tv Bloomberg Markets Asia Bloomberg June 20, 2018 10:00pm-11:00pm EDT
we will have to get our teeth into chinese markets, trading market at -- water at the moment. zte, andtion on donald trump meeting republican senators there. they went in opposite directions in the session wednesday. looking at where it might be trading and getting a valuation. trading day getting underway in indonesia, a rough time of it yesterday. it was playing catch-up. >> that rough time may be subsiding for jakarta stocks. asian stocks are looking mixed but edging higher, aussie stocks gaining at decade highs, rising over 1% so far this morning. is anst be is -- cospi outlier among benchmarks.
year, the nationals are the biggest laggards and samsung has eased earlier gains in seoul. rating forrading its the first time in 13 years and asian tech shares aren't doing too badly. chip stocks being helped along by macron's bullish forecast. manila stocks are slipping, entering bear market territory, even after the central bank signaled more rate hikes would be ahead. the gauge has fallen its lowest since march 2017 and set for a sixth straight day of decline. rishaad: thank you, for that. looking at other movement, in spite of all of these, we haven't had to move into havens like old. gold continues to decline.
oil, heading in opposite directions ahead of the opec meeting coming o starting friday in vienna. the u.s. threat to impose tariffs on another $200 billion could cut theorts nation's capital met growth. the first round of tariffs on $50 billion worth of chinese goods could lower gdp growth by 1/10 of a percent. chinese policymakers have signaled they will intervene to prevent volatility in financial markets. the european union triggering the first phase of retaliation against the u.s. over metal and -- tariffs. duties on more than $3 billion includingroduct, kentucky bourbon, harley davidson's, and levi jeans. the countermeasures would he -- hit key constituencies ahead of midterms. fended off aas
rebellion from within her own party to win a crucial brexit vote. may shouldas over have the power to take the u.k. out of the eu without a deal. the rebels wanted parliament to have a meaningful vote on the way forward. brussels fears the uncertainty of the "brexit soap opera." opec ministers have been working behind closed doors. crude industries falling last week i more than double the average estimate and if opec prepares to meet in the austrian capital, ukrainian ministers have indicated they are moving closer to an agreement on the state of supply caps. encouraged we are moving not only stakeholders within the oil industry, companies, but also our constituents. everyday, all day, we
also have tictoc on twitter. 2700 journalists working in 120 countries. rupee isndonesia, the online after just over a week. it is had a torrid time this year and now. >> it is. the rupee coming online lower, falling as much as 1% this morning and among the worst performers in asia year-to-date. certainly a head scratcher for the central bank and policymakers. i want to highlight the philippine peso, gaining ground. hiked rates, but saying that is not enough. this is treasury yields, picking up and therefore, eroding the assets.een for emerging
we have seen the dollar trading around 11.88, the bloomberg dollar index. keep an eye on that. has we are talking about foreign exchange, let's bring in the senior fx strategist at commonwealth bank of australia. tell us what your view is on the dollar and dollar strength. is it set to continue as some have suggested or others have said this is the peak of it? you >> -- >> there is upside risk to the u.s. dollar, influenced by two current themes driving the markets. first, this reemergence in monetary policy divergence that has now moved in favor of the u.s. dollar. fomc has, the fed or suggested they will raise rates to more times this year and probably three more times in
2019. in contrast, other centralks like the ecb, rba who are apparently in no rush to remove monetary policy, nation -- accommodation. generate upside risk for the u.s. dollar. the second theme supportive of the u.s. dollar is escalation in trade tension. that is a major headwind to global economic activity, largely because it impacts negatively economic and investor sentiment. it will also disrupt global supply chain. all of these are headwinds to global growth and i add to that the rising financial tension in emerging markets. all of these are major headwinds to global economic activity, and it is usually an environment where the u.s. dollar can potentially do well. we come to that team
about emerging markets, as well, but i want to focus on the monetary policy divergence one and you suggest we have these rates differentials playing out in the dollars favor. but the bank of england, no change expected there. wel us what happens because have central banks going in very different directions and we could see a rate hike from the u.k. sooner than the others. yeah, for the time being the interest rate normalization process that has been started by the bank of england is intact. we still expect the bank of england to raise rates in november, but the risk is the rate hike cycle, the interest rate normalization cycle for the bank of england will probably be more drawn out because of brexit uncertainty largely, that has --t a bit of doubt essentially a drag to u.k. economic growth. this has potential risk for a further delay and more rate
hikes from the bank of england and continues to play the monetary policy divergence thing that is favoring the u.s. dollar. let's look at where you are at the moment. australia, should i buy my dollars now or in three weeks? my aussie dollar's? -- dollars? elias: it is difficult on stage to give you a two-week forecast. it -- ittell me about seems the aussie dollar keeps getting weaker and weaker. when will it hit some resistance? we have been fairly positive on the australian dollar. pillars of our constructive aussie dollar view is the fact we expect and still expect a weaker u.s. dollar. we are still constructive on the global growth outlook. australia has a balance of payment backdrop.
