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tv   Bloomberg Markets Asia  Bloomberg  September 5, 2022 10:00pm-12:00am EDT

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hong kong and singapore. 11:00 a.m. if you are watching in tokyo. welcome to "bloomberg markets: asia." haslinda: stocks, futures, and treasury yields rise as the dollar dips. plus, a largely symbolic cut. liz truss drops a $150 billion plan to cap household energy bills as her first big policy move as uk prime minister. even if we talk about the markets, a lot of for investors to mull over. we talk about opec's move, the pboc move, and we are awaiting that move from the rba. david: yes, it could be 50.
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what is interesting is our economists at bloomberg economics gave it 25, which i guess is more to the downside. our economics reporter in australia said they might be the first country to start to bring down the pace rightly slowdown interest rate hikes. -- the pace or at least slowdown interest rate hikes. we did not have cash market trade in the u.s.. we are getting futures higher and european futures higher. most equity markets are on the up. currency markets, the down story today. really quite a rarity. we talked about the pound. we will get more details on how this is going to work. to be able to cap energy prices in the u.s.. it is all energy all across the world. cable to the upside. the rba, we have inflation numbers out of the philippines,
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a little lower than expectations. the central bank is going to start moderating going into next and the year after next. 0.1% in china where things have been down as far as the equity market is concerned. >> we are also keeping an eye on the pboc seeking to manage the decline, inching ever closer to that seven psychological level. it has fixed the yuan stronger than the market anticipated for a 10th day, the longest streak of fixing, stronger fixing since october 2019. the view out there, will it continue to limit the decline? some say it will reach the seven level pretty soon. david: if the trend continues it
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is just really slowing that down. we are continuing to follow energy prices. this is one year by the way. dutch contract over the u.k., the french year prices, this is the change over the last 12 months. these levels are well off highs we have seen in recent weeks and months. you had opec-plus yesterday. energy ministers are meeting in europe. they will decide the next steps to tame these prices. haslinda: opec surprising the market. joining us from dubai is the president of the national energy consultancy fte. -- fge. let's talk about opec, the
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surprise of 100,000 barrels cut per day, it seems small but an outsized reaction from the market. why is that? >> it is more of a signal really. opec is essentially signaling we don't like $90 a barrel. we like the price around $100 a barrel. they don't have to worry too much about u.s. supply coming back, which was the worry five or six years ago. they are pretty much at production limits. so let's defend the high price. i think the saudi minister a couple weeks ago started sending out the signal. we see it loud and clear from opec. now of course there was other news at the same time in terms of price caps and all these issues related to russia. another story you have been discussing. haslinda: some say perhaps traders are underpricing the tightness in the market. if so how much are they
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underpricing? will they listen to signals being sent by opec? >> there are two things going on in the market. when we look forward for oil and we look at how we think inventories will move ahead, we actually see inventories starting to rebuild and rebuilding through the last part of 2022. but the g7 now is really playing with fire when it comes to russia in the sense they are now going through this what i would consider sort of academic exercise, saying put a price cap on and we will contain russian revenues and everyone will get their oil and be happy. russia is very clearly signaling they are not going to play ball. russia is exporting 7 million barrels a day and if they start to cut oil, get ready for high prices. we could easily move back to the
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$120, 100 $30 range. fundamentally we are moving the right direction in terms of calling -- calming the oil market but friction related to russia seems it is only going one direction. david: one of the parts of this energy market, we will save the gas story for the next few questions. i wanted to ask about diesel and why you are excited about that. >> it gets into the details, but you look at a refiner, diesel is extraordinarily strong. it is the only part of the barrel that is incentivizing a refiner to run. diesel cracks are strong. there is excitement about switching to diesel because gas is tight in europe. it is the one part of the barrel that is getting refiners to buy oil. getting refiners excited to buy oil at high prices. that is the one indicator also to watch for our clients where
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if we see the global economy slowing down further and further and diesel cracks start to come off, that is the early warning signal where we start to see oil prices collapsed. i know everyone, opec is certainly watching that. others are watching that as well. when you look at the risk to the upside and the downside, we are watching russia upside and diesel cracks downside when it comes to oil prices. david: let's pivot here to russia and everything that is happening in europe and this meeting that's going to take place friday. we have heard from ursula von der leyen talking about how the eu will look to cap gas prices out of russia. do you think that is going to work? if it does not, what do you think europe gets gas and who ends up buying gas from russia? i would think they still end up selling to europe because they are not going to sell to anyone with caps.
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>> there's talk of caps. the details are fairly murky. which is a little bit scary frankly in the sense that we are right around the corner from when these barrels or these molecules need to be traded. we need more details to understand what the impact would be and how it will really be implemented. again, i come back to the fact that russia has been quite clear that we are not going to sell things under price caps. so you can do this, but we are not going to sell. again, it sounds good on one side. when we look at it from the practical perspective, we look at it within the industry, from an industrial perspective, from the clients we work with, they do not see a clear path where the molecules will get into the market at this lower price. haslinda: for the caps to work
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we need the likes of india and china to be part of it. chances are this cap is really not going to have any impact. >> probably what will happen is caps get implemented, europe, the west does not by russian oil or they try to implement caps and says we will not sell to you. then it rotates into china, india, other markets. the appetite for large amounts russian oil, they have already started taking a lot more, but there appetite will be tested. it is possible russian oil will not get produced. when that happens, we think oil prices go up to $120, $103 based
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on this policy. the risk is to the upside in terms of price. it does not do anything in terms of capping prices. david: we are taking the pulse of the market. we may have already asked but i will phrase it to you this way. where do you think the store will be over the next couple months? >> if you look across the energy complex, european gas has been the big risk. you highlighted some of the numbers related to that. that is the biggest challenge. in terms of shortages in oil, russia has been producing. it has not been -- there has not been any real shortage in oil. it is just market nervousness around shortages that could come in the future. very real nervousness. when we look ahead, we are going to have to move those barrels into asia and we are going to have to track barrels into
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europe or the west. what that will mean is higher prices for barrels in the atlanta basin -- atlantic basin and price pressures in asia. we have to remember price pressures upward due to this disruption. haslinda: thanks for getting up early for us. jeff brown, president of an international energy consultancy, fge in dubai. commodities lifting the jakarta composite index, benefiting from higher commodity prices. it is on fresh record levels today. it is the only benchmark in asia up by double digits this year. so it is getting a boost year to date, up by almost 19%. david: let's get over to paul allen in sydney with an update of the first word news.
