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tv   Bloomberg Daybreak Asia  Bloomberg  July 3, 2022 7:00pm-9:00pm EDT

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haidi: you're watching daybreak asia coming to live from sydney in hong kong. we're counting down to asia's major market opens. david: let's get to top stories. stocks look to build on last week's week on wall street as traders continue to weigh risks. chinese developer shimao is adding to a record year of offer bond delinquencies. traders are facing a showdown on the bank of japan here is its ultra low interest rate policy pretty much rips every asset class out there. haidi: start of another trading week in asia and we are all about recession fears. seeming to overtake inflation concerns. in the sovereign debt space we are seeing bonds dropping around the region particularly on the
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rate sensitive three year yield in australia because we do have the rba rate decision tomorrow and what we saw in our survey, 25.6 economies here -- economists here are seeing a half-point hike higher. that will be the first back-to-back height of that magnitude taking the rate to the highest since may of 2019. with we do see a course. looking aboard now, equities are pointing to further stock. nikkei futures flat, but also seeing gains for austria at the open. new zealand to the upside. we're keeping and i on commodity linked currencies. i'm talking about the aussie dollar and the kiwi produce other dropping theconcerns abouh outlook, we are seeing that recover slightly in the early trading here as well. but the concern here they say really brings in the psychology of the market, very much focused on growth here. david: the other side to that relatively strong aussie story is the u.s. dollar, that is on
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weaker footing as we get underway this week. perhaps really also boats in terms of risk assets, moving up in treasuries, indicative of a drop in yields when tokyo opens up. which might be good as far as risk appetite is concerned. haidi: yeah, let's get some more on the market outlook investors, weighing these growth -- recession risks. starting to come back again after shimao failed to pay the $1 billion bond. up let's bring in garfield reynolds. senior executive editor john liu as well. let's start with you. what are you seeing as the big risks for the second half? garfield: a lot of the big risks and challenges are the ones that delivered so much pain for investors in the first half. first and foremost, it is the war in ukraine, the impact of that, the ongoing potential that we had.
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a somewhat alarmist report it seems from j.p. morgan over the weekend, talking about how the most extreme scenario with russia deciding to cut oil production, you could see crude prices spiked to $380 a barrel. the more likely scenario is of a potential cut to russian oil that will see oil go a long way higher and who knows what might happen with natural gas. so there is all that on the table. there is also the concern that the combination of rate hikes and those high prices are going to lead to a slowdown in the u.s. economy and elsewhere. in a slowdown by the way that might not do much to bring down inflation, because of those commodity shocks. finally, we have china, where it is still struggling to break out of the slump that was induced by the covid lockdowns earlier this path. we've got diseases taking off there again. we've also got fresh concerns
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about over leverage, real estate companies, which can weigh on sentiment. you should never forget that real estate investment is very much a key part of a lot of chinese households efforts to merge their finances. so anything that hits sentiment in the real estate sector can be dangerous for china. china had been one of the sources that people were looking to for growth in the coming months, so if it is slower to recover than expected, that is going to be hit. david: john, we are talking about china a lot there. let's bring in this i guess issue that persists into this year and the latest iteration is shi missingmao -- shimao missing bond payments in the story that does not seem to be going away. john: there had been some optimism that we had reached a
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bottom for the property market in china. we had the chairman coming out and saying that he thought that was what was happening. we have seen it sales data for the month of may showing a sequential 31% increase from april, but of course, this again highlights how fragile -- if that recovery is underway, how fragile it is and how much time it is going to take for this market to get back to something more like normal. haidi: you've seen that recovery rally when it comes to us trillion bonds, really tracking treasuries. i flick ask you this every morning, about whether we have seen a bottom when it comes to sovereigns? garfield: the rally is extraordinary when you consider it is likely to see the first back to back 50 basis point hikes and yet bonds are rallying
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like crazy. not just at the long end, but at the front end. three year yields are about 12 basis points. this morning, the drop a lot. last we heard, i was talking at west bank and the reporting out that what is gone is the mentality where rate hikes are no longer bearish for bonds. they are bullish, because the faster the rba, the faster other central banks hike rates, the sooner is the calculation that they're going to stop hiking and start cutting again because the more likely you are to get a sustained slowdown in the economic activity. so in fact, the worst thing possible for the bond market could be if the rba for some reason decides to only hike 25 basis points tomorrow. and i think that apart from everything else highlights just how extreme these times are and how difficult it is to say that we have reached a bottom or a top in anything right now in markets. david: yeah, garfield, i'm going
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to bring john in and i want to get your thoughts on the back of that because that also goes into the inflation story. john, let me bring you entered the economy in china, pmi last week, what is the narrative now as far as them being able to engineer a recovery to the extent that may even reach a growth target? john: president xi jinping has pledged to hit those targets he talked about there, david, so we are expecting the china government to take measures to shore up growth. the question is how effective those measures will be. obviously with omicron, with potentially even more transmissible variance coming down the pike, there is always the danger looming of additional lockdowns. indeed, we have seen cases announced over the weekend and provinces, which are largely rural, but do house a lot of electronic car manufacturing as well. so with that looming, with the property issues and that market still there, the government will
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do what it can. whether it will be effective is still in the air. david: so garfield, on that note them, while a recovery in the chinese economy is obviously a good thing, would that be an unwanted inflation catalyst for other central banks that already have enough on their plate at the moment? garfield: no, in fact there is an argument to be made that china's woes have contributed to the inflation problem. china is still very much the world's factory and if it is having disruptions, it becomes part of the supply shocks. that is one of the ironies that the current inflation is driven as much by supply shocks as it is by the extremely loose monetary policy that existed when we started those supply shocks. so on the one hand, you probably do need to bring demand down a little bit and that is what the central bank is trying to do. but more portly, you need to bring the supply up to speed as it were.
