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tv   Bloomberg Markets Asia  Bloomberg  February 4, 2018 8:00pm-11:00pm EST

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♪ indi: it is 12:00 p.m. sydney. 9:00 a.m. in hong kong. this is "bloomberg markets: asia." ♪ asia pacific market extending the biggest global selloff in two years in growing concern that the fed may step of the pace of their rate hike. powell will be sworn in and janet yellen says she is sad to leave.
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seoul.will be live in the bond route continues. the contagion when it comes to equities playing out in the asian session. we had that 600 point drop to the dow. asianf extended in the session. a huge week when it comes to the data. four central-bank meetings. you have australia, central-bank in the philippines and looking at the reserve bank of india. very interesting to get any policy reaction to that fiscal situation of the tell by the latest budget. in the meantime, looking at treasury yields and the features looking at more downside and this is playing out in a negative way in asia. 30 minutes out from the oven in china and hong kong. hang seng looked at the
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barometer when it comes to the bearish sentiment in this world --as part of the world. david, we're watching everything. there are a lot of trades play ing out. david: it is getting worse as we speak. markets open at the moment. on a markets like taiwan flip. we will at teachers on a significant decline. a lot of central-bank decisions this week --a lot of that is happening in a situation where you have financial conditions on the way up. i was looking at the 30 year in the u.s., we are 3.12% last i checked there. that is really starting to take a lot out of the equity rallies we are seeing. 30-year up 10 bips.
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up on the aussie third year. japanese yen, a third of 1%. south korean won down 1%. taiwan dollar down 1%. you what to close your eyes when markets in hong kong start to open up later on. silver lining, one thing apart from the yen that is up. look at the implied faults. thehave the nikkei and kospi. stocks down. dollar seeing a bid. treasuries being offered up at the moment. not the best sign here as we move into the open here in hong kong and in china. haidi: not the best sign at all, david. first word news with remy innocence you -- rami.
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heir ise samsung appealing his five-year prison term for corruption. prosecutors are appealing for a longer term. for 12nt lee behind bars years, arguing that would establish the rule of law in investigations between government and business. china is ratcheting up trade tensions with the u.s., launching an investigation into sorghum imports. aging says it has evidence that ing u.s. government -- beij says it has evidence of the u.s. government subsidizes of the sector. this after president trump slapped sanctions on solar panels. something that china said was unnecessary. u.n. monitors say shipments
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in china, south korea and usingm were made by ships deceptive navigation patterns. beijiing is doing its part to enforce sanctions. prime minister theresa may has affirmed that the u.k. will not try to stay in the customs unit post brexit. british business has called on the government to apply to stay in the customs union while the says it would negate plans it to do trade deals around the world. this is bloomberg. ♪ haidi: thank you. anxiety about the outlook for monetary policy has reached fever pitch on the market.
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equities tested by the surge in bonn rate and views on the u.s. tenure climbing to a four-year high. for more on what is making the markets so edgy we are honored by mark in singapore. we are seeing this contagion route when what is happening -- with what is happening in the bond markets. it is trickling into equity markets. how hard does the bond selloff go? >> the rapid pace of the rise in treasury yields has taken a lot of people by surprise. we have seen dramatic increases, especially in the short end. the two-year yield has been rising day after day for the past months. the pace of rate tightening is not enough. --some arewage
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questioning whether the fed is behind the curve. we have a new fed chairman starting today and there is anxiety around the treasury market and is spreading to other asset classes. equities are getting hit. haidi: where do you high? hide,ou -- where do you when you look across asian markets. of bulls ofthis world -- this world are wondering if we are behind the stage of this cycle. >> the usual suspects can be brought out. if we see dollar-yen start to slide, if we see gold get big -- these are the typical kinds of things you expect to see if investors are panicky about things going on. it is starting in the equities market.
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ru. -- had a tremendous run. if we see it spread to the oil market, it will be an indicator this is spreading across asset classes. if we see gold doing well, then we can be fairly sure this is starting to be a major unwind across many investment portfolios. haidi: thank you for that. mark cranfield. you can hop on the bloomberg and take a look at the market training day, --trading day. let's get more from the otg asia investment director and strategist. is it time for us to take a pause. we have been worried about complacency and greed playing thelaying out and is this ticking come to roost? >> january was an extremely
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strong month for markets around the world, capping off a good 2017. in terms of bond yields you ask why haven't they been rising sooner. in the united states, we have a low 4.1% unemployment. were good.numbers average hourly earnings rising 3%. around the world we see figure nice global growth. --synchronized global growth. companies are reporting around 12% earnings year on year. very robust. most of the news it tends to be quite good and maybe what we are seeing is a bit of a breather, a correction, a profit taking from the very strong one in january and a resumption of the bull as february
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continues. haidi: i love to throw a quick g#btb2872. you see the gap between s&p earnings and the treasury yields is the narrowest in nine years. s&p 1.3% of the index price. the comparison falls down when you see how they reacted volatility. does this make you worry about how this next leg of the market goes? >> that is a fair point and i do not want to downplay that. i would go back to saying what i said earlier which is that investors today find themselves in a relatively unique environment. we have synchronized global growth. united states and japan -- it is
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powering earnings forward and we are seeing that around the world and in places like japan, which has been a bit of a disappointment for investors over the longer term. nings a question of earb and what you are willing to pay for the earnings. valuation, the united states investors have been stretched a wild and we are looking to --stretched a while. haidi: these worries we have a more hawkish fed under jay powell, are they warranted? we heard we could get three or four rate hikes. is four ok? is that a tolerable level for the market and economy? >> in terms of the fed itself, we can say the market is fully pricing in at least 3 hikes. thee get four hikes on
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backdrop of a strong 2017, i do not think it will derail the the market or the path of u.s. economy. in terms of the fed, we have to wait and see. the market is expecting a pragmatic fed. that is a code word for remaining relatively dovish. i do not see the fed lurching and becoming particularly hawkish given what little we know about mr. powell. haidi: moore to talk about, where do you find safety and where you see value. stay with us. a td bank asia executive investors strategists. speaking of value, of the trade is having its moment in shanghai. and we will be live in seoul as getformer samsung heir
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his prison sentence appeal.
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♪ ♪ haidi: what was always going to be an ugly picture going into the start of trading in asia looks like it is getting worse. picking up the pace when it comes to this sell off. japanese and korean markets trading at the moment --even with a bit of yen weakness we get with the stronger dollar, that is not getting much response. and kospiding lower .07.g lower at we had stocks closing out the week at 1.2%. you could argue the decline in
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sydney is just playing catch-up. we have some strength when it comes to the aussie dollar as well. one of the g-10 currencies. kiwi extending. big week when it comes to the aging calendar. four major central bank meetings reserves inflation as well. let's get what to expect with representativeia still with us in this conversation. what moves the needle out of the data calendar. if we have an unusual print when it comes to china in the ppi or cpi, with that change the global reflation -- would that change the global reflation story? >> we will have to watch. you're talking about where to hide when markets take a bit of
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a couple, it might be counterintuitive but actually one market that tends to ride these things out when you have troubles is the chinese market. valuations are low. there's a strong consensus that china could grow 6.5% this year. we have a bit of a deleveraging story that would take place in q1 of 2018. i would be looking to buy chinese equities in the current market weakness. haidi: the point of view that supports that strategy is that it is a market mostly shielded by global market forces. >> that is absolutely true. sometimes investors see that as a negative. certainly the longer term passes for trying to come better -- path is for china to become more
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connected with the outside world. but the problem with being shielded is you have a disconnect from the rest of the world and that could cause you to outperform. it is a bit of the glass half-full environment --being left connected with the outside world would be a benefit for investors in the chinese market. haidi: one of the things that played out on friday was a number of investors got caught up by their dollar short. does what happened on friday and what continues to play out , does that change yourview wg -- your view when it comes to the yen and euro. >> this is an important issue in terms of currencies and how they should impact the stock market. what we are looking for for the rest of 2018 is for prolonged strength.apanese yen
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it might be a bit tired intuitive --counterintuitive in that we have rate hikes and it will boost the value of the dollar. what we are seeing from the europeans and japanese is an incremental change in their language for guidance, which should be interpreted by the market as being bullish for those currencies. the big question is, can those stock markets perform well in the currencies are depreciating. it is possible to have moderate euro and yen appreciation and happy stock market to do well. we are recommending that investors take an unhedged approach to european and japanese equities this year. haidi: that is one of the interesting things that played out in the japanese markets. the correlation between yen strength and equity w
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comess did not together. >> in the japanese market there are new developments taking place. ies have so much excess cash on their balance sheets that they will the increases in m and a and those known are not that well wille market and that compensate for some headwinds coming in 2018. japanese markets are becoming more shareholder friendly and that is something we will recognize over the course of this year. haidi: ecb way things are unraveling this monday morning way things are
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unraveling this monday morning. this is the largest selloff since the u.s. election. if we get a more hawkish to directory from the fed, are we worrying about a temper tantrum from em's in this part of the world. stephen: that might be going too far. one view in the market is if you have the u.s. treasury yields by 3.5%, that is a level that remain fundamentally supportive for u.s. growth. if you're above the 3.5%, this will become restrictive of growth. 2.84 is where we are this morning. we have a bit of a ways to go. if the bond market can calm down, we can look back on this episode and say it was a moderate market correction and not the beginning of something much more serious. haidi: another thing we are watching is the commodity story. we have the biggest decline in
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two months. if that continues and we continue to get the stronger dollar, does that change your view when it comes to energy stock? >> the big thing with energy stock is over the last three years the entire energy stock complex has really done a lot in reducing the cost space. today with commodity prices and energy a lot higher than they were, they are doing exceptionally well. we see that and the ongoing earnings season energy stocks are in a relative sweet spot. we are recommending in our top three sectors, health care, financial and energy as replaces finances --investors should be positioned. haidi: thank you. otg investment strategist.
