Transcripts For BLOOMBERG Bloomberg Markets Asia 20180212

David a very good morning to all of our viewers joining us right now. New trading week. Lots to talk about in the markets. Shins and up and running as well. Focus will be on where we go with those markets. No one knows until we get there. Lets get a lay of the land of how things look. Where does this really set us up as we get underway this monday . Have a look at it at our bloomberg chart. G btv 7910. Into thursday, into friday, that little gap, more than a massive gap. Really push the market to extreme levels when you look at markets. 56 of constituents on the shanghai composite are now in oversold territory. Does that necessarily mean we will get something into that market, that really depends on where the herd goes. Will that be enough to restore confidence in that market . We were down almost 6 , 7 at one point. Friday that market has opened up. It will open up in about 25 minutes from now. Haslinda china was most overbought in kenya. It has put things in perspective, given that the full out given the full out last week. We are waiting on the opening of china and hong kong. Lets get to sophie for the latest. We are 30 minutes away from the open in china. Singapore, taiwan and malaysia just coming online. How are market striking right now . Mood isso far the looking fairly decent. We should be treading cautiously. Earlier, they mention that we do not have Institutional Investors and getting the chance to respond to the market sellout. With volatility likely a key theme, you have to wait for the other shoe to drop before you dive back in. Asian stocks, we are seeing stocks outside of japan snapping a sevenday decline. That check on on the mood in taipei after the taiex saw its after september, 20 11. We have some data on the docket out of singapore. We are waiting on retail sales figures. Be ontario retail sales will interesting to watch. Singapore is expected to unveil nextast commerce tax in weeks budget. In malaysia, i am kuala lumpur, we are waiting to see what the ceo has to say regarding the latest update regarding the dividend payout coming in at the highest since 1997. Now i am checking on stocks in taipei. Hai. Ng a eye on han if focus towards big data as we had a slew of updates from tech players, like tsmc. Ansingapore, we are keeping eye on one of the biggest shareholders of the commodity traders. It has come out to challenge its debt plan and it may be under pressure after several analysts say that its earnings could be under pressure, given the decision to loan longer license data to foreign exchanges. I want to leave you with this chart. Believe is the number. Although we did see asian stocks get better last week, Southeast Asia was able to hold onto its year to date gain. Despite the losses that we saw elsewhere in the region. Brief spotemain be of sorts when it comes to the region this week. Fortune, the change in thank you for that. Looking ahead at the open in china. We are expecting stocks to continued the downturn. To a lowerointing down by half a percent. Lets get some perspective on the markets. Markets alive strategist who joins us this morning. Despite the expected fall in the chinese market, the markets seem to be pretty muted this morning. Asia seems to be reluctant Going Forward. Is that a Fair Assessment . Oni think we saw that friday. Even after big turmoil on u. S. , asian markets were very calm and is looking to u. S. And europe for direction. We are seeing the same dynamic in europe. The moves are coming out of it u. S. At the moment. Especially the Chinese New Year holiday next week, people are stopping their shifting of position until the new note the u. S. Is the right position to make. David is there anything i should be paying attention to in terms of something that might savages little bit of confidence ahead of Chinese New Year . I think the biggest thing everyone will be watching as the u. S. Inflation data on wednesday. Fact thathas been the global inflation outside the u. S. Has disappointed expectations, but the u. S. Is surprised on one side. Connected, it is very unlikely that u. S. Inflation can take off when the rest of the world are struggling. The bar looking to see whether inflation in the u. S. Comes out strongly, that would imply that maybe the u. S. Can drive global inflation up, or u. S. Is the one that is wrong and inflation disappoints. That will seat yields correct sharply lower. It provides the platform for Global Equities. Say, sinces about to you bought it brought it up, inflation around treasury futures, everything got wiped out last week, except on the 10 year. You had bearish positions. That is a weekly in terms of data, but that sort of tells me we are capped at these levels. I would imagine it is a downside here. I think it probably should come lower. Dynamic is the fact that the curve is steepening because of fiscal difference being shined by the trump administration. The budget boosted the budget deficit. There is an expectation that the 30 year part of the curve will continue to rise. The front and, because of terminals in the market are coming lower as people lower their expectations of what the fed might do. The 10year is caught in the middle. Overall the 10 year lows will continue to come lower in the weeks ahead. Is in a think equity base until we see the tenure lows come lower. It does hinge on what the u. S. Inflation data says on wednesday. David absolutely. 85 roughly speaking on your bloomberg of a move coming from the fed in march. That was virtually at 100 about march. Ks in following more on the story, more of marks commentary and all of the trading here on our markets live blog for our clients. Click rundown of what is happening across the markets. Analysis for expert editors chiming in on Asset Classes at the moment. Find out what is happening with your investment at this point in time. But get you an update on your first word news. First, the u. K. , London City Airport has been closed indefinitely after the discovery of a world war ii bomb. The weapon was found during Development Work and the metropolitan police have imposed a 200 meter exclusion. It is not known how long the airport where we will remain closed. A russian plane crash after takeoff from moscow killing all 71 people on board. The airline 148 was headed for the southeastern city of horse but disappeared off the radar seven minutes into the fight. It is not known what caused the flight caused the crash. The National Investigative Committee Said it is opening a breachminal case for of aviation safety. North korea has confirmed it has invited south korean president moon to talk to kim jonguns sister. They extended the head of invitation during the we can visit to the winter olympics. She says she never expected to travel to the south but expected many things to be similar to the north. She said she hopes to meet again in pyongyang. National development and Reform Commission said it is restricting Outbound Investment in what it calls sensitive sectors. Properties,s hotels, cinema and entertainment, sports clubs, weapon and news media. A say the restrictions take effect from march 1. China has been scrutinizing overseas deals after Companies Global news 24 hours a day powered by more thans wednesday 700 journalists and analysts in 120 countries. This is bloomberg. David the boj back in the spotlight this week. He is on the verge of being reappointed. Its getting kathleen our economic and policy editor who is in new york for all of the latest. I am guessing the bets on the reappointment are about to pay off big. Kathleen it was so widely expected. I dont know if anyone would give you points on that bet. Surely, the idea here is that was dizzyster abe reflation continue, more stimulus get closer to the 2 target. Stepped down. As at this moment, when the Federal Reserve is raising rates and the ecb is looking at the exit, all the more important to signal to the markets. At least reports that the boj will keep its stimulus in place for now. Furthermore, Bloomberg Economics pointing out that the government may have concerned that, over the long weekend after a big market selloff, not just in the u. S. , but in other markets, you might see a stronger yen. Whatever the reason, chief in newst at financial york on Bloomberg Television said that timing is excellent. Here in the u. S. , where investors are grappling with such a rapidly changing environment, it is great to take one of the big variables and keeping constant. To know that we are not only going to have the same policy in japan, but the same person executing the policy is a huge relief. Ithleen my reporting, when was in tokyo, many conversations suggest that because the two pag boj deputies confirmed in march 19, everybody said this about early february and by midfebruary Prime Minister should be announced a reappointment and a package with whoever the two new deputy governors will be. Even in timing i dont think is a big surprise, but i think people will be relieved and markets relieved that this is closer to being a done deal. Haslinda having said that, how in point important are the reappointments . Kathleen there is a tradition here. One of the deputy governors is usually someone who has spent their many years at the boj. They know the institution and the structure. Lets start by looking at who conjecture. The he oversees the drafting of the bojs policy give at directive at every meeting. He is considered the mastermind of big bond purchases. Obviously, keyed to governor kurodas policies and carrying them out. And being able to communicate these policies to lawmakers about the can understand and be on board with all of that. That is one of the positions. The other governor is expected to be someone who is firmly in the camp of reflation, sticking with the stimulus. He has been a friend and advisor for over 30 years. He is ambassador to switzerland. He is known for being an architect for abenomics and it is in the reflation is cap. These appointments have to be made by march 19. Very important i think in the sense that it will be seen as support for governor kuroda and what he is doing to appoint people like this. Outd kathleen joining us of new york. Still ahead on the program, shares of verizon up 3. 4 . Australia and competing in the coal market. We speak with the ceo about the company, next. Is it over for hong kong and chinas markets . Here the view, next. This is bloomberg. This is Bloomberg Markets asia. Check of get a quick your latest business headlines. Struggling air by maker airbag maker has been accused. Evil are suing the company and furthereed to support lawsuits by channeling them into a trust funded by the sale of some of the companys assets. 22 deaths have been due to faulty airbags from the company. Alibaba is to moving into home improvement, buying easy alms by a hundred 65 million. It adds to alibabas recent expansion into brickandmortar real killing that combines its expertise brick and mortar retailing that combines its expertise. 30 of said it is buying Online Payment Service and financial. Economists surveyed by bloomberg said singapore may impose a tax in next weeks budget. Thailand, indonesia are considering similar plans. Governments are seeking to level the Playing Field for traditional vendors peddling erratic growth of Online Retailing on platforms such as amazon. Com. Breaching ders bracing for more. The volatility is largely limited. The chief investment strategist joins us this morning. Is this a new normal, because we are seeing a rise in inflation and the unwinding . Which stimulusn youre talking about. We have an increase fiscal stimulus. I think we will see more volatility Going Forward, but i think people could say that volatility means equity market reit equity market weakness. We are not sure that will be the case. S p 500 is an example. We saw break to the hundred Day Moving Average. That has happened 166 time since the beginning of 1990. 