tv Bloomberg Markets Asia Bloomberg August 15, 2019 9:00pm-11:00pm EDT
beijing.s 9:00 in welcome to "bloomberg markets: china open." yvonne: we are counting down to the open of trade. david: we will get you the top stories this friday morning. session on rocky wall street. recession fears sent treasury yields down to levels not seen in years. tom: hong kong announces billions of dollars of stimulus, warning the economy will struggle to see growth.
not thethe process trigger. -- it says the protests are not the trigger. tom: more mixed messages on trade china says -- on trade. trump says he wants to hold a phone call with president xi jinping soon. signs of some positivity, at least when it comes to the earnings. alibaba beating the street. david: something to take advantage of. the data has been bad. singapore and we have hong kong, worst-case scenario growth is at zero. why yields are where they are and why the boj might need to step in. yvonne: a lot of movement in the
last couple of hours when it comes to the bond market. you mentioned hong kong, final numbers come out today after the government slashed their forecast. they are announcing a whole wave of measures to boost the economy. we will see if they do enough to prevent hong kong from entering into a recession. weare still looking weak could be on set for a fourth straight week of decline. u.s. futures were positive. we have seen the reese deepening of that yield curve -- the steepening of that yield curve. we saw stronger retail sales in the u.s. fixed income, fixed income, fixed income. the u.s. 30-year yield dropping below 2%. the 10-year yield dropping. we are touching those three year lows as we speak.
japanese dropping 24 basis points. interesting to see what the boj is going to do to halt this plunge in yields. -- we will watch for that and bringing the latest. --are talking about dollar-yen, we are back above one dollar six. bid today.ng a tom: absolutely. another escalation in the trade war rhetoric, looming u.s. tariffs violate the court's reach. beijing is bowing unspecified -- is vowing unspecified
retaliation. the president says he will schedule a call with xi. having goode are discussions with china. they very much want to make a deal. we had a deal and they decided not to make it. i think they would like to have that opportunity again. we have a call scheduled soon. we will be speaking to him very soon. tom: certainly, the lack of a trade deal. our next guest is here to tell us, should you be chasing this rally? >> people are scrambling for safe assets. you can see this in bonds and gold. they should be negatively correlated but they are positively correlated at the moment. we still have money pouring into our organization.
money is still coming into swiss bonds. people are scrambling for yield and looking for safety. this tells you a slow down is happening. this tell you that earnings are starting to decrease across the u.s. yvonne: is it telling you a recession is coming? >> you have to see how the slow down transpires. where the yields are heading right now are where they were in 2015 and 2016. then, we had china come through and save the day. his china going to do that today -- is china going to do that today? they are sticking to their guns. they will not save the world this time around. tom: where do you want to be on the yield curve? are you looking at tens or 30's?
are you interested in the credit space? >> the front part of the yield curve in the u.s. feels like the safest place right now. if you want to take the other side of that, you will see less volatility. you will see further rate cuts coming through. we are thinking 50 base points at the next move. we are on a trajectory to zero here. you will start to see a steepening if they see an acceleration in rate cuts. credit markets, the front part of high-yield looks like a nice place to be. credit spread is such -- is so valuable today. if central banks can get their act together, credit will become even more valuable. the standout asset for us, chinese bonds. they have not kept up with the u.s. rally. they are around that 3% level
while the u.s. is down around 1.5%. if we do happen to get to the slow down phase, we will have to play catch-up. david: we are at 3% on the 10-year. need you step out of the way? >> they can still participate. i think they are worried about the currency. what they would really love to do, they would love to appreciate the yen against their trading partners. that is quite tough right now due to the political tension around the world. the numbers are pretty good lately. we have a reasonable gdp and we had a big bounce and the machinery orders this week, which was a surprise -- big bounce in the machinery orders this week, which was a surprise. taiwan, south korea all under pressure right now. yvonne: stay with us.
hayden will stay with us throughout the hour. su keenan is a new york. , whichs start with china has lost its status as america's top foreign creditor. japan became the leading holder of u.s. treasury. tokyo increased its -- of u.s. bonds, bills, and notes by .lmost $22 billion that is the highest level in 2.5 years. that is a fraction ahead of beijing's holdings back in june. hero -- the euro fell to a two-week low. andcommon currency was down touch the lowest since august 2 against the dollar. governing councilmember reportedly said significant
easing is needed next month. he is said to have added that it is better to overshoot than undershooting. t. undershoo the iranian oil tanker in gibraltar has been released. the u.s. is threatening sanctions to anyone who supports the vessel. it is called the grey swan. tehranreleased after provided assurances that it will not fail. person has been killed and dozens more have been hurt as a powerful storm lashes southern japan. the typhoon made landfall in western hiroshima with torrential winds and rain gushing to 150 kilometers per hour. latrines -- bullet trains were
suspended and domestic flights were also suspended. forecasters suspect -- expect more than a meter of rain. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am su keenan. this is bloomberg. ahead, as hong kong braces for more protest, we will take a look at the growing fallout on the economy. tom: alibaba asks, what china slow down? the company is reporting steady earnings. this is bloomberg. ♪
billion. that is why they needed to buy a little bit less. yvonne: japanese bonds are now the high-yield there's. talk about the -- high-yield ers. watching the fix and some positive earnings. we can dig into this. as term -- in terms of alibaba as well, beating the street. net income more than doubled. risk ofed just as the recession spiked. archrival has warned of a tough economic outlook. joining us is mitchell green. he is an investor in alibaba and has 20% of $2 billion in assets. thank you for joining us. invest your top take on these
earnings -- give us your top take on these earnings for alibaba and what it tells us about the company strategy. mitchell: the numbers speak for themselves. alibaba continues to perform, continues to perform very well. chinese consumers are spending money on the alibaba platform. they are spending some money on jd. all three of them beat their numbers nicely. i think there is a lot of worry in the western world that china has ground to a halt. showings like alibaba gross merchandise value growing at 35%. they show that is not the case. consumers and china are still spending money. -- consumers in china are still spending money. david: do you think they are expanding a little too quickly? mitchell: i did for a while but i think daniel, who is the ceo,
is really focused. we have the core business, which will generate $30 billion and is growing at nearly 30% a year and they will use that to get into other growth sectors. billiond business, $5 rate. it is going 66% a year. it could be profitable. i think that is smart. digital media and entertainment is an area i am more skeptical of. they said last quarter, they would start to pare back losses there. i think he went from -50% to -35% this quarter. that is good to see. they believe new retail is a huge opportunity for them. i tend to believe it as well. i think there is an interesting off-line-online dynamic they can play.
