Skip to main content

tv   Bloomberg Daybreak Asia  Bloomberg  August 27, 2018 7:00pm-9:00pm EDT

7:00 pm
7:00 a.m. in hong kong. i am yvonne man. welcome to "daybreak asia." the top stories this tuesday, trade makes the headlines today. stocks get new records. the peso jumped as the u.s. nears a post-nafta deal with mexico. president trump says he will terminate the yield agreement and find a new name. canada will rejoin talks in washington. >> i am kathleen hays in new york, where it is passed 7:00 p.m. on monday. beened reproduction has met. -- model three production has been met. is there anything to rescue?
7:01 pm
yvonne: don't you love it -- it?leen: don't you love trade news in the headlines. this time, it is not china. it is mexico. president trump announcing a deal has been reached. we do not have a lot of the details. a little bit of concessions on what the u.s. wants from mexico. they certainly want a lot. canada jumping in. the minister who covers trade -- coversfor canada trade for canada. what does it mean for asia, china in particular? yvonne: the linkage may not be as positive when it comes to china. that is still the big elephant in the room when it comes to trade discussions. a lot of questions weather
7:02 pm
we have reached the end of this trade war. a lot has to happen before friday to really rejoi the nafta negotiations. kathleen: a lot of optimism and hope. a bit of a surprising development. you can see the dow jones industrial average gaining 1%. so across the board, positive response in u.s. stocks. the dollar just a little bit higher. nevertheless in the green. mexican peso gaining -- the best performer, u.s. canada dollar, the loonie, not doing quite so well. a lot more question marks over what happens there. yvonne: question about em currencies, is that going to be a stabilizing factor for the rest of em? that's going to be the want to watch. the good vibes seem to be continuing in asia.
7:03 pm
we are not extending the gains likely here today with the nzx japan,1%, but sydney, theireing in the green, futures. take a look at currency as well. em currencies climbing the most since january on this u.s.-mexico deal. the after renminbi, holding steady below 680. -- 6.80. the japanese yen holding steady. the rebound after this new government was in place seems to have lost a bit of steam now. to our top story, the white house says the u.s. and mexico have reached a tentative deal for reforms post-nafta trade agreement. president trump called a news event, saying he will be terminating the original nafta and renaming it. pres. trump: they used to call it nafta. we are going to call it the
7:04 pm
united dates-mexican -- united states-mexico trade agreement. nafta has a bad connotation because the united states was hurt very badly by nafta. now, it's a good deal for both countries. yvonne: that clears the way for canada to rejoin the talks. flying to washington. let's look at the implications of all this. eric martin, who covers mexico and latin america for bloomberg news joins us right now. what does this deal mean for mexico? this is something bloomberg exclusively reported on sunday morning that they were poised to reach a deal as soon as today. they have come to an agreement on a lot of things in the bilateral relationship. the majority of what mexico sends to the u.s. our automobiles, and they have come up with new rules. they should strengthen reasonable content for vehicles made in mexico and sent to the u.s.
7:05 pm
they haveow that resolved issues on agriculture, which there was a concern about whether there would be limits on mexican agriculture, produce coming to the u.s.. also things like the u.s. demand for a potential automatic termination of the deal which has been taken off the table. what we will have is a review every six years and opportunity to renew the deal for another six years and really be the fault of -- defaultive. explainedhthizer today that they are looking to have nafta continue, but not looking to allow problems that come up to fester. that's one of the feelings that the 1994 agreement had the news that should have been addressed a long time ago and have not done so until this point. yvonne: have a actually lifted these tariffs when it comes to steel and aluminum? eric: those are still in place. andthing that lighthizer
7:06 pm
the mexican masters have made clear is they see the terrace as iffs as a-- tar separate process. mexico is still looking to bring canada and the u.s., looking to bring canada back into negotiation. we expect that to happen tomorrow. mexican officials making clear if canberra and the u.s. cannot come to an agreement on their trade issues, that at least mexico has the promise of free trade with the u.s. through bilateral deal as a fallback to the trilateral, which is the ideal for mexico and the u.s.. >> as you have been all over washington today and reporting and talking to people, what are you hearing? does the u.s. feel it has won because it got canada to say we have come back to the table? what should we be looking for in the next few days? eric: certainly president trump
7:07 pm
looked at this as a victory. it was something where he had promised the american manufacturing workers he was going to do something about this conclusion in his administration. hundreds of thousands of jobs were lost in mexico over the years due to nafta. it will be interesting to see what happens when canada comes back to the table because ambassador lighthizer told me today that they are ready to friday aboutss by a deal with mexico, and canada, in the large part, is kind of take it or leave it. join in the process or they will be looking at free trade between mexico and the u.s. from the outside, so that really puts a lot of pressure on the canadian try toion coming here to reach something, although they give 90 days notice before signing a deal with mesko and leave open the door. ambassador lighthizer said they would leave open the door for
7:08 pm
canada to potentially rejoin at a later date if they do not sign on by friday. martin, thanks so much for joining. a lot of great perspective on what is behind this, what is happening today, and what could be happening next. moving on to any silicone, she served as senior director for china affairs at the office of the u.s. trade representative. she is at stonebridge group now. thank you for joining us. gamet to start with this kind of question. you had a lot of experience dealing with trade, obviously. president sort of, you know, he knows mexico is very dependent on a deal with the u.s.. a have far too much dependence to not make some sort of a deal. they want to make a deal with mexico and see what happens with canada. smartat been a clever, negotiating tactic that might get more out of canada and get the whole thing done all at once? amy: i do think canada is going to be under a lot of pressure
7:09 pm
because, as your reporter just indicated, if they do not take this deal, it will go forward without canada. they have until friday. their minister is cutting short a visit to europe to be here in washington tomorrow because canada recognizes that the u.s. and mexico have in some ways pushed it into a corner. it is a great negotiating position for the trump administration to be in right now because it looks like canada needs to try and find a way forward here. even though the u.s. and mexico have made some agreements that canada is going to find very difficult to accept. >> in particular, what will they find most difficult to accept? amy: we heard from the canadians that they are much more serious about the sunset clause that's the mexicans are looking like they are willing to accept, although it is a much longer byse than initially imposed the u.s. side.
7:10 pm
if we look at the anti-dumping , ascountervailing duties well as the investor state settlement mechanism, these are issues where mexico has been willing to come toward the u.s. position, and canada said it's going to be very difficult. and of course, canadian agriculture is going to continue to be a problem for the u.s., too. yvonne: do you think, in terms of the u.s. strategy moving china, with hannah, with it solidified something before the midterms, help the economy a little bit, helps stocks move further? or does it depend on what comes out of november? amy: that's a good question. we have been looking at where u.s.-china relations are going to go and ugly had talks for the first time in a few months last week. as you know, nothing really came of those talks. i think the chinese side now side ises that the u.s. fine not making a deal before the midterms. president trump promising to be
7:11 pm
tough on china, maybe not make some kind of resolution in advance of the midterms. it makes him look tougher in fact. from the chinese perspective, looking at trade deals, inconclusive talks last thursday. on friday, we know the administration is meeting with the europeans and the japanese about what together we can do about concerns with china trade issues, and today, looking at this bilateral agreement with mexico, pressuring canada to come on board with it. i think the chinese should be a little bit worried. yvonne: do you see any linkages between a u.s.-mexico trade deal and the u.s.-china one? amy: i think the chinese are probably seeing their issues with the united states as much more difficult to resolve for one very important reason. nafta was an existing trade deal. the u.s. and mexico and canada
7:12 pm
know exactly the issues that they are renegotiating. the chinese consistently said the trump administration is not as clear about the goals it wants to achieve in its trade negotiations with the united states. we have moved the football on the chinese trade negotiators with us, so i think for u.s.-china trade, is going to be much more difficult to come to a short-term resolution, particularly if we sit back for a minute and look at some of the rhetoric that is coming out of this administration, some of the hawks certainly in the ascendancy on china trade policy. they are looking at the prospect of disengaging the u.s. economy from china's economy rather than finding a way forward together to potentially restrict or get rid of restrictions on trade flows. kathleen: our both sides posturing a bit -- are both
7:13 pm
sides posturing of it? threads the needle, the they can use to start something going again? amy: probably, since both presidents have been so tough and so reluctant to look like they are backing down from their bottom line position, we are going to be waiting until november or early december. meetingipac or the g20 where they will come together and really engage one another and talk about a way forward. >> thank you so very much for joining us. albright stonebridge group principal talking to us about the difficulties not only in finishing this mexico-canada deal, but certainly moving on to china. you will get a roundup of the stories you need to know to get your day going in today's edition of daybreak. bloomberg subscribers go to dayb on the terminal and you can customize your settings so you only get news on the industries and assets you care about.