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>> ukraine's prime minister says allies should help and russia's -- end russia's invasion fast. he has told bloomberg ukraine can perform obligations to customers despite the war accusing russia of using energy to black mary -- to blackmail europe. >> we have absolute understanding from european leaders that we are is an hybrid war. we have absolute understanding that russia is blackmailing european politicians. we have absolute assurance from european politicians they will stay with ukraine. >> california has raised the emergency status of the state electrical system as it battles a blistering heat wave. electricity uses at the highest since 2017 with millions of homes and businesses cranking
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air conditioning to cope with temperatures above 43 degrees celsius. consumers need to use less power face rolling blackouts. the incoming uk prime minister liz truss has drafted plans to fix annual electricity and gas bills at or below the current level of about 2300 u.s. dollars. trust officially takes over from boris johnson tuesday. she is expected to speak later outside 10 downing street. the effort to cap energy bills could cost $150 billion over the next 18 months. stans government has -- pakistan's government -- expansion is estimated at 2.3% down from 5% target set in june. the entire cotton crop and 55% of rice has been wiped out. more than 1300 people have killed and millions -- 1300
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people have been killed and millions are homeless. 46 people were reported killed after a powerful earthquake in china's sichuan province. the magnitude 6.8 quake shook buildings in the provisional -- the provincial capital chengdu, where residents are under covid-19 lockdown. falling rocks blocked roads, damaged homes, and interrupted power supplies. global news, 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. david: just ahead, how to navigate the macroenvironment. we will have a look at strategy and outlook. haslinda: first, more on the market fallout from china's latest move to slow yuan appreciation.
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this is bloomberg. ♪
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david: welcome back to the show. talking chinese currency for various reasons. it has been weaker by 1%. the pboc -- stronger-than-expected, 10 days, the longest since 2017. more currency into the system. for more on this, let's talk about the currency and the economic angle. why did the pboc lower that foreign-exchange ratio? is it going to work? >> the pboc wanted to slow the
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depreciation. dollars the ny reached 6.95, a key level, before reaching 7.0, which was a long time psychological threshold. in our mind we think the seed of the depreciation is what the pboc focus more. the pboc wants to avoid too much too quick depreciation because that would trigger one-way trade in the market which means heavier cost for the pboc to stabilize the currency. they want to take action before things get worse so that -- we think that was the reason the pboc reduced the ratio, to help
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the renminbi. in our mind, for the renminbi interest rate, for the mental side, the macroeconomy, the pboc, the central bank decision, in this way we think things are still negative. david: why do you think the market is obsessed with seven? >> nobody set the hard line for the pboc, but we think the pboc has that psychological threshold. it may trigger outflow.
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that is what the pboc was concerned about. haslinda: david, is there a sense that the pboc needs other tools? >> definitely. that is one of the pboc is tools in the exchange rate market. the pboc also has other tools such as the ctf, the technical factor, or some thing else. we think the pboc can use other tools in the future if we think it is needed, which means -- in other words, if the yuan depreciates more and quickly. haslinda: thank you. bloomberg china economist david qu. let's bring in our chief rates correspondent for asia mcgarr field reynolds -- for asia, our
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field reynolds. the worst is yet to come. >> i don't know about the worst. just about any brief period we have had of charm than markets, you know that is to give you time to get ready for the next bit of turmoil ahead. a lot of potential for volatility with the rba meeting and then looking forward, what will u.s. markets make of what is been debt has been going on in europe and china -- what has been going on in europe and china from the labor day holiday until now. haslinda: it is the energy crisis which is deepening in europe. that is also weighing on sentiment. >> very much. although in many ways it is hardly a surprise events have unfolded the way they have with russia moving to an indefinite
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pause in natural gas supplies, it is still shocked that it has actually happened. we saw a big jump in natural gas prices. that reinforces the fear that stagflation is the world economy's fate in the coming months. you can see that in what is going on with bond yields, what is going on with extreme dollar strength, mostly, and also what has been going on with equities where we have some rallies breakout here and there but they are quick to reverse. david: berkeley alluded to this. now i'm caught wanting to ask you about the boj. what is the bigger story, the rba today or maybe getting intervention from the boj when it comes to yields? >> in many ways the rba might be the more important point just because we have already had the boj, you know, slap yields back
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down in japan and the uprising is less strong than it was earlier this year. let's stick with the rba. the rba is at a pivotal point. it is almost certain to hike by 50 basis points based on markets and economists. but there's a lot of speculation that this will be the last 50 basis point hike. that highlights -- they will give some guidance potentially on that in today's statement. that is a key pivotal moment for the global economy. we have yet to have a central bank slow down the pace of rate hikes since we started this strong hiking cycle earlier this year. we have yet to see banks that started at 25 to 50, nobody has gone back down to 25. if the rba does that today or signals it might do that next month, that is going to put the
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confrontation between central banks and investors -- when do central bank away from extreme rate hikes? david: garfield reynolds. the rba rate decision, plenty more ahead. this is bloomberg. ♪
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david: we are continuing to track this typhoon. the understanding based on some reports, it has made its way back to water after skirting parts of chinese mainland and of course south korea. power outages there and thousands evacuated. haslinda: that's right. a massive radius, 400 kilometers, big enough to cover seoul to busan.
