Transcripts For BLOOMBERG Trending Business 20160704

For an election result in tell tuesday. Big business said the growing uncertainty is the worst possible outcome. Marketplace seen as chinas craigs list has gone from beauty to bes. Auto is burning through cash. You can let us know what you think of todays top stories by following us on twitter. The china and hong kong markets underway in 30 minutes, but singapore, taiwan, and malaysia have just come online. Here is david. David the question is what is not happening. Dense across the asiapacific, very mixed. Everything together, we are flat, so we have to wait another day for the msci pacific to hurdle the brexit losses. As far as all of asia, recouping those losses, largely down to the lethargic session in japan. Flat right now on the nikkei 225. Same across currencies, exception is aussie dollar. We are in limbo in a moment. We have the rba decision tomorrow, and your first instinct would be to reduce your long exposure. It has managed, to recoup some early losses. , last week was a bit ok. Dollaryen, more bad news out of corporate japan as far as the boj is concern, Inflation Expectations are being drawn lower. There you go. Thanks for that. The Australian Election delivered no clear result, a Hung Parliament looks like a near certainty. When our we going to at least get an idea of what the next government will look like . The pictures should become clear towards the end of the week. The counting resumes tomorrow, but 13 full days before everything is counted and it gets closed off by the electoral commission. At how thingsook stand, the Ruling Coalition sitting on 71 seats, 75 is the magic number you need to cross to form a government. On Opposition Labor Party 67. Thats why Malcolm Turnbull is in a slightly better position to form a majority government. If he can pick up a couple of seats yet to be determined and appoints a speaker from one of ts, he has made it. So malcolm tumble in a better position to form a minority government, but even if he does so, can he hang on . The former had similar circumstances in 2010, managed to get through her time as Prime Minister without facing a single vote of noconfidence. Legislation ing this sort of situation is next to impossible. We have a recipe for policy paralysis, or at least another election, providing uncertainty for markets and questions around the fate of the aaa Credit Rating. Angie how many leadership coups in the past couple of years . Almost as many Prime Minister leadership changes as there have been years in power. Took power from tony abbott nine months ago, is he under threat himself . , and there is already some talk about that, potentially a coup forming on the right wing of the liberal party. He did get the job to prevent an election wipeout under tony abbott. There is some recent history in the liberal party as well. Its going to be a real test of Malcolm Turnbulls ability to lead here, but even if he does manage to cobble together a minority government, there is trouble ahead within his own ranks as well. Angie thank you so much for that. A survey of economists by bloomberg says that china will have to bail out its bank within two years. Tom mckenzie is taking a look at the story for us. How big do they think this bail out will be, and why the urgency . We are talking about a 500 billion dollar bailout of chinas banks within two years. Some put the number far higher. Is a is one estimate that 3 trillion bail out, but even that is a fraction of the 10 billion trillion the 10 trillion forecast by kyle bass. Chinas debt now stands at 240 of gdp. Record numbern a of defaults, and in the 12 month since the end of march, nonperforming loans shot up 40 . 210erforming loans may cut billion u. S. Dollars according to Government Data. Would question that data and the true scale of the nonperforming loans is likely to be far higher. The pboc released a Financial Stability report last month, banks are able to maintain relatively high capital levels even if hit by severe shocks. Economistrtterm, predicted bailout would hit markets, bank stocks, the renminbi, pushing up government borrowing costs. Many say longerterm that a rescue would be positive. China bailed out its banks in the 1990s when nonperforming recapitalize, then the big for lenders and set up a big state run bank, largely seen as successful and followed by 10 years of breakneck growth, so shortterm pain for longterm gain some of these analysts are saying. Angie thank you so much for that. We will take a detailed look later on in the show. We want your opinion. Tweet us your thoughts. Lets take a look at some other stories we are watching today. As companies consider their future in the u k posts brexit, the chancellor exchequer may offer an incentive to stay. John osborne is looking to lower the tax rate to 15 from 20 . Meanwhile, tens of thousands of people marched through london protesting against leaving the european union. Campaigners point out the referendum result is not legally binding. Cannot legally happen without a vote in parliament. A group is threatening action against the government if it invokes article 50 without consulting mps. For brexit ision that it will be handled by whoever succeeds David Cameron. Latest figures have raised concerns about the state of the auto industry. 1. 5 one million vehicles were 2. 5 , but many automakers came in weaker than expected. Annualsonally adjusted sales pace for the industry was 16. 7 million month on month, falling short of 17. 2 million. Feeling concerns for u. S. Autos, weaker jobs growth, u. S. Employers added the fewest jobs in nearly six years in may. One of chinas Largest Property Developers resume trading for the first time this year. Vanke was faulted as the two biggest shareholders fought for control. Angie thank you so much for that. On our website, we will look at why asian banks may be facing a whatsapp moment. That is a bloomberg. Com asia. Persuade to be more relevant to ordinary people. We will take a look at the issues that have proved so divisive and australia. This is bloomberg. The latest first word worstnes, baghdads attack in the year has killed 100 15 people, a truck exploded in a shia neighborhood, underscoring the ability of extremist to strike. Clothing andmany jewelry stores, restaurants, and cafes. The blast came as the streets were filled with people. Days ofs announced six naval exercises. Andames start on tuesday run through july 11 in the South China Sea. Jing says shipped from ships from other countries will be banned in the area. It comes ahead of arbitration from the hague on july 12. China has said it will ignore the outcome. Rapprochement between israel and turkey has allowed for the passage of aid for palestinians in gaza. Caring food, clothing, and toys, which will be distributed this week. Global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries. This is bloomberg. Angie pressure mounting as the austrian election declared austrian election declared no clear winner. Election declared no clear winner. Can you explain the nasa nations of the parliament here mechanizations of the parliament here. Find ourselves in a similar situation to 