finance by net foreign direct link -- investment. these four factors that have been the pillars of our positive aussie dollar view, two factors have started to move a little against us. the first one is our view for a weaker u.s. dollar. right now, the risk has shifted the other way because of the relative monetary policy divergence thing. the risk, at least our view regarding constructive global growth outlook, the risk has now favored a bit of a slowdown in global growth because of trade tension and escalating financial market tension in emerging markets. rishaad: and that is what we will be talking about next. , senior fxd strategist at commonwealth bank of australia. we also chat with neil slater from aberdeen stander.
rishaad: you are back with bloomberg markets as we look at trade tensions. also dominating central banks centralnel in portugal, bankers warning escalating international trade tensions have damaged confidence among companies threatening ultimately global economic expansion. the effect on business investment, what is the effect on exports? what is the effect on consumer confidence? think there have been less in the past and they are all very
negative. -- lessons from the past and they have all been very negative. >> for the first time, we're hearing about decisions to postpone investments and decisions. >> one thing that is happening that is disturbing, can any of us think of a country that has made itself wealthier and boosted productivity growth by building walls? probably not. willy hope this escalation so theinded and normal trading relationship between u.s. and china would prevail. we're hearing that trade tensions could hit investments in an exclusive interview. it is in their interest to find a solution. obviously, hard to predict at
this point. market participants are watching closely but to the degree it escalated more significantly, it would be bad for china and the u.s. my hope would be the rhetoric gets put aside and over time, worksonstructive solution through. i am watching this and we will have to see how it plays out. >> what are you getting from your chinese clients? the top of their list of concerns? >> everybody is talking about it and the implications of a trade war would be on market activity, investment, implications in china and four u.s. clients. people are watching it and interested in seeing how this unfolds. everyone is hopeful because the relationship is so important that there will be a constructive solution. >> we heard yesterday that this is more of a negotiating tactic, perhaps from the white house and they -- either both sides will not be conducting usual suicides
here. david: it is in the interest of both parties to find a constructive solution. fact is referring to the that if people do what is economically in their medium and long-term interests, we should get a solution. >> how concerned are you this could spill into financial services? we know about the big bang reforms chinak has made about joint ownership of ventures. you have a 33% stake in a chinese company. you would like to get to 51% and in three years come up to 100%. do you think there is potential for this happening? we are encouraged by the messages around opening up and moving forward on the basis that is something we will accomplish over time. we continue to invest in our business here. we see the opportunities in china to be significant. partner higher in
our investment banking business in china. we continue to grow our business. we have been here for a while, we will be here for a long time. in a broader perspective, we are confident this will move forward appropriately. and ceo the president david solomon speaking with stephen engle. ,et's get back to elias haddad commonwealth bank senior fx strategist. how are central banks looking at trade right now? how do they position themselves with regard to trade and how they can mitigate some of the worst aspects and fallout from this full-blown trade war? that is actually the common theme that essentially came out of the central bank conference in portugal. all of the central bankers,
whether jay powell, draghi, kuroda, their main concern at this stage is about escalating trade tension. there hasn't been any hard data showing at this stage it is already starting to negatively impact economic activity, but they are concerned if things really do deteriorate. it is important to remember these tariffs announced by the u.s. and china -- at this stage, the economic impact is fairly negligible, but it is the threat and the threat of more inward looking trade policy that is a major headwind to the global economic activity. rishaad: absolutely, and if you have a lessening of global economic activity, you have a lessening of trading activity -- fx trading activity. a dollar one which
actually gains on the back of it or the other way around? the imf on what higher currencies would mean came to the conclusion it would be dollar supportive because it would filter through higher willtion, meaning the fed probably have to raise rates faster than anticipated. it is also a lower current account deficit for the u.s.. it triggers a little bit of financial tension and that is an environment that is dollar important toit is step back and see what happens. year,the beginning of the how minimal the effect of those announced tariffs are so far. has so far announced tariffs on roughly $350 billion worth of chinese goods, and the chinese have replicated by
implementing 350 billion of u.s. goods. the size of the economy at this stage, it is really nothing. to go even deeper into the details, out of the $350 billion the u.s. is planning to impose, only $34 billion is expected to come into effect on the sixth of july. right now, it is a war of words rather than of action, but clearly, the environment is quite shaky on that front and that is a risk to global economic tech -- activity. we are really monitoring this. rishaad: elias haddad, commonwealth bank senior fx strategist. out
