tv Bloomberg Markets Asia Bloomberg January 28, 2019 9:00pm-11:00pm EST
rishaad: we've been whipsawed with what we've seen out of caterpillar. helping to really depress sentiment here. we've got a series of tech titans on the way. side, then we've got a slew of other geopolitical concerns. >> it is hard to look forward. we've been told that everything was in the price. when you see the reaction of caterpillar, it is hard to make that argument. rishaad: should never have believed that people. >> the concern is the earnings are starting to see the macro concerns when it came to china, the global wealth slowdown, and we are feeling that hit to asian markets. we are cooling off quite a bit here today.
not as much as we saw in the u.s.. japan, nikkei still leading those losses. still seeing that haven buying into the japanese yen. some of these tech stocks, the chip stocks, really feeling these losses today in tokyo as well as taipei. taiex down about 1/8 of 1%. dropping theoil most in about a month when it came to these concerns of the equity market. that is sending shockwaves as well. zoom out to see what we are seeing broadly. china looking a little better today. perhaps they are going to try to stimulate the consumption story for china. perhaps that is helping offset these losses here. hovering around that 6.75 level
for your offshore today. watching commodities as well. iron ore seeing the heat come off of it. has disaster in brazil fueled things a bit here. not as severe as some were expecting. caterpillar, fourth quarter, worst miss in a decade. pointing the finger to china. the same story from the likes of apple, intel, and these corporate's talking about the effects of this trade war and how this plays into the e.m. stocks. take a look at the correlations between the caterpillar stock versus the ishares msci emerging markets etf. really, this correlation has moved in tandem. whatever happens to caterpillar could have large macro
e.m.tions when it comes to as well. we will see how things go. huawei concerns also weighing on sentiment here. you guys have got some breaking news. david: pg&e, they will be deciding on this bankruptcy. we know they were headed in this direction. there was an investment proposal. rishaad: two proposals. they are still lurching towards that chapter 11. that.s them approving that is kind of what we have. david: haven't filed just yet. let's happening. su keenan is with us. europeu.k. split from may come to a boil this week with rival factions in
parliament fighting for control. lawmakers are to vote on a series of amendments which could see brexit pause are abandoned with theresa may headed back to brussels for a new deal. she said to scrap the controversial irish backstop, replacing it with alternative arrangements. the world's top iron ore producer plunged in brazil. it erased $18 billion in market value as it suspended dividends after another fatal dam breach o. at least 65 people are known to have been killed. echo of the is an collapsed back in 2015. prosecutors say company executives may be held responsible. minister will put management of the economy at the center of his campaign for reelection. he will lay out plans to create
new jobs. in his first major speech of the year, polls have the labour party leading his liberal national coalition. indicating a change of government for the first time since 2013. president trump's confidence in tariffs has been challenged by the congressional budget office. a new report says trade barriers will hurt the economy, with gdp annually by 0.1% through 2029. the cbo said the rising uncertainty may further lower u.s. output. the president says tariffs will help the u.s. 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'm su keenan. this is bloomberg. david: more bad news for you guys. carrie lam, talking about trade.
we had the trait numbers out of hong kong yesterday. this quarter to be a little bit worse. what we've done is put together the average export growth. essentially, your export engines, that is what we have so far for the month of december. there is your frontloading. this is it disappearing. rishaad: what is coming through confirms what we were saying with the vietnamese exports. exports were seen as coming in at a 5.5% clip. down 1.3%. that feeds into exactly what you were saying. the u.s. hitting china, china's largest tech company, this has been causing a furor around the world. it is a string of charges that huawei is facing, from ip theft to fraud.
david: so mackenzie has been following the story in beijing. run us through these charges. let's start with that. >> a detailed list of charges coming from the u.s. after what they said was a more than year-long investigation, bank and wire fraud, conspiracy in t-mobile, to iran, theft of intellectual property from t-mobile, and saying that while late paid bonuses to employees to steal intellectual property from other firms. we heard from the fbi director, disguising walesa attempts to exploit the u.s. we haven't heard from huawei in relation to that. certainly, this seems to be a change in the approach the u.s. is taking to this chinese firm. rishaad: how do these charges impact the trade talks? butcan say what you like,
how far do people believe that is the case? it is interesting, given the timing. coming in the week where we have these all-important talks between the premier and robert. commerce secretary wilbur ross trying to delineate the two issues, saying these were separate. but as you allude to as well, the intellectual property allegations, the trade talks are about that. it is hard to see how the two issues don't bleed together. in thebe a case short-term, but they are both china avoids. and bringing up while way. tom mackenzie there in beijing. joining us in the studio to discuss this is raul.
what a day. what are you making of what is going on? we've been whipsawed all over the place. we got a lot of things to blame, haven't we? >> absolutely. there are multiple factors at work. of those factors which were headwinds for 2018 become neutral for 2019. i think a bigger issue is on u.s.-china relationships. no further escalation. thing whichgger each one of us is watching closely is how do china react to this. i think that is important. on the trade front, it seems like -- [indiscernible] that is, in a way, beneficial
for china. i think a bigger thing is emotions around huawei. david: but if i'm an investor, why should i care about that? >> from an investor perspective, the question is, does it end at huawei? china is particular about the growth of the economy. i think there is a bigger issue at stake here. this is where the markets will be worried. perspective,erm earnings are coming. [indiscernible] everybody was on shore on the way trade war was going to go. [indiscernible] rishaad: we had three days of gains on the s&p.
people take stock. butn't mean that as a pun, three steps forward, one step back. we have called ask all the time. this is how markets behave anyway. >> that is a fair point. again, the markets would look at -- [indiscernible] a lot of uncertainty is baked in in this. that this thing ,ets solved sooner than later but one has to look at this bipolar world now. david: a lot of your funds have done well in january. what are you buying and what are you waiting for? >> early january, there was an opportunity. they were pricing in the slowdown in production.
going to happen as production takes a breather. quarters,t couple of as the tax cuts move through the economy, consumption will come back. [indiscernible] stocks at 5-6 times earnings, looks interesting. now india is coming in the attractive zone. [indiscernible] rishaad: it went positive last year. >> so i think the whole issue with india is, because of the composition of the sensex, there is a part of the economy which tends to price correction.