i think what they are doing in southeast asia and india is smart. it is one of the last untapped regions of the world. greatk these guys are capital allocators and they have shown it over time, to be disciplined, and that will be reflected in the stock price. unless donald trump sends a tweet. if you are a long-term investor, things will go very well. tom: we will bring our viewers the yuan fix. it is something we have been obsessed with the last two days. 12 against the dollar. pretty much with the estimate. yuan currently
trading at 7.05. getting back to the alibaba story, are you adding your allocation in terms of alibaba stock? what is your stock currently trading? target ise 12 month 219. mitchell: we bought stock yesterday before the quarter. if there were not -- if the trade war was not going on, this would be a 230-240 dollars stock today right the stock can double over the next few years and i think there is no better company on the planet over the next decade in terms of risk-adjusted return. this company literally prints cash, trades on a mid-teens earnings multiple. it grows 40% a year this company trades -- it grows 40% a year.
all these software companies in the u.s. trade 20 times revenues. trades 15 times revenues and grows 40%. it is laughable. david: why is only 20% of your fund in it? mitchell: we could allocate more. i own a huge percent of my own personal net worth in it, too. i do not run the alibaba fund. have known these guys for a long time. alibaba at $6.75 a share -- a share in 2011. yvonne: how do you feel about the rest of chinese tech at the moment? is there more opportunity on the mainland?
mitchell: i think that is interesting. the great thing about china, they appear to actually like dominant monopolistic companies. less people to have to interact with. there is a huge regulatory issue hanging over facebook. we are not investors and a lot of other companies in china. we are but investors -- we are investors in alibaba. there tends to be, people that love alibaba or the people that love tencent. there are two different camps of people. tencent, the holding company, is a business i am not close to. it is growing superfast. i do not have -- i am not an
expert on that. david: kind of like the lakers and celtics, right? alibaba lists in hong kong, would it have the same allure to you? mitchell: one hunter percent. -- 100%. they always wanted to list in hong kong and they could not because of the dual class structure. it is crazy that hong kong did not amend it for them. i like to say it the following way -- this is one thing alibaba , it drove management a little nuts. states and western investors, nobody uses the alibaba platform. it is equivalent of literally having amazon listed in china and no americans could buy amazon.
once hong kong get started for alibaba, i think it is going to be a great thing for the company when all of these retail -- ators in china can homegrown giant. i think it is a really good thing. you.e: mitchell, thank joining us out of santa barbara. thank you for your insight. the pboc telling us to look somewhere else now? >> the pboc needs to keep devaluing the currency. you will either do it through the currency or fiscal spending. it looks to us, seven was not the magic number. they will allow the currency to devalue because competitors are in the region.
they are the people playing head to head with. we have a little bit of fiscal spending. if things get really bad, we will have a combination of rate cuts and rrr cuts coming through. i think they are sticking to their guns and the credit impulse, total social financing sitting at 10% is exactly what they posed at the start of the year. gdp, around 9%. until we get worse information, we will see that -- everybody is still sitting here. this is not coming to an end. aonne: hayden, hold on second. i want to show you live pictures happening outside of our building at the moment. garnering a lot of attention
few months of the year. reliefsame time, tax halfnced in may, more than of the tax liability. bolstered by expanding credit. a rise in 42%. offsets the ability to make money from funds ever since the pboc became the custodian for the third-party payment platforms. david: counting down to the open and get the final gdp numbers out of hong kong later. , ay are pretty much told us forecast of at least zero. it is probably going to be bad.
yvonne: you are watching "bloomberg markets: china open." these are life pictures outside our building -- these are live pictures outside our building. gathering a lot of attention on social media. people are taking pictures of a flag or a sign of china and hong kong, two hands shaking. gauging the temperature and where things are, the mood in hong kong at the moment. we will see what happens on
sunday where there is that plant march. -- planned march. tom: we just got more mixed messages in the last 24 hours. we heard from president trump saying he plans to have a call "soon."esident xi there is no evidence of any desperation. up,erms of markets opening futures have been pointing to moderate gains. we had gains on wednesday and thursday and we will see if we get a third day. shaky, theng pretty trade conversation is part of the mixed. stepping inhe pboc with additional liquidity. we can turn on -- turn to the
yuan, slightly weaker. just marginally weaker than the estimates have been. we have seen a bit of a strength for the yuan. david: have a look at the open in hong kong. we are coming off a fairly turbulent week and we are bracing for a big protest on sunday. we are flat at the open, which is pretty much what we are seeing anyway. today, the due out final numbers are coming out. let's have a look at your property stocks. -- 4%.d yields you understand why there is a little more value. finance index in hong kong, flat as well. here we go with the 10-year
yield, just above the 3% level. thate coming from 3.7% on yield in 2018. this looks to be a good trade, i guess. we can ask hayden that question, i guess. pretty boldmade a call about a year and a half ago inclusion and $3nclusion trillion would plow into the chinese domestic bond market. are you sticking to that call? hayden: the money is still pouring in, foreigners are still investing. atu cannot get the anywhere else.