70 of those times we have seen strong positive returns Going Forward averaging around 13 in total. We are still constructive on Global Equities but i think we will see volatility. Haslinda what will be the key stimulus . All eyes will be on inflation, but what else . Steve just seeing if markets calmed down. What we saw last week, we saw volatilitybased targeting strategies. Breakdown, that led to a bit of concern of volatility in the markets. Will that come down this week . Inflation will be important as an input to that outcome. Over the mediumterm, 612 month time, we still fill that buying up today or in the next few days is probably the best way to go forward. David typically when you get this location we saw in march, one of the first things to go is high yields. That did not happen. Is that a sign that the market is not as bad as a lot of people think . Partlyi think that is something that is going on. Was more interesting was, if you look at gold or yen, gold fell last week. If it is something more sinister that was going on, people really getting concerned about the economic environment, i. E. , the precursor to their market. Gold i thought wouldve rallied on the back of unwinds of stimulus. Reentering. Clearly we are way too early for that. Z yen did not rate higher against the dollar. I think that is the environment that suggests that this was a very specific equity market. You can call it what you like, but it is really just shaking up the complacency. That complacency is totally gone and that is why we think it will be an interesting 612 months for equities Going Forward. Do i blame Market Structure, because we have seen a lot of these positions stay put. We saw follow on across other Asset Classes, by guessing what you are saying is the underlying fundamentals, none of those assumptions are changing at the moment. Is this more acute . I put my finger at basically Market Structure here. Algorithmic training was one part of that structure if you want to call it that. It certainly hastened the volatility. On the first selloff day we saw a sharp move. Late trading on that and excelling of equity markets. I do not think we can blame it necessarily. It is something that happened. In terms of the blame, we have seen a significant reevaluation of inflation expectations. We have seen 10 year yield move higher. Some digestion challenges were inevitable. Onlinda david touched bonds. Bonds arearkets preferential for you. Why is that . We we still believer are in a weak dollar environment. There are commodities holding up. That is a positive environment. Not just bonds but equity markets. At our preferences, you have relatively attractive yields. If you look at emergingmarket government bonds in u. S. , they are offering a 5 yield an emerging markets are at 6 yields. Those are pretty attractive in this environment. Haslinda opportunities abound there. Correction setting the stage for the next rebound. E thank you for that chief investment strategist for a we will continue to watch the markets throughout the day. We will be joined by jpmorgan Asset Management in the next hour. After that, we will have atlantas investment. This is bloomberg. David we are counting down the deals and markets here in hong kong. As have a look at the early indication. It is looking good. That is relatively speaking following the 50 drop. Three plus percent drop in four chinesecent job from a mainland. 4 10 of 1 in your future market. Futures are adjusting higher. Back above 12,000 for that one. 850 index indicating that we might see a little bit of a bump up. We are coming up with the highest for that. That has been up and running for 20 minutes. We were at highs of 1. 1 at one point. Was take a step back and look at where we are on the chinese technicals at g btv 7190. The gap we saw on friday and fell as much of 6 and 7 at one point. Here is your percentage of constituents on the shanghai composite. Do we necessarily get people to come in, not necessarily . As far as what this is telling you, it is a bit expensive. Just something to watch, we were down 1. 4 as we head into the open there. Than half their. Lets see whether or not this gets more extreme or if it holds. Bambi on ice. Ike remember the scene in bambi where he was finding his way . Here is the other thing i want to point out. Broad sector across the hang seng. Just about everything is up with the exception of energy. Falling below 60 bucks. Utility is also coming up in little bit. It is a good sign when you look at risk estimate. That is one thing to consider. Fixed income from the pboc. 630 almost on the dot. Stepping away from injecting more liquidity into the system for a fairly long amount of time. China openrkets in up. Coming up, the country is finally ready to take on oil benchmarks, brent and wti. We find outn when. This is bloomberg. David about one minute away from the open of cash markets. We are opening a new trading week. We hope it is a new one following the route last week. It is slightly warmer in hong kong. Overtle bit of a move up the weekend in the mercury. Holding into this weekend. After this point in time people are making their way into the offices, to their desk as the cash markets open up. It is on slightly warmer footing. We are looking at some of the early rise here, showing gains. Lots of individual stories. At some point between now and over the next few days, only white we might get data on new money supplies. We are also heading into the new Lunar New Year holiday. That is when you see tightness around liquidity, which is the last thing these markets need. We are opening of the Chinese Markets. Lots of things to watch and talk about today. Haslinda lots of things to talk about. Direction from asian markets as well. In terms of the Chinese Markets down 4 over a period of four days down. 6 of a month. A lot of people are asking if it is tied to this or like catching a falling knife . There are two views out there. The shanghai and hong kong markets have just open. But skip to sophie for the latest numbers. A lot of metaphors being rolled out regarding the turmoil we sign asian markets last week. We are seeing this shape up on the mainland after the worst a week since january 2016. Now the data front, we are waiting for figures that could come at any time this week from china. The leveraging campaign, we will see if there is any reaction to the latest on the andy are sees move to restrict Outbound Investment in more sensitive sectors including properties, hotels and sports kicksas a new restriction in on march march 1. Less chicken on the hong kong after a rough white. A rough ride. Are is how the benchmarks shaping up. Lets check in on developers in china and hong kong. This is Morgan Stanley. Of selling prices rising for most players in the markets, as well is in india and singapore in 2018. Topics for Morgan Stanley sun hunk kai properties. Proposing shares in shenzhen. It would go to Building Nuclear power plants. Coal mining is jumping the most since june 2015. Under pressure after this chairman pressured its privatization talks. Atid thank you for a look the market open with the early movers we are following. We will be following it across the mainland and here in hong kong. Broader view this recent route brought to mind what happened in 2015. Rallyrgin debt driven that we saw. Of course that at the crash on the way down. Have a look at our bloomberg chart, 71 65. If you want to follow, your top one is the Outstanding Balance of margin debt, the bottom one is your csi. In little bit more dislocation in terms of index. The issue ofid, margin debt has not gone away. Just to give you a sense of how far we are from the busy levels back in 2015, we are nowhere near those levels. Bulger versus, do not panic. Just in case we do not see these markets roll up a little bit further. That is a look at that. Lets take a look at your first word news. From japan say boj governor will be given a second serve. They both say Prime Minister shinzo abe will have him for another five years when his current term ends this april 8. That would indicate the Prime Minister wants to continue with the bojs stimulus program, which has weakened the yen, boosted exporters and stoked corporate earnings. Over to the continent. Angela merkel says she is determined to serving you full term in august or chicken under attack after agreeing a new coalition with the social democrats and members said it is time for a change. She said she campaign on a fouryear term and stands by that. Confirm the to coalition, but the former leader has been drying his bid to be former minister. Harvey weinstein is being sued by the city of new york for creating a hostile Work Environment at his company. The attorney general suit may complicate weinsteins attempt to sell his studio and a 500 million deal. It seeks financial penalties from weinstein, his brother and the company. Restitution for the victims and Court Jurisdiction over any settlement. Independent inquiry into australias banks insurers Financial Advisors and Pension Funds began on monday. The government set up a yearlong Royal Commission to counter public anger over misconduct from allegations of Money Laundering to Financial Planning scams. All of that as banks rack record profits. Report submit an interim in september. South africas Ruling African National congress meets later monday to have transition of power finalize. Thateader told supporters the party must resolve its problem, including accusations of corruption against him. He replaced the president as a leader. Anc global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. David we can finally talk about corporate stories here are a lets start things off with a look at hna group. It may be looking slightly brighter this week. At least over the short term. It has been offered potential life by the chinese bank. Lets bring in Tom Mackenzie who is with us from beijing. Top more about the details of the story. My first question, where is relief coming from from hna . A shred of good news. This is coming from the state run bank. 3. 2 billion credit line is what they are offering the conglomerate. Hasou know, the company huge amounts of pressure. It lasted about three years. The fact that it is struggling to pay back many of its credits, that we know in the First Quarter of the year, it told its creditors are has a shortfall of 2. 4 billion. They have lined up 16 billion in the third part of asset deals. They hope to make 4 billion of u. S. Hna has stakes in Deutsche Bank and hilton. It is significant not just a mastic we the internationally. It is potentially easing the pressure in the shortterm. Cut its secondas or thee bank a oneoff start of an unwinding . Tom this purchase of the steak was originally the big headline grabber of the moment. It was very significant when they brought the steak and become the largest a colder in Deutsche Bank. They will have a significant stake in the german lender, that they have seen its rights dropped from 9. 9 to 9. 