Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20240713 :

Transcripts For BLOOMBERG Bloomberg Daybreak Asia 20240713

Barrier. Softbank is said to be planning deep cuts at the vision fund which could affect 10 global staff, souring bets on tech are takingke their toll. Haidi a mixed start to a politically driven status when it comes to the markets today as we get that precedent being set with that security bill as well as greater considerations over what kind of reopening and second wave issues we are seeing across the rest of the regions. We are seeing new zealand markets starting off the day with tepid gains. The session looks a little bit more muted for the rest of asia. We are seeing japanese futures as well as Australian Futures pointed a little bit higher. Those in hong kong seeing retreats. The npc is being i to be passing the Hong Kong Security eyed to be passing that Hong Kong Security bill. The u. S. Sees 100,000 deaths. We are watching the oil story, seeing whether this pause in the rally will continue given concerns about renewed production out of the likes of russia. Shery to our top story, hong kongs future as an independent trading leader in asia is in doubt after washington said it can no longer certify working distance from china. The decision could trigger farreaching have consequences on the Hong Kong Special trading status. China has vowed to retaliate, saying its affairs with the city are strictly internal. Tom mackenzie is watching this in beijing. We have more reaction coming from policymakers in china, especially when it comes to insisting that this would only affect a very narrow category of acts when it comes to the National Security law. Again, another attempt. This is of course from the Chinese Embassy in washington to try and clarify and reassure people in hong kong and internationally that this security offer hong kong would be narrowly defined, only focused on certain acts. Concern among those in hong kong, the pair democrats, and the nt beijing forces, but also internationally, is that this is a broad security law that could be used to undermine the autonomy but also to curtail free speech, free press, ngos, and a number of other issues. In terms of what we are hearing from the secretary of state, mike pompeo, he made the determination that hong kong does not, as he says, enjoy a high degree of autonomy from china. He was compelled to review the status that hong kong has because of this bill that was passed at the end of last year. Now, the question is what actions is the secretary of state and the Trump Administration likely to take . They could look at restricting visas or asset freezes. Of course, they have been provoked or their decision has been accelerated because of this decision by the National Peoples congress. Beijing to circumnavigate the government in hong kong with this security law. Beijing says the security law is one that many other nations have. This is an act in terms of what the u. S. Is doing, the response from the u. S. Is meddling in hong kong and chinas internal affairs. That is the chinese stance. They will respond with strong countermeasures. We have this unreliable entities listed they have been using that could target companies. We are watching for the chinese response, but first, we have got to see what the u. S. Is going to do in terms of visa restrictions, asset restrictions with chinese officials. It is not expected that this changes the trading status with hong kong. That is still an option for mike pompeo and the Trump Administration further down the line. All of this happening on the same day as the house passed that weaker bill which authorizes u. S. Sanctions to be placed on chinese officials for human rights abuses against muslim annuities in china minorities in china. This is likely to inflame the anger in beijing further. Am it will do and it is reminder that congress and the Trump Administration are taking actions on a number of fronts to pressure china and this is a reminder that human rights as part of the mix even if that is something we would not have considered when Trump Took Office in 2016. The human rights bill focused on what that means. According to the United States state department and United Nations and other ngos and human rights bodies, there are as many as one million muslims interned in camps. China says they are education camps, schools, essentially, is how china has described them. Most outside observers described them as detention camps and this would restrict visas for officials that are involved in that internment of those muslim people in chin zhang and possibly also asset freezes as well. They would also condemn the camps and push for them to be close to down. President trump has not said whether he will sign off on this though but it is a reminder that these pressure points between beijing and washington are on a number of fronts. Shery the National Security bill that would affect hong kong now expected to pass today at the npc. That is right. This is really the top ticket agenda as the National Peoples congress concludes today. You have delegates facing other measures in the great hall of the people this morning, but really, the focus is on that decision. They will vote and pass this bill to enshrine a mechanism, an entity, that would enforce the security law. It would not enshrine it in the law at this stage, but it is another major step in that direction, and of course, we have another set of measures by democrats and republicans in the u. S. Looking at pushing through a bill and legislation that would punish and take aim at any of those entities and potentially also chinese banks doing business with those entities so that is another reminder that the legislative process continues in washington to try and curtail chinas behavior in these issues. China says the security law is narrowly for focused. It is