2010 when Neither Party was able to win a majority of seats. To win a majority, a party must get 76 seats in order to govern. At the moment, the coalition of parties is sitting on 6568. The labour party is around 69. A number of seats have yet to be decided. We are waiting for the count to progress and to see which side can start to win more seats. If any of them are going to have a chance of forming a majority government. Angie this is bill lowest primary vote for either of the two major party since 1943. The liberals and the label party labour party, now they have to court the greens. Who else . There are so many here. How does that change the political tenure of the conversation . Australia has two houses, the lower and upper house. House, ther government of the day will have to negotiate or deal with a number of minor parties. The greens have representation. Has a seatical party in the lower house. There are a number of independents as well. They will become crucial if neither major party can get to 76 by themselves. Lets say that is done. The real challenge for the next government will be the senate, which has a number of new and old faces. Pauline hanson was a prominent figure in the late 1990s, she rewon a seat in the senate. , ahave a media personality number of rightwing , they arebased groups positioning themselves to win seats, so this will be a difficult next three years if such awe have government. Angie my question is whether or not this elevates the power of those minority voices. Certainly. Theres going to be an opportunity for all of these parties and independents to influence the government. Traditionally australia has usually had a Strong Majority government, but they have always had to negotiate with cross benches in the senate. Government for any now is the fact there are so many different voices in the senate. Greens,rightwing, social democrats, a range of tople that really have yet declare their policies as well on a range of issues, so that is where the challenge lies. Getting any major reforms to the senate is going to be impossible in some ways. Angie hard to get business done. I guess thats why we are looking at a Credit Rating cut. The question is about Malcolm Turnbull, will he survive . An unmitigatedn disaster for mr. Turnbull, who of course was able to get the liberal Party Leadership in a coup in september last year. His promise was not to change any policies, but his promise was that he was a more popular leader than tony abbott and would lead the coalition government. He has not been able to do that. He is severely weaken, and a lot of his supporters and those within the liberal party who backed his cause are now saying very upset with this result. Angie lets say they are able to cobble a coalition party. Can this government survive . If we have history as a guide, it is not impossible for a government to survive for three years and a minority situation. ,e have had that at some states so they can go for the three year time span, but that is provided they can satisfy the policy demands of those cross benches. The last time around, it was the greens and independents that gave labor the ability to govern. This time it is unclear to who and what demands they will make on the government of the day. That is where the question is, but if we can assume they make political decisions that satisfy these cross benches, the government can stand for the next three years. Angie what is the critical next step . To see how the counting progresses and how the votes progress. What we are expecting is that by thursday or friday next week, this week, we will have a clear understanding of how many seats have been one. Once that is clarified, we will leaderss by the party to court those cross benches and try to get them on board. Angie we will leave it there. Thank you so much for joining us. Coming up, bumpy ride, why traders are betting the company known as the craigs list of china faces a rough road ahead. This is bloomberg. Angie this is trending business. Wasyears ago bitauto attracting support from hedge funds. Thise have a look at why one time tech darling has hit the brakes. It seems investors feel it is underwhelming. Haidi this despite bitauto being a name included in the msci indices. Things have worsened. Two years ago, the stock surged , up 340 in 2013. Tiger management made a 600 million wager for 15 in the company. It then reduced at stake 20 within a year. Thats when things started to fall apart. This blue line here on the chart is where the stock price starts falling towards the end of 2015. We are also seeing this diversions. We are still seeing bear bets on it increase. The natureshow you of the investor interest in the company now. If you take a look at this white line, we see the divergence with those their bets climbing to a record high last week. A are saying this and tense five given that we are seeing a down, but also the Company Spending a lot of money in terms of how they are maintaining competitiveness against their major competitor. We are also seeing a potential drop in revenue, and listening if drop from 63 last year to 35 this year, falling further to 21 in 2017. Islysts are saying that this essentially a case of a company that has not performed according to expectations. Aboutors are undecided what they have managed to achieve versus the hype. Angie also, the economic slowdown, right . They are saying the economic slowdown is adding another layer of skepticism when it comes to this company. I want to bring up a chart that shows you what it has done over the past three years, this rise and fall, if you will. No doubt about it, you have an environment when the chinese is growing at its slowest pace in 25 years. This sector has a high exposure to the economy and investors may do longterm potential, but not see high returns in the shortterm. There is one vote of confidence in bitauto. Chinas Biggest Tech Companies together hold a 34 stake, and analysts say that this is a seal of approval as the company is trying to shift its focus from online to offline. Short out ofallen three out of the past four quarters. Amid growing speculation that chinas banks need a bailout, we will ask why economists think it is not in the cards. We will have all the opening numbers. This is bloomberg. Get ready for the rio Olympic Games by switching to xfinity x1. Show me gymnastics. X1 lets you search by sport, watch nbcs highlights and catch every live event on your tv with nbc sports live extra. Im getting ready. Are you . X1 will change the way you experience nbcuniversals coverage of the rio Olympic Games. Call or go online today to switch to x1. Angie top stories trend in this hour, australia will have to wait until tomorrow to know who won the election, counting paused. Thetwo parties reporting lowest support since 1943, leading to declines for the aussie dollar, the aaa Credit Rating under threat. The rba due to meet tomorrow to make its rate decision. Economists predict chinese banks will receive a government bailout in the next two years. They say they expect the cost of recapitalization at more than 500 billion. Are slumping. Vake was halted as the two biggest shareholders fault for control. More details on this corporate drama in china. This is one of chinas Largest Property Developers. It has dropped 10 this year. Halted in december as its two biggest shareholders fight for control. With thet all started uninvited hostile takeover to be the majority shareholder. Shares were halted from trade in december. Thaterged in december someone had been buying shares and had a stake of 23. 