9:00 in hong kong. 8:00 on the east asian seaboard. haidi here in sydney. this is bloomberg markets: asia. ♪ haidi: what challenges for china. have playedar may an overall influence. trey hollingsworth than anticipated. industrial reduction plunged last month.

haidi: take a hike. might mean a rate hike increase. >> asian-pacific benchmark it down for the eight state day. -- straight day. mess on theg manufacturing and nonmanufacturing side of things. haidi, it is all going on. a lot of this decorrelated between the strength of the currency and the strength of demand has been playing out quite favorably for beijing. said that we are seeing signs of a trade war between washington and beijing. that is going to be the major risk when it comes to data coming out of china this year. >> let us have a look at what is

happening elsewhere. a week pmi number is directed by the aussie dollar. need 77.8 u.s. cents for one aussie. the futures are down 2/10 of 1%. how does that all compared to what we have been seeing? it is a big fall in terms of the delta lease. that is about nine points down. .09. move for theof the downside for some of these major equity markets already trading in the session. we have australia lower. >> this is all against the backdrop of hearing from the new fed overnight. some statements of the market

interpreted as a hawkish tilt in his q&a. the stronger dollar is playing out when it comes to commodity markets. we had these latest lines about a steep aluminum tariff when it comes to china being formally declared -- we're so watching for develops what -- forget -- for developments when it comes to alumina. -- aluminum. is this largely a seasonal distortion? what you looking at here? >> as mark writes from bloomberg, china pmi is awful. the numbers are horrible. even if you take into context distortions, year many factories close over the holiday. , these are terrible numbers.

partners pointing to some softening. this will surprise many analysts. we are going to need another month or two of data to really get around picture. round picture. it was down from the expectations. it is softening from 51.3. the nonmanufacturing number came in at 54.4. this is lower than the expectations and below the january number. taking into context that we see from china's trade partners, also you have been talking about this, the u.s.-china trade tensions are ratcheting up. whether that is the aluminum tariffs that are being imposed or the steel tariffs that are being considered by washington. president trump is looking ahead to the midterms.

many reports coming out of washington about the determination of the americans to slap a whole dream of tariffs on chinese exports. how the chinese react, they pushed back on these tariffs. heard statements from them saying that they are trying to protect their own industry and look at retaliatory measures. in the context of president she gaining even more power, how these two square up. the trade tensions are clearly in focus. we have seen continued strong demand in europe and u.s.. they'll be playing into this picture of chinese manufacturing numbers. >> what does this mean for fiscal policy? is this likely to shift any of the thinking that? -- there? view amongensus economist is that we are not going to see a change, at least in the short-term, when it comes to monetary policy. we are expecting to see a new

government anointed. the decision has likely been made over the next few days. china's senior leadership meets. we are to get a decision announced when the congress kicks off on monday. we are also expecting to get new heads of regulator, probably the banking regular. looking at financial risks and the system. monetary policy likely to remain on hold. we have seen the pboc pushing up those money rate. the focus in policy making is on tackling this financial risk. that is expected to continue. we saw the market live blog also, their point at the bond markets benefiting from this. a long as thes -- -- along with this deficit marker.

possibly a bonus for the bond market here in china. >> all right. a note that david sent me, that pmi list was widest in about six years. it is pretty ugly. not terribly as vicious given we had the news this week of a indefinitely extending his tenure there. in oxford,economy joining us. it looks like a big miss. we wait until the seasonal distortion catches up before we get doom and gloom about the chinese economy? >> i don't think so. it is always very hard at the beginning of the year to make sense of how things are going. intold not read too much seemingly weak numbers. week credit quite -- weak credit data in january.

we are not seeing in acceleration. we are seeing a softening of growth in china rather than a picking up. >> the trade tensions, which seem to be intensifying, these formal proceedings with the u.s., we had already have these 'spectations on trump6 reportedly taking the harshest penalties when it comes to steal. will this be a strong downside when it comes to trade? definitely a negative. it implies a lot of risk. it becomes increasingly correct to me how we are seeing who has the stronger cards over here. chinese delegates going to the u.s. in order to dampen the sentence.

the trump team is quite inclined to ratchet up tensions. china will continue to want to be seen as the more restrained party in this whole affair. we are going to see a ratcheting up of trade tariffs and other measures taken by the u.s. with china continuing to be, trying to tone down this trait hustle. -- trade hustle. , theis is a situation external environment is very beneficial at the moment for china and the chinese economy, is it not? >> yes. the global environment is continuing to be very good. growing atbal trade very healthy rates. , isre looking very closely global trade accelerating or the 70's often a little bit? its -- is global

trade accelerating or is it softening a little bit? the u.s. should still as that momentum. in the u.s. we expect growth to be stronger this year than it was last year. overall in the world, we still have a very healthy picture. in china, we are definitely expecting that financial tightening. the gradual slowing down of credit growth. it is going to weigh on the domestic economy in china. not that much lower overall. it is not too different to what 6.9% we had last year. the backff the back of of a prediction of 6.6%, isn't it? we are not talking about a major slowdown. for instance, are no -- we are a the consensus is too optimistic in terms of how much growth you can

get out of an economy when the government is ready keen to tighten financially. keen to tighten financially. >> overall, what do you think in the moment of the story of leveraging? where are we? the jury seems to be out at the moment. in what ways do we have to go there? >> we are actually still in the early part of this process. despite all of the top of the leveraging, we have not seen any reduction in the credit or a regulation. -- credit regulation. credit is going to grow faster than at the economic outlook. is a lot of partial leveraging and the most dangerous, risky parts of the system. this is also where the authorities hope to make more progress this year. they are going to roll out a serious effort in wealth management.

see howwhere we need to gradual and nonessential they are able to roll out this financial tightening. the market is still quite anxious about, are they able to pull off a gradual tightening in the coming years? or is this going to be a more sudden, abrupt process that can lead to tensions? we are just getting these lines from the bank of japan, cutting-edge purchases -- cutting its purchases. we have been talking about asian central banks playing follow the leader. extent do you see convergence on monetary policy between asia and the fed, in that they do not have a choice? reduce -- or do you see

continued divergence? we are actually quite confident that the boj is not going to follow the fed. bojontinue to see the sticking to its policy of 0% bond yields. we think that the news that corona is likely to remain boj is confirmation that the government wants to continue with this monetary policy stance. more generally, we think that with inflation not getting out of hand, with economy is not yet very stretched, we think that asian interest rates will rise in the coming few years. but not as rapidly as the u.s.. to pose some questions for things like capital flows and currency markets. we think that asian monetary policy will not follow

one-to-one the u.s. lee. -- lead. >> it comes on the back of the first loss of a huge chunk of data we're getting this week. production not as good as expected, in fact much worse. soft is located in japan, the market tells a different story to what the economy is showing us right now. you think we have reached the piece -- peaked in terms of potential for the japanese economy? >> they had a really good 2017. if you compare the actual growth numbers that we had last year and a we expect for this year, these are really good numbers for japan. if you look at the potential rate of growth for the japanese economy that hit they can handle over a long-term of time. this ties in with the trade

cycle. we are still having good times globally, in global trade and activity. we have passed the peak point. he is ahead of asia economy at oxford. aboutg after the break andfed affect, jay powell, the hawkish statement in congress later on the way. this is bloomberg. ♪

>> he delivered his first official testimony to congress as federal reserve chair. that was seen as something as a caucus -- hawkish symbol. we're here with a look. is he leaning towards full rate

hikes? pretty robust conversation in the market about this possibility. >> well, heidi, he is opened the door for rate hike this year. it remains to be seen whether he is leaning towards it. during that testimony, during i saw his policy statement, his speech at the beginning, i thought this is the boilerplate. we've heard this before. when he got to the q&a, he was asked specifically about three or four hikes, are you ready to accelerate the pace? he said, jobs are growing, inflation is rising, these are all reasons for the economy to do better. this is the difference from december. i do not want to prejudge it. i think he is leaving the door open but is waiting to see what the numbers look like. he is one member of a committee.

he wants to know what his colleagues are thinking. for now, the doors open. we will see in three weeks. he is begin with the banking committee on thursday. maybe he will -- they will push them harder and he will changes tone. that can happen from one testimony to the next. we will see what happens on thursday. also, kathleen, jay powell may not be prejudging the number of rate hikes. traders have to take of you. it looks like they are. >> knee-jerk. design saw a fed chair talking they a stronger economy, are thinking, it is time to sell bonds. bonds came back a long way from their losses. bond yields to not search today. we can look at a bloomberg terminal function. doubt, that is the

rising probability of rate hikes in 2018. the move down, that was the big stockmarket fall. how it has recovered with the stock market recovery. he got even further with jay powell's statement. this is what we heard from the fed in january at the policy meeting. it is half speed ahead for the new fed chair. no speed up in the number of rate hikes. steady rate hikes in 2018. we will see how that plays out in markets. we will see what mr. powell says later in the week. >> let us get back to our guest from oxford economics. lewis coach is with us still. lewis, what was your take away from a jay powell statement. statement? >> i agree.