7:14 pm
at get the first word news with our own jessica summers. jessica. jessica: the lira split again after a week of relative calm and extended recent losses as the trading session got underway. 40%.mped past that is after dropping during the holiday last week. the lira has been battered amid u.s. sanctions and concerns about turkish monetary and economic policy. france say they are working on financing solutions to sidestep u.s. sanctions against countries such as iran, including a role for central banks. the discussions involve the u.k. and are a sign that european powers are getting serious about a greater level of independence. bruno le maire said it must be a sovereign continent, not a vassal. contingencyeparing plans for a no deal brexit.
7:15 pm
the government will present a draft bill in the next few weeks. it will include measures such as ritonsg after b already living in france. monday in an hoped to reach a deal by october, but it's increasingly clear that the deadline will slip. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. yvonne: still ahead, back from the break, noble groups controversial rescue plan. kathleen: up next, we will run through the day's market action with ig's kyle. keep it right here. this is bloomberg. ♪
7:16 pm
7:17 pm
kathleen: i am kathleen hays in new york. yvonne: i am yvonne man in hong kong. u.s. stocks in the trade
7:18 pm
helpednt with mexico has the peso and the canadian loonie on the rise as well. su keenan joining us with more on the market recap. su: it was her much risk on this monday and wall street. of hislar was weaker deal, but we did have treasuries falling and yields rising. ands&p closing in on 2900 look at the nasdaq 100. it's a concentration at tech stocks. that one was up as was the russell 2000. it continues to be on a record-breaking streak in terms of setting all-time highs. let's go into the currency pa re of the u.s. dollar and the mexican peso. the peso strengthening on this deal, which is bringing a lot of optimism. not just to the major carmakers like gm that was up, but let's look at some of the big movers. was up 5%.
7:19 pm
the auto parts maker was up almost as much. automakers, auto parts makers, truckers, all raising on this deal. we saw biofarma as a sector. game stock taking us the drop. gamestop taking a's the drop. this one is called auto break. u.s. car imports from mexico and canada are off the peaks. as you can see over here. the stocks moving higher and renewed optimism that there will be a greater deal between the u.s. and these countries. talks between the u.s. and mexico have largely focused on cars. off, and thelag is imports will be up and running once again. yvonne: su keenan, thank you very much. let's continue on this story with ig group market analysts
7:20 pm
kyl joining us from l burn. kyle, in terms of the emerging-market currencies, a lot of currencies getting beaten up. great dayso had a today. will this help emerging-market currencies more broadly and left the peso for that matter? kyle: i think it is an interesting one going forward because we have seen an easing of concerns. how is supported by the fact that everyone stepped away from it. also the chinese yuan, a bit of providing support for that as well. i think at this point in time, the fact that there is more risk appetite in the market and concerns around the trade war and fears around an explosion in certain targets given the wrong circumstances, there is the opportunity for markets to find themselves supported.
7:21 pm
low volatility environment trickling into developed markets as well as the riskier appetite. >> i just wanted to stay on the mexican peso for a moment. i have a bloomberg chart that looks at volatility. if back to a pre-election level. if you are a traitor come out -- trader, what are you watching for the next couple of days? kyle: i think we're just going to look for a consistent line, particularly out of the trump administration. what has been difficult to predict out of the white house in recent times, the whole cycle in terms of trump being in the white house, is they can have positive news and a friendly development between nations. ont turning around based what appears to be political in the unitedth
7:22 pm
states and midterms coming up in the u.s. as well, how the political story may play out to make sure that trump can obviously sell the republican party and cause coming into the midterms. has beenhe thing that killing markets over the last few months is the fact that we don't feel as though we are getting a nice consistency. from the white house. he would imagine -- you would imagine this is the real deal this time, can take this seriously, and start talking about the risk we are willing to take and have the effect and the equity spaces as well as support around emerging-market currencies. yvonne: on the other side, take a look at what's going on in the u.s., and it seems like things are back to normal once again. we keep getting these records when it comes to the nasdaq. we have a chart that shows what we have been seeing. is there time to curb your enthusiasm?
7:23 pm
when we take a look at the relative strength index for the s&p, it seems like the momentum is not as strong as when we reached the peak in january. do you think we need to be a little bit less optimistic? it starts to break down when you don't have levels to look at it, particularly reflecting on where the market is and where it should be. a zone nowously in which is completely uncertain or at least there is not much. the majority at this point in time is that there is still room to run in the u.s. market. i think there is a contrarian view in the market at this point in time if you want to look at it that way that perhaps it's not the risk being priced into the market of what may occur if the u.s. had comes back with a slightly hawkish streak.
7:24 pm
even that point in time, factoring in the possibility of higher rates in the future. i still think there is justification to say the u.s. market can continue. it has done so for the last few months irrespective, not to say that that will continue because i do think we are up closer to the top of the trend channel then we are to the bottom. -- than we are to the bottom. saying that, there are risks on the horizon. perhaps some of these risks are not reflecting the whole scope of what is going on. yvonne: are you buying any form of protection right now? how should we hedge this? kyle: if i am looking to take on unwinding of the confidence we have seen two markets at the moment, you have to look at some of the asset you can play with in terms of japanese markets. despite still not exactly going on a tear by any means against
7:25 pm
-- in this currency tear -- the japanese has climbed around to ,he 111 mark, which is strong and indicates as well that the u.s. dollar is weaker, so let's contain some of the upside there. it is -- the risk appetite still exists. shorting the nikkei on the back of that is another option to try and play into that trend. yvonne: great to have you, kyle rodda, ig group market analyst. plenty more to come still on "daybreak asia." this is bloomberg. ♪
7:26 pm
7:27 pm
yvonne: let's take a look at your markets. it looks like we are coming. with this equity rally after the pboc's yen shift and also this u.s.-mexico trade deal boosting the good vibes all across the world. more advances with nikkei futures up .6%.
