Transcripts For BLOOMBERG Bloomberg Markets Asia 20170109

Down the president. Americansler bows to first jobs policy. Looking positive out there, the absence of japanese trading, a Public Holiday they are, 30 minutes before the start of the session in hong kong and shanghai, the open in kuala lumpur, taipei, and singapore. Here is Sophie Kamaruddin. Sophie a number of markets coming online, checking that space. We are seeing continued gains on the asx and new zealand, and the kospi reversing gains made in the morning. Space,look at the data whats happening with Dollar Strength, resuming strength following the friday jobs report. Note, the yield of seven basis points friday. Bill gross is expecting a breakthrough to the 2. 6 level, pushing it into bear market territory, gross saying the treasuries are at an inflection point. Gold edging higher after falling in the wake of the u. S. Payroll data, gaining demand for alternative assets, and equities soft in. The robust case for u. S. Interest rates going higher could make bullion less appealing. And continued outflows in goldbacked funds. Oil halting gains below 54. Natural gas oil and explores increase of drilling activity to a oneyear high, offsetting saudi arabias output cuts. , thet word on the yuan pboc pledge to guard the Financial System and guide the yuan. We will have the daily fixing and less than an hour. Rishaad thank you very much indeed, Sophie Kamaruddin there. Lets catch you up to speed with those first word News Headlines as we head over to sydney and join haidi lun. Fiat chrysler the latest automaker to invest in the United States, pouring one billion dollars in two plants in ohio and michigan, expanding and adding 2000 jobs. Fiat chrysler said it will include the dodge ram struck currently truck currently being produced in mexico. Donald trump has put pressure on the Auto Industry to bring jobs back to the u. S. Face asidentelect made challenge from General Motors, shifting production of its new suv to mexico. It currently at a plant in canada. Mexican auto workers earn 8. 24 an hour compared to 46. 35 in the u. S. Will slow to a threeyear low of 7. 1 before the effects of the cash crisis are unknown. The forecast does not include data from november. The Prime Minister shocked in the nation by banning high denomination rupee notes. Services are growing 9 compared to previous years 10. 3 . Beijing taking new measures to tackle pollution as skies cleared up after days of choking smog. The city will shutdown polluting factories and order others to clean up their act, and restrict inefficient dirty vehicles off the road. Beijing spent nine days under an orange alert, the second highest level in chinas air quality system. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad thank you. Right, chinas pile of Foreign Exchange reserves sunk by 41 billion as the yuan tumbled. How willing is china to dwindle know, inves, you support of what they are trying to do here . You can do that, and ramp up capital controls, which they have done, on households. They have even gotten state owned enterprises to sell their the currency, so the reserve is tied to the a couple ofl in decades, so they want to stand that and the capital outflows. Spend as mucht to of the reserves. Lets get to the numbers, december, falling by 41. 4 billion, in line with forecasts, fresh fiveyear low for the fx pile, 3. 01 trillion, total drop in 2016, with 320 billion less. June 2014, it was as it has 4 trillion, so fallen for 10 consecutive quarters. That is a worrying sign. Depreciation trends are still in place in the yuan, more capital controls likely. Wehaad the thing is here, look at 3 trillion, they manage to stay just above it. It is just a psychological level surely . Yes and no. , it could below that affect market sentiment, but you have to look at reserve adequacy, how much do they need to defend the yuan. Ubs put out a note that said are liquid ands usable, but keep in mind that it is not built to defend the yuan over the longterm. 60 she estimates are u. S. Denominated assets, one point 1 trillion of those in u. S. Treasuries. Capital controls, chinas reserves adequacy to defend and attack on the yuan, which they have been having the last few months, is between 1. 7 5 trillion and 2. 82 trillion, ok, depending on the level of capital controls. Rishaad it is a huge spread there. If you have more capital controls, you need less buffer, right . Strictillion dollars, capital controls, 2. 82 trillion if you dont have capital controls. So you are getting to those levels where they go rishaad is that what they do . Yeah, thats what they do. Rishaad we will watch the space , a story that continues to develop. Executives from samsung facing prosecutors in seoul, korea. They will be question over the widening influence scandal surrounding the south korean president. Ok, give usok at, some background. What do we know . Investigation kicked off just before christmas, looking into allegations and the political turmoil surrounding the president and her relationship with one of her close friends. Office,ung corporate the covice chairman, will be expected in seoul, korea, appearing as testifiers. That states change depending on how things go. This political scandal is the one that helped bring down, in peach, the south korean president a month ago. Before that, we heard from some of the leaders of south koreas biggest conglomerates, grilled by lawmakers about their relationship and whether they , accused any donations of tens of millions of dollars of donations, to political foundations which were controlled by President Parks close friend. The de facto head of the Samsung Group was among those and denied allegations samsung gave donations to the political foundation. The president s friend is accused of using her relationship with the president to Pressure Companies to donate money y. This special prosecution investigation has been ongoing. They have looked at samsung is far,f the key things so because of a controversial merger that happened between two units of samsung in 2015. They are looking into south koreas National Pension service with that, because there are allegations that the Pension Service put pressure on to support this deal going through, and the chairman of the Pension Service has been arrested after its offices were investigated. We have reporting that he was suspected of pressuring the president to support the merger, and President Park denies colluding with any intent of helping anyone within the merger. The woman at the center of this remains in detention and says she did not ask for some some for money. President park was in peach to month ago, and the Constitutional Court has six months to decide on the ruling of impeachment. They did say that the court would make a decision impartially, and in the meantime, the Prime Minister is the leader of south korea. Rishaad still ahead, the biggest policy challenge for the Chinese Central Bank this year, we hear from the pboc advisor fan gang later in the show. Our next guest expecting clear winners and losers in the markets under donald trump. More with Standard Chartered in a moment. Theaad right, the scene at moment in singapore, a beautiful star to the session there, 16 minutes old, moving to the , 2973. By. 3 , uprs doing well in sydney muchhe kospi index pretty flat, tie one of a fraction, no trading in tokyo. A quick check of business flash headlines with the korean Economic Daily saying hotel lotte has decided to list in seoul, korea. Ipo wasial 4. 5 billion put on hold after criminal investigations paralyzed one knows koreas biggest dealmakers. They hope proceeds from the deal could unwind its convoluted ownership structure. And Fiat Chrysler planning to expand self driving partnership, adding 100 minivans to their autonomous fleet. The vehicles will be equipped by the newgy developed by Alphabet Company formed by the project. They plan to use the minivans for a commercial rights their service to be launched later this year. They have also confirmed they are talking to honda. Talking of autonomous vehicles, and china, the collaboration between beijing automotive and baidu is close to debut. The model will be equipped with Baidu Technology and is expected to break cover at the shanghai auto show in april. They are expected to conduct protesting in limited environments by the end of this year. The car is critically important for baidu. , thee next five years whole Automotive Industry will go through a profound transformation. I believe it will play an Important Role in driving the technological direction, so for us, this is a tremendous opportunity and is a gold mine, and also for china, for the country. Rishaad back to the markets, back to breaking news, the yuan , 6. 92rough, big weakening. S opposed to friday, 6. 8668 lets get to eric from Standard Chartered. It was a massive short squeeze on friday with that yuan strengthening move that took place, virtually unprecedented. Tell me about this. What messages is the sending out or is it reflecting what is going on on the ground. Of things,e a couple an enormous amount of Dollar Strength has impacted renminbi and other asian currencies with the approach of the new year and the increase in capital outflows from china, officials have been keen to try to limit or contain those outflows. With fx dropping towards 3 trillion, fx intervention becomes less palatable to them, so what we saw a really is a short squeeze implemented from the use of tighter liquidity, but over time, we expect with further Dollar Strength that the renminbi should continue to weaken. Theaad absolutely, this weakest fix since june of last year. As you alluded to, the fx story taking place as well, 3 trillion mark and reserves. Asking this, is this a psychological level or a monetarily important level . There is an enormous amount of psychological influence. Look at the traditional economic ratios and in the curators and indicators that describe reserve adequacy, china is well above those numbers. The correct reserve is 2. 