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tv   Trending Business  Bloomberg  May 31, 2016 9:00pm-10:01pm EDT

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♪ wednesday, the first of june, i am rishaad salamat. this is "trending business". ♪ getting straight to mayking news, numbers from crossing the bloomberg. we were expecting flatness. same.1 is the result, the as april for china may manufacturing pmi. that is still in positive territory.
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indicatere above 50 better conditions on the factory floor, below 50 indicates contraction or more pessimism. this is the third consecutive officialve 50 for the manufacturing pmi following seven consecutive months in negative territory below 50. what does this mean? in february and march, a bit of stabilization. up in a bump manufacturing and sentiment as the government talked up the economy. getting evidence that there has been a stabilization in manufacturing. 50.1, that is not a robust number, but it is staying relatively stable from the last couple of months. , we are also looking
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at services come in below expectations. pmi,is non-manufacturing an index that has never been in negative territory below 50, but is trending lower. the previous month was 53.5, so inittle bit of softening services, indicating property, telecom, banking, everything except traditional manufacturing , which tends to be more bullish in this new economy. nonmanufacturing pmi. rishaad: 30 minutes to go to the start of the trading day, but let's have a look at what is going on. we are following u.s. stocks, aren't we now? first time this week we did get a lead from wall street. we saw our rally, but not enough
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. we are looking at losses across the asia-pacific. just opening up, losses accelerating, especially australia, now underwater for the asx 200. asian stocks were up five straight days until this morning. we are giving back some of those bens ahead of what will crucial jobs coming out of the u.s. on friday. that may change things completely as far as the rate outlook concern or it could accelerate the pricing we are seeing, especially across the bond markets. asian stocks on the way down. as promised, bond markets, that is what we are seeing. the big story is south korea, a
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sharp drop as far as yields are concerned. especially the longer-term debt in south korea. 1.81 is the korean 10 year. we have the release of the latest central bank minutes, which shows one member that a preemptive cut would help the country prepare against external risks. data we got from seoul, korea this morning, inflation flat month on month, exports surprising to the downside, -6%. it's exporting engine has run into a bit of a snag, if you will. , 10 year, -11 basis points at the moment. we are counting down to the
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open. a lot of the pop yesterday had to do with speculation on inclusion of a shares. rishaad: bank of china division raise more than $1 billion in its ipo. asia's second-biggest share offering this year. that's right. the share offering was aviation byed, boc more than 38 times.
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that's about 8.7 billion hong kong dollars for new and existing shares. china, a parent of boc aviation, selling a 30% stake. boc aviation buys airplanes and then rinse them out to airlines. a lucrativeming business as demand for travel in asia increases as income increases in the region, and some figures show it can be more profitable to run the leasing company like boc aviation than it can need to run an airline itself. that a lot ofa other companies are looking to get into. it is predicted to rise dramatically. asia is set to become the world's biggest aviation market in the next two decades. later tolso talk robert martin on asiaair. ceo of boc aviation.
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theill talk to him after stock has done on his debut in 25 minutes from now. thank you very much indeed. , thatl have more on boc debut, coming up. reaction to chinese pmi figures. do tweet us your thoughts at @rishaadtv, include #trendingbusiness. right, japanese telecommunications company wanting to pay down some debt incurred when it bought an american carrier. let's have a look at that story and some others we are watching. haidi: that's right. investor the largest in alibaba, saying it would sell 7.9 billion dollars in the
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chinese e-commerce giant to bolster its cash position and pay down debt. alibaba falling an extended train on that news. softbank remains the largest shareholder with 28%. it is also selling some stock company ask ma's well as a sovereign wealth fund. the deal should not change how shareholders of view the stock. alibaba makings this large repurchase things shows that the company thinks it is undervalued. sources say 30 positions will go from its equity businesses and hong kong, japan, and india, amounting to 8% of the workforce. hsbc cutting senior investment ranking positions to
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as manyosts, shedding as 25,000 jobs gradually. following an industry trend of scaling back. other banks have announced similar cuts this year. malaysia has appointed three new directors had its troubled 1mbd state investment fund. the government dissolved the has globald investigations continue into alleged money laundering and investment. the move may put some space malaysia'sd and finance minister. the attorney general cleared him of any wrongdoing. the fund denies all allegations
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made. earlier, we spoke with malaysia's trade minister, he affecting 1mbdl infectin did not hurt trading. >> if the first quarter is any indicator, there has been a 4 billion increase compared to the fourth quarter. malaysiant was the trade minister. we will bring more from that. , and in coming up later dishes plan to double in size over the next four years, banking on chinese tourists to help them. we will talk to the asia-pacific had of marriott. we will have jp morgan's take on those pmi numbers. ♪
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♪ let's have a look at those pmi figures out of china for may. joining me is the china economist at j.p. morgan. inn the manufacturing coming a tiny bit above expectations, showing a little expansion. worst over with? what is the deal? >> the numbers are good. april number came out as a disappointment, so the market was speculating whether the recovery we see in march is temporary or will continue. 49, 51, it does not make that much difference. , an articleks ago
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pessimisticet too about one number. that second quarter, probably the growth was in modest recovery. i don't see a big upside, but i don't see a downside. rishaad: is this a stimulus coming through now? there is always a lag. enterprises, the pmi is falling down. the small enterprises are moving up. sectors,ok between overcapacity is still hurting the economy. it does give you incentive to draw down the inventory overhang. >> these are still strong sectors.
