tv Bloomberg Markets Asia Bloomberg May 15, 2019 10:00pm-11:00pm EDT
rishaad: did not mention trade in the headlines, but we did mention huawei. malaysia, twoh in hours away from their latest gdp figures, about 4.3 percent growth. a lot going on in the indonesian markets. >> also getting property numbers out of china. we had aussie data, the phone is ringing. yvonne: ignore that. we mentioned the spacex launch. seems there is a failure to launch, higher when it comes to risk assets. is that typical risk off session we are seeing when it comes to the trade headlines. of course with huawei, ratcheting up where the u.s. and china go where it comes -- when it comes to negotiations. investors continue to say, we do not know what to do for the next summitks until the g20
when president trump and president xi jinping meet. down 0.8%. new zealand looking better, but it has been mixed. the aussie dollar watching closely after we saw unemployment, surprisingly saw an uptick in april as more people went to look for jobs. we are seeing risk aversion heading to safeties like the japanese yen. 9.42 for your japanese yen. zoom out, commodities looking green. let's bring your reaction when it comes to the bond market, especially australia. theaw the aussie dollar hit three year lows. bonds are rallying. your two year at 124. 10 year yield at record lows, 166. down four basis points. china at 3.27. offshore renminbi reflate off at 6.91.
we continue to see more weakness in the currency. flip the boards and see the property market. it seems we are seeing more of a bright spot when it comes to chinese home prices. amidst the soggy outlook for the economy after what we saw with the latest data dump, we saw home prices rise a second straight month. perhaps we are seeing resilience. still going to be a growth driver when it comes to the economy. we are seeing stabilization. this highlights the funding pressures that still remain for property developers. you look at market conditions, funding conditions, activity conditions. we are seeing signs of stress persisting for many property developers. debt is maturing as well. cbre mentioning financing pressures as well. rishaad: coming through at the moment [indiscernible]
billion worth$412 of infrastructure spending. what are they spending it on? david: part of it goes toward 25 airports. infrastructure on that side, the power plant. they have been stuck at 5%. billion context, $412 -- indonesia is, roughly, about a $1 trillion economy, so that is about 40% of gdp. a fairly hefty amount. we are: let's see how doing first word news-wise. >> we start with the latest on the u.s. economic data. u.s. factory production fell in april for the third time in four months, led by weakness in machinery and autos, adding to signs of a slow. 0.5 percent and that missed all estimates in the
survey. factories losing momentum as the ande war raises prices complicates business decisions. the trump administration has a plan to reallocate at least $2.5 billion to build a wall along the mexican border. awarding the next building contracts later thursday. indonesian will explode by the justice department. some -- indonesia posted its biggest trade deficit in at least a decade. rupiah pressure on the and policymakers more reason to keep experts on hold. exports dropped 13% in april while imports fell more than 6%. that pushed the deficit out to $2.5 billion, far wider than the
$509 million shortfall predicted. a showdown between italy and the european union rippling through rural area athens. theian stocks crumbled, and prime minister said he could see the deficit rise against e.u. limits to boost employment. commissionn forecasted they would exceed the bloc's prediction next year. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am su keenan. this is bloomberg. tensions between beijing and washington heating up further after the u.s. moves to curb huawei's operation in america. zte may also be hit. china says there companies are being unfairly singled out.
