tv Bloomberg Markets Asia Bloomberg August 29, 2017 9:00pm-10:00pm EDT
♪ it is just gone 9:00 in hong kong and singapore. 9:00 tuesday evening in new york city. i am rishaad salamat. haidi: i am haidi lun in sydney. this is "bloomberg markets: asia." ♪ rishaad: the united nations security council condemns north korea's missile tests here it president says all options are on the table. haidi: pyongyang vows to continue firing and says that is a prelude to containing the
territory of qualm. rishaad: the president visits taxes and says it is epic. harvey bringing the heaviest downpour in u.s. history. haidi: growing doubts the fed will hike again this year, major applications for other central banks. rishaad: for years they have been the unloved part of the chinese stock market. we are talking about financials, lenders, and 8536, how things have changed. people looking at fundamentals as the big four report earnings. is clear laggard agricultural bank of china, and the winner is the industrial commercial bank. what is happening, these companies have come back in favor, but this one issue has
dogged them. china's big bang for banks and their nonperforming loan book. theree worst performer because it is perceived to be the most risky as it does indeed have the highest number of npl's on its books. all to play here, people looking for these numbers and other key makes aor what bank attractive. absolutely. campaigneleveraging isn't actually happening, so that is interesting, and whether we need to look at the small and midsized lenders coming under pressure than the big four announcing today. we are 30 minutes from the open in china and hong kong, banks in focus, but singapore, taiwan, and malaysia coming online.
sophie, a rebound from yesterday's risk obsession. sophie: recovery from the selloff on tuesday. malaysian stocks not joining that upturn. set for a second day of losses. elsewhere, japanese stocks leading gains, up .6%. drops snapping a two day for the nikkei. haven plays falling out of favor, the yen edging towards 110, bonds falling, treasury butds closer to 2.15%, other movers, the aussie dollar climbing. even as iron ore is living, the currency holding above key trendline support ahead of data at the bottom of the hour. made move asaussie it is expected to weaken. doingwhat the yuan is
today. the offshore rate on a back foot after a 10 day rally, but the broke through a key level for the first time since june 2016 this week. , capitaliquidity flows, and a weaker dollar helping to spur the yuan has sent, a largely one-way path, which has confounded forecasters and is a problem for bears. saying thisbull rally is set to continue. i look for resilience for shanghai stocks. 2015 highs.r the fibonacci analysis pointing to a break out. 1481 on the terminal shows it has broken above the upper percent between 38.2 and 61.8% retracement level since the drop early 2016.
the next area of resistance could be the 76.4% level, the 3400 level. and the stronger yuan stable pboc policy, that could spur gains along further. china inc. looking financially healthier, and set to grow in 2017 at the fastest pace in seven years. we are looking to those chinese mending rates. rishaad: absolutely. thank you for that. right, let's find out what is going on first word wise. , president trump has described the flooding in and said the government response will serve as a model for future disaster recovery. looting prompted authorities to impose a curfew from midnight to 5:00 a.m. harvey brought the heaviest recorded downpour in u.s. history.
billions range from $24 to $100 billion. meanwhile, the storm has paralyzed mumbai. it forced the closure of a train network which carries 8 million people each day. whether forecasters predict more of the same today. trading on the stock and bond markets was also affected. , while theell 1.2% rupee weakened slightly against the dollar. cooperatingt is with u.s. investigators looking into whether employees who violated the foreign corrupt act, using bribes to win a retain business. the company is also the subject of an inquiry into its alleged use of software to deceive law enforcement officials, a program ball.as grey meet thursday to
discuss exclusive negotiating rights to a group involving western digital, japan's innovation network corp., and kkr. it is said that would prevent talks with any other buyers of its memory unit. toshiba had wanted to finalize the sale by the end of this month, but is now aiming for the end of september. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: thanks so much. the un security council has condemned north korea's missile launches as outrages and demand they stop. the council met in emergency session to discuss how to respond to the latest tests less than a month after the imposition of toughest that's the toughest sanctions yet on pyongyang. >> the world is united against north korea. it is time for the north korean regime to recognize the danger they are putting themselves in. the united states will not allow
their lawlessness to continue. the rest of the world is with us. the security council calls the dprk's actions outrageous and demands they immediately cease. thecouncil suggestions actions are not just a threat to the region, but all you and members. -- united nations members. the security council expresses concern that by conducting such a launch over japan as well as its recent actions of public statements deliberately undermines peace and stability. asiaad: our chief north correspondent is in tokyo. the security council has spoken of its out range, but the man in the corridors of power in pyongyang doesn't give a fig, does he? >> well, you know, that's what we don't really know.
