225, things are moving. Bitets should have seen a of a better move to the downside given what futures contract suggestion. Suggesting. Aussie dollar, we are waiting for the next salvo in this trade war at the moment. I say currencies because there have been a few signs the Coalition Getting together in the u k to fight a hard. That has been brexit. 105. 77, up a fraction at thesehe dollar but levels, we have exporters feeling it. That is why a cap has been put on the topix. Stronger a onshore yuan, pretty flat. 7. 16 rmb for the dollar. Lets get the first word News Headlines with su keenan. Su we start with hong kongs bountyleader backing a program for identifying protesters who have perpetrated vandalism and defaced chinese flags and emblems. He posted a link on his Facebook Page to a website that promises a crowd funded reward and anonymity to potential tipsters. Is named after the moment on august 3 when a demonstrator through the chinese flag into hong kong harbor. On the corporate news, boeing is expecting major order from china as part of a trade deal with the u. S. That a told reuters solution will be found because of mutual interests and the aircraft business will be part of that. Demand there is pentup for planes in china as airlines havent ordered any new ones for about 18 months. Boeing has held talks with china focusing on these 7779. The former malaysian Prime Minister has arrived in court for the start of the second trial over the scandal surrounding the state Investment Fund 1mdb. A separate trial reached the end of the prosecution face tuesday and may conclude in november. Najib faces 42 charges related to his role. He has pledged guilty not guilty to all accusations. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im su keenan. This is bloomberg. David lets get our top story today. President trumps mixed signals on trade negotiations are prompting china to prepare for the worst. Officials tell us his credibility has become an obstacle to talks with only a few negotiators seeing a deal possible before next years u. S. Elections. Said at donald trump the g7, called to ask a resumption of talks. A shortlivedated win with beijing saying it has no idea what the president was talking about. Yvonne not the only nation preparing for the worst. Governments from south korea to thailand are bolstering centralbank efforts to hedge against a darkening global mood. Michelle has been tracking all of this from singapore. This is something developed markets would want, but tell us what asian politicians are doing to stave off the downturn. Michelle we have been talking all month about the dovish surprises from Central Banks and how much policymakers are trying to get in the game to head off the downturn. From the fiscal side in the past two weeks, weve seen it across asia. Record spending announcements from indonesia and south korea, more than a 10 billion dollars spending package with loans from thailand, hong kong and china rolling out stimulus and probably more to come. We are expecting announcements from japan ahead of a planned consumption tax hike in october. They are trying to find ways to offset the weight on consumption and from india after the record transfer yesterday from the r. B. I. To the government, we might see stimulus packages rolled out there. From the government side, getting into the game and not just the Central Banks providing the jolt to recharge the economy. Rishaad what are the drawbacks here of doing fiscal stimulus . There is always a fine line as to whether what they are doing is enough. Michelle thats absolutely right. Often it is a question of debt. Some of these countries dont have as much room as others. We look at indonesia and india more broadly at current account deficits, fiscal deficits. Some countries have targets, indonesia being one. They have to be mindful the spending doesnt get too out of control but it is always a question of efficiency. Is the money going to the right place . There is a lot of need in the region for infrastructure across projects. Always a question from analysts, last month showed sometimes this is a very effective but we will have to see how these things are channeled. It is coming in a lot of forms. It can be tax cuts china was talking about local debt sales. Will joltways that the consumption and the business side of the economy in the wake of the headwinds. David michelle jamrisko, asia economics reporter. The head of asia equities strategy at socgen is in our studios. Monetary policy always takes the headlines over fiscal unless you get a big fiscal boost. Should they get excited over what these governments are starting to do . No, unfortunately we are not getting very excited. We are seeing some fiscal boost but it is pretty muted at the moment and it is not something that is preventing the growth slowdown happen. At the are seeing earnings level, it is still a pretty poor earnings momentum and that is the number one issue we are seeing on asian equity at the moment. Rishaad do they need to do more . That leads to other problems with budgets and so forth. Frank they do need to get more, we need to get more aggressive easing, but this is not something that is doable for a number of countries so even in , a great high growth story, we are seeing growth has been quite disappointing as this is something the market is at the moment and the next two quarters, we dont see improvement coming. Rishaad i understand your improvement because Infrastructure Spending and fiscal stimulus takes a long time to feed through. It is a decade kind of program, isnt it . It is not something you will see the results of an six months. Frank on top of that, you have some issue of who is going to finance it because you have in a number of these countries some publicprivate partnerships that have been put in place that is something that is taking a lot of time to be implemented. Yvonne weve also seen Central Banks in