tv Bloomberg Markets Asia Bloomberg February 21, 2018 8:00pm-9:00pm EST
♪ david: market slide after a late session on wall street. there is concerns the fed will the government pays. shares soaring on the back of record profits here. there is also news of a $300 million buyback. support for the chinese data, they have run construction back. that is the big winner, we will talk about that later on. ♪ david: welcome to bloomberg markets asia, two big stories
for the next hour or so have the china open, we will look at how the asian pacific market continues to digest. a quick check and where we are when china opens up. have a look at my charts here for you the index futures, we are looking at 850 a.m. here. see the west end china traded here. we are up about two and a half percent. if that is any indicator of how the open will look, it will pop up here on the index. that will get up and running in about 25 minutes from now. haidi: chinese investors coming back to a trading environment world that looks a lot better than when they left it. chinese newter the year holiday. trying to play catch-up in terms of those lows we saw supported hong kong and the midst of that selloff trade a pretty bereft
day when it comes to asia, plenty of time and attention for investors to focus on this as they really saw indications of the central bank that was increasingly confident also a pickup when it comes to tightening the rent tight. it's take a look ahead. we have china looking at the bottom of this our bridge southeast asia, coming online. we had a session where investors were struggling to make up their minds about how they were going to take these fed minutes. we are see much of the same and asia. >> it looks like investors may be waiting on the sidelines while we wait for the china open. there is that hawkish fed on the rise asn a higher by the yield. thiss asia, there is
resuming of losses after the jump we saw on wednesday. the highest climb in september when we saw those clawback. those shares on the back foot. tokyo is now building. they are over 1.25%. l you have them drinking on the cup see. there is the barrage of earnings. there is this key among them, on the back of the results. think theyprobably have a good day. chinese carrier will be in focus at the bottom of the hour following separate speaking of airlines, let's check in on air asia after the reported stronger and rising passenger volumes boosted the fourth quarter. a good day for air asia at the open. david: mild declines, we saw in taiwan. we are also looking at the
market in china as his get on the way. in the meantime, let's get you an update with your first word news. david, ukip prime minister theresa may inflaming tensions and her party by asking to be proposed brings it. they said it could already last two years until 2019. the eu has an end date of 2020. a longer transition that would last until it is no longer needed. >> whatever the new relationship will be. inferior to be a member of the internal markets or being a member of customs. it is up to theresa may to tell us. minutes show
policymakers are concerned about the inflationary impact of dominant expansionary budgets. are havenor said they risks to inflation rate he noted if growth remains robust, inflation will stay well above the 4% target, a change in stance from neutral on accommodations may be considered. say they are being overwhelmed by casualties from a violent bombing campaign by grow government -- pro-government forces been hundreds of people have been killed in days. half a million have been forced to live in makeshift shelters. doctors and what local hospital say they have just 17 beds for more than 80 wounded victims. global news 24 hours a day powered by more than 2700 journalists and analysts, in more than 120 countries. this is bloomberg. topd: as i mentioned at the of the show. two things to look forward to
and the next 60 minutes. we have the open of the chinese markets after that long lunar new year slumber. pushing up ords at least trending higher up ross -- trending higher. have a look at our bloomberg chart. here is your term premium. from the 70's until where we are now. we want to focus on, we see a little bit of a pickup, then we go above zero per the there is a steepening in the yield curve to that depends on how quickly the fed goes. overnight it seems we should be prepared for at least three rate hikes trade something to talk about over the next 60 minutes. in the meantime, we are going to get the chinese markets up and running. investors are hopefully more bullish as things resume. we have seen property developers here in hong kong leading those gains. -- let's bring in
clyde mcdonnell. he joins us live today out in singapore. thank you for coming to the studio. seemsweeks ago, that properly and place with the initial gains, do you expect this sort of optimism to carry through with the open? de: i think china is playing catch-up. it is a different beast compared to different markets which will react to the fed minutes overnight, that the decline and the s&p and the last hour of trading. david: what in this market do you like? ve: for chinese stocks listed in hong kong, we like anything that is related to stock connect. the weight of buying from that
southbound flow from china into hong kong is really boost in some key stocks in the hong kong market. some, these are stocks that are very much en vogue. tencent which is a main driver from china. you are seeing you'd i from the southbound flow. 20% of turnover in hong kong every day. they are expecting to catch up on the chinese come back. david: that really picked up during the selloff. so our viewers can see this. can you can up for our viewers? tencent on the top of the listed from shanghai to hong kong. looking at this. almost like i should