going into the index, announcements from the other index providers, the other big government bond index providers. there will be further inclusion and people will be scrambling for yield. david: you had a previous estimate, 3 trillion, i believe, by 2020. yvonne: i just asked him about it. david: is it a no-brainer? about theam worried supply of government bonds. the unusual thing about the chinese market, the huge policy bank piece. it is the same size as the government bond piece. that will make the market more viable. foreigners are still mainly going into government today. for the first time ever, we are seeing global investors make a standalone chinese bond
allocation. you have a massive problem today . imagine going into a recession tomorrow, where will you hide out? if you believe in -200 basis points in european bonds and japanese bonds, you are ok. otherwise, you have a problem. chinese stands out that china stands out to somewhere you can put allocations today. you have somewhere where the bond market can rally. cash.people say, go into cash costs you. u.s. treasuries, chinese government bonds, and gold. costsou said that hedging are relatively cheap. what about the currency risks? at what level in terms of depreciation for the yuan, which you forecast, at what point does not become so low that it does
not make sense continuing investing in chinese sovereign? hayden: they will be hedging it here. if you are hedging -- most investors are still stuck in the old world. that cost you a lot of money. you can take that currency call out and fully hedge it and get the interest rate you are looking at and i think that is where people are missing out today. exactly what you are talking about, worried about the currency. the is goingber, down faster you're paying the investors -- faster. european investors are buying unhedged. money ishere the coming from.
david: final question. where yields are, -100 in switzerland, whatever it is in germany. bonds have been pricing for slow down for some time but they look further ahead as well. steepening see a re- in the curve? hayden: you asked the most crucial question. the yield curve steepen sub as soon as the central banks start cutting. that is the sign that you are going into a recession or a slump. if the fed is coming back, the teepens, that tells you you are getting close to the recession.
aggressive rate cutting could -- stevpens. re- yvonne: hayden, thank you. joining us here in hong kong. we will start with singapore, exports posted another double-digit decline last month, a further sign the city is on the edge of an economic downturn. domestic exports declined 11.2% in july from the same time last year. both categories fell on a year on year basis. congressman are being
pairedentry by israel the netanyahu government says they are being barred because of their support for a boycott of israel. unprecedentedp' s intervention anchored democrats and one -- anger democrats and one prominent republican. the world's largest shipping line is adding a gloomy forecast for the global economy. a warning about trade and weakening demand for containers. shares jumped as profit beat expectations but then fell as maersk continued to say that the escalating trade war could move up demand. alibaba, the cofounder says he
is moving to take control of the brooklyn nets and their home court. he is expecting to sign a deal valued at more than $700 million to buy the berkeley center while picking up the 51% of the nets he does not already own. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am su keenan. this is bloomberg. tom: president trump is suggesting chinese leader meets directly with protesters in hong kong, tweeting that it would lead to a happy and enlightened and to the demonstrations. china hit back against alleged foreign interference with the ambassador to the u.k. saying hong kong faces its gravest situation since the handover.
-- we have then full trust and confidence in the administration to handle the situation. if the situation deteriorates , the central government will not sit by and watch. we are talking about the climber. this is what he left here today this is a banner we saw early this morning. flags of hong kong and china with that symbolic handshake. it looks like it is a signal of a call for peace after 11 weeks of a face-off between protesters and hong kong police. we will see what happens on sunday.
we have been talking about these ads. david: normally, i do not obsess over the weekend glitz. violence, love china, love hong kong, love yourself, love freedom. interesting times. itperature is cool when comes to the economy and hot when it comes to what is happening in the streets. of full support for carrie lam. i think that is worth pointing -- what isg into why the take of it? give us more details about
the stimulus package announced by the hong kong government. how far can he go to address some of the economic pressures? >> this is an additional round of stimulus. thes not to do with protests. he was quite clear yesterday, of theit is because trade war. protest --ted to the relate it to the protest. they are not extremely new. they have been announced before. it is a question whether -- yvonne: it has been a turbulent week. does that play into what we will see on sunday?