actions, he is defying any kind of sanctions that might be proposed or that have been implemented in the past. we are learning in the last few minutes that prime minister shinzo abe is again on the phone according to kyoto news agency that he is talking on the phone with the president of south korea, moon, to discuss their options. there was one option put forward -- talking about the united states and japan, urging the un security council to perhaps impose an oil embargo, a global oil embargo, or sanctions stifling the flow of oil and energy into north korea. that is something to be discussed. two of thed that five permanent members on the united nations security council are russia and china.
they have veto powers, so what with their actions be. in those conversations donald trump had with shinzo abe, they agreed china and russia need to take action here. haidi: i guess that goes to my next question, where does that leave beijing? >> where does it leave beijing? the foreign ministry came out theyting the same claim, are proposed to the dprk's missile and nuclear programs, however, they want the relevant parties to stop provoking each other. they believe threats and sanctions are not the answer. more dialogue is needed. there hasn't been dialogue at all. have beenparty talks collapsed for many years. insisting the south and the american stop what they call the hostile acts
against north korea. they stopped their military drills that they must recently conducted, however, the united states and south korea have given no indication that will halt those kinds of actions. in fact, president moon yesterday and a show of force sent out for f-15 fighter jets on a bombing drill to flexed their muscles as well. those are the kind of terms that the north koreans are using. na using the term "muscle flexing.: " which is another way of saying, guam, watch out. rishaad: is there a since it is different this time? senseis different in the that the missile flew over a main island, japan, to the north. missiles from south korea have flown into japanese airspace before, but usually the east
china sea or one time near okinawa, but this was over a main island. north is of the goshen, so in that sense it is different. one other newspaper, this was talking about the capabilities of this particular missile, which flew about 1600 miles. is talking about the same missile has the capability of striking guam. guam is about 2100 miles away from pyongyang. again, there is a little speculation and concerned that these missiles they are testfiring, not the icbms, but the regional missile, can strike anywhere up and down japan and as far south as a guam. haidi: thank you so much for that. a lot more to discuss when it comes to north korea. coming up, a closer look at how
♪ this is "bloomberg markets: asia." i am haidi lun in sydney. rishaad: i am rishaad salamat in hong kong. the latest business flash headlines. a private equity company holding 12.5% of spring, calling for an extraordinary meeting to vote out spring asset management. it is pointing the finger at performance and corporate governance and questions around that.
has fallen since reporting results last week. a hong kong-based logistics set up says it is set to rival fedex and ups. it uses minivan drivers to move goods around and has expanded into mainland china, taiwan, south korea, singapore, and india. local media speculating it could become a tech unicorn. rishaad: the hong kong market regulators says the management of energy and others should be barred because of misconduct at the solar company. wantsd the court that it energy band. been suspended since may 2015 since it stock lost 47%. it's unexpected rise had made the company more viable at one stage then twitter.
