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tv   Bloomberg Markets Asia  Bloomberg  September 10, 2017 9:00pm-12:00am EDT

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♪ david: it is 9:00 a.m. in hong kong. this is "bloomberg markets: asia." ♪ david: all right, returning to risk. asian stocks advance with the dollar has worries he's over north korea and irma. irma still lashing florida's west coast after flooding miami's financial district. gate pricesy accelerate, an unexpected boost
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to global reflation. equally important, the data out of china. have a look at this bloomberg chart. uptick were expecting an , but not this, 6.3%, now back above 6%. here is your base effect, steadying, and pick up right there. bloomberg intelligence is telling us in a note is that it might the sentiment driven. is it supply side? partly. this could turn, but that the in said, if you did have to choose which industries are benefiting, look up stream, steel. downstream, not quite. upstream, steel and rebar prices, closely coal related. you can see where that one goes.
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very interesting. we will be flushing out that story and a few moments in market reaction when markets open in hong kong and china in 30 minutes. in the meantime, singapore, taiwan, malaysia coming online. sophie, currencies, but the equity markets so far. sophie: these are equity markets. higher byeing led tokyo and seoul, korea. some marginal losses for stocks in kuala lumpur. while stocks are higher, bonds falling, the u.s. 10 year yield closer to 2.1%. the dollar rebounding, up .2% from the lowest level in over two years, set for its first gain in eight days, so weighing on g10 and asian currencies.
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risk appetite returning, dragging on gold, the yen at 108 .41. surpriseighted that uptick in chinese inflation numbers, but that is supporting , and theore yuan aussie also shrugging off a stronger than forecast inflation data. when it comes to the yuan move to date, when catalyst could be the pboc removing a reserve for women for trading starting today. we have oil on the rise, gold falling, and ace metals under pressure. copper extending the drop on friday with aluminum and steel. iron ore futures extending last week's drop after the biggest weekly drop since may. as equity markets are getting warmed up, mining stocks are among the worst performers of the day here. and newcrestals mining dragging in sydney, but
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i.t. stocks leading gains so far. ,hen you look at the players trend micro gaining almost 5% in tokyo. when it comes to psmc in taipei after the company reported a 2.5% drop in sales, not affecting investor sentiment so far, getting about 1%, extending friday's advance. david: not bad. lots of movers to follow. , the massiverade beating it took before last week did look a little overextended given developments in the weekend. we have first word news with paul allen. an update on north korea. right.hat's north korea has warned of retaliation against the u.s. as
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the united nations approves harsher sanctions. washington wants a vote monday on measures, including a ban on oil imports. north korea celebrating the anniversary of its founding without testing a missile as south korea had expected. instead, kim jong-un on how they banquet for nuclear scientists and technicians. hurricane irma pounding florida's west coast, making to line falls and driving a wall of wind that submerged miami and the tampa bay area reading for its worst a disaster in decades. it also threatens alabama and georgia. it has talked up our two more than 2 million customers and shut 6000 gasoline stations. early estimates of damage or in the tens of billions of dollars. china will set a deadline for automakers to into sales of vehicles powered live fossil fuels. the vice minister of industry and information technology said the government is working with
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other regulators on a timetable to into production and sales to accelerate the push into the electric car market and follows similar decisions in the u k and france. said tocentral bank be removing reserve requirement for trading foreign currency forward and may slow the appreciation after the biggest two-week surgeon a decade. from monday that the pboc will stop requiring financial institutions to set aside cash when buying dollars for clients. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. david: thank you. an update on the inflation figures out of china on the weekend. materials,s in from factory profits pushing up the overall figures, a four month high. numbers beyond estimates, 6.3%. quickeningne is cpi
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more than forecast. we are joined in the studio by our chief asia economics correspondent enda curran. the reflation story does seem to be over. for the profitnt side of things are chinese debtanies, good for the servicing side of things. the question is what is behind the ppi resurgence. actual genuine demand on the ground? the jury is out on that. there's a feeling that much is down to the infrastructure spending, meaning the government is at the center of all of it, but still a good headline on ppi. david: how much of a contribution did this infrastructure push have on these results? >> by one ratio, infrastructure spending in china is levels
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during the global financial crisis in 2009. not all of this infrastructure spending is a bad thing. is productive for the economy, but comes at the cost and means ppr resurgence is continuing to rely on the government spending. when and if the government takes its foot off the pedal, ppi could be vulnerable to correction. david: it shows you how much influence the government still has. this is a chart we showed earlier, ppi at the top panel, the bottom rebar prices. is this supply side or down to demand? there is a co-relation, but it is not down to this here it -- to this. how do we push this forward? we have the party congress coming up. that is a fairly good assessment
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that they want going into that meeting. in something of a sweet spot. policymakers are happy where they are, the central bank happy were policy is, politicians happy growth is stable. past the party congress, we are into a new narrative. all cards will be on the table. david: that is next month. right, thank you for that update. program, we the continue to review china price inflation figures. does it change anything at all? are joined by macquarie securities head of asian strategy. plus, beijing prepares to hit the brakes on sales of fossil fuel cars. how that could reshape the electric vehicle race, not just china, but around the world. that is coming up on the program
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as well. this is bloomberg. ♪
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♪ let's get a check of the business flash headlines. qualcomm said to have lost its resume hange to royalties for technology used in iphones. a judge in san diego tonight qualcomm's request to make the recommence thers payments they halted after apple stopped reimbursing them. apple and qualcomm are still locked in a dispute over the value of each other's technology. bloomberg has been told that equifax may not have sufficient coverage to cover the cost of one of the biggest hacks in history. sources say it may cover up to $150 million, but it is expected
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it may be many times that amount. the hack in july affected 143 million customers. it was only reported last week. embraer many consider building a factory in china, marking a return after it shut down. the brazilian company ceo says it is a possibility if they can find the right partner and customer support. they see demand in china for about 1000 planes over the next two decades. that will depend on where demand comes from. we talked about the surprise strength as far as headline numbers were concerned as you look at chinese producer price inflation. 6.3%, not bad.
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we are joined by the head of --an securities at mccoury's at mccoury securities. the overshoot in terms of reflation was due to a couple of factors. one is non-tradable sector, a third is commodity prices. the question is is it reflective of the demand or is it reflective of cuts in capacity that occurred? it is far more reflective of speculation that is building steam within the chinese financial sector your, rather than demand or any meaningful supply. david: the market may have rallied a bit too much on expectations they will cut supply capacity.