fox,oking to comcast. we will get a bloomberg scoop, next on the race for 21st century fox's entertainment assets. ♪
rishaad: this is bloomberg markets. i am rishaad salamat. disney is close to winning u.s. antitrust approval for a deal for 21st century fox is entertainment assets. it would create a potentially insurmountable hurdle for comcast, which the justice -- in two could weeks. joins us.bs tell us about this. david: as you mentioned, this is looking very insurmountable and a very strong bid. it answers a lot of questions. one of them had been what is the price they are willing to go over comcast? it is an increase in value and has the additional tax advantage in that investors could take up
to half of it in stock. that lowers the tax burden, which was a big concern mentioned by rupert murdoch. another advantage of this deal on disney's side is murdoch has talked fondly of the company and wanting his sons to be involved in that. that is another plus that hasn't been settled yet, but something that is out there as a benefit for this kind of deal. it is not a done deal yet. they had originally said they would meet with investors on july 10 to consider the previous disney offer. they said that is delayed. comcast does have some time, but if you are brian roberts, there is a lot of pressure. and was a very strong bid fox has already said they have agreed to it. there is a lot of momentum on their side. comcast will have to come back with something pretty big. comcast stilldoes have in its favor to counter the
disney bid? dave: well, they have a strong balance sheet. it has been a well-run company, they have been doing great. the share price hasn't necessarily reflect the data. analysts expect a cash bid to be north of $40, something like that. just come in with more money is their best bet to win this thing. their shares, having some kind of matching disney's share offer would not be a good position for them because as i said, their share price has been pretty weak coming into the deal. comcast, making this deal a little more come -- complicated. comcast is simultaneously bidding for sky, another fox related asset. an offer in for a long time to buy the shares of sky it doesn't already own. this is a big reorganization of the top, some of the biggest media assets in the world and
there is a lot of competition for those. brian roberts has his job cut out for him to figure out how to top the disney bid, especially when murdoch has said such great things about disney and wanting to work with disney. the company has already said it has agreed to the bid. moread: is disney's bid share-based, in which it becomes more tax efficient for murdoch? exactly. the initial bid was all shares and the new bid has come in and they are allowing investors to take up the 50-50. an investor can take up to 50% exchangeyour shares in for your shares and only 50% would be in the form of shares. that seems like an attractive way to have the difference. you still get a tax benefit for receiving shares and at the same time, you get some cash. quite a formidable play being made here. bob iger has put together a
strong package. but brian roberts knows what he is doing and had to anticipate this. i don't there was any expectation disney would say, you can have it, comcast. they knew this bid was coming and they are busily preparing a response. rishaad: we will leave things there. dave mccombs, bloomberg asia's conglomerates editor. an economist briefing taking place in beijing. these are live images and it is all about trade at the moment. china and the eu to hold a summit on june 25 in beijing. -- thats talking about china is really looking at the united states as using them as a scapegoat or its own problems, going on to say technology transfers between chinese and international markets are all market orientated, saying the chinese abuses tariffs and
rishaad: looking at markets, a mixed bag, but generally, we are up. a bit of we also have coverage from the ministry of commerce in beijing saying that the united states is using china as a scapegoat for its internal problems. sophie: we have stocks on the mainland turning positive. the yuan could be poised for a break above x50 -- 650.
manila as pse has entered bear market territory even after the central market raised hikes -- hiked rates. on course for the worst losing streak since may 23. sliding.h is the biggest sled since 2016 after resuming trade after the id holiday. -- still below the 74 handle. i want to check in with korean assets. you have the kospi on shaky ground. an ominous signal for global trade. readinghe second week
after the drop we saw in february. while stocks are falling, check n -- the koreanwa won. since again at the end of the day after moody of grated that credit rating for the first time in 13 years. rishaad: moving things along, paul allen has the first word headlines. say u.s.nomists tariffs on chinese imports could cut half a percentage point from the nation's growth. bio -- byower gdp .1%. reversed trump has course on the policy to separate children from parents who
crossed the u.s. border illegally. he signed an executive order. he has been under intense criticism from congress over the separations which saw about 2000 children placed in federal custody. >> we have to have strong borders, totally strong. we can't do with the nonsense. at the same time, we're doing it with compassion. i signed an executive order keeping families together. that is probably an important thing to be doing. i also think it's the right thing to do. but we haven't let up. has: australia's parliament passed the turnbull government tax cuts. the senate approved the bill after independent and populous cross vengeance -- crossed benches -- cross benches supported it. two thirds of the benefits will go to high-income earners.