haidi: markets higher, traders shrugging off the most recent north korean missile launch. jonathan, great to have you. this kind of cycle we have gotten ourselves into, escalation come and then de-escalation, and back here again. how do we navigate this? northdid warn that the korea risk issue was unlikely to disappear rapidly. we believe we are trapped in the --cle of eskin- escalation-de-escalation. to be the worst phase of escalation during the military exercises between south korea and the u.s. if you look at the impact on equities, you have to come back to the fact that the earnings
environment is exceptionally so that's whyow, these corrective moves are so brief. we had one yesterday, then we essentially recovered all the losses. going forward, if we have which are calling an uneasy equilibrium, the status quo for now, do you continue to fight the dips when it comes to asia? >> that's right. we are looking at something like high 30% year on year growth for japan this year, mid 20's for .he broad emerging-market this is the best earnings story in the region since 2009-2010, and more underpinned since then. the global economic recovery is more like 2005-2006 with all regions growing strongly your it -- strongly. rishaad: does a rising tide lift all the boats?
what about the banks? the chinese big four reporting later. >> that is the sector where people have the most questions. they are still underway china, but particularly chinese banks. they are reporting today. we are more bullish than consensus. 5%, 6% epsxpects growth for chinese banks. we would be close to double digits, particularly factoring in the currency translation side with the strength in the renminbi. so we are between the big sectors, i.t., financials overweight, but there is still plenty to play for on the china banks. we have 20%, 30% upside on our target price. rishaad: what will you be looking at when earnings come out? how bad the nonperforming loans side of things is, or other
fundamentals, which can be encouraging, dividend return on equity, that sort of thing? particular, we are slightly more bullish than consensus that chinese banks have worked through a large portion of the npl's they had accrued 2011-2015. as you come down the other side of the hill as it were on npl's, earnings will recovered, also driven the shift towards mortgage lending. in fact, that shift is highly favorable for these big ranks in china. we would want to distinguish with some of the regional banks, which have more asset quality pressures and a bigger portion of their book and shadow banking assets, but the big four banks, we think the market is overly concerned and will be surprised on the upside in relation to earnings. seei: how much of a risk do from the 19th party congress?
>> we will get senior personnel change over at the party congress. politburoa number of members who reached retirement age. it is clear that president xi jinping will remain in charge as it were of china. after, typically policy and party congresses, we tended to see stimulus later. administration wants to steady the ship when it comes to the capital allocation process in china. is being prioritized. if we think about stimulus and why the economy is strong in china, the stimulus is gradually being with drawn, but the export sector is picking up momentum as the global economy is strong, so they ever able to do this policy tightening into the face of a stronger global economy. rishaad: quick 1, 20 5% up, the
kospi breaking out of that tight range it has been in and the last few years. does that mean that korean discount we always talk about is now gone? >> if you look at a metric like forward pe, it is trading significantly cheap to its average discount over the last 10 years. that is partly because earnings have been strong, particularly the dram sector. it's not necessarily north korea political risk or south korea, it is looking forward to somewhat less important environment next year for dram after an exceptionally strong 12-18 months. again coming back to where we began, there are various scenarios for how the north korea issue involves. one of them was a sustained positive scenario around
de-nuclear station in exchange for removal of sanctions, and that could narrow the discount -- discount. rishaad: thank you so much for that. weatheroming up, heavy for china southern as a reports a profit trop. we check in on it and the rival china eastern in the premarket. that is coming up next. this is bloomberg. ♪
taking a look at what is going on in the airline space. china has three big ones, and they've been adding flights on international routes, but they are slowing that down in favor of domestic passengers. in the first half of this year, air china reports wednesday, today. china eastern and china southern have an increasing international seats at half the pace last year. they have been stepping up domestic capacity as well. quick numbers. china eastern up 34%. china southern reporting an 11% drop according to its earnings. haidi: has shift in focus there. banks all come out with earnings results today. it is expected to be a strong story, in p kohl's have been steady for the past three quarters. we will be looking at loans made