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and mostly, mostly, the world is going to welcome a stronger chinese economy, because that will actually help to cool down global inflation. david: garfield reynolds there over in sydney and john liu joining us. the latest basically on everything. right, let's get your first word headlines for the let's start things off with a series of tweets on the weekend. you have amazon founder jeff bezos criticizing president biden here for tweeting that companies running gas stations should reduce their prices. jeff bezos said that biden's statement is either a misdirection or a deep misunderstanding of the basics of market dynamics. in a response, the white house stated that elevated gas prices are not basic market dynamics, but a market that is failing american consumers. chinese covid cases have climbed as officials carry out mass testing. almost 300 infections were
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detected in a province where two counties are already in lockdown. nationwide, 380 five local cases were registered on saturday. macau and update their, 30's have recorded to covid related deaths. -- authorities have recorded covid related deaths. now, to argentina, where the country is yet to choose a new economy minister. that is after turn guzman -- that is after guzman announced his decision on saturday as infighting worsened. his exit is raising doubts if argentina can meet the targets of its $44 billion imf program. it had come under pressure over the economy's direction and also inflation topping 60, that is 60%. people have been forced from their homes in sydney as torrential rain continues. 18 rescues were carried out
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overnight as three major rivers flooded. residents have been warned to avoid unnecessary travel and while the system which caused the dilution has weakened, forecasters predict rain for sydney, so brace yourselves. keep track, keep safe and those were your first word headlines. haidi: still ahead, we speak to boj governor kazou momma to get his take on policy. but next, the u.s. dollar continues to make moves despite the fed's movement to tackle inflation. more on that next. this is bloomberg. ♪
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>> i think the risks of a 2022 recession are significantly higher than i would have judged 649 weeks ago. >> one risk i am really worried about is the liquidity risk and we are starting to see markets locked out of funding. and keeping a very close by on issuance in june, which was very low. companies were either unwilling or unable to refinance themselves. david: bloomberg contributor's larry summers talking about the outlook and the biggest risks out there. quick one-week glanced across these growth proxies if you will or the opposite if you will, the tenure rate. a massive move as you can see
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late last week, our markets correcting pricing? let's get more from vishnu, head of economic strategy. i hope you're well and had a wonderful weekend. i was going to start with something else, but we heard from mohammed the biggest risk is liquidity, do you agree? vishnu: the risk will be filling up tremendously in the third to fourth quarter as tightening kicks in a little harder and we see the receding liquidity type revealing all of the unevenness around it. and i think for now, a lot of the focus has been on rate hikes, but certainly it emerges very prominently in the second half of the year. david: i think one of our conversations these last few months i think is the trade and you can remind me of the lyrics there. is it ticket fast?
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-- is it take it fast? that is on the feds raising the rates. is that still your expectation? vishnu: marcus have hijacked my expectations because that appears to be what -- markets have hijacked my expectations. that appears to be what they are doing. there is a get there fast with an opportunity to take it slow beyond that. but how true this stuff ends up being and the precise timing of the ability of the fed to step down its pace of rate hikes becomes a little bit more unclear, given that the fed has declared not very long ago that they need compelling evidence of inflation slowdown. haidi: you talk about the supply side snarls coming from geopolitics, setting the stage for stagflationary imposition or
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the amplification of a recessionary spiral. is that worse for the markets and fears of a policy step? vishnu: one builds into the other insofar about the supply side snarls lead to higher inflation and you get increasingly the risk that the fed and more central banks now no longer have the luxury of saying let me isolate supply-side stuff away from demand pole. right now, many central bank's are not given the option of segregating and after look at inflation. these two risks necessarily conspire and i think that is what make that much more dangerous. and as you pointed out, the trouble is we are on the knives edge between having elevated inflation and stagflationary situation, very quickly sliding into a recession, which means a severely narrow path to a soft
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landing. haidi: when you have a mixed outlook for china with the potential for a better than expected recovery, what are the implications for emerging-market assets because you talk about the risk of a spiraling selloff, particularly when it comes to the fx, but this is not the same as what we are seeing across the taper tantrum across the asian financial crisis. vishnu: right. to look at china first, one the reasons why, you know, i am optimistic this time compared to the street is perhaps because covid measures, including all of the testing, mobilizing the public sector, health care, so on and so forth, can add to growth in china can deliver through infrastructure a short-term used without picking up the underlying trend -- a short-term boost without picking up the underlying trend. that is not going to have a very positive spin for the rest of
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asia and one particular quick point is if asia's invasion picks up to accelerate faster than the u.s. dollar continuing to accelerate while the u.s. starts to peak, that can exacerbate the capital outflows in the downside risks to the currency, which is why for us, that remains a major problem. but i do concede that the call for stability before the congress. david: the last point you made or the other point is made of diverging inflation story in e.m. asia to what is happening in the u.s., is that a reasonable assumption or a best case for you? vishnu: a lot of the pressures when the u.s. came to really quickly, starting the second half of next year. where is the second half of last year we saw price pressures
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being really contained in asia. so two things have happened since. one is you got energy and food inflation featuring very prominently, but other than the inflation of the u.s. encounter the second half of last year. the second point is fiscal propensity is not really constrained. so the ability of e.m. asian authorities to offer the price pressures is far more limited this time, which means the pickup from energy and food inflation comes more prominently whereas in the u.s. we do see signs of peaking, although inflation may not be receding as quickly. haidi: always great to chat with you. head of economics and strategy at home bank. you can get all the stories he needed no to get your day going in today's edition of daybreak. terminals of scrubbers can get there at davie go this is bloomberg. -- dayb . this is bloomberg.