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they are elevated in your view. >> they are. the other thing is the base effect. it will get harder and harder to beat towards the end of 2017 and early 2018. i still think by the end of the year of the ppi will be much lower. i don't think we will go into negative territory, but 3% or 4% will be the right number. stage, the pboc would need to wonder what will happen with ppi in 2018 rather than through the backend of this year. how does that factor into the strong currency story? pmi initial indications picked ok,ecause exports have been but does that filter through into ppi and final demand for chinese products? the interesting saying about the currencies is that mostly it is weakness of u.s. dollar rather than strength of other
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currencies. , single basket of currencies appreciation has not been that significant, so what is driving the weakness of the u.s. dollar? my view is that the longer the thep administration fails, more the global economy reflate. the more they fail, the lower the u.s. dollar, the more inflation every country jets. the question is at with stage some of those local currencies become seriously overvalued. david: i'm looking at the taiwan dollar, for example. a two-year high. the pboc fixing coming through. net-net it has risen against the belar, but it might not that tangible good hasn't started to hurt markets? >> yes, it has. we live in a world where currencies are allowed to fluctuate according to fundamentals. everybody is asking what will central banks do, what will
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interest rates be, how they tried to job on currencies at various levels. my view is that none of those currencies are misaligned. the dollar is not necessarily is notlued and the euro necessarily overvalued at current prices, but pressure is increasing. eurozone in particular, because most of the depreciation of the dollar it will against euro, start to hurt the eurozone going forward. if you look at the yen, renminbi , real up terms, there has not been a great deal of a breakout. they are not yet hurting those economies. david: if i put those two things together, equities and europe have hit their head on the ceiling because of strength in the currency. i'm looking at the yield in the 10 year closer to 2%. does that poll massive amounts
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of money back into asia? >> yes. when you look at the bond market , ivory coast, nigeria, ukraine, belarus, iraq, countries like that can issue money at 5%, 6%. none of those countries will ever repay the debt, and some of those countries like ivory coast , your only collecting interest or six years, so you have to assume there will be more inflows into emerging a-share on markets. whether that crowds away some of the flows and equity markets remains to be seen. happening.t is there is less going into equity markets compared to bond markets. david: there is probably a distortion happening. against those countries, but if they can issue debt at those levels, something has to be wrong. sense, you either
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argue it is a bubble or you argue that interest rates globally are heading to zero. if they are, irrespective of what central banks want to do, which are spreads currently only 300 basis points against u.s. treasuries, that those spreads would just keep on narrowing as we go forward. is it a bubble or is it circular trend? i think it is a secular trend rather than a bubble, but in the next 3-4 months, there are massive policy error potentials. there is a possibility that central banks may just be trying to push interest rates higher, the possibility of a withdrawal of liquidity quiddity, policy errors, particularly china. david: what is the potential policy error there? >> china is writing a dragon and trying to stimulate all at the same time controlling the bubbles. whether the bubbles happen to be wealth management products,
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which doubled are waiting in commodities in the last 12 months, or happen to be in real estate or other area, they have a fine line they are treading. so there is always the possibility they might cause too much inflation, depressing gdp growth rates on a global basis, or they are not pushing enough into global economies. ivory coast,ying nigeria, you are counting on the -- bonds, you are counting on circular deflation, but not counting stagflation or complete inflation or a bonds. you are counting on the right mix of real gdp and inflation. if in fact central banks or china commits an error, the volatility in some of those bonds will be enormous. david: two key points, first, when you look at china, the tangible thing so far is you
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have elevated borrowing costs across local governments. if we had to worry about something in china, is that the tangible mechanism in the real economy? is, but you have to remember that there is no such thing as a yield curve in china. yield curve can go to negative in china and everything is fine. david: it has. >> yes, it has. in china, the government controls the liquidity. it is basically a closed market. whenever volatility is down, china tries to open the market a little bit. as soon as the volatility picks up, they close the market here it they have the capacity of reflate thing and re-floating areas. so what they are trying to do is find the right mix between interest rates, growth, and unlike other countries, they are
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operating a walled garden they can do that because the capital account is closed. david: policy error by the fed, this is a conversation that just started 24 hours of back, because of these whether disturbances, maybe the rate hike pushed back here it -- back. >> my personal view is there will be no rate hikes whatsoever , but even if they tried to do next 6-9 months, the yield curve will flatten against them, so they cannot raise the cost of capital even if they try. david: i appreciate your thoughts. the latest reaction to chinese eta -- data. , head of securities asian strategy. of act down 7%, a warning delayed turnaround plan. the details, next. this is bloomberg. ♪
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♪ we are counting down to the open of markets in china and hong kong. have a look at the premarket, a very good session, 200 points to the upside. give or take, 350 point top from the close on thursday. about 300 points short of our high so far this year. big story we have been following at the weekend was china looking to face out at cars that run on fossil fuels. yd, the leader in the space. volvo has indicated it has plans to produce electric vehicles on the chinese mainland. the idea was not surprising.
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it is the magnitude of which they said no more fossil fuel cars at some point. the operative word is that there is no timetable at this point. what they don't want to get rid of -- now, the other stocks we are following. , the turnaround plan, the company says we might have to wait a little bit longer. down 7% in the premarket. they want to introduce more sneakers. in any case, they want to extend the footwear in an online push. the markets not buying that at the moment. other names we are following when the markets open up.
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coming up, one of china's biggest mutual funds is advising pandators to bet on hand bonds. this is bloomberg. ♪
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♪ it is 9:29 in hong kong. the temperature outside is a nice 29 degrees celsius. it is a bit humid. 72% humidity. highs in theff the summer that made everyone from beauty queens to rich bankers sweat through their suits and cardigans. that being said, there we go. 20 minutes away from the open of markets in hong kong. we are up in the premarket, very good so far.
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speaking, markets up 1.5% on the nikkei 225. is back up, fears over hurricane irma and the damage so far has in scale to down. there is a lot to talk about when it comes to damage. ollar up, stocks up, and bond yields on the way out. shanghai, hong kong getting underway. sophie: the chinese large caps marginally higher. on the rise,g kong .7% higher. fix forly anticipated the currency and focus today, strengthening for an 11th straight day, but the offshore for a second day lower. leadingchinese stocks
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asian equities, the highest level since december 2007, offsetting the weakness in tokyo and seoul south korea. we have 31 stocks on the up. developers maintaining the advance we saw last friday. a check on chinese carmakers. this after beijing said it is working on a timetable to phase out fossil fuel vehicles. push towards electric vehicles. prada, the stock of dropping as much a 6.8%. isna national materials jumping after announcing plans to merge with china national building material.
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go, i want to leave you with the onshore yuan. that currency losing ground for a second straight day. another catalyst that could drive the yuan and chinese equities is the report that the pboc is removing forex forward trading rules. that worked when the currency was weak. thank you for those updates. some data from china out of china and out of japan's morning. let's get it over to paul allen. we get started with machine orders out of tokyo. core machine orders jumped more than expected in july, up 8% from the previous month, almost double the median estimate. the measure was still down 7.5% from july last year. core machine orders are an indication of future capital
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expending and excludes orders for ships and orders from electrical power companies. china's factory prices climbed as domestic demand remained' resilient. the producer price index rose 6.3% in august from a year earlier, up from 5.5% in july. the cpi index climbed 1.8% compared with 1.4% a month earlier. brexit secretary has rejected accusations the government is attempting a power grab with legislation on leaving the eu. that ifvis wrote lawmakers block the bill in a vote on monday, it may lead to a chaotic departure from the block. prime minister theresa may's conservatives lost their parliamentary majority in june selection. apple's most important new phone for years will be called the iphone x according to a league of its latest mobile operating
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system. strings of code showed three new models will be called the iphone eight, eight plus, and iphone x. apple is set to unveil them tuesday. the league comes not long after apple accidentally published software the provided details on upcoming iphone features. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. david: thank you for the update. one of the biggest stories we have been tracking this morning and you are seeing reaction in the markets. setting ang out and deadline for automakers to into sales of vehicles powered by fossil fuels, becoming the biggest market to do so. is working with regulators on a timetable to end production and sales. tom mackenzie has been tracking this for us. what does this mean for the auto
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market? i would imagine this would have massive implications. will accelerate what we have seen in the last few years, doubling downers in terms of their investment on batteryusing on technology and ramping up production of electric vehicles. this will underline and strengthen that push. there are a number of reasons why they may do this. they are setting up this framework and deadline, the pollution problem is a key issue for china still. they want to reduce the reliance on foreign oil. one of the main reasons is because there is this 2025 framework set up by the government for china to move towards high-tech manufacturing, and electric vehicles and particularly the battery innovation is a big part of that.