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korea electric power has been impacted. halting operations at a plant at the moment. nissan motor down. let's look at energy stocks on the back of what opec did, cutting hundred thousand barrels -- it will be cutting 100,000 barrels a day. some say it is a slow gesture but the impact has been quite big. we continue to track power outages and shortages in europe as well. as wel- [announcer] imagine keep having fuller, thicker,
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haslinda: there you have it.
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tokyo looking pretty. and two to five is flat as it comes back from the lunch break -- the nikkei 225 is flat as it comes back from lunch. the csi 300 getting a lift. we have the pboc fixing the yuan at the stronger end compared to estimates and it has done so for the 10th consecutive day, the longest streak since 2019. david: since we are talking currencies, you look at where we are on cable. this time yesterday we were trading at 114.4 4 -- 1.14. we are a little higher. ftse futures flat.
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bad deal and the cash markets yesterday. that takes us into another big story we are tracking. and u.k. households, some good news if they can execute on this . ms of plan from the incoming prime minister, liz truss to cap energy costs for households. let's bring in rebecca choong wilkins. how will this work exactly? rebecca: liz truss has come out with a promise for a bold plan for the u.k. and energy policy is front and center. the latest policy suggests she and her government will look to fix prices for energy bills and electricity and gas bills at the level they are currently at or below. that would keep them at about 2300 u.s. dollars. quite an extensive plan. about 130 billion has been your
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mark for this. where that cash is coming from is still unclear. it will be a support for many households across the u.k. prior to this coming into place, u.k. households were expecting to see an 80% jump in their bills for household energy in october. and alongside this plan to support consumers and households , we also are seeing some details emerge to support small businesses and their energy bills. business in the u.k. do not enjoy the same cap that consumers do so this will be a move that is appreciated by the business community. haslinda: uncomfortable with the plans to cut with inflation pressures. rebecca: in the last month as we saw liz truss coming in as a
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front runner, we saw markets react. they did not move too much yesterday. i think a lot of that was priced in. there is nervousness around plans to cut corporation tax. she also has made a fundamental shift saying she does not believe in the economic background of taxation as a form of redistricting -- of redistribution of wealth. david: truss the process. rebecca choong wilkins, our correspondent. i hear our producers. let's all be adults about this. let's get over to paul allen. paul: germany is reversing is policy on nuclear power as it is unlikely to meet its target for natural gas storage following russia's latest supply cut.
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germany will keep two nuclear plow -- nuclear power plants available this winter. berlin has also signed an energy pact with paris with france supplying germany with gas as needed and germany exporting energy -- electricity to france. opec plus has agreed to cut 100,000 barrels per day. the cut is aimed at stabilizing global markets and takes the cartel's oil levers -- oil
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china is slashing the amount of foreign exchange deposits. the pboc's move aims to boost the yuan. financial institutions will need to hold -- percent a supertype has moved past south korea's south east coast leaving one person missing but few reports of major damage. heavy rain and winds roads -- damaged roads. the storm has also disrupted ports and air traffic across china and japan. u.s. judge has granted donald trump's request for a neutral third party to review documents seized by the fbi. donald trump -- also temporarily blocked the justice department from using the material. the judge suggested the supreme court may eventually have to decide the issue of executive privilege related to a former president. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. haslinda: singapore says it is
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looking to attract global rainmakers with its new ex-pat visa across a range of next-generation sectors. we were told exclusively about the effort to draw global talent. >> i would not say it is and overhauling. i think it is part and parcel of an overall exercise in going for the highly differentiated sector in terms of top global talent and attracting them. bringing them to our shores. and hopefully getting them interested in bringing the top rainmakers into our country to beef up the talent base we have today. that will broaden and significantly strengthen the middle segment so we can continue to also provide a good platform and at the same time provide a good platform for this
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top talent to grow their creativity and innovation using singapore as a platform to launch into the rest of the world. >> at 30,000 singapore dollars a month, a 5% of the passholders --who are you trying to attract? what figure do you have? >> there is not a fixed quota. i think the headline number people think of when they think of this pass is 30,000. it corresponds to what you have said. the top 5% of our current passholders. what we are hoping to bring to singapore are the rainmakers. the guys at the cutting edge, leaders in every field, science, tech, energy -- engine nearing and math and finance and
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professional services. we also want to build top talent in culture, in the arts and in sports as well as in research and development. in terms of looking at numbers and groups of talent in this space, they are very mobile. there is no particular number. it is an offensive strategy. it is a matter for top companies to identify them and bring them here. >> that sad -- that salary level is a lot. are you training -- are you trying to lure people from hong kong and singapore? >> we are looking at talent from all over the world. not from one place and not just in finance. there is a lot of -- there are a
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lot of exciting opportunities. one is very forward-looking today. something close to my heart as energy minister is on sustainability in terms of green finance, green economy and energy reset. in the space where we want to be leaders in the use of hydrogen as a fuel, doing carbon capture and storage, these are areas we could really grow and that is the talent we hope to attract. >> singapore is going to repeal a colonial law banning sex between men. how does that square with your push for top talent if those peoples bounces cannot get visa or the right to live here? >> our prevailing immigration laws are very profamily. they have been in existence for a long time.