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>> this is a point of great uncertainty. >> uncertainty around inflation. >> some significant changes since the pandemic. >> transition point in the market. >> the fed acted way too late. >> the big question now we have is on proof. >> the question is on earnings. >> it has to fall further. >> volatility is likely to persist. >> we do not see uncertainty in markets going away. >> we still have a long road ahead. david: some of our earlier guests they are basically telling us that we don't know a lot of things going into the second half, but we will muddle through. as we mostly have. let's -- speaking of modeling
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through, monday morning seems to be slightly on the better side, so markets more than others certainly. futures there as you can see approaching the major market open in terms of context, we are coming off 11 weeks of losses across global stocks in the last what? 13 weeks or so. so it has not been kind the last three months or so. so second half, bring it. bring it. ok, having a look at u.s. futures now, up and running in 90 minutes or so. a couple of points to the downside, uss of the contract looking at the 12 month projections here in s&p futures, we're looking at about 12 -- 21% gains from current levels. so we will see whether of course these strategists, which have been largely wrong, are correct. we will see, haidi. haidi: yeah, we are getting some lines out when it comes to the bank of korea. south korea, to preemptively respond to economic risk factors. also saying there are monitoring
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financial conditions as well. they flag these complex economic risks to continue for a considerable time appeared this is for a meeting that took place on monday between south korea's finance minister and the central bank governor. really intended to reveal the country's economic situation amid growth risks. and this comes a day before south korea releases its latest report on inflation. economists from bloomberg are expecting a number around 5.9%. and we did really ecb finance minister warning that inflation could surpass 6% this summer. in all of that of course feeding into speculations the be ok could raise the benchmark rate by half a percentage point next week as well. so really leaving the door open dave to a another upside surprise. david: yeah, just like bruno mars. all right, as we calmed down into the opening of trade over in korea sorry, i cannot help it make musical references, leave the door open. the president will be meeting
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with the prime minister there in a couple of things to track as we approach the korean day ahead. bank of korea selling bonds here. 91 day debt to one trillion. news agency reporting that workers have voted in favor of a strike for higher wages and also investments. that is essentially the first potential work stoppage in four years at the auto giant. haidi: let's get a check of the latest business flash headlines. tesla's global deliveries dipped due to covid shutdowns as shanghai factories stopping at two-year streak of gains. the automakers shipped almost 250 thousand cars worldwide and reported the end of june, tesla delivered a record 310,000 cars and at time before that. tiktok has confirmed that employees outside the u.s. can access information from american users, raising concerns about its data sharing practices. the admission came in a letter to nine u.s. senators who accused tiktok and its chinese
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parent company of monitoring u.s. business. tiktok says none of the information it collects is shared with the chinese government. google says it will automatically delete records of user visits to sensitive locations, including abortion clinics because of a growing number of concerns of the data may be used to prosecute people seeking reproductive care. although they made no reference to it, the policy is seen as a response to the u.s. supreme court returning legal protections for abortions under roe v. wade. coming up next, china's covid zero policy is put to the test once again. hundreds of new infections. we see a c this is xfinity rewards. our way of showing our appreciation. with rewards of all shapes and sizes. [ cheers ] are we actually going? yes!! and once in a lifetime moments. two tickets to nascar! yes!
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david: there ago, that's -- is that tokyo? that should be korea if i'm not mistaken, but same time zone. anyway, 30 minutes to opening here. we should be getting some breaking data out of tokyo in terms of cash earnings, so both labor cap earnings and real cash earnings should be out anytime now. i was looking at the currency and we will have a deeper conversation of the japanese yen. 135 are now. kazuo will be joining us in about 15 minutes. have a look at the recipes market, no, we do not have data points just yet. in fact, they are coming out -- my mistake, they're coming out tomorrow, but we will be here to break the numbers. annabelle has the markets for you. that is happening right now. annabelle: 424 early, but in the
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meantime, one of the factors we are watching out for here is when we do get the wage data, it's something that the boj wants to see. sustained wages growth before it makes changes to its policy. and that does of course determine the direction of the again as well. our bloomberg economics team have been looking at three scenarios. you can take a look at this now. essentially, three difference in areas on whether we see the fed moving. so in the first scenario, this is louisiana aggressive fed. if you can change that, -- this is where we see an aggressive fed. that would be some thing that would send the yen to 141.3. an aggressive fed here is a fed that moves to 4% by the end of the year. that is a situation that forces the boj to change tact, so normalize its policies in some ways by shifting the forward guidance to neutral and shifting the jgb. in another situation where we have seen an easy fit, this is where we see a deep recession. the fed has the whole back from hiking a negative two .5% by the
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end of the year and that sense began to 125 and then the baseline here -- it sends the yen to 125. by the fourth quarter, that set us up on a strong are footing, still falling into 142. about rising rates are also a factor that will end up pressuring earnings in some capacity. let's take a look at the terminal here as well. put the brakes on spending, of course, as well as inflation fears. take a look at this terminal chart. despite that really what we're seeing here is it is not really showing up that's what we see on a 12 month basis for earnings projections. still looking pretty rosy here and you can see really the question is whether analysts perhaps are getting a little bit to behind the curve here when factoring in the damage. let's take a look at what we heard from some of our guests. >> high inflation is worse over the long term. >> at this point, inflation rules the game. >> that is why the fed is committed to really curtailing the inflation, that is the bigger problem right now. >> this risk of entrenchment,
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where inflation fears are in your head and you expect it to keep happening is elevated. >> markets are shifting away from inflation. >> i think it is recession risks. >> markets are not sure so that is why you see this going on in the markets, but actually we are at a tipping point. >> bigger risk by now because inflation is priced in. we are aware that we are in a high inflationary environment, people are adjusting their budgets. but recessions will turn the market over. >> i disagree on the recession risk in the united states. i think people are talking themselves into a tizzy about recessions. >> they are recession proof strategies that investors used in the last economic cycle. things like cash and hybrid bonds and treasuries, those spot just cannot be the strategies that you go for force into and a time when inflation is high. david: ok, let's get your first word headlines now. shimao property, a chinese developer, says it did not pay a
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$1 billion offshore note that matured on sunday adding to this record wave of chinese developers missing payments this year. the luxury builder says it also has not made payments for some other offshore debt and it is in talks with creditors to come up with amicable resolutions. if that fails, shimao says creditors can take enforcement actions. over in ukraine, well, the country says it has pulled its troops from a strategic city, confirming russia's claim to have taken control. russia had earlier declared that it seized the city, saying its goal of taking over ukraine's entire donbass region comprised of domestic, claims armed forces say the order to withdraw was to prevent heavy casualties. over in australia, the prime minister met face-to-face with ukrainian president by american so in ski. -- volodymyr zelenskyy. he pledged an additional $100 million in military support,
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including things like terms and equipment from border guards. so lenski says they discussed the food crisis and need for more actions or sanctions on moscow and economic support for ukraine. now over to the u.s., airports were essentially stretched as you can see from these pictures to the limit as they handled the biggest number of holiday travelers since the pandemic started. the tsa says it's created four point 6 million passengers on friday and saturday. that is 3% more than a 2019. flightaware says some 16,000 flights were delayed since friday, but better whether cap cancellations in check. global news, 24 hours a day. on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. you're watching bloomberg. haidi: china's covid serial policy continues to be tested in its eastern regions. hundreds of cases being reported over the weekend.