[indiscernible] assuming he gets reelected, of course. he will be rejoining us. thank you for that. still ahead, we are talking brexit. theresa may dumping a key part of her brexit deal as she urges tory rebels to back her strategy. we look at what is ahead. states: the united slamming new sanctions on venezuela's state-owned oil company. implications for the country and the future of the maduro regime. this is bloomberg. ♪
$1.50 cheaper than levels here. this is where we are as we speak. intervention coming from the saudi energy minister, speaking us t in riyadh. he pledged even deeper cuts. >> what is certain is the kingdom of saudi arabia and like-minded countries within the signedtry grouping that the declaration of cooperation a couple years ago, are determined to do what we did in 2017-2018, which is drive inventories down. >> most of the ceo's we spoke to opinion reflect your that the markets will stabilize by the end of the second quarter. does that mean that it is mission accomplished? is there a consideration or a
concern that you might need to --below the $1.2 million beyond the 1.2 billion barrels a day of cuts? >> we said before it happened, we should never really let our hands off the wheel. the market is very fickle. any small deviation from balance shocks the market. i'm not talking about prices only. plans,ent, corporate business plans get shaken and turned upside down after two or three weeks of a downturn. i think it is important for the producers. to really stay focused on keeping supply and demand balance. once we bring inventories below the five-year average and keep it there. but if we leave the market to its own devices, then we lose
control. therefore, i would never say mission accomplished. i think the minute you say that, you get off. >> you said saudi arabia has done more than its share. have you gone below 10.2 million barrels a day of production? and non-opec limit is 10.33 and we've brought it down to 10.2 in january. i believe our target for february is below that. there could be small adjustments in the domestic demand. we will find out in february. conditions, saudi arabia is going to be well below that voluntary cap that we agreed to. >> for the full six months? >> for the full six months. unless unforeseen conditions
ring us all together like we did themonths ago to lift , we never the caps deviate from our commitments. ministerthe energy speaking with bloomberg news' anthony dipaola. the trump administration slapping sanctions on venezuela's state-owned oil company and central-bank, putting ever more pressure on president nicolas maduro. david: the treasury secretary says the measures won't actually have a big impact on the oil supply. have a look. refineries,hese this is about 10% or less. there's plenty of supply at sea that has been paid for. there's inventories. .here's been excess oil i'm sure many of our friends in the middle east will be happy to make up the supply.
let's discuss the implications for the oil market. our asia energy reporter is with us out of singapore. dan, should i believe mr. mnuchin? david, you should believe him. unlike iran sanctions last year, where there was fear that we were going to take oil of the market, this is about redirecting trade flows. the u.s. isn't trying to get the international community to stop using venezuelan oil. traders can take the oil and ship it to china and india, and then just sort of ship flows oil from latin america or iraq goes to the u.s. the supply pool doesn't get affected. does it mean for
global oil markets and downstream buyers, people who are filling their cars up with petrol, gasoline as you would call it? good question, rish. for the most part, there won't be an immediate impact, but there is going to be an impact on refineries. the u.s. gulf coast is probably going to have to import from farther away. there's going to be extra logistical costs. that is probably going to be passed through to consumers. whether or not they notice it is tough to tell. these asian refineries in china and india might benefit from this. they will be able to access this distressed venezuelan crude. you for a repank of all things energy.
rishaad: we are back with the latest business flash headlines. foreignt division of a company given permission to write domestic chinese bonds in the mainland. the pboc says the introduction will meet foreign investor demand. they didn't mention moody's are fitch in the statement. david: pbg telecom is scrapping plans for a network after the government banned the use of equipment from huawei. they have chosen the chinese
telco. the equipment vendor says it no longer makes commercial sense to pursue the project. abandoning its own mobile network potentially removes the key objection to the merger with vodafone. rishaad: bank of america is said to the ready to transfer employees to paris in preparation for brexit. the bank employs about 4000 people in london and has rented a building in paris. concernschina slowdown spreading far and wide. take a look at how your chinese markets are faring this morning. the selling really picking up in the last hour or so. down 100%. a shares are down 1%. the hurt really seen in shenzhen. 2% losses when it comes to some of these small caps.
hang seng, down more than 200 -- 210 points. criminal charges filed by the u.s. was the nail in the coffin here for risk appetite. let's show you what we are seeing when it comes to this terminal chart. we've seen the strength coming into the chinese currency recently. we've hit a critical juncture here according to the technical analysis. the offshore renminbi hitting that 200 day moving average. the last time that happened, we did see this weakness for the renminbi. we will see how that fares with these trade talks. it really is the china story once again. down some 5%. this is one of the chipmakers in tokyo. falling in sympathy with the concerns. this is the
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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. david: it is 10:29 a.m. in hong kong. >> i'm su keenan with the first word headlines. treasury secretary steve mnuchin says president trump will meet china's top trade negotiator, a sign of the importance washington is placing on the talks. the meeting will cover intellectual property and technology issues. mnuchin says enforcement measures will be key, with the chinaistration tracking to show if it can live up to its promise. >> my expectation is we will make significant progress. these are complicated issues. we have a timeline. >> the lighthouse says it may
suspend the 1987 nuclear weapons treaty with russia as the trump administration inches toward a full withdrawal from a pillar of cold war diplomacy. investigators say that unless moscow destroys missiles and equipment by saturday, the u.s. will suspend its obligations under the intermediate range nuclear forces treaty. the trump administration has slapped sanctions on venezuela's state owned oil company as well as its central bank, putting more pressure on president nicolas maduro. treasury secretary steve mnuchin says the u.s. is holding accountable the people and entities that have overseen the country's decline into chaos and poverty. citgo assets in the united states will be able to continue to operate, provided that any funds that would otherwise go to
will go into a blocked account in the united states. [indiscernible] boss tim cook has taken to twitter to join the growing calls for better privacy protections. he says that we must fight for the world we want to live in because the dangers are real. earlier this month, cook called on the federal trade commission to track data brokers and monitor how they use people's digital information. 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'm su keenan. this is bloomberg. david: thank you. since there wasn't enough on the plate of investors here, talking brexit now.