vaguely defined. We will wait to see if we get any more details. Premier li keqiang will be giving a briefing at 4 00 p. M. Local time to go through what has been discussed over the last week in beijing. Maybe you will comment on these increasing and rising tensions with the United States and this issue of the Hong Kong Security law. Haidi Tom Mackenzie. Markets coanchor in beijing. More on the tensions over hong kong later with the former ledge copresident. Other guests will be joining us. Shery first word headlines. Global coronavirus cases are with u. S. 5 Million Deaths passing the psychologically important 100,000 mark. New york remains the worst hit state with Governor Andrew Cuomo calling for federal funds to alleviate the economic fallout. Will de blasio see is a 9 billion black hole in the budget , worse than the estimated shortfall released last month. The European Central bank says the singles market is deteriorating and heading for recession as bad as his most pessimistic forecast. Christine lagarde and her colleagues say output is set to shrink by as much as 12 , calling a less weak decline out of date as the coronavirus theked down is jobs and coronavirus slashes jobs. Japan is doubling its stimulus measures, vowing to keep the economy alive the worlds biggest virus stimulus package. More than 1 trillion to help households, healthcare care, regional economies. Plan will be funded by an additional budget that breaks the record for Government Spending that was sacked only last month. Reports from washington say the Trump Administration is to end waivers on doing business with iran over nuclear operations. The post said the decision would reactor the heavy water at the plant and to the transfer of spent fuel sent abroad. However, washington may extend waivers on support for the Nuclear Plans to boost an agreement that perceives the 2015 deal with major powers. Softbank is said to be planning deep job cuts at its vision fund. We will get the full details later on. Will saychael mccarthy how to navigate political tensions in the markets. This is bloomberg. Haidi asian stocks look set for a mixed session as investors weigh more gains on wall street against rising tensions over hong kong. Chief Market Strategist joins us now. Is it fair to assess at this point that despite the escalating tensions between washington and beijing, despite these concerns of market volatility that could affect hong kong will spill over to asia . It is more like a regional concern than a Global Market sentiment . I suspect that this one is a global issue because it is not just over the status of hong kong. We have got ongoing disputes over trade issues, the phase one trade deal only just being implemented. There are concerns about an inquiry into the coronavirus and a number of fronts on which the u. S. And china are doing that are so hong kong could become a proxy for a broader disagreement. If that is the case, it will quickly escalate from a regional issue to a global one. In the words of china, this is the u. S. Trying to potentially create a new cold war. How do you trade in that kind of environment or how do you hedge against it . We have seen heightened rhetoric out of beijing for some time now. It appears to be their new way of doing business globally. They are vehemently stating purely an internal china matter and it ignores the special status china has in financial markets. Hongkong is on par with kong, new york, the Financial Center at the moment. If they reduce independence or autonomy, it is hard to see how that special status as a Financial Center could remain. That might not be a consent to the chinese government. It is clear that they are looking to develop shanghai as a regional Financial Hub. In the shortterm, that disruption to the Global Financial market system is likely to have an impact that will be felt everywhere. Shery really interesting to see the mainland money flowing into the hang seng index. This index really has included owned companies from china and when you compare it to the msci hong kong, which does not include the Chinese Companies, has been under pressure. Is this a trend we will continue to see . Michael i suspect when there are issues around status of hong kong, it is likely to continue perceived mainland support. I think that will be part of the measures. Its interesting to see the divergence in markets overnight. The s p 200ures for in australia in the green. Hang seng futures are down. 3 . Within the region and china, they would like to see it performing with Global Markets. That might be a test of determination to support the hang seng, and by extension, the issues coming down. Shery we have also seen the pressure on the chinese yuan as well that has really, in overnight trading, fall into an alltime low. Where are we going with the renminbi . Theres a lot of speculation that beijing might let it weaken further. Michael they are watching it very closely because that will be interpreted as a sign that tensions are continuing to escalate. 