tv Bloomberg Markets Asia Bloomberg July 29, 2018 9:00pm-12:00am EDT
this is bloomberg markets: asia. where the last penultimate trading days of the month. movei 225 down as we see a to the yen. on's look at what is going elsewhere. haidi: a great deal of caution as we have a blockbuster week for earnings. reaction in the yen weighing on sentiment. discussing aapan reduction of nikkei 225 holdings.
continuation that of the downside for asian markets. let's look at what to expect for china and hong kong. >> caution could be the name of the game. where look at valuations they are, that could be enough to entice buyers. -- can find mainland markets the shanghai composite is trading at earnings multiples below what we saw in 2013 and 2016. are perhaps looking at a rebound. the benchmark rebounded more than 10% over a three month period. some strategists turning more optimistic.
jp market strategy saying the market has priced in the trade war. they say there is a big correction already behind us --h shares tending to bottom when it comes to other stocks some analysts are not optimistic. see itt pointing to growing interest in hong kong. rishaad: we're the lies books -- the likes of facebook and twitter under regulatory pressure. new pressureis from content laws in europe as they crackdown on hate speech and terrorist messages. in platform could face fines september if they fail to take down propaganda in hate speech. has laws inady
place and could face fines if they fail to tackle terrorist content. president trump he is willing to shut down the government if he doesn't get his way on the border wall. senior republicans say that they doubt a shutdown will happen in action on the border wall can wait until after the midterm election. minister hasinance rejected suggestions corporate tax cuts should be reviewed. opposition labor party retained the four seats it was contesting after a campaign that painted the turnbull government as big business. is as a straw you must compete with lower tax rates and other parts of the world. the cambodian people's party won 70% of the vote.
the victory was not in doubt. but in 2013 the opposition cambodian national rescue party nearly won. twice 700 journalists and analysts in more than 130 countries. i am yvonne man. haidi: with the attention of global bond market squarely on , kathleen haysan is in tokyo with the preview. tweak, and not to not to communicate that to the market. there is still very much a question mark. kathleen: it certainly does but the fact it is still there as a question goes to show the sense -- there haveave
been reports from bloomberg to ukip, thatgg to there is some conversation at the bank of japan about tweaking core control has been at the cause of the issue. friday, no purchases in the morning, a big purchase in the afternoon. 0.11?0.10, one the big drivers that makes -- it isve question not about moving monetary stimulus. indicates this could have a lot to do for regional banks. a flat yield curve makes it so hard to make money but let's look at the bloomberg library just to see how this activity in
the market, the far right hand side of the screen. you can see last weekend the yield is going into the end of the week with a big move up in that is why it remains a big question. everyone agrees that governor kuroda cannot step away from inflation. that is an important issue and -- lowering their current fiscal year forecast to about 1.5%. considered toas be in the works anyway. important than this is the discussion about etf purchases. will the boj announced it is ending them or shifting away from the nikkei?
maybe that is a pitch that is kurodar corona -- to pitch back. how he handles this is very important. not a change in stimulus. this is pretty optimistic about what is happening in the u.s., isn't it? dark of thein the forecast. >> economists agree that we got u.s. growth on domestic product -- that will not be repeated anytime soon. people believe the impact will be peaking this year. before we judge steve, let's listen to what he said -- steve
mnuchin, let's listen to what he said. >> i think we are on this path for several years. i don't think this is a one year or two year phenomena, i think we are looking at 4% -- four years to five years of 3% growth, at least. >> if you are on the supply side you will say that tax cuts are more spending, that will create its own momentum and feed into this 3% sustained growth rate. haveing to the fed, we several factors squarely in the drivers seat. the fed is not expected to do much. -- federal reserve bank expecting to underpin the bond market and the bank of england expected to hike a key rate. by the end of the week, that mnuchin forecast won't be quite as front and center as it is now. get more on the
state and street global markets. what are you making of the japanese government bond market at the moment? i will bring up this chart, this is about implied volatility. with the amount of bonds the bank of japan is earning, you could question whether there was a market. it certainly is now, isn't it? where do we go from here and is this overreaction? is a signal from policy makers in japan that they are starting to get the market ready for changes. changes in coming in numerous ways. can dos a lot that they in terms of stimulus because they are so ingrained in the market on a day-to-day basis. their moving toward some sort of change. the inflation -- they are moving
toward some sort of change. the inflation numbers are not sufficiently high to address policy. we are no longer talking about deflation. rishaad: disinflation? guest: on, actually. some of thek at factors trending inflation, the labor market, we are beginning to see the first signs that maybe there is a pass into inflation. i think this is the first signal that we are not there yet. we are not there yet but we have to make some sort of signal of an adjustment. rishaad: etf is most likely to target? guest:. it seems to be the case. you probably would not get this talk unless there was something more in it. this has been well reported.
the change of topics makes sense given how ingrained they are. rishaad: do you think they have done a good job or are they suffering from a lack of returns? guest: they have had a weak hand to start with. if the mandate is inflation, and if they cannot reach the inflation target, there are structural and demographic reasons why -- they are always pushing uphill. there always against it. there always fighting gravity. they have done a reasonable job, the we are not seeing the full extent of inflation. there is more to do. rishaad: please stay with us. we will be talking more with dwyfor on why the u.s. is trying to counter trade rhetoric. there are fingerprints all over china tower's $9 billion ipo. this is bloomberg. ♪
rishaad: this is bloomberg markets in hong kong. haidi: the reasons behind china's recent edition of the stimulus becoming more evident. early indicators that the economy slowed in july. bloomberg says mainline business have been hurt by title -- tidal liquidity conditions. help could be on the way. china's security general reporting that monetary policy is likely to remain marginally loose in the second half. measures signal a significant change in policy toward helping the economy. guest,ring back our ahead of macro strategy at state street global markets. will we see these macro
conditions easing -- does that create a good basis for a china rebounded what are the implications for the currency? dwyfor: the china rebound is something that is some way away. clearly authorities are moving toward trying to generate some stimulus in the economy. there was the idea of holding growth steady. this is something people have been talking about. the currency is really in play. here have seen a significant move on the cn why -- cny. rishaad: heidi has the fix for us as well. haidi: we just had the reference rate and another one just past 6.8. every psychological marker we have had in the past six weeks has gone by without much of a reaction from the pboc. i want to get your thoughts.
they may not be a consensus view, but do you think china would be willing to use the currency as a weapon in the trade war? they cannot do that without painful side effects. dwyfor: no, and look, they wouldn't explicitly admit this. they need to be able to defend their own interests. exporters in the exporter lobby is still very strong in china. they need to ensure that they maintain competitiveness. how to they maintain it by making the currency more comparative relative to regional currencies. as a tool for driving exports. they will never be explicit in saying this but one of the number of tools, one of a number of factors they can do to support their own interests is by ensuring currency remains on the weaker side. it does mean that they will take advantage of dollar strength to cny becomes more
competitive. lead to morehat volatility for emerging-market and asian currencies as well? anchor, is a better they yuan, than the dollar these days? dwyfor: well with these currencies they have shifted toward the cny over recent years. there is a shift toward anchoring the dollar on the cny. when you consider the capital outflows have been prevalent in asia, it would suggest that regional and asian currencies will come down on the backside pressure. rishaad: a lot of pressure has come about on these currencies from hiking environments in the u.s.. have prices been going down in
the states? --have a situation contracted by 5%. it is never a good idea to be raising interest rates in the face of a weakening housing market. dwyfor: the u.s. has never made a huge amount of rhetoric on housing per se in terms of monetary policy. argument, have a look at the labor market which is clearly strengthening. much you believe the returns over the next couple of years, but you are seeing quite a significant stimulus to growth and that is having an impact. you can play devils advocate but there are other factors in the economy that look strong.
if you aren't you that the interest rate cycle was more of an emergency setting until last couple years -- they are still moving out of emergency settings . this is beyond what is being shown in terms of the first few months of housing. go four predisposed to times this year. it will change, but i think this is predisposition still. rishaad: what about the gdp report? 4.1%. great numbers but the devil is in the details. guest: -- dwyfor: it is a strong report but was largely driven by a pickup in consumption, largely driven by the aftereffects of the tax cuts, all of this is baked into the cake. it is probably the most best flag forehead report in quite
some time. rishaad: some were expecting 5%. dwyfor: from the optimistic perspective, there were much higher forecasts. we have to wait and see on this one. because this does imply a best case scenario playing out. to the point you made early on about housing stocks, there are some headwinds as well. it's not all tailwind at this point. we could see this impact the supply side again. haidi: the amount that net exports contribute to gdp growth -- it was significant. think it was the most hiccups in 2013 because of the contributions in trade. do you assume that if trade tariffs exacerbate back and
forth between china that this level of growth is not going to be sustainable? dwyfor: it is unlikely to be sustainable. if we go back three or four years, we had four handles. they are quite volatile. there are still headwinds in the economy. we wouldn't have had the tax breaks in the first place. the truth is there are sectors within the u.s. economy that will take a hit from the trade tariffs. there are offsetting factors as well. it is difficult to forecast this far out on gdp. needuld seem here that we
to see all stars aligning in terms of the supply side impact. about thatquestion particular point given some of the other trade rhetoric and other conversations going on more globally at this particular point. will have to leave it there. i appreciate your time. remember, bloomberg users can interact with the charts. you can browse the recent charts featured on bloomberg tv. this is bloomberg. ♪
to deal with this week. rishaad: this is the premarket sense. ang seng features indicating lower session. coming on downdraft wall street on friday. that gain despite decent gdp numbers. it is swinging into a loss. it is up in the free market. companies have been threatened. country guarded at the moment down by roundabout 4%. we have pmi data coming out. there is a lot more to be keeping an eye on too. we have the federal reserve.