worry about valuation when it comes to this. clive: i think it depends on the company. for growth orientated companies such as tencent, valuation is not a driver. with somencept stock very solid foundations. when it comes to names like hsbc i think valuation is more important. on the higher evaluation scale, we see this more towards the lower and. relation does matter, it does depend on the country -- company if it is a more traditional played depending on a cyclical trend. haidi: i went to throw up a quick chart as well. upon -- ock, hardened when you look
at the hsi, it is a 35% over the chinese new year period. it is lagging, party much flat on the year. i thought it was interesting during the course of the global selloff, we had this narrative over the mainland market being the haven. be,hat a gooplace to if we are clicking volatility? i think there are some definite benefits from having exposure to water chinese industries -- indices. they do not have the same global markets, they have different drivers. i would not recommended as a core strategy. a satellite strategy certainly did not as a corporate we are in a growth oriented environment exposure.to have during ben's of volatility, i think china does have the potential to outperform. even mind, they have underperformed during the big
run-up. -- a: does the location location change in june? clive: not from a cyclical went to view. game't see it as a changer, particularly because things are quite low on the chinese shares. they are going to be included in rging market. over the long-term, the chinese in these industries is going to rise that you are going to see exposure in the longer term structural perspective. haidi: stay with us, plenty more to talk about. coming up later this hour, we are going to take a look at like goldman sachs says a chinese construction bank is the big winner this year. this is bloomberg. ♪
♪ haidi: this is bloomberg markets: asia. minneapolis fed president said they are paying close attention to inflation rates in growth in particular. they will not react to data. with the minutes from the last fed meeting with janet yellen, he said the language is vitally important. each word change in a statement that a lot of debate goes into those. intending ther is debate we have been having. i am very focused on what the outlook for inflation, what is the outlook for weigh trump, is there still slack in the labor department, with the minutes came out, i think the markets can read those and figure what
the collective view is. >> one person's view, you're telling from philadelphia, he said only two rate increases, he does not see inflation moving. you with a guy who did not see inflation moving lester much you dissented a number of times. you see that changing in 2018? >> that is what i am waiting to see. i do not want to wait for one job report. again, we do not want to dismiss the data. i don't want to overreact on one months blip. we have to look at year-over-year. his inflation building towards our target? i hope it is. the fed has been undershooting inflation. we keep saying inflation is around the corner prevent it is a once us. i reaction is, let's take our time, allow inflation to come to us to we have very powerful tools to keep inflation from getting too high. a limited tools of
inflation and's of being too low. i have been saying, a slight inflation come to us. reacting to inflation with those powerful tools can have side effects in the space you have to jump on wall street these days. if you saw inflation breakout, are you concerned you would see wall street overreact to the fed moving more quickly? >> wall street overreact to everything. we cannot make policy based on market blips, we have to on the long-term economic prospect did congress has said our goal mandate is stable prices and maximum employment and we tried to achieve that on average over the long-term. altered is good to do what wall street is can a deal. that was the federal reserve president speaking exclusively to bloomberg markets. mcdonnellg back clive , he joins us now trumps in the or. notionas this realistic
of the markets over reacting, i they going to react to the upside or downside, is there a sense that in the past couple of weeks we have a market participant that feels a little more comfortable with the notion of faster than expected inflation? clive: i don't think the market is comfortable with that. a correction, a technical correction. the market was spooked. as the fed governor highlighted, that is what wall street does. it is their job to be on watch for these things. i think median term, the market can digest higher inflation and content just -- and can digest the rise in bond deals. when the fed reaches 25 points too far, or should i say expectations will that they
raise rates too much. that the market will tip over and eventually it will take the economy with it. i think that is far away. clive, do you think the dollar weakness is key to asia strength? when it comes to a repeat of a takedown, we are looking at 6 099, we see this correlation and relationship between the u.s. dollar strengthened the rise in yield. asian currencies are strengthening. the u.s. yield surging. we did see on the shorter end of the tenure with options rising, we did not see that in 10 years. we also got to see on a fixed date the dollar strength. this the turning point where the currency is going to be less beneficial for asia? i don't believe so. during the market selloff in summer, we did not see the dollar require -- recover.