2 trillion dollars for reserve adequacy, so there is offer. The chinese are sensitive to a breakthrough that 3 trillion it is psychological, then exacerbates or encourages more capital outflows, and that makes their job tougher, whether fx intervention, capital tightening of liquidity and a raising of Interest Rates, all fairly difficult decisions for them to pursue. Rishaad absolutely, and of course it is seen as hawkish in the year ahead in terms of what the bank does with Monetary Policy. The strength of the dollar taking a toll with what is going on with the yuan, but what about emerging markets, and specifically emergingmarket asia . The ringgit and others have borne the brunt of this. Isyeah, look, i think that right, and especially since the u. S. Election in november, where we had aggressive Dollar Strength, much higher u. S. Interest rates, and the Interest Rate story has been just as damaging to in emerging markets as the fx, part and parcel together, and so what we saw in asia in the Fourth Quarter and a continuation so far this year is that those markets where we have high Foreign Ownership of their domestic bond market, high Interest Rates, and a dependence on foreign capital flows like indonesia, malaysia, as you suggested, have been more vulnerable. What is interesting is that over the past week, we have seen stability and the u. S. Interest rates, the yield curve in the u. S. Has flattened from more recent extremes. And globality Interest Rates has allowed some stability to come back into asia and into their fixed income markets, and we have seen a slight return of capital inflows. Rishaad absolutely, and in your thatrch, you allude to these countries you are talking about face increased risks, i. E. The dollar, looking at china as well with the economy there, and an Interest Rate horizon showing of course higher rates and tightening policy as well, and on the other side, well, fairly good, selectively, pretty good valuations ar. Great point. One of the things that has happened with the move Interest Rates and cheaper currencies is you have a number of markets that from a fury from a purely valuation point of view look attractive, whether nominal or adjusted differentials, markets like indonesia look a lot more attractive, and as i said, if you get Interest Rate and currency stability, those wide yield differentials should come back and be supported supportive to asia. Another market is india, where the demonetization story, decline in inflation, and a bank cutting Interest Rates, you have an attractive capital inflows story. Rishaad eric, thank you so much for joining us here it Standard Chartered there in singapore. Ubs in talks to boost holdings and its china business, we hear exclusively from the banks chairman next. The banks chairman next. Ubs has confirmed it is in talks with its chinese partner to boost holdings in its securities business on the mainland, holding its Greater China conference, and axel weber retains every confidence when it comes to the mainland. I cant give you that many details because the talks are ongoing, but we are talking to our partners and have a strong ourerest in increasing presence in china. We will increase our headcount over the years to calm. Run,nt to build a long steady presence in china, and that is part of our strategy, yet we do like locally partnering, so it is all about shifting, but talks are ongoing and i cant tell you more than that. You aboutdoes it tell where ubs Sees Opportunities in china and Expansion Plans, particular Capital Markets . The Investment Banking businesses oneday are committed to continuing to build in china. China is still the fastestgrowing economy around the globe, and it is the largest growing market. We are a number one wealth manager globally, and so china for us and so china for us in our strategy fits us very well. Banking and wealth management, supplemented by Asset Management and other businesses is what we bring to the market here, and we want to build on onshore presence. Tom we have heard in recent weeks about the increased capital controls implemented by policymakers here as they try to stem capital outflows that we know about. Is that having any impact on your business . Some of the big european firms are struggling to pay dividends. How is it affecting your business here . We have had no problems creating dividends, and we are committed to growing the onshore business. And the opening up capital account is being liberalized, and with every economy going through that at some stage of development, it has to be a slow process. You cannot open it up without controls in place, so it is a steady process of liberalizing and making Monetary Policy and international Capital Markets and the renminbi, a more international currency. It is a controlled opening process. The authorities have been doing a good job in such an orderly opening process, and they are committed to continuing that journey. It is a controlled journey, and it is good they do that in a controlled and steady fashion. Rishaad that was ubs chairman axel weber speaking to Tom Mackenzie in shanghai. We will be visiting that throughout the course of the program as well. What we have coming up on the way, Fiat Chrysler making headlines and also probably pleasing donald trump with a billiondollar investment in the u. S. Details are on the way. With the xfinity tv app, anything with a screen is a tv. Stream 130 live channels. Plus 40,000 on demand tv shows and movies, all on the go. You can even download from your x1 dvr and watch it offline. Only xfinity gives you more to stream to any screen. Download the xfinity tv app today. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Withad you are back Bloomberg Markets asia. I am rishaad salamat. It is about currency today, the biggest fixing to the weak side since june last year. That is what we have at the moment. Lets bring up a chart and put this into context in the last 365 days for the yuan, this is where we kicked off, june 8 last year. This is where we have come when it comes to the yuan, and a depreciation here of 6 or thereabouts. Now, that is enough for donald trump to label this currency as a currency manipulator on day one of his presidency, june 20. Lets look at sterling at the same time frame, this chart, sterling after brexit, well, 15 down, was down further than that, and that is what we have when it comes to the pound, so china is a currency manipulator, indeed japan and britain are not. Weakest fixingan taking place since june 2016. Sophie is having a look at the equities part of the session here and hong kong and shanghai. Sophie. A look at Chinese Markets and the shanghai composite opening lower,. 2 percent, extending losses on friday when that equity , butmark closed. 3 lower it did rise over the course of last week. The shanghai composite did fall 12 in 2016, the worst annual theormer since 2011, and hang seng opening. 25 high your, extending its gains for a third day. The kospi heading lower, but shipping. Njin we will get into that later in the show. Elsewhere, australian and new zealand stocks continuing there. The big story with the yuan given the fixing we saw this morning, we did see the offshore rate falling. 3 after the fixing was weakened by the most since june 2016, the central parity at 6. 92, comparing to friday 6. 86. This fixing was weaker than the level that was seen in some bank models. I want to focus on the equity space, a jump in samsung , the share, up 2. 7 price hitting its highs level since 1975 this morning, and notching the Biggest Center day gain since november, adding to samsungs 1. 8 advance on friday beat, even asings the companys executives are reportedly to the question in relation to President Parks influence peddling scandal. Analysts have boosted consensus for the First Quarter for the theany, and only one out of 45 Analysts Covering the stock rates the stock a sell. Rishaad thank you for that, Sophie Kamaruddin there. Lets get to first word news with haidi lun. Two samsung executives due to be questioned over the influence peddling scandal surrounding President Park. They are not accused of wrongdoing, but the prosecutors are say that could change. Another court is considering parliaments impeachment of the president , accused of of allowing a friend to medal in state affairs. Tosung trading up strongly the stronger side today, up. 7 . President elect Donald Trump Team says neither he or any transition official will meet the taiwanese leader. She did meet the Texas Governor greg abbott and senator ted cruz. China had called on washington whenr her and complained trump breached protocol by accepting a phone call from her. Theter has suspended account of a former pharma executive after he harassed a female journalist online. The the past few days, reporter made several posts about unwanted digital advances, include one and inviting her to Donald Trumps inauguration. She asked jack dorsey to intervene after he continue to post about her. President hasnian died at the age of 82. He was closely involved in the founding of the Islamic Republic and later proposed freeing the economy from state control. He served as president from 19891997, taking over after the end of the eightyear war. Much of his early tenure with spent directing irans Record Number irans economic recovery. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad right, chrysler saying it will invest 1 billion in making three new jeep models in the u. S. President elect donald trump press ring the Auto Industry to produce and hire workers inside the country. Sue, tell us more here. Su what we have is over the weekend, Fiat Chrysler announcing that will carry over into mondays session that it will not only invest 1 billion in u. S. Factories, which will be for the three jeep brands. Shiftl add jobs and will production of one specific model from mexico here to the u. S. That many may see as a victory for president elect trump, the key message that automakers should build their made in america credit. It will add 2000 jobs in the midwest by 2020. They will be making the heavy duty ram truck in the u. S. , currently made in mexico. Who will bed Trump Taking Office in less than two weeks has been pressuring automakers to build in the u. S. Fiat chrysler saying they will retool their michigan and ohio plants. Strong rally into the new year, a lot of this had to do with strong sales for all of the major automakers, but clearly this move puts them in good stead with an incoming president known to favor made in america. Well, su, lets talk about the timing, a lot of carmakers making similar announcements, and mixed reception out of donald trump. Company, which was in the cross hairs of president elect donald trump during the campaign, announced just last week that they are canceling over a 1 billion production in mexico, and instead invest 700 million in a michigan plant. Again, that is a big made in america move, although the ceo of ford made it clear this was not due to pressure from donald trump, but shifting consumer trends. The very same week, president elect trump threaten g. M. With import taxes if they did not move the production of their chevy cruz out of mexico and back to the u. S. , so that is the latest there. It seems the automakers are getting the message that if you want to be in favor with the incoming president and avoid heavy tariffs, you want to be making your automobiles this side of the mexican border. Note, this coming week, president elect trump will be very much in focus, not only making a speech midweek, but his president ial picks for cabinet will be facing scrutiny in the first of hearings taking place. Rishaad thank you. There. An the north American International auto show opens into tried on monday. We will be there live in joined by volvos president and chief executive. Shortly after that, talking to gm chairman and ceo mary barra, and dont forget, ford chairman bill ford. Rishaad we are going back and will be live at the ubs Greater China conference in shanghai, well we will be joined by fan gang discussing the latest economic challenges to china. Lets take you to the ubs Greater China conference in shanghai. Tom mackenzie is there for us. Take it away. Tom thank you. Yes, im joined by fan gang, the director of the National Economic Research Institute in china and an advisor for the pboc. Lets look at the Foreign Exchange reserves. Down to just over three train dollars. Is the pboc defending that line . China only has 3 trillion, not for tree in dollars, but we have been talking about the inefficiency of fortran dollars in foreign reserves. Of 4 trillion in foreign reserves. This is good news. Dont forget, even there is some dollar ht from the from the yuan to the dollar, the dollar is not out of the country. They just park in another account of chinese banks, so this means we reduced official reserves, but national reserves, the prime reserve, is still there, and this is improvement of the inefficiency because the commercial banks can use that money to invest in higher returns over some other financial assets, so this is not totally bad news. I dont think the intervention is so big, but any government, any central bank, does not like to see the big move, fluctuations. They want to see the transition smoothly, right . They dont like 4 trillion, but they dont like it to become 2 trillion overnight. They wanted to reduce gradually with a smooth transition. Part of the reason the dollar stays on sure is because of capital controls. You expect further measures to contain the capital outflows . As i said, the government dont like to have a very fast change, so they will work the situation. At the moment, things are stabilizing. They took some measure, and the measure become effective, and the market started to respond, so my point of view, i dont but iit will go further, dont believe they will totally drop themeasure, intervention, so that is normal for any government. Tom what does it say about the internationalization of the renminbi . Was the imf premature and adding it to its sdr basket given the control measures put in place since then . I dont know. This is a judgment made by others, but maybe the problem is that after a couple of years, has been renminbi overvalued in the past 35 years, pegging to the u. S. Dollar. It has come to the turning point where the renminbi should be corrected for this overvalue, but i still think the renminbi is ready for internationalization and will continue to the, even with the devaluation. Hasview of the chinese yuan been increasing. Joining the sdr made china an international currency, so we need less reserves rather than bigger reserves, right . The reserve originally is because you dont have the hard currency, so people dont believe you, so you need some other currencies to be reserves, so now chinas economy is Strong Enough and the trade is Strong Enough to do that. Tom we saw Goldman Sachs coming out and saying the yuan could fall to the 7. 