Transcripts For BLOOMBERG Bloomberg Markets Asia 20170612 :

business confidence is plunging. haidi: more disappointing news from the factory floor and japan , machine orders slumping, producer prices staying flat. rishaad: the long and short of it, hong kong stocks being targeted by skeptical researchers. of course all this political drama, the british election, james comey and his testimony to congress. having a look at gold. start toshed in and buy gold at times like this as a haven play. this is #502, a look at the last three weeks. have had three weeks of gold prices falling. never mind if you look at gold in sterling terms, but gold is priced in dollars. we could be heading for a negative fourth week -- third week for gold as well. haidi: that's right. you mentioned that excellent point about gold being a currency play. you look at this chart. it is showing that correlation of the prices metal priced in sterling gaining 2.2% after that calamitous result in the u.k. of election. that is very much isolated when it comes to bullion nominated in sterling. saw is interesting is we the fall out in terms of market volatility contained to sterling , sterling price assets, but within the u.s. session, that selloff of tech stocks, adding to speculation we will get a wave of volatility for what has been smooth sailing and record high after record high. 30 minutes away from the open in china and hong kong. singapore and taiwan coming online. so far, not a great start to the trading week. sophie: it looks like that tech route is having a knock on effect in asia, offsetting the rise in financials and energy playsers and commodity thanks to even's and base metals and oil, extending gains as saudi anticipates that global supply dropping somewhat. leading thehe kospi drop in asia, down must 1%. the won affirming its diversions from the yen, 110.23 of dollar. we did get data out of japan showing machine orders slumped in april, so we are seeing a reaction in some machinery makers in tokyo. several falling this morning. makes a aircraft jet engines and agricultural machinery with a small rise of 3%. the outperforming sunrise stocks are succumbing to that regional drag. heavyng in on the tech taiex in taipei, trading near a it isr high, but today dropping for a second straight day. stocks falling over 1.5%. may did turn out to be a tough month. rishaad: thank you for that. let's talk about a man who did not have a political party a and now he is president and the political party has done well in the elections. >> french president a manual macron seems headed for a landslide in the legislative election as voters rally around their leader. will take a third of the vault, which would result in winning 450 seats in the 577 seat national assembly. healthy majority to push through tax and labor market reforms. president trump has renewed his attack on james comey, tweeting that his league comments about their white house talks were "cowardly" and suggested they were even legal. will speak on capitol hill on tuesday about alleged russian meddling in the u.s. presidential election. says it is important in light of james comey's testimony. north korea says it has moved icbm withfiring an the potential to hit the u.s. mainland. recent tests have shown the military is not far away from such a weapon, despite president trump's pledge to stop that from happening. the u.s. said it had successfully intercepted and destroyed a mock icbm over the pacific in a drill. the political drama and the u.k. innt losses for li ka-shing hong kong as the slump in pound cut the value of u.k. earnings. hutcheson generated 36% of earnings from the u.k. last year. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: thanks for that. prime minister may's failure to win a majority in parliament in an election she called for sheelf three years before had to is casting a shadow of economy thatver an was already weak enough to keep the bank of england and monetary policy on hold. kathleen hays is here with more. sothis really going to be bad for the u.k. economy to the extent that the boe needs to take it into account because people have been living under this brexit cloud? go again perhaps. this is shaking the current the power structure, how quickly brexit can be negotiated and what kind of brexit will occur. it is a cliché, but true. investors say there is a pullback at times like this. the institute of directors in the u.k. did a survey over the weekend to find out what businesses are looking at and ,ight of this election result this unexpected result for theresa may, and stephen martin arector saying that firms worried about a possible postelection disaster. plunging aftersm the election. let me run through the key findings. percent are now pessimistic about that u.k. economic future after this vote. that is a lot more than the 43% who turned pessimistic after the eu referendum in june. isn't that interesting? concerned about the new governments impact on the economy, and bottom-line what they are most worried about is businesses are worried about the u.k. ability to get a new trade deal with the eu. what will it look like? this is what they are asking themselves. what is interesting is that this is occurring at a time when the u.k. economy was getting weaker. look at these bars that tell the story so well. you can see in the first 0.2%, and estimates of future economic growth taken shows be a result not rebounding very much. , thehis in perspective u.k. economy survive the referendum vote last summer. s&p seeing no immediate need for our ratings change. let's just be calm kind of perspective, but bloomberg intelligence harkening back to that survey about how worried businesses are, u.k. investment is more sensitive to uncertainty about the economy than it is to changes in consumer spending. this is showing what an impact it can have on the economy. the question is does it have any bearing on what the bank of england is thinking as it meets on thursday? >> inflation is accelerating, gdp is weak, so it was a in the and that the fed will move the boe will not. it will be the first time mark carney is speaking publicly since this boat. will he mention of election uncertainty, and what will he say? let's take a look in the bloomberg now to see how big that inflation acceleration is, #6974, the white line is the core inflation, the turquoise is headline coming the yellow line is the doe target of 2%. supposed to move even higher this week. mark carney said it will be moving towards 3%, so that is not a surprise, but when you see it looking like that, it makes a point. another report in the u.k. hs market.m i they are singapore back in consumer spending in may according to these are. visa. maybe they are getting squeezed like this other chart will show you, inflation's and wages, #9279. there is that turquoise line again. of some concern. that is the problem. if prices keep rising and there is so much uncertainty about what will happen with the u.k. economy next. rishaad: thank you very much indeed. opening one hotel every week across the asia-pacific, the regional chief executive joining us to explain why. on the falloutre from theresa may selection disaster. we are discussing the prospects for a new government. this is bloomberg. ♪ haidi: i am rishaad salamat in hong kong. haidi: i am haidi lun in sydney. toshiba has open strongly as the battle for its flash memory chip unit heats up. western digital is planning to raise its bid to $18 billion and would table the offer by thursday when toshiba said it will announce its preferred bidder. toshiba is desperate for cash to offset losses at its u.s. nuclear unit and wants a japanese fire to keep that technology at home. will sell argrande 14% stake in vanke, ending its role as shareholder 10 months after an overshooting -- ownership route. cash as is freeing up evergrande cuts debt and may smooth the way for a backdoor listing in mainland china. sources in the usa uber directors will meet to discuss removing a senior executive. he is close to travis kalanick but has been embroiled in some of the company's biggest controversies. a had improperly obtained woman's medical report calling by an uber aape driver and had raised questions about whether she was raped. rishaad: the british pound the tote changed in the risk in the political turmoil and the united , but our next guest does not see another election happening anytime soon. in london, the visiting us in hong kong to what is the thinking they are exactly? mrs. may thought she would strengthen her hand in terms of brexit negotiations, and the big miscalculation. getting at isi am you don't expect another election. how can she govern, even if the dup is not playing ball exactly? >> we can't have another election. i think she will have to survive. she will try to bring the dup into some sort of line in terms of what their negotiation stance should be, and hang on. will she make it through a parliamentary term? i doubt it. in terms of setting the agenda for brexit negotiations, i think not much has got option other than sticking with theresa may. rishaad: we talked and november 2007 last and you said banks would fall because of subprime, and that is what did happen. tell me about the read through then market wise. >> mark carney created something an event following the original referendum. in a central banker who tries to predict a recession, he runs the risk. in the immediate aftermath of that referendum, he cut rates, tried to boost the economy, and the economy was pretty resilient and we have not seen any slowing. we are getting some inflation talk for thethe last 2-3 months is at what point does the central bank need to tighten? that is off the cards, so we carney'sd mr. recession he talked about in june last year actually starts to gain some credibility here, but he has already fired his old so to speak. haidi: the shocker of the result has people looking at italy. does it pretend a diminishing of to move we have started away from with the results in france and the netherlands? is it still a real risk? look, it is an ongoing problem around the western world in terms of how politicians redistribute. coefficient where wealth is so unevenly trying to cutd entitlements to one group, pay out another, governments everywhere will wrestle with no easy there are solutions, and the electorate is telling you there are note easy solutions because they are no more polarized in terms of how you deal with that than tries tot are, so it muddle through and we see it everywhere. andpolitical establishment the number of countries has been affected. haidi: if you get this level of political dysfunction, the struggle to have a functioning government, what do you do if you are an investor looking at the u.k. or you have financial holdings or assets and the u.k.? >> you remain invested. policy response is that monetary policy will be easier everywhere, and as will fiscal policy. is difficult for any administration to put any sort wheneak on economic growth the political situations are as unstable as they are. my guess is that interest rates remain low, fiscal policy will continue to will see equities outperform bonds. i don't think earnings are threatened. i still see buoyancy ahead for earnings