720 markthrough the would be significant and it could signal about the political intent behind the currency moves as interpreted by those in the u. S. , so it will be very important for the regional performance as well as the hang sengs performance. Is that we are emerging markets, particularly em currencies, are going to take their leave from given the anchor role the yuan continues to play . Michael i think that will be a key factor because at the moment, we are getting diversions across the asset passes. A much different performance in other markets. Dons rallied. Gold held 700 to 800 u. S. Aluminum managed to which saw big pressure on copper, nickel, tin, coming up 1 to 3 . Those growth fears were not reflected in market trading so it is hard to say what the region will respond to. Today, it is quite possible we will see diversions between the different markets across the asiapacific region. I thought it was interesting, in particular come out of the overnight session, you are starting to see the start of rotation from growth to mega caps,ize from recovery in small caps, and potentially, we are seeing tech certainly still dominant but you are seeing some of the other sectors play catch up as well. Are these trends that you expect would continue as we continue to get to the other side of this pandemic . Michael emerging stock markets look at central performance over the last 48 hours and it indicates growing optimism about the lifting of lockdowns because you are absolutely right. Financial stocks have led the last night, 7 gains which pushed the dow higher. They gains in the u. S. Are narrow and as we spread out and look at the broader indicators, the upward momentum gets less and less. These are very narrow gains. I expect that while optimism around lockdown measures continue for financials, for industrials, for Consumer Discretionary stocks, despite the equity background, it pains me to note that equity markets are often the cousins of the Asset Classes and the last to react on that pressure we are seeing for both exposures and that preference for safe havens and other Asset Classes. We might be about to see the end of that rotation in equities. Shery just before we let you go, we have seen extraordinary gains not only here in the u. S. With the s p 500 rally, but also in the asx 200, which has gained around 5 or so in the past month. What does that do to valuation levels . Michael this is a fascinating thing. If we start to look at the graph of earnings related ratios, the s p 500 is back at alltime highs in terms of expectations, so valuations are looking very anand that is on you unusual situation to be in for u. S. Exposures. Shery we are now seeing stock valuations in australia also soaring to record novels. Thank you veryy, much. Coming up next, the job cuts are coming to softbanks vision fund. We will have more details, next. This is bloomberg. Shery sources say softbank is planning deep cuts at the vision fund which could affect about 10 of total staff. Asia tech executive editor Peter Elstrom has the story and joins us from tokyo. Not that surprising given all of the problems that the vision fund has faced. I do wonder, where are the cuts happening . We know japan has pretty strict labor laws. Peter thats a good point. You are right. It is not a huge surprise. We saw the vision fund announced losses of about 18 billion on the Portfolio Investments so we know things are going in the wrong direction. They do not need the kind of staffing they have had in the past so sources are telling us they are planning these cuts. The vision fund is based in london so our understanding is that the focus of the cuts is going to be in london and they have offices in other parts of the world including california and tokyo, so they are trimming back across the board. They have not made any of these details public at this point so we are doing this based on sources but our understanding is that it should it is likely to touch those offices. We are seeing softbank unwinding its holdings and a lot of investments. Are we seeing that continue, this kind of fire sale, as it tries to regain control of the situation . That athe backstory is softbank, after a steep incline in the share price, Masayoshi Son announced a buyback of his stock, which he has been proceeding with, and that they were going to sell more than 40 billion in assets, so we have seen them take some steps in that direction. They sold off a chunk of their alibaba stop. They have an enormous holding in alibaba. The chinese ecommerce company. They are selling a bit of their domestic wireless operation, which is softbank corp. , and they own a stake in tmobile, the u. S. Wireless operator, because they merged sprint into that and got an equity stake, so sources have told us they are selling a big chunk of that business to raise cash and they are going to use that to buy back the stock and then also to pay down some of the debt that theyve got. Shery what is next for softbank . We have seen historic losses for the company, for the vision fund as well, and what difference a year has made, so if they are trying to really upset all of these losses, what is in store in the future when these Portfolio Companies seem to be suffering . Peter for the vision fund in particular, this is a cleanup job. You are exactly right. A year ago, the fund was reporting profits and then we got this record loss of 18 billion. It is really a cleanup job. They have about 90 startups in that portfolio. We have heard mostly about the big disasters there. Of most glaring example that. They wrote down that company yet again. At one point, it was worth 47 billion. They have it on the books at about 3 billion, so much lower. Theres also scores of companies we have not really written about, have not heard that much about, and some of those companies and the partners there, they are hoping they will be able to regain ground and do reasonably well. Many of them are involved in the sharing economy, not just sharing office space but also sharing cars or other kinds of assets. The ridehailing companies, which is the biggest bat from the vision fund, those companies are also struggling a bit at this point. We have seen the uber share price but softbank also has a stake in southeast asia, in china, and all these companies are kind of struggling with the new rules of the game after the coronavirus. Tech executive editor, Peter Elstrom, with us with the latest on softbank. Lets get you a quick check of the latest business flash headlines. Boeing launched a wave of new job cuts, telling almost 7000 employees they have to leave. The collapse in air travel has crippled demand for new planes with boei

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