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tv   Asia Edge  Bloomberg  March 29, 2015 11:00pm-12:01am EDT

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has come to far and it is having an impact. prada sales slump as fewer people splurge on handbags. why one figure means instant profit for investors in chinese sharemarket. this and more in this edition of "asia edge." john: i am john dawson. the airlines. there they are. chinese eastern, earnings out today. and cathay seeing gains. korean air is up 2.5%. china eastern has risen 9.5%. the best-performing sector in asia today. the reason, angie has the answer. angie: thank you so much. what is given the airline stocks a left? let's bring in our
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report. michael, what is going on? michael: we have earnings out from china southern probably the drop in the price of fuel. angie: that is the key. what has fuel been doing to allow these stocks to search? michael: the key is what the airlines have been doing. the difference is the chinese and hair -- airlines have not been hedging their fuel prices. we saw pacific, they had been hedging their purchases and it came back to haunt them. they made a decision when prices were falling a few years ago that they were not do that. hedges are basically insurance. a risk that you are taking. the more confident they feel where price of going, the riskier.
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angie: european and u.s. airlines have hedged. something to write jet fuel prices fall. let's talk about high-speed rail. will it affect the output? michael: it is interesting. the chinese government is investing heavily in railways and also air infrastructure. in the budget presented recently, both of these sectors saw huge investments. i think even though high-speed rail is expanding rapidly and china has the largest network, there's a lot of room for growth for chinese airlines for you china southern is the biggest in the world in terms of domestic passengers. we are after the beginning of china's big there -- travel surge. people who want to fly and there's a lot of room for growth. angie: you have to move 1.3
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billion people by rail or plane. michael arnold thank you for outlining that. a quick check on other stories. chinese railway company is benefiting from the state promotion of their services. earnings are due later for chinese railway and cnr. we are expecting record profits. shares of china snr will be suspended at the regulatory commission reviews their plan to merge. and $5.5 billion expansion of the mine in mongolia hangs by a thread. ceo sam walsh said a few issues remain unresolved and he describes them as a deal breakers. mongolia's government said resolving cost overruns is a priority. when finished, it will contribute about 1/3 of mongolia's economy.
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facebook is looking at more friends of china and is waging a charm campaign to attract chinese advertisers. the company is hiring in hong kong and has a partner. ceo mark zuckerberg has been trying to raise facebook's profile. facebook, twitter and other foreign social media services are banned in china. you can get more on that and the rest of today's news at a you will find in-depth reports and market data and you go watch the interviews you may have missed. prada shares are rising after a major overhaul in strategy. the brand it needs to do something after profits fell 28% last year. yvonne man has looked at what has gone wrong. hit by a slowdown in china. yvonne: they are not going for that $3000 bag anymore and a
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change in consumer price. the parallel traders are coming to hong kong and bind to the essentials, the shampoo and not so much that luxury handbag. investors say prada did not react as much. the price of their bags. they announced they will open fewer stores and introduce more bags at a lower range of $1000, a bit of a cut. that income for last year, fell nearly 30%. sales and the asia-pacific excluding japan, fell 30%. hong kong macau and weaker euro. it helps sales in the latter part of the world -- latter part of the year. a significant portion of 2014 was complicated and more complicated than expected.
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in terms of a major overhaul they said we may not see it until the beginning of next year. analysts are optimistic for prada and see appeal for the brand. they said it is too early to buy it right now. angie: to early to buy the stop but not too early for bargains. it seems like product and other luxury brands -- prada and luxury burress have been hit hard by volatility. yvonne: the share price and bloomberg intelligence compiled luxury brands and look at the first quarter shares and the top 30% is dominated by a italian and french houses. they said these are companies that report in euros and have high euro costs but their cell exposure is outside of europe. they are benefiting. on the worst side worst-performing stocks, high
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exposure to the dollar, hong kong take a big hit. ralph lauren, fossil, michael kors that seemed a bit of a plunge in the stock price. angie: volatility to come. let's get back to the markets. what is driving asia. john dawson. john: airlines, 2 crucial games. china composite is up and gradually gaining all through the morning session. very encouraging for china. hong kong is similar. excuse me. the morning is unfolding, just below 25,000. its performance for the 2 mainland chinese benchmarks, you can see thailand is open. they are up. southeast asia markets malaysia singapore, taiwan the
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main benchmarks today. hong kong, china mentioned it to jakarta there. and japan which opened lower. teachers changing direction. and -- futures changing direction. resource stocks are falling in australia. santos are in declined. oil prices are falling. platinum is down. that is driving down australia. you can see these 2 markets. korean air, one of the biggest performers there. and steel stocks, one the biggest performers. this is about airlines. look at china. the driving force. angie: thank you.