3 level or weaker by the end of 2017. What is a comfortable level for you . I dont have any speculative level, but i think the renminbi will be more flexible. What i mean is today is seven, then 6. 8, then the next day 7. 2, so that is the fluctuation. Tom there seems to be a move amongst policymakers to move away from this growth target and focus on financial risks, is that something you encourage and what are the implications . Tom the focus on the reform more. Of supplyside reforms, that is good and that focuses on the issues, on the problems, which prevented you from the investment and other goals. At this stage, particularly, we are still in the downturn, the adjustment stage, dealing with overheating in the past 10 years , so that is good policy rule, and i think that will be helpful for the long run growth. Tom is it time to drop the target altogether . I dont think so, but maybe they will target on a range rather than one number. Tom what range would be suitable . To 7 is achievable and comfortable. Corporate debt and the implications it has for chinas Banking System. Many say there may need to be a bailout or recapitalization, how healthy are chinas banks . This is a long story. I dont think we have time. But i think it is still manageable, and people realize the problem, and a whole Financial System and corporate system are working on that, reducing the leverage. I think it takes some time, but it is still manageable. Tom in the halls of power in china, what kind of action might china take if donald trump goes ahead with his threat of imposing tariffs . Like everywhere else in the world, uncertainty. Nobody else knows how things are going on, but the chinese have preparation for any worst, but hopefully things are not that bad. Tom many thanks, fan gang director of the interNational Economics Research Institute in china, saying the drawdown in the fx reserves is a good thing and the market is playing a greater role when it comes to the yuan. Back to you. Rishaad tom, good stuff. Tom mackenzie in shanghai. More from that conference, and back with the man who runs chinas largest recruitment site. Also hearing from the chief global economist at ubs who says Global Growth may increase for the first time in seven years this year. That interview in just about 53 minutes. Later on, we will talk to the former imf deputy managing director. Dont forget to watch those interviews live from the ubs Greater China conference in shanghai. Up onts get you caught the latest business flash headlines, japans Prime Minister saying he is not thinking about an early election while his Government Works to pass a new budget. Shinzo on be saying he wants to submit the bill soon on limiting overtime and meet as soon as possible with donald trump upon the new president the benefits of the u. S. Japan alliance. Shinzo are be says no date for such a meeting has been fixed. The worlds biggest Pension Funds says there is a growing disparity between the rich and poor, and that is fueling the rise of populism globally. Looking at what led to events like brexit and the election of a certain donald trump, and says they will act as they see fit. We are talking about takahashi aying the gpif will remain passive investment, but is keeping a close eye on the market. F has been half ha managing funds for over 100 years or dont change our style after each shock of the market, rather focus on events behind the event. Brexit and the Trump Presidency are due to the rise of populism from economic disparity around the world. We prefer to watch how these gaps are being corrected. Rishaad reports of japan saying sharpe has asked suppliers to cut prices. To company asked for prices come down 20 across the board, calling for suppliers to lower costs, a favorite tactic of apple and foxconn. They tell the supply chain to keep prices down or risk losing future orders. Right, up next, wage growth in the u. S. Leading to bigger bets that the Federal Reserve will be upping the ante and the paste of of ratereases pace increases. Rishaad you are back with Bloomberg Markets asia. Forget the number of jobs created in december, it was acceleration and wages economists have been looking at here. Witheen hays has more wages rising more than forecast here. I guesstion slowed, but everybody is looking at this as the perfect kind of jobs report with faster Interest Rate hikes in the next few months or couple of years. I would agree that is the prevailing feeling. A couple of points pointing to things not being as rosie or bullish, the fed hiking rates at least three times this year would have it. Recall that in the december 14 , there was concern about employment andn inflation picking up, so the fed is tilting and a hawkish direction, and wages in particular seem to support this view. Lets jump into the bloomberg and look at one of our btv 240. S, that is the rate falling, but look at that trend. Costs,ite line shows you wages, benefits, definitely on an uptrend. The most important one is that turquoise line. That is average Hourly Earnings yearoveryear. That is wages and rose to 2. 9 from 2. 5 , the fastest rate since june 2009. This would support that fed consensus view that there will be three rate hikes in 2017. Robert kaplan spoke to Michael Mckee in chicago on friday and said 2017 hikes are getting all the more appropriate. He did not say how many, but maybe he is leaning towards three. Lets listen. The thing we will be debating as the year goes on is the rate at which we should be removing accommodation, but the sep they in december and gives you a sense of where we are and my views. Rob kaplan also said he sees the economy rapidly approaching for employment. There are at least three fed Bank President s who publicly said they are in the threeratehike campanale. This is a more hawkish tilt. The number of jobs and that friday report fell shy of forecast, was that a concern at all for the fomc . Bad down fromnot the forecast of 180,000, and the previous month was revised over 200,000, so altogether the number was in line, but the trend is slowing. , 222 look at another chart , the white line is the monthly payrolls number, up and down, but it was peaking and the number had gotten smaller. The yellow line is the three month moving average and seems to be peaking and trending lower, same for the six month moving average, so maybe we could consider the doves will be putting the brakes on a little bit and saying we should not move too quickly to raise that rate. Charlie evans peaking in chicago on friday, the president of the saidgo fed, a strong the, it would not be unreasonable to see two rate hikes, and not implausible to see three. He does not seem fully on board for three, but open to it, an important signal from someone who has been dovish. Kathleen hays there in new york, looking at that jobs report in what it means for the fed and beyond. What is going on with the force, it does remain strong with a rogue one topping theaters and holding on to its top spot at the north american box office, a fourth straight weekend it has managed to do that. The star wars prequel taking in 22 million, while sonys vampire release was fourth. 10 00 a. M. Int singapore, 1 00 p. M. In sydney, and 9 00 p. M. In new york. I am rishaad salamat. This is Bloomberg Markets asia. Rishaad chinas foreign currency reserves frank more than 300 billion last year as the yuan saw it steepest decline in two decades. Two samsung executives facing prosecutors as part of the undue influence scandal that brought down the president. It ishrysler announced america first, but gma had for mexico. In indonesia getting underway, lets check the market, a mixed bag, but generally higher, the absence of tokyo trading, Public Holiday there, a again. Here is sophie. Long weekend for japanese markets, but broadly speaking, asian stocks following u. S. Equities higher after they hit new records on friday. Looking at southeast asia, a mixed bag, the Straits Times leading gains there. Elsewhere, the shanghai composite gain after reversing its earlier losses, the hang seng climbing higher, up. 4 , and the asx 200 over 1 gains, the best performer in the region today, but flashing warning signs on the relative strength index, indicating oversold signals. , of a look at the kospi marginally, but consumers staples and utilities dragging. Climbed aspping investors reacting to speculation around the companys debt restructuring. Jin was once the world seventh biggest shipping company. , big theme and markets today what is going on with that rebound and Dollar Strength, weighing on asian currencies. We are seeing that lay out in the south korean won leading the drop in asia, down. 8 , a most in three weeks. The bank of singapore currency strategists saying the big factor for the won will be trumps trade policies, given that the domestic political concerns are already priced into the currency. To returnyen poised to a bull trend as u. S. Treasury yields seen rising again. It touched 117. 35, the offshore yuan extending its trop. Its drop you today, the pboc weaker thanng fridays fix, but still stronger than what some bank models were predicting. The most since june 2016, and more on the yuan surely. Rishaad thank you. Chinas weakening its fixing to near parity to, fridays close against the u. S. Foreign exchange reserve dropped by 41 billion. To willing is china well, let its reserves keep diminishing like this . It depends on how quickly the yuan weakens and the outflows exacerbate the situation. A note on that fix, yes, the weakest, the most since june of last year, but it was pretty much on par with what we have on on friday, so they are finding a level ground around 6. 9, and it is weakening after this reserves data. There are some confidence issues coming in. By reserves pile falling 41. 1 billion, in line with forecasts. It is a lot. It is a fiveyear low at 3. 