his prepared statement did not care any surprises. the surprises were that he made what had may have been of faux pas. he was talking about his personal ideas and set of the committees. instead of the committees. he was clearly very bullish. he opened the door to those interest rate hikes that we were forecasting as a firm. the market only attaches 30% probability to it. is becoming more of a dominant conversation, right? it is creeping up on it comes to imply probability going by fed fund futures. you can see that hiccup in the market imply probability of getting four. is there a chance that we are going to see, as with every year of the past decade, inflation

failed to materialize -- fail to materialize? >> that is still a crucial question. we are very comfortable about growth. we have so many positives at the moment. some of these factors that used to be headwinds have become tailwinds, like the global economy, fiscal policy. uncertainty is not enough anymore. it is inflation. will that tightening of the labor market finally produce accelerated wage increases? the jury is a lot on that. there are a lot of people who can point you to issues in the that,market that mean actually, even though the an appointment rate is low, we still have a lot of untapped labor. affirmed, do not expect wage increases to accelerate beyond 3%.

remains a knife edged situation, whether or not this is considered to be strong enough inflation. >> always a pleasure. checking in on your japanese markets. moving move from a the boj announcing that it is cutting its buying of 25 year jgb's of the last money market operation. tote a move when it comes dollar-yen as well. plenty more to come. this is bloomberg. ♪

>> you are back with bloomberg markets. donerading day is nearly

for hong kong and the greater china as well. looking at negative figures coming through premarket wise. sophie? >> we are seeing a risk tone being set for the open air. lucifer caroline's first budget to be announced later today. there could be troubled waters ahead for hong kong investors. they cannot necessarily rely on mainland influence coming in. yankedve written -- number of amounts from stocks. what stocks too watch on hong kong's budget day, there could be surprises in the budget. the administration grapples with a lack of supply issues. other lee care companies on the radar as they may move. watching out for that.

coming up, washington making huge tariffs on aluminum from china. this is bloomberg. ♪

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hong kong. open, it ishe looking negative at the moment. we have lots of news coming out of japan. they have been cutting the amount of japanese government bonds that they're going to be buying. that is part of this program of yield control, if you will. in data out of china much weaker. the world digesting what is the federal reserve with jay powell talking about a strong u.s. economy from its own data rather than the fed data itself. it is a little bit of a

reaction. move towardses full rate hikes, something that the market is pretty aggressively debating at the moment. you can see the reaction on that. the last time, they said do not read too much into this. there was a long way until we get into percent. hong kong is just opening up for trade. >> so far, we are seeing a fumble for chinese stocks on the mainland and of the hong kong share market also under pressure. pager index lighting by 1.4%. we saw the tremors began on tuesday as a large caps took a tumble ahead around the earnings season. we have the likes of goldman sachs supporting the rise of what it.

the fundamentals remain intact. pmiave that missing chinese figure, we have this ongoing debate about what direction future policy may take. what isake a look about moving the dow in hong kong. shares under pressure. very few bright spots when it comes to adventures on the hans saying. i want to highlight this as well. they're said to be seeking a $2.2 billion young for its volvo mission. let us take a look at some movers in hong kong.

taking a look at imac china. install 175 computers this year. both of these stocks under pressure, indicating that investors should not get too excited at a surge in lunar new year to get sales. there have been no major changes in the company's business. >> nice one. this is a lovely problem to have. what you do with a massive pile of cash? this is the problem facing the hong kong budget that is sitting on one of the biggest fiscal surpluses anywhere. we have a budget, have at least leave -- haven't we steve? >> there is a much cash laying

around, what you do with it? hong kong is the least affordable housing market. the stock market is up 32% or so in the past year. you have these rising prices fueling this budget surplus. that is what carrie lam has to face in her first fiscal year as thelater this morning financial secretary will read out the budget coming up. it could take over a couple of hours. let me give you some numbers. when they unveiled the numbers -- budget today, a may have as much as 21.5 billion u.s. dollars left over from the last year to play with. that is 16 8 billion hong kong dollars. that is 10 times what the government had forecast that they would have as surplus. they are getting a lot more money from revenue from land

sales, profit tax, stamp duty. stamp duties have run very high. stock gains, as i mentioned. it could have the biggest budget surplus since 1999 on a quarterly basis. if that pace continues through the full fiscal year, that will be among the highest in the developed economies of the world. why don't they just give it away? i'm talking about cash handouts. they have done it before. >> they have done it. singapore did it. i remember the last time they did it in hong kong. my life got some but i didn't. i was not a citizen -- resident of hong kong. they said that this is part of the surplus. it is not recurrent. we have to be very careful.

it is not like hong kong is sitting on a pile of oil under the ground. this could be a temporary asset bubble and they want to invest in the long-term. they are investing in innovation and technology. they want to prepare hong kong for the future. that is what they are saying right now. hong kong residents, do not expect a payment today in the form of a cash. they can see some initiatives to make hong kong more competitive in the new economy of the future. >> put it away for the rainy day -- a rainy day. we are going to get back over the next couple of hours. c the first look at his. thehe latest gauge has factory floor on china. well below expectations. the manufacturing pmi came in at 50.3.

beijing was the blame on the lunar new year holiday and official attempts to tackle pollution. it expects out to improve and become stable from now on. the british cabinet has discussed the anticipated ipo as part of preparations for the visit of saudi prime prints. -- prince. saudi arabia said it will sell for $100 billion. transform plans to the kingdom and we know the economy off of oil. foreign lenders become more reluctant to accept guarantees from local buying. isrces tell us citigroup among those reducing exposure to these transactions, which are used by smaller companies to access short-term funding.

of bitcoin is accused of swindling more than $5 billion worth of the digital parity from computer security experts. he claims two years ago that he could -- created bitcoin. the lawsuit alleges that the use identity to claim that point. kim jong-un is reported to have used an illegally obtained brazilian passport to travel to the west in the 90's. your and security agencies have published pictures of the passport issued by the brazilian passport and used by cam as his father in 1996. he traveled under the name joseph, a brazilian citizen born in sao paulo in 1983. a chinese billionaire is said to have struck a stake and diamonds

through complex derivative transactions. --used we learned that he avoids preaching german rules and acquired shareholders and holdings exceeding 3%. this is bloomberg. ♪ >> thank you for that. washington is threatened to sour relations with beijing by slapping duties on imports of chinese aluminum foil. the news comes on the day that the senior advisor to president -- the president arrives in the u.s. to talk trade. trade worth, trade tensions, what are these risk that rolled 2017?om 2017 -- in from are investors paying in us --

enough attention to this? >> this is the last of the greeting -- could be elements of trade regulations from the u.s.. the indications are that president is leaning towards deeper tariffs. we have an ip program in the background. we are a long way from a classic trade war. we have seen this before. we have seen u.s. trade tensions with china before. ultimately, it has worked itself out. so reason economists are concerned about what is happening with these creeping protectionist measures between u.s. and china is that it has the two worlds biggest economies and it is on the global stage. so many economies are in the middle of these big one supplying them with components. that is why economists say it is not just a risk to china and the

u.s., it is a risk to the rest of the world. yet. jeopardizing this global growth story we have been talking about. the timing of this, coming on the eve of the visit. what is the significance of the visit? >> it is very significant. he is the top economic advisor. he is very savvy. he is western educated. as angoing over there indication of, china is quite worried about the trump administration direction. he is going to offer some kind of olive branch, maybe seed of up taking in more u.s. imports and he was investments. there's a feeling that he will have some explain to do. you'll be arriving right when china tour up their own internal bluebook.

there will be a sense that u.s. may ask, what exactly are we dealing with here? if you're not willing to pay by her own wheels, what rules are you willing to play by on the global stage? >> what can china due to retaliate here? what are the options on the table to strike back? they have a big stick in certain areas. aircraft is an often cited example. they can block imports of u.s. goods. they could curb u.s. investments -- chinese investments into the u.s.. it is not insignificant. it is a risk for china to. if they were to strike back fruitedu.s., that risks price inflation. -- food price inflation. they will have some leverage. they need to be careful.

there is a feeling among economists that a trade war would be met damaging -- net damaging on china's economy. >> absolutely. thank you for that. cheap asia economic correspondent. we are going to be talking virgin australia. this is bloomberg. ♪

>> this is bloomberg markets: asia. jamie dimon said he is ready to fight for the same deal that amazon is expected to win when it takes the location of its second headquarters. officials across united states and canada have rolled out marketing campaigns to try to win the race. last month.

dimon says will be on the phone at the moment the news breaks. on the list for amazon is columbus, phoenix, dallas, chicago -- who knows. the second that you benefit those people, you can be sure that i am calling the government on them. i mean it, by the way. i'm not kidding. five for your company, folks. the wheels does. -- fight for your company, folks. you are the only one who does. customers have been told there will no longer be available after march 31. they were launched back in 2012 aimed at rivaling traditional credit cards but failed to catch on.

it created tension with visa and mastercard. sources telling us the changes in negotiations involving an 85% stake in the venture. venture could lead to an ipo in what is your years. >> disney is becoming embroiled in a heated topic union workers over pay and conditions of profits in the park positions. complained about being struck out of disneyland for the annual disney party. contracted talks are underway. it is not really the happiest place on earth, you would think. >> not at the moment. let us get a look at the markets.