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looking at the surge in the u.s. dollar index. we have a lot of big losers when it comes to the hong kong premarket session. you can catch up on our interviews by using our interactive function tvgo. you can go into any of the securities or bloomberg functions we talk about. or join in on the conversation by sending us instant messages through our show. this is for bloomberg subscribers only. this is bloomberg. ♪
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♪ haidi: counting down to the open of markets in hong kong and china. the premarket session not looking great. the damage so far, this was always going to be the kind of parameter when it comes to --
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thateter when it comes to bearish session. features looking much of these seng, the heang and so much red, hitting milestones for the worst rates for these stocks. down.t aac technology. airlines, china eastern one of the biggest decline that 7.5%. a big week for china data. --crucialting the cpi where we go in this global reflation story. newredit reserves and data that will give us an
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indication of whether that new credit is flowing through to the economy. lookg up, why two stocks to be a winning trade. this is bloomberg. ♪
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♪ a.m in hong 9:29 kong. market open, a violent set of moves in the premarket open. .9ci asia-pacific trading at 1 percent. worries about financial stability and higher asset prices also creeping in. treasury yields at the highest in four years. looking to test of the 3% level when it comes to the 10 year u.s. treasury. he will say that will be the inflection point as to where
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this bear markets goes. january, what a month it was for hong kong's stocks. crossing 31000 and rallying from there. are we looking at a break even from investors? david: 800 point drop at the open for hong kong and i would say you how that looks on a daily price change. the selloff is getting to be quite ethic. the bigger movers, you look at equities, taiwan dollar, south korean won taking it on the chin. australia's worst today. hong kong, 800 points. look at some of the other thing we are following. ms. up in yields. 30 year in australia, 3.5%. we're above this gap. i will show you a chart in the show on this hurdle it had to cross.
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it is above that hurdle now at this point in time. gdp numbers out of indonesia. this pointatters at in time. everything else: back. back.ling there is your 800 point drop on the hans saying --hang seng index. in september, going up 2000. early movers, the tenten was stock wasot a single and- the tencent was down 90 single stock was up. 2.4% financials, 2.2%. best to put 5%. you're looking very bad across equity markets. what is causing this?
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this bull market has been tinged on two things. fairly good earnings story and synchronize growth amd tje --and the other was good financial conditions, which is starting to turn. the four states have taken place on days when you look at financial conditions start to turn, tighten or both. ecb corresponding drop we -- you drops, corresponding five days wiped out half $1 trillion in market value. asia-pacificsci and japan. japan's financial conditions index. let's look at the momentum tracker. we revisited this chart every time we get a massive sort of
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lowering and the level you want to watch --is the -- it is the 30 level. belowep process a drop furthere hit our head that might see men nine some -- the momentum return. a lot of ways, everything i said, which was a lot of ways to say it is a bad day across markets today. haidi: this is a story --the selloff that started in fixed income in bonds and went over to equities and we saw it play over across commodities. a lotbout fx, which have of painful trades getting caught up in the fx base.
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david: they are mispricing. not a lot of people were position for long rates --higher rates on the long end. let me get a chart here. you compare the yield premium of the u.s. over australia. that is starting to change. 3, 2, 1. that is really playing out in you look at the current the market. -- currency market. this is not boding well for the aussie dollar. you see the aussie dollar as the 0 currency.rming g-1 thank you for that. busy day for the markets. let's get you caught up with the rest of the first word news with ramy. ramy: north korea says it is
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sending a high level delegation to south korea later this week for the opening of the winter olympics. the state news agency says the official be led by the head of north korea's supreme people's assembly. 22 north korean athletes will compete at the gains. u.s. stocks and commercial real high. prices are the banking system much more resilient before the banking crisis, yellen says. she stepped down as chair and she said she is disappointed that president trump opted to replace her with jerome powell. --aramco setabia the price for air of crude to
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the regional benchmark. the first time since 2017 that the price went unchanged for two weeks in a row. plane makers have never had it so good in asia. the rapid growth of mainland chinese carriers and new budget operators have been good business for boeing and air -- for beoimg and airbus. they estimate 23 million passengers. boeing says the region will need at least 16,000 new planes to meet all of that demand. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. ♪ haidi: thanks for that. those stocks seemed to
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be a best that in china. china. bet in let's get it over to our china markets reporter. more details about this value trade when it come to china. we argue about where fundamentals apply for chinese equities. >> it seems on a stranger to be talking about finding bargains when global markets are selling off across the board. it is a bad day. but you did have a guest on ear lier who said it may be counterintuitive but china's mainland markets is a good place to hide on a day like this. value in china is financials and energy companies and property developers. everything that did not rise last year. a big chunk of it being financials.
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a lot of people have a turning on mainland markets. that is what is the driving this 12% rally in values shared. it is a very domestic market. it is kind of shielded from what is happening in the rest of the world. yet to bear that in mind. it might not be a logical market at all times because it is very volatile and what drives markets is not necessarily fundamentals and values and those trends. it has been a very sentiment driven market lately. haidi: what is it about this strategy? is it very specific and limited to china or does it not work elsewhere. what has been interesting, if you wanted to latest value trade --i have heard people talking about this for the past two years.
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stocks around the world are expensive and if you want to chase growth, that is all the popular stocks, internet and that, all that has been so expansive -- all that has been --people have been willing to chase that. you do not have those kinds of companies in shanghai and in those kind of indexes. maybe that is why it has been working so well in shanghai but if you want to chase the value trade elsewhere in the world -- and in the u.s. it has been a losing strategy over the past 10 years. investors are still willing to pay all the high multiples for internet growth stocks and anything else but financials. haidi: what could go wrong? seet is the volatility you
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on a day like this in hong kong. people are selling the last isng they bought and that financials the down 2.2% on the hang seng. this volatility is a contained market on the mainland but i am not sure it can be a haven play. it is a very difficult market. it had its worst week since 2016 last week and it is twice as volatile as markets elsewhere. financials in china, that does sound risky and if it is a market that continues into selloff, it will be a difficult trade to carry through. haidi: thank you so much for that. bloomberg's china markets reporter. talking about value trading on a day for the markets so far. ul becauseto seo
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the heir to the samsung fortune is seeking a reduction in his prison term. they want him jailed for 12 years. this is the big south korean case that is peeling back the onion and seeing because the relationship we've all known that many of the big conglomerates in south korea have had with politicians. this one ran right up to the top with the allegations and the conditions -- conviction of jae y lee. he goes all the way back to the president the and the president who was ousted last year and awaits are on trial. he was arrested in that trial for corruption and this is part
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of the appellate process. in the building behind me is the seoul high court and it is hearing an appeal. we expect a ruling around 2:00 p.m. local time for that appeal. this is a case of that pealed -- that pealed back the onion but there is a benefit he. the company has installed a new ceo and divisional head at the three divisions. pealedis a case of that by the onion. they will have the olympics on friday. a lot of south korean. focus on that. wasntnts --urse jae
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wants a shorter prison sentence and prosecutors want more time. >> the appellate court could of holding the sentence. -- years in prison for je jae y lee. or they could extend the could staynd -- he in detention. this is a sage th --socko that has gripped the nation -- this i s a saga that has gripped the nation. if they reduce the sentence or give a suspended sentence, lee jae-yong could go home from this appellate court ruling. that is an interesting development. the final is ever turning the
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conviction, which legal experts say is least likely. setting the scene there, our chief asia correspondent in seoul. waiting for the verdict and this is the latest episode and not the finale. coming up, as president trump declares himself vindicated. where next for russia investigation? ♪
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♪ haidi: three republican lawmakers are giving their backing to an inquiry into russia's alleged interference into the 26 election. -- 2016 election. president trump says that he is totally vindicated in the russia
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interference scandal. correspondent: over the weekend we heard a lot of noise about the memo from both sides of the aisle. the president himself said the memo steadily vindicate him of any attempt to -- totally vindicated him of any attempt to the russians.with that the memo does less than that. it is not have any smoking guns and does not indicate if president trump was involved at all or is there were any attempt to conclude. they say it does show that the republicans decided to release the memo which they say was a wrong decision given some of the information was classified. the republicans themselves saying this is not mean that the program by mr. mueller should end. that there is more to be looked
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at. three house intelligence republicans saying that themselves. haidi: what is the motivation behind why they want the mueller program to continue? -- probe to continue? >> they are thinking it is good to get all this information out there and there's plenty more. that by stopping the investigation it is not ultimately help the white house. other republicans are saying that at this point that they question the motivation of the investigationan --investigation and a lot is driven by partisan politics. today we will see more discussion about information that will be discussed to be released by the committee. and there's talk about rod rosenstein and whether the white house will keep him or attempt to fire him.