52 . That is from less than 5 . Saw this as a hostile takeover. It was not a welcome move. The chairman said they lacked sufficient credibility and could have a negative impact on vanke s Credit Rating and reputation. This is when it emerged that this happened. As you know, these moves are not at all welcome. Fought backnke here. Shenzhen metro, they tried to bring them in an equity swap to make them the majority shareholder. Essentially, yes. Vanke has been trying to find of its grasp. Out the pressure is continuing. One thing they have tried to do is sell shares to other companies to dilute the state. Stake. Shenzhen metro group would then become the main shareholder. China resources is now the number two biggest shareholder in vanke. It is facing opposition from its two biggest shareholders. Plus, the pressure to survive does continue. Angie they are fighting back . There was an extraordinary general meeting in which will be discussed the removal of 10 out of the 11 members of the board. Vanke has rejected this. Angie im not surprised the board would reject the Extraordinary Shareholder Meeting to get rid of itself. A stakeholder with more than , they have the right to call this meeting. Angie are they going to do that . We dont know. Shares will resume trading today. Shares profit 11 when they dropped in january in hong kong. They are down 30 so far this year. Angie we are waiting to see whether or not that is the case. Thanks for that. Lets see what else is moving the markets right now with david. I actually think i lived in a vanke property when i was living in china. Lets have a look at the broader markets right now. Put everything together, basically flat on the regional benchmark, although we are starting to see buying pickup. Have a look at hong kong. Shanghai is flat. The nikkei has managed to erase most of its losses. Australia is managing to recover most of those losses as well. Long story short, very little to trade on today. Volumes are fairly thin. At some of the stock movers. We are looking at the casino friday,midsession on the latest gambling data from a cow, not as bad as expected, a drop of 8 . It is still fairly hefty. The casinos are not losing money. Have a look at the follow on releasellowing fridays , some buying there. , trading atbanks three quarters book. Guys are traded as a proxy to concerns over china. That being said, this is where of these stocks are trading at for the moment. Again, we are have to three value. Of book thats why people are talking about the need for a rescue for the banking structure. Angie how big will that check look like . China will have to bill at its banks in two years according to bloomberg. How big would this bailout have to be . How things really got not bad for chinas lenders . They will have to cut a check 500 and 10, that at billion dollars, that is the size of the bank out. They expect that to happen within the next two years. Higher, the number far one estimate of a 3 trillion bailout, even that is well below the 10 trillion bailout that kyle bass predicted in february. Iss is because there mounting concerns about the debt levels. To gdp isat debt around 247 right now. That at least 11 firms have missed bond payments this year, more than all of 2015. Ofthe 12 months to the end march, nonperforming loans shot up 40 . Upperforming loans make 1. 75 of the total debt pile, 210 billion, and that is ,ccording to Government Data many say the true scale is likely to be far higher. Pboc saying . The unsurprisingly, they have not responded wrigley to the Bloomberg Survey, but did release a Financial Stability report last month that says banks are able to maintain their relatively high capital levels even if they are hit by severe shocks. Beijing is pushing for the big four banks to have capital but thef 11. 5 by 2018, markets look like they are already starting to price that in. As david pointed to earlier, they are trying to price in potential losses. , chinasof valuations banks are trading well below peers. In the longer term, it could prove positive. In the 1990s, we saw china bailing out its banks and setting up a bad bank when nonperforming loans hit 40 in the 1990s. Economists think that we could see a positive future if this bailout happens. What a different economy china is now. Thank you so much for that. Lets check in on some other stories we are following for you. New ceo is going to pause mergers and acquisitions to focus on steering the economy through minings downturn. Says newstien jacques deals are not the top of the agenda and says he will develop existing projects and cut costs. The slowdown in china has lowered prices and created a supply glut. Rio tinto has decided to shelve plans to develop the worlds biggest iron ore deposit. Told thestien jacques Times Newspaper that the 20 billion project is not the right time to expand the operations. National bank of abu dhabi has confirmed its merger with first gulf bank, creating a regional powerhouse worth 175 billion. Shareholders will hold 52 , but operate under the National Bank , allowing themme to compete with regional rivals like qatar National Bank. For asean be a call to operate more in touch with people. Correspondent is east our south correspondent is here, and breaks it is seen as a warning for leaders here in asean. Lets put it this way. Pause andan take a , indonesias trade minister said not enough time, not enough money and assets being spent for the people. A Single Market this year, 10 countries, six hundred million people, combined gdp of 2. 5 trillion. Singapore on one hand. They have managed to remove Tariff Barriers. It has passive charter that sets the road for regional indication. Removes to move nonTariff Barriers. It has been difficult. Angie how closely has asean tailored itself to the eu anyway . The eu has been a source of asean inspiration for asean. The eu is not the model that asean has adopted. Has pointed to the model being somewhat unrealistic and utopian. Warning asean means should be careful. To be tooafford ambitious, two huge, or too powerful. Angie hasnt faced internal dissent as well . Yes. Over the years and more recently over the issue of china and the South China Sea. It has failed to come together to stop chinas expansion there. In fact, because of the internal had to with draw a statement expressing his fears of rising tensions and the South China Sea, also the need to respect international law. Based onthat asean consensus, all members will have to agree, depending on how you look at it, it could be a blessing or a setback. Angie we will leave it there. Coming up, our next guest says it is looking more likely the boj will ease at the end of the month. We will look at the implications for you, next. This is bloomberg. Kong. Is 9 45 a. M. In hong these are the latest first word headlines. 