tv Bloomberg Markets Asia Bloomberg November 4, 2021 10:00pm-11:00pm EDT
for more oil. what a week, right? you can even see a little bit of that today after we heard from the boe. a shock, shock announcement. david: absolutely. the third biggest drop on a net basis point basis. going back the last 10 years. >> i think, as you can tell from the commentary we made, the direction might be somewhat overdone, but it might be a bit of a candid view.
david: certainly the conversation this week, it's friday, so let's wrap things up. there is an inflation part to the hawkish and us -- hawkishness around markets. i think central banks are saying wait a minute, don't move too quickly. in terms of real inflation, wage inflation to be adjusted for the high inflation we are seeing now, also below historical averages, up about 1%. there is some basis on why they are pushing back. ivanka: and inflation is not a concern according to jay powell. still a lot of questions about what he meant by maximum employment as well and one of the conditions that they need to meet here to raise rates as well. a lot to look at just beyond this headline we are going to get on friday. we are watching oil markets as
well, seeing a little bit of relief and reversing some of the declines we saw post-opec-plus. they stuck to their guns, essentially, saying they are not going to outpace output. that seem to be a disappointment first. a lot of questions on what this means and what the u.s. will do to fill in the gap when it comes to supply shortages out there. david: ed morris will be coming in as a city. in the meantime, the other big story we are tracking is kaisa and their trade suspended in hong kong. you are looking at substantial volume coming through during that selloff. record lows, and we are also trading at 15% net liquidation value. yvonne: for the latest, let's bring in our chief north asia correspondent.
stephen: all the group shares are suspended today after we learned yesterday that they missed payments on their wealth management products, which are on shore liability. kaisa, of course, came into our focus as the first chinese developer to default in 2015. they have become among chinese developers the third biggest borrower in the dollar bond market, so they have about $11 billion of bonds outstanding, dollar bonds outstanding, so this is, you know, another sign of the issues that are plaguing some of these midtier developers, and they did put out a statement saying yesterday the company has faced unprecedented pressure on its liquidity due to these unfavorable factors we have been talking about for so long now, such as credit rating downgrade and a challenging property market environment, to
say the least. media in china is saying that they missed about 2 billion -- 2 million -- let me get my numbers correct here -- 12 point billion yuan, two billion u.s. dollars in principal and interest. if they are not paying their onshore liabilities, which is a priority of the government for these developers, what does that mean for their dollar bondholders with those $11 billion in dollar bonds out there? david: we are fairly familiar -- i won't say we are super familiar. give us the significance, though. is it simply the company, or does it represent the whack-a-mole that we are trying to follow which property developer is coming under stress? stephen: are you talking about
evergrande are -- or kai? davidsa -- or kaisa? : talking about kaisa. stephen: it is hard to keep track. it is the third biggest offshore debt issuer, and that definitely and as we are seeing in the markets right now -- this is a significant risk not only to the real estate industry but a symptom of the problems in the industry and something that chinese authorities will obviously be taking a very close look at.
yvonne: when it comes to evergrande, it seems like bondholders are taking a look. stephen: there's a few marinas in hong kong. a yacht that is in name at least owned by the founder, but he has a lot of different, you know -- i guess his finger in many different pies as far as the intricate, confusing web of joint ventures and affiliates, and tracking his paper trail, we know government affiliates would like to see him did into his personal fortune to pay off some of these liabilities. it would be a dent because of the amount of liability. i'm not sure he has hundreds of billions of dollars at his disposal, but again, his holdings in evergrande are through a british virgin islands company, so it is a bit opaque as far as how much wealth he actually has. we know he was paying about $7 billion in dividends in the
company since it went public. he has also out laid within $3.3 billion, not only in company shares but in bonds. not just a yacht but three private jets worth more than $300 million. two houses on the peak. you know the peak. it is not cheap property. that combined worth about 208 million u.s. dollars. these are things that i'm sure the chinese government would say, offload these things. yvonne: in terms of what is next, we have some coupon payments coming up for evergrande next week. stephen: that's right. that's my everything is in focus right now. again, the d-days keep shifting day by day, week by week. david: very quickly, it has
obviously been a terrible last few weeks for high yield. when you look at performance on a weekly basis, virtually every week with the exception of one week in june. when you look, the market has started to distinguish between developers. we are looking at the 12 biggest real estate, if it's commercial, industrial, or real estate in china, and we are looking at price-to-book. you will notice the dispersion between those the market thinks are healthy, and we are getting some valuations as far as book value is concerned at about -- there we go. an increase of 1.6. all the way down to evergrande, which has dropped about -- dropped to about 10% of net valuations. vonnie quinn is in new york with your first word news. vonnie: president xi jinping says china is open to discussing
trade with the united states. he says china will take an open attitude to talks on issues such as the digital economy, trade, and the environment. he also mentioned policies aimed at boosting imports. a london court has allowed malaysia to continue its sovereign wealth fund. malaysia's government challenged the arbitration settlement between the two sides in the u.k. the london case is one of a series of legal and regulatory investigations around the world linked to 1mdb. the biden administration has mandated covid-19 vaccinations for all staff for companies with 100 or more employees. under the federal rule, workers must be fully vaccinated by january 4 or submit to weekly testing.