01 trillion, this after the yuan posted its steepest annual slide versus the dollar and a couple of decades, down 7 . Chinadrop in reserves for in 2016, 300 20 billion. We have gone from 4 trillion in june 2014 down to 3 trillion now, 10 straight quarters of declines. Rishaad it sounds like a lot of money. Saying chinas intervention in fx reserves is not big. He thinks this is a good thing, so lets hear from fan gang. Has 3lly china trillion, not for train dollars. We have been talking about the inefficiency of this 4 trillion. For a long run trend, this is good news. Well, steve, at the end of the day, we have to ask whether this 3 trillion level is a psychological one, or something that has material, real monetary implications. You have to look at the reserve adequacy, how much does china need to longterm defend the currency. On on fridayg note for ubs, most fx reserves are liquid and usable, but keep in mind that a lot of this is tied up in u. S. Assets, 60 and u. S. Dollar denominated assets, 1. 1 trillion in treasuries. With moderate capital controls reserves adequacy to defend and attack on the currency needs to be between 1. 75 trillion with thai capital controls to 2. 8 trillion dollars with no capital controls, so they are already at 3 trillion, so if you have lacks capital controls, it still needs a reserve adequacy rate of 2. 82, so youre getting to the point where it starts getting dodgy. Rishaad who is saying that . Ubs. Rishaad supports barcelona actually. There we go. Rishaad lets move on. News,get the first word heres haidi lun. Fiat chrysler is the latest automaker to invest in the United States. It is barring 1 billion for plants in ohio and michigan, expanding the jeep line and adding 2000 jobs. Fiat chrysler says it will include the dodge ram truck currently produced in mexico. Resident elected donald trump has put heavy pressure on the Auto Industry to bring jobs back to the u. S. The president elect may face a challenge from General Motors, shifting production of its new compact suv to mexico. Gm makes the vehicle and another in a plant in canada. Criticized them for importing cars from south of the border. Mexican workers work at a dollars . 24 an hour compared to over 46 in the u. S. Beijing tackles pollution after days of choking smog. The city will shut down polluting factories and order 2000 more to clean up their act and restrict inefficient dirty vehicles off the road. Beijing spent nine consecutive days under a smog alert, the second highest level in chinas air quality system. Slow to a growth will three year low of 7. 1 and the 12 months through march, and thats before the affect of the cash crackdown. The forecast does not include when primeovember minister modi shocked the nation by banning high denomination notes. Services are growing at 9 compared to the previous years 10. 3 . Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad thanks. Right, executives from samsung facing prosecutors, the companys Corporate Strategy office vicechairman and president will be questioned over the influence scandal surrounding the south korean president. Us the background earlier, but what do we know . Investigation is widening. We have a special investigation that kicked off before christmas, and they want to talk to some sun executives. The Corporate Strategy office ,icechairman and the president they are expected to talk to prosecutors today, coming in to testify, not accused of wrongdoing. Although, it depends on what comes out of the questioning. This is related to a widening President Park and has led to her in peach meant, in peach one month ago led to her in peach meant a covice chair at samsung had been question among others, whether they had donated any money to foundations controlled by a woman who was a close friend of President Park, and he denied the allegations that they had given to these foundations in return for political favors. Rishaad right, well, what developments have there been sense President Park was in peach . Been thisthere has special prosecution, and they are looking at samsung closely because of its controversial merger and 2015 of two samsung units. Came, even though there were a lot of critics against it, activist investors who oppose the move, so questions have been raised about the deal. South koreas National Pension service help to get it through, and the special prosecution investigators arrested the chairman of the National Pension service. It has been said that he is suspected of pressuring south koreas Biggest Pension Fund to support the merger, and there are reports that the president had any did not have any intention of helping anyone. Askalso said she did not samsung for money, so denial all around regarding the relationship with samsung, the merger, the relationship during the merger and how it helped to go ahead, and this is what the special prosecutors want to look at, also criminal investigations as well. It has been a month since the president was impeached, five more months for the Constitutional Court to decide on what they want to do. Rishaad we are in limbo really, arent we . Rosalind there have been shenanigans going on in terms of getting various people in front of them under question, so President Park herself refused constitutionale court when it kicked off in january, so delays there, but they said they will try and make the decision impartially and quickly, so in the meantime, the Prime Minister has been leading the country. Rishaad thank you. I look at what we have coming up, we are talking to the ubs chief global economist. Tradeinking is rising protectionism is a key risk for the year ahead. The ceo of chinas largest recruitment site is our guest for his take on Employment Trends in china of the a quick check latest business flash headlines, the korean Economic Daily saying tte has decided to list, shelving plans for an ipo last year after criminal investigations paralyzed one of the countrys gives us dealmakers. Couldoceeds from the deal help unwind its convoluted ownership structure. Set to be introducing a new engine, 30 more efficient than the one it will replace, the nikkei news says the new parkland is expected in late 2018 and uses pressure rather than spark plugs to ignite gasoline. The technology is not new, but always problematic. It is aimed at a range of out coming models, including the mazda three. More on automotive stuff, chinas drive for Autonomous Cars closer as the collaboration is close to its debut with a doel equipped with him by technology expect to break cover at the shanghai auto show in april. They will conduct protesting that will drive itself in limited environments by the end of this year. The car is critically important for baidu. If you look at the next five years, the whole Automotive Industry is going through a profound transformation. Say that, i do and can baidu will play an Important Role in driving the technological direction. So far, this is a tremendous opportunity and a gold mine for baidu and for china, the whole country. Lets head back to shanghai and the ubs Greater China congress with Tom Mackenzie. What is the outlook when it comes to the job market this year . This will be Key Information from your guest. Absolutely. We have been talking about the macro themes for china for 2017, but what does that mean and how does it translate for workers on the ground . Areet color and insight, we ,oined by the ceo of zhopin chinas largest recruitment site. How would you describe the job picture in china right now . Overall, healthy. If we look at the employment index, it is consistent with the pmi and the gdp growth, so overall, we are confident the job market is healthy and good. Having said that, we see the industry, internet the Financial Institution industry, and transportation, express. Rly driven by the manufacturing and the retell is not doing so well. The industry is polarized. That is a positive. The sector that the government wants rests alliance on. It is good news for workers, but those people who used to spend their life in manufacturing has a difficult fromto switch manufacturing into Service Industries and high tech industry, so it is polarized. In coastal areas, the job market androwing quick, strong, the supply is strong, but in the northeast of china, those people who are 40 years old, 50 years old and they are having a difficult time. Regional wise it is polarized. Tom i know you were recently and coal country and you have been working with the local government there. There has been talk about the money put aside by chinas policymakers to read train, but what are the practical realities of that . How can you reach rain a minor to move in the services or hightech industry . It will take a long time. They have put effort into helping those guys, to train them, give them new skills, and encourage them to move into different sectors and regions. Those efforts will take a long time, but having said that, the marketdriven efforts will have effects much faster. Didi is hiring a lot of people to drive taxis, etc. , so they are moving into this sector. Governmentdriven program that will take a long time, but a marketdriven newram, new restaurants, smaller businesses, ecommerce, online shops, those are faster and effective. Me about wages. There has been a concern that the increase in wages is not matching the amounts people are spending. With wages not growing as fast as they were, is there a risk that retail spending will have to be reduced . Or is that looking healthy . That is a bit worrisome. If i look at the wage growth, 2016, the overall job demand is growing, but the wage trend is not good. It is probably growing less than 5 . In past years, it has been above 5 . Now it is less than 5 . It will hit people and their spending power, so that is one area of concern. Having said that, there are different side is different cities. In beijing, some areas are robust with the i. T. Industry and internet industry, so beijing, shanghai, shenzhen, they are growing fast in terms of wage. Other areas, not so promising. The wages even dropping there. Tom lets talk about your business and strategy. You are in the process of going private. Give us details on where you stand in relation to that change . We are seeing progress. A lot of people are worried about the currency controls, whether the privatization will be slowed or stopped, but we are still good. Is always chasing good projects. We are here not because of financial arbitrage, but because of business expansion. We will continue to build our platforms and scale it up and make sure we have more engagement with the users and customers, so we are in good shape. President of zhaopin, the largest recruitment business in china. Wages rising not as high as they have been in 2016, but some interesting insight there from the ceo of zhaopin. Thank you. Tom mackenzie in shanghai. Donald trumps rhetoric is forcing some to swerve on investment plans. We will speak to your chrysler about it spending in the United States. Rishaad you are act with Bloomberg Markets asia. Fiat chrysler will invest 1 billion making three new jeep bottles in the United States as donald trump has been pressuring the Auto Industry to hire workers and make vehicles inside the country. Su keenan sent us the details. Su Fiat Chrysler announcing that builds its made in america credit and translates into trading action on monday. It will invest 1 billion in u. S. Plants by 2020, adding 2000 jobs in the midwest, making three different brands of its jeep model here in the u. S. , and in particular, moving production of the heavyduty ram truck, currently made in mexico, to these retooled plants in michigan and ohio. It has been a key theme of foridentelect trump automakers to make their production of vehicles this side of the mexican border, and just last week, he upped the ante in terms of pressure on automakers. Fiat chrysler shares have been strong into the beginning of 2017, and there are many who believe that the company has now been put in even better stead with the coming administration. Last week, ford canceled 1. 