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as the deputy prime minister has shared in a previous interview, on a case-by-case basis, we are prepared to review. at the moment, when you talk about this new pass we are targeting, i don't think there is a specific quota on number. these are people in the top space. i think we can manage those applications. david: that was singapore's manpower ministers speaking with our duly at sally exclusively. let's stay in saudi arabia. jakarta and indonesia also. 40 minutes into the session. coming through some inflation numbers out of the philippines. 4.9. lower than the august estimates. speaking of lower, what has gone
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lower is the hang seng index. you can see some wea kb=ness, also lower today is the taiwan dollar. three year lows as far -- or highs as far as the exchange rate is concerned. we are also looking at the chinese currency. haslinda: also trending lower revising the gains we saw. [indiscernible] also in the back of china's ratio to support the weakening currency. the currency is not getting that much support today. we have plenty ahead. flowering tree will join us to discuss their investment outlook and strategy for asia. keep it here with us. this is bloomberg. ♪
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david: market are up but let's face it and to be completely honest, they are not doing anything. let's talk about market strategy
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in the middle of a microenvironment that has been difficult. 60-40 has given you negative returns and with the fed raising rates and inflation, the micro strategies might have to consider what is happening in terms of risk premium. let's bring in rajesh sachdeva. he is the ceo and founding partner of flowering tree investment management. nice to see you and speak with you again. almost 12 months. i want to ask you not so much about your trades but how you have managed over the last 12 months which have been difficult if you are a fund manager especially if you are not a micro fund given the challenges macro wise. rajesh: thank you for having me on. actually, the current work environment has been better suited for us.
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we never really ran up the momentum stocks last year. we were not as badly affected as the rest of the market. value investing, and disciplined choices have allowed us to do all right. david: a lot of things have fallen these last few months. i would imagine the pool you can pick from has gotten were active. rajesh: the average holding period for us is five years. there is always something looking up. we have been lucky. particularly in india and vietnam where we had a
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significant position. that has really paid off this year. and that has put us in a good light. haslinda: dave talked about the 60-40 portfolio giving you negative returns. -15% year to date. how should the portfolio be looking right now? rajesh: for example, we have 40% of our fund in financials. we think that has played out. we don't think the rate hike cycle will have a negative impact. one of our biggest positions in india is a bank and we picked it four years ago.
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costs are falling. the outlook is good. haslinda: for those looking at buying, what should they be looking at? rajesh: i won't say southeast asia and india are better positioned because they did have the expected stimulus and so not much risk. that has played out through financials. we like financials in vietnam and in india. [indiscernible] david: i'm not sure if you are watching but we are flashing that one of your stock picks from last year i remember you convincing us why that seemed
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like a good idea and it was. to clarify on this jewelry play you have, are you still long? rajesh: it is still in a top 10 position for us. it is up 18% this year. they are having a blockbuster year. in a retail industry, they are up. this year they are growing. this year should be a record year. we remain very optimistic. it is a good management team. david: if i find myself in singapore, lunch on you and we can bring haslinda too. plenty more ahead. this is bloomberg. ♪
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david: a snapshot of commodity markets against the backdrop of what is happening in ukraine and what will likely happen there. we were speaking with the prime minister and he told us that his country has a commitment from
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european politicians to support the war against russia despite the other big crisis created in europe, the energy crisis. he also told us that ukraine's allies need to help quickly end the russian invasion because time is on our scouts side. -- is on moscow's side. >> we have a criminal war in ukraine but the european union also has a hybrid word. gas and oil blackmail. it is hybrid, cyber and disinformation. it is a crisis that russia has created in food. it is a migrant crisis that russia creates by killing civilians in ukraine and having famine in african and asian countries. all of this is elements of a hybrid war.
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what is happening in european union on the continent is not so simple. it is not because there is a war in ukraine. it is because of action of russia in european union, ukraine and all around the world. now we have a principal war between different worlds, between the civilized war, democracy and freedom and between autocracy and soviet styled principles, between the russian empire. we don't want to be a part of the russian empire. we want to be a part of the free and democratic worlds. and it is important to understand that if we could be united, we could win the war and save our democratic and freedom principles and we should go through this winter and find the possibility to go through this war and end the war.
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we in ukraine protect borders of europe from the literary ut europe should protect the democratic principles in ukraine, should support us and protect the democratic and freedom principles on the territory of european union. we should act as one unit. >> did you have a clear commitment from european officials that the sanctions will stay on? it does not matter if there is nord stream one flows? the european union will not play along with the rules that vladimir putin wants which are very clear, lift the sanctions. >> we have a clear understanding from european leaders that we are in a hybrid war. we have absolute understanding that russia is blackmailing european politicians. and we have absolute assure meant from european politicians
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that they will stay with ukraine until the end. haslinda: the ukrainian prime minister. that's do a quick check of the headlines. credit suisse is expanding roles in doha. it is also establishing a technology hub there and aims to strengthen its wealth management business and contribute to accelerating developments and digitization in qatar. cbs -- cvs health to buy signify health for about $8 million continuing its expansion beyond its retail origins. unitedhealth group, and option care health. the deal is expected to close in the first half of 2023. some --sembcorp industries. it operates two coal-fired
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plants in india but it is looking to d carbonized -- decarbonize its portfolio. david: several components in the equity story. looking at volumes. volumes across every single stock. to the right is the extrapolation. we are projected to be lighter. in terms of sector groups, financials and energy leading gains. a line out of gazprom and a way to tease the next hour, i will tell you what that line is in a couple of moments. this is bloomberg. ♪
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haslinda: could oil get a boost after opec-plus agrees to an output cut. david: when you look at cross assets, and currency markets, that is what is leading risk
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appetite which is coming back in. let me get started with the chinese currency. we are flat. on a nominal level we are closing in on seven. the spread between onshore and offshore -- what will be interesting is the hibor rate. you are also getting some dollar weakness coming through but despite that, taiwan dollar weakness coming through we are flat on the regional asian equity benchmark. getting some pieces of green. we were talking about indonesia early on looking like we might get an all-time high by the close. this is the commodity call. we will get to that end moment. in 90 minutes we got the rba, will they do 50? a small minority in the market things they will go 25.
