We have the world covered on daybreak asia obligated to crack down on hate. We have the will covered on daybreak asia. Betty we will have the latest on that tesla story. Tesla trying to save taxes. This is daybreak asia coming to you from bloombergs asian headquarters here in hong kong, where it is just after 7 00 a. M. I am betty liu. Yvonne i am yvonne man. Eyes are glued on china for the next 24 hours. Not only do we have this msci decision, but we will hear from the pboc governor as well. We do not hear from him too often, but it will be interesting to get his take now that it seems like the pboc is parting ways with the fed. They held off on raising those borrowing costs after the fed raised rates last week. Betty a lot on the agenda as you mentioned. We will be going through a lot of big corporate stories, including that story on tesla. Everybody focused on the Chinese Market and tesla being a tech movie has been a big today. How much a big mover today. How much of the impact will be on the asian markets . Yvonne a pretty big boost so far in new zealand. The nzx 50. on the kiwi at 7224. Watch the body lenders today after that meeting these downgrade after that moodys downgraded on the housing market. You will hear more of that on the rba minute later on this morning. On the at 7597. The aussie is up. 7597. Arjun japan, we close above 20,000 for the nikkei on monday. We could continue on with this rally. Dollaryen well above 111 right now. 1163, so that is going to help sentiment as well. We are set to be a pretty good day thanks to that. Pretty solid session in wall street overnight. Betty let us take a look at what happened on wall street. As we have mentioned, tech shares, particularly the big one, a large market cap, led the gains today. Look at the nasdaq, up 1. 4 . Up a lot of those losses. The Dow Jones Industrial average rose about 144 points. The s p rising almost 1 . Let us look at in particular some of those big cap tech stocks might amazon, apple, and they rose up about 3 . Way, oneocks, by the losers ingest todays session on wall street. First word news with lena melendez. Nina. Nina we talk brexit negotiators say the top brexit negotiators say it has started positively. Gary davis said there was more that unites the two sides then divide them. The chief you negotiate Michel Barnier said they hoped to tackle a timetable for britain to leave the block. , a fair deal as possible. Deal. R better than no that is what i said today and why we will work all the time with the u. K. And never against the pay. Against the u. K. They confirmed that trade talks will not start before october. He will brexit deal will follow the timeline set out by brussels. They had wanted trade negotiations to run in parallel with divorce proceedings, but has accepted the timetable set out by barnier. He welcomes top industry executives to the white house. The president vowed to work diligently with congress on immigration to ensure the sector gets the people in needs and jareds ceo praised kushner for leading the administrations tech outreach. The u. S. Should have the most modern government in the world. Today, it does not. Effortreat to see the that jared is putting in a working on things that will pay back in 5, 10, 20 years. Spicer may be in line for a new job. He has been President Trump spokesman since the beginning, but has faced months of speculation that he will be fired. Sources now say officials may move him to a more strategic role and bring in a new press secretary. The Administration Needs a new commissions director after he quit last month. The american student released from prison in north korea has died. News,mily confirmed the saying the torture he suffered in north korea meant no other outcome was possible. The 22yearold was sentenced for 15 years with hard labor in march of last year after admitting trying to steal a propaganda better. U. S. Doctors said he had severe brain damage. The cause is not clear. The imf says japans improving economy undertakes both reforms. The abe government needs to boost wages as well as working to increase private investment. Japan is enjoying its longest economic expansion in a decade, but the imf sees growth weakening in 2018 with inflation below the central bank 2 target. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am nina melendez. This is bloomberg. Anchor thank you. Tesla is said to be close to an agreement to produce vehicles in china for the very first time. It would allow the electric carmaker to avoid an import tax and price its vehicles more competitively in the World Largest auto market. Let us get to the hall get to joining us from San Francisco. So how significant is this deal . To be clear, we are waiting for more details. Yunnan up with a partner would be. This would be huge. Tesla has one auto plan in fremont, california. If they want to become a global cars by 2018d sell they will need additional facilities. Be a pretty significant development. Betty it would be. Meanify what this could for teslas business . U. S. Automakers on allah to produce in china on the a have a local partner. Their cars are subject to a pretty significant import cap that makes their cars more expensive, so here, you have tesla tried to sell electric vehicles in china. Chinas government, which has itious goals around that they would be cheaper, so they would be more competitive with other automakers, but the time it takes to ship the cars and transfer them from the u. S. To china would be negligible, so it really would open up the Chinese Market for the company. Anchor right, and in terms of Pricing Power, you mentioned this could potentially alleviate boost some of the Pricing Power tesla could have when it comes to pricing their vehicles. The timing could be right given that they are about to start production. It is a model three sedan in july. Dana the model three is teslas reason for being. Founded to was brangelexit