they tried to break through 91. a pullback to 90ish. thosedriven by some of higher yields. a bit of a reset and expectations. ultimately, or view it is a relative yield that matters. , relative to dollar yields, is more supportive of a weaker dollar in my mind. supportive of a weaker dollar in my mind. we don't think we will break through that 91 level. david: when you look at where they are and what the treasury has moved up to. that being said, when i look at trends, when do i start to consider the reversal these ?lows
clive: frankly speaking, i think it is too early to be talking about that. in simple terms, the are coming off of the end of 2016. rally, a cyclical rally with the dollar. we are heading into an environment of a week or dollar. weaker dollar. that is a great tailwind for the market i don't expect that tailwind to reverse. there could be a slump in commodity prices. they are certainly risks, i don't see a sudden reversal being one of them on a medium term basis. it could happen, on a medium-term basis, we firmly believe in a moderately weaker dollar which is the art of of those emerging markets and asset prices. david: fair enough. stronger currency, should i expect them to start dragging on that growth?
where should i start looking? area is think the euro strong there. we have been looking at expectations. the earning expectations for bouncing along at 7% for the past couple of months. that is driven by the effect of a stronger euro for you compare that to the u.s., not really driven by a week or dollar, or so by tax cuts. we have seen earning expectations for 2018 go from 12% up to 19% in the s&p 500 for that is a huge bump up .for the emerging markets. that is part of the effect of that weaker dollar, with the monetary conditions, improving liquidity. clive, it sounds like you are describing the goldilocks scenario.
em there isinly for a high probability the edge towards goldilocks they we do not have a bull market in commodities. the goldilocks scenario for the u.s. comes to an end. if the global economy really does ira, if we were to see commodity prices, oil, metal, rise more meaningfully in price, then a goldilocks could emerge for markets. we are not there yet. david: good stuff, thank you. coming up on our program, the chinese markets prepared to enter the year of the dog. we can expect, next. this is bloomberg. ♪
we are counting down to the reopening of markets in china. --ontinuation of china trading and china continuing. we are shaping up with investors , if you are missing out on this there has been is percent rally. be pent-upy anticipation, it is building for the return of china. when we look at futures it could be a luscious start to the year of the dog in the have been seeing offshore stocks saying this is a good time to buy. saying they look fragile great china could he the key to maintain this momentum. when you look at the bloomberg, that was left out of what we saw across global what is. -- equities. that is liking and performance of what we saw in the honk sign.
mainland investors, they are going to want to get back to the rally we are seeing in honk sign. coming back from the lunar new ofr, with the resumption , that influence may be coming in. with both charts coming in, we economy a look at the at a 20% turnover in hong kong. we will see if that our will come through when chinese investors return to the fray. haidi: they will be joining a global environment it comes to sentiment that rebound we have seen globally for equities, does serene thanbit more they left it in that selloff great we will be joined looking ahead at how mainland markets are set to perform as we get into trading on the first day of
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hopefully they are feeling refreshed and bullish as we get started on this first trading day of the year. do bid wecatch-up to have the hong kong markets rallied about seven or center at that time. during that global selloff, we did see by inflows coming through for investors. they really kind of lessened the damage. let's go over to sophie for the open. >> it looks like mainland investors are putting this across the board. they are gaining over 1%. 1.4% atx also gaining the open. it is not a bad day. it may be that time to look at the hong kong session. starting on the back foot here, reversing some of the gains we saw on wednesday. 1.2%, let's take a look at what is moving in shanghai. we do have financials leading the charts here could we have
what we saweading on wednesday when it came to the offshore chinese space. we have several analyst saying banks remain the blank spots among chinese ready. and goldman there is a race for financial stocks. that is something to watch. we have materials and industrials under pressure. we have steelmakers in focus, of may be the winter curve coming off line, we are going to see what that means for the outlook for such layers. taking a look at the session in hong kong. we have energy producers under pressure. reversing the gains we saw on wednesday di they may be just losing. 2%. this could be happening during aia.