prime minister theresa may is backing this move to scrap the most contentious part of this deal, the so-called backstop plan for the irish border. that is one of several proposed amendments to the divorce package which lawmakers will vote on later. the international editor is with us. markets don't seem very convinced that this is good news. what are the difficulties for theresa may now? there are so many of them. we've heard the yuan european union -- the european union say that is it. , don't are also saying mess with the irish backstop. the e.u. countries are starting to weigh in and say they would be willing to extend that deadline. it looks like that will have to happen because march 29 is right around the corner.
but they want some preconditions. france and germany said they would be willing to consider, but some other countries are saying, don't get rid of the irish backstop, and also, there can't be changes to that agreement, that that has to go forward. we have topone, but deal with the agreement on the table. it could get very complicated. e.u.,re going to need the all the member countries, to sign off on this deal to postpone, and they have to make some trading going on. david: the other things we talked about, financial institutions and other companies are moving ahead, even as people still negotiate, but businesses don't wait. >> bank of america, according to people familiar with the matter, is going to move as many as 400 jobs right away, before that march 29 deadline, to paris.
more people in london, but the fact that they are starting this before that deadline is also sending a signal that businesses are very concerned. they want certainty. we've heard from a number of business executives saying that. that has to be weighing on any decisions that are being made in the u k and in the e.u. this may help the e.u. give the u.k. more time, knowing the business community wants that as well. rishaad: watch this space. the bickering continuing. we don't quite know what the numbers are looking like. >> we don't. it is unclear at this point. it is a complicated situation. there,: jodi schneider senior international editor. we're looking at malaysia, taking a look at some news
coming out. david: the railway project. this canceled this rail project and essentially -- there's basically no money. the headline is, the lesion will be terminating $20 billion china backed rail project. the east coast railway that we are talking about here. project was the apparently beyond the government's financial capabilities. that was according to the economic affairs minister. just confirming what we had before. details on that and a full market check on the way. this is bloomberg. ♪
oil prices, in growth, in global recovery, and despite all of that, it seems as if there has been no change at all in the overall. you cannot really have overall fiscal deficit that is flat as a pancake when the economy has gone through, and oil prices have gone through, such large cycles. >> the numbers will not exceed maybe 3.5%. 3.4% is prettyt .uch the maximum it by makingintain sure that others go up. [indiscernible]
david: it's that time of the year. economists are giving their take on india's economy as the modi administration prepares its interim budget. let's get another take on that. strategist joins us out of singapore for his take on this. is there anything specific you are taking interest in when it comes to this budget on friday? >> yes and no. it is clearly, the political discourse has shifted a bit to the left in india. on top of that, you had popularity erode quite a bit at the end of last year. the fiscal pressure is on. some ofwhat reflects the hyperventilation, if you will, that is taking place in the markets. 3.3%, 3.4%, 3.5%?
i don't disagree that there's some fiscal pressure, but there are some buffers in place. reserves thee government could get into and steeper slope over the medium-term where the intent into lower the fiscal gap the 20 20's. one more thing i would add is that this is an interim budget. if there is a shift in in the general election, we will be revisiting the numbers all over again. a shift in government is not my best case, but it is something to keep in mind before beginning to see this budget set in stone and altering the physical
trajectory. rishaad: you just mentioned reserves they can dip into, including what the r.b.i. has in its coffers as well. >> sure. it would include that. let's face it. not only this government, but governments in india have pushed some spending off budget or recognized spending in the following fiscal year. there are some tricks and gimmicks that can be brought into play to limit the shock to domestic market sentiment in a big way. david: r.b.i. meeting coming up. your take on direction there? is it too early? i would sit on the side of a
longer pause. i heard some stories about the r.b.i. governor potentially wanting to visit. getting a handle on the fiscal deficit mechanics would be quite important to assess. it is not set in stone just yet. there could be another budget in july. the r.b.i. should be on holding pattern. i think it will be ok to signaling easing stance. to cut rates at this stage might be premature. the inflation story in india is a story of two halves. in the second half, we could start to see it jump back up. i think that is a context in which uncertain fiscal mechanics should keep the r.b.i. on hold
for now. rishaad: that was going to be my question. how closely will they be watching what is going on in a fiscal sense? what will they be comfortable with? how do they react to monetary policy? good question. i think the political uncertainty is weighing on market sentiment. whether or not you have policy continuity is the key question. that makes everybody's job a lot more difficult. insofar as you have a sustained trend of low core prices in particular, which has yet to show meaningful improvement, that would send a more comfortable signal which the r.b.i. could work with to lower rates at some point.
go ahead. david: as far as the overall inflation outlook globally, something peculiar has happened. falling, butprices headline inflation in some places is now below core inflation. what do i do with that information? >> it is a passing phase. that is a situation in the u.s. as well. it puts the fed in a bit of a bind as well. they have amplified patience and prudence for some time. the first quarter data in the u.s. will be quite week because of the government shutdown. doesn'twith inflation give you a lot of scope to ease policy. it is a bit of a wait and watch, and a more cautious cycle, round ofan inevitable
cuts and that sort of thing. rishaad: thank you very much indeed. mellon, a senior sovereign analyst. we are counting you down to the start of the session in india. let's get over to davina in mumbai. pressure continues to mount on equities. pain likely to continue today? if you are short, that is correct. for a majority of the markets, it is a tricky situation to be in. there is a consensus that it is rather important to sit on cash at this point. yesterday's session saw cuts from the indices, broad-based
selloff, the mid-caps and the small caps witnessed further pressure building up. banks led the pain in yesterday's session. the last two or three trading sessions, there have been continued declines led by banks in particular. all itsy closed below near-term moving averages. which is going to be crucial from a technical standpoint as well on whether we can hold on to support levels at this point. that is where most technical analysts are placing support levels. david: that is just 11 points from where we are. maybe a lot of that will depend on where banks' financials go. what is leading the selloff there? nonbankinginly the financial institutes that are causing a lot of pain for the
entire financial index. decline on the index itself. a 4% cutcial index saw in the last five sessions. all the heavyweights saw cuts. the nonbanking financial institutions are the ones leading this. that is leading to the pain and causing this kind of selloff. rishaad: there we have it. thank you very much, divina. it is busy. you could say that. yvonne: taking a look at the movers here. david, you were mentioning the hong kong trade numbers. the retail picture not looking rosy as well. here, we arene seeing mainland visitors increase in the city. the optimism has been these