>> we urge the u.s. to stop cracking down on chinese companies on the pretext of security issues and provide a fair, equitable and nondiscriminatory environment for chinese companies to operate in the u.s. to get more from a senior editor and tom mackenzie in beijing. david: take us through the latest details. >> sure. for nowd been talk months that the u.s. was going chineseaction against telecom companies, restricting them. that has now happened. the u.s. has not only gone with that step, they have gone further and said huawei will get an order requiring government licenses to do a range of business. circulating through this order, still looking through it, but this is a severe step. senator tom cotton on the senate floor referred to it as a death penalty for huawei, although the
u.s. and ministration is taking pains to not go that far. it is a major move to restrict what huawei is able to do in the u.s. it comes amid tensions in the u.s.-china trade war, escalating tariffs. the u.s. is not linking those, but it is hard to not see the coincidence of the timing of this move and take heavy note of it as i'm sure the chinese will. david: tom, what is the response? fromwe got a response chinese officials when they learned president trump was planning to sign this executive order. they were vociferous. we ran that soundbite earlier. they have been concerned about actions the u.s. has been putting in place to freeze out chinese companies, particularly huawei. on, thes touching blacklisting, the licensing, the requiring of use -- u.s. companies to get licenses if
they are dealing with huawei. it is less about what huawei cells into the u.s., because their market share is tiny. it is more about what they can sell to huawei. members of the huawei have been telling me they have plans in place to stop some of these components. they are well aware and have been aware of this, but this is a major blow for this company. you would expect the chinese side to continue on a government level to push ahead in trying to pressure the u.s. over this issue. it is very hard to unpick this from the trade side. on the corporate level huawei is suing the u.s. government and the canadian government. according to various reports, huawei would shut down if chinese authorities are to eavesdrop. no spy agreements with germany and the u.k. does not cut the mustard for some, does it?
this comes down to the national security law in china which many interpret as putting the onus on chinese companies and individuals to work with security services here, should they be called upon to use it. huawei denied they would ever except that kind of request, ever open up and put backdoors into their equipment. it is very hard for anyone who has lived and spent time in china to accept the argument a major corporation like this would be able to deny a request from the chinese state. in terms of how this campaign is playing out, they have had some success, even key u.s. allies like the u.k. have balked at the idea of blocking huawei completely and that led to political fallout in london in the last few weeks. germany as well has pushed out -- pushed back against u.s. demands.
david: derek, while the u.s. appears to be firm on china, it pulled back when it comes to negotiations with europe and japan. talk to us aboutdavid: autos. auto tariffs it has been an existential threat from japanese and korean carmakers of major tariffs on things coming and that would make these imported cars flat out unaffordable. the trump administration singled about a six month reprieve while negotiations are ongoing between europe and the u.s., and japan and the u.s.. seems that south korea might be exempt entirely. that is a move that pushes a lot of the risk of this down the way. have are companies that gone on an aggressive lobbying from the last several months,
trying to make the point they are investing in states. nothing is ever completely unrelated. personally a lot of the factories of some of these companies happen to be in very red states, states that donald election,in the last critical to his campaign in 2020. they made a point of noting those manufacturing bases. number in these companies is that this is a risk deferred for a meaningful amount of time, at least six months. for the u.s. there are bigger fish to fry and the bigger fish are chinese. chinese, the, the people's daily calling donald trump a thug. derek: yeah. the gangster tactics is one of the ways they were referring to
that. i think the president won't mind any of this criticism at all. wr chinese are helping him ite election ads. if the white house has gone on, the major, overwriting idea with china is, not that we need a bullish equity market, but to show we are tough on china. you have seen the president's tweets to that effect. if that is the idea, the chinese coming back and saying the president is being too tough, that will sound like he is standing up for america. it is not going to play in some horrible way. there is not an electoral constituency in the plane states saying, my goodness president trump, please be softer on china. that does not exist. rishaad: well put, derek wallbank. still ahead, with the yuan
♪ welcome back. let's turn our attention to some parts of southeast asia. a rate decision and the escalating trade war threatening to upend the global economy's much anticipated rebound and could throw decades long expansion into doubt. rishaad: let's look at the implications. onstal, what is your take what is happening, in a holistic way. : the trade war
escalation, there will be a lot of downside risk, especially for the more trade-oriented economies. korea, taiwan, thailand. india, probably not as affected. thailand -- thailand thailandt to me, does have the policy room to respond in case things get worse? thailand's case, the policy response would have to be on the fiscal front. in terms of monetary policy rates, they are low at 1.75%. the limit to how far the central bank can lower things further. we would need to see another policy. at least on that aspect thailand does have room, more ammunition. rishaad: crystal, let's have a
look at what is going on with indonesia. the trade war could arguably be taking a bit of a toll on the trade deficit in the country. let's have a look at the trade deficit going back to 2008. it has been largely positive, but we have seen a $2.5 billion trade deficit amid this trade war. the biggest decline in three years, imports on the way down at 6.6%. restricting overseas purchases. this has created a blowout in the deficit far wider than the $500 million odd shortfall predicted. how much can you attribute to the trade war, or perhaps to the domestic situation there? krystal: if we look at indonesia's trade numbers in march there was a surplus.
