Transcripts For BLOOMBERG Bloomberg Markets Asia 20170626

Called recall. Shares remained suspended in tokyo. A change at nestle, dan loeb once more urgency as its fund builds up its stake in the global food giant. Bailout, mored imf loans as mongolia begins to vote for a new president. Thing whichther dominated the trading week, oil falling into a bear market, falling from the peak in february, down 20 . I want to bring this chart up, 355 i was going to bring it up, but we will not. It shows the oil price and its relationship with gold, should be a bit cautious out there. We will discuss that in the course of the program. Lets get over to shery ahn. We should be seeing markets in malaysia and singapore open, but they are on holidays with india, indonesia, and philippines. This session looks positive, the regional benchmark gaining with australia leading gains. Do keep an eye on commodities. We are hearing competition over rios coal assets intensifies, it could be upping its bid to match glencore. When it comes to commodities, keep an eye on copper, gaining. 5 . Hearing that the downward trend line has been broken. Brokers on the Shanghai Futures Exchange turning less bearish, meaning cutting net short positions. When it comes to the currency markets, the south korean won leading gains after seeing one of the biggest losses last week. U. S. Dollar. Have toptier fed speakers coming out, including janet yellen, so we could see some more pressure for the dollar. When it comes to the bond yarkets, chinese equit markets close, but the fiveyear losing ground. Markets yieldd curve has corrected after being inverted for the longest time on record. This yield curve trading pretty much flat. The yield curve may remain flat given that we are seeing this historic Deleveraging Campaign going on. The spread between the 10 year and one year has been below zero, now just gaining ground slightly. This has caused some historic moves in the 9 trillion dollar bond market, and now lots of speculation over when the bond connect could start. This could spur inflows of foreign money into the bond market, so this is something we have to keep an eye on. Right, indeed, lets get to first word news headlines. Indian the Narendra Modis visit to the white house with h1b visas high on the agenda. President trump described the premise or as a true friend and was looking for to talks, however fundamental differences stand between them, such as the h1b visas used by Many Indian Companies and the paris climate accord. The gulf diplomatic crisis is qatari pressure on the currency, capping a third week of trading outside the Central Banks preferred range. The dispute has disrupted offshore markets, creating a temporary dollar shortage. Given the week to implement demands, including shutting outages era news networking cutting ties with iran. 150 people were killed when a fuel tanker exploded in pakistan. Said villagerse were trying to collect spilled oil. The number of victims is expected to rise with local hospital saying many survivors suffered severe burns. Japanese banks are being warned that they are increasingly vulnerable to a repeat of the shocks that excess are baited the financial crisis. The bank for International Settlements say banks have doubled borrowing and lending since 2007, with dollar denominated assets on their Balance Sheet surging to 3. 5 trillion at the end of last year. Airways plans to replace all must 30 older aircraft over the next five years. The staterun carrier is hoping that will turn around performance after losses in three of the past four years. The airlines chairman told Bloomberg Television it is vital to protect against your price volatility. Will beur aircraft replaced in the next five years with new generation aircraft, airbus or boeing. This is the way we will move for the this this is fuel efficient. Low, but fuel cost is there is future possible volatility. Haslinda global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad right, takata has filed for bankruptcy protection, claiming liabilities of 10 billion and confirmed the sale of its business to key Safety Systems, 1. 6 billion. What does this actually mean for takata, its customers, and owners of affected cars . We have a few lines coming through saying there is no plans for bondholders meetings. Bond payments will the pen on the rehabilitation plan. It is, for car owners, good news because it means the company will continue to operate and that it will continue to produce airbags needed to replace those. The takeover by key Safety Systems means there will be new investment in the company in order to produce the massive number of airbags needed to replace the faulty ones. Bondholders, less good news for them, and as well for companies that have all kinds of liabilities with takata. Now that they are a bankrupt entity, there is less money to pay out on those, so there will be a gap between liabilities and the cash on hand, and that will have to be worked out in court. Rishaad what is likely to be here the impact on the industry as a whole . Industry as a whole, obviously there is going to be more concerned going ahead about the cost of recalls, to see how these can bring companies to their knees, not just parts makers, but the automakers themselves. Constantly pushing to cut costs, and one way automakers cut costs is relying on a Single Source as a supplier, allowing them to get greater economies of scale. All of the top automakers were relying at least in part on takata. Honda especially had a big share suppliedairbags being i one supplier, and efficient way, but when you do have a recall, you have tremendous costs and disruptions to your customers, so going ahead, you will be looking at more complicated supply chains. Simplifying that down to one supplier for each component will be tougher companies to do given these kinds of risks. Is in a now the thing situation like this, there must be some winners. I am assuming the other airbag manufactures . They are able to get new customers out of this. The company taking over takatas , overnight it becomes a Global Supplier to almost every major carmaker, so that puts them on the map as a Major Global Company within the auto supply chain, so it is a big move up for them. It wont be without challenges. Going ahead, this is a product we have all learned now is fueled by a small explosion, so when you have an explosion, the safety ramifications are pretty clear, so you have to be very careful with that technology, that it is durable in all situations, so there is a lot of pressure on them, but a huge opportunity for that company as one of the winners out of this. Rishaad thank you a lot for that. We will keep tabs on the takata story later today. Chinas high fliers have had their wings clipped, the dropoff in deals as beijing cracks down on overseas acquisitions. Up next, the crisis in the arabian gulf. The list of demands by saudi arabia and its allies, next. This is bloomberg. Rishaad this is Bloomberg Markets asia. A look at the latest business flash headlines. Glencore, a lastminute bid for rio tintos austrian coal mine has left the group with a dilemma, except less money or risk upsetting its biggest customer. Glencore offering 225 million more. Glencore is the biggest coal miner, but its reserves are running out, making use mines an attractive to proposition. Toshiba ceiling the sale of its flash chip memory business on tuesday. Kyoto news says talks are continuing with Western Digital, trying to block the sale. Toshiba is being demoted to the second section of the Tokyo Stock Exchange after a third extension to its Earnings Report. We can reach final agreement on the sale of the chip unit as planned by june 28. We are making a huge effort to reach that deadline, and there is no backup plan if we dont make it. Rishaad spacex has launched its ninth rocket of the year, beating last years total. The falcon kraft is caring 10 satellites for iridium off oncations. The lift sunday in california follows another launch on friday. It is the first time spacex has sent to rockets into orbit in such a short period. The qatar diplomatic crisis looks no closer to resolution as it enters a fourth week. We also have secretary of state Rex Tillerson saying the saudi demands will be difficult to meet. Peter, thank you for joining us. Core of thise dispute in your view . Is a long it cherished desire on the part of the saudis to muzzle qatar and to control qatar to do more or less what the saudis want, particularly not to support the muslim brethren, who the saudis dislike intensely. Also, i think that the saudis would be perfectly pleased to as it were close al jazeera, with its various satellites is the only thing vaguely resembling a free media in the region, but also the saudis resent qatars ties to iran, which is rather ridiculous given that they shared the biggest gas field in the world. This kind of accident of geography requires that they get on. Rishaad yes, absolutely. They have to placy nice with iran. What about al jazeera, shuttering any turkish bases in qatar and being subjected to these monthly checks as well by the, well, an International Body i suppose . Exactly. It is rather farfetched. Know this iswe all the pot calling the kettle black saudi arabiathat has been funding extremist groups all over the muslim world for the last 40 odd years. Like ale, it does not jazeera because al jazeera is pretty much unique and this le region in adopting, not a relatively critical attitude to what is going on in the air world. In the arab world. I dont think the saudis will be able to force turkey to do anything it does not want. Rishaad exactly. In your view, Rex Tillerson also says some of these demands would be very difficult for qatar to fulfill. How do you think it plays out . It is very difficult to say. Qatar the demands is that doesnt interfere with the internal sovereignty anywhere else. This is a massive interference in internal sovereignty, as you can see as you read through this list. All utterly unreasonable. Should not Fund Terrorism and so forth, that goes without saying, but the saudis are scarcely innocent of that. Difficult to say because you have these contradictory voices coming out of the white house. Tillerson i think is trying to go for some sort of moderation and reason and so on. Trump is of course as always unpredictable, and of course doesnt understand the politics particularly well, but it is very hard to see how this list of demands will pass muster anywhere that matters. Peter, then we have to ask another question, if this drags on, they have given them 10 days when this ultimatum expires, but what will happen then . Think people will end up with egg on their face. It is almost inconceivable that qatar will just fold up and capitulate. There are all sorts of other factors of play here. This is one of the largest and most significant american bases in the world in qatar, which cannot exactly be removed overnight. Isother words, this important strategically for the United States. I think there is a limit to what the saudis and the mri fees can it imre it y can do. Popular inis quite qatar. Difficult to see a clear way out of this because the demands are so utterly unreasonable. Rishaad thank you so much for joining us. We will see how all this pans out. More on that takata, some lines from honda saying the decision for takata to sell its assets and businesses to key Safety Systems for 1. 