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the all forum attract us some of the biggest names including the man who coined the term bric. jim o'neill is having a change of heart and said it might be time to remove the "r." jim anil: -- jim o'neill: i have been getting e-mails about when are we going to remove the "r." angie: we spoke with one a russia's largest petrochemical companies, the ceo. he sees china a comment is largest single country customer. -- he sees china as the coming its largest single country customer. >> [indiscernible] and actually russia sees china as an important trading partner and energy.
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and the current developments push russia. angie: and fortesque medical -- fortesque metals confirmed to boost prices as "andrew forrest -- and speaking to bloomberg, andrew forrest said he is not been optimistic. andrew: there is national interest here. it does not helped by companies dumping iron ore into a falling market. we are here to husband and the assets. we do not actually own them. we are here to husband the assets. fortesque has always done and that's what we will continue to do.
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we did not expand. we do not spend tens of millions of dollars in a collapsing commodity environment. angie: the full interview with andrew forrest coming up later at 11:20 a.m. hong kong time. you do not want to miss it. we have breaking news for you right now. this is according to the news agency korea aerospace is the number one bidder for the fighter project. they said they would pick a preferred bidd by april. er korea airspace is of the one, and acquisition program. it is worth 8.3 trillion one and shares right now are climbing, surging more than 2.8%. nearly 3% on at that news.
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something else to look forward to. star chef jamie oliver said he wants world leaders to take things seriously. ahead of china central bank we would take a look at the numbers that show china's real growth rate could be as low as 4%. you are watching "asian edge.” ♪
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angie: forensic teams have identified dna from some of the 150 people killed in the germanwings plane crash. the copilot, 27 year old andreas lubitz was suffering from a psychosomatic illness. a doctor's note that would've excuse of her flying on the day off the crash was found torn in his apartment. investigators say lubitz intentionally crash the plane.
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he run nuclear talks resume this morning with each side saying the other must make tough choices. the end of the month is the deadline for an agreement that would limit iran's ability to make an atomic bomb. and goes toward lifting economic isolation. israel has expressed serious concern saying it confirms all of its worst fears. the u.k. election campaign officially gets underway later today. david cameron visits to keep the dissolution of parliament. polling day is amazed seven with cameron's party -- polling date is may 7 with cameron's party trailing the labour party. labor's leader ed miliband said a day are focused on keeping -- saying they are focused on keeping the u.k. in the
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eurogroup. let's get back to market now. head of asian strategy. joining us in the studio this morning. i want to get to china here. though forum really breaking the news headlines with comments that a lot of people are trading on this morning. more specifically is zhou xiaochun saying china slowdown has gone a little bit too far. what to do think he will do about it? >> it is very important he made the statement. and the past few times where the pboc cut interest rates they did not make a statement and monetary easing is important to help the economy. this time around, the statement
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itself is very important. acknowledging that the chinese economy is slowing very fast. and all indicators suggest that the chinese economy as of the moment is only growing at about 4%-5%. it is not growing at 70%. the country's objective is to grow at 7%. it is way behind it. the statement is very important. angie: if it's really at 4%, you are taking a look at people not to getting the jobs. 1.3 billion people facing economic hardship as china slows down. this is not a good for a country that has no democracy. khiem do;: the unemployment situation is more underemployment than unemployment. people are finding jobs but where the jobs are, well paid
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jobs or skilled jobs, that is the question. the answer from an employment viewpoint but the fact that perhaps some workers are working on very low paying jobs. angie: do you think we will see qe from china? khiem do: i do not think so. i do not think china needs qe. they did a massive amount of reserve from the central bank. that is now worth over 19%. that has to be cut back sharply in order to inject more liquidity into a banking system. that we needed to see. and real rates in china are too high. real rates need to be reduced as well. that is what zhou xiaochun was implying this morning and that is why markets are rejoicing. angie: what are you betting on to benefit from any kind of
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regulatory moves or interest rate moves from any kind of these moves we can expect? khiem do: obviously, the bond market and equity market in china will do better. more so to do with the equity market. we think of that global investors have ignored china and asia over the last few years. they are not interested in investing in china. they fill china has a banking -- fill china -- feel china has a banking issue. with that statement, it might change the view. doing qe in china and get foreign investors to get excited. angie: taking a page out of all of the central banks, foreign investment, transparency. khiem do: exactly.