vehicles to the masses. They are launching the model three in july. They have not launched or done any marketing of the vehicle in china. When they do, that could be a real game changer in terms of bringing an american luxury automaker that is much more affordable into china, and we know that suvs are all the rage in china. Teslas model x seems to be doing fairly well. Elon musk has been to china several times. He was most recently there in april. Right now, i think everyone is very excited to find out a little bit more. There might be some kind of announcement imminent. Betty dana hull, thank you so much. A big story and move for tesla in china. Stilltory still being evolving. In the meantime, another evolving story in china is of course the decision time for chinas ashares and whether they will be included in the msci emerging markets index. This has been a longstanding saga for these chinese ashares. The fourth time around with that decision. Tom mackenzie has more on this. Iinas fourth attempt mean, certainly, it has been a long wait. What is going to be different this time around, tom . Both sides, really. We have Seen Movement from both the msci antenna to close this gap. Another to close this gap. They have reduced this by a large portion of the ashares. 169 from 448 last year. More than 3000 ashares. It is a 0. 5 weighting is what the ashares would get. From china side, they have done things like initiated the hong kong to shanghai stock connect, which is part of their attempt to convince the msci they are serious about this. They have reduced the amount of time stocks can be extended and the quota for black rock. They try again to win over the msci. There are sticking points that remain inl controls place. I is an issue, as is the need for authorization from both the shanghai and shenzhen stock exchanges when it comes to etf that includes these ashares. That could be a sticking point. Morgan stanley says if the decision does go through in less than 20 hours time, you could see a market uptick about half a percent to 1 . It will not be hugely significant at this stage because it would not be implemented until june 2018. If the decision goes against china, you could see a market follow of 1 . Morgan stanley says initially, you might see passive inflows of 1 billion to 1. 5 billion. This is the first step in a long process of including these into the msci, something Bloomberg Intelligence says would eventually or could eventually lead to about 400 billion worth of investment or foreign interests in chinas ashares. A move forcould be now in the short term. How does this all play into chinas desire for a Greater International Role for the yen . Into therly, it ties focus that they want on trying to liberalize their Capital Markets and internationalize the renminbi. They want this to happen. They want this seal of approval that it would give them. They are not prepared to give everything up, and that is what we have seen in this authorization around the shenzhen and Shanghai Stock Exchange when it comes to the etfs and a share inclusion. They have included uandenominated ashares. This would help to move it forward in the yuan nationalization. They want to increase access and use of the yuan, so it is part of that play. They have a working group liaising with the msci to move things forward. With so many things in china, they are reluctant to give up all control on this. Clearly, if they get this approval from the msci, it will arese them, but there certain lines they do not want to cross at this stage. Yvonne it comes down to whether the msci has it knowledge that acknowledged that. Thank you. Still ahead, facing the mobile challenge. Facebooks coo Sheryl Sandberg on the social media giants push. Betty staying with tech, u. S. Tech stocks have rallied. We will talk about this momentum just ahead and what that means for the economy. Independent Market Strategist jim polson joining us. This is bloomberg. Betty this is daybreak asia. I am betty liu in hong kong. Yvonne and i am yvonne man. It is Technology Week and we are diving deep into tech today. Let us look at how the sector has performed since the start of the year and relative to other industries. Ramy inocencio at the terminal right now. To show you exactly how Important Information technology or Technology Stocks have been to the performance of the s p ever since year to date. On there all the sectors s p, starting with Information Technology. Ramy it is at the top here average rate, it is like this. I want to show you that it has actually made up the bulk of the performance for the s p 500. To 39 tually translates of the growth of the portfolio return of the s p 500, year to date. You can see how Important Technology is. Moving down to the secondplace financials is never to bring. 0. 77 on the means it has to that port. 08 for your return. Let us switch to another btv 9101. Erminal, g energy is the orange line. That is any negatives because of what has been happening with oil stocks. The yellow line is the s p financials. We have this trump bump after the inauguration for these first two lines. The Technology Sector is pretty much flat, only up by 1. 5 here. Things changed at the start of the year. You see this break out of the white line and the yellow line was basically flat, up by 5 . Switch in terms of Investor Sentiment as well as investor action. Betty, you were talking about how Information Technology was up. You just see this pop right here. The white line up by 1. 