Transcripts For BLOOMBERG Bloomberg Markets Asia 20170724

Eases the strain as the city looks ahead to the olympics. China has a puzzling problem, the labor market tight, unemployment low, yet wage Growth Continues to be week. Weak. We rarely talk about Wage Inflation in china. The other thing counting down to the open in china, last week, we that roller coaster ride brought together the nasdaq have a look at my chart btv 6495 on your terminal. We are looking at valuations about the same, 35 times current earnings. Is downhelp the chinext 14 while the nasdaq is up 18 . Perspective,ion right at parity. We talk about the nasdaq the nearer ring of that gap. We have a huge week when it comes to tech earnings, amazon, facebook, twitter, also big financials. That will determine the tech rallysoftware that goes from here, then looking ahead to the fed and u. S. Gdp at the end of the week, the imf report also interesting to see how they see u. S. Economic growth. On the last one, they did downgrade it. We are 30 minutes away from the open. Southeast asia, singapore, ingwan, and malaysia com online. Sophie, how is monday . Sophie asian stocks set to snap attend a rally. Macro and micro drivers, earnings, the fed decision, and out of australia, philip lowe do to talk, looking to reinforce what was said on friday. We are seeing the aussie dollar down. 8 . 80 level looking farther away. Bonds climbing, commodities base pressure, stocks and metals on the decline, and oil dropping after sliding the most in two weeks on friday. Brenda just below 48. We do have volatility returning an it comes to japanese markets. The gauge has risen 10 , the most in a month, rebounding from the lowest level since 2005 as the yen hads for a fifth day of gains. A poll puts shinzo obvious process for a third term not so bright. I want to highlight what is happening with taiwanese stocks, extending the drop for a third day. This afternoon, we will get factory output and jobless data for june. We saw export orders and trade surplus surged to a record. Ahead of that data, the taiwanese dollar climbing for a second day. I want to round out by checking on tsnc shares on reports it is to deliver chips for the new iphone this week. The courtship for iphones, so shares down. 2 this morning. Impetusld be another for tech stocks, because alphabet, amazon, and facebook do announce earnings this week. , also thats one thing Industrial Production and employment out of taiwan ahead of the big opec meeting. Thank you. And othergs, the u. K. First word news. Rosalind the u. K. Claiming that removing trade barriers with the u. S. Could generate 50 billion of business by 2030. Ministers admit reaching a deal will not be easy. Trade secretary liam fox in washington for talks and warned the American Team has more negotiating experience. The u. K. Cannot sign trade deals until it leaves the eu. The secretarygeneral says oil markets will need more crude from libya and nigeria as it rebalances at a faster rate. Secretary general said the pace will increase as they offset cuts by other producers. China exports of diesel and gasoline surged as a domestic glut and waning demand prompted the refiner to look abroad. Diesel shipments jumped 21 , while gasoline exports rose 8 . Shanghaibased to commodities researchers is domestic demand n hit by cyber and electric cars. Stocks the highest since 2011, mostly thanks to the recent bug of their, china. An earlier glut had close ills, meaning a steep fall in exports and pushing prices up 45 in the past year. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. David thank you. Right, china is facing a puzzling problem. Well, thetries as labor market. Plenty of jobs, and wage growth has slowed, an issue in the u. S. And europe. Malcolm scott joins us now. Nice to see you. Talk about what factors are at work when you look at this disconnect in china. Many of the same factors at work globally. In chinas case, lets go macro and look at the jobs picture. Unemployment rate is always low. It never budget is. To look at the trends come you need to look at what wages are doing and the ratio of applicants to vacancies, and both look fairly ok. 1. 11umber of vacancies, two every applicant, so more than one is a good number. Thats down from the First Quarter, but still robust. When we get to wages, it looks softer. For the 280 million migrant workers, wage gains of about 6. 3 . Comparedds pretty good to u. S. , hong kong, or other levels, but not great for their history. Run high wage policies to beef up the middle class and get them with more money in their wallets so they can spend and help the economy transition to a consumerbased economy. 6. 3 is not great when the base is still so low. David you put that together with the growth in property prices, inflation may not be the problem. It is not the same when you look across sectors. What is Government Data showing on that front . You have to look at the private data, and there it looks mixed. The older economy a bit of a , some jobs around energy, excavation. To number of applicants positions is improving, although still not above one. Internet and ecommerce is where the real strength is, nine positions for every applicant, and that reflects that huge surge in the second quarter, the gdp breakdowns which it showed Information Technology rising 23 from the previous year. Suppose it is worth pointing out that there is a structural theme across other economies as well, but with china, the idea of social stability, so in terms of policy reaction, are we expecting anything . Remember that china needs to become wealthy. Goal, tothe big become a wealthy nation by 2020, and they are prepared to sacrifice competitiveness in the process. To do that, you need rising wages and productivity. Off, andare tapering wages went backwards. 7. 5 million graduates hitting the labor market each year. Most of them want to be in the whitecollar space, so there is a lot of supply, and the shrinking of the overall labor market because of the population come intot does not play in the whitecollar space where there is a bountiful flow of young, educated people. If they will not get the wages that allow them to buy the apartments and fill them with nice furniture and buy a car, this could get in the way of the overarching ambition to become a moderately Prosperous Society by 2020. Much forank you so that. Malcolm scott for us in hong kong, a quandary for chinese policymakers, one of many. Atting the commute, we take look at how companies are responding in tokyo. Thed make or break, meeting of opec and nonopec and what it could mean for oil prices. This is bloomberg. The massive disruption taking offshore, so and we are sure the rebalancing going on at a slower pace than earlier projected. It is on course. It is on course, and it is bound to accelerate in the second half because of the numbers. Month time frame, things are playing out as expected, and our outlook for the later half of this year and 2018 is a tight market that should reduce inventories. If the market is calling for , they may have to react in at least a small way. There is real risk of a domino effect. Some Oil Ministers have said different things. They will not adhere to these targets. Iraq a says they want to produce 5 Million Barrels a day. Difficult to see why nigeria and libby would cut when they are recovering output. If you put that together, you could see a material stock build. Ray of views we have been getting on bloomberg about this opec meeting in st. Petersburg. Lets get more on that from our next guest who sees Oil Supply Growth lagging demand growth in the second half, which could push prices to 50 a barrel. Wayne gordon is the executive director for commodities and fx at ubs wealth management. Great to have you. What are you looking for from this meeting . Is it coming on board, some of these nations that so far have an exempt . Sure. Thomashaving a doubting moment, doubting markets are rebalancing, but the evidence is clear. As we look at numbers going into the Third Quarter and the fourth quarter, we see the oil market in a. 7 Million Barrels a day. 9 milliond we see barrels a day deficit in the fourth quarter, so we see the deficit increasing over the next couple of quarters, and we think that will start to tell as we continue this journey as you can describe it since last november. It is also important to realize that u. S. Oil production is topping out. A lot of the negativity around oil and the push back on having a bullish oil view in the next 36 months is people say, u. S. Oil production continues to accelerate. That is not the case. The market is constraining. Oecd inventories are coming down. To see,what opec wants but the market will be disappointed in the next week relative to potentially if they were to bring nigeria as well as libya into the fold. Just looking at this chart on your screen now btv 7046, turquoise as total opec production, purple line is russian output, the yellow is brent crude prices. It has done pretty much nothing since that supply cut curbs were put into place. The fact that u. S. Is now the swing producer, can you say on the supply side that Market Participants are only looking at u. S. Output and how that undermines what opec does . To be honest, the market has picked up on some key bits of information and continue to play that card, and that is u. S. Oil inventories have been slower to contracted than expected. U. S. Oil inventories have not theyup since february, so have been fairly stagnant and are starting to come down. In charge of the data ,or Oil Production in the u. S. They continue to increase their Production Forecast for the u. S. Until last month, when they brought it down a little bit, so these oil prices are having impacts on the amount of drilling activity and the productivity gains in the sector in the u. S. , but not just that. Opec is 93 compliant to the cuts in november. Fall inntly, that inpliance from 110 earlier the year is mostly to do with nigeria and libya producing more. The reason it is likely they wont bring them into the curve agreement is because they are uncertain whether they can maintain that production. We have heard from both those countries in the runup to the meeting in st. Petersburg that they want to normalize first, then join in the cuts. Assuming nigeria gets 1. 8 point 3and libya one million, how far does that pushed back the rebalancing in your view . I think it has pushed it back about three months, and we have in through a portion of that, so we have probably been feeling the weight of improving nigerian and live production within the market context for the last couple of months, so we probably have another month to go and demand start to see the side has also improved, and lets not forget that. In the First Quarter, demand disappointed, annualized growth of one Million Barrels a day. Now it is growing above trend in the second quarter, growing at 1. 