an attempt to outease the fed, they are going on easing cycles. Is that a good or bad thing for equity markets because at one point, there was a concern about the risk that market volatility would happen, we would see weaker currencies. Is that supportive for the equity markets . Frank it helps, and what we really need to see on the equity market is earnings coming back. Bit oft we have a little breathing space coming from the fed loosening, which is also allowing asian Central Banks to have some looser policy. It is a good thing for valuation. It is helping, but we are not there yet and what we would really need to see, especially for the equity market, would be the dollar starting to depreciate against the asian currency. David im guessing based on what you said, you are telling clients to stay away from equities generally speaking. There are no signs for the dollar to turn. Frank we are giving a cautious message on the equity market. That is very much a tactical point we are making for this quarter, for the next quarter, and getting into 2020 where we could see improvement. What we start to see is also the valuation starting to become more interesting. An interesting market is korea. That is a market we have been underweight for quite some time. The earnings momentum has been an absolute disaster and then we start to see possibility of a rebound. Nne are there any markets you came up with a list of stocks in particular that you said were a concern because of the foreign debt levels. Tell us more about that. String anyle to common theme or consensus here as to why there is so much accumulation of debt and which sectors were hit hard by this . Frank you mean in asia . Yvonne yeah. Frank in asia, we have two kinds of debt. We have corporate debt in china and more Household Debt in a number of other countries. Issue we are seeing but it is a longterm issue andh is more manageable, can still be managed. Yearina are we had last de the leveraging leveraging mode, that was putting a lot of pressure on the corporate sector and this is less in the picture this year. David we will talk about your top three Equity Investment ideas. Frank benzimra is head of asia equity strategy. Rishaad we will joined be joined by thailands minister. This is bloomberg. Oneaad lets look at the earlier on yuan fix earlier on. This chart is sending the message arguably that the pboc wants a stable currency. Perhaps also they dont want people to think it is a oneway bet. David they are trying to rein in the weakness. It was a strong message, but obviously not Strong Enough as we saw the currency gain and two minutes after quickly reverse those gains. This is the midpoint, the daily fix. That is the Goldman Sachs estimate and there is a big difference. Rishaad lets get frank benzimras views. How does this play into your equity strategy . Frank what is interesting to note is in this current phase of depreciation, we dont have a negative impact on the fact we had in the previous day of the depreciation because there is not the same kind of panic and concern of capital flight that we could have heard in the past and the interesting thing is if we look at the last three months, the only major market in asia which increased in price has been the chinese domestic market so it means the concern on the cny, on the equity market has become less acute and in some cases can even play positively and help emerging markets under pressure. You mentioned in terms of your Equity Investment ideas, long china domestic and short Hong Kong Listed chinese stocks. We had the chart showing the hh share premium is at 30 . What is behind that call . Frank with have the premium which is high. Globallythat we take in terms of asset allocation, chinese domestic stocks are not well correlated with the rest of the world. We are becoming more resilient and we are seeing earnings which outpacing story the rest of the world. Puttingong kong uncertainty in hong kong, we see the chinese domestic stocks being put under more pressure than the offshore ones. David the forecast for earnings is double digits, 15 to 18 . Do you think it will be that bad . Frank i think it is quite high. We are in a process when we have some downward revisions. They have been extremely severe in one country which has been korea, and that is maybe one market where we could see a little bit less pain on the earning side. We think there is more to come in other markets. The indian expectation was quite high. We have seen some poor earnings season and this is something that might continue. Rishaad tell us about hong kong or a second. You say it will affect equities in two ways. What are they . It is obviously you will not etc. ,to retail outlooets, people not going into department stores. Frank the hong kong economy was already slowing down in the second half of last year because of the trade impact and we are now seeing that the likelihood of a recession is high. The first effect is through the future earnings, and then you can have an impact which is on the sentiment, which i tried to equity i amthe going to give to the hong kong stock and how is it going to impact it because we now need to factor in some Political Risk on the equity market. Been talking about tourist numbers which have been a focus the protest, the fear that mainland tourism is not coming in. Im wondering, it seems like every time we see a melt up in equities, the bond markets continue to see yields tumble. What our bond traders pricing in . Do they know something equity guys dont . Frank im not completely sure the bondsay that market and equity market are finding a different message because when we about it from a theoretical point of view, we have a lower level of yield and this level yield of yield is making the assets become cheaper. That is why even the u. S. Equity market, when we consider it on the risk premium model, is not really sending some message that it is very