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that is a reflection of the cash markets. no cash market trading in the u.s. -- the u.s. open -- i'm kidding. haslinda: we are taking a look at the future is pure you in focus on the back of the deepening energy crisis that it is experiencing and the u.k. has a new prime minister who wants to cut taxes despite inflationary pressures. this is how it is looking for future is pure speaking of energy, looking at where energy prices are in a one-year timeframe. look at natural gas up by 365%. we have the german power surging by 500 as well. let's get more on the energy markets from ed morse. let's start with what opec-plus did -- it is cutting 100,000
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barrels per day. some say a small move but it is about protecting prices instead of the balance in the market. ed: i think it is a lot of do about nothing. it does nothing. we have seen bti go up so there has been no impact on the oil market. i don't know if the saudis are happy or sad about that but they wanted to signal they could do something. they basically did nothing. no one will see that in the marketplace. haslinda: where do you see prices going from here? hedge fund bets significantly higher. ed: the hedge fund bets are irrelevant. we are not seeing much in the speculative community. liquidity is low.
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we are seeing a market that is torn between weakness on one hand as driven by lower economic growth and higher supply and it is driven by demand falling out completely from where people thought it was going to be. there are a lot of potential bullish factors in the market. it leaves the market in a bit of a limbo. we don't know if there will be a hurricane season. we don't know if there will be dislocations of supply coming out of iraq, nigeria, and libya. we don't know what the dislocations of the market are going to be as europe moves away from importing russian crude by the end of this year. there are a lot of potentially important bullish factors in the market. the one big bearish factor
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looming over the market is what will happen with the jcp agreement looming in the next week or two. whether the u.s. and iran are coming back to an agreement. we have mixed signals. the bearish part is overwhelmingly more important and the bullish part -- than the bullish part. all we need is a hefty gulf of mexico hurricane season and that will really turn the market tighter. david: i want -- you have outlined the major factors. if we could attach probabilities, say on the iranian deal, would you say on balance that would be more important? ed: we are seeing tightness in the global power system. no doubt about that. a combination of things were happening before russia-ukraine,
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a climate change impact across the planet. we have had the highest temperatures on record in the northern hemisphere. we do not have redundancy on the electricity grid so prices are high and unbelievably so in europe because of the geopolitics surrounding russia-ukraine and the russian decision to drop nord stream flows to zero for however long. the oil market is looking different. we have had a 25% drop in oil prices since june. we have more bearish factors in the oil market than in the gas or electric markets. we are having a big divide across the energy spectrum. i think one thing is for sure, the world is going to see tighter electricity markets for some time to come. europe cannot deal without russian gas for 3-4 years before
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there are adequate replacements on the market so we will see very high electricity prices impacting domestic politics. in europe and around the world. on the oil market side it is a different picture. more inventory growth, all else equal but the relative decline in growth and oil demand. the u.s. is down 2 million barrels this summer then where it was a summer ago. and that is a function of high prices impacting demand. we have two different markets. what happens to oil will be a function of what happens in a iran. or interruption of supply coming from disruptions in iraq where domestic politics are not
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working out well at the moment and in nigeria and libya. we have russian production that could be questionable in terms of investable proposition. in russia and we have a drop in demand. the hurricane season is something to watch out for. it is an interesting phenomenon. the u.s. is important in a way that it has never been as a supplier in the market. david: the hurricane season is what it is, if it comes, it comes. europe seems to be in big trouble. for obvious reasons politicians coming in, liz truss has her plan, european energy ministers meeting later this week. what is the best case scenario for european consumers struggling with these prices? ed: the best case for consumers
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is, sad to say, is pulling back on consumption, conserving. they are doing it because high prices tend to do that. there is no way there can be a replacement of the lost russian gas in europe without there being phenomenal drop in demand. we are seeing a drop in demand in energy intensive industries. those think and just -- the zinc smelting industry has gone to zero. we are seeing a big impact on the european economy in the energy intensive industries that cannot do without that gas. the consumer might have some rebellion at the political level which is a worrisome side look out for the next three months. haslinda: we had john kerry say
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russia is weaponizing fuel when it shut down the nord stream pipeline. might oil be the next commodity to be weaponized? what impact would that have? ed: oil is being weaponized. it is a two-way street. on the russian side but it is also being weaponized by the europeans and the west. the very idea that the g7 has of putting a price cap on oil is a weaponization of energy as an instrument of policy. can they do this? this will be a severe test. the sanctions imposed on russia in terms of everything related to the oil sector, imports, supplies, experts being embargoed -- exports being embargoed, this is a weaponization that is happening
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and it is happening on both sides. not a one-way street. haslinda: ed morse from citigroup. let's get a first word news from paul allen in sydney. paul: japan's households cut back on spending and july while real wages fell again amid a surge in virus cases and a steady living -- and a steady increase in living costs. spending on furniture, clothing and insurance fell suggesting the country's recovery path is still shaky. spending was 3.4% higher than a year ago impaired to a four point 6% gain forecast. ukraine's prime minister says its allies should help. he also told bloomberg that ukraine can fulfill its gas transit obligations to european customers despite the war accusing russia of using energy
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to blackmail europe. >> we see understanding from european leaders that we are in a hybrid board. we have absolute understanding that russia is blackmailing european politicians. and we have assurance from european politicians that they still with ukraine until the win. paul: at least 46 people reported killed after a powerful earthquake in sichuan. 21 million residents are under a covid-19 locked in chengdu. falling rocks blocked roads and damaged homes and interrupted power supplies. and there is your first word news. david: just ahead this hour, india has overtaken britain to become the world fifth largest economy.