13 people including three foreigners in court in connection with a tax at istanbul airport. Inpeople died in an attack which no one has claimed responsibility. 27 people have been detained in connection with the attacks. China has warned of severe flooding after days of torrential rain. Authorities said Flood Control facilities have been improved in recent years, but rising water levels pose a serious threat. The reservoir is already with 17,000 people at risk if the dam collapses. Completing its purchase of a 25 . Ake in kuka by midea the attempt to find european suitors failed. Confirm jobs will be safe until the end of 2023, pledging to expand production for china and move into household robots. Global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries. This is bloomberg. Head start onet a what may move markets this week. Thank you for joining us. Is brexit over . Are the concerns surrounding it over . I dont think it is over. We are going into a bit of a quiet time. Youre not going to see negotiations starting until fourth quarter, so we are in a bit of a vacuum in terms of how the whole thing will play out. Angie someone came up with an theory, political theory, that is creating a lot of buzz, the possibility that despite the referendum, despite the popular vote to leave europe , that in fact the government and the u. K. Does not have to go through with it. Various people are making that argument, but all the candidates for the conservative Party Leadership have made a point of saying brexit means brexit, so they seem to be aiming for the job with the commitment of taking the u. K. Out of the eu. The response of the european politicians has been that you voted and now you have to leave. People i think are clutching straws. Themt see a way back for without absolute political carnage in the u. K. After a vote like this. We do know Central Banks around the world are moving forward with stimulus. There is word possibly we will see action from the ecb. What about the boj here in japan . To levels yen surged that made it very uncomfortable. It remains below that 105 market where we would see intervention. Our we going to get stimulus from governor kuroda . The chances of something more from the boj must have increased after the brexit vote. The yen is viewed as a safe haven. They need to find some way to offset the yen strength damage to the economy. What you going to do . Going to buy even more government bonds, even more of the stock market . Any reallyhave obvious or attractive policies to put into place, but there is pressure for something more from governor kuroda. Angie what about the rva . Now the rba . Aey are staring at a triple credit right cut credit rate cut in the face. Ofit does look like a bit the mess. I doubt the rba will act tomorrow. The currency is suggesting there is no need to act anytime soon, but it has to be a possibility. I guess they would like to see some clarity on how the politics is going to look before they decide on any subsequent policy moves. Last question for you, china, china banks, we did a Bloomberg Survey of economists, not sure if we included you, but nine of 15 economist we surveyed expect some sort of bailout. What you think about the possibility . To me it has been clear for years that the chinese banks have a massive nonperforming loan problem. The bailout has already started. The local Government Debt swap last year effectively was recapitalization of the banks by taking off future bad loans and swapping them for government bonds, so you can see the government is well aware they have a problem and they are already taking measures to solve the problem. Yes, you might get a former bailout at some point in the future, but to make him the bailout began last year. Angie are you seeing liquidity seizing up in china . No, i dont think liquidity is seizing up. There seems to be an abundance of liquidity. This is the problem. The banks are throwing good money after bad, keep lending more money to distressed taking theo avoid debt writedown, recognizing the nonperforming loan. You can keep the wheels turning for quite a long time if you are prepared to protect the banks them to makeallow more bad lending decisions. That seems to be pretty much an explicit policy in china. Angie i guess lets see how Foreign Investors react to that ultimately. We will leave it there. Thank you so much for that. Still up, hanergy suspended from trade, but its Parent Company is thinking big. That is next. This is bloomberg. Angie are you ready for cloud anxiety . That may be, thing if one ker has solar ma success with its new solar powered vehicle. What happens if it rains for a long time . I am from seattle. We dont have cloud anxiety. , the troubled solar cell maker. Unveiled four new solar cars. We knew this was in the pipeline, but had been delayed by their financial troubles and suspension on the stock market. Anxiety, this car will work and the batteries will charge of the sun is shining. About fivesix hours of direct sunlight will charge the battery. Is the primary source of energy, but there is a secondary. The primary source will give you 80 kilometers maximum range, 50 miles. Please dont be cloudy today because i have to get to work. Maybe it is not a bad thing. They also have a lithium ion trips or iflonger it is smoggy. Beijing is very smoggy. They are trying to figure out this in the midst of this investigation. Alleged share price manipulation. No update, still under investigation. Andan bring up the chart show how the stock went up threefold during the big runup in chinese stocks last year, then it fell off a cliff in half an hour, losing 19 billion in market cap. The ceo is no longer chinas richest man. He resigned in may as the executive director and chairman. He is still the biggest shareholder of the Parent Company. Whether this company will be viable going for it, it will have to do with these new products. Angie maybe that is true clouding psyd there. Thanks. Sydney to gete in the take on the Australian Election uncertainty in the next hour of trending business. This is bloomberg. It is monday, the fourth of july and this is trending business. Angie were going to be live in beijing, city and singapore this hour. Heres what were watching this morning. Your ego. We have the stock was halted in december amid a power struggle between top shareholders. Is going to have to wait another day to know the outcome of the weekend election. A Hung Parliament is the likely outcome keeping pressure on the Prime Minister. And new Bloomberg Survey says china will be forced to bail out the banks. 500inal bill could top billion dollars. You can follow me on twitter, do not forget to include the trending business. But no hashtag needed for david. Fourth of july. Seem to of fireworks we were hoping. It has picked up a little bit, we are now mostly think green. 