6 in investment in a mexican production project and would instead final 700 million to its michigan plant. Trump last week threatened General Motors with import taxes , taking aim and criticism at the gm and chevy cruz made in mexico. Barraday, the gm ceo mary said gm has no plans to alter their production at this point. Well, absolutely, the north American International auto show will open in detroit on monday. We will be there. We will be joined by volvos president and chief executive. Also, g. M. s chairman and chief executive mark Barro Mary Barra on with us as well, and chairman of ford, we will be , bill ford. Im the china backed Asian Infrastructure bank will tell us why investors should not worry about beijings moves to curb capital outflows. That and more. This is bloomberg. It is 10 29 a. M. In hong kong, 1 29 p. M. In sydney, i am haidi lun with first word headlines. Samsung executives due to be questioned over the influence peddling scandal surrounding President Park geunhye. They are not accused of wrongdoing, but the Prosecutors Office says that may change. Another court is considering parliaments impeachment of the president. Has been trading up strongly in the morning session, up 3 at the moment. Trumpstelect donald team says neither he nor any transition official will meet the taiwanese leader as she passes through houston on route to central america. However, she did meet Texas Governor greg abbott and senator ted cruz. China had called on washington to bar tsai. Twitter suspended the account of a former pharma executive after he harassed a emailed journalist online. Madereelance reporter several posts about unwanted digital advances by him, including one inviting her to Donald Trumps inauguration. Asked the twitter Ceo Jack Dorsey to intervene after he continued to post about her. The former iranian president rafsanjani has died at 82. He was mostly involved in the founding of the Islamic Republic and later propose freeing the economy from state control. President served as from 19891997 and took over a year after the end of the eightyear war with iraq and much of his tenure was spent directing irans economic recovery. Global news 24 hours a day powered by more than 2600 journalists and analysts in 120 countries. I am haidi lun. This is bloomberg. Rishaad some breaking news from mcdonalds, keeping, or said i should say, signing a deal at the moment to sell off their china operations to a group which contains others. 80 ,are said to be buying mcdonalds keeping 20 of operations and the share of those operations as well. The business at about 2 billion, the thinking at the moment of those who still do not want to be identified because the information remains private. It is seeking to sell the other 80 of its operations in china and hong kong to a consortium. Deal that could be announced as soon as today. We will keep you up to speed with it of course. Lets get you up to speed market wise. Here is Sophie Kamaruddin. Sophie checking in with what is , thening with the yuan offshore rate dropping after the pboc set the daily fixing at their weakest since june 2016, and this followed chinas reserves falling to a fiveyear low in december. We did have the pboc advisor fan gang saying intervention was not big and policymakers want to see a smooth and gradual reduction. He also said the yuan had been overvalued against the dollar over the past 34 years. ,lso, the aussie dollar stronger by. 3 , the biggest major currency to gain against the dollar, getting support from the strongerthanexpected data we got this morning. In the bond space, a selloff. The 10 year rate adding six 2. 74 . Oints to when it comes to u. S. Yields, futures indicate they will raise further at the london open. Asx 200quity space, the 1. 1 . A, up by hong kong stocks reversing earlier gains. Listing on the shanghai composite today, petrochina and Southeast Asian stocks, a mixed bag here, but broadly rebounding over the past to bring weeks as filipino and indonesian shares leave that charge. They are at a two month high. Generally in southeast asia, the bank of singapore saying this is likely due to a more dovish fed. Thank you very Sophie Kamaruddin much indeed for that. They are. The jobse a look at report, sealing the deal for two fed rate hikes, but some calling for three and more. That as you imagine is raising red flags for the dollar and fixed income markets, particularly treasuries. Lets get more from kathleen hays. We have seen big bond moves, a route, some have been calling it. Why may it be picking up steam once again here . 2. 6 , that is the yield you want to be watching according to bill gross. He was talking about the jobs report in the u. S. On friday on bloomberg television. Is the bond king. He sees some growth and suggests gdp and the United States grows around 2. 2 . Lets look at some of the numbers. Sinceup their fastest 2009, some fed officials see that tilting towards the three rate hike camp. 158 thousand, they were supposed to rise 180,000, so the trend has slowed. Bill gross is focused on the technicals. He says you dont know the steps donald trump would take her how the central bank will respond. Ifwe will see it and know it the 10 year breaks 2. 6 on a weekly or monthly basis, because it is so strong and so important in terms of Technical Analysis that if and when it has broken on the upside, it is a bear market, and if it is not broken, we stay where we are. At a chart from our Bloomberg News bond team showing that downward trend in yields, an upward trend in price , some saying this could be the end of a 30 year rally in bonds. It didmiddle of 2016, start reversing, some recovery, but bill gross said if it gets above 2. 6 , thats what youre watching for. If im boj, this selloff might have me wondering about yield curve controls, because there could be further pressure on japanese bonds and give the boj more work to do. We have absolutely, and this dire warning on jobs, fed rate hikes, and the dollar here from ahmed elerian. What is he thinking . Chief Economic Advisor to ollie ons, Mohamed Elerian to ollie ons ollie ons \ he said the number i look at every morning is what the dollar is doing. The thing that the market should worry about is the Dollar Strengthening to quickly, and too much. That is what could derail us. Btv, dollar versus the yen, the threeweek move versus the yen, stronger dollar weaker bigger move in 2021 and a move in the back of japan will go in error. Citigroup saying the dollar could gain versus the euro if congress and donald trump get together and pull off the biggest fiscal stimulus and the 1980s. That is the risk. Not just him, a lot are saying that is the dark cloud, dark lining in the silver cloud, stronger dollar, fed hiking rates, that could be an issue. You very much indeed for that. Kathleen hays joining us from new york. The president of the china led Asian Infrastructure Investment Bank says China Capital controls should not worry investors. Telling our very own Tom Mackenzie that the economy faces a number of challenges, but nothing that beijing cap handle. China is faced with a number of challenges, and particularly, the restructuring towards,onomy moving moving from excessive dependence on external factors, to dismiss domestic consumption, and improving the efficiency of chinas economy. Tom you talk about a growth target, is it time to drop that target, because it seems too many to be a contradiction to talk about attempts to rein in some of these high debt levels, tolst also having the 6. 5 7 target. Something has to give. In my view, this is the right time, high time for china to our trust the complicated Development Issues now that china is moving to the middle Income Countries category, right . If you look at some of these issues, for instance, domestic is veryu will see it much different from the debt situations of some other countries which happened in the last century. Chinese debt basically as domestic debt. China does not have external debt at high levels. It is easier to handle. I believe growth can solve of these problems, and chinas government will be able to address all these issues. What is most important is to make sure that we and china go ahead, it hearing to the fundamental issue of restructuring and to address some of the structure issues. Tom on the question of capital controls rolled out in the last few months, does that suggest the imf was premature in including the yuan in its sdr basket . Decision made the in my view, this is my understanding, my reading, Chinese Government would adhere to the principle and keep chinese currency as a global arrency, and increasingly currency in the basket, but with the money that flows in and out, some measures to address this issue in my view probably is necessary, and i hope that things will stabilize, and some kind of panicking on the part of investors will disappear. Rishaad that was the president of aiib speaking to Tom Mackenzie. Coming up, heading back to do the ubs Greater China conference in shanghai. We have the outlook for the year ahead. China said to have reached an unexpected conclusion at the meeting in december, rising debt levels have forced them to pick stability over Everything Else. We have the story in beijing. The thing is, what is the leadership thinking. It is quite an important shift. Indeed, they seem to have come to the conclusion that the cost of debtfueled growth is too high. Year, 6. 7 growth was achieved, but that came about through a lot of credit being pumped into the economy. The leaders are finally coming to the conclusion that is too costly and the prices too high, so we have heard in order has gone out to central and local government officials that for this year stability as the priority. If officials are facing a choice between stability and growth, they should prioritize stability, growth secondary, and everything basically secondary to stability, including economic reforms. Well, what are the key factors causing this policy change, kevin . Longtermhe short and ones, shortterm, a year in which there will be a communist Party Congress in which there will be a leadership reshuffle, five out of seven politburos members being plays. In past years, they have put more emphasis on stability than usual, so that is a key factor. Some longerterm ones, falling into the middle income trap, china concerned that if it does not create enough innovation, then it will get stop at stock at middle income level. By they, it is concerned trap that says a rising power establishedith an one, and with donald trump having been elected in the u. S. Recently with that has brought in this sharp relief in china with some friction already over taiwan and trade issues. Finally, there are concerns over the clearing up and environmental costs of air that is poisoning and infuriating residents all over the country. Kevin, great, kevin hamlin joining us from beijing, china tallying the cost of another year of debtfueled growth. Lets go to the ubs greater Greater China conference in shanghai. Over to you. Tom i will put the same question to the chief global economist for ubs. We were talking about a bloomberg story about the fact that the chinese leaders now are putting emphasis this year on stability rather than hit that growth target, and that is seen as a significant change, presumably something you would welcome, but the key is implementation and whether the provincial governments follow through with that. Exactly. Our forecast is for 6. 