9:29 a.m. right here in hong kong. change in and shanghai, a move to the downside generally anticipated. region, wethe wider have one eye on the bank of japan expected to be making some tweaks to its program. of other central banks meeting -- meeting those out of britain, the united states, and india. we have apple expecting to
dominate some of the moves as well. investors looking closely at some of the data coming out of the united states and in china. if the end of the week we have the biggest data point of the month. nonfarm payrolls. we have the u.n. fix. 6.81. this is sophie. looking stablege . marginal gains out of hong kong on friday. country garden off over 5% after the suspended construction works for safety checks. with this back-check let me show you what is going on. we have this benchmark rebounding after hitting a two-year low. the question is they may have reached a bottom for mainland markets. look at what is going on with
the offshore yuan. more commentary that the yuan faces further appreciation rift. the downside does look limited if we consider the slide. four points for the yuan. this could be apple liquidity. things aren't took a when it comes to chinese stocks. a lot of people would call that quite brave. are they feeling optimistic? bravehave some strategists out there. people are finding reassurance of low valuation and buybacks. check this out. have beenhares lighting up with the s&p 500. we saw in 2014 and 2005. following those declines, the shanghai, did value to
outperform the s&p 500 on both occasions. have we reached a bottom? rishaad: let's look at china equities. are we near the bottom? that is what everybody wants to know when it relates to this agreement. bullish --cautiously >> i am cautiously bullish. equity strategist adjusted the year on target. we see potentially a percent upside from here. year-end. behaad: that should also based, i suppose, on fundamentals in the market. we have some decent earnings. a mixed bag, but generally they are ok. in there factoring u.s.-china trade war escalation. we are adjusting down the
it is 12forecast, but times australian pe so we're hitting 3500 by the end of the year. rishaad: this could all be scuttled if the trade war becomes hotter. cannot our general-based view is the market already priced in the majority of negative views for the time being. negativity, how much further downside in the yuan has the market priced in? how much more can it tolerate? our chief economist just updated the forecast. 6.8%, that is at roughly at the current level by the end of the year and potentially 6.9 by 2019. that is with the forecast is for renminbi. not much downside. haidi: not much change at all.
loosern we are expecting fiscal conditions and more infrastructure investment, stimulus from the authorities, do you rotate back into the old economy? >> the market has already been reacting to the potential relaxation of physical and monetary policy. we will definitely see some pickup for the cyclical names. for us from a valuation perspective, we will continue to look at sectors such as consumer tourism. in hong kong we like health care. haidi: this is a -- rishaad: this is a crowded table, isn't it? everyone goes on about health care, you must have a new idea, surely. -- theuld say that using potential upside can bring us
further. cyclical is relatively -- haidi: thomas, you mentioned health care. i am curious to get your take away from the vaccine scandal that is still sorting itself out and creating negativity toward the entire sector in china. the implications to the amount of research, it is a pretty major company at the center of all of this. >> my advice to the global investor continues to be that china, like it or not, is a major emerging market. there is governance, transparency of information. this is a reflection of the volatility. will react the way that they should. the earnings forecast, even the
sector related to that risk will face volatility. rishaad: you mentioned the trade war briefly. is there a silver lining and where do you find it? i would say that the debate is around everybody sitting together. do you want to make the cake bigger or do you want a bigger slice? collectively, the world leader would like to make it bigger. rishaad: both, actually. guest: yes. that would be the silver lining. there are lessons to be learned. negotiatorchinese will take it slowly and seriously to get where the global market wanted them to be. rishaad: what about policy? do you think communication has improved in beijing? is there more transparency? we did not see the same kind of
in 2015.t we saw we seem to be fairly calm about it all. from our perspective, there are a lot of concerns. for chinese policymakers, i can see that they are taking a pause to review their strategies. we are feeding back to our global investors a commentary wishlist along with msci inclusion. the second wave is coming by the end of august. haidi: a bit of a step back. you changed your allocations from some of the more under pressure sectors at all? guest: can you say that again? haidi: if the theory is that in order to provide more easing into the economy and to deal with the trade war pressures,
that beijing cannot also continue to be so aggressive , does thatraging change your view of the sectors in the industries that have been badly hit by the deleveraging? guest: watching the policy very , the weekend before last we are seeing a solid sign of policy easing which the market reacted to. as i mentioned the cyclical sector will benefit from those. how chineseis governments can counter balance at the trade war negative impasse, but at the same time do not react too much to keep the benefit of deleveraging the overall economy for the longer run. you see the changes up the value chain being reflected in the aggressive strategy you are pursuing on a primary basis? guest: definitely, for global
investors and also increasing our domestic clients. they are focusing on the ai sector, artificial intelligence, big data, and e-commerce to look at the companies which can grow 10 times over the next 10 years. rishaad: this is the promise. 2025 is something that donald trump is targeting deliberately, it could still be derailed. guest: our advice is that the chinese government should downplay the rhetoric. they should really focus on what they can do and make a difference. more global investors investing in china. walk-on transparency and include the corporate governance. talking about the correlation between the yuan and emerging-market currents -- currencies. i want to throw up this quick chart.
em andrrelation between chinese equity assets has increased to record. what is your explanation behind this? as you get deeper into expect to see we this correlation gura -- grow? in the derivatives background, making a call on correlation consistencies is risky. rim and be is still in the process of internationalization -- we renminbi is still in the process of internationalization. i think the market would take it relatively ok, but not see a 4% to 5% change. we can increase of volatility more on the downside for the chinese equity markets. haidi: we always appreciate your
a thomas faang there. let's get you to the first word news with yvonne man. yvonne: treasury secretary steven mnuchin has an optimistic forecast for the u.s. economy, when that is at odds with many observers including the fed. expects four to five years of sustained growth. the fastest pace since 2014. few economists support that saying the u.s. economy will barely attain president trump's goal of 3%. >> we can only project a couple years in the future but i think we are well on this path for four or five years. i think it's is more than a one year or two-year phenomena. four or five years to sustain 3% growth, at least. yvonne: president trump's top
economic adviser is accusing companies of sometimes failing to tell the truth of disappointing earnings. they are seeing weaker than expected results and blaming them on tariffs. admitd executives should more fault on execution and management. >> people say president trump's tariffs are damaging this and the other thing. i say, don't blame president trump. brokenrited a completely world trade system including the wto, most particular china. yvonne: they will meet on monday and discuss the future of les moonves. researchers say there is a scheduled meeting days before the report results. les moonves was accused of sexual harassment by six women in a new yorker article. madeknowledges he may have some people uncomfortable decades ago but denies harming anyone's career.
the world's biggest compromise is facing strike action after the suggested payoff for the workers. the workers in chile are voting to accept the offer. support is said to be overwhelming. had his strike that led to know agreement. tom cruise's sixth mission impossible cruised to a week and victory. raised more than $61 million in the u.s. and canada and $153 million worldwide. hello mr. billionaire also cashed in a $130 million take on opening weekend. of a retiredstory football player who finds unexpected fortune. andal news 24 hours a day on air powered by more than 2700 journalists and analysts in more than 120 countries.
haidi: this is bloomberg markets asia. rishaad: i am rishaad salamat. looking at the movers, where are we at the moment? country garden having a tough time with construction hostages. behie: this has to temporarily suspended, all construction projects for safety checks. it is after last thursday a second collapse. china -- highlight
-- as coal prices were seen dropping in september to october. on the other side of spectrum, shares climbing on the mainland by as much as 10%. they continue to climb on these prospects for infrastructure spending. -- zte-h highlight dte shares climbing. sing the concern is overdone about the impact of a potential china telecom and union merger. the potentiale is for first-quarter profits -- haidi: talking about the china towers ipo, we may be focusing -- he says beijing's
fingerprints are all over this company. what is china tower all about? put it into perspective for us. guest: it is a pretty simple company when you think about it. it is more of a real estate investment trust. america tower is one of the major global players. they have five towers in the u.s.. they build towers and then rent space on those towers to telecom companies. three largest shareholders are also its largest customers. this is certainly a conflict of interest. they did about $10 billion in revenue in the u.s. -- that is larger than xiaomi's ipo.