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we have some downside and other sectors picking up offsetting each other. rishaad: what next, i suppose. does this mean the reform process, the structural reform process, is in play? >> it is a very tricky question. china always has multiple policy objectives. they are always trying to balance among these different policy priority objectives. balancing reform is still on the table. that's why the recent speech emphasize that china should not introduce a large stimulus. instead, it is only playing a supportive role in rebalancing and restructuring. rishaad: what about debt? the authority said the national debt levels were well within the
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warning levels. people went, hang on a second. why are they saying this? what precipitated this? biggestis still the financial risk, especially when we talk about over capacity. is more of a structural problem. concentrated in overcapacity industries. issue -- soality expect'tnews further acceleration in credit growth. for the rest of the year, we are
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expecting credit growth to stabilize. , whether perspective it is enough, probably not. credit growth is still higher than nominal gdp growth. i would say the government needs to do more -- rishaad: they are borrowing from peter to pay paul, aren't they? they should allow the banks to write off more bad loans. if you write off bad loans, the banks will create some space for lending to the new sectors. the bank's disposal speed has been accelerating, but still not enough. rishaad: let's move to something different. msci inclusion. it was goldman that suggested a sharesnce that china a will be included in the msci indices. >> we think it is a pretty good
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chance. market ise domestic still facing hangover problem from last year's big correction -- they havecent been pretty aggressive in introducing new measures for msci inclusion. rishaad: as soon as they did kick in, they decided this has gone a bit too far. are they going to stick either guns should we have another meltdown? >> we need to take serious, the forcle has a good statement stock market, bond market, and also the real estate market. instead of being used as a tool to stimulate growth, it should be going back to the true , the market for
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allocating capital in a more effective and efficient way. rishaad: thank you so much for coming in. that's all we have time for. >> the stories making headlines , 15 immigration officers have been fired and malaysia, accused of taking airport terminals offline to allow wanted criminals or militants to enter the country undiscovered. the immigration department begin inquiry. the home ministry says there is a strong possibility of official collusion in the almost daily breakdown of computers at airports across malaysia. a lawsuit against las vegas sands has been settled a month before the case was due to go to court. claims he was wrongly fired after alleged demands to carry out illegal practices. they have reached an
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"comprehensive and confidential settlement that results all the claims against the company." currency has become the top currency, a clear sign that the country is emerging from decades of isolation. it is up more than 10% and is on track for an annual gain after falling every year since 2012. the election victory of aung san suu kyi's national league for democracy has attracted a wave of foreign investment, laying the foundation for a further rise in the currency. powered by over 2400 journalists and 150 bureaus around the world, this is bloomberg news. coming up, softbank going soft on alibaba, selling $8 billion. the details on "trending business" next. ♪
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♪ right, this is the scene at the moment, 9:22 a.m. in hong kong. boc aviation coming to the market. debut, 38 times oversubscribed. i gain of about 3% there. -- a gain of about 3%. ,he gray market was higher looking at gains of 6% to 7%. the second biggest ipo in asia this year. it has raised more than $1 billion in this offering. let's move to softbank.