it turned into a big deficit in april. we saw exports slumping, slightly driven by the oil and gas sector. volume supplemented and it created structural decline in the sector due to aging oil wells. we also saw a potential increase in imports. part of it is seasonal. historical trends, we should see a pullback in imports in june. that would alleviate pressure on the trade deficit. staying with indonesia, they announced this $412 billion staggered over the next five years or so. we are showing a breakdown toward viewers. 60% of that massive fiscal push. going into transportation and infrastructure. to unlock theough
potential of growth in indonesia? we have been stuck at 5% for half a decade now. spendinginfrastructure has been key for president jokowi. remain a keye will focus of his policy platform. that is more business as usual. may be 5% or higher. in particular the manufacturing sector, diversifying the expert base. some growth to be higher than what we are seeing right now. at what is you look going on in the areas you cover here, who is the star performer, who is the laggard? think thailand stands
out as one that will be struggling. we do expect growth to be very weak, the weakest in four years. it is facing a lot of pressure points at the moment. far,u look at the data so government spending has been picking up. everything else is suffering. we are talking about good exports down 4% in q1. tourism sector also struggling. this used to be the key support for the thai. private consumption also not picking up the slack. on top of that, droughts. the potential escalation on the u.s. trade front. we have recently downgraded to 3% for forecast 2019. i am surprised you picked
thailand because you also cover south korea. arguably they are doing worse than thailand. krystal: yes, but the difference i think -- if you are talking about just absolute growth, korea is the more advanced economy, but at least on the korean economy's spending, you have one less element of consequence than you do in thailand that poses even more downside risk. david: do you expect the export picture to continue to be weak in south korea? it has not improved at all. krystal: yes. if you look at their numbers for 10 days, still very weak. semiconductors still struggling. korea's growth will also be disappointing this year. david: you are very depressing to talk to. i do not mean that in a personal
nissan has rebuffed so far. david: a look at tesla. analysts are curbing their enthusiasm for the company. shares from $240 to $200. revenuecut tesla's forecasts across all models amid lingering concern about production levels. calls outnumbered since december. it has fallen almost a third year today. rishaad: isuzu with a more modest refund. at $4.3me now seen billion. 18 million, so that would miss the survey that was compiled by bloomberg. >> we are watching when it comes to the huawei headlines. it is the suppliers actually falling here today and leading
to declines we see in asia with the u.s. announcement of curbing the market.ess to not pinpointing huawei, but it seems they are targeting china's telcos. some of the suppliers really falling out of favor. technologies, sunny optical are part of the list of huawei suppliers. they are one of the biggest movers on the hang seng today. sunny optical down 4.3%. were banned from providing services to u.s. markets. losses down 1%. tencent, we focused on the earnings. we had erased most of the losses at the beginning of the session after we sell revenue growth the slowest pace since its ipo.