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they want to dominate this market. we have seen the u.k. and france set deadlines of 2040 to phase out diesel and castling powered cars. countries like the netherlands and norway setting more ambitious target. from one automobile executive who said he thinks it will be a couple of decades before this deadline comes into place your it the government is working with regulators on a specific timing as to when they will finally phase out diesel and gasoline powered cars in china. talk to us about the implications on the other side of the equation for foreign carmakers. paul: we have a chart that shows projections. not just china, but the u.s.. 29 . projections to 2039. you will see that by 2039
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according to these projections, electric vehicle sales around 18 million in china versus 11 million in the u.s., so clearly the opportunity is significant. have teslayou looking for a production facility and shanghai, nissan saying they will release the in 2018-2019. gm with a fairly pitiful number, selling only 700. there are risks. there is the competitive risks because domestic players are helped by subsidies. also, there is a push by the government for foreign automakers and their joint ventures with their chinese partners to transfer or some of their technology over to their chinese counterparts. that is seen by many analysts as a risk, but like a mall to a
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flame, foreign automakers cannot avoid the number one auto market and they are pushing to increase their footprint. there are indications beyond , oil, and, utility energy firms, so significant absolutely. still waiting for that date and deadline. david: thank you for the update there. it is a longer-term story more than anything else. let's stick with china and talk about the currency. looking at the offshore renminbi , an 11th straight day of a stronger fixing. have a look at the move in dollar cnh. academic, but you look at that, the biggest jump in dollar cnh since the start of this year. do pboc, perhaps it has to with that, perhaps that massive
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rally last week. the pboc is said to have resumed a reserve requirement for trading forex. demonstrating confidence the currency can deal with the pressure. we spoke with jonathan sloan who said it is now strong. >> the renminbi is very strong. which might have concerns on the mainland, but for right now we are in a good place. whenre not there last year everybody was talking about tapering and the slowdown in china. david: let's get more on this story from our next guest who helped to run china's fund.-largest good morning. nice to see you. we were talking about the chinese currency. what 8-9ig difference months make. were talking about
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crossing seven, and now 650, but i'm guessing a stronger currency has helped is this net-net? >> i guess so. we have pushed hard in the renminbi-related products. won't be goodi for our business. can getct that renminbi to a critical point at the beginning of this year. there are two value points that we believe can change it. we believe the u.s. dollar index it's a multi-your high. -- index hits a multi-year high. believe it will reach an overbought area. the chinese currency at that ,ime wanted to take a breath
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and if the u.s. dollar continues to be strong, and we do believe chinese currencies are tied with a basket of currencies, which is weaker, so the u.s. dollar becomes weak and it will become good for the chinese currency. david: we were closer to 104. i remember that in february and march, and now 91, which helps sentiment around it. when the chinese currency weakens, the psychology changes. we had the outflows that stopped. longer-term, a lot of people need exposure to chinese renminbi. there are so many ways to do that, the stock connect, the bond connect. what would you say is the best choice about one to get exposure to chinese currency? assetdepends on your allocation needs. for fixed income allocation or equity? multiple,me, we have
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and the bond connect will become one of the major convenience vehicles. david: people don't understand the chinese bond market very well. that may be one of the big entrance is. the understanding -- big hindrances. getting over that mindset, what would you say would be the easiest target? are we talking panda bonds? something more palatable for foreign investors? bonds is a good vehicle. it is offshore. your your regulation, in forum to be sold to the foreign investor. however because of the market andof the cnh
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participation in the market, which i would say is chinese financial institutions, haven't done a great job. hashe chinese regulator been putting in a lot of efforts to push to be a more acceptable currency. a panda bond can be another choice. i assume the chinese regulator put all the efforts to try and promote the chinese capital market. david: on the surface, panda bonds is multinational selling chinese denominated debt, so the closest thing to understanding a chinese currency, but what is the supply outlook like? i don't have a specific name, but do believe there are a few local good governments, like in
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europe. they have showed some interest. when you are funding for the needs, you also have to look at the cost of this funding. is not cheapnbi funding. so far. effort and the trend is very clear. david: let's hope it is. we have to leave it there. 4th investorhe 2 forum kicks off today. we have an interview with the big equity strategist or that is coming up. this is bloomberg. ♪
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♪ back to the head investors form in hong kong where angie lau is standing by with a man who has been ranked
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as asia's top equity stretch this. -- equity strategist. >> 1300 investors in that room of the 24th hyatt annual conference. with me now is christopher would, global equity strategist. about thehis views world and how it is going to perform for the rest of the year into 2018. top of line for you, what is your biggest concern when it comes to asia? >> my biggest short-term concern is the dollar has weakened a lot this year and we are right on the major support line. a the dollar manages countertrend rally, we should see underperformance for emerging markets. if the dollar fails to rally and breaks below the support level, the dollar goes lower and we get
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another wave of money coming into asian emerging markets. my long-term view is that asian emerging markets after a period of extended how performance, and began in 2016 when the sentiment on china peaked in terms of negative sentiment with more than 50% investors globally thought that the chinese had lost control over the currency and there would be a big devaluation. >> is that a global re-inflation about asian it central banks managing the inflows coming into asia right now?. storys is the best growth in the world could we have been looking for a collapse in china, and it has not happened. are in control of the currency and capital accounts. chinese equities, in particular bullish, we have this
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sentiment. that is a long-term story. stretch of this, you have to take into consideration geopolitics. what about north korea and the pressure on the china-u.s. relationship? theorth korea is definitely major geopolitical story and asia this year. in my view though, the reality is that north korea demonstrated it is only power, so a matter of time in my view for the u.s. to acknowledge that strategic reality. once you acknowledge north korea is a nuclear power, then you can focus on policies to contain them. i would expect at some point in andnext six months
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admittance from the u.s. that that is a reality. i think they will coordinate with the japanese and expect focus to turn on how to contain north korea and have discussions with north korea about ending this period of hostility. >> is it enough to change or asset allocations? i am overweight regardless of north korea. >> you really like india, why? indiaave been overweight before mr. modi got elected. i think he has major medical reforms and india. he has nota where fully resolved it yet is the banking system. the demonetization move was extremely bullish for stocks and like privateets sector banks come mutual fund companies, insurance companies.
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these sorts of stocks are in my portfolio. in the short-term, they have gone ballistic with a huge domestic mutual fund boom in india. few, i think it remains the best equity story and asia. tightening, and cooling of the u.s. story, is that diminishing and how does that story turnaround for you? that believe has died. it is dead. we can get a dollar rally if we suddenly get news flow suggesting that this trump tax deal will be reactivated. i would expect somewhere in the next 3-4 months the market focus .o return their the trump administration and republicans in congress need tax
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reform because they have elections next year. the key question is how dramatic as the tax reform. tax reform,ing at border adjustment tax, corporate repatriation, so the question is the details. does not happen on tax reform is much more important than what the fed does or does not do. investor behalf of the universe, what is the one thing got investors should be paying attention to that they are not right now? >> if you are overweight asia, which i think is the right call, the one thing that can go wrong from a global perspective is certainly the trump economics trade reactivated. angie: thank you so much for that. a pleasure to talk to christopher at the cos a conference. -- csla conference. up,d: plenty more coming
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including the open of jakarta and vietnam. this is bloomberg. ♪
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♪ we are continuing to track the market reaction to the story out of china and the plan to eventually at some point banning or phasing out the production and marketing and sales of fossil fuel vehicles. one thing i want to point out. have a look at the graphic. when you talk about electric vehicles, a lot comes down to the fact of who provides those batteries. .ere is a snapshot global market share as of last year. chemicals, panasonic, so we are getting positive market reaction out of china.
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get youeantime, let me caught up with some of the latest business flash headlines. honda planning to launch an electric car made exclusively for china. it says the car will be developed under a new brand between venture partners and will hit the market next year. it made the announcement over , where chinand said it is working to end production and sales of fossil vehicles. offering free rides during hurricane irma. the office of emergency management publicize the free rides on its twitter feed and mobile news alert services. said it was also giving free rides to hospitals. tampa bay got late notice on saturday that the storm was
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changing course. coming up, the belt and road initiative moves into the implementation phase. that is in the next hour, how hong kong can be a key pillar. this is bloomberg. ♪
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david: almost 10:00 in hong kong. this is bloomberg markets: asia. ♪ david: asian stocks rise with a dollar as hurricane irma starts winning and the yuan set to vote on a new north korea sanction. china is set to set a deadline for the end of fossil fuel powered vehicles. the hong kong dollar bears are down but not out.
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the main pressure is not going anywhere at the moment. you have sizable moves in the trend, but when you do, it signals there might be something happening unusual under the hood. we also talk about irma. this is something we have been checking since we got word of how big the storm was and how it is made its way to the caribbean. look at the spread between west texas and then. -- bend. it essentially tracks the spread. this is the widest level, give or take. we have shut refineries in texas,/oil demand because of the economies that have been, well, at a temporary halt across florida.
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coast ofits way up the florida into tampa. there is damage reports, how much with the damage be, and the more existential economic question on the damage and how much there would be. that comes down to the oil story oil up with your spoil -- spread. let's get it over to sophie, who has been watching markets for us all morning. it has been a good day. sophie: risk appetite has come back. bonds are falling and the dollar is rebounding from over a two-year low coming getting to tense of a percent. asian forex, the yen is fighting half a percent, and in the nikkei is getting 1.4%.
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that would be the biggest gain in three months. chinese stocks have swung up to 2/10 of a percent. the housing is rising for a second straight day of we are seeing pressure for the you want, both onshore and offshore rate taking a hit this morning. the read here is the fix was weaker than forecasts. we have reports pboc scrapping a trading role introduced october 2015. that is dragging on the currency. theread here is that central bank wants to ease the you want ascent up. the roof yet is getting a third of a percent. bucking the trend in the asia report space. also catching a bid. forest reserves rose to a record in august. you mentioned oil prices near
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crude, but base metals not looking half. copper extending their drop, alumina -- aluminum steel also under pressure. it is the longest rally in a decade. given what is going on with economics, that is something to take into consideration. last week, we had exports of rob materials slowing down, which might be what caused the anxiety in the base metal space. david: they have been up substantially, as well. thank you for the update. looking good as far as equity markets. that being said, the big story last week was north korea. let's get you caught up with first word news with paul allen. paul: north korea has warned of the retaliation if the u.n.
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approves harsher sanctions over the latest nuclear test. washington wants a vote monday, including a ban on oil imports. north korea celebrated the anniversary of its founding. kim jong-un reportedly held a banquet for nuclear scientist and take dishes. hnicians. the government continued to reduce excess industrial capacity. index rose 6.3% from a year earlier, up from 5.5% in july. the consumer price index climbed 1.8%. china's central bank is effectively removing a reserve requirement for trading foreign currency. the move may slow the pace of you on appreciation after its search. the pboc will stop requiring financial institutions to set
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aside cash when buying dollars for clients. the mexican government is supplying supplies to survivors for the earthquake that killed 90 people. are sleeping outside as stronger aftershocks continue into sunday. the 8.1 quake is the strongest that hit mexico in a century, with damage stretching across several states. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm paul allen, this is bloomberg. david: thanks for that update. for our viewers and bloomberg clients, we will get an update as far as the hurricane is concerned. we are talking about irma and was a. jose. this tracks those two weather systems. you is often where you can click and get a sense of where things
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like oil refineries are. nuclear power plants, that sort of thing. here is irma, there is the projected track. and a category two hopefully it will become one. have a look at jose. lots to talk about when it comes to this. the built for the u.s. get thent to try and underlying economies up and running. president trump has praised the efforts of emergency crews to hurricane irma. more than 3 million customers have lost power in a storm that research said could leave damage of $49 billion. bloomberg editor jodi schneider joins us now. we just showed our uterus where we are logistical -- showed our viewers where we are logistically.