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two counties are in lockdown, plus a city near shanghai just reported dirty five local cases for sunday as well. -- 35 local cases. let's get more from charlie zhu. what's the latest on the ground and the strategy from authorities? charlie: the strategy is still covid zero as president xi jinping highlighted in his recent trip to hong kong. so, covid zero is here tuesday. the goal is to eliminate all cases in the community. once the situation is under control, they will lift all of the restrictions on the cities they have imposed. i mean, they have tested and it proves to be effective in terms of dealing with the outbreaks in shanghai and beijing. but now of course, the constant challenge they are facing is the omicron variant, which is highly
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contagious. as you can see, the cases in china are getting bigger. the problem is getting bigger. they reported 285 cases over the weekend and that accounts for the majority of the total cases in china. david: charlie, while that is the case, the assumption from economists at least up until this point, is that even if cases do arise and we get these testings and lockdowns in some places, we will not get the sort of disruptions that we had where you are in shanghai. do you think that is the correct assumption to make at this point still? charlie: i think -- i don't know, but so far shanghai has proven to be working. one of the main reasons is people are getting tested regularly. people like me, where you are going to work, you have to be
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tested. you have to show your health code. you have done a nucleic acid test within the past 72 hours that is negative. and you have to constantly swipe the location code to let people know where you have entered, so it is infrastructure. the infrastructure is in place to keep the outbreak under control. previously, before the shanghai lockdown, there was so -- there was no such kind of infrastructure there. david: charlie, our shanghai bureau chief, as you can see now back at the office there. just ahead, we're talking japan here. former assistant boj governor kazou momma tells us why traders are back -- betting on a hawkish turn from the boj and they will be proven wrong. he will tell us why. that is next. this is bloomberg. ♪
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haidi: japanese markets will open at the top of the next hour. take a look at how they are shaping up to start the week. this is what we are seeing when it comes to dollar-yen, this is we see the japanese currency sinking to even deeper lows. but japanese bond yields and a central banks target, dollar-yen holding at over 135 to the dollar as well. so we are potentially really seeing further downward pressure . if we continue see the bank of japan clinging to these ultra
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low interest rates as we have seen it the last nine months of thank of japan, the recent tenure. the decision to pass up on opportunity to ramp up defense when it comes to policy, it is really kind of turning to a fear of crippling weakening of the yen. keeping purchases unchanged for the next quarter, it's a move that surprised some of the participants. they have been betting on a change. let's bring in executive economist at the research institute who previously served as the assistant governor at the bank of japan. great to have you with us as always and we appreciate your time. have you been surprised with the i guess determination of the boj, of the government to hold its policies down? kazou: thank you for having me. i think there's good reason for the boj to be sticking to
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current income control. even after that, 2.1% april in may -- april and may, but in terms of the underlying inflation, the energy component, if you talk about medium cpi, it's only zero point 4%. in the u.s. it is 5.5. 5.5 compared to 0.4, so it will be a trend. on top of that, still the boj is concerned about the economy with global conditions. and also the supply chain, so i think the boj will stay around for many quarters to computer haidi: what does the boj need to see in the structural shift in inflation dynamics, which today, they've essentially been signaling that they are not seeing that in the pressures?
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kazou: well, of course boj has had a target growth for nine years, so hopefully, they will get eventually a basis. there's the possibility that they may see some such changes. at the same time, they are aware that those things are not sustainable. it's a clear sign that inflation is going up to sustainable levels. it comes from a survey that shows that people are complain about prices. so if anything, people are retreating from property more. david: i'm going to ask another
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way of asking the question i guess on the two percent inflation target. you mentioned that we've been waiting all not for nine years and it has not,. is that a reasonable target to have? or are we going to secure in 10 years and stay the same thing -- and say the same thing that we have not met the target? kazou: i think that is a very fundamental, good question. as for property, i do not think it is a good target for the japan situation, because the last nine years, the boj continuously failed to get on target. and we see inflation, we have seen 3% wage rises. up 1.5%. at last time we saw 2% wage hikes was 1991, more than 30 years ago. so it is very hard to believe that anything would happen to
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indicate that it would be taking place in the near future, so i think that at least for now, it is not a realistic target for the boj. david: so that reality and the other reality, the headline inflation, including energy driving things up about 2%, what is the best course of action for the boj? what does it need to do? what if it does nothing? kazou: doing nothing is the best course for the boj as far as sustainable inflation. because any rate hikes are going to be at the boj, risking derailing recovery. japan's economy is in a rare position to have a good recovery for the rest of this year. what has taken place around the energy markets is taking place in japan, because now people are
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feeling more comfortable eating, traveling because covid-19 is fading. so i think the boj and government are really suggesting to taking this opportunity for sustainable growth. so any interest rate hike is not really an option for the boj right now. haidi: given the unprecedented global challenges, domestic challenges, we know the story has been a long-term concern for japan now. what do you think is the one change that japan needs the most? kazou: well, i think people have been talking about reforms for many, many years. talking about a good balance between economic growth. and doing something about wage rises, but i do not think that there is any immediate fear for
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the economy of japan. japan's economy, even with reform, the structural reform so far, it has continued to growth where other countries have failed. productivity growth is about 1% on average for many years. in other words, it is very hard and difficult for any country to support substantial managing of more than 1% growth. so what the government and boj attorney do is challenging in parts. so we have to probably satisfy the current situation to some extent and hopefully, the situation is getting better. david: that is a good way of looking at it really. things are fine, right? things are fine. kazou momma thank you so much for that. as always, great insights.
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research institute executive economist. i will remind my grandkids and future grandkids to keep watch for structural reform traded get more on the interview -- reform. get more on the interview. the leading names in the japanese business circle. that is monday at 8:40 a.m. after watching out of tokyo. there is plenty more ahead on the show pretty keep it here. you are watching bloomberg. good morning. ♪
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haidi: we are tracking the fallout of the global supply chain crunch and these are our top stories today. the june quarter snapping a two week gain. missing forecasters covid related shutdowns at a factory in shanghai production. the potential victim of russian gas supplies, the top regulator is calling for greater efforts to save energy. if virtual network agency says the nord stream pipeline from russia may turn into a longer-lasting stoppage. and australia's mineral exports are set to reach unseen heights for a second year as the global crunch lists the value of the
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natural gas. the government says income from look at five natural gas and coal as russia's invasion of ukraine will offset waiting earnings from the country's top export, of course, that is iron ore. david: precisely their, iron ore prices are down 3% here less than a check, so we are coming off a marginal gain at last week. but the trend is on the way down here to prices are off over 2% at the overnight session as you can see a little bit of pressure, not a lot as far as energy markets there. by the way, for bloomberg clients, you can read more about the stories affecting supply chain's in our newsletter, that is supply lines. you can check that out on your bloomberg terminal, that is and i trade and l go. so you see where oil is, right? so over the weekend, you might have seen this on the twitter, the u.s. president essentially tweeting out if i am not mistaken probably the second time.