4 , a modest slowdown. I will believe it when i see it. The one thing it has going from last year was the property sector, and at the margin, it would have allowed them to do less fiscal stimulus and credit stimulus. With the property sector slowing, i dont see what other levers they have get the growth targets. Tom how concerned are you about the buildup of credit in the system, helping to push the gdp up . Yearry concerned on a five basis, not so concerned on a one year basis. It is difficult to see the trigger on the liability side, so given that the state owns 75 and most of the lending is to state owned entities, it is difficult to have a westernstyle run on a bank. The globaltalk about picture, a baseline of 3. 1 and 3. 5 this year, but with a number of important caveats. It is a boring forecast. More so than at any time over the last 78 years, is the outlook uncertain, political risks in europe to the downside, and risks in the u. S. , potentially to the upside, depending on what we see implemented, so fact filled around a boring forecast. The boring forecast is one of acceleration, the Global Economy accelerating in nominal terms, brazil, russia, argentina coming out of recession. Other half comes from the u. S. , but thats before you include trump. The fiscal spending, the tax cuts could be positive, but then the looming prospect, particularly when you look at his nominations, of a u. S. Trade war. Side, there isl a large range of potential outcomes. Tweets to take many come up with a package that would generate 75 basis points a year. He has a big range on the fiscal side of potential outcomes. On the trade side, there is a study by a think tank in washington that has estimated that if you do what he said on trade and start a trade war and china retaliates, that costs you 4 million jobs, so neutralizes the positives, which is why analysts are in waitandsee mode. Tom if fiscal stimulus goes ahead, we could see more than two rate hikes by the fed. Tell us how you see that unfolding and whether there will be less to emergence amongst central banks. The fed was transparent and the december minutes about what their policy now is. They have said that we know there is a fiscal package coming , but there is a policy mix issue. We did not think they were saying trump would win, so now there will be a new fiscal policy and fiscal will contribute to growth, that means more hikes. The market is currently price for the fed doing two hikes, 20 of a third hike. The fed is saying they would do three hikes in 2017. The risk is that if he delivers and its all positives and no negatives, then it could be more than three. What happens in Global Markets is that the one market moving is u. S. Treasury rates higher, none of the other markets are price for anything, so now all currencies become a function of policy. Markets,the emerging you say they could end up propping up the growth next year, brazil, russia, argentina. Those markets is not a story of great optimism. These economies are coming from deep recessionary levels, but they are underinvested, so to the extent they bounced back, and russia is a good example. Optimism,ore sanctions debate in the u. S. , it is possible those markets get more money coming back, and that is good for growth. Economisthief global at ubs talking about risks and an uncertainty. Rishaad thank you very much indeed for that. That is Tom Mackenzie cashing in on the cash ban. How promised are modis band actually lifted Digital Payment stocks. Rishaad you are back with Bloomberg Markets asia. Sherry and will be updating us in seven minutes. We are seeing a cyclical rally, keeping banking and consumer stocks. Asked whether this rally is sustainable. This contradicts the situation we are seeing on the ground in china. We will be talking about what policy makers be prioritizing for this year. Lots of people thinking it will be stability given political risks with the Party Congress coming up. Thank you very much that. India is expecting growth to slow to a threeyear low and the 12 month through march, the 7. 1omy expanding at percent, down from 7. 7 , this is before the fx of the cash the effects of the cash ban are known. The government has forecast the full Financial Year ending march at 7. 1 , but the key aspect that it does not take into account, the impact of the demonetization drive. Announced the notesf 500 and 1000 rupee to squeeze out money or unaccounted wealth and squeeze out fake currency. Months have been extreme destruction to the life of the common man. Forecasters have always had doubts about the effect on the larger economy, even today. We still dont know what the impact will be and the gdp number does not capture that at all. Not seem todoes have translated into antagonism against Prime Minister narendra modi. Very quickly. The political fallout has yet to be realized. Preparingment will be the budget. Economists are scratching their heads, what are the numbers calculated, because the official numbers are not out yet. Rishaad great talking to you there. Bloomberg markets asia continues, right after this. Angie it is 11 00 in hong kong and 2 00 p. M. In sydney. Welcome to Bloomberg Markets asia. Angie china weakens the one yuan fixing, reaching its steepest slide in two decades. At the same time, two executives are to be questioned in the undue influence able scandal. Remaind on samsung confident in chinas economic journey. Everything today again on china. Reserves asoreign well as the offshore and onshore moving around the pboc. Again weakening now, the yuan affecting to the most now in six months. 96, but some of the big movers in asia right now and australia are searching. We are seeing all sectors in the denmark benchmark index in the green. This index has been gaining every day since the start of the new year. Also, some other gainers of the Southeast Asian stocks as we see the rally or rebound continue in the new years emerging markets. We are also keeping an eye on some of those metals. Precious metals, gold saw some declines in the last session. It is seeing another rebound in the session. Days has the comingofage , so they are close. We are seeing the japanese yen moving again. We will give you the context here when we get back. Lets get some other headlines across the world with heidi. Heidi an agreement was signed as early as today to sell 80 of operations in china and hong kong. Omberg is told the vital buyer is an owner in citigroup. The bill business is valued at over 2 billion. Mcdonalds will own a 20 stake. The companies rallying demand for semiconductors that in china. Two seniors executives were due to be questioned today over the influence peddling scandal sending the surrounding the south korean president. Offers good change. Could change. Issidentelect donald trump receiving some pushback. To bring the jobs owners are not saying they will not change production plans. Japan is shifting production to mexico from ontario. Creswell is planning to invest in the United States. Are planning on expanding the jeep lineup and adding about 2000 jobs. They are currently producing the dodge ram truck in a plant in mexico. Sherry . Shery heidi, thank you. Chinas Foreign Exchange reserves slumped by another 41 billion last month. This is all to do with the tumbling neon. Yuan. Hina is doing what is china doing to extend the punch . The downward pressure is continuing, not necessarily at a fast of a rate as we have ian, but still capital control has helped stem is a little bit. Remittances one house control, and we are likely to see more coming. Instant in december, we saw falling reserves by 41. 1 billion u. S. Dollars. It was not a surprise, but a fresh fiveyear low to 3. 01 3. 0 one trillion u. S. 0 one trillion u. S. Dollars in that time, it has come down about by 1 trillion. Yuan is that its steepest decline against the greenback in two decades. What are they going to do . The capital controls are going to be in place and tightened. Now we have had 10 straight quarters affect stockpiles. Shery they did manage to stay above to directories in the dollar mark. Symbolic, but how important is it . If it falls below that, we could see some more panic on the markets. Is more symbolic, because the reserves adequacy is still in place. We heard from cit, who said it there will be a psychological impact that may induce a depression. Chinaffect reserves in are liquid and usable, however a lot of them are tied up in u. S. Asset. Its deeper or so of that pile is tied up to dollar denominated, including what they estimate is 1. 1 trillion in the u. S. Treasury, with moderate capital control. Moderate capital control in china reserves adequacy to defended attack on the neon, which we have seen yuan, trillion. Etween 1. 82 we might be able to split the difference at 3 trillion. Shery thank you so much for that. The latest on chinas foreign reserves, and we will continue talking about china because business confidences growing in the country. The bank is in talks with its local partner over a security operation there. Ubs is holding its jeter cut Greater China conference in shanghai. I can give you details because talks are still ongoing, but we are talking to our partners. We have a strong and chris interest in increasing our footprint or presence in china. The long run,ld steady presence in china. It is all about strategy. , so it is partnering all about shifting some of this away. Talks are still ongoing. What does this say about where ubs sees the opportunity in china, and the Expansion Plan . Particularly the opportunity to be in the Capital Market their . The Investment Banking business is one that we are very committed to building in china. It is still the fastestgrowing economy in china, around the globe. One managerber globally, so china, for us and our strategy, fits very well. Investment tanking and wealth toagement is what is going be we try and bring to the market here. Want to build it on progress. We have heard a lot in recent weeks about the increased capital control being implemented by policymakers here as they try to stem the capital outflows we know about. Is that having an impact on your business . Some big european firms are struggling to pay dividends. Have no problems recalculating dividends. I think we are committed to going on for business. The real business is that child in his opening up, and the capital count as being liberalized. China is opening up, and the capital count is being liberalized. We cant just open it up without any controls in place. It is a steady process of liberalizing and making Monetary Policy and international Capital Markets. Stages, and the authorities so far have been doing a good job in switching over the opening process. What we are seeing is a control journey, and i think it is good that they continue to do that in a controlled and that he fashion. That was the ubs chairman, speaking to tom at the Greater China conference in shanghai. Southeast asian stocks may offer shelter from the global storm. We will at how u. S. China tensions can top the rally. And what sent chinas effect by over but slumping 3 trillion. This is bloomberg. Back, this is Bloomberg Markets asia. Sophie, who has the latest on market. Sophie . Inhie it is a mixed picture asian and japanese markets are off for the holiday, but we are seeing some asian equities eke out some slight gains with health care and energy stocks. Change in taiwanese stocks sent the fiveday rally down, but in terms of what industries are looking like on home saying, that chineseying stocks listing in hong kong are also retreating from the highest level in almost four weeks. Pyd is leading the drop. Chinas Largest Electric vehicle major maker decided to set up two plants in the east. Lets look at what is happening in the currency. Offshoreyuan