6 billion, that coming through. That as the company is said to be filing for bankruptcy protection. Honda is saying the decision will have a limited impact on earnings this year. It is hard to cover these takata related costs as a result. On the shares moving to the upside. Coming up, nestle is a sweet target for hedge fund third point. We will look for calls for urgent change. On wall the week ahead street, investors focused on a potential deal in what we call merger monday. Nestle targeted by the activist dan loeb. Su keenan has the latest in new york. Monday in wall street is usually all about deals. This is a deal maker, a highaker, dan loeb profile activist from third point. Very interested in nestle. The company has confirmed a 3. 5 billion stake. We can look at a chart on how nestle has done. There has been a lot of pressure on Food Companies to rein in , a new ceo looking to sell off some candy units. In the u. S. , there has been a large step back from consumption of sugarbased candies. Interested in . Kingwhat is loeb they own 40 million shares and some options in this was company. Tends to that the fund encourage management bursar change with a greater sense of urgency. It appears they would like nestle to sell off its stake in in the Makeup Company and review his portfolio. Third point, which has traditionally been interested in u. S. And Japanese Companies, is starting to take a closer look at europe. They said in their investor letter that as Economic Conditions have improved in europe and french elections are behind us, this is a trend that will likely continue. Theaad what are some of specific changes third point is pushing for . It looks like nestle has a large portfolio of companies, and third point wants to shake it up iritate a look at what was in the investor newsletter that went out sunday after bloomberg broke news that there was an interest by third point in nestle. The bestt having position portfolio in the consumer packaged goods industry , third point told investors, that nestle shares have significantly underperformed, mostly in u. S. And european consumer staples. The letter went on to say that it is rare to find a business of such quality was so many avenues for improvement. You can expect more on this. Rishaad thank you very much. Right, coming up, having a look , employeesesorts they are facing up to three gears in jail as they face a court, accused of illegally promoting gambling. We will find out what that means for casinos chasing chinese money. Rishaad there we go. Is 9 29 in hong kong. We are counting you down to the start of the trading week. I am Rishaad Salamat coming to you from bloombergs asia headquarters. We did not have many catalysts over the weekend. As result, we are looking at centralbank speak. Mario draghi talking in portugal tomorrow. Janet yellen will be in london talking about Monetary Policy as well. Mainhile, what are the events happening . A mixed start to the trading day. Oil sub45, still in a bear market. Where does it go . It has moved slightly to the upside, as indeed has sterling underway. Negotiations a long, drawn out process. You were talking about fed speak, not a lot of movement likeit comes to anything data coming out. So top tier fed speak coming up. The dollar could be pressured for the rest of the week. Lets look at the hang seng index. A pretty positive day for most markets in asia. Gaining seng index. 25 , most sectors up, except industrials unchanged at the moment. Tech shares and Energy Leading declines, energy as mentioned, some upside. The the vcr r on wc function. Reversaleing some happening this week on monday. We do have a little bit of pressure on the bloomberg dollar index. We are talking about back to losses, declines for the bloomberg dollar index in a long time. Investors now questioning the inflation outlook and what the fed will do next. Right now, the onshore yuan fix was kept on change almost. After seeing its biggest weekly loss in almost three months. Also losing auan little ground, but not doing much after a big loss in the last session. Is stayinge yen around 111. 040 range. Oil is more interesting. We are seeing further upside after we saw the plunge against the bear market, 20 to klein since its 2017 highs. , the question remains what will happen later as we see rigs come online in the u. S. , the 23rd straight week of adding rigs in the u. S. We are seeing the supply glut continue and oil prices feeling the brunt, although after falling into a bear market, a little upside. Rishaad thank you very much indeed. Right, lets get first word news headlines. Will be takata suspended in tokyo after it filed for bankruptcy, citing liabilities of 10 billion. Takata will be delisted on july 27. The stock wont trade again before that day. It is also confirmed that it will sell the business to key Safety Systems for 1. 6 billion. More than 100 million cars need fixing in the biggest product recall in history. A cyber attack disable communications and the u. K. Parliament with email disrupted. The house of commons is investigating the attack along with the National Cyber security center. Aftereach came two days it was reported that passwords were for sale on russian hacking sites. Is turning to emerging markets to shore up trade as onxit puts existing deals uncertain footing. A statement from the Prime Ministers Office promises improved access to u. K. Markets for the worlds poorest countries and remaining dutyfree access for everything except arms for 48 countries. Italy has committed up to 19 billion to clean up to fail banks in one of its wealthiest regions. Banks andaves the two involves another lender. They are taking over the good assets with state funding of 5 billion. The European Commission has approved the plan and says it is in line with eurozone state aid. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Staff willown resort be appearing in course to face charges of illegally promoting gambling. The case is seen as beijings most public warning to foreign casinos. On . S, what is going what do we know . This has all been shrouded in secrecy. Good morning. Thats right. A cloudy case since october since they were detained, but we do know today is that 19 current and former employees go on trial in shanghai. They are accused of illegally promoting gambling. You are not allowed to do that anywhere on the chinese mainland. It is only legal in macau. They face a panel of judges and are expected to enter please today. Today. S it could last only a few days. We should say the history of , almostcourt cases every case ends up in a conviction. Former employees are convicted, they face as many as three years in jail. Right, angus, the next question is why is china cracking down on foreign casino operators . From the fact that it is illegal to promote gambling, they are cracking down on every foreign casino operator, or at least sending a warning to every foreign casino operator that tries to drum up business on the mainland. They dont want them brazing lead taking away gamblers from china and taking them to their domestic casino operators in australia or other resorts around asia, but there is another aim. They are trying to prevent hundreds of billions of dollars of capital flowing out of china. Some of that exits the mainland through betting operations, so it is a dual fold operation, if you like. The most recent president was in 2015 when a Smaller Group of employees who worked for a south korean casino operator were arrested and served jail terms of various links, but by last year were all released. Todays case is a bigger group, so certainly the biggest warning to foreign casino operator since they started cracking down. Maybe i am asking you to stick your neck out here, but what do we know about next steps . Enter pleasy should today, and the verdict could come in a matter of days, then we start the process of moving on. For crown, this has been an ordeal for the employees in the months in the eight since they were detained. Crown has closed regional offices and pulled out of macau and focused on its domestic resorts, reversing its strategy. How does crown move on from this . The verdict will be poured over for details of what crown may or may have not done. There may be questions about the suitability for crown to hold onto its domestic casino license. It will be interesting to see what the repercussions are from this case depending on the verdict of course. Rishaad thank you very much. Right, lets take you to mongolia. Why . They go to the polls today after one of the uglies campaigns in the countrys history. Whoever wins faces an equally as theeconomic picture imf is working to stabilize the economy with a loan amid a downturn in resource prices. Its that, isnt it . The price of these commodities have fallen and it has taken this economy from 18 growth to negative terrain. Can you put it all onto commodities . You can put a lot on commodities. The biggest exports are coal and copper. It rode the wave of Commodity Prices when there was a boom on. With the gogo years, money poured in. When the commodities prices came it created problems for commercial operators. Mongolia did quite well in the have years, but they fallen into something of a bust. That is the bigger problem. Rishaad how onerous is the bailout . It is reasonably onerous. Of itsne of the biggest kind on a per capita gdp basis. It involves all the big multinationals, the imf, the bank of japan. Hina became involved there were tensions between china and mongolia over the dalai lama visit. Obviously there are targets and they have to implement tight fiscal policy. That is where some of the concerns live. Rishaad what are the key risks ahead . Moodys said they are reasonably good at the imf implementing the bailout. Once the program ends, they slip back into bad habits. Of course, if that does happen, mongolia might lose international markets, which it needs to hold onto. Debt is expected to hit 98 of gdp. Mongolia has to keep on track and keep a tight policy in the future. Rishaad good stuff. Thank you very much indeed. The ongoing elections in mongolia and what is at stake there as well. Guest says chinas crackdown on overseas dealmakers is for their own good. We will discuss why. This is bloomberg. Inhaad i am Rishaad Salamat hong kong has we have a look at the this is flash headlines softbanks 100 billion vision fund looking for investment in quantum computing, searching for new technologies to replace current computer processes. One Fund Managers says it wants to back the group as quantum computing becomes the industry standard. Alphabet, apple, and microsoft are among the groups working on quantum computing. Linen buffett has thrown a the stock has soared since berkshire hath we agreed to take a 30 stake last week. One of the people who helped to create modernday macau is taking a backseat. Stanley ho stepping down. He will be replaced by his daughter. He built a monopoly with huge numbers of high rollers from china. It has been surpassed by sands china and galaxy entertainment. Right, lets have a look at some of these big serial dealmakers, including hna group and anbang insurance. It sounds a bit like micromanagement to me. If you where to look at this from a u. S. Standpoint, if the fed were to look at what some big banks are doing, you might call it a stress test. The point is that they have to look at whether or not these satisfy riskos standards. I think it is appropriate and a good thing for foreign investors. They should be encouraged that china is doing this. Rishaad will it make a difference . I think it will make a big difference. Rishaad when you tell the banks to stop dealing with them, but it is cutting their legs off. Nonsense. That is it is a question of whether or not the banks are looking at these investments from a proper risk standpoint. If they do, fine. 300 billionng at chinaflows in m a for overseas, and that is risky. They have every good reason to take a closer look. Rishaad i want to bring up this 357. It shows what happens with these serial acquires. We saw what happened with anbang , buying the waldorf a story, then a bid for starwood. Fosun, down 5 . One Film Holdings down as well. The point is you do this, but how much confidence is eroded in these companies, and how much confidence is eroded in the Broader Market . It was interesting the timing of this because it happened after the msci inclusion. I used to work at bank of america, and they did a stress test after the crisis and found out that bank of america failed it. What happened was that initially there was a stock market reaction, but however it created the situation in which Risk Management procedures were put in place that allow the bank to recover and make a good comeback. This is what we are looking at. This is the right thing to do. You sometimes have to look at this hard, and you want to avoid what japan did in the 1980s. Rishaad indeed, how closely do chinese authorities look at what 1980s, to japan in the going into the 1990s, never recovered sense. Very close. Bank of japan has a Representative Office in beijing, and one of the principal occupations of the representatives there is to answer questions by chinese regulators about just exactly what went wrong in japan and how to avoid it. Is telling a story, isnt it . Have a look at this. This is what we are talking about. 