alibaba, largest since globally. billion u.s. dollars raised in 2014. it will be the largest in a long time. that is why there is a lot of interest from investors. is it worth it? it is one of those companies where there are big numbers. they are beijing-involved. rishaad: when investors look at this ipo, what do they look at? you can describe it as a utility. we normally get a decent dividend. what are we looking at? an aren't indispensable driving force in the implementation of china building strength in cyberspace. very clearly, there are pointing out the role of what they are in pushing xi jinping's being
strong technologically, his approach and strategy. arend the numbers, one role they going to play in china's national service? rishaad: they differ that. -- thank you for that. let's look at hong kong's new listing rules. they are said to have raised $400 million pricing the ipo at the midpoint. the team leader is with me now. this country is not worth $19 billion, is it? it has generated no revenues the date. are investors actually buying them? guest: it is always about the promise. it is a bet you are making. thist this in perspective, is the first biotech company to list in hong kong under these new rules adopted by the exchange in april. this allowed early stage drug
developers who have not posted a profit to list. this company had a net loss of $13 million last year. they have been generated sales but there is excitement. rishaad: it is difficult to mass letis. pronounce, asc they are aged viral drugmaker for hiv, liver disease , and cancer. they have two hepatitis drugs that are almost ready. at this point, no sales yet. rishaad: it is always jammed tomorrow. we have several -- guest: we have several drugmakers as well, you have a company doing therapeutics in the u.s. and another company that has applied to list under these new rules. haidi: we were talking the
vaccine scandal that has engulfed headlines in the broader industry. is that likely to have a broader impact? there has been a lot of public outcry over the past to cut weeks because of this vaccine scandal. we are seeing people upset because the government revealed it had find them for selling low-quality that seems that are used for children and that it fabricated data when it came to production and inspection. chinese government is now saying they want to crack down on this. will see scrutiny on the industry but there is so much promise that a lot of people want to see the regulator and the industry ensure quality. this is a $100 billion health-care industry by 2020. haidi: thank you so much, oanh. oanh ha. joining us.
let's look at the stories trending across the bloomberg universe. more from china's turnaround from being a detractor of the india'slar to -- economy is in focus. the manufacturing and services sectors show signs of recovery. expensive sectors based on sushi prices. plenty still to come. this is bloomberg. arabic ♪
of $42 million. in-flightumped due to sales and insurance policies. the airbus has 370 more on order had airbus and boeing. there is a weaker rupee . they boasted port -- quarterly to $1.3 billion with sales jumping 36%. this telecom business reporting a third straight quarter of profit. haidi: this bank posted an unexpected loss as it posted more money to cover debt. their provisions or than doubled last quarter leading to an $18 million loss as compared to the $213 million profit seen by economists. regulators in india and the u.s. accountingng icici's
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rishaad: asia pacific equity markets down. was leading the way amid speculation of a treat for the federal reserve. the bank of england and the reserve bank of india. trump team comes up swinging predicting years of u.s. growth. i am in hong kong. up, icici in the spotlight. unexpected loss and debt cleanup. about their corporate governance, this is "bloomberg
markets: asia." a hectic week for central banks as they watch. bank of japan gets the two-day meeting underway with watching equities on the way down in asia. jgb was on their way up. possibility of another intervention from the bank of japan. earnings continue watching out for the likes of apple, burke xiao hathaway -- brookshire hathaway. have this trade war in the background, which is of putting ant damper on everything. let's get to what we have after this trading day started in shanghai and hong kong. sophie: asian market starting this week off in the red giving concerns over earnings as well a
central bank decisions. onshoreh offshore and trading around 683, adding to last year's slump. taking a look at what is going on in mainland markets. 7/10 of a percent, could snap a three-day decline. the stocks are jumping on the mainland. a look elsewhere. i want to highlight what is going on with the korean won. inflation data due on wednesday. is a spark that think it korea could see a rate hike in the first -- in the fourth quarter. the target.ds with the boj in focus, let's look at was it -- what is going on in the jgb market. traders are testing the yield market as a way for that decision. we had the boj conduct in bond buying operations last week.
say one governor has to tuesday will be closely watched for commentary around whether or thethey might tweak monetary policy and what that might mean for the etf. nuances weof the look ahead to in that press conference. let's get you to first word news in the meantime. paul allen here in sydney. social media sites facing content laws in europe as brussels cracks down on hate speech and terrorist messages. bloomberg has been told that platforms could face fines if they fail to take down propaganda and hate speech. germany has already passed laws that threat and social media platforms with fines of up to $60 million if they fail to tackle terrorist content. president trump has floated the idea of shutting down the federal government. he tweeted that he is willing to bring washington to a halt. supportcrats failed to
security. tina republicans say they doubt a shutdown will happen and the action on the border wall can wait until after the midterm elections. australia's finance minister has rejected suggestions that corporate tax cuts should be reviewed. the opposition made the party retain the seats it was contesting after a campaign painted the government as a friend of big business. australia must compete with lower tax rates in other parts of the world. come bone he leader has extended his three decades in power, election that an featured no meaningful critics after disbanding the opposition. rulingcampaigning -- people's party contained 70% of the vote. political dissent, which the opposition cambodian party nearly one. global news, 24 hours a day on than 2700ed by more
journalists and analysts in more than 120 countries, i am paul allen and this is bloomberg. bank of japan is at a reserve, think of india, all setting policy more than 40 kilometers. we have been talking to them. there is a lot of speculation about its plan eventually adjusting stimulus. mainhird likely to divergence for its peers. trade is expected to move in. high the benchmark may ultimately be set. jay powell said, gradual hikes are the best part for now. let's discuss all this with mark. should they be raising rates? welcome to the program. should they be raising rates as we going to signs of terminal is and a trade war on top of a u.s. housing market that is showing signs of week this? -- weakness?
always a dangerous game. the bottom line is, with the , theyainty in the market begin to think, if they are raising now, they will probably keep on racing and it may go up in the u.s. to five percent -- 5%, 6%, 8%, 9%, 10%. a should say, this is what we will do, when we will do it so everybody can plan accordingly. that is not the way it works. rishaad: they hang on every word. mark: the problem is, a lot of onse decisions are based faulty statistics. for example, inflation. inflation numbers are all over the place. the way they gather inflation numbers is very questionable. rishaad: the things in that basket seems questionable by their relevance. mark: exactly.
at the end of the day, you're comparing apples and oranges because you are possibly changing this index, the weighting of the index, different products and they forget about the impact of technology. rishaad: sharing economy, the impact of that? mark: we are in an inflationary period because of technology. prices are going down. take the example of the impact of uber and other examples of services. computersonsumers -- coming down. price of cell phones. can you believe it? in india smart phones art 25 u.s. -- are 25 u.s. i am wondering if you think the fed should be making decisions based on friday's gdp result, which the president and his supporters are claiming is a big win? mark: absolutely not.
-- have a situation where ok, the numbers are 4%. next year, you will not get that 4% because you will compare what is happening next year to the 4% now. to get be very difficult the same number. you have to be very careful about making decisions on short-term numbers that may not last. in fact, all guaranteed not to last. 6%, 7%. will get the growth you are seeing in china or india. we have a call out from bank of america merrill lynch saying, give been -- given the facebook selloff, it is an extension of sign of peaking in the banks and getting back into emerging markets. is it -- is it time to get back into emerging markets? mark: as you know, i have been saying that we expect a 30%
decline. 20% down in emerging markets, depending on which index you look at. i expect a little bit more because of this interest rate fear. as i have said many times before, interest rates do not necessarily go with markets. a very good indicator. the reality is that investors gave very fearful when they see these interest rates moving up. i believe this is the problem with tech stocks. the stocks that are flying high on the back of very -- almost no interest rates at all. if you were in the euro you would be in the negative territory. now, it will really become a big test for these tech stocks, particularly those who have been counting with no earnings at all. just going on -- rishaad: that was amazon for years, wasn't it?