what are you expecting? >> the sunday march has not been approved. only the rally has been approved from midday to the evening. we have to see if the march will happen. it is early days. thank you very much. hong kong bureau chief with the latest on the situation in hong kong. one of the prominent tech investors in asia talks to bloomberg exclusively on how the trade war is affecting venture capital deals. this is bloomberg. ♪
markets: china open." expects sinovation's new subsidiary to go public. to selinaxclusively wang. she joins us on set. what does this company do? what did you learn from kai-fu? spend: i had some time to at their headquarters and see the products they are developing for their customers, like foxconn, nestle. they have a smart retail vending machine that opens with facial recognition. they have computer vision technology. they have a robotic arm that detects defects on the manufacturing line. because the chinese government, this company allies with their goals to become leaders in ai,
as well as the fact that they are in the early stages of commercialization, it is bullish that they can reach a large size and a small amount of time. this aheadt plann of time. based on the trajectory of innovation, it is fair to say the fastest $200 million company million revenue company in the world. reachl be the fastest to $100 million in revenue. quickly,t there pretty both the revenue over 100 million hong kong plus 200 million, and at that point it should be well over a unicorn and can be listed publicly. selina: what is your timeline
for an ipo? >> the price sales ratio of 10 or so which values the company at $1 billion or $2 billion. less than two years from now. selina: you wrote in your book that the era of technological discovery is over and now it is about implementation. >> we are still at an early stage in the commercialization. we are still at the equivalent of early internet portals, back when everybody was using yahoo! and there was not even a google yet nor amazon nor facebook. there is a lot of room to reap rewards. selina: we are seeing venture deals fall dramatically. do you think this is a long-term winter? or is it a healthy short-term --ce to bring evaluations
bring valuations back to a heavy level -- healthy level? -- there will deftly be a shakeout. -- there will definitely be a shakeout. companiese smaller will be in trouble. that is one part of it. the positive side of it, if the economy is challenging and evaluations are down, it is a good chance for us to go shopping. selina: i asked him about the impact of the economic slowdown on ar development in china. you need to invest in technology to replace some of the bodies. he is bullish that the tech industry will continue to thrive even amid the trade war, especially in ai.
immediately by $18 billion in cash plus an additional non-cash charge of 10 billion under new accounting rules. larry culp called the claims market manipulation, pure and simple. yvonne: apple says it is on track to create 20,000 new jobs in the u.s. by 2023. it is responsible for creating and supporting 2.4 million u.s. jobs, four times the number of american positions attributable to the company eight years ago. apple currently employs 90,000 employees. tom: another company is under fire for implying taiwan is independent from china. this way it is while way technologies. smartphones listed taipei taiwan as their language of choice.
it has been viewed more than 350,000 times with some calling for boycott of one of the corporate crown jewels. the market is flat in mainland china. flat.ai is in hong kong, red on the board, down about four tens of 1%. we are obsessed of the yield -- we are obsessed over the yield. at 3.02 for the chinese 10-year. ubs saying there is more opportunity in the sovereign debt space. in terms of the yuan, slightly weaker than the previous day. dollar-you on is a little stronger -- dollar yuan is a little stronger. saying thaten was
china, gold was the safest places at the moment. u.s. 10-year yield, we are back above 150. the plunge in the long end as well, gold futures we continue to see this rally. a new target for the shiny metal, 1650 by second quarter of next year. david: they are joining us, right? what are we doing now? mind,korea, keep in reopening today. playing a bit of catch-up. one stock we are tracking closely today.
get myself --to it is hard to say. the stock was down 20% yesterday. the stock was suspended, companies denied allegations. the stock was up 17% at one point. we have not quite recovered. do we have the stock rice? -- do we have the stock price? we have hong kong gdp, malaysia gdp. yvonne: hopefully, it paints a different visual. hong kong is interesting with the new measures put in place. it is going to be interesting to see if this prevents hong kong from entering the technical recession. tom: interesting talking about stimulus in hong kong because we
yvonne: almost 10:00 in hong kong. welcome. david: china warning of a retaliation. president trump talks of beijing's desperation for a deal. he says he's planning to call xi jinping. yvonne: the economy will struggle to see growth, but says protests are not the trigger. david: it is budget day in indonesia. we are live in jakarta to see what might be on the president to do list this time around. ♪
yvonne: live pictures with the president, starting of his estate of the nation address before the members of the people's assembly. of aesting to see how big package it will be, given growth has far disappointed from the 7% target the government set, everything from infrastructure, tax cuts could potentially be on that list. growth below 6% since he took office. the markets is opening in indonesia. we are strong and currency and equity market. later onlesh this out in about 30 minutes. the market looks like, fourth straight week of losses.
asia, japan, and emerging markets. look at where we are on the fixed income space with small eye and in some cases, no i. they pulled back on purchases. below 1% on the kiwi 10, 90 basis points on the aussie 10 and below 1.5 on the treasury unchanged as we speak. take a look at the renminbi. you have iron ore, seeing a little bit of upside following a collapse of 25% from its peak. that's the setup from the markets. su is with us in new york for your first word news. su: we start with china, which lost its status as the top foreign creditor. japan became the leading treasury. they increased a stash of u.s.
billion tomost $22 $1.1 trillion, the highest level in years, also a fraction of beijing's holdings in june. the last time japan was the largest foreign creditor was in may of 2017. and yet another company is under fire for taiwan's independence from china. it's mainland champion huawei technology. users are outraged. honored smartphone owners chose them. it has been viewed 350,000 times, with some calling for a boycott of one of china's corporate crown jewels. to singapore, exports posted a double-digit decline in a further sign city state is on the age of an economic downturn.
exportsstic air -- declined from same time last year. it is not the largest fear, but the fifth straight month in both categories fell on a year-over-year basis. shipping's largest line is adding to gloomy forecasts of the global economy. maersk released earnings along with a warning about trait and weakening demand for containers. shares jumped as profit beat expectations, but fell as they went on to say the escalating to .5%ar could remove up of global container demand this year and next. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. keenan. this is bloomberg.