because the global economy looks pretty good to me. rishaad: sterling, what happens there? up inrrency has held spite of this political uncertainty on friday, and even today so far. you saw what happened in june last year. surprised that sterling has held up as well as it has. that it has not been the keenest trade in the world since the referendum. abouthas been pessimism u.k. stocks, the economy, and the pound, so it has retraced a bit off its lows. could it go back? that would be my way over the next week or so. what are you looking at in this part of the world? , we think the economy globally is pretty good and earnings are set to surprise globally and equities are not a bad place to be invested at the moment. thank you very much. right, coming up, the shorted stock which is bouncing back. we look at what to watch ahead of that china market open. this is bloomberg. ♪ haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. rishaad: i am rishaad salamat in hong kong as we go towards the open and a new trading week in hong kong, shanghai, and shenzhen. depressed,nt, premarket auction they're showing a decline of .4%, suggesting the futures contract we will be seeing. a are watching out for furniture retailer which on wednesday or thursday last week was essentially shorted by muddy waters. they were questioning the company's accounting practices, looking at their debt, and saying the company was in debt far more than the balance sheet was suggesting, and that befored in this 10% fall the stock was suspended the following day on thursday, then on friday, we saw a lift and paring some losses. there we go. the volatility we saw over those three trading days they are. cents andment, 20 sin another move to the upside. haidi: we are watching a couple of developers in hong kong and shanghai. tonsilsve ownership vanke when it comes to vanke -- tustle when it comes to vanke. evergrande exiting as a shareholder from vanke, one of china's biggest property developers. metroeaves the way for group to become the number one shareholder in vanke. year to date, you can see china vanke has rallied 20%, the hong kong listing there. for evergrande, you can expect to see a pop because that deal does free up cash flow as the company is working hard to cut its debt load and could smooth the way for that backdoor listing in china. stake in unlisted competitor makes things messier when it comes to regulatory approval, so that is upside when it comes to evergrande. trump lashing out at james comey again. we bring you the latest developments and this ongoing piece of political theater out of washington. this is bloomberg. ♪ so new touch screens... and biometrics. in 574 branches. all done by... yesterday. ♪ ♪ banks aren't just undergoing a face lift. they're undergoing a transformation. a data fueled, security driven shift in applications and customer experience. which is why comcast business delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. tthat's why at comcast,t to be connected 24/7. we're always working to make our services more reliable. with technology that can update itself. and advanced fiber network infrastructure. new, more reliable equipment for your home. and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most. 9:29 as we count your down to the start of the trading day. i am rishaad salamat coming to you from bloomberg's asia headquarters. haidi: i am haidi lun in sydney. we are watching tech stocks closely in the asian session. to that nosedived when it comes to the fangs stocks after hitting record high after hitting record high. , theu look at the topix sectors leading weakness looking strikingly similar. ech on the back of that comment from goldman sachs saying investors have and ignoring regulation and cyclicality when it comes to tech stocks. rishaad: a huge week for central banks. fed, boe, boj, swiss national bank, and political uncertainty in britain with the fallout of that election. here is sophie. sophie: that tech route on friday is looking hard to shake and asia, tech us leading the drag across the region, falling the nikkei 225 down, the kospi and taiex on the back foot this morning. chinese shares falling that decline, the shanghai composite down .5%, snapping a four-day advance. and h-shares falling, tencent losing 58 points in hong kong. some movers on the hang seng and the rest of the hong kong benchmark, china evergrande and vanke shares. evergrande falling after it agreed to sell a 14% stake in vanke to shenzhen metro, earning evergrande $4.3 billion. glencore moves to top the bid for coal assets. it says it has the right to match or beat glencore's offer. short seller targets in hong , a share buyback at aac tech dropping after a three day rise. valuations on the msci china index have been pushed average higher. -- pushed ever higher. h-share index has widened. it is primarily weighted towards , without a single text stock, but that could be up for a revamp. thank you so much for that. sophie kamaruddin there. let's get first word news headlines with steve engle's. >> the latest readings of japan is disappointing, core machine orders fell 3.1%. economists had expected .5 percent gain, orders were up 2.7%, short of expectations of at 7.3% rise. producer prices were unchanged. corrode it is seen as increasingly likely to win a second term ahead of a policy meeting this week. of a,ey finds a third saying he is the only possible contender after his term runs out in april. expectt majority don't any change in policy and tell after governor corrode his current term ins. germany is warning that the saudi-led isolation of qatar could lead to war. the foreign minister the situation could rapidly deteriorate, although there is a chance for resolution. turkey is pushing ahead with the military base in qatar, saying it is for the security of the hole golf. ankara says the impasse must be resolved by the end of ramadan. the half-brother of kim jong-un was carrying 120,000 dollars when he was killed in february at kuala lumpur airport. the report said he had met an american suspected of links to u.s. intelligence agencies four days before he died. malaysian authorities think cam may have been paid for information, and there is no record of any bank withdrawal around the time. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. rishaad: we've had the open in .ong kong stocks have been attracting attention from short-sellers recently. calls sent their stocks plunging but the situation has turned around. it is quite something, isn't it? we saw those gyrations, but it seems perhaps they are not getting it all their own way anymore. go after companies who are are not covered by analysts, you are fine. when you go after companies like , and there are lots of bullish analysts on the stoxx, that is a harder proposition to win. muddy waters and gotham city researcher finding out, which after -- went after aac. rishaad: they have been looking at hong kong and will continue to look at hong kong, but those bullish analysts are perhaps also being recognized that they are not themselves unable to also look at the balance sheet and come up with a completely reverse idea. is the dilemma. analysts can say from the figures they have, there are cases when short-sellers have not been completely correct. the regulator went after them. citron research has been banned for five years, the head of citron research has been banned for five years from hong kong for going after evergrande. it can be difficult and there are issues. if your case is watertight and you don't go after bullish analysts, stocks will be fine. rishaad: it is a combination of whether the brokerages are with you on that call. haidi: also, is it how the company handles the short call? >> many of them tonight there problems and say the short-sellers were using misguided research. they have gone after them, but all these companies have denied the short seller claims. the issue is when others back it up. a chinese bank is going to amend money to the short sold companies so that they can protect themselves. that is what is happening now. thei: as you can see, after initial bruising, aac seeing a rebound at the start of this week. thank you for that. renewed hisump has attack on the fired fbi director james comey calling him cowardly in reaction to james comey's admission that he leaked his own memos. this is what the president tweeted. comeyieve the james -- we have been looking at the administration's strategy and another look at the goings-on in washington, d.c. we are looking ahead to tuesday when jeff sessions heads to capitol hill and speaks to the senate intelligence committee, the same committee that james comey spoke to on thursday. we will be looking at a couple of questions that will be front and center. was theple, what situation around the handling of james comey's firing? or at lack of confidence link to the russian collusion pro? we will be looking at by meddling in the election by russia, as well as a possible resignation by jeff sessions himself. there has been talk in the past that sessions had already offered his resignation, but of course still serves of the pleasure of the president and is still in that job. beare not sure if it will public are not as it was with mr. comey, but people on capitol hill are hoping it will be, so we could be back to where we were with a couple of hours of jeff sessions answering these questions from senators. that is one thing we are looking ahead to. thursday, also related to russia, but in regards to sanctions bank to a bill on sanctions not regarding russia first and foremost. rider is this senators will be trying to attach to the bill. this is a bill for intercontinental ballistic missile tests the country has been conducting, as well as its support of terror, but there is some issue whether donald trump will sign it or veto it. one senior republican has said mr. trump, you do have to do this. senator lindsey graham of south carolina saying if the president does not sign this bill to beish russia, he would betraying democracy, very strong words coming from a member of his own party, but speaks to the issue and concern of what is happening around russia and russia's links. we are looking ahead to that on tuesday through wednesday and thursday. just shifting to the economy, steel on the agenda. wilbur ross is preparing to announce protectionist measures. >> that's right. we could hear on that as early as wednesday when wilbur ross will be talking about the findings from an investigation on whether foreign countries are dumping steel at an artificially low cost in the united states. the question is whether it is an issue of national security, whether this cheap steel is hurting u.s. steel manufacturers. if so, it could include a recommendation of higher tariffs , quotas, or some mix. itald trump last week said would look at particular products as well as particular countries. that was a failed to swipe, because anybody watching steel knows it all has to go back to china. is china'swhite line production of steel. that outpaces the blue line, which is the rest of the world. in the yellow, that is u.s. production. ofs is all normalized as 2007. after we heard the first news from donald trump saying he might pull out