this is what it looks like for equities in hong kong right now. moved to the downside for the shanghai composite. stock selloff perhaps abating a little bit. assessing again once more where interest rates in the united states can go next. this is what we have right now. >> virgin australia is plunging. loss of over 10 million australian dollars. it is ditching a planned privatization after the talks of its largest investors. john, great to have you. help me understand what you dropped the plan. your stock has never recovered from the gst.

after this fight back, you are going to see the free float shrink even more. what is the argument for staying listed? chairman said that we are shares also ofk $500 or less. the board has made the discussion to do that. i'm not going to talk about discussions that have been had on the board and reasons for that. the position of ceo's run the company. that is exactly what we are doing. have the highest underlying profit results in 10 years. if the lowest financial leverage and 10 years. -- in 10 years. i think these are all good, strong metrics. we are doing a good job of getting where we said we would get to. aside, using the

conversations will return to potential privatization or delisting? we are trying to work out what the sticking point may have been in that conversation this time around. as you can expect, i am not going to talk about conversations in the boardroom. aboutt going to talk privatization. my job is to run the company. i've here to talk about the results. frome buying back shares shareholders, those that are holding $500 or less. that is good practice. to put that into perspective, if you exclude the major about 21,000 are going to be impacted in a positive way with this $500 buyback. have you move things forward?

net, it was a loss. second outlook is better. what gives you the optimism there? how much better? >> good point. today, our second half will definitely be better than the second half of last year. what makes me confident about that? if you look at the last three quarter performances, they are showing a trajectory that i am not seeing diminished. the underlying reasons for that external -- that, the external once, the economy seems to be recovering. consumer confidence appears to be higher. we are getting good, strong feelings about the corporate market. now at the leisure market is also improving. from a demand side, we are

seeing good trends. i do notsee why any -- see any reasons why that would change. if we look at the external aspects, we just reported the highest available safe kilometers in our history. the highest yields in our history. that gives me great faith in going forward into the second half. i see virgin domestic, the engine room of the group, performing particularly well, particularly well. tiger, which has suffered somewhat of the last six months, now back on track. that aircraft. i'm getting great confidence about the tiger business as well. -- believe relief that the second half of the financial year will be better. ofthe trick is, it is the

this one, you have to keep even whenbove costs, costs are effectively out of your control, this really -- especially oil costs. >> it is interesting. you are absolutely right. position.a fortunate in oil andhedge ethics. .- fx we are very well covered for this financial year. >> how do you get as much money out of the passenger when they are on that plane? yeah. these revenues, from a group perspective, are a small proportion. morphedn blue murder --

into virgin australia, it does not rely on much on the revenue that a low-cost carrier would rely on. the compensating part of that is that the yield in the airfares go up. that is exactly what we have done. we have seen good yield growth on that. this revenue is particularly important. it is more important, the lower it -- it is more important on the lower end of market than on the upper end of the market. >> are you missing a trick then? >> not really that. not if you're airfares go up more than those revenues. clearly they are when you look at the last growth in the year. >> i need to ask you about one of virgins latest statements. this is one of a handful of chinese conglomerates that have been under pressure to make assets as emergencies to do risk

and deleverage. what kind of an effect you think it happen to virgin australia, given that this is under pressure to do these disposals? you see potential risks there? >> whatever pressures they are under, i read about it in the newspaper or hear about it from journalist. isn i do know for a fact that, as a shareholder, they are incredibly supportive. i'm pleased to have them on the register. they have allowed us to work with them and expect synergies on other companies. from my perspective, they are a great shareholder. as is the other chinese shareholder in our business. singapore airlines and virgin groups. is, as theell you

ceo of the company, i am pleased. verye working where it -- well together. we have huge support from them. >> what happened last week? this example of one of the chinese conglomerates that has been taken over by the chinese is that a risk that you are potentially looking at? we have seen beijing banned companies to well, in situation, which is the other major takeovers being interested in buying them out? -- stakeholders being interested in taking them out? >> it will be when it will be. i am not seeing any signs of what you said. in terms of our end. before, we are happy to have them on the register and were closely with them.

their district -- they are terrific. let me give you an example. we just announced that, in july, we will start hong kong services daily. year, -- if it in not for the alliance, terms of hong kong airlines and hong kong express, we would not have hong kong services. it would have been financially not viable. why? we would not have had the alliance partner at the other end. they provided us with traffic

from mainland china to connector services. that is very important. >> we're going to have to leave it there. the bridge in australia ceo joining us with his views. once more to come. this is bloomberg. -- plenty more to come. this is bloomberg. ♪ mom you called?

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it's a drone! i know. find your phone easily with the xfinity voice remote. one more way comcast is working to fit into your life, not the other way around. ♪ >> this is "bloomberg daybreak: asia." ♪ rishaad: more challenges for china, though lunar new year may have played a role. >> abenomics coming under pressure, retail sales and trade falling more than expected. rishaad: noble reporting

earnings later. it's potential losses are "shocking." >> lenovo doesn't compute with investors anymore. the future what holds. shares are down sharply since 2015. jerome powell was in the house, day one of congressional testimony. the first part following the script. in the queue and day, he took on a more hawkish tone. is 5528. these are previous economic cycles in the united states, higher bondtion, yields, a concern that trope the selloff we saw at the start of the year. we getstion is that once to that 3% level when it comes to the 10 year, where do we go from there? does it pull back?

is that where we see foreign interest coming into the markets? rishaad: yield differentials playing an absolute key role in that, and predictions that if we get four .5% according to goldman sachs that we would see a 20% fallback for equities. lots of other stuff to digest as well. investors looking at that much weaker than anticipated p.m. number out of china, and yield control being the watchwords of the boj. let's get over to sophie checking the pulse of the market. we had disappointing retail sales and factory output data from japan. jerome powell front and center. we have data to chew on today, but not lifting the mood across equity markets. asian stocks set to snap a 13 month rally. tods mostly sliding come up

check out the tumble in indonesian debt. hong kong bonds catching a bid as the hong kong dollar moves closer to a 2007 low. when it comes to the equity space, china and hong kong bearing the brunt of losses as investors turned cautious with earnings season about to start. h-shareings for the index have turned wild, making the benchmark the world's most volatile. in the commodities space -- currency space, the korean won holding on to gains. 392malaysian ringgit at before inflation data. the yen gaining ground after the boj tightened its longer-term jgb buying. some stocks in the region, harvey norman shares sinking the most since 1994 as early

second-half sales slow. yahoo japan falling the most companyril after one plans to sell its stake in the company. kuten gaining ground. even as it faces japanese expansion of amazon. fung jumping on a day when we see what might be revealed in hong kong budget. rishaad: nice one. sophie kamaruddin there. boj under pressure. curveld be a sign that flattening has gone far enough. with ourcuss this bloomberg markets life strategist. comeyield curve control there is always the danger

aople misinterpret this as bond buying operation that does not imply shifts in policy. we have to be careful with this. >> there was a small tweaked a bond purchases in january. , governorf days later kuroda had to reassure markets that qt was not ending as abruptly as people thought. they injected a large amount of three-year and five your purchases. he is addressing the long end of the curve. in 2016 when they introduced the 10 against 30 year curve control, it did push the yen up slightly and the equity market as well. this time he seems to be addressing the fact that has flattened too much and he can help the dollar-yen move as well. theaad: how does environment of rising rates by the fed impact what governor kuroda is trying to do? >> in a way it helps them come although -- him.

do tooyear did not badly. that does not help japan initially. he would rather see 30 yields rising. japan does need to do more for its self. it can't rely completely on the united states. at least as a first step in addressing 30 year yields got a bit too low for his liking. that: what did you make of ugly set of china pmi numbers? is that one of the themes playing out as to the resilience of this synchronize growth story under pending sentiment? >> of course people will say that has to do with the lunar new year holidays. that would take a lot of explaining. it was a pretty awful number. you have this big congress next week in china. theyure the key message will be reiterating is the fact

that the long-term future for china is very bright and everything is under control and the economy is moving in the right direction and they are rebalancing to the type of economy they want, so they will try to pass this off as a blip and hopefully the data will reflect that. so march may be a lot better than february numbers. haidi: what are you looking at for the rest of the week in terms of dictating whether this fragile recovery that took a setback in the overnight session and again in asia has further to go? this 3% threshold on the 10 year treasury yield will be an important number. bonds did weakened slightly yesterday, but not too badly. comes back on thursday in america. if by the end of the week, 10 year treasury yields are still below 3%, that will probably be taken as a positive sign for asset classes across the world and equities can get back on their feet am a but if we go

through 3% yields next week, it could look ugly no matter where you are. threshold important and we should have a better idea on thursday after jerome powell speaks. haidi: keenly watching that 10 year yield there. mark cranfield in singapore. let's get to first word news in hong kong. >> thank you. talked with mark cranfield, the latest gauge of factory floor came in below expectations, falling the most in five years to let manufacturing pmi at 50.3 compared to forecast of 51.1. beijing puts the blame on the lunar new year holiday and official attempts to tackle pollution and says it expects output to improve and become on.ble" from now the u.s. is imposing duties on aluminum, saying they dump