vowing this iss a violation of you was accords, beijing pushing back on efforts to link trade war with the terminal in hong kong as trump is said to talk to xi soon. president trump: i don't think they will retaliate, but if they could, we have the ultimate form of retaliation. there are very few jobs in china. just so you understand, i've been mild about it. there's a long way i can go. david: tom is in beijing for us. i'm confused. you're confused by china, confused by trump, it is confusing. mixed signals. your hearing from trump china is desperate to get a deal. you're also hearing from the chinese side despite plans to retaliate, they are planning to send negotiators to washington
in september. so very mixed messages from both sides. the chinese is that they are forced to retaliate. they are saying the agreement made between trump and xi at the g20 has been violated and the decision by the trump administration to put tariffs on chinese goods have thrown talks of track. they didn't give details how they plan to retaliate, but we talk about nontariff barriers and this black list of u.s. companies they could publish. we will be looking for details on that. china hasow is that stopped those planned purchases of u.s. soybeans and also depreciated the yuan. in terms of hong kong, the message is by trump linking hong kong and trade, suggesting maybe president xi involves himself by meeting with protesters, definitely not welcome messages in beijing. chinese officials said this is
an internal affair and china said it thinks the u.s. is helping to cement the unrest in hong kong. there's a lot going on. trump thinks he's going to have a phone call with president xi. maybe that's mild optimism. longer-term, it seems china is digging in. there is a lack of trust in china in what they can achieve with the stocks. yvonne: you mentioned the trust deficit. china plays the long game, as well. president trump says china is desperate for a deal. his president trump right? tom: we talk about this every day. the economic data in china is looking weaker, industrial production at 17 year lows. yes, there is economic pain. part of that is the impact of tariffs. but you are seeing china step up with some supportive measures,
close to $7 billion through lending facilities and other forms of financing. china thinks it has the tools at thesesposal to make sure slowdowns can be contained and -- contain -- contained and controlled. 1, the 70thtober anniversary of the banning of the people's republic of china. president xi does not want to be looking weak in front of the u.s. administration, in front of president trump on the back of that celebration. you are going to see strength from the chinese side unwillingness to make concessions before that anniversary. that is part of the mix, the politics and the economics. david: tom, thank you so much. you might have already seen it here, breaking news. alibaba is earnings -- alibaba's
earnings. there is news he was bright -- buying the brooklyn nets. he's including the berkeley center for $3.5 billion. yvonne: he previously had that 49% stake. pretty hefty price tag, but he will be taking ownership away from the russian billionaire. i'm probably butchering his name, but we might be hearing announcements as soon today according to people familiar with the matter. david: you've got to wonder if that price tag valuation went up after kevin durant and kyrie irving moved. yvonne: i don't know. david: i wonder if our next guest has something to say about the nba. i'm kidding. good morning. we will save it. do you have anything to say about that? guest: well, not really. [laughter]
yvonne: let's move on to bond markets and yield curve. david: from basketball to bonds, ok. trillion right now in terms of negative yielding bonds. do you still chase this rally? if so, where do you buy? guest: i wouldn't say we are choosing the rally, but looking at conditions, there seems to be a synchronized monetary easing from central banks. athink that we may even see lot more into the negative settlement. i think the $16 trillion will go higher. we are still very much into fixed income, especially looking at the synchronized rate cuts around the world today. it is certainly the way to go right now. how do you make money out of that?
youou use a strategy for do rotate alec -- rotate out of the u.s.? francis: there is a risk of strategies, but they are waiting for capital appreciation, price appreciation. it's also because of the negative yielding assets. there's been a renewed search. it is coming over again, so we are seeing possibly a lot of renewed sentiment in higher-yielding items. in fact, if not for the measures around the world, i would say property of the next asset class of interest for a lot of investors today. david: so, as a very simple trait or simple investment, you note here that your analysis has pointed to after we have inversion, you do get fixed
income outperforming by about three percentage points. simple index, what do i by? bloomberg barclays aggregate index? how do i get exposure to that trade? thecis: we do analysis of previous six rounds of inversion in the tend to space. every time they start on an average basis, fixed income, world fixed income, the index generally moves up the next two years. we will likely see a total of around 7% over the next two years, whenever they tend to invert. however, i think we have a preference over global investment grade bonds because it's around 8% for the next two years. otherwise, i think the next thing we are looking at is the highly -- high-yield segment in em asia. the spacey looking at
in the high-yield segment of emerging markets asia. anything below that space, we will likely be very, very selective. yvonne: francis,. hold on a second we will -- hold on a second. he will stick around. a booster shock for a flagging economy. we look ahead to hong kong's gdp numbers today. david: a reboot for southeast asia's trillion dollar economy. we are set for indonesia ahead of the budget. that's also coming up. this is bloomberg. ♪
governmental policies, particularly the populace policies we have seen in so many countries, the notion that this will not harm the global economy. it's simply a fallacy that is revealing itself. yvonne: and that was blackrock vice chairman speaking exclusively to bloomberg. let's bring back francis tan. he joins us from singapore, talking about fixed income. you heard from mr. hildebrand. 30 year yields below 2%. what is the floor right now? at what point should we worry bonds are in a bubble? francis: well, i don't think we should be very much worried yet because we have just seen them start cutting interest rates in july. there look at bloomberg, are expectations of more rate cuts as we approach toward the end of this year. i wouldn't say bonds are in a bubble. in fact, this is only the start.