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ethic i've seen one before, but essentially, -- i think i've seen one before, but essentially calling on companies that are in charge or run the gasoline stations to do their parts in taking down inflation. he said if you have the capacity and reflect the cost properly and bring down prices and help alleviate some of the costs. jeff hoover -- jeff bezos had this retort. haidi: yes, this is really deep response out to inflation, it is support for the white house to keep making statements like this. it is either straight ahead misdirection or deep misunderstanding for it what i also found interesting was that divided white house responded to that. saying that -- abiding what houses wanted to that. saying that this is not basic market ethics. the american consumer, the other thing that i find quite interesting is that the psychologist -- psychology of
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the summer driving peak demand season when it comes to oil in the u.s., there are some signs, even as you see it more air travel this long weekend, the perhaps not as many people are going for long drives the summer because of how expensive gas has really been. let's get a quick check of the latest business flash headlines this hour for you. watching the world's biggest oil traders saying that oil costs are weighing on demand. speaking, they told the head of a shed that high energy costs are causing demand destruction. it's come after gasoline and diesel prices hit a record high in the u.s.. japan's kddi has restored its mobile phone network after a nationwide disruption over the weekend. after 40 million connections may have been affected, according to local media, the destruction also affected other platforms that use the network like atm sprint president takahashi says the situation is deeply regret it will.
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an investment group has emerged as the preferred bidder for department stores in japan. the newspaper says fortress made an offer that was significant we hired than one half billion dollars. putting it ahead by other -- ahead of other bids. parent company holdings says the decision has been -- says no decision has been made so far. david: a couple of names, a partial list of some of the stuff we will be tracking. five minutes from now you get cash markets opening up in tokyo. fortress investment group, we will get through this. a chain of department stores independent -- in japan. we're watching closely. the adoption of climate from the cars. considering replacing older fleets and of course a strike watch in terms of yaounde, so a
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potential stoppage there in about four years. coming up in the next hour, we discussed how asia's central banks will be a never getting fed policy and recession fears obviously showing up in economists forecasts. monthly earnings, we will see what that means for these economies and investments. they will join us in a couple minutes. any questions, send them our way. and talking to goldman sachs kenneth ho. a $1 billion debt obligation and credit markets. also coming up, the market opens, the first sessions of the week. sydney and tokyo just ahead. this is bloomberg. good morning. ♪
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david: this is "bloomberg
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daybreak: asia." getting your first session, tokyo, seoul city and sydney, 11 weeks of declines, the good news ahead of a key event in rba and ecb, job reports on friday. haidi: we are watching chinese developers as well with the nonpayment in focus and highlighting some of that distress and pressure on that sector despite expectations of recovery in china. let's take a look at the monday morning open. >> liquidity stress being highlighted in other markets as well, we are a few seconds away from the opening cap and, australia, and korea, keeping an eye on treasury bond futures, pointing to us to love, we are pointing to futures because we have that july 4 holiday indigos. young holding steady at 135, a lot of focus on house elections
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in japan this week, and the results we do see for prime minister to she that could set the direction for doj as well. whether we see pressure on the central bank to change the course of its policy. japan stops talking -- stopping a three-day losing streak. taking a look at the open we have for korea, foreign investors fleeing markets in the last three months, the most outflows since 2020. we are this morning seeing the cost be -- kospi coming on my. tech heavy nasdaq index, keeping an eye on the korean won, we have seen strength in the u.s. dollar, and that has been editing broader gauge of em currencies trading around its lowest since the inauguration of president biden into u.s.. changing to the open in
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australia, the big focus this week in this region central bank wise is rba rate decision and whether received back-to-back basis point move, 50 for the first time on record if we get that tomorrow. we are keeping particular focus on fields -- yeilds. aussie stocks fairly flat and we are keeping an eye on brent crude, it investors focusing on these growth concerns we have in markets. haidi: our next guest positive on asia in emerging markets despite weakness we see across em assets. she sees strong growth in southeast asia, dreading this is a chief global market strategist. great to have you with us. we see the currency side under pressure when it comes to em as we surge back to king dollar.
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does that create risk for emerging market strategy? >> i do not think so. on the margins, yes, but let's face it. especially when we look at asia em, we are seeing the potential for higher growth, when we are seeing is an environment in which it is relatively accommodative. this is the kind of environment, given covid reopening's we could see great things coming from this space. there are some headwinds but the general picture is far more tailwind. haidi: that is your view when it comes to the u.s. as well where you believe a recession is not the writing on the wall at this
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point. >> that is correct. when we look at the u.s. economy we see an incredibly tight labor market, and that to me is one key reason why the u.s. may be able to avoid a recession. there is going to be a slow down the u.s. since there are so many job openings, we could see an environment in which companies cut their job openings as opposed to having any kind of large scale layoffs. the second argument i would make for why the u.s. could avoid a recession is because the fed is being data dependent. it is riveting quickly based on incoming data. that will cause more aggressive rate hikes, but it could also work the other way. the fed is trying to make what is a blunt instrument as surgical as possible. david: david here. to that point, you might turn out to be correct and we do not
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get a recession but a slowdown is in the cards. earnings estimates, global equities on aggregate have actually yet to reflect the start of any trend in revision down. do you think stocks are cheap enough is the question going into the second half? >> socks are very cheap, but it depends on how much we see in terms of downward earnings revision. my suspicion is that we will not see traumatic downward earnings revisions. this is an environment in which i do not think we have hit a market bottom yet for u.s. stocks, but we could see a bottom in the next couple of months and we could see a nice rebound based on some positive surprise. that surprise could come from the fed in terms of pivoting to
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a less aggressive path we're tightening toward the back quarter of the year. david: talk us through your calls across emerging markets. >> for emerging markets, what we see is a number of countries that have higher growth projections for this year versus last year. we will see an acceleration, and we will see a re-acceleration in china as well. that is going to be an important catalyst for asia em, the role of covid restrictions, monetary and fiscal stimulus should be very supportive, and that is why we have already seen the chinese stock market start to forecast, signal a comeback. david: thank you so much for joining us, and a great week
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ahead. we will revisit some of these in a couple of weeks. we were talking about -- that will make sense in a couple of seconds. we were talking about a company that did not meet its debt obligation, sunac with a similar story. they will continue to be suspended in terms of trade. they are in the process of appointing a new auditor, we should be good news. they have financial and legal advisors and they are actively formulating a viable debt solution one would help and formulating this consensual solution as soon as practicable. they will continue to be suspended in trade.