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>> it is 10:29 a.m. in hong kong. i'm sue keenan with the first word headlines. we start with quality, which is shrugging off reports the new order by the u.s. may restrict american companies from using its products. iscutive director says -- unfair and unnecessary. president trump may delay up to six months a decision on auto tariffs, this to avoid derailing trade talks with the eu. and japan sources. -- eu and japan. sources say trump does not want to further antagonize allies as
he works out a trade deal with china. tracy secretary mnuchin says he has no plans to fly to china for trade talks. he adds he is hopeful for a deal, but not confident. president trump signed an order that could restrict chinese telcos from operating in the u.s.. the order declares a national emergency against communications technology, but doesn't specify any countries or companies. washington pursued a global campaign to keep chinese tech out of privacy networks, urging allies not to use technology made by companies such as huawei and zte. a satellite image shows a saudi pumping station fully intact, this after claims it was attacked after armed drones. the footage shows two black marks near the heart where the -- point where it crosses the facility.
yemeni rebels said tuesday they struck the attack. the attack caused a temporary shutdown of operations and follows saudi claims of separate attacks on two oil tankers. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm sue keenan. this is bloomberg. the offshore yuan slumped by more than 2% this month. this is down to the trade standoff intensifying. we saw the currency reach its weakest since december. as these markets turn more bearish on the currency, our next guest says it is unlikely china will let it pass the seven mark. david: senior asian fx strategist from mizuho bank is with us in the studio. why don't we get past seven? -- are destructive to the
cheney test of the chinese economy. rishaad: why? admit the yuan is still an emerging market we will check over asia.t in the bnp i think the seven level is very important, because we did not see it picking up above seven past 10 years. i i think it will be uncharted territory for the are in the side. at that time, if china wants to restore order in the fx market, i think they will need to use to cut lot of fx reserve expectation.
in that scenario, if they use too much fx reserve, they fall into the trap where they reserve the fx or rnb again. that is quite dangerous to the chinese economy. >> how much lower could we go? what kind of a range are you watching for? ken: in the near-term, it is under heavy because there is a lot of uncertainty in the trademark. - itink we can look at cny - hit the 6.9 level. think in the near-term, maybe at 6.95. going up to near seven will be quite dangerous for the chinese government. rishaad: we don't expect the so-called nuclear option, the chinese selling off treasuries en masse.
we could see them buying fewer. will that have any implications for you? ken: china holding off on u.s. treasuries, it is reminding investors that china still has such an option. they do aing so, if fast sale on u.s. treasury holdings, it will disrupt the global financial under. -- financial order. the will also suffer, markets in asia and in the fx reserve. looking after the sales of the u.s. treasury, i think it will be destructive to the confidence on china and its ability to defend the currency. ifmost people watching say it wasn't for that, they would fall much further. ken: slow down the depreciation
pace rather than reverse the depreciation trend. we saw it is quite effective. according to our model, the adjustment has been a slow down effectively over the past few weeks. right now i think it is a most reflecting the depreciation ratio. david: what is the best trade, then? ken: if you want to conserve the --reciation resizing, the remains caps on around 300, 400 points. it is quite different than 2016
when cnh got to 2000. rishaad: if the trade war intensifies, bets are surely going to be off. ken: if the trade war intensifies and both sides impose their 25% tariff, i think better to do it to reduce exposure. >> in terms of policy, what are you expecting from the pbmc? will it be more broad-based, more calibrated? ken: previous he is trying to stabilize the market. the factor is effective to anchor the expectations of our.