38,915 for the nikkei to 25 in 1989 on the 29th of december, went all the way down, recovered a bit now. Are they coming out of the woods . Might, but there are so many real problems there in japan that they are still facing, basically demographic problems. Rishaad something china may well have been the future. What do they look at in particular, the chinese authorities, and we mustnt do that because thats what the japanese did . What specifically . The plaza accords tripled the value of the japanese yen, that is not something the chinese will replicate for sure. Why should they . Rishaad that was the seed planted at that point . At that point you were able to buy rockefeller center, and before you would have lot a house in greenwich village, i dont know, so it is something that created a difficult situation. About this, what whole capital controls, that is one of the reasons why we have those stocks which have fallen so much . Capital controls are important for china right now. Rishaad japan did not have them, did they . Know, they didnt. In fact, they were told by the imf that they could not have them. China has been telling the imf, look, we are slowly but surely coming up here with opening measures for our markets, but nothing too hasty. That has always been the chinese way of doing things. Shin first, then all of china. It is not all of sudden all of china. Rishaad they look at things in very long time horizons. What next . How do they evolve and become more involved with the Global Economy . Saw msci inclusion. That is one way, the other is the sdr basket. Since they enter that basket, the yuan is further away from being internationalized. Thats true. Problem, as it was for the United States 35 years ago, was to create a bond market that can support demographics of an aging society , and for that you need transparency. You cannot have a bond market without transparent deals, whether crossborder m a or local m a, you have to be transparent an to have a vibrant bond market. I think they are strongly committed to making that work. Rishaad maybe they follow argentina with a 100 year bond. That will be a decision made by the next pboc governor. Right. Rishaad a tough act to follow some of this guy. He did a great job. What can anybody complain about . The Central Bank Governor with a difficult task, and he has really managed well. Rishaad thank you so much. The race for rios coal assets is heating up. This is bloomberg. Rishaad this is Bloomberg Markets asia. I am Rishaad Salamat. Rio tinto has a problem after recommending shareholders forove a bid from yancoal its assets. Glencore has arrived with a better offer. As get the details with paul allen in sydney. Rio tinto could take the bigger offer, but could risk alienating an important customer. Paul thats right. Yancoal has done all the right things, a good offer, 2. 45 billion, of the regulatory clearances are there, and rio tinto has recommended this deal to shareholders. Tinto has been working hard on improving its relationship with the china. The ironthe head of ore unit got jailed on corruption and bribery charges. Throwing out this bid from yancoal will not do a whole lot in terms of relationship building. For 225offering next million including other sweeteners, compensation of the deal gets delayed. From glencores point of view, getting these extra mines from rio tinto would link up all of lynn course the pleading tenements as well link up all of glencores temperaments as well. Rishaad a pretty tough decision. What are people telling you about the way they are leaning . Review thisard will glencore bid and it will be an announcement before the Shareholder Meeting tomorrow, so they will have to crack on with it. If they decide the glencore bid is superior, the Shareholder Meeting will be delayed and give yancoal time to come up with a counter offer. Will expected that yancoal come through with a counter offer, so plenty to run as far as this story is concerned. Rishaad thank you very much indeed for that. Paul allen joining us from sydney. Coming up, President Donald Trump has been calling the indian Prime Minister Narendra Modi a true friend. That is ahead of their meeting at the white house later today on monday. We will find out what is the agenda for the leaders of the two biggest democracies. This is bloomberg. Rishaad almost 10 00 a. M. In hong kong aimed singapore. That 00 in the evening on sunday in the eastern seaboard of the United States. This is bloomberg. Rishaad a buyer in a bankruptcy. Takata gets a deal as it reveals liabilities have reached 10 billion. A record call recall. We are expecting a News Conference. Aircraft,new travelers return. We speak to the chief executive. Donald trump is calling him a true friend. Theon Prime Minister indian Prime Minister gets a warm welcome in the u. S. Lets have a look at what is going on. The week we just had has been ,ominated by the oil price dropping 20 . Lets bring up this chart. Intoe plunge took place your market range, there we go. This is a correlation with gold. One ounce of gold buys 29 , thats the most since the trump ascendancy to the presidency. It may suggest nervousness in the Financial Market about Global Economic prospects. Energy commodities compared with safe haven assets. Thats the deal. We are getting jitters when it comes to the oil price. The path of least resistance is perhaps to the downside. With that in mind and indeed, with the first trading day of the week strong and positive day for equity markets across asia. Gaining for a third consecutive session. The south korean coffee is also gaining ground. We have to keep an eye on the south korean yuan. Pressureeing a little for the dollar index. Now headed for its first backtoback quarterly decline in over three years. Given that we have fed speaks including janet yellen, the dollar could be further pressured throughout the week. We are seeing oil prices continuing to gain. When it comes to treasury yields in the Asian Session they are rebounding huddle yields in other debt markets in asia are losing ground. Look at thea asiapacific index you can see that Technology Stocks are leading the gains. Samsung electronics. Leading the declines, toshiba down more than 4 . Again, toshiba has been demoted to the second section of the Tokyo Stock Exchange. Last week they already asked for earning for a delay of reports. Were also seeing banks dragging the index. When it comes to the shanghai deposit, gaining. One thing that is interesting to note in the Chinese Markets is the gap between a and h continues to rise after they announced they will include a shares into global industries. We are seeing the premium index in ground. It is at the highest level rebounding. With a year to go before we could see prices converge at some point but that is being that has been elusive. Rishaad lets get over to singapore for the latest first word news headlines. Takata shares are to be suspended all day. Starting liabilities of 10 billion. Takata will be formally the listed july 27 and theres a chance the stock wont trade again before that day. There is also concerned that once other business for 1. 6 billion. More than 100 million cars need fixing in what is the biggest product recall and history. In history. The currency capping a third week of trading outside the preferred range. The dispute with saudis have disrupted causing a dollar storage. They had been given a week to implement a list of demand including cutting ties with iran. People were killed when a fuel tanker exploded in pakistan. Crashed andd villagers were trying to collect spilled oil. The number of victims is expected to rise and local hospital hes hospitals say many experienced burns. 19 crownase against resort staff detained since october has begun in shanghai. They include the head of International Operations and are all charged with illegally promoting gambling. Public warning yet warning people not to gamble. They face three years in jail if convicted. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Rishaad President Donald Trump is meeting the indian Prime Minister today, welcoming someone he called, quote, a true friend. Lets look ahead to that with a former indian consul general in new york and ambassador to various other countries. Thank you for joining us. What is going to be top of the agenda in your view . Terrorism,ibly defense cooperation. Certainly trade will figure in the talks. But the region, especially to indias west, has become very troubled. Strategically, along with defense, will be top of the agenda. Rishaad one of the things of course, which india has a vested interest in qamar visas for i. S. Per for i. T. Personnel. Trump wants to limit them. I think he is trying to get a more liberal view from him. In the long run a lack of these is could be good for the union economy. Visas could be good for the indian economy. Neelam they had lobbied, including during the campaign. Sector, somet. Ceos have already said their products have been upgraded, much more value added. They dont think it will be a problem. They announced hiring 10,000 people in the u. S. I think this is less of an issue than it appears to be. Rishaad yes, there has been a lot of noise made about it. Of course, all of this is also going to be contingent to some extent on how these two get on, wont it . Trump has actually been pretty good at charming otherworldly years he has but he is being cautious. In the less than six months that President Trump has been the president , he has gained a reputation for unpredictability. And there was that unpleasantness on the telephone with the australian Prime Minister. I think the Indian Foreign office has said there is not a fixed agenda, they have been fairly lowkey on the visit, talked about it as a getting to know you visit. But the american side is playing up the visit. Rishaad yes. Indeed, one