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3.78, trade shares here. we are looking at key movers seven minutes into the session. tesla. haidi: delivering a result over the weekend, and it was a weak result, just under 250,000 cars delivered worldwide in the second quarter. that did snap estimate expectations. rising or beating estimates for more than two years here. we are seeing mixed moves in the reaction for trading. top stocks are some of the battery suppliers to tesla and korea names of particular. an autonomous breaking -- bra king provider. david: let's get to first world deadlines, give you an update of the covid situation in china.
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cases continue to climb as officials carry out mass testing. 287 local cases on sunday. two counties are already in lucked out. in macau authorities reported two covid related deaths. we talked about shimao, the company said it did not make this payment of $1 billion on sunday adding to a record wave of chinese developers missing payments. the lecture rebuilder says it has not made payments for other offshore debts and distant dogs with creditors to come up with amicable resolutions. if that fails it says its creditors can take enforcement action. a new poll puts japan's ruling composition on course to secure a majority. the survey as prime minister can
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ashita -- kishida and its junior partner set to win 23 of the seats up for grabs. his opponent suggests to capitalize on the fallout from weak currency. argentina yet to choose a new economy minister. the former announces decision on saturday as infighting within the ruling coalition worsens. his exit is raising doubts the country can reach its targets of the program. it has come under pressure after the economy's direction with inflation popping 60%. those were your first word headlines. let's tell you what is coming up, shimao has not paid that offshore no.
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we will get the case of goldman sachs. the asset class ahead. rba will raise its key rates 50 basis points this week. the first back-to-back hike of that size ever. we discussed that ahead. this is bloomberg. ♪
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david: good morning, welcome back to the show. as always at this time of the week we look ahead to what is coming up essentially ahead, busy week as always. we are getting cues from central banks attempting to contain
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global inflation. we started with the u.s. out of action, weekend of july 4. if you are joining us from the beach, your beds, the pub, i hope you are well. investors will be awaiting more insight into the fed's thinking. as far as jumbo rate hike is concerned, jobless rate, further guided for further action. australia, rba set to hike once again and thursday we prevent toward geopolitics, g20, foreign ministers meeting in bali. ecb's first-ever climate stress test. we are looking at the rba with the decision it out roughly this time tomorrow. the bank said to follow it last month's 50 basis point hike with another price hike.
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we are getting to our chief asia economics correspondent right beside me in our studio. i stole your thunder. >> they are behind the curve actually. they are playing catch up. economist have landed on another 50 basis point hike. tomorrow, the interesting debate emerging is how far they will go before the economy buckles, and in particular the consumer. the household debt to income ratio is among the highest in the world. and when you throw in the fact that a lot of mortgages in australia are floating-rate, there is a floating to the consumer. some softening of consumer credit card spending down there, early hints sentiment is coming
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off at the boil. there was a big debate about how far the rba can go before easing up there cycle. they are facing the same kind of inflation problems addressing the world, seafood and energy. it is a question of the pace of hikes toward the second half of the year. haidi: we are seeing forecast coming perilously close to the sign we are seeing a u.s. recession. what does that look like and does it come down to the u.s. consumer in large part? >> a lot of economists are saying by the end of next year the u.s. will fall into a, and debate as we come out deep recession might be. a recession is going to cause pain for household income, pain for corporate profits. there is a few forming this time in the u.s. that the recession might be somewhat moderate. it could be longer-lasting but
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compared to the big pandemic/and the financial crash because the labor market stood pretty tight. that is a unique factor in this slow down. there has been a stress test by the fed, banks are in good order in terms of capital ratios, liquidity to withstand a slump in the economy. households are in good order too. the amount of aid as left them in a stronger position. that is why people are saying moderate may be longer. haidi: edna curran there. concerns about recession fears are not playing out when it comes to market sentiment this monday morning. we are seeing gains, when you look at major markets, australia outperforming, particularly when it comes to tech, real estate.
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every sector is in the green. we are seeing gains when it comes to share trading in tokyo as well as festivities, to gain -- utilities, when it comes to the neck a 225. david: you aggregate everything together, 35% upside on msci. europe is coming online and ftse 500, 52 points, euro stocks up, in line with the tailwind we are feeling across equity markets. it bodes well as we make our way into the open. there is plenty more ahead on "bloomberg daybreak: asia." stay with us. this is bloomberg. ♪
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david: here is a question, what would you do if you were 19 again? that is for bitcoin to answer, 19, struggling with my ad leaves today -- ad libs today. haidi: would you buy bitcoin if you were 19 again? david: i would not. haidi: [laughter] a contributor will talk about the side to get that liquidity is becoming the key concern. it is playing up for crypto.
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what is the outlook you see? >> [indiscernible] david: i think we are having some issues. either that or i have an abundance of [indiscernible] haidi: we will never know. david: let's take you into this conversation in terms of the crypto space and the collapse of ftx founded by a billionaire. it has agreed to reject out of its blockfi agreed to purchase the crypto lender for $30 million. >> there are synergies between the businesses.
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if you look at this, they have a loyal customer base. they have a card that people love. we have been focusing on backup infrastructure, matching risk engine and everything else. there are a lot of ways our products tend to work together and mesh together. i would also say that they have been working productively with regulators on building out regulated yield of products and licensed yield products. excited that they have been doing it in a regulated weight. that is a healthy way to do it.
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it is something work stage works with as well. >> looking for places to bailout customers who would otherwise be underwater, what are you worried about moral hazard? that bailing out a company may not be best for the industry at large. >> that is a good question. what you are getting at is does that bailout feature accompanied that should have failed? i am way more excited to bailout customers than shareholders. the focus of this is not how do we deliver shareholder value. it is how do we protect customers, and those implied pretty different things. that is one thing.