employers that do not enforce the rule face fines. about 18% -- 80% of u.s. adult have received at least one shot. david: let's tell you what is coming up in the show. come on, guys. i did not put my lipstick on today, nor did i brush my teeth. the chief head of global commodities research at citigroup joins us to talk about opec output driving prices higher. yvonne: it was a nice shot. then have a financial sector can help this push toward renewable energy. this is bloomberg. ♪
>> we have records to show comparing us [indiscernible] responsive regulators to a market that needs to be regulated. yvonne: responsive regulator of a market. oil is not the problem. it is really the havoc and hell in energy prices. the saudi energy minister speaking after that opec-plus meeting, really rejecting what the u.s. really wanted. david: you could try to put a ceiling somewhat on the prices. high inflation obviously is the unspoken elephant in the room as it pertains to the conversation. joining us is the head of commodities research at citigroup. let me start off getting your
initial thoughts. was it a political statement or a statement of economic reality? >> it was a political statement and a statement they have sustained for the last few months. three months ago, turning back, they would have said, "we are the central bank of the oil markets. we are going to be providing liquidity when it needs it," and now all of a sudden, the argument is we are going to regulate.it is a combination ofy funny factors, the funniest of which in a way is that they did what the u.s. and china and japan and india did not want them to do. they helped steady the output and prices went down, not up. yvonne: what does it mean when it comes to, first of all, demand? when do you expect demand to start peeking?
>> it depends on what you mean by peaking. opec last week said demand was going to be very slow in growing. we got the pandemic ahead of us. actually, the reverse is probably more true. we are seeing an uptick in demand, particularly in air travel, particularly starting in november. you just have to look at what airlines have scheduled that they were not scheduling in october, and the recovery from the pandemic has been quite robust. we think demand has been about one to one. we think it will be lower next year, but still pretty high. demand is not really the ultimate issue. the ultimate issue in the longer run might be demand, but the ultimate issue in the short run is the balance between supply and demand, and the world is really drawing down inventory, so they are at a very low level and we expect prices to continue to rise in the fourth quarter get to a high level after
whatever the financial sector has done. david: your outlook has been on prices, and i also wanted to get your thoughts on if we do get to the point where the world needs more oil, can this opec-plus have the capacity to get that oil to the markets equitably across their members? >> it depends what you mean by equitably. the majority of members cannot meet their quota. they have lost production capacity. there are just a few countries that can expand, but they can expand a lot. saudi arabia, uae, russia -- they all have an ability not to grow by 5 million barrels overnight, but certainly 3 million, 3.5 million barrel a day range. the next thing we think will be a big surprise upward, including from the u.s. opec has been in many ways given its position by the very sharp
decline in u.s. drilling and in u.s. production, but u.s. production is ramping up, and it will be bigger in terms of growth next year than anything we think we will see from any individual opec member. yvonne: it brings the next question, what the u.s. can do. they talked about how the consequences of opec not ramping up output could lead to applications for the global economy, but in terms of the u.s. perspective, there is that likelihood now of them tapping into their oil stocks. how likely is that, and what sort of precedent does that suggest? >> i'm not sure what kind of precedent it sets. there have been republican and democratic administrations in many periods of time that gasoline prices were rising. this is an embarrassing moment for the u.s. government. the u.s. government under the
biden administration, which has been not looking up fossil fuels. we had u.s. production falling from 13 million barrels a day on down, but if we look at what is really happening on now, production in the u.s. has gone back to pre-pandemic levels in the permian. it is producing as much as it ever has, and we think it is on the verge of a big explosion, for lack of a better word, on production going into next year. we think while the u.s. production went from 13 million barrels a day of just crude oil into if you exclude natural gas liquids and a bunch of other things, down to below 11 million at one period of time, they are back to 11.5, 11 .6 million barrels a day. we think production is going to grow by one point 4 million barrels a day at a minimum next year.