i want to move back to emerging markets and looking into the central banks. the reserve bank of india has been urged to hike interest rates this week. in an economy that is extracts do interestare, rates make a huge difference? mark: i think they should lower interest rates in india, not raise them. rishaad:'s monetary policy effective and a structured economy like that? mark: i don't think so. in india you have many states. different economic systems all over the country, which are widely dispersed. the u.s., to a great extent, but toa less extent compared india. you have different languages in india, different ways of living. i think it would be a big mistake for them to raise. see them lower rates because then they would have more investments. within the em space, is
tokyo the biggest basket case, and do you see any concern about contagion when it comes to european banks? mark: i think turkey is a very interesting thing. the currency has gone really down, dramatically. the market is down because the because in -- but also the negative news we are getting out of turkey. is ae end of the day, it big economy, great companies in turkey, i was just there last month and they are doing very well. there will be some problems going forward, but i think turkey is a place we want to look at now. rishaad: i am looking here at the turkish lira and what it has done this century, since 2000. appreciated, you cannot depreciate 630%.
the dollar has appreciated by 630%. currency risk is your biggest problem. absolutelyre correct. in emerging markets, currency is a big opportunity, as well as a problem. if you see a very, very undervalued currency, there is a chance for you to -- because you will see this currency buying a lot more with u.s. dollars then you were doing before. --ood example is you go from to singapore, prices are one third. you know the currency is undervalued. this is the kind of thing we like to look at. -- if currency risk is your biggest risk within the em space, you look at the u.s. dollar, a good news story strengthens, a bad news story strengthens as well. under what circumstances do see weakness going forth? currency is not
necessarily the biggest risk. if we are investing in equities, the biggest risk is the management of the company, the ownership. a good company can take advantage of the currency problem. exporter inn turkey, you will do well. i believe turkey will now do much better on exports because a lot of the business from china will be shifted to turkey, vietnam, to these other emerging-market countries that can compete with a cheap currency and low labor costs. looking beyond that, what we do is, we say, look, what is the situation longer-term any particular country? let's not look at the short-term situation. and, which companies will be able to survive this situation? chances are, they will be among the few companies that can't survive this situation and do very well. under those circumstances, they
take market share, they grow faster and so forth. of noteally a matter only currency, but the company as well. with us, lots more to talk about in terms of that survival of the fittest. we are talking about china stocks. is there a reason for it investors to remain bullish? japan sales are rebounding. whether consumption can be sustained into the second quarter. ♪
are not looking so bad and just onto the week that was. have a few other factors potentially at play that could entice buyers back to mainland markets. you have low valuations, a surge in buybacks and foreign thattors returning for china trading link. i want to show you are earning multiples for the shanghai composite. we are seeing it back below levels that we saw since honey 15. $1 trillion have been wiped out over the past two months. this could be one of those alluring factors for investors. shanghai composite hit those lows, that benchmark rebounded more than 10% over a three-month period. among the strategist seeing a rosy outlook, they have priced in the negative impact from the leveraging campaign as well as the trade war. the secondrebound in
half. to see whether or not this might be the case is partner and obius capitals. the big question is, are we seeing a bottom from a man markets? don't think so. in the case of shanghai and emerging markets there is a good chance we will recover after continuing to climb. youhe case of china, it have a number of problems. debt, debt is a big problem for companies in china. number two, the tech situation. with what we have seen with the there will-- stocks be a row problem. the third thing is that trade war. that will be affecting a number and thenies psychological effect will be even greater. i think you have three downward pressures on this. we have seen chinese
policymakers put in place for stimulus policies that we are not seeing that will impact us just yet in the neo--- in the near-term. the campaign also putting brakes there. what does that mean for growth for china? side, they want to support -- they do not want the market to crash. on the other side they want reform. they want changes in the way chinese companies do business. this has been going on for the last few years. how do balance these two problems? one way to get out of this -- one is the one road belt, one road program. exports you are able to technology, equipment and so forth. there by stimulating the chinese economy without the help of the u.s. that will be a very interesting
situation to see develop. road is one belt, one it global reach. a narrative behind the narrative about the trade war, which is effectively a hegemonic war. would you agree? mark: to some extent. the intention is one thing. there is strategic intention, economic in tension and so forth. at the end of the day looking at the other side, from the beneficiaries of this, it is a good program. it means a lot of these companies will be getting infrastructure. rishaad: they are having trouble affording this. pakistan is running into payment program -- they met problems. it is a double edge sword. i think thebut chinese will delay these payments, will allow them to
take longer time to pay and will sometimes even canceled because it is in the interest of china to keep this program going. i was in sri lanka looking at what they build and it is incredible. it will do a lot to help the sri lankan economy. i think it is something that is good. on the threat of a trade war, you said president trump is "as dumb as a fox." do you believe negotiations are on foot, much like the ray of hope we had last week with the eu and u.s. detente in their trade -- trade war. mark: it will be continuous negotiations. trump is a businessman, he negotiates all the time. a good example of what happen with the eu last week, china said we will not input anymore, now he gets to deal with europe imports.
this is the thing that will go on for some time. day, the goodthe news is that trump is flexible. he will be willing to change if he is able to get that if it's from his negotiating tactics. by the way -- haidi: stay with us. go ahead. mark: the other interesting thing is that the chinese take a long-term view. the americans take a short-term view. the get along for a well together because they are looking at different things. i think they will come to some agreement. china reach its goals in the long-term? mark: i believe so. they are on the path. they are ahead of schedule. haidi: stay with us, lots more to talk about in terms of being ahead of schedule. we will look at chinese tech and see whether it is time to sell in that space.
haidi: bank of america merrill lynch said investigators should -- claiming that the hammering we have seen in facebook stocks is a sign of peaking. let's get a look at the partner and cofounder of mobius. how to get back into emerging markets is what we have covered. does facebook selloff across the sector? mark: i believe this is true. particularly for those companies that are not really earning. ofre has been a lot of ipos companies that have not been earning and have no real prospect of having substantial profits. to bek that is going separating the men from the boys, so to speak. there will be real problems in some areas.
the emerging markets index, to tech stocks have bacon a bigger share of the index. emerging markets is affected by that. haidi: a lot of people have been caught wrongfooted -- wrongfooted. do you have that assessment when you look at companies like amazon and apple? it is not buying growth, it is buying hope. it is the same thing with bitcoin and the other currencies. it is all about hope. you can have a lot of hope when interest rates are zero or less. that when interest rates start climbing, and you began tipping, wait a minute, i have been throwing many in the hopes that in five or six years this company will be a winner. now you have second thoughts and it is better to keep it in the bank or it -- bank. rishaad: let's have a look at what happened in the msci
emerging markets. we saw the hits that some of the stocks took. i think there will be an impact because people will say, oil tech, i am out because of what happened with facebook. that is a mistake. there are some chinese companies that are really good. their earnings are growing. the price-to-earnings ratio are not that high. they are not skyrocketing. i think you will have to pick and choose. what is the impact of the msci inclusion? mark: substantial impact. no question about that. rishaad: mark, thank you for joining us. talking with us about emerging markets. he is a rather well-known person in that field. we are going to the lunchtime break there in tokyo looking at our story across the board for
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♪ >> 10:29 in hong kong. i'm paul allen of the first word headlines. treasury secretary steve mnuchin has an optimistic forecast for the u.s. economy, one that is at odds with many observers, including the fed. he told fox he expects for five years of sustained growth after -- however, few economists support that, saying the u.s. economy will barely attain the goal of 3%. >> we can only project a couple years in the future, but i think we are well on this path for several years. i don't think this is a one or two year phenomenon. i think we are definitely in a -- for five o
years of sustained growth at least. topresident trump's economic adviser is accusing companies are failing to tell the truth about sometimes disappointing earnings. he says he is seeing some poor earnings on tariffs. he says executives should admit poor execution and management, but declined to give any examples. rump'sple say, "well, t tariffs are damaging this, that, and the other thing." he inherited a completely broken world trading system, including china.most particularly >> the cbs board will meet later and discussed the future of the embattled ceo. bloomberg sources it is a scheduled meeting days before the company reports results. last week, he was accused of
sexual harassment by six with a -- six women. he acknowledges he may have made some people feel uncomfortable decades ago, but denies harming anyone's career. the world's biggest copper mine is facing strike action after union leaders rejected a pay raise. they're voting on whether to accept what the company says is its final offer. ands last year failed triggered a strike, which contributed to a global copper deficit and higher prices. tom cruise's next "mission impossible." a weekend victory at the global box office. it raked in more than $61 million in the u.s. and canada, and $153 million worldwide. the film tells the story of a
retired football player who finds unexpected fortune. global news, 24 hours a day and at @tictoc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. ♪ >> thanks. let's take a look at market trading in the asia-pacific. mixed, as we are seeing. look at trading underway in hong kong, the hang seng off by .5%. we are seeing shanghai marching to the beat of its own drum. pmi data a miss on this week, that could be bad news and good news for shanghai equities. the nikkei 225, a bit of downside getting into day one of the two day bank of japan meeting. we are keenly watching for equity investors, for any reduction in the boj. rish. >> this is what we have, this policy meeting over several
major companies which are influencing and dictating where markets go. banks are in focus, reporting after turkey today. if you look at the ea go thetion, it shows you earnings and how they have been tepid in japan. financials in particular have had a pretty bad. consumer stocks have seen a bit of a boost, seeing a rebound from a steep drop in may. it is offering a sign of improved consumption in the second quarter. meanwhile, the bank of japan ost asgive the topix a bo policymakers consider reducing investment in exchange traded funds, etf's, which track the nikkei. --s could affect the egg the big stocks.