andducts in america says beijing is "dissatisfied with washington's decision and will take necessary measures to rights."hina's the news comes as a senior chinese adviser is due in washington for trade talks. has lost his top secret security clearance as the white house limits access to sensitive information. jared kushner is one of several aides who have lost access to material they could previously see under a new policy backed by john kelly. he said the month, white house "must do better in the way it handles security clearances." more pressure on theresa may with eight of her own lawmakers backing a call for closer eu ties after brexit. the size of the revolt is potentially enough to wipe out all the working majority and threatens her political survival. theresa may is under attack from brussels. it is expected to reject many of

her so-called red lines. >> the clock is ticking. time is passing, time is short. not mucherned there is time left between now and next often, because it is an just a few months away, that we need to reach an agreement with united kingdom. >> global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am stephen engle. this is bloomberg. rishaad: still ahead, powering down, how lenovo shares are running out of that treat life fast. indi: next, in proof men's china,ovements in presenting new opportunities. we will be discussing what those opportunities are next. this is bloomberg. ♪

after substantially easing

during 2017, financial conditions in the united states have reversed some of that easing over the past month. not seepoint we do these developments weighing heavily on the outlook for economic activity, labor market, or inflation. indeed, the economic outlook remains strong. >> there is always a question about the data and what is action happening in the economy and labor market, but we don't need a new paradigm. this search for a new paradigm is someone who would like to have a new idea but can't think of one. i think it is important for people to stick to the basic truths we know and understand. >> the issues i don't think are particularly pressing now. i do think if we were to roll forward to years from now and that we are having a lot more stimulation in the united states, like the tax bill, and

also because liquidity is we wantly plentiful, so to be in that part where central banks will have a problem getting it right. some of the views on the fed strategy and the outlook for the american economy. let's discuss this with fidelity international, an investment director there. it is a debate which goes on and on and on. what is your view of the narrative and how it is involving -- evolving? >> we have seen a cruel month in february. the what is happening is definitely something wrong but from ourappen, perspective what we are saying is that we remain positive on what is happening on the ground in asia with asian companies. there are several things happening. one is earnings. valuations are attractive relative to developed markets,

but there are questions and uncertainties about what is happening in the u.s. with a new fed reserve chairman, as with china and what is happening there this week. rishaad: that is what my question was originally about, whether the federal reserve interest rate policies, if we see four hikes in the cost of borrowing, how will that impact the likes of india and china? at what thelook markets are telling you today, the interest rates are expected, the hikes come and that is in the price getting priced in. the question is despite all of hikes out of the u.s., what is the base of these rate hikes and how quickly will they happen? certain parts of the markets in asia will get impacted like the

exporters come a but central banks in asia don't have to match what is happening with the u.s., because they remain focused on domestic priorities. when you look at the strength of asia, the strong fundamentals we see on government balance sheets with respect to current accounts, etc., we don't think central banks are necessary likely to follow the u.s. as long as inflation remains under control in asia, we think asian economies are in a relatively stronger position just to drive through reforms and the mystic growth. -- and domestic growth. and aseanhina, india, , which has lagged where we have seen strong companies attractively priced ignored by investors. haidi: let me start then with china. it has been a very busy few days

when it comes to news flow. as he isr, or as long ready to stick around, is that and that positive or investors? >> active investors like us like to see stability in markets. determineddership is and on track to provide that stability to the economy, to the markets. the centralized model is here to stay. there is no surprise there. when you look at china, it is a $13 trillion economy. half of that is companies it would managed, so be complacent of us to say we are not finding opportunities there on a bottom-up perspective. there is politics on one hand come up but there is the part of the market which is growing and delivering that earnings we are looking for. haidi: what did you make of

anbang and the sudden seizure of control by the chinese government, the chairman clearly in trouble. howhat just one example of quickly the tables can turn and how beijing can and will when it wants to bend companies to their will? >> definitely. this is not the first example. it has happened before. top-down policy perspective, leadership remains focused on addressing one of the biggest challenges, which is debt creation, and addressing or making those companies which are fueling their growth by just raising debt, just targeting those kinds of names. what we see here is another example. we are not saying this is the end or the beginning. you could see these companies come to the market, and therefore it is important to ground footprint in china to make sure that we are insulated from these kinds of shocks.

just continue to do your hard work, due diligence, not just from a what is coming in macro perspective, but also looking at other indicators and trying to avoid shocks that can suddenly hit us. there could be something coming out more, but it is not a surprise i think. look at investing in china and compare that with investing in india. of course very different countries with very different places in the whole trajectory of growth i suppose as well and development. china in thelate future, and if so, do you look at china 20 years ago and use the same investment techniques on india now? interesting question. we looked at india within emerging markets and relative to china. we think these are two very different economies. the political systems are different. one is centralized.

one is about consensus decision-making, and that can provide different policy perspectives. at the same time when you look at the base of the economy, i.t. in china and india are mirror images. oneis transitioning from economy to a consumption economy , the other is already a consumption economy. , so wers look at china are positive on both china and india, but for different reasons. china more for stability, structural change happening across areas. population base led by reform. whether china can emulate india is a hard question, because india needs to build up its infrastructure from the ground level that is happening after prime minister modi has come to power, but it has been very much

a be steps. we have seen some announcements and reforms, but it is a very different model from china, and the companies are different. india does have privately managed companies and a long-term history longer than china. the sectors are different. rishaad: great talking to you. a feature on the bloomberg terminal is called tv . it is interactive and you can find it on the terminal and watch us live and catch up with some of the interviews we may have done before and dive into securities or bloomberg functions we mentioned as well. if you want to be part of the conversation, you can send us instant messaging during our program. this is for bloomberg subscribers only. check it out at tv . ♪

rishaad: this is "bloomberg markets: asia."

i am rishaad salamat in singapore. isdi: the market increasingly concerned that little progress will be made with negotiations extended further. ottawaance minister said is not willing to accept any old trade deal and the focus is to make sure canada's fundamentals remain strong. >> the fact of the matter is the reason rates have gone up and some people think will continue to go up is because our economy is doing well. it means canadians are doing stronger, moreis people working, spending money in the economy, so the fact we have rising rates is a positive reflection of the kind of things we have done. what rising rates mean of course is that all of us will have to deal with that change to the economic environment. in the case of canadians, the majority, about 70%, of people's

bt is in in -- de mortgages, so you will see people rolling off those mortgages in a gradual way and dealing with slightly higher rates. the rates are still accommodative, so while they are going up, they do provide fuel for the economy. we think that is a positive. heard from business groups in particular who said they wanted steps to address butdian competitiveness, not just because of u.s. tax reform, but nafta, regulations that is basically hurting canadian competitiveness. what do you say to them now, especially groups expressing disappointment this budget did not move on the competitiveness issue on the way they wanted it? the facts of our economy. the economy is doing well. we are experiencing strong growth rates. we have employment in a positive

situation with low rates. inare seeing companies are some cases having challenges getting the workers they need for their business. we need to start with that. the way to deal with those risks around nafta, the changing tax rates in the united states, starting with a strong fortress at home. our economy is strong. then with that fortress, it allows us to negotiate appropriately. in the case of nafta, we are saying we want to get to a better deal of a but we are not willing to accept any deal. we know we need to be strong and show how we can improve the north american economy and nafta. rates, iect to tax appreciate that businesses will always ask for lower tax rates. i get this. the tax changes in the united states happened a couple of months ago. the regulations have not all been written. act inare asking me to

an impetuous way before we have done our homework. ensuring that our country remains competitive and we need to think about all the factors of competitiveness. taxes is one of them. need to make sure a strong, divorce workforce remains competitiveness and we invest in fundamental research. we are doing that. we need to keep institution strong in this country. we have a strong banking sector. and of course we need a really great talents sheet. rishaad: the finance minister speaking to bloomberg in ottawa. having a look at the markets, a down day overall, perhaps not quite as pronounced in declines as we had seen earlier. the asia-pacific index being led lower by real estate, financials, and material issues. national inch marks down due to weaker pmi numbers out of china.