7:28 pm
nikkei futures also pretty positive. coming up next, investor focus back to the crucial model three. the bloomberg tracker suggests good news. this is bloomberg. ♪
7:29 pm
7:30 pm
yvonne: good morning. 7:30 a.m. tuesday on a steamy hong kong morning. 30 minutes away from asia's major market opens, kathleen. seven: 30 p.m. monday in new york. it was a steamy day today. what a rally in stocks today, on the news president trump has dropped some kind of deal with mexico on trade. i am kathleen hays in new york. yvonne: i am yvonne man in hong kong. let's get to the first word news with jessica summers. jessica: president trump says he's signing a new trade deal with mexico and he is calling on canada to get on board or risk being left behind. he announced the deal in an oval office event with mexican
7:31 pm
president pena nieto. they agreed to raise -- to 75%. half the workers earning at least $16 per hour. terminatep: i will the existing deal. when that happens, i cannot quite tell you. it depends on what the timetable is with congress, but i will be terminating the existing deal and going into this deal. we will start negotiating with canada relatively soon. they want to negotiate very badly. but one way or the other, we have a deal with canada. u.s. farmers will get almost $5 billion of direct government aid to compensate for losses sparked by the tit-for-tat trade war with china. soybean growers will get $3.6 billion and pork reducers or number two on the list with $290 million. gary, sorghum, corn, wheat, and con producers won't get payment.
7:32 pm
recently deposed australian pm malcolm turnbull is quitting frontline politics. he will resign this week, triggering an election in the constituency. he served as prime minister from september 2015 until last week when he lost a vote of no-confidence in the parliamentarian liberal party. turnbull leaves politics with his party trailing in the polls. drama may have overshadowed progress on the model three. bloomberg's tesla tracker suggests production of the all-important car may have exceeded the target of 5000 per week. estimates indicate tesla may have topped its goal for late august. atbal news, 24 hours a day, to talk on twitter, in more than 120 countries, i am jessica
7:33 pm
summers. this is bloomberg. yvonne: we are counting down to some of the major market opens in the asia-pacific. let's bring in sophie kamaruddin. we have the u.s.-mexico trade deal. vibes on theg good offshore renminbi. what are you watching? sophie: that may continue when you take a look at how futures are pointing higher in the region. we have data that could derail that risk appetite that is keeping the yen above 111. this wait on figures due tuesday. consumer confidence in august tumbled. the case of the bank of korea on friday. when it comes to emerging markets, the argument could be made that conditions are turning more positive after the u.s.-mexico trade deal and the pboc's efforts to support the yuan. you can see eem currencies
7:34 pm
climbed the most since january thanks to the rally in the peso. that came up just a touch. the euro was the exception when it came to the em space. the yuan is stabilizing after a record decline against the dollar, but it bears keeping in mind, kathleen, that the other drivers behind the $2.5 trillion rout in chinese stocks are waiting on the msci e.m. index. >> let's move onto ubs, because they are in the skeptics camp when it comes to the outlook for chinese stocks. what is their argument? ishie: the aipac head of ubs wealthy. they have yet to find a floor. terminal, see on the we are anticipating that with theyuan bottoming out, will eventually follow suit. even with monday's rally, the shanghai composite is still in a bear market, trading at a cheap 10 times forward earnings.
7:35 pm
plus, turnover is near the lowest in four years. ups is recommending -- andicularly as banks state-owned giants are expected to suffer from an eventual return to tighter policy. more of china's lenders -- analysts expect stable growth for profit in the second quarter, but the outlook is looking lackluster with concerns over margin growth as well as asset qualities. sophie, thank you. apple taking a page from its own playbook. it plans to triple down on the iphone x, offering yet again three new models. the new devices will have a wider range of prices, features, and sizes to increase their appeal. color is different as well. let's bring in mark gurman, who couple of -- who covers all
7:36 pm
things apple. is this just another s year? mark: definitely. the focus is going to be on the profits and camera improvements, if you really drill down. in terms of bigger picture for apple, it's a big deal. three new phones. this is their biggest seller. over two thirds of the revenues and profits come from the iphone. everything apple is about the iphone these days, so there will be too big bigger models -- two bigger models. so a lot to look forward to in two weeks to three weeks from now. i miss the high iphone x initial wave. how am i supposed to pick through all these different choices right now? mark: the question really comes down to which iphone you are using today, right?
7:37 pm
if you have an iphone x, you're probably not going to want to upgrade this year. if you have an iphone 7, you might want to take a look at upgrading to the iphone x. if you have an iphone 7 plus, you might be looking at the that will be x s coming as part of the new wave of devices. if you are looking at something on the lower cost of the spectrum, you might look at lower cost models that will come in multiple colors. pretty much something for everyone in this new generation. yvonne: what else is apple coming out with this year? that's what i want to know. pods, deeper siri integration, alongside the new iphones. a new ipad pro model with facial recognition, removing the home button, new interface. the biggest apple watch upgrade since the first model was previewed in 2014. yvonne: how will these models help apple gain some of them ground it lost to rivals? mark: the lower-cost model that
7:38 pm
will come in multiple colors, stainless steel, will be very key for apple. that will come at a lower price point while having a bigger screen, and it will be interesting to a lot of people in developing markets such as asia. >> thank you so much, mark gurman, joining us from los angeles. that move onto another very important company. tesla may have obscured welcome news. a bloomberg tracker suggests production targets for the crucial model three may have been actually hit this month. wouldn't it be nice for elon musk to have some good news? a day forward in october where we will get the latest quarterly production numbers and the deliveries, but that is positive news as we review some of the major drama that hit the stocks. let's take a look at how the stock has performed. we definitely saw it come off the lows of the day. it was down some 4%, coming off the news that elon musk had
7:39 pm
scrapped the plans to go private. let's go into the bloomberg. gtv is where you can find our library of charts. tesla has been growing here. that is a very big question. a lawsuit that had been filed sedan production numbers, that was dismissed, so that the victory of sorts for tesla. now to the main issue, again, take a look at the way the stock has performed just in the past five days. it has been a roller coaster ride as there has been this focus on whether the company was going to go private or not, whether when elon musk put out between on august 7 and said he had secured financing, whether he had, whether he realized many legal analysts said he could have broken some serious regulations. issues alsomajor
7:40 pm
ahead in terms of the credibility of elon musk after reversing himself. one of the major tech analysts out there says the issue is not going to go away. he also thinks it has taken the focus off the main issue, which is production. many believe the positive and negative gets back to the basics. you have got major questions for the board. two they reign them in for these production targets -- do they reign them in for these production targets? we have basically 11 that have a stocks,is -- buy in the 11 that have a hold, and cannot have a sell. you have a very divided analyst community. you have rbc with a note saying both the bold and the bears are emboldened by this latest episode where questions have
7:41 pm
been raised about the health and impetuous this of the ceo -- impetuousness of the ceo, but there are positives as well. yvonne: if you go back to basics, there seems to be hence they are reaching those targets for the model 3, 2. the latest numbers have been very positive, but again, it's going to really depend on what those october end of quarter numbers are that will on thee needle stock. many believe this is a chance for tesla to redeem itself. yvonne: thank you, su keenan. another company that we are focusing, noble. the controversial rescue plan has been approved, but what is actually left to rescue? we will assess the damage, next. this is bloomberg. ♪
7:42 pm
7:43 pm
7:44 pm