transport links we saw recently. this bridge linking to that peril delta. that hasn't exactly materialized yet. that is why we are seeing this really take a hit when it comes to the hong kong retail stocks. not exactly taking part in this rally we saw in the hang seng. let's show you what we are watching. trading at the lowest levels we've seen in the past year versus the hang seng. to believey hard pick up in the first half. when it comes to international, analysts have been slashing price targets by the most in the decade. not seeing any type of tailwind. when it comes to these chinese developers, a report saying that
earnings for 2018 should be pretty strong. they are expecting about 39%. they are saying these developers remain pretty generous when it comes to dividends. finally, talking about apple, these suppliers really taking it on the chin, particularly. they reported a disruption in a production plant in southern taiwan. it was due to a chemical mishap. also, a report saying that suppliers have agreed to cut prices by 10%. we are seeing most of these apple suppliers taking a little bit of a bad day here ahead of those apple earnings. we will see how bad it gets. rishaad: thanks for that. let's get the latest business flash headlines. california utility pg&e set to declare bankruptcy despite
attracting rival pitches. proposalium has a backed by bonds that could convert into pg&e shares. citadel and apollo global management pitching a rival firm. for chapterto file 11 protection. david: let's have a look at wynn resorts. the company is settling its investigation in nevada over how it handled allegations of sexual misconduct against former ceo steve wynn. the casino operator will pay an unspecified find and regulators say they won't revoke or limit any of his licenses. authorities from massachusetts to macau are looking into claims against him. set to: saudi arabia is take steps to protect its holdings in tesla against any
david: it's time for battle of the charts. today we go to will davies and eric lam and hopefully they are going to pay their best charts against one another. rishaad: you can find those charts on the bloomberg by running that feature. who should we start off with? i'm judging, by the way. i don't want to. [laughter] >> we are to look at hong kong stocks. so yesterday, they reached a four-month high on the hang seng index. that has reached a level that shows that buying momentum is the strongest since the hang
seng reached a record high last january. omen that perhaps things are overbought. a warning sign perhaps to investors. if you look at the bottom, it shows that valuations are relatively cheap. that red line is the 10 year average. it is way below that. the problem is, you see what happened last year. investors are pretty badly burned. they've been cautious. we also have uncertainty about trade talks. chinese new year holiday coming up, and while way issues. it could be another drop. rishaad: eric. >> we were just talking about an old and tired market. this is the new hotness with south korea. if you take a look at this chart, we are showing the
valuations versus the msci asia-pacific. you can see the valuations for korea is less than half that of the benchmark. investors starting to recognize that. we've got the biggest foreign inflows since march 2017. investors are really recognizing that. south korea is the place to be. [indiscernible] we've always got this discount because of tensions with the north, but i'm going to give you the chocolate teapot anyway. well done, will, for coming second. [laughter] rishaad: it is better than having a chocolate teapot. it is not quite the poisoned chalice. much nicer and sweeter than that. bloomberg news, you can have a look at the recent charts.
catch up on some of the key analysis and save charts for future reference. david: we are watching shenzhen very closely following that sudden plunge about an hour back. that.get you an update of can we get that up as well? 0.7% on then benchmark, following declines on wall street and in europe overnight. rishaad: i wonder how that fits in. this is bloomberg. ♪
>> asia-pacific stocks are falling on rising concern that the trade war is hitting corporate profits. bellwethers are worried about china. while way is weighing on investors as the u.s. files charges. tensions grow ahead of new talks in washington. is expected to further depressed the mood when it reports earnings later. this is bloomberg markets: asia.
>> we are entering the last hour of the morning session in hong kong. it is certainly risk off in these markets today. we've had disappointing results coming through from caterpillar and there's growing concerns about how much china is playing into the slowdown globally. , offan see taiwan's taiex by over 1%. most markets that we track are trading lower. weakness coming through in a lot of these commodity markets. i want to show you what happened in the shenzhen composite. we saw at least 20 companies fall by the 10% daily limit. the shenzhen composite down by about 2%. all that impact that you have
seen across the tech sector following that huawei news. rishaad: let's have a look at what is going on with the semiconductor issues. that andalking about those earnings affecting what is going on. taiwan semiconductor falling. on top of that, let's look at some of these other companies making waves. we were looking at equipment companies as well. at the moment, going to have a look at some other movers. of, one of the biggest winners. this is down to that dam collapse taking place. that has made iron ore prices shoot up, which has improved rio tinto's luck. heavy veryndai positive about its outlook.
it has also won a couple major contracts to build ships. that good news not affecting it as much as yesterday. we did see it selling that stake in aramco. trend micro, down 8.5%. disappointing earnings. disappointing also on its guidance. the share down the most in three years. this is currently what we have. this company is an infrastructure software player. tpg telecom. you would think if you next your five year rollout because they were in bed with huawei, that would be bad news, but it isn't. it has led to the feeling that regulators would approve its merger with vodafone australia. this is currently the position we have. yvonne: let's take a look at your india futures and see how
the setup is over there. really just following what we are seeing here. futures down about 0.2%. india 10 yearour yield at the moment. david: the other thing we are tracking at this point, the open in thailand. out that we have time cabinet ministers submitting their resignations before the election. we will get you details on that. right, steve is here. first word news. president's confidence in tariffs is being challenged by the congressional budget office. a new report says trade barriers will hurt the economy, with gdp being cut by 0.1% annually. the cbo also saying that rising uncertainty may further lower u.s. output.
the president says tariffs will help the u.s.. the trump administration has slaps sanctions on venezuela's state owned oil company and its central bank, putting more pressure on president nicolas maduro and his allies. the treasury secretary says the u.s. is holding accountable the people and entities that have overseen the decline into chaos and poverty. says a houston-based unit can still operate. 's assets in the united states will be able to operate, provided that any funds instead go into a blocked account in the united states. off venezuela. donald trump, hands off venezuela. europeu.k.'s split from may come to a boil with rival factions in parliament fighting
for control. lawmakers are to vote on a series of amendments which could see brexit pause or abandoned, or theresa may may be sent back to brussels for a new deal. she said to scrap the controversial irish backstop. apple boss tim cook has taken to twitter to join the growing call for better privacy protections. he wrote that we must fight for the world we want to live in, because the dangers are real, and the consequences too important. earlier this month, cook called on the federal trade commission to track data brokers and monitor how they use people's digital information. 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'm stephen. this is bloomberg. rishaad: let's get back to our top stories. the u.s. hitting china's largest tech company with charges ranging from id theft to fraud.