5 Million Barrels per day, so as it demand normalizes, and the First Quarter was about a disappointment from indian imports, so now demand is starting to normalize and we are not seeing the downward pressure due to the surprises in nigeria and libya, we think the market will start to take these deficits we are seeing in the crude oil market globally more seriously. Thats the way we see it at ubs, pushing Oil Prices Back to 60 a barrel over the next 36 months. David do you recommend i get into Energy Equities at the moment . If so, which part of Energy Equities do i get into . Think playing the pure commodities story is the best way to play the jump in oil prices over the next 36 months. On the taking positions oil curve itself. Basis as we see noticeries normalize, we oil equities have performed very poorly this year so far relative to metals and mining, relative to the market more generally, so once oil prices pop up above 50 , yourel more consistently will see people looking more favorably on oil equities. Unloved rightre now, you can get some rotation back into the oil space from some investors, and that will see a material lift and equity values. Your target for west texas and brent, sixmonth target . Barrelre targeting 60 a , less for wti. We see ourselves getting there over the next 24 months. See you. Ry nice to thank you for coming on the show. Right, coming up, some changes coming to hong kong. Revamphange looking at a of the 30 minutes into the open session. Details next. This is bloomberg. Toid we are counting down the open of markets in china and hong kong. Last i checked, not a compelling picture. There we go. It looks like we were open lower. Speaking of a premarket, we could get changes in hong kong. Exchangearing that the is preparing to consult Market Participants on the revamp of the 30 minutes leading to the open. Currently you have first 20 minutes order input, the last 10 minutes for order matching in preparation. The talk will focus on whether to have random matching. Expansion of its closing auction, which involves more stocks and permitting shortselling in the 10 minutes end of the day session. At thee potentially start, a change in place towards the end of the session. Thats right. Watching, great wall motors, falling 7 , hshares, some ratings downgrades. Hshares at a hold. The new price target 16 downside. Also cut to sell at managers. We do have preliminary earnings coming through at 2. 4 9 billion yuan, so getting the Market Reaction to that and the various downgrades. Stock plusk at that more as we head into the shenzhenshanghaihong kong open. Coming up, japan inc. Urging people to work from home. We will see how that is being received. This is intended to lessen the on public transport. That ahead of the olympics. This is bloomberg. s 9 29, counting down to the open. There we go. That is the view. I am david ingles here in hong kong. I am haidi lun in sydney, where it is a beautiful day. We are waiting for the shanghai and hong kong open. Watchl be interesting to for this washout of conglomerates with his confirmation of this clampdown that has come straight from the president. David absolutely. We are getting reports that it did come from xi jinping, really trying to get ahead of perhaps what could be exuberance, outflows out of china. In the meantime, we will see how that plays out across the broader market. Sophie is checking in on the open. Chinese stocks extending the drop on friday, coming off of the losses in the early start of the session, down just. 03 on the csi 300. Hong kong shares resuming gains after snapping a nine day rally on friday. Just marginally higher, up. 8 . This morning, the pboc setting the daily yuan fix stronger, but. 1 . Onshore rate down on the dollar near a 14 month low i of the fed Rate Decision. The yuan softening for a fourth straight day there. On the flipside come the yen up. 2 . Rising for a fifth straight day, and jgb yields picking up after the boj cut its purchases of 510 year bonds by ¥30 billion, coming as yields have retreated from recent highs. The yen is strengthening, speculators anticipating a slide , so shorts on the yen and dollar picking up. Bets on a showing you drop in the dollar against all majors, except the yen, has risen to the most since early 2013. You can see that by the way the bars have dissented from the bottom of this chart. Bearish bets have surged to the highs in 3. 5 years, so the aussie and euro among currencies favorite given the broader risk environmentens off, when it comes to the currencies space. I want to end on what is going gauge fore small cap chinese stocks, mostly made up of tech shares. The vibration premium for chinext has been narrowing against the nasdaq, and today by. 3 after it advanced four days last week. In index is down 25 so far 2017, the opposite in the of what we have seen for the nasdaq , up 25 year to date. David we will flesh out that story for you guys. Before that, other news, shinzo abe, new record low for public support. Rosalind thats right. 26 , down 10 points from a month ago. Than 60 of respondents said he should not serve a third term. Abe is being question over allegations of cronyism. Lawmakers want to know why one of his Close Friends one government backing. Government backing. Britain has joined the u. S. And calling for the diplomatic isolation to end for qatar. The u. S. Secretary of state Rex Tillerson said last week that washington is satisfied with the efforts doha was making, but the saudi a lines says qatar must revise policies before talks can begin. President trumps team playing down his weekend tweet that he has complete power to pardon. While he does have constitutional power to grant of them come the Supreme Court would have to decide whether he can pardon himself. His Communications Team say the issue is not on the table. Im not sure if he has the power or not, but it does not matter anyway because that is another one of those stupid hypotheticals. He will not pardon himself because he has done nothing wrong. David the filipino president extends martial law as the Army Continues to battle islamist fighters. Rosalind representatives voted overwhelmingly in favor of the move. 240 514, while the Senate Approved it by 164. He is due to make his second state of the nation address later today. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. David thank you. We talked about the small caps chinext index, cheaper than the nasdaq. Of technologyp companies, down 25 in the past year. The declines set to continue. The bottom panel is your valuation, current pe, close to 35, and the spread getting closer and closer. Robin, more about this, this love affair for chinese 120 in 2015, so is it finally over . It is at risk of being over. One likes to choose ones words very carefully. David we do of course. 80 of investors are individual investors. Sometimes a selloff goes into a big selloff. Fortunes could not be more different for the chinext and nasdaq. They are going in opposite directions. The reason for the chinext dropping so much as investors are nervous chinas efforts to reduce leverage is getting over twospreading stocks rather than the bond and money markets. The succeeded in taming bond market in money market, borrowing costs are at a slightly elevated level close to 3 . Last monday, we saw the chinext dropping five point 1 , so that shows how nervous and anxious people are. They set broad financial policy concernes, and that did investors that china will crack down on Financial Leverage and speculators. They dont want speculators in the market. Could faceact, you jail time if you are labeled a speculator. What has happened is you have small caps coming down, the large caps touching the highest level since 2015. Is that really set to continue . It is. A basic stock market policy in terms of prices. The csi 300 up 12. 6 , the of 15 , even the shanghai , soosite above 4 this year people are moving into large cap for safety. At some point when the concerns ease off, you will see a rise in the shenzhen composite is investors try to take and make some profit. Robin, it is rare when we talk about fundamentals in relation to the Chinese Market, as a policyveraging issue, but it is an earnings story as well what is happening with the chinext . Definitely. Companiesen chinext not performing particularly well. We are seeing earnings, and most have disappointed. Unsure people are pretty earnings, butext from a broader point of view, these earnings are contributing week to week moves in the gauge, but broadly, it is more of the deleveraging story. People are afraid of going long on the chinext. Haidi policy reigns supreme. Thank you so much. Lets head to tokyo. It is one of the busiest cities in the world, and tokyos trains and subway are notoriously million a potential one visitors for the 2020 olympics. The city is planning a radical change. , plan totelework day ease the congestion. Our editor is here with more. First off, what is the rationale behind this . Said, tokyo will see about one million extra visitors , day during the 2020 olympics so the only way to make that happen logistically is to convince a lot of people not to ride on the subway during rush hour to work every morning, so the plan is to try this out. This is the first time. They would do this annually up to the olympics, and the plan is to convince everyone to stay home today and let the visitors filled the subways. Have companies, employers, employees responded . Are they at home today . The signs are mixed based on what i have heard from tokyo. Our reported there has been tied up with shinzo abes parliament reported aut some less than busy commute. Others saw no difference than 700r, but more companies and organizations participated actively and told their employees to avoid commuting during peak hours. David it is almost supplyside reform. They are telling people not to get on the trains. They doing anything overcapacity to tackle the congestion problem more fundamentally . The railways are investing in 2020 to ease the burden on the transportation system. We have seen the tokyo governor announced plans to offer Companies Awards for the best ,lan to get people to stay home flexed commuting, and this fits into japans bigger issues with Flexible Work arrangements. They are trying to convince companies not to be so rigid and workers to work from home, coming later on these days, so that is tackling the bigger cultural problems companies have to deal with. David they also allow people to leave early from work on friday. Thank you for joining us. Program,ming up on the president he