>> this is "daybreak asia." i am kathleen hays in new york. yvonne: i am yvonne man in hong kong. for violating- the platform's policies. 468 accounts have been down, lifting the total removed to 770 since last tuesday. the ceo agreed to testify to congress on september 5 on how he and twitter monitor and moderate user content. he will address the issue of russian meddling in th the election. kathleen: it expanded its alliance uber. the deal values in writing a letter at $72 billion and will see toyota equipped the top technology. that entity has yet to be identified. such a deal would raise uber's valuation by 15%. e is thejetblu
7:45 pm
first carrier to raise the cost of a checked bag to $30. the charge for a second bag goes up by the same amount to $40. tohird bag rises $150. it is facing increasing costs as growth slows. southwest is the only large u.s. airline that does not charge for a single checked bag. kathleen: noble group is starting the first day of the rest of its life after shareholders backed a controversial rescue plan. it dramatically reduces investor influence. noble's guest says future remains uncertain. associate now is an professor of accounting. when you look at this deal, when you look at all the company has been through, were the investors ready to say that we want to
7:46 pm
come out of this with something. we will go along with everything, and did they get a good deal? >> i think what they got is hope, ok? it was a choice between hope and absolutely nothing, so i guess hope. whether that hope plays out remains to be seen. kathleen: will you remind our audience, who may be has not followed every twist and turn, what happened to this company? how did it get into this dire straight? >> it started when it was attacked by a a research company, alleging accounting irregularities. that was denial, but subsequently, i guess, overtime, it has proven to be with some basis, the allegations. 90%, thellen by over
7:47 pm
market capitalizations in 2015. >> we have seen this dramatic fall in the stock. noble? really a new take a look at the restructuring plan. has the dna of that accounting been changed under this new company? mark: of -- >> of course. it's more focused. circumstances, it's more asian-centric, and more limited in terms of focus. becausestill worrying of the key management issue there. to changenot proposed the alternatives. if you're talking about the new normal, you would want a really fresh change. yvonne: what does that signal to you? that they have not learned from these mistakes? do the management still need to
7:48 pm
be held accountable here? mak: i sensed stubbornness. right from the beginning, when it was attacked. at the time, i said it did not seem to respond in the right way. more recently, they still do not get it. even now, i still do not see them getting it. just imagine they will appoint, you know, five new directors, independent directors. these new directors will come in and they will find -- i do not know what they are going to find. do they have a choice to replace the key management? who would want to join the board when they are stuck with whoever the key management is or whatever? whoever is agreeing want to do it before they do. chairman,d from the that passing the restructuring plan was hard enough, but he
7:49 pm
saying it's all about business now. what can the company due to turn around this company and raise capital at a time when it went through such a controversial restructuring? mak: yes, you know, i think, you know, it makes it very clear that the struggle will continue. it's not straightforward. whether the business is they have remaining will perform and whether it's able to raise capital, and one of the things is of course the lack of trust in the company, and i think that is going to be a concern going forward. kathleen: you know, the question of regulators, you said this started when iceberg research jumped in, right? if i am a regulator, why wasn't i the one that jumped in? how do they then and in all this -- end in all of this? mak: i think the regulators were put in a difficult position because obviously, noble was from a clean accounts
7:50 pm
big four accounting firm in hong kong. the trouble is of course the big four accounting firm in hong kong does not have much accountability. not the same accountability as an accounting firm or other accounts in singapore. of course, they then commissioned another review by another accounting firm, but that was a limited review. be these of probably may regulators, we like to much the auditors. besides that, there is a need to look at whether the disclosures are made at the right time, the capital raising time, and around times when they announce surprising results. kathleen: i want to have a setback looking at history. when we had things like this happening in the united states, and it led to regulatory reform, it seems that investors have been hearing the same have a story. is there any need for that now? mak: yeah, i think that that
7:51 pm
needs to have regulatory reform. we have a lot of companies that attract a lot of foreign companies to list here. the nature of our exchange. we need foreign companies. a lot of them, there is a regulatory lacuna. i think there is a need to look at whether we need to amend regulations to make sure those regulations do apply, and of course, our capability to enforce those regulations. kathleen: thank you so very much for joining us. associate professor of accounting. look at some of the stories trending across the bloomberg universe come on, get all the details on upcoming new iphones as apple triples down on the flagship design. terminal users reading about how the oil and facebook are in a slugfest to win over indian
7:52 pm
users. dozens of tech firms have attempted to expand in the country. on tictoc, the timeline of the late senator john mccain and trump's rocky relationship. the white house returned it flags to half staff on monday after facing a barrage of that afteror ending just one day. check out more on the terminal. ♪
7:53 pm
7:54 pm
kathleen: now for a quick check of the latest business flash headlines. t-mobile proposed $26 billion front acquisition of sprint and is being criticized by union leaders. the deal threatens jobs and competition and made you nothing to accelerate the arrival of 5g, they say. reunion at the two companies have a history of targeting each unions customers -- the says the two companies have a
7:55 pm
history of targeting each other's customers. the company is selling brother my cash as it tries to pare down its debt. the delinquent firm faces deadlines. is said to be in delivery of having -- a delivery of the dreamliner. production of two more is being caused. include suspected shanghai airlines. the blog says they requested a delay. a dreamliner for air china is sitting in storage for a loan reasons. -- unknown reasons. to face it in a rational way. some question the cost and feel it is an attempt to extend
7:56 pm
beijing's influence around the world. effective financing and valuable assets have been created for relevant countries and their people, and economic development has been boosted as well. note that trap has been -- no debt trap has been created in this process. yvonne: we are counting down to some of the major market opens, just less than four minutes ago. it seems like a good times are continuing in asia after what started the rally was the pboc's move to try to stem the route we did see in the renminbi. we did see the offerman beholding this morning and equity futures also pointing positive after that u.s.-mexico trade deal was announced. surgedsee u.s. stocks back to a record we did see in january. look at the nasdaq as well hitting the records as well. we will talk to tim campbell, the capital partners
7:57 pm
cio. he has been in the front of this long short is a fund which has dunk when it comes to the calls on trade. their fund has returned 26% this year through july to see what kind -- the trade tensions seem to be easing. what about for china? chinese banks set to release earnings today. we have the ones to watch, watching bank of china, the andcultural bank construction bank. those all coming through later on today. we have the market open coming up next. this is bloomberg. kathleen: let's take a quick look at some of the market boards we have been watching throughout the shows so far today. nice rally today in the stock market for the dow jones industrial average, of more than 1%. the nasdaq almost that much as well. bloomberg dollar, a little bit of gain.
7:58 pm
said i have got a deal with mexico. not a lot of details yet. canada dollar, not quite so good. a little bit weaker close, but a lot will happen on that front this week. keep it right here. this is bloomberg. ♪
7:59 pm
to rent a movie? showtime. or buy the hottest shows. even here? we've got you covered. now they are all yours. to take on the go. on any screen. bingo! alright! and watch whatever you buy. wherever you are. head to to start watching. simple to rent, easy to buy, awesome to go.
8:00 pm
yvonne: we are live from bloomberg's asian headquarters. i am yvonne man. welcome to daybreak asia. asian markets look set to sustain monday's gains after u.s. stocks rose to yet more new highs. the dollar and treasuries decline. trade is the catalyst. the u.s. is closing in on a new post-nafta deal with mexico. canada will rejoin the talks in washington. kathleen: from bloomberg's global headquarters, i am kathleen hays in new york, just past 8:00 p.m. the yuan stabled on pboc promises of support. the recent daily fixing has been stronger than expected. uber wins backing from toyota.