the indictments against huawei come just ahead of crucial trade talks in washington. china correspondent tom mackenzie is in beijing. i think there's 13 indictments in total. >> this is a detailed indictment. i was just reading through it. it kicks off with what it describes as a conspiracy put together by huawei around trying to deceive u.s. banks in relation to business in iran. they talk of alleged bank and wire fraud. they talk about the fact that, the accusation, that while way stole electronics from t-mobile. they say huawei paid bonuses to employees to steal technology from u.s. rivals. we have yet to hear an official statement or response from huawei. i've spoken to an employee there
that says it is business as normal today. clearly this is another broadside in u.s. attempts to constrain or at least take on what it sees as bad actions from this chinese tech company. quited: it is serendipitous that we are getting this news at the moment. just talking about these accusations, calling them unfair and unethical, beijing going on to say that they don't directly comment on these charges, but nonetheless, they are saying they are unethical and unfair. the point being that this is seen by some as separate to the trade talks themselves, but you can't really disentangle them, can you? >> it is very difficult to disentangle them. commentsments echo the that we got from china's foreign
minister, talking about the thatr, unethical approach the u.s. is taking to some companies. he didn't name huawei, but clearly huawei was part of his mind. wilbur ross said, these are wholly separate to the trade talks. you are right in that the allegations stem from intellectual property theft as well as that conspiracy around iran sanctions. theft ledal property to the initial round of u.s. sanctions. president trump himself has muddied the water, suggesting that the huawei cfo could be a bargaining chip in these discussions around trade talks. it is difficult to disentangle the two. >> i was thinking the australian defense minister was saying that huawei didn't even come up in his talks with china. also getting some lines, saying
they will stop output on march due to the u.s. sanctions, to appeal the u.s. ban. towe see president trump set meet china's lead negotiator, all this is going to play in. what sort of resolution do you think we are going to get? >> we heard from steve mnuchin, saying that he expects to make significant progress at these talks that kickoff wednesday and thursday in washington between china's vice premier and the u.s. trade representative. steve mnuchin was saying some of the key issues are structural changes and china's pledges to buy more goods from the u.s.. he says that he wants to nail down the chinese on some of these promises. mnuchin saying a key element of these talks would be some process of verification. he was saying he was pretty
confident they may make progress. march 1 is this deadline. if they don't get a significant deal by that time, tariffs could go up more than double. yvonne: plenty at stake. thank you. tom mackenzie joining us from beijing. we talk about these charges against huawei coming at a time when the economy is showing more signs that it is slowing down. indicators,arly have a look at this graphic. eight straight months ahead of the numbers on thursday suggest that we haven't seen the bottom for the chinese economy. stimulus efforts have yet to fully show up in these numbers. to discuss all of this, charles chang is with us in our studios. do i just take it that yields fall further from here? >> in terms of where the growth picture is, i think for china, it ought to be expected that the
secular slowdown of the country continues. is probablyr itself going to add a bit of pressure on top of that. the government has made it quite clear that it is willing to use a vast range of tools to help ease pressure where they see there is too much. we've seen that happen towards the end of last year and the beginning of this year. yvonne: are you seeing signs that perhaps the leverage issue is looking better? >> the government has been on a deleveraging drive for the last year or so. if anything, that seems to come to a conclusion toward the end of last year. is, are theiron credits that should be directed to different parts of the economy that should help the companies, the local government financing channels, and so forth? that is the theme this year.
continued drive to reduce leverage. david: so there will be more liquidity in the system. that should bring borrowing costs down. we've seen credit rally. does it continue? >> the domestic bond market has been rallying for some time. that has essentially caused rates to come in. for investors looking at chinese bonds, this creates an interesting dynamic. you have chinese investors who are now attracted to buy u.s. dollar bonds. them 3%s are now giving to 4%. offshore, they can get 5% to 6%. going to be part of the market this year. long propertye bonds in china. i'm curious whether some of what you've seen affects whether it is time to switch into chinese
stocks. and if so, where are you looking? in terms of the kind of allocation type issues, i'll just .1 thing out. last year, we've seen an important investor group somewhat less active in our region. year,nvestor group last according to anecdotal evidence, got more involved in u.s. equities. if you are involved in u.s. equities, it kind of feels like a roller coaster ride. at the end of it, you are back at the same place. the kind of turned around and looked at property bonds and high-yield bonds. the levels are now much more interesting. high single digits, low teens. they find that much more attractive versus being involved in equity in the u.s. me about the thinking behind that. we are seeing dollar bond
issuance on a tear here at the expense of this double digit that is, for investors, very attractive. these bonds mature and it seems like it is worth the risk. is that the right assumption to make? misunderstanding that the yield where these bonds are is somehow driven by the rise in default risk. fundamentally, these companies are seeing lower default risk. last year, the average sales growth was 30% to 40%. you see that come in in cash levels. when they report in march, you said -- you should see fundamentals improve further. why do yields continue to go up? that is driven by issuance. in 2017, they weren't allowed to issue very much.
in 2018, they got the quotas they wanted. better to issue earlier. issuewas a binge throughout much of last year. that has tapered a little bit. the new issues this year and last year have been a bit more disciplined. why aren't we seeing that in the offshore market? >> in the offshore market, you have some bonds that are coming due. developers are looking to raise money to repay bonds. they have incentive to issue overseas. kuan sure, they cannot borrow from the banks. they do have an interest to grow bigger, partly because the market is still in a consolidation phase.
they want to get bigger and get the funding. the offshore market is a quick and effective way to do that. david: just some breaking news. hold that thought. we have canada saying that the u.s. has filed an extradition request. that is the latest line coming out. sayscting attorney general that the u.s. intends to file this formal extradition request by tomorrow. point maybe at some be over the next 12 hours or so. we will get you details on that. yvonne: we have more with charles chang. coming back, s&p global ratings. the first foreign rating agency to be allowed in. we will discuss what that means. david: tech has been under pressure recently.