♪ there we go. a gorgeous day in hong kong. 9:29 a.m. as we count you down to the start of the session. a positive day for asian equity markets. arising north korea, the yen easing with those tensions. nots, tropical storm harvey doing much to the oil price, but gasoline prices moving to the upside for seven straight days. economic data out of the eurozone, inflation data from the biggest economies there this week. retail sales out of japan surprising to the upside. nonfarm payrolls friday and core
inflation numbers with perhaps a revision the second-quarter gdp there. haidi: that's right. a data heavy week when it comes to that calendar. as well, looking for signs of resilience when it comes to that chinese growth story. we are waiting on some numbers when it comes to a gauge of how these the property markets are doing. we are getting that now. -1.7%,ming in at expecting a decline of 5%, so not as steep. approvals building year on year, a decline of 13.9%, softer than expectations of a decline at 16.6%. a jumpmes on the back of in building approvals the at huge month at 10.9%, surprise and the fastest pace of
growth and building approvals in a year. a quarter of that was arise when it comes to apartments in australia. it may be more of an indication that the housing market is starting to cool, but that decline of 1.7% not as steep as ofected, coming on the back fresh rate increases from the major banks, macro prudential measures with policymakers very concerned about levels of housing lending in the financial sector here in australia. at shanghai and hong kong markets joining a recovery in asia. sophie: checking out mainland markets in china, the csi 200 gaining .1%. the hang seng resuming gains for day, gaining .5%. check out the currencies base, the aussie following the data, jumping, but now easing
gains and looking study. with the stronger fix from the pboc, the onshore rate slightly that mark still below which a broker for the first time since december 2016 overnight. fork out the offshore rate now swinging to gains, set for an 11th straight session higher. the yuan is the best performer against the dollar when it comes 11 forex tracked by bloomberg. after the shanghai composite move through 3300, this benchmark in focus. today, materials and telcos stocks and dragging on that benchmark, while real estate is up .3%. financials not seeing too much movement. we are waiting on chinese
banking earnings later today. morgan stanley has been overweight for chinese banks all year. they see more upside for the sector given the improvement in npl's. i want to show you china postal bank. a-shareer planning an sale, trading at the highest level since may. chinese carriers after the results, some diversion outlooks from china southern and china eastern, but both stocks on the up, climbing just under 1%. a quick look at the shanghai composite, swinging to slight gains so far. rishaad: looking at the new zealand dollar, the reserve bank has been talking, and we have seen it drop .3%, there we go. that is it. it is saying we need of lower new zealand dollar in the country at the moment in order
to really drive things along there. so, of course, that means it has dropped as the financial risk stability picture improves and there is more room for monetary policy maneuvers than other central banks. it is needed to weaken so they can have, well, an increase in tradable's, inflation there. that is graham wheeler talking there, talking down the new zealand dollar. ok, well, let's talk about talking to kim jong-un. let's get the first word news. haslinda: the un security council has repeated demands for north korea to stop the missile launches. the council met after pyongyang said the missile launches would continue. north korea has released photos of the latest missile.
president trump said all options remain open and that pyongyang has showed contempt for the international community. japan's retail sales growth beat expectations in july, indicating the recovery in private demand may be firming has households become more willing to open their pocketbooks. of 1.9% from a year earlier, almost double the median forecast. however supermarkets and grocery stores declined. the u.k. is said to have asked for more brexit sessions, the latest talks showing little progress. london wants to move on to potential trade links after the divorce. focused on thes bill the u.k. will have to pay to quit the eu. didn't arriveam until midmorning tuesday, and press conference is scheduled for thursday lunchtime. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
rishaad: right, oil not doing much in like tropical storm harvey. are gettingces two-year highs. oil traders bracing for more disruption to gulf coast refineries. let's get more. the oil price has not done much at all, but seven straight days of gains for gasoline. tell us about this. >> that is the longest run in a year for gasoline prices. the reaction is in the product market because of closures to the refineries there. a two-year high for gasoline, 18% of refining capacity is closed to that may climb as high as 30%. closed.