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find out how duro capital is looking to position. haslinda: javelin wealth management explains cautious starts in equities and why they are favoring vietnam. ceo stephen dave -- steven davies joins us. this is bloomberg. ♪
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david: mixed basket or bag? i'm going with bag today. we are still getting a mixed picture across the equity markets. weaker on the chinese currency. approaching the seven handle. you had a stronger fix again, 10th straight day. the cut with the foreign reserve
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requirements to get more foreign currency. james mayger is a china economy editor to talk us through. those were steps to slow the currency down pure the broader story is an economy that is slowing down. hope for a third-quarter for things to pick up? james: it is a strong dollar. the pboc -- this is not a weak yuan. n you are seeing a lot of weakness in the chinese economy. you have the lockdowns. the economy is not looking strong in the third quarter of the government yesterday said the quarter is crucial for getting the stimulus measures out.
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we are two thirds of the way through the third quarter. it is hard to see how the stimulus measures announced and the second half are having an effect. while there is a strong dollar, the weakness in the chinese economy -- and the expectation is that china will have to further cut rates to try to stimulate more growth. it is also probably having an effect on the weakness in the yuan though the pboc changed their reserve requirements yesterday regarding foreign exchange. haslinda: we are so focused on the yuan getting to seven versus the dollar but even if it does reach seven, it is still too strong given the dollar environment. james: the official line is there is no too strong or too weak which is similar to what the japanese say.
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whether it goes to seven or not, it is arbitrary. it will make chinese imports more expensive the weaker it gets and it will also affect china's exports. the weaker the yuan gets, that is a bennett for exports. haslinda: james mayger, thank you. let's get back to market action and bring in steven davies. a big welcome back after three years. i want to pick up on what james said. the environment in china is not great. we have seen an exit of foreign firms from china. that is likely to continue. regardless of what the government does, covid zero is being maintained. steve: what has been a surprise
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and the last 12 months is the degree to which historically the answer out of the policy playbook is pump. they will flush the system with liquidity and there will be different measures. a lot of liquidity being provided to the banking system. they have done this this time around on the margin but it shows the degree to which the pboc and the government are much more reluctant to do that type of pump priming. one can only speculate but perhaps that reflects a more limited pool of resources or they are more concerned about maintaining the integrity of the -- and therefore the policy option is more limited. haslinda: chinese stocks are already laggards. what stage would you be buying? steve: at the moment the answer is no, we whatnot specifically
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because the policy playbook in itself is still far too opaque. we need to see some concrete action coming through as far as the integrity of the banking system. the huge problems they have in the property sector and also a little more regulatory transparency over the outlook for the tech sector which is being hammered by changes in regulation and in approach on the part of the chinese government. until those things change it is difficult to be anything more than cautious. haslinda: you have to try to find out where you see the best value once the policy meeting in october is over. steve: that is perhaps a bit of a surprise. more stimulus measures have not come out before that meeting. maybe it reflects the degree to which xi and his cohorts are confident they will get the
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votes they require in national terms. it might mean that once that is out of the way they can be more relaxed in going forward, but at the same time the chinese economy is under big pressure. you can see there is a degree of popular discomfort to put it mildly with covid zero. a lot of these things require a different approach and we have not seen it so far. david: i want to get a sense -- there are a lot of risks on balance, a lot more risks compared to previous years. would you say it would be wise to increase your cash balance these next few months? steve: in overall terms that is what we have done. it was a bit uncomfortable in july because we had a bit of a whipsaw. in august, economic realities came back with a vengeance and the federal reserve and the u.s.
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reaffirmed its strong commitment to keeping inflation under control. all of those reasons would tend to mean you have to be a little more cautious and look at opportunities but at the same time be patient and not be too trigger-happy. david: understood. when everyone talks about one trade and everyone seems to agree and currently that is a stronger dollar, is it time to start thinking about what one would do when the tides turn if the dollar does chart to fall? what would be the first thing you would do? steve: good question. the arnie is that -- the irony is that the forecast last year was for dollar weakness. we have not had that. that is entirely because of interest rate differentials. it does not look like the interest rate differential will change materially any time soon because although other central banks are raising rates, it is
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the case that the federal reserve is outfront having been a late starter but they are a long wait outfront now with more to come. in addition -- in addition to interest rate increases, the one getting less attention but that is more significant is tightening. the removal of liquidity from the system is dollar positive even if it is market negative. david: that is qt. we can talk about that next time. let's not wait three years before we have the next conversation. steve davies. plenty more ahead. this is bloomberg. ♪
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haslinda: we are waiting the rba
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decision coming in about an hour from now. the aussie trading -- higher by 0.1%. a weaker dollar environment for today. let's do a quick check of the headlines. seeking as much as 300 million dollars in a london ipo. the investment firm focuses on buying stakes and private chinese companies. it aims to list in the premium segment and expects to publish its prospectus in the coming days. asia's richest man is said to be looking for new -- a new mergers and acquisition chief. they have already reached out to potential candidates. he has been aggressively diversifying his empire beyond coal to sectors including data and health care. volkswagen is pushing ahead with
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its plan to list a minority stake in porsche this year paving the way for what could be one of europe's biggest ipo's. it is planning a listing at the end of this month. let's take a look at the stocks on the back of the typhoon in korea. lg posco and others all trading in negative territory. plenty more ahead. this is bloomberg. ♪ as a business owner, your bottom line is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts.
