David as we mentioned, market taking a pause ahead of the fed. Where are we . Fx flat. Not a lot of i am right now. Lets take a step back. That is your forward multiple across the group. We put that together with the earnings yield and blue. That tells you they have outpaced revisions upward. E are currently above it gives you yield gap just just above 4 . Open ofes away from the markets. What are we watching . Not very excited about today. Sophie you can smell the caution in the air. Taking bigiding positions as we wait for the fed. The kospi had a session low. Aussie stocks leading laggards, falling for a second straight day. Telecom stocks on the back foot. The currency space, the aussie under pressure, perhaps sliding given what we futureing in iron ore, slumping 10 in the past four days. He dollar is rebounding the hong kong dollar higher. On tuesday, it jumped. Investors seeing a bit of a hangover after yesterdays advance, the most heavily traded day for japanese stocks. Near a twoyear high. It underscores the resilience of the japan economy. With the yen for honorable to dollar strength, that could bode well for japan inc. s profit. Japanese stocks are fluctuating between gains and losses today with telcos leaving the rise on the nikkei, gaining 2 so far. Newsank climbing on the that talks have resumed for a potential merger of sprint and tmobile. When it comes to japanese , should Mark Cranfield the boj stand pat, then 21,000 in the futuree for the nikkei 225, a reinforcement of the upside breakout tuesday. David we will see how that plays out. Thank you. Lets get you caught up with first word news with paul allen. President trump has threatened to destroy north korea, saying kim jongun is on a suicide mission. Said the u. S. Was ready and able to protect itself and its allies and would respond with overwhelming force if attacked. He described kim jongun as rocket man and said he hoped military action against north korea would not be required. The United States has great strength and patience, but if it is forced to defend itself or its allies, we will have no choice but to totally destroyed north korea. Japan reported doubledigit increases in in august. Imports an exports grew up 18 from year earlier. Expanded beyond expectations, rising 15 on the year. That left a trade balance of just over 1 billion against forecasts of 935 million. 139 people have been killed by a powerful earthquake in mexico. The 7. 2 magnitude tremor struck south of mexico city, closing the airport and the metro system and halting trading on the stock exchange. Investors sold assets and the peso fell to a session low against the dollar. It is mexicos second major quake this month and came on the anniversary of one in 1995 that killed 5000 people. Reviewing operations in asia after notifying u. S. Officials about payments made in indonesia. With uber facing a federal investigation of overseas bribery laws. Attorneys are focused on five china, india, indonesia, south korea, and malaysia, where a web of Financial Arrangements tied to the government may have influenced lawmakers. 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. Back to markets. Investors focused on what the. Ed does the question is what will it signal on its rate hike path and the Balance Sheet unwind. Mix. Hile, boj also in the it wraps up its twoday meeting in tokyo. Lets get more on this from kathleen hays. , want to start with the fed talk about the dot plots. What questions should i be asking . Be a shift in a hawkish or dovish direction . The fed puts out a summary of economic projections. Those will be updated at this meeting. A forecast onkes gdp, unemployment, and inflation, and based on this. Iew of the economy on the terminal, the far left side in the bottom, the long line suggests the key rate, the funds rate, will hike one more time to meet their median forecast. 2018, therray for median also suggesting three more rate hikes. Only five. Nevertheless, you still have this view of four more rate hikes from here on out. I think a lot of people are wondering if the fed can do this or not. Any of those move in either direction, that will catch the bond markets attention. Plans for thesing Balance Sheet unwind in june. It said it would stop reinvesting all the proceeds of maturing bonds in its portfolio intle by little, 6 billion treasuries, 4 billion in Mortgage Backed securities until is 50 billion. It could push yields a little, but not a big deal to the markets. What is interesting to ask yourself coming back to the dots, does it matter what they signal when you get a new array of characters when donald trump finishes appointing the people he does come including fed chair next year. Andink looking at the dots policy statements on inflation what janet yellen says,e a lot can be taken away. Do they hike rates or do they ease off a bit . It is a lot of thing at once, but potentially of the guilford the markets. Not a lot of people realize when it comes to japan that it is the first birthday of yield curve control. How does the fed meeting essentially affect with the boj does come if any . That spread is something we are watching closely as well. I dont think the decision changes where they are or are going, but could make it harder to get there. They are on hold because inflation is so low. We also know that if anything pushes u. S. Bond yields higher, that makes it harder potentially for the boj to keep its tenure yield on the jgb at zero. Ironically, the big problem for the boj is yields have fallen too low. Its look at 2026 on the bloomberg. The volatility in that jgb tenure yield from donald trump getting elected, the french election, then the north korea missile launch, global bond market rally, yields fall briefly below 0 on that 10 year jgb, but this makes it problematic for the boj. Heres what i call the boj yield curve control conundrum. Yields have fallen on global risk aversion, what do they want to cut bond purchases to make the yield move higher, especially if it falls below zero. Economists say that would effectively