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haidi: thank you for that. never a dull moment in washington. jodi schneider, our bloomberg editor in hong kong. numbers,omes to china the composite number for january coming in at 53.7. that a tick up from the prior month. china pmi services coming in at 54.7. a pretty strong pickup when it comes to the previous month. 53.9 and a beat of expectations of 53.5. a bit of a response for markets disappointed with the manufacturing pmi last week in the cayman worse than expected and weakness across the board when it comes to the china numbers. much or if the overall picture of stability is going to be enough to move the needle when
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it comes to turn around the bear market in asia. coming up, we are talking to the ceo of an airline. our interview next. this is bloomberg. ♪
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♪ isdi: qantas ceo alan joyce saying the airline is coping well with rising fuel prices because it's a new aircraft are more fuel-efficient. thereby the start direct services between australia and --they are about to start direct services between australia and europe in march. >> we know people want direct services and this will be on the news agency art 787. we put less seats on the aircraft. --and this will be on the new
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state-of-the-art 787. it is only a few weeks away and the initial numbers are strong ahead of where we expected to be. i'm confident that the traveling public like to direct services. >> correspondent: what impact will it have on your domestic businesses? is it going to bring more traffic into australia? >> we believe so. the big thing about this for western australia, the economy has been a bit depressed for a wild with resource decline and there is real excitement at wa for the tourism experiences an opportunity it brings for the state. people coming in and experiencing different tourist locations and then coming to the east coast for the great cafes and restaurants in melbourne or the great barrier reef. we think we will more stopoff in the domestic market. haidi: you've also flacco
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nonstop sydney to l.a. and new york --you're also talking about nonstop sydney to l.a. and new york. >> of airbus and boeing has an aircraft in production that we can nearly do it/the challeng. -- it. the challenge with project sunrise is to get a full craft passenger with a full payloads. our engineers can make it happen. this is a game changing aircraft. we have flown on the kangaroo route fotr 80 years. there used to be plenty of stocks. now these direct services you can do non stop stops. haidi: i was going to ask how you are hedging in this environment? >> we always take the same
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approach. we put hedging in to give us protection in the short-term and the way the hedging works is is ona cap -- is it puts a cap our fuel expenditure. that has helped us the competitive. coping well with fuel. would maketas between 900 and 950 million at the underlying level. that will be good for the qantas group. haidi: that was qantas ceo alan joyce speaking at the singapore airshow. great interviews from the singapore airshow today.
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goolsbee with robert martin, the leasing arm for bank of china and don't miss our conversation with star alliance ceo jeffery goh. let's get back to the markets because this global equity slump is deepening. we heard from robert kaplan suggesting more than three rate hikes from the fed is possible and we could get four. the market reacting very violently to that as u.s. treasury yields hovering at the highest in 4 year. hong kong stocks looking bearish. now extending earlier losses. -- you see comp down shanghai comp down. 2.5 percent lower.
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1.5e seeing kospi off by percent. australian markets playing catch-up. this is bloomberg. ♪
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sydney.lmost 1:00 in i'm haidi lun and this is bloomberg markets: asia. ♪ haidi: it is a sea of red across the asia-pacific as the selloff deepened. hong kong leading the way in asia, stocks falling the most in 18 months. tokyo and taipei down 2%. oil could be the next for correction if they extend across asset classes.
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more -- are sending a chill through the market. verying crude rises carefully. you can see a greater selling across energy stocks. we are seeing that taking place. bloomberg commodity index adding to it. elsewhere, we are seeing a sea of red across the region when it comes to hong kong markets. the has been a focus after 31,000 level breached. this is the worst fall off in asia region. just the past five sessions and we are building on those losses today. let's get to sophie kamaruddin with a look at the market. sophie: following the rep we saw on friday, investors in asia have been waiting for this moment to take profits given. the lofty valuations across the region. when you look at the breakdown, you have the taiex taking over
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sincein, the most november 2016. australia is not a good start to the opening season there. have aussie bonds also under pressure along with the rest of the region. today's auction of debt not finding much in lowering in investors. this as the yield premium has managed against the u.s. and over in tokyo, check out the nikkei 225, down 2.6%, the worst drop november. japanese stocks still remain dirt cheap. i want to highlight some of that. take a look at the big picture. they still remain attractive and they are still remaining their 60,000 forecast for the index. take a look at currencies and commodities given the moves we saw for the dollar.
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we had a lot of dollar short backs and caught given the moves in the currency space. the korean won is eyeing that 1090 handle. the most in two months. not much in the way of bright spots. philippian pesos gaining, but not by much. even when we have data such as indonesian fourth-quarter gdp, that is getting loss amid the sea of red. i want to highlight something one of our bloggers put out today. going onye on what is in the crude space because this might be the next casualty when it comes to that correction given the tilde in -- -- given the buildup. haidi: not a lot of good news stories around if you take a look at what's going on behind you. let's get you the first word news with ramy inocencio in new york. ramy: that's right. north korea says it is sending a
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high-level delegation to south korea later this week for the opening of the winter olympics. news agencies say officials will be led by the head of the presidium of north korea's supreme people's assembly. president mont may meet that delegation. 22 north korean athletes will compete at the games. theresa may has confirmed the country will not attempt to stay in the eu customs union after brexit. that was a key for those who have hatched a plot to topple the prime minister. they have called on the government to stay in the customs union while the anti-e.u. camp says that would negate plans to pursue bilateral trade deals. new research shows apple is far from the only smartphone maker to see deliveries fall. global shipments and the holiday quarter fell 9%. the biggest decline on record. , only xiaomilayers
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managed to raise sales. apples lower than expensive -- expensive -- expected sales thing of the past. samsung air, jay y lee is back in court later on monday appealing against his prison term for corruption. the defensive wants his sentence squashed. prosecutors are appealing for a longer term. they want him behind bars for 12 years, arguing that would establish rule of law. final appeal to the supreme court make follow. -- may follow. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ramy inocencio. this is bloomberg. that. thanks from , ratehis re-pricing expectations continuing to play out in asia and take a look at how futures are trading. it may be the super bowl, but
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this is what we are watching. extended downside when it comes to the u.s. market. points,es plunging 166 .6%. s&p 500 also down .4%. the friday session seeing wholesale selling. 11 sectors firmly and the red. nasdaq not being left out of the selloff. moderate in comparison of .3%. all about the fed and fed expectations and janet yellen bringing down the curtain at a time with the fed is some disappointment and a final word of warning for the markets. u.s. stocks and commercial real estate prices are high, but stopped short of saying they are in a bubble. enda curran joins us now. there's an external review that janet yellen gave. my take a was that we have an
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alternate reality where she stays on for another term. a: absolutely. there was plenty in that interview. not just for miss yellen, but a lot of policymakers. the global economy seems to be in good order. there seems to be a certain risk to the growth stories and it may come from markets. that's because of the devaluations in stock markets. we are seeing that in asset markets. and of course, we are seeing it in traders. there's a real sense that miss yellen was articulating the idea that the economy is fine. that's a feeling around the world. that the storys could be upended a something happening in the market and we are seeing that with catching up with inflation pricing. that's where it worries. she was speaking to concerns of
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money on that point. haidi: also had some fed speak adding to these jitters. you can see what's happening when it comes to the market reaction. the markets have priced in three hikes this year, only to get more than that according to what we heard from robert kaplan. enda: absolutely. in terms of the u.s. story, it seems to be all positive. tax reforms coming through will accelerate growth in the near term. when the imf upgrades their global growth forecast, this almost of it on the back of stronger u.s. growth. the risk is the fed goes faster than anticipated. that would have fx not on the u.s. on markets, but globally, as well. they are tightening in sync with the fed, far from a uniform picture. in asia, if we watch a hawkish fed, that could impact current markets and cause banks to respond in ways they haven't anticipated.