2 . We heard from the ceo of the german lender, he said that the relationship with hna is fine. He did acknowledge that they have a financial issue. Hna says it is simply readjusting its financing and will continue to play a significant role in its holdings with Deutsche Bank. Haslinda having said that, tom, are the banking raking up the fees as agent unwind its position . They certainly made hay when h and they made those acquisitions over that threeyear time. The company spent 55 billion over that threeyear period. Generating 200 million worth of fees. You had ups that was a lead layer. It was involving nine transaction with hna with 26 billion dollars. Then you had jpmorgan that was second place, involved in six transactions with hna. Some of these banks are lining up and pitching business with hna as a unwind. They are looking at 16 billion worth of access asset sales. There is an opportunity for some of these Financial Institutions are it others are a little more cautious. Of hsbc and bank of america say they will stay on the sidelines for now. They have raised concerns about the company and capacity around ownership. David understandably understandably caution there. Tom mackenzie in beijing. After a 25 year delay, the worlds Top Oil Buyer is launching its own crude contract. March 26 will see local crude in shanghai. A dollar denominated benchmark. What does china aim to achieve by introducing this contract . For,at china is hoping eventually challenge the dollar crude and brent. It is also part of ongoing efforts for the Chinese Government to internationalize its own currency in global trade. David that is the big dream. The big dream is the challenge dollar dominance. Im sure there are hurdles before it can happen. Talked to us about the challenges before china can realize that the dream. Sungwoo that is a very good question. The main challenge or hurdle at the moment is the apparent control that the Chinese Government has over the yuan. Unless Foreign Investors and overseas participants as long abouty have those doubts Chinese Government control over the currency, it its own currency its own currency, it is very difficult for us to see anyone jumping in and adopting uant you on base y base contract. And since it has been there for decades, it is very hard for as to imagine the dollar to loosen its grip anytime soon. It still remains to be seen. David if i look at previous examples, we do have a lot right now. Commodity various exchanges in china. They have had those futures contracts for a while, but how have they been doing and have they been established as benchmarks . Sungwoo that is also a good question. China has many, many commodity contracts trading already on its main victory exchanges. And also in thalia. Sorry, i have to brush up on my chinese. The chinese and has been exploded and driven later. That is one concerned that the Foreign Investors have at the moment. Excessive of speculation or volatilities, any certified uncertainties have had an, or theern about yu local currency base as benchmarks. I can say that they are not yet benchmarks. David thank you so much. Program, here on the the ceo of the largest operator joins us to explain the earnings. What it is like for the company and why it has cut its forecast. That is ahead. This is bloomberg. Is Bloomberg Markets asia. Look atets have a shares trading in sydney. We were up 3. 5 . 2. 6 after the company cut its million, it has proved that competition is hitting the price across the contracts. Itscompany also affirmed fully earnings guidance, 900 to 960 aussie dollars. I am talking millions here. Of 52 first half profits from the previous year. Itll bit of a miss when you compare that forecast here. Its get more on the story joined by the ceo out of sydney. Thank you for coming to the program. Just to get straight to it here, underlying ebit for 85 million aussie, you have contained it to 900 and 960, and it tells me we should expect a slight moderation in your earnings to add best for 75 million aussie in the current half . Andrew i am just going to talk about earnings over the full 12 months period. Range isguidance sound. I happen to recognize that some of the things we implement as part of the regulators decision will cost a few million tons as we go throughout the year. David jane talk a little bit more about that at first draft competition ruling . By a lot of people understand the dynamics and how that actually impacts, not just you, but your entire industry. Had a draftave decision and a final decision by the regulator, which had the draft decision. Historically, there is not a lot of difference between the two. You do get an opportunity to respond to the draft decision. The decision that came through in draft is actually causing what we see as unrealistic actions to be taken from our maintenance point of view. That would not only adversely impact ourselves, but clearly impacts the entire coal supply chain. Because there is not a lot of difference between the final ,ecision and what we are seeing historically, then i actually have to act to protect the business in the meantime. A little bit more of the complication is that the draft decision actually applies from july of last year. We are already being impacted by this decision. See issuesill we with getting the same amount of gold coal . Do you see issues with it . Andrew last year we were the mostby significant negative event. That took 60 million tons out of the market. That, we have record volumes in the last quarter of our last year. We have been rallying at a good rate. The decision that has been issued by the regulator has an impact that is spread out over the entire year. To the half of this year, it actually has a small impact because the alignment actions are undertaken, then youll only have a few months to play out. As it is, it will definitely have an impact year on year. I am curious, when i read reports that says growth at aurizon will be under pressure since the because it is likely to lose its most valuable contract, what is your response to that view, andrew . Andrew i think what you saw was that is part of the share price reaction of data and results. It was not better than expected results, but we had actually won very significant contracts that analysts are not expecting. There is a lot of commentary around that and it was only announced today. That is a reaction to not only the underlying growth in the coal business, which is not as negative as people have some but it is intot, asia, not globally, but times will come. I think people will just realized that the market is actually positive and aurizon has announced two of the bigger winners in australia. The pickuphave cited in competition, putting some pressure on a lot of the Contract Prices for coal. What is your outlook on the coal price moving ahead, broadly speaking . Andrew the fundamentals for demand outncreasing of india, then thermal coal and the rest of asia, you are actually seeing some good, Strong Production results. Spreading call that is highquality. I think that is playing a pretty good prospect for a reasonable period of time. There is no debt that on a historical basis these prices are pretty high. Howome point you could see there is a reversion to coal plant coal price. It is looking good at the moment. There are producing problems around the world, particularly in the thermal space. Andrew, just on the currency, we have seen the aussie dollar really rally on not so much of an aussie factor, but because of a weak dollar. You following the movement in the currency . I would imagine it affects not just exports but your income into australia. Andrew we do not actually. Articipate in coal price as a rail company we are actually the biggest impact on us is volume. We contract the price of the haulage. The actual aussie dollar does not directly play too much in that space. Looking at your stock price right now, it has dropped about 14 since late december. Do you think your stocks are under price, and what do you do to boost shareholder return . Easy, from anvery analytical point of view to look at the price drops since december. You could see were actually set directlyg and it is it result of draft decision that came i bought a regulator. Marketact of that is reacharound the regulation. Theask is to adjust business so that the regulation has the minimal impact that it possibly can have on business Going Forward. Haslinda andrew harding, ceo of aurizon. We thank you for your insights. You can catch up with all of our interviews by using our interactive function tb go. You can watch a live and dive into any of the securities of bloomberg functions that we talk about. You can become part of the conversation by sending us instant messages during a show. For bloomberg subscribers only. Check it out at tv. This is bloomberg. Is Bloomberg Markets asia. Lets do a quick check of the latest business headlines. They invest 1 billion in the new energy vehicles. It has been reported that the carmakers have struck a deal to build a base. It will consist of an assembly plant, a factory and in industrial pub. The projects will be built in two stages. The construction beginning in october. David uber settles the waymo lawsuit. Theng the lawsuit that had top economist engineer and threatened more embarrassment. Paying 250to be million to resolve the allegations that it was involved in a plan to sell or steal information from waymo by a senior employee. Ceo tos that forced the quit. They will live on for at least another decade. Amherst has some a signed a contract with an option for 60 more. The deal extends production of data of at least 2029 and comes after airlines that made it my have to terminate the project unless new orders come along. If emirates contemplates the full deal, it will have 170 883 100 83 80s than flying globally. David we are looking at gains flying across the markets. You have the big take japan out of the equation. 12,000 now. We have regained that level on ashares. We are coming off the highs for the index as we speak. Its have a look at other markets across the asiapacific. There we go. Singapore. The first hour of trade. South korea is getting across. That is up a 10th of 1 against the u. S. Dollar, which is markets. Cross the so much more to talk about. We might get data out at some point today on new loans in money supply out of china. Do not hold your breath for that one. Aslinda one of the biggest they are done more than 7 . Still to come in the next hour, we will continue our focus on the markets with jpmorgan Asset Management manager. ,nd the nonexecutive chairman alan zeman will be in the house and about half an hour. This is bloomberg. David hong kong and korea leading the regional benchmark advocacy higher by half of 1 as we start off the new trading week. Look at the oil space, that is showing strength. Brent crude snapping six days of declines of broader dolly, story is weaker. Do not more the measure here. Higher than it was side of the tangible at the chilly winter olympics. North korea says lets talk. This is Bloomberg Markets asia. We saw the global debt eroded by five chilly dollars worth in the markets. Say you go to the havens but gulf has not shown it is a haven of people go to, why is that . 