25 of stocks still on the way down. You want to look within pockets of the market that are doing very well. Look at the gold markets doing very well. Have a look at the, rumors and australia. Back to levels of 2014. Were pushing to over 3000 for gold. Have a look at silver. Theperforming commodity in first half. It takes us back about two years. The first time we are trading above the 20 level for solar silver. Whydo understand that there is a lot of buying. Aussie kiwi, every time we talk about the chart traces that u s back. Parity is now a realistic possibility. Were down about 7 . Dollar is far from bulletproof but it is in a better spot right here for parity to be a realistic possibility. Using the height points of that downward parity could be a possibility by the end of this week. But every time we talk about this it does not happen so ill just leave this year. Angie thank you. By the dailyropped limit of 10 after resuming trade for the first time this year. It was halted in december as his two biggest shareholders far for control. Start for v good anke. It has been trading in hong kong and those shares have fallen Something Like 30 . If you look at how hong kong shares are doing, vanke probably would have dropped. Lets look at why was suspended in the first place. It happened december last year and emerged recently in december the consortium headed back buying up shares and within five shares rishaad it was not a welcome move by vanke. They lacked sufficient credibility and would have possibly a negative impact on the Credit Rating and reputation. They are going to push back on this spirit on this. What a recent we have seen vanke shares rally by Something Like 36 . They were basically buying up vanke shares are going to be daily limit. 1 i angie the stakes are huge year. We are talking about a massive market were Chinese People look to invest not only in the market this is one of the few things here. This is a huge deal. Vanke is fighting back. Did they lineup shenzhen metro to try to offset this . Find alleen trying to kind of wiggle out of the grasp. One of the things it wants to do is to sell a stake to a third party and one of those third parties is shenzhen metro. 6. 9 primed to sell billion shares to shenzhen. Groups do not agree with this. Number one and number two biggest shareholders in vanke hold Something Like 39. 9 . They have a quite large stake. Angie they called for extraordinary shareholders meeting. They want to get rid of 10 of the 11 Board Members. The majority of the Board Members. One of the units in the consortium basically called for edium asking to discuss angie the network . Didi that work . No. Stakeholders with more than 10 shares in vanke have the right to call an egm even know the Board Members rejected it. We have not heard a comeback yet but this is the current session vanke is under and it continues to find ways to move forward. It is a life or death matter. Angie that is a nuclear option. Lets see if they get what they want in the extraordinary situation. For outlininguch the very complicated story for us. In china here because a survey of economists by bloomberg say china will have to bail out its banks within two years. Lets go to beijing and talk to our chinese correspondent. Who is making this prediction and how big would be bailout be . This is a production by economists. The prediction from them is china will have to bail out its banks to the tune of 500 bi then u. S. Dollars within next two years. Some of the number far higher, 3 trillion. He reckoned china would need a 10 trillion bailout. Theres mounting concern about chinas bailout power. Missedt 11 firms have payments on sure this year, that is more than all 2015. It then shut up more than 40 . It made up about 1. 75 , that is equal to around 2010 billion u. S. Dollars. Many are skeptical about that data and city true scale is likely to be far higher. Pboc beent has the saying here and could a bailout be good news in the longterm . Tom they had been issuing statements of calm. Boc released a report last month and they said the banks here are able to maintain their relatively high capital levels even if they are hit by severe shocks. Systemics pushing banks to up their capital ratios to 11. 5 by 2018. That is one step in which they could try to reassure the markets. But the market are trying to price and the potential losses and in terms of evaluations, chinas biggest banks are trading well below their peers. The bailout with it hit chinas markets. An uptick into see chinas borrowing costs. A rescue would be positive and we have seen this before in chinas history, china bailout its banks in the 1990s when they hit 40 . The recapitalize and set up a state run bad bank. It was largely seen as successful. The question now is how exactly the government would implement a bailout and when they would pull the trigger on it . Angie thank you. While the biggest law firms in london said the uks retreat from the eu could not legally happen without a vote from parliament. They are threatening action against the government if it invokes article 50. The uks position is it is a position for weber succeeds David Cameron as Prime Minister. The latest u. S. Car sales reported a mixed bag, stoking concerns the market is slowing and consumers are putting purchases on hold. Board be rejections that toyota, gm and chrysler missed estimates. May saw the fewest jobs created an almost six years. Offeredralian election no clear results in the over the weekend. Lets get over to paul and city. Australia, what is going on . When we have an idea of what the next government will look like, what is the mood right now . That i mayl tell you be a resident of us try it am a citizen of new zealand so im not allowed to vote. I can happily step above all this freight but the situation is a real mess, im glad i do not have to take responsibility. Currently a 57 seats, the opposition on 71. The key thing to be recounting counting of the prepolling and postal votes which resumes on tuesday when a may be 13 days until we have a clear result. You might see those numbers shift quite a lot. Look at those smaller parties, independence, theyll say they havent taking calls from both labour party and the Ruling Coalition but none are saying they would support either side in a minority government at the moment. What we had here is a recipe for paralysis. The senate is also per divided. To be toos not going happy about all the uncertainty surrounding this result. Theres also the question over what the fate of australias aaa Credit Rating will be. Angie that is what is concerning the market right now. Also concerning here is Malcolm Turnbull. He promised election victory, a lot of people saying, calling an early election here was a huge mistake. Is he under threat and self here himself here . Paul yes. Some of the journalists on the Campaign Said they were only making one or two stops per day. While the Opposition Leader was working tremendously hard to get votes for his party. Just forcriticism not that but also for failing to deliver on that promise. Back in september, promising to deliver victory, and he did not do it. He will not only have difficulty forming a minority government if the numbers fall to his side, but he will have to quell the rebellion in his own ranks as well. Angie thanks for that come alive out of city. Pushing ahead with ipo despite uncertainty. Well take a look at what could be the biggest offering in the