The asx 200. 3 , a fresh record high. Now holding at levels we have not seen since august 5 last year. From consumert stocks today, also real estate. Yesterday was the material players, a switch out there, but some weakness from emerging markets and hong kong. Development stocks are in focus today. See there are only two stocks out of the 50 listed in the black. Elsewhere, insurance players , oil holdinge steady around 53 a barrel, weakness in the shanghai market. Willing to putot money back into equities ahead of the end of the year. The offshore renminbi weaker following the pboc fix today. You are seeing the yen flat after hitting that 10 month low against the dollar, 117 handle. , aterms of the commodities boost in the aussie around. 2 , emerging Market Countries being sold off, so a Dollar Strength story. Down. 2 percent, but mixed in terms of the overall equity picture today. Lets get to first word News Headlines with sophie kamaruddin. Aramco will continue to explore an ipo in japan. Riyadh is looking at markets from hong kong to new york for one of the biggest share sales in history. The Saudi Foreign minister has downplayed tensions with the u. S. After Congress Passed a law allowing victims of the 9 11 attack to sue them. Californiaity of economics professor peter as donaldll advise trump puts a china critic as a trade advisor. New zealands economy expanded faster than economists forecast last quarter as construction boomed and Consumer Spending increased, gdp rising 1. 1 . Expanded lower than estimated, up 3. 5 . The kiwi dollar traded at a near sixmonth low. Organizers of the Tokyo Olympics 15 announced a budget of billion to 17 billion, allocating 6 billion to construction, 7 billion to services, and 3 million for contingencies. The original olympics stadium design alone ballooned above 2 billion. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am sophie kamaruddin. Japan has approved a record budget for the next fiscal year aimed at boosting the governments policy objectives. Haidi there is a record defense appropriation at the time of rising tensions with neighbors. Before we get to the defense component, break down the numbers for us. It looks like the government is targeting that missing link between soaring corporate profit and spending for companies and households. The total budget is 825 in dollars, a number that we have heard before, but we did not know where the government would bes ending their money. It includes funds for subsidies policypanies that boost objectives, raising wages, making child and elder care more available, so the subsidies will be encouraging firms to raise wages based on employee performance rather than seniority as often happens in japan, also it in some devices turning nonregular workers into permanent ones. These measures are the latest efforts by shinzo abe to change private sector behavior, and some hope it may be a catalyst for structural reform in japan. Also when we is it look at this budget, defense spending. Colossal, oning top of an already big Defense Budget. It is huge. It is the fifth rise in defense spending annually. A trend under these shinzo obvious ministration a Defense Budget worth over 42. 5 billion, a new submarine, f35 fighter jets, and with an aggressive north korea, an extra physical spending package this year. It begs the question what happens to japans mounting mountain of debt . Shery exactly. That is the largest in the industrialized world. When you look at the headline n budget, you think it is only a marginal increase, but on supplementary budgets, so we have to keep an eye on where that goes. The government though does plan to curb a new bond issuance to a nineyear low. The government is instead tapping into more nontax revenue by using investment returns from a foreign reserves, but assumes a weaker yen will continue, and economists say that could be at risk here it we will discuss all of this in our interview and 30 minutes with a former boj board beber, and we will dissecting what this budget means for japan as it goes into 2017. Haidi and about half an hour, catch thek to interview with the former boj policy board member for more insight into whether this budget will be the game changer for abenomics. Move to aht, lets third former employee of a swiss bank convicted in singapore for involvement in Money Laundering related to 1mdb. Regulators are tracking down all these errant bankers. Todi lets get over haslinda almond. What more do we know . All, he is 34t of years old, worked for the bank for five years. He is found to have obstructed justice, encouraging witnesses to lie to police, destroyed evidence, tried to hide his illgotten money received in secret profits from transactions linked to 1mdb. He downplayed his ties. This is a key person in all juliette it 1mdb investigations. He has denied the charges. The court described him as not reliable. He faces a jail sentence of up to six years and a fine. He faces other charges apart from obstruction of justice. Haslinda he does. He faces severance separate charges, including Money Laundering, but the trial for that will only happen in april, and prosecutors say he could face even more charges. Singapore is clamping down on errant workers given that its reputation as a Financial Hub is at risk. This is the third case linked to 1mdb, which allegedly misappropriated billions of dollars. Singapore says the investigation is the most complex it has seen, the biggest Money Laundering case in the lion city. Not the only lender to have breached regulations, ubs, standard chartered, they have all been named, at least six different jurisdictions involved from singapore to switzerland to u. S. And to hong kong. Rishaad right, thank you for that. Come. More to china is determined to become a soccer star and continues to sign big names. Rishaad can they afford it . What is hot and what is not in 2017. We will be discussing Investment Strategy with peak asset management. Rishaad a quick check of the latest business flash headlines as nintendo shares on the move following the slump in new york despite a record run for super mario. The download is the fastest and app store history. Super mario is currently only available on apple devices and in 140 countries. The 10 fee to unlock new levels is too steep, and some reviews less than glowing. Tdk will buy a company in vensense 1. 