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that is the point. angie: thank you for that. let's talk about europe and the rest when we get back. that is khiem do read joining us in a few moments. coming up next fortesque's chairman defends iron ore prices. we will hear from andrew forrest on why such a cap is in australia's national interest. you are watching "asia edge." ♪
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angie: fortesque ceo is defending his point. andrew forrest said companies need to act responsibly and he spoke to stephen engle. andrew: that outcry really missed the elephant in the room and i would like to start talking about that now. there is an issue, china's national interest and australia's national interest is not helped by companies dumping iron ore into a falling market. we are here to husband the assets. we do not actually own the iron or. we are sure to husband as best we can for the people of australia. we do not expect or spend 10 billions of dollars in a collapsing commodity price
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environment that would not be good for australia. we would not do it. china needs a stable supply to diversified. they do not want to concentrate a supply. that is 101 economics. have a diversified supply. fortesque's is part of the figure. stephen engle -- even bank you do not -- stephen: you do not wish to risk want to your competitors. -- risk alert to your competitors you do not -- you do not wish to respond to your competitors. andrew: it is like a broken record. they wish with had never found 15 billion tons of iron ore. that wish would never built the
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world's best platform. they wish that we did not let customers all over asia love us and support us. and they wished all of these things in public. and sometimes the wishes get printed especially they are colorful enough. but fortesque get stronger every time we get criticized. fortesque is in good shape. stephen: you build your company on debt and not equity when a time when iron ore prices were going up and soaring through the stratosphere. it is the opposite environment now. injury: -- andrew: part of that is true. we have $7 billion of debt and i do not think it is a great deal of debt, it is manageable. when iron ore prices were strong and rising, even though we relate starters to the game,
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others have had a jump on us we started out with expansion. and we finished a very early. we have watched others playing johnny-come-lately catch up into a collapsing commodity price. and the shareholders interests and the interests of china and australia because is this a strategy to force everyone out? is it a strategy to get pressure? we struggle with that. i look forward one day to respondent and now is not the time. -- to respond on at that and now is not the time. ♪
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♪ angie: flying high, chinese airline stocks soar thanks to lower oil prices. more easing and a slowdown has gone a bit too far. prada's profits plunging, a 20% fall in earnings. let's get to the latest. john dawson. john? john: the highest since march of
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guess what? 2008. that year we know was the lehman collapse. there you go. it is the highest since march of 2008, a seven-year high for the shanghai composite. that shows you the dramatic. [indiscernible] you can see from this chart all of 2015, this right here gaining ground. so far, it is actually up by 16%. the best performers around the world and not just in asia. the big gains has already touched today a seven-year high. that is china's composite. of that high and you see some of the gainers are construction and
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airliners. driving up. construction of 10%. look to hong kong. similar story china dairy. those are the top 2 performers. the nikkei at lunch. opening lower since this morning. is up by 3%. across asia, a strong day except for austro-asia. resorts are driving it down. those 2 there are the only ones. jakarta opening again. no real performance on the u.s. wall street but asia setting is
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on standard and on trend. -- its own standard and own trend. they gfc, global financial crisis. angie: thank you. zhou xiaochun says growth in the world's second-largest economy has slowed a low bit too much for his liking but the overall message from his and president xi jinping is china has ago tools to deal with it. they were speaking at a forum over the weekend. and we have more from beijing. christine, give us the details. christine: zhou xiaochun said china's growth has fallen a little bit too much. keep one of the risk of china's inflation trend saying china needs to be vigilant to see is deflation will happen or becomes a possibility.