shanghai down 1%. hang seng down 1.2 percent, deficit on the day so far. -- interestculation rate speculation in the u.s. and more. we will be looking at china's debt issues next. ♪

in hong 10:20 nine kong, 11:29 in tokyo. jerome powell has indicated the possibility of four rate hikes this year and has acknowledged a strengthening economy and inflation. it may prompt a rethink by hike in the a fourth quarter 50%. second and third quarters 60% and 70% respectively. remains near 100%. many factors shaped the economic outlook comes some of the headwinds the economy faced have turned into tailwinds, in particular fiscal policy has become more stimulative and

foreign demand for u.s. experts -- exports is on a firmer trajectory. >> the boj cut for justice of bonds maturing to five years for the second time this year after yields declined on the back a solid demand before the end of the fiscal year. the bank trimmed buying by $93 million to ¥70 billion and had cut purchases by the same amount on january 9 and it cut buying of debt maturing in 10-25 years for the first time in more than a year. discussed thes anticipated aramco ipo as part of preparations for the visit of the saudi crown prince. london is among cities battling to host the countries expected second listing. saudi arabia has signaled it will sell 5% of aramco to raise $100 billion as part of a plan to transform the saudi arabian kingdom and wean the economy off oil. the fallout from india's biggest bank fraud spreading to trade financing as lenders become reluctant to accept errant fees

from local banks that underpin loans. sources tell us that citigroup, deutsche bank, standard chartered, and hsbc are reducing exposures to these transactions used by smaller companies to access short-term dollar funding. the u.s. has cut aid to cambodia over what it describes as deep concerns about democracy. the white house says this month's elections failed to represent the will of the people and would ensure taxpayer money is not used for "anti-democratic behavior." several treasury and military programs have been suspended or curtailed, what washington says it will continue to support health, agricultural, and mine clearance. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am stephen engle. this is bloomberg. haidi: thank you so much for that. an interesting note in tokyo analyzing the boj's move to cut its purchase of bonds maturing over 25 years, saying it is

probably in response to the recent drop in superlong yields and pushed lower by seasonal demand come at so essentially the boj don't need to to buy as much as. lots of speculation about whether this is yield curve control or still tapering and does it follow what the fed has been doing. let's get the latest on the markets with sophie. like a redis looking today with losses across the board in asia. the nikkei 225 dragged lower by s.ergy and propertie the overall picture of global month in twoorst years as investors are up against more than a few hurdles. from jerome powell's hawkish comments to weaker data from china and japan. the fumble and chinese pmi adding pressure on stocks in hong kong and on the mainland. share sliding 1.7%.

world'shmark is the most volatile. those fluctuations would likely continue as mainland investors turn bearish and that have seen them yanked funds from hong kong stocks. after the fed chairman's testimony, the key question is how high will treasury yields climb. they are now above that 2.9 percent handle and this is stoking speculation about what a hawkish fed means for policy divergence in asia. when it comes to the rba, traders have pushed back rate hikes to may 2019. you mentioned whether or not this boj bond buying cut is a self tapering or whether it is hasd curve control, the boj affirmed time and again that it on ano go on man exit -- exit anytime soon. last month cut stood anticipation of normalization. rishaad: thank you so much for

that. getting back to that data out of china, the manufacturing gauge missing estimates in february, pollution and death weighing on output, as indeed the lunar new year. tom mackenzie has the details in beijing. it was a big miss come a but there are a lot of excuses for it. that's right. certainly lunar new year distortions are one area that officials are pointing to and saying there is a need to look to data next month before we can get an accurate assessment come a but a lot of people will be looking at this and looking potentially more cautious at the growth picture, 15.34 february. , 51 comes in below january point three, so a not insignificant drop, and nonmanufacturing 54.4 versus 55 .3 in january.

the manufacturing number is the lowest since september 2016. 975 four that shows the official manufacturing pmi number over a longer term over unofficiald to the caixin survey. you can see that over the longer term. the debt has likely played an effect, as have the curbs around pollution. despite that, we heard from jp morgan's china economist earlier in the show speaking before that data came out, but says she expects an upward surprise for the growth picture in china. going forward is that economic growth has been surprising on the upside last year and will quite likely be holding quite well this year. so what that means on the policy front is that the focus will

shift to focusing on the quality of growth as well as the prevention of major risks. many have headwind been talking about this morning are these u.s.-china trade ties ratcheting up. it seems like washington is intent on slapping on more sanctions and tariffs as we have seen with aluminum, and trump has to make a decision about whether to implement tariffs on steel. so how china responds is what people will be focusing on and the impact on the trade picture here. indi: the communist party beijing is in the process of reshaping the government. what changes are we except in -- are we expecting when it comes to xi jinping? hashe recent announcement taken a lot of the oxygen out. a lot of focus on those constitutional changes that

would likely to be rubberstamped and allow president xi jinping to extend his term almost indefinitely for the presidency. some have speculated that we may get additional hours linked to that presidential role. it is less of a powerful role than the head of the communist party or head of the military. as is of course the new head of the pboc, no clear steer on when the timing may be made, but china's top policymakers are meeting and will into that meeting later today and there may be some direction towards the end of the day. certainly we are expecting some clarity on the nominations, pboc come at banking regulator, insurance regulator, and another name to watch is the chief economic advisor to president xi jinping. there is speculation he may be given the role overseeing the committee to look at regulatory or financial risks come and there is speculation he maketh

the role of pboc governor. there may be more out this afternoon or on march 5. haidi: thank you for that. , mackenzie there in beijing. coming up, lenovo rio -- tom mackenzie there in beijing. coming up lenovo has a pretty big chip on their shoulders. we will be coming you why. this is bloomberg. ♪

rishaad: this is "bloomberg markets: asia." i am rishaad salamat. haidi: i am haidi lun in sydney. simply doest lenovo not compute for investors anymore, shares have shed two thirds of their value after a high in 2015. that stock is the cheapest out of the world's largest computer arers, but most analysts still relentlessly bearish.

the chips are down for lenovo. how many ponds can we get here? can we get here? i remember when everyone was positive on this company. >> lenovo was the face of china's overseas acquisition drive. it was a flag bearer in many ways for an emergent tech sector. i think it is in a bit of a rut. hastyof that stems from acquisitions it made in 2014, motorola mobility from google, and ibm's commodity services. where -- anyre any way they can turn this around? >> it has several options. most analysts are looking at the company and want lenovo to do one of two things. either hp did and knuckle down and control costs and execute on sales, shore up its distribution

routels, or the apple where you come up with new and exciting products that excite consumer markets. i think between the two it is hard to make a dent in the smartphone market when you have and samsung capturing virtually every dollar of profit available, and chinese rivals really fighting for the remainder, so i think a lot of analysts just want to see execution on the bottom line, will saynk the critics there is not a clearly articulated strategy on how exactly they pull turn things around. behaad: they don't seem to showing many signs of change or new ideas at the top coming to the fore. >> i think what worries some people is if they are intent on

making the motorola brand is significant player in smartphones, and the thing is again as we discussed with the market being hyper and component costs rising, that does not sit well with some investors. rishaad: we have at least one analyst at the moment saying the that the company needs cool products, but it may be too late for that and goes on to say that tech brands do not come back. it is a toughie though, isn't it? not many tech companies that have come back. ibm is one, but ibm went from being sexy to un-sexy. lenovo is trying to do the reverse come at to become sexy again, and i think that is what

the analyst was talking about. rishaad: thank you so much for that. let's have a look at some of the business flash headlines. one property group, revenue of $7 billion, the figure of a year ago was $16. the hong kong property developer setting a target of annual property sales of $5 billion and actively seeking land in the city and says hong kong's residential market will continue to perform well despite expectations of modest interest rate increases. a struggling chinese entertainment site has announced a loss of $1.8 billion for 2017 and expects to announce total bad debt and asset impairment provisions of $1.3 billion. a filing reveals falling at revenue, membership fees, and a rise in financing costs. rishaad: air asia with falling

andits, pointing to current deferred tax charges. fourth-quarter net income dropping 20%. $95 million compared to a year ago. says itpside, airasia has a net increase of five aircraft in the quarter, designed to serve the region's rising demand for travel. rgin australia plunging 8ter announcing a loss over million dollars. the ceo told us earlier that he still sees positive trends. >> the economy seems to be recovering. consumer confidence appears to be higher. we are getting good, strong feelings about the corporate market, and now the leisure market is also improving, so from a demand-side we are seeing don't see anynd i

reason why that will change over the next six months. if i then look at the internal aspects of this, we have just reported the highest revenue per seat kilometer in our history, the highest yield in our history. that gives me great faith in going forward into the second half. i see the engine room of the group performing particularly well. i see tiger, which has suffered somewhat because of the withdraw from bali and the excess capacity it had, now back on track because we have removed that. so i am confident about the tiger business as well. overall it gives me believe that the second half of the year will be better than the corresponding period. is the: the trick

obvious one, you have to keep revenue above costs even with costs effectively out of your control, particularly oil prices, but luckily they have been pretty stable. >> it is interesting. you are absolutely right. again, we are in a fortunate hedgedn where we are 95% on oil and in fx. we are very well covered for the rest of this financial year. rishaad: indeed, tell me youthing, how do effectively get as much money out of the passenger when they are on that plane as well? tell me about your and sillier revenue -- and sillier >> from a group perspective, it is a small proportion. into virginrphed australia, it does not rely as

much on the ancillary revenue that a low-cost carrier would rely on. up, andthe yield goes that is exactly what we have done. we have seen good yield growth, so i think that ancillary revenue is important, but clearly more important at the lower end of the market than the upper into the market. that was on bloomberg markets a little earlier on. bang's budget, where will they/the cash with $20 billion on the table? that is next. this is bloomberg. ♪

rishaad: we are back. this is "bloomberg markets: asia." i am rishaad salamat. haidi: i am haidi lun. this is a nice problem to have, a massive pile of cash. that is the conundrum facing the hong kong government sitting on one of the week's surpluses anywhere in the world. our chief north asia correspondent has the story. indeed.roblem what will they do with it? >> you just can't get rid of it, can you?