protectionist measures, we did see a pop in u.s. steelmakers, ak steel, u.s. steel. ak steel jumped by as much as 7%. you can see that in the middle of your screen. the same for u.s. steel, both jumping, still higher on this three-day performance chart. wednesday is when wilbur ross will releases findings and potentially any protective measures. rishaad: coming up, we look at accor's ambitions. ♪ haidi: this is "bloomberg markets: asia." william haidi lun in sydney. rishaad: i am rishaad salamat in hong kong. airways has posted a rise in profit has it has expanded its fleet to carry more long-haul travelers through doha . $539 million, while revenue climbed to $10.5 billion. some 32 million passengers, a rise of 20%. expectsietnam airlines after-tax profit to top $59 million. $138arrier plans to invest million in new projects this year and will issue shares to raise capital in the fourth quarter. the number ofise passengers this year by 10% to 22.6 million. airlines isn's confident a $3 billion deal to buy planes from boeing will go through despite washington considering new sanctions against iran. jetsll take 37 737 max initially. its largest owner is iran's national pension fund. the deal was announced in april. staying with tourism and travel, europe's biggest hotel operator accor operates more than 4000 hotels and resorts across 95 countries, now aiming to ask and in the asia-pacific. joining us now is as regional chairman and ceo. great to have you. talk me through these expansion plans. a couple of years ago, i spoke to your global president, very much a focus on china. is that where you still see opportunities? >> china is the biggest hotel story of this century and continues to be. have 200 hotels with more than 30,000 hotel rooms. fastest-growing part of our network, not just asia-pacific, but the world. of the issue of , rightlow room rates across emerging asia, do you see that improving anytime soon? >> look, it will not improve in the short-term. prices respond to the market. growth inremendous the market and that keeps prices suppressed. hotels are profitable and china at those prices. haidi: what do you see as being the biggest challenges across these emerging markets, government regulation, being ofe to capture the zeitgeist the traveler quickly developing and changing? >> to be honest, i would say the easiest part is capturing the traveler. are traveling in huge numbers, inquisitive, want to travel. biggest challenge is attracting great talent to the industry, training that talent, retaining that talent, developing careers and making sure they are delivering a great guest experience. that is our number one challenge. hardware,ou have the so why do you have difficulty in recruiting people? with the growth we are achieving, we have over 90,000 employees in asia-pacific. we will need to add 10,000 for our new hotel. we will need to add 30,000 throughout the region. mass recruitment. you want to attract the right talent, then give them the right skills, and then retain them so you can reduce turnover and deliver the experience. we are giving them the skills they need to delight our guests. let's just take china, you have brands from either , so whichfitel segments of the market are doing better for you and china in particular? china wascally, started as a luxury market, then in the last five-seven years, economy was the fastest-growing part, and now it would be midscale, the domestic traveler acquiring more wealth and wanting more, moving up the ladder so to speak. so those are the ones growing the fastest, and in this shorter term have the biggest potential, but in a market like china that changes so quickly, you need to respond to what is in front of you today and plan for the longer term. all segments of the market will continue to grow at quite a rapid case. rishaad: i will stick with china for a second. china and other countries have their own peculiar heritage. ities.uliar what would you do there that you would not do in your home country of france? it varies. the economy sector, which has grown rapidly, the hardware remains fairly similar. it is the software you need to change. the software revolves around the food offering. you are catering to chinese domestic travelers, so they want to eat what they want. the training of the staff has to be in relation to the needs of the staff. the technology in china is all bespoke. everything in china, the technology has to be responding to the needs of the local traveler, and that is very different to what it is in the rest of the world, so that is where we probably have to a single biggest investment. haidi: accor close this deal to raffles.brands like how has that addition to the portfolio been working out for you guys in asian? >> look, it has been fantastic to have brands like raffles as part of our stable of brands. it is an honor. singapore, the raffles hotel is an iconic hotel. undergoing a $200 million restoration right now. brands making sure that is positioned at the absolute top of the luxury market. the fairmont brand is another well-known and iconic brand. now we are getting a lot of inquiries about growing the brand and developing new properties throughout asia, particularly southeast asia, but expect that to ramp up in china in the new future as well. haidi: thank you so much for that. raffles, the legendary singapore sling there, huge part of that hotels revenue. coming up, defending president trump, the u.s. energy secretary's message. our exclusive interview is next. this is bloomberg. ♪ rishaad: i am rishaad salamat in hong kong. haidi: i am haidi lun in sydney. lloyd blankfein, jamie dimon, and many others in the business have heavily criticized president trump's move to withdraw from the paris climate accord. u.s. energy secretary rick perry says they are wrong and are acting for political reasons. he spoke exclusively to tom mackenzie about the paris decision and cooperation between the u.s. and china. >> it is not just an interview story. it is an economic development story, energy being at the heart of it. american lng into china has an extraordinary opportunity for both sides. changede revolution has the entire landscape of energy. lng will play a very important role. closer to get any china signing a long-term contract for u.s. energy? able tonk what we were do was share with the vice that our ability to deliver lng was very substantial. our desire to be a participant in this market is very strong, so the will is there, and i think both governments will come together working with the and find some great opportunities for american energy coming into china. changehe paris climate accord, you were right to want to stay in because it has reduced america's role and we are seeing china and europe step into that void now. it is interesting that those of you who were of the come over, you must stay in position, don't have a little bit of reality to your view, which is i could argue it round or square. at theld stay in, but inn of the day, the administration made the decision , and i agree with it. when you look at the cost versus the benefit of being in the paris agreement, it was not worth it. lloyd blankfein, jamie dimon, gm, ford, they are all wrong on this issue? >> they are wrong. they are coming at it from the political side rather than the reality side. we will continue to be leaders in clean energy. that is going to happen. focus oncoming up, we the follow-up from the british election and look at the prospects for the pound. ♪ >> almost 10:00 a.m. in hong kong and singapore. than a clackum evening in new york city -- 10:00 in the evening in your c-suite on said in a evening. rishaad: markets dropping back as friday's technology selloff spreads to asia. the traders says britain's political drama. embracesa may conservative rivals. business confidence is already plunging. rishaad: victims of the election fallout. the weaker pound is cutting the u.k. earnings. >> machine orders slumping in japan. it is a big week ahead for central-bank action, of course. and wellwell flagged expected to go for that rate hike. we are listening for more details on how that unwinds, how that $4.5 trillion balance sheet will proceed. governor kuroda is expected to keep things unchanged, but under pressure to provide some details about how the exit this unprecedented negative rate policy. there is one great story out on the bloomberg. and it features this chart here. it really compares, you have the ecb, the fed, the boj. massive stimulus, unwinding bad from these blows in the balance sheets. -- from these bloated balance sheets. the pboc in green, has been remaining stable. it is a $5 trillion anchor. the fundamental difference is it is a different base from its global peers. the pboc uses global surpluses, rather than by sucking up otherment bonds, which central banks have done through quantitative and qualitative easing. saystially, the chart china is more than a couple years away from balance sheet contraction, and till then, you will see broader growth when it comes to money supply. rishaad: let's get to the japanese story at the moment. we have been talking about th facebook, netflix, and google in the u.s. the nasdaq wet in a southerly direction. it has been hitting record highs. if you look at japan, it is interesting. i will just go into this chart. stocks, softbank, nintendo, recruit holdings, the biggest employment services holding group in japan, they have been outperforming on the 65%., on average, rising just an interesting note there as far as their share price performance goes. japan is underway with a lot to digest. haidi: we have these sunrise stocks in tokyo outperforming. they are also among the stocks on a decline there, following that route we saw on wall street. investors are receiving warnings of risk that comes with low volatility in the so-called bank stocks. 1.3%.res in asia are down tencent alone, that is knocking off 50 points from the hang seng. the tech giant made off with 1/4 of the 50% rally. as you can see from this chart, the hang seng, the line in white, has been highly correlated to the fortunes of tencent, the line in blue. security strategist points out, investors have to be cautious in the tech space after the saudi security. and samsung, the is leading the slide. cospi, just off session lows, but it is set to snap a t wo day rise. again, today, we are seeing weakness there. and machine orders out of japan indicated a slump in april. tech stocks, down about 0.5% on the nikkei 225. in shanghai are under pressure as well, the benchmark csi 300, has been .3%.aining gaings, up otherwise, tech stocks are also on the back foot in china. haidi? haidi: thank you for that. let's get over to the first word news. it is not just political sentiment that is being battered, but business confidence in the u.k. reporter: absolutely. business optimism in the u.k. has plunged since the election last week. the institute of directors says a week and survey showing 57% of business leaders are pessimistic about the economy over the next year. former justice secretary also left the cabinet. he and boris johnson led campaign to take the u.k. out of europe. >> i brought in talents from across the party. this is a government that is going to be governing for everyone. i'm pleased that people from across the party have agreed to serve in my cabinet and we are going to get o on with the job of government. reporter: french president macron seems headed for a landslide in the legislative election as voters appear to rally around the new leader. a poll says his party will take 1/3 of the vote, which could result in him winning 450 seats. macron needs a healthy majority to push through tax and labor market reforms. stateside, president trump has renewed his attack on former fbi director james comey, tweeting his leaked comments about their white house talks were "cowardly." he also suggested they were illegal. attorney general jeff sessions will speak on capitol hill on tuesday about allegedly russian meddling in the election. asia, north korea says it has moved closer to firing an intercontinental ballistic missile with the potential of hitting the united states mainland. testsgencies say recent have shown the military is not far away from such a weapon, despite president tr ump's pledge to prevent that. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. rishaad: we are looking at the pound, pairing first election losses. traders say the economy will survive. a new survey out, that steve was just talking about, that says business confidence has evaporated as theresa may clings to power in the hope of staying in downing street. mark cudmore is here. is further volatility on the way? reporter: i think absolutely there will be more volatility this week. the market will remain sensitive to headlines and we will get more of these headlines of the former government. the final agreement to have a majority coalition. that is the biggest factor. there is negative sentiment about the fact it seems theresa may is weakened. and she has had to welcome back former rivals from the other side of the party. i think sterling will remain a little bit vulnerable, but that does not mean there needs to be sudden moves. it is in portage remember the long-term macro fundamentals -- it is important to remember the long-term macro fundamentals for sterling are fundamental. the election provides the excuse to sell, the catalyst to sell on the long-term stories that were in place already. rishaad: how are shorts positioned, and how far in your view is this soft brexit being priced in? reporter: on the shorts, there is still quite a bit there, but it is smaller than it was only a month or towo ago. a lot of the shorts have been e isced and ther potential to start rebuilding the shorts. we have squeezed down the weaker position so we can build with stronger hands. it is not too that on the position in, by little short at the moment. haidi: mark, we have been talking about this everything rally, where unusually you see everything from equities to bonds rallying. is there a sense that there are a few things that could make this come undone this week, given we have the fed moving and this selloff on friday? tech falli think the is the biggest worry for markets, and certainly they are watching that nervously. it is important to remember we have had months of this scenario where everything is rallying and that is because we have access capital chasing two qualities, economic growth and inflation. this is no reason to sell bonds. overall, there is excess capital that needs to be put to work. in all that time, the market is always nervous. the market looks stretched, but there is no reason to sell off. at the moment, the tech stocks doing poorly on friday are what we will continue to watch. if they bounced backward, keep on buying everything. haidi: the argument is that this is a liquidity story, which many analysts have said that it is. has that mentality changed, given the data we get from the fed, and potentially what we get uroda regarding how the exit negative rates? >> it is definitely a liquidity story. it will be important what they decide to do with their balance sheets. we have been given a little bit of guidance already what the fed might do. debt will not start yet, and it will be very gradual. i expect it might be more gradual than they intend. it will be hard for them to unwind their budget aggressively, given that is what has been driving asset prices. as we get more and more guidance, it will impact the market, but i think it will be a slow process of unwinding balance sheets and it is important to remember that while the fed is no longer building their balance sheet, the boj continues to expand aggressively. overall, there is more liquidity being pumped into the system every month. even if the fed unwind, that might stabilize things, not shrink global liquidity. haidi: mark, thank you for that. you can track his thoughtso o n the mlive blog. you can get a market rundown in one click. there is ongoing commentary and live analysis from bloomberg. you can find out what is affecting your investments right now. we are searching for real yield in asian markets. that is up in 30 minutes time. rishaad: also, constitutional crisis in the making. voters are suffering ballot box would take. fatigue.ballot box this is bloomberg. ♪ rishaad: you are back with "bloomberg markets." haidi: a quick check of the business flash headlines. a strong open in the tokyo session. the battle for the memory chip heats up. they will table the new offer by thursday. that is when toshiba says it will announce is preferred bidder. toshiba is desperate for cash amidst the enormous losses of the nuclear unit in the u.s. and wants a japanese buyer to keep the technology at home. rishaad: the chinese developer will sell a 40% stake, ending its time as a shareholder 10 months after wading into a a bidder leadership row. the deal frees up cash as couldande cuts debt and free the way for a mainland listing in china. haidi: uber directors are to me to discuss moving the senior seconds. they have been embroiled in some of the company's against controversies. womanmichael knew that a who had allegedly been raped that she expressed skepticism. isdi: theresa may essentially finished, despite her attempts to cling to power. a lot of people have said that. was a osborne said hshe dead woman walking. >> i think that is true. if we look at what is important for politicians it is perception, reputation, and leadership. the perception out is she is a weak candidate. the tories have been tainted by what looks to be incompetence of the campaign, the botching of the manifesto, and the inability to explain to the british electorate what they want to do with mandates and what they want to do with brexit. and lastly, this does not translate into leadership abilities. in brussels, when you look at the teams from the european commission and the council from the european union, they might think she will topple any time, so what kind of authority will she bring to the table? rishaad: what does it mean then for another election? will there be another poll? on top of that, isn't there going to be electoral fatigue? >> yes, and that is an important phenomenon. the next parliamentary election is not scheduled until 2022. i don't think this will happen. i think we will see another in a year or two, or even sooner. because to solve this problem, i fresh mandate will have to be taken from the people. you mentioned the electoral fatigue phenomenon and this is important because britain has traditionally had very stable electoral cycles and now we have moved off that. we have the scottish referendum, the european referendum, the brexit referendum. this year we had a new general election. this tears at the political fabric of political parties in general in britain. we have been trying to work out exactly what happened. i'm sure theresa may and her colleagues are as well, but isn't this the fact that she made this about brexit -- when the voters turned out, they were looking at domestic issues, not brexit. it was brexit fatigue, wasn't it? >> yes, much of the british electorate thinks that brexit is a deal from 2016 and they want to move on. we saw a focus on domestic issues. ncern aboutcne deteriorating public services, particularly about education and the nhs. we had a shift away from brexit. there was not a lot of detail being offered, both by the conservatives in the labour party by how they wanted to put brexit into practice and i think this is a major mistake, a missed opportunity to spell out to the british public and per prepare them for what is ahead. haidi: it is inevitable that we start looking more closely with italy with their potential election coming sooner than expected. what what happened when you have an anti-eu government in london, and potentially an anti-eu government in rome as well? we have had an on slot of populism. is there a sense that this is not over? >> no, i think they would be more cautious on this. they still have to see have the elections in italy play out. it is too early to call. over time and again, the european electorate have shown that they have confounded the expectations of pundits and researchers, suggesting one scenario would be more likely than another, and suddenly the opposite comes true. in italy, it is too early to tell. in any case, the british government will be very much confronting a lot of difficulties and dealing with the new french government, that has a lot of new vigor. rishaad: that is what i want to talk about because emmanuel macron did not even have a political party one year ago. he set that up and had a landslide victory. >> is ticket was very much a pro-european ticket. andow compromises of may the election. rishaad: we were talking about this earlier, a soft brexit. what is a soft brexit, anyway? >> they could be something more akin to the european or swiss model, where britain would remain in the customs union. it would have to agree to the freedom of movement and the jurisdiction by the european court of justice, and it might have to contribute to the european budget. at the moment, it is unlikely because we don't see any politicians arguing courageously britainthis is what writte should do. without that, we are heading for a hard brexit. rishaad: thank you. coming up, one of the losers from the u.k. election is this man. changing fortunes, next. this is next. ♪ haidi: this is "bloomberg markets: asia." 10:00d: 23 minutes past in hong kong. the political drama in the u.k. meant losses for one of asia's richest men, li ka-shing. more on the china markets. li has a lot invested in the u.k. the loss is predominantly from the machinations of the foreign-exchange. >> exactly, just as we saw u.k. stocks rising in the wake of the hung parliament vote, because of the benefit to the weaker pound, the flip side is true for li ka-shing. you have to feel sorry for him in a way. he tried to divest away from hong kong. there was a fairly desperate political situation here and he put his eggs into the basket of the u.k. time, it was the wake of brexit. rishaad: the point is, oit is 36% of total earnings. >> he is one of the u.k.'s biggest investors and the interests range from drugstores to telecommunications. since brexit-- you about a 20% drop in the value of the pound. li ka-shing does not tend to comment on political matters. he did make his displeasure known about the brexit vote. it is hard to imagine