filipino state address, the reforms he is set to announce for the fastgrowing economy. This is bloomberg. David this is Bloomberg Markets asia. I am david inge less than hong kong. Haidi i am haidi lun in sydney. The latest business flash headlines. Deutsche bank and j. P. Morgan chase to pay 148 million to resolve claims they conspired to fix the yen and libor rates, accused of manipulating the rate between 20062011. The agreement was reached despite neither bank admitting to wrongdoing. Millions andd fines to settle similar allegations in past years. David lets have a look at newcrest mining, climbing despite Gold Production falling. Output fell 8 at a mine after an earthquake on april 14. It is still beating estimates. Has saying the company remained overall resilient. The australian competition and Consumer Commission seeking information from Car Manufacturers in the government about the recall of cars equipped with takata airbags, urging all drivers to find out if their car has a potentially lethal device fitted. Wales, a man was killed on july 13 when the airbag in his car misdeployed. David right, lets look at the philippines. Rodrigo duterte is set to stater his Second Annual of the nation address this afternoon. For a look at what to expect, the finer points from his speech, we are joined here in asia seniory our economist. When you look at duterte, it is easy to come up with headlines that gloss over the fundamental story of the country. What has his government achieved in your view . The philippines may be the worst performing currency, but it is one of the strongest economies in the region. It is only behind china. This year, it will have the fastestgrowing economy in the region come expanding by 6. 9 . A lot this is due to the fact that it has built a Strong Foundation thanks to prudent theal policy and as household and corporate sectors prudent, so moving forward, the question is where will the philippines spend it, and so far, duterte has been effective in unleashing animal spirits. David this is btv 654 on your bloomberg. It is the worstperforming currency in the asiapacific. A lot of this comes down to the of a record trade deficit. What is behind the deficit, and is the peso a little too competitive . The peso is symptomatic of its growth cycle. Thisre finally having investment being unleased unleashed after pentup demand on the public and private sector side. You see imports picking up significantly. You also see the trade deficit widening and the current account turning into a deficit after years of surpluses. The central bank has accumulated enough reserves to intervene. For example, reserves as a share however the central bank is comfortable with letting the currency absorb some shock. This is one reason why moving forward there is still room for the peso to depreciate versus the dollar. We expected to move towards 52. Thed the expectation for budget, the president outlines it after his speech tonight. Do we get a fiscal push . Right, he will try to push for the first tax reform to be passed. He has only been able to pass three legislative initiatives since he came to power. Even so, his rhetoric is progrowth and is pushing import demands up. He would try to get the senate to push through the tax reform. It remains to be seen whether it can do so, but he has a very aggressive agenda. He wants to raise fiscal spending as a share of gdp to 7. 4 from 2 , so there is a lot of mathematics a behind this, how to balance it and raise revenue. Haidi what else are you looking for in that state of the nation . Im sorry . Argue lookingse for in that speech . Him tore looking for speak more of the potential growth of the philippines, and more on the progress. He said hes going to be rather frank, but duterte has never been accused of not being frank. People will look at the security issue, how will he address it. In the beginning, he was aggressive, but since then, he has backtracked. We will look for to how he will balance this focus on the drug war versus domestic Security Issues regarding terrorism. David lots more to talk about. You will stay with us. Will have more discussions on the philippines and other things as well, korea, india, what have you. That comes up next. This is bloomberg. Haidi lets get back to our conversation. Run when ita good comes to emerging markets this year. Thisu anticipate goldilocks sweet spot will continue . We will have a summer break until september, which for developed markets, centralbank actions will take place. We think the fed this week will we expected to announce normalization of the Balance Sheet. For the ecb, we expected to announce a reduction of its asset purchase program. What that means for emerging asia is how Different Countries will respond to this. In emerging asia, the philippines is one country due to its own growth of cycle and the fact that additional pressure externally will need to hike Interest Rates. Another country where the central bank after a respite will need to hike as well. A long way away from the taper tantrum and the vulnerability when it comes to these tripleare currencies the last time around . Is there a sense that emerging market economies this year, that their houses are much more resilient . The fed has been better at managing Market Expectations. Several hikes in addition to more tightening expected, markets have in muted. The time horizon we have had, the global trade cycle has picked up, so we are coming out of a low in 2016 where asian traits have been performing well in every single country, and especially south korea. We are seeing the trade pickup help the economy, offsetting domestic demand decline. Philippines, we are having export performance and domestic amand picking up, helping credit growth, etc. Reading 20 in the latest numbers, so overall, asia and the Global Economy is in better shape. A tightening of global anditions actually could prove global demand, which is really positive generally speaking. David i have to talk about india very quickly. Nothing against modi and the government, but it is as if we are pricing in indians being germanlike in their execution. Are you concerned . As one professor said what is coming is coming from a low base. It is doing well for several reasons. , itou look at the rupee trends with oil, and although oil has picked up, it has been low, allowing for india to narrow its current account deficit. The credit cycle has been deteriorating, and current accounts count as cyclical, and as result, the rupee has done well. Is aed with this highyielding currency that is reform respite and rhetoric, whether you question the implementation or not, it is happening and these factors are helping the currency performance. David and the Central Bank Decision next week. Nice to see you. Thank you. Program,ming up on the well, speaking of india, live in mumbai to discuss the concern over indias bad debt situation. By an independent banking analysis and a little over 10 minutes. This is bloomberg. Almost 10 a. M. In hong kong, 10 00 p. M. If youre watching out of new york. This is Bloomberg Markets asia. Japan leave equity at the start of the week, dominating. The said Property Developer soon that is among the days winners. Weakening as producers meet in st. Petersburg. There are worries about the opec curb will not succeed in draining the current glut. Giving india quite a run for its money. Talking about a little earlier on, our top story, that opec meeting getting underway in st. Petersburg. A policy check as to how these production curves are going. This is not a group that is going to react to Market Dynamics, theyre going to assert these dynamics. Not exactly promising. Take a look at this chart, to relate one on your bloomberg. Youripe a one on bloomberg. These african nations will not itjoining the supply group, is about the u. S. Being the swing producer. U. S. Production that change, opec output net change, in the middle is that difference and this is what we have been talking about. Whatever opec does, to what point does shell discontinued to undermine these Market Dynamics shale discontinue to undermine these Market Dynamics. Our guests in the previous hour highlighting the fact that when you look at production, we peak oiling close to oe production in the u. S. At some point is going to start hurting them. , nigeria anding libya have already come out and said they will not be participating in cut. In the mix, equity markets a bit on the softer side. Ing inmonday, trad asia getting underway. Jakarta guys joining the party. Snapping aocks ten day rally. 9 percent. Sliding a week that has a lot of macro as well as micro drivers. We had earnings out of wall street. Hong kong up about half a percent and the cfi 300 on the mainland in china of one third of 1 . We are seeing some outliers when it comes into the stock market. We see bonds climbing but the japanese tenure is climbing is falling. The boj cutting its purchasing of five to 10 year notes. The currency space, the dollar trading near a 14 month low. That is setting most asian forex on the up. Higher but it is trading near a two month high. Extraent moon did get an budget passed on saturday. The biggest drag for the kospi. Crude prices extending on fridays decline. The taiwanese dollar is on the losing end of the prester best end of these losing end of the spectrum. I want to show you what is going on when it comes to the hang seng, one of the outliers, adding. 4 percent. Green for other sectors led by casino stocks and utilities sectors. Hscei index staying afloat, said to rise for the first day in three. Great wall, China Railway and china bloc hong kong stocks back to gains this monday after fridays pause. Lets get the first word news. The u. K. Is claiming that removing trade barriers to the u. S. Could generate another 23 billion in business by 2030. The trade secretary is in washington for pulmonary talks. The u. K. Cannot formally signed trade deals with other countries until it leaves the european union. Chinas export of diesel and gasoline surged in the first half as the combination of a domestic glut and wing demand weighing demand. Icis china says domestic demand has been hit by cycle sharing and hybrid and electric cars. Demand has been surprisingly earlier glut at mills. 