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on the way up in a declining market. it is selling almost $1 billion in shares and alibaba. alibaba of course, biggest shareholder is softbank. been one of have the strongest believers in alibaba's potential. this is the first time they are shares.elling why? to bolster some debt which has been mounting. they have established a new stressed, about $5 billion. within three years, it will be converted into alibaba shares and sold to qualified institutional buyers. getting a bit of a buy back here. million for its
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unidentified major sovereign , $400 million worth to members of the alibaba partnership. softbank will strengthen its balance sheet. it had been holding about ¥8.5 trillion in long-term debt. $77 billion.f they are increasing this liquidity cushion for the company now. rishaad: how does this change the dynamics with this that softbank has with alibaba? they have been the largest shareholder, a 32% stake. it has been lowered now to 28%. so, they are still among the biggest investors in alabama. the chairman and ceo of soft
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maintains the relationship. jack ma remains a director of softbank, but also talking about this by back, saying this will be one of the best uses of its capital to reinvest in its own business. notaba shares tanking, tanking, but falling about 10%. rishaad: there we go. alibaba group had its trials and tribulations after january and february. i am yvonne man. yvonne: it has recovered a bit there. rishaad: boc aviation, pricing taking place. $42, 43.10 in the
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market. the debut occurs in just a few minutes. we will be live for that as well. this is "trending business". second biggest ipo and asia this year. ♪ get ready for the rio olympic games
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♪ rishaad: you are back with "trending business". this aircraft leasing company, boc aviation, just about to have its debut. this should mark the start of trading. , we will behey do underway with the second-biggest listing and asia this year. billiontion raising $1 and is ipo. the company selling new and
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existing share at $42 of these. $1.10,ce has risen by but, in the premarket, trading getting underway proper. here is the count down to the start of trading future of this company. there we go. oversubscribed, 30 times, in fact. the company betting the skies of asia will be getting more crowded. that's what we have at the moment, that debut taking place. gdp numbers coming across the bloomberg terminal, australia first quarter growth numbers. let's get straight to paul allen. paul: it's terrific. 1.1% for the quarter.
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expecting have been .8 percent, so a strong read for first-quarter gdp, giving us an annualized number of 3.1%, stripping the expectations of the markets, 2.8%. huge surprise, but we did get an indication that something special might be in the works. net exports ons the rise, contribute one percentage point to gdp growth, services particular strong, iron ore and coal strong as well. if we take a look at the aussie dollar, it has gained strongly, 73 cents.g towards first-quarter gdp growth, 1.1%, much better than forecast. rishaad: thanks a lot for that. we will get reaction to that. let's get to the open for hong kong and shanghai.
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boc aviation, that debut taking place. reaction way better than anticipated to the gdp read. >> before i get to the opening numbers for the indices, have a look at the renminbi. 6.5863. roughly speaking, signaling stabilization, if you will. have a look at some of these comments coming through. when you consider the data, this increasest the chances that the pboc will step in to provide some sort of support here to defend the dollar-this is "trending business". -- to defend the dollar-renminbi .