we are looking at a 10 year bond yield to be lower than today, perhaps 1.2% mark. from there, we are at the start of this bond cycle that there should be a lot of interest into the longer duration bonds right now, especially looking at the 30 year s&p yields dropping quickly. it's really pointing out level sentiment out there that the fundamentals and lack of inflation seems to be in the next one year or so. i don't think the bonds are in a big rally yet right now. david: but francis, though, not to push back, bonds tend to push forward. we talked about the inversion, 16 months coming. you look at it five years coming, at what point does it start -- do we need to start talking about receiving, that bonds look through the recession
that might come, and into the recovery after that? because that tends to be when risk assets, it's time to go home. francis: well, i think one of the trickier things that we have to look at is how far the inversion will go. we start to see inversion between how far out. the second would be the support from global central banks, particularly the fed. we are going to be looking towards the actions of the fed going forward, whether they will cut a couple more times in the months going forward. yvonne: yeah, we also have gold at the moment. you come up with a new target at 60.50 by the second quarter of 2020. quite a call there. how do we get there? guess,: well, i especially now toward the late stage of the economic cycle, we usually see when central banks
around the world starts to cut interest rates, there will be renewed refresh for yield. the lack of inflation this time around, a lot of investments are looking at safeguarding. in this case, they are looking at gold. i think a lot more interest in gold, and that's why we are putting out our target by the second quarter of 2020 to be $ 1,650 per ounce. francis, thank you so much. wheretake you to jakarta, we have the state of the union out of the president, outlining the challenges and what he is seeing from the economy, and his call for unity, as well. yvonne: right, it will be interesting to see what he announces as far as the fiscal boost. they are pledging to continue cutting rules to expedite business.
it's about attracting foreign investment into the country. and of course, how they are going to reach the growth target. they have disappointed for years since he took office. we'll see if it has to do with agriculture. corporate tax cuts are something to boost the consumer. david: we'll get you more lines and we will join you in 10 or so minutes to deep reef and look ahead to what is in store for the indonesian economy. this is bloomberg. ♪
government, the central government will not stand by and watch. president trump: i really would like to see china, in a humane way, solve the problem in hong kong, humanely solve the problem in hong kong. and i think they can do it very quickly. david: and hong kong has announced, amid the slowdown we're seeing, gdp numbers are expected a contraction on a quarter basis, warning the economy will continue to struggle to grow at all this year amid all that's happening, politically. 2%-3%, the forecast was now 0%-1%. stephen engle is live outside the building here this morning. more gloom for the city. do you think these measures are going to work? aephen: well, it's not
small stimulus package. the big question is, will it be put to the right uses to stimulate the areas of the economy that are suffering the most from the trade war? of course, as well as the recent protests. even though i might add the financial secretary said this stimulus package is not in relationship to the protests, upheaval of the economy. we all know it is, but he probably doesn't want to link the demands of the protesters, who want to hurt the hong kong economy, with these coming from the hong kong government. this is speculation on my part because i've been following throughout. we've heard from carrie lam, the chief executive, saying the damage from the economy is like a tsunami. definitely, the government here is worried about those numbers
you were just talking about. this is an economy that has not had year-over-year growth contractions since the third quarter of 2009. so, in the throes of the global financial crisis. retail sales have fallen for five months. bookings are falling. revenue per available room could fall by as much as 50%, according to one projection i have seen. 10%ing is down by about since these protests started in june. there are a lot of headwinds and the government is now coming out, finally, some people said, with gifts for the economy. david: we got to talk about what happened this morning and why you're standing right where you are outside our building. this climber, tell us about that. all,en: well, first of today is a day about banners. the chairman of asia's
wealthiest man, they put up big banners saying no to violence. finally, we heard from the big tightens of the hong kong and anna -- hong kong economy. someone else put up a big banner today, too. he's known as spider-man, the frenchman who has lined buildings all over the world, including the eiffel tower, the sydney bridge, the world's tallest building, and now for a third time, this is the third time he's done it. keqiang,r, owned by li and where bloomberg headquarters are. he climbed up here today, unveiling his own banner, which was a peace offering, if you will, with a chinese flag and a hong kong flag and a handshake. so it was not necessarily political against hong kong or china or taking sides. it was another chance for him to display his message of peace.
and he did get carted away by police. he is at the station now. you are not supposed to climb skyscrapers, especially ones near 1000 feet tall. yvonne: yeah, it's happened before. certainly a site to see for everyone. i just want to show you what steve was mentioning. this is what li keqiang put up. we see a big red. no to violence. love china, love hong kong, love yourself. we'll continue to watch what's going on here, especially with this weekend, a planned rally. protesters defied those violations and start marching. the crowd comeg up after what has been so turbulent. david: fourth straight week of declines.
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yvonne: it is 10:29 in hong kong. i'm su keenan with the first word headlines. the iranian oil tanker detained by the u.k. in gibraltar has been released. however, the u.s. is threatening sanctions against anyone who supports the vessel. sixgrey swan was seized weeks ago on suspicion of smuggling crude to syria. it was providing assurances it will not provide sanction destination. washington says the release of this ship is appeasement. at least one person killed and dozens more hurt as a powerful
storm lashes southern japan. the typhoon made landfall in western hiroshima, with torrential rain and winds gusting to about 150 kilometers per hour. bullet trains connecting osaka in the west were suspended, and hundreds of domestic flights were suspended, as well. weather forecasters expect more than a meter of rain. private home sales in singapore jumped to the highest level in eight months since the wider economic slowdown turned investors to park their money in a market known as a haven. apartments, an increase of 43% the previous month. it's also the most since november. foreigners more than doubled to 82 units, the highest in a year. and alibaba co-founder is moving to take control of nba's franchise, the brooklyn nets, as
well as their home courts. he's expecting to sign a deal valued more than $700 million to buy the barclays center, while at the same time, picking up the 51% of the nets he doesn't already own. billion, and.5 will see the current ceo leave the team. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. i'm su keenan. this is bloomberg. yvonne: the indonesian president is set to reveal measures to boost the economy. we have heard some of them so far as he lifts government spending to a record in his budget address next year. let's ask what we can fix fact -- expect. what is the priority in this budget?