725 seven, there you have it, why havent they row despite the active meltdown, you just backed by gold. One possible reason is that there;. Having said that, commerzbank says this is the evident in the basis,ance on a relative this is the latest phase of the downturn, so dont rush on gold as a safe haven just yet. But is it is a lovehate relationship as you can tell. Things is one of those that moves depending on what your narrative is. If inflation is up and goes up. It is the was suddenly collapse and you this geopolitical things picking up. Interesting, we also had have to put this into context. It had a good run in january and then you see the strength of the dollar come back. It might also be one of the start of the relationship and knows what is happening as far as these markets. It is very interesting for us to note that it hasnt been the most traditional haven you have expected given the route last week. Now is put that behind us. I am knocking on wood but here. Indonesia is getting underway. It is only monday. In my peaches and but the drive behind us. It might be too soon to put the drop behind us. This is capping a twoweek drop on friday. This selloff was largely maintained barring singapore and the philippines. Speaking of singapore, we are waiting on data due out today. It will be interesting to see how the online segment aired, especially as we are weighing the budget. This may reveal plans for an ecommerce tax. Risingave korean stocks and your photos hedges amid wenzhou the games. We have health care and i teachers bleeding the decline in so. Over in sydney, the asx 200 is extending fridays losses. Mode in in on the Chinese Markets, looking cheerful ahead of the new year. That reversed his earlier losses as well as the hong seng. Point of the board to check in on some of the movers of note in asia you have Chinese Airlines like air china and China Southern on the rise as they are sent to enjoy better volumes as domestic travelers look to avoid this during the holiday rush. Over in sydney, Harvey Norman being dragged lower with other retailers offering yet another consumer demand that could further push the prospect of a rate hike. I want to highlight this which is sliding in singapore. Many Analysts Expect earnings to be heard. Are some movers we are watching in asia today. Some gains in the market today, the question is if there is conviction in these gains. Lets go with migrant go. He joins us right now, mark it does look like they are buying into the gains we saw on friday. Mark it is relief that it will be a short week. Naturalcoming as a circuit break. It is coming at a great time. As you say, wall street had a reasonable finish on friday and it is spinning over to some extent. It is unlikely well is a volumes, it will be subdued. Peoplen opportunity for to say that these have been pretty large and they could be opportunities now where people say some of the stocks got really overdone, the fundamentals are not that bad. Maybe when we come back from our holidays we will look at a better than we did before. David how important i know the inflation will be love. We will probably not get a lot of those big bets that my push us up back to the levels of two weeks ago. Inflation rate on wednesday, that will be really key on where we go from there. It is a huge number. The treasury market has really been one of the main reasons for all of this weakness in equities. This yields uncertainty after about whether the fed has been slow to raise Interest Rates. Inflation is a key number for the bond market. The core inflation is going to stay below 2 . If you look at recent bloomberg surveys, economists have done a good thing at good job at forecasting to an 0. 1 of the data. This could be a relief to people in the bond market which could be ever lead to other asset markets as well. Thank you so much for coming on the program. You can follow all of marks and all the commentary surrounding the days trading on the blog. This is a market rundown, one play commentary. Lets find out what is affecting your investments at this point in time. There was a very short week, liquidity might become an issue. Heidi is here with an update of your first word news. Haidi the london airport has been closed indefinitely after the discovery of a world war ii bomb. During Development Work and the metropolitan police have imposed a 200 meter exclusion zone. It is not known how long the airport will remain closed. Soonsian plane crashed after takeoff killing all 71 people on board. It was headed to the southeastern city that disappeared off the radar. It is not know what caused the crash but an inquiry is under the way. The National Investigative committee opened a criminal case for the alleged breve of aviation safety. Chancellor merkel says she is determined to serve another term. Some of us said it is time for a change but she told them that she campaigned on a fouryear term as she stands by that. Coalition butthe the leader has withdrawn his bid to be Prime Minister. Southkorea has confirmed korean president moved to talk in pyongyang. This extended invitation during a weekend visit to the winter olympics. His sister says she never planned to travel to the south budget on many things to be similar to the north. She says she hopes to meet again in pyongyang. This is bloomberg. David lots of big interviews coming up this hour. Alan zima will be joining us. Next, we will get the view of this isgans highest, bloomberg. David haslinda this is Bloomberg Markets asia. Stable, not alm, lot of volume coming out. Bambi. Of feels like well see if he gets through. We have Chinese New Year coming up. Coming thisbets are week but maybe not. Tokyo is closed. The markets here in hong kong, some green out there. The futures, we are getting headlines out of the Budget Office here. This is perhaps with the digit but it might look like. I would say in a few moments what it looks like. , up is across features 1. 4 . There is some stability in the markets. The only surprise about the current market volatility is that it didnt happen sooner. Here with us is the Portfolio Manager and cohead of the asiapacific regional team, he joins us from hong kong. No surprise but what a surprise. How deep it was and how fast the drop was. Pretty introspective. We havent seen volatility in these markets for a long time. The norm in markets is positivity exists. What was it in Global Markets is that you have very low volatility. That is actually unusual. Volatility coming back is healthy for the markets. Obviously the drop was pretty sharp but with the backdrop this put that in perspective. We arek at msci asia, only got 2 or something. Drops, i wouldrp a lot of it. Some say dont blame complex volatility products, this is the new normal, inflation is a. Is this the new normal . I think inflation moving upward is probably a very likelihood. But with the backdrop, the Economic Cycle is still very strong. This is globally. We still see the u. S. , we see the u. S. In terms of a strong economy. We see europe picking up, japan picking up, we see the rest of asia picking up. This is all very healthy for corporate earnings. What drives markets in the and is going to be earnings and when we look at valuation, especially in the asian region, we are 2018ng at 13 times pe for with trading below pricetobook. We have upgrades coming through to 44is is run 20 percent, the earnings forecast consensus for this year is broadly around 13 , i would be surprised to see upgrades. Inflation is going to move up and we will see higher Interest Rates on the back of that what we believe these rates are still going to move very gradually up and as well supported by growth in the economy and therefore earnings. Time to buy, right . I know your topics are china, korea and india. What do you like . Growth stockst of do very well over the latter part of 2016 and into 2017 and in the tech area. Now we are looking at some of the more cyclical areas. The banks, the financials was will be event be beneficiary from higher rates, we are looking at some of the manufacturing cyclicals across korea and japan. We are looking at certain sects of petrochemicals, engineering companies, Infrastructure Companies and robotic companies which will all benefit from the investment cycle picking up from corporate. Heard is the things i that financials might do well. Tech might not do well. I cant understand why people would say that. Think tech is selective. As we saw in asia throughout party 17 and a lot of 2016 was that the apple supply chain did very well. Though was on the back of strong smart phone sales and apple specifically as well. There has been some disappointment as we all know from the new launches in apple. Therefore tech which is linked to the apple supply chain has seen a bit of a selloff. There may be some opportunities a Going Forward. Certainly we see that the demands for some of those products may soften and some of those estimates that we thought early on may down a bit. That selloff is largely linked to that. Of the ecommerce areas, some selective Hardware Companies which are still still doing quite well. The only thing that came up right in the middle of the selloff when those things happened, people will try to look for things to blame. One of the things that came up was this morning upgrade cycle. It might have gone too far. Able may have become too optimistic about this earnings season here in hong kong. Do you think that is the case . In reaction to some of these results coming out . I would not disagree with what you said. Ofhink we saw a lot exuberance. I think it was late to the fact that there were a lot of inflows in the early part of the year that were looking to buy stocks. Of a healthy correction. So what you say is correct, maybe the markets ran a little bit ahead of themselves to quickly. We have seen a healthy correction if it goes down even more, i dont think it will go down a lot more. I think it will be a great buying opportunity for some of these companies. Seen a rallyt we in gold during the meltdown . In what we specialize in is in equity. Gold in some companies that are exposed to that area. Maybe just going back to the gold. Gold traditionally, historically one has been an inflation hedge. It is a flight to safety as you said. The fact that the gold prices have not reacted is telling us something that the markets still generally are pretty confident, it is not running it is not worried about very high inflation. We have to anticipate where the next crisis will come from. From your perspective, what could cause this next crisis . That is always difficult. Lets look at some of the risk factors that we see out there. Obviously, we are conscious of. I stress we are very constructive on the markets. If we see sharply higher Interest Rates caused by sharply higher inflation, that would be a concern for equity markets. Our base case is still very much a gradual rise in Interest Rates. If this were to change, i think that would be an issue. The other thing is china. Although the Economic Growth in china is very stable, it appears stable and reflected in the chinese currencies as well which have been very decent for a while now. There is always the concern that with the Chinese Government tightening Monetary Policy and preparing for the domestic coming softening a bit, if that does sharply slowdown further, i think i could be a risk as well. Ive heard a lot about economic fundamentals this week. There is nothing that is changing. You could point at a Wage Inflation to figure out that. Overall, things are the same. The thing is it makes you think, chicken or the a . Egg . Rates are gradual. They dont surprise and shock the markets. Rates going above 3 in terms of the bond yields and so on, Economic Growth in as from as it is, it is not a concern. I think it moves up a little bit further. Wait pressure, if we see that coming through, we seek output gaps narrowing symmetrically, i think those will be a concern for the markets. There was probably a time where bad news is good news. Thank you so much for coming. That is the head of the asiapacific regional. One feature we would like to bring to your attention is our interactive tv function. You can find it at tv for our bloomberg crime. Just watch us live. See any of the previous you might have missed. Zeemal coming up. Become part of the