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president xi jinping said china's resiliency and the economy and potential for growth. the one thing they both stressed was china has a wealth of monetary policy at hand. economists are expecting a benchmark rate this year. what they said confirms that a little bit. president responded to concerns and here's what he had to say. president jinping: people are afraid china no longer needs foreign investors because china's is the loader overseas -- china is the largest overseas. these understandings are one-sided. christine: zhou xiaochun went on to say china will continue to open up and the legal rights of enterprises will be protected
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and china's growth is to the benefit of everything. still quite a strong message from china despite the focus of slowing growth. angie: christine, and opportunity to push items on china's agenda in the coming years, didn't they? china bank well -- christine: well, the president focus on these investment items like infrastructure bank where most other major economies except for u.s. and japan said they will join. and targeting development along the old chinese trading route to europe. they are pushing out financing for that. and also encouraged chinese to sell bonds to spend money in the country. last week, zhou xiaochun pushing the imf and saying that chinese will loosen capital control
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accounts this year and it helps of the case. the yen is the fifth most used currency globally and reserve currency and having cheaper borrower cost and abib project. and what is growth for them is growth for everyone else. angie: that is right. christine hah reporting out of beijing for us. thank you for that. to australia. finalizing plans to start a chinese back -- backed infrastructure bank. let's get the paul allen for more. is australia's commitment a done deal? paul: well, it is difficult to imagine not happening. australia saying it will be finalizing steps to sign a memorandum of understanding. a couple of issues of concern.
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first of all, australia wants to ensure the board of directors has the final say over any key investment is visions. and also to ensure that no one country comes to dominate decision-making at the bank. over the weekend, the treasurer saying joining the asian infrastructure bank is the right for australia to do it is going to be part of a multilateral thing that will provide billions of loans to the region. and also in the region right now is the former australian prime minister kevin rudd and has a new job and heads of a commission on multilateralism. he is part of the forum and lending a hand. mr. rudd: i have supported it. china has a massive infrastructure need. second, we have a shortage of capital willing to invest. third, the real challenge to use public capital rather from the
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aibb. to get major projects going. and it is good for global growth. global growth is frankly fairly flat at the moment. angie: -- china led how are they reconciling that? paul: it was a diplomatic balancing act for australia and the u.s. is a close friend and ally. china is the most important and largest trading partner. in the end, it was britain joining that took the decision off. and thinking it is a matter of time before the u.s. gets behind the bank. he said it will take a bit of time. he has a point. even the adb's has signed a pledge.
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the u.s. faces a choice, it can join or miss out completely. angie: paul allen, thank you. time for look the corporate stories making headlines. two shery ahn. shery ahn: the wall street journal said chemchina is not rolling out a higher bid for pirelli. the stock has risen suggesting that investors think a better offer might come. even if there is a rival bid, they are saying the baby. pirelli knees and asian partner. questions about china's role on a cyber attack on a u.s. site. github has been attacked. it's overwhelming the victim's
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site. the wall street journal saying they may have originated in china that links to site linked -- banned by beijing. mercedes-benz has plans to develop a midsized pickup truck by 2020. "the wall street journal" said talks with the nissan are in process and it would be produced in a nissan. those are your top corporate headlines. i am sherry in. -- sherry and. angie: there is a magic number that breaks ipo's in china. david is here with the magic number. magic number. david: 23. [laughter]
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angie: was it hard to figure out to the code? david: you have to look through 147 ipo prospectus. it is a great story. you can see it on the website. ss there is a -- it says 23 print the threshold which authorities in china, not a formal directive, not public. anything above 23, a multiple of 23 gets rejected when you want to list your company. you see this clearly when you look at the data across 147 plus companies. look at where the valuations are between 22 and under 23. more than half of the companies. angie: statistical. david: they have managed to do it. yeah, numbers do not naturally form like this.
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usually have curves at the normal distribution. and outliers. it seems to be what authorities have been putting through. if you want to price your ipo cheaply, you are shortchanging your client. it in you run the risk of it not getting approved. numbers in the sand and it seems to be 23. angie: any specific example? david: we do. the most interesting is the one just below, at the border. 22. angie: somebody else's magic number. david: movie theaters, chicken wings and budget airlines. they are chinese companies. and they went public over the past 12 months. angie: and a price in at 22.96? david: there were 2 companies
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that got to their ideal approved a little bit above 23. 23.2 was one company. and another one, technology and 23.01. angie: just fractionally. wide 23? -- why 23?> david: i do not know. we took a look. taking a look at some of these websites that look at the internet of 23. -- enigma of 23. michael jordan and david beckham , those were the numbers. that's probably not the reason. 23 is their number. a beautiful mind russell crowe, he was obsessed with the number 23. what else?
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each parent contributes 23 chromosomes to the dna of a child. angie: we are really reaching. david: it gets crazy. the lowest prime numbers that consists of consecutive digits. and there are numbers that follow and that is my contribution. >> angie: let's leave it there. thank you for that. central bank chief raises concerns that it is surging at the highest of 70 years. the likelihood of stimulus after the break. ♪
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shery ahn -- angie: the latest talks with creditors.