ironically, i think if we look forward to a year from now, the issue will be what opec is going to do, and if it is going to be restraining production again to fight what otherwise might be a $20 lower price. david: it brings to mind also cop 26 and the reminder that maybe we have not invested enough in oil or maybe we shifted away too quickly without a sort of reliable plan b. we are getting lines with asian countries coming out with gdp numbers. i'm wondering, as we almost close out a banner year for oil and energy producers in general, where do you think they will use all that profit? >> you touched on a bunch of interesting topics. one of them is the energy transition. certainly, this has been one of the things that the opec leader
said. europe has sworn off of fossil fuels, and who are these people, they think -- who are these people to complain about there being tight markets when they are the ones who have gotten rid of their ability to use fossil fuels and power generation? they are the ones saying we have got to get off of it? there is tension built in here between producers of oil and gas and the biggest importers of oil and gas. the movement at cop 26 right now, energy has been a fairly critical issue. the other question you raised is what are companies going to do about the prophets they are now having? you did not say it exactly, but oil was at the bottom of the s&p 500 a year ago and now has risen
higher than any other sector in the s&p 500. oil is the darling of the investment community despite what people are saying about the anti-fossil fuel movement. what are they going to do with this? certainly, they are going to retire debt. certainly the bigger the company is, they are going to be returning profits to shareholders. the smaller a company is, they are more likely to file this back into investment. we have seen companies in the u.s. that have been "disciplined ." the discipline as they have made if you percent of their cash flow going into capital spending, but the cash flow has more than doubled. maybe by all of them increasing their drilling activity, but they buy other companies, and those other companies are really ripe for increased drilling, which is why we are thinking about oil production out of the u.s., out of canada being pretty
robust next year. yvonne: i was going to ask you about china. power shortages seem to have eased somewhat. what effect -- what impact do you think it will have on oil prices? >> it has had an impact. what is driving most of the increase is power generation and the -- in the world, cut short by revenue generation in the summertime in china which had a combination of drought and a lot of rainfall. all the major consumer companies in china, the u.s., canada, and europe have had drought conditions so that hydropower really sunk to very low levels. they actually had record temperatures over the summertime when electricity demand in general was at record levels, so there was not an ability to store natural gas and other fossil fuels needed. there was a lack of, ironically
in the middle of cop 26, solar and wind in various parts of the world. it really was a crisis of the energy transition. countries including china went into the autumn with very low levels of inventory, so what the chinese have done is very anti-cop 26 but very much what they are capable of doing. they started mining coal. they are adding to million tons a day to their inventory. coal, which went up 300% was followed by 55% in a few weeks' time. then on the oil side, one of the reasons oil has actually gone down is all of these other fuels. and switching from coal or natural gas -- yvonne: we are going to leave it there, but have a great weekend.
david: welcome back to the markets. i was going to say going into this morning that hopefully, there would have been some momentum coming through, but a bit meh at this point in time. certainly that is the case when you look at equity markets, very much mixed. there's not a lot of volume coming through. certainly when you look at the fx markets, that is where we are having some consistency, and in commodity markets, you might have already seen the weakness in hong kong. hsbc dragging the index forward and as we head into the japanese lunch break, a quick glance, .7%
brexit referendum. two year yields across the board. >> massive adjustment off of what markets are pricing in. you still look at the future swaps and markets are still pricing in a rate hike in june. it is a 70% probability right now. it raises a big question. our central banks themselves able to take back control when it comes to the narrative? speaking of the boe, the governor really did hit back against the critics. >> because we condition our
forecast on the market curve, our forecast suggests by the end of the forecast, inflation was coming a bit under target. we had an outboard gap opening up. that would not be what we want to see. >> if we could go back to markets, we will have to act pretty hawkish at times. were you not worried enough about growth? >> it is a statement that holds true today. we are seeing inflation expectations. we will have to act. quested the markets misread you? is it a communication problem? >> it is pretty interesting.