be like tightening, so you can see how the fed does , one more wrinkle in an equation that has already gotten complicated for the boj. Thatnk it is interesting as the boj wraps up its meeting, lighting a candle for you curve control. How complicated can we get . Thank you. Still ahead, iron ore prices. Metals in general as well. China may be nearing its peak. We ask how big those losses could be from these current levels. , we look at the equity markets and discussed why they are overweight on the asiapacific emerging markets in general. That chat is next. This is bloomberg. David this is Bloomberg Markets asia. Lets get you caught up on the business flash headlines. Fedex has put this 300 million the cyberhe impact of attack that hit its tnt unit in june. The hack showing shipments and forcing tnt to process transactions by hand. Of one point in extended trading the u. S. The nikkei news, a story that keeps giving, says Western Digital has made a new bid for the toshiba chip unit, reducing its role. That is back in front, bain capital, for those assets. Due to meetoured is later wednesday to discuss the matter, but it is still not clear if of final decision will be reached. Meanwhile, bain capital once apple to put more in for the toshiba chip unit. Apple is being asked for 7 billion. Proposal will include 1 billion for equity and 6 billion in debt, a bid roughly 19 billion. Apple uses toshibas flash memory chips in iphones and ipads. Lets get a sense of where we are. Now pushingrket nine years, 10 years if you look at emerging markets. Violations also at multiyear highs. With get more perspective the head of asian equities and research. Ice to see you. Thank you for coming in. Help us make sense of the math. Not all markets are created equal. Its easy to say its expensive. Cheap, reasonable, what does look reasonable . Overweight on asia emerging markets, supported by the earnings recovery story in the Fourth Quarter of last year, salmas 2yearold. So almost a year old. The market is 30 higher over the same period of time, so we are comfortable the earnings story is supporting the current level on msci asia. Pushing toward these levels are japan, you have a contrarian call. If you focus on earnings, the recovery story in japan is much stronger than asia emerging markets. In the Fourth Quarter last year, earnings autumn in japan and are now pushing alltime highs. That is despite the fact the yen has been strong, stable, 1. 10 or so. Earnings up 40 since Fourth Quarter last year in japan. 30 so far this year. The market is up less than 10 . We think it looks like a coiled spring. Market responding finally to that earnings story there. David in the first half, coming out before i get to your results on china, the fixing today. There we go. That is your current fixed. The weakest fixing since september. Regained that party in 2015, now a tenure high. How much more can this go . The recoverying and nation come up 40 this year so far. You need to separate what is. Oing on with msci china a lot of the tech names. Aroundre some specifics my msci china has done better than other china indices. Overall, supported in some sectors by the earnings recovery story, specifically tech is a major leader. A curiousia its market. I want to bring up a chart. Bloomberg. 2 on the when you look at fight you asians. Levels, it is either we fall back traumatically from this or are in the middle of a rerating. Which one . The second one. Prime minister modi has been in power for a long time now. The whole story is structural reform of the indian economy, which takes time. As you see markets pushing isher, the indian market never particularly cheap. That is part of the story. What is driving the market are domestic inflows into ones. Into funds. , the longtermns restructuring remains, then we would be buying any tips. Any dips. David its like we are pricing in germanlike efficiency when it comes to reforms, but we are talking india here. They dont have a perfect track record of putting in these plans. There is a lot of upside in getting halfway there. David you are still convinced . We still like the india story. David how does this play into the fed . Are we discounting the possible disruption that could come a few months down the road and how that could the back to your point, the inflow straight into india. How much money . We are talking about domestic inflows into the equity market. For india specifically. If we were at tenure lows in asia and we started to see the fed normalize, there would be less risk of a correction. We are at multiyear highs, so there is some risk. Aen tapering comes, that has take profit impact. What we have seen his, so lets say we look at fed rate and how that impacts. Ignoring the level, the volatility has had almost no impact on the recovery story in asia so far. We take comfort in that. There has been at the coupling ,etween asia, asian markets Asia Economic activity, and whats happening in the u. S. David taiwan, korea, some other , alsos, very tech heavy formidable to stronger currencies. Back to your point of where we have seen a decoupling. At what point to these currencies become too strong . Are we there yet . Are we close . No. When you talk about decoupling, then we talk about tech and taiwan, the main driver has been the upgrade cycle for apple for samsung and a lot of demand is in the u. S. When we talk about decoupling, that is probably not part of the real story there. Also, it has been a sharp underperformer, especially north asia, so far this year because of that. Good for now. Hopefully as we into the Fourth Quarter. , we will watch our interviews by using our interactive tv function, tv. You can dive into securities, chat, and other things you mightve missed on the show. This is for our clients only. Check it out. Tv. David minutes away from the open of markets in hong kong. Have a look at the movers so far. Some changes in ratings. Of china looking s in thease foreign cap electronic vehicle space. Sunac facing new loan suspensions. Wuxi getting a stamp of