much, much less waiting on the topix. that's one way of looking at things, anyway. >> yeah, lots of factors as they get underway. joining us now, a preview of analysis, andrew jackson from capital markets head
of japan equities. this is a market that has got itself into quite a fervor. if you take a look at bond markets. there is a chance this could be much ado about nothing, given that statistically the bank of japan is still heading toward 2% inflation. they can really change too much about policy. >> yeah. it's been an interesting earnings season so far. generally, if you look at earnings outside of some of the brokers, it hasn't actually been that bad. but looking at nomura, for
example, that was a shocking set of first-quarter numbers, and they're not the only ones that have had troubles coming into the start of the year. a few other and smaller brokers that had a domestic focus, they also
came out with fairly poor numbers. financialsg at the and looking at the brokers. i'd think it is probably a little bit difficult, particularly facing uphill challenges. the fact that we have the backdrop of a global trade war with revenues from emerging markets and investment banking declining. we've got the fact that retail investors in general in japan are very much sitting on the sidelines, with everything that's going on. you need to look at the performance of the mothers market in japan, which is a smaller cap market, and see its
growth underperformance, 14% versus the topix -- versus the nikkei, which is flat. that's a real sign that they are staying away. this is definitely starting to hurt the brokers' profits. we've got the likes of dollar coming out, and i would think -- they are in a similar position, so i would think they could potentially surprise to the downside. it's going to be an interesting set of numbers to watch. financials?t the if you take a look at the reporting season so far, it has been a broad-based set of negative surprises. >> well, yes and no. i mean, we had really good numbers from advent in sps spac e. we have had good numbers from hitachi construction materials, construction machinery. a few others have surprised.
if you looksting, at the price actions that have followed, especially in the construction/machinery space. hgm was definitely a beat, and k omatsu looked to be as well. but if you look at the price the following day, both these names have been sold off quite aggressively. the this really shows is general sentiment that is out regardless ofle, what guidance for the four-year is. people are very concerned that everything going on globally is going to be impacting names, global stocks that have big exposure in china and emerging markets and the u.s. that, weing on from could look at the likes of sumi
heavy, which has yet to report. some negative surprises, and i think if you were to single out one sector in particular, it would be the factory automation. we had a bad numbers coming out, downumbers from mitsui, about 5% earlier today. a number of these factory automation plays, of which sumi heavy has a pass. it also has its hydraulics business, which fits into the construction, but then it also has the factory automation side of the business as well. that's another name which i think could potentially come under a little bit of pressure when it is released in the next few days. >> a bit like caterpillar, to some extent. they're a bellwether for what's happening with the economy. >> well, most definitely.
that's going to be the watch tonight. they are releasing in the u.s. if that comes through as a negative, then it is going to be a death knell for a lot of japanese names that have yet to report, the big crane makers, those that are more focused on farming machinery, and the likes of sumi heavy. >> what about the banks? we touched on them briefly. and the lack of any real yield curve, we have a small steepening taking place. is there no net interest margin? where will they make their money? banks are mean, the definitely interesting. there has been a lot of coverage on this so far, and they're very much in focus. we have to look and see how they are trading over the last week or so, when we are starting to get shaken up. point it's at this
going to be a lot less about what happens in the first quarter numbers and what the gardens for the year is. rather, i think it's going to be all eyes on with the bank of japan does. like you said, it's very difficult for those guys to make money in the current environment. them,es it very hard for for their clients to justify paying high rates on loans. if you look at the ratio of what the cost of borrowing, the amount they are actually able to lend, it is at the lowest percentage since kuroda ever took the helm. that does not leave a lot of meat on the bones for these guys to make money. definitely, as far as banks, and that goes for the megabanks and regional banks, it really is all eyes on the boj.
if we get a rise in rates like a lot of people are expecting -- o go on. >> yeah. i'm going to finish her sentence. if we see repatriation of funds chase back into japan, you recognize the need for the boj to diversified to the topix, not just keep buying 225 names. do they risk a pre-severe selloff? >> regardless of what they are risking, it is something that has to be done or there won't be anything left. the markets are starting to price in, we just saw that moved to the downside last week, and softness in some of the big heavyweights like softbank, etc. this kind of movement away from being too centered in the topix.
looking ahead, the regional banks, they started to outperform, because they are more of a topix play. there's a double positive for those guys at the moment. >> thank you. andrew jackson. let's move to what we have coming up. we are looking at an indian bank , icici. $230 million earnings forecast. we'll be telling you why. that's on the way. ♪
and mining stocks are rallying. in shanghai, chinese rail players are leading gains for large-cap gains, which could strap a three-day slump. tencent is dropping by about 50 points, falling to a december 6 low. country garden is falling the most on the hang seng after construction work was halted due to an incident at a project site in eastern china last week. haicom to highlight brb losing ground as the malaysian prime minister says the government is considering restrictions on lauren construct. >> thank you. amid rising construction and we currency for the second consecutive meeting, economists predict the rise of 25 basis points. it is the timeh, for the r.b.i. to be hiking, or is it?
mark mobius was saying they should be coming. >> i think all expectations are that they will go for rising. they are dealing with a worst-performing currency in asia this year, and the inflation is outside of their target. and of course oil prices remain elevated, so they are importing inflation. i think the expectations are that it will move tomorrow. whether or not they extend beyond that is the big question. indication this is a shift to longer-term tightening? >> difficult to say. as you know, we have fits and starts of tightening around emerging asia partly because of the broader emerging-market volatility story. tightening,nes are more to do with their own inflation story than the brought him rout. indonesia is on the frontline of
all of that. let's see what they say tomorrow. they have in the past spoken about the impact of the fed. there was fed commentary this week in terms of their policy meeting, trying to put more pressure on emerging markets. for sure, most economists think the r.b.i. will move, but the question is where they go from here. a lot of it will depend on external factors. >> enda, thank you. and the curren -- enda curran. a busy week for central banks. icici reported an unexpected first quarter loss as it that aside cash for the ongoing debt cleanup. the mumbai-based lender is also under investigation or accounting and corporate government practices. reporter inin our mumbai for context. situationk at the
when it comes to nonperforming or bad loans, it seems to be improving. >> well, that's right. just to put this into context, this is the second largest central bank in the country, and this will have the highest. they reported their first lows in history, because the bad loans had to be increased, partly because they had to fully comply and partly because the management took the call that the enrichment has to be strengthened. although these are the first lows we have seen, it is likely to stay high for the next quarter, and analysts are looking at it. >> what's the outlook for india's provisions when we move forward here and look at the future? bank -- already the bank
management has already guided that. while the new bad loan would remain muted, the addition in terms of fresh would remain high. we are expecting them to be on the profits of the bank, which you have to keep in mind in the current quarter would be pushed higher. it amounts to about 150 million. over the next three quarters, probably we will see very muted growth, if at all. >> anto, what has been the market response? it will take us toward more cash, so it will take they are t they had to be made and there was no point in ditching the position in the current
management is fortifying the balance sheet and this will help in moving to hedge. emerging, and they pointed out the bad loan additions are coming down. most analysts have put a by while some have cut the price by 5% to 10%. >> as they try to understand the short-term pain. anto, thank you. our asia finance reporter in mumbai. let's get a check up latest business flash headlines. allianz beating estimates as its petrochemicals business and the weekend rupiah boosted earnings. net income climbed 7.6% to $1.3 billion, sales jumping 36%. separately, the upstart telecom business jio reported a third straight quarter of profits. its gas production,
a project of the coast of western australia, the government expecting to begin shipments toward the end of december. they say it is the world's most expensive energy project. -- fell the most in more than two years on friday, but lower electricity rates led to power sales dropping by $231 million. quarterly operating profit fell 19% from a year earlier. they cut rates for customers last august and again this month as it restarted its nuclear plants. the utility says it is continuing to lose low-voltage customers. @tictoc, theunched first global news network design for social media, offering live
going to the gtv number on the bottom of your screen. theo by chart shows how stock market performance and earnings have decoupled this year. you can see on the top line, analysts have raised their expectation for earnings, companies report better earnings on the back of stronger demand. despite the trade war. some companies, including japan and the u.s. when you look at the bottom line, you can see that the stock market performance didn't really follow that optimism, just because of all the concerns going around on the macro front. there's a lot of sentiment weighing down the market. this huge gap, blackrock mentioned that it creates moneymaking opportunities, because it's not going to stay there forever. as you can see, until earlier this year, those two gauges
have closely tracked. we will see if investors start to focus on the sentiment. very nice. >> we have a yen-chinese yuan conundrum on the charts today. what it is showing is that, very unusually, even though spot dollar cny is rising in the forward market, it's going another way. usually we expect there would be speculative pressure to weaken the yuan further, but that's not happening. thely the reason why is high liquidity which is being pumped in by the pboc that is going red across the money market spectrum in china. it's helping to depress interest rates, which then feeds into the forward curve as well.