bloomberg, he published -- it was pretty balanced on what we were going to do. >> that is the thing isn't it? >> we picked up a lot of commentary that matched your survey. it was because. it was a very finally balanced situation. as you can tell from the commentary we have made today -- the direction was a bit overdone. >> there was quite a lot of
traders. when you look at the analysts. they said that if they had not spoken so much, would remarks be more valuable if they were less frequent? >> i take that with a fair pinch of salt. we don't speak to guide markets. i take that with a fair pinch of salt. i think we have seen a correction and markets from over the summer particularly. i am not surprised about that. it puzzled me at the time to see that pricing. >> that was andrew bailey
speaking with francine lacqua. let's get to the first word news. >> the white house says opec and its allies are putting everything at risk. opec-plus stuck to the original plan of 400,000 barrels per day in december. putting pressure on oil for the coronavirus. the u.s. will alleviate high food prices. the u.s. market regulator has rejected plans for at least two that point -- bitcoin funds. the first u.s. bitcoin ets -- etf launched in october. it seems regulators are not ready to greenlight more >> derivative based funds. >> going back more than 2.5
years, i have urged us to rethink our products. i think the standard we apply has been different than the one we applied to similar products. i don't know if that will change but my guess is that given they have signaled british strongly that he likes to see these products rated regulated markets, that may be something standing in the way of approval. >> eric adams says he would like to take his first paychecks in bitcoin. he told bloomberg he wanted to turn new york into a crypto friendly city. he said he wants to set up a city going cryptocurrency similar to the one launched by miami. global news, 24 hours a day on
air and on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am vonnie quinn, this is bloomberg. >> coming up, we will talk about these pledges made in the ending days of cop 26. we will be joined by the head of hsbc's climate change center. we will have the conversation in a few minutes. this is bloomberg. ♪
the invisible gas is becoming less invisible. special satellites with infrared cameras are starting to capture large sources of emissions. this needs an attractive climate solution. producing methane from landfills requires building a network of pipes that can capture the gas and turn it into a source of energy. you could install masks on cows. the solutions are everywhere you look. governments are starting to take notice. the u.s. and the eu launched a global methane pledge that, to reduce emissions 30% within a decade.
that is the kind of momentum that can be built at the u.n. climate summit. >> that was bloomberg explaining the world of methane and global warming. it is a rare instance where you get to talk about cow flatulence on this program. on a broader and more serious note, when you look at methane pledges, 100 countries have come out and agree to cut their own emissions by at least 30%. the companies were not included. >> china sticks out a little bit. also when it comes to fossil fuel funding projects.
the impact could be undermined by the absence of key countries like china and japan as well. that brings us to our next guest here. i am sure you have been busy watching all of the headlines. i am sure there has been a lot of admissions. separate the fluff for us and what is actually achievable. >> there has been a lot of pledging and setting targets. that is good. it makes a lot of noise and gives you a lot of idea about where the policies are going in the future. but the policies have not been set yet. we need to get leaders back to their own countries. we need to make it a bit more mandatory. one of the plays -- one of the pledges that came out yesterday were not mandatory.
it give countries a little wiggle room. >> people talk about how it is a long time away but we need to act now. what we need to be put in place in terms of legislation? is forcing the right word? how do you incentivize? >> i would not say this forced. a good example is the european union's. when they introduce their net zero target, they made a lot of different proposals about infrastructure and renewals and so on. most other countries when they set the net zero target have not told us how they will do that so for a place like china, we know them -- we know they will wean their selves off of coal and -- but we need a timeframe about when that will happen. we will need the government to put the money into achieve that.