michelle: what a difference a year makes. we were talking about stabilizing the rupiah, and now we are in a more dovish cycle, the focus on growth. and the administration has renewed mandate to focus on this and get a little bit more room for government spending after they turned the deficit to a smaller shortfall last year since 2011. so they're really doing their side and giving stimulus to the economy in a rough time for the world. today,ey're looking at three parties will look at labor, infrastructure, and tax. on the labor front, they need to boost productivity. they have a labor force bigger than the u.k. and south africa combined, but haven't gotten the bang for the buck they would like. look for them to increase funding for education and vocational training, get the high skilled workers in thei
and make itthere, easier to hire and fire workers. an infrastructure that will continue with infrastructure plans, probably $400 billion in project spending. an untaxed, they are looking to lower the corporate tax rate to higherlower, which is than the average across the region. david: so, we have the budget. how does it fit into -- you mentioned three things to pay attention to -- i imagine two of the three would have to deal with finances and spending. how does that fit into the broader objective of indonesia to get growth out of the range it's been stuck in forever? michelle: right, well one thing they're doing is improving tax policies so they can offset the spending that they've maintained throughout.
that's one thing we'll be looking for, but maybe they will have other things. they're going to probably maintain the troth target. if it does -- growth target. if it does come in, it would be that most since 2015. that would be trying times. it's been interesting to look at, central-bank crying for help, looking for more support they're trying to do in this global downturn. my economics colleague in washington, ben holland, put out a piece, sort of a fiscal guide. he was noting the euro zone, japan, and the u.k. were the most guilty of not helping the fiscal side. across asia, you see a different story. you saw the hong kong news on
david: welcome back. it's a big day in indonesia. you might have seen live pictures there out of the presence there. bringing the country together to achieve their objectives. let's talk more about this live from jakarta. joining us over the phone is the bank economist, dn. thank you for joining us.
what should we be focusing on today/ guest: i think we are quite optimistic today because the president is going to announce soon, and we are expecting some significant policy measures to push the economy to grow even stronger. it's now increasing --petitiveness southerly southerly -- solidly. and probably in some parts, there will be an increase in social transfer funds to the consumption side. so yeah, i think we're expecting a push. yvonne: when it comes to infrastructure, this is one of the key pillars of the campaign during his first term in office. how much of a big spend could we see on the budget when it comes to infrastructure? and do they have room for it?
dian: yeah, for infrastructure, i think there will be a slight increase. it's not going to be a big increase because the bulk of infrastructure has been ongoing. for the current year and next year, the government and private sector will be more involved. so, the allocation of the budget is not going to be increasing that much. i believe it's going to be increased only slightly. but then there will be more involvement from the rabbit sector. -- private sector. david: in terms of how he helps consumption, will that come in the form of tax cuts or handouts? the ones on the consumption side, you know about supported economy is
by private consumption. data,en for the recent shows consumption is still going very strong. that is a result of the government giving out social transfer funds, which is supportive of the low income people, before the middle income class and after. the most significant is the government should maintain protection by maintaining the inflation stable. i think that's the two most important things to earn customer confidence for the middle, upper income class. how does this impact b.i.'s easing cycle? does the b.i., can they take a step back? well, i think it's to
stimulate growth because we are facing the challenge from the slowdown of the global growth. i believe they will have to cut more. provided the financial market is stable. i think the stability part is still there. the currency is not really moving. i think they have room to cut rates further. and i believe the intention this time of the monetary policy is easing in the next three years, yeah. david: very simple question for you. we were showing a graphic of how indonesia's growth, it's not that it's fallen off a cliff, but it hasn't moved. it's been stuck at about 5% for seven years now. why has it been stuck? and does it actually feel like an economy that's actually growing at 5%, or does it feel
like it's growing less than that? have, fori think we indonesia, we have been facing structural problems, so we cannot grow quite strong without inducing growth. we have been reliant on imports. i think the government needs to find some balance for the balance. an account that's manageable. it doesn't create a pressure in the financial markets. it creates pressure in the financial markets and affect consumer confidence. it will affect corporate confidence to invest and expand. now is 5% growth right somewhat influenced by the global economy because export is declining. so, 5% is still quite good for indonesia compared to other
countries because we have a strong support from consumption. but still, the government needs to maintain that part of social growth. we need to maintain financial keeplity and inflation to customer confidence stable. yvonne: dian, thank you. joining us on the phone. let's get a check of the business flash headlines. cisco systems plummeted, beginning a lackluster sales forecast, shares reacting badly to the trade war and slowing global economy. the ceo is trying to turn cisco into a software and services company. the transformation is being stymied by the trade war and its negative impact on corporate sentiment and spending. david: financial per hosting profit, $611 million in the second quarter, expanding the services it provides to other
financial entities. that's a rise of 42%, which tops the highest analyst estimate and offsets inability to make money pboc-- ever since the became the custodian for the platforms. yvonne: insurance promoted a jump and a rise in business value growth. net income climbed 68% to $14 billion in the first six months of the year, as a 19% rally in stocks helped quadruple investment income. thannounced in may more half income tax liability. david: so, we mentioned a couple seconds ago alibaba, despite the trade war, the company reported revenue that rose 42% while net income doubled. of report dropped as risks the u.s. trade tensions ratcheted up yet again.
tencent warns of a fairly tough economic output. yvonne: let's bring in bloomberg senior analyst for internet. take a look at sales growth we saw. what downturn? what really drove that? guest: i think the secular drivers are very well understood, rising incomes in tier one, tier two cities, increasing digitization. but really, that just drives the core business. in the core business group at 26%, 27%. all the business grew at 30%, which is what is expected. numbers at about 40% the first quarter. but what really drew growth over the top was investments in local services. they call a fresh report.