45bal steel stocks up percent this past year. Abes hasr shinzo fallen to a new low of 25 . More than 20 of respondents said he should not serve a third term as Prime Minister. Abe is facing allegations of cronyism. Aboutigators want to know why a certain friend received government backing. This is bloomberg. Thanks for that. Russias Energy Minister says olivia and nigeria might be old Production Cut but only once in their own production stabilizes. Their participation will be central to these talks getting underway in st. Petersburg on monday. Correspondent with crude Oil Prices Still under pressure, financial the liberation in full swing behind me. The secretarygeneral to step down. He is confident, optimistic this deal is working out but perhaps more importantly he is described a level of compliance as excellent. Place bothtaking onshore and offshore, we are the process may be going on at a slower pace than earlier projected but it is on course and it is bound to accelerate because of these numbers. Correspondent things kickoff with the mind hearing with the monitoring committee. On the nonopec front you have russia and oman. Role,eet in an expanded they will look at the data and be in a position to make recommendations on how best to refine the deal going forward. That brings up all kinds of scenarios we have focused on is in the past. The issue of accelerating the rebalancing of global inventory. For two. Look forward to. Have a look at opec here on my bloomberg. It just felt about everything you need to know. A quick snapshot of where we are. To libya. Ns here is libya and here is nigeria. Nigeria close to the 1. 8 million target. Libya, when i understand is there closer to 1. 1 Million Barrels. Heres the capacities for both these countries. More on this topic. Lets bring in our energy reporter. Talk to us about the points for both these countries. It is not surprising that libya and nigeria are on the agenda. They were increasing supply and it has exhibited desk it has contributed it has contributed the most. Surprise seeing them want to get to a certain level before they concede to cutting. This Committee Meeting tonight, some thought, would address that. Ministers from both countries are there to discuss their plans. At this stage it will not be a factor. They have signaled willingness and 1. 84 nigeria and 1. 254 libya. They want to get there. What is the demand feature looking like, we spent a lot of time talking about the supplyside dynamics. It all depends on who you talk to on that front. The rebalancing is on track and it will accelerate into the second half but we have another saying the rebalancing is more uncertain. It looks like there is a demand increasing areas there was the indication demand would increase during the second half. Rebalancing seems to be happening but at a much slower pace than many were expecting. That is what is causing the issues here. Supply from opec nations like nigeria, libya and the u. S. Thank you so much for that. Still at this hour, the biggest risk to the bond market. Segment. D were talking real steel. How indias bad debt problem is weighing on the banks. This is bloomberg. This is Bloomberg Markets asia. Im in hong kong. Haidi a quick check of the latest business flash headlines. It is on the verge of being cheaper than the nasdaq. It is at 36 and two compared to the 33. 3 for the nasdaq. Next is mostly made of tech companies. The nasdaq has hit record high after record high rising 26 . In hong kong, the Stock Exchange operators said to be consulting market operators 30 minutes ahead of deals. We are told the exchange is now working on the preopen session for the 30 minute auction to be split into two. You have the first 20 minutes at 9 20. The now the last 20 minutes for order matching and reparation. India they are betting on would demand for equity fund tripling there. Doubling atomy is twice the pace of japan with more than one Million People joining the labor force every month. Optimism about the picture grows. Have a look at teachers over in india. That is one of the later markets to open up. A fairly decent day. We are coming off a record high close. That is the jumping point when you look at the nifty. Mumbai in anp in hour and 30 minutes. In india, when you talk about bad debt is not about china that we just keep bring this theme up. The Banking Sector is dealing with a pile of nonperforming ones. When hundred billion dollars. Our next guest says that is not a problem. Were joined by independent banking analysts uninjured and nazari. Amendra the last time we spoke you had a recommendation on the entire indian Banking Sector. If i have listened to your advice i would have missed out on this 8 rally. Are you convinced buying indian banks is a bad call . Fundamentally the entire indian rally has been fueled by liquidity flows. Been quite poor and i expect that to continue. My entire view will still hold that fundamentally i do not see any improvement of any significant taking lines. The entire rally has been fueled by liquidity. The argument would be about a pickup but we have been seeing it has stagnated while the markets have gone up. For our viewers just tuning in, what is the fundamental problem with the indian Banking Sector . Isthe fundamental problem that there are very huge bad debts and they are mainly with the government banks and the government being the principal loner refuses to recapitalize the banks to the losses they have suffered. They have abdicated their rule of ownership and how our indian banks going to recapitalize . Allowvernment refuses to enforcement agencies to go after these large companies. It isney isnt there but lining some of their personal accounts. It is up to the government to use its regulatory agencies to get these moneys back. But we see a convoluted process of approaching courts and coming up with new laws. They are come up with a new laws and to go after this but the in being court system, it takes many years for any judgment to come out. One of the important issues which you alluded to is that this misreporting of all the debt reports in india is not getting as much attention as it should. You are looking at serious allegations which usually costs other companies in their jobs. For the record, is it happening, yes or no . Most definitely as it is happening really in all the market fancy banks which are the new fan which are the new private sector banks area these are some of the very big names with huge Foreign Ownership but the problem is with those media and analysts, they refused to give any coverage. There is a very significant divergence of the mps to the extent of the 90 . There is no Media Coverage and the regulator refuses to take action against of these he has the ceos. Haidi how does this story ends for india. If you take a look at the china version of the same story, so far there we have seen a delay of that day of reckoning. In china, the bank was fully supported by the government, they funded the equity and cleaned it up. In india they refuse to fund it because it will lead to an expansion of the fiscal deficit. They have to run and try to get capital but the valuations are far below. Existing shareholders will very reluctantly part with their money to invest. Ofwill see a long period stagnation in the indian economy. The share price seems to have its on dynamic and is on drivers which are delineating from the underlying fundamentals. Haidi this is a prolonged, dragged out slowdown as opposed to any sort of seismic event that you see. Blessed definitely, quality track the market earnings, the entire indian market, for the last threeor years, they have stagnated. At the beginning of the next year, analysts come up with forecast of 20 Earnings Growth and by the end of the year that is 12 . Betty stay with us, we will continue our conversation. Plenty more to talk about. This is bloomberg. Lets rejoin independent banking analyst in mumbai. Piecee this great gadfly that talks about the indian steel sector. The r. B. I. Currently friendless. It attracted a bit of bad publicity from the public with the demonetization drive and the way that was handled. Butting heads with the finance industry over monetary rates. Our their hands tied in how they can deal with the Banking Sector given that they also regulate the banks . Bi isfortunately the r following the governments dictations. They have rushed in and introduce legislation. High courtck the that it cannot dictate what the court can hear. They are clear what is happening in the reserve bank of india. They are coming up things without adequate planning and it is causing them a great deal of embarrassment. Their credibility has been impacted under the leadership of the present governor. Sevid there is absolutely cau for concern, it is an objective number, the ltl, but is it one bank that stands out to you that seems to be less bad are less exposed to what you say are industrywide problems . In hdfc bank like limited, like a quota bank, they seem to have insulated themselves quite well against this kind of massive industrial and orbit slowdown. And corporate slowdown. Very quickly, the r. B. I. Is expected to cut rates next look at the consensus, how does that affect the earnings for the banks . Rates, thets the mountains of the banks will come down in the shortterm. They will flash of their deposit rates and it could control could result in a contraction for the markets. It could provide some relief to the corporates. David there he nice to see you. Senior independent banking analysts. Kushner prepares it to testify on capitol hill. Asked about allegations linked to russia. This is bloomberg. It is 10 29 in hong kong. These the first word headlines. The malaysian Prime Minister has stepped up his campaign for election support by announcing millions of dollars in aid for farmers. Farmers will be given cash at the end of the month and have some debt wiped off. The South Korean Parliament has approved a 9. 8 billion in spending, the centerpiece of moon jaeins plan to create thousands of jobs and return korea to 3 growth. French president emanuel mi macrons Approval Rating sinks. His rating fell 10 points this secondbiggesthe decline for a president so early in the job. Never was elected despite Holding Office and the lack of a Political Base makes his position fragile. Images robot show thebot images number three reactor at fukushima. By ofages were captured toshiba robot to withstand radiation inside the reactor. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. I am rosalind chin. Thanks so much for that. Clint the for the markets tomball over as we head into the new trading week. Opec first and foremost, the there, change expected but looking for more details on the unwinding of the Balance Sheet, and a lot of u. S. Data, gdp towards the end of the week, so it is a question of what janet yellen has been saying, the lack of inflationary pressures are transitory. The bond market is trolling her, right . David calling the bluff. At what point does transitory not make sense anymore . They have spoken about how that has been temporary going back to april. At some point, it comes to fruition and you have breakeven, a rollover, the dollar on a downtrend. You also have inflation out of australia. When you look at the currency markets, one of the event risks ahead will be Jared Kushner and his testimony on capitol hill. Lets get more on that, because donald trump jr. And Jerod Kushner will be appearing on capitol hill this week as part of this investigation into alleged links with russia, so lots to talk about here. We are joined by our asia editor here at bloomberg. Where do we start . Jared kushner will be testifying before the house and Senate Intelligence committees behind closed doors. Manafort,r that, paul the former Campaign Chairman for trumpump and also donald junior, will be turning over records. Their lawyers are negotiating, but it looks like they will turn over records. Getsussian investigation closer to the president and his associates will be on the hill. Testimony atthat this point, but it will be interesting. This is one of the reasons why President Trump brought in Anthony Scaramucci as a new communications director, saying he wanted a reset after six months in office with a lot of communications back and forth. Haidi a couple of points on chart, theloomberg most unpopular president since modern polling began. You talk about anthony appointed andng thi the resignation of sean spicer. This is interesting in terms of how much we will see, what kind of trading will will see postbrexit. What willeally know transpire for some time, but obviously it is an important issue for the u. K. , and that is why they are having mr. Fox go to washington. David set that up for us. Talks in washington later monday, obviously the agenda will be to prepare the groundwork for a postbrexit deal. Right. There is a lot at stake for the u. K. Somewill be losing automatic trade partners postbrexit, so they would like to do deals with the u. S. The u. S. Could use some of that as well with President Trump having decided not to go forward with the tpp. Both sides. M on it is a ways off and more symbolic than anything else, but the fact he is coming to washington is important. Lyle brainard it it is a start. David you will be on top of that for us. Lets get an update on markets. Sophie is standing by. 3, 2, 1. Sophie the gm and function loaded. The equity space, the nikkei 225 closing out. 9 lower. Set for a second day of losses. When it comes to jgb yields and the strength in the yen, that is putting pressure on japanese stocks, so continued weakness perhaps when it comes to shares in tokyo. Take a look at what is moving the market there for the nikkei 225, industrials and financials leading the drop. We are seeing a drop of 1 for a number of these sectors for tokyo. The nikkei 225 trading at the lowest in over eight months. We did get the preliminary dry manufacturing pmi, reinforcing the potential recovery, but not feeding into the stock Market Action today. That number slightly softer from june, but still in expansionary territory at 52. 2. In terms of leaders and laggards , steel players in favor in tokyo. Mission steel up 2 . Nippon steel gaining. 7 . This is japans biggest steel player. Atbal steel stocks trading the highest since 2011 thanks to chinese demand helping spur the ,ecent recovery in steel prices but the metal on the back foot, along with iron ore and copper, so dragging on miners in sydney. Atd stocks, Bullion Trading a month high given concerns around u. S. Politics and getting ready for the fed Rate Decision wednesday. Before i go, some movers in hong kong, i. T. Products and Software Services provider Digital China plunging to the lowest since may 2016. Brilliance china jumping 10 , faring better than great wall motors, falling 3 . Sunac china trading at a record high. Haidi china looking pretty brilliant. That was an easy one. Thank you for that. A lot on the agenda this week. Plenty to watch out for. The imf economic update. The last one, they downgraded their view on the u. S. Economy. We have u. S. Gdp as well. Dan, what is a theme you are watching for as we await key releases and events . Lets talk about the imf. Leaving aside the downgrade, which happened at the time of fullyear u. S. Forecasts. The last time the imf released its World Economic outlook, there was a distinct change in tone. For the first time in quite a while, they not only sounded upbeat about the Global Economy, but the Global Forecast was raised a touch, rather than revising it down. We had gdp data from europe, japan, china, better than expected. Impressive, not a breakout number. Later this week, the u. S. Comes out with 2. 5 growth forecast, hardly even at potential. What is going on there . , but it is awesome basically in the range where we have seen since the u. S. Economy begin growing again in 2009. Not terrible. Should we be doing better . Sure, but where will that come from . There were expectations late last year, early this year that growth could be higher. That was dependent on a number of things happening, particularly in congress. Guess what . Nothing has passed. David not yet. Andould look at this number hope to get the bonus towards the end of the year. Thank you. Could posewhy china the greatest danger to the bond market in the second half of this year. Thisll talk about that and lack of inflation with pine bridge investments in our real yield segment in a few minutes. You dont want to miss that one. This is bloomberg. Traders will be watching for clues from the fed this week about its tightening path. On, bondalking earlier markets the bluff. Au this with pine bridge investments. We were talking during the break on anything specific we are expecting from the fed. Do you think we will get an update on Inflation Expectations . That seems to be where the market is at this agreement with the fed. I dont think the market expects too much this week. In particular, the expectation of the september bond issuance reductions. I dont think there will be new news. The rhetoric will be around confirmation of the path. You highlighted, inflation is trending downwards given the recent oil price movement. Is on trackation and growth is on tax, the market probably looks beyond that. The reduction of bond issuance, that will probably push out into the year. Policy,o that is taxation, health care reform, everything is pushed back, so there is Downside Risks at the moment. David as an investment professional, people were positioning for higher yields at the start of the year. If we did that, i wouldve made a lot of money. Isnt the reason why yields are at these lowering levels simply because the fed is reinvesting, the ecb is still in the market. Do i wait for them to stop doing that before i position and go short duration perhaps . Outlook is your best guidance at the moment. You cant wait for the Central Banks to tell you they are going to do things, then you follow them. You have to be ahead of the curve in order to make more money. If you look at the inflation cycle in japan, ecb, inflation risks are low. Last week, the boj continues to revise downwards their targets and it will take a few more years before they can reach it. The markets dont believe they can achieve that. I said the Oil Prices Backdrop, still pretty weak, but the rate will stay lower for longer. , a weekhe boj story before, they started buying bonds. In your view, does that then lead to wider spreads or push money at of japan and cap yields outside. If you look at the deposit Interest Rate, it is next to nothing basically, so people are yielding invest in the assets, which is fixed income. It is more class, than the market expected earlier softerar, so the environment has not changed. The sentiment has not really changed. Haidi that option last week of through thetips worst the manned in a decade. You have janet yellen saying that we inflation pressures are just transitory. Is there any basis for hawkish fed speakers are sounding given the consistent misses. She has turned not as hawkish as before. Said, the market will look at the data and sing the inflation rate is the background is on the downside, trying to manage Market Expectations in a way she does not want to send a signal will affectt that the market. At the moment, we think whether december has a hike are not is less than 50 at the moment. Haidi right. I want to get your views when it comes to all strain bonds and what the aussie dollar did last week. The central bank tried to manage the market. The tried to help the exports, tried to help the economy be on a stronger footing before they think about an Interest Rate hike cycle. The rba wants to send a signal about a good economic recovery. Contractinge is a signal telling you the austrian market is not ready for a hike. David i want to bring up one of our charts. Btv 5321 on your bloomberg. You have the cash rate in yellow. You have the implied rate in blue, now above the cash rate. You had this confusing statement , the neutral rate at 3. 5 . What does that mean to you . The central bank tried to about themarket marketc recovery in the expecting following the hiking of rates. But the fundamentals of the economy are not ready to do that. Alm down theo c market in terms of expecting a hike. You can see the austrian dollar had a big reversal. I guess there is some inconsistency about what they want to achieve here, which is sending a conflicting signal within the market. There is more of a risk premium in the austrian market at the moment. Rbi is another interesting one. When you talk about inflation, it is usually not india. Will they cut next week and do i stay away from fixed income in india at the moment . Believed thet we inflationary risks in india is on the downtrend, but since then they have had some reversal. Whether they would cut or not, i would think there is a lower chance of them cutting Interest Rates given the current situation. I dont think on the fixed income side that we like it. Not because of the Interest Rate, more on the carry. We think the local bond market will benefit from this low inflation rate, low Interest Rate. , so thatsy stable why we like the local market. David your favorite currency on the kerry . I think it is the japanese yen. David there we go. Early for a throwback thursday. Thank you for joining us. Right, coming up, late to the party. What are we talking about . Rivals inlows larger grabbing a piece of the fintech pie. That is next. This is bloomberg. Haidi Chinese Electronics maker xiaomi shrugging off rising regulation of the Financial Sector and the head start alibaba and tencent have come pushing into online lending. The head of Consumer Lending says the fintech pie is large enough for larger players. Over the past few years, we notice a lot of problems in this industry. This Industry Needs regulation in place to enforce the activities and behaviors and to make the industry developed in a good way. It important