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david: there we go. a live shot.
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in case you are wondering, that is the tv tower. that is our view outside of the office. we are heading into the lunch break. i won't speculate -- we can talk about that later but here we go. we are at session highs in these equity markets. haslinda: we have japan coming back from lunch. it is doing little right now. we will call it flat two. the yen. it could be trending lower from here. david: a lot of that will depend on what the dollar does and where it goes because that has forced a lot of policy action across the region. we heard from the be ok a couple -- the bok a couple weeks ago talking about how a weak
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currency might engender inflation and the latest one this week is out of the pboc. 10th straight day and the announcement that comes september 15 they will be reducing the foreign reserve rate which is another step to support the currency. can you chen is -- tania chen is with us and stephen cho. you put out aps on this. is it going to work? what is it meant to do? >> it will only work temporarily. in april they did the same thing. the currency stabilized a little bit but after that the dollar gets stronger. this time we expect the same as long as china [indiscernible] david: we talk about the seven handle.
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do we talk about that because it is a nice, round number? tania: it is a psychological milestone. the last time it touched seven was in 2019 which was post the china-u.s. trade war. what is different about the fundamentals this time is the spot rate is moving. the pboc is trying to lean against the declines with the daily fixing, it is trying to eliminate herd behavior. david: let's talk about that. when we talk about fundamentals, we know it is a weakening economy. i look at exports. 90 billion was the latest.
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that does not seem come if i put that together with a currency, a currency that many say is overvalued. >> the trade surplus is at a record high regionally. it has not changed. the thing is the rest of the economy is weakening so that is a problem. we don't have a strong export trade. the yuan will be beyond seven already. exports are keeping them below seven. the problem with covid and the restrictions, not saying it is right or wrong but it is hurting the economy. and it is impacting taiwan as well as well as other asian economies. china's problem will impact asia and the world economy. and on top of that, we are talking about slower aggregate demand globally. that is going to fit into weaker
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exports going forward. even this -- there are a lot of headwinds for the chinese currency right now. david: does that weaken the broader asian fx? are we overthinking this? [laughter] tania: kind of because it is basically a dollars story. there are two things you should note. the asian currencies are going to be linked to what happens with the chinese currency. at the same time, if you look at the chinese currency from a valuation, it has not moved that much this week. the policymakers look at the yuan from the holistic point of view. from that angle, it is quite stable. speaking about emerging markets,
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i think there is a debate emerging over whether emerging markets have decoupled from china appeared a year ago the correlation was high. some people say now since the financial crisis, asian emerging market economies have boosted their markets and they have done a lot to be better prepared for this cycle of fed tightening. some of them are more cushioned this time from the yuan weakness. david: the likes of the thai baht --where do you see that going? >> right now our number is 10 250. we are slightly below fair value which is one reason why the basket is stable though it is weakening quite fast over the last few weeks. that is a trigger. that is why the pboc is throwing out measures. david: our bloomberg
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intelligence analyst and can you chen. -- tania chen. from hong kong we take you to sydney where paul allen has your first word news. paul: the incoming uk prime minister liz truss has drafted plans to fix and you will electricity and gas ills for a typical household at or below the current levels of about 2300 u.s. dollars. she officially takes over from boris johnson on tuesday and will speak later outside 10 downing street according to officials briefed on her plan. the mechanism could cost 150 billion dollars over the next 18 months. germany is reversing is policy on nuclear power and it is unlikely to meet its target for natural gas storage. germany will keep two nuclear plants available for this winter as it works to ensure energy security.
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berlin has signed an energy pact with paris with france supplying gas to germany and germany exporting electricity to france when demand peaks. opec-plus has agreed to reduce oil production by 100,000 barrels a day in october, surprise move reverses september's hike. the cut is aimed at stabilizing global markets and takes the oil back to august levels. in its final communicate opec-plus that it would be willing to call another meeting at any time to address further market developments. the eu's chief diplomat has played down the prospects of a nuclear deal with iran saying the chances of an agreement are fading. the negotiations are in danger he said and he is a less confident about a deal being reached. and a draft agreement has been submitted but he says the positions of iran and the u.s. are diverting. california has raised --
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electricity use hit its highest level since 2017 with millions of homes and businesses cranking air conditioning to deal with temperatures above 43 degrees celsius. grid operators say consumers need to use less power or phase rolling blackouts. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. haslinda: ukraine's prime minister says his country has a commitment from european politicians to support ukraine in the were against russia despite the turmoil they face in the energy markets. he also told us that ukraine's allies need to quickly end the invasion because time is on moscow's side. >> we have a criminal war in ukraine but european union also has a hybrid war.
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it is gas and oil blackmail. it is cyber and disinformation. it is a food crisis that russia has created blocking our seaports. it is a migrant crisis russia creates by killing civilians and a famine. all of this is elements of hybrid war. this is what is happening on the european continent and it is not so simple. it is not because of the war in ukraine. it is because of the action in russia. in european union and ukraine and around the world. we have a principal war between civilized world, democracy, freedom and between autocracy and soviet styled principles. we would not like to be a part of the russian empire.
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we would like to be a part of free and democratic europe. and very important to understand is if we are united we could win and we could save our democratic and freedom principles and we should go through this winter and find the possibility to go through the war and win. all of us in our own place. we protect the borders of your from military invasion but europe should protect the democratic principles in ukraine and should support us and protect their freedom and democratic principles. we should be acting together like one unit. >> did you have the clear commitment from european officials that the sanctions will stay on? it does not matter if the nord stream one flows or not?