you have this unusual situation where even though the yuan is getting weaker, the cost of being short of the yuan is not rising. it's extremely unusual, but it is quite helpful to the chinese authorities. >> all right. i'm going to be pretty predictable and say that the winner is the uber chart, but i think rish might disagree. that's mark taking away the glory today. [laughter] you can always look at those charts by going to gtd go. ♪
♪ >> it's almost 11:00 year in the lion city, when :00 p.m. in the >> during the last hour of the morning session, welcome to "bloomberg markets" again. ♪ >> asia-pacific markets starting the week in the red as investors weigh earnings reality against lofty expectations. >> attention now turns to the central bank policy of the boj, leading the way.
there's also focus on the r.b.i., the bank of england, and the fed. >> trump comes out swinging, mnuchin protecting. roled a look at beijing's in china's upcoming ipo. it is less about numbers and more about national. >taking a look at the markets in asia, we are seeing mostly red here in this part of the world, being led by the likes of hong kong, japan, australia. central-bank decisions across the world this week. case in point, the boj, whether it will tweak or not. es, is there any indication there will be repercussions across the global debt market. your first taking a look at the yen, pretty much holding steady at 1.11. if there is any indication from the boj it will tweak, investors
are looking at going to 1.10. i want to show you the emerging-market current. we're seeing how emerging-market currencies have been -- in recent months. in terms of volatility it is at the highest in more than a year, which is contrary to what's happening with developed market currencies. volatility there in that space, pretty low, alarming investors. a different case for emerging markets, which is likely to continue, especially with that decision from the boj. also, i want to catch you up on this. we have seen from the likes of facebook and twitter the disappointment from the tech space, which is leading to declines in tech in asia. now bank of america is saying perhaps it is time to bet against attack. over the last few years, we saw
how tech pretty much boosted the rally that we saw, and that could be a turnaround, rish. >> yeah. at what's a look also happening with larry kudlow. he's taking aim at some u.s. businesses to find out why. here's the first word news with paul allen. >> thanks, rish. president trump's top economic advisor is accusing companies are failing to tell the truth about sometimes disappointing earnings. some kudlow says he sees companies reporting weaker than expected result in blaming them on tariffs. he says executives should admitted poor execution and management, but declined to give examples. >> people say, "wow, president trump's tariffs are damaging this, that, and the other thing." i say don't blame president trump. he inherited a completely broken world trading system, including
a wto most particularly china,, but not only china. >> president trump has again floated the idea of shutting down the federal government if he doesn't get his way on immigration and is border wall. he tweeted that he is willing to bring washington to a halt if the democrats failed to support legislation on border security. senior republicans say they doubt the shutdown will happen, and that action on the border wall can wait until after the midterms. social media sites are said to be facing tough new content laws in europe as brussels cracks down on hate speech in terrorist messages. platforms could face fines from september if they fail to take down propaganda and hate speech. germany has already passed laws that threaten social media platforms with fines of up to $60 million if they failed to tackle terrorist content. australia's finance minister has rejected suggestions corporate tax cuts should be reviewed after the government's defeat of weekend elections.
they retain the seat it was contesting after a campaign that painted the government as a friend of big business. but he says australia must compete with lower tax rates in other parts of the world. global news, 24 hours a day and at @tictoc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. the attentional global bond markets is squarely on the bank of japan as it starts its today policy meeting. our policy editor has a preview. we'reing anything -- talking about so-called yield curve control. >> we certainly are, rish, and of course all of this talk started with several news reports from every news agency from bloomberg to nikkei, saying that the boj has something
under discussion that could be brought to the table at the conclusion of the two day meeting starting tomorrow. that kicked off a lot of speculation, several instances of bond purchases, and friday of course was a very interesting day. everybody said, what's going on here as the yield rose, cap debt 0.10%. let's see how that looked. jumping to the bloomberg library, as we ran up to that friday, which said we are trying to make sure it doesn't go too high, you can see there is a substantial move up in yields from just over zero, up above or very close to 0.1% level, which was followed by global bond yields. as we think about this and get ready for what we may be hearing from the boj, let's realize that people are talking about a technical tweak to the yield
curve control policy, driven by the the realization that this is a very large price on regional banks. they are having a hard time making money with a flat curve. not to be billed as a move away from an aggressive monetary stimulus, inflation is even halfway to its target. this will be haruhiko kuroda's challenge, if he's even ready to announce thinking about this step, but there is way they will move away from negative rates. they will keep buying bonds and adjusted for technical reasons. the etf question, they might start buying etf's with more stocks from the topix. that seems like a more doable step. maybe just some hints at the other. >> kathleen, investors are keeping a watch on the boj and kuroda. stephen mnuchin is also catching attention, pretty upbeat about growth.
is that a good forecast? >> well, it depends on what you are looking at. steve mnuchin, treasury secretary coming out of the gdp report on friday, the jobs report on friday. we're getting a lot of information about the economy that suggests, yeah, it has picked up. but most economists don't expect it to last at 4%. but before we trust him, let's listen to what he said. >> we can only project a couple years in the future, but i think we are well on this path for several years. i don't think this is a one or two year phenomenon. i think we are in a period of four or five years of sustained 3% growth at least. easy to find the reasons why this won't work. trade tensions, tariff wars. one staunch republican reporter said in the united states, supply sides who believe in the power of tax cuts to create a positive change of more purchasing by consumers and more
business investment, by a supply-side boost. i think that's what he's thinking about. meanwhile, this will save as we get into the boj decision coming out, followed by the federal reserve. no policy change, but two big meetings. the reserve bank of and yet is expected to raise its key rate. there's a debate there. the bank of england also expected to raise its key rate. >> that's right. a for week ahead. kathleen hays, in tokyo. bank analysisur continues. we look ahead to rate decisions in india and the u.k. that's next. plus, beijing has a tight grip on investors. they need to pay more attention to natural service that number crunching. this is bloomberg. ♪
♪ >> you are back with "bloomberg markets." i'm rishaad salamat. >> i'm haslinda amin. the fed and boj are not the only banks in action this week. we are also awaiting rate decisions from brazil and india, and the bank of england on thursday, making it a very busy week before a usually quiet august. let's bring in our guest from singapore. good to have you with us. the boj is in focus, and people expect some kind of indication. the thing is that change -- it seems that the boj has already had it. >> we will really see some impact to there. the question is whether or not governor kuroda will announce any tweak. in terms of action, they have already looked at the long end,
so the big question is whether there will be further movement in the sense that they will allow more flexibility around 0% over 10 years, and you all know investors of japanese have in global bond markets, so it's the long end of the yield curve in japan and we could see flux of money coming back into the japanese bond market. that could be an indication. >> and of course the boj's soft, 2% inflation. do you expect a tweak in inflation targets? >> i think the last meeting, they weren't really holding fast to 2%. i think the track record suggests that it will take a very long time if they hit it at all. i do suspect they will hold hard and fast to 2%.