still here, and joining us as well is our china credit editor. how big of a deal is this? it is pboc delivering on its promise. they are going to open the market up for global rating agencies in order to foster competition and improve the local rating quality. now they delivered on it. people don't think it is going to take immediate effect in terms of improving local rating quality. how do you get clients? that takes time. how do you deal with making a lower profit? david: charles, big deal? >> it is not a particular surprised, but it is a good sign that the government is coming through with this promise, and the direction is more liberalization. this is a solution to a very big problem in the domestic bond market.
most of that market is rated aaa on the domestic scale. this creates a very big problem for domestic investors. this market is very illiquid. the price information is not good. if you don't have a credit rating, you don't have pricing to tell you which credit is good or bad, then you have a major problem. this exercise of allowing international rating agencies to come in should help you differentiate and should help liquidity. yvonne: these local credit agencies have lower fees. it is going to take some time for this to have a bigger impact on the market. for us, a long-term time horizon is a couple months, maybe a year. the chinese government thinks in terms of five and 10 years. the important thing is to make the right decisions and to go in
the right direction. how long would it take for them to take effect on the overall rating market in china? probably five years. thing to note is that s&p has said it is studying the local rating scale. not going to be the same scale as international rating. that is very different from moody's and fitch, who are going to use the international rating scale. s&p kind of create a little bit of confusion. david: instead of bringing their standard, they are buying into it. i guess the overall point is defaults, itue of is not that there's too much defaults, but too few defaults in china. that is a problem for you why? >> if you don't have defaults, you don't know what default feels like. defaults need to occur in
order for discipline and differentiation to happen. the market needs to learn how to react to these things. last year there were a number of defaults and investors got nervous. in a normal market, that should not have happened. this is because that overreaction is coming from not accustomedre to seeing this. the domestic and international rating agencies, there's at least one thing they could do. if a company is about the default, they should flag it a little bit sooner. some of the issues that we've seen recently is that the ratings stay at aa plus after the default for a couple weeks. the promptness of reflecting those risks are important as well. david: charles, pleasure to have you on the program. charles chang of b.n.p. paribas, and our china credit editor. yvonne: we have plenty more
have a quicks check of the latest business flash headlines. pg&e expected to file for chapter 11 protection. should happen any hour now. -- has aium including proposal backed by $4 billion of convertible bonds with a group that includes citadel and apollo. telecom scrapping plans for a mobile network in australia after the government and the use of equipment from huawei. it no longer makes commercial .ense [indiscernible] checking china and hong kong markets, it is risk off. have a look at what is happening
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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. . it's 11:29 in hong kong the first word headlines. canada says the u.s. has filed a formal extradition request and beijing has again asked for her release. the administration says she used lies and deceit as a business strategy. the u.s. also announced criminal charges against her alleging bank and wire fraud, sanctions violations and the theft of american intellectual property that was widespread and accepted at high levels. the treasury secretary steven mnuchin says president trump will meet china's top trade negotiator this week in a sign of importance washington is
placing on the talks meeting wednesday and thursday. they will cover intellectual property and technology issues. mnuchin says enforcement will likely be key with the administration pressing china to show it can live up to its promises. >> my expectation is we'll make significant progress at these meetings but i would emphasize these are complicated issues. we have a timeline of how we've ma mapped out the 90 days. >> the maker of japan's new passenger plane is filing a counterclaim for anti-competitive behavior. mitsubishi's u.s. unit says its rival has been engaging in acts to impede development of the new jet and the filing comes in response to bombardier's allegation of mitsubishi aircraft's misappropriation. the world's top iron other producer plunged the most on record in brazil and erased $18 million in market value as it suspended dividends after another fatal dam breach. at least 65 people are known to
have been killed and almost 300 are still missing. the disaster is an echo of the san marco dam collapse of 2015. brazilian prosecutors say the company executives may be held responsible. the australian prime minister is putting management of the economy at the center of his campaign for re-election. he has laid out plans to create more than a million new jobs over the next five years in his first major speech of the year. polls have the labor party leading the national coalition by 53% to 47% indicating a change of government for the first time since 2013. global news 24 hours a day on air and at tick tock on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> getting to the markets quickly looking at the price action at the moment and what is currently out there.
this is what it looks like. just perhaps coming off the lows of the day, still nevertheless down in this session thus far. but tech stocks the major under performer we have. also reminders of others, the u.s.-china tensions and how deep seated they are. american prosecutors filing criminal charges and also a look at what's been going on with caterpillar and video blaming the global slowdown for disappointing results and all of that coming together to halt a three-day rally for the s&p and certainly any possibility of a rail thist far today in this part of the world. that is currently the position. let's take a look, we have other things very much on the agenda. of course mentioned trade talks, brexit as ever. these things are also weighing on what is going on with sentiment globally. 0.2% off on the contract as we head toward that open in about 15 minutes for the cash market there in mumbai.
>> the big one of course is going to be apple earnings. taking a look at that ahead with results later on tuesday. all too aware now for investors they will miss the initial revenue forecast. >> let's bring in our asia executive editor for tech, normally based in japan and for all you here, and in our studios in hong kong. nice to see you. it is probably the most analyzed company in the world for obvious reasons but talk to us about the key issues we should be paying attention to. >> this is not the kind of earnings report we're used to from apple. usually apple has very high expectations and they come out and are able to surpass those. this time they've already told us they're not going to meet their own goal for revenue targets for this quarter. they talked about this a couple weeks ago. so now expectations have been set much lower. people are actually anticipating that revenue is going to shrink a little bit this quarter year on year. earnings are going to be about flat. and the big problem, really two
big things going on. one the smartphone market which had been growing great guns for many years now has essentially stagnated. on top of that apple had pretty serious problems in china which had been a good growth market for them. they're facing serious competition from local players including huawei and losing ground against other players so they are trying to change that strategy a bit and instead of relying on growth and the number of iphones they sell each quarter they want to sell more services. a faster growing business, very profitable. >> it's starting to broaden to some of the assemblers for the iphone. are they likely going to mitigate the tariff impact? >> apple is one company most vulnerable to the trade war. of course an american company. they do virtually all of their manufacturing in china. they rely on partners there. what we've seen just recently s a couple of those partners have said they're going to move
some of their manufacturing capacity out of china into other areas in part because of the danger of the trade war and the possibility they could have these tariffs levied on top. >> the apple story isn't complete without us talking about how they're looking to reduce their dependence on this blockbuster product. 12 years ago of course changed the world. now less so be vicely the iphone. now less so, obviously, the iphone. give you a sense where we are. 60% of revenue last quarter came from the iphone. we're looking at -- let me change my ink -- this bit right here. services. how do they pivot here and what is the active install date tim cook is talking about? >> well, apple did a very interesting thing just recently and said they were going to stop disclosing exactly how many iphones they sell. that was a worrisome sign to investors because they knew the number had been driving the top line growth, a lot of the
profits, too. they've discovered there is a cap on how much they can sell the iphones especially when they operate at price points that begin at a thousand dollars and go higher than that. they're trying to shift into these additional services, things you buy through itunes, advertising mixed in there. there are other opportunities for them to grow and they've been cashing in on that installed base they have with all of these iphone users around the world to buy other services but it is not clear they'll get back to kind of growth rates we saw for a long time. >> my social media has been growing up about this face time bug that says you can listen in on these conversations. >> this is sort of the last thing they needed at this point. apparently there is a bug in the software so if you make a face time call with a conference call air able to listen to the person on the other end even before they pick up the phone. so it sounds like kind of a dangerous thing. i don't know if you use face time. >> i do. >> may want to keep it turned off for a while. >> yeah.