thing he will be seeking is a harder line on pakistan. India of course accuses them of terrorism within their own borders. How far will donald trump go on that in your view . Of course he is unpredictable, so what he says may be of little consequence down the road. Neelam it is difficult to say, because i think in the western perspective, terrorism at the moment constitutes isis or daesh, so they are really focused on syria. It remains a fact that they originate out of tax stand. And al qaeda is revising. What i think the focus for the americans will be on daesh or isis in west asia. Rishaad lets have a look at its also if you look at pakistan is often seen by the u. S. As effectively he coming more and more in bed with beijing. Bulwarkndia seen as a against that . Neelam often americans say they need india to balance the expansionism of china. Now india is very concerned because with the china, Pakistan Economic corridor, going through what is indian territory, be concerned on the inside is very high. Concern on the indian sisde is very high. Rishaad how would you describe relations between beijing and delhi . Neelam i would say i am comfortable. At this moment, the difficulties than earlier when it was more talk of trade, etc. At the summits everything seemed to go well. On the other hand, two days indiasna vetoed entry into the group and the naming of pakistani terrorists by the United Nations remains unchanged. I would say the relationship is difficult at the moment. Rishaad ok. It is difficult, absolutely. On the one level they do make the right noises. Very big a very, discrepancy between those nice words being actually translated into action. Are these two sides bluffing each other . There has been much more open acknowledgment of the difficulties in the relationship from the indian in the past year than there used to be when everyone talked friendship instead of actually naming the problem. India has gone as far as to say that only china is videoing vetoing indias entry into the group and other important bodies. I think there is a greater realism on the indian side. I think the chinese have other preoccupations, particularly trying to push the one road for which they have been very keen india to come along. But india stayed away from that altogether. Rishaad yes. Why is there a lack of interest in that . Neelam because of the china, Pakistan Economic corridor, which at the moment is at the heart of this, and actually provides to connect china into the arabian sea, for which it seems to the indian side is looking more and more like a naval base than just a commercial port. Linkhe road and the rail through territory occupied by pakistan and some is seated to pakistan decades ago. So india is very uncomfortable on the sovereignty question. Rishaad last question. Assuming all goes well with the meeting between the two, where do you see india in the world in lets say, five years from now . I would say closer to all the democracies, economy going well at 7 a year. Rillion plusa 3 t economy. Becoming more closer to the goal of being the thirdlargest, not just in purchasing power. But i think also the Defense Modernization is underway. The United States will be a big player in that along with russia. Indianhink that the economic and should capabilities will be much greater and it will have a greater voice and influence in global affairs. Rishaad thank you so much for that. Neelam, a former diplomat in new york. Of course, takata and the bankruptcy and sale is at the moment other companies are talking about this and saying toyota is the latest. When honda said it would be difficult to get these expensive recalls that takata has, they would be very difficult to actually get, saying they would be uncollectible. They are already provisioning for the costs saying there will not be any real impact on earnings, echoing what honda said. Chinas takeover tycoons are risking hitting the wall under the scrutiny of the government. That is next. The dis, a bank of international sentiment s lements, has been warning our assets editor. With is the key risk highlighted industry . Bis is going back to the scene of the crimes of the Global Financial crisis which was a mismatch between foreign entities building up assets in u. S. Dollars for not having a lot of funding to back it. They are taking a look at vulnerabilities and identifying more than 500 million mismatch on the part of japanese banks. They made a lot of dollar loans and went to big u. S. Companies, Japanese Companies. Obviously they dont have a big of dollar deposits. Big pool of dollar deposits. They have the mismatch in short fund markets. The bis is pointing out some vulnerability. Rishaad ok. But the thing is, what are the changes chances of a crisis actually happening . Chris thats a good question. Crises are usually unpredictable. All told, the situation for the japanese omega banks looks pretty strong. These are generally thought to be buyer finance teams highquality loans. Our finance teams highquality loans. If push comes to shove, they always have the bank of japan as a potential backstop. The boj hasnt unlimited dollar swap would be fed. With the fed. It is hard to see looking at things here how exactly a crisis would erupt with regard to japanese banks, dollar funding mismatch. Rishaad right. What kind of shape our japanese banks in . Do they have stress tests . Chris when of the things the bis is suggesting is there be global or at least international stress tests done on banks that looks at dollar funding, in particular. Probably not a bad suggestion. When it comes to japanese banks, the japanese economy is not going gang busters but i think as we have discussed before, it is looking pretty solid. More of the risks are among the regional japanese banks that are less active in the dollar market. The regional banks are more exposed to the areas being affected by population decline, stagnation in the economy. Those are where the risks are more in the japanese Banking System than the big guys lending generally to highquality borrowers in u. S. Dollars. Rishaad thank you very much. A quick look at the latest business headlines. Glencore is a lastminute bid for australian coal mines. Glencores offering at least a25 million more than proposal from china, which rio has already back. They are the biggest coal miner in the valley that it has its reserves are running out. Third point hedge fund has its site set on nestle. He tries to get them to change their strategy. He is known for targeting u. S. And Japanese Companies but is now looking opportunities in europe. Toshibas shell price was down. Share price was down. It is striking a deal with a group. With are continuing Western Digital which is trying to block the sale. Toshiba is also being demoted to the second section of the Tokyo Stock Exchange. They asked for a third extension for Earnings Report your report. We think we can reach an agreement as planned by june 28. We are making a huge effort to reach that deadline and there is no backup plan if we do not make it. Rishaad coming up, chinas rags to riches trends transformation. This is bloomberg. Rishaad chinese citizens are wealthier than ever and their slice of the Global Economic by will continue to expand. Pie will continue to expand. Capita is a metric per gdp which is worth looking at when we are talking about moving and shifting from manufacturing in an industryled to a consumerdriven economy. What the number crunching has shown is that china is moving towards 64 positions out of 166 countries when it comes to per capita gdp. Bear in mind that compares to 133rd in 1992, about the level of haiti back then. In 1992, their per capita gdp was so low, more than 50 lived under 2 a day. China has over past and beat brazil and within five years it will be catching up with argentina and will have surpassed mexico. In terms of the britain nation grouping, it stands out. It has beaten and is about india and is closing in on russia. Some pretty fast Economic Growth on a per person cap a capita. Rishaad is china likely to chose the glad with the United States any times likely to close the gap with the u. S. Anytime soon . Tom the u. S. Is intense and unlikely to move much. If you bear in mind in the u. S. Per capita gdp is around 43,000 u. S. Dollars, chinas as around 6,600. Still a huge goal. Chinas perseen as capita gdp has grown come eat we grown, the has number of people under the poverty line has shrunk. It is a widening wealth gap, particularly between urban and something very much in focus for policymakers. Rishaad thank you very much for that. Chinese companies enjoying an 18 month long shopping spree, much abroad. It is all granted to a halt. [ noises inside can ] [ laughing ] its driving me crazy come on. [ spitting from tongue ] time for my secret weapon. Sports, movies, tv, ah, show me music to distract a minion. [ voice remote click ] oh [ pharrell starts to play ] [ minion so happy to see screen ] ahh im pretty smart. Ahhh [ lots of minions ] [ mooing sound ] show me unicorns. [ click noise for tv ] ahhh that works too. Find your awesome with the xfinity x1 voice remote. See despicable me 3. In theaters in june. It is 10 29 in singapore. I am Haslinda Amin. Narendra modi this is the white. Ouse President Trump describe the Prime Minister as a true friend. Fundamental differences stand between them on issues such as the h1b pieces used by Many Indian Companies and the paris climate accord, which trump has abandoned. Attack disabled communications in the u. K. Parliament saturday with lawmakers access to email disrupted. The house of commons is investigating along with the National Cyber security center. The breach came two days after the times reported that the passwords for officials were for sale on russian hacking sites. Britain is turning to emerging markets to shore up trade as brexit will its existing deals on an uncertain footing. A statement from the prime promisesoffice improved access for the worlds poor countries and to maintain existing dutyfree access for everything but arms for 48 countries. To lee has committed up to 19 billion to clean up to fail banks in one of its wealthiest regions. The deal involves another lender taking over the good assets with state funding of more than 5 billion. The European Commission has approved the plan and says it is in line with the eurozone stated rules. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. A look atight, taking what chinese regulators have been doing stepping up their checks on overseas deals. Countrys most prolific dealmakers could find themselves without access to financing. Lenders have been asked to provide details of loans. Special about these companies . I think as you mentioned that the crucial thing is ranking regulators looking at this. These Companies Live on borrowed money. Beecent comparison might apple. Apple has famously hardly borrowed a cent in decades. Tothe same thing happened apple and its bankers cut off access, tim cook would not have much of a problem. He could pay off the debt out of cash and marketable securities and still have 160 billion in cash left over. The troubles with the Chinese Companies is they are very different to that. Absolutely, so if they are very different, in what way are they different . Way to sure, the best look at it is to look at the free cash flow. Free cash flow is a popular metric to understand what is going on with these companies. Mostly they dont pay with shares because owners want to retain control, so they are raising cash by taking on that. The u. S. Equivalent, the big cash buyers in the u. S. , qualcomm, johnson johnson, blackstone. Precashsee that their flows are consistently positive, but substantial amounts, which makes a lot of sense. You not to limit cash unless the underlying business is good. Look at the affiliates of these Chinese Companies, consistently negative, which begs the question why the banks are lending to them in the first place. Rishaad nice one, david, joining us from sydney with the latest on these troubled serial acquirers in china. Facing this, well, probe if you like. Is holding atakata News Conference in tokyo after the company confirmed it is filing for bankruptcy protection at home and in the United States where its assets will be under chapter 11 protection. Event is being led by the chief executive and president of takata. The Companies Potentially lethal airbags are linked to at least 17 death around the world and trigger the biggest product recall in history. Tradinguspended from today and will eventually be delisted on july 27. To the United States, the senate expected to vote on the new Republican Health care plan with up to five gop senators opposing it. The bill could well be in jeopardy. Jodi schneider, what is going on here . You have this new bill after the first one failed to tell me about the difficulties and what the problems are with this legislation . The house did finally passed the bill after some struggles, but the senate said the bill went too far and they wanted to phase things in. However, five republican senators dont think it goes far enough. Now we have heard from some moderates, including Susan Collins of maine, who says she is worried that the bill will leave older people and people in rural areas without a Health Protections they need. Lose to only of ford to republicans because no democrats will vote for the bill. Much is this down to politicking rather than sound policy . Politics. Of it is obamacare was a big Campaign Slogan for President Trump and he says this is a legislative priority for them. They would like to do something in both chambers of congress, but it is hard. We saw in the house when they did a store from the nonpartisan congressional budget office, saying 23 million americans would lose health care, so we are waiting for the score on the senate bill. Where are we with the Supreme Court looking at Donald Trumps travel ban . We expect to hear something from the court anytime now. Two federal appeals courts have blocked the bill from moving forward. The Trump Administration would like the court to not only say they will consider this and look at this, but that they will let them have their travel ban in the meantime. This would be a big priority for them. Rishaad it does seem like we have almost paralysis at the moment, dont we . Would love toy change the conversation to a couple of wins on health care and the travel ban. We will see if that happens. Rishaad a quick look at the trading day, a moved to the upside. But doingssion today, pretty well at the moment. Hang seng up. 5 , shanghai composite up. 7 . We do have crude oil coming back a little bit, meaning we are seeing some of these equities related to oil moving to the upside. Futuresve those crude holding above 43 a barrel. Aerling has been climbing for fourth day and amid these brexit negotiations by theresa may. There we go. ,he kospi on the way up. 3 taipei up by nearly 1 , a market there that is rather tech heavy. Coming up, the outlook for fixed income amid uncertainty and the big week for Central Banks. We are hunting for real yields next with ubs wealth management. This is bloomberg. Our weekly real yield segment, the fed threatens potential missteps, the treasury market is has calm as it has been in years. Its talk with ubs management. You would not think anything was going along with treasury yields . Thats true. It has been very stable, and since the start of the year, a tight trading range. Environment,tility not just fixed income, but across a lot of asset classes. The bond market has performed well and credit acids do well in the low volatility environment. On the 10he yields year, 2. 1 percent, essentially no real yield, so where do you look for it . It is challenging. 75 of the german bond market has a negative yield. 70 of the japanese pond market has a negative yield. , 30 of their Government Bond market has gone negative yield, so a really challenging environment for all investors. Why a lot ofis people have gravitated towards emerging markets, where you do get some return for the risk you are taking, credit assets, Government Bond assets, emerging market assets, flows have been incredible, and that is the place where investors can find that return on their investment that they are sadly lacking in other markets. Me something here, you mentioned emerging markets. Emerging market credit has proved very popular, particularly dollar denominated credit. Why . I think it comes down to that yield argument. Within a emerging markets as well, asian has been a much more stable region compared to what has been happening in latin america or eastern europe, so asia is almost seen as a bit of a safe haven in emerging markets. That is probably not the right way to think about it, but when investors are searching for some kind of reasonable yield without too much volatility, political has been, that attractive to them, and certainly the u. S. Dollar market within asia has performed incredibly well over a number of years now. Caveat there is a huge isnt there with credit in asia, and that could be of course janet yellen and company . , although when you really think about where the fed is going to get to and the overall inflation environment globally, negative real yields in other parts of the world, but with the fed tightening gradually and modestly, it is not putting a lot of pressure on markets. Even with the Balance Sheet run down they are talking about, it is small when you consider the Balance Sheet is 4. 5 trillion. They might start to run it down 10 billion a month, so it is not really significant. I made a comment that it is trying to empty at bath with a thimble because it is a slow drawdown. Ecb and consider the bank of japan are continuing to buy assets at 120 billion a , 10 billion is not much to come out, so while the fed maintains good communication with the market and a gradual policy move, then it is unlikely to cause a massive disruption in the asian credit market. The bigger risk cleared he is what is happening within china and the chinese economy, given that chinese credit is roughly 50 of the dollar credit market within asia, that is the key with what happens with the economy there and the policy outlook within china is really important to that market. Rishaad ok. I was looking at european debt, even greek 10 year yields are now 5. 3 . Who thought that would happen a few months ago even . Yeah, exactly. The world has become a low yield, low growth, low inflation place. Haveere where you actually places like greece that are being backed up by the imf and the ecb, there is generally support for all of these markets giving you a positive yield, whether investors are taking too much risk to get that little bit of extra yield is a question where there will be a day of reckoning in the future, but this low volatility environment encourages investors to continue down that path. Rishaad actually, people are also looking at the data in europe and thinking to themselves, do we need more stimulus . Do we still need this Bond Buying Program . Mario draghi will be talking in portugal tomorrow. Any hint of anything in that regard . I doubt it for tomorrow. I think they are certainly starting to help themselves up into something that could be announced later in the year. With the Central Banks, the fed is tightening although the data has been weak, and the ecb has continued to tom in liquidity, and actually that data in europe is quite reasonable, performing quite well, so at some point in time, yes, there will be further tapering out of the ecb, but i think markets are well prepared for it and mario draghi has been consistent in his messaging with markets, so i think it is unlikely they will change too much and will continue to remain supportive in terms of sentiment within fixed income markets in europe. Rishaad thank you so much for joining us. , the, lets get to takata big story of the day. Its president mr. Takata is promising to reside as soon as they hand over the company to also as iter, and goes in for bankruptcy protection here as well. Thats what we have at the moment. The president of the company saying he will be resigning after takata filed for bankruptcy protection, the biggest corporate failure in japanese postwar manufacturing. Fromve liabilities millions of recall airbags linked to Something Like 17 some of theas Company Going for chapter 11 bankruptcy in delaware. Something like 10 billion in liabilities including claims by automakers. They have been saying it is unlikely they will get their money back with regards to this recall, but it is something they well,nage at the moment, will not hit their earnings particular is what companies have been saying to date. Owned by asystems chinese conglomerate will be buying takata. Thes get to some of business flash headlines and talk about softbank and its 100 billion vision fund. It is looking for investment in quantum computing, of field searching for new technology to replace current computer processors. Manager wants to back the group whose quantum computing hardware or Software Becomes the industry standard. Microsoft, alphabet are among the big names working on quantum technology. Warren buffett may have thrown a lifeline to him battle Canadian Home capital group. It does not mean he is optimistic about the country soaring housing market. Buffett saying that while rising home prices make him cautious, home capital is not a shortterm investment. Sinceock has soared Berkshire Hathaway agreed to a 38 stake in the company last week. X has launched its ninth rocket of the year, beating last years total, and we are not at the end of june. The falcon craft is carrying 10 satellites for Iridium Communications and took off from Vandenberg Air base in california. There was another launch on friday. It is the first time space x has sent to rockets into orbit in such a short period. Coming up, out with the old, thai airways plans a major fleet revamp. We will hear from its chairman. That is next. This is bloomberg. Rishaad this is Bloomberg Markets asia. I am Rishaad Salamat in hong kong. Thai airways revamping its fleet. Says that will mean 100 new planes from airbus and boeing, including 30 in the next five years. Atright now we are looking replacement of the old aircraft. We have 100 aircraft right now. We are looking in the next five years to replace the old ones, almost 30 aircraft. That is in the next five years. The portfolio us, of our airline means we will have new aircraft must 100 . There is sotime, much competition in the world, now. E are very good right we are quite confident that in that if we do this better, we can expand beyond 100 aircraft in the future. Airlines are buying fuelefficient models. Are you looking at the same . They will be new generation aircraft, airbus and boeing. This is the way we have to move forward. It is fuelefficient. Are low, fuel costs but the future is subject to volatility. So we want to go with the new generation aircraft. What is the future for your a380 . It would still be a significant part of our portfolio. A lot