world is here. Why traders are betting the company known as the craigslist of china. The truck exploded in a mostly shia neighborhood. The area has many closing restaurants and cafes. The streets were filled with people after they had broken the ramadan fast. China has announced six days of naval exercises. Wargames will start on tuesday and run through the 11th in the South China Sea. Ships from other countries will be banned from the air and exercise is coming just ahead of arbitration of disputed water. China said it will ignore the outcome. Diplomatic carrying 10,000 toys which will be the she rated at the end of the week. The sixyear split between israel and turkey was triggered global news 24 hours a day power by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Just two years ago, chinas online car marketplace was attracting support from hedge funds including Tiger Management. But now that is against the u. S. Trade we have a look at why this one time tech darling has hit the brakes. That investors are feeling underwhelming. Storm of therfect signals. It does seem that is greater exposure seems to have worsened the sentiment. Just two years ago there stocks surged 120 . Before that, Tiger Management right up forillion a 16 stake in the country. Tothen reduced its stake zero. Were looking at investor interest of a different nature. This chart shows that Short Interest in this auto stock climbed to a record high last week, despite shares already having lost half of its value over the past year. In cash flow turned negative 2015. Spending more money to compete with its Major Chinese rival. Analysts are increasingly bearish towards revenue which is expected to drop to 35 this year from 63 last year to 20 per and 221 in 2017. 2017. 21 in investors are not excited what the company has managed to achieve after so much hype. It is one of the tech bubble type stocks that is coming down very rapidly. Angie also at play is the economic slowdown, right . Haidi thats right. If you take a look at this start, you can bring it up and see this decline really tracking the clients we have seen in china gdp. The economy slowdown is adding just another layer of skepticism over this companys fortunes. The chinese economy is growing at the slowest pace in about a quarter of a century. Signs of new york says that have high exposure to the economy. This is a longterm potential and the company but they do not have high hopes for the shortterm. Of 2015 youmiddle can see were the brakes of the chinese economy were put on. You can see a steady decline in the stock price. There is one vote of confidence. It does have support from chinas Biggest Tech Companies. Together, they hold about a 34 stake in bitauto. Seal ofsomething of a approval, especially as the company is shifting its focus from online to offline services. A lot of speculation about with synergy there could be but no doubt things will have to be done quickly for the stock to rise. Has fallen short of wall streets expectations three of the past four quarters. Coming up next, for the First Time Since april, mitsubishi has been allowed to read resume production. Is the worst over for the troubled carmaker . This is bloomberg. Mitsubishi has been allowed to resume making minicars. The company admitted manipulating fuel economy chest. Tests. What is the state of play at the factory right now . Mitsubishi has already resumed production at the car point plant. Sign of relief because the mitsubishi plant is where they produce cars. It is the only part of the japanese automotive business because industrywide demand is shrinking. Only minicars are doing ok. That is really important. Angie how is the factory feeling about nissans rescue . In the immediate aftermath of the scandal, the investors and suppliers really encouraged to see Mitsubishi Motors minicar plant will not be shut down because mitsubishi will still be around after nissans investment. Town, they uncovered the other side of the coin which is the fear for the cost killer. Given their track record of shutting down factories, to turn those two companies around, they fear they will do the same to the mitsubishi plant in japan and maybe elsewhere after the company merged production. They switched to common platforms for automobiles. Oneser suppliers like the they feel like they lost their business with nissan. Angie what measures are being taken to overcome the effects of the scandal . Mitsubishi has restated their minicars,my for two so they managed to resume their sales and production for those four models. Discounts andr they promised the dealer is that they would try to subsidize and compensate japanese consumers for ¥10,000 each. Bute measures seven taken it will still take a long time taken but itll take a long time to see if consumers will return to their dealers. Angie thank you for that. Other stories making headlines has let delivery targets for the second straight quarter, so i 40,300 cars. 15 below is goal. As i has had trouble getting those of vehicles to customers. It now expects to deliver about 50,000 cars in its second half means itn which would fall slightly short of its target. Hyundai wants to build a shipyard in saudi arabia. They were discussing the deal with a saudi oil leader. The company has been hit by massive you guys be good. Ill see you later [ bark ] [ bark ] bye. See ya pal. Ever wonder what your pets do when you leave home . [ laughing ] aw you cutie pie. Aw. Aw. Aw. Aw. [ barking ] [ washing machine running ] partys on know what your pets are up to with xfinity home. Xfinity. The future of awesome. See the secret life of pets, in theaters july 8th. Angie top stories trending, shares in chinas largest Property Developer have dropped after resuming chain. China vanke trade was halted as to shareholders for control. Rejected avanke request for an extraordinary general meeting to remove 10 directors. No surprise why the board rejected that. An increasing number of economists predict that chinese banks will receive a government bailout in the next two years. Say such a move would be 500 billion as a cost of recapitalization. Australia, here we go. We have to wait until tuesday to know who won the election. Recording theties lowest support since 1943. The uncertainty led to declines in the aussie dollar, the aaa Credit Rating under threat. Meetber, rba is due to tomorrow to make its latest rate decision. Have a look at asia right now. The last 10 minutes or so, we just cross that threshold taking us back to levels prebrexit. We have reversed all of those losses. Every single sector group is higher. When you have a look in financials, it is also a reflection of which stocks have underperformed, banks still seeing some pressure. Brunt of the concern still in the banks. Have a look at some of these Precious Metals. Base materials up 1. 6 . We can go through each and every one. I would take you through some quickly here. , note goldmining stocks surprising. This is your market story today. Continued buying into the Precious Metals space. Gold, silver, really getting bought up. Just keep in mind that these Precious Metals are the best ,erforming commodity out there up 30 , 40 . Have a look at these yeartodate gains. Silver is what you want to watch. 