3 billion. Malaise is stateowned Energy Companies to study two oil fields and iran, signing a memorandum of understanding, joining others and exploring irans deposits after sanctions were eased in january. Return toent marks a a ron of petronas. Asian stocks losing steam ahead of the christmas holidays, that slide in u. S. Stocks overnight, oil prices steady, but a stronger again is weighing on the tokyo session. Rishaad our next guest says markets are focused on growth rather than yield. Great to see you. It, people are looking at growth. You could argue that is what the rally is all about. You are suggesting yield comes into play in the early part of 2017, so does that mean this rally is done then . Look, thanks for having us. We dont think the growth story is out of the question. We are still bullish. If dow tops 20,000, we are advising some investors to take money off the table. Calls it a fomo trade. Do you think with the christmas and new years break that we will get more sensibility coming into the market . Absolutely. Global assets are rallying on the proposed deregulation, policy changes, the ability to stimulate the economy, and what is interesting is that commodities invert related to the strength and the dollar. This time around, we have seen the dollar rise as bond yields omo trade is whole f in question, and we are expecting windowdressing from Fund Managers as we move into next year. Rishaad where do they go to if they are looking for yield and you have the fomo trade out of the way . Where do they go . Are an of the etfs interesting play. Some of those Exchange Traded funds are an interesting play. Looking the funds are for growth and income at the same time. The banks have had a spectacular run. Looking at the banks, we have seen a huge gap in performance. Seeing a shift from the small cap into large blue chips, and thats generating out poor and the market. Haidi is there weakening going to be the flash point going into next year . We are expecting some profit taking to hit early next year. The reason is that the 10 year 2014,ate at the highs of a huge diversions into the u. S. Dollar, the doj has left Monetary Policy on hold, has lifted growth forecasts with the weaker yen, and the chinese yuan is a key focus, 6. 5 . We are seeing outflows from emergingmarket currencies, and that is impacting Global Growth overall. Rishaad when will we get a clear idea of what is going on with Donald Trumps policies, we dont know, but when the u. S. Economy shows more signs of recovery, doesnt on a trade weighted basis, these emerging markets where we are seeing outflows, do they come back into the fore. Means about longterm reversion, and we do expect emergingmarket currencies, the yen is not an emergingmarket currency, but to see dollaryen at 117 shows a huge move to risk on, and that is boosting export growth. We are looking at the 10 year bond yield carefully. The biggest risk for the market is that as the 10 year bond rate increases, and the dollar increases, what effect that has on gold, incomes in the u. S. , mortgages as well, the retail sales figures last month were a smallubdued with increase. We have seen a Consumer Price index of. 2 , so not necessarily a lived in cpi, but the First Quarter focus will be what impact the stronger dollar has had on the Macro Economy in the u. S. And globally as well. Much weight are you giving to geopolitics going into next year . We have this trend where markets are shrugging off major geopolitical shocks, but with risk in europe, does it weigh on how you feel about the dollar . Or does the really just go from strength to strength . The market is not pricing any geopolitical tension effectively. We saw the attacks during the not, but Global Markets did react. We have seen a ceiling and the dow jones at the 20,000 level. Right now, the market is focused on growth, focus on the bank deregulation, one sector in australia that has felt some pain is the milk sector. Resourcement from the play into them know clay into that chinese play, and we are watching chinese outflows and what impact that has globally as well. Rishaad ive never heard the milk play before. Versus thesmall caps blue chips and 2017 . We have seen as we said a strong shift over the last few have beenf items removed from the market away from the Small Cap Index relative to the large cap index. We had seen a shift into bluechip stocks and australia, globally as well. We do expect profit at these levels. Our top picks over the next few months are still the banks leading into that higher Interest Rate environment. Commodities should continue to outperform. Technology, we have some flight into medical technology, and that is a big story we see in 2017. Haidi thank you so much for that. Have a very merry christmas. Well, coming up, alibaba is again on the u. S. Blacklist for counterfeit products, but says it is doing the best it can. Put alibaba. S. Has on its