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the government said it was a budget surplus of 1.5% of gdp this year brink again $3 billion of extra raven. alexis tsipras is rolling got cutting wages and it did -- ruling out cutting wages and selling all broadcast licenses and privatizing some state assets. singapore has been -- bid an emotional farewell to is found in father. lee kuan yew's coffin was taken by carriage. in attendance was the prime ministers of india and thailand and former president real clinton. >> it has been a dark week for singapore. the life that has guided is all of these years has been extinguished. we lost our finding father mr.
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lee kuan yew, who lived and breathed singapore. all of his life. angie: a new crew has arrived at the international space station. they will spend 342 days in at the iss, about twice as long as normal. it is nasa's first attempt as a rough -- as a year experience. kelly's identical twin, mark, will complete the same experiment on earth to see how their bodies compare. back down here on earth [laughter] john yvonne, david and our guest, khiem do. a part of the world all eyes are on and that is your. alexis tsipras and all of the
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decision-makers. -- and that is euro. trying to get to a deal. do you think they will reach one? khiem do: it is like kicking the can down the road for as long as they can. the position of the two groups are very far apart. angie: john, what do you think? [laughter] john: another two years or more. it is going to be another two years. they cannot let greece bail. -- fail. ar -- far more serious. spain and portugal would do the same. that is the problem. you are between a rock and a very hard place. khiem do: they are not in a strong position to lead greece
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goal. another deal will be made kicking the can down the road. john: how does it affect your customers? khiem do: absolutely, we keep an eye on it. investors in europe has hedged the currency. they hedged the euro back to hong kong dollars. but i think almost every fundamental investor loves the european equity markets. the reason for that is there is a consumer confidence has turned up. and finally, it is coming through in europe. what is not to like right? all of these stars are lining up. i think everyone. david: you have to hedge your bets. khiem do: absolutely. you want a lower europe.
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everybody wants lower. the bank of australia, bank of japan ecb -- everybody. [laughter] yvonne: people do go through currency wars and they can make it more competitive. as far as exports, have you seen the matching numbers? i do not think so. khiem do: because of that everybody is hoping by lower the currency, a bit more competitive. and a bit out of the game. not so much a winning but i want to be in the game. i do not know if i win the game but i want to be in. angie: you call it currency wars and we are engaging in right now. khiem do: a soft one. the u.s. has not screened and shouted yet. it may be beijing accord, who
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knows yet. at the two federal banks is the u.s. and china. really. big economies and they are holding fire. they have not screened and shouted -- screamed and shouted yet. david: we have a chart that shows you and would call the bloomberg chart. what it measures is a few years ago, zhou xiaochun said to their other measures you look at which are lending and these three. this shows growth is at 3.7%, roughly what the u.s. is turning out. are we close to the level? khiem do: i think so. i was intrigued china is not growing at the moment between 4% and 5%. 3.7%, not much difference.
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very slow at the moment. i am so glad the chief this morning acknowledged that it economy is slow. he also acknowledged that perhaps monetary policy in china is too tight. the requirement ratio is way, way too high in real interest rates are way, way too high. i think we are looking at a very significant reduction in all rates in the next eight months. where bottom going to a massive bull markets. john: the shanghai reached a seven-year high. khiem do: exactly and i think so. and i think in china, the authorities have discouraged investors to play the property market. and encourage them to play the trust fund industry and the all cash management and a lot of high-yield stuff.
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i think that the avenue of investing in china has been narrowed down and that is a soft market. the equity market is going skyhigh as well. angie: we will leave it there. khiem do thank you so much for that. you are watching "asia edge." plenty more after this short break. stay with us. ♪
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angie: u.k. election campaign officially gets underway today when prime minister david cameron visits the quaint. polling today is may 7 with david cameron's party trailing. labor leader ed miliband will make his pitch today in a speech in london and will say they remain committed with keeping the u.k. in the european union. bloomberg will have complete coverage for you.
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we begin our special programming this afternoon with an extended version of "the pulse." for those of you in sydney, 7:00. it has been a big uk's sports. australia won the cricket championship against new zealand. they beat new zealand 33-19 to win the 40th edition. it is now moved to tokyo next weekend. and for rory -- ferrari won the grand prix, breaking were said he bends' streak -- breaking a mercedes-benz' straight. a lot of excitement in those boards world. ferrari and new zealand getting beat in cricket and the rugby in
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hong kong. it was the weekend that was a lot of partying.
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