conversation, if you have any questions for allan, send them in. These features are on bloomberg, check them out, tv. What has budget director says president trumps budget will include aggressive spending reforms. He says the plan is to cut deficit by 3 trillion over the next decade. For more, here is jodie snyder, jodi, what else did we learn from modality mulvaneys st atement . Theredget looks at is a twoyear spending plan. Ongress essentially passed we know generally outline in any case. To aulvaney is referring lot of criticism has come from republicans that this budget plan, along with the tax cuts that worked over that of the end of last year would raise Interest Rates because of the large deficits that there will be. So he is saying that when this money works its way through the economy, that will help the deficits in the long run. There has been quite a bit of criticism and for some conservative republicans, there is a lot of spending here and it is going to affect the overall budget picture Going Forward. Also, the u. S. Interestrate picture. Some of these economic moves are not a sugar high. What does that mean . This is not just spending for spending say. In the long run, you will see this argument, the democrats dont agree. What do i was moving ahead . We are getting drips and drops and they went up and saw that they did have it. We know how much they might be setting aside for a southern border while. What else what is doing a subpar . A couple of present froms priorities are outlined here. He is saying he will go along with some changes to immigration policy but only if there is border security. That is outlined there. Some funding to combat the opioid prices in the u. S. Also, infrastructure. They made a big point of saying there will be an infrastructure plan. Interestingly there is not a whole lot a lot of money for that budget plan. When the 200 billion president is talking about 1. 5 trillion. Money thate seed will cause state and local governments as well as private companies to go in there and invest. There to say that despite this, big Infrastructure Spending plans will be a disappointment . President s plan is always for the budget, it is always just a proposal, a wish list if you will. And then things out Congress Gets to do what they want. Democrats are obvious going to be not happy with a lot of this because it doesnt do a whole lot. Spending isructure only a drop in the bucket . It lays out a lot of details there. That would be a disappointment to some Congress Mike trout the country. This changes the prospect of the was economy Going Forward . The deficit question is a big question. This is something that had been part of the republican playbook. Thatis something conservative republicans really fought for over the past several years. That is the change. This is an awful lot of spending between that huge tax cut depending on how you calculate 1. 5 children dollars in tax cuts. Billion in a300 twoyear budget plan. More to come, stay with us. This is bloomberg. It is 10 29 in hong kong and beijing. 1 29 in sydney. I am haidi lun with the first word headlines. This Reform Commission is restricting Outbound Investment to what it calls sensitive sectors that includes property, hotels, cinemas and detainment. The and yes he says the restrictions take effect from march 3. China has been scrutinizing seas deals by Companies Reports out of japan say the bank of japan is to be given a second term. Prime minister i they will appoint brought up another five years when his current term ends on april 8. That would indicate the Prime Minister was to continue with the boj silla program which is weekend again. It boosted exporters and stoked corporate earnings. Harvey weinstein is being sued by the city of new york for creating a hostile Work Environment at his company. Competentrs suit may attempts to sell his to go in at 500 million deal. They seek financial penalties from his brother and the companies. Restitution for the victims and Court Jurisdiction over any eventual settlement. An independent inquiry has begin to australian banks, insurers Financial Services and the Pension Funds. The government has set up the yearlong Royal Commission to capture public anger over for allegations and rigging and Money Laundering to Financial Planning scams. All of that as banks continue to rack up record profits who would submit it report in september. Allegations of failing to disclose information material is unfounded and without merit. And some executives are accused of making false and misleading statements and this quote material information. This was a lawsuit but they have yet to make a decision. News, 24 hours a day, powered by more than 2700 journalists and analysts in more than one of the 20 countries. I am haidi lun, this is bloomberg. I am looking across markets right now. Is a bit early for that. We change directions, highs already here on the benchmark. Anuess hopefully it is not omen of things to come. Asia is very hesitant to dictate where the markets go from here. S2 a quick check on the market action. This could be the death of trepidation but asian stocks out of japan could look twostep a sevenday decline. This rises u. S. Futures after last weeks trouble. The dollar, those declining across most major peers on friday and Holding Losses triggered by the u. S. Hitting a threeyear high last week. Energy stocks are leading in asia and it is playing out there, the worst performer on the hang seng. Trading above 115 hong kong dollars. That is nothing a five day decline, cicc and france sabine is emerging after the correction for the hr market. This gives 20 old economy sectors like banks. Continuing the tribe but the new economy sectors correct further in 2018. I had of the Lunar New Year holidays, its check in on these stocks. These hotels are filling up for the holidays. Both high and an massmarket hotels. Chinas president says there has been more prebooking this year than last. Perhaps some work for the casinos. Two days to Chinese New Year. Thanks so much for that. Questions remain about the future of resources here. Following the departure of the chief architect steve when steve wynn. Us. N is here with he is chairman of the group. Thank you for coming. I think Turbulent Times for the company. Everyone is wondering how the Company Moves forward. I think there is a very strong management team. I have been with the company from day one when it was first built out here in las vegas. I have hotels in my blood. The management who worked at wynn have worked there for many years. They dont like to leave. I think that in general i am not concerned. To get that desk if you on this media circus that has happened in the past few days, it really brings the ability back to the company, must be very busy. Having working with meetings with the management. Everybody is at ease now. They know it job they have to do, Chinese New Year is coming up. Everybody is gearing up for that. Times have been good, we have seen a recovery in the industry. One of the issues that was brought up, it was the name of the company. It was moodys. It came out with this statement. Has that been any conversations about changing the name or a similar dynamic when it comes to this issue . Not at this point, i think this is kind of like a death in the family, something just happened. I think we find that it really affects business and there will probably be more in las vegas and the u. S. That out here. How here, generally, from what i china, gaming advertising is banned. The average country that comes they know i am on a hotel. Although hotels are basically the same. To ais how they come different hotel. I think that in general, how here, it is very different than in the u. S. You talked about how strong leadership is in place, what do you do has the Biggest Challenges for them Going Forward . There been challenges and problems and a possible takeover as well. As the chairman of the company, but you view as the Biggest Challenges . It is to bring stability to the staff, it is about the guest experience. People come to hotels because they really enjoy the place. They enjoy the ambience and it is bring stability to the company, it is up to the board and the leadership, the chairman, the ceo to drive that and think about the competition as to think about all the other things that we face, this is an added distraction. There from theen beginning. I think there is a pretty good team that will Work Together to work through any of these problems that everybody faces. Do you expect them to contact the macau business whether it was in the short, medium or long term . Not really. As i say, people that come to macau are mostly 98 from china. The chinese comfort a day or two days. They stay in a hotel. They enjoy themselves and they go back to china and they have their fun and go back to china. I dont see any great impact on here. Macau is almost 75 of the business. In general, i am pretty confident about the company here. Do you envision a situation where steve wynn will have to divest his shares in the company . Anything is possible. I think they dont allow anything over 5 . These things might come up. It is something that none has not been discussed at this moment. Just having a look at the longerterm prospects, two weeks ago, there were reports that came out that china is looking to legalize not very far from where we are. I know a lot of this comes down to the details and the licenses that come from that that is that and is essential threat . Most of your clientele are from the mainland . Every six months there are unidentified sources that come out of beijing as looking at legalizing gambling. I saw that report. It was a bloomberg report that came out. I checked with some of my sources and finance if there is any truth. These are pretty high up and in general, they told me forget it. I been askeds out, that summary times. At some point, is it possible . Everything is possible, check sona is changing dramatically, it is opening up so much, people are traveling. They said something through midi lottery or online gaming, i will see them of any hotels and legalized gaming, it is a gangster culture for the moment. The licensing issue is live and well. Is there a indication from the government how they plan to approach that . Are you guys getting anymore comfortable . I think in general, all operators are waiting anxiously for the government to come up with a way forward. The one thing i know that government, the macau government has been very fair with all the operators. It has always been a great employer of choice and i think in general, the community is waiting for the way forward from the government. Government is working on the planet and i am sure as soon as they have it, it will come out and then everybody will be in the same position. The most important thing for governments, they like stability, keeping jobs. We have over 13,000 local people working at the moment in macau. The government really doesnt want to destabilize the jobs and 13,000 people times three families or four. Wynn haslot of people, always been the employer of choice for most people. Most people dont want to leave when they work at wynn. It has been a great place for people to work. There is so much optimism. The question is whether the chinese highrollers returned for saw after the crackdown we from the government years ago. Allan even in january, the numbers were up for macau. As long as china continues to do well which it has, i am in china lost every week, we have a lot of businesses in china. Iam pretty confident that dont see china slowing down at the moment. Not under the