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jodi: the latest on the hurricane, we are hitting several parts of florida and the damages will be huge. it could have been worse if it four as five or a people anticipated. they have come up with emergency funding and presumably there will be more bills to do that as we go forward. david: one of which is this hurricane relief bill that has been passed. is this an accomplishment, a bipartisan a compliment? compliment --a bipartisan accomplishment? jodi: the debt ceiling was extended only through december and the budget was only extended through the second week of december, not something conservative republicans wanted to try and get spending cuts on other things by doing a longer deal.
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and doing it through the 2018 election. there is a lot of republican frustration with this. while bipartisan, he was not winning friends among conservative republicans. david: how does this derail, if anything, his other agenda? obamacare for example, i believe republicans are pushing for another potential replacement for that. what are the prospects for this specific bill? jodi: there are several senators who have a proposal. it would repeal and replace, but it would also add some money to states to make up for some of those insurance payments. it faces really long odds. senator john mccain was the deciding vote against obama care repeal last month before the recess. basically he has required the bill follows regular order,
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meeting going through committee hearings and be subject to amendments. it is hard to see this bill doing that. certainly in a short period, they want to vote by the end of september on it. september does not have a many legislative days. on tax reform, still on the agenda -- david: that's the think of it affects the timetable on that one. are we looking at something that is ambitiously planned? jodi: there is still no real hill, no real puzzle. s and talking points. people are talking about scaled-back approach. with republicans frustrated over the deal president trump made with the democrats on the debt ceiling, there is really talk about how much they could possibly do on this. how much they could get through congress with frustrated
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republican party. david: a lot to talk about. jodi schneider, our lumbered editor. joining us here on -- our bloomberg editor joining us here. david: the biggest event in ill the new iphone justify the eye watering price? out fossil to phase feel cars. this is bloomberg. ♪
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♪ this is bloomberg markets asia, i'm david english in hong kong. quick check on your bloomberg business flash. contractors resume paying hundreds of millions of dollars for technology used in iphones.
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what happened is a judge in san diego has now sent a request to make those factors recommenced those payments after apple stopped reimbursing them. qualcomm and apple have been locked in a licensing dispute over the value of their prospective technologies. mighterg has been told not have adequate insurance against cyber issues. our sources say it may have to cover $150 million but the expenses maybe many times the amount. the hack put 143 million consumers at risk was only reported last week. honda is planning to launch a electric car made exclusively on the chinese mainland. truell be developed under venture partners and its scheduled its market for next year.
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they made the market at the same form where china said it was working towards ending production and sales of fossil fuel cars. is lookinge, china to set a deadline for automakers to end sales of vehicles powered by fossil fuels and has become the biggest market to do so. they are working with regulators on a timetable to end production. we have more on the story. tom mackenzie joins us. tom, let me get started with you. what do we no caps off are on -- what do we know so far on the story? tom: they would indeed be phasing out these gasoline fuels
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and diesel fueled cars. they have not specified, they are working with regulators to firm that date up. many private companies and state-owned companies in china have had a big push, no going down on the electric vehicle space, whether the battery technology, charging technology, companies like byd leading the pack, invested in by warren buffett. there has been a big push on this already. it takes a number of boxes for beijing, whether with pollution reducing reliance on oil imports and just part of this big industrial policy, which is china wanting to dominate in terms of electric video -- electric vehicle batteries. david: when you heard of the story, what would be the biggest challenge for china to achieve this in your view?
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we don't have a timetable yet, but it is a big challenge to shift away from what the industry is right now. guest: thank you for your question. the devil will be in the details. this was an unexpected announcement. whenat the end of april the ministries came out with its plan. they explicitly said they wanted all the companies in the automatedto come from this. if you look at the targets set in april, they said 2020 and they wanted to increase up to 7 million electric vehicle sales by 2025. they set very stringent targets of what they wanted out of the supply chain. cost, -- battery
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cost. the auto industry has been expecting this. we will see what the dark details will be, whether there will be a phaseout or similar to the california zero emission program. moreat is the case, it is meaningful than the u.k. and france advanced earlier this year. announced earlier this year. >> what do you think the level setting upfor them electric vehicles and the concern for passing on their technology, sharing their technology? how concerned should they be about that? guest: that was the dilemma for the orient. as you correctly mentioned at the beginning, the push was hardly an industrial family -- strategy the government adopted. china was keen to establish the global automotive industry.
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they want byd to be able to compete in the international market. this was the main reason they announced -- they announced the joint ventures were setting up to mystically in a technology transfer which will allow the homegrown companies to go in the spaceompete of internal combustion engines. china has not been that successful. you will not see byd driving down 5th avenue anytime soon. what they are trying to do, because of technology is so new, the industry will have a chance. it is being strict in terms of what they can do. starting from last year's, they started restricting what auto parts they could use and put restrictions on what models would be getting subsidies.
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the chinese models they were planning to use, korean made batteries, even if they were made in china, they are still manufactured in korea and the chinese government was restricting them. it is always tricky. commitmentsas made and honda has not made a commitment. the challenge they have is that china is the largest oil market in the world, pushing strongly on these. volkswagen, if they want to be in china, they have to abide by this or risk losing technology. david: i was about to say, these big carmakers do not have a choice but to get in line. i'm glad you brought that up for our viewers. pie chart that shows you the market share as of last year. which of these big players
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actually holds that piece of the mark when it comes to emi and batteries. to your point earlier, these are some of the south korean names, lg can. samsung and others. the foreign carmakers do not have a choice. it could be positive for them. tom: it's the difficult proposition them to turn around and say, we are not getting involved. that's why they are investing in various ways, whether it is gm with their facilities or nissan talking about its lease it hopes to launch in 2018 or 2019. when you speak on the record to these big foreign automakers, they say they can handle these challenges around the jvs and the tech transfers and the opportunities are too large to ignore. it is also interesting to switch focus domestically, i was at a
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forum over the weekend and you gcl,companies there like one of the largest players in the solar industry, and they are investing in electric vehicles as well. whether that is the end product or the batteries in the case of gcl, they are interested in battery space. it's interesting you have players from other sectors indexing -- investing in the food chain of the electric system in china. david: great having you on the program. thanks for coming on the program. coming up, we will shift the conversation to hong kong. when you look at the currency, there will be a move. the highest level in 19 months. we will reveal why the bears might be down but not out just yet. this is bloomberg. ♪
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♪ the hong kong dollar has recorded its biggest jump in 19 months, but she funding costs could make it an especially appealing shorts. reported china markets and we don't talk about the hong kong dollar. what happened on friday? he was dollar plunged the hong kong dollar gain. isn't that natural? the hong kong dollar has been depreciating for most of this year even though the greenback has been weakening for a while now. last friday and thursday, with the greenback in an extended slide, finally they decided they had enough. the move was amplified because the short hong kong dollar trade
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has been crowded before that. when everyone started unwinding that short, what we saw was the steepest regan for the hong kong rebound for the hong kong dollar since january. david: are they expecting for this to pay off? what is the logic here? isit is a simple logic which it has been higher than the hong kong interest rate for a long time and the gap has only been widening. the u.s. is still raising interest rates, whereas ample liquidity in hong kong has kept rates low. when you have a widening interest gap, people will convert the hong kong dollar into other currencies, which has been pushing down the local exchange rate here. analysts say that hasn't changed, so it might still pay to be short the hong kong dollar. david: at some point, something has got to give. you have great chart on your story.