of destinations that we the a380 can really accommodate the strategy. In terms of your 747s, will you retire them completely or the leasing them out . Aircraft, in the next five years, we are taking this out and replacing them with new generation aircraft. There are update plans for thai. Thaiabout tahi cargo cargo . We mostly ship agricultural products, so it is not worth for the aircraft cargo. For the airline to be able to survive in the future, it is diversifying of the revenue that is so important. Planes will of the come to this area, and that means more competition in flying , but at the same time, we look at the opportunity for more planes to maintenance, repair, and overhaul, so this is the area in thailand. Hugeere is already competitors in the form of singapore airlines. Are you prepared to take them on . There is more need the capacity available. There will be 600 planes each alone,ming to this area so the area here is expected to grow 10 . In the longterm, is there a case for thai to be privatized . The government is only holding 51 today. This is the model we will have going forward. Rishaad that was the chairman of thai airways. , angie have coming up and david will update you on the biggest story so far. Bankruptcy protection for takata , sale to key Safety Systems. What a dramatic into the biggest automotive recall safety recall and history. We are seeing live pictures of the press conference that takata. S holding with journalists we are trying to figure out what this materialy means. Both honda and tour yoda saying they will be unable to collect those recallrelated expenses. Rishaad they did say they dont see it hitting their bottom line. T will beome of tha written off. The president did say he will resign after handing over the company. Thats right. More on that, the latest impact on the industry. It is drama on a relatively quiet day on the asian trading week. We will speak to the head of asian strategy for macquarrie to see how we will set up for the second half of 2017. That is next. This is bloomberg. Angie it is homeless 11 00 in hong kong. I am angie lau. David we are in the middle of the first trading day of the week. Welcome to Bloomberg Markets asia. Angie takata finds a way to survive, filing for bankruptcy and finds a buyer. The costs are mounting for the 100 million car recall. Tour yoda alon gettingese citizens are wealthier, imf figures painting influence in the Global Economy. Prepares a new Shopping List for airplanes. The chairman says how he will continue with the turnaround. Right, having a look at markets in the asiapacific. A very slow start the week. We did gain some traction. Absolutely no volumes out there. A few fed speakers due out. There is a big conference in portugal, where you have central bankers there. Equities continue to grind higher despite lack of catalysts. 40 either unchanged or down. The dollar is on the back foot. Higher, backn about 46, and a decent bit across the bond market as well. Long story short, not much happening this monday. Angie we are closing that first half of the year. Our stocks looking at another monthly gain . A few more sessions to go, up. 7 globally. That would make it six straight months of gains. Have a look at this function. It takes you back to 1988. These are your monthly moves. This is where we are. Until june. We are looking at the first time that equities have managed to gain homeless every single month. Most importantly, which one looks cheapest across major europe, asia, s p 500, and emerging markets here in purple. The most expensive is the s p 500. Also expensive to back then, but have a look where asia is. That is the story. In 2013, it is lower. This is not really expensive levels just yet. Guessing you could find more than a few people who would agree with me. 14. 2 ford earnings forward earnings. Toht, lets get it over Haslinda Amin for first word news. Haslinda 19 employees of Crown Resorts charged with illegal gambling. It is beijings most public running yet to foreigners attempting to bring chinese citizens abroad to gamble. The gulf diplomatic crisis putting pressure on the qatari currency, capping a third week of trading outside the preferred range. The dispute has disrupted offshore markets, creating a temporary dollar shortage. Has been given a week to implement demands, including shutting the Al Jazeera News Network cutting ties with iran. Indias Prime Minister visits the white house with h1b visas high on the agenda. President trump described president modi as a true friend. However, fundamental differences. Tand between them global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Files fori takata bankruptcy protection at home in the United States, climbing liabilities of 10 billion, selling its core business to key Safety Systems for 1. 6 billion. David nice to see you. Take us through the latest lines. Thee are a lot of angles to story, one of which is you have 10 billion in liabilities outstanding and a lot of companies hoping to get their payments from takata. Talk to us about the key lines here. Issues. Are the key how automakers will be repaid for their costs here at most of them have written most of those off. Toy have set aside money cover that knowing that this was the inevitable case, that takata would go bankrupt. There was still a chance a deal could have been worked out to avoid it, but in the end, it was unavoidable. As we speak, takata top executives talking about this to the press, saying this was the best course for us given what our liabilities are. It generates the most cash for us to pay, however, they will not be able to pay everything, and so carmakers will be left holding the bag. Another issue would be victims. Takata will now have less money to respond to those lawsuits, so those victims will be getting less and compensation. I just want to bring up the latest headlines crossing the bloomberg terminal. They have set aside appropriate reserves for recall costs come also responding to the takata bankruptcy, saying they will likely not be able to recover anything in most cases. That is what we are hearing from honda asoyota, and well. A lot of these automakers left holding the bag. The Ripple Effect across the Auto Industry will be huge. Thats right. This will be huge across the Auto Industry. One of the faxes now you have key Safety Systems, a chinabased company that is now becoming global, including operating japanese factories in japan, the former factories of takata. They came out today and said we will continue to operate all of bese factories and will not closing any factories, and we will be keeping on the employees to do that, so you have a case where there has in a lot of Japanese Investment in the auto parts sector and auto sector in china, but now you have the reverse with a Chinese Company investing in japans auto parts supply chain comes of that will be interesting to see how that goes ahead. It is a big change for the Auto Industry. A clear risk that automakers face, especially when they respond to pressure to cut costs by narrowing the number of suppliers they have. On singlere relying supplies for major components and there is a recall, you have a lot of costs because the product is in almost all of your vehicles, so that is a challenge tong ahead, how diversify supply while keeping costs down. David do we have any details on which payments takata will be prioritizing . We talked about the liabilities for suppliers. I also imagine they had death on the Balance Sheet. Right, this is the thing with the chapter 11 bankruptcy in the u. S. Much of that will be up to the administrator. Towont be up to takata decide who will get paid. That will be up to the administrator comes of that will be closely watched for sure. Takata has said its factories open. Prior to the bankruptcy, that is what they were struggling to do because there was such a huge demand for replacement airbags. They need new inflators. It was the inflator technology that proved faulty and was causing the problems, so they have emphasized staying alive in the past. Is takingfety systems over and running these factories, so they will be left to attend the Court Hearings and figure out with the bankruptcy administrator who is going to get paid. David nice to see you. We are also learning that takata will hold their annual Shareholder Meeting as scheduled. Right, looking ahead, the Chinese People are richer than ever. We will be live out of beijing and flesh out that story for you. Angie next, the evidence for and against with viktor shvets. This is bloomberg. David this is Bloomberg Markets asia. Lets get you a quick check of the latest headlines. Glencores lastminute bid leads the group with a dilemma, except less money or upset its biggest customer. Glencore offering 225 million more than the proposal from yancoal. Glencore is the biggest coal miner in the hunter valley, but reserves are running out. s third pointloeb hedge fund has its sights set on nestle. 3. 5recently bought billion in the worlds Biggest Food Company and seek strategic change. It is now looking more closely at opportunities in europe. Angie toshiba falling in tokyo today. After it said it expects to seal the sale of its flash memory chip unit on tuesday, striking a deal with the group led by japan incorporated. Trying togital is block the sale. Toshiba has been promoted to the second section of the Tokyo Stock Exchange after it out for a third extension for its Earnings Report. We think we can reach final agreement as planned by june 28. We are making a huge effort to reach that deadline, and there is no backup plan if we do not make it. David being demoted to team the. Team b. We are stuckt says between a rock and a hard place. Viktor shvets says the biggest threat will be potential policy. When you loook across the central bank space, which banks are most likely to make that error. Anglosaxons, bank of england, bank of canada, ecb will remain soft, and boj just gives doing what they are doing, so mostly anglosaxon that you need to worry about. Angie why specifically . For taking a look at the curve, but you are saying that is a false paradigm. Has not existed in any meaningful form for at least 1520 years. We might ask a question whether it exists at all. Even at zero unemployment, there will probably not be any wages going forward. Relationship between employment, wages, and inflation completely broken down. David why is that . Part the technology, what do we use humans for. David dont they know that already . Absolutely right, but Central Banks are populated by consensus people. If you are not in a consensus, you will never be elected to begin with. That is the first point. The second point is they want to operate, but consensus develops through academia. Inre is no consensus academia whether the phillips curve is real and the extent to which technology will replace human input, how much the brain is more important than physical labor . Do you need iq these days . Essentially Artificial Intelligence is taking away iq and automation is taking away muscle, so what does it mean for the future . Usually 515 years behind, so one of the problems is that if you live in an ivory tower and are part of a consensus structure, then inevitably you have difficulty getting away from the models you are using. Shouldso what new models one be looking at . That is the question. That is what everybody is looking for. How does it work in a world where information is almost free. Almost everything is almost free. What are the right pricing signals . Had you incentivize