blacklist of companies that sell counterfeit goods. Stayba had done enough to off that list the last couple of years. Rishaad we are having a look at how this is playing out at the moment. It has to take a toll on the company. Share prices dropping this morning. Alibaba, a real and bare cement for them. They are being labeled again as a haven for knockoffs. That, you have the u. S. Investigations looking into their accounting practices, dealing a blow to their expansion plans and the u. S. , and regulatory wise not a good year for alibaba. Haidi there is a political element to this story. That this is hinting is political. We are seeing trump become much more vocal towards china in terms of criticizing its trade and currency policies. Have more policies towards Chinese Companies when it comes to trade. Rishaad tell me something, what has been the response . They are not very happy about it. They say they have taken down 380 million products. That gives you an idea of how hard it is to police. They have one billion listings on their website, and new ones pop up by the day. Is an issue country wide china, so not just limited to alibaba. U. S. Has seen progress, but it is not enough for them. Haidi a said christmas for jack ma on that front. Rishaad right, lets get you up to speed, asian equities under pressure. 6 , but this by bear trend for this market is continuing. Do,ghai as it is want to just flat at the moment. Some the nikkei 225, profittaking ahead of that three day weekend into christmas. Up about 3 for the year. Rishaad there we go. The straight times index also under pressure. Of whatthe doorstep happened on the dow, the day before yesterday, at records, but now off slightly and tantalizingly close to that psychologically important 20,000 number. Weaknessite a bit of from southeast asia, emerging market, philippines down, jakarta holding its head above water. Volumes aroundat the region as we head into the holidays. Rishaad we are looking at south korea and the impeaching of a president. In thentrys top Court Process that brought her down. The former chief angles for the countrys top job. Haidi it is 20 9 a. M. In hong kong. These are your first word headlines. To return landry to japan after 20 years of negotiations. A formal ceremony will be held in oconomowoc, where the military will hand over the land. Home to two thirds of u. S. Troops stationed in japan. The japanese government has been criticized for giving the goahead for a new military base in okinawa. Rishaad spending 2 billion to boost maritime security, particularly around islands in the disputed south china sea. Known byds are different names in japan and china, ships and aircraft regularly patrol the area. Haidi beijing has lifted the red smog alert, but china is demanding better coordination on a mission for the next time around. Much of the north has suffered six days of choking pollution with error quality a levels quality levels above except a danger levels. People have been warned to stay indoors. Rishaad details emerging of Cyrus Mistrys against tata group. He is asking to bar ratan tata from board and board meetings. Cyrus mistry was deposed as ratan tata returned to take control. You are watching Bloomberg Markets asia i am haidi lun. Ishaad i am Rishaad Salamat lets get you up to speed. We are seeing the nikkei underwater, down. 2 into that lunch break. A little year and positioning ahead of the long weekend in japanese equity markets on tuesday, the nikkei and the topix reaching highs, so not too surprising to see a pullback. 25 , a fresh , but you are seeing a dip out of hong kong equities. Only one stock on the hang seng is higher, and that is one of the stocks under selling pressure lately, so bargainhunting coming through there. In terms of specific stocks, bellamys still in that trading halt, trying to downplay how significant this is. Suppliers to bellamy says it is still seeing upside in terms of its relationship and moving forward. Bellamy japan display down after confirming that it did get a source. From olympus under pressure, its shares dropping the most since november 9, and trade volumes double on that stock. Currency market, Dollar Strength in terms of the emerging market currencies. Down. 1 , a 117 handle still. Haidi thank you for that. Ban kimoon has led the United Nations for almost 10 years. His next gig puts them back in south korea. Rishaad he has given the strongest signal yet that he would join the race to secede President Park geunhye. How are voters viewing this idea . Likedis certainly being by certain voters. His rating went up today after he made the comments a couple of days ago in new york, his comments were basically a hint that he would seek to run for president if he comes back to south korea. It is a good signing that the rating is up for him. For himgood sign because he has been running second place in polls for the last several weeks. Fronte polls show him in running position, so he could be the most sought after man in south koreas political market. Right now there is no clear conservative candidate that ofld match the popularity opposition hopefuls, and he certainly comes into that position. Of campaignkind would it be if he runs . What challenges do you anticipate he faces . Promote hishim to nationsce as the united chief, leading the United Nations for the last decade, and he certainly has a high profile on the global stage, and people like that here. They think his profile on the International Stage helps to boost the profile of the country , but he has not shown any sort of domestic agenda, especially on the economic front, what he can do and what economic