leadership that they had. I think it will continue. As long as you have that, macau will continue to do very well. That is the majority of the business. A lot of the investors have lost money. We saw the global route last week and china was among the biggest losers. Do you expect that to be translated into the gambling business that your business could be impacted . You know markets, they go up , you of all people know that. This is your business. We dont worry, as long as you have a good product, as long as you have as many rounds, you can ure that china will macau is changing so rapidly. We have a bridge between hong kong and macau that will be open in the middle of this year. This will be in a half hour on the bridge to macau. You have to take the ferry anymore. Srl, the highspeed interconnection muchreally make macau easier. I pretty cop in about the future of macau. Some analysts have pointed out that with macau, it is a bit more a bit too blind and there have been sources that told us that the government might not be too happy with that given Development Part of the business. Are you looking to rectify that . One thing i can tell you is dont listen to sources. From what i know, i can tell you general, the government has always been really proud of what they have built. It truly is, not because im connected but it is just a pleasure to go there. We are always looking at new technology, new things that are coming up, ar, the are, all of these new words that millennials like. You constantly have to be changing and upgrading in all markets including your own. This is something we are always looking at. The government has always been very proud and i am pretty confident that they are happy having us there. Chinese new years coming up. Are you full . Allan we are more than full. I wish we had another hotel right now. Happy Chinese New Year to all of you guys. David he is the chairman. Coming up on Bloomberg Markets asia, signs of a thought on the korean peninsula. Letsnguns sister says talk. This is bloomberg. This is Bloomberg Markets asia. Kim jongun has been invited south to meet in pyongyang. A dramatic gesture that may raise prospects for easing tensions on the korean peninsula. The invitation was though there by kim jonguns sister. Ours cross over to solve peter is standing by. Work willve work . Harm offensive i think it has. Calls forn talks talks with kim jongun. The local media year was all over her visit. They were looking at everything. The freckles on her face, the plane here. Overshadowed the elevator. Their attention was on kim jonguns sister. Does this address those concerns prior to the objects that a lot of this was for sure because the lipids were taking place . I think there are still critters that believe this is just a big gigantic propaganda by kim jongun to give them more time as he tries to develop his Nuclear Weapons program. South korea played into that. There was some Significant Developments just a few hours ago when Vice President pence said that the u. S. Is willing to engage in talks with north korea without the precondition that they were before. That is that the u. S. Would not talk to north korea until they had started dismantling the Nuclear Weapons program. Clearly, whatever the Charm Offensive Propaganda Machine that they instituted over the olympics, it has worked in a practical sense. There is diplomacy now. Some of it is likely between south and north korean leaders. Also, the possibility of a talk between the u. S. And north korea. The question is whether u. S. And south korea can keep up the pressure. Thank you so much for your insights. Coming up, and the debate about ownership, wecar have an exquisite interview next. Exclusive interview next. This is bloomberg. A quick check of your latest business flash headlines from the airbag makers, takata is representing its potentially lethal product. It was when the company have agreed to support this is a plan that would resolve further lawsuits by channeling them into a trust fund and the sale of the companys assets. At least 22 debt 22 deaths have been late to the faulty airbags. This ended a conflict that had already cost the companys top Autonomous Car engineer and threatened more embarrassment. Bloomberg is inspected to be resolve225 million to allegations that resulted in a plan to steal information from waymo. The head of the autonomous forcle units has been here self driving cars, it will be driven by individual buyers. These are my turn on such as over. Thatthey told bloomberg traditional comic have the edge of a Tech Companies when it comes to pass production. Mass production. Lets do a quick market check and see how we are doing this monday morning. It does look like we are seeing some stability in the market. Curry arising but almost 1 . The hong kong index also rising by 7 10 of 1 . It does look like some stability is returning to the market. More coming up in the next hour, lets get to the story on the Autonomous Vehicle unit. Stephen engle has more. These are tier one companies. I think at the end of the day, what matters is who is going to on the market for self driving technology. The owner ofuture, the subprime market will be a Mobility Service such as over, left, many of the companies to provide a robust taxi service to the general customer. The trend is not changing. Like to be, people the own individual. D. C. Being antage relatively common to this industry which is initially driven by Technology Companies but now of course, the big automobile makers like jim and then there is waymo from google. The una does it make is being a latecomer . I agree that there are many things that we need to cover and in some areas we will be a little bit behind on our competitors. Be at an Automotive Company or in on Automotive Company. Ut we have our strength our core strength in terms of the quality. We are quite confident that we are one of the leading incorporating this driving or assistant technology to the mass market and mass production vehicles. Given that we have a long experience of successfully incrementing this technology, we had a great, deep knowhow in terms of guaranteeing the center ford stable control and technology. Also, if they can manufacture in terms of the scalability. You think a traditional manufacturer, if you make cars on a grander scale than a tesla or a technically, google. Google. Company being able to massproduce this technology is a different animal. David haslinda im haslinda amin. Haslinda and im david david and im david english. Welcome to this midday edition of Bloomberg Markets asia. David some solvation. Building on new yorks friday rally. Strength, snapping six days of decline. Trying to prepare a futures market. Threee measure times higher than it was back in january 26. Haslinda looking at u. S. Inflation numbers that may accelerate the pace of rate hikes. A check across the markets of the asiapacific. It is a new week. Hopefully it is a new week following what we saw last week. Asiapacific stocks on the way up. We are getting strength coming from the currency. Japan is closed. We dont have trading in treasuries at the moment. Of four basis points on your aussie 10year yield. Not quite back to levels this time last week. It does help to see this come up a little bit. We are still above average. Have a look across the Chinese Markets. Bloomberg,. 7 on your bloomberg,. 7 up. There is this build up in margin we have to consider, less the liquidity squeeze in the chinese new york. There is a Silver Lining here. Flipping the page, i as well asck the sti he did futures. And particular, the sti is in focus today. Stx shares down the most in nine years. Markets are not allowed to trade it in shares. There is pressure on sgx earnings. Ratherdown about. 7 7 at this time. Lets get more on the markets. Kind of a rebound right now. Not much conviction. Mark that is a definite way to describe it. The markets are getting a relief. There is calm ahead of the Chinese New Year holiday. A bit of relief for markets p still more trouble ahead this week. U. S. Yields have not come down lower. Stress. Remain under even the treasury markets are closed, japan closed at the moment, we see treasury futures fall. That means yields going higher the u. S. That will cause stress for equity markets when we go into the u. S. Timezone later on. Haslinda there is some consolation that there is possibly the reappointment of corona for kuroda for another five years. Mark that is largely expected. He has been adamant that there will be no tightening of policy from japan, that they will stick with easing policy. That will be good for markets overall and put pressure on the yen again. David im looking at the short move on the south korean won. Is that last week behind or diplomacy from the weekend . Mark i think it is a little bit of both. The fact that there is further signs of goodwill between north korea and south korea over the weekend at the Opening Ceremony is definitely a good sign for removing some of that geopolitical risk premium on the peninsula. The other part is the korean assets were at the forefront of some of the losses in asia last month or a couple of weeks ago. If there is a bit of stabilization, they have more than other countries. Theres genuine good news as well. Side of thetion u. S. , valentines day, do we get a print that spells love across treasuries are now, yields coming back lower . Mark i think it will be a sign of love for treasury markets rather than a valentines day massacre. Core inflation is put at 1. 7 . Thats the expectation. The bloomberg consensus survey hasnt underestimated the annualized rate by my than 18 basis points in my than a decade. It would be a shock to get the bond vigilantes which drives yields hiring again. Higher see yields again. We will see yields lower and provide a little bit of a longerterm form for equities to bank. Haslinda watch out for the catalyst. Allcan catch the story and. Oomberg at ny you can find out what is impacting your investments right now. Lets get to first word news. Weinstein is being sued by the city of new york for creating a hostile Work Environment at his company. Eric snowden men Eric Schneiderman seeks financial penalties from weinstein, his brother, and the company. The airport has been closed after the discovery of a world war ii bomb. Police haveitan imposed a 200 meter exclusion zone. It is not known how long the airport will remain closed. The national develop mental rm commitment says they take effect march 1. Chinas number three developer has started selling homes on the cheap. A 12 discount will apply around the Lunar New Year. Analysts think it could be to please a government, which is trying to call the markets. Global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. David thank you for that update. If you are a bloomberg subscriber, there is one function i would like to bring your best to your attention, tv. To your attention, tv. We have Richard Harris coming up. If you have any questions, send. Nto tv this is for bloomberg subscribers only. This is bloomberg. This is Bloomberg Markets asia. Im has less common im haslinda amin. David im dating was. Im david is english. Hopefully, it is a new week. Our next guest says, this light all the pickup, market volatility has not been around for a long time. We did see it raise its ugly head last week. Has anything actually changed . Underlying, no. The market went up yet it is coming back towards fundamentals. The market went up. It is coming back towards fundamentals. Market hast, the gone up a lot and a thousand points is not that much. Its not as much as 600 points in 2008. The market is going