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let's get that up for our viewers. 4095. the reason i am bringing this up, the hong kong monitor has waste of influencing where this goes. can you describe what we are seeing here? >> we already saw a rebound in the hong kong dollar around august when the hkn a announced additional debt sales. they said they are not doing this to influence the exchange or interest rates, but just look at the chart. what you saw was a huge recovery because the rates were going to go up because of these debt sales. they could do this again, they could announced additional debt sales after the current round of .ales ends in september there is also a new their option in which they can intervene in the market before the trading
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and is reached. david: let's hope we do not get to that nuclear option. we will talk about the other currency. the one. this is bloomberg. ♪
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♪ it is 10:29 in hong kong. i am paul allen with first word headlines. the west irma pounding coast of florida, making to land falls and driving water and wind that submerged miami and the tampa bay readying for the worst disaster in decades. it is also threatening alabama and georgia. to 3has knocked out power million and shut 6000 gasoline stations. the early damage bill at tens of billions of dollars. japan core machine orders jumped in july, up 8%, almost double the median estimate. the measure was down 7.5% from
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july. futurechine orders are a indicator of capital spending and exclude volatile orders. china's factory prices climbed as domestic demand remained resilient in the government continued to reduce excess industrial capacity. the cpi rose 6.3% from a year earlier, up from 5.5% in july. the cpi climbed 1.8% compared with 1.4% a month earlier. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. david: thank you for the update. there is the two consider. other things happening, let's get over to sophie. what's relevant is risk on. check out stocks. the nikkei 225 leading gains,
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1.4% higher. this is the yen leads forex lower, 108.38 now. when it comes to stocks leading gains in tokyo in the region, technology and health care and pull position. , leading japanese robot risinghigher, and bye for a fourth straight day after china announced the shift towards electric vehicles. , newg stocks tracking crest among the miners losing ground in sydney. hyundai dropping along with cream carmakers. performer ine
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taipei, losing 8.5%, losses for a fourth day. real estate the biggest drag on the taiex. out the twsc, bucking the trend, losing .2%. looks good. thanks. a quick look on china's currency. back, weminutes crossed above 6.50. we have come back down. there is a big story on the weekend. be steppingmight into the fx markets after the biggest two-week search and a decade in the chinese currency. sources saying that central-bank
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pboc looking to remove a reserve requirement for trading foreign currency forward. them o' we know that -- why are they doing that is the question? ison think the main takeaway they are making it freer and easy to short the yuan. what you can take out of this given that this is china is that they are comfortable that they don't think people want to. there are two main takeaways. first, the yuan strength has gone far enough, up more than 5% since the start of may after declining the most in two decades last year. so it staged a remarkable turnaround. been have seen, it has powering ahead. they may be saying, yeah, we can afford a few short positions, a
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little bit of two-way trade to come into this now because we think around 6.5, you mentioned the level is probably where we are happy with at the moment. secondly, by removing restrictions in the fx derivatives markets, they are saying that if people want to do this, they can. atis an easing of control the same time it is communicating this message that we think of strength for now has gone far enough. there is also talk that because of this that it might paving the way for more forex market reforms. there? the logic they are doing it now because it is convenient. >> right. i think that are short-term and long-term implications. short term, we are seeing the currency come off because this
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store has been open to shorting the currency come up at big picture we cannot forget this is not easing. this is a freeing of controls on a very controlled currency, so the message could be taken, but this is china so things can change very weakly and at a moments notice it a are unhappy with the direction, but this is a freeing up in a market where we don't normally see this. the big picture may suggest they are more comfortable with two-way trade in this currency, more comfortable with allowing a thate bit of this way and in a currency that tends to undergo one direction or the other. fairlythank you for that complicated story, but a simple of looking at what they have been trying to achieve when it comes to the currency.
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let's is shifting gears a little governmentk senior leaders, officials, and experts beyond the one belt, one road initiative. joining us is the chairman of mtr live out of the bill and wrote summit in hong kong. -- belt and road summit out of hong kong. >> good morning. know you have been in exposure increase outside hong kong. i imagine this offers a lot of opportunities are you. take us to what those opportunities are. mtr has been in overseas markets for 10 years now. have been in the u k, sweden, and australia for almost 10
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years. markets, we are expanding our operations. 30% jointy had a venture and managing southwest wales in london and have been shortlisted in a bid together the china wealth to build high-speed rail connecting london and birmingham, so we in one belt,ive one road countries, but almost all of them at this juncture are developed economies. been receiving requests to participate in some developing countries. howeverooking at them, we are very prudent and assessing risks like political risks, so soial far i would say we have not then
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active in the developing economies in the one belt, one road countries, however, we have in helping one belt, one road countries to develop. -- in tr academy, our own academy to train professionals, has been organizing courses for some of these one belt, one road country people. -- countries people. david: can you tell us more about which countries you are looking at? a lot of these discussions might be preliminary. can you give us a sense of where you are looking in who you are talking to? most of the countries have been talking to us. we have lots of friends in places like thailand, vietnam, yanmar, all of these
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contacts have approached us and asked us to participate in the respective economies. we are very prudent in our strategy. we don't want to rush into anything. are doingthing we right now as i said earlier on mtro use the in tr -- academy to train some of these people. david: correct me if i am wrong, one area you are actually looking or have already in fact employed your expertise when it comes to the mtr academy is guangzhou. to confirmingyou the management of the high-speed railway there? we, hong kong is the
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government owner. we are likely to be appointed as the operator of the xrl before areend of this year, so we very active in this regard. david: would you say that is close to a done deal now? >> no. negotiating, but i am confident we could do the deal before the end of the year. in other words we should be appointed the operator of the xrl between hong kong and guangzhou before the end of the year. david: the other thing i want to ask you about, i understand you are looking for a joint head with china railway to tilt the kuala lumpur-singapore link.
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where are you in the process? mou and i signed am understand they are interested it. our hope is when they go for that bid that we can participate somehow, because we know these two countries are well, singapore and malaysia am a but -- malaysia, but this is our wish. we have not seen anything yet. invited by will be china rail, we would be ready to talk to them. help us understand the bigger picture. it is easy to comprehend how a company such as yours, infrastructure-related with the can bring,ertise mtr how important is one belt, one road to other hong kong
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companies who don't have your expertise? think the one belt, one road's initiative presents good as this opportunities for companies who are based in hong kong and would like to expand into these markets. you are talking about 65 countries, 40% of the world's gdp, and i can see that other than infrastructure, be it legal, accounting, arbitration, there will be a lot of opportunities, not to mention the financial services sector, issue is since of bonds and so on and so forth. -- issuances of bonds and so on and so forth, so i think companies should take advantage of this national initiative and go out. gone out 10 years ago to
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some of these countries, and we continue to look for expansion opportunities. i think hong kong companies who are doing very well in their home market should look into these areas. david: we have to leave it there, but again, thank you for coming on the program. mtr was the chairman of corporation life out of the event. , uncertainty levels are far from over. we will discuss the case for investing in bonds as we hunt for real yields. that is next. this is bloomberg. ♪
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♪ david: all right, have a look at the bond markets. of the last three
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weeks, quiet. belows. 10 year must fell 2%, now up for basis points. are we looking at a new normal, a lower range, as we head into the end of this year? in this week's real yields segment we are joined by the founder and ceo of asia investor advisors. whetherooking at these disturbances in the united states. the reason i bring it up his because we are hearing a narrative that that might cause some disturbance in the underlying economy and forces the fed took pushback any rate hike we may have gotten in december, but maybe first quarter next year. what are your thoughts? >> it has become a market game to play every here.
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expects rate increases at the beginning of here and 10 year yields go to 3%, but it does not happen. it has to do with the medium-term issues about inflation not picking up. the trump reflation trade is not holding water as people thought it might, so it has to do more with that. issues you spoke about, it will affect production, florida is a big tourism economy, so it will have an impact on the gdp, but when you talk about the national perspective, gdp, inflation, and rates, the impact of this alone will be marginal. glad you brought it up. if i listen to advice, consensus advice the last five years, that rates would go up, i would probably be hanging my head on the wall right now. they have come down.
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is there anything now that you think might be different for me to believe it might just be true going into 2018 that yields might be on the way up? >> the yields well not rise as fast as people expect. rates will rise, but we are talking about normalization appealed, so what does that mean -- normalization of yield, so what does that mean? the rates reach a neutral level. the neutral level is 2.5%. already 1.25%s come so maybe over the next two years we are reaching another 1.25% increase. that is hardly anything. i don't think the rate increases will come one after the other and the 10 year rates will go up so much. david: the potential for a policy error, and the reason i bring that up this because we
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talked about the neutral rate and where that is. it becomes clear and hindsight where that was. 1913t to bring up a chart, on your bloomberg. , you have your policy rates or fed funds rates in blue , white line is your where we think the neutral rate is based information and then add core into that. the last time it overshot the neutral rate, it was followed by a recession. 2.5%.ought it up, maybe do you think the u.s. may push the economy into recession if a hike 1-2 more times? >> the fed has been clear that their actions are data dependent , so they are willing to go forward when warranted, and hold
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back when necessary come so i don't think the fed will push the rates up so much that the u.s. economy would fall back into recession. david: investment advice, high-yield, junk, where is the value? >> there is much more value in the investment grade. i have been saying this to all my clients heard there are a few reasons for this here it healed is very tight -- this. high yield is very tight compared to the last five years. even when you compare high-yield, asian high-yield looks tighter, only 20-30 basis points. why would you do that when you could invest in u.s. yield, so the remember is not sufficient for people to get excited. investment grade is the same premium, 30-4 basis points.