yuan continues to fall. Is theter the pboc weakest in six months. Thatve a visor saying china will not likely impose more capital. Are seen asures effective. In current industries, we are seeing the korean won taking a bit of a beating today, falling the most in three weeks. As a proxy is acting for the yuan, with the one being beinged instead won targeted instead. Elsewhere, we are looking at what is going on in the oil states for example. Under 54rude holding a barrel here. Gold is rising for the fourth day out of five. These are the latest jobs report out of the rest west. The dollaryen is seeing a bit above 117 along the Dollar Strength that return on returned on friday. The Commonwealth Bank of australia says that with that dollar picture, we are likely to see further strength of this week. Because of the stronger labor market in the u. S. And prospects for false faster retail sales in december. This is what we are looking at in asia right now, shery. Joining us now, the andad of asias Equity Investment management. That just mentioned chinas intervention of effect reserves is not that big. Given the data we have out, what is your recession assessment . Aboutdecember, a reduced 40 billion u. S. Essentially lesson they were the previous year. I think what we are seeing here is two things. There is interventions, so the boc is coming in and we are seeing the 2 average ca should , and then we are seeing the individual fx conversion. U. S. Dollarsl youre being taken out. And then theres scrutiny not only from individuals, but corporations. They are removing money from try a china and to other areas. They are looking into the reasons why that money is leaving china. This is all a step. Originally, we had some current abroad. Controls we saw that being reduced with korea, for example. Then we saw some union pay, and that reduction has affected macau. But it is all the steps from different areas to reduce the stress. Shery so orderly control of the depreciation, it seems. The highertioned requirements for households changing into fx. Is that going to get a bit of agreement to the pboc now. Griever to the pboc now . That is very likely, i say in terms of not giving a forecast but looking at a consensus, that it will drop limit 3 trillion. The pbocs inhan regards to capital controls . What are they doing that could reduce demand for the r b or reduce the amount of money being seen. Is that hasntrance money offshore should bring a back into china. Of u. S. Dollars, it is not a bad position to be. A bad position, but given were china stands right where china stands right now and everything going on in financial markets, do think we could see china being more focused on maintaining stability without hampering the reforms right we have seen recently . Stability is the mantra within Central Government, in terms they do things very longterm, planned and orchestrated as well, i think theyre starting point is looking at history. Back in 2007, 2008 when all those capital inflows came in. They include that increased climate reserves in the bank. Increased credit reserves in the bank. Looking at what the market does, we look at next week. They are more long term in nature. From that point of view, we need to be more mindful and what will happen the next 510 years, not the next 510 days. Shery is that why you are good thingsnd see in the new china stocks, not just the old stock . Lets call it the sixth goal cyclical bias. Energy materials are rallying significantly. The underlying price has relative from 400 to 600 from about june. Im not a big lever that this is a sustained rally. I think there is a lot of speculation. We can see the trading volumes in terms of commodities, but we are seeing less price increases in terms of underlying cement or theversus line the underlying commodity. So demand for steel and demand for cement is only get a be about 2. 5 in terms of growth. I think that this rally that we peopleis what asking what is the chinas Fiscal Stimulus Program going to be in response to what is happening in the u. S. . At the end of the day, we have a very fundamental focus, and are not the earnings per share, on those Material Energy companies as much as we are in new china. Trump president elect seems to have backtracked a little bit on many of his aggressive stances. But not on china. It is a difficult one and not for me to comment on politics. Shery but you have to factor it into guess what is going to happen. Terms ofdifficult in korea and terrorists, could you youe you going to do have a manufacturing hub in korea and for china and that matter, and what will they , or will it be trade were . It is a difficult one to work out. What i see is domestic demand in China Holding out. I see new china, which is being left behind, seeing the port eps earnings come through. Strong fundamentals. They are contrary in nature. The old fashion businesses are what we have and lot of speculation in materials and energy. Shery and you mentioned korea. I wanted to come back to that. Coming up, more on south korea, because top samsung executives are grilled again over the undue influence scandal that brought down the president. This is bloomberg. Shery welcome back. A quick check of the business flash headlines. An engine is being reviewed, it is more 30 more efficient than the one of will replace. It uses pressure rather than spark plugs to ignite gasoline. The technology is new, but is not new, but has always been problematic. Used in thed to be next mazda three, called the xima inand japan japan. But model group and with biotechnology, expected to break cover at the shanghai auto show. They also plan to test conduct road testing of the vehicle that can drive inlet environments. You can look at it next five years as the whole Automotive Industry [indiscernible] and i believe, i do [indiscernible] inspiring the technological us, this is a tremendous opportunity. China, and for the country. Daily the korea economic hotela has this l file for ipo after criminal investigations paralyzed one of the countrys busiest dealmakers. A stay in south korea because shares and Samsung Electronics hit a record high this section session. Rosalyn is coauthoring this covering this. To boost samsung, even as executives are once to be questioned by authorities there. Just more and more trouble in south korea. Really, samsung shares at 1. 8 6,000,001 1. 8 1. 8 6 million won, the highest in years. They are at a 50 surge in quarterly profits. Shery and we already had e. G. Being looked at by lawmakers last month, so why again are samsung officials be questioned by lawmakers. The investigation kicked off just before christmas, and as part of summoning executives and to be questioned, those today will be the Office Chairman and the vice president. These men will be questioned as test fires, meaning test , meetingtestifiers made us want to ask them questions. Investigators want to know what were their relationships between samsung possibly with the government officials and members, and also possibly with the National Pension service as well . And the woman at the center of these political influence scandal. Shery which has been going on for quite some time right now. Rosalind chin with the latest on samsung. This is bloomberg. It is a 1129 a. M. In hong kong, 1229 p. M. In sydney. The nikkei news says japans finance ministry will boost the amount of frontloading bonds next fiscal year. It will raise ¥56 trillion, up a trillion yen. Raised a yearonds ahead of time and says they wont take it of lower cost and negative rates. President elect Donald Trumps team says neither he nor any transition official were to meet the time when these leader as she passed through houston, texas. China has called on washington whenr her and complained trump breached protocol but taking a phone call from her. In starst installment wars saga tops chinas box office during its opening weekend. Rogue one made 30 million in china since friday. That is a third less than last years force awakens on its first weekend. Rogue one features prominent roles for two chinese actors, but faces competition from the homegrown romantic comedy some like it hot. Tojing taking measures tackle pollution as skies clear after days of choking smog. The city will shut down high polluting factories, 2500 more should clean up their act and they will restrict inefficient 30 vehicles. Beijing has spent nine days under an orange alert for small, the second highest level in chinas air quality system. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Shery thank you. Markets looking mixed, lacking clear direction, japan away on its comingofage day holiday, so lets get to Sophie Kamaruddin for a breakdown of asia. Sophie as you said, a mixed picture. We have the shanghai composite up. 6 . Tie one set to snap a five day rally taiwan set to snap a five day rally, asx 200 still in pole position leading gains. , moving between gains and losses. Anjin up 12. 4 ,. In terms of what is moving the kospi, Samsung Electronics spoke price surginghare to a record high monday after posting its best operating Profit Guidance in three years, the stock gaining 3. 1 earlier today, the biggest gain since november. There are 40 buy calls, four holds, and one sell. Korean cosmetics players in the , this on concerns that dutyfree sales to Chinese Tourists are at risk after reports that china has canceled joint military events with south korea, and three cosmetics players last week were under pressure following lackluster november sales. Shery thank you so much. Chinas leaders are set to have reached an unexpected conclusion in december, rising debt levels have forced them to pick stability over Everything Else this year. Kevin hamlin has the story in beijing. Does this mean stability over reforms, or stability over growth targets, what is the leadership thinking here . After years of prioritizing growth, growth has been paramount for 2030 years plus, leaders seem to be recognizing that the debt in recent years is too high. About 6. 7 ,rowth of a lot of that was funded by stimulus into smokestack industries, and the conclusion seems to be that the cost is too high and that it is undermining the foundation needed for sustainable longterm growth, and so what we heard is an order went out to local and Central Government officials saying stability is the priority, and officials if they have to choose between growth and stability, growthy is first second, and everything basically can be sacrificed to stability, including economic reforms. Shery can the government achieve this policy shift of deemphasizing those decade old growth targets . Yeah, i think that is a big question. Some fine words from policy makers in recent years. ,n 2013 after the third plenum theyve out sweeping reforms, and those have been underwhelming sense, and the reason is probably that there are lots of vested interests that stand up against these kind of changes. At local government levels, growth targets and the emphasis on growth has been paramount for years, there will definitely be resistance. Then the other question is that that may alsos, threaten stability as well, and so whether the government has the will, the staying power, the not put its foot on the stimulus pedal again is something we have to wait and see whether that exists or not. Shery the temptation will be huge there. Thank you so much for joining us. Kevin hamlin from beijing. One year into the job, the china led aiib remains open to the u. S. Becoming a member. Speaking to bloomberg, the president says that bank has a bigger list of projects for 2017, and would welcome u. S. Involvement. We approved eight lending worthm of nine projects 1. 