the new zealand prime minister has entered an awkward hospital for the birth of her first child. she will be just the second world later to give birth while nfs -- while in office. she will take six weeks maternity leave. she has not revealed to the baby's gender. this is bloomberg. ♪ --global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ rishaad: let's look at what is going on in japan. growth and inflation below and -- below expectations. will this trigger a policy response or more of the same? byid english is standing with the menu may have an answer. see.: we will
there is lots to talk about. thank you for coming on the program what is the main talking point? >> japan is fascinating at the moment. a lot of discussion around key elements. corporate governance change, will it be impactful in the short to medium term? will allocation and impact continue in the low environment for institutions in japan. and lastly, the ongoing impact of boj actions and the lack of inflation. so there's lots to talk about in japan. looks like we will be stuck here for a while on the boj. in terms of the low rate environment, has anything changed? has that spurred anything? >> it has.
a low rate environment does two things. it impacts your rate of return and the present value of your liabilities. firstly, increasing asset allocation a rod from institutional investors. we have seen quite a bit of m&a activity in the last four to five years, especially from insurance companies as they seek diversification and ongoing growth. additionally, for even the retail investment in japan, there is focus from a -- from sure thatow can we be retail investors have the longevity of return for the retirement and for the children's education. there is a lot of focus on that domestic we as well. david: what are the opportunities now we look at the equity market? when you look at the benchmarks, the nikkei are the topix, they haven't gone anywhere. we have to look further down, small caps.
where do we look? >> we look at small-cap and large-cap here in japan. it is interesting on the small caps side. long-term holders have value. it is well flagged that japanese companies are holding a lot of cash at the moment. are they doing the right thing with that cash? are they reinvesting it appropriately? there are definitely some areas where we believe in the management is doing the right thing, thinking about the return on equity and making the right investment decisions. you see some of those companies may be off shoring some of the less value add work and keeping the high end, especially technology, onshore in japan. in the medium to long-term, that will provide value for investors. david: are they investing it in japan? one of the comments we get a lot from outside investors looking at japan is what is the long-term bull case.
aging population and you have a lot of japanese corporate sitting on cash but a lot of room for growth. with eisai is a counterargument to that? >> the counterargument has been going on for years. when you look at that from a macro perspective, i understand u would think that. you look at some of the fundamentals. going. a lot of corporate governance changes happening. that will not happen overnight. but over the medium turn, focus on return on investment and honestly, our companies in the right thing? , and equities perspective, -- on the equities perspective, you see a lot of international investors who come here for diversification. interest froming global investors. i think the story at the moment ,round the governance change
around immigration, which is increa he japan as well, and over the medium-term is providing some confidence of the market. david: what is the conference -- the conversation on immigration since you bring it up? are we still a way away from opening the floodgates? you look at the demographics are, the worst in the world. >> it is an interesting -- you look at the demographics here, the worst in the world. >> it is an interesting subject. around tokyo and some of the official numbers, there has been a significant increase in key areas around retail and health care, some of the really core leverage we see in the market. that will not change overnight. but it's the start of something. there is a lot happening here now. start building up to things.
-- generically, think we are coming to a tipping point in japan in the next up of years. david: arthur -- are things building up simple because of the doj? is there enough momentum for this to continue? obviously, the zero to negative rate environment is impacting everything. --you look at the 10-urate 10-year rate, that will always impact diversification abroad. was pushing week out to another five years the fiscal aspects. there's more to it than that. that has a huge impact, of course. but that is well known. what else is going on is this change around how japanese
copies operate, how they are thinking how they are -- david: how will that change? >> there is a recognition, by -- ir executives in japan bumped into a senior executive earlier and he was saying, look, things are changing. things are definitely changing on the ground. not dramatically, not quickly, but there is a sense, whether it is corporate governance, allocations, return on equity, there is a collective process going on here with the japan. david: fascinating insights. thank you so much. a lot of ideas here that we don't normally here. that's why we are here on the ground. back to you. rishaa: thank you very much -- rishaad: thank you very much for that. coming up, opec inching closer to a deal.
rishaad: this is bloomberg markets. we are heading into this big bloomberg markets indiana. vienna. lift oilikely to supplies? if so, by how much? it will not be as much of the saudis and the russians wanted. >> the crucial point is how much. russia'sde, you have saudi who think it is 1.5 -- russia ands saudi who think it is 1.5 million barrels.