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points.sis i find the investment ray companies have begun to take hold of their balance sheets. the leverage has also gone up. the high-yield companies will take longer to get things under control. david: we have to leave it there. please come back on the program. at asiader and ceo investment advisors. one function on the bloomberg is our interactive tv function. you can find it at -- tv and watch us live, previous interviews, look at the charts we brought up. for bloomberg clients only. check it out. tv . ♪
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♪ this year marks the 10th anniversary of the iphone. apple has some big plans, including the iphone x. emily chang takes a look at apple's past 10 years and what is coming next. ♪ its mosthas set significant new product onouncement here it september 12, three new iphones with a variety of features including facial recognition and
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just or control -- just or control. apple's ability to change with the way we interact with technology is not new ever send customers got their hands on the 29, 2007,ne on june the market has been revolutionized. the market is the king of apple products. it revolutionized an entire ecosystem. destroying heavyweights of the day and spurring new arrivals across the globe like xiaomi. the iphone open the door to a large chunk of the company's revenue, apps. sales have generated $100 billion in gross revenue for apple with more than 16 million developers worldwide producing apps from uber to snapchat to the launch of the iphone did not just change the way people work and socialize, it also transform the company itself. apple group i every dimension, tong from 18,000 pre-iphone
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a workforce of 116000 and 2016, and sales went from $19 billion in 2006 two over $215 billion in 2016. it does not stop there. apple has sold 1.3 billion iphones, generating more than $800 billion in revenue, blowing other iconic devices out of the water, including nintendo's game , which sony's walkman sold over 200 million and 38 years. astronomicalnes growth rate comes heavy dependence. the iphone makes up 63% of apple's revenue, making it the company's most crucial product by far. some tech heavyweights are sounding the alarm with peter thiel saying of the device that it is not an area where there will be any more innovation. st is clear that tim cook see things differently.
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>> i think we are just getting excited and started. there is nothing i think that virtually anybody would say is going to replace the smartphone anytime soon. >> as apple looks towards the next decade and competition ramps up, a major question, how long can the iphone remain at apple's core? that was bloomberg tech emily chang. the biggest story has we make our way into the last hour of trade has been the rebound of the dollar. the other side of the equation is the weaker chinese currency. more updates coming up. this is bloomberg. ♪
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>> it is so muscle 11:00 in hong kong. i am angie lau. this is "bloomberg markets: asia." ♪ angie: weathering the storm, asian stocks as hurricane irma lashes florida. damage may not be as expensive as feared. north korea threatens retaliation as the un security council set to vote on new sanctions. china's policymakers pushback against the yuan, making it
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cheaper to short. the u.s. military has begun relief mission for areas hit by hurricane irma. the storm remains that category to with wind of up to 175 kilometers an hour, lashing many parts of florida, making to land falls on the west coast, driving a wall of water and wind that submerged miami and has tampa they lose.g for a delusio it was strong enough to topple cranes in miami. the financial district was turned into a river. irma did week and is letting up in terms of what he or see following the storm hurricane harvey as well. the forces of hurricane
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irma weakening. oil prices gaining ground. new york crude and brent on the up as u.s. refining operations are back online. 16% of capacity does remain shut. the dollarve helped recover some losses against g10 and asian forex. when itcheck that out comes to the red in the forex column today with the yen asia,g the drop in 108.38. that is helping japanese shares lead gains in asian stocks. asian bonds are tracking the drop in treasuries as u.s. 10 year yields point closer to 2.1%. the yuan is under pressure today, the onshore rate for a second day of losses, while the offshore rate loses a third of a
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percent as the reference rate came in weaker than forecast, though stronger for an 11th straight day. the pboc scrapping of a forex trading rule has been feeding this drop in the yuan, the central bank seen as slowing appreciation. the trend,bucking the strongest level since november. strong inflows into the indonesian bond market is supporting the currencies gains as you can see from this chart, matching november 2016 and serves up a level for the rupiah and the drop in treasury yields is helping that influx into indonesian bonds and emerging-market bonds. this move has pushed the relative strength index for the rupiah to its most overbought territory in five years. check it out and see whether this will spur some selling of the rupiah.
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for now, on the front foot. angie: really interesting what is happening in emerging-market currencies. now let's get first word news with all allen. china's factory places asmbed for a 12th month domestic demand remained resilient and the government reduced excess industrial capacity. the ppi rose 6.3% from a year earlier up from 5.5% in july. comparedlimbed 1.8% with 1.4% a month earlier. a lot of the overshoot in to a of inflation was due couple of factors. are commoditys prices reflective of demand or cuts in capacity? perspective, it is
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reflective of speculation building steam within the chinese financial sector your rather than demand or actually any meaningful cuts and supply. the u.k. brexit secretary has rejected accusations the government is attempting a power grab on leaving the eu. wrote in the sunday telegraph that if lawmakers blocked the bill, it may lead to a chaotic departure. theresa may's conservatives lost their parliamentary majority in june selections. former white house strategist stephen bannon will speak at an event in hong kong on tuesday hosted by a unit of citic securities. china's biggest state-owned brokerage, stephen bannon has abdicated a tougher stance towards beijing. garyld charlie rose that cohn should've resigned. >> if you are going to break and
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stuff that was leaked that week by certain members of the white house i thought was unacceptable. if you find it acceptable, you should resign. >> who are you talking about? >> gary cohn and other people. if you don't agree with that, you have an obligation to resign. >> gary cohn should have resigned? >> absolutely. of thattch more interview on charlie rose on wednesday at 1:00 a.m. sydney time. apple's most important new phone for years will be called the iphone x according to a leak of its latest mobile operating system. strings of code showed three models, the iphone 8, 8 plus, and iphone x. apple is set to unveil them at an event on tuesday.
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global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. david: the u.s. a dollar on the rise as concerns over hurricane irma and north korea ease, but longmay not last too because pyongyang has warned it will retaliate if united nations approves harsher sanctions. wants measures, including a ban on oil imports. we are tracking all the developments. stance when it comes to north korea ahead of this united nations meeting. what else is the u.s. proposing? textiles a ban on exports from north korea. that is one of the ways they get foreign-exchange. one other sources north korean workers, guestworkers, overseas.
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about 50,000 of them according to the united nations. the u.s. is proposing that these people not be paid, which is pretty tough for those people, certainly in the places where they are working. as you mentioned, there is the oil ban. it does not look as if china or russia will support that. angie: why not? >> china does not want to see a collapse of the north korean regime. the traditional idea is that would cause floods of refugees over the border. it is so unpredictable what could potentially happen. ,ou could have potential chaos who would take the place of kim jong-un? the risk of famine comes civil war, so these are the real considerations china has. it does not want to see instability right next to it. written anhave
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analysis piece on china saying the u.s. is in fact the instigator and being too provocative. what does china want instead? >> maybe not so much provocative, but not actually looking at the real root cause for north korea's weapons program. we did have a look at it and some of the writings of the chairwoman at the foreign affairs committee. she is also the chinese ambassador to london at one stage. she has written that the thing about china is that without holding the key to north korean security concerns, china has no leverage to stop this nation's nuclear program. she calls it a foreign nation. north korea in the eyes of china is a sovereign state. china does not have any leverage over that. if you look at the reasons why north korea is developing this program as is often repeated
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mantra that they are worried about their security. angie: with a have economic leverage? >> they do have economic leverage, but that rings us back to what we are talking about earlier, if you cut off the systems, you have chaos on your border. on that point, i was speaking to someone in beijing the other day who did point out that china could easily absorbed floods of refugees coming over, 25 million north koreans is a blip when you look at china's population come up but it is the chaos on the border that they are concerned about. angie: you take a look at the u.s., china is the one holding .he key >> this is the real issue. what we hear from
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the u.s., you seek to verging messages. trumpthreatening war -- threatening war and criticizing president moon for his so-called policy of appeasement because moon has talked about having a dialogue with north korea, similar stuff from rex tillerson, the secretary of state, also talked about dialogue. todoes give lip service trumps all options are on the table, but at the same time, he talks about dialogue, so there is a split within the u.s. on how to deal with the situation. how does the u.s. come and talk to china? they need to sort out their own methods first. angie: thank you for that. out, ratings coming affirming that korean tensions have created spillover effects from the korean peninsula and could substantially impact the economy. we heard that from south korea as it looks worryingly at the
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situation here. fitch rating saying korean temperatures could disrupt trade relations. a affirming the big fears when it comes to the north korean icbm and nuclear ambitions. we are going to talk more about geopolitical tensions next at the csla investor form in hong kong. we talk about the implications for world trade. on, the milken institute releases its latest survey on china's best-performing city. we will give you the first look at that with the group's managing director of research. this is bloomberg. ♪
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angie: welcome back. here is a check of the business flash headlines.