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gradualmally a approach. when might see pressures and the money markets, especially emerging markets in asia, for example. haidi: at this point, we have been putting aside the idea we will have a repeat of the taper tantrum, but the central banks focus, as well. what's interesting at of australian and new zealand to you? to build on what miss yellen said, it would be interesting to build on fresh commentary from these policymakers. in inflation signs taking off. what do you think u.s. tax reforms mean for is a story and what does it mean for their own aussie outlook? -- policy outlook? policies weenty of haven't heard from. there is a lot of new ground in 2018. it will be interesting to hear
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some commentary and adding to the point for asia central banks in more vigilant in the markets and perhaps inching toward more timing than expected. we could get more lines to investigate the dollar rowdy. haidi: thank you for that. our chief economics correspondent in hong kong. the dollar is extending gains against most of its major development market peers except the yen. we have the bloomberg dollar index climbing almost 1% on friday, the biggest advance in more than a year and the best week we have had in 2018 so far for the dollar. let's get it to singapore where patricia lui joins us now. what is driving this turnaround of the dollar? we saw in the trades on friday a lot of them got called out. until last friday, markets were still pricing about
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two rounds of rate hikes if no the fed was signaling a three. what the market has done is try to chase where the fed talks are and there is a possibility it might move to for. especially now that markets are thinking the fed rate hike would come as early as march. what you saw was a big repricing of the treasury futures and the treasury curve. today, this morning the 10 year yield has hit a four year high of about 2.87% of it -- 2.87%. that's driving the sentiment across asia that this morning, we had the australian dollar suffering -- a got sold off at the most because it's such a well favored high-yield are and this morning, we saw the spread between the u.s. and australian interest rates almost close to zero. for the first time since 2000
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and this is the big impact on the australian dollar. in theeven as of friday asian session, we were talking about what happens if the u.s. dollar stays lower for longer, what that means for em. is there a rule for turnaround. what's the sentiment when it comes to emerging-market currencies? patricia: traders are focusing on the ones that sold off a lot this morning, especially the korean won. traders say the countries that are most wonderful to higher u.s. interest rates would be once that have high exposure of foreign participation, index stocks and bonds markets. this includes korea, malaysia, indonesia. the korean won was tanking about 1% this morning. i failed to mention now about the yen. it was rallying this morning.
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that's basically a result of the risk aversion trade as a result of the selloff in the nikkei and treasury futures, rather than the you factor. all right, patricia, thank you so much for that. still ahead this hour, some great conversations to come from the singapore airshow. don't miss our conversation about how they are reducing stopovers for those traveling ultra long halls. we have robert martin on the future of aviation and which plane maker has the best strategy. this is bloomberg. ♪
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♪ aircraft leasing is highly lucrative and increasingly appealing to fast-growing low-cost carrier
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that need new plans quickly to satisfy aggressive expansion. juliette saly is there for us talking to one of asia's biggest aircraft leasing firms. i'm here with robert martin, the ceo of the -- aviation and we are seeing an increase in leasing, particularly among those low-cost carriers. thank you for joining us. he has been to hundreds of air shows. this is the first big one of the year. you are saying they could be quiet, the where are you expecting to see --? guest: if you think of how last year ended, we are only five weeks into the year. we are just getting going at this point. i'm not expecting a lot of new activity on the conversion side, but there will be a number of and didn'terms of
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side of the orders. juliette: any particular aircraft you think will be low-cost carriers will be interested in leasing? guest: at the moment, we are seeing very good demand. and the 737 mac. interestingly, over the last three or four months, we have seen a lot of activity on the 1822 and a 77 generation x. the of this is because growth in the industry is higher than what was originally priced in and because of that, people want near-term aircraft delivery. they are going back to the old type, as well. juliette: there is pressure on passing the yields in the leasing market. oil prices are rising, as well. are you concerned about that? guest: no. one thing we are doing is trying
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to stay on the top side of our balance sheet to make sure we have that. we are prime adding to investors. -- we are providing to investors. we are also looking for up of other opportunities to get better returns for our investors. juliette: i know you are in a quiet period at the moment. we have seen concern weighing its asset restructuring. when you are looking at your clients overall, how concerned are you about your --? guest: we had a good year last year and despite the fact we had to move to aircrafts around, some from air berlin, we ended the year with close to 100% of -- aboutte: we also talked the tax cuts on your bottom line. are we expecting a profitable year when you see the impact of what we have seen from president trump? guest: i can't comment on our
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profitability for this year, but it has to impacts. the lower tax rate now going forward. both of those are beneficial for a company like ours. juliette: is there any signs of m&a in the leasing phase? guest: in the leasing phase, m&a is when you have late sellers. there are a number of companies who have been involved in business over the last 10 years -- theirlook to position this year and sell out. however, i don't think it's the right time generally for m&a. we would need a specific situation. juliette: where is the majority of growth coming from? a lot of the low-cost carriers are in southeast asia and india. there's a lot of demand for the infrastructure is not there. what you see the central opportunities?
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guest: if i look back at what we have been doing, it's a culmination of doing business in asia, particularly northern asia, and europe. one is basically the growth being driven by higher economics. that's more the asian story. parts,placed i rare which is europe and to a lesser extent, america. juliette: we talked about oil prices as well, they are breaking up. you think that decreases profitability of these clients and you are worried that might impact you? what'sif you look at happening jet fuel, the price hit $80 last week. yet, but itd impact will have impact in two ways. bottom line. but also, it's going to drive
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how people think between taking all the technology and u.s. aircraft technology when they can get the benefits of -- juliette: can you tell us about the benefits in your last airline? do have a lot of --? guest: there is very little. if you look at -- at an all-time high, i think really places where we did see some weakness over the last two or three years , they had a very good year last year and the number of freighter aircraft have come back into the market. juliette: if you don't have many in your lot, are you going to be buying more? guest: we had 74 aircrafts into our fleet, this year we have committed to 53. we will be looking to add to that 53 this year and likewise for next year and the year after. juliette: can you tell us what specific plans -- lanes you are looking at? -- planes you are looking at?
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guest: maybe we need financing for our own orders and the midsize wide bodies every -- wide bodies. juliette: do think they look positive? are there any concerns in the leasing space? guest: the only concern we have is the risk of flu. generally, this is the time of year, once we get past chinese new year, or that risk is higher. we are pretty positive about this here. juliette: wendy think we will see more specific growth? is it coming from asia? boeing said we need 60,000 points. can we carry the traffic for asia -- 16,000 claims. can we carry the traffic for asia? guest: eventually, we will see growth out of africa and i think that will also drive industry growth. martin, ceo oft boc aviation.
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thank you for joining us at the air show. looking fairly positive in terms of what we can expect from leasing potential more deals and saying we could take on another hike. haidi: another interesting interview there on juliette saly from the singapore airshow aviation summit. -- leadership summit, i should say. you can find that interview again on tv on the bloomberg. not only will you watch this live, but see-- previous interviews we talk about. part of the conversation, as well, said us instant messages. this is for subscribers only at tv . check it out. this is bloomberg. ♪
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♪ haidi: a quick check on the
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latest business flash headlines. they issued new guidelines allowing companies to price below the indicative range as they try to attract more firms. companies can process shares as much as 10% below the bottom and of their range without issuing a supplemental -- or extend the offer period. the change takes place immediately and will be reviewed in 12 months. -- tries to replicate its dominance in home improvements. the company announced a charge of more than one billion aussie dollar's and its acquisition of the home-based chain. the market leader says they will write-down goodwill and stock and take a hit on closures on the chain it bought two years ago. adding subscribers faster than spotify. the wall street journal says the domestic base is expanding at 5% a month compared with 2% at its rival. the paper says as it continues,
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apple music will take the lead in the next few months. spotify is larger globally and continues to grow slightly faster. it has 70 million users against apples 36 million. let's take a look at the damage when it comes to markets trading in the asia-pacific. the selloff last week really steepening as we had declines in the u.s. to the tune of 666 points in the dow. the tone in sentiment being pushed down when it comes to rising expectations with what the fed might hike more than three times this year or whether their inflation will pick up more than expected. all the applications expected. down close to 2%. down .3% for the shanghai,, then nikkei 225 declines at 2.4% basically every sector there in the red. elsewhere, we are seeing declines in korea, kospi down
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.7%. the index is also weaker by .3%. the commodities has been leading asia stocks as we had those decline, as well. this is bloomberg. ♪ we use our phones and computers the same way these days.