this is a political problem as far as rising home prices, but a financial windfall. overflowings are because of the rise in property and that 32% rise in the hang seng index and other investment returns over the past year. the index is above 31,000 now. it was 24,000 exactly a year ago, rising 32% come in so what do you do as the chief executive unveils her first budget is , and thecutive financial secretary reads out in just a matter of minutes from now. it will last for about two hours, the outline of the fiscal year budget for 2018-2019. they might have as much as $21.5 billion left over from last with. budget to play that is 168 billion hong kong dollars. that is 10 times more than what the government had forecast to

be their surplus of $16.3 billion. they have been getting a lot more revenue from stamp duties, .and sales, stock gains on a quarterly basis, budget 8.6 percent of gdp in the third quarter of 2017. if that carries out for the ll fiscal year, that will be among the highest of all the developed economies in the world. the question is what do you do with that cash? will you go to help first-time homebuyers come a long-term initiatives, belt and road, what? haidi: what about just handing it out in cash? they have done it before. >> they have. i remember when my wife got it and i did not because i'm not a permanent resident. the financial secretary is not in favor of a one time hand out

of cash like macau and singapore have done. paul chan cautioned that the surplus might not be as high as a lot of analysts are predicting. that he is saying basically part of the surplus is not recurrent, so we have to be careful. hong kong is not sitting on a bunch of oil. this is a speculative market in property and stock market, so he is more in favor of longer-term investment rather than short-term payouts in research and development, innovation and technology, the greater bay initiative and integration with the pearl river alto. there could be some belt and road initiative announced. also, targeted tax measures for certain industries could be on the table, medical services, and low income housing. all land in hong

kong is actually for residential purpose. they need to sort the severe housing crunch here in hong kong. that has driven up the prices. rishaad: that is certainly one of the top priorities. that legit speech coming up. thank you very much indeed. -- that budget speech coming up. thank you very much indeed. you can get more analysis from bloomberg's expert editors on mliv . at what isa look coming up in the next hour of "bloomberg markets: asia." mentioned, we will be keeping track of the hong kong budget and the tracking the hong kong dollar, poised to be at the weakest level since 2007. rishaad: we should point out it is in a narrow band. >> it is good news for me to go shopping in your city. we have a look at the markets

given what jerome powell did. asian stocks have been falling between .5% to 1%, investors mulling over the implications of four rate hikes or perhaps more. and to top it off, we look at india's gdp. gdp numbers coming out today. analyst with us coming up. it will be a very busy hour ahead. rishaad: and no doubt some discussion will revolve around those terrible pmi numbers out of china, now looking ahead to the unofficial ones. the official one was quite a miss. that is why we are seeing a lot of weakness for equities in china and hong kong as well. there we go. >> even if you take into account the lunary season, new year holiday, that pmi numbers look really bad, so

something to digest as investors look to the markets. rishaad: all right. we are going to outer space, actually interspace, three astronauts, there we go, just return from spending six months on the international space station. the two americans and one russian there landing. they normally land somewhere in kazakh a stand. -- flu last --4 and flew last october making renovations to the robot arm and talking to schoolchildren on earth. ♪

>> it is almost 11:00 here in hong kong, 2:00 out of sydney. i am david ingles. >> and i am haslinda amin. it is the morning session here in the lion city. welcome to bloomberg markets: asia. ♪ >> more challenges for china as the official factory gauge falls the most in five years. lunar new year and pollution are blamed. under pressure, trade falling more than

expected. industrial production falling last -- plunging last month. haslinda: spreading from india's -- several foreign players reluctant. dave: of course, we will be watching out what is happening here. you are looking at live pictures in hong kong. the finance secretary to reveal the budget. when you look at it, it is a nice problem to have. hong kong saying they are awash with cash. haslinda: definitely a good problem to have. we are watching the markets. he spooked the, market, caused the selloff in the u.s. overnight. we have across asia losses in the red. losses are between 0.5% and 1%. jay powell indicated four rate

hikes might be coming. and the market traders are mulling over what that means. the dollar is poised to be at the lowest level in -- since 2007. all eyes on the market. dave: have a look at some of the yields across the treasury curve. they are up, aggressive flattening overnight. thatters the magnitude when you look closer at these numbers, the market continues to discuss what jay powell had to say. and there is the testimony of the u.s. senate. let's get you an update of your first word news. here is paul. >> the latest gauge of the factory floor in china came in well below expectations, falling the most in five years. this month, manufacturing pmi came in at 54 .3.

beijing puts the blame on the lunar new year holiday and attempts to tackle pollution. they expected to become a stable from now on. the bank of japan capped purchases on bonds maturing for the second time this year as yields declined on the back of solid demands before the end of the fiscal year. the bank trimmed of buying by $93 million to ¥70 billion. the same amount on january 9 when it cut debt maturing in 10 to 25 years for the first time in more than here. the u.s. has cut aid to cambodia over what it calls deep concerns about democracy. the white house said this month's elections failed to represent the will of the people, and they will ensure that u.s. taxpayer money is not used for anti-democratic savior. washington says it will continue

to support health, agriculture and mine clearance. the white house limits access to sensitive information. jared kushner is one of several aid to have lost access to material they could previously see under a new policy backed by chief of staff john kelly. he said they must do better in the way it handles security clearances. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. haslinda: paul, thank you so much for that. china's economy is in focus. its gauge missed estimates in february. pollution weighed on output. correspondent, tom mackenzie is with us now. tom, how batter these numbers? are these numbers?

the lowest we have seen since december 2016. and in january, 51.3. softness across the board in terms of these numbers. a lot of people pointing to the clampdown on that and the havetion curbs, and they been playing up of the lunar new year and distortions around the. terminal that shows the official pmi data over a longer timeframe and the survey which looks at the smaller industry players. just for comparison to look at that. we have been speaking to economists about the reactions to this data. one person from oxford economics says it does look like a

downturn when it comes to china's manufacturing. take a listen. >> we're not seeing an acceleration. we are seeing softening of growth rather than a picking up. >> that is despite what we are seeing in terms of robust demand in europe and the u.s. at least from his perspective, more of a drag to be expected. the lunar new year festival should be taken into account. we need to look at next month for a better ideas what the numbers are looking at. washingtonout of regarding china, steeper tariffs on a lot of things. has china responded? tom: it feels like a brewing storm. chinese officials this morning said measures to impose up to 106% on aluminum exported from china to the yet -- to the u.s.

the economic advisor to britain is in washington this week. there is interest around the timing of this. trump is weighing potential higher tariffs on steel and aluminum. the chinese were flagged ever since trump came into office. there are potential retaliatory efforts they could take, whether reducing soybeans into the u.s. or cutting back on boeing purchases. it seems to be exacerbated. trump is looking ahead to the midterms and perhaps playing to his base. dave: tom mackenzie live for us in beijing. lots of bad news at china. have a look at our chart, 981 on your bloomberg. it compares actual estimates. we saw the biggest miss in pmi seasonal. we have to go back to 2012. let's see what this means for

your investments earnings. very nice to see you. lots of very disappointing eco-numbers in japan and china. you have an estimate of 20% in terms of bps growth across the region. does that feel too optimistic? >> it could be. the seasonal downturn in china we should take into account. this year we are forecasting china growth would be slowing down from 6.8% to 6.5%. the more important thing is to look at the ppi numbers. the ppi gives you indication of the pricing power for companies in china. the ppi, though it has decelerated, is still positive. that is important. dave: 4.3% was the latest read i

believe for ppi. there are other metrics across the region. since theask you, selloffs, volumes have not come back. is that something i should be worried about? khiem: as far as hong kong is concerned? dave: and to a lesser extent, the u.s. -- volumes are not back to average. europe, as well? after the chinese new especially ins, the case of hong kong, china, are still assessing the situation before they reinvest. it is showing deceleration, it is still growing at a synchronized pace. i think that is important. i am wondering. we talk about the selloff,

chinese investors selling off their investments in hong kong. we saw $490 million worth. is it profit-making or a deeper issue? khiem: we do not think it is a deeper issue because i think mainland chinese investors are diversifying their portfolio away from local market into offshore markets. only market which is officially available for them to invest in. if we look at some of the results which came out in hong kong yesterday, they are's -- they are spectacular. the blue chips are delivering very strongly. stage,lieve that some that money is likely to return. haslinda: what kind of catalyst are you looking for? policy the upcoming

meeting that is closely watched by the market. don't think the market will be surprised massively on the downside. i don't think so. most of only understood the fact that the chinese government would like to continue to have growth, but quality growth, a lot of growth. they do not want to leverage growth, they want quality and sustainable growth. growth by six and a half percent -- 6.5%. we think that would be sufficient to carry the chinese economy going forward. in addition to that, deleveraging of the leveraged products in the banking system will continue. i do not think that would be a surprise either. it could be a surprise on the soeinuing reforms, at the level. is stickingiem do

with us. they have gained their ground as asia's best-performing market. what is driving investors back there. dave: meet the new boss. jay powell sees rates continuing to rise only gradually. this is bloomberg. ♪