73 billion. The 25 of the Lending Program are freestanding projects prepared by our own professionals, 75 percent are the cofinancing programs. Than in, we can do more 2016, because we have more people and we have collected to consider. The pipeline is getting bigger. In 2017, my priority is not just a Lending Program of mostbillion, what is i important is to have a better balance across the country, regions, and sectors. Moving to the u. S. , do you expect the election of donald trump to see washington reconsidering its position regarding the aiib and crucially does the doors to remain open to the u. S. Joining should they choose to . The door is still open and will remain that way. Occasionst on many that regardless of the membership of the United States, we can work well together. For instance, we engaged american Financial Institutions, we engaged the business sector companies, encouraging them to participate in International Competitive bidding when we finance Infrastructure Projects and our member countries. And as you know, we have american nationals working in this institution. Encouragedst of been regarding your bank . I was encouraged by the positive comments on aiib. I heard this expressed by various senior officials in the u. S. Government. I heard about the comments. Both the democrats and the , who served in various senior positions in government. You think the consensus is forming in washington that it was a mistake to ignore, or at least turn a skeptical eye, to the aiib . I dont regard this as a mistake. A mistake is something you did and cannot take back. We have 30 countries waiting to join. They did not become members for various reasons. You cannot tell me they made a mistake. I dont think so. Tom how concerned should we be about a potential chinau. S. Trade war, and what steps would you expect beijing to make should trump go ahead with some of the policies he has talked about on the campaign trail . Thinkill say briefly, i it is important for china and the United States to work together. Tom how concerned are you about that relationship . I am by nature an optimist. Sense china every opened its door in 1980, i was involved in the bilateral dialogues between u. S. And china, and i and the witness to the huge amount of benefit accruing to china, the United States, and other countries when china and United States work together. Shery that was the aiib president speaking to Tom Mackenzie. Haveeast asian stocks rebounded sharply after taking a dive on expectations of a u. S. Rate increase, and if analysts are right, the rally may persist as investors brace for try nonu. S. Trade wars. Fila biteing the msci of pressure for the day, but a lot of optimism out there about what is to comment 2017, so what is driving it . Its about strong Economic Growth rates in southeast asia, strong corporate earnings, also the pullback in the dollar. That is what some Money Managers are saying to us. All that making the region stocks look attractive. I want to show you how they have done so far, the benchmark msci highest levelir he since november. Trading during the holiday may have exaggerated stock moves, but on the whole, looking positive. Shows the chart vshape recovery of Southeast Asian shares. Foreign funding is coming back, this after pulling out close to 4 billion in november and december, and the flows have started to come back, partly because of the shrinking premium. Worldthe lowest in the since 2008, price to earnings decemberlow as 14. 2 in versus 15. 3 and august. But we are expecting some potential u. S. Trade tensions. How will that impact appetite for Southeast Asian stocks . Say,nda well, analysts fear not. Southeast asian stocks may well benefit from u. S. China trade tensions. Of trump uncertainty policies, it likes markets which are more defensive, indonesia, asch it says is a standout it has a lower export to gdp ratio and a higher weighting towards domestic industries. India is the other favorite because of similar reasons, so Foreign Investors may shift money from china to the region to avoid trade barriers, call it a shelter from any global fallout. Chinas laws could be southeast asias gains they are. Thank you so much for joining us. Coming up, stronger wage growth in the u. S. Leads to bigger bets that the fed will step up the pace of rate hikes. We go all in on what this means for investment strategy. This is bloomberg. Shery welcome back. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am shery ahn. We have been live at the ubs Greater China conference today, hearing from some big names. , ubs exclusive Interview Group chairman axel weber assesses situation. The u. S. China relationship will go through discussions that past. En longer than in ultimately, since china has opened up its current account, there is much less the central bank is doing in order to drive the Exchange Rate. The Exchange Rate actually is driven by the market now, and continues to be more driven by the market, and that was the key. Shery the director of chinas fanomic Research Institute ga saysn hesg not worried about chinese corporate debt. It is manageable. The whole Financial System is working on that. Reducing the leverage, it takes some time. It is still manageable. Shery ubs chief global says concernseyn remain over chinas credit build up. It is a concern on a five year basis, not so concerning on a one year basis, so it is difficult to see the trigger on the liability side of the Balance Sheet will force them to recognize the loans sitting on the books, given the state owns 75 of the Banking System and most lending is to stateowned entities, it is difficult to see a westernstyle run on the bank. Word fromt was the asia on china. Oining me now, our guests thank you for staying around. We were talking about china, but i want to turn the focus to south korea. You were pretty positive on some of the stocks there. Curious, we are seeing so Many Political uncertainties there. Where is your stance now in the new year . It is interesting and difficult to give political but the election for korea this year, who will get in . Person Say Something the cost of selloff in stocks. A lot of these are sentiment related. How is it affecting cosmetic stocks . Touristsf the mainland are staying away from korea, reducing travel, and it is one of the main venues or channels for sas. Rishaad bringing all boats down as well. Price is what you pay, value is what you get. We think earnings are strong. Weve seen month to month increases that are still ok. Sand, take a line in the a superficial line in the sand, and say there will be an election, if one guy who is leading this particular party comes in, he has come out against that. There will bes, short coverings and those names and a reversal. Look at these are you asians these companies are trading at, the core fundamentals look intact. They are highquality names. Are still listed on the kospi affected by that . Consumer discretionary, groupics names, tour operators, namely outbound, also the overall overarching sentiment, the birdseye view, which is negative at the moment. Putting companies, looking for the best quality and thus far you, saying how do we juggle whats going on here at the moment with the present situation in korea. Earnings are looking solid. What about defense stocks . Is reportedly preparing to launch a longrange missile. Is that north korea risk factored in . We dont invest in defense names, nor do we have a view on north korea. For us, we continue to look at the tourism dollar that comes across, which is by the current account. We are looking at in terms of the pboc, Central Government, looking at capital controls in place at the moment, and two currentaccount controls, Union Mainland tourists traveling to korea, thats more of what we are looking at when it comes to the government and things like that. You dont have to keep it confined to korea. , the hongy, new china kongshenzhen stock connect, at the moment, the jury is out. ,t might stay out a long time to put it diplomatically. The stock and it is interesting. It is a closed system. It has to clear in both exchanges. Play currencies and you are mainland chinese, you can buy the Hong Kong Listed equipment at a discount, and also gains in the currency appreciation. What is fundamentally attractive and southbound that we can own. There are different areas. We are always looking at fundamentals and core eps. We are about a month and a half away from reporting season, and having your school exam. Rishaad how is your fun getting along . Quality, focused on high return on equity, consumer staples, discretionary, health care names, and new china as well. It andstperforming energy. It, bestperforming is t materials, energy. We are true to form and are looking at the best companies in areas that we like. Fundamentals over anything else. Absolutely. Thank you for talking with us. Coming out, indias government has less than a month to finish preparing its 2017 budget, but it may need to fly blind. We will be live in mumbai next. This is bloomberg. Shery welcome back. India expects growth to slow to a threeyear low in the 12 months through march and sees the economy expanding at seven point 1 , down from 7. 7 forecast made before the crackdown on high denomination rupee notes, and before the effects of the cash ban are known. Do we as of now know the impact of Prime Minister modis cash ban on the economy . There is no official figure. Year 2017 coming in at seven point 1 , less than 7. 7 earlier forecast, but this does not capture the effect of the demonetization drive. Announcedster modi the withdrawal of 500 and 1000 from the system, 80 of cash as been with the drawn, and we are still trying to figure out what this means for the economy. There have been reports of job losses and businesses affected, not to mention the inconvenience to the common man, but it is yet to be certain what this means for the broader economy. The second one, Prime Minister modi, the intention was to squeeze out black money or unaccounted wealth and remove counterfeit notes. Yet ass no official data to whether these objectives have been met so far. Are expecting that 3 billion budget being announced in india, how does that affect the budget announcement in february . For the first time, you will have the budget presented on the first of february. Traditionally it has been on the last day of february. The reason for the advancement was to close off the financial but this has been the subject of controversy because after the budget, you will see crucial state elections. Many political opponents believe this is a ploy to announce populist schemes. The data itself is a controversy. Second, there is no official data to save what the impact of the demonetization drive has in , so we dont know what the calculations are. How the government is going to be calculating the numbers. They have not released any data to say whether demonetization has worked or not. Lastly, there has been speculation whether Prime Minister modi will announce a scheme to limit the impact of demonetization. Shery thank you for joining us from mumbai. Bloomberg markets middle east is coming out. A lot to talk about, including our eyes on commodities and stocks. I dont know where to start how about the former deafening manager of the imf, speaking to him about china and the ongoing dilemma with the yuan. Yousef a rift over russia, Senior Republicans demand tougher action from donald trump over Election Hacking allegations. Minors that warning the commodity rally will run out of steam this year. Yousef the former iranian president ross and johnny dies at 82. He was seen as an economic moderate. Hits a record on the back of the best operating profit