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embraer may build a commercial aircraft factory in china. the present company ceo says it is a possibility if they can find the right partner and enough customer support. sees demand in china for 1000 planes in 20 years. tolcomm has lost its bid force contractors to repay hundreds of million dollars for technology used in iphones. a judge in san diego denied the request to make the asian recommence payments they halted after apple stopped reimbursing them. locked innd apple are a licensing dispute over the value of their technology. prada warned its turnaround plan may take longer than expected. the stock in hong kong down 11.5%, first-half revenue
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dropped 5.7% as the strong euro cut into tourist spending. stores int shut 13 the first half. one feature on the bloomberg we would like to bring to her attention is our interactive tv function. you can find it at tv . you can watch us live, see previous interviews and dive into securities or functions we talk about. this is for bloomberg subscribers only. you can become part of the conversation by sending us an and messages during our show. check it out. tv . this is bloomberg. ♪
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♪ people don't understand the china is doing fine.
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a lot of the policies in place are taking shape. this part of the world is in good shape. is talkinghe complete rubbish, but everyone is allowed their view, aren't they? >> why? >> what reform process? everyone talks reform and deleveraging you show me any concrete radical reforms. there aren't any. it is a lot of wonderful rhetoric. we don't have anything happening on the ground. >> from our perspective, we see congress as a political event, where as on the wenomic policy side, what are most likely to see after the congress is a continuation of the policy, i.e. ongoing focus on containing financial risks as well as pushing out further in terms of the reforms. forthright views
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from our guests on the direction of china's reform. is ericus from the csla fish with, the company's head of economic research. i was sitting in on your opening plenary with your colleague chris wood. the theme, half full, half empty. you have loose liquidity, cheap dollar theme going on, put the first question to china, pboc fixing the yuan had a weaker than expected level, and driving the yuan down. people not what a lot of were anticipating ahead of the 19th is congress. -- people's congress. put think you have got to that into context. the renminbi has appreciated steadily against the dollar ,ince the start of the year, 1%
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2% in trade weighted terms. china is mindful of its competitiveness, so it is choosing and narrow band between not inciting capital outflows on the assumption that the dollar currency will be weak. angie: you say there is a lot of wealth of from china. what is driving it? china.t of delta from what is driving it? china has been driving trade growth over the last six- nine months because china's growth accelerated from the end of 2015 to 2016 and now above target. feeling is china stays there as a market and continues to drive asian exports but we don't get the same acceleration we have seen in the past. thee: are you worried about
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geopolitics of the region, specifically north korea? doesn't that have the potential of disrupting trade flows? does, andainly clearly north korea is a must impossible to call on a daily basis. it does carry the risk of death in the u.s. sanctions on china to encourage china to exert influence on north korea. , &'s the election of president trump, the story has been an increasingly political vacuum that china has been more than willing to inhabit here it china is already regionally dominant. i think it is looking to increase its political role in asia. angie: when we take a look at the one belt, one road initiative, it talks to that theme of growing its influence, also dealing with its own supply
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issues and overcapacity and controlling capital outflow. it is all of the above. we tend to look at these things and say they are driven by one specific motive, but they are not. one belt, one road is growing china politically. heres a free trade area w china will become a preferred trading partner with all the countries into which it is investing. it increases the security supplies, so a win-win on multiple levels for china. angie: i want to tap into the theme you greeted investors with today. 1300 there in the grand hyatt, the clsa conference. you say you expect this cheap dollar theme to play through.
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that props up a economies and props up the emerging markets space, doesn't it? it is hugely helpful for the region. year, thestart of the dollar has traded with a progressive lack of confidence. one of the issues is that given that inflation in the states his low, every fed funds tightening is interpreted as being the last one, and that dynamic continues. around the middle of next year, i expect the fed will send the signal that it is done with tightening, and that will be an opportunity for the dollar to trade into more weakness still. i am still bullish on asian currencies, the euro versus the dollar, and i have been bullish on liquidity in every asian market, he cuts asian central will be intervening to hold their currencies down
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rather than prop them up. it has been the pattern that she or and next where as well. angie: chris wood agreed with factorwhere the only that can change that scenario is tax reform from the trump administration, so what happens then? if we were tot see the sort of tax reforms out of the u.s. that markets were expecting in november and december last year, i would agree. one of the big lessons we have learned this year as that the trump presidency is for poor at implementing. getting anything difficult through doesn't seem to happen, so my working case is that you see only the smallest of fiscal stimulus is and don't see any progress on the really difficult stuff like reforming the tax system and a border tax, for example. angie: i want to press you on a
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point you made earlier. you see fed tightening going away next year. is this because of economic weakness? visit the fundamentals you don't like? or policy error? think i will answer that question directly in a second, but in a sense fed policy tightening has already gone away. when the fed to deliver rate increases earlier this year, the markets were quick to say this is the last one, and therefore we have seen the yield curve remained flat and the dollar has not really strengthened. i do think the fed will tighten further, but the real important thing to remember is that every time they do move in that low inflation environment, the markets will say this is the last one, so the yield curve stays flat in the dollar stays weak.
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i would not expect more than three more tightening's. ,nce we get the rate up to 2% that is for a much in line with what fed members think is the new jewelry for the u.s. economy. angie: we will leave it there. thank you so much for joining us. great to get your insides -- insights. let's take a look across the region as it is risk on. checking trading in sydney, .3% higher -- .75% higher. without the north korean firing icbm test expected saturday, we , .1%some size of relief higher. in hong kong, we continue to see shares play out, a lot of people liking that market and right
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here as well with those h-shares. we are looking forward to the afternoons business in tokyo, the latest on japan is next. this is bloomberg. ♪
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>> it is 11:29 a.m. in hong kong. i am paul allen with first word news. begun a military has mission for areas hit by hurricane irma. remains a category to with wind up to 175 kilometers per hour. it has made to land falls on florida's west coast. it has the tampa bay area readying. the damage phil is expected in the tens of billions of dollars. has warned of retaliation against the u.s. of
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the united nations approve sanctions over its latest nuclear test. washington wants a vote on measures including a ban on oil imports. north korea celebrating the anniversary without testing a missile. instead, kim jong-un reportedly held a banquet for scientists and technicians. china's policy pushing back against a surging yuan. will nol institutions longer need to set aside cash when buying dollars for clients through currency forwards. the news drove the currency lower, and analysts say it may become range bound in the near term. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. sophie: stocks higher led by shares in japan. bonds falling. ,e have that dollar rebounding
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so that dollar yen at 108.41. the rupiah bucking the trend. the yuan under pressure, and the kiwi falling along with the aussie dollar, shrugging off that china inflation data. aussie stocks rising with all segments of materials gaining ground, miners tracking, copper, gold, and steel. ino shares leading the rise seoul, korea as well as tokyo and shanghai. they are not helping the i.t. , losing .4%. real estate stocks weighing in taipei. when it comes to the regional leading theng 5.6% rise in asian tech chairs. rising after china announced plans to phase out fossil fuel
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vehicles in favor of electric vehicles. , a new record, gaining over 300% this year. that is your market snapshot. back to the fallout from hurricane irma. the u.s. military has begun a relief mission in florida, sending food, water, and medical supplies. storm remains at category two with wind up to 175 kilometers an hour. erik schatzker reports from orlando. irma made landfall sunday as a category four storm packing wind as strong as 130 miles per hour. thisossed the florida keys morning. officials described the situation as a humanitarian crisis. the storm is moving up the west naples, fortening
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myers, st. petersburg, and tampa with hurricane force wind flooding and a storm surge as high as 15 feet. i spoke to campus mayor on saturday and asked him what the area was expecting. >> it is always the surge. we are on the water. a category 3 they came right up tampa bay come up my office in downtown would be 15 feet underwater. i don't think that will be the case come up but that is what we train for. >> it is tempting to describe the storm in superlative terms. already more than 2 million people are without power. the wind is slowing, and florida may be spared the worst. >> the bad news is that this is some big monster. i think we are very well coordinated. >> officials across the state will start adding up the damage and we will have a better idea of where irma is headed next. texas is counting the
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cost of your cane harvey. or than 20% of refining capacity were shut down, hedge funds reacted, but now those positions have rebounded. her energy reporter joins us now. let's start with our chart, 7143 tothe bloomberg, just outline how investors are taking a look at the deputy i short the wti short positions when harvey hit. we are singles calls decrease wall of the longs are rising. how are investors playing this out as the two storm start weakening? >> you hit it on the nose. when hurricane harvey was hitting, people saw the risk to
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refineries because harvey landed , the biggestton refining and petrochemical process in the world. it processes oil from the oklahoma area, where wti is priced at, so that means they can process less oil, oil builds up, 1.5 million barrels added in the last two weeks, and that will put a weight on prices. i think the refiner surprise the getting backwith online quicker than people expected. for now, people are seeing refining online and crude being eaten up because gasoline prices are higher, so they are getting into the long game on oil. refiners coming back online, boosting long positions for crude. what impact has this had on oil markets? ,> the other impact
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refineries were shut down for several days, and some refiners for weeks afterward. key pipelines that carry gasoline from the gulf coast to the harbor where futures are priced have been shut down a while, although they are back online. gasoline prices still remain elevated from when harvey hit because speculators and traders are trying to incentivize refiners in europe and asia to upp oil to new york to make for shortages that might occur because of the shutdown of refiners along the gulf coast. when: give us a sense here it comes to crude, we are seeing the short positions go away, along taking hold, but in the context of what is happening in the industry, how will this hold in terms of momentum? it is a tough one to predict.