♪ after substantial easing during 2017, financial conditions in the united date have reversed some of that easing over the past month. at this point we do not see developments weighing on output for economic activity, for the labor market or inflation. the economic outlook looks strong. >> there is always a question about the data, what is happening in the economy, labor market. but we do not need a new

paradigm. paradigm isor new someone that would like to have a new idea but cannot think of one. i think it is important for people to stick to the basic truths we know and understand. >> jerome is not new to the business. he has been in it since 2012. i think we will see a continuation of the economic policies changing. >> it is not a healthy situation for monetary policy to be the only game in town. i would like to see a situation in which fiscal policy was in a better position to make a contribution on occasions and situations we are talking about. that is one reason why our current fiscal situation concerns me as much as it does. on the fedviews

strategy and outlook for the american economy. let's have a look at the pricing around samsung futures. how many hikes? almost a full three rate hikes. do we get the four? -- to four? let's see where we go from here, khiem do of baring asset management. how does it change from three to four, change your approach to investors? khiem: at the beginning of this year we were thinking about three. three would be a gradual nominee is asian monetary policy in the u.s. we thought about the core inflation rate in the u.s. would surprise to the upside. it is possible the fed may have to do a fourth. dave: we have a graphic. we will show to

our viewers and a few seconds, are contingent upon where yields go. 3.5% is the line in the sand you see. khiem: that is correct. gothe effective rate were to from a 3% to 3.5% and the 10 year bond rate, it would have a negative effect on the economy be therefore, investors may thinking about a possible big downturn in the u.s.. it could be a recession. coulday be thinking it precipitate something bad in the economy and corporate profits. we think those are the key levels to watch. at the moment we are way below that. haslinda: i want to bring up

this chart, g #btv 873. shows how emerging-market assets were sold off after powell's testimony. i am wondering whether it is four or more. how do you think emerging-market assets will be seen by investors? khiem: we believe if you look at emerging economies, they are very solid. it is rare we see them in such good health. in thesult of that, short-term there is a negative reaction everywhere, in the bond market, the fx market, the equities market. but i think it will stabilize soon. soon investors will be coming back to markets. we have seen growth in some of the worst economies in the emerging world, which include brazil, russia.

we have seen their economies rebounding. china is slowing down a little bit, but it is not a major concern. fromr the emerging region, a fundamental viewpoint it looks solid and valuations are not too expensive. we do think that andging-market, bonds, fx, equities, should continue to do well after a small correction. haslinda: which emerging markets in asia are you liking? -- we areasia investing across the whole spectrum. north asian markets like korea, taiwan, offered technology names. in the case of china, you have great internet names and many other situations which are looking great. in hong kong you have very cheap companies. you have a lot of good domestic

cyclicals. not any particular market, but a spread of them. head of: khiem do multi-asset strategy at baring asset management, thank you. dave: breaking lines out of hong kong. the gdp print for the full year of 2017, little higher than estimates, 3.8%. the estimate was for 3.7%. you are looking from the finance minister looking for the outlook. he is cautiously optimistic about this year. i will try to get you more details once we have them from that speech he is doing at the moment. coming up on the program, lenovo planning a comeback after losing 2/3 of its market value. look at the chart, it does not

look good. investors are not convinced. this is bloomberg. ♪

♪ is "bloomberg markets: asia." i am david ingles. haslinda: i am haslinda amin. is ready to fight for the same deal amazon is expected to win, as it takes the second location of its headquarters. they have ruled out tax breaks to try to win the race. amazon narrative to 20 cities last month and plans to make a decision this year. dimon says he will be on the phone the moments of the newsbreaks. >> i have to confess on the list for amazon is columbus, phoenix, dallas, chicago. these are places with 20,000

people. sure i will be calling the governor on this, i am not kidding. going to fight for your company, folks. if you don't, no one else does. ending services launched years ago. a phone number and date pin, well the other uses special payment codes. been told they are no longer available the end of next month. they were launched in 2012 at two change credit cards, but never caught on. uslinda: struggling toys "r" said to be in talks to sell its operations in asia to a local partner. talks to sell off the chain and offload the 80% stake in the venture. a hong kong billionaire who owns of the rest of the venture.

it could value toys "r" us asia at more than $1 billion and lead to an ipo in one or two years. dave: let's have a look at lenovo. it seems for investors the company does not compute anymore. 2/3 of the rally since hitting a high in 2015. it was cheapest among the world's largest computer makers. if youl among analysts, don't have the stock, don't you dare touch it. edwin, i remember when i was a student in china 13 years ago thevo had recently bought computer business, much fanfare. how the mighty have a fallen. edwin: that acquisition really made waves. imagine a chinese computer maker 13 years ago buying one of the

largest global operations at that time. and from the blue itself. -- big blue itself. china'sbig bearer of overseas drive. but it has been in a rut. we have seen the stock price drop. to current pain is a failure have signature acquisitions. this time it is commodity services. haslinda: we have seen a lot of missteps from this company, any sign to change it all? this: about a month ago, legendary chinese businessman, the one who built lenovo into the pc empire it is today admitted, yes, we made a series of mistakes.

i myself have made mistakes. but in terms of solutions, it was not articulated the public markets. they are still intent on reviving the motorola band -- brand. at one point it was the third-largest smart phone maker, but it has slipped from site. -- sight. the want to re-energize brand in the u.s. and emerging markets. i think they are trying to tighten up on sales execution while still controlling costs. we continue to track that space, thank you so much. china heading into the break continues to be in the red. we know that pmi data disappointed. even when you take into account the lunar new year holiday, optimism about xi jinping's

leadership. we continue to track the shanghai, 1.3%. more to come. this is bloomberg. ♪

♪ 11:30da: it is almost here in the lion city. we are in the middle of the trading week. 35.39.much flat, the rest of asia in the bad. considering, that is not too bad. dave: in hong kong, take a look at the developing story. we are getting lines right now. 130 billion hong kong dollars is the expected surplus. they are commenting on the housing supply situation, that the tightness should ease at some point. 700 pointsy index is 40,000 on that,

level. i am david ingles here in hong kong. haslinda: i am haslinda amin here in the lion city. you are watching "bloomberg markets: asia." a quick check of the headlines with paul allen in sydney. >> more pressure on theresa may with lawmakers backing a call for closer e.u. ties after brexit. the result is essentially enough to wipe out the prime minister's slim majority and threaten her political survival. said to publish a draft brexit deal later said to reject many of her so-called red lines. ticking, time is passing, time is short. i am concerned there is not much time left between now and next autumn because it is in autumn, just a few months away, we need to reach an agreement with the united kingdom. british cabinet has

discussed the anticipated aramco ipo as part of agreements. london is among cities battling to host companies. they signaled they would sell 5% of aramco to raise $100 billion as part of the prince's plan to transform the kingdom and wean the economy off oil. president trump reached an informal deal with boeing for a new air force one. it would cost to $3.5 billion and sell the taxpayer $1.4 billion. it is not clear where the numbers come from. the president has long it criticized the cost of replacing the plane. reported to have used an illegally obtained brazilian passport to travel in the 1990's. two published pictures of passports issued by the embassy

in prague used by kim and his father. traveled under the name of joseph cragg. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. haslinda: thank you so much for that. let's move to the aviation space. falling, air asia are after news of the results. tony, good to have you with us. it market is unimpressed fell as much as 6.7%. what have you got to say to your investors? >> i think we have had a fantastic quarter. even in bloomberg when your reporting it, not really comparable numbers. we consolidated in 2017 and the comparable number is in the

performer. markets were up substantially in the fourth quarter. the net was up. what i am most proud about was all of our associates, including india, made a profit. we are really happy with the year and looking good for 2018. i think the market will digest of the numbers. we just continue to deliver results and that will be reflected in the price. forward, theng leasing company, leasing unit, how much is being sold? what is the state of that, who are the final bidders, how close are you? tony: we had an excellent meeting with the board yesterday. i don't want to comment any more an announcement will be made in due course.

i promised by the end of march it would be sold and i am sticking to that announcement. i would rather wait for the announcement when it comes out, which is fairly soon. haslinda: how many bidders have you had? at one point five bidders. it is down to two now. tony, david here in hong kong. i wanted to ask you. when you look at the headline figure, i will give you a chance to clarify -- what you are saying is, the headline figure does not compare apples to apples. could you clarify for us? tony: correct. the number in 2016 the number we had the report was just the malaysian operation. in 2017 we have a consolidated number with indonesia.

the stock listing requirement does not allow us to put a performer into 2016. dave: so that is clarified, fair enough. some analysts have come out, i imagine they can distinguish apples to apples. what they are saying is, when you fully into indonesia and the philippines, i am quoting an analyst, they are looking at an estimate cut to the overall figure by 5%. care to comment on that? tony: no. 23% on netwe are up operation numbers. if you take out all the one offs, we are still up 13%, 14%. we had an excellent quarter, so did indonesia. we are pushing ahead with of the ipo of the philippines and talking to the regulators as we speak. haslinda: you talked about the

possibility -- i am going to jump in here. you we talked in davos, talked about the possibility of buying more planes, but not yet. what might you consider? what type of planes, and when will you come to that decision? we took in about 30 planes last year. 24 into operation. the last six coming in now. we are looking at another 30 aircraft. we are growing at quite a big pace. we have been slow the past few years. for the first time in our history, all of our associates are -- from india to japan. if you look at our order book, we only have 100 additional planes on the 320 and another 100 planes on the 321. we selloff all our existing planes we still have 200.