down on the back of a bull market. I think it is part of the bull market run. When we saw the big falls in the states, the market fell in a bear market. I think those two scenarios are completely different. David what does it mean . Is the bull market over . . I think we are still enable run. From make a pdf substantial strength. From a period of substantial strength. Way that liquidity, despite the fundamentals of the economy, it doesnt seem equities have legs. This is one of the problems these days. Despite the fanciest mens, liquidities seems relatively low. Fancyou despite the instruments, liquidities seem relatively low. When you need it in trading, it is difficult to find. One of the dangers we have these because people are quite keen on hedging, we are in a situation where they board volatility if they can stay in it. By volatility is expensive. And the guys providing the products go bust. What is the point of hedging if you dont get your money back in the end of the day. A cheeky environment with these instruments going around. We dont do how they interact. Haslinda you said this is a correction in a bull market. Can you buy the dips . Will it be like catching a falling knife or not . Richard its always like catching a falling knife. It takes quite a lot of guts to do it. If you are following this rule, if you say the economy in the states is very good, it will be caked with a tax stimulus, chinas looking better, you have more positive underlying economic environment. Thats why the markets fell. There were about Interest Rates going up. You do have support. It is a buying environment. Dont forget that these things tend to last a little bit longer than normally they would. Probably the best thing to do is , goit on your hands, wait to the beach, drink a little bit of wine and come back in april, which is the same time in hong kong as the rug been a seven. [laughter] haslinda that all sounds good. If you are to hazard a guess when it comes to recovery, what shape would it be . Richard i think people will be cautious. We have had Market Participants saying it is going up too much, too much, too much, for quite a while now, certainly over the last three months. Bit, peopleat a come out of the woodwork say, oh, yeah, i sold before. Its good to be in the market. Participants will be more cautious. Markets are likely to go up more gradually. Out there is the big four. We know all that. We just dont know when it is coming. At the moment, it doesnt seem as if it is area can we dont have the kind of trigger for a big fall for a major liquidity crisis. It does look like a blip in the bull market. David i will ask you about the vix. This is a hotly contested topic recently. I have a simple chart of the next and a nevers line to show us we are above that for obvious reasons. But we have been below for such a long time. When i look back at this, can i trust of the vix again . It didnt really do the job it was supposed to do, which was give me a sense of the positionsing positioning around puts markets. Then you have this massive explosion. Richard that is a great question. We all think of the vix as being a leading indicator, some kind of thing we can look to to see volatility. But it is not acting like that. Its maybe a contemporary indicator, if not a lagging indicator. Volatility doesnt really go up until we get worried. And if we were worried, we know we are worried. We want something that will work will forecast worry before we get there. The big thing that people thought was that the vix was like forecasting that last drop of sand on a pile of sand. That last pot last drop of sand makes it all go down. Contemporarys a indicator. Edwards, it is slightly lagging. David i have asked this question to several of our guests last week. You look at the high yield some of the coal mine. But with highyield, nothing really happened there. Isnthat mean the route as bad as it looks . Richard thats right. If you look at a number of other indicators, it might foretell things. Gold has only moved. Oil has come off. It is strange why oil has come off. If the economy is going to move ahead, why would oil come off . David its a dollars story though. Richard of course, dollar pops up here what we have seen is a shakeup in dollar pops up. What we have seen is a shakeup among speculators. If you look at last week, the big fall was on thursday. Friday recovered. That tends to indicate the people were able to flatten their portfolios as much as they were happy to hold it over the weekend. Europe will be up when we start. I think we are seeing that sort of move. Haslinda i want to talk about the emerging markets. They have shown some kind of resilience. I want to bring up this chart. It shows how Southeast Asian markets in particular have done pretty well despite the route. Richard fundamentals are attacked in emerging markets. I think maybe sometimes there is a bit of a lag from developed markets to emerging markets. Maybe that hasnt come through. If a stockd to see, prices go up, when you see a it to the when you see a period go up a lot,frenzy it also comes down a lot. Emerging markets have not going up not gone up like a lot of other markets. You, richard. Think you for coming on the program to make sense of all these things. Coming up, the worlds biggest a quarterhas waited of a century, but finally gets its contract. This is bloomberg. David this is Bloomberg Markets asia. After a tony fiveyear delay, its Worlds Largest buyer is launching its own futures contract. Adjust a matter of providing an alternative. Yeah. China is trying to offer these new contracts, not just to the domestic market, but also through the global market. What the country is hoping for to challenge the established crude oil benchmarks. That is what the country is planning to do at the moment. Haslinda the goal is pretty clear and it is pretty big. It will be easy for china to do this. Of course. The one main hurdle at the moment, apparently, the country that the government has over the yuan currency. , thosers outside country kind of interventions will be reduced or removed enough for them to join the market. David if you dont trust the currency, if you dont trust the system, it is hard to see this one gaining traction. I want to take a look back. We already have a Commodities Exchange in shanghai. How are the contracts on those markets doing . , rubberiron ore contracts in shanghai. Have those gate traction . Are they gained traction . Are they now established benchmarks . You have a very good knowledge of all these chinese commodities contracts currently trading there. The country has many commodity Contract Trading already, as you said. One in shanghai, one in and another. Trading has exploded in recent may be driven by speculators. It is quite risky. From the perspective of Foreign Investors, it is quite uncertain. A bit risky for them to jump in now at the moment. Because of speculation, the government has repeatedly stepped in to quell fears of a bubble. This excessive speculation has also raised concerns about those kind of contract reliability is benchmarks. Haslinda who might trade this contract . Will there be interested to national he, from outside china . Sure. Interest internationally, from outside china . Sure. Investors and traders will look to participate in these new contracts. At the same time, some analysts said that Big International will also look to using these contracts for trading, for hedging, and arbitrage trade. Haslinda we will have to leave it there. A quick check of the latest business headlines. A deal with two groups representing victims, people suing takata have agreed an exit into a channeling them trust fund. 22 deaths have been light to the faulty airbags. David alibaba is moving into home improvements, buying a 15 stake in beijing easy home. Last week, alibaba beat earnings estimates and rose its forecast, saying it is buying 33 of an Online Payment Service. Haslinda hong High Precision is foxconn ho industrial internet reported sales of 56 million in 2017 with net income rising to 2. 5 billion. To move beyond electronics assembly. David lets have a look at singapore. Eight out of 12 economists. Be a commercell tax in the budget. Southeast asian governments are seeking to level the Playing Field for traditional vendors. Midweek, everyone is basically agreed that the inflation rate is the key to watch. The reason i bring that up is resultt of the cftc, the of the blowout across a lot of these positions last week, have now shown the market a little bit more bullish on the lawn and in the short end of the treasury curve. This shows you two things, positioning around 2 and positioning around 10year treasurys. Bearish treasuries. Seen mayp that we have fed might because the not be able to move in march. It is a moving target. Looking at the wider markets, it does seem that some kind of calm has returned. We see markets across the region pretty much in the red, including china, which led the drop last week. T lost 10 today, pretty green territory across the board. We are in the middle of the trading day. The sti up. 3 . The biggest gainers, the large caps. In hong kong, the last 30 minutes of trading in the morning session. Shares up more than 1 . Keep in mind we were down 10 last week, so that is a start. Will we get more . It depends on the quiddity in the coming days. You are watching Bloomberg Markets asia. Lets get a check of the first word headlines. Sayeports from japan governor kuroda is to be given a second term. He will be appointed for another five years. That indicates the Prime Minister wants to continue with the unprecedented stimulus program. South africas Ruling African National congress meets to finalize the transition from jacob zuma. He replaced the president at an anc meeting in december and is expected to succeed him. Israel and i run edging towards iran edging towards confrontation. The military said it hit 12 targets in syria. Israel has said it will not rule out effectively taking control in syria. Korea has confirmed it has invited president moon to talk in pyongyang. A nominal head of state extended the invitation this week. She said she never expected to travel to the south, but has found many things similar to the north. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. David all of us are trying to make sense of what is happening across markets. Had a quickex, we look together. Just entering the last 30 minutes of trade. Eight points above the 12,000 level. That is an academic level. At our 100aught us Day Moving Average as we were entering oversold terrain. We were afraid that support level was not going to hold, but it turns out we are a little bit above that. Interesting to watch what is happening here. Hshares up 101 points as we speak. Does this support level hold . Chairperson and chief Investment Officer at atlantis investment with us here in the studio. Hold orhink we will this is a bad sign and we will fall through this . I suspect the market will hold on a little while. 