face off. thank you so much, peter. asia executive editor for tech. just to tell you of some other earnings coming out this week, pretty much fang but other big ones as well. i won't take you through each and every one. here in the asia pacific also looking at samsung for example but a fair amount of investor money at stake with the results coming out. >> all right. that face time bug certainly a bit after concern for all of us. southeast asia is fast gaining attention of institutional investors looking for growth outside china and india. technology investment in the region hit a record of more than $11 billion last year, nearly double what was invested in 2017. and 70% of funding was so-called megadeals where you several aptured by groups. we have the founder here with me in the singapore studio.
i noticed carousel was one of those deals getting very close to the megadeal $85 million i believe. why do you think southeast asia s so attractive? >> first of all, thank you for having me here. southeast asia shows fantastic parameters as far as digital investment is concerned. even though 11 billion is a pretty impressive number considering that only 3 billion really went outside of the top five companies, the market still remains heavily under invested so you would see investors from all of the world showing up. >> what companies are you looking at in terms of i guess a lot of thin tech, financials, we mentioned some of the big names. is that the main growth engine or are you seeing it more broadly in terms of venture capital? >> the data shows us over the last five years first it was e-commerce then companies have shown up and became multi-vertical companies from
food delivery to business document logistics. a phenomenon of the last two years, mostly lending and all that. we expect in 2019 it'll be logistics. a company in e-commerce and a fair amount of other financial services. >> obviously the biggest focus of the business in this part of the world and globally is what is happening with the u.s./china relationship. alibaba did one that is starting to impact growth. are you seeing that in the companies you're talking to about capital? >> i would expect a number of megadeals, the ones that come from strategics to north asia to drop off significantly this year. however, private equity companies, changing yield is still there and the long-term impact of u.s./china relationship is only starting to be felt. only a few companies so far announced major investments into assembly plants in vietnam but that will lead in the long term to a recalibration of the economy of southeast asia
vis-a-vis china and the u.s. and will produce digital opportunities as well. >> that is obviously a growing area in vietnam. we know singapore and indonesia takes a big chunk of the marketshare when it comes to venture capital. is vietnam one area you are looking at in terms of a potential growth trajectory? >> we expect the rest of the ecosystem to heavily look at vietnam this year seeing how singapore and indonesia absorbed about 90% of available venture capital last year. we're already seeing an uptick in vietnam in 2018. i think the market will explode in 2019. >> what sectors in particular is vietnam attracting? >> i think they would follow the rest of the region in the main pattern of multi vertical services, logistics, and ecommerce but i also note exceptional quality of vietnamese engineers so i expect mobile
well as things like cyber security becoming more and more relevant. >> what about india, an economy going through a lot of change and elections there, too. are there any predictions? >> the system is so well developed over there. health care. health care. and health care again seems to be growing gang busters. >> ok. what about some of the smaller companies? we talked about the megadeals, some of the names i mentioned earlier. are you seeing much traction for capital for companies that are, say, less than 500,000? >> in revenue? >> in looking for venture capital. >> actually i do think that southeast asia is going through a revival of early stage investment. i just think our report is not adequately resourced to capture all of them. the system needs to catch up and build its own reporting systems to really see what is going on. at the moment i would say it's extremely healthy in singapore, quite healthy in indonesia, and
lacking in the rest of the region but early stage fund creation is going on at a frenetic pace in vietnam especially. >> david here. in hong kong. i'm just curious who you think about just some of the thoughts of several key investors i've spoken with the last 12 months or so that the industry, v.c.p., put that together, seems to be too forgiving of losses. in other words, the private companies which should be going public by now, the likes -- would like to grab that sort of scale are staying private too long. what do you think? >> well, at the moment we only have one significant data point. that would be listing of c group in nasdaq. apologies. new york stock exchange. that's been doing relatively well. i don't expect more companies from southeast asia to go public next year seeing how a very large number of much larger businesses in the u.s.
will be acquiring public listings. let's check thon again in 2020. >> speaking of 2020, finally, your predictions for what we could see in the next couple years? we've seen huge ones already in the past year or so. >> i do expect the slowdown in china and in digital china especially, will arrive to southeast asia maybe the middle of this year, toward the end of the year i'm sure there will be quite a few negative stories about the region short term, over spent, exceptional ex-ube ration, but a short term wobble. in the long run. in the medium run i think southeast asia is becoming the next large digital market. >> thanks for your time. are you getting a grab or a go jet to go home? certainly the competition hitting out. coming up we'll be looking closer at the u.s. sanctions on venezuela's state-owned oil company hwan it means for markets and how it could affect
welcome back. markets in india have just opened up and the equity markets are down p 3 points. >> let's go to mumbai to go through what to expect. after this sharp drop we're seeing in major markets here today how are we looking now? >> yes, well weakness persists. the third straight day of losses currently down around almost half a percent now, the same for -- the banking industry will be in focus considering a whole bunch of earnings from this particular sector will be trending down around a third of a percent. the indian rupee opening largely flatish perhaps with some weakness around 71.2.