key point here is, if you look at production of opec in may production, it is $1.2 million per day lower than production levels in 2016. essentially, opec is under supply in the market by about a million barrels. they need to increase that supply. rishaad: we have been talking about a glut for ages. an increase in supplies will play out how in the oil price? >> the market is not in a deficit per se. they are all pointing to inventories building up. but there is building a risk of supply in the next 12 to 15 months. 700,000ill drop another barrels in the next 15 months.
u.s. sanctions can again, four months from now, you're looking at a risk of about one million barrels per day of supply being withdrawn from the market over the next 12 to 15 months. doing is trying to counterbalance that supply for the next 15 months. rishaad: you can imagine why iran is getting annoyed about that. tell me about the trade war. how does it impact energy markets? >> trade war is risk on consumption. you would see probably gdp growth rates slowdown internal in the u.s.. that could impact oil consumption of energy. we are talking about the supply market story. then we go with a demand market story. having said that, you could see
flows moving around, between u.s. and china, try to find other markets. of. exporting large volumes crude and gas these days and it will only increase in the next few orders. those have to find a new market. the u.s. will probably be able to do that because they're crude is lighter and sweeter and there is demand for that. china loses out on that. growing marketst by volume. they have to find other markets for their own resources. the real risk is consumption slowing down. rishaad: think you so much. let's move from oil to the soft commodities and look at some of the farm commodities on china's hit list. china is the world's biggest consumer of soybeans.
cb: we have already seen a slight shift. they are buying big volumes of brazilian soybeans and shunning the u.s. in the last couple of months. we expect to see premiums rise for the next few months. we are anticipating china to --tinue buying from his oh from brazil, a lot lighter than they normally would. soybean tariff had been flagged in late march. they have been able to prepare themselves a little bit. the big question is what happens in the fourth quarter when brazilian supplies run out and typically china
stops by a from the u.s.. rishaad: this is typically to do with soybeans and how effectively demand from the u.s. into china has fallen off a cliff recently. this is what has happened. when this sort of started toward the end of march, the amount of soybeans shipped from america have been falling and falling until virtually nothing. this would be a boon to producers outside of the u.s. brazil is the main one. phoebe: brazil is the obvious winner this time of year. it has a decent harvest and a lot of supply in the market. it is easy to send it over to china. other south american producers would predict -- would benefit. into the year, the fourth quarter is typically when the u.s. has quite plentiful supply.
if you are not lying from the u.s., who in the northern hemisphere could you buy it from? we expect some of the smaller producers, like canada or even russia to increase their shipments. rishaad: what about commodities in the south side of things. phoebe: soybeans is the big-ticket item. some of the other grains markets like corn and wheat, the u.s. does send those grains to china, but when you compare them to soybeans, there is real know -- there is really no comparison. -- quitequite fluent plentiful and easy to source from other locations. since march, the soybean market has been very nervous. the next deadline looming for markets is july 6. in the leader, will there be any
softening to the rhetoric? will they follow through with that? sincesee the big jumps the announcements were initially made. we will have to and see what happens in july. rishaad: thank you so much, just got to get you to some of the business flash headlines. such a bank has agreed to pay $205 million to settle in new york investigation of its foreign exchange trading. finedn regulators have in malan. the longest bond in india is a three-year. it yields 1.5.
this narrative has taken a 180 this year from the first quarter when we were talking about tightening. my chart is throwing up more smoke signals. stocks and bonds tend to move in the same direction. consider this. in bonds, they are off to the worst in history as you can see by this diving blue line. 5.5%, the light in weight. -- the line in white. is looking like a very sorry picture. i presented this to you as a winner for the battle of the charts. [laughter] rishaad: we will see what
haslinda has. haslinda: i will keep it simple. i will stay with e.m.. trend -- thed the bot bucked the trend. let's show you this particular chart. the blet's show you this particr -- thailand has a few things going for it. billion, a large current account surplus. so no need for tightening despite rising rates in the u.s.. not an issue for the thai economy. the land of smiles continues to smile. its growth forecast continues to bahtase, the weaker boosting exports.
forget about the noises from the u.s. as well as china. sophie: she has as many elements in her chart as mine in [laughter] haslinda: mine is a positive story. rishaad: i'm going to give it to has. a bit of news coming through. sayingi bank governor baht moves with economic fundamentals. haslinda taking away all the glory today. if you want to see all the stress again, just type gtv .