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toare getting awful close that level. the pboc for a third straight day setting a reference rate at a five-year low for the chinese currency. we will switch stories. gdp numbers, very encouraging, beating expectations, well off the lows of the day for the asx 200. we were down 1.3% on the index. aussie dollar, a big rally yesterday. there we go. , $72.84h high yesterday . this typically moves quite file me most of the time -- quite violently most of the time. across the picture asia-pacific equity space, fairly mixed. it is looking a little bit better. 15 minutesly red
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ago. marketsday for mainland yesterday. down a 10th of 1%, consistent with what the futures where indicating. australia, 1%. nikkei down boeing sharp gains on monday. p three, philippines u force of 1%. fourths of 1%. rishaad: thank you. debut inion making its hong kong. let's get straight to the hong kong stock exchange. the second biggest share offering this year, right? second biggest
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offering in asia this year. 2.6%, $43.10, compared to the ipo price of $42. up to 2.93%43.65, from the ipo price in the first few minutes of trade. a total of 8.7 billion hong kong dollars, $1.1 billion, more than 38 times oversubscribed. it was being sold by bank of china, a junior that bank of china, sold about a 30% stake, slightly more. it is holding on to the other 70% for itself. boc aviation buys planes and leases them to airlines. this in fact can be far more lucrative as an industry than
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running an airline itself. at the moment, when forecasters of looking at the aviation market for asia, they are saying it is set to become the world's a guest in the next two decades as incomes rise and the demand for travel also rises. how much of the share offering to cornerstone investors take up? rosalind: they took up about 52%. we have china investment corp., $100 million. also boeing investing $30 million, according to bloomberg intelligence information. area forn attractive these companies, especially boeing. company airplanes to a like boc aviation, and if it
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does well, boeing will do well. some of the plus side for boc aviation include low interest costs, high-quality planes, but it does face a pretty high book thanlue of 1.7, well more others in the same industry. for example, assuming boc takes and if it's used to buy assets at no debt, then it is 1.1 times. rishaad: just checking in with some other stories. buying for microsoft. the deal is part of a broader agreement. office and microsoft skype will come preinstalled on devices made by xiaomi. softene is designed to
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expansion into other markets. teaming up to enter the connected car business, an suv that feature software developed with alibaba. will deliveredvrx5 tailored music suggestion and suggest alternate routes. slowdown in china, marriott international is pursuing a rapid expansion in the asia-pacific to double its hotel numbers by the end of the decade. the director for the region joins us from the world economic asean.n how are you going to do it?
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you are also going to buy starwood. how much of that will be responsible for the 100% increase in hotels? you have ask a couple of good questions. the first one, things are positive. we are all smiles here at the world economic forum. this region of the world's leading in tourism. tourism is up 3.1% across the world. this region is the number one growth region in the world, 7.9% , all hotels. travel is a big thing in this part of the world. jobs are treated to travel and tourism, so we are growing along with the industry in this part of the world. rishaad: the second part was the starwood impact. the starwood impact will help us. we are still in the middle of the acquisition, so it is hard
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to comment on it. things have been positive so far. we have had overwhelming support from shareholders, and we are working now with the chinese government to pass regulatory hurdles in their countries. it is still anticipated to close somewhere in the middle of the year. it will make us a company that has hotels in every destination where people want to travel. rishaad: you can't get larger than that in the hospitality business. havehe other companies been doing this in your industry. you split yourself into various brands. you see further evolution of that? think we will add more brands in the beginning. we will spend more time placing the brands, looking at them and
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where they are placed what we are more interested in is our loyalty program, which drive so much of our business. traveler,e a luxury the ritz carlton. someone in the economic world, the fairfield inn. our goal is to capture any traveler, anywhere, anytime. china outbounde tourism on the rise. it's quite incredible, that story. how do your brands benefit from that. fall off inng any this as we talk about the economic slowdown in china? no, it is interesting, because everyone i talked to talks about the slowdown in china, and all we see are things
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speeding up. within china, we are growing quickly. chinese travelers are growing across china. they are the largest source market we have right now. 120 million chinese are traveling outbound. most of their travel happens to be in the asia-pacific. they will continue to grow, and by 2020, they will outstrip u.s. travelers as the number one out round market in the world. we keep hearing all the rhetoric about the slowdown of china, but i think it depends on the industry. 13% to 15%r, we grew in our resorts from chinese travelers. that does not show eight slowdown. economy and china are slowing down, but there is a huge middle class that was to go out and explore the rest of the world. rishaad: and you have to have varied brands
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to cater for them. marriott international. up next, the reading of china's manufacturing pmi. look at how that measure compares with that number. stay with "trending business". ♪
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rishaad: breaking news, the official pmi manufacturing number. caixinet the 1mbd reading. below 50, indicating more pessimistic conditions, 49.2. the consents estimate was 49.2. april was 49.4.
