not seem like youre penning a good picture for these. Reporter if youre looking at shortterm and longterm shortterm we do have some doubts in terms of longterm profitability. They had a gross margin of 29 in 2013. Theyre down to 35 . The trends micro down even further if they do not improve their product lineup and offering down the road. If you look at the shortterm, yet the auto market in china actually slowing down in terms of growth. What theyre doing is cutting production. On the have an impact increase in unit costs Going Forward. Ramy thank you very much. Coming up, indias stocks rose to a record. That is next. This is bloomberg. Yvonne 8 30 in singapore. 81 humidity. I that we could be that in hong kong. Half an hour until the opening of trading there. I am yvonne man in hong kong. Ramy i am Ramy Inocencio in new york. Youre watching daybreak asia. Lets get the first word news. It is humid in the lion city. Googles off the net tumbled. Of google. He price it was hit by a record antitrust fine by the european you know union. The biggest contribution to growth was mobile search, an area the Company Expected improve. The turkish president is at the end of a three nation golf to and that aiming the nations disputes. He could force initiative to end the crisis or it turkey maintains a military base in qatar. Supposed to be close on the original list. A president has used the state of the nation address to ensure the country he is not planning to impose nationwide martial law. The Army Continues to fight islamic militants prompting some to date a crackdown across the country. He said that what happened, but faces ultimatem punishment. And the philippines, it is really an eye for an eye, a tooth for a tooth. If you take a life, you must pay for your life. To do it. E only way but if you do it, you will die. A company said to be in advanced talks of renting a hotel in hong kong sneered center. Hotel closes the fourth in july 1. It will be converted into office space. At some firms are being pushed out of hong kongs financial district. Global news. 24 hours a day. Powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Yvonne thank you. Time to see how the asian markets are shaping up this morning. Despite this session, we seeing some green in equity markets. Sophie looking like a more positive move when it comes to stock investors in sydney and tokyo. Asian currencies are still under pressure. The yen is falling for the first day in six. Down. 2 . The greenback is among those lending support to the japanese stocks. Does after the muted stock we got in the wake of the boj june minutes. That introduce the yield curve control energy as well as highlighted divergence with central bankers globally. We do have japanese five years deals falling slightly. For the sector breakdown in terms of what is happening in tokyo, check out the function the terminal. We do have Energy Leading to the nikkei 225 ups. 7 tracking the rise we are seeing in oil prices following saudis promise to deepen its export cuts. Taking a look at the breakdown in terms of leader and laggards, toshiba falling 3 this morning. This is on the back of an assignee report saying its auditor thinks the company made accounting errors over losses at the westinghouse unit. Toshiba is aiming to supported by august 10. Another highlight here. This fell 1. 2 this morning. After the nikkei reported its firstquarter operating profit fell 10 on year due to discounted pricing and trying to retain customers against competition from rivals there. They will announce results on thursday. We will see whether that nikkeis numbers will come. Ramy they very much. Indias benchmark stock index climbed to a record on monday with Reliance Industries and a stxe thank contributing to most of the gains. Reliant closed at an alltime high on the back of the phone plan. They expected to boost subscriber numbers more than originally thought. The bank also serves of april. The june profits came in line with estimates. We have seen several records this year amid optimism about the Prime Ministers campaign against bad loans. The head of the bank told themberg editorinchief indias making good products. Have in this is the 9. 2 . This is 5. 15. 2. Around 42 . Plus we have security. Capital adequacy at 13 . 70 is owned by the government 17 is owned by the government. The government has put in various Good Measures which will lead to a resolution. Until measures until a. Of time. They brought in the insolvency act to be more active. Some banks were tied to standards. Created ae that had problem, they single them out. The banks are required to swap them out in the next six months or taken to bankruptcy court. I do believe that of the next 1218 months, this problem should not be that much of an issue. The government is also talking about consolidation. That will improve the Capital Assets and noncore bringing Services Common services for the banks together. And whatever it is, the balance will put in equity. To superimpose after the demonetization, all the money that was under the mattresses came into the system. Is 50ey market today billion. Is there a shortage of money today . I will be happy to give any viable proposal. I dont think that will be a constraint. Private investment was will require a lot of money as Capital Investment has been a much a bit slow because capacity had been created. We think that will happen of the next 1218 months or it by which time the Banking System should also be ready. Reporter so the financial industry has had a dramatic increase in waiting over the past five years. Up 11 percentage points. Is unlikely to continue . I think it is likely to continue. It might increase a bit because the market is based on a tremendous evaluation of Public Sector banks. If they get that situation right, the valuation should be a multiple of what is today. I would say it will grow. Reporter what about growth . Growth we are again fortunately position. If you take that we stand today, we probably have the best brandon the system. We like the oldfashioned ranking, i give you money, we give your money back, or you have a problem. We dont have any issue. Country that is growing at 7. 