to innovate before this regulations stifle the innovation . Difficult because it leaves more space to innovate. At the same time, if a lot of players in the market not selfcontained, self regulated, regulations and rules need to be in place to make sure everything is fine. What is the biggest risk to you . First is risk management. Many people, the debt to income ratio is so high that some of them may have trouble to pay back. The other side is the financing side. Over the past few months, we have seen an increase that squeeze how profits. So those of the two risks i have seen. Your chairman has talked about the troubles xiaomi has had losing a Little Market share, sales coming down. Grewid maybe the company to fast, but in financial services, are too late to the game . I would not say it is late. It is about the timing to extend our business into this space. We have over 200 million phone iots, and over 60 million devices connected, so that translates into a lot of customers. At a disadvantage because you dont have the one hasion users that wechat and the multiplatforms alibaba has . You are limited by how far you can go. The Chinese Market is huge enough. With sucho grow, even huge competitors in the market. ,he big players in the market we still have the space to grow. David that was the head of Consumer Lending at xiaomi speaking to stephen engle. Shery will give us an update. Shery we will get an update from the imf on its World Economic outlook. What are the Downside Risks for the Global Economy . That is the key question the imf is looking at. One key risk could be china, will it maintain growth momentum , 6. 7 last year. We will hear from the imf and what they have to say on their latest update and to discuss this, independent strategy, we will discuss all of that, and what is it mean for developing markets, especially thailand . The secretary general of the Eastern Economic corridor of thailand will be dissecting what everything means for his economy. All of that, coming up. This is bloomberg. Shery a mixed picture across asiapacific, stocks falling in tokyo, the hang seng rising. A Property Developer among the days winners. A record in hong kong. Or your weekends as producers meet in st. Petersburg. , asian being pressured stocks falling for the first time in 11 days from that 2007 hi. High. Btv 6542 showing we are still in the mscitrend for regional benchmark following the longest winning streak since 2013. Today, singapore inflation, jobles, but traders taking caution. Lets get the details of what is happening across markets. Sophie, so maybe some profit taking . The back of micro drivers and macro themes given the fed Rate Decision due wednesday. , whatgs to look out for is going on in the oil patch, dragging on shares in sydney, for example, and the decline in base metals weighing on that index. To 5 on the back folk back foot. Falling. Chinese and hong kong stocks the clear out performers. The csi 300 gaining. 7 . Trimming itse boj bond purchases, but that was anticipated, although happening earlier than expected. Rising slightly, unlimited reaction to that news. We will check on the boj commitment to yield curve control when the minutes come out tuesday. That is ahead of cpi data on friday affected to show sluggish inflation despite a tighter labor market and rising household spending. We have the yen rising for a fifth straight day, getting a boost from shinzo abes dwindling popularity. The weaker again has been a part of abenomics, but ubs says in the sharp drop in dollaryen would be shortlived if there is a leadership change. Ll would be difficult to ro back that strong commitment. Bond traders have made up their to thaten it comes tightening path for the fed being eased by janet yellen. Continue to yields fall after losing nine basis points last week, the biggest drop since april. It broke through the 50 and 200 day moving averages this chart shows you we could see a retracement of the 61 point 8 fibonacci line at 2. 21 , how we are coming back to that line after a potential rebound from the 2017 low. Keep an eye out for movement when it comes to this ahead of the fed meeting. Shery thank you. Breaking news. Di investing 2 billion in the latest funding grab, expecting to raise 2. 5 billion. Rideshare app taking in Southeast Asia. We will have details later in the program. Opec secretarygeneral so the markets will need more crude from libya and nigeria. He says the process would accelerate after a slow start. Investors have been concern rising production from libya and nigeria are offsetting the cuts. U. K. Claiming that removing trade barriers with the u. S. Could generate an additional 50 billion of business by 2030, although ministers admit reaching a deal will not be easy. Liam fox is in washington for preliminary talks, and warned the American Team has far more negotiation asked arians. Signed. Cannot formally trade deals until it leaves the eu. Supportduterte has won for extending martial law as the army battles islamists. The house of representatives voted overwhelmingly in favor of the move, 240 514, while the Senate Approved it 164. Duterte is due to make his second state of the nation address later today. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Shery thank you. Lets get more details on that breaking news. Grab has raised 2 billion from k and didi. Deed issue showin how did grab pull this off . Of thes a continuation previous alliance. Softbank, their vision fund was the change inort transportation and communication in the future. It all falls into place right now. Most of the funding is coming from these two companies that already have a history with grab. The largestll be single financing in the history of Southeast Asia, and we do know that the previous fundraising round already raised september,lion in also grab, so what are they doing with the money . They want to expand in different regions. Hailing is aide proxy war for the Payments Companies owned by tencent and see alibabayou potentially we reported earlier that they wanted to invest in grab as well. That is not confirmed yet, but the company said there is an additional 500 million on top of the 2 billion coming in. We dont know who that is, but there is a proxy work for payments still ongoing them a so we could see these Companies Expanding in those areas as well. Could it looks like grab be the clear winner. They are ready take 95 of market share when it comes to ride hailing, so could we say that game is over for the other apps. Thats what they are telling us. We are still seeing them battling it out. Also, the battle with uber is not over yet, so still a lot of money to be poured into this space and cash burning going forward. Shery over a clear winner, at least when it comes to hong kong. Thank you for the latest breaking lines out of grab. News, the imf saying the driver for the Global Economic recovery is ship in with the u. S. Shifting with the u. S. Playing a smaller role. It says President Trumps policies are unlikely to provide a boost to the world growth. Our chief International Correspondent for Southeast Asia Haslinda Amin has the story. Who will be in the drivers seat . China, japan, the eurozone, and canada will be key to Global Growth going forward. The assumption is the u. S. Will less expansionary policy going forward, cut taxes, spend a infrastructure, plans for sustained 3 growth are not expected to happen. I want to show you this graph. Global growth gaining momentum, 3. 5 this year, 3. 6 next year. Advanced economies lackluster and and even. Japans gdp and the eurozone were revised up, and take a look at the one in pink, emerging markets, on the up over the next two years. China growing at 6. 7 , up 1 from april, some never mind the u. S. , the world will sustain its growth and the imf calls it a recovery. They you just mentioned outlook for the eurozone was revised up, but i wonder how big of a risk the brexit negotiations will be going toward, so how do the prospects for the u. K. Look at this time . Different, denver, the mf cutting it by 0. 3 , gdp and expects1. 7 weaker economic activity. Keep an i as it works through brexit negotiations. Broadly Global Growth balanced in the near term, but the imf says they remain to the downturn that downside in the medium term. They suggest the likelihood of a Market Correction could in turn affect market confidence, trickled down to Economic Growth. After that, chinas credit growth and rollback of financial regulation. So we have optimism on one side, a cautionary note on the other, so call it cautious optimism. When it comes to economic outlooks. It was surprising to see that the more supportive policy in china is the risks could be bigger. Haslinda amin with a breakdown of the imf update on its global outlook. You can watch the imf deliver that report in kuala lumpur at life. ,ou can find the diary entries also the events you may have missed. , covering a ahead, assessing the ims latest projections for the asean economies. Our next guest says there is no the u. S. Een asia and the eurozone. That is next. This is bloomberg. Shery welcome back. This is Bloomberg Markets asia. Lets get a quick check of the business flash headlines. Walesath of a new south man 10 days ago may be the first related airbag incident and austria. The regulator is seeking information about cars equipped with the potentially lethal product and released a statement urging all drivers to find out if their car has one fitted. In the morning session in tokyo plunged 13 . Gauge isll cap share on the verge of being cheaper than the nasdaq for the first time. Is 36. 2, compared with 34. 3 for the nasdaq, the narrowest gap since the board started in 2010. 