8:01 pm
the investment in self driving cars values the ride hailer at $72 billion. yvonne: it is all about trade today, kathleen, with that u.s. and mexico trade deal announced. a lot of questions about what meaningful change came out of this trade agreement. a lot of questions remain about whether canada can rejoin. what does this mean for u.s. and china negotiations as well. markets are liking the news. kathleen: we spoke earlier on amy, whoasia with worked in the office of a trade represents day of of the united states and imf. she said yes, it will be difficult, but she thinks china should be afraid, she thinks there could be more pressure. also agrees you have two strong leaders, officials speaking in a very blustery way that may make
8:02 pm
it tougher. the plot has thickened today, not just between the u.s., mexico, and canada, but between the u.s. and other big trade agreements. yvonne: a lot ahead for justin trudeau and xi jinping. there are key events where president trump and president xi will be meeting, so we will see if anything gets ironed out. in the meantime, let's get you caught up on the market open with sophie kamaruddin. sophie: risk value looking intact. by .9%225 opening higher, the kospi up by .5%. also gains in sydney. take a look at a barometer of the risk sentiment around the nafta deal. the mexican peso giving up some of its overnight advantage, perhaps on concerns the luminary agreement may find hurdles on the incoming over door -- incomingobrador administration.
8:03 pm
some strategists are optimistic that once the nafta issue is settled, the u.s. will use that as a tool to restart trade talks with china and europe. trump himself has said it is not the right time to talk with china, and ubs says the mexico deal should not be extrapolated to ties with beijing. the recent developments are being read by some as positive for emerging assets. the offshore yuan is steady below 680, sparking hope that chinese stocks may find a bottom. you have morgan stanley saying buy the dollar, targeting a 3% gain. a quick check on 10 year treasury yields, still eyeing 2.8% level after these recent developments. let's get a quick check on the full springboard to check on how metals are kicking off on the lme after climbing overnight as the dollar vaulted on the u.s.-mexico deal. a mixed bag for metals. yvonne: thank you, sophie kamaruddin, on your market open.
8:04 pm
president trump says he is signing a new trade deal on mexico and he is calling on canada to get on board or risk being left behind. he announced the deal at a hastily arranged oval office event with his mexican counterpart joining by conference call. take a listen. pres. trump: i will terminate the existing deal. when that happens, i can't quite tell you, depends on the timetable with congress, but i will be terminating the existing deal and going into this deal. we will start negotiating with canada relatively soon. they want to negotiate very badly, but one way or the other, we have a deal with canada. let's bring in bloomberg's senior international editor, jodi schneider, joining us in hong kong right now. does this mean nafta is dead? it certainly looks like the agreement the u.s. and mexico have come up with is not nafta. it is between them.
8:05 pm
if they were to go ahead with this, it would be significantly different from nafta. the big question is is canada going to join or not. canada has some big problems, big stumbling block for canada, including what happens with protections for its dairy industry, which is very crucial for them. we will see, but this is a preliminary agreement. becauser big issue is it is something that is not an extension of the previous nafta agreement, whether it would have to go through congress. it probably would, especially if canada is not involved. then it is a bilateral agreement rather than trilateral. yvonne: it still might not go through. jodi: it is a midterm election year. congress does not have that long they are in town. they want to leave by october to campaign for midterms. it would be hard to see how you would get something like this through quickly. and then you will have a different congress. there is a lot of questions to be resolved, but it certainly
8:06 pm
looks like a different agreement then what they sat down to renegotiate. yvonne: what do we know about the terms? i know autos were always a big sticking point. jodi: they seem to have resolved that between the u.s. and mexico. regional auto content would go up to 75% from 62.5% under nafta. that's a big deal. also it would be softened, the requirements. the u.s. wanted the agreement to be looked at every five years, now they are saying every six years. yvonne: the sunset provision. jodi: that's right. they made progress on that and on autos. yvonne: these were big changes the u.s. has made, willing to offer small concessions. is there any chance that maybe trump's team has convinced him it is ok -- including with the chinese, especially with the chinese -- to find places to back off a little bit, so maybe you get them to come to the table and make a deal? jodi: perhaps, although i think
8:07 pm
what president trump will take away -- you saw this in his comments at the oval office -- is that he negotiated tough. he was not willing to let canada's, what they thought were important issues, to necessarily crowd when he wanted. so we will really have to see. the other thing we will have to see, does this go through congress, is this a win for the president or not? whether this will strengthen his hand with china. the other issue is this does not necessarily do a lot to protect manufacturing jobs in the u.s., which of course was the whole president trump had talked about as a candidate. himher it will be a win for and how it strengthens his hand with china will need to play out in the coming weeks and months. yvonne: one step at a time, we will see. thanks to jodi schneider. now let's get to the first word news with jessica summers.
8:08 pm
lira split again after a week of relative calm as marcus host for eid. one month implied lira volatility, the expected currencies when jump past 40%. dropping during the holiday last week. the lira had been battered during the past month amid u.s. sanctions and concerns about turkish monetary and economic policy. china is hitting back at international criticism of its criticism of itsd ambitious belt and road trade infrastructure plan. it says it will suss out in an objective and rational way. the plan aims to link china with the middle east, africa, and europe. some questions the cost and feeling it is a covert attempt to extend beijing's influence around the world. >> [translated] effective financing and valuable assets have been created for relevant countries and their people, and economic development has been boosted. no debt trap has been created in
8:09 pm
this process. private elon musk's go drum may have overshadowed progress on the model three. production of the all-important car may have exceeded the target of 5000 per week for much of this month. estimates can vary week to week but indicate tesla may have actually topped its 6000 cars a week goal for late august. recently deposed australian pm markham turnbull is quitting from my politics. the abc reports he will resign from parliament, triggering an election. he served as prime minister from september 2015 until last week, when he lost essentially a vote of no-confidence in the parliamentary liberal party. turnbull leaves politics with his party trailing in the polls. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am jessica summers. this is bloomberg. yvonne: toyota has confirmed it
8:10 pm
is expanding its alliance with uber $3.5 billion investment in autonomous car's. the deal values the ride hailer at $72 billion. we will see toyota making vehicles equipped with uber's self driving technology. a reporter joins us from toyota now. what more do we know about this? >> as you said, the dollar value , $.5 billion. that adds to the investment they may previously a couple of years ago, which they never said how much it was. we don't know how much the total investment, but certainly they have upped their stake. the vehicles they are making our purpose built minivans based on the sierra minivan. those will be fitted with uber's self driving technology.