the fact of the matter is that a lot of other global central banks are moving to normalize interest rate policy. after a long period of economic growth, you would expect it to be in this negative interest rate environment for the next 15, 20 years, which would cause a lot of disruption to asset prices. i expect they will have to tweak at some point, whether or not they achieve that 2% inflation target or not. it's rish. i want to start with the bank of japan. what can they do to change their etf buying program? are they at the moment, in your opinion, perhaps suffering from the law of diminishing returns? >> yes. is one of the bigger risks we see in the japanese market. the bank of japan is one of the
largest holders of japanese etf's around. the big question is how do they unwind this position and move forward? purchase i think will be one step toward this normalization, at least ending this very easy monetary policy regime. but as we have seen so far, in terms of the results, they haven't seemed to materialize in terms of actual benefits to the broader japanese economy. the question is whether or not it's an effective move, to buy levels that they have been. >> if you look at the bond market, you couldn't really call it the bond market until what happened on friday, when we saw that move up in yields. there has been, virtually no volatility. >> yeah. they need issues is
to help the japanese banks by leading the long end of the rates move higher. i think the japanese banks have been complaining for quite a while about net interest margins, and that is affecting their ability to lend. i think making some sort of normalization will help the japanese banks and could have some tangible benefits to the broader japanese economy. >> please stay with us. singapore, he will be staying on to talk about what happens next in the tech space. coming up, bank of america thinks it is time to short a tech stocks. we discuss whether it is a time for investors to defang their portfolios. this is bloomberg. ♪ ♪
♪ >> -- saw provisions more than double, leading to an $18 million loss. of the new bad loans for the lowest in 11 quarters. regulators in india and the u.s. examining icici's governance practices. beatingnz industries with its petrochemicals businesses, net income climbing 7.6% to $1.3 billion. sales on the way up. the upstart telecom business out with its third straight quarter of profits. >> and standard chartered will remain at its site until the end of the year. the regulators are saying compliance measures are still
insufficient after more than half a decade. a 2012 deal expired over the weekend, but has now been extended to december 31. standard chartered has made significant progress, but has not yet reached the level required by the deal. america has short hang stocks on facebook, alphabet, netflix, and google. the company saying money saying going long as the most crowded strategy. investors are starting to suggest betting against them to prepare for monetary tightening. let's find out what mark mobius had to say. he told us we should worry about the tech sector were interest rates are rising. >> people get fearful when they see these interest rates moving up. this is a problem with the tech stocks, these stocks that are
flying high on the back of very, very -- almost no interest rates at all. in europe you are in the negative territory. 's going to become a big test for these tech stocks. >> for more on this, the portfolio manager at real simple. what do you make of this? >> that's the big question. stocks are the ones which has been lifting u.s. equity markets for probably the last 18, 34 months. the big question is whether there's room for stocks to move higher. if you look at the recent results, take a pinch of salt. facebook collected quite a bit, but their actual quarterly earnings were pretty decent, it was more the guidance moving forward in terms of what kind of growth numbers on the top line and what kind of margins they are expecting.
i think we saw a similar correction when they came out with some sort of guidance in terms of growth. that's the issue, whether or not these stocks continue to meet the lofty expectations that a lot of market analysts have already put in, with experience from the latest earnings results, to suggest that expectations are going to hit. we could be seeing a period of consolidation in the next couple weeks or months ahead. >> does that band if we see a drop back? does a correction represent an opportunity to buy? >> that's the other question. --h this correction, the dip investors are coming in too little. it could present a buying opportunity, because facebook is still looking at earnings growth
in excess of 20%, 25%. it could be a decent time to be picking up if you have a long-term time horizon. but if you are looking for a continuation of the very high, fast-paced growth in stock prices we've seen over the last several months, probably that's not going to happen, at least in the immediate future. >> what will be the impact of rising interest rates on these tech stocks? >> if you look at the valuation, of these growth names get bolstered with a low interest rate environment. businesses are counting cash up,s, and if the rates go you have lower valuation. growth names across the board will take some sort of hit in terms of valuations. analysts will have to do some repricing. with the fed telegraphing where short-term rates are going to go, that is already --
>> some like bank of america are saying be careful about those stocks. can the chinese players like alibaba, tencent compensate for the disappointment we are seeing in the u.s.? >> possibly. we had a chat earlier on about the asian tech names. if you compare the chart side-by-side, asians have broadly underperformed u.s. tech. 10%, with down positive returns on the same names. you can make the argument, for example, for the likes of tencent. it's a different kind of operating environment. i'd say that the chinese names are quite different animal to the u.s., almost like a private equity investment. it diversifies the risk to an
extent. they are huge behemoths. then again, it gives you -- in asia, if you are looking at alibaba, tencent, there could be opportunities for these names to do quite well moving forward. do you start looking at the smaller names and go with them, the ones which have underperformed? >> are you referring -- >> yes. well, at least in the asian space, we still like a lot of the old tech. samsung, for example, has underperformed. not exactly a small name, it's big and asia. but there are smaller names in asia, including the likes of -- a bit of a new tech play.
but they are looking for the smaller names who potentially could have some technology that could lead to potential acquisition. potential ipos as well. there are always opportunities in the marketplace, it's a question of being in the right space. -- whatme something question are you asked most by clients currently? i'm sure they are fearful of the trade war, but in a more vanilla way than that. asia,ean, sitting here in it's a bit more asia centric compared to my colleagues in europe. the question i get quite a bit is what's happening to emerging markets, all these macro concerns. what is the outlook for these markets.
these macro headwinds are a big issue. the u.s. dollar might be popping up. that is one potential headwind that will ease off. oil prices have corrected to an extent, and there's another headwind. the biggest is still the trade issues. my concern is that the issues in the u.s. and china won't be solved anytime soon, and the concern is that the two parties don't seem to be talking anymore. so in terms of impact, it is anybody's guess what could happen. some sectors could be hit depending on what kind of moves are being made in the months ahead leading to the november midterms. i think that's the biggest overhang that will impact emerging and asian markets. thehaving said that, if dust settled once the year ended, i think that could lead to a lot of asian markets rebounding. it has corrected quite a bit already.
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♪ >> in hong kong. i'm paul allen with first word headlines. treasury secretary steve mnuchin has an optimistic forecast for the u.s. economy, one that is at odds with many, including the .ed he expects several years of but fewd growth economists support that saying they will barely attain the goal of 3%. >> we can only project a couple years in the future, but i think we are well on this path for several years. i don't think this is a one- or two-year phenomenon, i think we are in a period of four or five
years of sustained 3% growth at least. >> the world's biggest copper mine is facing strike action after union leaders rejected a pay offer. workers at the escondido mine in chile are voting on whether to accept with the company says is its final offer. support is said to be overwhelming. talks last year failed in triggered a strike. it contributed to a global copper deficit in higher prices. cambodia's leader has extended ower, featuring no meaningful credits. his rule in the cambodian people's party won 70% of the vote, although victory was never in doubt. he silenced political dissent in 2013, where the opposition nearly won. tom cruise's sixth "mission
impossible" cruised to the top of the box office. it raked in more than $61 million in the u.s. and canada, and $153 million worldwide. "hello, mr. billionaire" also cashed in with an impressive $130 million take on its opening weekend. that tells the story of a retired football player who finds unexpected fortune. global news, 24 hours a day and at @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. ♪ hong kong gets off its lunch break, let's have a look at what's happening. it was particularly red. is it less? is it a lighter shade of red? >> a later say the of red, can't say that for sure. we do have stocks in tokyo, hong kong, and china. let's check out was going on with the yuan, retreating for a
third day for the renminbi, trading at the lowest level in a year after they cut their reference rate. lost itstocks have guise and we have not yet reached the bottom for chinese industries. hang seng is in decline. let's switch it off to regional bonds, elevated ahead of the boj decision. strategists are saying the central bank is taking a more flexible approach. i want to check out the jump in 10 year yields. the peso is trading at a six-week high, manila shares are gaining ground after the governor said the central bank is ready to tighten as early as august. i want to take a look at movers of note.on the mainland afterave biotech falling
the securities regulators said they will have severe violations it will be forced to deal with them. that has traded with an investment risk warning since thursday, once again fell below the 5% daily limit. ishong kong, ue yuen fighting after the company renounced -- company announced a drop in earnings, which suggest structural changes in order. over in japan, a solid first-quarter is helping ricoh jump as much as 10%. japan.s stay with it has been a big few days in japan with a positive earnings season, and decision due from the boj. the speculation about a tweak to policy, local media reporting it could discuss reducing investments in etf's. let's get to our reporter it on
asia equities, joining us from tokyo. let's kick off on earnings. tell us what exactly is going on in japan. >> hey, has. so only about 20% of the companies listed on the topic have reported earningx so far. at this point it is looking a bit 50-50. 50% of them are reporting earnings that have been estimates, the other 50 haven't. this weekend next week is when you are going to see a lot of companies coming through and reporting earnings. you have companies like toyota, like sony coming through. once these next couple weeks are over, you can make a decision on where earnings have been going. holdings inassive exchange traded funds that track the nikkei 225. the thing is, they bought so many of them, it is crowding out