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one is important for the system and the other is the biggest moral hazard. the other thing is that we are trying to find who were the responsible layers building out a good business, and had a sustainable model, and could use short-term liquidity and that could help protect customer funds. built a real valuable business that had something real to offer to customers rather than which companies honestly should never have existed? as of today may be we should let them sort of die like that. that is something we have been
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thinking of. haidi: sam bankman fried. i went to bring you our chief correspondent. the outlook when it comes to where we will go from here, the risk is further weakness right now that we are under 20,000. >> the risk for crypto's big moves in either direction. crypto has been pricewise more stable than other assets. it has been stable around this level, 20,000, 19,000. the big concern is if we get an upside inflation surprise, each has seen crypto take another leg down, particularly bitcoin. that lack of liquidity exacerbates the concerns there, but in a lot of ways i would expect us to oscillate for the
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next 1.5 weeks or so, and the big question is what happens with the mid july cpi report and how is the fed reacting at what will go on with broader assets? part of what happens with crypto is it is the sort of thing people will have to sell when everything sells off, because the lack of liquidity squeezes them out. they went to get out of their positions, and sometimes they cannot. david: garfield, great stuff. let's give you an update on latest business flash headlines. we are looking at might teleprompter, hong kong shopping mall sales have been altered because carpet restrictions have deterred interest from investors visiting the city. a hong kong economic journal citing a ceo saying the stanley
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plaza sale has been suspended. hong kong still maintain some of the toughest travel restrictions. we are looking at japan, shares we are starting to trade, that should be under pressure. one 20% -- 1.8%. up to 40 million connections may have been affected this weekend. disruptions affected other platforms. the president said millions have made the switch from the big three to xfinity mobile. that means millions are saving hundreds a year on their wireless bill. and all of those millions are on the nation's most reliable 5g network, with the carrier rated #1 in customer satisfaction. that's a whole lot of happy campers out there. and it's never too late to join them.
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haidi: -- >> this is "bloomberg daybreak: asia."
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with a check on markets in australia, korea, and japan. broad moves across the board, most sectors in the green what would look at volumes we are below the 20 day moving average because we do have to holiday in the u.s. as well, july 4. when you look at the markets, which sectors are moving into the red, nikkei will looking at the tech sector and financials and real estate as well. at these are recession sensitive sectors and sensitive to rising rates. let's take a look at what we are expecting for central bank action across this week in asia. we are focusing on pakistan, australia, and malaysia. we could see a 50 basis point hike in australia, the first back-to-back half point hike on record for the central bank.
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malaysia has a case for 50 basis point, still economist expecting a 0.25 of 1% move. ahead of that we are keeping an eye of where bonds are going. flipping the board, look at the moves we are seeing in sovereign debt. we are tracking moves in treasuries in the previous session, cash markets close without holiday. haidi: let's get first world headlines this hour. amazon thunder jeff bezos has criticized president joe biden for tweeting companies running gas stations should reduce prices. bezos said it is a misunderstanding or basic -- it is a market failing american consumers.
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-- the city is advancing its goal of taking over the entire donbas region. ukraine's armed forces say the order to withdraw was made to prevent heavy casualties. the australian prime minister met face-to-face with the ukrainian president. the premise are pledged additional support including drones and equipment from border guards. thousands of people have been forced from their homes in and around sydney as torrential rain continues. emergency aid services as 18 rescues have been carried out overnight as three major rivers flooded resident -- flooded. residents have been warned against unnecessary travel.
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china's covid zero policy continues to be tested in its eastern regions with hundreds of cases detected over the weekend. let's get to michelle cortez. we saw a doubling down of dedication to covid zero. how are authorities handling this patchwork of new cases? >> we are seeing this happen again and again where the number of sections creep up, you see severe restrictions moving toward the lockdown. we are expecting bigger moves to be coming in the days ahead. the number of cases eventually come down, and they will pop back up again. in china that they have learned a lesson. fast action, but it does mean
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millions of people across china now seeing increasing numbers of infection, and they will have to deal with these infections until they get back to zero. david: not to trivialize what is happening. the question for investors is is there any indication of a return to what we saw in shanghai? is this a new normal we can live with economically? >> what we are seeing definitely does not seem to be living with. this is an economically important area of china. a lot of technology companies are there. the only thing we can oh for internet is they are taking fast and affection that they will be able to get it under control.
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they had to go to the serious lockdown for two months. beijing, shenzhen were able to work more quickly and they were able to get it under control. it is something to keep an eye on. david: michelle, one community case in shanghai after 5:00 p.m. sunday outside of quarantine. do i need to be concerned? >> what that means is there is still virus circulating in shanghai. that is not something that would be surprising in the entire world. the difference in china is they are trying to get to zero. the idea there could be someone infected in the community who could expose other people, and that person got it from somewhere, they do not know where it is, it is a worrisome thing. they are doing massive testing there, you would have to expect
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they would pick up those cases quickly. what you would be afraid of is that there will be additional restrictions in your neighborhood or friend's neighborhood or at work as opposed to going back to never shut down in shanghai. david: michelle cortez there. just ahead, we are staying in china but evening to high yields, another chinese firm selling, the debt ridden real estate sector. goldman sachs largely avoiding double bonds. we will get the take on what the alternatives are. this is bloomberg. ♪
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haidi: a check of the latest business flash headlines. the company says the global surgeon will cost is starting to weigh on demand. the head of asia says there is evidence i am costs and economic distress can cause destruction. diesel prices had a record in the u.s. -- the newspaper says fortune has made an offer significantly higher from $1.5 billion putting it ahead of other companies.
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the parent company says no decision has been made so far. google says it will automatically delete records of his or visit your locations including abortion clinics barring concerns at the date it be used to prosecute people seeking reproductive care. google made no reference to it, the policy is seen as a response to the u.s. supreme court overturning of legal protections for abortion. tiktok as concerned employees outside the u.s. could access information from american users raising concerns about data sharing practices. the admission comes in a letter to non-us editors have accused tiktok and its parent company of monitoring u.s. citizens. tiktok says none of the information it collects is shared with the chinese government. david: let's have a look upon markets right now. it is a long weekend in the u.s.