these things are growing at more than 100%, which has been spending a lot of money in these investments. and now i think it's coming together and reaping returns. david: margin decline, it didn't fall as much, is that a one-off? is that sustainable? guest: what is really great about this report is margin decline has slowed. it's fallen. it's down to percentage points from last year. last quarter, down five percentage points. the quarter before, down 15. it's slowing down. it's really down to across the board. we have seen better cross -- cost control since the trade war started coming into play last year. these companies have been tightening control. in particular, the subsidies. so, with, you mentioned financials reaping high profits, and that's in part because they
have reduced a lot of subsidies for acquisitions. more targeted subsidies is helping alibaba, as well. next week will likely benefit from that, as well. yvonne: what does this mean for outlook for the end of the year? guest: i think clearly, the secular growth trend is there. they should be dealing growth. the, recommendation feet -- we should see very stable growth. what i'm really looking forward to is better cost control, so margins are more stable and profits can rise at the same pace as revenue. yvonne: thank you, to break down alibaba's earnings for us. take a look at movers. equity markets were soft, fourth straight weekly decline.
we wrap up what has been very turbulent here in hong kong. let's bring in some movers we are watching. , this insurance we talked about the insurance war. tencent upgraded to buy. that stockwery, flying 8% here today, and china resources beer reporting results. let's look at the stocks we're watching. what a week it has been with flight delays, cancellations, airport violence we've seen. we saw 10 year lows earlier this week. it seems we bounced back a bit. we're watching austin tria, as well, after reports of shorting the stock. they are coming back and denying the allegations.
you see the stocks coming back. david: alright, looking at india, fairly flat. davina, what's on deck this friday? davina: so, while they are showing .5% gains, we missed out before that happened across global markets the previous session. yesterday was the independence day holiday. keeping that in mind, you probably see an account of that and may not see a big upchuck -- uptick. it was crucial support level. as long as we hold onto that, we're probably in a safer spot. below that level, we are down which is the next level that comes in.
extremely has been shallow and narrow. they're almost at the end of the earnings season, and that's reflecting in the equity markets. today's session expected to open slightly lower, in fact. yvonne: devina, thank you, joining us with the latest of what to expect after coming back from that holiday, of course. we're not just talking about that french spider-man climbing the building walls. we've got reporters battling it out, chart chart -- chart to chart, as well. this is bloomberg. ♪
yvonne: her battle of the charts segment, friday edition. reporters with their best charts. david: viewers can access their charts, or clients can access charts on the bloomberg at the bottom of your screen. w'ell save the rookie for second. matt, why don't you do the honors? matt: oh, tough to go first on this one. but if you pull up my chart, it's sort of a squishy and to the week here.
we see a big downturn happening in orange juice futures. they lost about 37%, and that's as the u.s. and brazil increased production. they're coming off the back of a deadly disease that has decimated their crops. we saw them rise to a record a couple years ago. they're coming back. the introduced new trade species, a little more resistant to the disease, but also producing larger fruit. so, production is coming back in a big way. the u.s. department of agriculture expects a 36% year on year production. that's also coupled with demand for orange juice waning a little bit, as well. so we're seeing this downtrend really well entrenched. given there is little technical resistance, i wouldn't be surprised if we start seeing a drop, about 91a
u.s. cents being tested again. yvonne: i think i came up with another headline for your chart. juice for juice. there's so many different types of juices. no one is drinking orange juice. david: liquidity management. yvonne: good one. david: if anyone out here in hong kong that sells coldpressed uses sees that chart, can you please stop overcharging for that? there is no reason for that. it's just juice. we know you do it in your blender. i will buy anyway. i'm going on a rant. yvonne: welcome. >> hi, hi. i just thought it would be a good time to look at southeast asia now and see the impact of the trade war. and i noticed the broadest measure for southeast asian is up, the msci index,
about 0.5% this year, which means it's close to negative territory. on the other hand, the two markets in the center of the 32%. war, are up about so it seems like they are burying the brunt of the trade war at this time even though it's being seen as a relative shelter for some. and it's also seeing supply chains coming toward, shifting away from china. looking ahead, i think the good thing for us is that it is in territories so we could see at bounceback and there could be respect for investors looking ahead. david: if the only thing that's good about it is it's oversold. i have a bad hangover, this is probably the worst.
>> there is growth happening. so, yeah. yvonne: people always say they have the most growth potential. for that, i'm going to go with her. sorry, matt. i do like the oj chart. david: congratulations. your first time. i hope to see you back on the show. yvonne: gtv is where you go for those charts featured here on bloomberg television. you can browse them, save them for future reference. plenty more to come. this is bloomberg. ♪ from the couldn't be prouders
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>> what a week, tgif. 8:30 a.m. in mumbai. hour are entering the last of the morning session in hong kong. china warns of tariff retaliation as president trump talks of beijing's desperation for a deal. targetedong announces -- announcing the country will struggle to seek growth, but it says the protests are not the trigger yvonne: it is budget day in indonesia. the president is expected to lift infrastructure spending to
boost the economy. this is "bloomberg markets: asia." ♪ haslinda: asian stocks giving up those losses for the morning, currently in positive territory they may just close higher, tracking gains in the u.s. overnight. concerns remain. it has to do with treasury yields. 10 year below 1.5 since the first time since 2016. a sign of a looming recession. we have asian stocks in positive territory, up 1/10 of 1%. since we are looking at treasury yields, let's look at how