21 now. We have not seen these level since 2014. Can we get the graphic up, please . , some say it is down to safe haven buying. A lot of people saying the search for yield is pushing money into this asset class. Xag is spot silver, the second one is spot gold, the third one is spot palladium. Not bad for year to date gains. Angie the new normal. Thanks for that. Chinamberg survey says will have to bailout out its banks within the next two years. Our china finance editor is here. Havent we been talking about this for years . There are two things that have focused attention on it again. One was an article in may personse authoritative said china needs to tackle its bad debt. The other thing are high estimates from analysts as to what they think a true bad debt level is. 15 to 19 bad loan ratio when the official number is less than 2 . We areat the bottom starting to see defaults of loans, then it builds and builds and builds. At some point, a l out might he likely. A bailout might be likely. How likely . Depends on how aggressive the government wants to be in tackling it. There is disagreement on how high the bad loan level is. Angie kyle bass things he could be a 10 trillion bailout. Kyle bass talks about chinese banks losing 3. 5 trillion in assets. Sliding 30 , so he talks about a Fairly Extreme scenario. Contrast to kyle bass, some analysts think the bad lane higher, loan ratio is so there is no agreement on what the real bad loan level is. Then there is the question of analysts sometimes talking about the Chinese Government being in extend and pretend mode. It does not want to deal with the bad debt situation, but rather the banks keep on rolling and will deal with the problem later and hopefully we will grow out of it. So there is no real sign that the government will act, so analysts are forecasting something to happen within two years. That is forecasting a big change in the governments attitude. Angie there are two options, bail out or grow out of it, but it is china slowing down. At some point, how long will that patience last and it defaults to a possible bailout here . That is true if the bad debts are as bad as some analysts estimate. Angie can china afford such a bailout . That is one thing that all the analysts are agreed on, that china has the capacity to deal with it, that the money is there. Angie that is the expectation. Thank you for monitoring that for us. Isnas Postal Savings Bank pressing ahead with its 8 billion ipo despite recent market turmoil. The listing is expected to be the worlds a guest this year. What is driving this ipo . I suppose they could have taken better timing. In fact, one thing they will face is reaching a price of at least one times price to book. They did a private offering last year that got them one times pricetobook, but if you look at all the other banks in china listed in hong kong, they all trade below book value. There is a requirement by the chinese regulator that chinese banks cannot sell shares to foreigners unless they are at least at book by you. Book value. The bad loan ratio keeps growing , and that is probably affecting the Postal Savings Bank as well. They have a low capital ratio compared to their peers. They were around 9. 6 , meaning ir equity is subordinated to bad debt. One of the reasons they might be doing this Equity Offering is they need more capital. Angie ok, they need more apital, but is this likely problem of nonperforming loans or Something Else . Bestey are one of the seated when it comes to nonperforming loans. They have the lowest nonperforming loan ratio among the big thanks in china. While that is not the biggest problem, it is still a problem because nonperforming loans in china are going up, so whether you are at 0. 65 , which is supposedly what the Postal Savings Bank is, or 1. 7 , which is what the other big banks are, or 10 , which is what kyle bass says, the truth is that the trend is up. If the trend is up, the more nonperforming loans you have, the less capital you have technically or the more capital you need, so they need more capital. They raised some equity last year and a private placement. Think they would do many more capital raisings, because as they bring their capital structure back to 11. 5 , the capital adequacy ratio required to have by 2019, they will need a lot more equity. Well, the timing may be good after all, especially if you have such a pessimistic outlook as to the environment around you at some point in the future. That is a great point. Thank you so much for that. Lets check in on some other stories we are following. Rio tintos new ceo says he will pause on new mergers and acquisitions to focus on steering the company through minings downturn. Jeansebastien jacques says new deals are not top of the agenda. He will instead develop existing projects and cut costs. Rio tinto is battling a slowdown in china, creating a supply glut. At rio tinto, it has decided to shelve plans to develop the worlds biggest iron ore deposit. Jeansebastien jacques telling the Times Newspaper that the 20 expensive,ject is not really the right time to expand operations, he says. Pop in new guineas government has recently claimed that rio tinto was too slow with its plans. The National Bank of abu dhabi is creating a regional powerhouse of assets worth one and 75 billion. Shareholders will hold 52 of the combined entity, but will operate under the National Bank of abu dhabi name. It will allow the lender to better compete with rivals such as qatar National Bank. Lets check back in on how markets have responded to the uncertainty of the Australian Election outcome. Us indoes this leave australia . How is the business of doing business going to get done here . Good morning. Certainly the result is still unknown. Been closerinly than most had anticipated, although the polls are predicting very close to 5050. There might have been some sentiment, and the betting agencies might have given the coalition a slight upper hand, so unfortunately we will be very close. We have to wait until tuesday or wednesday for a final result. It does look like the conservatives may just get a majority in their own right, but bit ofse will also be a a battlefield for them to negotiate legislation through. Is almost ay, this return to the 2010 time for legislators, and certainly for austrian business. Angie i guess it is not something that you are not used to. This is very familiar to investors here, but of course this time what we are staring at is a aaa rating cut. We are not concerned by that. Clearly agencies will be watching closely, particularly around whoever comes in and governs. What they will be doing in terms of the budget and budget deficit, but that has been on the table for quite some time. Our budget at deficit as a percentage of the gdp, it is still one of the lowest in the oecd, but ratings ensuringwant to keep that deficit does not blow out, so there will be lots of warnings, but we feel reasonably comfortable in terms of total debt and the budget deficit component that that aaa rating is not at risk. Angie lets talk about the broader market. Msci asiapacific regional ,enchmark at levels prebrexit completely discounting the possibility well, the absolute likelihood that it will leave the eu. Is that fair . Is it sustainable . It is an interesting to see how markets have rebounded so strongly. If you look at any longterm volatility chart, we do see spikes, clearly a very big spike on concerns of global growth, and a similar spike, although not to the same extent, through the brexit vote with a strong rebound. Im not so sure the markets are saying they will not leave brexit. There is so much unknown in plan. S to that exit as a result, we would expect to see ongoing volatility, although surely the pace will surely subside. Thats not to say we dont take it seriously. Clearly we do. We have downgraded our outlook for the u. K. Economy, literally lving it to 1 , but we dont see it going to reception. To europe,. 