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♪ 1:29 here in sydney, which makes it 9:29 in new york. you are watching bloomberg markets asia, i'm haidi lun. sophie andt over to we are seeing this steepening selloff and all of this is on concerns about the rising yields in the u.s. treasuries markets and concerns the fed will move much quicker than what the markets are priced in for so far. sophie: what helped trigger this latest bout of weakness, you have several fed officials over the course of the past week indicating we may be getting a
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faster pace of tightening when it comes to the interest rate environment in the u.s. jitters across equity markets as well as the bond spaces. investors are adjusting to surging yields. asian stocks are heading for the worst drop in 14 months with japan leading that tumble. nikkei 225 closing down 2.4% and investors may be looking for just -- for japanese policymakers as boj governor kuroda in parliament later this afternoon looking for some verbal assurances from the japanese policymaking space. the hung saying lost as much as 2.7% and we saw that tumble in tencent and ecb but we are seeing just a touch here. we had warnings of this impending correction around hong kong stocks last week. given several metrics indicating stocks were looking overheated
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in the city. when it comes to the hate share space, despite volatility likely increasing in the short-term, they still remain optimistic regarding a chinese offshore stocks given the metrics we've got that would have the chinese economy looking good and mainland investors still buying into hong kong stocks, as well as global funds remaining underweight chinese shares. more stomach churning is likely ahead, but maybe the start of a bear market. we might see a pullback of about 10% or so, but you might find rewards are given and equity returns will likely stay positive for 2018. let's flip up to the board to check on the currency space. we are seeing losses there, as well, particularly for the korean won. i want to highlight will we are seeing with the yen below the
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market there. ,e have this move towards although gold is under pressure today. and commodities, keep an eye on oil. sliding .9% this monday. let's take a look at what is going across different sectors in the region. when you check it out by breakdown, you have i.t. stocks the worst-performing industry group across the 11 segments in the original benchmarks, citing 2% there. again, consider what it means when you look at how investors have been piling into the text space. sell.ight be the time to haidi: it might. certainly watching capitulation when it comes to oil and gold. when we see the buying going into gold, that could be the next turning point when it comes to save haven and demand. let's get to ramy inocencio with
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the first word news. ramy: first up, janet yellen says u.s. stocks and commercial real estate prices are high, but stopped short of saying they are in a bubble. the financial system is much better capitalized and the banking system is more resilient than they were before the financial crisis 10 years ago. she stepped down as fed on saturday and says she is disappointed president trump opted to replace her with jerome powell. >> i would be willing to serve another term and so, yes i do feel a sense of disappointment. but i have been in high positions in the federal reserve for many years where i think i have had a seat at the table to make the arguments that i feel like i needed to be made and to attic of get -- to advocate for good policies. ramy: talks in germany broke up as negotiators tried to bridge gaps on labor laws and health
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care. chancellor merkel's agreement expansion,- won on but disputes still remain for tighter laws on work contracts and a review of doctors pay. two parties had hoped to reach agreements, but talks will resume. china is ratcheting up trade tensions with the u.s., launching an investigation into sort of imports. they have evidence that the u.s. government subsidizes this sector and will check imports from the beginning of 2013 to october of 2017. this comes after president trump slapped tariffs on solar panels and washing machines, which they say it was a misuse of trade measures. saudi arabia kept oil pricing to asia unchanged for a second month. this is in response to slower seasonal demands. aramco set the level of a premium of one dollar six five
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cents a barrel. it's the first time since 2007 the pricing was unchanged for two months in a row. aramco had increased the price for five straight months to january. and south australia is to provide solar panels and tesla batteries to at least 50,000 homes. authorities say it will be the biggest virtual power plant. powerful to batteries will be installed free of charge and financed through the sale of electricity. last year, tesla built the largest lithium battle -- battery to support australia's of blackout grid. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ramy inocencio. this is bloomberg. haidi: remy, thanks for that. the bedrock of the if industry for the past few years. there are going signs things might be changing. carriers focusing on bilateral
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ties and joint venture agreements instead of wholesale alliances. let's talk about this at the asian leadership summit. we get back there ahead of the air show. juliette saly there. jules? juliette: i'm here with the ceo of -- and he has been at this job for a year. thank you for coming on. it's a very busy week. it is one year you have been in the role and just one week since you changed from around the world. how is that going to benefit your members? guest: first of all, we have been listening to the customers and we have been told for some time we need to be much more combative to make it more flexible. so we have and looking at this with our members to see how we can improve it this is what -- improve. this is what we will improve.
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we will see how we can enhance for our quarter, particularly on the markets such as the indian market and chinese market. that isn't the one thing we have done since the beginning of last year. we have been rewriting our strategy and forming an alliance. ago, weding 20 years focused on building a global conference and i think we have pretty much completed that strategy after all. i would also say that in the 20 years, we have built a significance, but as we move forward, we want to rewrite our strategy and we have rewritten our strategy. juliette: does part of that rewriting including adding more members? so 28 members is pretty large. still the largest alliance by industry measures. we are not close to business of it whichever new member we bring in have to bring in added value
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to our mentorship. at the moment, we are not speaking to anyone, but our new strategy is focusing on the customers and how we can leverage digital technology to improve the experience. juliette: we have seen airlines fall outside the airline system, as well, like qantas and emirates moving together on their partnership. do you see movements like this within the industry as a threat to your people? guest: clearly the dynamics will always happen. i cannot speak to everyone on my team, but we recognize and our governments provides -- our governance provides for stability. there are certain times in markets where you can infer from indexing -- existing members of our alliance. you can recognize is entirely for our members. we have a governance that cares for that at the end of the day. juliette: one of your members is
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going private. what are your thoughts on that? guest: we don't take a stand on airline members. in this case, the indian government, we have many members that are fully owned by the government. what we will say is that we have our governance and change of ownership event because what we want to be clear is, there is no backdoor entry as it were, into the alliance. juliette: we look at some of the challenges in the region. we have rising oil prices and infrastructure at these airports come up, some of the indian airports. i think you mentioned some of the infrastructure is one of the biggest challenges airlines are facing. i think that's a risk of overcapacity. we have seen capacity being cheapened. remains -- fuel remains
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unknown on forward. competition is a big challenge for our members, but we have to recognize we have a day of members spread around the globe and each have their own specific challenges. we hope that by being members of star alliance, they will get synergies and cost synergies. most important like, to deliver for the customer the same experience those passengers that travel across the alliance. one of our strategy is moving forward is we want to hand back that experience, the control of the experience in their own hands and create a similar journey for the customers. juliette: you recently signed a memorandum of understanding with air china and banking capital. how important is that for the overall star alliance? how are you bringing your members together there? guest: hugely important and this is a program we have had many
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years, move under one roof. but to enhance of the similar experience for the customers so you are connecting from one flight to another. you don't have to run a mile and a half to make the connection. it improves the connecting a springs for customers. we have strong connection -- strong credentials. we have been looking at hong kong, taipei, and a soul, where new terminals are taking place. we want to get into early conversations with airport authorities. juliette: very busy year in your first year. thank you for joining us. goh, ceo of star alliance. trying to make all their baggage handling digital and easier for the member clients, as well. we will send it back to you from the singapore aviation -- i keep mixing that up, so i'm just
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going to send it back to you. much, notnk you very looking to run between different gates and terminals. juliette saly from the singapore airshow leadership aviation summit. automobiles,f to -- planning to increase sales in a million vehicles, 2.6 million by 2022. tom mackenzie joins us now. pretty ambitious target there. it scented pretty bullish privet look back to 2017, they sold 1.2 5 million vehicles, an increase of 12%. they think they can build on that substantially. adding one million units from now and 2022, they expect revenues to come in from the ties market up $48 billion. to get there, they are investing $9 billion across the business,
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not just manufacturing, but also rmb. i got a clear picture from their strategy from their present -- from their president. he is nissans top command in china. in china.s top man is $1.2rimary objective million increase. and then accordingly, it will increase other than 60%, which is a 300 million members, and then to support those, we are going to invest 60 billion, about -- we are going to introduce -- for all our brand. already, many brands are the same way. let's say our difference is our ebf fence from this year. 2019, we introduced
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six models. those six models are you and to from this sense tom: you feel you have a head start on germans in the space? >> we anticipate it. tom: in terms of that margins, do you anticipate those be squeezed as the market slows in china? >> of course we don't want to, but we have to spend lots of money and it should become difficult. we are going to maintain profit margins. tom: how successful has that been and what has it achieved for you? >> from 2016-2017, the nation group 27%. show --ly, the new venutia is now completely
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developing its a. designse, basic strong for platforms, we are going to venucia. for also new technologies. coming from nissan with cadence. but we don't wait to make -- to provide better exteriors, interiors. intentionally letting venucia develop themselves. we started to develop see sedans we areember and amazingly successful for customer satisfaction. tom: what are the sales targets for venucia up until 2022?