policies he is willing to promote, so there are a lot of questions still to be answered by m. Rishaad right, how will this massive scandal grabbing all the headlines, how will this scandal affect his chances . Years,the past several ban kimoon has been viewed as a aligned with park geunhye. And park geunhye impeached her Approval Rating dropping, ban kimoons rating dropped quite significantly. If there is more investigations that happen and that produce the damaging details about park scandal, it could somehow affect the Voter Sentiment about here, and that would undermine ban kimoons chance of winning the presidency. Haidi thank you so much for those insights. Right, well, apples plan to introduce nextgeneration displays will hinge on a little manufacturer in rural japan. It has a near monopoly on the machines that make those panels. Haidi it is struggling to meet those orders even after doubling in 2016. Company, they have doubled down on production capacity, but still not meeting demand. This is a perfect example of one of those Japanese Companies you never hear of until there is a quake in the country and supply chainwhole grinds to a halt. The equipment they make is very , a 100 meter long vacuum line equipped with robotic arms to create all those screens. D is sensitive to light and moisture, it is a specific process read the company can only make a handful of these each year, less than 10, and they are swamped with sharp,from samsung, lg, and the reason is because apple is shifting towards these greens as early as next year. Rishaad what are people saying about the market for these screens. I checked one of the markets forecasting it will exceed the market for lcds as early as 2018, and apples rollout will be key to that did and now, samsung dominated, selling 99 of the units out there. In the fray, that opens a market of 200 Million Units of iphones per year. The question is apple is notoriously unwilling to buy everything from samsung. The question is who will be the if there issupplier a bottleneck with canon tokki. Rishaad thank you a lot for that. Haidi honda says it is talking to googles autonomous driving unit to put Self Driving Technology into its cars. Rishaad what is the deal . Sophie they are the latest player looking to snuggle up to google. Last year, General Motors and ford made the attempt. Have a deal for 100 minivans. The key things to take away from honda and google, the credibility of their technology and finding the sweet spot to work with those already in the car business. A desirenda, they have to imagine a future with self driving tech. Honda has a package called honda sensing, but the waymo tie up could allow honda to advance self driving cars around 2020. Haidi this is one of the instances where the regulation is struggling to keep up. Over selfhis morning, driving cars getting forced off the road in southern california. Sophie they rolled out Autonomous Cars in san francisco, but the california registration on 16 self driving cars, saying they were improperly issued. On oversight, they are looking into redeploying those vehicles elsewhere, but are 100 committed to california. Block another stumbling when it comes to uber in these markets. Thank you so much for that. Sophie kamaruddin with the latest in autonomous driving. Rishaad that the the euro j, what it does next, and we will talk to a former boj policy member. Haidi we were also look at how this budget for 2016 features into the prospects for abenomics. Rishaad a quick check of the latest business flash headlines. Winningrump seemingly his cost battle over air force one. The tycoon that the replacement job could be done for less than 4 billion, reported in recent days. Lockheedth boeing and martin and florida and said the budget was out of control. We will get it done for less than that and are committed to working together to make sure that happens. Give the president my personal commitment on behalf of knowing. Of boeing aircraft. Rishaad rishaad the latest high profile figure to face jail for trading. He received a year after using privileged information to trade shares ahead of public announcements. He was based in black rocks london office. Rishaad sources telling apacherg that monti will make a state rescue likely. Again another 12 in men lawn taking the decline to. 7 lets head back to tokyo. Rishaad you have an interesting guest with you. Shery we do. Boj board member, so lets talk to her and break down the budget. It has been announced it is worth 825 billion for fiscal 2017. How important is the size of this budget and what you make of that . The government is trying to fiscal to bring things, consolidation by reducing this newly issued japanese government on. Another thing, they want to have fiscalctive policy over expenditures by providing more money to the companies who are willing to increase wages and convert nonregular workers to regular workers, and some money regulated to caretakers. Shery japan is never about the thee budget, its about supplemental budget. Is there hope a fiscal discipline next year . The japanese government was quite lucky in the sense that there was a greater than expected corporate sector earnings, partially because of , so they couldn get higher than projected revenue that could be allocated to the supplemental budget. This year, it is more difficult to do that, so if the budget , thewill not be achievable budget is based on the nominal gdp growth of 2. 5 , so if it does not happen, the budget will not materialize as a plan. A lot seems to depend on a weakening yen, nominal growth onewo point 5 , real growth. 