he is going to be pleased with what was a poor performance by the conservative party on friday. my only could it mean to more weakness in terms of the pound, but greater uncertainty within the business environment. what does he do? potentially pick up more australian assets? >> it is probably not a great time to be selling u.k. assets, given the value of the pound. we have seen him retrenching na, as well as hong kong. he does have assets invested around the world. there is potential in australia, where he could look to find some value. tough times for li ka-shing. richard, thank you from hong kong with some of the fallout from that u.k. vote. coming up, no signs of shrinkage when it comes to the pboc's asset pile. other central banks are looking to unwind from their massive $1 trillion balance sheet. bucking the trend when it comes to central banks unwinding. this is bloomberg. ♪ ♪ it is 10:29 in hong kong. the latest readings of factories in japan disappointing, core machine orders fell. up 2.7% from a year earlier, well short of expectations of a 7.3% rise. producer prices were unchanged. boj governor kuroda is seen as increasingly likely to win a second term. a bloomberg survey finds a third of economists saying he is the only possible contender. none said they see a change in policy this week, and the vast majority don't expect any change until after the current term ends. to bank of korea on track turn around years of rate cuts by normalizing policy. and the governor said the central bank should review its policy if the recovery continues , although will remain accommodative for now. growth is expected to exceed 2.6%. saudi-ledrning the isolation of qatar could lead to war. the foreign minister saying the situation could rapidly deteriorate. turkey is pushing ahead with a military base in qatar, saying it is for the security of the ulf.e g russia says it is ready to work with the u.s. to resolve the qatar crisis. the russian foreign minister speaking to secretary of state tillerson saying negotiations are the only way ford and differences are emerging within the trump administration. rex tillerson caught on saudi arabia to step back. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: those fangs stocks were the main story on friday. that is also carrying through to the asian session. tech shares the thorn in the side of asian markets. we also have caution ahead of the policy decision feeding in today's trading action. a rise in oil prices are extending gains as saudi sees the global supply drop accelerating. copper futures adding 1% jeffries says the copper price might be a better predictor of equity returns than other economic variables. imports have risen 29% this year. you contract the build up using the index function on your terminal here. we see that rise in iron ore holdings looking unstoppable for now. that,d: thank you for right, now, indeed, as the ecb to fed asset files are set shrink, seemingly a different story in china. around $5t remaining trillion to the end of the year. our managing editor for greater china is here with more. this balance sheet managed to blow up and become so big? i don't know if that is the wrong word to use, expansive. qqe and theyd boj, who up these assets. up these-- hoovered assets. surplusesbig trade and foreign direct investment inflows, so to offset that, the central bank in china had to buy and put them on the balance sheet and try to sterilize some of that. that led to a first-quarter worry that perhaps it was going the other way and we would see the shrinking, this taper. said that would not be the case and we would see ofs continued study state around $5 trillion. haidi: the steady balance seems to be the base case scenario. given the sensitivity beijing has this year to liquidity and capital outflows, is there a possibility we see pace money expand? >> there is that possibility. growth target in q2 is 12%. so far, undershooting that even with the rapid credit growth. where the balance sheet comes .nto question it is in the form of foreign reserves, foreign assets, so the yuan has been studying and we have not seen a need to although it is still widely in the market to try to keep that stability in place. if we see the fed raise interest what economists are anticipating, continued pressure on the dollar, that is when the pboc may become interesting again and whether it has to put its balance sheet to work. for now, it looks steady as she goes. rishaad: is it all down to the pboc? haidi: talk to me about the mult money multiplier and what that implies. >> it is hot at the moment. every extra money is trading five times more than the yuan, a good sign for the economy. means the stimulus effort by the authorities do seem to be working. the big? is what are those five yuan created from one, what is that going towards? financial assets they could lose by you and be a debt, or is it real growth? if you look at the nominal growth in the first quarter, it was strong, so it seems the stimulus going into the economy feeding through to the real plays outut how that could be years before we know the results of that. does thed what unwinding the clackum of course of course. thank you so much for that. loss,n sachs, the big lloyd blankfein, jamie dimon, another prominent business have criticized president trump's decision to withdraw from the paris climate accord. but energy secretary says they were wrong and were acting for political reasons. spoke exclusively with tom mackenzie from beijing. apparently they are all wrong. it is a pretty big rebuke to some of america's top executives. that's right. rick perry not pulling punches. lloyd blankfein signed up specifically to twitter to send his first tweet to criticize going out of the paris accord. rick perry said he and other senior executives were wrong to criticize to the decision, saying they were looking at it from a political stance, rather than a pragmatic and practical stance. rick perry himself said he was in favor if it could be renegotiated. that looks incredibly unlikely at this stage. he was in china for a summit of energy ministers on clean energy. he was here to push for cooperation on nuclear, lng, gas, carbon capture technologies , and i started by asking him what he could go away with,, way with from his visit in china. >> it is not just an interview story. it is an economic development story, energy being at the heart of it. american lng to china is an external opportunity for both sides. the shale revolution has changed the entire landscape of energy. lng will play a very, very important role. >> did you get any closer to china signing long-term contracts for u.s. lng? >> what we were able to do is share with the vice premier that our ability to deliver lng was very substantial. our desire to be a participant in this market is very strong, so the will is there and i think both governments will come together working with the private sector and find some great opportunities for american energy coming into china. >> on the paris climate change accord, you were right to want to stay in, weren't you? it has reduced america's role and we are seeing china and europe step into that void now. >> i find that interesting that those a few of the oh, you must to stay in position don't have a bit of reality to your view, which is i could argue it round or square. you could stay in, but at the end of the day, the administration made the decision, and i agree with that. when you look at the cost versus the benefit, it was not worth it. blankfein,mon, lloyd gm, ford, they are all wrong on this issue? wrong herethey are it they are coming at it from the political side rather than from the realities side. the reality site is we will continue to be leaders in clean energy. that will happen. rishaad: of course one of the ingest problems we have geopolitics currently is the standoff in the gulf. what did he have to say about that and other issues that dominate the agenda? clearly any further deterioration in the middle east would impact the u.s. potentially and energy secretary >> perry having some views on this. we ask how concerned he was at the standoff, something the foreign minister of germany said could lead to war. rick perry saying the focus should be on radical islam and terrorism and all steps should be taken to combat that, .ncluding the blockade in qatar he says this has to happen, the focus has to be on tackling radical islamic terrorism. i've also been talking about the gripping testimony from james comey, and he says he expects the president to be exonerated and that president trump not do anything wrong and was right to fire the former fbi director. i asked him about the u.s.-u.k. relationship following the elections in the u.k. and the theresan position for may, who invested quite heavily in trying to build that relationship controversially in the u.k.. expects relations to improve whoever is in power in the u.k. and they will shoulder burdens together. he is optimistic that relationship will continue. the u.k. looking for a free trade agreement with the u.s., although some way off at this stage. rishaad: thank you. up, what schroeder investments says bond traders should be placing their bets as yields a dip. this is bloomberg. ♪ haidi: the weighted average and year estimate for 10 years fell down 20 basis points. long-term yields have remained low. segment, aal yield big week clearly for central banks. if you look at what the fed is , perhapsll telegraphed looking for details of the great unwind at the balance sheet. bond investors have been doubting janet yellen so far. generally the story has been the u.s. economy has been growing at a slower pace than expected in the first quarter. the if it takes up in second quarter, inflation has been weak and are expecting some inflation data, but they don't seem to pressure the fed to accelerate that pays for maintain the base they announced earlier on, so that is why bond investors are a bit doubtful, but you have this difference in yields, relatively high to german and european yields and competitive to japanese yields. that is also supporting the long end of the u.s. treasury market. one of the reasons we have this synchronize rally across asset classes that should not be rallying at the same time is fundamentally a liquidity story. liquidity is ample, even though central banks, the fed, and the ecb are signaling somewhat that they will change their policy and inject less liquidity. there is still plenty and the keeping its active bond buying operations in targeting the 10 year yield continuing. generally the story is inflation is low and volatility of a lot soassets is low as well, there's no real pressure for investors to reduce their positions, especially going into the northern hemisphere summer. rishaad: the question is, where is the juice then? >> the juice is in the high-yielding on markets of countries. .n asia, indonesia, india they have done very well year to indonesia in march, india more recently, but generally will be favored if we have this goldilocks environment where the economy is not too hot, not too cold, so central banks can remain very gradual and investors with all that liquidity have to find places to invest, so they are looking at higher-yielding