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our proxies of supplicants at least in australia and ggp futures, double-digit declines on 10 year, three year too and rba, expecting 50 basis points. we can worry about that tomorrow. haidi: this is a risk developing, the chinese developer shimao did not pay a note that matured on sunday. let's get details from christine. was this expected? >> since china reduced lines and even lester it raised concerns. the fact that it set a contagion
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, ever grand, they are among the top 50 developers in china. haidi: what sort of policy response could we see? >> they have been extending onshore bond sales to more developers, but the list continues to be restrictive. we see some being able to cut on sorbonne's now, but the list is restrictive because there are chinese developers that need financing and cannot get it. that continues to aggravate the liquidity well. david: christy, what is the outlook for that. >> a lot of market watchers are
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praying for a recovery in the second half of this year. you see developers enjoying a recovery but not distressed developers. chinese homebuyers are increasingly worried about making a purchase of distressed developers. they are spending billions on the property and if company cannot complete the project in two or three years it is a big concern. they have bad liquidity to begin with, and they have to worry about the liquidity condition. that further aggravates liquidity problems. david: n/a completely -- in a completely understandable word to have.
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kristy, thank you so much. let's look at opportunities against the backdrop of what is happening in china, it spreads widening off very look at our yields, with thousand basis points. our next guest is going by general guidelines, you can see his preference for non-china property head of asia credit strategy at goldman sachs. this reinforces that you stay away from this at least for now. >> from our perspective on the china property story it requires long-term restructuring. there was a lot of stress going through the system for companies that require restructuring. on the other hand the better developers we think will disproportionately benefit from a recovery, also easing credit conditions. you will see clear signs of differentiation between weaker
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and stronger ones. you have distressed developers which will take a number of years in our opinion in order for them to be restructured. david: what will that restructuring look like? that could be a perfectly accurate statement 12 months ago, but the tail risk is just looking like that. >> if you look at how a lot of the stresses have been resolved so far, it has been a lot of action that has driven up the process. if you look at the dollar bond there are a lot of bond exchanges. a company unable to meet the maturity profile will exchange for longer-term bonds. if you look at rnb bonds there have been maturity extensions. they go and say can you extent it was slightly longer maturity? if you look at successful restructuring across china in the last 45 years, many of them
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incorporate some kind of white knight, a third party coming in to inject capital to support restructuring, to support the company, and given so much stress in the system is not that easy to find white knights to support restructuring. all of these things we think will get dragged out. haidi: do you see contagion dress as well to the rest of high-yield this point, it even nondefault names that we see? >> we have been of the view that the contagion risk is relatively well contained. if you look at rnb bond defaults, u.s. dollar bond defaults is compartmentalized within the property sector. we think part of this is because we are seeing more liquidity injection in the system. we are also seeing a lot of support to ensure projects are completed such that you do not
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have a lot of forced liquidation across the property sector. our view continues to be that the stresses will continue, you will see more people ought to bind extensions and maturity extensions, but we do not expect this to have broader contagion effects. haidi: what support would you expect to see from the government? >> clearly we have seen action in terms of some of the better quality companies to encourage them to issue bonds. there has been loosening in terms of phone purchase requirements. also on the mortgage front. we think those actions will continue. there are some improvements in terms of the physical property market already. david: what do you like, and
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let's not just stick to china? >> overall, our view is cautious not because of china but mainly because of what we are seeing around the world. we have a preference for investment-grade over high-yield. we have a preference for shorter maturity. we have seen a lot of losses across asia credit markets, so there are pockets which to offer value. in property markets we like longer basis paper for the best developers. even though we are overall relatively cautious, there are pockets that offer decent relative value. haidi: what other changes in value to you see across the rest of asia? you are more cautious when it comes to india, but what is of
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interest to you at this stage? >> for investment-grade we think the shorter data trip will be hong kong credit and malaysia credit. we do relatively prefer indonesia over india and we think there is value in indonesia's open curve. in terms of high-yield our preference is non-china property and we stick to the short end. haidi: ken, great to have you with us, we appreciate your views. coming up, on-call's -- ipo is about to end. several ipos are sent to list -- set to list for the second half of this year. this is bloomberg. ♪
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haidi: pretty robust start to the trading week given the system digesting the carnage of the past six months. what we are seeing across major asian markets, coming from australia, every sector in the green when it comes to trading in sydney. these gains being led by tech as well as real estate. the kospi theater performer, but
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nikkei 225 up with strong gains coming from new zealand with bonds extending a recent jump we saw in the friday session being continued through the asian session this morning. several large chinese firms are set to snap on god's dry spell of ipos -- hong kong's dry spell of ipos. what are we seeing is a listing for hong kong? >> good morning. it has been a dismal 1st avenue for hong kong and global ipo markets to be fair. what has turned the needle around is the outperformance of mainland hong kong and stockmarkets and the signs regulatory crackdowns may be
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easing. the market is approaching a bull market, just over 1% away from it. and hong kong and 10 sent -- tencent tech index have rallied. all of these markets are above the best-performing in the world, and that is creating a window of opportunity. a lithium company is seeking a secondary listing in hong kong will be potentially the first $1 billion listing this year. haidi: what is the outlook? >> the outlook as we discussed, people are getting more bullish over hong kong's market. the market as been dominated by chinese tech companies. that took a beating in the last one year or 1.5 years.
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also the easing of the crackdown is brightening the outlook for that group. the consensus is what the market to rebound from here a little bit more. david: lianting, it is the anniversary, there is a summit today, and that is a milestone in time. what have we seen as far as this endeavor is concerned? >> i was just talking to our bond and fx team, but they are not expecting any new announcements coming out of it. it is more of a ceremony. in terms of help market participants have viewed the bond collapse over the past five years, it is generally considered a success. it has functioned the weight that it is supposed to function, which is to offer hong kong
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investors a way to go into mainland markets, and the markets in the past three years have for -- performed relatively well. bond yields have been better than treasury yields and is offering diversity. from that perspective it has worked well, and recently we have seen outflows from mainland bond markets because of the kind of concern over russia and ukraine and yield premium coming down. people are able to pull their money out of the markets. it has worked the way it should be. david: and we would not wish it in any form else. our managing editor. big names coming through of course in the anniversary summit later today. a couple of things we are tracking ahead of the open,
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there is a reopen in hong kong, we were shot on friday -- shut on friday because of the 25th anniversary of the handover. maybe we would have been shut anyway because of the type phone -- typhoon. worldwide car delivery as decline for tesla, covid remitted shutdowns and i terms of production. lithium and industrial manufacturing, a couple of names we are tracking. yvonne mann takes the wheel. ♪
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