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it is still better than september, when we were in the 47 area. , pessimism,ve month so a couple of months of declining sentiment. the official pmi this morning at 50.1, theiency same as april. fromd some stabilization the official state owned enterprises in the manufacturing space, the third consecutive month of of 50 after seven straight months of contraction below 50. the initial reading i guess could say that this a bitization is probably of a relief for policymakers. they don't necessarily have to ease monetary conditions at this time. the stories making headlines
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around the world. day poeition day depot in india has killed 17. it is not clear what caused the fire. officials have not ruled out sabotage. three people injured in the latest drama in china's industrial sector, fires destroying a chemical plant. got the blaze under control, but still not completely extinguished. it is not known what caused the fire, but no dangerous chemicals were released. an investigation is underway. staples ceo will step down following his failure to acquire office depot. he had staked the company's future on the deal to merge with
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its main rival, blocked by competition regulators. he will be succeeded by staples north american president. powered by over 2400 journalists and 150 bureaus around the world, this is bloomberg news. now hedge funds have had their worst start. after the break, some of the top investment picks and how they fared over the past 12 months. ♪
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rishaad: quite a 12 months for hedge funds. investors had widespread euphoria about abenomics. since then, the industry has had the worst start since 2009.
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how have some of those top picks fared? yvonne: what a difference a year makes. it seems like this commodities slumped and what the fed will do and this concern about slow global growth. chart take a look at this , how bad has it been? take a look at the first quarter of 2016, $15 billion have been pulled out of some of these ones, the worst start since 2009. 2009, wempare it to the damages oflf what we saw during the global financial crisis. we have some trends we did see. among them was japanese power producers. there was a hope at this time that the stocks would advance
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60% because there was an increase in tariffs and a restart of nuclear power reactors that was going to return things back to profitability after that 2011 earthquake. take a look at these two stocks in particular, falling more than 20% in the past 12 months or so. finally, a look at chinese brokerages. that was a top take a year ago. this is what we saw, a basket of the chinese brokerages. there was a lot of hope at the time. this was before that $5 trillion market route. there was going to be a surgeon trading volume, but it has urge insome 28% -- a search trading volume, but it is fallen 28%.
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to show howes go tough it is to pick these investments when a lot of investors are on their toes about what central banks are going to do and of course with the governments are going to do. indeed, billions of invested capital presenting investment ideas at a conference in hong kong today. our next guest is a speaker at the event. you will not reveal what your picks are. hordee, it has been a time of it for hedge funds -- horrid time of it for hedge funds. what is going on in the industry? >> all i can say is that it has been a tricky macro environment with a lot of short-term pitfalls and surprises. just have to keep focusing on what our main strategy is and what we are good
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at, finding opportunities in equities and credits all over the world and being markets and macro agnostic. our approach is a little different than other firms in the sense that none of the analysts have a specific sector they need to focus on. have any geographic requirements, and generally we can invest in any asset class all over the world, so that allows us to be a greatest hits fund. you of them far are -- living the algorithmically driven? can invest in any asset class, so it is up to us to look all over the world and try to find ideas, and the ideas come from basically finding changes in industries or sectors are
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companies. rishaad: i'm just talking about the industry, not yourself. go-basede so many al guys out there that they are fighting for the same trade. >> it is hard to say, to be honest. it is not our focus, and we don't know much about a terrific algorithmic trading. we have to do bottoms up analysis and not worry about with the market is doing. rishaad: tell me more about your strategy. where do you bet at the moment? we have seen what is going on in this part of the world and it is not in that critique this year, but when do we get a turnaround? >> we like to look for complicated situations that may be getting simpler, so we have spent a lot of time in japan.
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japanese companies always traded at a fairly material discount than their peers because they are more complicated, cross shareholdings, and investments in industries that are not necessarily related come in so it's hard to peace out with the core business is doing. some changes in management and some more independent boards, you are seeing companies focusing on their core business and shareholders, which is what we like to see, a simple occasion which we think should lead to a re-rating, so we are spending a lot of time in japan. are you more confident this year for a particular reason? >> one, a lot of people got out of the trade because of stronger yen, so the valuations are more compelling relative to the world and on an absolute basis. rishaad: thank you very much indeed. we have to take a break.
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coming up, the future of consumer spending. ♪
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♪ announcer: from our studios in new york city, this is "charlie rose." charlie: david brooks is here. he has been a columnist for "the new york times" since 2003. he teaches courses on leadership at yale university. he is known for tackling wide ranging subjects from politics and the presidency to capitalism and character. more recently, he has turned his focus to the 2016 presidential campaign. i am pleased to have him back at it table. welcome. david: thank you. charlie: it has been too long, but i know you have books to write and other things to do. david: wine to drink. [laughter] c


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