people to innovate if nobody gets paid for anything . Why limit software surviving when nobody is getting paid . Why do people contribute to wikipedia for example . There is a brandnew industry and markets evolving right now and nobody knows how to price them, so that is a problem. We are aiming towards facilitating the new change. Alwaysthe things we recommend is that anything that replaces humans, augments humans, attempts to skill humans, entertain humans, opium of the people, anything that benefits from social dislocation such as defense contractors, anything that this. Disrupt is good, so long as there is no other disruptor disrupting business disruptors. That is what we recommend rather than playing for traditional quality companies, because all is disintegrating rapidly. By these you do go assumptions, then tech is cheap. Do we need to rethink classify them as tech. They are everything. Is amazon tech . Is google tech . You are absently right. Traditional industries have been dying for about two decades, and gradually one by one, they are surrounded by technology. The next thing you know it is just smoldering ruins left. Another, oneafter good Quality Company after another disappears. When Warren Buffett started investing, that was not happening, so if you find a good company, good management, good product, you could stick with that. Today, some of those Good Companies might not be with us over the next five years. What is happening is companies are trying to defend themselves, and the way he to defend themselves is by merger, creating monopolies, oligopolies. Ultimately they will lose. The technology companys will either become conventional, or conventional companies will become technology, or they wont be with us. Angie the common denominator to this entire shift when it comes policy. Ess is monetary what we are witnessing is this tightening of quantitative easing. This is historic. How does one figure out how not to step in this minefield . My view is that Central Banks cannot withdraw liquidity. They would love to normalize rates. The Federal Reserve would love to have Interest Rates at 3 three. 5 . The problem is they cant. The more they tighten, the more the yield curve flattens. Eventually the yield curve might start inverting completely. Angie i want to bring up a seeing411, where we are some of the tightest ranges in treasury yields right now since 2006. You can see the 10 year yield pretty much as you said the narrowest trading band, and what happens if it starts flattening. Thats right. Essentially we live in a world that is asset and debt driven. Anything that jeopardizes asset violation or credit is extremely dangerous. Throughon is leverage financial and Monetary Policy. Neither can tolerate high Interest Rates, nor asset prices control rate that. At the same time because there are five times to 10 times as many Financial Instruments as the underlying economy, if you have volatility in the clouds, the ground shakes, so Central Banks have a dilemma. They are creating too many anomalies. One of the problems is Monetary Policy. To be the continues key driver for income inequalities, but Monetary Policy made it worse. ,here are many other areas overcapacity, zombie companies, that continue to survive because of Interest Rates where they are, so they are creating a lot of anomalies, but can they go back . My answer is no, they cant. David you will be sticking around. I want to ask you where theyre all these things merits ignoring inflation and going ahead with tightening. Viktor shvets will rejoin us after the break. He is head of strategy at securities macquarie securities. This is bloomberg. Angie this is Bloomberg Markets asia. By viktorare rejoin shvets. He is the head of strategy at macquarie securities. We show this chart, but can we get it up again 422, less bank for your buck here this is the velocity of money. I imagine when you look at your, the same looking chart. This is the reason why equities are still high because there is nowhere for money to go in the reason why Central Banks are normalizing policy. Thats right. Money stays within the walls of finance. To fivethree dollars dollars of debt for liquidity for every dollar of gdp generated. Thats one of the things that shows you. And more money is not productively deployed, and the less money deployed productively, the less volatility. That, howu dont have much money do we need to deploy into productive assets . Do we need more infrastructure in developed countries . The answer is largely know. Do we need more infrastructure in china . The answer is largely know. Do we need more in malaysia . Probably know. Is there another way to deploy capital away from Financial Markets into real assets, but not in the areas where it will not add to protect kitt product. Asia, africa, central asia, there are areas where money can be deployed. The equivalent of a Marshall Plan requires not investment, but giving money away in order to enable those countries to pick up productivity. Right now it is china, one belt, one road program. Relativelyllish selfish but nevertheless enlightened Marshall Plan for those areas. Angie these countries do need to pay it back at some point. They will never pay it back, and china knows this. Just like the Marshall Plan was never supposed to be paid back and was not paid back. This money will not come back to china. To overt is do you want invest in your domestic economy and see further collapse of returns within china, or would you rather invest in areas that potentially have higher returns . The other issue is the geopolitical and social risks. If you dont build out those areas, they will come home at some stage. ,hrough immigration, terrorism all sorts of stuff will happen. There are two incentives, better allocation of capital and geopolitics. To giveery quickly just it, hong kong bond contact, no official start date yet, are you looking at that . Believer never been a in connect. Either equity connect or bond connect, and the reason for that is simple. I do not believe china can open capital account ever. The only way the Chinese Business model can continue rolling along and the only way china can rescue the world is by keeping capital account closed. Angie always good to see you. Thank you so much for that. Looking forward to the afternoons business in tokyo. The latest on japans reopening next. This is bloomberg. It is 11 29 in hong kong and singapore. These of the latest first word news headlines. Britain expanding to emerging markets to shore of trade as brexit makes things uncertain. It will maintain existing dutyfree access for every thing but arms for 48 countries. A cyber attack disabled communications in the u. K. Parliament saturday with lawmakers access to email disrupted. The house of commons is investigating the attack along with the National Cyber security center. Days aftercame two the times reported that passwords were for sale on russian hacking sites. Toto the has committed up 19 billion to clean up to fail banks in one of its wealthiest regions. The deal to save the banks involves another lender taking over the good assets with state funding of more than 5 billion. The European Commission has approved the plan and says it is in line with the eurozone stated group. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Checking markets in asia, a solid start to the trading week. Gains, up. 9 ing as we see this rally in tech players. The newi 300 and zealand markets looking well. There are a number of markets closed, but other than that positive. Coming online up. 1 . Eneral dollar weakness the aussie dollar up by. 1 , a switch out of the kiwi, down. 1 . In terms of what is moving lifting tech players the market. If you have a look at the laggards, toshiba in focus after it got demoted on the Tokyo Stock Exchange after the bell on friday. There is a bit of mixed movement with an of broker calls increase in some provisions, so some sell calls, but generally positive in asia. That is the state of play across asian markets at lunchtime. Angie thanks. I want to pick up on what viktor ,hvets was saying about china kind of the revised Marshall Plan when it comes to one belt, one road. China becomes this huge behemoth in the worlds economy, we take a look at how integral chinas gdp is to the world story. I also want to relate it back to hong kong. This is the 20th anniversary of handover week. Lets dive deeper into our bloomberg to tell the story of chinas rise, 9214, the yellow is hong kongs gdp as the world bank factors it in. It has remained pretty consistent. Out, the rise of china in the trillions of dollars now, 12 trillion as a share of chinas out, the rise of gdp, hw shrunk to less than 3 . Historically as we mark the 20th anniversary shows how incredible chinas impact on the world stage has been. David it really is. , anded to be one to one now when xi jinping comes to town, a lot of these things will be in focus. The other thing i want to bring china, we growth in have a bloomberg chart that the price of commercial rent, the number of people in the street. Is a back to 2008, that close correlation between gdp growth on the mainland and the decline of retail sales in the city. Long story short, we are nowhere near the glory days in early 2000s when we were getting growth of 12 on the chinese mainland. Angie that is definitely a concern for hong kong has it drives the conversation about chinesere, but now citizens are wealthier than ever and their slice of the Global Economic i will continue to expand according to a bloomberg analysis of imf data. David Tom Mackenzie joins us to talk about this story. Take us through the details here. Snapshot of the wealth of chinese citizens. It to theght to tie Retail Sector because it is the move from manufacturing an industry to a consumer driven economy. This is a snapshot of how things have progressed since 1992. This is using imf data. They are forecasting from this that by 2022, the per capita gdp growth of china will move china to about 64 out of 166 countries on this list. That compares to 133, where china was in 1992. Of theen, more than 50 population was earning less than two dollars a day. Capitaare talking per gdp of around 16,600 per chinese citizen. Already overtaken brazil when you take into account purchasing power. In the next five years, it will overtake mexico. We have a chart that shows how it compares to the other bric nations. Soaring,the china line catching up with russia. It is above south africa, brazil, in india, and now catching up with russia. , to whatat is brics about the u. S. . Is china likely to close that gap . Tom still a long way off. Of u. S. Is 10th in this list 166 countries and is not likely to move beyond that position in the next five years, but her gdp is 43,000 compared to 16,600 for china. If you look at other industrialized developed nations like japan, 26,000, so there is still a long way to go for china to match up with the likes of germany, the u. K. , japan, and of course the u. S. What we have seen as a result of this growth and this increase in wealth for chinese citizens is 2 of thets than population living below the official poverty line. Has increased by six years since 1992, calorie intake and diet have improved a but the payoff of course is the deterioration of the environment here, and really importantly is the wealth gap between urban china, and rural issue that has moved up the list in terms of the agenda and priorities for policymakers here. To some calculations, it is one of the largest wealth gaps in the world. David