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>> we are going to make it three times from now at least. at least three times. tom: are you prepared to sacrifice a bit of profit margin to get that market share? >> naturally. profitability is not as high as the nissan brand, so it's made a some, but wiki nissans and they are going to include venucia much higher. >> we are going to be rolling out 40 new brands across the business here in china between now and 20 of those will be either fully electric or hybrid. they expect the infinity to be
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fully electric, 100% electric by 2025. he's talking about the venucia brand, as well. it helps to triple the sales. he also talked about domestic competition in china automakers becoming fiercer. this is an optimistic outlook. haidi: very optimistic, very ambitious. great interview, tom mackenzie in beijing. coming up. time.s a short period of i would say but investors should expect to earn nothing in 2018. haidi: he's saying that you should expect to earn nothing. we will be putting that question to the bank of singapore next. this is bloomberg. ♪
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♪ haidi: it's a day equities are being tested and the yields are climbing to a four-year high and staying there. let's talk about that with the head of fixed income at the bank of singapore. let me fill out this quick chart because this seems to support the argument you will see this rotation await from, some would say, a frothy equities market. this is 2872. this is a variation of the fed models, keeping an mind, of course, these assets react differently when it comes to volatility and inflation. you look at the spread between s&p earnings and the u.s. ten-year treasury yield, we are the narrowest in eight or nine years. is that enough to see this rotation out of equities and more people going into a longer duration when it comes to bond portfolio? >> no, i don't think so.
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-- ourgest risk would be biggest risk would be risk in bond markets sensitive to duration. you have a common earlier saying bonds earn nothing for the next year and we can agree with regards to the average. and the development of has low credit spread, low interest rates. they are likely to earn a little worried our spreads are more p.m.. you have more sensitive for global growth and commodity process stable. different regions are behaving differently. we still see value. this rotation, probably not yet. haidi: if you talk about 3%, which is the 10 year it seems destined to test, is at the beginning with appoint the market takes a breather? growth has taken a step back, saying we are in the middle of a mild bear market at the moment. guest: that is the key question.
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for us, it would leave us the worst 3.25%, but after that, do he stopped before? we stop at eight? you can say is over tight and we have done more than what it required. we are very cautious that this is just the beginning. would it be a drawn out process? probably, given there is a lot of caution around the change of fed chairman and a lot of movement. we also agree around 3%. we might get pullback, but eventually we will be -- e.m.'si want to head to come a interesting when it comes to central bank meetings. in line inhing particular with the bond markets in india and the aftermath of this budget delivered last week that had this whiter than expected fiscal position. 2023, this is
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india's bonds. we had a selloff going on for quite some time. do you anticipate the budget will put further pressure when it comes to indian yields? do you see them rise further and is that derail growth when you take into account higher borrowing costs? do you see a policy reaction from the central bank as a result? guest: know, we don't see a policy reaction in the short-term. there is more pressure on growth , and the reforms that have been done, the difficult has been taken and we feel growth is still moving forward. asia is still the growth engine of the world. china is still stable and the other three big economies, india, indonesia, and the philippines are going to drive growth forward. within it is a short-term hurdle, but something the market will look through. haidi: we will have to leave it there.
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gareth nicholson joining us for our segment. this is bloomberg. ♪
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haidi: a bit of a rough day out there when it comes to equity markets. let's get some more of what david is watching. david: quite a day.
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we have been talking for several hours. markets are opening up in the next few hours. you do not really need to be a rocket scientist to know where the market is going to go. nextuests coming up in the hour. economist at hsbc. we are back to singapore with the ceo. talking about the outlook. a lot more coming up. this is bloomberg. ♪
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david: it is almost 11:00 here in hong kong. let's have a look. when you look across markets, it is a sea of red. they might pick up the pace of rate hikes and the regional benchmark is on course for its biggest fall in almost 14 months. ♪ i'm stephen engle. we are awaiting a decision.
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i live from singapore where we have been speaking to the leaders. we have an exclusive interview coming up. we will be live at of singapore. front and center, when you look at market, the big story this monday, the carnage that we are seeing over global market. the engine of this selloff in the asia-pacific. investment on a day like this. just close your eyes. let's have a look at where we are across a lot of these metrics. stocks are down. the dollar is seeing a little bit of yield. getting a little bit across
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japanese currency. gold, a little bit up as well. there is nowhere to hide at the moment. sophie was checking on where we are and we look at the benchmarks in the asia pacific. at the moment, once a nine on the benchmark. -- 179 on the benchmark. investors should just be closing their eyes and ducking for cover. yielding to this environment. they are headed for the worst drop in 14 months. you can see this column of red. em space, malaysia is one of the most vulnerable. we are also seeing volatility
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back in the spotlight. pricing on the nikkei 225 is at a three month high. we have global volatility jumping. demonstrating that pick up in volatility and the yen that is rising for the first time in four days against the dollar. while there might be more's summit turning -- more stomach churning, while this is a pullback of correction, they do not really see that being more than 10% or so. we are not anticipating a retreat into the market territory. david: where's the pain being felt the most? if you had to pick or choose right now. sophie: let's take a look at the
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bigger context. you have tencent very much the backbone of the rally we are seeing in asian stocks. we are looking at that 400 mark. up,y we have a i.t. stocks fearing the worst across the region over 2%. tore are some bright spots be had. let's take a look at some of those players. in the investment, pointing to this as a rotation out of tech. will not be significant rebound in korean auto sales this year. in japan, some are escaping the sellout. both companies have enlisted profit outlooks. do not forget about earnings. that is what they are stressing.
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they have been very strong and should not be tanking. they have appointed quarterly profit that beat estimates this earnings season. japanese stock correction might be short-lived. the economy is good. we are seeing some of these little bright shoots of optimism because we still have those pillars that we have been discussing that drive the rally. today, it is pain across the board. david: i will call a correction. thank you so much for the markets update. now to your first word news. debra: north korea says it is sending a high level delegation to south korea this week for the opening of the winter olympics. by kimicials will be led jong nam.
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meet the moon may delegation. 22 north korean athletes will compete at the games. u.k. prime minister theresa may has confirmed that the country will not attempt to stay in the eu customs union after brexit. that was the key demand of hardliners. british business has called on the government to apply to stay in the customs union, while the anti-eu camp says that would negate plans to pursue bilateral trade deals around the world. new research shows that apple is far from the only smart phone, any to see deliveries fall. global shipments in the holiday quarter fell 9%. the biggest decline on record. salesne managed to raise in the month of december. apples lower sales --
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samsung lee is back in court. they want lee behind bars for 12 years, arguing that would establish the rule of law. a final appeal to the supreme court may follow. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. you.: thank janet yellen brought the curtain down on her time at the fed. we look at the newest stocks here. commercial prices might be a little high. conversationo the with our chief economics correspondent. before we talk about central
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banks in the region, what did she say? >> she echoed what a lot of policymakers are worrying about. there is a feeling that the macroeconomy, globally, is in ok shape. there is a worry about flash markets. around treasury as well. there is a sense that the iserlying economy -- gdp picking up quite nicely. risk and worry is complacency that it could be tripped up by something that happens in the markets. one of the things that markets do. how does that lead us to the asia-pacific? schedule thisusy
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week. what should i be watching out for and what is important? >> it is a big week. perhaps the philippines are amongst the most likely to move. there has been talking on the back of inflation's. central bank seven new narrative of where inflation in asia is headed. some spillover effects from what is happening in the u.s. and what will that mean for the gdp growth story? the dollar continues to weaken, which is hurting asia exporters. they might have to tighten up sooner, or than expected. it almost might be confirmation of what the bond markets have been telling us for
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the last six hours. -- 36 hours. just to highlight one of these points, can we get that up? 500.e looking at the s&p top panel is your u.s. commissions index. we have a similar chart on asia. the point we want to make is that you typically get the worst for equities when financial conditions turn or tighten, or both. what we are seeing is the yield heading up, which might be symptomatic of a further turn ahead, which does not bode well for equity markets. is this justified? are there changes? much u.s. story.