countries and securities. rishaad: absolutely. i'm going to bring up a chart talking about these bloated balance sheets of the central banks, something just alluded to. what impact does that have on the bond market overhaul? -- overall? >> the central banks have increased their bond buying operations. the curve is relatively flat. we are seeing an increase in the ecb and boj, so continuing to buy bonds. thehink that will support rest of the fixed income markets in general because the money that central banks spend buying their own government bonds has to be reinvested by investors, some goes to credit, other countries, but everything looks for a replacement asset as the central banks by there and bonds, so the question is really when do we see an inflection and those charts you showed? when does the fed balance sheet start to fall? we think there is a chance in september or december to see that balance sheet start to come off, but it will be as the fed has told us repeatedly extremely gradual and will have a minimal impact on the yield curve at the beginning of this policy. rishaad: that is the question i was driving at. in that case, what does it do to yields against the case which will be fundamental, isn't it? it will also test whether there is any i guess credit seizure in the market. i think there will be no credit seizure in the market if it will be well telegraphed, gradual, and you have the fed moving slowly to reduce its balance sheet, but the ecb will only reduce the pace of the increase and the boj had no indication they're going to change policy anytime soon. what the central banks are seeing is that even though their growth is better than before, especially the unemployment rate so much lower him a they are not seeing any inflation, so wages are not increasing and inflation is going nowhere, so they are under no pressure to change that policy. haidi: thank you so much for that. this coming has deutsche bank saying that bond traders have really diverted from reality. ♪ haidi: coming up, as the fed prepares to raise interest rates once again, and expect more down pressure when it comes to the yuan. our exclusive interview is next. this is bloomberg. ♪ haidi: this is "bloomberg markets: asia." i am haidi lun in sydney. rishaad: i am rishaad salamat in hong kong as we look at the business flash headlines with a rise in full-year profit for qatar airways. 540 millionf 22%, dollars, revenues up 10%, $10.5 billion there. adding some 10 destinations in that time frame, arising passengers at 20%. haidi: vietnam airlines expects tax profit of $59 million. invest $130plans to million in new projects this year has it issue share to raise capital in the fourth quarter. the company says it hopes to raise the number of passengers this year 10%. iran's -- airlines is confident that its deal to buy planes from boeing will go through despite washington considering new sanctions. take 30 737 max planes initially. itss a private company and largest owner is iran's national pension fund. this deal was announced in april. haidi: the fed expected to hike this week, one of the most well telegraphed moves in recent by beijingowed planning its own tightening response. >> i think the impact on china is obvious. first, china's exchange rate could face somewhat downward pressure given that the rates in the u.s. will be higher, and secondly, this could encourage further capital outflows to seek higher returns outside of china, so i think china in response to the u.s. fed tightening or normalization of policy needs to by withdrawing monetary stimulus from the economy. >> this seems to have been the thenrn, watch the fed, but see how long it takes for the pboc to take its steps. the beginning of this year has already taken some lifting the short-term coney market rate, also the cbr has also stepped up regulatory oversight on the banks on arrowing, so that served as regulatory tightening, if you like, of the overall credit policy and china. >> is that having the desired effect? >> that's a good question. that inred affect his the past few months, the chinese h-share market is not doing very well compared to the u.s. or compared to hong kong, the a-share market his weak. that is a side effect of monetary policy tightening. ♪ a difference a couple of hours make. this is the scene in victoria harbor at the moment. cyclone, acting a tropical storm may within 100 kilometers around midnight tonight. ♪ >> it is so must 11:00 in hong kong. >> we are in the middle of the first trading session of the week. welcome to "bloomberg markets: asia," ♪ >> traders assess the fallout, paring earlier losses. david: theresa may clings to institute of directors says u.k. business confidence is plunging. news fromsappointing the factory floor. machine orders slumped, producer prices flat. david: i'm calling this account dracula trade, fang against sunrise. , have a on that note look at my bloomberg. when you look at markets, most sectors are on the way up. what is pulling things down are these tech plays. this is basically the grr function. just to break things down, let me shift to this quickly. the left column, .0% down just to put this into context, this group of stocks head above shoulders in terms of performance. news, for sterling key levels. right, it is rare we see this. the key moving average and retracement level, so just to highlight, have a look at this. right here.ne we are still above that 127 level in sterling. watching that space closely because theresa may barringr entire party their fangs and refusing to step down. onreally saw that gold rally the pound weakness. 9242, this is what we saw. it was limited to the u.k. has we saw that weakness in pound. is gold., this when you look at the broader market, it did not play into the rest of the world is the focus for everyone else, not necessarily the u.k. or what will happen with the fed this week. this get to first word news with paul allen. business optimism in the u.k. has plunged. the institute of directors says a survey shows 57% of business leaders are pessimistic over the next year. lessel gove is back in the than a year after being fired by theresa may after the brexit vote. he and boris johnson led the campaign to take the u.k. out of europe. >> i brought and talent from the whole of the conservative party. i believe that is important. this is a government that will be governing for everyone. acrosseased that people the party have agreed to serve in my cabinet and we will be getting on with the job of government. macronident in my new seems headed for a landslide as voters appear to rally around their new leader. about ay will take third of the vote, which could result in him winning the in the national assembly. he needs a healthy majority to push their tax and labor market reform. renewed hisump has attack on james comey, tweaking that his leaked comments about their white house talks work "cowardly" and suggested they were either the goal. jeff sessions will speak on capitol hill tuesday about alleged russian meddling in the presidential election. he says it is important in light of comey's testimony last week. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. david: thank you. theresa may's failure to win a majority is casting a shadow over an economy that is already weak enough that the boe decision on thursday will be on hold. kathleen hays joins us right now. how bad can this actually be for the economy. peoplek back 12 months, have been living on this for nearly a year. good point to make. people are talking about theresa may hanging onto her powered by a thread. people saying they think she will be lucky to last until the end of the year as prime minister and will have to step down and that there will be a second election this year. nevertheless, she is forming her cabinet and will begin brexit negotiations. conducted by the institute of directors over the weekend in the u.k. found business optimism plunging. 57%, are nowure, pessimistic about the u.k. economies future, and even considerably more than the percentage, 43% after the vote to leave the eu in june of last year. 92% are worried about how the new government is going to impact the economy. over theanother poll weekend, more than half of the british voters think prime minister may should step down. the main thing businesses are worried about in this survey is the uk's ability to get a new trade deal with the eu. now people aren't talking about hard brexit. can theresa may talk about a hard brexit when she does not have the power and influence. some people say that is a good thing and could have removed a risk that could have an worse for the u.k. economy. weak whens already this latest election result hit. of gdplook at this chart put together by bloomberg news. momentum aloss of third of the way in from the left-hand side, only 0.2%. made yellow bars were even the for this vote, so i wonder how they would look, the estimates for u.k. growth if they were taken today. this into perspective, the u.k. did survive the referendum vote and the economy is still growing. theret out a note to say is no need to change the ratings on the u.k., but bloomberg intelligence in its analysis of the u.k. and fallout noting u.k. investment data shows it is more sensitive to changes in uncertainty even than it is to consumer spending, and that is an indication of how this can take even a bigger toll on the u.k. economy than we have seen so far. david: just to add to what you said, visa credit card came out with new data and are basically saying expenditure in may fell , so how does time this come together on super thursday, the boe, what can they do and what to expect them to say? they are planning to keep their policy on hold because of the slowdown we have seen in the u.k. economy so far, even though inflation his accelerating quite a bit. carney will be speaking publicly about their decision and it will be interesting how he falls election uncertainty into his outlook. inflation is moving up so quickly. it has been expected by the boe. you can see the white line, the turquoise, both above the 2% target and presumably headed for maybe 2.7% on the latest reading later this week and as high as 3%. spending,tioned, u.k. the latest data showed a fall in may for the first time in four years, why? may be because the consumer is getting squeezed. 9287, inflation has been pricing, the white line, but the turquoise line is average hourly earnings for u.k. households, and they have flattened out. maybe that is why people are not spending, another worry hanging over the u.k. economy. , we could maybe expect that to be worse now that this u.k. election result is out and will have these ripple effects for investors, consumers, and more. week forviously a big central banks, the fed, boj, boe, bank of russia. what is going on? >> the fed is expected to hike its rate on june 14, janet yellen will also answer questions about what this means for the balance sheet reduction. is the fed ready to elaborate more on that? medman sachs talking to about how we should be on the lookout for the people's bank of china to make some kind of parallel move to protect itself from capital outflows and protect the value of the currency. boj, policy unchanged is the assumption, but there may be some hints of what they are thinking about talking about with respect to the exit strategy. central banks on this week, and with all this buzz around the u.k., the doe decision will get extra attention, even though they will probably announce no change in policy. angie: absolutely. keeping an eye on thursday, thank you so much for that. we continue to look at the followed from the u.k. and why investors should be watching bonds instead of the fx markets. whyd: later on in the show, geo security says short-sellers are damaging hong kong's image. this is bloomberg. ♪ angie: this is "bloomberg markets: asia." a quick check of the business flash headlines. 