i don't think an order will be put in this year. haslinda: no decision on which aircraft. what would make sense? tony: right now with the way airports are going, we are at 80 -- 88%. it is getting more difficult catch-up,orts play like china and india. we like that that are there planes -- that the larger , -- thelike that 321 321, those are the kinds of aircraft we are looking at. final question you mentioned the philippine ipo. what is the timetable for that? you mentioned china. what is the update on your entry there? tony: we are looking at china

first. we are bidding off many options, many different partners. it is looking more and more interesting every week. the options are to try to merge with an existing player. we are working on that pretty carefully. it is becoming more interesting. in the philippines we have to meet with regulators and make sure we have the right profit forecast, etc. we were focused on indonesia, but putting all guns on the philippines. shouldsame time, airasia have our structure approved by authorities and enable us to move toward consolidation. dave: tony, appreciate you coming on the program. moment.own 5% at the let's pivot back to hong kong,

where the developing story is the budget. we're just getting lines right now. live pictures of the finance minister continuing to speak. 50 billion hong kong dollars for tech. i would call it the tech innovation fund. let's get more on this story. we are joined on this set to flesh out what we know so far. let's start with you, what stands out so far? >> as a someone who follows property closely, it is striking to me how much of the surplus was fueled by higher staff thees and land sales, accelerated land sales and prices being paid for land. one of the cautionary notes that was struck was secretary chen talking about rising interest rates and the pressure it might put on mortgages and people's

ability to pay mortgages going forward. that is one of the themes one will be looking out for as we are on a rising interest rate projector he. we were talking on bloomberg radio and looking at eight surplus, 21 billion or so. i think it is at 17 billion right now, if my math is correct. >> that is about right. dave: anything that stands out to you? 138 billion hong kong dollars, i would not say no to that. we are still looking for specifics on how they will spend that surplus. a big chunk will go to attack and innovation. he says 40% of the surplus will go back to hong kong the citizens. dave: in what form? eric: we do not know yet. we discussed the run-up of the budget, looking specifically for

spending for targeted tax incentives for individual groups, particularly highlighted, the middle class. he highlighted middle-class, senior citizens, youth, students. specific groups. i don't think we will see across the board cuts, but more targeted things. dave: we don't know if that handout will tweak allowances for taxes. they are getting a lot more of the surplus from property. can i take it that it is not in their best interest that property prices fall? sree: that would stand to reason. however, there have been higher and higher property prices. affordability is a very key issue. world'sg is one of the least affordable cities when it comes to housing prices. it is not a record the leaders are proud of.

there is rising wealth inequality. as eric pointed out, there is a bigger pressure to keep some groups happier and help them either improve -- help them improve their quality of life. dave: a wealthy city, but inequality is something to think about. thank you, talking about the hong kong budget. indian markets open up two minutes from now. looks like we will get the kleins when the cash markets open up. stay with us. this is bloomberg. ♪

morning, toood viewers just joining us now, not just out of mumbai. chances are we will get declines at the open. we are looking at the gdp print

coming out 8:00 p.m. hong kong time tonight, just to clarify the time snap. 7% is what we are expecting out of the economy. talk and preview the number, where they expect it to go and the challenges for india. meantime, the open is upon us. here is sophie kamaruddin. >> along with the gdp data, we have the hang seng data due in just over an hour. against more positivity what we heard from china, japan. today, india's gdp report. stocks sliding a second day. all industry groups in the red. let's take a look at indian banks. the government is asking lenders to review bad loans. above the 500 million rupees for fraud. punjab national sliding.

another under pressure, although it had no exposure to the narendra modi group. health care -- fortis health care undergoing its own fraud issues. the biggestrgoing drop since november 2016. indiagoldman is saying does not deserve to underperform like this. why? >> they are seeing the economy of india surging ahead in earnings. that is suggesting domestic strength and government spending is encouraging. seeing foreign outflows, over $1 billion a month to date, those are not warranted. haslinda: looking at the rupee, quite a month. more pain ahead? >> yes, it has been a punishing month. the rupee has depreciated 2%. that is the line in blue on this chart.

we do have the widening trade deficit as well as capital outflows amid that bank fraud thatal, weighing on currency. forecasting 65.50 by then. seeing some of the wind out of the sails for the rupee. but he believes below 63 will be reinstated on the horizon. haslinda: we have vishnu here with us, head of economics and strategy for more on his outlook on india. we are talking about the rupee. 66?re looking at 65, >> yes. and we think 67, 68 cannot be ruled out. we think the rupee will underperform most asian

currencies, that is our central take. it is broadly a function of the dollar, as well. the dollar can overrule quite a few of these moves. the main reason the rupee will continue to underperform, it has entered the anti-goldilocks mode. and the three bears will be twinned deficits, rising inflation. these are exacerbated by oil. the last is a little risks. how they want the play into this in the state and general elections next year. and how they maintain consumption. but whatever happens to the rupee, the r.b.i. can come to the rescue, right? it will stop the rupee from having a steep decline. vishnu: yes. this is the one thing that will make sure it is not deja vu of 2013. nonetheless, a correction is

due. we ran results against the real effective exchange rates. it shows the rupee can collect a little further down. we maintain it will underperform, but not going to be a full blowout, fragile five scenario we saw in 2013. haslinda: i want to pivot to gdp. modi has been struggling to jumpstart the economy. what else can he do? i think he has done the most he can. a record amount of spending, but it is still not attracting foreign investment. vishnu: that would rely on more things falling into place first. it is a great policy to have. but not gaining traction yet. it allows supply chain linkages to come about with less hassle. we also have a major reforms around land and labor that need to be figured out. the scandals do not help.

we will see what comes out of this. in if they gain the majority 2019, some positive momentum will come back into the economy. dave: vishnu, david here in hong kong. your estimate is 7.2%. for the whole year, let's look at the floor for growth. we have politics in the forefront, elections next year, and problems in the banking system continuing. what is the worst case scenario according to your models? vishnu: we are looking at a situation where the fiscal deficit could rise by another 0.5%. that will drag on growth because it will take away from discretionary income. we are forecasting the fiscal 2018 7.5%.ng april that could drop back to 6.8% if oil has a better outcome.

-- a bad outcome. dave: you have a bigger budget deficit, which tells me the government needs to raise money. do foreign investors have to be concerned the government will need to spend more money in terms of debt servicing? vishnu: there is a big concern. it does take a lot from the budget. deficit. of the it is certainly a concern. as we may extrapolate, rising yields are not the reason for carry trade's to support the rupee. rising yields are reflecting risks. that is something we want to watch out for. if that continues, we could see equity market selloffs, which will not be good for the rupee in the near term. fiscal consolidation needs to stay intact. hoping oil does

not give them a bad hand this year. fingers are crossed, you don't see them on tv, they are in my lap. plenty of eco-data ahead. traders keeping busy over the next few days. in addition, malaysia set to -- releaselation inflation figures at 3:00 p.m. today. it is expected to grow two point 8%, the slowest pace in more than 12 months. thursday, the latest trade balance. the country's trade minister in washington to appeal feel tariffs and set up talks to amend bilateral trade deals. dave: before the weekends, inflation, jobs data out of japan, that comes after reporting a fairly bad industrial output number earlier this morning. we look forward to that and whether the boj is getting closer or further are the same

distance from that all-important inflation target. of course, if you are a bloomberg subscriber you can catch up with all our interviews using our interactive function, that is tv . join the conversation, send us instant messages to our team or guests during live shows. this is bloomberg. ♪

♪ haslinda: this is "bloomberg markets: asia." i am haslinda amin. dave: i am david inglis. let's be you a quick market check, things we are watching in hong kong. the benchmark, there we go as we go into the lunch break. continuing to digest the details coming out. paul mentioning the budget. small and unexpected budget surplus. we are headed to session.

i will blame the budget, seeing as it is only happening to hong kong. energy down as a group. i.t. down 2.6%. fairly heavy pressure, 800 points to the downside on the hang seng. speaking of financials, let's split the board and have a look at hopefully good earnings coming out. company, the operator of the exchanges here, down 1.4%. to volumes were ok last quarter, but not ok right now. it is not expected to reflect last quarter's numbers. final -- sinoland down. casinos down 0.33%. lots more to look forward to, data across the region. haslinda: not just of those

companies. we are keeping and i on noble. -- eye on noble. we are looking at $1.9 billion in losses. investors are not happy. one key investor came out to say they are bleeding cash. that company is not doing well. they have been surviving -- fighting for survival for a long time. people are asking if it has a viable commodities business. that is one to watch, noble, in singapore. good that you brought it up. the core business is not doing well. you can imagine the creditors, the last priority in that list. not happy with what is happening here. haslinda: that is right, just looking ahead, testimony coming up thursday. this has been "bloomberg markets: asia."

stay with us. this is bloomberg. ♪

alisa: i'm alisa parenti in washington, and you are watching "bloomberg technology." here is a check of your first word news. president trump has named digital strategist brad parscale as his campaign manager for his reelection bid in 2020. e was key to parscal the campaign's digital operations in 2016. several lawmakers last year asked for information related to his work for trump, saying his firm had not turned over documents related to russian contacts or wikileaks. president trump's advisor and son-in-law jared kushner has had his security clearance downgraded. that is according to politico. kushner reportedly was not singled out. other white house aides also saw