5 percent, those are the projections the governments pacing for more tax income to fund it, but how realistic is this . 1. 5 is higher than many projected views. They really count on this gdp exchange, 1 , so that depends on the boj policy and the yen depreciation. If that does not happen, probably they might have a tighter budget. When i say they, i mean the boj has sent the ball back fiscal court. Anding that tenure target 0 , what will happen to that . The whole purpose of the yield control was to move away from monetarybased controls to ease cost controls, so they want from these massive jgb purchases, but they have not done that yet. In this environment with higher pressure on the Interest Rate, it is difficult for them to unwind, so they buy massive jgbs and at the same time tried to maintain Interest Rates by buying more. Shery which you dont think will be reasonable for next year . I dont think it is sustainable. That is why they switched to the new policy. The numbers pick up, then they can increase the target higher, but it is becoming difficult because impacting on this policy is the exchange rate. Shery they seem to be relying on the weaker yen to boost the inflation. This whole policy has been going on for years, and it is still not bearing results. What is your take on that . Moment, a lot of dependency on the boj policy, so i think the boj is having quite a lot of pressures, so maybe they end up maintaining the status quo rather than try to do more normalization. Shery is the weaker yen feasible for more inflation . Depending on the estimation, but the current value is a bit undervalued. If we look at the current account surplus rising and the lower inflation, those fundamentals are suggesting a different level. Right now, we see deflation happening because of the Interest Rate differential. About,. Trump will think depreciation of the yen, i dont know how he will react to this policy, so things might get worse. Shery a lot of people worry reaction,u. S. Especially with the new administration, to a much weaker yen. Thank you for joining us today. A professor and former boj board member here, dissecting the 2017 budget here in japan. Haidi great stuff. Thank you for that shery ahn. Rishaad coming up, shanghais 75 million man and how can one of chinas youngest football clubs of 40 star . Afford a star . Haidi this is Bloomberg Markets asia welcome back. Rishaad the seemingly limitle in chinese football have brought in another big name. Make 500stands to ,000 a week. Rishaad what a massive amount of money. The super clubs are now forking out such huge sums. It is not out of the blue. Rishaad it has been ramping up, but this is a huge step. Up to now, they have taken players who are not the frontline stars from the european leagues, players approaching the end of their career in their 30s. Oscar is in his prime, 25 years old, brazilian international, played in the world cup semifinals two years ago. Rishaad didnt work out quite like they wanted it, did it . A 71 defeat by germany, but even so, he is a big star. I think this has sent shockwaves through the game in england and they are wondering where does it go from here. Who else where they come for. Haidi it is part of this broader theme of the chinese spending astronomical amounts of money on soccer. This is what the president wants, the chinese soccer dream. Has said he wants china to host and win the world cup, and it seems the clubs in china are picking this up and running with it now. Rishaad the question is, where does the money come . We took a look at shanghai sipg, and its difficult to understand how it makes sense financially. Revenue or gate receipts for the club, but they are only two years old here at they were taken over by Shanghai International port group a couple of years ago. The crowds they get every week in the price of tickets, you can buy a season ticket for shanghai sipg four 1000 yuan. Foret a season ticket chelsea is five, six, maybe 10 times as much. Chelsea get bigger crowds as well. Rishaad at the moment. At the moment, of course. And you look at the money they thepaying, it is a play on future and you would figure they are calculating on the fact that they will get crowds and get people to make more money as the find theeople simply teams more attractive to watch. That will be a long process. The standard is still pretty low. Is a trend paying out megabucks for these transfers . That is a question i dont think we know the answer for sure. All you can say at the moment is that it is hard to see how these sums add up and clubs like will get apg meaningful economic return on the psalms they are laying out, but there are reports in england that they are trying to tempt a player from arsenal, and that would be even eager an earthquake than oscar. His pricehich makes tag propositiontractive for him since he is only sitting on the bench anyway. I would love to see him leave. Isnt this trajectory a little bit like when the premier league in the 1990s, the older ones coming in from europe and it suddenly changed. You could say that. You off. I have to cut we have to break. Thank you so much. From our studios in new york city, this is charlie rose. Charlie what is Artificial Intelligence . So, it is what we are all doing when we make machines do things which we usually ascribed to human intelligence. Its all about taking the things which we thought were brilliant things that only went along inside our brains, we make computers do them instead. We often break up Artificial Intelligence into two subsets of work. Many of the researchers are working on what we call autonomy, which is having
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