absolutely. Tom mackenzie live out of beijing. The other question is can mother allow that many chinese to consume. Angie it is an issue we are all facing, but not right now. Coming up, out with the old, thai Airways Planning a major fleet revamp. We will hear from the chairman next. This is bloomberg. Angie this is Bloomberg Markets asia. A quick check of the business flash headlines. Softbanks 100 billion vision fund looking for possible investment in quantum computing. One of the Funds Investment manager says it wants to back the group whose quantum computing hardware and Software Becomes the industry standard. Ibm, alphabet, and microsoft are among the names. Angie Warren Buffett may have thrown a lifeline to home capital group, but that does not mean he is optimistic about the nation soaring housing market. Rising home prices make him cautious, home capital is not a shortterm investment. Has soared since Berkshire Hathaway agreed to take a 38 stake last week here has launchedce x its ninth rocket of the year, beating last years total. We are not even done with the first half of the year. Caring 10 craft satellites for Iridium Communications. Off from Vandenberg Air force base pause another launch on friday. It is the first time that space x has sent two rockets into orbit in such a short time. Mongolia heads to the polls today after one of the ugliest campaigns in the countrys history. Bloomberg takes a look at what is at stake. Station,s polling voters were lining before the doors open to cast their ballots. Some older people came wearing traditional dress, reflection for those who experienced the communist years, the chance to express themselves at the ballot box is a solemn duty. Many feel the right to vote is no longer the cause for celebration it once was. Voters are cynical, and this president ial campaign widely seen as the ugliest, has done little to spark enthusiasm. Voters can choose between the current speaker of parliament and the leading ruler. The next president will inherit a 5. 5 billion dollar imf support package and the challenge of the economicsuring recovery remains on track. Voters have heard little on issues that matter the most, jobs and the economy. Populist rhetoric has dominated the campaign. Allegations of corruption range from cash for political positions to offshore bank accounts. No reliable Public Opinion polls have been released during the campaign. The only debate between candidates took place saturday night, and that has not made the choice any easier. The result should be known after the polls close this evening. As we heard, mongolia is heading to the polls after one of the ugliest campaigns in the countrys history. Whoever wins faces an equally grim picture economically. Angie the imf is working to stabilize the economy after a loan after a downturn in resources prices. It went from the worlds fastestgrowing economy, 23 one year, and now it is in trouble. Last year it was showing all the signs of a classic emerging markets crisis. It is a landlocked economy, exports coal and copper, and has been riding the wave of the commodities boom and bust for years. Over theoes take economy, one of the most pressing needs would be to diversify away from mining into agricultural and tourism as a potential bright spot for mongolia. It would be about enforcing the structural change in the economy and diversification of revenue going forward. David we just talked about this imf loan. They just inked this bailout. The bailout is more than 5 billion, one of the biggest on a per capita gdp basis. Imf, world bank, Asian Development bank, japan and bank didd the chinese a currency swap. That was an important deal because tensions have been rising over the dalai lama. It gives mongolia access to muchneeded hard currencies, but there is a view that mongolia has not been good at keeping discipline once the imf leaves, and that is where the concerns are. Angie this is a landlocked nation, stuck between china and russia. What are the key issues that it faces . One the consistent trends or themes is they have to win back the confidence of Global Markets and stick with the plan the imf has given them, tighten their belt, cut back on spending, and keep tight Monetary Policy. Will wino that, they the confidence of global investors, then it can borrow on the public markets, but until then, they will rely on bailouts. That is why it mongolia needs to break this boombust cycle. David how dependent is the mongolian economy on things like coal, copper . Theres this hoping with rio tinto in the country as well. It is very dependent. Thats why there is a debate that they have to diversify. Mongolia arers for wants toecurity, china source more beef and pork, and tourism. A lot of people would like to go to mongolia. There is Great Potential there. ,avid that wrestling festival for lack of a better word to describe it. Angie thank you so much for that. Airways is revamping its fleet as it looks to spread its wings across asia. Meanhairman says that will 100 new planes from airbus and boeing, including 30 in the next five years. We are looking at replacement of the old aircraft. 100 aircraft, so we have to replace them, almost 30 aircraft in the next five years. The portfolio us of our airlines will have new aircraft was 100 , so we will say that for the moment. At the same time, there is so much competition in the world, but we are very good right now are at alltime highs, so we are quite confident in the future you can sell better with the competitions, the yields and profits are squeezed, but we can also expand beyond 100 aircraft in the future. Rival airlines are buying new fuelefficient models. Are you looking at the same . Hall our aircraft will be new generation aircraft, airbus or boeing. This is the way we will move forward because it is fuelefficient. Right now the cost is low, but future, this is subject to so we want to go for the new generation aircraft. Having said that, what is the future for your a380 . It will still be a significant part of our portfolio. A lot of destinations that we a380t is limited, so the can really accommodate the strategy here. Your 74 sevens, will you retire them complete your lease them out . , in the old aircraft next five years, we are taking this out and replacing them with the new generation aircraft. There are big plans for thai currently, how about thai cargo, what is the plan for that unit . In thailand, the product we ship out is mostly agricultural product, so it is not worth for the aircraft cargo. For the airline to really be able to survive in the future, the diversifying of the revenue is so important, and one of the areas we know that 40 of the planes and the next 20 years will come to this area. That means there will be more competition in flying. The same time, we look at the opportunity that there will be more planes to repair and overhaul, so this is the area in thailand. There is already a huge competitor in the form of singapore and singapore airlines. Are you prepared to take them on . Is more need the capacity available these days. There will be 600 planes each year, more than 600 planes each year come in this area alone, so the area here we are expecting to grow 10 in this area. In the longterm, is there a case for thai to privatize . Now, the government is only holding 51 of shares today. This is the model we will put forward. David that was the chairman of thai airways. , President Trump has called the indian Prime Minister a true friend, but what else is modi looking to get out of this trip to the United States . That is next. This is bloomberg. Angie this is Bloomberg Markets asia. I am angie lau. David President Trump meets the indian Prime Minister Narendra Modi on monday, welcoming a man he called a true friend. But despite their mutual warm words, the two leaders have significant differences. Our asian government editor is here. The mainland being the i. T. Industry, right . Thats right. There are certain visas that india has been a big beneficiary of. Most of them go to india in fact. These are crucial for indias exports. They do a lot of servicing over there and are supported by the u. S. Tech industry as well. Silicon valley has been urging up on trying to crack down on this, because they see this flow of talent as important to their industry as well. Minister of external affairs this morning posting on twitter that he is also scheduled to visit apple, amazon, walmart as well. I am guessing that part of the agenda is to take back business. Right. We have seen Prime Minister modi do this under the Obama Administration as well, head out to silicon valley. It is one of the areas where indy has a competitive advantage , and modi himself is been pushing that. Facebook has been trying to gain more market share in india and expanded their, so there is a lot of mutual interest in the tech sector making this work. Warm words of welcome, but america and india are competitors. Making America Great again, then you have modi helping to make india great with make in india, so how did the two mesh when it comes to trade relationship . There are certain areas where they can work together. Defense is one of those. Defense is one area where the u. S. Wants to have a greater defense relationship with india. They want india to be a major defense partner, to hedge isinst china, so india looking for the u. S. To build more defense items in india. Area where potential the two can come to gather and mash, but that remains to be seen. There are still a lot of obstacles for that to happen as well. David they are meeting on monday, Prime Minister modi meeting President Trump, who president called a true friend of the white house. Angie thank you, our friend. Well, Bloomberg Markets middle east at the top of the hour. Shery ahn will be joining you next. Markets in the middle east are close, but we continue to watch the gulf crisis closely. Shery most markets in the middle east are closed right now marking the end of ramadan. The exception is israel, which is trading. The conversation continues about the isolation of qatar. Qatar has been getting demands from saudi arabia on what they should do in order for this theation to end, including closure of the Al Jazeera Television network, not to mention cutting back ties with iran. We will be discussing that with our guest. We will also be talking about oil. Gaining ground for a third consecutive session and 46 level when it comes to wti and brent, but this after falling into a bear market last week, falling more ,han 20 from its peak of 2017 so why are prices rising despite the fact that bakers use data shows that u. S. Rig counts in the u. S. Continue to gain ground for a 23rd consecutive session . Of our be asking that reporter and talking it with our guest from westpac. He thinks that the markets are way too bearish when it comes to oil. We will talk to him about why he links that, but of course we are speak thisg fed week. We have toptier fed speak, including janet yellen. Be talking about what to expect out of them. Our guest thinks that we will see a september rate hike, not to mention december. A lot coming up. David absolutely. A lot to talk about, a lot of fed speak to that is it for this edition of Bloomberg Markets asia. Angie the following program is a paid advertisement they are out there, driving recklessly, causing accidents and driving up your insurance rates. This is a show about Car Accidents classic cars, and the hd mirror cam, your personal Security Camera for your car. Accidents caught on camera with the