4 . Last week, we were talking about this growth to value rotation. We are now seeing this pop. Generally speaking, you can see this white line is pretty much going gangbusters over the past several months since the inauguration. Take is on the up and up. Guys. Tech is on the up and up. Yvonne thank you for that matter look at how the tech shares have performed by segment. Betty i want to bring in someone who wants to talk a little bit more about this tech what the declines have meant. I want to bring jim, you have an interesting take where you say do not worry about these tech shares and when they fall. That is a possible positive sign for the economy . Jim it sounds kind of weird. I admit that, betty. What i found is that there is a very close relationship with the relative performance of financial stocks relative to Technology Stocks to the economic momentum index of the United States, to the positive surprise index of the u. S. And when financial stocks outperform tech, it is often a precursor a couple months down the road to reexhilaration of economic momentum in the economy, so a lot of people in the last few weeks have looked at the pullback in tech stocks as a harbinger, the beginning of the bear market with the leadership of this market ending. I think what has been happening more likely is that while tech has fullback, financial stocks have taken off and their combination suggests the market a starting to sniff out reinstallation in the economy after a period slowdown in the last few months. A good example is prior to the auction, last summer, up until prior to the election, last summer, tech stocks were doing very well when people were fearing the economy was slowing down in financial stocks were not doing well. Once trump got elected and optimism took off, financial stocks soared and tech stocks pulled back through the end of last year, telling you that the economy with accelerating. Earlier this year, people wonder why the financial stocks were doing so poorly when the data was still bit. What the takeoff in tech earlier this year told you and financial stocks struggling was that the economy was want to slow down again. This being a bull market and her, it is suggesting a shift in relation able market ender, this is continuing to keep the market higher. Anchor are we reading too much into that . You have to think about the atmosphere we are in, right . The fed is on an aggressive rate hike path. At least, that is what janet yellen seems to suggest with rate hikes and pulling back on the Balance Sheet. That is going to be positive for the financials. Jim right. I mean, i think one of the things that will be helpful for financials is if rates to go up, and that is one of the reasons stocks have been doing better since the fed meeting. My view on the fed is that the doneas so overwhelmingly easy policy for so long that i think they are going to have to tighten for some time before it is very noticeable in you Financial Markets or the economy. To give you an example, the fed has lifted rates now three times or maybe four times, and you still have a negative real federal funds rate below the rate of inflation even though they have tightened three or four times. The amount of the m2 money supply is about 70 of gdp. That is 10 Percentage Points higher than almost any other time in postwar history. So they could restrict liquidity and raise rates for some time before it is even noticeable by the market or the economy. I think that is what the market is telling us. It is continuing to climb even though the fed started to i would say start to normalize. Very abnormal policy. Anchor if we are going to see any meaningful rotation out of growth to value, how much of your thesis is based on us seeing trumps agenda go through . With have about capture forms and infrastructure, both of which tax reforms in infrastructure, both of which seem to be in jeopardy. Jim i have never really thought that the market rally has been based that much on trump expectation. I think that the rally was based on a synchronized balance across the globe, and economic momentum. Most of the momentum is still in force around the globe. They continue to do better even though we slowed down here. I think that is the true undertow of this. If you put that together with continued Growth Without inflation or rate consequence, that is a pretty nirvana situation for stocks, that i think is the real driving force. What i would say about trump is that to the extent there was any expectation, i think there is very little left on wall street. I do not think anyone expects there to be major legislation the rest of this year what with rating, popularity special prosecutors, and investigations. I dont think anyone expect anything to be done. What i would suggest is that trump could turn out to be a positive force if surprisingly they actually do get something accomplished. Yes . Betty i want to get back to the Technology Stocks and bring up this bart chart we have that showed bar chart that shows the positive signal. Wall street analysts have been , in fact,g, massively outpacing out grades in tech shares over the first and second quarter. You can see that represented by lightow outpaced by that yellow bar, how many downgrades we are seeing. They are downgrading, which is not a great sign. They are seeing earnings deterioration. That is not a great sign for the economy. Jim i think tech stocks may well continue to perform for a periods time. I do not think they will collapse. I would be nibbling at them may be another month out if they continue to underperform again. Here is what i noticed. The market is at a new high. The leading sector, which the previous person just pointed out , has accounted for much of the performance this year, and it has pulled back in the market has gone on to new highs. Even without that leading sector, we are refreshing other sectors to take leadership. What if we bring energy back before the year is out . I think it is a Healthy Development that is more a rebalancing of this market b ull, which gives it more sense that it could be sustainable, rather than waiting for the sector to lose its appeal. It is very encouraging that the leading sector has pulled back and yet the market has gone on to new highs. Yvonne for all the doomsayers, which one of those arguments still sticks . Jim i think they all do. I think th