the fx reserve stands above the u.s. dollar. there is capability for china to do an intervention and defend the currency. david: you look at it objectively, where should the chinese exchange rate be? should it be at parity with the hong kong dollar? ken: right now it is depreciating, but hong kong -- will not be changing in the for siebel future. giving the hong kong dollar will be ok at this level. has been pretty neutral compared to previous trade rounds. ken: we saw the last round of ade war -- this
time markets are falling into a recession sooner. expect u.s. dollar strength in the trade war this time. less heavy depreciation pressure for the u.s.. thank you. rishaad: a veteran emerging market investor is urging caution and reward in the midst of the trade war in emerging markets. he spoke to us in london. >> we are looking at places like vietnam, places like bangladesh, where a lot of the chinese manufacturers are moving their production. you can have a very interesting situation where exports of
low-cost goods from china to the u.s. are going down because of the tariffs, but that is the move to these lower-cost countries. that is where we would be looking to see opportunities, for exporters at least, in these weak currency countries. further afield, we are interested in places like brazil and india. those are the two countries where you will not be very much affected by what is happening in china and the u.s.-china trade disputes. >> what is your best case for what happens to the yuan, and how are you playing that? >> i think the situation now is so liquid and so difficult with regards to china-u.s.. you will have to be cautious when you look at individual companies that depend on next force to china or exports from china to the u.s.. that is the reason why we are very cautious. you can see the chinese market is down. i think the emerging markets index will be continuing down as
this continues. china now represents 30% of the index. about when you talk opportunities in emerging markets, we are seeing a lot of funds flowing out. how do you take advantage of that without trying to catch a falling knife? mark: that is a good question. most of the funds are etf funds. the index depends on china. 30% is china. if china goes down, the index goes down. it is understandable. what we do as active investors, we are not going to follow any index, we will go after these countries and companies that are not going to be affected, therefore we can escape from this downturn. >> that was mark mobius from mobius capital partners from london.
rishaad: you are back with "bloomberg markets: asia." u.s. aviation regulators said to review going's 737 max 8 as soon as next week. the faa says it wouldn't allow the plane to fly in the u.s. unless it is "absolutely safe to do so." china's biggest airlines may team up to seek opposition from boeing, southern china and chinese operate half of the max planes carded in the country. david: oracle result part of a workplace dissemination case brought to the u.s. labor department, agreeing to address claims it has under hired non-asian stuff from -- staff from college campuses.
as part of the accord, oracle must provide annual reports on the racial makeup and success rate of its college recruits. rishaad: south korea's sovereign wealth fund may consider the state of the ritz carlton in central park. we have been told they have received interest from at least two potential buyers and are seeking $600 billion from the sale. the ritz-carlton is one of the priciest hotels in manhattan. david: let's have a closer look at the middle east, where washington has ordered nonemergency government staff to leave iraq amid increasing tensions in the region that the u.s. is now blaming on iran, as fears rise in the region heading toward another conflict. rishaad: we spoke to the uae foreign minister. but again incerned,
think the key word is reasonable. clearly i think we have to be calm right now , and we have to deescalate. everybody follows all of these developments, and this is the region we live in. it is important for us that we manage this crisis and it is not the first crisis we have seen this region. is a very turbulent region. clearly we need to work very hard at managing our region. >> you use the word crisis. is thetion to you, what risk of tripping into war? is it a high-risk? with, i think with wisdom, our recognition that we need to clearly,ran's behavior but at the same time not to
deviate into a crisis is very important. as i said, the region has seen of difficulties because of iranian the i think it is essential we and our friends are able to deal with this. clearly the onus is very much on iran, because the current sanctions on iran are formidable, and they are effective. >> do you think the sanctions are biting harder than they anticipated? minister gargash: the sanctions are biting very hard, and you can clearly see it in the debate within iran, if you follow that domestic debate. they have to address as effect that countries in the region -- countries in the international community have concerns about iran's behavior, and for iran to allay these concerns, it has to look inward about what it has
been doing and address it. >> you launched an investigation along with the united states and french. the phraseology we are using thus far, iran is responsible for the attacks? minister gargash: as i said areier in the briefing, we being supported by various countries, the united states, other countries wanting to join. the investigation will take a couple days for us to know exactly what happened. then it will have also to credibility of the various countries that are launching it. i don't want to go ahead of the curve on this one. we will weigh on the investigation. >> that was the united arab emirates foreign minister anwar gargash. let's take a look at the movers out of indonesia. the jakarta composite pre-much