8:11 pm
toyota is also putting its own self driving technology here, too. it has something called guardian mode self driving. that is different from the self driving that basically takes over for you, the chauffeur that drives you are bound. guardian is there underneath as a safety net so if anything goes wrong, the car can take over. certainly that seems to be a nod to the unfortunate accident which led to the first autonomous driving death earlier this year, which was caused by -- by uber. that, the press release also says initially toyota will make sierra minivans for this project. you may remember that in january, toyota debuted or revealed something called the e palat concept, basically a big box on wheels, a multipurpose
8:12 pm
box. it could deliver a pizza or move people like a bus or become a rolling hotel room. project, so of that maybe in the longer term that might figure in. kathleen: this guardian aspect is so important because i think a lot of people figure this can never get off the ground until the technology is perfect enough that it almost guarantees no pedestrians get hurt. but for so many companies, this is the next step, right? this is why toyota is going ahead with this interest in uber ridesharing, because auto companies will get competition from this if they are not part of it. kevin: that's right. certainly uber is not the only place toyota is investing. it has its own autonomous program. it has got the toyota group companies, which include big suppliers. these companies -- four of these companies -- actually consolidated their autonomous
8:13 pm
driving functions in an announcement just yesterday. there is a lot of movement here. toyota recently invested $1 billion in other companies. it is really looking geographically all across the board. if you think of uber as primarily u.s., grab as being southeast asia, and deedee being in china, although i am sure their ambitions are bigger, toyota is covering the globe as much as again. , theyyo and japan as well have a partnership with the taxi service here, which uses that kind of ride-hailing application as well to hail taxis. it is getting off the ground now. so really toyota is investing very heavily in mobility as a service. as you know, toyota is trying to move very quickly to turn itself from a car manufacturer into a service provider, a mobility
8:14 pm
service provider, and a very complete service mobility provider. one of the things it wants on the road to this is data. data is invaluable and toyota has made no secret that one of the reason it is partnering with these companies like uber is to get data on how people drive, how people hail rise, how people move around, as we move into this new era of mobility. yvonne: for uber itself, how key is this partnership with toyota when it comes to their ridesharing strategy? kevin: it is certainly a victory for uber. pressave had a lot of bad in a lot of ways, including the unfortunate fatality earlier this year. , thelly interestingly chatter about uber and toyota's partnership died down after that , although i was hearing it still continued under the surface. we saw the results of that today. so uber now has a third prong in
8:15 pm
its strategy for autonomous robo taxis. one is the one where it is retrofitting its own software into the volvos it ordered and running that sleep. it is also allowing daimler to operate its own autonomous driving cars using uber's network. then the most recent with toyota is where it licenses the technology to toyota. what is a little unclear still is whether toyota will operate that fleet or whether it will be operated by somebody else. yvonne: kevin buckland there, joining us from tokyo. still ahead, will president xi is lending drive boost bank stocks? a preview of earnings from china's big lenders. kathleen: up next, we look at the market movers with tim campbell. this is bloomberg. ♪
8:16 pm
8:17 pm
8:18 pm
yvonne: big news -- kathleen: big news, as you know. traders and investors around the world are trying to sort it out. that is trump announcing a bilateral trade deal with mexico , backing away from the nafta framework that has been in existence for so long. jeffrey sides have tried to negotiate, -- the three sides have tried to negotiate, not gotten that far. questions remain about canada and how the deal will affect mexico. has gigantic trade relationships, the biggest partner with them, that they have to make a deal. their trade with canada is so much smaller that they have to say, well, hope you can get aboard, because if we can't get a deal with the u.s., a deal with you does not make up for it. yvonne: it seems the priority for president trump is to try to get others on board. they are focusing on other nations like mexico first.
8:19 pm
this has implications for japanese automakers as well. on top of the toyota news, uber, it is good for nissan, honda, and toyota, who have plants across mexico. the nation has received more than $14 billion foreign direct investment from japan for the past two decades. the implication is not just between the u.s. and mexico, but also international automakers. obviously what does it mean when it comes to the threats the president has when it comes to imposing auto tariffs. it has that threat eliminated now that we see the u.s.-mexico deal. against aul bet little-known japanese company has helped our next guest, singapore is longlead capital partners, making his fund the best short performing hedge fund this year. it gained 26% through july by betting against a company that makes battery -- factory automation equipment. let's get behind this with
8:20 pm
longlead capital partner tim campbell. let's talk about the latest when it comes to the u.s. and mexico trade deals. this really eliminates a lot of uncertainty we have in the markets when it comes to trade. >> thank you, yvonne, lovely to be here this morning. it is certainly an interesting time from a political perspective. at long lead, we focus on the company level, and what we have seen very clearly is the longer the trade dispute has gone on in china, it has led to more and more uncertainty. the mexico deal announced overnight is yet another example of where there has been disruption in equity markets from global policies. yvonne: you have made some pretty right calls when it comes to trade. talk us through the call with smc, the stock in tokyo. a little-known japanese manufacturer, but what made you bet against the company?
8:21 pm
>> as a team, we have got really strong dna in the factory automation space, followed it for over 10 years. what is important in that space is a demand for products for any of these factory supplies, comes from other companies' capital expenditure. what typically happens is the decision on capital expenditure is based on their perception of their end markets. in the case of smc, what we have seen is as the uncertainty has risen in china, there have been cutbacks across the board on a number of companies. smc is not immune in terms of feeling the capital expenditure cut back. -- most recent q1 reports kathleen: tim, go ahead. >> in their most recent q1 reports, revenue grew 7% and inventory balances grew 17%, which is an indication to us
8:22 pm
there is growing weakness starting to build across the business. i am a real macro person, but i love to hear how a macro force like this trade war, trying to force some kind of new agreement, which china, too, seems to want to get on board with, how it is affecting the micro level. where else are you looking to find companies you want to short or companies you want to buy them a? >> -- buy? >> exactly. the two key areas we have seen, impact from the trade tensions. one is on the factory level for chinese manufacturing firms. that is, like i said, across the board we have seen it in plastic injection molding companies. the other area worth mentioning is we have seen early signs of a slowdown in the chinese consumer
8:23 pm
, indications there we have spotted from hotel data in china. it is indicated that -- is starting to decline. hasound chinese tourism shown up some weakness in japan. we also monitor very closely the heavy-duty truck market that has all sorts of end market. in july and august, that data specifically has weakened as well. kathleen: who wins? can you get any winners or is this a time to play the short side? >> our strategy is based on finding long and short around the region. we have of longs invested in successfully this year, one is a japanese refiner called jxtg, which is listed in japan. consolidation of that industry meant there were a two key players with 90% market share. jxt, we started buying the position in february of this year on the back of three key
8:24 pm
pillars, the first of which is as the pint-size discipline craft and from the consolidation, our view was that utilization rates would rise and that would lead to a more stable refining margin. the second of which is the company announced ¥100 billion of synergies post merger. we have gone through each of those buckets and feel there is some upside in terms of beating that synergy number. thirdly, we felt the stock was very undervalued. multiple and successful execution would mean that the invoke capital management in the form of buybacks and share, increase dividends. kathleen: thank you so much for joining us, tim campbell, chief investment officer and cofounder of longlead capital partners. bloomberg users can interact with the charts shown using gtv
8:25 pm
. onwse recent charts featured bloomberg television to catch up on key analysis and save your future -- save your charts for future reference. this is bloomberg. ♪
8:26 pm
8:27 pm
yvonne: big day for trade with president trump saying he has a deal put together for mexico. let's look at the currencies that are closely affected. you have the dollar, a small gain. the mexican peso was the big star, biggest gainer in emerging markets, up nearly .2%. the canada dollar is weaker because it remains to be seen what canada can do to appease demands the u.s. has for them. yvonne: of course, when it comes to the automaker, they have been quite positive on this news. we did see gm, ford rally overnight. japan has been talking about
8:28 pm
being a big investor when it comes to mexico. nissan, honda, toyota all have plans across mexico. korean automakers also rallying today. coming up, the pboc's mood bolstered the ends stability, but can it be maintained? more coming up. ♪
8:29 pm
8:30 pm
yvonne: 8:30 and singapore, half an hour away from the open of trading. one-stop we are watching his noble group. the trading halt has been lifted, or at least the company has made a request to lift after the debt for equity restructuring plan was approved by shareholders yesterday late afternoon. cast as avotes were sign of hope that perhaps they can turn around this company. i'm yvonne man in hong kong. kathleen: i am kathleen hays in new york. you are watching "daybreak: asia." let's get to the first word news with jessica summers. jessica: president trump says he is signing a new trade deal with
8:31 pm