8%,es of toshiba jumping the battle for its flash memory unit keeps up. western digital planning to raise its bid to $18 billion. toshiba will announce its preferred bidder thursday. the company is desperate for cash to offset losses at its nuclear unit and once a japanese buyer. evergrande has agreed to sell 14% stake in vanke, ending its shareholding. comesen metro group b vanke's largest shareholder with 28%. sources in the usa uber directors will discuss removing a senior executive. he has been embroiled in some of the company's biggest controversies. he had improperly obtained a woman's medical report following ape by an uber driver and expressed skepticism whether she had been raped. angie: sterling fell the most in hate months in the aftermath of thursday's election come up our next guest says investors should be watching bond volatility and not fx moves. sean darby joins us now. >> good morning. giltbehind this is that yields have been negative, and the has put a cushion on ftse and the ftse 250, and most of the drop in the sterling has been put into earnings numbers, so they are already rolling over, so the barrier is the confidence in u.k. inc. as we go into brexit negotiations. yields rise, it will be much more troublesome. angie: there was a bloomberg survey, and that environment, the sentiment right now is very are disappointed and pessimistic about the uk's future. >> look at foreign direct investments, u.k. has been one of the best spaces in europe for recentt three years, but surveys have shown companies becoming much cooler towards putting in investment. now, again, i think it is early days at the may be spending too much time at sterling and not enough on other variables a could have a longer-term impact. sterlinge weakness in is contributing to why the real yield is low. it is deflationary to an extent. i'm looking at the nominal yields on the 10 year gilt. the current read on real yield is negative. duke expected to continue to fall? >> if you have weaker sterling, you get imported inflation into the u.k. not growing, so in terms of consumer numbers, it will be difficult in terms of seeing better earnings numbers from that side of things, but gilt yields the negative puts h people into the ftse, and the spread is around 3% in some cases, so it is marked and that's why we did not get the big selloff that perhaps the equity market wanted on that surprising result at the end of last week. david: in a lot of ways a new that sterlingfect bears trade. what you watching to upgrade that risk profile of a new election a little bit more? the beginning of this year, we have had one of the most bearish positioning's on sterling based on the data we , theet from the cme futures markets, so extraordinary perish, and that has proved to have been right. the difficulty is we all to be yields, because if they move up in real terms, it will be troublesome for the equity market and the economy as well. an indebtedte government and households, and a move in real yields would mean a difficult economic time as a goes through brexit. angie: a lot of people as we said earlier, there is no expectation of any policy change from the boe, but will be watching for forward guidance of a softer brexit or the implications of negotiations and what they might mean. people at the doe, it has been quite a week. i guess they were prepared for the worst possible outcome which was a hard brexit. suddenly in the space of 42 hours, you have an opportunity it will be softer and in a shorter period of time. a two-year window, but that does not mean it will have to take two years. we see a quicker space than people admitted, which would be good news for the doe -- boe. i'm sure they're taking the worst case scenario into their forecast. let you gon't without asking what you think rotation. how long do expect that to continue and are you willing to buy the dip? markets have been narrow in some cases and the leadership stocks have been down to just a couple of sectors, so i am not too surprise we have had this correction. looking at the risk place in equities, it does seem it is not likely to cause a tremendous selloff in the rest of the market. it's just that those stocks cut fully valued in many cases and they wanted some form of a breather, so again i don't think we are into a massive selloff of equities at the moment. the implications on tech stocks in asia, we are watching that. sean darby, good to see you here in hong kong. coming up, china faces growth versus that dilemma -- debt dilemma, why beijing must up kicking the can down the road. this is bloomberg. ♪ david: the former vice chair of goldman sachs in china is concerned there's little to hold back the growing debt. child policy has helped to fuel borrowing. >> there is a very unique reason -- behindhe high rate the high rate, that is relating to the one child policy. when the policy was implemented three decades ago, the defendants ratio of chinese family shrank and drive up savings rates. going forward, those families will have a lot of people retiring, and when that comes, you have a surge in china's elderly dependency ratio, which will drive down the savings rate, so the challenge for china his 5-10 years from now that we see a much higher debt level, but a much lower savings rate, so the disadvantage in china will increase the advantage will decrease. that will be the time we need to think about from now. know that xi jinping has made deleveraging a priority and there has been over investment, mightpacity now, but both be slowing. you mentioned markets being stressed, so there is a trade-off if the chinese government tries to tighten its credit policy, it may towards taking steps on the debt. where does that leave the pboc? >> the chinese government has already announced to pursue a policy, not too expansionary, not contractionary let the fiscal policy be more expansionary. , think it is the right policy but when it comes to implementation, china's monetary policy is still quite money supply's still growing 12% to 13% with a slowing gdp growth and inflation is still muted, so you have excess money being printed to finance the economy. unfortunately a lot of that is going to the property market, pushing up the property prices, so china is facing a dilemma. if growth is slowing too fast, you may have unemployment and a , inosive increase in debt bad loans, so china needs to maintain some kind of growth maintain this you growth rate, but not to reform, through money printing, through policy stimulus, chances are you blue increase risks going forward in future, so this kind some people call it kicking the can down the road cannot sustain forever. >> so what will happen? , and i hope after the 19th party congress, the china will be more determined to implement some key economic but not including state-ownedirst enterprise reform, who borrowed a lot of money. a lot of the debt is owed by the state owned and they are not so efficient. monopoly that needs to be abolished and the economy needs to be more open to private investment and even to foreign investment, which foreign investment three decades ago promoted china's productivity growth. this is what china needs today. angie: that was the former vice chairman of goldman sachs. are looking forward to the afternoon's business in tokyo after the fang drop. downshares leading the way on the heels of disappointing machine orders and ppi, the latest on japan's reopening next. this is bloomberg. ♪ >> it is 11:29 in hong kong. i am paul allen with the first word news. factories in japan disappointing, core machine orders fell 3.1% from the previous month. economists expected .5% gain. of2.7%, well short expectations of a 7.3% rise. ppi prices were unchanged as well. is governor kuroda increasingly likely to win a second term ahead of a policy meeting this week. finds a third of economists saying he is the only possible contender after his current term runs out. economists see a change in policy and the vast majority don't is any change until his current term ends. reports from japan say prime minister shinzo abe may invite president xi jinping for a state visit next year. he is likely to go to china early to lay the groundwork for the trip route it will be the first visit by a chinese leader to japan since 2008. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. sophie: the asian markets looking like a mixed session midday in hong kong. the techlt across space, falling from a 17 year high. sees it, he's not surprised of the correction and that several stocks are fully valued and that warrants it hit of a breather. see a massive selloff in equities broadly the tech route on wall street is hard to shake and asia, knocking off 60 points from the hang seng, falling over one are sent a low 26,000. and kospieavy taiex also, no surprise. the rally in japanese financials is helping support the topix. energy producers are making headway, tracking the rise in oil prices up for a second day. ,hecking in on regional movers jumping the most after credit suisse raised the stock to outperform. todaya is rising over 8% as the battle for its chip unit heats up. angie: central banks, david, he will be a busy week, the fed, up, boe, ecb chatted things last week, but this gives us a perfect opportunity to dive into 9283 and talk # about the pboc. here is the yellow line, fed reserve bank total assets, and what you are seeing is that it is leveling off. boj still in its asset arches program. the blue line, the ecb continues to ramp up. there is some talk whether that will tighten by september or later than that. check out this green line. this is interesting to a bunch , majoritytchers respondents in a bloomberg survey few this line as continuing to grow. horde. a $5 trillion m2 surveys that giving a sense of liquidity in china. m2 pboc on a very busy week. david: a good chart. when the fed does move and we saw this previously in march pboc had to adjust. helpwill in a lot of ways the sentiment out there if you are worried the fed scaling back offset the loss of liquidity there. on that note, wednesday, the fed might raise rates. #9288, yes, they might raise rates, but the street is calling for the 10 year yield by forecasts this year, have been scaled down from 2.95% as early as march, now looking for a weighted average of 2.7%. the bottom panel shows you this bread between the two bank, roughly where it should be, 50- 55 basis points. 