that may climb as high as 30%. hurricane harvey or tropical storm harvey is starting to turn and pivot in the gulf coast and is poised to hit texas-louisiana border again, so refiners are racing for more pain. rishaad: this will not do much for the shale industry either, will it? 2009,you look back in crude prices rose 40%. because we have seen the dynamic oil move on sure, there is not much happening at the moment. the biggest problem for oil at the moment is crude processing at those refineries, so a small reaction come in nothing large. haidi: what is the situation with the two gas tankers sitting off the louisiana coast? >> there is some speculation there that the liquid gas tankers might be looking for a
window to load at some specific point, but the storm is forecast to pass directly over them. when it comes to storms and hurricanes, it all comes down to damage to infrastructure, whether poor channels can be flooding, sosevere there might be optimism there as to whether they can load and the timing there. we will have to wait and see once harvey passes. they will assess the damage to infrastructure, four channels, and associated bits and pieces. haidi: a lot of work to be done. thank you for that. his eyeing reserve the stimulus exit door, but there is doubt it will hike again this year. news for the good pboc as it uses tools to keep policy where it wants. kathleen hays has more.
let's start with the fed. what has been going on to make these rate hike? expectations to reseed >> it is inflation far below target. one reason it is up for discussion is twofold to one, , andate hike keep slipping the benchmark has dropped to the lowest yield level in a year this week. people are saying north korea missiles, but bloomberg news, our fixed income team, saying, guess what? yes, north korea is an issue, but it is all about inflation and rate hike expectations. with me.irp no chance the fed moves. the third number from the top left, the december meeting, the odds are 29%, and had been over 60%. you can see the pullback in
inflation has made a difference in what people expect. thated has made it clear they would like to hike rates one more time this year. two big bang numbers this week. payrolls on friday is a big one. thursday might be bigger. that is when we get the fed key inflation gauge, the pce, forecast not to head back to 2% from 1.5 percent, but forecast to fall by 0.1% to 1.4%. payrolls potentially take a backseat because a gain of 180,000 is fine, down from 290,000, but still decent. unemployment at 4.3% will not rock anybody's boat. we also get the manufacturing numbers. wednesday, the number that sets the whole thing up, the adp private survey of employment, that is the gauge, but it is all
about inflation this week and the bond market is not expecting any kind of improvement. haidi: if the fed doesn't move on interest rates this year, what does that mean for the pboc? certainly to a ownain extent is in its world. like any central bank, it has to watch what the fed does because look at what happened in 2016. after the fed hike, that was one of the factors that help spur capital outflows from china. right now, the pboc has two conflicting goals it is trying to manage. reduce excessive borrowing by allowing an increase in short-term rates. it has also got to make sure credits no -- enough left as the economy is transitioning to consumption led growth. but it also has to keep a
delicate balance even more importantly ahead of the 19th party congress in the fall. it is doing its job with open days, operations, seven , theys, 28 they repos kind of management the fed used to do in the 1980's you'd what 9469. from this is i want to show you a graphic depiction of the pboc trying to keep policy not to lose, not too tight. the white bar showed net inflows from adding liquidity. the blue bars below are outflows. the pboc ishow maintaining that delicate balance through these open market operations. this is just traditional central banking. they have allowed interbank rates to rise of that to cut short-term lending and death. we have seen some -- and de
bt. make lendingdo tougher, it seems like the pboc is doing good job keeping things were they need to be. haidi: thank you so much. some breaking news, the united nations security council sending a message of condemnation to the regime there. abe andshinzo president moon agreeing to raise the pressure on pyongyang to its maximum level. they have also agreed to seek a stricter united nations resolution as well emanating from that security council meeting. bigt, coming up, have the four bounceback? we will talk to fitch. this is bloomberg. ♪
♪ this is "bloomberg markets: asia." i am haidi lun in sydney. rishaad: i am rishaad salamat in hong kong. some of china's biggest vendors releasing earnings, clear signs of how they are holding up against a government led clampdown on debt. our next guest sees china facing a dilemma with its economic model heavily reliant on credit to me growth targets. he is head of china bank ratings at fitch ratings. i was going through these balance sheets. bigs astonished at the four. they are all roughly the same, the agricultural bank of bit weaker. dividends roughly the same as , or thereabouts.