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economists have felt this for a while. markets did not quite believe it. whether it turns globally is yet to be seen. the global tightening, it is very slow-paced. off.e a long way worry is of inflation and worries about central bank tightening. david: to the point that there might be miss pricing out there. mispricing out there. risking your assets. we will assess the u.s. treasury yields. coming live out of singapore, the ceo.ace with
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join us next with bloomberg. ♪
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>> one thing you have to realize -- industry has gone through the chart. this is a comfortable region to be in. we think the oil price will range around $70. we think the market will bear it. updatectober, we gave an of our first half, which is july to december. 900aid we would make around million to 950 million. just digesting quite well
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at the moment. >> very interestingly, over the last three to four months, a lot of activity. because theis growth in the industry is higher than originally expected. because of it, people want delivery. just some comments from our guests today. let's get back to singapore right now with our reporter juliette saly. juliette: now i am with ceo alexander. we had some comments there about the increase in fuel.
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thank you so much for joining us. in december, it you set -- you set a record earnings. what impact does the rising oil prices have? >> you may be impressed by the number profit. it is a small number relative to our revenues. it is a small number when the airlines want to be able to cope with shocks. they can come from various regions, including oil price. above the lowest point that we have -- roughly two pricesgo, the range of between 100 and 120.
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it is an acceptable range of prices. we also forecast for 2018 that it should remain in that range. oil prices will increase. part of this increase will be transferred to the ticket prices. ourre very keen to maintain level. isiette: the other shock some of the infrastructure. you have said that we could be heading towards a crisis. why do you think that? >> we think this causes a problem everywhere in the world. it is a problem we are facing everywhere, which is based on to elements. elements.
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the lack of capacity. the capacitycrease now. it takes five to 10 years. this has to be made now for an effective 10 years. sky.anagement of the there are problems in the region . ,ue to lack of cooperation traffic flow between countries. those are the two worries. you are saying you do not like this sort of thing being passed on to the consumer. >> two points. first of all, we say the government, be careful when you want to follow the privatization
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track. everywhere in the world, we have , notprivatization as being as a failure, but it carries a lot of inconvenience for airlines, especially with cost increase. cost increase means fair increase for passengers. increase for passengers. we also urge governments to avoid pre-financing. do not want to pay in advance. askould be very strange to drivers to pay for june -- a bridge before it was built. you must be aware that we are a sector, perhaps the only one, to pay for infrastructure. we pay for airports, air traffic , air trafficms control over fly see. we pay for infrastructure.
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we said ok, we pay for that, but we want to pay the fare price and not pay in advance for future infrastructure cost. juliette: we're seeing an influx andow-cost carriers increasing budget carriers. how do full-service carriers get around that? what do they need to do to attract more customers? they represent 54% of the market in southeast asia. representing -- they increased dramatically. the reaction has been first to create their own branch of low-cost companies, whether in the long haul, but also in the shortfall. short haul.
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they know their offers. they try to cope with or answer properly to the needs of the passengers. the passengers one value for money, and they want to pay the right price for that. does there need to be more consolidation? >> in a sector, which is highly capital sensitive come with low margins, normally it would need consolidation. it is also an area where you have foreign ownership communication. it means that foreign interest cannot by more than 25% to 49% of local career. it is a big obstacle to consolidation. we do not see this regulation and limitation being lifted by any country.
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it would be an obstacle for consolidation. we are seeing inside the same country is of the regulatory space. juliette: a one-word answer. what is the biggest risk? is the infrastructure? >> infrastructure and cost. juliette: thank you for joining us on bloomberg television. it has been a big morning. keeping ahead of the very big is in singapore. david: good conversation there. live on the ground in singapore. you can catch up on all those interviews you might have missed. use our interactive tv function, discussion by the sending instant messages to our team, to me, for our guests.
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if you have any questions, send them in. check it out at tv go. this is bloomberg. ♪
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david: let's give you a quick check of the headlines. the stock exchange has issued new guidelines allowing companies below the indicative more to try to attract firms to list. they can share to 10% below without having issues. the change takes effect immediately, to be reviewed in 12 months. replicate its domestic dominance. the company announcing a charged more than a billion aussie dollar's on the acquisition.
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they said it will be taking a hit on store closures on the chain that it bought two years back. apple music is said to be adding new subscribers. domestic cases are expanding at about 5% a month. continuessays if that , apple music will take the lead in the u.s. in the next few months. it has someday million users. -- 70 million users. that is the summary of your corporate story. the big story is the carnage we're seeing a -- across the asia-pacific. look at the chinese markets. just minutes away from the much-needed and much awaited lunch break. you look at china, this seems to
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be the best performer. day.a really bad compared to how other benchmarks are trading. that is a look across the chinese benchmark. let's look at how other areas of the market are trading at the moment. these are some of the big snapshots of water happening across the region. have a look at southeast asia. 2.8%hilippines down about at the moment, which would be the most single largest drop for the philippines, going back two years. january 2016 is the last time we saw that. back of these assets. measures have fallen.
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those volumes are on the way up. now is the right time. a lot more to talk about when markets continue in a few minutes from now. stay with us. lots more coming up. this is bloomberg. ♪
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david: it is almost 12 quarter and 30 on this cold winter day that we are looking at in the south korean capital. down 1.6%. over two days. samsung down 7%. one set of the index, that will pull everything down with it. that is exactly what we are saying across samsung electronics right now. our other top story, the reason why we are looking at this.
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.ack in court way throughibed his the samsung company. let's bring in steve engles. it will be an explosive few hours there. help set the scene for us. stephen: not to take the drama out of it, but this is not the endgame. this is the appeal process. thisuld, if he loses appeal, of your the supreme court just down the road from here. right now this is the greatest -- the latest chapter in what brought down even the president and led to that five-year conviction on corruption charges for the heir apparent to the
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samsung empire, if you want to call it that. the appellate process goes through the high court, a central district court building behind me. the sense i am getting from a lot of the people here is that there's a little bit of fatigue, if you want to call it that. the company has moved on. samsung electronics had record full-year earnings, record fourth-quarter earnings. well in doing really the semiconductors with all the smartphone demand. they are doing well with oled screens to the like of apple. the company is doing well. they have new division heads across the board and a new ceo the beginning of the fourth quarter, so they have moved on. ,outh korea has a new president and the winter olympics that begin on friday.
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i think a lot of people here as they begin to bundle up with the cold weather are looking to the olympics and getting a little tired of this samsung saga. that being said, what are we looking at when it comes to possible outcomes for this afternoon? what is the worst case for j -- what is the worst case? they could uphold the five-year conviction and keep the status quo. loggers will, and all likelihood, then appeal that to the supreme court. scenario number two, the high court could actually change the links of the sentence, either fewer years or more years. prosecutors wanted 12 years. if it is anything more than three years, he stays in
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detention and they likely appeal to the supreme court. if it is below three years or even if the high court decides we are going to do a suspended sentence, he actually could walk out today. three-year a sentence he could appeal, but he could buy the rules go free. the other scenario would of course be a complete overturning of that conviction, which legal experts say is the most unlikely scenario that we are going to see today. ,gain, 2:00 p.m. seoul time when :00 p.m. hong kong time we are expecting -- 1:00 p.m. hong kong time we are expecting that ruling on jay y. lee's appeal. david: let's get you an update of the first word headlines with debra mao. coalition talks in germany broke up on labor laws and health care. agreementsmerkel won
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on rent, public housing, and broadband expansion. parties had hoped to reach agreement by sunday. talks will now resume on monday. six senior members of south africa's ruling anc have met with jacob zuma, who is facing mounting pressure to sit down. top officials will meet monday to discuss zuma's future. the many in the anc what had gone, while opposition parties are calling for him to be impeached. china is ratcheting up trade tensions with the u.s., launching an investigation into sorghum imports. they say they have initial evidence that the u.s. government subsidized to the sector and will check imports
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from the beginning of 2013 to october 2017. that move comes after president trump -- president trump slapped tariffs on solar panels and washing machines. north korea made almost $200 billion between january and september last year from b anned exports of coal, steel, and other commodities. china's "global times" newspaper says beijing is doing its part to enforce sanctions. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm debra mao. this is bloomberg. david: thank you so much. i am just looking at my bloomberg terminal, waiting for growth numbers out of indonesia at some point to give you a sense when it comes to fairly
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important right decisions across -- rate decisions across the region. it is the largest economy in southeast asia. have a look at the bloomberg chart here. it takes you all the way back to 2012. there's your deceleration into 2013. it has just been stuck there for the most part in the last five years or so. do we actually break the spell and hopefully see this at some point rise above 5.5%, 6%? let's bring in our guest, chief economist at hsbc. very nice to see you. we are waiting for these numbers. there are three forecasts. what is your forecast? guest: 5.1%. in line with a slow and gradual recovery in the indonesian economy, i stress it is going to be a very gradual recovery. it is actually still investment
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that is powering growth a little higher. good, butble is stable isn't good when you look at your neighbors doing something else. what do they need to do to hopefully pick up and break out of this range? guest: you are right to say the haven't seen the same growth because they are not logged into the broader electronic cycle. when you look at commodity prices, even though they have improved, the transition to the rural economy has taken a lot longer than somewhat expect. it takes a long time. slowly we are starting to see signs of improvement, but also we have to look on the higher into the economy in the upper-middle-class and upper classes. their consumption is most likely subdued because of the government push for higher tax revenues as a share of gdp. it is a positive improvement in
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the indonesian economy. david: what else is doing well in indonesia? --ust saw linda lear guest: coal has also been doing better. indonesia has relatively low sulfur content. i think the main positive story here is investment, and that is really what the economy needs for the long-term. we need that to be sustained, and not just via government spending and fiscal policy, but increasingly by the private sector. that is actually what is necessary given some of the fiscal constraints in indonesia. david: that is not what we are seeing across other economies like india. cuts since 2016. are they done cutting rates? guest: we think they are at the
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very end. there could be one last rate cut that is very intelligent -- very contingent on inflation. they want to see fundamentals continue to improve. that would allow one more rate cut. david: the current central bank governor has three months left. we don't know yet who the president is going to nominate for that job. do you want to see the current governor keep his job? signs of always like continuity in central banks, and he has done a very good job. government has been relatively quiet till now. david: since we are talking about the central banks, the philippines. you already have a couple economists saying it is the right time for. them to move. d think they will move -- the
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right time for them to move. do you think they will be thursday? guest: but they have been saying is they are still studying the second round impact of tax reform. that actually increased in january. is the economy healthy enough for transport costs to be passed on? this has been one of the stars for southeast asia, so it is strong enough, no? guest: the fundamentals have improved. consumption actually decelerated a little bit at the end of 2017, so that may be why pricing power has been a little weaker come of generally yes, the fundamentals are strong. we will be looking very specifically at these readings.