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i think the crude markets this year have traded a range bound to $55 range and harvey does not seem to have a long-term impact there. i think we will go back to that range. up theicane irma moves coast, you are seeing its impact on natural gas markets, a little tempered. last week, there were fears 9 million people could lose power would reducehich gas to man's, so futures dropped 5%. now that the worst has been we are seeing natural gas futures bounce up a little bit today. angie: thank you so much for that. just ahead on bloomberg markets: asia, the milken institute discusses china's best-performing cities and how the one belt, one road
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initiative could shape development in the years to come. this is bloomberg. ♪
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♪ angie: i want to bring you directly to south korea. christine lagarde speaking at an imf news conference saying she will continue to assist and in terms of north korea. let's listen in. week takeagree that one woman, one man? >> one woman right here in the front, please? [indiscernible]
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>> as i said, i take away from my visit a good and strong impression of the korean economy. is of goodmance quality. numbers show it, 3% growth, 3.5% unemployment, 1.9% accounts acurrent bit on the high side, but it is an economy that performs well, and all of that despite difficult circumstances. we have suggested and i have mentioned that this morning to the president and the vice
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premier minister kim that the fiscal space i have just referred to could be put to good use it targeted to the challenges that the korean economy will face in the medium-term. a social safety net in order to address the situation of the aderly korean people would be good avenue to explore in order to reform society. a fairsame vein, competition environment would be proficient for growth and support for innovation, key to include the productivity of the korean economy. so those were the topics i discussed this morning with theident moon together with current environment in which the society operates.
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>> thank you. >> yes, the gentleman in the center right here. right here. that was christine lagarde, optimistic about the future of the south korean economy. this is a conference between the imf and bank of korea. spoke with the south korean president about the economy and says the outlook in 2017 is 3% growth, in line with the south arean government as they have budget that could help lift 2017 growth. she is also saying that south korean fiscal space could be put to good use. that is christine lagarde in the imf press conference during her visit in seoul, korea. let's move on to china. higher on are trading
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news that the government is eyeing a deadline to into sales of vehicles powered by fossil fuel. this would make china and the biggest market to set a target for facing out gasoline and diesel powered vehicles. tom mackenzie is tracking this for us. this is significant. is, although not all together surprising. byd backede likes of by warren buffett investing in electric vehicles on trading higher today on this news. automaker based in beijing have also invested heavily in electric vehicles. this is not surprising for the industry. there has been a lot of focus on government subsidies in this sector where. a lot of money has been produced in the whole ecosystem.
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china once to reduce its reliance on imported oil. also importantly sees this as part of an industrial strategy. they do one a play at dominating role in the electric vehicle market, and this is part of that pushed, batteries as well a key focus. that is why we have seen regulations to set a date for phasing out these petrol and diesel vehicles at some point. we know the france and the u.k. have said they will phase them out by 2040. the netherlands and norway setting ambition targets. more detailsg on for when it will be implemented by china. angie: what are the implications for foreign carmakers here? tom: china is number one automaker.
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-- market, i should say. it is likely to be the largest market for electric vehicles. chart 29, the projected sales of electric vehicles in the u.s. and china. 2039, 11 million electric vehicles sold in the u.s., 18 million sold in china, so the opportunities are significant, as are the risks. foreign auto companies have to set up joint ventures with chinese partners and there is pressure to transfer their technology to those chinese partners. some analysts said that is a concern. a is looking to set up a shanghai. facility in gm is setting up its main rnd hub in china as well for electric vehicles. they see this as significant opportunity, even if there are risks.
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go on tocations utilities, oil, and energy companies as well because this will potentially reduce china's demand for imported oil. detailsaiting for the on when this will be and fermented to come up but a significant move by the chinese authorities, and part of their push to start to carve out this electric vehicle dominance that they are looking for. angie: thank you so much for that out of beijing. let's continue with business flash headlines. lithium miners in australia expected to be given a boost i that news from china. exports began exports to china this year and has seen a rise in its share price. it is the biggest producer of lithium. also expecting to see a rise in cobalt, nickel, and graphite.
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nissan unveiled its new leaf ev and is willing to share experience with the indian authorities. it goes on sale in japan, followed by the europe and the u.s. in january. hyundai planning to build an electric car assembly plant in india next year. that report comes from digital times, citing unidentified sources. been looking to increase its presence in india. the first electric car is built to compete with the leaf at just under $30,000. you can follow more on this story and all the day's trading on our markets live blog on .loomberg at mliv
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there is commentary and analysis from bloomberg's expert editors. this is bloomberg. ♪
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♪ angie: this is "bloomberg markets: asia." indian markets getting under way. let's look at what is happening right now. had 0.07 against the u.s. dollar. and sensex nifty climbing. something interesting in terms of the electronic vehicle space. an electric rickshaw being developed. so some interesting equity news right there. on to china, the capital of southwest china's sichuan province has claimed the top
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spot in the milken institute rankings. the capital of china's poor but tot-growing province fell third from first according to a new report from the think tank. joining us is the managing director or of research at the milken institute. all cities jockeying for status on your latest research paper. what is driving the move here this year? think 2-3 key factors. three, least for the top it has a lot of government policy to guide the development in that part of the world. also, comes with some surprise ies with good fundamentals can still claim a good spot.
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on the contrary, some of the large cities that have in getting a lot of government support have fallen out of the top 10 positions for the first time in the last three years. it says two things come a good policy, good fundamentals, and a desire to tap into global markets would definitely help. moore and portend, good fundamentals is overshadowing policy directions as you noted. road.bout one belt, one how will this distinguish the cities in the years to come? it would come in a big and long lasting way. look at the number three ranked. for people who actually travel to that part of china, they would understand that it is one of the poorest provinces since ancient times, a high plateau.
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the capital city was one of the laggards in the last 40 years, if not longer, but this time it actually capitalized on two key factors. one has to do with technology and infrastructure building in the last 5-10 years, and most importantly, it actually sits on the location for the belt and road initiative, a key transit point from that part of china to myanmar, thailand, vietnam, and south asia, so that is why it helps. very, verycy support important, but i wonder what part of your research when you take a look at the cities reflects the challenges still of china. china's northeast is still overcapacity this
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in terms of restructuring from an older industrial base. in successful has china been making those reforms stick? not successful at all. do with the has to free-spirited enterprise. government giving guidance and capital, that the free-spirited state-owned invest moneynfest mone that may not reside in the regions, so change has been slow and workers and family are like moving out of the region to the south, southeast, so where opportunities are abundant. call it au might
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failed example of the rust belt in china, so it would take a lot more and money and central government policy to turn that region around. so much for you sharing this research with us. it gives investors and our audience a different view on how to take a look at that gdp growth figure when it comes to china. bloomberg markets: middle east is coming up at the top of the hour. yousef gamal el-din standing by in dubai. a big show, what do you have? getting continuous hurricaneout irma, the damage and devastating destruction, but also about the longer-term consequences of the storm, also harvey. fed policy.s of will that affect u.s. economic growth, fed policy?
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bank of singapore investment strategist will weigh in on that. also, the u.s. dollar and broader emerging-market strategy. later on, we have the managing director and head of research who will join us for a chat on saudi arabia's national betsformation plan, their on diversifying away from dependence on crude oil, recalibration and refinement and what that means in terms of their call on saudi banks. we will also look at the egyptian inflation. angie: thank you so much for that. before we go, let's take a look at this chart, asian stocks regaining at 10 year high, now at the highest level since 2007. on across therisk asia-pacific as we look at the msci asia-pacific regional benchmark at the highest we have seen since december 12, 2007, and the biggest jump since july
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this year. markets rallying. that is it for this edition of bloomberg markets: asia. bloomberg markets: middle east is next. ♪
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