that does not seem to be the case so far this morning. take a look at what is on the screen. raising a tenths of 1%. for the be a mixed bag casino. also considered what they have to say about the operators participating in that revenue growth. 13%her it will slow down to as opposed to the 19% in our revenue growth for casino operators last year. thank you so much for flushing out the open for us. our next guest, when we look at a crystal ball, do chinese returns this year look as good this year as last year? to dispute that. welcome to the program, wendy. we are looking at index levels. 4000 on china.
what is the upside to all this? wendy: i think based on our target there is 10%-50% upside. that target goes closer down to the single digits. essentially, i think this is the first year where we will see rates go up and starting to uity prices great lester was spectacular for equ e ties. it is kind of difficult to repeat that. david: they were spoiled looking at those returns. 10%-15% are we still looking at the same drivers? what is going to lead to this? wendy: that is a very good question. i think the internet on the margins is not going to see as big of a leader, with the financials, the energy, the
resources, maybe a bigger leader. have seen since 2016 is market share consolidation. it is really good for equities. the big ones tend to be listed. resources industrial , for example. this is going to be accounted for 40% of the sale this year. insurance, we see the private insurance, the leverage pullback. i think with financial regulation, tighter liquidity, rising rates. that management coming back. the bigger banks will be able to grow faster than the mid small size banks. david: one of the things that came up three weeks ago when we
talked about some people on the thisand underneath all of vast flow of money, there are these large gaps bit what you are saying, because we are getting more consolidation in the industry. you can pick the top names. at the same time, should i be concerned with the outflows because of china looking to crack down on those same wealth management products that we to all these lows? dy: that is an important thing to track. with the selloff that we had, since late january it was partly doing with leverage being taken down. they are not been renewed. the ones that have very large trust holdings, those were the stocks that took a bigger beating. categorically, when we see wealth management products, they are going to be slowing growth.
is going to come from somewhere. restrictions being lifted, here and there, it is very difficult to make those purchases. i think the liquidity categorically is good for equity. we do have the highest return for issuers based on hsbc i. haidi: when you look at the policy impacts out of beijing, at the beginning it was easily. with the developers, clearly there was that leverage impacting them. n consolidation take
place, where are the biggest risks with the? y: that is absolutely right but we have never seen such widespread celebration in the 20 years. i think it is because of the leaders. with this widespread consolidation, becoming stronger, they are going to have the market share set for themselves in the next decade. i think the risk is to the over excited about this gap. haidi: i want to throw up this quick chart. year, they hadar the striking performance when it came to hong kong stocks. we are seeing and of flat underperformance when it comes to the mainland markets. as we get closer to june, when
we get there first branch of inclusion, do you expect to see a flurry of foreign flow going into china or do you think there is a risk that some investors that do not have enough exposure going through june and september? wendy: june and september will see healthy demand. the asianbe into markets. speaking to offshore investors, i think once they start doing channel checks, they realize the company is quite different. there is a letter of interest to invest in organic growth and management that can deliver sustainable results on the medium-term view. in hong kong, and do think there was a lot of retail excitement, when we look at the war on
trading and the war on turnover. billion a day 2 in hong kong dollars. that historically, that has indicated the excess retail that in 2015,id we saw that this time it is more concentrated around a large rally. i think it was due for a correction. i think that concern aggravated it. chinesepoint, i think equities will get support from the interested offshore buyers. have morewe will stress because of the rate hike factors.
david: go ahead. wendy was talking about retail exuberance, that makes me think of tencent. to hear your views on that stock in particular. endy: tencent is our top pick in the internet's basic we only have tencent above that. just to dig a little deeper, we have tracked the southbound ownership in the stock. it was the heaviest for trading. these are tencent exchanges. their trading has been increasing very steadily. the hong kong exchange was more even driven. the hong kong exchange proposed lifting rule changes. we saw a huge surge in southbound ownership.
peaked in november around the time they held -- david: it had pulled back down. check -- they are at 150. 600, is that realistic? wendy: we have not published a forecast. [laughter] think, internet is very consolidated in terms of market share. one of the things we did in january was looking at the ecosystem of network devices and platforms of internet systems. as well as the carriers. and theat the u.s. china example. when the network is about to be built for under way.