flat among the we are watching construction stocks after the government drafting these ambitious plans for more than $400 billion in building projects. everything from 25 airports to new power plants. we are seeing mixed reaction and it construction stocks in particular. plananalysts saying this gives some positive breath of fresh air to some of these companies, it shows at least there are some upcoming projects in the pipeline. a big concern in the medium to long term could be when it comes to what this means on the impact to their balance sheet. we are seeing a mixed reaction. fact, we will be headed back to jakarta for a battle of the charts. one of our contestants will be from there, also from seoul. that daily segment is coming up next. rishaad: battle of the charts coming up next. this is bloomberg. ♪
rishaad: it is that time of day, battle of the charts. asia politics reporter comi ng up. david: viewers can see the charts on the function at the bottom of your screen. should be right now. kicking things off in jakarta. go for it. >> good morning, guys what you will on my chart is a snapshot of indonesia's trade
deficit from last month. it went to negative $2.5 billion. that is the worst in more than a decade. you will see the currency, which has come under renewed pressure. what does all this mean? this is coming as we see an upswing amid global concerns he from the trade war. --uncertainty from the trade war. this is a special chart. these are magic charts. they will perhaps tell you what the central bank will do in about four hours from now when they need for a policy rate decision. few expectations that the bank will remain on hold. rishaad: is it magical? [laughter] tellingal, because i am you what will happen in about four hours from now. these charts are not looking backwards, they are saying watch
this space and watch the terminal in about four hours from now. >> [laughter] rishaad: does it tell us where the rupiah will go next? is there any correlation between those two lines? >> the correlation is that both the globals of uncertainty, and the trade war ratcheting up in tension. the rupiah has come under renewed pressure. it is under 2.7% in the last month, last year the central bank was raising rates so many times. six times last year. central banks are now cutting. indonesia's central bank staying on hold for a little while yet. david: those two metrics of traffic and weather tell me the indonesian currency might fall to lower-levels than migraines
in school. -- than my grades in school. >> it is all about the magic today. i am here to present a silver lining for south korea's auto markets after he was president donald trump announced a six month window he currently considering for the european union and japan before imposing auto tariffs. you can see on this chart, south korea's automakers are moving quite closely intend him with its german rivals. they are the ones that rallied pretty hard overnight. you can see daimler really spiking up at the end of this chart. while you also see is an indication of what impacts it will have on south korea, again a silver lining for the cost be. -- for the kospi. krx south korean auto index, highly likely to take a cue from their german rivals to head
upwards. with the won maintaining quite weak, the semi conductor is quite sluggish, and as you mentioned the ongoing trade war lingering above our heads between the u.s. and china, this could give south korean domestic carmakers the hope they needed. rishaad: my problem with that chart is in you are comparing all of those carmakers in korea with just one on the blue line, which is daimler, a luxury car manufacturer. it is not apples and apples you are comparing here, surely. >> well if you do compare kia motors, it rose 3.3%. the point i'm trying to make with this chart is the general auto market is taking a cue -- rishaad: but you don't decide i am going to have a kia, no i
think i will go -- that is my point. >> you might want to go for a kia. a k pop group is their ambassador. you may want to reconsider. [laughter] rishaad: because you mentioned that, i'm going to give it to you. be patient. i was going to give it to you, but because of that -- you know how people put posts on instagram and they put two words and 20 hashtags? that is is what you just did. i'm kidding. >> i will have to go with magic chart. i have to give it to you. just because you put a fancy
adjective next to it doesn't necessarily make it magic, but i liked it. it was a telling chart given we are getting close to the bank of indonesia. rishaad: mine has nothing to do with your chart. congratulations, you win nothing. whenever bloomberg users can interact with our charts using gtv . catch up with some of the key analysis. you can save those charts for future reference as well. what is going on market-wise? david: u.s. futures were down earlier, now they have stabilized. you have hong kong and shanghai. from asia. ♪
>> i'm carol massar in boston, and for emily chang. this is bloomberg technology. coming up in the next hour, we explore the biggest industries in the region, health as we sit down with the ceos of boston children's hospital and health care.com. plus, turbulence and turnover as ge has upended the company's plans in boston. we explore what happened.