approval bear. Byd story. K at the lit is the etf. As you can see, pushing higher and higher. More on that story. This is bloomberg. David 9 29 in hong kong. We count down to the open of markets. Round and round we go, the momentum has disappeared. In hong kong, up 48 points. It looks like a slightly higher bank of china, china mobile, all seeing a decent bid. Between as far as constituents on the hang seng index. Iron ore still in the next. The mix. Have a look at our bloomberg chart 2020 on your terminal. Handinhand they go. We also have the risk reversal, aussie a bottom. Went to talkgavin about the metals space. We have seen a massive runup since aprilmay. How far does this fall, or is a story . Buy the dip bears in control at the moment. Opene moment, getting the in shanghai, hong kong, shenzhen, and manila. Here is sophie. Seng, check out the hang bright spot, up. 2 . Resuming gains for a Third Session in four. Chinese large cap flatlining. Sticking around that level. We have the yuan weakening by the most since september 12. Surprise markets last week with a string of weaker fixing, indicating that regulators are trying to camp appreciation for the yuan. Want to pull up some stocks to show you. Speculation china plans to liberalize the market. And aic motors, the biggest players in china. Volvo among the foreign carmakers with jvs in china. Changesany saying no being made as its too early to speculate on policy changes. Chinese toymaker vtec in the wake of toys are us filing for bankruptcy. Sales to date have been covered and it does see sales declining. That stock gaining 2 . Toys r us is one of the tax five largest customers. Do have an electrical toymaker halting trading in ,henzhen on a pending issue perhaps what is going on with toys r us there. Lets look at hang seng in terms of early movers, china unicom leading gainers. Light sunacigh china, snapping a sevenday advance on news management has suspended new loans. David thank you so much for that update. Geopolitics in the next. s have the fed, but let get you caught up with first word news. Paul the u. S. Secretary of state has confirmed the Trump Administration intends to renegotiate the iran nuclear deal, saying anything else kicking the can down the road. Rex tillerson made these comments despite allies in issias saying the accord working, and iran is abiding by its commitments. Tillerson says the deal must be revised. If we stick with the iran deal, there has to be changes. The sunset provision is not sensible. It is simply kicking the can down the road again for someone in the future to deal with. Paul the Senate Intelligence committee expects facebook and twitter to face of public the use of social media to influence the u. S. President ial election. The Committee Chairman says the timing and scope are still being determined. Facebook has revealed 100,000 in ad spending linked to fake russian accounts. The senate says it has been less than forthcoming. Marie is bringing gusts of 200 65 Kilometers Per Hour and comes two weeks after Hurricane Irma caused widespread destruction in the same area. Left a damagey bill estimated at 140 billion. That makes this year season the second most costly since 1980. New 200 million plant in china, hoping to boost orders in an Aviation Market soon to become the biggest in the world. Is designed to finish off wide bodies a330s and will roll out to bring planes a month. It is already home to plant that produces a 319 send three 20s. Boeing estimates china will order more than 1 trillion in new jets in the next 20 years. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. I am paul allen. David thank you for the update. When you look at chinas , they are ramping up shortterm dollar debt again. That is fueling speculation of an impending crackdown by authorities. Tom mackenzie joins us live out of beijing. What do we know about the story and why are they doing this . The much talked about Deleveraging Campaign involves a lot of talk, whether moving money market rates higher or pressuring banks to rein in lending. Or putting for the restrictions on outbound deals from some of the big conglomerates. One of the tools they have is making it more difficult for some of china, particularly thesety developers in local government financing vehicles to issue offshore dollardenominated debt. Do ishey have managed to find a way around those restrictions by issuing shorterterm debt in u. S. Dollars that is 12 months or shorter in time. Hey have managed to do that in 2017, we have seen 17 companies in china issuing or pricing about 4. 3 billion worth of the shortterm debt to next year just this month in september. We have seen Six Companies issue more than 700 million in shortterm debt. Julycked up in june and come a came off in august, and spiked in september. It is a way to get around the current restrictions on longerterm Debt Financing offshore. David i would imagine more expensive as well to do so. What is the Bigger Picture . How much of a risk does all of this posed to the broader deleveraging . We are talking about companies or entities that are largely unrated. The ratings agencies dont give ratings for shortterm debt issuance. Many of them wont have dollars piled up offshore, so there are questions around the refinancing. This bike we have seen in september has led to speculation from analysts that you will see , the regulators here, and that in itself could lead to questions about how they refinance in 2018. We are looking at 3 billion in june and july 2018 that will need to be refinanced. Where they get that money from is the question. That poses a risk, and that is another horny issue that developers, regulators will have to get their heads around. What we are hearing from the bankers involved in these deals, they say they are sensing Strong Demand and expect sales to pick up because of this potential impending crackdown from regulators, property developers, local Government Finance vehicles, running to get shortterm debt issued before the crackdown happens. Big of the buyers are not