mexico, calling on canada to get on board or risk being left behind. he announced the deal at a hastily arranged oval office event with mexican president pena nieto joining by conference call. to raiseides agreed the regional manufacturing for autos to 72%. with at least half the workers earning at least $16 an hour. around i will -- pres. trump: i will terminate the existing deal. when, i can't exactly tell you, depends on the time frame with congress. but i will be terminating the existing deal and going into this deal. we will start negotiating with canada soon. they want to negotiate very badly. one way or the other, we will have a deal with canada, either a tariff on cars are a negotiated deal. jessica: u.s. farmers will get at least $5 billion of government aid to compensate for losses caused by the tit-for-tat trade war with china. soybean growers and pork
8:32 pm
producers will also get a. corn, wheat, and cotton producers will also benefit. the payments start early next month ahead of the harvest and the crucial midterm election. germany and france say they are working on financing solutions to sidestep u.s. sanctions on countries including iran. the discussions also involve the u.k. and are assigned that european powers are getting serious about a greater level of independence from america. the french finance minister said europe must be a sovereign confident -- confident, not a vassal. france is preparing contingency plans for a no deal brexit. the government will present a draft bill and it few weeks, including measures such as looking after britain's living in france and ensuring fluid border controls after the u.k. leaves the single market. london and brussels had hoped to reach a deal by october, but it is increasingly clear they will
8:33 pm
not. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. yvonne: let's get another update of markets. let's get the latest with sophie kamaruddin. seems like japanese stocks leading the gains. sophie: japanese stocks set for a sixth day of gains, the longest winning streak since october. the nikkei 225 could be heading for a high. the yen the back foot trading at about 111 517 against the dollar. when it comes to what is helping boost the sentiment in japan, auto related companies are among the best performers, tracking gains. trade uncertainty may be tempered by the u.s.-mexico packed, although jeffrey scott from the peterson institute earlier told us that caution should be had as the deal is a
8:34 pm
big morning flag for japan. , and nissana, mazda have operations in mexico, which has helped make japan the biggest investor. korean automakers also rising as the terror of risks are seemingly resolved -- as the tariff risks are seemingly resolved. that might make it difficult to build new car plant in mexico, giving those with existing facilities a leg up. kathleen: plenty of tailwinds when it comes to the u.s.-mexico trade deal. stabilizing onso monday following news the pboc will take extra steps to support the currency. tom mackenzie joining us with more on this. can the stability be sustained? tom: the view is we will probably avoid going through the seventh level for the time being. of course we have continuing pressures from the trade war, the slowing economy longer-term, which will continue to put
8:35 pm
pressure on the chinese currency. for now at least we have the cyclical factor reintroduced on friday. the currency stabilized on monday. we have 13 consecutive days where the fixing has been stronger than expected. we have had additional pressure on the pboc, putting pressure on banks to avoid earned behavior when it comes to fx market. measures to make it more expensive for hedge funds the short the currency. analysts saying it is about avoiding breaking through the seventh level. it may also be something of a nod to president trump, who in the last few weeks has accused china of being currency manipulators. they don't want that to be a headline as they continue to look for potential openings to restart talks. the talks failed, but they don't want to exacerbate tensions. that appears to be the line for now, but longer-term, there are concerns there will remain pressure on the chinese market. kathleen: we know trade negotiations often have failures and people often come back.
8:36 pm
with this post nafta deal in the works, what does it mean for china? it has only been a few hours really, several hours. our people starting to comment about what it might or might not mean? tom: to some extent, you look at this as an example of drop going in hard and coming to a negotiated deal. it looks like he is doing that with nafta, he did it with north korea to some extent. he has done that with the europeans, at least the threat fs terrorists -- of tarif against european autos on the back burner. there is a caveat, the chinese situation is different. the hawks in washington seem to be in the ascendancy. it seems to be a considered view from the trump administration that this is a longer-term battle with china, particularly around the structural changes
8:37 pm
they want to see around its made in china 2025 strategy about developing technology. the u.s. wants to push back on that, not just the trump administration, but democrats who have coalesced on this idea. we had trump coming out in the last few hours saying we will eventually come to a deal with china, but saying he was in no rush. any optimism this would be resolved or getting momentum toward a deal before the midterms looks very unlikely. we are heading toward additional tariffs, $200 billion worth of chinese goods likely to take in potentially as early as september 6. this is coming as there are early indicators suggesting we are looking at a fourth month of a slowing economy in china. for august, we have had early indicators suggesting internal demand is starting to slow. that ramps up the pressure on automakers in china to open up the credit perhaps. you have seen the move to increase spending around
8:38 pm
infrastructure, you have seen the tax cuts. those measures have not had an material impact yet, but policymakers will continue to be under pressure because the data is not looking positive. we are looking ahead to pmi data on friday, expected to show a slight softening. the environment for china is difficult as it looks to these continuing trade tensions with the u.s. policymakers and executives we have been does policymakers we have been speaking with, executives seem to be digging in for a long fight with the u.s., despite the optimism about the nafta deal. kathleen: thanks so much for joining us, tom. you can follow more on this story, all the days training on our markets live blog. it is on bloomberg at mliv . you can get a market run down in one click and there is commentary and analysis from bloomberg's expert editors so you can find out what is affecting your investments right now. you must check it out.
8:39 pm
up next, we preview earnings from some big chinese banks with grace will -- with grace wu. ♪
8:40 pm
8:41 pm
yvonne: this is daybreak asia. i'm yvonne man in hong kong. kathleen: and i am kathleen hays in new york. let's get a check of the business flash headlines. knoll group has requested a listing of it shares suspension after shareholders backed a rescue plan that will strip them of control. the $3.5 billion restructuring will hand power to creditors and was supported by more than 99% of votes. noble had said at least a third of the investors, including the founder, backed the plan. yvonne: t-mobile's proposed acquisition of sprint is being criticized by union leaders. the communication workers of america says the deal threatens jobs and competition and may do nothing to accelerate the
8:42 pm
arrival of 5g. the union as the companies have a history of targeting each other's customers, and combined, the pair could mean higher prices. kathleen: debt ridden indian wireless outfitter is wrapped in the sale of its fiber and infrastructure assets for $435 million. the company is selling to brother may cash as it tries to pare down its debt. the firms face a deadline to say how they plan to reimburse creditors or face bankruptcy. china's biggest banks report this week they may prove to be the biggest beneficiaries of president xi's debt crackdown. it has tightened liquidity, boosted borrowing costs, which analysts say may see lenders post their fastest profit growth in five years. joining us is grace wu, senior director and head of china bank ratings at fitch. the analysts seem quite positive. do you share that similar
8:43 pm
optimism, or are you looking for cracks in the second half that the economy is slowing down? >> we do expect some slowdown in the second half, and part of that will factor into the bank earnings. chinese banks tend to make more expense and long provisions in the second half. usually we tend to see stronger earnings in the first half, but a slowdown in the second half. yvonne: china has been more on the target stimulus these days. do you see these measures undercutting the deleveraging campaign in a big way? >> not yet, but it is one of our concerns given that one of the reasons we have kept a negative outlook on china with respect to the tightening measures is the fear whether we would see another stimulus that would further left the debt leverage in china. we have seen statements from the authorities requesting banks to
8:44 pm
extend lending and also to support lending to borrowers that might be experiencing temporary difficulties. whenever you have any kind of asks banksctive that to lend to certain sectors, that always runs counter against the bank's prudent risk management. yvonne: do you expect the bank to follow through on china's demands to extend credit? we reported they were skittish about this. there seems to be a bit of a transmission clog right now. do you see that changing in the second half? >> one of the key constraints holding banks back from extending another round of stimulus is the fact there is not enough back -- not enough capital. with the stimulus in 2008-2009, there was a wave of capital raising that followed. now with bank evaluation that has come down from the higher
8:45 pm
levels, it is a lot more difficult the banks -- more difficult for banks to tap the market for funding. authorities are well aware of the issues we're dealing with today. much of those are the aftermath of the stimulus a decade ago. kathleen: let's take a look at small and medium banks. it is often the case that when there are tough times, they have the hardest time. of course, there is the deleveraging process now. what is the biggest problem for them and is it something they are going to be able to resolve? >> liquidity and asset quality issues, the biggest issues with the smaller banks in general. for these banks typically they lack a deposit franchise, so they tend to be reliant on interbank funding. the crackdown on shadow activities has had an outsized impact in terms of smaller banks, because not only are they more reliant on these non-deposit funding, but they are also more exposed in terms
8:46 pm
of wealth management products. the tightening will impact them in terms of profitability and the migration of assets will bring on more asset quality pressure. we have already seen, for example, an increase in terms of the mdl ratios reported by these smaller institutions. part of it is due to more stringent recognition policies now being imposed by the regulators, but also, broadly speaking, these banks have weaker balance sheets, more reliant on interbank funding, more exposed to wealth management products. yvonne: you just said the regulators are being tough, they have things they have to deal with. at the same time, we have often seen chinese regulators pullback or take steps to support banks. is that even possibly a little more true if this trade war intensifies? the chinese economy is slowing.