2.7% by the end of the year, #9288 on your bloomberg. when you talk about markets, the big story is the selloff in the tech space. friday, facebook, amazon, netflix, google, a great year, which is why we saw the pullback. group,u look at that they have seen their stocks rally over 40%. have a look at this chart, #9281. counterparts, the sunrise stocks, might be doing ,etter, softbank nintendo, sony so let's get the meat and bones of the story. coming on the program for nice to see you. we know who these stocks are, but why have they done this? matter ofs to be a these stocks being overlooked for the past few years and are now going through reassessment by analysts. this is especially true of nintendo. they have more than doubled over the past year over pokémon go and global sales of switch consoles. something that brings the four stocks together are their prospects according to one portfolio manager. ,hey have beaten the u.s. banks facebook, amazon, netflix, and amazon. they have beaten these stocks by around 20% in points. japaneset of the four sunrise stocks, recruit is relatively unknown outside the u.s. to have they been informing so well -- the u.s.. why have they been performing so well? >> they are known within japan as an incubator for entrepreneurs, but have been doing well with the job listing company indeed and have risen 60% over the past 12 months. on that note, what are the prospects? sunrise or sunset? they have taken a beating u.s. tech stocks tanked on friday, but if you look at what analysts are saying and the rating for all four mostnies, i would say that longer-term investors would probably see more upside from here. thank you so much for that. live from tokyo. the rise ofst says shortselling in hong kong has made it a center for financial criminals. , we will ask why they feel so strongly. this is bloomberg. ♪ david: this is "bloomberg markets: asia." angie: a quick check of the business flash headlines. airways posted a rise in profits as it secured more long-haul travelers through doha . income rose 22% to 530 new million dollars, while revenue newbed 10%, adding 10 destinations and carried 32 million passengers, a rise of 20%. vietnam airlines expects after-tax profit to top $59 million this year. the carrier plans to invest about $130 million in new projects this year and will list shares to raise capital. hopes to raise the number of passengers by 10%, 22.6 main passengers. confidence its deal to buy planes from bond will go through for aseman airlines, taking 30 737 max jets initially. the first plane should be delivered in 2022. aseman is a private company with its largest owner the iran national pension fund. hong kong stocks have increasingly been attracting attention from short helpers, the latest to be targeted sent stocks plunging and the situation quickly turned around. usually when companies are targeted by short-sellers abroad , they stay down. here they bounce back up. >> usually they do go down. in these cases, the short-sellers picked on to and a, a cell phone maker foods maker that have lots of buy calls, so they went against the analysts and that affected it. look, learn from the citroen research experience, one stock in focus previously, evergrande, what lesson can we take from that? from a short seller perspective, completely make sure your case is watertight. goes wrong, you could be banned, which is what happened to citron, and fines as well, big risk in hong kong. angie: during the global financial crisis, a lot of markets shut down short-sellers. >> hong kong kept it open. this is one of the most open markets for shortselling in the world and one of the reasons you see so much shortselling, in addition to companies that can be easily targeted. >> that opaque nest is pervasive in chinese companies. ss is pervasive in chinese companies. it is hard to find out how they are doing. these issues will always continue. we will talk more about shortselling in hong kong. thank you so much for that. let's do ahat note, quick check of where of where those stocks are trading at the moment. we are looking at three at the moment. have a look. look at where the share prices are. i will mention where they were a few weeks ago. wah six dollars, now -- oh, an ominous number there. foods, closer to not that actually. aac, closer to $81 a few weeks back. what is happening across the stocks today. short our next guest says selling has become an industry and is damaging hong kong as a leading global financial center. it is actually a great market for short-sellers because it is one of the most open markets. >> because they can borrow these shares from existing because there are so many questionable stocks. shortselling becomes an industry, so every month you have one or-two stocks being attacked, so expect more to happen. angie: you had carson block on the show and he previewed the fact that he was going to short a stock in hong kong. >> that's correct. angie: what does this tell us about markets? do those investors know something about those stocks more than anybody else? >> i think it exposed the fundamental question. the system has broken down. this is the honor system. they depend on the owners of the business being honest. they do honest business and give you correct and genuine accounting and depend on the sponsors, to be honest and to do their due diligence, but the problem is the professionals have not done their due diligence, and the securities exchange commission failed to keep pace with responsibility and allowed these questionable companies to come profit is sose the enormous. look at han energy trading at eight dollars, the capitalization was 370 billion hong kong dollars, so because we profit is so enormous, draw a lot of shady people into the business, and that is the crux of the problem. david: why are there so many shady problems. not to put all companies in one this 3-4 decade process of opening up the of economy, interpreting the rules as you went along, what you got away with in which you couldn't get away with, that line moved, so the mindset of some of these founders is quite there that they will try and get away with something as long as they can, is that the main problem? i think the current registration system failed the market. because there are so many shady operators, so many dishonest businessmen, the system has broken down. a systemto go back to where you treat every account as if it is a forensic report before you can really ascertain that the accounts are honest. companiesve is that routinely overstate sales and profits by enormous amounts so they can get listed chemical or of the money, and run, and this is not the correct way to do business. this is damaging hong kong's reputation. though dooretically you see a large chinese state-owned enterprise and the situation? is not so muchk that they are doing something g? to, but are they to bi be targeted --too big to be targeted? steel mills,k at telecom companies, banks, they are a bit overstated, but not that dishonest come not to the same scale to what we have been witnessing so far. when you have a blue-chip come under attack, basically don't trust anyone. angie: let's take a look at aac and those other stocks that have #9284 in yourd bloomberg. what is this telling us? when you get that dip, but things bounceback. citic bank of aac, coming in with a big fat wallet and blank check. >> i want to quote carson block. apple is the most successful company in the history of mankind. gross profit and 28% net profit margins, and no company can be better than apple. , so i better than apple have my serious doubts. the roman catholic church would disagree and a lot of people would said that is the most successful company in the world, but back to hong kong and a more serious topic, how widespread is the problem? 5%, 20% of listed companies? what is the idea you are getting? 5% is a very,n very high number because we are talking about fraudulent accounting, and you have the big four banks accounting firms being the auditors of these companies, and also the big , hsbc,ent banks, ubs goldman sachs, you name it, so what is happening to the is a not professionals doing an adequate due diligence job. david: absolutely. on that note, let's leave it there. it is an open ended argument. nice to see you. thank you for coming on the program. , china is the main game for asian expansion. we will hear from the hotels ceo next. this is bloomberg. ♪ angie: this is "bloomberg markets: asia." let's get a check of markets in india opening up right now, a mixed session. there we go. a pullback of .4 percent, some weakness in the currency, industrial output numbers and cpi data out today. some reverse repo auctions being held as well. biggesturope's hotel looking to expand in the asia-pacific. accor has hotels and 95 countries, and earlier the chairman and ceo said there are big growth plans right here, as well as key challenges. is the biggest hotel story of the century and continues to be. we have 200 hotels with 50,000 hotel rooms. part the fastest-growing of our network, not just asia-pacific, but the world. in terms of fairly low room rates, that has been a boom for markets like china and you see that, do improving anytime soon? >> it will not improve in the short-term. the prices respond to the market. tremendous growth in the market, and that keeps prices suppressed. there are tremendous profits in china. you see as the biggest challenges across these emerging markets? government regulation? to capture the site guys, if you will -- zeitgeist, if you will, of the traveler who is changing? >> i would say the easiest part is capturing the traveler. they are traveling in huge numbers, are inquisitive, want to travel. our biggest challenge is attracting talent to the industry and training that talent in developing careers and great guest experience. that is our number one challenge in a fast-growing market. have the hardware, and that is the software you have to develop. why did you have difficulty recruiting people? with the growth we are achieving, we have over 90,000 weloyees and asia-pacific. will need to add 10,000 for our new hotel, and 30,000 people throughout teams in the region. it is not just a matter of mass recruitment. you want to attract the right talent, make sure you give them the right skills, and make sure you retain them so you can reduce turnover and deliver the experience, so that takes time and effort to make sure we are giving them the skills they need to delight our guests. the ceo forwas accorhotels. up, yousef gamal el-din is in doha. what do you have in store? the latest from the diplomatic flurry of activity, the kuwait is saying that qatar is willing to understand the concerns of their neighbors, what ever that means. we will try to break that down for you. also, economic fallout, credit ratings agencies assessing the resilience of the qatari bank system. we will widen out that conversation with standard chartered bank. the hour, guys, plenty more. david: nice to see you. that is it for this edition of "bloomberg markets: asia." angie: this is a paid advertisement. you know that confidence you get when your hair feels good and feels great. you feel absolutely beautiful. that confidence can be shattered when your hair shows sinning. -- thinning. what are the problem signs of so many of us experience? dryness,

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