25 innext has plummeted the past year, while the nasdaq has risen 26 . Kong Stock Exchange operator is consulting the market on changes to its option system ahead of the open, and expanded closing auction will debut monday. The exchanges working on the preopen session. The 30 minute auction is split into two sections, 20 minutes for order input, and the rest for order matching and preparation. Mixed results for asiapacific kongts with gains in hong and declines in sydney and austria. We have the latest policy statement from the fed. Thes discuss with with president and global strategist at independent strategist. Great to see you again. Go back to that china story earlier. It seems that in the broader context of what is happening across markets in china, small caps are taking a big hit from the governments the leveraging efforts. Btv 6589 showing the huge contrast the between the nasdaq and the chinext, and you can see that for the first time we could bubble, we15 market could see the chinext and the pe gav ratio with the nasdaq falling. My question from this chart, the this boileddoes down to what is happening with the government crackdown . Fundamentals of the tech sector in china and the u. S. Are so different good what does it oil down to . Frankly, if you look at that chart, attempts you about speculation. If you go back to when differences were at their highest, they were unjustifiable. Copper,ron ore, whatever. There was so much money sloshing around that it went to ever it could to find a home. Now they are trying to deleverage. It is pretty gradual. Hill a gently sloping rather than an alpine peak. When that happens, all of these speculative positions get liquidated. That is probably most of what is going on. Shery you were talking about valuations being unjustified before, but compared to other equity gauges, they are still pretty high. Does that mean further pain for the small caps . I think we will see pain down the road in all of the equity markets, but china is no exception. Where the valuations are less justified than when valuations come to matter again in china or most places, then it will hurt most in china. Shery as an investor, how concerned should you be about this crackdown on overseas investment . The fact the government is cracking down, will that have an impact on the stock itself . Look, it is complex would is going on in china. Its not only crackdown in overseas investment, its a crack on social media, freedom of expression, and the deep breathe, can you create a society like bill gates. Country offhe aggressively from things, that is not in the interest of trade, this sort of society that china needs to become if it will become a higher income economy rather than a middle income economy. Argument thatnter chinese authorities would give you is that when it comes to Economic Growth data, it is doing well. We have industrial profit numbers on thursday, and early indicators suggest the sector is doing well. The industrial sector is looking backwards. It is feasible to create a middleclass Manufacturing Base with topdownnomy measures. Im talking about the announcement that china was to lead the world in artificial intelligence. When you move on to that sort of andg, the growth you need the freethinking you need are very different. That is something china has to really get together, its economic desire to become the thed leader in the east and sociability to become so. Shery its not surprising you the moorsmf saying supportive policies in china, the greater risk for the region. How complicated is the situation for regional partners if you still need growth in china for there are economies and their Inflation Numbers to be sustained, but at the same time, you have to be careful about leveraging and financial risks. In the longer term, the growth china will have is going to be the less dependent on imports from any country because it will create it itself and the second it will be in tangible. That is saying to the other asian economies that since the financial crisis, you have become the factory supplier economies of china. Thats fine. Down the road come you have to think about another model. What will you make when what china is making his intellectual and they are not buying it from you . Maybe five years, maybe 10 years, but that is the question for their economic model. Later in theor us block, we have to about the fomc policy meeting. David, stick around. We will discuss much more all coming up. This is bloomberg. Shery this is Bloomberg Markets asia. Lets continue our conversation with the president and global strategist at independent strategy. We have to talk about the fomc. Given inflation is muted, the job market robust, is or anything the fed can do this week . They will not do anything this week. They have to raise Interest Rates even though inflation remains subdued and the phillips supine. Is s you will be another shock. If they dont raise rates, they wont be able to do anything. They are doing what good central bankers like Glenn Stevens did, build up buffers. Shery when it comes to the Balance Sheet runoff, j. P. Morgan said there is a valid argument for the head to start doing something this week given the financial conditions do seem to be pretty loose. They are. I dont think they will. I think they will start and often and will run down the Balance Sheet, and so they should. Im sure you have participated in all the academic conversations that say they will end up with a level of access, the liability side of their qe, thatat excess reserves is how Monetary Policy is now run. That is the tool. They will take it down, but not like it was before. Comes to least when it the bond markets, some people are saying bond traders seem to be trolling janet yellen. Btv 6599 shows the 10year breakevens rates. We had the auction recently for tips, a week auction come extending declines. 1. 76. Given the boj and ecb cap policy is there ahanged, audi chance they might ease on the tightening path just because the bond markets are not reacting as they were supposed to . So. Dont think the ecb will start tightening and reduce its Balance Sheet next year. It is behind the fed because the economic recovery is behind. Lo and behold, the last your wagon in the train will be japan a year later. In a sense, we are looking at this happening everywhere you the question is what does it do . A lot of people say it does not work atmuch because we investment banks and dont want it to do very much, but the likelihood is we dont know what happens when a major buyer of treasury bonds, government bonds, sovereign bonds stops. We dont know what happens. We know the mountain of debt worldwide has grown higher, and effect, butd have an it also might be asked off easily because they have better control. Shery it is all an experiment, isnt it . Thank you for joining us. We are looking ahead to the reopen in japan. We saw the market being pressured in the morning session, the yen strengthening for a fifth consecutive session. We will have the latest. This is bloomberg. I am rosalind chin. The imf says the world is relying less on the u. S. To sustain the recovery. It left its Growth Prediction unchanged at 3. 5 , but said the drivers are changing. The u. S. And u. K. Are less crucial with china, japan, and the eurozone playing a more prominent role. The imf dropped assumptions on President Trump cutting taxes expansion. Ructure fromhas raised 2 billion didi chuxing and softbank to fend off uber. An additional 500 million is expected. Groep star you wish and climbs to more than 6 billion when the latest fundraising closes, making it the most viable startup in Southeast Asia. The South Korean Parliament has approved an extra budget. The nine . 4 billion is the centerpiece of moon jaeins plan to create thousands of jobs. Approval was delayed by disagreement between the ruling and opposition parties over issues, including the recruitment of more civil servants. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Sophie we are kicking off a week with 20 of macro drivers. The fed Rate Decision, boj tuesday, inflation data out of australia and japan. Plus, earnings from banks, tech, farmer as well. To getnvestors trying their footing, so stocks mostly lower, except the honk saying up. 4 . Saying hang seng up. 4 . Trading at ae yuan twomonth high, up. 1 and the dollar again rising for a fifth straight day. In the commodities strength, we are seeing iron ore soften and brent crossing 48 a barrel. Japanese stocks continue to decline in the afternoon session. Some bright spots when it comes to steal players. Today. Steel gaining. 7 shares. Heck on softbank given the announcement, shares , resuming gains for a sixth day in seven following that announcement to invest 2 billion with didi chuxing in grab. Shery markets in india underway in a few minutes. We have to talk about the rally that the indian market has been areng to know that people excited about the economy there. The sensex gaining 20 in the past year, the best performer in asia. The japanese people are getting excited about equities over there as well. Surging indian find from of this chart showing exactly what is happening as it quadrupled in the past year, mirroring the surge in the sensex in dollar terms, the blue line. This is not surprising given that indias economy is expanding at seven times the pace of the japanese economy, and india getting help from lower oil prices, the worlds thirdlargest consumer of oil after china and the u. S. Someugh we are seeing upside, they could be pressured going forward. Hearing that limiting oil output from libya and nigeria will not be on the agenda when opec and other producers meet and russia on monday. Both countries were exempt from last years deal. Yousef gamal eldin reports from st. Petersburg. With crude prices under pressure, bilateral negotiations going on behind me. General isry confident and optimistic this deal is working out. He has described the level of compliance is excellent. Much of what has taken place , so we are offshore pretty sure the rebalancing process may be going on at a slower pace than projected, but it is on course. It is on course, and it is bound to accelerate in the second half because of these numbers. Monday morning, things kick off with the joint committee. On the nonopec front, you have russia and oman. To only will they be able look at that data, they are in a position as to how to refine the deal going forward. That brings up all kinds of scenarios we have spoken about in the past. When it comes to libya and nigeria, but also the issue of accelerating the rebalancing of global inventories. Plenty to look forward to. Lets take a look at the numbers of what opec has been doing by looking at this chart on the bloomberg, btv 8881 reducingpec is production less than in recent months. The yellow bars at the top are changing Oil Production. The blue bars are the difference. Has reduced cuts, while the u. S. Stands firm on production. Lets discuss what opec has been doing with then sharples who joins us now. Who joins usarples now. Loyal oil prices seem to be the normal now. If you look at the four the initial cuts were mentioned or agreed, we are not far off that at the moment. Prices have gone up, come down, and we are back to an equilibrium. Just notare happening, as quickly as many expected, and that is the issue there. At this point, a lot of the work would party have been done many thought, but that is not the case. We are seeing compliance start to slip. Induction is climbing nigeria and libya, a lot of focus on them. , sor production is up rising production is pointing to a testy time for the group. Shery we are hearing nigeria and libya not reduce output. We are hearing ecuador needs to pump given their fiscal situation, so what does this mean for opec . Lot of pressure on