the winners from a perspective other companies. application takes off, it is the platform and the devices. from a smart perspective, i think we are reaching saturation did some of the markets are reacting to that. comparing the s&p internet sectors, it has been outperforming. tencent is the only internet the larger internet capsize that outperforms. a similar trend, you can see that in the u.s.. to a stageegueing
♪ david: welcome back. this is bloomberg markets: asia. analysts are betting that china's biggest banks have further to run this year, powered by a robust economy and a crackdown that is squeezing the rifles many are actually picking chinese construction banks is the biggest winner. we are joined from aging. why the exuberance in the confidence? particular with china
construction bank, a number of factors, there are those interest margins. npl, they are looking pretty robust compared to their arrival. this is what you are getting this interest rate you have had the majority of analysts rate this. there is goldman sachs, morgan stanley, raising their price 'srget for the stock fifth-year. the timeline is going to increase about 17%. you have the institutional investors like blackrock investing in construction bank. it is not the only one. resultte 2017, a longer that expect it. expected, there is this crackdown that is squeezing the smaller players. they are all likely to do fairly
well. david: i am just looking here. buys one wholesale. what are they looking at? one analyst at morgan stanley points to a number of areas where they are doing. around the deposit franchise for that is the strong bid the widening gap in the lending margins, that is improving. they have been a conservative around their that. that has not always been the case. and pl is around one point 5% rebate have ratios above the official rate. thesector npl's rates are red bars. that you have the white line, that is consistently below the
average. it has about 63% versus the official hundred 50%. it is looking closer. about 16.5% as of september of last year with that is above the other top three banks in china. that of course you have printed you touched on this. in terms of the discount you have in hong kong. it is 22 percent compared to the rise of trade in shanghai there is that opportunity as well. stuff, thank you. we have been talking about construction bank the was ring wendy little back into the conversation. we just heard from tom, is that the best pick?
been on top bye merit heexactly on the summarize. i think if there is anything to add, this tends to be a value play, when investors want to add exposure inside. to aisk is the internet, degree is the bank. bank of china, i have always wondered. we talk about the big for all the time when you look at china, within that universe. why is that? wendy: it is a qualitative difference. it is also cheaper. they are trading below asset value. wendy: everything has a price. at a certain level, it can also
become attractive again. at theople are looking risk management. when they look at their books. people are just making these positions on the face of the analysis. picture is quite different when you are talking about smaller regional lenders. wendy: that is right. that is where we see more risk. i think with equity investors, we are fortunate we can stick to the bigger ones and there is some anticipation within this valuation. at some point they will be asked to take over some of the smaller banks. after thehink that is equity buffer has moved, after
it has been there. it is probably still in the specific banks. that the know deleveraging campaign has worked. for the longest time, the isversation was about npl, it looking a lot better? wendy: i think things in financial institutions cannot to be killed by capital dependency. they are killed by liquidity. it's -- it is something that they need to pay attention to grade suffice to say a lot has happened around the world. there is so much liquidity.
we need to see this come up a bit to see what is lying underneath. the past year, we have done a lot of cross-country comparisons. u.s., seven the other countries. indicatengs of those havethe chinese company raised over 10 years ago. there is an increased that. it looks reasonably strong. the banks will get some help trend judge a -- help tangentially. haidi: we appreciate those insights and sharing them with us for the head of china equity research. one feature on the bloomberg we
would like to bring to your attention is our interactive tv featuring you can watch it on tv , you can watch us live there and catch up on previous interviews. be part of the conversation, send instant messages during the show. bloomberg -- this is forced bloomberg subscribers only. check it out at tv . this is bloomberg. ♪
is pleasing is that all parts of the business are performing well. we had a record result for qantas domestic. a record result from qantas loyalty. it was found slightly. we have a huge change. that business is going to be implemented next year. in new zealand, the story after forecasting their second highest year. in 2018, before taxes, lifted by local demand and strong inbound of 230 the equivalent million u.s. dollars. only's slightly because of fuel cost. david: a temporary fix that will keep them flying until it from an solution is found. thisping production of