5 , it could be growing at 8 once the capital comes in. We are also growing with the use of technology, taking our products to semi urban and rural india during previously it did not make sense on the cost to revenue basis. To deal the ability with them on the mobile and take photocopies and send the messages with the ability to provide them and the ability to train our people electronically, we have gone in there and that advanced 20 of the business. We are almost the market leader. Only majorhe Financial Institution on the asset side of the business. The country will grow. We will grow. A combination of increased market share and increased geography. I dont think growth is an issue. That was a stxe bank ceo speaking to bloombergs editor in chief. Lets talk more about hdfc. Thanks for joining us. Lets start with the results they came out on monday. But with a Key Takeaways . Reporter you would have seen the fourth year Fourth Quarter last year took about 20 growth and profit for the last 20 years. The Fourth Quarter was a blip because the rpi had given leeway to banks to postpone recognition caused by the demonetization process. Taking the hit, develop provisions in the First Quarter. This quarter has been particularly strong on the revenue side. It is backed by a solid the growth. We have seen 22 longer backed by a broad range of segments including Retail Business banking, and working capital loans. All of these have been on the back of market share gains. Interestingly, the whole digitization pushes help them contain their cost which is giving it a lot of good momentum. Yvonne good momentum on the bottom line. Strong revenue growth. How does the npl ratio gone up again . Up 20er it has gone business points to 1. 24 . If you see compared to the other banks, it is still way too low. A lot of this has been because of the loan waivers announcements. A lot of state governments have announced that. Mostly farmers who have outstanding debt are the ones who are eligible for this. That is why they have seen an industrywide delay in payment of those kind of loans. This going to take twothree quarters to resolve when there is clarity on which owns we adopt in which are. Either the government comes in and pays with the ones they adopt, or the customer and creditor does those loans. Ramy to what extent will new regulations and the r. B. I. Itself to tackle the bad loans problem . Oforter there been a couple very good step so that ive come across. R. B. I. Has told the banks to disclose the divergence between reported loans and what the r. B. I. Of orders had suggested. That should give banks power to push for more conservative reporting and provisioning. That is one good thing. Secondly, the more empowered joint letter forms should speed up the whole resolution process. You are essentially forcing decisions by cutting the resolution process. R. B. I. Hasly, mandated the banks to revert to the 12 largest corporate accounts. That comprises 25 of the entire sector of stress loans to file for bankruptcy under the idc. It definitely gives teeth to the bankruptcy court. The banks have been asked to speed up their distribution or the next six months of the remaining accounts. That puts some timeline context of this whole issue. What is some of the challenges and main risk moving ahead . Reporter that is the main point. Psych two steps forward, one sense back kind of situation. The these were made, one of corporates appeared to the courts. The decision went in favor of the lender. They said all these accounts should be given a fair chance as other resolutions. That could mean there could be further delays in getting these things resolved. Secondly, i think the government and r. B. I. Our focus on resolutions. There is in a clear roadmap in terms of how they will capitalize the rank very we need a proper strategy to force cooperation. In the absence of this, you will see a lot of banks who will and theyprovisioning might have to shrink their Balance Sheet in order to maintain those capital adequacy levels rate i just worry this will become another exercise of kicking the can down the road. Not surertantly, im how much resolution can be actually gotten by this mechanism because there are sector wide stresses in the steel and power industry. All of those issues are because they are forcing some of these s, doesnt mean a bad as that will turn good. At some point banks will have to take his. To be able to move forward. They will have to have capital to be able to take haircut. Ramy well have to leave it there. Analyst. Telligence up next, we will be getting the first glimpse of south koreas new economic priorities when the president speaks very shortly. We will be live in a moment. This is bloomberg. Ramy youre watching daybreak asia. Yvonne the south korean president is due to announce the Economic Policy plan for next five years. He is expected to announce higher spending to target inequality and create jobs. Of koreas is the head Economic Research at Standard Chartered. Great to talk to. The president is saying this budget will bring korea back to 3 growth. How realistic is that given the infighting we have seen for the has month in government . It seems like there is a big question on how these economic policies will be implemented. Considering we have expected to grow at 2. 