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the european union will not play along with the rules of from putin. >> there is a clear understanding from european leaders that we are in a hybrid word. we have absolute understanding that russia is blackmailing european politicians. and we have assurance from european politicians that they will stay with ukraine until the win. haslinda: that was ukraine's prime minister. still to come,, how to get the most out of the indian markets with duro capital's farmer as india's economy becomes the fifth largest in the world. this is bloomberg. ♪
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haslinda: welcome back. india starts trading in about three minutes. investors are watching key stories. the are b.i. will hold options and is in discussions with russia about the supply of liquefied natural gas. it aims to become a global leader in green hydrogen. and trading in mumbai after an ipo. 50 futures pointing to a higher
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open up by 0.2%. david: let's stay in india. the big news that took over social media is the news that india overtook britain to become the world's fifth largest economy. our next task says we need to wake up to that reality and how to position around the rise of india and how you should be allocating your global portfolio given that backdrop. joining us is euro capital's -- duro capital's founder. before we get to that, let's talk about this demographic dividend in india. it seems to be a low hanging fruit. it is how one accesses that. nishchay: thank you for having
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me on. i think you pointed to india over taking the u.k. as the fifth largest economy. the point i wanted to highlight is that is a great statistic but what is even more fascinating is that when you look at allocations of global investors to the u.k., and these are people that basically follow msci allocations, they allocate about 4% of their portfolios to the u.k. india being a larger economy than the u.k. is allocated only 1.5%. i think there is a big disconnect there. and if you look at it, india is also probably one of the largest contributors to global gdp growth every year. so come by the way, why is the
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disconnect there? one of the reasons is because of the limited flow or the lower float of freely tradable stock available to investors on public exchanges in india and that is because founders in india tend to own much higher stakes in their own businesses. while that is considered a negative by global investors reducing their allocations to india, people like us like to see businesses where founders are more incentivized to drive up the value of their businesses. david: interesting dynamic and tightly held -- not so unique to india. help me understand -- as the world -- it also depends on where the capital is coming from and who the allocators are in
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india the multiples are almost always much higher than anywhere else. how would you approach what some would say are expensive valuations but locals might not say that? nishchay: 10 years ago if you asked me the same question i would have pointed to the premium that india trades over other emerging markets. 10 years ago that was a significant premium. interestingly, over the last 10 years, significantly -- india significantly outperformed the indices and the premium is only expanded. yes, india is expensive. india will probably stay expensive. but i think for people like us, we focus on business fundamentals and the individual valuations of the company we are investing in. i said india will likely stay
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more expensive and that is because of another trend. domestic money coming in. let me give you another example. in 2008, $12.5 million left india. this year in the first half of the year we had close to $30 million leave india and the markets are only 9%. this was because the domestic institution of investors matched pound for pound --. in the last two months, they have reentered india and invested around 7.5 and markets are up around 12%. i think valuations that have been expensive will probably stay expensive. haslinda: you talk about how indian investors have managed to prop up the market even though
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foreign funds were at one time making an exit. is it enough to counter volatility in the market? nishchay: at the end of the date it is not flows that determine where markets will go. in the short-term flows determine the outcome of markets but in the long-term it is about fundamentals. we happen to believe that india is probably the only large economy left where every sector is underpenetrated. i am not talking about sectors from a per capita basis. i'm talking about the percentage of gdp. when we look at this under penetration and we look at the scale of the economy, it is a huge runway of growth in the market. india has a lot of things going for it. we can talk about government reforms. this government has shown that
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they have acted and will continue to act in ways that will continue to benefit the economy. haslinda: in terms of credit growth in india, what are your thoughts on that? has a government done enough to reform? nishchay: i think they have done a lot. if you look at the financial sector, this morning you guys were talking about the financial space and absolutely it is an interesting space. if you think about it, indian banks have been cleaning their balance sheets for the last eight years. that is a long cleanup. if you think about covid, every bank took up its credit filters. the credit given out over the last two years is probably of decent quality. and all of these banks have raised capital during covid.
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capital ratios are great. and we are now coming -- we are looking at an uptick in the credit cycle. credit which is the fuel of the economy is ready to bump out. and i think that sets the economy up well. the cleanup mission was driven by the government and the are rbi. david: we appreciate speaking to you. the founder at duro capital. india is one of the few markets this year that is up come up to percent among a handful including indonesia, singapore. the rest of asia is down for the year so far. we are flat on the currency there. plenty more ahead. we will preview the rate
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decision out of the rba next. this is bloomberg. ♪
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david: good afternoon, sidney. here we go. in just over a half hour, we will probably get higher rates. by how much is the question.
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we will probably get 50. a small possibility that we might get a 25 which would maybe indicate the central bank tightening -- we will get to that. in terms of what that looks for, the curve is implied cash rate based on futures, it won't even up until this time next year. what is the betting like? one month ago it was -- maybe not a chance for a 50 basis point hike. we crunched the same numbers and right now it is 70% that we will get a 50 basis point hike. chances are we well.
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haslinda: the rba did say it does not have a set path. will it be 50 or not? this is on the back of wanting to fight inflation. q2 is at 6.1%, double what the rba is targeting. and it says it expects inflation to peak at 8% later in the year but it begs the question, how will it impact the people? households here have the highest debt to gdp, highest in the world. we await the decision in about 30 minutes from now. let's do a quick check of the latest headlines. credit suisse expanding operations in doha creating up to 100 roles across all divisions. it is also establishing a technology and engineering hub aiming to strengthen its wealth
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management business and contribute to accelerating development and digitization in qatar. cvs health has reached a deal to buy signify health for about $8 million. it continues the expansion beyond its retail origins. david: the two equity markets that came online this hour, thailand and india are both up. but on an aggregate basis we are lowered. we are heading into the lunch break. that means i will see you guys tomorrow. time for the break. this is bloomberg. ♪
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