all eyes once again on earnings today. >> you've been talking about the earnings. which ones should i be looking at the most? >> i'm going to start with the rivate sector banking -- trending down by nearly 1%. hdsc limited one of the largest companies trending flat. we do however have some gains coming in from the information technology sector. and baja finance the other one trending higher. we have to remember that these two stocks have been under pressure of late. we have to keep a watch out for how these earnings turn out for the trade today. >> thank you very much indeed for that. now the trump administration has slapped sanctions on venezuela's state owned oil company and the central bank
putting more pressure on the president and his allies. treasury secretary steven mnuchin says the measures won't have a big impact on oil supply. >> most of these refineries this is about 10% or less. there's plenty of supply at sea. that's already been paid for. so there is inventories. there has been access oil. many of our friends will be happy to make up the supply as we push down venezuela's supply. >> let's look at the implications for the oil market with our asia energy reporter with me here in our singapore studio. dan, what is the immediate-term impact? >> right away there is not much impact. oil futures haven't moved much today. mostly because unlike the big iran sanctions from last year the u.s. isn't really trying to cut off oil supply. they're just diverting oil away from their refineries. so you'll see venezuelan crude move to china and india which are other big importers of
crude oil and more crude from the middle east and other south american producers will flow in. so shifts in trade flows but not a change in overall supply and demand. >> i guess some of the buyers as well, what sort of change does it have in impacting those buyers? >> a little impact to gulf coast refineries. they'll have to pay a premium for crude to pull from further away. china and india might get a little advantage crude oil. you also see a little impact based on the quality. venezuelan crude is disgusting. it is very heavy and full of acids and metals and so other oils that are like that, canadian oil, mexican oil, will have to be swapped into these u.s. refineries. those might see a little bump up. >> what about president mad urea calling the u.s. actions theft, pledging legal action. how much pressure is that going to be in the coming days? > a lot.
once there is revenue from the oil sales that gets cut off if they have to accept less money because they're selling it further away it is going to impact his regime. long term, if this helps lead to the dismissal of madura this is bearish for oil prices because a new regime means more investment into oil and more production which would help global supplies increase. >> all right. i love how you say some oil is disgusting and other is not. hanks so much. if you are a bloomberg subscriber catch up with our interviews by using our interaction tv and join the conversation by sending instant messages to our team and guests during the live shows. check it out at tv go. this is bloomberg. ♪ ♪
the biggest single trench bond sale in japanese history as part of a $62 billion purchase. we are told they are aiming to sell about 4.6 billion dollars of hybrid notes starting april 1. that would be the largest ever issuance of corporate bonds in the japanese market excluding private placement. >> saudi arabia is said to have taken some steps to protect its holdings in tesla against any decline in share price. it is said a public investment hedge, most of the stake via arrangement with jpmorgan. the paper says the fund still holds the stock. tesla now faces little exposure if the price falls ahead. >> s&p's global ratings has won approval to conduct credit rating business in china. the first unit of a wholly foreign owned company given permission to rank domestic chinese bonds. the cboc says the introduction
of international rating firms will meet foreign investor demand for various assets. did not mention moody's or itch in its statement. it is another risk day for asian markets. the index off about 0.7% with disappointing earnings coming through from the likes of caterpillar, individual ya, the nikkei down by 0.6% and hong kong's market about to head into the lunch break also weaker. the aussie also under some pressure. in early trade the nifty down bay around a third of 1%. the other big i guess point that investors will be watching is that crucial break in the united kingdom. we have theresa may potentially really facing the deal that she has been working on for 18 months being shut down. it looks like she's had these last minute gamble risks a essentially on the back stop move really to try and buy off
the rebels in her conservative party. so abandonning that deal she has been working on for 18 months or so. >> the 12 amendments to be voting on as well and the most popular of which it does mean here, well actually this is the impact, bank of america moving some staff to paris. deutsche bank also expanding earlier last year in london and what they're doing at the moment is repatriating $400 billion of balance sheat assets. this is what we need in order for them to passport things as well. jpmorgan as well doing like wise. they need that, those balance sheet assets in frankfurt if they are able to sell products as well in the way they used to be able to because they won't be able to do it because of passporting issues out of london. that is currently the position. 12 amendments though the most popular of which is rejecting the u.k. leaving the e.u. without a deal. that's what we have. >> politics, we'll talk about earnings in a moment but there are trade talks we have some lines coming up right now.
>> yes. the economic adviser to china has arrived in d.c. for those trade talks. who is joining him? we'll talk about his delegation. the governor is actually with him for these trade talks. interesting to see how the monetary policy, how they're going to view all of the trade talks as well but they'll be meeting with the likes in the u.s. and steven mnuchin. that kicks off soon. >> great central bank opportunity. just in case talks fail. >> a little more easing. >> all right. let's have a look at earnings also coming out recalling the sales side here. a lot of companies out, we talked about apple and a few other names. verizon. l.d.m.h. lockheed martin. take your pick. a lot of investor money at stake the next 24 to 36 hours. >> apple is probably the big one here given that guidance cut that they saw and earlier this month. did they already take the surprise out of what is going to be coming up in the next earnings report?
but the big question is what is going to happen in the march quarter? with more trouble ahead? >> yeah. l.v.m.h., out with earnings. we talk about hong kong just to bring it back as well. it's luxury sales, that sort of thing. we have a rally in the equity market here. have a look at our bloomberg chart. it doesn't have to be translated to some of the retail stocks in hong kong, sort of left behind. retail sales left wanting so they're walking around but not really buying anything. >> they're saying that there are all these different transport lengths now, the hong kong high speed rail connected to shen general the bridge connected throughout the pearl river delta. that was supposed to bring in the shoppers. we're seeing the tourist numbers but the trips sometimes are just kind of one day trips not exactly going straight to the malls. so the first half unlikely to really recover. >> yes. big buddha and the peak. yeah.
>> i'm emily chang in san francisco and this is bloomberg technology. in the next hour the u.s. department of justice outlined its case against huawei with formal charges 'cusing china's largest smartphone maker of fraud and stealing trade secrets. plus corporate america is pointing the finger at china for disappointing results. individual ya -- nvidia cutting its outlook. is it a bn