expensive. Alreadythink there is any correlation. David we can get along. Rishaad on that note, thank you. Frank benzimra, Societe Generales head of asia equity strategy. Developments. St this is bloomberg. Yvonne lets get the latest business flash headlines. Virgin australia is cutting 750 jobs and launching an operational review under a seventh straight annual loss, the cuts affecting 8 of the workforce and shrink head office staff. It will review its fleet and destinations, eliminate some domestic and International Rights and reassess contract with suppliers. American airlines is stepping up damage control f for travelers who suffer from a targeted slowdown from mechanics and bag handlers pushing for better contract. More than 1200d cancellations and lengthy delays, delivering a blow to the travel season. Has sued the Workers Union for damages to recover some of its cost. David lets look at what is happening in malaysia. The former Prime Ministers Second Corruption trial is underway after being delayed a week as his first trial continued. Is charged with abuse of power related to the multibilliondollar looting of state Investment Fund 1mdb. Anita, what is actually happening because he was in court a week ago, as well. Smiling, shaking hands with reporters. He is actually facing his biggest trial related to 1mdb, facing 25 charges on Money Laundering and corruption involving billions every get ringgit in relation to 1mdb. Today, the prosecution is expected to give their Opening Statement and call in their first witness. How does todays trial differ fromefer the first one . In a wider context, he is facing 42 charges. Was in relation to domestic transactions related to a former unit of 1mdb whereas this trial directly involves 1mdb, involving billions of dollars in acquisitions. Yvonne this trial has been postponed time and time again. What can we expect out of the trial today . Today, prosecutions Opening Statement. It has been postponed multiple times. We dont expect that to happen again because the prosecution yesterday, it will finally go ahead. Thank you so much. Our bloomberg reporter, live with the latest out of malaysia. One stock we want to call your attention to is in south korea, the biggest mover across asia today. Collapsing 30 , medical equipment maker getting an injection. An injection of too much potassium. 30 drop. There is her headline. Click on that and there is the story behind the drop across the stock. We are also watching carmakers. Yvonne local reports sayingsec. We are watching consumer stocks after we heard from beijing trying to boost consumption and reduced some of these restrictions. Everything from cars, retailers, Household Appliances rallying today. This is bloomberg. Su 10 29 in hong kong and shanghai. Im su keenan. Trump,t with president who has returned from the g7 and wasted no time in resuming his attacks on the fed. He took to twitter to accuse jay powell and his colleagues of standing by and watching in many actual or struggle with exports. He added the rest of the world has long been taking advantage of the u. S. The fed, trump says, has been calling it wrong for too long. Former senior fed up the shul bill dudley says the central bank should reject the president demands for rate cuts and not bow to pressure to fix the damage caused by his trade war. Dudley was new york fed president until last year and said by appeasing the white house, the fed could encourage trump to escalate the trade war further. On brexit, u. K. Government sees a chance of restarting brexit negotiations after Boris Johnsons talk last week in berlin and paris. Sources say germany and france appeared to relax their tone on the agreement and the need for a backstop on the irish border. Meanwhile, the leaders of the u. K. Opposition party held a closeddoor meeting. Talks on a new coalition in italy stumbled with the Democratic Party and the fivestar movement blaming each other for the threat of an early election. The harsh words suggested even if a deal is reached, a coalition would be hobbled by him i think infighting. He said he would only support a andition if was approved a vote would take place next week. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im su keenan. This is bloomberg. David thank you. We are two thirds into the reporting season. They will get very busy the next 48 hours. Look at our e. A. Unction function. 223 out of the 336 on the index have reported. Not very impressive as far as sale prices. Earnings are 5050. We are looking at financials given overnight. 5 netrnight income and then the rest of others coming out. We will not get into the details of each one but it will be very busy. The banks will be in focus. Later today, China Construction Bank and we will get through the big four into the weekend with friday being the big one with bank of china and i think. Just to give you a sense of other countries reporting results, as well. The marketing director joins us. Thank you for joining us. These banks have some incredibly , tier one qualities capital ratios look very safe. Good dividends, as well but they are unloved. Why . Is it always down to the npl issue . For one, the npl issue. Market does not have the visibility and from time to time, we are seeing the nationwide reforms working against them. , the market has been talking about the Interest Rate forms a lot. We look at the Interest Rate reform and it is asymmetric interestrate cuts for banks. Big picture in china financial sector, banks have been made in a lot of money, as you mentioned. It has been lucrative but they were protected by the financial regulations. That is why at this point in time when we are facing headwinds from global trade frictions, macro, chinese banks, stateowned banks are being used as tools to subsidize the rest of the economy, including nonfinancial industries and financial institutions, as well and we understand Global Investors are reluctant to invest in