the group. It is normal that libya and nigeria want to keep pumping. Conflict has kept their production low. They want to get to normal levels before they consider a cut. Increasing inand the second half. Supply is a constant issue here. Countries like ecuador, it is appropriate because low prices is a big problem because they need revenue. Obviously you want to see opec cut more and possibly deeper. Shery deeper cuts would not equal more compliance comes so that is a key problem. You mentioned the second half, optimistic for the outlook, seeing a faster rebalancing, so what can we expect to the year . It seems to be a case of who you speak to. The very bullish see the rebalancing accelerating, where as the iea said the rebalancing all,ss certain, so over the expectation is demand will increase in the second half, which will aid that cut. Is a constant issue, and what we keep talking about is supply, not only opec supply, but the u. S. Supply there has increased consistently. Shery i wonder if were focusing too much on supply. Chinas demand may not be as strong as we had hoped. Demand from china is very important. It is the worlds second biggest consumer of oil. As soon as Something Like that starts to slip come it will bring into question what is happening with the Global Economy and oil consumption. Once that happens, you have seen compliance starting to slip. It may bring in questions as to whether they are losing market share for no reason at all. Keep an eye on the commentary tonight from the meeting. And whether they recommend deeper cuts or to keep going as they are. Much forank you so that. You can five that commentary on tliv. Donald trump jr. And Jared Kushner testify on capitol hill as part of the investigation into alleged links with russia. The white house says it supports new russian sanctions for meddling in last years elections. Lets start with Jared Kushner. What is the latest on this issue . Will testifyner before the house and Senate Intelligence committees and the next day or so, but he wont you doing it publicly. It will be behind closed doors. They couldut so that get the testimony, but that he would not be doing it in a public forum. Also, donald trump junior and paul manafort, Donald Trumps former campaign director, will, are still working out with their lawyers the terms of what records they will turnover and what their testimony of that situation will be, but they are expected to testify behind closed doors as well this week. This does not mean there wont be more public hearings in the future. , robertall round one muellers investigation is still ongoing, the criminal probe into whether there was russian meddling in the election and who was involved in that from the u. S. Side. Shery moving away from the political situation in the u. S. , washington,in u. K. Trade secretary liam fox of this thing the city for talks on what happens postbrexit. How will are we expecting them to prepare the ground for a trade deal after brexit happens . And these are not things that would be happening anytime soon. It would be years away after the u. K. Leaves the european union. They are symbolically important because this could allow the u. K. To perhaps regain some of those trade ties it will lose when it leaves the eu. Withestingly, he will meet members of congress as well as his counterpart, the u. S. Trade representative and the commerce texasary, and will go to and mexico to lay some groundwork there as well. For u. K. Sy, busy times diplomats. Thank you for joining us. The latest out of washington. The thailand government seeking 44 billion of investment to develop its eastern seaboard. The project secretary general discuss those plans next. This is bloomberg. Shery welcome back. This is Bloomberg Markets asia. The latest business flash headlines. Mining declining despite production fell. Output fell 8 after an earthquake on april 14. It still beat estimates. It accounted for about half of earnings in the six months through december, the ceo saying the quarter shows the companys overall resilience. Yft hoping to benefit from the stumbles of uber and launch its ,wn self Autonomous Vehicles opening a facility in palo alto called level five and expects to employ several hundred staff by the end of next year. Self now, the public driving effort has focused on partnerships with general motors, Jaguar Land Rover and waymo. The world war ii epic dunkirk has stormed to the top spot in the north american box office. Directed by christopher nolan, the film is being talked about as and auster contender for one or brothers, pulling in 50 million ahead of girls trip, which took 30 million. The imf has released its World Economic out look, raising projections for emerging and developing asia and says growth countries will reach 5. 1 this year. Joining us is the secretary council of the eastern Corridor Office of thailand. Thank you for joining us this morning. You are in beijing to promote the Eastern Economic court order , seeking chinese investors. Economic corridor, seeking chinese investors. Chineseortunities to Investors Show interest in right now . Thank you. This is an exciting time for asia. Corporation has been good. I am in beijing to explain investors in china about the new project of the thai government. From thect ranges airport, the highs the train, deepsea port, and also the new liketries and technologies electronic cars. So that is raising the concern of the japanese investor that wants to be there. Shery how much funding do you expect to get . I think the total project funding will be around 45 billion. Funding is not much of a problem because in thailand we already have some funding capabilities. In japan, cooperate china, and india to invest in this project as well. Shery where does thailand see it self fitting into chinas built and Road Initiative . Belt and Road Initiative . We have done a study of the fromative, and ranging areas down to the eastern areas of bangkok, the location for the eastern seaboard. The link down to that area is one of the one belt, one Road Initiatives. See an economic corridor along that route. Shery lets talk about the economy and thailand. The imf has come out with its outlook and has revised developing and emergingmarket economies. Thailand, wcrst on the bloomberg. Baht is the thirdbest performer, gaining 5 among asian currencies. I wonder how much of an impact this will have for businesses there. Believe it might have some impact, but not that much. Economy this the year bounced back quite a bit, and the Economic Growth will reach 3. 6 compared to the twosomething percent in the past couple of years. Thedownside has caused currency to rise. The bank of thailand tried to intervene and reduce the increase of the thai baht, but our chief export has been to neighboring countries already, so we are focused on the new manufacturing sectors, and some of them have already invested in thailand, so it might have some impact, but not that much. Shery talking about the industrial sector, we are overcapacity thai in the Industrial Site there. Why are we seeing this overcapacity and what can be done to tackle the problem . I think the overcapacity comes from two things. Because of the link of the Global Economy is not that partg as before, so export of thailand to some sectors has been slowing down, but that is from the past couple of years. Now this time the Cooperation Among asian countries, the linkage of the asian economy has been pretty much so and the productionional network in asia has been getting stronger. Our exports have bounced back as well. If the local economy and export sector bounces back, you will see a decrease of overcapacity in thailand quickly. Beijing, are you hearing investor concern about political stability in thailand given the general elections next year . There are some come up but the political situation in thailand has been stable for three years, and we compare for the next election, hopefully coming smooth. I believe people understand what is going on in the past and what has been done to the economy, so should beople effective for a good size of the country. Some investors are concerned, of somehe case investment projects, we try to implement under the longterm law so that the longterm perspective of the economy will still be there, i believe, yes. Haidi thank you so much. Of theretarygeneral Eastern Economic Corridor Office of thailand. Xiaomis ishy undeterred by chinas regulatory crackdown reining in risks. Our interview, next. This is bloomberg. Shery Chinese Electronics maker xiaomi shrugging off rising regulation of the Financial Sector. Ahead into online lending and other peertopeer services. The head of Consumer Lending saying the fintech high is big enough for more players. Over the past few years, we noticed problems in this industry. This Industry Needs regulation in place to enforce the activities and behaviors and to make the industry for development in a good way. Is it important to innovate before those regulations stifle the innovation . This is difficult it needs spacees to innovate. At the same time, if a lot of players in the market are not regulated,ned, self the government regulation and rules needs to be in place to make sure everything is fine. What is the biggest risk to you . First is risk management. The debt to income ratio is high. Some people have trouble to pay back. The other side is the financing side. Over the past few months, we in costs increases that have squeezed our profits. Those of the two risks i have seen. Your chairman has talked about the trouble xiaomi has had of late, losing market share and sales coming down. He talked about maybe the Company Growing a little too fast, but in financial services, arent you late to the game . I would not say it is late. It is just about timing to move into this space. We have over 200 million phone iots and over 60 million devices connected, so that translates into a lot of customers. Are you at a disadvantage because you dont have the one chation users that we has and the multiplatforms alibaba has come as a you are limited by how far you can go . The Chinese Market is huge enough. As i see it, we have enough space to grow, even with so huge competitors in the market. I mean big players in the market , we still have the space to grow. Shery that is it for this edition of Bloomberg Markets asia. Bloomberg markets middle east is next, live in st. Petersburg talking oil ahead of the opec ministerial. This is bloomberg. The following program is a paid advertisement for the hd mirror cam brought to you by Inventel Products llc. Announcer yep, theyre 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, the personal Security Camera for your car. This is accidents caught on camera with the hd mirror cam