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they are targeting headline inflation, so it will all depend on these affect. david: is there a number that comes out tomorrow that could change your mind? guest: we're looking at 3.6% for january, up to 4%. if we see something approaching 4%, that would actually start to make us a little bit more a very because bsp is aggressive inflation targeter . that is when we would see a change in status. you agree with some economists that there are moderate signs of overheating? guest: we would push back against the view of overheating. the only reason we are expecting an increase potentially is because of tax reform. you look at bank lending, although it is elevated, consumer lending isn't that much higher.
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we wouldn't say overheating. david: joseph, you're going to chief asean, hsbc's economist. we are looking at the futures at the moment, down 120 points on the nifty 50. best strategy, just do not look. coming up on the program, the great indian hope. traders seem skeptical about the government's effort to fund this large budget deficit. more on that coming up next. this is bloomberg. ♪
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david: moments away from the open up cash markets. you look at where we are in the currency, a little bit weaker there. suffice to say when that market opens up, it would change substantially. we had a sharp drop friday. we are looking at maybe 500 points for that lower. as you can see, it is morning over there in mumbai, not exactly the clearest of days. personally, the biggest problem they have there is making the air breathable. that is another conversation altogether. more on the market story in india in just a moment. in the meantime, let's more to talk about in a broader environment. let's bring our guest back into aseannversation, chief economist for hsbc. i know you don't cover india,
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but what is happening there sure has cut your attention that's caught your attention. -- caught your attention. guest: we think the r.b.i. will likely stay intact in this week's meeting. the thing to look for is inflation. food prices have been picking up. we have been in many years of this inflation on the food price side. we think for the most part r.b.i. will look to this, even if it pushes overall inflation a little bit higher. david: oil is always in the mix there. oil starts to pick up and suddenly everything needs to be rethought. is that the thought as well in southeast asia? if you had been a couple economies that might get into a tricky situation with oil prices, what would those be? interestingis very because of the subsidy reforms in places like indonesia and malaysia.
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prices are, petrol almost eight percent of the cpi basket, much more sensitive to global prices. that is why we see headline cpi push higher in malaysia. the transition between global to domestic prices is actually very quick. that is why we are worried about the second round impact of tax reform. you mentioned why a few minutes back that consumption has started to, and rollover? is that because of the weaker currency and import prices? what exactly is the driver of that? guest: we think that had more to do with frictional changes in the labor market. we see more from the agrarian sector and some of those impacts from a structural perspective have probably weighed down consumption a little bit. there was a little bit of weakness in q3 that was actually
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corrected in q4. highlight that point, it is just one of the things that a lot of people have brought up, the current trade deficit. david: i think what this speaks to his when you look at the currency space, the weaker dollar because this record trade deal. this is a good sign, i would imagine. at one point -- at what point does the start being eight at sign? guest: in this case it really is mostly reflecting the infrastructure buildout. even when you look at the government going from 2% to 3% deficit target, agencies are mostly supportive of that because as long as it is for productive investment, we are ok with that change. as long as the current account is reflected those imports. we look at the details just to make sure it is not driven by consumer spending or nonessential types of imports. for the most part it is raw materials and capital goods.
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as long as that is sustaining we are a bit more sanguine. david: the bigger story across the region, and i think the last 36 hours, has really been this adjustment in prices surrounding bonds pushing up yields in the long end. that is arguably reflective of the u.s. story, but asia has followed that up. i am wondering if we are mispricing that. are you seeing any early signs of inflation broadly across the asia-pacific? guest: we look at these data points very closely and what headline has been picking up for the most part, look at malaysia, for example. you saw headline inflation up to in 2017. core prices actually decelerated 2017. for the most part we are not seeing these types of pressures. it will probably pick up a
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little bit from here, so we are expecting that. but no runaway underlying price pressures. the central mac is very cautious. david: do i have to start worrying about fiscal space? there might be more pressure to allocate more to debt servicing. is that an issue i should worry about this year, or is that a 2019 story? guest: we are not seeing many signs of that happening yet. i was -- this isn't necessarily a concern right now. we do see some signs of governments preparing for this. they are ready for the possibility. but from a fiscal risk perspective, i would look maybe more at indonesia, where we see the key retail petroleum benchmark not moving higher because of keeping the prices stable. maybe worried about that come midyear. david: but they have space.
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which economy does not have that much space? fort: the headline target 2018 for indonesia is to point is 2.2 percent -- is 2.2%. a 3% deficit target is not that far away. the economy has been improving, so they have space now. they are actually fiscally tightening over the next few year, so we are not worried in the short term for malaysia. it is really indonesia where the cyclical story isn't yet that commencing. -- yet that convincing. david: how about thailand? guest: they have been talking quite a bit about that, the beauty -- the bot. we are not expecting any changes in monetary policy, for example.
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they have been trying to encourage capital outflows from portfoliosc sector, and resident investors, similar to what korea did a few years back. from the fiscal perspective in thailand, they have quite a bit of room, and that is why we expect them to remain resilient. this has been a story that has been going on for a couple of years, but we do see a lot of these priority projects the government is pushing breaking ground. joseph, thank you so much. joseph in cap tara -- joseph aseanaterra, hsbc chief economist. this is bloomberg. ♪
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it is quite bad out there, 1.7% as you can see. these markets are really taking it straight on the chin. let's get a damage report and look under the hood with sophie. we are also looking at india, which is not taking it quite so well. mumbai we have stocks in catching that contagion, slumping over 1% for both. bond traders are bracing for a test from the r.b.i. later this week. we are anticipating perhaps some change from these banks given the wider fiscal target from the indian administration. continued losses in u.s. futures heralding more churning ahead, we are unlikely to be in a bear market because financials remain strong.
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asian fundamentals are different from the united states, and many economies in the region are still in the early part of the economic cycle. i want to highlight something that one of our colleagues pointed out. what this tells you is that we could see a rebound of sorts coming from asia given that asian stocks are still not overstretched when it comes to violations -- valuations as compared to the u.s., despite the rallies we have seen in the region. india remaining vulnerable as you can see from this line in pink. india stocks certainly remaining vulnerable to the contagion we are seeing. david: the most expensive market in asia, of course, so clearly it is standing out. you have high valuations and a targeting cycle that has begun here. malaysia was last week, the philippines maybe on thursday. how does that affect? sophie: i want to show you what
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is going on with stocks in 2018's wiping out advances. yet the likes of ap security say philippine banks may then if it from an expected rate hike, raising rates as early as march should this thursday meeting take on a hawkish tone. at this, i want to that asian stocks are seeing the biggest slump. this is not the chart i went to show you. this question about fundamentals remaining intact, earnings very much in focus here. buy.: today is the time to quite a big drop here.
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more coming up next. that is just about it for us here at "bloomberg markets asia ." this is bloomberg. ♪
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♪ yousef: fears of interest rate rises great markets. oil be the next asset class for correction? the u.k. government insisted britain will leave the customs union, with claims of disunity over the future of its relationship with the european union. -- heir ja jay j. y y.


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