some of the other investors. this policy decision may well mean we have a shift away from that. what's the deal? reportsere have been saying that there is a chance that the boj could come out and say they are going to move their etf purchase program away from the nikkei to the topix. those reports came out last week, and we already saw the nikkei falling. quite a few of the companies listed with heavy weightings on the nikkei. that is one thing we are going to be waiting for going into the boj decision tomorrow. are they going to make that announcement? will that boost the topix and pull down the nikkei? that's another big thing that is happening this week, aside from earnings. but also for the stock market in japan, there will be other fed decisions coming through from the u.s. and europe that will play a big part. >> thank you so much. joining us from tokyo. down have the nikkei 225
in the session, .75%. on top of that, have a look at how many stocks are moving. we have at the moment something like 87 stocks. pe ratio is pretty much the long-term average. trading on 16 times earnings. as we were talking about, retail sales rebounding from a sharp drop in may. this offers a sign of improved consumption in the second quarter, fueled due to higher oil prices. air-conditioners, they are trying to be that terrible heat wave. wage gains, shoppers remain reluctant to open their wallets with the sluggish economic recovery still relying on exports. that's not really good when the trade outlook is as uncertain as
it is. over to our have global economics policy editor in tokyo. kathleen, taken away. -- take it away. >> let's get right to our special guest, the portfolio manager at alliancebernstein japan. he follows the boj inside and out. let's get right to the question. skepticism in some parts that this is any more than reports from several news agencies in tokyo that something is underway. this could be another fizzle, that governor kuroda will say nothing and deny anything happened. you believe these are credible reports. why do you think they are credible and what do you expect to hear? >> think the reason media leaks are pretty much credible. it comes directly from the boj itself, planning that possible
tweak, the technical adjustment in terms of the bond purchasing and etf purchases. meeting -- --so you believe that this from your discussions with people close to the boj, you are saying that it is your sense that this is going to happen, and it is being led by the "mainstream camp" within the boj, in other words something governor kuroda knows what is going on and he is on board. why would you this be happening now? >> the boj has always been trying to look at the prolonged easing. for last fall, mr. kuroda and the x deputy were talking about the whole reversal and the prolonged easing will weigh on financial executions, how the
policies become tighter. but markets are speculating. then one thing in evidence to the boj is not walking away at all. what they are trying to do here, achieve here, is they talk a lot about how earnings can wait on financial institutions. we have seen several centrists and boj board members talking about prolonged easing. in 2016, before the introduction, what happened in 2016 in june was brexit, and that may the whole yield curve become really flat. boj came out with more speeches in june followed by media leaks. in july,, there was the comprehensive assessment. fast forward two months later,
in september they came out with the introduction. >> you've seen a similar pattern, where there is smoke, there is fire. let's talk about the operations in the bond market. people are trying to figure out now, it looks like they have tested the boj, but let's sell some bonds in a push up the yield curve. what has the message been from the operations people are trying to decide? >> one thing we should watch out for is the statement tomorrow. the boj will include some of the wording, the boj governor mitigate theaff to effects of the prolonged. if boj allows the 10-year bank to be wider, the angle is to still contribute. a prefer a steeper yield curve to stay afloat, and to anchor
yen and equities. >> a couple more bond markets. ifre's a lot of talk about, they really say something, it will hit the bond markets so hard, etc. do you think it is going to be such a big event, a negative event, for the jgb market if something is acknowledged at the meeting? >> i don't think it will be such a big event. in the second event, there might be something in global bonds, but the jgb itself is ready much -- the stock impact factor is very big. points,ically, 15 basis i think the yield curve will go steeper. kuroda, the one thing that is important is the communication he wants to have with the market.
everything is down to communication. kuroda could do het we saw in the summer, could move around current levels. >> what isn't priced in to global bond markets right now? where can people make money? itin terms of global bond, will have a spillover impact in terms of the global bond market. if you look at the global bonds, which area is rich in valuations, we think it is valuations. a lot of japanese inflows are expected to go into jgb's, because they are hedging costs. we think there's some room for it to go deeper. >> speculation about etf
purchases, buying etf's weighted toward the topix. are you expecting that? will that have an impact on japanese stocks? >> we have seen the market start pricing the whole shifting. have beene big names trading at touch lower. i think it is pretty much priced in. it seems like the market is expecting some sort of a tweak. >> ok. thank you very much for joining us. he is portfolio manager of alliancebernstein japan. he thinks it's going to happen. we will see very soon if it does.in the meantime , everyone is talking about it. back to you. >> that's right. we will know better tomorrow. thanks so much, kathleen. still to come, india is on course to raise rates for the second time in a row. will it be enough to quell sticky inflation and a weak
♪ >> getting started with market action, the indian market is on screen. >> here's the mumbai open, up .2%, trading at a record high. checking in on the rupee, a touch softer ahead of the decision amid speculation of higher rates from the r.b.i. the 10 year yield is up about 45 basis points this year. on the other side we had our guest is you should think foreign costs. we'ree earnings lineup, checking in on reaction to earnings from the likes of allianz, which served up a beat in its petrochemical business, and a weaker rupee. and icici gaining ground despite
registering a surprise loss for the first quarter. showan sachs and jeffries it is expediting the cleanup of bad loans and its balance sheet. hcl tech is delivering an earnings beat, cut to neutral from buy. india, rising for inflation and a weak rupee could prompt the bank of india to raise rates a second consecutive meeting. bloomberg predicted a hike of 25 basis points, but mark mobius says the r.b.i. should actually cut the benchmark. >> i think they should lower interest rates, not raise them. >> do you think monetary policy is effective in a structured economy like that? >> i don't think so. you have different economic situations all over the country which are quite widely dispersed. >> let's get perspective from our india economics
reporter. looking solid. it looks to be the right time, the perfect time for r.b.i. to hike again. >> absolutely. with inflation running well above the r.b.i.'s medium-term target of 4%, in the outlook set to worsen, given the currency weakening and oil prices staying elevated. the timing does seem correct for the r.b.i. to act and economist 6.25% onexpect to august 1. that will take the report rate to the highest into your amid growing signs that the economy is rebounding. apart from costs are rising in the government -- all that means inflation is likely to
stay above 6%, as well as wholesale prices building. that news, that confluence of factors we are talking about, looks like there will be a rate hike this week. to long-termshift tightening? one,ll, that's a tricky given that domestic inflation factors show that it's an inflation targeting central bank and they should be raising rates, but trade tensions arising all the time. and there is an economy growth inflation here. it bites into consumption, and we have the presumption of growth for the past few years. growth, ites into will look to be more cautious on the growth side rather than on
the inflation side. it ising said that, likely that they will keep the policy neutral, which means that it toill stay -- force unwind some of the rate hikes later on if it has gone bad to worse. >> all right. anir in mumbai, our india economics reporter. still to come, a vanilla company with a not so straightforward ipo. it may determine investor appetite for china. this is bloomberg. ♪
western australia. the japanese company expects to begin shipments towards the end of september. it is the world's most expensive energythe japanese company expeo total has a 30% stake. followingtric power the mid power sales dropping by $230 million. quarterly operating profit down nearly 20% from a year ago. it has restarted its nuclear plant, saying it is continuing to lose low-voltage customers. >> -- took off in the second quarter after more people looked on national flights. they say pretax profit rose 44% from a year earlier to $41 million.
saleshelped by a record of in-flight food in insurance policies. inhas 60 airbus planes service in 370 more on order. ♪ >> investors are currently weighing whether or not to buy into china towers ipo. they want to worry less about the numbers. that is from one analyst to says beijing's fingerprints are all over the country. he is in taipei and joins us. what is it all about? put it into perspective for us. is it a utility? what is it exactly? >> i guess a utility. some people look at these companies as in the real estate business. they go around china, build towers, and leased space on those towers to their three major shareholders and clients, china unicom, china mobile, and
china telecom. it's a straightforward business model. the idea is that they negotiate prices at arms length. i have certain amounts of questions about the idea of arm's-length. their biggest clients together comprise 99.5% of revenue, and happen to be shareholders of the company. one of my concerns when we talk about national services, at some point if china tower is a company owned by major customers has to take a sacrifice for the good of the country, that wouldn't necessarily be good for investors. it will be difficult for executives of china tower to negotiate with the same people who are major shareholders. that is one of the many areas unconcerned about with this company. >> silicon plate of interest. when investors look at the ipo, what's the key thing they should be looking at? what kind of return should they be looking at, too? >> well, i mean, in terms of
returns, you can do the numbers. there's a lot of analysis and very good research. one of the things that needs to be looked at is 5g, the new technology they will roll out in china. china wants to be a world leader in this technology, which means starting at home. 5g will lend itself to smaller cells, where the transmitters would be closer together. that in theory also means that in many cases you wouldn't necessarily need the tall towers, they might be more discreet, on best shelters, telephone poles, so forth. the tower business would have more than one telco on that tower. but when you are putting them in smaller towers you could only get one or two, in the economic still work out quite as well. that's one of the things you need to look at. you need to look at the technology, the nuts and bolts of the business, to understand
whether or not it will work going forward. the other thing, as i pointed out, national security -- issue.l service, a big when push comes to shove, do we expect the china tower executives will have to all the whatever beijing needs or wants from them? >> tim, have a great day. our bloomberg opinion economist. gdp print was weaker than expected. the prospects of the trading day on what's happening in this part of the world. 225 is off by .7%, hong kong and hang seng lower by .7% heading into the lunch break. that's it for this edition of "bloomberg markets."
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