8:47 pm
if this was a year ago, maybe they would be tougher on smaller media banks. do you think that makes a difference in terms of supporting them more? >> there have already been some relief measures, if i can call it that that have been introduced. alleviate have helped the funding pressure for the smaller banks. already in the second quarter, we have seen a decent rebound in terms of the net interest margins, because the larger banks have been asked to channel more liquidity into smaller banks. there is going to be an element of support that extends not just too small banks, but the entire banking system. in terms of the bank's intrinsic financial strength, these are weaker at the smaller banks. you mentioned about helpful debt, becoming a bigger risk to the economy. it has flown under the radar so far. how big a risk the you actually see? >> we see it as a medium-term
8:48 pm
risk. it is the long-term impact that matters more. we are not too concerned about the household affordability at the moment. the fact that banks continue to lend mortgage loans, which in effect push-up real estate prices, and in turn banks use real estate as collateral to lend. it is a bit of a vicious cycle if you have got banks pushing up real estate prices, then using elevated prices as a basis to do their corporate lending. do you see potentially that china could catch up to the u.s. and japan when it comes to household debt? >> yes, based on the current rate, it will not take long. again, the issue with china is more complex. tier one and tier two cities, the affordability of prices would differ materially from a
8:49 pm
tier three or tier four city. there are more complex issues with regard to china. yvonne: we will leave it there, grace wu joining us from fitch ratings on what to expect out of the china bank earnings. our interactive function, tv , you can watch us live and catch up on past interviews as well as dial into any of the securities or functions we talk to. all of the right side of your screen. keep it open for your day at work. you can send me an kathleen messages during the show. this is for bloomberg subscribers only. check it out at tv . this is bloomberg. ♪
8:50 pm
8:51 pm
kathleen: this is "daybreak: asia." i am kathleen hays in new york yvonne: i'm yvonne man in hong kong. let's get a quick check of the latest business flash headlines. toyota is expanding its alliance with uber the .5 million dollars of new investment in hondas cars. the deal values the ride hailer at $72 billion and will see toyota making vehicles equipped with uber's self driving technology. a third-party will operate the fleet, although that entity is yet to be identified. the deal would raise uber's valuation by 15%. kathleen: jetblue is the first major u.s. carrier to raise the cost of a checked bag to $30.
8:52 pm
the charge for a second bag goes up by the same amount of $40. a third bag rises to $150. jetblue is facing weaker revenue, rising fuel prices. southwest is the only large u.s. airline that does not charge for a single checked bag, yet. yvonne: boeing is said to be in a delivery bottleneck with the dreamliner. saysll things 787 blog supplier problems are affecting at least explains. airlines affected include united and shanghai airlines. the blog also says high non-airlines has requested a delay. the dreamliner is sitting in storage for unknown reasons. revelations that a medical school in japan systematically excluded female students in favor of less qualified men came as a shock. the new was revealed with female participation in the workforce,
8:53 pm
a key part of abenomics. >> [translated] unless we transform how we work, we will be done for an japan will lose its vitality. we can't afford not to change. pretty soon it will be clear to everyone, the longer we dawdle, the further japan will decline while vibrant countries in the rest of asia league ahead of us. yvonne: let's get to bloomberg's asia government reporter, joining us from tokyo with the latest on this sexism scandal. was this incident just the tip of the iceberg? >> all the data we have so far indicates there was a lot more to it than just one medical school. the government runs a survey every year, which has shown for many years that women across the board are more likely to succeed at college application, but when it comes to medical school only, they are far less likely than men to get in. in the last few weeks, we have
8:54 pm
seen a couple of national newspapers run their own surveys, looking specifically at the entrance tests for medical school. approximatelyhat 75% of japan's medical schools, women are less likely to get in. ,n the second round of tests they found in some cases they are less than half as likely as men to get into medical school. kathleen: tell us more about the motivation behind the discrimination. , we are knownapan to work long hours. there is a lot of cultural aspect on why this may be came about. isabel: right. that is what came up in your video clip. that is a theme that came up across the board as we spoke to a lot of doctors, medical students, and academics. the hours are just crazy. in the past few years, we have seen cases of overwork leading to death in some industries. that applies also to the medical field. unless japan can somehow
8:55 pm
transform its medical system, they are going to be stuck with this problem of women dropping out of the workforce. data shows that 12 years after graduation or qualification, only 75% of women doctors are working in their field, compared to 90% of men, probably an indication of the difficulty of combining those hours with raising a family. kathleen: what is the government planning to do about it, isabel? isabel: the response has been a little bit low-key. there is a possibility, quite likely, that tokyo medical university will be fined, will lose some subsidies from the government. the government has launched an inquiry into admissions at other medical universities across the country. there are more than 80 of them. those results have not yet been made public and we don't know what the universities are saying, whether they are trying to claim this is a coincidence that women are not getting it or
8:56 pm
whether there is going to be a more widespread admission of something deliberate going on. ultimately what the government does need to tackle is reform of the health care system. kathleen: great to have you, not only to talk about this, but because this deal that president trump has started hammering out with mexico. we are going to see what happens with canada on trade. that has everyone wondering what it means about asia, not just china, but japan. autos are such an important thing. as our government reporter in tokyo, what do you think the big questions are going to be now? is this a negative, a positive? what does it mean for abe? isabel: i think the devil is probably in the details for japan. mexico is an extremely important part of japan's auto industry in connection with the u.s. and parts going back and forth over the border. japan will have to take a very close look at this. of course, japan is very concerned about its own auto
8:57 pm
exports, whether they will be subject to penalties in the future, which is something they are desperately trying to avoid at the moment. we are expecting another round of trade talks between japan and the u.s. sometimes this month. at the moment, japan's strategy is to put things off and try to keep the status quo as long as it can. thank you for joining us. let's take a look at smith the asian markets. we are going to take a look at how the stock market is faring as we go to the close. we have got the bloomberg dollar index up a little, the mexican peso holding onto gains. u.s.-canada dollar a little weaker. this is bloomberg. ♪
8:58 pm
8:59 pm
9:00 pm
rishaad: the united states ceiling a post-nafta deal with mexico, canada rejoining the talks. president trump hailing a great deal that will terminate nafta. rising optimism that trade tensions will ease, but that feeling not applying it to china. the president said there's no time to discuss a potential deal with beijing. in hong kong, i'm rishaad salamat. >> in sydney, i'm haidi. going all out. three new iphone tends on the way making the most of the


info Stream Only

Uploaded by TV Archive on