>> does the math stack up to make some of these pledges? >> net zero can be thought of as a spectrum. there is good that zero and bed nets are. it basically means offsetting your emissions. that can be done in a big way or a small way. it can be done if india and other countries put their mind to it. they have to think about how they can wean themselves off of coal. it is going to be a lot of money they will have to pay. they need to be mobilizing the public capital. that could come from development as well as making it easier for private capital to be a part of this. they will have to have the risky incentive to encourage people to invest in these things by making
it easier. it will cost a lot of money but it is possible. david: part of this feels like when you're out with your friends at night and you are looking at the skies and the stars and you are all pointing to different things. but you really don't have an idea of whether you're looking at the same thing. do we have enough credible data? are we talking to the right people to figure out whether all of these pledges and what everyone is trying to do -- clearly we are in the right direction but are these the right milestones we should be hitting? >> i would not call them milestones. they are the right agencies. if all the new pledges are fully implement it, we might reach 1.8 degrees. there is a lot of wiggle room
there but i think the key is to keep on making those pledges and improve on those pledges and implement those ledges. a lot more work needs to be done by all parts of the society. us as individuals as well. we are all looking at the same sky but we all need to be making progress about how we achieve this. >> if you look at research, the themes we are seeing, whether it is producing methane, ending deforestation, india, that plays well, what is the theme you can see investors looking on and investing in? >> these things are long-term. you can't stop coal and fire power plants tomorrow. structurally, there will be a big change there. investors need to position their
portfolios to be ready for that eventuality. are they investing in the right companies that say they are changing their business models to be a better part and to be well-positioned for that transition? moving away from high carbon activity. it is a long-term game. it is not something you can do tomorrow but taking about it, doing the research now and putting in place all of the pieces for this structural change in the future. >> the way that oil producers have become energy producers. as a follower to yvonne's question, as a portfolio manager, how do i approach polluting industries as the world financial services disengage from funding dirty
energy sources? these big oil companies, what did they do? >> the funding is beginning to dry up but it is not as if the funding needs to be removed today. we are still driving cars and flying. there is room for oil and gas in the medium-term. as an investor, we should be looking at all of these different oil and gas burning. over time, it is about positioning ourselves, thinking about your exposure as well as engaging with these oil and gas companies. could you be doing more? can you bring for your targets? if the companies are listening, that is great. i think investors have a lot of potential to make some change.
>> you are watching bloomberg markets: asia, i am su keenan with the follow from the global supply chain crunch. some of the top stories today, sources say airbus deliveries start in october with the european playmakers to have only delivered -- plain makers -- plane makers only delivering a fraction of what they said they would. meanwhile, peloton is facing a double whammy from the end of its pandemic sales boom with supply chain constraints and soaring costs of commodities weighing on its outlook. they have slashed their guidance for next year by up to a billion dollars. the white house is pressing congress to quickly pass the semiconductor act which provides 52 billion for manufacturers and eases the shortage of trips -- chips.
this is a big issue for some of japan's biggest firms from carmakers to game console manufacturers. the shortage prompted them to slash profit forecast for the year. yamaha and -- these are some of the worst performers on th25 after lowering their outlooks due to chip issues. you can read about these stories on our newsletter supply line. david: a lot of exciting stuff. the company signaled that it expected the global squeeze to come soon. >> we talked to her three earnings calls ago. we took action early. we moved to source our products.
we are one of the few companies if not the only that actually moved its source across snapdragon. we launched multiple products as a result of the move to sourcing. we have put capacity expansion in place. we made a commitment to our suppliers because we believe in the demand for qualcomm technology. we believe we will see to real supply improvements coming at the end of the calendar year. that is kind of reflected in our guide for q1. we see improvement. it is a lot more balanced for demand. as we enter 2022, around the
first half of the year, we will see the and of the supply imbalance. >> at that point, are you saying there will be an end to the supply and demand imbalance for qualcomm only question mark if so, how much longer does this drag on for other industries? it seems like qualcomm is navigating this as well but others are saying this could go on for years. would you agree? >> that is correct. i have seen reports that companies will probably see. shortness of supply in 2023. you can find pockets of areas -- we will still have more demand than supply. largely we will see a lot more balance between supply and demand. >> you mentioned high-end phones being in demand. i would like to get some color on what happened in that moment. would you say that android is growing faster?
>> what we see right now is an opportunity for qualcomm to grow much faster than the market. the mobile market still grows single-digit. we saw a different oem landscape. we saw an opportunity for premium and high tier devices and customers such as samsung and all of these. we see incredibly high demand driving a lot of the growth. there are new form factors. i think the new samsung phone, flip, the market is really moving up. consumers are becoming even more dependent on this. that is driving the growth. what we said in the earnings call, in q1 -- from a
seasonality standpoint, it is traditionally a very high quarter when we sell modems to one of our customers, most of the growth in the quarter is coming from the android. you're starting to see the correlation of the qualcomm fitness become more like the premium and high android. >> supply chain inflation is part of the conversation. we are looking at the u.s. jobs report. we are looking at hourly earnings. we are looking at negative ways inflation when you are ingesting for inflation. it is also below trend. as we move into the latter part of the money session, it is slightly better but still mixed across the region. we are seeing some equity market pressure here in hong kong.