it is all about npl's, is it not? , but we look at the overall leverage. there are signs in the asset dueity, but much of that is to the stimulus efforts in the second half of last year. whether that stabilization or improvement in asset quality can be sustained into next year, we still have questions. rishaad: tell me something, does the dividend yield mean anything to you here? again, we are looking at icbc, ccb, bank of china and 4.5%, but agricultural bank, some perhaps reflecting
weakness and underperformance when it comes to the share price. >> the overall capitalization level at the banks, especially so large banksl, would say because earnings have been supported by better margins in the first half helped by improvements in market rates, there is less pressure on the large state banks. if we were to look at some smaller banks, for example, we have seen some signs of deleverage in the sense their assets have declined for the first time and we believe that is due to capitalization pressure, the clampdown on the shadow activities. those banks have been forced to take on exposure on to the balance sheet and capitalization. haidi: i want to ask about what you focus on largely, leverage in the economy, the financial system. this is 624 on your bloomberg,
breaking down china's debt picture. ,orporate debt is 160% of gdp household debt is 45%. to gdp isinese debt over 300% as of the middle of this year. we have spoken to a lot of sayysts and economists who the deleveraging campaign is either underway or concluded, but progress has been made. you don't believe china is in the deleveraging cycle yet. >> the fact we are still seeing credit at the pace, we believe part of that is due to legacy debts. is more capital gains servicing these deaths that could've flown into the real economy. most: who is the vulnerable when it comes to this delicate balance between china gdp targets and a system where
, andh is driven by credit also we know policymakers are trying to clampdown on financial stability and systemic risks. >> we still see the risks being the greatest with some of these second-tier joint stock and commercial banks. these banks have become excessively reliant on products like wmp's. up 50% of the deposits for some of these banks. that overreliance has the potential to threaten stability given the fact these banks have been the most aggressive in terms of gaining market share. what about the interconnectedness with non-bank financial institutions, a polite way of calling them shadow banks? how does that figure into the big four balance sheets? some of these second-tier banks, are moreou say, they
indebted than we think, affecting the state banks. >> for the state banks, we think the impact is smaller. to thise banks exposure would be investments like wealth management products. the works out to about 1% of assets for the large state thanks, but on average about 19% for the second-tier banks, so clearly there is more exposure and interconnectedness at the second-tier bank level. is greaterat there connectivity in the system and they are the largest in terms of gainers and market share, that poses a threat to the overall stability of the system if they were allowed to grow further. so regulatory actions targeting these activities has the
china southern, a different picture, profits falling 11%. china eastern saying what they want to do now is focus on pushing up passenger yields. they say they would do that by adding more corporate clients and more direct ticket sales. and addedf capacity flights, they will be focused domestically on the top tier cities here. to beger yields tend higher. china southern sticking to its plan to expand internationally, focused on north america, is where ith expects international traffic to pick up 15%. we do have a chart showing chart -- 7941 is that i should say 730 eight, the revenues for the big three state-owned airlines. we are expecting china air results later this afternoon as well. rishaad: why are we seeing a
pullback in overseas expansion by these airlines? all about capacity versus yield. in the last few years generally and broadly the airlines have been focused on expanding capacity very aggressively, but passenger yields have tended to take down. chart, 7941.econd that shows passenger yields internationally and domestically have started to tighten and edge down. domestically they are holding above the international yields. in terms of traffic numbers, domestically we have seen an uptick. in may, we saw a 70% increase in traffic, the largest in more than two years. whereas the whole of 2016 come up passenger yields were down on international flights by 25% compared to domestic, so that is
♪ >> from our studios in new york city, this is "charlie rose." charlie: welcome to the program, tonight, jon stewart, the former "daily show" host is the subject of a new book called "the daily show (the book): an oral history as told by jon stewart, the correspondents, staff and guests . jon: any artistic pursuit, is a relatively selfish pursuit. it is a catharsis for the individual, and a way to express ideas and get them out and feel the seduction of it is, is it going to score or not? that is the hit, that is the adrenaline.
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