7 or 2. 8 growth for this year. We have additional budget which was approved last week around 10 billion. Usually if you added up, it can go up 0. 2 . With simple mathematics, you can add it up. Forecast of 6 is doable for this year. It is a yvonne not impossible thing to achieve for this year. It makes you wonder, south korea doesnt even need a supplementary budget. You mentioned 2. 9 growth for the First Quarter already. A few months ago we were talking about this extra spending and how would be a good boost to offset the tensions reseller china over this department. That seems to be east of it now. 4778 stillicture, very much strong in korea right now. That overall numbers probably ok. Inequality is high and unemployment uses quite high. The number is quite ok. He micro number shows concern is youth unemployment going to be one of the Big Solutions there. We continue to see that is three times as bad as the overall Unemployment Rate. The employment rates for 20s is over 10 . Low unemployment, it is complicated because of the labor market and the mismatch of the talents. We need to change a lot of things in order to solve that. Because the problem is hard to solve, at least we can find a shortterm solution to solve that. It is going to shortterm solution. , we should don restructuring in the manufacturing sector. Looking at the whole entire overview of what we might expect in 10 minutes here during what he think should be the First Priority moving ahead . It is going to be creating jobs. It is trying to provide more specific plans to provide jobs. Also providing more fair competition between companies. Weve talked about middle and low income classes. Ramy you mentioned the tables here. We are talking of the last few hours about taxation. We have heard about tax bond that might not be well received, but it is something that does need to happen . It looks like it is going to happen. It is 200 billion, they want to increase the tax up to 25 . Personally i think it is a faraway story. Tax meter change the with the Opposition Party support. Im not sure they will support it. The government wants to put the issue on the table. Actual implementation will probably happen next year. Year looking ahead to next , in terms of the bank of korea starting to tighten anytime soon, youre not expecting until 2018. Whether the details on this . Looking at the Inflation Numbers quite low. Also the influence is quite strong in korea. The problem there is the rate hike and the minimum wage might boost with inflation. Inflation stays at 1. 9. The government wants have a strong fiscal spending. It is going to be misaligned with the government policy. They will hold the current rate until they receive signs of the inflation pick up. Maybe further down the line for rate hikes from anchor korea. Before we let you go, what will be the key risk for south korea . Will be something domestic or something external like north korea or a continued fight with china . Geopolitical tension will be immediate. It can kill the confidence of the consumer and hampered the confidence of the foreign investors. Also the china relationship with korea. Yvonne thank you. The head of Korea Economic Research at Standard Chartered joining us live. You can get a roundup of the stories in todays edition of daybreak for bloomberg subscribers. I have to go to tv on your terminal or your smart phone and the bloomberg anyway cap. You can customize your new so you get what you care about. Make sure to check it out. This is bloomberg. Yvonne youre watching daybreak asia. A quick check of the business flash headlines. Toshiba slumped at the open in tokyo after the new said its auditor thinks it made accounting errors over accounting in the u. S. They say they do not know where that news was learned because there and talks with parties about issuing adverse opinion about accounts in 2016. Yvonne shares of sk hynix are down today. The Second Quarter profit topped analyst estimates as memory chips continue to rally. Profits jumped to 2. 7 billion on revenue of 3. 6 billion. Health margins for sk hynix which is why the group chose it as a better for the conductor unit. Ramy alibaba is set to make an investment in indonesias Largest Online marketplace. It will accelerate the entry into southeast asias biggest economy. Theyin may we were told would seek on alliance with alibaba with jd. Com. Yvonne that is almost it from us on daybreak asia. Here is what is coming up next few hours on Bloomberg Markets. We are just minutes away from hearing from south korea. David it is the fiveyear plan. We are set to get that in four minutes. When it does come out we will be fleshing out the details. Plus, we will be having a guest to flesh out what this means. There are shortterm challenges, but bigger problems i heard a few minutes ago things like demographics. They are in a sweet spot right now. Ofy are at greater risk certainly when it comes to trade. They get a lot out of that as well. Which way can it be tilted at the moment . The bond market is saying the next move will be a hike. That is a story we are hearing. We are joined by the Credit Suisse head at 10 10 hong kong time. Yvonne someone was saying this budget does not solve the problem when it comes to youth unemployment. Theres still need to be Structural Reforms that take place in your it the rate hike is not until 2018. David yes, we have to wait. And of course india, there is a big story there. The Supreme Court decides on privacy whether it is a fundamental right of every citizen. A lot to talk about on the show today. This is bloomberg. 11 00. S this is Bloomberg Markets asia. Di asiapacific markets the yen is halting holding five straight games days