30,000 points is a critical level. It means it is a psychological level. We are trying so hard to reach and go beyond that level last december,hould say now we had this correction. Everybody now resumes talking about the fundamentals. We havent looked at the fundamentals for a long while, because we talk about ai or , quantitative whatever, but fundamentals hold because now we have three major strategies that we have to follow. This is the most positive thing in a long time. Global, oris to be internationalization. If you are a smart investor, you have to buy because renminbi it is too good to ignore that. Strategyis the lbo er the one belt, one road strategy. This is something that will happen, like 100 years, so with they are veryes supportive and positive for hong kong. We all talk about hong kong, and the money will continue to flow into hong kong. That is for sure. The ashares does look a little shaky at this moment. It did not go that much or go down too much. 20 correction, the nightmare time during 2008, you look at the history, every time we saw big correction, like these few days, 20 or something. It is a buying opportunity, and the blue chips, and they are looking really reasonable. David a few people told me last week if you look at the drop of the ashares index, a drop like that to those something is happening underneath. One of them pointed out that these Wealth Management products have funneled billions of dollars into blue chips and large caps, those are starting to explode, which means this foundation of ashares one hold for too long. How important is that part of the market Market Structure . Withoutt believe Structure Problem come up because without structure in , we talk about hong kong, trade moreng will and more like ashares, not the u. S. Market behavior, although may be sometimes once in a while they are synchronized together, but looking at the trend, we talk about ashares, they are very special. Allares more or less it is denominated thats dominated by government behavior. If the government will look after that, the market will go up for sure. I dont believe at this moment that the major strategy for china top leaders will look at ashares at this moment. To tell usy anything you should buy ashares. In fact, they are warning you because this market is not normal at this moment, but we will spike to normalization for sure. It will probably take 12 years after a longterm of consolidation in correction. If you go back to the fundamentals, i think hshares going up than the ashares because hong kong is a different measure, one country, thesystems, but you look at flows at the expense of ashares. Hshares will go up. That is why we love after a big correction, 20 or so, the blue chips, the white horses. They are so good at this moment. At this level some houses are recommending you to buy, but it has now consolidated around 400, and i think the stock will go to 1000. Haslinda before the route, chinese repartee and financial stocks were overbought. What do you make of them now . You said overbought. It depends on what. Cycled think the early well lastrform very year. You look at the banks, the hotels arelus flying. Automobile stocks are flying last year. Early cycle names, plus properties. They did well. But this year, 20,018, is a different game. 2018, is a different game. We saw good stocks how they performed and how they behaved already. They correct them at this moment. China,f investors from the incremental game has begun, so a lot of money will continue to flow into hong kong. That is for sure. That is why we should focus on late cycle stocks, or late Cycle Industries and sectors. For instance, health care. They have not performed well, but we should buy it. We should increase them right now. Secondly is that the Consumer Brand names. But once theyer, move, it will be powerful. That is why the latest cycle sectors we love so much at this moment. Haslinda stay with us. Chairperson and chief Investment Officer at atlantis investment management. Indias exchanges are tightening control of the foreign trading. On friday, the three equity forces said they would not provide data, including the price of securities, to exchanges or trading platforms in foreign jurisdictions. Lets get more from our markets reporter. Is this a big surprise . Well, it has been coming for some time, for the last two months. Of convincing them to stop introducing single stock futures on indian equities. The sgx has not listened and gone ahead and launched those last week. It precipitated this crisis. We believe the Indian Government has taken a serious note of this because it actually means off shoring the Indian Markets there areso in effect more volumes outside of india. From the concern Indian Government point of view. David right, help simplify this for us and what i should he watching for nearterm. Bet is the impact going to come a on the overseas investor on india . The impact on overseas investors is they have to withdraw from the nifty within the next six months. They have to bring down there portions. Directlyant to invest through india, they some of them are not registered in india, so they have to get registered within the next six months. So they have some time to do is some section of these investors who are concerned about the tax laws in india which are complicated, and which might be a bump for some kind of easy movement for Foreign Investors to go indirectly invest in indias nifty and sensex. David thank you so much. Really simplifying what is very complex and a moving target there. Ets have a look at markets three minutes away from the cash market opening bell in india. Not as indicate a pop, big one, but it will help. There we go with your futures. Some strength coming through in the indian currency. The opening coming up next. This is bloomberg. Haslinda there you have it. India is just about to join the trading day. Will pitt rise in line with the rest of the region it rise in line with the rest of the region . Banks, 3. 6 billion in hidden loans, indian bank stress is one thing to watch. Counting down to the open. You are watching live pictures of mumbai. Lets get to so for sophie for the latest. After stocks lost 1 on friday, lets check in on the nikkei and sensex. Gaining as appetite for emergingmarket assets is picking up. Bonds in focus ahead of the indian inflation port amid signs of a sixmonth selloff in india debt nearing an end. Asian stocks outside of japan are set to snap a sevenday drop , while the u. S. Futures point to a higher open. Tech shares leading the regional advance, tencent in hong kong, the chinextps in rising the most. For the first day in seven, but staying below 64 in the face of the rising u. S. Rig count. Haslinda some relief in the asian markets. What stocks are you watching . Sophie lets pull up the board. Some of the big movers in the region here. Soaring after returning to the black in january. With otherlimbing airlines on anticipation of a Lunar New Year holiday boost. Jb hifi leading to decline. The Singapore Exchange dropping the most on doubts that it will be able to offer india derivative projects. In focus afteria reporting a surprise quarterly loss friday. Years hasfirst in 17 bad loan provisions surged, putting a spotlight on distress in the indian Financial Sector given underreporting. David that is a hot topic when you look at india. Its not just the bad loans. We did not know they were there. We are getting some names sophie was pointing out getting underway. When you look across sector groups, that one is lagging behind. In the meantime, indias exchanges, regulators, have unheard on earth 3. 6 billion in bad loans. State bank of india calling into question the extent of the rot in the banking system. Lets bring in our finance editor. Thing, these are hidden bad loans. What are they . Cropping up on these Balance Sheets of indian banks . Where did they come from . Loans is theen bad cap between bad loans reported by the vendors themselves and bad loans identified by the regulator, so the regulator completed an audit last year. Has been grappling with the bad loan crisis for the past few years. In 2016, the regulator tightened classification rules on bad loans and mandated if the cap is more than 15 , banks have to disclose these bad loans. The gap between that loans identified by the banks itself versus the regulator, these are cropping up on Balance Sheets across the private sector and public sector. Haslinda we are looking at financials in india down 2 . We talked about how other lenders have supported the purchases, but why the state bank of india in particular is worrying . Fartate bank of india by indias biggest lender. It dominates in terms of the amount of lending, the new loans that kill off to companies in india. Loans, loan growth is hovering around the lowest in two decades. It is historically very low. Because of low loan growth, Economic Growth has been choking off. So manyblem has grabbed headlines that last week we had the Prime Minister attacking the policy, saying it is the kind of legacy issue this government is. Rappling with it is becoming a political hot potato in india, and economic chokepoint, and the biggest economic problem india is grappling with. Haslinda just when you thought india was wiping out its bad debt issues. Thank you for that. If you are a bloomberg subscriber, you can catch up with all our interviews by using our interactive function tv and join the conversation by instant messages to our team and guess during our live shows. Check it out at tv. This is bloomberg. Haslinda this is Bloomberg Markets asia. Joining us now is our , chairperson and chief Investment Officer at atlantis investment management. We will get a graphic up on our screen to show you a look at the cheapest stocks on the pricetobook basis on the hang seng index. A rocketot take scientist to figure out the cheapest of the banks,. 7. 4. 9es nine times times book. Do you buy the banks now, and if so, what . Last year, the banks performed well. The answer is yes. I have in a cumulative in banks in the past three days. Chinese banks traditionally are trading at a big discount compared to the old asian banks. Ping an bank, chinas Largest Consumer bank, trading 1. 21. 3. Look at the Indian Consumer banks. They are trading 4. 5 times. Is a big Consumer Bank. We did not have a big Consumer Bank history in china. Now we are coming out. I have been holding three banks. , chinathe largest bank postal bank. China construction bank. Like a small been called citic. Bookhave a very solid loans, however they will have some surprises. David what else . Late cyclical sectors took some profit on automobiles, which performed well last year. Beyond theseting three major sectors, Consumer Brands, insurance. That is why i am buying ping an. Also, health care. These are the three. From the top down, how could we have a bull market in the future but dont have inflation . This does not make sense to me. 1. 6 . It is tricky. So i dont believe the inflation will stay forever at this level. It has to be picking up one way or the other. That is the supply side, consumption increasing. I am now beyond these three sectors holding 50 of my total. I have been accumulating energy. I love the three energy players. They really performed for a long time. , cnooc, china petro. Haslinda what do you view as the biggest risk for the china market . Biggest is you dont know how big a hole is the china credit system. We talk about deleveraging, d stocking, since the new leaders came out, however we dont know , thatagile they are everybody realized that and tried to solve this problem. Will take time to solve it, but at this very moment it is very important that we by the sectors. That gives you the visibility and stability. We need stability. All right. Thank you for all of those tangible insights. We are headed to the lunch break in hong kong. More coming up next. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Asian equities rise and u. S. Futures point higher has a new trading week gets underway, but investors are still cautious. The Inflation Report is the next big hurdle. To finalize the transition of power by the anc away from the south african president. Could this be a turning point for confidence in the economy