2 of 1 down 1. 6 growth for europe, so a slowing of growth and we will be watching that closely, but we dont see as big a risks as markets might have been forecasting when markets were down 6 in europe. You are notay counting in a risk of recession, why not . Is it centralbank action that will help buffer some of the problems there . I think it is twofold, we are certainly expecting Central Banks, who have been well prepared for either outcome on brexit, will be accommodated in terms of policy settings, but dont forget the trade links remain. It is not as if business has suddenly stopped. Business will continue, albeit consumers and British Business will delay investment plans, but are still expecting to see growth around that 1 level for britain in 2017, so we dont see it falling off a cliff, but definitely slowing. Angie and volatility persisting. Thank you so much for joining us live from sydney. Next, lessons to be learned. We will look at what the uks retreat means for asean. That story is coming up next. This is bloomberg. 10 47 a. M. In hong kong. The latest first word headlines. In court have appeared in connection with last weeks attack on istanbul airport. In the attack, which no one has claimed responsibility, although turkey blames islamic state. Inpeople have been detained connection with the attack. China warns of severe flooding after days of torrential rain. Ishorities say Flood Control obese have been improved, but rising water levels pose a serious threat. A reservoir is already overflowing with 70,000 people at risk if the dam collapses. Has completed a stake of 1. 3 billion in kuka. Kuka executives back the deal confirm jobs will be safe until the end of 2023. They will expand production in china and move into household robots. Global news 24 hours a day powered by over 2600 journalists and analysts in more than 120 countries. This is bloomberg. Angie the historic referendum in the u. K. May hold a lesson for the asean. They have been moving closer in recent years, but brexit may mean it made now be forced to consider the views of ordinary people more than ever. Asianutheast orso correspondent has been watching this. Brexit seen as a warning here. Pretty much. Time for asean to think about what it once to do now. Asean faces the risk of becoming a project of the elite. Indonesias trade minister said exactly that, and says not enough time, not enough money, not enough effort being spent on socializing it to the people, the people that asean is supposed to be serving. Asean launched a Single Market this year, 10 countries, 600 million six and a million people. These countries are at different stages of development. Asean has managed to remove Tariff Barriers between members, a charter for regional integration. Nontariffs to remove barriers to trade before 2025. The thing to remember is that the integration process has not been easy, has not been without its challenges. Angie how closely has asean tailored itself to the eu anyway . A you can say the eu has been source of inspiration for asean, but we have to be very clear here. On several occasions, asean did say that the eu is not the model it has adopted. The modelnted to being unrealistic and utopian, and brexit serves as a warning. To be careful, that is what one political observer said. Angie isnt it the case that asean has also faced internal dissent . You bet. The sent of the years, dissent recently in the South China Sea over china. It failed to come together to stop chinas expansion in the South China Sea because beijing membersome asean against each other, and because of internal dissent. To withdraw a strong statement expressing concern over rising tensions in the South China Sea and the need to respect international law. Asean is based on consensus. All members will have to agree. Angie thanks for that. Coming up next, troubled chinese solar equivalent maker hanergy has been suspended from trade for more than year, but traders say it has a Bright Future ahead. That is next. This is bloomberg. Angie welcome back. Are you ready for cloud anxiety . That may be a thing if one company has success with his new solar powered car. I guessompany what theyre hoping for is that the solar powered vehicle is going to be what we remember. They are hoping it will be a thing. I dont know if it will be a thing. Even with chinas cloudy and smoggy skies, it may happen because they are incentivizing the building out of ev vehicles. Angie it is hard to power your solar car was so much sic small. We now have cloud anxiety. Im coining that term because i am from seattle. I would not have a solar car in seattle. I would not have a solar car in beijing, lots of smog. Here is the basic thing from outrgy, they have rolled four new designs of solar powered cars. Basically you can get forfive hours of charge, but you can only drive 80 kilometers. Angie is it being stuck in a beijing traffic jam like five hours right there . They have a lithium battery as well so you can do traditional charging. This is a basic hybrid. It is at a very beginning stage. To offset all those concerns about investigations into alleged share price manipulation . The stock is still suspended more than a year now as it is under investigation in hong kong for possible stock price manipulation. Look at that chart. It tripled in value leading up to that big plunge, 47 down in half an hour, so a lot of uncertainty with this company. Angie thanks. Theaters, pixars finding of the box office, beating three new movies. Took ining nemo sequel just under 42 million ahead of tarzan and stephenville barks and Steven Spielbergs bfg. It is expected to be the biggest weekend ever, Box Office Receipts at 190 million. That is it for trending business. It is the middle of the asian trading day. We are live in hong kong and this is asia edge. The top stories this hour, asiapacific stocks back to where they started. Election on hold, australia must wait for an official result. Uncertainty is the most worst possible outcome. Will India Supreme Court lifted span lift the ban on diesel in delhi . Shares have fully reversed post brexit losses. The regional benchmark climbs back above 130. Look at the number and it takes us back to levels at the very start of 2016. Markets,he chinese hong kong. Stocks all but two stocks are on the way up. Volumerom these two, still quite